Extended-form Case Study

Moderna: dividends, share buybacks, R&D, and shareholder value

Published on February 29, 2024   13 min

A selection of talks on Management, Leadership & Organisation

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Hello. I'm Dr. Michael McDonald. I'm a professor of finance at Fairfield University in Fairfield, Connecticut and today I want to talk to you about a very unique corporate case study. That is the case of Moderna; dividends, share buybacks, R&D, and shareholder value.
At the end of 2019, the world was introduced to a new event, COVID-19, and in 2020 it went global. In a lot of cases, new things can be fun. COVID, I think we can all agree, did not fall into that category. Pharmaceutical companies Moderna and Pfizer developed vaccines to help protect against COVID-19. Both companies made boat loads of money from solving what had become a global pandemic and a major issue for billions of people. Essentially, the COVID pandemic turned everyone around the globe into a potential or even likely customer for these two firms.
Pfizer had been a major company in the pharmaceutical space for decades. COVID was certainly a boon to the company. It helped to turbocharge their profitability, but it wasn't a game changer. Pfizer was a very large company, an enormous company before COVID, it was an enormous company after COVID. COVID might have added 25%, 50%, even 100% to the firm's profits, but Pfizer was always a big company and has been for decades. In contrast, Moderna had essentially no meaningful revenue before their COVID vaccine. Certainly as an early stage pharmaceutical company, they had a very promising product portfolio and they were publicly traded. So in a sense, they were a big company, but they didn't really have any revenue. They just had a very exciting and unique approach to making new pharmaceutical products using their mRNA technology. But they weren't a big company by most people's standards. If you don't have any revenue and don't have any profits, you're not really a big company in some sense. So as a result of this, the COVID crisis and the vaccine that Moderna developed in response were transformational to the firm. One quick note here and this is a side comment. There are a lot of folks that critique Pfizer and Moderna for investing capital, taking a risk, and then earning a profit off of their COVID vaccines. There are many other companies that tried to do this and failed. So Pfizer and Moderna were uniquely successful in this regard. I'm not among those that critique the company for taking a risk and earning a profit. But regardless of your particular view on the ethical issues here, that's not the focus for today's talks. We want to understand what Moderna could and should do, given the financial reality that they're in today. We can save the ethical debate for another time. So with that said, let's look at their financials.

Moderna: dividends, share buybacks, R&D, and shareholder value

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