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My Top COVID Stock for 2021

By Zhiyuan Sun - Jan 16, 2021 at 6:52AM

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Its coronavirus vaccine isn't the only cause of investor celebration.

If you invested $10,000 in shares of coronavirus vaccine manufacturer Moderna (MRNA 0.76%) last year, that principal would have grown to over $52,000 as of Jan. 15. The company is one of the hottest biotechs on the market after its IPO a little more than two years ago -- and for good reason.

After a decade of research and development and receiving over $3 billion in funding, Moderna has made a major scientific achievement by validating the use of messenger RNA (mRNA) technology in vaccines. Its momentum is far from over, however. Today, let's look at why Moderna is a top coronavirus stock for the new year.

Coronavirus vaccine vials.

Image source: Getty Images.

An excellent coronavirus vaccine

In clinical trials, Moderna's vaccine (mRNA-1273) demonstrated 95% efficacy in preventing COVID-19 infections and was fully effective at preventing severe cases of COVID-19. Based on these positive results, regulatory agencies in more than 30 countries have cleared the vaccine for use.

So far, the company has received $2.89 billion in payments for vaccines and expects it can generate $11.7 billion in revenue this year via sales of mRNA-1273 alone. Back in 2019, the company only brought in $60.2 million in revenue for the entire year.

Right now, the company is running a series of concurrent clinical tests to expand the vaccine's use to young children and adolescents, and is testing a booster shot for adults. Moderna expects its vaccine's protection will last at least one year. Afterwards, a naturally waning immune response may require patients to receive further doses. This would likely enable Moderna to generate annual revenue given the transmissibility of the virusand the need for vaccination in at least 82% of the general population to prevent new outbreaks.

One could argue that Moderna possesses the most innovative pipeline in the entire industry. The company is investigating four first-in-class vaccines for respiratory illnesses. One candidate, mRNA-1647, for immunization against cytomegalovirus (CMV), is heading for phase 3 trials this year. CMV is a herpes-like virus that remains the leading cause of birth defects worldwide. If successful in this investigation, Moderna expects the vaccine to generate between $2 billion and $5 billion in peak annual revenue.

The company is also investigating 13 mRNA therapeutics targeting cancers, rare diseases, cardiovascular illnesses, and autoimmune diseases. So far, it has more than enough capital to fund such research and development expenses. The company's cash and investments total $5.25 billion, with no debt whatsoever.

Takeaways for investors  

Given its solid coronavirus vaccine, promising pipeline, and strong financial position, I would argue Moderna is a top coronavirus stock for 2021. It is currently trading for 4.8 times future revenue, which is pretty inexpensive, considering the company could add 10 figures to its sales this year. 

The company has more than enough manufacturing capacity to keep its vaccine deliveries going. This year, it expects to produce between 600 million and 1 billion doses. By the end of 2022, Moderna expects to ramp up to an annual production rate of 1.3 billion doses. For these reasons, I think it's one of the best biotechs to buy for the new year.

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