Moderna (MRNA 1.55%) is having a terrific year, raking in profits and generating plenty of cash due to its COVID-19 vaccine. However, that doesn't mean it has money to waste. As its business grows and the company plans for a post-COVID future, it needs to make smart decisions with its money.
It recently made a blunder that cost it a whopping $700,000. And the worst part of all: The company got nothing from it but a painful learning experience.
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Moderna's new CFO leaves after just a day on the job
On May 9, Jorge Gomez was set to become Moderna's CFO, replacing David Meline, who is planning to retire. Gomez previously worked for dental equipment manufacturer Dentsply Sirona (XRAY 2.20%). But, by May 11, Moderna issued a press release announcing that Gomez departed the company and that Meline would go back to his old role while Moderna looks for a new replacement.
The reason for the decision reversal for Moderna is that Gomez's previous employer, Dentsply, announced through a filing with the Securities and Exchange Commission on May 10 that its quarterly financials were going to be late. And the reason for that was due to an investigation of "the company's use of incentives to sell products to distributors." The company's audit committee also said it "has engaged a forensic accounting firm."
Moderna's May 11 press release references the Dentsply investigation in its announcement of the departure of Gomez. And what's surprising is that the issue spooked Moderna to the point that it cut ties with Gomez within just one hour of learning about the probe.
Moderna to pay a $700,000 severance -- or will it?
Despite being on the job for a single day, Moderna initially said it would pay Gomez a severance of $700,000. That's the annual salary Gomez would have received for a full year's work. However, that money may not be lost for good. On May 13, Moderna and Gomez agreed that the healthcare company could recoup the severance if it determines that in relation to the ongoing investigation, Gomez "is found to have engaged in any wrongdoing or is required to pay a fine, penalty or disgorgement."
The good news for Moderna investors is that regardless of what happens, this shouldn't adversely affect the business. For the first three months of 2022, the healthcare company reported net income of $3.7 billion. While a $700,000 hit to salaries isn't great, especially for one day's worth of work, it isn't going to cripple the business by any means. It also has close to $20 billion in cash and investments on its books. Hiring can be challenging, especially when an executive is working at another company and it can be difficult to gauge their performance or obtain references from the current employer.
It's Dentsply investors who should be worried
Although Moderna may lose $700,000, Dentsply is the stock that could feel the more serious effects of this investigation. A forensic accounting team is going to do a lot of digging, and that can result in the restatement of financials and it may uncover problems relating to internal controls. These are just a couple of examples of what could happen.
Dentsply isn't as financially strong as Moderna to be able to weather any significant financial setbacks. Last year, its profits for the full year totaled just $421 million (in the prior year, it was in the red). Even though its top line of $4.3 billion rose by 27%, the legitimacy of that number is under a cloud as long as this investigation related to incentives is ongoing.
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Key Data Points
In the past year, shares of Dentsply are down more than 43% -- worse than the S&P 500's decline of 4% during that time. The danger for investors is that this investigation could make things go from bad to worse for Dentsply if the findings prove to be concerning. The company could stand to lose something more significant than a $700,000 severance payment: It could lose the trust of its shareholders.
