How Much Is Moderna Really Worth?

The world's desperate need for vaccines and treatments to fight the COVID-19 pandemic has thrust a few companies into the limelight, including Moderna. The Massachusetts-based biotech, which specializes in using engineered messenger RNA to prevent or treat a variety of diseases, is one of the front-runners in the vaccine race. It could get emergency use authorization for its vaccine candidate from the U.S. Food and Drug Administration before the end of the year.

Moderna had already attracted investor attention before the pandemic hit after it became the biggest biotech initial public offering in history in late 2018. The company's market capitalization has soared from $6.6 billion at the beginning of the year to $28 billion now, leaving a lot of investors wondering if the stock is actually worth its current price. Superficially, a stock is worth whatever investors are willing to pay for it. But what we really care about is what investors may be willing to pay for it down the road.

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Comparison with peers

In order to get a feel for what Moderna could be worth as the company progresses, let's compare it with four other biotech stocks that have a similar market cap.

Data source: Yahoo!Finance and company websites.

Regeneron is a good benchmark for valuing Moderna. It represents the sort of biotech business that Moderna would like to be when it grows up. It's also an important part of the COVID-19 story. The company is profitable, with two blockbuster drugs in its portfolio. It's developing a highly diversified pipeline of antibody-based medicines in most major therapeutic areas, including immuno-oncology, inflammatory disease, cardiovascular and metabolic disease, retinal disease, and others. Regeneron also makes antibody cocktails for the treatment of infectious diseases, including the experimental medicine that was administered to President Trump for COVID-19 and the first treatment for Ebola ever approved by the FDA.

Since both Regeneron and Moderna are benefiting from the buzz around COVID-19, that factor cancels out to some extent. The comparison can instead give us insight into how investors are valuing the rest of the businesses. Regeneron is nearing $10 billion in revenue, and growing in the high teens. It also has a significant number of assets in late-stage clinical trials. If everything goes right for Moderna, it could be in a similar situation within another three to five years. Investors could reasonably expect the share price to double in this time horizon, assuming success in clinical trials.

Vertex has a market cap similar to Regeneron's, but with less revenue and a mid-teens growth rate that's not much slower. What investors like about Vertex is the company's dominance in cystic fibrosis. New medicines that treat the underlying causes of the disease, geographic expansion, approval for treating new variants, and younger cohorts are all contributing to a market expectation of 25% annualized growth for the next five years. The company will need to expand beyond CF in the long term, but even with less diversification and with a recent failed trial, the market still gives Vertex a multiple of sales that Moderna investors would like to see in a few years.

Seagen is succeeding in the highly valued field of oncology, and while it has the smallest current revenue of the four peers, it's growing the fastest, with recently launched cancer drugs looking effective very early in their product lives. Seagen's leadership in antibody-drug conjugates appears to put it in position to compete with treatments for a wide variety of cancers. Seagen is the only one of these four that hasn't been consistently profitable, but it's on the verge of turning that corner as volumes grow, an event that often makes investors take notice. The company's market cap is about 25% higher than Moderna's, having already proven success with its medicines.

Alexion is arguably the best bargain among the four, selling for only about four times estimated 2021 revenue despite having a successful portfolio of drugs for rare diseases and a promising pipeline. The company's growth rate is the lowest of the bunch. Alexion projects 10% compound annual revenue growth for the next five years, a number that doesn't inspire a lot of excitement in investors. If Moderna scores some consistent wins, it'll achieve stronger growth than Alexion forecasts, and will almost certainly get a higher valuation.

Uncertainty overshadows everything

The comparisons help us get an idea for how Moderna's stock could be valued in the future. Regeneron and Vertex are worth twice what Moderna sells for, but the current reality for those businesses won't resemble the reality for Moderna for several years at best. Seagen's current business, growth, and outlook may resemble Moderna's only a year or two from now, if the company succeeds with its COVID-19 vaccine and its cytomegalovirus vaccine candidate, which is scheduled to enter a pivotal phase 3 trial next year. The Seagen comparison suggests another 25% upside in Moderna's value in the nearer term.

The biggest issue with benchmarking Moderna's value with mature biotech stocks is the uncertainty about its future. Analysts are only guessing about the company's results in the next few months. The average analyst estimate for Moderna's 2021 revenue is just shy of $5 billion, but the low estimate is $200 million and the high estimate is $32 billion. Going out further, the crystal ball only gets cloudier. No mRNA medicine has ever been approved by a regulatory agency. While a COVID-19 vaccine may be the first, Moderna will need to get over many hurdles to prove the technology works, much less achieve the current level of business peer companies with similar valuations do.

The real value in Moderna lies in the long-term potential of mRNA technology to produce medicines that prevent and treat a huge variety of diseases. But other companies are developing mRNA drugs, and Moderna looks expensive even compared with those. German biotech BioNTech, Pfizer's partner in its front-running mRNA COVID-19 vaccine, is valued at about 30% less, while CureVac and Translate Bio have market caps of only $8.6 billion and $1 billion, respectively.

High potential, high risk

If Moderna's medicines pass the gauntlet of clinical trials and become commercial products, the company's stock could double or more in the next five years, given what investors are willing to pay for Regeneron or Vertex now. That's far from a sure thing, though, and today's stock price is not discounted for the risk. Investors willing to take a chance on it should be prepared to hold on for years while the story plays out.