Moderna Shares Soar As Company Announces $3 Billion Stock Buyback
Moderna Inc (NASDAQ: MRNA) shares on Wednesday soared as high as 17% after it announced that it would be buying back up to US$3 billion of its stock when it reported its second-quarter earnings. But not everyone’s happy about the plan.
The buyback will benefit early investors, those who’ve already made millions from the Covid-19 vaccine maker. But, as Open Crier points out, the federal government previously gave $10 billion of taxpayer money to the biotech firm to fund almost the entire cost of clinical development and to secure 500 million doses of its vaccine.
Is Moderna essentially using taxpayer money to reward its investors?
The Cambridge, Massachusetts-based firm exceeded Wall Street’s forecast of its earnings, posting US$4.7 billion in revenue versus the expected US$4.1 billion.
It also reported cost of sales of US$1.4 billion, with US$499 million coming from write-downs for doses that have expired or are set to expire before they can be used, US$184 million from purchase commitments that fell through, and expenses amounting to US$131 million for unused manufacturing capacity. The latter costs were incurred after Covax, the international program that brings vaccines to poorer countries, slashed its expected deliveries.
The company overall posted net income of $2.2 billion, and adjusted earnings of US$5.24 per share versus the expected figure of US$4.55 based on analysts’ average estimate.
Moderna retained its sales forecast for the year, new orders for the redesigned booster that targets the highly-transmissible Omicron variants offset the losses. It recently signed a US$1.7 billion deal for 66 million doses with the US government, with an option to purchase an additional 230 million doses.
The US$3 billion for its buyback program will presumably come from Moderna’s cash pile, which currently sits at $2.87 billion. The firm anticipates moving to the endemic phase in 2023, where demand for the Covid-19 vaccine will fluctuate based on the season, and they will likely move to sell the shots to private buyers such as pharmacies, rather than to the US government.
Moderna last traded at US$186.49 on the Nasdaq.
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