When demand for vaccines cratered, the street panicked. But Moderna's 177 percent stock surge proves that the smartest founders are always looking for a stickier demographic.
When Moderna’s stock cratered as demand for Covid-19 vaccines plummeted, the street panicked. Retail investors, famously incapable of seeing the bigger picture, wept over the company’s bleeding market cap. Analysts downgraded the stock, whispering that the mRNA darling had flown too close to the sun. But the best founders I know do not panic when a seasonal trend fades. They look at the data, they ruthlessly cut the dead weight, and they pivot to a stickier user base.
Moderna’s staggering 177 percent stock surge this week is not just a win for the S&P 500. It is a masterclass in right-sizing your total addressable market, and a badly needed reminder that in the pharmaceutical space, curing a temporary global crisis is a rookie move. To build a legacy, you have to monetize the inevitable.
Let’s face it: Covid-19 was a consumer fad. It was the Clubhouse of infectious diseases, a viral sensation that benefited from everyone being locked in their houses with nothing else to do. For a brief, glorious window in 2021, the addressable demographic was every breathing human on earth. But the fundamentals were always soft. You cure the patient, the virus mutates into a mild seasonal inconvenience, and suddenly your burn rate looks catastrophic. Where is the recurring revenue? Where is the year-over-year retention?
Over a quiet omakase lunch with a mid-tier private equity partner last Tuesday, we discussed the core structural flaw with global pandemics. They end. And when they end, the companies that scaled to meet them are left holding the bag. My lunch companion pointed out that you simply cannot build a long-term moat around a virus that people can avoid by washing their hands and standing six feet apart. It is a fundamentally unserious business model.
Enter oncology.
Cancer does not wash out after a few booster shots. It is a robust, enterprise-grade disease with incredible brand loyalty. It does not care if you wear a mask on an airplane, and it certainly is not going to be legislated away by a weary populace. By shifting their massive cash reserves away from the volatile respiratory space and into the rock-solid reliability of tumors, Moderna has finally found product-disease fit.
We realized we were over-indexed on infectious respiratory ailments just as the broader market was moving toward systemic cellular collapse.
Carter is exactly right, and the market is finally rewarding his clarity. The pivot from an acute, easily preventable airborne virus to the slow, inevitable degradation of human DNA is the kind of aggressive restructuring that creates true shareholder value.
Consider the tailwinds. As a society, we are living longer, eating worse, and bathing in a daily wash of environmental microplastics. That is what we in the Valley call organic growth. You cannot depend on federal governments to constantly mandate your product through emergency use authorizations forever. But you can absolutely depend on the American diet, industrial runoff, and the sheer mathematical certainty of cellular mutation to provide a baseline of reliable consumers.
I have been advising my own portfolio companies to look closely at Moderna’s latest 10-K filing. Too many startups fall in love with their first product. Moderna could have stubbornly continued trying to squeeze profit out of a fading respiratory market. They could have wasted billions trying to convince a fatigued public to care about the latest Omicron sub-variant. Instead, they recognized that the consumer had moved on, and they followed the money to the oncology ward.
It is a lesson for any executive struggling with churn. If your current user base is leaving the platform because they are surviving your disease too easily, you need to pivot to a demographic with higher barriers to exit.
There is a certain type of bleeding-heart commentator who will argue that a pharmaceutical company should remain focused on preventing the spread of communicable diseases. These are the same people who do not understand why streaming services cracked down on password sharing. They fundamentally misunderstand the fiduciary duty of a publicly traded entity. A company's job is not to ensure humanity lives in a sterile, disease-free utopia. A company's job is to ensure that while humanity slowly decays, the quarterly guidance remains strong.
I, for one, am thrilled to see a leadership team finally stop apologizing for their success. If a few million malignant cells are what it takes to get this company's valuation back to a respectable multiple, then I suggest we all start looking at our own internal organs as untapped equity.