It's always possible to come up with a justification for why someone should sell their shares of a stock, but that doesn't make every justification correct. For a company like Moderna (MRNA +15.97%) that just reported some not-so-great news, rushing to quit your position could be a mistake that causes you to miss out down the line.
All in all, there appear to be more opportunities to look forward to with this stock than there are risks to avoid. Let's delve into the specifics by examining what's going on and how it relates to the biotech's merit as an investment for long-term holding.
NASDAQ: MRNA
Key Data Points
Don't get distracted by this bump in the road
On March 1, Moderna announced that it'd be laying off an undisclosed number of its manufacturing staff as part of its ongoing plan to scale down its coronavirus vaccine segment and save on some costs. The logic of the bear argument is that the company's biggest cash cow is going the way of the dodo, and it is not anticipated to revive anytime soon.
And it's true that a prompt return to 2022, when its total revenue was close to $19 billion, is not in the cards. Management is signaling that the top line will be only around $4 billion for 2024.
But the layoffs aren't a smart reason to sell the stock, and its revenue will likely start to perk up eventually. In fact, in late January 2023 it mapped out a plan to add 2,000 employees over the course of the year in preparation for its expected upcoming product launches and its ongoing late-stage clinical trials.
And it's those opportunities to launch new medicines over the next couple of years and beyond that comprise a couple of very compelling reasons to buy the stock, not to mention its favorable valuation.
Focus on these two upsides
In total, Moderna has four late-stage programs that it thinks it could commercialize in the next few years. But there's one project in particular that could become the foundation for the company's next growth spurt.
Its individualized neoantigen therapy (INT) candidate, called mRNA-4157, is currently being investigated in a pair of phase 3 clinical trials to test whether it's effective at treating melanoma and also non-small cell lung cancer (NSCLC) when combined with Merck's legendary oncology therapy Keytruda.
Put plainly, the INT candidate is a vaccine that stimulates the patient's immune system to attack cancer cells based on the particular molecular features on the surface of their tumor. The early- and mid-stage data suggest the candidate is safe and capable of dramatically increasing patients' recurrence-free survival time beyond that of a placebo, as well as beyond what's possible via treatment with Keytruda alone.
The pair is planning on initiating additional trials for other cancers this year, so it's possible that this technology may produce multiple products over a long-enough time period. Theoretically speaking, most types of solid tumors outside the brain could potentially be treatable using the INT approach.
So Moderna likely has years of running additional clinical trials before it reaches the end of its addressable market. And that means it has years of potentially positive catalysts in store for investors, before even taking its many vaccine programs for infectious diseases into account.
Aside from mRNA-4157 and its positive long-term prospects, Moderna's stock is very inexpensive at the moment, which is another reason to consider buying it. Whereas the biopharma sector has an average price-to-book (P/B) multiple of 6.3, its P/B is only 2.6. That means investors will be getting a lot more bang for their buck with this stock compared to its competitors.
It won't likely be undervalued forever, though. Once it finishes getting its latest crop of programs out the door, its rotation away from coronavirus product revenue should be well on its way to completion, and the next phase of its lifespan will begin. Buying shares now could well turn out to be a good bargain for patient investors.
