Is it too late to buy Moderna shares?

It’s been a mad rush for investors this year, as the coronavirus pandemic has hit companies that have been around for a century, while also creating a way for innovative biotech companies to deliver on the promise of gene-based approaches, studied at length.

Modern (NASDAQ: ARNM) certainly falls into the second category. Founded ten years ago, the company creates synthetic messenger RNA (mRNA) to use the body’s own cells to fight disease. The company was a pioneer in the race to develop a vaccine against COVID-19 and recently announced overwhelmingly positive results from its Phase 3 trial. With vaccine results seemingly assured and stock rising massively this year, is it too late to buy Moderna shares?

Image source: Getty Images.

How did Moderna get here?

Until recently, Moderna had been a role model for broken scientific promises. A cynic could have argued that the company was a perfect example of how the Wall Street hype can help a biotech company with a little cash and a great story get billions of dollars in funding and a valuation. rich. The company, which was founded in 2010, has become the largest private biotechnology company to ever go public and has yet to approve a product for sale. Until recently, the company was better known for its rigorous culture, promotional CEO and research secrecy than for its accomplishments. COVID-19 has changed all that.

After the genome of the novel coronavirus was shared by China on January 11, the company took action. Two days later, working with the National Institutes of Health (NIH) and the Biomedical Advanced Research and Development Authority (BARDA), Moderna had a potential vaccine candidate that he was ready to test. Six weeks later, the first batch of vaccine candidate doses began phase 1 trials. The pandemic created an unprecedented funding environment. The company first received funding from the Coalition for Epidemic Preparedness Innovations (CEPI), then $ 1 billion from Operation Warp Speed ​​(OWS) and finally $ 1.3 billion from a secondary offering from ‘actions to investors. By mid-November, the company had met the primary efficacy endpoint of its Phase 3 study. In response to this record-breaking development schedule, the company’s shares have risen about 670% this year.

MRNA data by YCharts

Where is Moderna now?

In November, the company shared data from its Phase 3 trial of 30,000 people. Its vaccine candidate, mRNA-1273, demonstrated 94.5% efficacy without severe cases of COVID-19 in the group receiving the drug. Not only is this fantastic news for the company, the results have led to favorable comparisons with the vaccine of Pfizer (NYSE: PFE) and BioNTech (NASDAQ: BNTX) which had reported similar effectiveness only a week before. In comparison, the Moderna vaccine can be stored at a warmer temperature, close to the effectiveness of candidate Pfizer (95%), and has the potential to eliminate serious consequences rather than simply reducing them. (On November 30, a final data release showed that the efficiency of mRNA-1273 decreased slightly to 94.1%.)

After science, manufacturing and logistics will become the obstacles to overcome. In May, the company signed a 10-year agreement with Lonza Group (OTC: LZAGY) to produce the vaccine. While initial production will take place in the United States, the deal allows up to 1 billion doses per year to be produced at Lonza facilities around the world. Since the Moderna vaccine requires negative temperatures of 4 degrees Fahrenheit for long-term storage, cold chain logistics are of less concern than the Pfizer candidate, which requires a negative 94-degree environment.

What is the bright future?

With the company’s $ 60 billion market cap and a vaccine candidate close to approval and distribution, it’s only natural to wonder if all the positivity is ever valued in stocks. In addition to the COVID-19 vaccine, the company has 20 other drugs in development, ranging from other vaccines to drugs targeting cancer and heart failure. However, in the absence of other candidates in Phase 3 trials, the next year or two will likely be spent on economics of the company’s COVID-19 vaccine.

The doses are expected to cost between $ 32 and $ 37 each, significantly more than other COVID-19 vaccines. Although the cost varies depending on the economic situation of a country, this price would make the economy attractive. However, the company’s agreement with the U.S. government calls for an initial 100 million doses at a cost of $ 1.5 billion – about $ 15 per dose. Keep in mind that each patient will need two doses of the vaccine to develop immunity. The lower price may be a discount due to early support from NIH and BARDA. Whatever the cost, next year will likely be a geyser of money for the company. Moderna plans to have 15 million doses available this year and between 500 million and 1 billion doses next year.

The length of the good times may depend on the dozens of other potential vaccines on the horizon and on the ability of management to translate the success of 1273 mRNA into other drug development programs. A big investor votes with his feet. Merck (NYSE: MRK), which took a $ 50 million stake in the company in 2015, recently announced the sale of the shares. Whether it’s wise timing or a rehearsal of eBay sale Pay Pal and Free market until the growth of these companies skyrockets, no one can guess.

For my investment dollars, I’m looking for one of the companies using mRNA to demonstrate success in an area outside of COVID-19 as a validation of the company’s ability. Two things we know for sure are that Moderna couldn’t market a drug before the coronavirus pandemic and that with an avalanche of resources and support the company was able to figure that out. If you think the mRNA dam has been broken and new drugs in the company’s pipeline will follow, we may still be at the beginning of Moderna’s growth story. If you think the COVID-19 vaccine is the main driver of Moderna now and for the foreseeable future, I think it’s too late to buy stocks. I myself will be eager to see signs of progress from any of the other candidates in the company’s pipeline. It would convince me that the success of its COVID-19 vaccine is sustainable.