Moderna's (MRNA +0.68%) stock has been a fast-mover in the last few weeks as a result of the company's COVID-19 vaccine efforts, funded to the tune of $483 million by the U.S. government.
Investors should know that Moderna's scientific approach to vaccine development is unproven. But its mature technology platform and long-standing collaborations with government institutions and established pharmaceutical companies mean it's well-positioned to thrive in the long-term whether or not its COVID-19 vaccine pans out as hoped.
Moderna was an exciting company before COVID-19
Moderna's technology platform is centered around its ability to quickly produce clinical trial-ready sequences of genetic information. This genetic information is the active ingredient in all of Moderna's products. Then, using the company's patented therapeutic delivery platform, the sequence infiltrates its cellular targets and prompts them to react in the way Moderna envisions.
Unlike similar technologies for drug delivery, Moderna's tech platform is highly reliable and safe at transporting its payload into cells. This means that the company has already overcome a significant scientific and engineering hurdle that its competitors have not. In a nutshell, it also means that the company has a solution in hand and is searching for the right disease problem to solve. There's no guarantee that Moderna will produce a COVID-19 vaccine successfully, but the marginal cost of the attempt will be low either way.
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The same goes for a handful of other diseases that Moderna could consider targeting. By investing so much in its technology platform, Moderna has driven down the cost of pipeline gambles to the point where the company's own literature compares it to running a software program. In other words, Moderna has a dominating strategic advantage among biotechs because it is extremely resilient against pipeline risks.
Moderna's clinical collaborations bolster its chances of success
Moderna has several scientific peers in the COVID-19 vaccine space. However, Moderna has an extensive number of collaborations that strengthened its competitive position long before the pandemic. Merck (MRK +0.98%), AstraZeneca (AZN +0.00%), Lonza (OTC: LZAGY), and Vertex Pharmaceuticals (VRTX +3.02%) are partners in a handful of different Moderna therapeutic development efforts. In particular, Moderna's 2015 collaboration with Merck pertains directly to developing vaccines for infectious diseases using Moderna's technology platform and Merck's clinical trial expertise. These collaborations ensure that its candidate therapies and candidate vaccines have momentum in the clinical trial process right out of the gate.
Industry partnerships are only half of Moderna's collaboration story. Since 2013, Moderna has also partnered with government institutions like the Defense Advanced Research Projects Agency (DARPA) and later the Biomedical Advanced Research and Development Authority (BARDA) for its COVID-19 efforts.
Many of Moderna's peer companies are flush with collaborations in industry, but few have the same level of experience or comfort when dealing with government groups. The company's mixture of long-lasting and high-powered collaborations means that its vaccine development efforts get cash infusions upfront and critical sets of helping hands during the clinical trial process, increasing the chances of success.
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Investors should look for buying opportunities
Given that Moderna doesn't yet have a product on the market, its financials are of limited use in analysis. Nonetheless, Moderna's stock price is currently more than double that of a year ago. Similarly, its market cap more than doubled over 2019, expanding from $6.58 billion to $15.13 billion in Q1 2020.
While the company isn't yet profitable, its consistent investment in its own platform, extensive array of strategic collaborations, and investment in basic science make it one of the more dynamic biotech companies with similar market caps. Compared to biotech companies pursuing similar scientific approaches, like Inovio Pharmaceuticals (INO 1.40%), Moderna is the better choice for investors.
Investors who are curious about Moderna may need to time their purchase carefully. Moderna's stock might tumble when its vaccine trials falter, or it might skyrocket again on favorable preliminary results. At present, it's worth a buy for long-term holders because the company's platform will eventually succeed in rendering a profitable vaccine or therapeutic drug. People seeking a shorter-term return structured around gambling on the success of Moderna's COVID-19 efforts should probably wait for the price to drop from its present heights to get the most out of the company's growth potential.
