Is Moderna Stock Set to Rebound?

Moderna stock plunged last month after the company said its respiratory syncytial virus shot, mRESVIA, only has 50% efficacy in preventing RSV after 18 months. This is below GSK’s Arexvy, which demonstrates 78% efficacy after only two years.

Additionally, Pfizer’s candidate was 78% efficient through the second RSV season. Moderna stock has slumped about 22% over the past month. In light of the disappointing clinical results and share price slump, is Moderna now on sale?

What Exactly Does Moderna Do?

Moderna, Inc. (NASDAQ:MRNA) is among the most prominent biotech firms and sprang to infamy after developing and selling mRNA treatments and vaccines during the 2020-21 era.

The company commercialized one of the first COVID-19 vaccines by gained emergency use authorization in December 2020 and uses synthetic mRNA as a means to program cells to produce proteins that can mitigate or cure diseases.

Moderna does much more than sell its flagship vaccine and now has multiple programs, including mRNA treatments for infectious diseases and several types of cancer, cardiovascular diseases, and rare diseases.

The company’s mRNA advancements have catapulted it to a leadership position the biotechnology industry but against stiff competition from Pfizer and others, its share price has struggled to keep pace, so what does the future hold?

Weakness In Recent Years Set To U-Turn?

Moderna encountered several issues after the pandemic that influenced the company and its stock. Waning customer demand for COVID-19 vaccines means Moderna’s main product generates lower revenues compared to during the peak of that era. Also, other competitors in the vaccine market, such as Pfizer and BioNTech have heightened competitive threats.

The firm heavily relied on its flagship vaccine but that concentration in the top line soon gave way to revenue deficits that highlighted the need for more product diversification.

Moderna has several mRNA therapeutics and vaccines in the pipeline but they are still in various states of development, so it may take years before they reach the market. The uncertainty around approval for new products and their commercialization contributes to the company’s weakness.

In the last reported quarter, Moderna posted $167 million in sales, driven by its only product on the market, the COVID-19 vaccine called Spikevax. The company’s first-quarter revenue is down significantly from the $1.9 billion it reported in the same quarter last year.

Another important factor is the decreasing interest among populations in adhering to health interventions for the vaccination. This behavioral shift has impacted Moderna’s existing revenues and, worryingly, threatens future sales too as well as its share of the market. The reality is Americans are simply not getting booster vaccines as often as they used to, which has translated to stubbornly lower sales.

Falling revenues have hurt the bottom line too, and that has led to a lingering question, what can Moderna do to re-ignite growth?

What Is Moderna’s Growth Strategy?

As of last December, 45 projects were being worked on in focus areas including infectious diseases, immuno-oncology, and rare and autoimmune diseases.

Part of Moderna’s long-term strategy involves launching about 15 new products in the respiratory, latent virus, oncology, and rare disease segments over the next five years.

Management plans to deliver a broad respiratory vaccine portfolio with COVID-19, seasonal flu, and RSV vaccines, including single-shot and multivalent options. Expanding the line of respiratory products has the potential to drive both revenues and margins, leading to ever greater efficiencies.

The company is also progressing with vaccines for viruses like cytomegalovirus, Epstein-Barr virus, herpes simplex virus, varicella-zoster virus, norovirus, HIV, and Lyme disease. It has in store a number of possible treatments at various phases of the clinical trial process.

Management is also investing in rare disease programs, including programs for propionic acidemia, methylmalonic acidemia, and glycogen storage disease type 1a (GSD1a). Pivotal studies are expected in 2024.

If management can stay on track with their vision, the result will be a broad product line of mRNA solutions addressing everything from infectious diseases and cancer to rare hereditary diseases.

Is Moderna Stock Set To Rebound?

If the 22 analysts covering Moderna stock are correct, Moderna stock is set to rebound to $122 per share, representing 31.7% upside from present levels.

With that said, it’s reasonable to view Moderna with at least some degree of skepticism because it’s so reliant on a single vaccine and lacks other revenue streams. This view has the potential to materially change if Moderna commercializes new products that generate substantially new and higher revenues.

In light of the reward-to-risk ratio now, Moderna presents an intriguing opportunity where revenue concentration is poor now and the balance sheet is threatened by a worsening bottom line as revenues have declined yet, on the flipside, any one of the many products in the clinical trial process now have the potential to re-ignite the stock once again.

With billions still sitting on the balance sheet, it’s hard to bet against Moderna now. It succeeded in proving with its flagship product that it can generate billions in revenues and scale globally. The odds of it being a one-hit wonder are slim in light of the long cash runway it has to develop further solutions. So, while sentiment is dim at the moment and 11 analysts downgraded their estimates for the upcoming quarter, the longer term picture has the potential to be very rosy indeed.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.