Despite concerted efforts to curb the spread of COVID-19, new cases of the disease continue to pop up at an alarming rate in several states. As evidence of this fact, consider that the states of California and Oregon have opted to halt the process of reopening their economies because of a spike in the number of new cases. Amid this chaos, the one thing that could truly end the pandemic is a vaccine. And among the companies working on developing vaccines for COVID-19, Moderna (NASDAQ:MRNA) is one of the leaders.

Given the vast market opportunity, the company's vaccine could bring in more than $5 billion per year if approved, at least according to Jefferies analyst Michael Yee. The analyst recently initiated coverage on Moderna's stock with a "buy" rating, sending the shares 14.8% higher. If Moderna's candidate, mRNA-1273, can generate annual revenue of more than $5 billion per year, it would become a significant growth driver. But before pulling the trigger, let's take a closer look at the context and figure out whether Moderna's mRNA-1273 could really turn into a multibillion-dollar opportunity. 

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Uncharted territory

A little bit of background information about Moderna will be helpful. Since its founding in 2010, the biotech has yet to receive regulatory approval for any of its vaccines or therapies. The company doesn't even have any products in late-stage trials at the moment. What's more, Moderna specializes in messenger RNA (mRNA) vaccines, a promising but unproven type of treatment.

mRNA molecules transfer information from the DNA to the part of the cell that makes proteins. mRNA vaccines could, in theory, provide instruction to the body to produce the desired immune response to a virus. Despite the success of several such candidates in clinical trials, there hasn't been a single mRNA vaccine approved by the U.S. Food and Drug Administration (FDA). Success in clinical trials does not necessarily translate to success in the real world.

It is also worth noting that on average, it takes between 10 and 15 years to develop a new vaccine, according to the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA). Further, according to BIO, a biotechnology trade organization, the probability that a vaccine that is in a phase 2 clinical trial will go on to earn regulatory approval is a little less than 25%. Moderna's investigational vaccine is currently at this stage.

That said, the probability of a vaccine earning regulatory approval jumps to 74.3% once it makes it to a phase 3 study. Moderna should start such a late-stage study sometime this month, but due to the urgency of the situation, the company will likely do so before completing its phase 2 study. Because of these factors, betting on Moderna to bring this project home remains risky.

The competition

Many other companies are looking to develop vaccines for COVID-19, which only compounds the problem for Moderna. For instance, Pfizer and BioNTech are currently working on four candidates of the mRNA variety. The FDA recently granted fast-track designation to two of these products, BNT162b1 and BNT162b2. These vaccines are currently in a phase 1/2 clinical trial, which, according to the interim data Pfizer released, is going well.

The two companies plan to start a phase 2b/3 clinical trial for the most promising vaccine candidate by the end of July. Also, there's AstraZeneca, which is developing its vaccine in collaboration with the University of Oxford. The pharma company started enrolling participants for a phase 2/3 clinical trial in late May. Other companies worth mentioning in this race include Novavax, Johnson & Johnson, and Inovio Pharmaceuticals. Moderna could certainly come out the winner in the hunt for a COVID-19 vaccine, but at this point, it is far from a sure bet.

Looking forward

Could Moderna generate annual sales of more than $5 billion from mRNA-1273? In my view, here's what would need to happen for that goal to become a reality. First, the company would have to earn regulatory approval for its vaccine before any of its peers. Second, Moderna's mRNA-1273 would have to prove more effective than any other candidate. Both of those things could happen, but right now, it is mere speculation. In short, Moderna seems far too risky for most investors at this point. There are scores of biotech stocks on the market that present much more attractive long-term prospects.