What happened

Shares of Moderna (NASDAQ:MRNA) fell 12% on Wednesday after a court ruling placed a portion of the biotech's blockbuster COVID-19 vaccine proceeds at risk.

So what

A U.S. Court of Appeals for the Federal Circuit panel affirmed a previous ruling by the U.S. Patent and Trademark Office's Patent Trial and Appeal Board. The decision blocked Moderna's attempts to invalidate two of Arbutus Biopharma's (NASDAQ:ABUS) patents on its lipid nanoparticle (LNP) drug-delivery technology.

Moderna uses LNP to deliver its messenger RNA (mRNA) COVID-19 vaccine safely and effectively into patients. 

A declining stock chart.

Moderna's stock price fell sharply on Wednesday following an unfavorable legal decision. Image source: Getty Images.

The court ruling could expose Moderna to a patent infringement lawsuit if Arbutus chooses to bring one against it.  However, analysts say it's more likely that the two companies will work out a royalty agreement, with Moderna passing a small percentage of its COVID-19 vaccine sales on to Arbutus. 

Now what 

Moderna's shares were already under pressure after CEO Stéphane Bancel warned of a sharp decline in the effectiveness of the drugmaker's vaccine in the wake of the emergence of the omicron variant. That could result in reduced demand for its vaccine, which accounts for nearly all of Moderna's revenue.

Still, Moderna President Stephen Hoge expects the company to develop a booster shot that specifically targets the new coronavirus strain. He believes Moderna could file for regulatory authorization for the shots as early as March. Thus, any near-term hit to its COVID-19 vaccine revenue could be offset by sales of boosters beginning early next year.

With the long-term impact of the omicron variant and the recent appeals court ruling likely to be minor, today's sell-off in Moderna's share price could prove to be an overreaction on the part of investors.

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