Shares of Moderna (MRNA -0.74%) recently shot higher in response to surprisingly positive results from a clinical trial with a cancer drug candidate. In a nutshell, it looks like the drugmaker's vaccine technology can also be used to keep tumors from coming back after they've been surgically removed.

Was Moderna's latest stock market rally the first of many or will it fizzle out? Here's what you should know about the road ahead of Moderna and its cancer vaccine program.

Hooray for mRNA-4157

Moderna's stock price shot higher on Dec. 13 after the company surprised the world with positive results from a trial with a cancer vaccine candidate, tentatively named mRNA-4157. In the study, 157 melanoma patients were randomized to receive either Keytruda, a top-selling cancer immunotherapy from Merck (MRK 0.81%), or mRNA-4157 plus Keytruda.

Patients treated with a combination of mRNA-4157 plus Keytruda were 44% less likely to die or see their tumors return compared to patients who had Keytruda on its own. If these results can be repeated in a larger population, mRNA-4157 could become a new cancer drug in just a few years.

Although called a vaccine, mRNA-4157 is really more of a personalized treatment that primes a patient's immune system to recognize the patient's unique tumor mutation signature. Keytruda is an off-the-shelf therapy that prevents tumors from shutting down the immune system when it attacks.

Keytruda is famous for working extremely well, but only for a limited percentage of patients. This October, Merck exercised an option to jointly develop and commercialize mRNA-4157. Moderna's collaboration partner paid $250 million upfront for rights to mRNA-4157 hoping that it can make Keytruda far more popular than it already is. The partners plan to begin a phase 3 study with melanoma patients in 2023 and multiple studies with other types of cancer probably aren't far behind.

Not a slam dunk

Before running out to buy Moderna on the strength of its cancer vaccine program, it's important to understand the results that drove the stock higher weren't a slam dunk. If you look at the reported confidence interval you'll see that investigators said there was a 95% chance the true reduction of risk could have been as good as 69% or as bad as an 8% increase.

The phase 2b study only enrolled 157 patients and the larger phase 3 trial that Merck and Moderna intend to begin in 2023 will enroll a great deal more. A larger number of patients could tighten up that confidence interval around a successful risk reduction score. Then again, a larger trial could prove that mRNA-4157 is far less beneficial than it currently appears.

If approved, mRNA-4157 won't be the first cancer vaccine for melanoma patients. In 2015, the U.S. Food and Drug Administration (FDA) approved Imlygic from Amgen to treat melanoma patients who relapse after surgery. Amgen shared revenue data from 22 individual drugs it sold in the third quarter but Imlygic sales are still so disappointing that it wasn't one of them.

Individual investor looking at stock charts.

Image source: Getty Images.

A buy now?

Imlygic is a one-size-fits-all solution while mRNA-4157 is a personalized vaccine that can get a patient's immune system to recognize up to 34 neoantigens specific to their own tumors. The extra personalization should lead to better outcomes and stronger sales. That said, cancer vaccines have such a troubled history that investors would do well to temper their expectations regarding this program.

This is probably a good stock to buy right now but the company's cancer vaccine program is just a small part of the attraction. Shares of Moderna have been trading at the ultra-low valuation of just 9.9 times forward-looking earnings expectations. At this low valuation, investors can come out ahead over the long run even if profits never budge from their present levels. 

An ongoing shift from big government contracts to a private market will make 2023 a challenging year for Moderna. However, the company was one of the first to earn FDA authorization for an updated COVID-19 booster and those boosters will most likely maintain a large share of the market. Buying the stock now and holding it for the long run looks like a great idea right now.