Covid-19 vaccine play Moderna (NASAQ:MRNA) has had a hard landing. MRNA stock came tantalizingly close to the $500 level in early August 2021. If the stock had successfully surpassed that psychological mark, it would have given the biopharma an enviable market capitalization of over $202 billion, positioning it in the elite list of top 10 pharma companies by market value.
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Remember, all the other companies currently featuring in the list have been running their businesses for a long time, as opposed to Moderna, which came into the scene only about a decade back.
But now it trades around $150, placing it outside the top 20 in that list.
How did MRNA stock get caught in its recent rut? Is its heyday already in the past or is redemption in sight, either in the near term or at least in the distant future?
Moderna’s Road to Glory
Moderna’s ticket to stardom is mRNA technology – one that uses messenger RNAs to instruct our cell to produce the spike protein present on the surface of the virus that causes Covid-19. Our body will then be tricked into producing an immune response to the engineered spike protein, which imparts immunity against any potential infection.
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For those of you curious about how traditional vaccines differ from the mRNA tech, the former uses inactivated live pathogens or microbial proteins. mRNA vaccines are relatively easier and faster to produce. That was crucial for containing a pandemic that began to spread at an alarming pace at the start of 2020, threatening to derail the global economy.
Moderna was not alone in the mRNA vaccine race. Teeny-weeny German biotech BioNTech (NASDAQ:BNTX) had joined hands with U.S. pharma giant Pfizer (NYSE:PFE) to develop its own mRNA vaccine against the Covid-19 virus. A few others, including a handful of Chinese companies, also jumped into the fray. Most of those preferred to take the traditional vaccine tech route, however.
From the time Moderna announced funding from the Coalition for Epidemic Preparedness Innovations in late January 2020, things proceeded at a lightning-fast pace. It took only about 11 months for Moderna to move its vaccine – now called Spikevax – from lab testing to the FDA’s table. It then earned its emergency use authorization.
Mind you, traditional vaccines take about 10-15 years to go from lab to shelves.
Moderna’s vaccine development journey was fairly smooth but for a slight delay in completing enrollment in the late-stage trial due to a reduction in Covid cases. Peer Novavax (NASDAQ:NVAX), as I discussed in an earlier story, has yet to get FDA authorization for its vaccine despite starting almost at the same time as Moderna, for reasons more than one.
MRNA Stock Gets Shot In The Arm But Efficacy Wears Off
With not much in the pipeline, Moderna’s shares were locked in a trading range of $13-$23 between the middle of 2019 and early 2020. The stock broke out of this range in late February 2020, when the company said it began shipping the first batch of its vaccine for testing by the National Institute of Allergy and Infectious Diseases.
The stock broadly rallied through the development of the vaccine, and amid its authorizations by multiple regulatory agencies and clinching of supply deals with several governments and agencies. It topped out at $497.49 in August 10, 2021 and has been tracing a downtrend since then.
Pushbacks Weighing On MRNA Stock
It’s easy to blame extraneous factors for any weakness. There is no denying that macroeconomics and geopolitics did have a hand in MRNA stock’s current sorry state of affairs. Moderna, however, cannot shy away from copping some of the blame.
Vaccine demand is a function of the pandemic. As the pandemic recedes, Moderna cannot count on Spikevax alone to support its top- and bottom-line growth. It’s likely that Spikevax demand peaks in 2022 or at least in the next 12 months, leaving Moderna scurrying to other revenue sources in order to survive and thrive.
Moderna sees a transition away from the variant focus, and to an endemic/seasonal setting in the current year and next. At this stage, the focus, according to Moderna will be on “seasonal protection against waning immunity in high-risk” and “multi-valent approaches with broadest immunity.”
Moderna’s 2021 revenue was at $18.5 billion, comprising $17.7 billion from the sale of 807 million vaccine doses. For 2022, the company has firm advanced purchase commitments worth $19 billion and $3 billion in options. The consensus estimate calls for total revenue of $21.55 billion for 2022. The biotech also flagged 2022 to be second-half weighted.
Two dynamics will come into play in 2022 — lower price realization and higher manufacturing costs, SVB Leerink analyst Mani Foroohar said. The former is due to the mix shifting toward low- and middle-income countries, and the latter due to the different packaging involved in vaccines meant for endemic setting.
Moderna has yet to receive authorization for Spikevax in adolescent population in the U.S., while Comirnaty, co-developed by Pfizer-BioNTech, received the nod for this age group in May 2021 and for children aged 5-11 years, in October 2021.
Moderna is currently testing in the clinics several variant boosters and also a next-gen Covid-19 vaccine.
The company’s buyback strategy has also ruffled some feathers. Investing some of the cash balance in bolt-on acquisitions could have been a more prudent strategy than paying out another $3 billion via buybacks, on top of the $1 billion spent until January.
What’s Cooking In Moderna’s Ex-COVID Pipeline
It doesn’t appear that Moderna has a pipeline candidate that can be pushed quickly through development and past the regulatory hurdle in the near term, to make up for potentially receding Spikevax revenue.
In the respiratory vaccine category, Moderna has several flu vaccines candidates in development, with the most advanced among them due to enter Phase-3 testing in 2022. Moderna also plans to start Phase-2 testing of a combo vaccine for Covid and flu this year.
A late-stage program for respiratory syncytial virus in adults is on currently.
Among latent and public health vaccine candidates, a cytomegalovirus vaccine candidate, codenamed mRNA-1647, is in Phase-3 testing. Also in the works are vaccine candidates for Epstein-Barr virus, Zika virus, HIV, Nipah virus and the viruses that cause Shingles and chickenpox.
Moderna also has a therapeutic pipeline, comprising immuno-oncology, cardiovascular, autoimmune and rare diseases candidates.
Bottom Line on MRNA Stock
MRNA stock climbed over 15% on Thursday in reaction to the quarterly results. Notwithstanding the precipitous drop from the August 2021 peak, the stock is trading at a forward price-earnings ratio of 5.17, slightly more expensive than BioNTech’s 4.77. Moderna’s trailing-12-month price-sales ratio is at 5.21, more than double of BioNTech’s and higher than Pfizer’s 3.41.
On both counts, the stock is not priced cheaply, at least on a relative basis.
At current levels, the stock appears to have discounted much of the vaccine opportunity, leaving limited scope for upside. The stock could bounce back when macroeconomic concerns and geopolitical tensions abate. But how much upside is in the cards is a key question.
Outperformance in the long term may require the company to demonstrate its ability to bring in long-term durable revenue streams. Until such time, there will be more fence sitters than those willing to take the plunge.
On the date of publication, Shanthi Rexaline did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Shanthi is a contributor to InvestorPlace.com as well as a staff writer with Benzinga. Equipped with a Bachelor’s degree in Agriculture and an MBA with specialization in finance and marketing, she has about two decades of experience in financial reporting and analysis, and specializes in the biopharma and EV sectors.
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