Perhaps the best news of all related to coronavirus vaccines is just how much good news there's been. The development of experimental vaccines proceeded breathtakingly fast in 2020. Two vaccines with high efficacy levels won U.S. Food and Drug Administration (FDA) emergency use authorization. Millions of Americans have already been vaccinated, with many more on the way.
Now there's more good news. Here's why you'll love Moderna's (NASDAQ:MRNA) latest COVID vaccine update.
A dream scenario instead of a nightmare
Moderna CEO Stephane Bancel alluded to a "nightmare scenario" in his comments at an event last week. In that scenario, COVID-19 vaccines only provide protection against infection by the novel coronavirus for at most a couple of months.
Such a scenario truly would be a nightmare for everyone hoping to quickly bring an end to the pandemic. The challenges of motivating individuals to receive vaccines every few months would be staggering. Vaccination rates would likely be much lower than healthcare professionals estimate are needed to achieve herd immunity.
However, Bancel now thinks this nightmare scenario is "out of the window." Why? He stated that the antibodies generated by Moderna's mRNA-1273 vaccine decay "very slowly." Based on the data analyzed so far, Moderna believes that its vaccine could provide protection for up to two years.
The news got even better. There have been some concerns about the potential impact the new, more transmissible strains of the novel coronavirus might have on vaccines. Bancel said that Moderna should soon establish that mRNA-1273 is highly effective against variants of the coronavirus that have been found in the U.K. and South Africa.
Assessing the impact
If Moderna's vaccine provides protection for up to two years, it will make reaching herd immunity much easier. More individuals might want to be vaccinated if they know their immunity will be long-lasting.
There's also an important impact for Moderna as an investment option. Bernstein analyst Ronny Gal projects that the coronavirus vaccine market will approach $40 billion this year. How big the market will be in subsequent years depends largely on the duration of immunity offered by the vaccines.
Gal thinks that Moderna will make around $11 billion in 2021 from mRNA-1273. The biotech expects to produce at least 600 million doses of its coronavirus vaccine this year and sell all that it makes.
If we assume that Moderna could generate similar revenue every two years, the company is on track to rake in average annual revenue of more than $5 billion from mRNA-1273. That could make Moderna's shares seem somewhat expensive to investors, with the company's market cap currently hovering around $47 billion. However, a price-to-sales ratio of 9.4 isn't unheard of for biotech stocks, especially considering that Moderna also has a promising pipeline.
Also, this outlook for Moderna is better than what Ronny Gal expected. He modeled for booster shots being needed every three years instead of every two years. While a triennial vaccine would have been great for individuals, it wouldn't have been as lucrative for Moderna.
One key caveat
Don't celebrate the impressive duration of mRNA-1273 just yet. Stephane Bancel stated, "We believe there will be protection potentially for a couple of years." The word "potentially" is important. Moderna needs more data before it can conclusively determine how long its COVID-19 vaccine protects against infection.
Still, it seems likely that mRNA-1273 (and perhaps other vaccines) will offer immunity against the novel coronavirus for at least one year and perhaps up to two years. Any duration of protection significantly lower than that could be problematic for adoption of the vaccines. Any duration significantly higher would have hurt Moderna's financial prospects. The one- to two-year range is the sweet spot for vaccine makers. The good news just keeps on coming.