It's clear that those who bought shares of Moderna (MRNA -1.79%) at the end of 2019 have reason to be happy. The stock has soared more than 600% since that time. So, it's very logical to say that was the best time to invest in this biotech stock. And that's why I'll probably surprise you when I way something completely different.
Right now actually may be the best time to invest in Moderna. How could this be possible? Let's take a closer look at Moderna's story so far -- and what's ahead.
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A riskier bet
First, it's important to keep in mind that Moderna was a much riskier stock back in 2019 than it is today. Moderna's closest-to-market programs were its personalized cancer vaccine candidate and its cytomegalovirus (CMV) vaccine candidate -- in phases 2 and 1, respectively. And no one knew a billion-dollar coronavirus vaccine would be in the company's future. The company's mRNA technology hadn't yet fully demonstrated its safety and efficacy in humans. And all of Moderna's programs are based on this technology. So, for cautious investors, it wasn't exactly the best time to buy shares of Moderna.
Today, the situation has changed. We know Moderna's mRNA techniques work. It brought its coronavirus vaccine from the drawing board to commercialization in less than a year. Moderna now is generating billions of dollars in revenue and profit from this vaccine. All of this means the risk of investing in Moderna has dropped significantly.
But there are two more reasons why now is the best time to buy Moderna shares. One of them has to do with the fact that many of Moderna's programs have made it to late-stage development. Five candidates -- excluding those in the coronavirus program -- are in phase 2 studies or farther along.
Moderna recently began phase 3 trials for a CMV vaccine candidate and a respiratory syncytial virus (RSV) vaccine candidate. Both of these could represent blockbuster opportunities. CMV and RSV are common viruses that are particularly dangerous for certain individuals. A CMV vaccine doesn't exist. And only an antibody treatment exists for RSV protection.
More products ahead
Today, Moderna is very close to becoming a multi-product company. Moderna may continue generating revenue from its coronavirus vaccine -- or an updated version of it. Experts say the coronavirus will stick around well beyond the pandemic. As a result, countries should be ready to offer protection to at least the most vulnerable individuals.
If all goes well in Moderna's CMV and RSV clinical trials, two more products may enter the market over the next few years. Of course, there's always the risk of failure. Even in late-stage studies. But the depth of Moderna's pipeline offers us a bit of security. The company has a total of 44 programs in development. If even a handful make it to market over time, the company could continue to be quite successful.
Now, let's talk valuation. That's the third reason Moderna's a great buy right now. The stock is trading at about five times forward earnings estimates. That's down from more than 16 about six months ago.
MRNA PE Ratio (Forward) data by YCharts
Investors' concern
But there's one problem. Some investors worry earnings will drop once the pandemic shifts to endemic. The idea is countries will order fewer vaccine doses if the virus isn't as much of a threat as it was before.
I think these worries are overdone. It doesn't look as if Moderna's vaccine revenue is set to fall in a major way. Here's why. First, the company has a plan. In its recent earnings report, Moderna said it's developing a 10-year subscription program. It aims to sell an annual booster this way, and it's already in negations with several countries. Second, Moderna says it's likely to raise the price of its vaccine once it starts selling to private buyers -- such as pharmacies -- in some countries rather than directly to governments.
Considering this, I'm optimistic about Moderna's future revenue and profit. And that's why I think the stock is a bargain today.
So, yes, 2019 was a great time to buy Moderna stock -- for aggressive investors. Today, though, less risk, billions of dollars in earnings, and a more advanced pipeline have transformed Moderna. It's a good choice for both aggressive and cautious investors. And that's why now is the best time to buy this dynamic biotech stock.
