Please ensure Javascript is enabled for purposes of website accessibility

3 Red Flags for Moderna's Potential Coronavirus Vaccine

By Alex Carchidi – Aug 29, 2020 at 9:32AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Moderna's candidate is exciting, but the company's circumstances are far from perfect.

Moderna's (MRNA 3.26%) coronavirus vaccine efforts have made the biotech into a household name, fueling its impressive stock-price growth in the process. As shown by positive data from the first two phases of its clinical trials, Moderna's mRNA-1273 vaccine has a solid chance of winning the global race for a coronavirus prophylactic. Nonetheless, there are three red flags that prospective investors in Moderna should be aware of:

  • The company's insiders have made high-profile exits from their stock positions.
  • The company has never successfully produced a medicine of any kind.
  • Moderna's scientific approach to vaccine development has never been successfully implemented in humans.

Let's investigate these red flags to see how they might influence the candidate's future.

1. Insider sales by leaders don't signal confidence 

The CEO, chief financial officer, chief technical officer, president, and chief medical officer of Moderna have sold tens of millions of dollars of the company's stock over the last five months in a slew of pre-planned trades. While there are many reasons for someone to sell a stock, zero members of Moderna's senior management have reported purchasing its stock in the same period. These insider sales may indicate that management is unconvinced that mRNA-1273 sales will drive a windfall to boost the share price beyond this year's highs.

If members of leadership believed the project would be successful, they would probably also believe it would be more profitable to wait to sell until after mRNA-1273 is generating sales revenue. But with all that said, insider selling does not mean that Moderna's prophylactic will be commercially unsuccessful or that it won't be safe or effective. It's only an -- imperfect -- sign that senior leadership may not have full confidence that the stock's future price will be higher than it has been so far this year.

A gloved hand readies a syringe labeled COVID-19

Image source: Getty Images.

2. Moderna still doesn't have any products on the market

Biotech investors know that the industry's product development cycle usually requires years of effort in the laboratory and clinical trials, with a typical vaccine taking a decade to reach the market (and that's if everything goes well). This means that we would expect Moderna, founded in 2010, to have at least one pipeline program on the verge of commercialization. Instead, mRNA-1273 is its most advanced project. The company has three other programs in phase 2 clinical trials, but nothing else in late-stage development.

In short, this is a red flag because it means Moderna doesn't have a history of successful drug or vaccine development. That doesn't mean mRNA-1273 will fail, but it does mean that the company is in uncharted territory, and that having more experience would come in handy.

3. Nobody has made this type of vaccine before

Moderna's candidate is an mRNA vaccine, meaning it aims to deliver pre-programmed genetic information to a patient's cells so that they will subsequently produce antibodies against the coronavirus. This methodology has worked well enough to bring the candidate through the first two phases of clinical trials so far. But there are no other therapies or prophylactics on the market that use the same approach, despite a handful of efforts, which is a red flag.

Furthermore, the company's preliminary safety data suggested that patients in the mRNA-1273 trial were more likely to experience systemic adverse events -- clinical-trial lingo for "difficult side effects" -- after a second dose of the vaccine. If subsequent data show that these side effects are especially burdensome for certain patient populations, like immunocompromised people or older adults, it would make Moderna's candidate much less appealing. On the other hand, as long as the majority of patients experience only mild side effects, Moderna's vaccine could still be a success, so don't put too much weight into these preliminary reports when you're deciding whether to buy the stock.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$124.93 (3.26%) $3.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.