Moderna's (MRNA 0.53%) second quarter might not be as strong as expected. The company announced today that it has reached an agreement with the European Commission to revise the contractual delivery schedules for shipping its COVID-19 vaccine boosters. Booster doses scheduled for delivery in Q2 will now likely be pushed back to the second half of 2022 or even into early 2023.
The vaccine stock was down 6.5% as of 10:45 a.m. ET on Thursday on the news. Should investors worry about Moderna's European vaccine delivery delay?
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Singing the same tune
Moderna stated in its first-quarter update that it expected "COVID market dynamics will result in sales slightly larger in the second half of 2022 than in the first half." CFO David Meline acknowledged in the company's Q1 conference call that Q2 would likely have the lowest vaccine sales this year.
Nothing has changed with that outlook. Moderna said in the press release announcing the revised EU agreement that it still anticipates advanced purchase agreements of around $21 billion this year. The company also continues to project that sales will be "slightly higher in the second half of 2022 than in the first half."
This seems to indicate that Moderna doesn't expect the potential for delayed booster dose shipments will negatively impact Q2 revenue all that much. We're already approaching the end of the second quarter. Moderna's financial team should have a pretty good feel for how the quarterly results will look.
It's important to note that the revised agreement doesn't dictate that deliveries scheduled for Q2 will be pushed back. Instead, the changes give participating European Union (EU) countries the option to push back their deliveries of booster doses.
NASDAQ: MRNA
Key Data Points
Doing the shuffle
The worst-case scenario for Moderna is that revenue originally targeted to be recorded in one quarter is shifted into another quarter. This shuffle might bother Wall Street analysts a little bit. However, it shouldn't really impact Moderna's prospects.
Investors would have something to worry about if Moderna and the EU lowered the total number of booster doses to be delivered. That's not what's happening in this case, though. The chances that Moderna would agree to anything along those lines are almost certainly slim to none.
The revised agreement could even work to Moderna's benefit over the long run. EU countries would probably be resentful if the company didn't show any flexibility. Moderna's willingness to accommodate their needs just might help put the company in a favorable position with potential future supply deals (perhaps even with future non-COVID-19 vaccines).
Moderna expects to report initial data for mRNA-1273.214 later this month. This bivalent prototype combines the original mRNA-1273 vaccine with a version that specifically targets the coronavirus omicron variant. Moderna plans to use this data to help it select a candidate to be used as a booster for tall 2022 in the Northern Hemisphere.
The company's amended deal with the European Commission makes it more likely that EU countries will order the bivalent booster (assuming it secures the necessary authorization). These countries will almost certainly see the flexibility to delay deliveries and possibly get more effective boosters as a big plus.
The real worry
No potential delay in revenue is good news for a company. However, Moderna's announcement shouldn't be cause for investors to worry. Its 2022 outlook hasn't changed by even a penny at this point.
There is a real worry for investors, though. The future demand for COVID-19 vaccines is uncertain. It's possible that Moderna's sales could decline significantly in 2023 and subsequent years.
However, Moderna is in a much stronger position to weather a potential slump than most companies. It ended the first quarter with cash, cash equivalents, and investments totaling $19.3 billion. That's a game-changing number that should enable Moderna to cruise along while it advances its pipeline programs.
