One big concern has preoccupied vaccine stock investors over the past few weeks: the possibility that vaccine sales will taper off as the pandemic wanes. Shares of vaccine leader Moderna (MRNA 0.89%) slipped in early November after the biotech cut this year's sales forecast. Even though it didn't have to do with a loss of orders, investors still worried.
Of course, experts say the coronavirus is here to stay. So it's logical to assume we'll still need vaccination to protect us. But it's also logical to assume that the world may not move to vaccinate as quickly and aggressively once the pandemic is over. That opens the door to the idea of smaller vaccine orders. So, what's an investor to think? Let's look at a clue directly from Moderna's CEO.
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Handling the omicron variant
CEO Stéphane Bancel spoke with newspaper The Financial Times about today's coronavirus vaccines -- and the possibility of handling the omicron variant. Healthcare officials discovered the omicron variant a few weeks ago in South Africa. Since, it has spread to other countries and regions, including Europe and North America. Now, vaccine makers are testing their vaccines to see if they can protect against this new strain.
Bancel expects a significant decline in protection.
"I think it's going to be a material drop," he said in the Financial Times interview.
How can these words from Bancel actually result in an increase in vaccine sales? Well, first, I'm not talking about an immediate increase. Moderna and rival vaccine makers already have secured orders for this year and are delivering on those. I'm talking about orders for next year and beyond.
Now, you might wonder: If the vaccines don't protect very well against omicron, why would vaccine makers win more orders? For two reasons. First, a new variant that partially evades vaccine protection is a serious reminder that experts are right: The coronavirus is going to stick around. And as countries actually see this sort of proof, they may be more likely to plan ahead and order doses into the coming years.
Future boosters and vaccine updates
And here's the second reason Moderna may win more supply agreements. These agreements don't uniquely cover the current vaccine. They also include future boosters and vaccine updates that Moderna may develop. Right now, Moderna is working on four possible strategies to handle omicron. The company is testing its authorized booster at a higher dose. Moderna also is testing two booster candidates that target mutations potentially found in variants. Moderna created these candidates to stay one step ahead of future strains.
One of these candidates includes mutations found in the delta strain, while the other includes mutations found in the delta and beta strains. Some of the mutations are found in omicron as well. Moderna plans to examine blood serum from participants in these trials to see if these candidates may work to beat omicron.
And finally, Moderna has launched the development of a booster candidate to specifically target omicron. This candidate would be the slowest option. It takes about two to three months to advance a candidate to the clinical trials stage. And then trials add a few months to that.
As countries see Moderna's solid plan to tackle omicron, they may consider securing future doses of a potential booster -- or even boosters that would cover a future strain.
So, what could this mean for Moderna's revenue? Today, Moderna is generating billions of dollars each quarter in vaccine revenue and profit.
MRNA Revenue (Quarterly) data by YCharts
As mentioned above, investors worry that sales may peak this year or even next year, then start to decline. But, it's possible the emergence of omicron may spur countries to maintain a high level of orders beyond that point, not with the idea that omicron itself may be around into the next few years, but with the idea that other new variants might emerge. And this could keep Moderna's earnings -- and share price -- climbing beyond the pandemic.
