The Biggest mRNA Winner: Pfizer, BioNTech, Moderna, or an Under-the-Radar Biotech?

Messenger RNA (mRNA) vaccines have transformed the fight against COVID-19 thanks to the success achieved by Pfizer (PFE -0.19%), BioNTech (BNTX -0.45%), and Moderna (MRNA 0.89%). The technology also holds significant potential in fighting other diseases. In this Motley Fool Live video recorded on April 14, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss which company -- whether one of these well-known players or an under-the-radar biotech -- is poised to be the biggest mRNA winner.

Keith Speights: This is a semi-COVID-19-related story. Many Americans probably know more about messenger RNA, mRNA, now than they ever thought [laughs] they would, because of the successful mRNA vaccines that have hit the market from Moderna, ticker there is MRNA, and Pfizer, PFE is the ticker there, and its partner, BioNTech, BNTX is the ticker there.

But there are other players in the messenger RNA arena, and the list continues to grow. Sanofi, the ticker there is SNY, announced last week that it's acquiring Tidal Therapeutics, which is an mRNA-focused biotech.

Brian, with all of these players jumping in or already in messenger RNA, which company do you think could be in the best position to be the biggest mRNA winter? Do you think it's Pfizer, BioNTech, Moderna, or just some other company that's perhaps under the radar right now.

Brian Orelli: I'm going to put under-the-radar stocks back under the radar, because I think they might give you better returns, but I think you're taking on more risk than companies that have already proven out their technology.

The other advantage to buying a company like BioNTech, or Moderna, is that they have a huge balance sheet right now. One of the hardest things for a biotech company to do is to balance raising capital, you either have to dilute shareholders through doing secondary offerings, or you have to license your drugs and then you're sharing revenue. Moderna and BioNTech, and Pfizer, for that matter, are going to have to do that anytime in the near future because they have plenty of capital.

I think that's a big advantage of those three over any smaller biotech. They're probably is going to end up being acquired rather than trying to fight with the other companies, it'll be easier for the management to just sell it off and you might make some money there, but I don't like to invest. One of my thesis is I'm hoping this company's going to get bought, that's out of your control and hard to guess the timeline.

Of the two big biotechs, I think the biggest issue is probably market cap. Moderna is about 60 billion; BioNTech is 31 billion. That doesn't leave a lot of room for growth in the next few years. Over the long term, maybe the valuation doesn't matter, you could holds your nose and buy anyway.

That strategy certainly works for David Gardner, with his Rule Breakers picks. I'm trying to embrace it as much as I can, but I'm also cheap, and so I like a good value play when I can find one. That's the reason why I haven't bought Moderna or BioNTech.

In terms of Pfizer, its executives have hinted that the company plans to go it alone with mRNA, and not continue on with BioNTech. We'll have to see what its plans are before we try to handicap it against Moderna and BioNTech. At least with Moderna and BioNTech you know what's in their pipelines right now. I don't think Pfizer's disclosed any mRNA candidate so far. So it's presumably behind Moderna and BioNTech that have some middle to early stage candidates.

Speights: By the way, Brian, because you said, you admitted you like to be cheap. I wrote an article not long ago about whether or not Moderna is actually a value stock. The [laughs] reason why I did it, I noticed that their forward price to earnings multiple is nine. BioNTech's forward P/E is 8. Of course, what it is is the massive sales that they'll be getting this year from their vaccine.

Of course, the real issue is how much of that is going to be recurring, I think that's the big question there. But if someone just looked at the forward earnings multiples, they would think these stocks are dirt cheap right now. [laughs]

Orelli: Yeah. The issue is that you can't compare a company that's going to get a one-time boost to a company that has recurring revenue. That's been the valuation problem with Moderna and BioNTech since the pandemic started is how long is the revenue going to last? If it's going to last for multiple years then they're dirt cheap right now and if it's going to last for one year then they're probably too expensive and maybe it's something in between those two and maybe it's perfectly priced.

Speights: Exactly. I will throw in one semi-under-the-radar stock just for investors to check out on their own, CureVac (CVAC -3.46%), the ticker, there's CVAC. They're also developing a messenger RNA COVID vaccine that's in late-stage testing. The company, it's a German company I believe, or a Dutch company.

They've secured several 100 million doses in a supply deal with the European Union and have a big partner with Bayer and have some intriguing pipeline candidates that are mRNA therapies so that's another one that you might want to take a look at. It doesn't have the visibility yet anyway that a Moderna or BioNTech would have.