Biotech giant Moderna (MRNA -2.45%) made a name for itself in the past couple of years as it developed and marketed one of the most successful coronavirus vaccines. The money it generated from this success should be enough to fund its research and development.
However, while the pandemic isn't over, it is no longer a public health emergency, according to the World Health Organization. Demand for coronavirus vaccines has started to fall, affecting Moderna's revenue. Meanwhile, the company still has no other approved products, but its $47 billion market capitalization rivals that of well-established biotechs.
Is Moderna's stock worth considering, especially at current levels? Let's find out.
The pipeline is highly promising
In the first quarter, Moderna's revenue of $1.9 billion fell by 69% year over year. On the bottom line, the company's net income of $79 million was a small fraction of the $3.7 billion profit it reported in the year-ago period. The declining top and bottom lines aren't ideal, but it is nothing investors weren't expecting. The more important thing to consider now is how Moderna is preparing for a post-pandemic world. On that front, things look encouraging.
A quick look at Moderna's pipeline reveals it has well over a dozen non-coronavirus related programs. Moreover, some of the company's candidates are racing toward approval. And in the next five years, the biotech's lineup will look very different. The company predicts that its revenue should be between $8 billion and $15 billion by 2027. That is still lower than the almost $19 billion it reported last year, but it signals that after a period of declining sales, Moderna will reverse course.
But that's only if it can execute its plan. Here are some of the most exciting candidates the company is working on.
First, there is mRNA-1345, a potential respiratory syncytial virus (RSV) vaccine that aced a phase 3 clinical trial earlier this year. There is plenty of competition in this space, with GlaxoSmithKline recently becoming the first company ever to earn approval for an RSV vaccine. At least two others are nearing launches -- both Pfizer and Sanofi are looking to make a dent in this market.
Still, Moderna's RSV candidate should help strengthen its portfolio if it makes it past the final regulatory hurdle in its way. The company estimates a potential $10 billion opportunity here. Even if it captures only 10% of this space, it could still translate to a meaningful win for the biotech. Moderna is also working on a phase 3 clinical trial for an influenza vaccine called mRNA-1010. Here too, there is an interesting opportunity since current flu vaccines tend to be only 40% to 60% effective.
Moderna's other candidates include a potential cancer vaccine that has reported positive, but somewhat mixed, results in a phase 2b study. It is also working on several combination vaccines -- for instance, one that goes after both COVID-19 and influenza. There are many other programs in Moderna's pipeline. Moderna won't stop generating sales from its COVID-19 product, Spikevax. The company is ready to sell this vaccine directly to consumers as opposed to doing so to governments.
While Moderna will have to substantially increase the price of each shot -- to up to $130 per dose -- CEO Stéphane Bancel defended this decision earlier this year, citing the substantial drop in vaccine demand.
What should investors do?
Moderna's pipeline is unquestionably strong, but the company faces issues that may not be entirely reflected in its stock price yet. We still don't fully know what the coronavirus vaccine market will look like next year and beyond. And, of course, Moderna's late-stage candidates could encounter clinical or regulatory problems, which would sink its stock price. Moderna's shares could remain volatile for a year or two.
But given the rich pipeline Moderna boasts, it seems highly likely that it will score important wins eventually and go on to replace its dropping COVID-19 sales -- and then some. That's why investors focused on the long game should still strongly consider initiating or adding to their positions in Moderna while remembering that patience will be required while this biotech stock goes through a transition period.
