A few years ago, Moderna (MRNA 3.33%) stock represented the ticket to an investing win. The company brought its coronavirus vaccine from drawing board to commercialization in less than a year and saw its stock price skyrocket.
The biotech went on to generate billions of dollars in revenue and profit amid soaring demand for its vaccine in those earlier days of the pandemic. But in later stages of the health crisis, fewer people rushed to get vaccinated, and this had a significant impact on Moderna's earnings -- and stock performance.
Though Moderna has since won approval for updated versions of its vaccine and approval for another respiratory shot and the company has cut costs, the earnings and stock performance path remain difficult. But there are reasons to be optimistic about Moderna's long-term prospects as it has a robust late-stage pipeline ready to potentially deliver several products. Considering the full picture, down 80% over the past year, is Moderna a buy? Let's find out.
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Moderna's success story
So, as mentioned, Moderna was a brilliant success story just a few years ago. The company even proved the safety and efficacy of a new technology based on messenger RNA. This is important because it's a technology Moderna uses throughout its pipeline. The company's mRNA technique involves teaching the body to produce a particular protein that will protect it from or help it fight a virus or disease.
Considering the depth of the pandemic, regulators helped speed coronavirus vaccines to the finish line, but it's worth keeping in mind that these products were based on years of research. Now, of course, investors have to be more patient and wait longer for Moderna's products to earn a regulatory nod because they aren't being approved for an early pandemic situation.
As a result, Moderna right now continues to generate most of its revenue from the coronavirus vaccine, and it also brings in revenue from sales of its respiratory syncytial virus (RSV) vaccine, approved last year. Unfortunately for Moderna and its investors, however, coronavirus vaccine sales have declined, and the RSV vaccine hasn't performed as well as initially expected.
But before throwing in the towel on Moderna, it's key to remember that better days are likely down the road. The company is at a point of transition right now as it prepares for what could be a great number of product launches ahead. In fact, Moderna recently reiterated it may roll out as many as 10 new products within the next few years. These products represent a total addressable market of $30 billion, so this could offer revenue a major boost.
A broad variety of programs
These programs also span many indications, from cytomegalovirus to oncology -- this is positive because Moderna won't depend on just one or two treatment areas in the future, reducing risk if one product sees a slowdown. It's also important to note that there's less risk of a slowdown when treating an ever-present virus or disease versus dealing with a pandemic situation -- pandemics result in steep gains, but when the situation improves, sales may sharply drop off.
Meanwhile, Moderna has progressed nicely on its cost cutting program, and beyond this year, plans to reduce as much as $1.7 billion in estimated GAAP operating costs by 2027.
Now let's return to our question: After Moderna's 80% drop, is the stock a buy? Moderna still faces challenges ahead. For example, the company recently lost U.S. government funding for its investigational bird flu vaccine, and uncertainty about the policies of President Trump's administration on vaccines could add to headwinds. On top of this, investors still often view Moderna as a COVID vaccine company and focus on declines in demand for that product. These elements could weigh on the stock's performance.
But for investors who don't mind some volatility and plan on holding on to the stock for at least five years, Moderna makes an exciting biotech buy right now. If the company even partially reaches its product launch goal, the long-term revenue picture could look very bright.
