TheChek News Flow

St Louis president warns of wave of bankruptcies without public health measures

A senior Federal Reserve official has warned that a wave of business failures owing to the pandemic could still trigger a financial crisis, as he justified the central bank’s continuing efforts to prop up capital markets.

“We’re still in the middle of the crisis here,” James Bullard, president of the Federal Reserve Bank of St Louis, said in an interview with the Financial Times on Wednesday.

“Even though we got past the initial wave of the March-April timeframe the disease is still quite capable of surprising us,” he said. “Without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and [that] could feed into a financial crisis.”

Mr Bullard’s comments came as Fed officials were assessing the economic impact of a new spike in infections in large US states including Texas, Florida, California and Arizona, which threatens to derail the nascent rebound from the initial pandemic shock.

“In any crisis, I think we need to keep in mind that there can be twists and turns, there can be another shoe to drop, and that could happen here,” he said. “And for that reason I think it’s probably prudent to keep our lending facilities in place for now even though it’s true that liquidity has improved dramatically in financial markets.”

The Fed has faced criticism that it has gone too far in its efforts to shore up financial markets — artificially inflating asset prices and helping corporate America at the expense of Main Street, while adding to income inequality. 

The Fed now has two facilities in place to buy corporate debt in the primary and secondary markets, including bonds that have fallen into higher-risk “junk” territory — terrain into which the US central bank had never ventured before.

Mr Bullard acknowledged the schemes were “controversial” but said corporate debt liquidity had been “sorely tested” early in the crisis and the Fed facilities served as an important “backstop” even if they were not being used much.

“With all these programmes the idea is to make sure the markets don’t freeze up entirely, because that’s what gets you into a financial crisis, when traders won’t trade the asset at any price,” he said. ” It’s not my base case but it’s possible we could take a turn for the worse at some point in the future.”

Mr Bullard said he believed the worst of the economic hit occurred in the second quarter of the year. He anticipated a transition to a “big quarter for growth” in the third quarter, though “how big” remained a question to be answered in the next 90 days.

Minutes from the Federal Open Market Committee meeting on June 9-10 released on Wednesday showed many US central bankers were converging around the need for firmer guidance on the path of interest rates and asset purchases. Mr Bullard said he did not see the need for a quick move in that direction since the current signalling was “very effective”.

“The situation we’re in now is that the committee expects to stay low, the markets also expect us to stay low, and that it’s probably not going to have inflationary consequences,” Mr Bullard said. “Because of that there really isn’t that much impetus to add additional forward guidance on top of that. We could do that but I don’t think it would really change the situation.”

If the Fed were to make that move, Mr Bullard said he would prefer linking forward guidance to “economic conditions” rather than dates. On so-called “yield curve control” — a policy last used in the second world war whereby the central bank sets targets for Treasury yields and adjusts its asset purchases accordingly — Mr Bullard was sceptical. “At least for me, this is down the list of priorities for the central bank,” he said.

Mr Bullard, 59, is among the longest-serving regional Fed presidents, having taken up the top job for the St Louis district — which spans Arkansas and parts of Missouri, Mississippi, Kentucky, Indiana, Illinois and Tennessee — in 2008, at the height of the financial crisis.

He described the last downturn as “more difficult” for central bankers, since it was far less clear what was happening in the US and globally.

“Here, for all the difficulty and human tragedy around the pandemic this is a well understood shock. It’s not hard to see that a disease has descended upon us and is causing havoc,” he said. “There has been more unity both inside and outside the Fed about what the policy response should be and even globally that’s been true.”

The son of Miuccia Prada and Patrizio Bertelli talks to BoF’s Imran Amed about joining the family business and his vision for the future of the company.

MILAN, Italy — When former rally car driver Lorenzo Bertelli, the son of Prada Group Co-Chief Executives Miuccia Prada and Patrizio Bertelli, joined the family business to lead marketing and communications in September 2017, he assumed what many industry observers saw as pole position to lead Prada when his parents one day step away from the company that, together, they turned from a staid Italian leather goods house into one of the world’s most desirable luxury brands.

The husband and wife duo still own about 80 percent of the Hong Kong-listed business which registered operating profit of €307 million ($345 million) in 2019, down 5.3 percent on the previous year, on revenues of €3.22 billion. And though Mrs Prada and Bertelli senior show no signs of exiting their roles anytime soon, the next step in a succession plan seemed to come on the Sunday of Milan Fashion Week in February, when Prada officially installed Raf Simons as co-creative director, working alongside Mrs Prada.

The Prada Group, which owns Miu Miu, Church's and Car Shoe in addition to its flagship Prada brand, has been buffeted by the coronavirus crisis like the rest of the luxury sector, which is expected to contract by up to 39 percent this year, according to BoF and McKinsey’s State of Fashion 2020 Coronavirus Update. In March, the company’s stock price sank to a new all-time low, as stores around the world were forced closed and sales stalled. But even before Covid-19, the company was lagging its peers, suffering from high wholesale exposure and a weak digital strategy.

“Lorenzo has been instrumental in driving a number of changes for the better, including more focus on digital, the new initiative on sneakers [and] a fresh look at creativity,” said Bernstein’s Luca Solca. “Not bad for someone who was supposed not to have any industry experience.”

Until now, Lorenzo has kept a low-profile, working mostly behind the scenes as head of marketing and communications. But today, in his first major interview, the 32-year-old self-described computer nerd who was appointed to the Prada Group board of directors in June 2018, shares details of his life pre-Prada and lays out his vision for the future of the family firm as it works on a turnaround amid the coronavirus crisis, aims to catch up with a digital revolution in fashion that has only been accelerated by months of lockdowns and takes the first steps to becoming a more diverse and inclusive company.

Imran Amed: What was it like growing up the son of the legendary fashion designer, Miuccia Prada and her equally legendary husband, Patrizio Bertelli? Do you remember when you first understood what it was that your family did and how big of a deal it is in the fashion world?

Lorenzo Bertelli: They were just my parents. I'm born in 1988. Let's say, I grew up with the company while it was growing up, you know. So maybe if I were born now, or 10 years ago, it would be different, but because Prada was successfully built in the '90s, it’s been a parallel process, I would say.

Having grown up in the fashion world, you didn't choose to join the family business at first. I was watching some of the YouTube videos of your rally car driving. How did you get into that?

This is a part of my life that is closed now, but at the moment, it was the most relevant part of my life because I learned so much in that period. I always liked, since I was young, motorbikes, cars, engines — and adrenaline. I started racing just for fun. And so I did another one, and then it was not so bad, so another one, another one, and after one year, I almost stopped but my father said to me, "You have to try, seriously at least once, to understand how it is to be completely committed to one objective and one direction."

I said, "Okay, why not?"

I was sometimes away for almost 200 days per year. It’s not like Formula One where you have races during the weekend and you stay in five-star hotels. Rally is quite different because they take you away for at least ten days. It's a team sport because you have the driver — that was me — and the co-driver and you race for 12 hours a day for four days in a row, without much resting time.

It teaches you a lot in terms of life lessons because even if you do everything perfectly, the car can suddenly break down… sometimes I was almost winning and then I had a mechanical issue with the car and I lost, so I was really, really sad. But then I had other moments where I felt very happy. It's a nice metaphor for life.

You've now gone from high-speed racing to high fashion. Clearly you have this family connection, but I'm sure it was still a really big decision for you. What made you decide to leave your passion and join the family business where you didn’t really have much experience?

It has been a bit hard to make this decision but at the same time, I was responsible for myself and what surrounds me. I don't know, I felt that was the moment to join the company, but not because I felt I needed to help my family. I still had margin to grow. If I had to choose again, I would make the same choice.

So what has it been like?

I was not scared at all when I joined the company because I’m used to pressure in rally. I’ve never been scared, you know? But, I felt a lot of responsibility. It's a different kind of emotion. When I was doing rally, I would wake up and do the best possible, and this is the same approach that I have in the business life in fashion. I wake up every morning doing the best I possibly can, and then if success happens, good. Otherwise, I've done my best so I can sleep well without any problem.

On the other hand, I’ve found out more than I thought about what it is like working with, not just one, but two of your parents. In the first couple of years, I was bringing too much of the job home. I really had to learn how to switch off when I was with my father and mother. There have been honestly some moments where it's been really hard, because you can imagine how it is to work with your parents. But in the end, things went in the right direction. So we argue, but the principles are the same. Otherwise it would have been almost impossible to work with them.

What has been the biggest challenge for you, Lorenzo, coming from outside the industry?

The most challenging thing has been for me to prove to people inside that I'm able to do the task that was asked of me — this is exactly the same kind of feeling that I had when I was a rally car driver and needed to prove that I was fast enough to be at that level — and to be respected among my colleagues for what I was able to do and not because of my position.

Another point has been diplomacy, you know, because you are not the boss of the company, but at the same time you want to understand what is happening within the company. So you have to have that right dose of diplomacy to understand everything that happens within the company and be open enough to let people talk about some topics with you and not say too much to my parents because you have to keep some secrets. So, I think diplomacy has been something that I had to learn and I hope has helped me to be appreciated inside the company.

Tell me a little bit about your role. Coming into the business, I'm sure one of the conversations you had with your parents was, well, "What am I going to be responsible for?"

Yes. When I joined the company, there were two main areas where I could join. One was in retail and one was more marketing-focused. But communication has been hit hardest from the digital revolution of the sector. And since I was very young, I’ve always been a kind of nerd with computers and things like that. So in the end, we said, "Okay, maybe that area is where there is more clear sky." So we decided, with my father and mother, to focus on digital communication because the role was clear and there was nobody in that role.

I took the role and after a few months, I said, this is not about just digital communication, it’s about communication. Personally, I hate the word digital, you know, because I always say it's not another cake, it's the same cake that must be divided into more slices. There is digital, print and so on. So I said, "Guys, this is communications, not digital. We have to put everything together and create a 360 approach to communications. It's not about a single pillar. It's about the connection between different pillars: communication, CRM [Customer Relationship Management], the customer, the product, the marketing strategy, a lot of things."

In the end, we decided the best thing to do was to create a big team that now is marketing and I'm in charge of it, where we have communication, which is in part dedicated to the customer, so CRM and omnichannel, and also dedicated to product insight marketing. In our company, we don't have completely vertical pillars for every brand.

You recently took on this additional role in Corporate Social Responsibility — or CSR. In some places, this is seen as an old-fashioned way of thinking because CSR is integrated into everything that we do as business people now, right? It's not just a little department on the side.

Yeah, I completely agree one hundred percent, because CSR touches on everything from marketing to communications to the customer to supply chain to the product. It's so wide that I always say the first CSR person of a company should be the person in charge of the whole company. In order to give real relevance to the sustainability aspect, we decided to put me in charge exactly because of what you're saying. So I'm in charge of the marketing, but because of my role, I have, for sure, a bigger relevance on that topic. Then I can apply the right notes everywhere in the company to make sure it works in a smooth and straight direction. CSR alone is nothing. You have to really work in vectors with a lot of departments.

So what are the areas that you've identified in that role as being a focus? As you know, there are so many challenges in the whole fashion supply chain that need to be addressed, around environmental impact, around impact on people, around diversity and inclusion. There are all of these different topics that kind of come together and you can't do everything at once. Where have you focused your energy?

Yes, first of all, I think the biggest focus of CSR is to make every division of the company — from the supply chain, HR, etcetera — aware of the direction the market is taking on different topics. I make them aware, and then we set some objectives and roadmaps on those topics.

So how do you do that? How do you find out what's going on in the market?

There are a lot of companies and agencies that grade the sustainability parameters of every company. So what you do generally is put together all those parameters from those rating agencies and you benchmark what others are doing, and then you create your roadmap, your KPIs, and then you work to achieve those objectives.

So these areas where you've taken the lead around communications, with an emphasis on digital, and CSR, how do you take those kinds of more modern topics for business back to your parents who've run the business in a completely different way? I mean, your mother is one of the best communicators there is in fashion, but digital is probably not something that comes to her as naturally.

Yes, it's true. But, I always say it's like they learned to use the smartphone, you know, and they are clever. So, I think a lot of problems that I see now is that if you want to have a really digitalised company, you need to start from the heads. You cannot start from the bottom because if the heads don’t really understand, you will never be able to do it.

And because they are not stupid, and I know them very well, I know which points I have to touch to make them understand and explain and they really understand perfectly so they are completely on the same page. But sometimes you find out that they already know what you want to say to them, but they think in a different way. I think being able to explain what is the key of every digital officer of the company and nobody other than his son can explain.

So, on this topic, they were happy and they say, "Okay, let's do it." I mean, it was no problem at all and really fast and quick. It's just a conversation of one hour at dinner and that's it, you know?

On the sustainability side, which is a relatively new topic for our industry, it's something that I think people have really started taking seriously in the past few years. How do you convey that critical topic back to your parents?

First of all, both my parents, they've always had a kind of renaissance mindset. I will not say a sustainable mindset but, it’s always been a cultural mindset that is, let's say, sustainable by definition. They have that kind of vision of where the world needs to go, a more sustainable world where people produce less, then create more value, because the rush of growing, growing, growing creates an environment that is not sustainable. I bring to them evidence...of what is sustainable and what is not today.

And then you have to go into the technical aspects. I have a team that works with me on those points. I have to explain what we need to do to achieve those points and what happens if we don't do that. So, I simply put choice on the table and they clearly understand. There is a lot of complexity to applying those strategies, especially in the supply chain. You see a lot of those rankings and the ratings on supply chain and things like that, but there is nobody that in the end really checks that what you say is true, you know.

And they say, okay, we have to work because we are responsible. The company has to be responsible in saying the truth and doing as best as possible. Because I believe that once you do a mistake, in a globalised world like this, with digital communication, the damage that you get in terms of perception is too big. And this is I think is why everybody is investing more. Sustainability has become a marketing need for the company.

When you say a marketing need, is that because customers are asking for it?

Yes, exactly. I really like engine cars, you know, because I think a sports car needs to have an engine. But personally, I have an electric scooter and an electric car. There are two different tasks. One, you go from A to B and one is just to have fun. A lot of people talk badly about Tesla, but in the end, Elon Musk has done an incredible job because he forced all the other manufacturers to accelerate the process in going electric.

What is happening also in our sector is a little bit the same. You need to go in that spot because the customers, as you say, want that. But being sustainable also means being sustainable in economics. At the moment, for example, our nylon is more expensive than normal nylon.

Let's talk about that nylon project because that was one of the most interesting moves that Prada has made recently. It did two things at once. It managed to go back to the archive of what Prada first became famous for —those black nylon bags from the 1990s — but the company did so by using a completely new material, which is much more sustainable.

Yeah. I remember when we took that decision because I was at dinner talking with my mother and we were discussing sustainability and she told me, "You should talk to the person in charge of materials because they're working on a sustainable nylon." I said, "Okay, tomorrow I will call them and I will investigate."

And actually I found out that they were already at a good point with this company Aquafil on the sustainable nylon. This is an example of one part of a company that is doing its job, but nobody knows and [we just need to] put together all the pieces. I said to my mother and my father, "Hey, guys, we have this incredible opportunity. We have to take it!”

It sounds a little bit like your role is connecting the dots of different parts of the business — including with the two people who are in charge — and making them aware of opportunities that maybe they didn't see themselves.

Exactly. I would say that connecting the dots is my biggest task every day. You have incredible people with incredible know-how, heritage and history and sometimes you simply have to connect the dots and bring them together.

Okay, Lorenzo, you know, if we were doing this interview three months ago, I might have ended the interview there. The last time I saw you was the Sunday of Milan Fashion Week when Prada announced that Raf Simons was joining as co-creative director. The industry was speculating about it for quite some time.

It's been very funny to hear all the speculation through these months. We managed to keep the big secret about the collaboration until the end. It's been a very open discussion and the basis of everything was that we are in a more complex environment and they believe that it's not enough anymore just for one person to cope with this multitude of culture, this environment that is changing so fast.

Sometimes you need to make a confrontation between people to discuss some topics. So, it's not about a one-man show, but it's more about talking about what is going on together. This is a very big milestone compared to the one-man-show approach of the past of this sector.

They're both such strong-minded creative people, though. And the question I asked at the press conference that day was, how are they going to make decisions if they don't agree?

I participated in a lot of meetings with them. When you have mature people, and very clever people, it’s never a problem because it's always a constructive clash. And this, I think, is the scope of their collaboration. If there is going to be a clash, it's going to be a winning clash for the company and for them themselves. When I look at them speak together, they are friends, since, I don't know, decades. I'm not worried at all, honestly.

But of course, since that Sunday of the press conference, the world has completely changed. I want to get your perspective on how this crisis has impacted Prada, how it's impacted you personally and how as a new leader in this company you have played a part in helping the company navigate this really very, very unusual unexpected situation.

If you think about Prada as a company, it went through a lot of crises in the past. Compared to other companies and other managers, my parents went through a lot of crises and they came back from all of that. We have a core group of people that are used to those kinds of situations.

There was no panic. Everybody was calm and said, "We are doing what we need. It's just a period and we will get over it.” We are not scared at all for the future because we are on a very good path, but we have to take the opportunity of this moment to accelerate our transformation of the company. And so, I think, it is more of an opportunity. It can be an opportunity if you can take it in the proper way.

For sure this situation, the Covid-19 situation, has accelerated the relevance of e-commerce. And everybody is learning to use Zoom now — my parents as well. We will see an acceleration of digital because everybody is learning how to use digital even faster than before because they're being simply forced. It's like if your mom or dad put you on a chair and said, “You stay here until you've done your maths.” It's the same kind of thing. I think this is going to be the biggest impact of Covid-19. And I believe that, after this situation, things will bloom again because history teaches you that after the crisis, it takes a bit of time, but people want to forget that period.

Let's talk concretely about the operational impact of the virus. As a big retail company, obviously, Prada has to navigate the kind of new rules at retail, with social distancing and different protection measures in place. But Prada also owns factories in Italy that had to be shut down. And I know you re-purposed some of those factories at some point to create protective equipment. How have you been navigating this as a company, both on the retail side and the manufacturing side?

The biggest impact has been for us the fact that for a couple of months we were not able to produce anything, but also there was the need to help Tuscany and the people around us and we said, "Okay, let's produce some protective equipment for the Tuscany region." And so, we started to do it that. I'm not involved in the supply chain, but the biggest problem has been the logistics, to organise the checks of every single employee and to make the protocols and procedures to apply those rules.

I also wanted to touch on another really important topic. Last year, Prada found itself in a difficult position with regards to this keychain that was deemed by many people to be representative of blackface which some people found extremely offensive. I know that the Prada Group has taken some actions, for example, setting up a diversity and inclusion council. All of that seems to have laid a path for the situation the fashion industry is in now, with the Black Lives Matter movement that has erupted in the wake of several killings of unarmed Black men in the United States. How are you, as an Italian group with a global operation, thinking about your role dismantling some of the systemic and structural issues of racism in society, within fashion more broadly and at Prada specifically?

Personally, and this is the position of the group, this is everybody’s issue. We have had wars on these kinds of topics. Everything starts from culture and knowing and studying the history of the past. It’s maybe the main issue of humankind. It’s unacceptable that these things still happen. The best way to help is first to educate ourselves on the history, to better understand their problems, to force everybody to know more about these topics. We have to address their problems as though they are our problems.

Definitely it starts with self-education and understanding history. But I wonder, specifically, with the diversity and inclusion council, I’m curious how you have engaged with this group while all of this has been happening. Everybody has created these councils, but it’s not entirely clear exactly how people actually work with their councils during a time like this.

We called the council after what was happening. Actually, Ava DuVernay was in the field with her feet on the ground, calling in by phone. We had a discussion on this topic, just like we are talking now, on a concrete level and a philosophical conversation. Then we came back with practical proposals in the following weeks, which we refined internally to take concrete actions on those proposals to take back to the council if everyone agrees (which usually happens because it is based on long conversations we have had with them). We are soon going to announce what we are going to do effectively on top of what the group is doing already. Very soon you will know more about what that meeting will produce in effective terms.

Is this a topic that your mother and father are engaged with? There are obviously generational differences at play here which we were talking about earlier, so how is that self-education that clearly you and others at Prada have been part of being extended to your family?

Yes, it’s a generational thing, because it is happening now, but if you look to the past it is not happening only now. It has already happened in the past. My parents lived through the 1960s. They are committed like us, and we talk about it home and it’s a topic that is repeated. The biggest problem is that these kinds of problems keep happening. We never seem to learn from history. We really have to start from the education and remember what tremendous damage was created from these situations in the past, because this is the only way.

Diversity must also start from within. As an industry, when it comes to recruiting, we have also tended to hire people from within our own circles. Aren’t there are a lot of skilled Black people out there who are simply not being given a chance?

Yes, this is a fair point. I agree completely. You have to look in the right places to find the right talent. This is a very good topic for HR teams. We have to have skilled people in all the areas, otherwise there is no diversity; there is no inclusion.

Finally, I did want to ask you about succession planning at Prada and the future of the company, because as soon as you were appointed, your father said, "Lorenzo is getting ready to become one day — if he wants to — the head of Prada." Is that something you think you want?

I like to challenge myself and solve problems. Then, if I have to do it in a fashion company or while being a rally driver, for me, it doesn't change that much. I simply want to enjoy what I'm doing. So I'm now enjoying what I'm doing. And so, if it's going to be like this, why not?

This interview has been edited and condensed for clarity.

The hotel will be strategically located in the central Piazza Augusto Imperatore, not far from the city's Spanish Steps and Bulgari's flagship on the luxury shopping street Via Condotti.

That’s on top of the $551 million profit loss last quarter.

Moynat’s New Designer Comes From Louis Vuitton

Nicholas Knightly has been Vuitton's creative director of leather goods since 2004.

DAX:

MDAX:

SDAX:

Inside Moderna: The Covid Vaccine Front-Runner With No Track Record and an Unsparing CEO

The upstart hasn’t yet developed an approved drug, its chief can be excoriating and until recently investors were disillusioned. A breakthrough coronavirus vaccine could come in trials starting this month.

At the year’s start, few outside the world of biotech had heard of a Boston-area company with a New Age name and unproven approach to drugmaking. Most in the industry who did know Moderna Inc. doubted its prospects. Investors barely had interest in the company, which had yet to produce a medicine.

Moderna and its staffers were dealing with other pressures. For nine years, chief executive officer Stéphane Bancel nurtured a high-stress environment at the Cambridge, Mass., company, characterized by high expectations, sharp critiques of workers and heavy employee turnover, according to current and former staffers. Mr. Bancel’s admonitions of some underlings in group meetings motivated some to do better, and others to leave.

Today, Moderna represents one of the world’s best shots at stemming a historic pandemic. It’s a front-runner in the hunt for a coronavirus vaccine, vying against industry heavyweights with proven track records. The question is whether Moderna’s vanguard science and tough management style is the right recipe for a vaccine breakthrough.

This summer, the U.S. government plans to fund and conduct decisive studies of three experimental coronavirus vaccines. Moderna’s will be first, starting later this month. Its lead status in the vaccine hunt is the reason the company’s shares have soared more than 200% this year.

“I think the world is going to change tremendously,” says Mr. Bancel, referring to the company’s coronavirus vaccine as well as the experimental drugmaking technology being used to develop it.

A 47-year-old native of France, Mr. Bancel says Moderna’s vaccine could be available for emergency use in health-care workers as soon as the fall with a full rollout next year. Eventually, he adds, the company could produce dozens of drugs and vaccines “for diseases for which there is no solution.”

The bold promises of Mr. Bancel and his colleagues have long struck some in the pharmaceutical industry and on Wall Street as hubris. No company using the same experimental approach has managed to pull off a successful drug. Moderna has more than 20 experimental drugs and vaccines for cancer, infectious diseases and other conditions in development, but none are close to being commercially available to patients.

“It’s always been a battleground company,” says Brad Loncar, head of Loncar Investments and creator of an exchange-traded fund that holds Moderna shares. “For some reason people get emotional about it.”

Skepticism has dogged Moderna since its creation in 2010. Noubar Afeyan, a Beirut-born biochemical engineer who runs Cambridge, Mass., venture-capital firm Flagship Pioneering, wanted to form a company that would turn a patient’s own cellular machinery into a personal medicine factory.

The tool for this effort is a piece of genetic code known as messenger RNA, or mRNA. Normally, this code carries the instructions from a person’s own DNA telling cells what to do. Moderna aimed to synthesize mRNA with instructions for attacking a disease or pathogen, and then give it to patients.

Mr. Afeyan wooed Mr. Bancel, an engineer by training who was a manufacturing executive at drug giant Eli Lilly & Co. and then led diagnostics company bioMerieux. “I saw in him a level of intensity, curiosity and impatience,” Mr. Afeyan recalls.

Mr. Bancel greeted the interest with doubts. “I looked at the science and said, ‘It’s impossible,’ ” he recalls. He took the job in 2011, though, after becoming convinced the approach could work and that Moderna might eventually be able to develop hundreds of medicines.

The startup began with just $2 million, which made it hard for Mr. Bancel to persuade top scientists to join the fledgling company.

Some nights, he came home from work frustrated. “This will never work,” Mr. Bancel recalls telling his wife one night.

The industry largely agreed. A key question was whether Mr. Bancel and his colleagues could get the mRNA, an unstable molecule, into human cells (once it was there the process by which it creates disease-fighting proteins was less difficult). The company spent several years refining a solution to use microscopic capsules known as lipid nanoparticles to ferry the mRNA.

Nearly a dozen contract manufacturing companies turned down the opportunity to produce an early version of a Moderna flu vaccine. “Even if it works you will run out of money,” one told Mr. Bancel, who was forced to turn to a 20-person Portuguese drug manufacturer.

Moderna saw its work on the vaccine as a way to test its technology, and didn’t advance testing of the product because the flu strain it targets doesn’t circulate widely.

From the beginning, Mr. Bancel brought a level of intensity that made some staff uncomfortable, former employees say. Sometimes, in meetings of 15 to 20 people, Mr. Bancel singled out employees if he thought their progress on projects was lacking, such as not enrolling patients in clinical trials quickly enough, in ways some found demoralizing.

In a group meeting several years ago, he told one staffer, “You have no idea what you’re talking about. Have you given this any real thought?” according to a former employee who was present.

Resulting tension may be part of the reason many have left Moderna, current and former employees say.

“It is a demanding culture,” Mr. Bancel says. “It is not an unfair culture.” He says he made his share of mistakes, such as not being more upfront with new hires about how difficult the work would be. “I was trying not to kill the company,” he says.

Mr. Bancel says turnover has been lower than some other biotechs in recent years, though higher than large drug companies.

After joining the company in 2013 as president, Stephen Hoge, a former New York City physician-turned-management-consultant, emerged as a calming influence in the office, former employees say.

Dr. Hoge says he and Mr. Bancel “have always functioned as partners. We have different strengths, and we balance each other really well.”

Some credit Mr. Bancel with pushing the company forward amid early disappointments, and say he was hard on staffers because he sensed Moderna could achieve something big.

“What’s not tolerable is to do sloppy science,” says Marcello Damiani, Moderna’s chief digital and operational excellence officer, who has overseen the company’s adoption of artificial intelligence in its drug design. “Stéphane is very rigorous, and he’s very demanding at the same time.”

Mr. Bancel, a skilled salesman, sought funding from larger drug companies and investors. A turning point came in 2013, when he persuaded pharmaceutical giant AstraZeneca PLC to pay $240 million for the rights to drugs arising from Moderna’s research. Moderna later formed a partnership with Merck & Co. to develop vaccines for cancer and other things.

In February 2018, Moderna raised $500 million in new financing from Geneva-based Pictet Group, Arrowmark Partners, Viking Global Investors LP and other investors that aren’t known as health-care specialists.

Some who focus on biotech were unwilling to invest, partly because they felt the company didn’t publish much about its results and was less transparent about its progress on various drugs than some rivals.

Mr. Bancel says the company was open about sharing information with prospective investors and partners.

Moderna went public the first week of December in 2018, raising more than $600 million in the largest biotech IPO. But by the end of that year, shares had fallen 34%.

In recent years the company has focused on an experimental vaccine against cytomegalovirus, a virus that can damage organs and can be harmful to people with weakened immune systems and to babies whose mothers were infected during pregnancy. Moderna thinks it could generate as much as $5 billion in annual sales. The company also is developing vaccines against Zika and certain respiratory viruses.

At the start of 2020, Moderna wasn’t expecting to have a product on the market for another two to four years, frustrating some investors. Some were disappointed Moderna had begun emphasizing vaccine discovery, a crowded and challenging field seen as having limited financial potential.

By then, some of Wall Street’s largest investors had sold the stock, even those who were previous fans. Viking, a $29 billion hedge fund, owned 5.2% of the company’s shares at the end of 2018, after it went public. It owned just 0.3% of the company by the end of March. A Viking spokeswoman declined to comment.

In early January, Mr. Bancel was on vacation with his family in France when he read news about a mysterious virus spreading in China. He emailed a National Institutes of Health vaccine researcher about working together on a potential vaccine, he recalls, which eventually led to a collaboration.

Back at the office, Mr. Bancel pushed colleagues to focus on the new virus. “How do we accelerate our vaccine?” he asked one.

Some inside the company harbored doubts about pursuing a vaccine against the new coronavirus. The company had been traumatized by its failure to find a vaccine for the Zika virus after a 2016 outbreak, Mr. Bancel says, though it is now developing a backup candidate. Dr. Hoge says he worried coronavirus vaccine work could jeopardize the development of its other products, some with major commercial potential.

“Are we sure we should be doing this?” Dr. Hoge recalls asking in internal discussions.

“This is going to be a big deal, we have to do something now,” Mr. Bancel responded, according to Dr. Hoge.

The company had a “once-in-a-lifetime opportunity” to save lives, says Mr. Bancel, whose mother is battling blood cancer and is immunocompromised.

Mr. Bancel and the NIH, which co-designed the vaccine, set an ambitious new goal: going from vaccine design to a human trial in three months, an unprecedented pace. The company, which counts about 800 employees, is hiring about 150 new workers largely to assist in the effort to scale up manufacturing capacity.

Unlike competitors who are developing vaccines that use a killed coronavirus or proteins from the virus, Moderna’s vaccine uses only a genetic sequence from the virus. The programmed material—mRNA—directs a person’s cells to make proteins that, in turn, trigger the immune system to produce antibodies to the coronavirus.

A potential advantage of Moderna’s approach: The mRNA vaccine can be designed and manufactured more quickly than vaccines based on older technologies, which often require growing the virus or proteins for weeks or months.

Moderna’s vaccine was among the first to begin testing in humans. After producing positive preliminary results in the first phase of human testing, the vaccine started the second stage of studies with 600 people in May. The tests this month will encompass up to 30,000 people, and will determine whether Moderna’s vaccine reduces rates of infection and disease.

The relatively rapid progress, and its soaring shares, have made Mr. Bancel a billionaire, at least on paper. The company is now worth around $24 billion, more than many drugmakers with medicines already on the market.

Some days, news of the Moderna vaccine’s progress has powered the overall market.

Many investors remain skeptical the Moderna strategy will work, though. Nearly 10% of the company’s shares available to trade have been shorted, up from 5% a year ago, as of June 15, according to FactSet, a level that is higher than any health-care stock except one in the S&P 500 index. Investors using this strategy are betting that the stock’s price will decline.

“There are better approaches” to discover a coronavirus vaccine, says Joseph Lawler, a physician who runs JFL Capital Management, a hedge fund betting against Moderna, partly due to the company’s rich valuation.

Moderna’s own executives, including Mr. Bancel, have been selling. This year through late June, executives and directors have sold about $161 million worth of shares, according to InsiderScore, which tracks insider transactions. Flagship, the venture-capital firm that founded the company, sold more than $68 million of shares.

Most of the sales were preplanned, including those of Mr. Bancel, the company says.

The validation of Moderna’s technique could raise expectations for more profitable products in the future.

While many vaccines fail in the trials, Anthony Fauci, the nation’s top infectious-diseases expert, recently said he was “really optimistic” about Moderna’s vaccine. The U.S. government is investing nearly $500 million to speed up testing and prepare for making hundreds of millions of doses.

After the large trial of Moderna’s vaccine starts, similar U.S. tests are planned for a vaccine co-developed by the University of Oxford and AstraZeneca, and one from Johnson & Johnson.

Pfizer Inc. and partner BioNTech SE also are planning to start a large trial this month for an experimental vaccine.

The challenge of developing the first vaccine means even more pressure for Mr. Bancel and his colleagues. On a recent Saturday, manufacturing staffers were told to turn off their mobile phones and take the day off. The team had been working nonstop for a few months on the vaccine.

Instead, staffers spent the day trading project-related emails, as if it were a regular workday. Executives who had issued the stop-work order were copied in and monitored the email exchanges without interfering.

“We’ve always had this hard-charging culture of relentlessness,” Mr. Bancel says. Moderna’s ability to quickly respond to the coronavirus pandemic “is why we worked so hard for nine years.”

Inside Moderna: The Covid Vaccine Front-Runner With No Track Record and an Unsparing CEO

The upstart hasn’t yet developed an approved drug, its chief can be excoriating and until recently investors were disillusioned. A breakthrough coronavirus vaccine could come in trials starting this month.

At the year’s start, few outside the world of biotech had heard of a Boston-area company with a New Age name and unproven approach to drugmaking. Most in the industry who did know Moderna Inc. doubted its prospects. Investors barely had interest in the company, which had yet to produce a medicine.

Moderna and its staffers were dealing with other pressures. For nine years, chief executive officer Stéphane Bancel nurtured a high-stress environment at the Cambridge, Mass., company, characterized by high expectations, sharp critiques of workers and heavy employee turnover, according to current and former staffers. Mr. Bancel’s admonitions of some underlings in group meetings motivated some to do better, and others to leave.

Today, Moderna represents one of the world’s best shots at stemming a historic pandemic. It’s a front-runner in the hunt for a coronavirus vaccine, vying against industry heavyweights with proven track records. The question is whether Moderna’s vanguard science and tough management style is the right recipe for a vaccine breakthrough.

This summer, the U.S. government plans to fund and conduct decisive studies of three experimental coronavirus vaccines. Moderna’s will be first, starting later this month. Its lead status in the vaccine hunt is the reason the company’s shares have soared more than 200% this year.

“I think the world is going to change tremendously,” says Mr. Bancel, referring to the company’s coronavirus vaccine as well as the experimental drugmaking technology being used to develop it.

A 47-year-old native of France, Mr. Bancel says Moderna’s vaccine could be available for emergency use in health-care workers as soon as the fall with a full rollout next year. Eventually, he adds, the company could produce dozens of drugs and vaccines “for diseases for which there is no solution.”

The bold promises of Mr. Bancel and his colleagues have long struck some in the pharmaceutical industry and on Wall Street as hubris. No company using the same experimental approach has managed to pull off a successful drug. Moderna has more than 20 experimental drugs and vaccines for cancer, infectious diseases and other conditions in development, but none are close to being commercially available to patients.

“It’s always been a battleground company,” says Brad Loncar, head of Loncar Investments and creator of an exchange-traded fund that holds Moderna shares. “For some reason people get emotional about it.”

Skepticism has dogged Moderna since its creation in 2010. Noubar Afeyan, a Beirut-born biochemical engineer who runs Cambridge, Mass., venture-capital firm Flagship Pioneering, wanted to form a company that would turn a patient’s own cellular machinery into a personal medicine factory.

The tool for this effort is a piece of genetic code known as messenger RNA, or mRNA. Normally, this code carries the instructions from a person’s own DNA telling cells what to do. Moderna aimed to synthesize mRNA with instructions for attacking a disease or pathogen, and then give it to patients.

Mr. Afeyan wooed Mr. Bancel, an engineer by training who was a manufacturing executive at drug giant Eli Lilly & Co. and then led diagnostics company bioMerieux. “I saw in him a level of intensity, curiosity and impatience,” Mr. Afeyan recalls.

Mr. Bancel greeted the interest with doubts. “I looked at the science and said, ‘It’s impossible,’ ” he recalls. He took the job in 2011, though, after becoming convinced the approach could work and that Moderna might eventually be able to develop hundreds of medicines.

The startup began with just $2 million, which made it hard for Mr. Bancel to persuade top scientists to join the fledgling company.

Some nights, he came home from work frustrated. “This will never work,” Mr. Bancel recalls telling his wife one night.

The industry largely agreed. A key question was whether Mr. Bancel and his colleagues could get the mRNA, an unstable molecule, into human cells (once it was there the process by which it creates disease-fighting proteins was less difficult). The company spent several years refining a solution to use microscopic capsules known as lipid nanoparticles to ferry the mRNA.

Nearly a dozen contract manufacturing companies turned down the opportunity to produce an early version of a Moderna flu vaccine. “Even if it works you will run out of money,” one told Mr. Bancel, who was forced to turn to a 20-person Portuguese drug manufacturer.

Moderna saw its work on the vaccine as a way to test its technology, and didn’t advance testing of the product because the flu strain it targets doesn’t circulate widely.

From the beginning, Mr. Bancel brought a level of intensity that made some staff uncomfortable, former employees say. Sometimes, in meetings of 15 to 20 people, Mr. Bancel singled out employees if he thought their progress on projects was lacking, such as not enrolling patients in clinical trials quickly enough, in ways some found demoralizing.

In a group meeting several years ago, he told one staffer, “You have no idea what you’re talking about. Have you given this any real thought?” according to a former employee who was present.

Resulting tension may be part of the reason many have left Moderna, current and former employees say.

“It is a demanding culture,” Mr. Bancel says. “It is not an unfair culture.” He says he made his share of mistakes, such as not being more upfront with new hires about how difficult the work would be. “I was trying not to kill the company,” he says.

Mr. Bancel says turnover has been lower than some other biotechs in recent years, though higher than large drug companies.

After joining the company in 2013 as president, Stephen Hoge, a former New York City physician-turned-management-consultant, emerged as a calming influence in the office, former employees say.

Dr. Hoge says he and Mr. Bancel “have always functioned as partners. We have different strengths, and we balance each other really well.”

Some credit Mr. Bancel with pushing the company forward amid early disappointments, and say he was hard on staffers because he sensed Moderna could achieve something big.

“What’s not tolerable is to do sloppy science,” says Marcello Damiani, Moderna’s chief digital and operational excellence officer, who has overseen the company’s adoption of artificial intelligence in its drug design. “Stéphane is very rigorous, and he’s very demanding at the same time.”

Mr. Bancel, a skilled salesman, sought funding from larger drug companies and investors. A turning point came in 2013, when he persuaded pharmaceutical giant AstraZeneca PLC to pay $240 million for the rights to drugs arising from Moderna’s research. Moderna later formed a partnership with Merck & Co. to develop vaccines for cancer and other things.

In February 2018, Moderna raised $500 million in new financing from Geneva-based Pictet Group, Arrowmark Partners, Viking Global Investors LP and other investors that aren’t known as health-care specialists.

Some who focus on biotech were unwilling to invest, partly because they felt the company didn’t publish much about its results and was less transparent about its progress on various drugs than some rivals.

Mr. Bancel says the company was open about sharing information with prospective investors and partners.

Moderna went public the first week of December in 2018, raising more than $600 million in the largest biotech IPO. But by the end of that year, shares had fallen 34%.

In recent years the company has focused on an experimental vaccine against cytomegalovirus, a virus that can damage organs and can be harmful to people with weakened immune systems and to babies whose mothers were infected during pregnancy. Moderna thinks it could generate as much as $5 billion in annual sales. The company also is developing vaccines against Zika and certain respiratory viruses.

At the start of 2020, Moderna wasn’t expecting to have a product on the market for another two to four years, frustrating some investors. Some were disappointed Moderna had begun emphasizing vaccine discovery, a crowded and challenging field seen as having limited financial potential.

By then, some of Wall Street’s largest investors had sold the stock, even those who were previous fans. Viking, a $29 billion hedge fund, owned 5.2% of the company’s shares at the end of 2018, after it went public. It owned just 0.3% of the company by the end of March. A Viking spokeswoman declined to comment.

In early January, Mr. Bancel was on vacation with his family in France when he read news about a mysterious virus spreading in China. He emailed a National Institutes of Health vaccine researcher about working together on a potential vaccine, he recalls, which eventually led to a collaboration.

Back at the office, Mr. Bancel pushed colleagues to focus on the new virus. “How do we accelerate our vaccine?” he asked one.

Some inside the company harbored doubts about pursuing a vaccine against the new coronavirus. The company had been traumatized by its failure to find a vaccine for the Zika virus after a 2016 outbreak, Mr. Bancel says, though it is now developing a backup candidate. Dr. Hoge says he worried coronavirus vaccine work could jeopardize the development of its other products, some with major commercial potential.

“Are we sure we should be doing this?” Dr. Hoge recalls asking in internal discussions.

“This is going to be a big deal, we have to do something now,” Mr. Bancel responded, according to Dr. Hoge.

The company had a “once-in-a-lifetime opportunity” to save lives, says Mr. Bancel, whose mother is battling blood cancer and is immunocompromised.

Mr. Bancel and the NIH, which co-designed the vaccine, set an ambitious new goal: going from vaccine design to a human trial in three months, an unprecedented pace. The company, which counts about 800 employees, is hiring about 150 new workers largely to assist in the effort to scale up manufacturing capacity.

Unlike competitors who are developing vaccines that use a killed coronavirus or proteins from the virus, Moderna’s vaccine uses only a genetic sequence from the virus. The programmed material—mRNA—directs a person’s cells to make proteins that, in turn, trigger the immune system to produce antibodies to the coronavirus.

A potential advantage of Moderna’s approach: The mRNA vaccine can be designed and manufactured more quickly than vaccines based on older technologies, which often require growing the virus or proteins for weeks or months.

Moderna’s vaccine was among the first to begin testing in humans. After producing positive preliminary results in the first phase of human testing, the vaccine started the second stage of studies with 600 people in May. The tests this month will encompass up to 30,000 people, and will determine whether Moderna’s vaccine reduces rates of infection and disease.

The relatively rapid progress, and its soaring shares, have made Mr. Bancel a billionaire, at least on paper. The company is now worth around $24 billion, more than many drugmakers with medicines already on the market.

Some days, news of the Moderna vaccine’s progress has powered the overall market.

Can BNP Paribas beat the investment banking jinx?

The French lender is the latest European bank with ambitious plans to take on Wall Street

BNP Paribas wants to become the dominant force in European investment banking, displacing Deutsche Bank and Barclays and taking on Wall Street heavyweights such as JPMorgan Chase.

It is the same strain of ambition that — more often that not — has led to abject failure over the last 30 years at banks including Deutsche, Royal Bank of Scotland and Nomura, as bouts of expansion and hiring have been followed by humiliating retreat, job cuts and writedowns.

Today rivals suggest BNP, under chief executive Jean-Laurent Bonnafé, is engaged on just the latest doomed attempt to compete with US powerhouses on a global scale. They suggest that the Paris-based bank could be overextending itself in an attempt to win short-term market share.

The intent is clear. Last year brought BNP’s takeover of Deutsche’s $200bn prime brokerage business, part of a plan to become a top-three player in the potentially lucrative but risky business of servicing hedge funds.

In the first quarter of this year, with smaller rivals hobbled by the coronavirus pandemic and US banks focusing on their home market, the French lender added half a trillion euros of additional loans to its balance sheet.

“Some have suggested this is just a sign of BNP Paribas acting recklessly, using the balance sheet and a big, open cheque book,” said Yannick Jung, head of global banking at BNP. “I can assure you that all of these loans that we’ve underwritten have been successfully distributed . . . there is nothing random about what we have done.”

BNP underwrote more than €83bn of syndicated loans in Europe between mid-March and the end of May, leading the region with a 16.8 per cent market share, up from 7.9 per cent for 2019. In the six weeks to the end of May, it worked on more than half of the investment-grade corporate bond issuances across Europe.

“Our clients told us that the first bank that was in touch when hell broke loose was BNP Paribas,” Mr Jung added. “We are the bank that reopened the syndicated loan market with a $10bn facility for [UK oil major] BP, which we underwrote in full.”

He pointed to the “extraordinary” decision of German conglomerate Siemens to pick BNP, rather than a local bank, to underwrite an emergency €3bn credit line to help it survive the pandemic. BP and Siemens did not immediately respond to a request for comment.

“The ambition of BNP is something to watch and I am in no way dismissive,” said Magdalena Stoklosa, analyst at Morgan Stanley. “Sometimes behaviour in moments like this goes a very long way [with clients] . . . They were one of the few happy to use their balance sheet over the past few months supporting corporates and then ensuring the European bond market could reopen.”

At the height of the panic in March and April, several US banks balked at providing credit to European businesses in distress. JPMorgan stepped back from lending to BASF, the German chemicals group, while Goldman declined to take part in a €12bn syndicated loan for German carmaker Daimler.

“US banks [are] pulling out, or being much more cautious, less dependable,” said Mr Jung. “There are plenty of situations where our clients were hoping that US banks would step in by our side and share the underwriting, but then they were not comfortable doing so.”

However, Omar Fall, an analyst at Barclays, doubted BNP would be able to maintain its position as lead regional underwriter. “The US banks may be pulling out of European syndicated lending now, but I remember they did that during the last crisis and they came back again,” he said. “I’m sure that once the current crisis dies down, there is every likelihood the US banks will be back in Europe and most likely little will have changed [in the power dynamic].”

The history of European banks taking on Wall Street rivals is littered with failure. And there are precedents for opportunism during a crisis backfiring — notably at Deutsche and RBS during the last financial crisis more than a decade ago.

BNP had a starring role in the early days of that crisis, with its decision to close three investment funds exposed to the subprime market in August 2007, but the group emerged stronger than most. Deals for Belgium’s Fortis Bank and Rabobank’s Polish unit helped the business spread across Europe.

However, its transatlantic ambitions were halted in 2014. It pleaded guilty to breaking US sanctions and reached an $8.9bn settlement with several state and federal authorities, which led to the French bank pulling back from its US dollar clearing activities.

That same year Yann Gérardin, head of the corporate and institutional banking division, outlined plans for the investment bank. He repositioned BNP to adapt to tougher capital and risk regulations, moving away from proprietary trading and towards serving clients.

Today Mr Gérardin sees an opportunity as other lenders retreat behind their borders, unwilling to risk their balance sheets abroad amid political pressure to prioritise their home economies ravaged by the fallout from Covid-19.

“We have a huge advantage given we are a very solid, well capitalised bank,” he said. “It’s easier to serve your clients when you are in good shape then when you are suffering.”

Despite BNP’s increased activity in underwriting loans, rival bankers are sceptical about the long-term benefits. “In syndicated loans, they have been aggressive, but I would call it fake underwriting,” said the chief executive of a major rival. Much of the business is low risk with little fee revenue, he added.

In BNP’s home market of France, the government has introduced a €300bn guaranteed loan scheme designed to help troubled businesses in badly hit sectors. Under the initiative, BNP has already lent €17bn to companies including Renault and Air France-KLM.

Although the loans are guaranteed by the state up to 90 per cent, banks must keep some of the risk on their own balance sheets. As another rival banker said of BNP, “that means getting into some complicated situations and they are going to hope there is a pay-off down the road”.

Often banks lend at slim margins in the hope of winning more lucrative business later on, such as advising on a merger or winning a cash management or hedging mandate.

But different corporate habits around raising capital and M&A in Europe mean the profitability of becoming number one on the continent is questionable.

“I’m sceptical of anyone becoming a European champion for the simple reason that it’s meaningless,” said Jerry del Missier, former chief operating officer at Barclays and now head of Copper Street Capital, an alternative investment manager. “You do not have a European investment banking market. The profit pools are non-existent.”

BNP has not been immune to the effects of the pandemic. It warned in May that coronavirus could knock a fifth off its 2020 profits. It suffered a €184m blow to its equities trading division after complex derivatives products suffered in volatile markets, and earmarked an additional half a billion euros to cover potential loan losses.

In the first quarter, BNP’s balance sheet increased by €500bn to €2.7tn, which reduced its leverage ratio — a measure of its capital against total assets — to 3.9 per cent from 4.6 per cent since the start of the year. Banks are required by regulators to stay above 3 per cent.

Mr Jung painted this as a virtue. He said the bank was taking on calculated risk and using its balance sheet, in the hope that the clients it lent to today would pay dividends in the future.

“BNP did the job,” said Mr Jung. “We were the one European bank that went out of its way during the crisis to support its client base . . . We believe we are on our way to achieving our goal of becoming the leading European [corporate and investment bank]. That is where we belong, that is where we want to be and that is where we will stay.”