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Vaccine stocks have been all the hype this year, as pharmaceutical and biotech companies feverishly work to find a way to stop the spread of the coronavirus. And Modern (NASDAQ: ARNM) is leading the pack, having announced on Nov. 16 that its mRNA-1273 vaccine was 94.5% effective in preventing COVID-19 infection. On November 30, the company announced that it is filing for Emergency Use Authorization (EUA) with the United States Food and Drug Administration (FDA). Moderna’s shares eventually doubled during the month of November, from less than $ 68 at the end of October to more than $ 140 on November 30.
However, despite soaring prices and Moderna’s stock up 640% this year (while S&P 500 is up 13%), it may not yet be too late to invest in the company. There are many reasons to be bullish about Moderna at this time, and while investors may want to cash in some of their earnings, the stock may continue to rise even more in the weeks and months to come.
Image source: Getty Images.
1. Moderna has not yet obtained an emergency use authorization
The strong results of its advanced trial are encouraging news for Moderna, but the company has yet to secure EUA from the FDA before the party can really begin for investors. On November 30, its stock jumped more than 15% on learning the company would file an EUA application for mRNA-1273. Although technically not the first at the finish line – Pfizer (NYSE: PFE) asked the EUA for its vaccine days earlier – Moderna has always achieved an incredible feat by competing against many big companies around the world working on a vaccine, including giants like Johnson & johnson (NYSE: JNJ).
If Moderna’s vaccine receives EUA and there is little reason to doubt that it will be given its high efficacy rate, the stock is likely to get another boost from the news. While investors are likely to incorporate this approval into the stock’s current valuation, news from the EUA will give markets confidence that help for COVID-19 is (officially) on the way, which could lead to even more rise in the stock markets.
2. The results of other vaccine stocks could disappoint
Another reason Moderna’s stock could continue to rise is if other COVID-19 vaccine manufacturers are unable to report impressive results. Pfizer and Moderna’s vaccines are over 90% effective, which sets the bar high for their competitors – well above the 50% effectiveness sought by the FDA. This does not mean that other vaccines will not get EUA if they are less effective than Moderna. However, this could ensure that the Pfizer and Moderna vaccines are the most sought after. This means that a larger share of the $ 100 billion COVID-19 vaccine market could go to these two.
Even though Pfizer and Moderna’s efficacy results are similar, Moderna’s vaccine still holds an advantage over Pfizer’s, which must be stored at -70 degrees Celsius to be effective. Moderna’s mRNA-1273 should stay at just -20 degrees Celsius.
Both Pfizer and Moderna’s vaccines use messenger RNA (mRNA) technology, which is a relatively new approach to the industry and means there will also be more question marks, especially in this area. which concerns potential long-term side effects. Novavax, which has yet to release the results of its coronavirus vaccine trial, uses advanced synthetic proteins rather than mRNA. Meanwhile, Vaxart works on a tablet that can be administered orally.
Another vaccine manufacturer, AstraZeneca (NASDAQ: AZN), announced positive Phase 3 results at the end of November (a week after the publication of its own by Moderna) that its vaccine candidate was also 90% effective against COVID-19. But that excitement quickly subsided after questions arose about his data from a two-dose schedule: Using a lower first dose, his vaccine was 90% effective, but with a higher first dose. , this measure fell to 62%. The company therefore reports an average efficiency of 70%. But experts are not convinced that it makes sense to average these numbers. If the AstraZeneca vaccine is approved, it will provide the most effective dosage regimen of treatment.
Even though AstraZeneca released encouraging numbers from its study, the ambiguity surrounding its results actually spurred Moderna’s action. After the news, AstraZeneca stock fell 3.5% on trading day, while Moderna rose almost 2%. The fact that AstraZeneca’s results far exceeded FDA expectations but still led to a decline in stock prices, simply because they were worse than Moderna and Pfizer’s, shows that investors in Moderna must pay attention to all runners’ results.
Should you buy Moderna shares today?
With Moderna shares trading at record highs, some investors may be reluctant to buy into the hype. There is certainly a risk given that vaccine stocks can be particularly volatile, and if more companies report positive results equal or similar to Moderna’s, it could have a negative impact on its share price. It looks like the EUA should be as close as the company can come to a “sure thing”, but if the FDA comes back with questions or if it’s not a smooth process, it could also trigger a sale of Moderna shares.
Investing in any vaccine stock – especially those that don’t yet have other products on the market, like Moderna – can be risky. Part of the reason is that they are smaller in size and more dependent on an effective vaccine than other, more established companies. Here’s how Moderna’s stock fared this year compared to Pfizer and AstraZeneca:
MRNA data by YCharts
Today, the health care share is trading at an astounding 160 times its sales. However, if its vaccine can generate $ 5 billion in annual revenue, as one Jefferies analyst predicts, it could bring that multiple down to around 12 – assuming its market cap remains unchanged.
This would be even more than sales 1.6 times the average stock in the SPDR Select Healthcare Sector Fund trades at. But the company’s sales could also increase if Moderna is able to achieve a greater share of the COVID-19 vaccine market, which could happen if there aren’t many viable options or if Pfizer and other players face major distribution challenges.
Moderna is not a stock to buy if you are a risk averse investor, and it certainly does not come cheap; but it is poised to become a long-term leader among manufacturers of COVID-19 vaccines. While it may not grow again to the extremes it has in 2020, there is still a lot of potential for the stock to generate strong returns if you buy biotech stocks today.
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