Positive results from clinical trials with their coronavirus vaccine candidates have pushed shares of Moderna (NASDAQ:MRNA) and BioNTech (NASDAQ:BNTX) into the clouds. Neither of these companies has developed a marketable product yet, but their market caps have risen to a combined $62 billion at recent prices.
With plenty of competition on the way, neither of these companies can justify their recent stock-market valuations with potential sales from just one coronavirus vaccine. Can these companies be expected to produce multiple blockbuster drugs? Here's what you need to know about the road ahead for Moderna, BioNTech, and a wave of younger businesses developing similar drugs.
Shooting the messenger
All of the experimental drugs in Moderna's pipeline and most of the drugs in BioNTech's pipeline rely on strands of messenger-RNA (mRNA) that instruct cells to produce a specific therapeutic protein. Unfortunately, safely getting strands of mRNA into a position where they can provide a benefit has been a lot more challenging than these companies' founders imagined when they began pursuing mRNA-based treatment options over a decade ago.
Immune systems go beserk when they encounter therapeutic strands of mRNA because viruses have been bypassing complicated cell signaling pathways with strands of RNA since life began. This is why Moderna has put therapies that require frequent administration on the back burner and pivoted to vaccines, a field of development that wasn't terribly lucrative before the COVID-19 pandemic.
Instead of raising heaps of capital to develop treatment candidates that couldn't do their job repeatedly without eliciting a dangerous immune reaction, BioNTech turned its attention to vaccines early in its history. Whether the company you want to invest in is willing to admit it or not, it's important to understand the potential for mRNA-based drugs will most likely remain very limited.
Selling vaccines isn't easy
Vaccine sales from the world's top two sellers of branded vaccines, GlaxoSmithKline and Merck, reached a combined $12.4 billion in the first nine months of 2020, which is probably less revenue than Merck's star cancer immunotherapy Keytruda will generate on its own this year. Among the world's top 20 drugs by expected sales this year, all but one are intended for repeat use. Right now, none of the mRNA-based drugs in development at BioNTech or Moderna involve frequent dosing for a significant length of time.
Prevnar 13, a vaccine approved in 2010 to prevent pneumonia, made the list of top-selling drugs with sales on pace to reach $5.5 billion this year for Pfizer (NYSE:PFE). BioNTech partnered with Pfizer to help develop, manufacture, and market its coronavirus vaccine candidate because of the company's successful vaccine track record.
Moderna sports a $38 billion market cap, and BioNTech's has swelled to $24 billion at recent prices. Shares of commercial-stage biotechnology companies generally trade at single-digit multiples of total revenue. That means shares of Moderna will slide if investors don't see the company has a path to generate around $7 billion in annual revenue in a short amount of time. Expectations for BioNTech's future cash flows are more reasonable, but it's hard to see how either company is going to live up to these expectations with coronavirus vaccine competition on the way.
Right now, there are at least six other coronavirus vaccine candidates in late-stage testing and dozens more in early- to mid-stage clinical trials. Moderna and BioNTech could see a large amount of coronavirus vaccine revenue in 2021, but by 2022, pricing competition from at least a couple of competing vaccines will press everyone's coronavirus vaccine profit margins into the dirt.
If their coronavirus vaccine candidates don't generate an explosion of sales far beyond anything we've ever seen, there isn't much in BioNTech's or Moderna's late-stage pipelines to keep investors from running for the exits. The most advanced candidate at BioNTech is BNT122, an mRNA-based single-dose cancer-treatment candidate in a phase 2 trial that began last January. If there were positive interim results to report, we probably would have heard them by now.
Moderna's been a little more active, with two candidates ready to enter late-stage clinical trials. An experimental vaccine for cytomegalovirus (CMV) called mRNA-1647 could begin a phase 3 trial in 2021. The company also reported encouraging results with mRNA-4157, a cancer vaccine candidate that produced encouraging results during an interim assessment of an ongoing mid-stage study.
With competition for coronavirus vaccine sales likely to be hot on their heels, BioNTech and Moderna are going to have a hard time feeding stock market bulls enough good news to keep running forward.