How Moderna's Patent Challenge Loss Could Impact Coronavirus Vaccine Program

Moderna Inc (NASDAQ: MRNA) shares came under significant selling pressure Thursday afternoon following an adverse patent ruling, and the stock is adding to the losses in Friday's session. 

Moderna Loses Patent Challenge: In an ongoing legal dispute, the Patent Trial and Appeal Board ruled against Moderna's challenge to the patentability of Arbutus Biopharma Corp's (NASDAQ: ABUS) ABUS'069 patent.

The ‘069 patent covers liquid nanoparticle formulations, or LNPs, meant for nucleic acid delivery, which is used by Moderna in its vaccine candidates.

The patent describes the composition of nucleic acid-lipid particles and the ranges in which the different lipid particle components can be combined for effective delivery of nucleic acid sequence payload.

Moderna holds four non-exclusive viral vaccine sublicenses of Arbutus-issued LNP delivery technology. Each one allows for the use of pre-April 15, 2010 LNP patent families and is limited to a specific viral target, Chardan analyst Keay Nakae said in a note. 

These sub-licenses would not be applicable to Moderna's mRNA-1273, the analyst said. 

Potential Impact On Moderna: The sell-side is in wait-and-watch mode as investors digest the development.

"This legal dispute has been an ongoing debate among investors, and today's decision is a disappointing turn for MRNA," said SVB Leerink analyst Mani Foroohar said in a note reviewing the development. The analyst initiated coverage of Moderna shares on Thursday. 

This could lead to a protracted period of investor controversy and debate around the implications of any potential infringement claims by Arbutus regarding Moderna's use of LNP delivery technology in its investigational vaccines, and any further actions Moderna may take to defend its own IP position, the analyst said. 

Discussions around the ruling will also involve IP and potential royalty/economic claims by Arbutus on Moderna, he said.

Foroohar sees any meaningful royalty burden as hampering Moderna's pricing flexibility and margin versus other players in the SARS-CoV-2 vaccine race.

This could potentially aggravate downside implications should a HCV-like competitive pricing dynamic emerge, the analyst said. 

"We continue to watch this emerging dynamic closely, but do not explicitly model any royalty burden, settlement or other financial impact in our MRNA model at this time." 

MRNA Price Action: At last check, Moderna shares were slipping by 7.22% to $72.13 after plunging about 10% Thursday.

Arbutus shares were down 7.9% at $5.71 at last check. 

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