Will Moderna Stock Go Up Again?

Moderna Inc. [NASDAQ: MRNA] is a Massachusetts-based American biotechnology and pharmaceutical company.

It was established in 2010 and focuses on the discovery and development of transformative medicines and vaccines based on messenger ribonucleic acid (mRNA).

In other words, the company develops and discovers drugs that prompt the body to trigger its immune response through production of proteins or antibodies inside a patient’s cells.

Moderna has a deep pipeline of over two dozen mRNA therapeutics and vaccine candidates, including prophylactic vaccines, cancer vaccines, and vaccines for infectious, immuno-oncology, and cardiovascular diseases.

The clinical stage biotechnology company also has vaccine candidates for flu, HIV, the Zika virus, the Nipah virus, and a second Covid-19 vaccine. 

The Bull Case for Moderna

Moderna has jumped over 320% year-to-date and, on top of that, has not lost much steam during the recent market weakness, which attests to the fact that investors are still bullish on Modena, even after the stock’s epic run post Covid vaccine approval.

The U.S. is facing a surge of Covid-19 infections fueled by the highly transmissible Delta variant, and this is keeping Moderna at the top of investors’ minds.

Moderna’s future holds a lot of promises as the company is likely to significantly benefit from recent FDA approval of a booster shot for vaccinated individuals with a compromised immune system, as well as the ability for the Moderna vaccine to be used for a younger population aged 12 to 15.

More importantly, investors are keeping an eye on the $20 billion in purchase agreements the company has for 2021, with orders confirmed for 2022 and 2023 as well. It means Moderna, for the near future, is likely to have an established revenue stream which is really good news for investors.

It is important to note that a purchase agreement isn’t the same as actual revenue on the books but, nonetheless, is indicative of the fact that Moderna’s vaccine will continue to remain in demand as long as Covid-19 remains a credible public health threat.

Moderna and rival Pfizer (PFE) are the top two sellers of coronavirus vaccines in the U.S. Moderna, in addition to the U.S. government, has also signed major vaccine supply agreements with other countries worldwide. The vaccine, the company’s very first commercialized product, turned out to be the golden goose for the company, generating $1.2 billion in profit during its first full quarter on the market.

Considering current orders, the biotech expects the vaccine to bring in $20 billion in revenue this year. The icing on the cake is that Moderna owns full rights to the vaccine, which means it gets to keep the entire share of the profit. 

Sustained Efficacy

Also, recent studies have shown Moderna’s vaccine to be more protective than the Pfizer-BioNTech vaccine in the months after immunization. A study by Centers for Disease Control and Prevention found that the efficacy of the Pfizer-BioNTech vaccine against hospitalization fell from 91 percent to 77 percent after a four-month period following the second shot. The Moderna vaccine showed no decline over the same period.

Also, investors can hope for the dream run to continue, as there are a number of catalysts on the horizon that could further augment the demand for Moderna’s vaccine. It is likely that regulators may expand use of the vaccine to teens and children. And booster shots (that means three doses instead of two) also could be part of the vaccination schedule.

Recurring Revenue Model

Of course, it’s a foregone conclusion that vaccine revenue growth will not last forever as the impact of the pandemic subsides and life returns to normal. However, there is a possibility that coronavirus vaccination could become like the flu shot, which means recurring revenue for Moderna.

As for now, Moderna’s entire revenue and profit is dependent on the coronavirus vaccine. But instead of resting on its laurels, Moderna is actively working on other vaccine candidates.

Cash Pile To Fund Pipeline Of Products

The biotech company currently has 37 programs in the pipeline; 22 are in clinical trials. And Moderna’s huge cash level of $15 billion could help it fund its ambitious vaccine programs. 

As a company that is focused on creating transformative medicines based on messenger RNA (mRNA) technology, Moderna’s medicines could help humanity deal with a myriad life-threatening diseases and illnesses.

The company’s pipeline has some potential blockbuster candidates, including a Cytomegalovirus vaccine, a Zika vaccine, a flu vaccine, and an HIV vaccine.

Moderna is expected to begin a phase 3 trial for its cytomegalovirus (CMV) vaccine candidate this year. CMV is a common virus that can be life-threatening for pregnant women and people with weakened immune system. 

Of course, not all vaccine candidates can be expected to replicate the stupendous success of the coronavirus vaccine, but even if a couple of them turn out to be successful, we could be looking at another monumental run for Moderna’s stock, which is another reason why it’s one of the best biotech companies for investors to consider buying.

The Moderna Bear Case

Moderna has become synonymous with the Covid-19 vaccine, the success of which has sent its valuation skyrocketing, and caused its stock price to more than quadruple. The biotech firm, with a market cap of over $170 billion, is trading at 8.6 times expected 2021 sales.

That’s not bad, but we are not sure how long the honeymoon is going to last as the pandemic is brought under control and herd immunity is achieved.

Revenue Cliff On The Horizon

A very high valuation, growing competition and optimism that pandemic could be over in a year means Moderna is most likely to face a revenue cliff in the years ahead.

Shares of Moderna suddenly found themselves in the stratosphere after the company’s vaccine became the second after Pfizer’s vaccine to receive emergency use authorization from the FDA in December 2020.

The vaccine, technically called mRNA-1273, was the first mass-produced commercial product for the biotechnology firm. It was a commercial blockbuster for the biotechnology firm, and an obscure company quickly went from zero to hero within a year, signing supply agreements worth billions of dollars with governments around the world

Moderna’s Covid-19 vaccine has been a defining commercial success for the firm, generating handsome revenue for the company, with the US government being its biggest customer.

Other countries, too, have been lining up to purchase Moderna’s vaccine with product sales to other countries expected to generate billion in revenue for the biotechnology firm. In short, surging product sales and pent-up demand for vaccines have catapulted Moderna’s market value to an astral plane.

Will The Moderna Fairytale End?

Moderna is expected to generate more than $20B in revenues this year, but the fairytale run for the company is likely to suffer a bump as the world moves on from the pandemic and life returns to normal.

This sentiment, in fact, is echoed by none other than Moderna’s CEO Stephane Bancel who thinks the coronavirus pandemic could be over in a year as increased vaccine production ensures global supplies and herd immunity is achieved. 

Moderna’s pandemic-driven frenzy, as such, is set to experience a drop-off in revenues, starting in FY 2022, and gather further momentum in 2023, with falling demand for Covid-19 vaccines.

Moderna’s expected slide in future revenue, coupled with its high valuation, is likely to dampen investors’ sentiments in times to come.

Pipeline Products Unlikely To Be As Successful

Initial investors in Moderna have been handsomely rewarded, but it seems highly unlikely that the company will be able to repeat its mammoth success as the pandemic is brought under control and immunity level of the global population rises. 

Moderna, no doubt, has a huge pipeline, with around two dozen vaccine candidates, but it’s hard to know at this juncture how many of these vaccines will see the light of the day and bring in a revenue windfall for the company like the Covid vaccine did.

Given the sky-high high valuation of Moderna and fear of declining sales, investors could be tempted to look for better investment opportunities in the EV market.  Coming up quickly with a Covid vaccine was a defining moment for Moderna, as it raised the company’s stature as well as its revenue graph.

However, it will be incredibly hard for Moderna to keep the momentum going as the pandemic winds down and life returns to normal. However, the need for booster shots and emerging new variants of the virus which would require continual immunization shots, can help Moderna generate additional billions of dollars in revenues.

Moderna Stock Price Forecast

Analysts, offering 12-month price forecasts for Moderna Inc., have a median target of $363, with a high estimate of 485.00 and a low estimate of 115.00.

Is Moderna Stock A Buy?

Biotech stocks, undoubtedly, are one of the most high-risk, high-reward sectors of the stock market, and not without some concrete reasons.

On one hand, a life-changing product can do wonders for a company, and lead to massive price upside for investors. On the other, a company can spend millions of dollars on R&D without coming out with any product of any value.

Also, biotech companies are always at the mercy of FDA approvals, and any negative headlines can do irreversible damage to their reputation. However, the risk of investing in biotech companies can be mitigated to a considerable extent by focusing on quality names with an impressive product portfolio.

With the world currently finding itself in the grip of a raging pandemic, it is a golden opportunity for many biotech companies to deliver handsome returns for investors over the next few years.

And when we talk about the current crisis, one name that instantly springs to mind is that of Moderna. The company’s only commercial product is the Moderna Covid-19 vaccine, and this single product has generated billions of dollars for the company.

Moderna shares skyrocketed 434% in 2020, thanks to approval of its Covid vaccine. The stupendous run continued in 2021 with Moderna stock price soaring more than 360% since the beginning of the year to reach a high of more than $495 a share as investors’ enthusiasm towards Moderna showed no signs of abating.

The company generated billions of dollars in vaccine revenue, and turned profitable after just one full quarter of coronavirus vaccine sales.

Moderna’s Covid-19 vaccine has been a runaway success for the company, allowing it to sign multiple supply agreements with governments around the world and securing $20 billion worth of Advance Purchase Agreements. In the second-quarter earnings release, Moderna said that it had already signed $12billion in Advance Purchase Agreements for FY 2022.

Also, analysts and investors would be closely watching Moderna’s announcements of Advance Purchase Agreements for the coming years, as it would translate into more revenue for the company. Moderna recently announced that it has signed a supply agreement with Canada for as many as 105 million vaccine doses, all the way through 2024.

Product sales in the first six months of the year surged to $6.3 billion, up from just $75 million in the year-earlier period. Total profits for FY 2021 already surpassed $4 billion compared to development cost-related losses of $241 million in the first six months of 2020.

The company expects its revenue to reach up to $20 billion this year, helping the company surpass $12 billion in profits this year – an astonishing feat for a company which hardly had any product worth mentioning until about recently.

Is It Too Late To Buy Moderna Stock?

Investors who haven’t invested in Moderna may think that the ship has sailed, and the current price of the stock means it is too late to get in on the Moderna growth story. However, there’s still plenty of juice left in the stock with some analysts predicting that it could breach the $500 mark in the near term. Let’s take a closer look to find out if the enthusiasm is justified.

Moderna commercializes only the coronavirus vaccine, but let’s not forget that it is one of the most-needed products right now. And health experts believe that coronavirus is here to stay for years to come – long after the pandemic is over. It means the demand for Moderna’s vaccine will remain strong for quite some time.

Still, for the shares to reach $500 in the coming months, Moderna will need catalysts.

And investors are expecting that new emerging variants of Covid, administration of booster shots on a mass scale, and the vaccine’s use by younger age groups would allow Moderna to bring into play its manufacturing setup and technical knowhow to generate billions of dollars in revenues that are not part of estimates yet.

Also, the European Medicines Agency is evaluating using a booster shot of Moderna’s Covid-19 vaccine for anyone over 12 years old. The booster would be given six months after the first two doses. The EMA wrote in a statement that Moderna’s application would undergo an accelerated approval process.

At the beginning of September, the EU’s medicine agency and the infectious disease agency said booster shots are not yet needed, although a third shot could be helpful for people with weakened immune systems.

Moderna’s cause can be further advanced by the fact that its Covid-19 vaccine has one of the highest efficacy rates at 94.1% in the market. Efficacy rates are the determinant of the effectiveness of a vaccine, with higher efficacy related to better protection against the virus.

Also, the Moderna vaccine, unlike that of AstraZeneca [AZN] and Johnson & Johnson [JNJ], did not have to suffer negative press and delayed registration due to reports of their vaccines causing blood clots.

Skeptics View

There are, of course, skeptics who believe that it will be incredibly tough for Moderna to continue with its current intense momentum, as the demand for its vaccine is likely to wane once the pandemic is brought under control and herd immunity is achieved.

However, one should not forget that Moderna’s experience, and its seamless integration of vaccine development, authorization, manufacturing, and distribution could help it generate additional billions of dollars in revenue with boosters and expanded vaccine use in younger age groups.

To sum it up, Moderna has billions of dollars in revenue and profit right now. More importantly, it has 37 programs in the pipeline, and with the coronavirus vaccine, it has already proven that mRNA technology can work.

Even if a couple of them follow in the footsteps of the coronavirus vaccine, we could be potentially looking at another golden run for the company.

Moderna Investment Thesis Conclusion

Sagacious investors, keen on identifying the next exciting frontier for mankind, may look for organizations that are on the way to conquering outer space. But the pandemic, and the worldwide chaos it unleashed, has put the focus firmly on (at least for the time being) on the vaccine industry, and the vast ecosystem surrounding it.

Investment in biotech companies offers promises of handsome rewards for investors. Moderna raked in billions of dollars in revenue and profit with the commercialization of just one vaccine.

The biotech company, which engages in the development of transformative medicines based on messenger ribonucleic acid (mRNA), has a lot of vaccines in the pipeline, and approval of even a couple of vaccines by the U.S. Food and Drug Administration could bring in another windfall for the company.

Moderna emerged as one of the biggest winners of the pandemic, thanks to its Covid vaccine. And approval of booster shots by the FDA  is another great news for MRNA and its peers.

The Biden administration also is a fan of booster shots, which means additional source of revenue for Moderna. Booster shots, however, are only likely to be recommended for older people, or people with some underlying health conditions.

Also, booster shots would naturally generate additional revenue for Moderna, as people who have already been vaccinated will get another shot of the vaccine.  This can aid Moderna’s near-term revenue and growth, but is unlikely to impact its longer-term future in a significant way, as the world will eventually have dealt with Covid.

Will Moderna Stock Go Up Again?

Moderna’s Covid vaccine was the second vaccine to be approved by the FDA. And just like the story of Noah, the windows of heaven were opened for the company as well as the investors who bought Moderna’s stock before the pandemic.

The shares exploded upwards after Moderna’s vaccine candidate turned out to be a monumental success. Shares gained 530% over that time frame, which means an investment of $10,000 returned more than $63,000 in just one year.

Let’s now have a look at the outlook for the year. Moderna, in the first half of 2021, generated revenue of $6.3 billion, a colossal jump of over 9000% from the meagre $70 million it generated during the same period a year ago.

Also, the company, in the first half, generated EPS of $9.30. Analysts believe the EPS will be even stronger in the second half of the year.

The new healthcare titan is enjoying an outstanding 2021, and it is likely to have a strong 2022 as well, thanks to international sales and approval of booster shots. However, things are unlikely to remain as rosy beyond that, with some projecting a revenue decline of more than 40% between 2022 and 2023. Nevertheless, let’s not forget that these are just projections and Moderna may once again prove all doubting Cassandras wrong.  

Still, the company’s stock is expensively priced, and its cloudy earnings outlook could set the alarm bells ringing for investors, as the market is known for severely punishing a high-growth biotech/pharma with declining revenue and profitability.

This is, at least, in the realm of possibilities for Moderna as well, should the gloomy projections about Moderna turn out to be right.

Moderna Investment Thesis: The Bottom Line

Moderna would have been a superb buy a year ago. It is still going strong, but then past performance is no guarantor of an exceptional future.

It looks extremely unlikely for Moderna to continue its dream run post 2022. In fact, Moderna’s CEO Stéphane Bancel believes that COVID-19 vaccines could help usher in a return to normalcy in the second half of next year. This could be great news for people across the world, but Moderna’s investors are unlikely to join the celebration.

The main problem with Moderna is that the company is a one-trick pony, for now, sans any product in the market except its Covid vaccine.

Of course, Moderna has other vaccine candidates in the pipeline but none of them are yet in late-stage testing (no Phase III candidates).

It means it is unlikely any other product in the near term has the potential to offset the declining revenue from its Covid vaccine.

All in all, Moderna is a very good company, but the future looks a bit hazy because of all the uncertainty surrounding the company’s future revenue and profitability once the pandemic becomes a thing of the past.

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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.