Shares of Moderna (MRNA) closed up 3.18% yesterday, September 13, on news that
1. The Food & Drug Administration has approved updated Covid-19 vaccine boosters (including one from Moderna) and that the Centers for Disease Control was recommending the boosters for adults and children older than 6 months.
2. The company announced that the newest results from Phase 3 clinical trials for an updated version of its flu vaccine, mRNA-1010, had met all primary endpoints in a Phase 3 trial, Compared to Glaxo’s Fluarix, Moderna’s vaccine showed higher antibody levels for all four influenza strains (two each for influenza A and B) recommended by the World Health Organization (WHO) as well as higher seroconversion rates. This comes after an earlier version of the vaccine failed to demonstrate superiority for the B strains. The company expects to meet with regulators very soon and, depending on guidance received, the flu shot could launch as soon as next year, CEO Stephane Bancel told Fierce Biotech. “We’ll know more in a few months when we speak to regulators, but [we’re] trying to go as fast as we can,” he said.
Of these two pieces of news I’d say No 2 is way, way more important. Moderna is working to convince investors that it is more than a Covid-19 vaccine company.
The stock has been beaten down, and beaten down some more on fears that first, the company’s huge revenues from the first Covid-19 vaccines wouldn’t/couldn’t be repeated and that the possibility that Covid-19 might require an annual booster wasn’t enough to sustain the stock prices. Second, attacks on the rush to market during the worst of the Covid-19 surge and data that called into question the efficacy and the safety of Covid-19 vaccines became a steady meme among legitimately concerned consumers and experts and among those who saw it as possibly source of ideological political advantage (See for example, the way Florida governor Ron DeSantis has sought to make political hay in his campaign against Donald Trump out of a current opposition to the new vaccines.) I’m all in favor of scrutiny and more scrutiny of the Covid-19 data. As a number of very convincing (to me anyway) studies from the United Kingdom have pointed out there are real problems with the Covid-19 data because so many people who die with Covid don’t die from Covid but from prior conditions and vulnerabilities. That has made the records for cause of death a global mess. Same with the data on possible serious side effects. But my take away is that the RNA technology works and is a legitimate platform for the development of future drugs and vaccines.
I’d like to own the stock on that potential. I added it to my Jubak Picks Portfolio back on April 14, 2023, because I thought the company’s RNA technology could be extended to other diseases. The flu vaccine results are an early indiction that my judgement is correct. (The stock is down 31% from the date of that pick as of September 13.)
As is other news announced by the company on its September 12 R&D day. The company announced progress on its rare-disease treatments and its oncology strategy. Moderna said it has very aggressive goals for moving 15 new products to market and 50 new candidates to clinical trials over the next five years. That’s a huge pipeline for any biotech, And because the Covid-19 vaccines provided the company with such huge early revenue, this is an early-stage biotech that has been able, largely, to maintain total ownership of future revenue from new products.
Morningstar assumes 2027 revenue from respiratory vaccine sales of $11 billion by 2032 along with $5 billion in additional vaccines (mostly latent viruses), $4 billion in oncology sales, and more than $1.5 billion in rare-disease sales. The company’s own guidance is for $10 billion-$15 billion in annual sales from new products within five years of a 2028 launch.
Morningstar calculates that the stock now trades at a 60% discount to fair value of $266. (The shares traded at $108 on the morning of September 14.) My target isn’t quite that aggressive, but a $220 price in 12-18 months seems reasonable.