What Will Drive Moderna Stock Back Up?

Moderna, Inc. (NASDAQ:MRNA) may be a leading biotechnology company that is breaking new ground with a novel class of medicine that uses messenger ribonic acid (mRNA) but its share price has been nothing short of calamitous this year.

The firm develops treatments and vaccines for infectious diseases, cancer-related immunotherapy, rare illnesses, and autoimmune issues and has a strong pipeline with 45 therapeutic and vaccine programs, including nine in late-stage development. This places the company at the leading edge of medical innovation.

The company’s so active in making vaccines that any single blockbuster drug could spark a new rally, but is that pie in the sky or something shareholders can reasonably hope for?

What Are Moderna’s Latest Vaccine Developments?

In July, Moderna and Mitsubishi Tanabe Pharma Corporation signed a joint agreement to promote Moderna’s mRNA respiratory vaccines in Japan, including the COVID-19 vaccine Spikevax®.

The deal is struck so that Moderna makes the vaccines, sells them and distributes them but Mitsubishi Tanabe Pharma’s capitalizes on local knowledge of the Japanese market to get better results.

In June, Moderna’s main goal was met by its Phase 3 test for mRNA-1283, an investigational next-generation COVID-19 vaccine. It showed that it worked just as well as Spikevax®, and the results were even better in adults.

This makes people trust Moderna’s mRNA technology more and shows that it can help with important health issues around the world.

Moderna also reported that its Phase 3 trial of mRNA-1083, a combined vaccine for influenza and COVID-19, created a stronger immune response than existing vaccines. For investors look for a company with an edge, Moderna stands out in this regard because it is still the only company with a successful Phase 3 vaccine that combines flu and COVID.

Moderna Sales Are Flat for the Year

Moderna’s latest quarterly report showed a massive improvement from the prior quarter with revenues of $1.8 billion versus $241 million in Q2.

Adding to the woes for shareholders was the fact that management reported an operating loss of $1.36 billion in the quarter, a figure sufficiently high to threaten balance sheet cash in a big way if it persists.

The loss of $3.33 per share weakened the firm’s liquidity position with cash and cash equivalents sliding to $2.48 billion, down from $2.91 billion at the close of 2023. By the end of the quarter, total current assets had slipped to $9.66 billion, compared with $10.33 billion at the end of last year.

Moderna Profitability Has Been Choppy

Moderna barely squeezed out a profit of $13 million in the most recent quarter but the prior quarter was downright concerning with a $1.2 billion loss reported.

The last four quarters have been very choppy with the company barely reporting net income in the black in two quarters and announcing sharp losses in the other two.

Earnings before interest and taxes have been negative in three of the four quarters, and quite dramatically so, explaining away clearly the share price plunge this past year.

What Does The Future Look Like For Moderna?

Management anticipates bringing in somewhere between $3.0 billion and $3.5 billion from its portfolio of respiratory products with an equal split for the most part between the final two quarters of the year.

This switch-up in guidance is first a result of Moderna foreseeing a significant reduction in its 2024 sales within the European Union. Second, management has acknowledged international orders may slide next year and finally, growing competition in the U.S. market for respiratory vaccines is likely to curb market dominance.

Nevertheless, management intends to spend roughly $900 million on capital expenditures during 2024, and it expects to exit the year with close to $9 billion in combined cash and investments, a fortress level balance sheet if ever there was one given the lack of debt.

Will Moderna Stock Ever Recover?

Moderna is the only company with a successful Phase 3 vaccine that combines flu and COVID and that alone may be sufficient to cause the stock to recover.

The costs of developing new vaccines has been a real anchor and the balance sheet reveals it is quickly burning through the once enormous cash pile. The big picture isn’t being helped lower sales that have also hurt gross margins and in turn profitability. 

Still, with a cash-rich, albeit dwindling, pile of $7.8 billion in reserves on the balance sheet, Moderna isn’t at risk of a fragile balance sheet hurting its ability to finance new developments.

Turning from the balance sheet to the P&L statement, management expects the top line to fall by as much as 31.6% year-over-year and It doesn’t get a whole lot better on a 5-year horizon where net income is expect to crash by 2% annually over the next half decade.

Analysts are expecting revenues to drop by 40.7% compared to last year, and come in at ballpark $1.67 billion. So, even though there are growth levers that may well spark a rally, the fundamental business weakness evident on the income statement have weighed heavily on shares of Moderna that have plunged over 65% this year and technically they aren’t showing strong signs of rebounding.

In other words, until Moderna proves that it can bounce back fundamentally, the technical outlook may look decidedly so-so. And for investors the takeaway is that there is no compelling reason to jump in with both feet for now, though that may change with the next clinical trial approval.

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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.