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Why Moderna Could Be Worth $100 Billion Within 5 Years

By Keith Speights - Mar 4, 2021 at 6:01AM

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It's more achievable than you might think.

There are only a dozen drugmakers in the world right now with market caps of $100 billion or more. All of them have been in business for at least 40 years. Moderna (MRNA 0.23%) started operations a little over 10 years ago. And the biotech just might join the $100 billion club within the next five years.

At least, that's what Oppenheimer analyst Hartaj Singh thinks. But is he right? Here are three reasons why the answer could be a resounding "yes."

Vaccine vials forming the shape of a dollar sign

Image source: Getty Images.

1. Recurring COVID-19 vaccine sales

The most important factor by far behind Singh's bullish view on Moderna is the company's COVID-19 vaccine, mRNA-1273. Moderna expects to rake in $18.4 billion in sales from mRNA-1273 this year. And that's a conservative estimate based solely on advance purchase agreements already signed. 

If Moderna could count on that kind of recurring revenue every year, its market cap would likely soar to $100 billion a lot sooner than five years from now. However, that scenario is probably overly optimistic. 

No one knows at this point how much annual sales mRNA-1273 will actually generate going forward. Moderna has at least a couple of things going for it, though, that could translate to revenue of more than $5 billion per year. The biotech has already demonstrated that it can achieve high efficacy with its COVID-19 vaccine. Also, its messenger RNA (mRNA) technology should enable the company to rapidly develop effective versions to combat new variants that emerge in the future.

2. Other vaccines potentially on the way relatively soon

Moderna plans to advance its cytomegalovirus (CMV) vaccine candidate mRNA-1647 into pivotal late-stage clinical testing this year. There's a good chance the vaccine could be on the market within the next few years.

No vaccine has been approved so far for CMV. Moderna believes that mRNA-1647 could generate peak annual sales of between $2 billion and $5 billion if approved. 

Singh expressed enthusiasm about Moderna's mRNA seasonal flu vaccine program. The company is currently evaluating three candidates in preclinical testing and expects to begin phase 1 studies later this year. Singh thinks one or more of Moderna's flu vaccines could reach the market within the next two years. If he's right, the biotech is likely to have another blockbuster in its lineup.

Let's assume that mRNA-1273 can make around $6 billion in annual sales. Then add in the midpoint of Moderna's projected sales range for mRNA-1647 of $3.5 billion. Finally, let's go with an even $1 billion in sales for the company's flu vaccine. The total comes to $10.5 billion. Applying a price-to-sales (P/S) multiple of 10 (which is what Singh used) would give Moderna a market cap of well over $100 billion.

3. A robust pipeline

There's one potential problem, though: A P/S multiple of 10 is high. The average P/S ratio for biotech stocks right now is around eight.

No worries. Higher P/S multiples are warranted when strong growth is likely in the future. And Moderna's robust pipeline should give investors plenty of reasons to expect continued sales momentum for a long time to come.

We've discussed the company's CMV and flu vaccine candidates. In addition, Moderna's pipeline currently includes 11 other clinical programs. CEO Stephane Bancel wants to use the cash generated by mRNA-1273 to expand the pipeline to feature as many as 50 clinical programs. 

Moderna could have quite a few candidates in late-stage testing or close to advancing to phase 3 five years from now. The potential growth represented by these programs could easily justify a higher P/S multiple for the stock.

Blue-sky scenario

I'll be the first to admit that Moderna hitting a $100 billion market cap within five years reflects a decidedly blue-sky scenario. There's no guarantee that any of the assumptions required to get to that point will turn out to be good ones.

A lot of things could go wrong for Moderna that prevent the company from delivering the growth needed to make Singh's prediction come true. So far, though, nearly everything has gone right for Moderna. I wouldn't dismiss the possibility that it could be a $100-billion company before the end of the decade. 

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