Moderna (MRNA 1.69%) can be described in several ways. A messenger RNA (mRNA) pioneer. A leader in the COVID-19 vaccine market. A cash-rich biotech company.
One description of Moderna you probably won't hear very often, however, is value stock. After all, shares trade at nearly 66 times the most optimistic earnings estimate for 2023. But is Moderna actually a value stock to buy right now?
The value argument
There is an argument to be made that Moderna is a value stock. It just requires looking into the future a bit.
Currently, all of Moderna's revenue stems from its COVID-19 vaccine. That might not be true for much longer, though. The company expects to launch two new vaccines next year for providing protection against the flu virus and respiratory syncytial virus (RSV).
Even in a post-pandemic environment, Moderna estimates the global COVID-19 vaccine market will be around $15 billion. It projects an RSV vaccine market (for adults) of between $6 billion and $8 billion. The global flu market is estimated to be in the range of $6 billion to $9 billion.
Moderna believes that it will be able to generate sales in these three respiratory virus markets of at least $8 billion annually and potentially up to $15 billion per year by 2027. Let's use the midpoint of the company's range -- $11 billion.
The average price-to-sales ratio for the biotech industry earlier this year was 5.78, based on data collected by stock valuation expert Aswath Damodaran. Using this multiple, Moderna's valuation if it can generate $11 billion in sales would be nearly $64 billion. The company's current market cap is more than 20% below that level. You could argue that's value stock territory.
Note that this sales figure doesn't include any revenue from Moderna's cytomegalovirus (CMV) vaccine. This vaccine candidate is currently in a late-stage clinical study that's expected to complete in April 2026. If all goes well, Moderna could potentially win approval and launch its CMV vaccine in 2027. In the past, the company has estimated the vaccine could generate sales of between $2 billion and $5 billion if approved.
Two big problems
So can we officially declare that Moderna is a value stock? Not really. There are two big problems we need to address.
First, it's wise to remember the old adage about not counting your chickens before they hatch. Moderna certainly hopes to launch its flu and RSV vaccines next year. However, there's no guarantee that will happen.
To be sure, the fact that those vaccines are in late-stage testing reduces their risk of failure. It doesn't eliminate the risk, though. One analysis conducted in 2021 found that nearly 40% of vaccines in late-stage clinical studies don't win U.S. Food and Drug Administration approval.
Second, even if Moderna wins regulatory approvals for its vaccines, it will face significant competition. Pfizer will fight hard for dominance in the COVID-19 market. GSK recently won FDA approval for its RSV vaccine. Pfizer shouldn't be far behind. Novavax has a head start in developing a combination COVID-flu vaccine.
Ask again later
When I was a kid, the Magic 8 Ball was popular. It would answer questions in one of several ways. Sometimes, the answer would be "It is certain" or "Yes, definitely." Other times, the Magic 8 Ball would respond with "My reply is no" or "Very doubtful." But the answer that I think is most applicable to the question of whether or not Moderna is a value stock to buy right now is... "Ask again later."
I do think that Moderna could, in retrospect, look like a bargain at its current valuation. However, I'm not confident about that at this point.
I'd prefer to see more data for the company's late-stage vaccine candidates. And I'd like to see how Moderna's rivals fare with their programs as well. My take is that there's another apt description for Moderna right now: a work in progress.
