During the earlier days of the pandemic, it was easy to see why Moderna (MRNA 0.93%) made for a great investment. The company took leadership in the vaccine race right from the start. And once Moderna launched its vaccine, it dominated the market along with rival Pfizer. The vaccine has generated billions in earnings for Moderna -- and helped it build up a massive cash level.
But as we head toward a post-pandemic world, you may be wondering if Moderna still makes a good investment. After all, it relies on the coronavirus vaccine and booster for all of its product revenue. And vaccine demand is on the decline. Before deciding whether or not to buy this vaccine giant, here are three crucial things to know.
1. This is a year of transition
The year 2023 isn't likely to be Moderna's biggest when it comes to earnings growth. But that's OK. We've seen this coming, and it doesn't mean growth is over. This is a transition year. We're shifting to a post-pandemic environment, and that means a few different things.
First, Moderna itself will face a new set of logistics and costs as it sells vaccines directly to healthcare providers instead of governments. Second, the company plans on raising the price of its vaccine in this context. This should compensate for some of the declines in demand. By how much? We won't know until we get an idea of how many people will actually get annual coronavirus boosters. That should start to happen this fall -- but we may not have a clear picture until the following fall.
Moderna predicts the coronavirus booster market will follow that of the flu. This offers us reason to be optimistic -- half of the U.S. population generally goes for a flu shot.
Meanwhile, Moderna's vaccine sales this year are likely to be much lower than they were in 2021 and 2022. They reached about $18 billion annually over the past two years. This year, Moderna has orders for about $5 billion. Of course, this could move higher. But it's unlikely to reach the levels we've seen.
2. Moderna's flu shot candidate could set the tone for another big potential product
Moderna recently reported interim phase 3 data from its flu vaccine candidate. This was from a study of immunogenicity -- this evaluates whether trial participants mount an immune response against a particular virus. In this case, mRNA1010 showed positive results against influenza A. But it didn't show superiority to current flu vaccines when it comes to influenza B.
An efficacy study -- measuring if the candidate actually prevents infection -- is ongoing. Moderna expects an independent safety and data monitoring board to review interim data from this study before the end of the first quarter.
It's important to keep in mind that the influenza A strain leads to more than 95% of flu hospitalizations in adults. Still, Moderna has updated its candidate to improve immune response for influenza B and will evaluate its performance.
A potential regulatory nod for Moderna's flu vaccine would bring the company a new revenue stream -- and that's positive. But, even better, it would offer Moderna a boost for its combined vaccine program. Moderna is working on candidates combining coronavirus and flu -- and coronavirus, flu, and respiratory syncytial virus (RSV). It's crucial for Moderna to succeed on the stand-alone flu vaccine first.
An eventual combined product could be a gamechanger -- attracting more people to annual vaccination. So, progress in the flu candidate today could represent a big step for the combined vaccine program.
3. Moderna's next big product may be on the way
We may not have to wait too long for Moderna's next blockbuster. The company recently reported positive data from a phase 3 trial of its RSV vaccine candidate. And Moderna aims to file for regulatory approval in the first half. If all goes well, Moderna says it could launch an RSV vaccine early next year.
RSV is a common respiratory virus that causes cold-like symptoms -- but it can be particularly serious for infants and older adults. Until now, there hasn't been a vaccine available. Today, though, Moderna and rivals are close to the finish line. Moderna expects to share the market at least with Pfizer and GSK.
Moderna, Pfizer, and GSK each reported efficacy of more than 80% in their phase 3 trials. So, it's difficult to predict whether one of these players will dominate the market. But the good news is the market is big enough for all three companies to benefit. The RSV market for older adults may be worth more than $10 billion, Moderna has said.
This means that even if Moderna shares the market, it still may be looking at another source of blockbuster revenue in the near term.
What does this mean for investors?
This year may not be one of revenue growth or major stock gains for Moderna. But the company's long-term prospects look brighter than ever. This means investors this year may look to buy Moderna on the dip and wait. As this biotech establishes itself in the post-pandemic vaccine market and brings other products to market, growth may take off -- and that should lead to lasting share performance over time.
