Shares Moderna (NASDAQ: mRNA) have climbed more than 300% since the start of the year. And much of that gain has happened over the past two months. Earlier this year, investors saw Moderna turn profitable after a full quarter of coronavirus vaccine sales. Now they are betting on the potential clearances for a booster and use of the vaccine by younger age groups.
The upcoming image looks brilliant for Moderna. But if you haven’t bought shares of this innovative biotech company yet, today’s share price might scare you. After the winnings, is it too late to make Moderna’s growth story? Let’s take a close look.
Image source: Getty Images.
Moderna and Pfizer vaccine contracts
First of all, a little history. Moderna and rival Pfizer are the top two vendors of coronavirus vaccines in the United States. They each signed contracts for 500 million doses to be delivered in the first quarter of next year. Meanwhile, the Moderna vaccine and the Pfizer vaccine have fully immunized 67 million and 99 million Americans, respectively. The companies have also signed important agreements with other countries around the world.
Now let’s focus on Moderna’s finances. The vaccine, the company’s first-to-market product, generated a profit of $ 1.2 billion in its first full quarter on the market. Given the pending orders, biotechnology expects the vaccine to bring in $ 20 billion in revenue this year. She owns all the rights to the vaccine and therefore does not have to share the profits with a partner.
Beyond profit and revenue, another plus is Moderna’s cash flow level. The company has accumulated $ 15 billion in cash. This is great because it means he has funds to support his big pipeline. But more on the pipeline later.
So now the big question is: Will Moderna generate billions in recurring revenue from the coronavirus vaccine? It’s possible. Experts say the coronavirus is here to stay. And given the duration and depth of the pandemic, governments will likely be proactive in ordering many doses of the vaccine for their citizens.
StÃ©phane Bancel’s prognosis
CEO StÃ©phane Bancel said earlier this year that market needs may be greater next year. He is right. That’s because by next year regulators could expand the use of the vaccine to adolescents and children. And reminders could also be part of the immunization schedule. Moderna recently applied to the United States for approval of a third injection of its vaccine (at a lower dose) as a booster. The company is also working on strain-specific boosters.
If these authorizations arrive, vaccine orders could be larger. A booster means that each person would need a total of three doses rather than just the primary series of two doses. And authorization in younger people means a larger population to be vaccinated.
Of course, it’s impossible to predict exactly how long vaccine revenue growth may last. But one could imagine that the coronavirus vaccination would become a bit like the flu vaccine: an annual routine. If this happens, Moderna can generate significant recurring revenue. He is also working on a combined coronavirus / influenza vaccine candidate. It could be a major product down the road.
Right now, Moderna relies on the coronavirus vaccine for its revenue (and profits). But another potential blockbuster could be on the horizon. The company will begin a phase 3 trial for its cytomegalovirus (CMV) vaccine candidate this year. CMV is a common virus that is most dangerous for women who are pregnant or have weakened immune systems. There is currently no vaccine for this.
And Moderna has 37 programs in the works; 22 are in clinical trials. Its programs use mRNA technology, the same technology that powers the coronavirus vaccine. This does not mean that all programs will be successful. But the vaccine has given us proof that this approach can actually work in humans.
Billions of dollars in revenue
So, to sum up, Moderna currently has billions of dollars in revenue and profit. And it has many candidates who could complement its product portfolio in the future. Of course, there is always a risk of failure for one or more programs being tested. This is a risk that all biotechnology and pharmaceutical companies face.
Today, this incredible story of growth can seem costly. Moderna stock is more than $ 100 above Wall Street’s 12-month average price forecast and is trading at 14 times expected earnings estimates. That doesn’t sound like too much, but the multiple is up from less than 4 earlier this year.
Is it too late to buy Moderna shares? If you’re willing to hang on to them for the long haul, they’re still a buy today. But I would expect the gains to slow down at some point. So you might not earn as much on the investment as those who bought before the pandemic and sold at the end of last year, for example. These investors, however, were rewarded for taking a big risk. At the start of the pandemic, we weren’t sure whether Moderna’s vaccine candidate would be successful.
Today the risk is much lower. The benefits run into the billions and we understand the potential of mRNA in vaccine development. We are therefore paying a higher price to participate in the second chapter of this exciting adventure. But it is very possible that we are still at the beginning of Moderna’s story.
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Adria Cimino has no position in the mentioned stocks. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.