Scottish Mortgage Trust (SMT) rose 2.2% yesterday after its fund managers’ faith in Moderna (MRNA) was rewarded with a near trebling in the US drug developer’s shares.
Nasdaq-listed Moderna soared 177%, or $111, to $174.38, valuing the company at more than $60bn, after a late-stage trial showed its individualised cancer therapy intisemeran was successful in treating melanoma patients when used with Merck’s existing blockbuster cancer drug Keytruda.
Merck, a US partner in the trials, saw its shares rise 12.6% in New York.
Moderna chief executive Stephane Bancel said the phase three trial results were a “pivotal moment” in cancer research and its messenger RNA (mRNA) technology in particular. “For many years, the idea of creating an mRNA treatment designed specifically for an individual patient’s cancer was aspirational. We are now helping turn that vision into a reality,” he said.
Scottish Mortgage, the £15bn flagship of Baillie Gifford, held 1.8% in Moderna at the end of July. That’s a long way down from the 9.2% top position it represented in November 2021 after shares in the US company exploded with a 16-fold increase during the pandemic after it provided a vaccine for Covid based on its mRNA technology.
However, the bubble burst as vaccine demand evaporated with the end of lockdowns and the company plunged into losses as it waited for new products to emerge.
Scottish Mortgage managers Tom Slater and Lawrence Burns maintained their conviction that Moderna’s ability to create bespoke drugs to specific ailments would lead to further breakthroughs.
In a podcast in January 2024 Bancel told Slater that its technology reads the DNA of a patient’s healthy cells compared with their cancerous cells to identify where the mutations are occurring. Moderna scientists then write a code that instructs the immune system to “reboot” to enable it to detect the mutations that it didn’t see before.
Even after yesterday’s surge, Moderna shares remain 61% below that peak when the company was briefly valued at $180bn. Baillie Gifford remains a key backer but has cut its stake from 12% to 4.6%.
Baillie Gifford US Growth (USA), a £900m investment trust that shares many of the same holdings as SMT, held 1% of its assets in Moderna at the end of June. It rose 1.4% or 4.5p to 330p yesterday, taking its gain this year to nearly 15%.
Specialist healthcare and biotechnology trusts in London appear to have missed out on Moderna’s sudden upturn. Reports from Biotech Growth (BIOG), CT Healthcare (CTHT), International Biotechnology (IBT), Polar Capital Global Healthcare (PCGH), RTW Biotech Opportunities (RTW) and Worldwide Healthcare (WWH) show it was not held by these funds, most of which have performed strongly as the sector has rebounded from lows in the past 16 months.
However, WWH and PCGH hold Merck. Trevor Polischuk, Orbimed co-manager of WWH, which holds 3.8%, its fifth largest position, said: “”If the magnitude and durability of benefit hold up in the full dataset, today’s result could mark the transition of personalised cancer vaccines from a compelling scientific concept into a major new therapeutic platform.”
Hedge funds that bet against Moderna are worst off, however. They face record-breaking losses of over $5bn on positions that only made money if the shares fell, the Times reported.
The boost from Moderna extends a recent recovery in both Baillie Gifford trusts which rose in advance of SpaceX’s record $1.7trn flotation in June but fell back as its shares, and AI-related stocks, sold off on concerns of a speculative bubble around the transformative artificial intelligence technology.
Scottish Mortgage held 18.1% of its assets in SpaceX and US 13.6% at 31 July, having invested in the company when it was private. Both have indicated they will reduce the positions when lock-up agreements in the initial public offer expire. SMT and USA have risen 8.6% and 4% in the past month, buoyed by plans for Anthropic, the AI developer in which they are 2.8% and 6.6% invested, for a new record $2trn flotation in September or October.
SMT has rallied 35% and 131% over one and three years after crashing in 2022 when interest rates rose. Similarly, USA has advanced 24% and 123%%. It is likely to face another challenge from activist hedge fund Saba Capital, which holds a 29% stake, at its annual general meeting in October.
