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What happened
Actions of Modern (NASDAQ: ARNM) were trading down 2.5% at 12:07 am EST Tuesday after falling 6.1% earlier in the session. The company said on Monday it was proposing to start filling vials with up to 15 doses of its COVID-19 vaccine instead of the current 10 doses. This approach would help Moderna alleviate supply constraints, as its ability to ship more vaccines to the public is limited in part by the vial throughput speed of its production lines.
However, investors are unlikely to be overly concerned with Moderna’s proposal, which the Food and Drug Administration will need to approve before it is implemented. Instead, Tuesday morning’s drop in biotech stock was likely fueled by lingering concerns about its valuation. This question was again highlighted when Bank of America analyst Geoff Meacham downgraded the stock from neutral to underperforming on Monday.
Image source: Getty Images.
So what
Is Moderna’s rating a cause for concern? Perhaps. The company’s market capitalization now stands at nearly $ 60 billion after a remarkable increase that began in 2020 and has continued this year.
However, Moderna will soon see a massive influx of cash as it recognizes revenue from sales of its COVID-19 vaccine, mRNA-1273. These revenues could easily exceed $ 12 billion in 2021.
A sales price multiple of around five is not unusual for biotech stocks. The big question for Moderna, however, is how much recurring revenue mRNA-1273 will generate in the long run. Investors who expect the company’s sales to plunge in 2022 and beyond cannot be blamed for worrying about the stock’s valuation.
On the other hand, there is reason to believe that mRNA-1273 sales will remain high for years to come. Moderna itself predicts that people will likely need annual boosters.
Now what
Moderna’s biggest catalysts for mRNA-1273 going forward will likely be additional supply agreements. The Biden administration is in talks with the company to deliver an additional 100 million doses to the United States.
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