Biotech company Moderna (MRNA +1.41%) has been southbound for most of the year, but the vaccine maker seems to be ending 2022 on a high note. On Dec. 13, the company's shares soared by more than 20% in one day. As is usually the case with biotechs, Moderna had good news from the clinic to thank for that impressive one-day rally (more on that later).
But the company is still facing issues, including a potential drop in sales of its prized coronavirus vaccines. Are Moderna's shares still worth buying right now? Let's find out.
A highly promising vaccine
Moderna has become quite popular in the past three years thanks to its coronavirus-related efforts. But even before the pandemic, the company already had a rich pipeline of promising mRNA-based vaccines. On Dec. 13, the biotech announced positive results from a phase 2 clinical trial for one of those candidates, mRNA-4157/V940, a potential cancer vaccine.
The clinical trial investigated mRNA-4157/V940's ability -- in combination with Merck's cancer therapy Keytruda -- to prevent recurrence or death in patients with stage 3 or stage 4 melanoma, in comparison to just Keytruda. The results were very encouraging; mRNA-4157/V940 and Keytruda decreased the risk of recurrence or death by 44% compared to Keytruda alone.
That's an impressive result. Of course, the study was only phase 2. Moderna and Merck plan to start a phase 3 study next year after discussing it with the appropriate authorities.
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Moderna's long-term prospects
One could argue that the market overreacted to these new developments from Moderna, given how many steps are left before mRNA-4157/V940 earns regulatory approval, if it ever gets that far. But there's a broader picture to look at now. The biotech continues to show the potential of its mRNA vaccine platform, following its success in the coronavirus market.
Now, it has several phase 3 clinical trials in the works. They include mRNA-1010, mRNA-1345, and mRNA-1647, which target influenza, respiratory syncytial virus, and cytomegalovirus, respectively. Will all of these candidates make it past the remaining clinical and regulatory steps ahead? Maybe not. But the company has many more programs in early-stage studies, just like mRNA-4157/V940.
Moderna is working on a potential HIV vaccine, and other programs target the Zika virus and the herpes simplex virus (HSV), to name a few; there are as yet no approved vaccines for the Zika virus or HSV. For biotech companies, getting therapies or vaccines to market is sometimes a bit of a numbers game. Not every program will succeed, but at least some will.
And the more candidates a drugmaker has, the more likely it is that some will eventually earn regulatory approval. Moderna's pipeline has made solid progress in the past two years. And it will continue to do so, largely thanks to its coronavirus efforts and the amazing impact they had on its revenue and earnings.
True, sales of COVID-19 products might drop next year. But there are important things to note here. Moderna thinks the COVID booster market will eventually switch to an endemic phase. Many will continue to get vaccinated annually, just as they do for the flu. But COVID-19 is even more contagious and deadly than influenza, so there are good reasons to think the coronavirus booster market will be even bigger. Moderna should continue to generate decent revenue from its related products.
Next year, the biotech's established purchase agreements should allow it to generate at least $4.5 billion to $5.5 billion in vaccine sales. That's lower than the $14.2 billion in revenue it racked up through the first nine months of this year. But as the state of emergency we faced at the peak of the pandemic fades into the rearview mirror, year-over-year comparisons will become less unflattering for Moderna.
And given that Moderna is getting closer to new approvals, the slowdown in coronavirus sales shouldn't be a deal breaker, at least for investors focused on the long term. In short, the company's shares are still worth buying, especially as they remain down 18% this year.
