In response to the COVID-19 pandemic, many pharmaceutical companies around the world have raced to produce an effective vaccine. Pfizer and its German partner BioNTech were the first to receive emergency authorization for their mRNA vaccine in December. Within weeks, Moderna (MRNA +6.23%) also received approval for its similar mRNA vaccine.
Both companies were able to gear up their manufacturing processes to capture the U.S. market, while competitors like Johnson & Johnson, AstraZeneca, and Novavax (NVAX +5.76%) ran into regulatory and production issues which delayed their efforts.
Because of its successful development and manufacturing ramp-up, as of Q1 Moderna, had advance purchase agreements (APAs) in place to the tune of $19.2 billion, and it expects to ship 800 million to 1 billion doses by the end of 2021.
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To the victor go the spoils
Because Moderna doesn't have to split profits with a partner, it's likely to make more money from its vaccine sales than either Pfizer or BioNTech. Pfizer is also a much larger company, so it takes a lot more to move its price. As a result, Moderna has been the big winner in the stock market over the past year, with its stock price rising 377% in the past 52 weeks versus 235% for BioNTech and 17% for Pfizer.
The big question many investors are asking themselves is, "Is it too late to buy Moderna?"
The next leg of the race
Despite the early successes, there are three things investors need to know before deciding whether Moderna is a buy:
1. Competing for the global opportunity
The competitive landscape may change as the focus shifts from the U.S. to the rest of the world. Despite initial stumbles, Novavax may have some advantages in global distribution -- it can be refrigerated at lower temperatures and is therefore easier to transport and store. That could end up splitting the global market across more players, thereby reducing Moderna's opportunity.
2. Developing a combo COVID-19 and flu vaccine
Moderna, Novavax, and Pfizer-BioNTech are working on developing a combination vaccine to address COVID-19 and the flu in a single shot. A successful combo vaccine could change the competitive dynamics -- both healthcare providers and patients may prefer a single annual shot. Novavax is thought to be somewhat ahead of the game because it has a flu vaccine in clinical trials already, but combo vaccine trials are not expected to be completed until 2025.
3. Pipeline of additional mRNA vaccines and medicines
The COVID-19 vaccine is a great proof point that mRNA vaccines actually work and might be effective in treating a variety of other viruses. Moderna has nine other vaccines in various stages of development, including the mRNA-1647 program targeting cytomegalovirus (CMV, a form of the herpes virus), which is expected to enter phase 3 trials this year. The hope is that vaccinating pregnant mothers will prevent CMV in babies, which occurs in one out of every 200 births.
Beyond vaccines, Moderna is hoping to use mRNA to solve challenges in treating a variety of other conditions. As an example, Moderna and AstraZeneca have a 50/50 partnership for the AZD8601 program to develop a regenerative therapeutic for the heart. The program, currently in phase 2 trials, aims to rebuild blood vessels, improve blood flow, and partially restore heart function in patients with coronary artery disease. An estimated 9 million people die from this heart disease each year.
Keep an eye on these developments
Moderna is scheduled to report Q2 earnings Aug. 5. Smart investors will look for progress on global approvals and APAs, long-term progress on flu and combination vaccines, and continued development of the pipeline beyond COVID-19 vaccines.
Moderna had quite the year with a large run-up in its stock price. It would be easy to build a case that this business is overvalued based on the COVID-19 vaccine alone. But if Moderna can build on its progress with additional mRNA vaccines and medicines, there should be a long runway of future growth. For patient buy-and-hold investors, Moderna could be a long-term winner for your portfolio.
