Since the start of 2020, Moderna (MRNA 1.69%) stock is up an astounding 438%. And yet an exuberant announcement made on the pharmaceutical giant's research and development (R&D) day (Sept. 13) suggests that the best may be yet to come.
In the announcement, management celebrated the successful conclusion of the phase 3 trials of the company's flu vaccine. It also noted that it would soon submit the data for its respiratory syncytial virus (RSV) drug to regulators for their evaluation too. It also said that it would initiate another phase 3 trial of its personalized cancer vaccine program in collaboration with Merck.
Those developments have a high chance of leading to more revenue in the near term. But management went even further and gave investors 15 other new reasons to be bullish about the stock. Let's dig deeper and see what those reasons are and what they mean for the stock's long-term success.
Pipeline, pipeline, pipeline
As you're doubtlessly aware, Moderna's coronavirus vaccine is its biggest (and for now, only) earner. But take a gander at this chart:
MRNA Revenue (TTM) data by YCharts
As you can see, the market for coronavirus vaccines is collapsing. It probably won't be coming back anytime soon, and it's still unclear how much demand there will be for annual boosters. That means the pressure is on for the company to prove that it's more than a one-hit wonder. And that's likely why it made a flurry of announcements about its present and future prospects.
In particular, the pipeline is set to broaden significantly over the next five years, with as many as 50 new programs entering clinical trials. Those candidates will likely span its traditional stomping grounds of infectious disease, oncology, and rare disease. If we assume that each one of the new programs has roughly a 14% chance of making it to commercialization, which would mean that their odds are average for phase 1 candidates, shareholders can eventually expect seven additional products on the market. But it will likely take well into the next decade before any of those have a chance to generate revenue.
Management has even bigger plans within the next five years, however. In short, it plans to launch as many as 15 new medicines. Each of those new medicines could start to generate revenue before 2030, which means that each is a solid reason to be bullish about Moderna's long-term future.
Its cytomegalovirus (CMV) vaccine, personalized cancer vaccine, and its therapy for propionic acidemia (PA) are in late-stage trials now, so it's probable that they'll reach the market, assuming regulators assent. By 2027, it could be making as much as $15 billion annually from sales of its respiratory vaccines alone, per its estimations. In conjunction with its other segments, that means it might make even more than it did in 2022 when it brought in nearly $19 billion.
The ride could still be bumpy
Moderna has a high chance of succeeding with its ambitious schedule and remaining one of the few kings among the vaccine stocks. It has $8.5 billion in cash, equivalents, and short-term investments, and only $1.2 billion of debt. But even if it's reasonable to be bullish about its future performance, it's important to keep a grounded view of the risks it faces.
First, it is unlikely to be the only competitor in the markets it's looking to enter the soonest. For example, Pfizer already competes in the coronavirus vaccine market, and its RSV vaccine was approved in late May of this year too. It also has a flu shot in phase 3 trials that uses a similar technology as Moderna's. So there's a risk that the biotech will be in for fierce market share fights, compressing its profit margin.
Then there's the significant risk that some of the business's pipeline programs fail to demonstrate their safety and efficacy in clinical trials. Each failure could dent its share price, especially if it's in a closely watched program. But its competitors face much the same danger.
Still, Moderna now has so many shots on goal lined up that it's bound to score with at least a few, and it has more than enough resources to keep chasing opportunities for drug development wherever it thinks it has good odds. For a profitable biotech, it's hard to imagine a better situation to be in.
