Shares of COVID-19 vaccine pioneer Moderna (MRNA -1.43%) moved higher on Monday morning, rising more than 3% as the company announced more good news with its virus-fighting efforts. Specifically, Moderna said that it has received approval for use in the U.K. for what the company is calling its "next-generation COVID-19 vaccine."
The mRNA specialist received conditional authorization for its mRNA-1273.214 omicron-containing bivalent COVID-19 booster vaccine from the Medicines and Healthcare Products Regulatory Agency, or MHRA. The body oversees immunization approvals in the U.K., and this is the first time that it or any other regulatory agency has approved a bivalent vaccine designed to address the omicron variant.
Going beyond Spikevax
The mRNA-1273.214 vaccine combines the Spikevax vaccine that Moderna originally released to fight COVID-19 with a new candidate that targets the BA.1 omicron variant. The company believes that the bivalent vaccine will do a better job of fighting the newer variant than its original vaccine alone.
Positive clinical data from a phase 2/3 trial supports Moderna's belief. The trial met all its primary endpoints, producing a superior neutralizing antibody response against BA.1 omicron compared to a dose of the original Moderna vaccine. In particular, a booster dose of the bivalent vaccine increased neutralizing titers against omicron by roughly eight times from baseline levels. The newly authorized vaccine also showed strong responses in fighting newer subvariants of omicron, including BA.4 and BA.5.
For now, the U.K. authorization covers use for patients 18 and older. As evidence comes in from its use, it's possible that the range of ages that could take Moderna's new vaccine could widen.
What the future may bring
Many investors have feared that Moderna's COVID-19 success will prove to be a one-time boost to the company. Even after seeing a 50% rise since mid-June, the vaccine stock is still priced at less than six times its trailing earnings over the past 12 months, signaling that few investors expect Moderna to be able to sustain its current level of profitability for more than a year or two.
However, the ongoing evolution of the virus causing COVID-19 suggests that cycles of new vaccinations and boosters could continue for some time. Moreover, although the omicron variant has generally been mild, there's always the possibility of a mutation creating a more harmful threat that would motivate a stronger response from health officials and the general public.
In the near term, Moderna expects demand for its new vaccine to be strong. It has already submitted the necessary regulatory paperwork to gain approval in Australia, Canada, and the European Union. The biotech expects to get feedback from regulatory agencies within the next several weeks.
Moderna will have to overcome some troubling trends, however. In its second-quarter financial report, Moderna wrote off nearly half a billion dollars worth of vaccine doses that were past or near expiration. Even as the company gets high-profile orders from governments, it doesn't always end up delivering on the initial schedule dates if fewer patients seek vaccinations than anticipated.
A stock that's hard to value
Investors always have difficulty putting a price on a stock when the underlying business is going through a short-term spike in demand. It's far easier to be comfortable with valuations for businesses that experience steady, persistent growth that isn't lumpy or unpredictable.
Nevertheless, Moderna's current price puts very little value on the non-COVID-19 treatments in its pipeline. Bullish investors should see the company's vaccine success as a proof of concept for its entire mRNA-based business model. With so many areas in which it could improve patients' lives, Moderna looks well positioned to find new opportunities for growth in the years ahead regardless of what happens with COVID-19.
