When it rains, it pours. A few weeks ago Moderna (MRNA -0.05%) reported some concerning safety data for its experimental flu vaccine. Last week, the company had more bad news.
On Tuesday, Bloomberg reported that COVID-19 Vaccines Global Access (COVAX) and the African Union declined options to buy more doses of Moderna's Spikevax COVID-19 vaccine. At the end of the week, Moderna revealed that it was recalling thousands of doses of the Spikevax vaccine in Europe.
Moderna's shares fell 9% last week. Is the vaccine stock a buy after this latest round of horrible news?
Breaking down the bad
Just how bad was Moderna's horrible news last week? Let's look at both negative stories more closely.
Covax has options to purchase 166 million doses of Spikevax in the third quarter of 2022 plus another 166 million doses in the fourth quarter. The African Union has already bought 50 million doses of the vaccine but decided not to exercise an option to buy another 60 million doses in the second quarter of 2022.
There's a common denominator behind both decisions -- supply is outpacing demand. The African Union still has around 300 million vaccine doses available while COVID-19 cases are declining. Many people in Africa don't see an urgency in being vaccinated.
Meanwhile, Moderna is recalling nearly 765,000 doses of Spikevax made by Rovi, a contract manufacturer. These doses were distributed in January to Norway, Poland, Portugal, Spain, and Sweden.
Looking at the positives
Organizations deciding against buying more doses and a big recall certainly aren't great for Moderna. However, there are some positives.
For one thing, only 15% of Africans have been fully vaccinated. It's possible that the continent will need more vaccine doses in the future. As for Covax, the organization remains in discussions with Moderna about potential additional purchases.
Also, the vaccine recall in several European countries was due to contamination by a foreign object found in just one vial. Moderna stated that it moved ahead with the recall of the entire manufacturing lot "out of an abundance of caution." This incident shouldn't have a big negative effect on the company.
There have also been some recent developments that could work to Moderna's benefit. The spread of the BA.2 subvariant of the coronavirus omicron variant could lead to increased demand for COVID-19 vaccines. In the U.S., a Senate compromise should pave the way for another $10 billion in federal funding, part of which will be used to purchase additional vaccine doses.
You could probably argue somewhat persuasively that Moderna's horrible news last week won't be nearly as bad as time goes by. With Moderna's shares trading at only 6.2 times expected earnings, it's understandable if many investors might see the recent pullback as a great buying opportunity.
Not long ago, I would have agreed with that perspective. My view is that there will likely be ongoing demand for COVID-19 vaccines for years to come. I think that Moderna's strategy of developing combination respiratory vaccines for providing protection against COVID-19, flu, and respiratory syncytial virus (RSV) is a smart one.
However, I have admittedly gone wobbly about Moderna over the past few weeks. My concern is that the side effects in phase 2 testing of the company's flu vaccine candidate mRNA-1010 could be a bigger issue than some might think.
Around twice as many individuals in the study who received mRNA-1010 experienced side effects than individuals taking Afluria, an already-approved flu vaccine. If this safety profile doesn't improve with Moderna's combo vaccines, there's a real possibility that the company could lose significant ground in the longer-term COVID-19 vaccine market.
Over the next couple of decades, Moderna could be a huge winner if its messenger RNA platform achieves success in other indications. But I'm reluctant to call the stock a buy until some of the uncertainties related to the company's combo vaccine development are resolved.