Moderna (NASDAQ:MRNA) had good news for investors during its earnings report this week: The company received a nod from the U.S. Food and Drug Administration to begin phase 2 trials for its coronavirus vaccine. And there's more. Moderna also said it aims to start phase 3 testing early this summer -- that's sooner than Moderna's original goal of this fall.

A scientist's gloved hand holds a dose of coronavirus vaccine.

Image source: Getty Images.

The company's CEO Stephane Bancel called phase 2 "a crucial step forward" for the vaccine. Though progression to this stage is positive, there are still important hurdles ahead. The vaccine will have to show that it is safe and efficacious in larger patient groups of various ages. This is where many investigational candidates stumble.

The overall probability of success through clinical trials for an infectious disease vaccine program is about 33%, according to an Oxford Academic paper. That's the highest of any therapeutic group, the research showed. But it still means the chance of failure is 67%. An FDA report showed 22 case studies of divergent results from phase 2 to phase 3 trials, offering more evidence that a candidate may slip during late-stage studies.

This isn't meant to paint a grim picture, but instead to emphasize that investors should keep an eye on each trial phase because things can change -- for better or worse -- at any moment.

Safety and side effects

Let's have a look at Moderna's studies so far and what's ahead. The phase 1 trial, run by the National Institutes of Health, completed enrollment of 45 healthy adults age 18 to 55 in three dosing groups. The study is expanding to enroll six additional groups of older and elderly adults. The primary endpoint concerns safety and side effects, while the secondary endpoint evaluates immune response following two vaccine doses.

In phase 2, the safety, side effects, and the ability to induce immune response will be studied on a much larger population. The study will include 600 participants in two study groups according to age -- 18 to 55 and 55 and older. Subjects may receive placebo or one of two different doses of the vaccine. As in phase 1, the vaccine will be given in two doses 28 days apart.

Moderna is still working on the protocol for the third phase. That study will only begin if supported by data from the earlier trials. If all goes well during the coronavirus vaccine trials, Moderna says its first regulatory approval may come as soon as next year.

Government funding

Now that we have an initial timeline, the next question is: Can Moderna afford to take this vaccine candidate through trials? The answer to that is "yes." The U.S. Department of Health and Human Services' Biomedical Advanced Research and Development Authority recently granted Moderna as much as $483 million, which the company said would carry the vaccine through regulatory approval. If needed, Moderna has about $2.4 billion to invest. And this year, the company expects net cash used in operating activities to total $500 million.

Let's get back to how crucial this phase 2 coronavirus vaccine trial is for Moderna. All of the company's candidates harness the power of messenger RNA (mRNA). Using mRNA, Moderna's investigational medicines give the body's cells instructions to make proteins that would prevent or treat disease. So, an approval of one of these investigational products -- such as the coronavirus vaccine -- could validate the treatment method. That's pretty important for the company's whole pipeline.

Moderna's shares have soared 203% this year as investors bet on the success of the company's coronavirus vaccine. If trial data is favorable, the shares are likely to move higher. If you bought shares early in the story, congratulations on the gains. For those who haven't bought shares though, before investing in this clinical stage biotech company, it might be worth waiting to see if the crucial next steps are successful.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.