Taking advantage of its monstrous 339% share price gain this year, including today's 20% gain on promising phase 1 data for its COVID-19 vaccine mRNA-1273, Moderna (MRNA -1.75%) plans to raise a whopping $1.25 billion selling shares in a secondary offering. The biotech expects to give the underwriters a 30-day option to purchase up to an additional $187.5 million in shares, so the total amount raised could be in excess of $1.4 billion.

At that level, this will be one of the largest secondary offerings for a biotech company in recent memory -- perhaps ever. There are some months when the entire industry doesn't raise $1.4 billion combined. Typically, companies needing to rise that much capital would go to the debt market and sell bonds or convertible notes, so they didn't have to dilute shareholders.

But these aren't typical times, and Moderna isn't a typical company. The biotech sports a nearly $30 billion market cap despite not having any drugs on the market. Taking out debt doesn't make much sense if you don't have any meaningful revenue coming in to put toward the interest payments.

Using its stock to raise capital at this lofty valuation, on the other hand, is a smart move. It'll dilute shareholders, but only by about 5%, and the hope for shareholders is that the valuation will go even higher if Moderna can get mRNA-1273 through the clinical trial process and onto the market.

Pen and magnifying glass on a balance sheet

Image source: Getty Images.

Moderna will need the large infusion of capital to help pay for larger phase 2 study (expected to begin shortly) and phase 3 study (expected to start in July) as well as for ramping up production of the vaccine. The biotech ended the first quarter with $1.7 billion in the bank and had another $0.7 billion in grants and awards that could potentially be spent on the vaccine and the rest of Moderna's pipeline.

The price for the shares being sold in the offering hadn't been disclosed at the time of publication.