Leading the charge into a potential new category of medicines made Moderna (MRNA -3.00%) the largest biotech unicorn yet. The pre-commercial start-up recently raised another impressive sum during a successful initial public offering, but sentiment soured and the new shares lost around a fifth of their value on their first day of trading.

Does this pioneer have what it takes to turn its initial losses around? To find out, let's look at what's making investors nervous about Moderna and the slew of experimental therapies it's developing right now.

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Send in the messengers

Messenger RNAs -- or mRNAs -- are essentially sets of protein building instructions copied from DNA. Moderna's experimental mRNA drugs trick cells into producing useful proteins intended to prevent or treat diseases, and the potential applications seem endless.

Moderna has already advanced 10 potential new mRNA drugs into human testing, and investors giddy about more have already contributed $2.6 billion in total funding. That's how the company had a whopping $1.2 billion in cash on hand before its successful first offering raised another $604 million. With 10 new drug candidates in clinical trials and 11 more pre-clinical programs, Moderna should get plenty of chances to return shareholders' recent losses before its cash supply dwindles. 

What we know so far

The potential value for Moderna's mRNA drugs could be enormous, but there's still a lot that we don't know. The company has been working at this since 2010 and has taken a varied approach rather than focusing resources into any single program. As a result, Moderna has a lot of candidates, but no solid evidence they'll actually make a difference for patients.

We're waiting for midstage clinical-trial data from the company's most advanced program. Earlier this year, Moderna's collaboration partner, AstraZeneca (AZN 2.65%), sponsored a 33-patient phase 2 study with AZD8601. This mRNA drug should boost production of vascular endothelial growth factor A (VEGF-A), which could improve heart surgery patients' rate of recovery. Getting mRNA to the right spot is a little tricky, so during this trial, AZD8601 -- or a placebo -- will be injected 30 times directly into heart tissue while patients undergo coronary bypass surgery. 

If the group injected with AZD8601 heals up better than the group on placebo, that would be a big step in the right direction. But the top-line results aren't expected until 2020. AstraZeneca also tried injecting the forearms of type-2 diabetes patients in a phase 1 study and found significantly higher VEGF-A among patients injected with AZD8601 versus the placebo group. That doesn't tell us a great deal about its ability to actually help these patients, but a lack of serious adverse events and Astra's willingness to continue testing the candidate are encouraging.

Doctor injecting a patient with something.

Image source: Getty Images.

Vaccine programs

So far, most of the evidence Moderna has produced to suggest its mRNA platform has a future comes from the field of vaccines. The company has observed neutralizing antibody responses for four out of five mRNA vaccines tested in phase 1 trials. That's a pretty good track record, but it doesn't tell us a whole lot about whether they'll provide a significant preventative benefit when tested among thousands of patients in the years ahead.

An experimental mRNA vaccine to prevent respiratory syncytial virus (RSV) might be the most watched vaccine in Moderna's pipeline in the near term. Merck (MRK 0.15%) is getting ready to advance mRNA-1777 into a phase 2 trial after a 200-patient study didn't find any dose-limiting toxicity. It will be a long time before we can compare infection rates from large enough groups to draw big conclusions, but Merck's willingness to invest in a larger study is a positive sign.

A long way to fall

Developing the first effective RSV vaccine could generate blockbuster sales for Moderna, but investors need to understand that this stock already has a great deal of success baked into the price. Despite stumbling out of the gate, the clinical-stage biotech still boasts a $6.1 billion market cap at recent prices.

Moderna has done an impressive job moving new drug candidates from the idea stage into clinical trials, but the jury's still out. It won't be long before we know if this stock can boost its lofty valuation, though. Two phase 1 trials with influenza vaccine candidates were supposed to provide top-line data months ago, and five more early stage studies should provide us with some data to chew on before the end of 2019.

With truly meaningful studies still not underway, it's going to be awhile before we can be sure Moderna's mRNA drugs are all they're cracked up to be. Without any products to sell, the company lost $243 million during the first nine months of 2018, and advancing a stable of new drug candidates from phase 1 to phase 2 will ramp up spending in the year ahead. 

Moderna stock will have enough chances to please investors with trial data that it could recover its early losses next year. If investors get the slightest whiff of trouble, though, this stock could quickly get cut in half or worse. Until we know a little more about what mRNAs can do in the clinic, it probably isn't worth the risk.