Moderna (MRNA 1.69%) exploded onto the scene when it began development of its coronavirus vaccine. The company had been around for a decade -- but this new mission attracted all eyes. Success of the program led to share gains of more than 400% in 2020. Since, the company has reported billions of dollars in revenue and profit from its vaccine.
But Moderna is no longer the brightest star in the investment sky. Investors have worried about the company's vaccine revenue over the long term. The concern is revenue may sink like a stone in a post-pandemic world. As a result, shares have dropped more than 40% this year. But Moderna recently offered us one number that's pretty reassuring. In fact, if you've been doubting Moderna's long-term potential, this number may completely change your mind.
Long-term revenue opportunities
So, what is this magic number? It has to do with the long-term revenue opportunity for coronavirus vaccines. First, a bit of background on the past and current revenue situation. Moderna has been selling its vaccine directly to governments around the world. In this context, the price per dose has been lower than if Moderna was selling directly to drug distributors.
Moderna has priced its vaccine differently for each country. For example, low-income countries get the very lowest price. As for high-income countries, the price has been higher. The U.S. most recently paid about $26 per dose for a new batch of Moderna strain-specific boosters.
But over the long term, this model will shift to a private market. This means Moderna will sell to distributors instead of the government. This gets payers such as Medicare involved. Recently, Centers for Medicare & Medicaid Services projected a cost for the coronavirus vaccine of $64 per dose.
This tells us the price of the vaccine in the U.S. clearly will go up. And that's positive for Moderna. That still left us with one big uncertainty though: future demand.
And this brings us to the key number: $13 billion. Moderna said last week the potential U.S. coronavirus vaccine market in a post-pandemic world could be as high as $13 billion. This assumes about half of all U.S. adults ages 18 and older would go for a vaccine -- at a price of $100 a dose.
Flu shots as an example
It's important to keep in mind that about half of the U.S. adult population went for a flu vaccine last year. So it's reasonable to consider the above scenario actually playing out. If it doesn't, the situation still looks promising for vaccine sales. Moderna's lowest estimate is a $5.2 billion U.S. market. That's considering only high-risk individuals opt for vaccination at a price of $64 a dose.
This year, in a pandemic world, Moderna predicts $21 billion in vaccine revenue. Both of the above scenarios leave Moderna with a lower level of revenue. But there are three reasons this doesn't bother me.
First, Moderna has built up an enormous stockpile of cash thanks to vaccine sales so far. It reported $18 billion in cash as of the end of the second quarter. This will help it advance its pipeline -- which includes three phase 3 candidates outside of its coronavirus programs. If all goes well, Moderna could soon become a multi-product company.
Second, the coronavirus vaccine products, according to these predictions, will remain blockbusters for quite some time. Moderna's work on making its vaccines more and more precise also may help it keep prices higher. The company is set to adapt its boosters according to the strain of the moment -- and Moderna is working on combined vaccine candidates, such as one targeting both flu and coronavirus.
Third, Moderna's estimates just include the U.S. vaccine market. So, we should probably expect additional vaccine revenue from other countries.
What does this mean for investors?
Moderna shares today trade at only 5.3 times forward earnings estimates. This looks like a bargain considering the long-term potential of Moderna's coronavirus program -- and the potential of the company's late-stage pipeline too.
The shares may not bounce back in the near term. Vaccine stocks no longer are generating the excitement they did during the earlier stages of the pandemic. But over the long haul, Moderna has plenty of fuel to drive revenue growth -- and share price gains. The number $13 billion may be just the beginning for this innovative biotech company.
