Moderna (NASDAQ:MRNA) has been one of the hottest biotech stocks on the market for the past few weeks. The company, which specializes in experimental mRNA-based vaccines, has garnered mainstream attention for its potential COVID-19 vaccine. The initial batch of the vaccine has already been shipped to U.S. health authorities, with initial phase 1 trials expected to begin soon.
As one of the few companies with a COVID-19 treatment entering clincial trials, there's a lot of excitement surrounding Moderna right now. Shares of the company have grown 10% year to date while the S&P 500 has sunk by 12% over the same period. However, exactly how much money is this COVID-19 vaccine worth to Moderna, and is it truly the cash cow that many investors are expecting it to be?
What makes this vaccine special?
Unlike other vaccine developers that use DNA-based treatments, Moderna is known as one of the only companies working in the largely experimental domain of mRNA-based vaccines. In theory, mRNA-based treatments work faster and show greater efficacy than their DNA-based counterparts. Whereas DNA is found only in the nucleus of the cell, mRNA can be found more or less everywhere, making it easier to access.
Moderna has a pretty large pipeline of early stage mRNA vaccines, but its coronavirus vaccine, mRNA-1273, made news for just how quickly it was completed after the virus's genetic sequence was discovered. In less than two months, Moderna managed to develop an initial vaccine from scratch, an impressive turnaround time by modern drug development standards.
The first batch of the company's COVID-19 vaccine has already been shipped to the National Institute of Allergy and Infectious Diseases (NIAID) in late February, with clinical trials experimenting with a two-dose schedule expected to begin in April. If everything begins on schedule, that would be just three months from the initial design of the vaccine to human testing.
What's the potential market size?
Unlike other COVID-19 treatments in clinical testing, mRNA-1273 can be used as a preventative (also referred to as a prophylactic) treatment. This is a big deal because there are millions of people who are living in areas deemed to be high-risk for COVID-19 infections but aren't infected themselves so they want to pre-emptively protect themselves.
Moderna's CEO, Stephane Bancel, spoke in an interview with Business Insider where he said that the company's COVID-19 vaccine will be priced comparatively with other respiratory infection vaccines. To put that into perspective, Prevnar 13, a preventative pneumonia vaccine, costs around $800 for four injections. Bancel went on to add that he doesn't even see Moderna pricing its COVID-19 vaccine at that level, possibly being charging less than that.
If we theoretically say Moderna prices its vaccine at $600, that's still a lot of money considering there are millions of people who would be interested in having a COVID-19 prophylactic. In the Chinese province of Hubei -- the epicenter of the COVID-19 outbreak -- there are approximately 61.9 million people, with around 11.1 million in the city of Wuhan. Even if we assume that only half of the province's population chooses to take a prophylactic, the total addressable market in Hubei alone would come to a whopping $37.1 billion.
What are the risks?
There are a couple of things worth noting, however. For one, Moderna's COVID-19 vaccine is still on the cusp of beginning phase 1 clinical trials with humans. Despite the company's head start, many health groups, such as the World Health Organization (WHO), have said it could still be another 18 months before a vaccine is publicly available.
Clinical trials could end up reporting unexpected side effects during this time, something that would severely hurt Moderna's chances of successfully developing and marketing its COVID-19 vaccine. mRNA-based treatments are still quite experimental, with even Moderna's most developed vaccines only in early clinical testing. There's always the chance that something could go wrong as mRNA-1273 moves on to late-stage trials.
At the same time, there's also the threat of competition. Other biotech companies, such as Inovio Pharmaceuticals (NASDAQ:INO), are accelerating development for their own COVID-19 vaccine, INO-4800. Clinical trials are expected to begin in April with the results to be presented sometime this fall. When Moderna's vaccine is finally ready sometime in 2021, it could find itself with serious competition.
Gilead Sciences (NASDAQ:GILD) is also developing a COVID-19 treatment as well. Remdesivir, a former failed Ebola drug that has shown success in treating COVID-19 patients, has already begun phase 3 clinical trials. Remdesivir is an intravenous antiviral treatment, which inhibits the ability of viruses to replicate in the body. In its current state, the drug would find use among the tens of thousands of people currently infected with the virus, but it wouldn't see the same demand as a COVID-19 prophylactic would.
However, in a recently released study with Rhesus monkeys, remdesivir has proved effective as a preventative treatment against Middle East Respiratory Syndrome (MERS). Considering the similarities between MERS and COVID-19, as well as the genetic similarity between Rhesus monkeys and humans, there's still a chance that the drug could prove to be effective in preventing COVID-19 in humans as well. This would require further clinical tests, but if this turns out to be the case, remdesivir would also become a direct competitor to Moderna's vaccine.
Should investors buy Moderna right now?
While there's plenty of money to be made in developing a COVID-19 vaccine, investors shouldn't forget that Moderna has a lot of other things going on for its as well. The company has a robust pipeline of early stage vaccine candidates, all using mRNA technology. This includes a vaccine for cytomegalovirus (CMV), a type of herpes that is a major cause of birth defects in newborn infants. Moderna's CEO has predicted that this CMV vaccine alone could bring in $2 billion to $5 billion in peak annual sales for the company. Even if its COVID-19 vaccine ends up not doing as well as some would have hoped, Moderna still has a very promising lineup.
With that being said, I think Moderna and its COVID-19 vaccine have a pretty good chance of being successful. Even if there ends up being some competition, assuming the COVID-19 outbreak doesn't completely disappear by next year, there will likely still be plenty of demand for this particular vaccine.