Why buy Moderna (MRNA -0.58%) stock? Many people will point to the company's coronavirus vaccine. The product is the reason for this biotech company's meteoric rise to stardom, after all. Moderna grabbed investors' attention as the pandemic gained ground last spring: It was the first to launch a clinical trial for a vaccine candidate. And it sealed the deal at the end of the year, when it became one of the first to commercialize a vaccine.
Today, the vaccine is generating billions of dollars in revenue, and it even made Moderna profitable after just one full quarter of sales. So it might seem obvious that the vaccine is a good reason to buy Moderna shares -- it is.
But there's another solid reason to invest in this biotech company. And it, too, may represent billions of dollars down the road.
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A common, dangerous virus
Moderna is working on a vaccine candidate for cytomegalovirus. CMV is a common virus -- so common that almost 1 out of 3 kids contract it by age five, according to the Centers for Disease Control and Prevention. And more than half of adults have had it by age 40.
In healthy individuals, CMV usually isn't a problem; some people don't even realize they have it. So why a vaccine? CMV can be particularly harmful to a developing fetus: The virus may result in devastating birth defects, developmental disabilities, and even death. CMV also can wreak havoc on individuals with weakened immune systems. There is currently no vaccine that could protect either fetuses or the immunocompromised from CMV, so commercialization of such a product clearly would be groundbreaking -- and lifesaving.
Enter Moderna. The company is preparing to launch a phase 3 pivotal trial this year of its CMV vaccine candidate. Earlier clinical studies showed strong levels of neutralizing antibodies. In participants testing negative for previous CMV infection, the investigational vaccine produced antibody responses above the level of those in individuals who'd already been infected; in some cases, levels were more than 20 times higher. In people who'd had CMV, antibody levels rose in the range of twofold to more than "6.8-fold over baseline." And studies suggest that immunity after a third vaccine dose lasts at least 12 months.
The plan for phase 3
The phase 3 study will include 8,000 volunteers in the U.S., Europe, and Asia. Moderna is aiming to prove the vaccine can protect women ages 16 through 40 who are not CMV-positive. The company expects that if the vaccine protects pregnant women from infection, it then will prevent infections in their babies.
Success in CMV could be big for Moderna. It would represent a second victory for its mRNA vaccine technology. It would be Moderna's second product to fill an unmet need. And it would be a second product with blockbuster sales potential.
CEO Stephane Bancel said during a presentation last year that peak annual sales for the CMV vaccine would be in the range of $2 billion to $5 billion. Bancel expects Moderna's gross margins in the U.S. market to be greater than 90%. And that should result in EBIT (earnings before interest and taxes) margins of about 50%, he said. Bancel bases that on vaccine pricing similar to that of Gardasil, Merck's vaccine for human papillomavirus (HPV), which is responsible for various cancers such as cervical cancer; Gardasil is priced at $238.50 per dose.
Moderna owns global commercial rights to the CMV vaccine candidate. That means the biotech company won't have to share revenue from an eventual marketed product.
A longer timeline
Of course, the CMV candidate won't make it to commercialization as quickly as Moderna's coronavirus vaccine. The COVID-19 pandemic meant regulatory agencies were willing to look at early clinical data and offer emergency authorization to vaccines. It also meant individuals readily volunteered for companies' clinical trials. In last year's presentation, Moderna said it generally takes 18 months to enroll participants in a large-scale phase 3 trial. So, even if all goes smoothly, potential commercialization of the CMV candidate is likely a few years down the road.
What does this mean for investors today? Moderna's shares can benefit from coronavirus vaccine revenue and profit right now. That's what's been happening: They climbed 125% in the first half of the year.
But Moderna's share performance isn't limited to that one product. Positive data from the CMV trial, a possible approval, and potential for blockbuster sales could power share gains well into the future. Of course, there's always the possibility that a candidate will fail during clinical trials; investors must accept that idea before diving into shares of biotech companies. But data so far gives us reason to be optimistic about Moderna's CMV program.
For investors, all of this means a purchase of the stock today could pay off immediately -- and in the long term.
