On Nov. 16, large-cap biotech Moderna (MRNA 0.89%) reported that its experimental messenger RNA (mRNA) vaccine (mRNA-1273) is nearly 95% effective at immunizing patients against COVID-19. This was the third time a coronavirus vaccine candidate demonstrated efficacy in a large-scale placebo-controlled phase 3 study, following Pfizer (PFE -0.19%) and BioNTech's (BNTX -0.45%) BNT162b2 and the Russian government's Sputnik V.
Moderna's mRNA-1273 is set to be released in a hypercompetitve coronavirus vaccine market. Even if commercialized, the vaccine could save many lives and still fail to live up to investors' expectations. Though many investors are now bullish on Moderna stock, here's why the savvy stock pickers should continue to proceed with caution.
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A major milestone
The company's vaccine trial recruited more than 30,000 participants at risk of contracting coronavirus at their geographical location. Out of this group, approximately half received a placebo while another half received the full two-dose schedule of the experimental vaccine.
An independent data committee conducted the first analysis of vaccine efficacy after 95 confirmed cases of COVID-19 among both groups. Out of the 95 cases, 90 came from the placebo group, while only five came from the mRNA-1273 group. The discrepancy in infection rates yields an experimental efficacy of 94.5% for mRNA-1273.
Additionally, there were no serious safety concerns among participants who received the vaccine. Among 11 cases of severe COVID-19, all of the patients were from the placebo cohort.
Research methodology matters too
The data is good, but it is important to acknowledge possible caveats. Most importantly, the cases required to determine efficacy at this stage are few -- 95. It's easy to picture a scenario in which, as trials wind down, more confirmed cases in the vaccinated group swing the candidate's efficacy in wrong direction. For the sake of argument, if there were approximately 15,000 COVID-19 cases in the placebo cohort versus 50 in the mRNA-1273 cohort after a period of time, that would be more definitive in proving the latter is working.
The final analysis of mRNA-1273 concludes at just 151 cases of COVID-19 in both cohorts. Consequently, we will not know with certainty whether mRNA-1273 can succeed on a large scale until -- ironically -- more people receive it. On an additional note, the trial assumes that patients who receive mRNA-1273 have proportional chances of exposure to COVID-19 as those in placebo. Due to the small number of cases, if there was only a tiny group of vaccinated participants exposed to the virus versus a large group of placebo participants, that could skew the efficacy data.
These limitations to the interim analysis, meanwhile, are by no means problems that Moderna faces alone. The company's competitor, Pfizer, published its first round of interim phase 3 data on its own coronavirus vaccine candidate after just 94 cases of COVID-19 among a staggering 43,438 participants.
Leaning on a coronavirus vaccine's success
On the other hand, Moderna's overall business does deserve an extra layer of scrutiny because, unlike Pfizer, it is still in the development stage. It does not have a profitable pipeline to fall back on if its mRNA-1273 disappoints. With that said, I'd expect mRNA-1273 to perform better than Pfizer's in distribution, as Moderna's vaccine would only need standard refrigeration for temperature control, while Pfizer's needs a temperature of -94°F during transport and can only remain at slightly warmer temperatures for 48 hours before being thrown away.
Next year, Moderna expects to ramp up production of mRNA-1273 to between 500 million to 1 billion doses and sell them for between $15 to $37 per dose ($30 to $74 per person on a two-dose schedule). More than 5.7 billion doses of coronavirus vaccines (both single and double) have been pre-ordered by governments worldwide from various coronavirus vaccine drugmakers.
Whether or not long-term demand exists, however, is another question. According to a major UK study, over a quarter of coronavirus antibodies disappeared after just a few months. Should Moderna's vaccine candidate generate immunity against COVID-19 for years, then it would diminish the company's revenue potential. A long-lasting vaccine would be great news for patients, but worse for Moderna's bottom-line, because it would severely restrict the possibility of generating recurring annual revenue.
In this scenario, the company generates billions in sales with the product for one or two years, then sees its financials decline as vaccinated patients no longer need more shots from Moderna. Up 400% year to date, investors can still make some money by investing in the almost $40 billion market cap company now. However, buyers should beware that real-world distribution of mRNA-1273 (if approved) could be very different from its clinical trial results and that the longevity of the vaccine's efficacy could actually restrict its market potential.
Takeaways for investors
Regardless of what happens, the progress that Moderna has already made is quite remarkable. The advancement of COVID-19 vaccines to regulatory approval processes just 12 months after the first outbreaks of the disease makes these projects the fastest in history. The next fastest vaccine development story belongs to the mumps vaccine -- and the development time for that treatment was four whole years.
Right now, there isn't sufficient data to say COVID-19 vaccine candidates are the pandemic saviors that we elevate them to be (at least not yet). While it can be lucrative to speculate on clinical trial results, that window of opportunity is swiftly closing. In the future, investors of Moderna and other coronavirus vaccine stocks will be betting on their vaccine candidates' success in commercialization.
At the next stage, there is a lot at stake, especially because the experimental vaccine's revenue potential has already been baked into the company's stock price. As a result, biotech investors who are late to the coronavirus vaccine race may wish to start small with investing in Moderna and other vaccine race participants.
