Moderna (MRNA -3.53%) was the star of 2020 and 2021, with its shares skyrocketing as a result of its ambitious work to develop a coronavirus vaccine and get it approved for sale. Since March 2020, the stock is up 414%. But it's hard to see how the next three years could possibly be as great for shareholders.
The near term doesn't look so hot for the biotech as global demand for its only product, a coronavirus jab, seems to be in persistent decline. But does that mean it's all over for what was once one of the most promising businesses in the world? Let's think about whether it's too late to buy Moderna stock, or whether the looming doldrums might be the preamble to reaching greatness once again.
A strong outlook in the long term
While it's definitely too late to buy shares to capture the upside of its coronavirus vaccine boom, it isn't remotely too late to buy Moderna stock -- assuming that you have the patience to hold your shares for at least five years or more, and you have the fortitude to avoid selling when the temptation to do so may be high. Here's why.
Within the next two years, it will likely have three products on the market: its up-to-date coronavirus jab, a jab for respiratory syncytial virus (RSV), and a shot for seasonal influenza. After that, it could be working on commercializing its combination shots that vaccinate against all three of those viruses simultaneously, assuming that their clinical trials go as planned.
At the same time, it'll be advancing multiple other programs from its total of 48 that are currently in development, including therapeutics like its personalized cancer vaccine (PCV) that's in phase 2 trials in collaboration with Merck. Each program that reports promising clinical trial results is a chance for the stock to rise, and there should be quite a few such instances over the next 10 years for those who invest today.
Experiencing failures along the way is all but assured. The secret is that those failures simply don't matter if you're investing for the long term, because the company should be able to recover from them. Moderna ended 2022 with $3.2 billion in cash and equivalents, and nearly $6.7 billion in short-term investments, and it has only $1 billion in capital lease obligations. A well-capitalized company with a plethora of high-impact programs on the way should be music to the ears of investors.
But the next few years could be bumpy
Given the promise of the future, it bears mentioning why someone might think that it's too late to buy shares of Moderna. There is going to be a sharp decline in Moderna's income. It's already underway, and it will probably take several years before seeing a recovery.
The culprit, of course, is that demand for its coronavirus vaccines is anticipated to continue plummeting now that the most intense phase of the pandemic is over. In 2023, it could sell as few as 101 million doses in the U.S., which is less than the 169 million doses of annual influenza vaccinations sold by a group of its competitors. As of now, Moderna only has advance purchase agreements (APAs) signed for around $5 billion in sales this year, which is hardly anything compared to 2022's total revenue of $19.3 billion and 2021's haul of $17.7 billion.
The market has been expecting this decline, but it's important to note that Moderna could still underperform the low expectations. After all, on average, Wall Street analysts are estimating that it'll bring in around $7.6 billion for 2023, which is an entire $2.6 billion more than the orders that are already on the biotech's books. And given that its shares have barely kept pace with the market over the last 12 months, the above is a decent argument for not buying the stock right this moment, even if the long-term picture is good.
Nonetheless, the balance of risks and rewards tilt in favor of making an investment in Moderna. The ongoing headwinds will eventually pass, and when they do the company will likely be larger and more valuable, so in the big scheme of things it isn't too late at all.
