Moderna (MRNA 1.69%) blew it with its third-quarter earnings update on nearly every front. The company reported revenue of $5 billion, far below the consensus Wall Street estimate of $6.2 billion. It posted earnings of $3.3 billion, or $7.70 per diluted share. The average analysts' estimate was for earnings of $9.05 per share. Moderna also cut its full-year 2021 sales guidance from $20 billion to between $15 billion and $18 billion.
Unsurprisingly, the vaccine stock plunged 17% in intraday trading on Thursday. But investors actually shouldn't focus much on the big revenue and earnings misses. Here are the only three things in Moderna's Q3 update that really matter.
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1. Projected 2022 sales
Moderna's sales in the third quarter were a lot lower than expected. However, the revenue isn't going away. Instead, it's being shifted from the second half of 2021 into 2022.
The main problem is that Moderna isn't able to manufacture and ship as many doses for delivery this year as it had hoped. The company is also prioritizing shipments of its COVID-19 vaccine to low-income countries, which generate lower sales than doses supplied to the U.S. and Europe.
All of this makes Moderna's projected 2022 sales much more important. The good news is that next year is shaping up to be solid. Moderna has already signed advance purchase agreements for around $17 billion. It expects governments to exercise options that will add up to $3 billion to that total. The company also looks for booster sales in the U.S. next fall to generate sales of up to $2 billion.
In total, Moderna anticipates 2022 revenue will be between $17 billion and $22 billion. My hunch is that the actual amount will be closer to the upper end of that range than the bottom end, considering that the company continues to talk with governments and international organizations about potential 2022 supply deals.
2. Pipeline progress
My Motley Fool colleague Adria Cimino recently wrote that Moderna's initiation of its phase 3 study of its cytomegalovirus (CMV) vaccine candidate could be more important than anything else the company says in its Q3 update. I think Adria made a good point. In a real sense, Moderna's pipeline progress is more critical than its performance in the recent quarter.
Experimental CMV vaccine mRNA-1647 is the lead pipeline candidate outside of Moderna's COVID-19 vaccine program. The company plans to enroll close to 8,000 participants globally in the pivotal late-stage study of the vaccine candidate. If it's eventually approved, Moderna thinks the vaccine could rake in annual sales of between $2 billion and $5 billion.
But the CMV vaccine is only one feather in Moderna's cap. The company now has 37 programs in development, 21 of which are in ongoing clinical trials.
Two of those programs that especially stand out are flu vaccine candidate mRNA-1010 and respiratory syncytial virus (RSV) vaccine candidate mRNA-1345. Moderna expects to report data from a phase 1 study of its experimental flu vaccine soon. It also plans to soon begin a phase 2/3 study evaluating its RSV vaccine candidate.
3. Cash position
The third thing in Moderna's Q3 update that really matters is the company's cash position. Moderna ended the third quarter with cash, cash equivalents, and investments of $15.3 billion. The total should grow significantly in the coming quarters.
The big question for Moderna is: What will it do with this cash? The company's board of directors has approved a stock buyback plan, but it's for up to $1 billion over a two-year period. That's a drop in the bucket compared to Moderna's current cash position. And considering the company didn't buy back a single share in Q3, I'm not sure that the repurchase threshold will be raised anytime soon.
Moderna's research and development costs will definitely increase as it ramps up larger clinical trials. However, the company should be able to easily fund this expansion through its cash flow.
Perhaps the most likely use of Moderna's large and growing cash stockpile is business development. The company can afford to make multiple key licensing deals or even fully acquire one or more smaller biotechs.
Sure, Moderna's Q3 update was disappointing. But with as much cash as it has along with the prospects of strong sales next year and a promising pipeline, there's no reason for investors to be despondent about the company's long-term future.
