On the face of it, biotech Moderna (NASDAQ:MRNA) looks like a winner: it’s widely expected to win regulatory approval and mega bucks for its Covid-19 vaccine that could help put an end to the global pandemic. But this stock is not for the faint hearted.
Moderna, until the pandemic a little-known Massachusetts company, has developed a front-runner in the vaccine race and looks set to share a global (and desperate) marketplace with a Pfizer/BioNTech (NYSE: PFE/NASDAQ/ BNTX) version.
Its vaccine efficacy is 94.5 percent, only slightly below that of its approved rival with 95 percent. Analysts say it’s a no-brainer that it will win approval later this week from US regulator the FDA (Food and Drug Administration) and be able to rake in those dollars.
Since Moderna announced it was developing a vaccine using its mRNA technology, like a messaging system for body cells to produce proteins to prevent and fight disease, shares have skyrocketed more than 700 percent.
Moderna fundamentals are not there yet
But take away the excitement about the Covid-19 vaccine and we are looking at a company which has yet to make a profit or have any drugs approved for use. Would you, in normal circumstances, invest in such a company whose share is already up eight-fold this year?
Moderna has an impressive array of drugs in its pipeline, including vaccines for prevalent diseases such as Epstein-Barr virus, RSV, and influenza, and pregnancy transmitted diseases Zika and CMV. Success with these would give the company a secure future earnings flow.
The company says its cell messaging system heralds great potential: “If it works for one disease; it has the potential to work for many diseases.” But it’s not the only one using this type of technology. The Pfizer/BioNTech rival uses mRNA.
So for now, investors would be betting solely on the prospects of the Covid vaccine unless they put their money in for the long haul and their faith in products that would not likely see approval for a few years yet and whose competitive landscape is unknown.
And with the Covid vaccine, there are still many unknowns.
The Pfizer/BioNTech vaccine so far only received FDA Emergency Use Authorization, which Moderna hopes to win later this week. But the FDA stressed in its press release this is not a final approval.
It also said: “Data are not available to make a determination about how long the vaccine will provide protection, nor is there evidence that the vaccine prevents transmission of SARS-CoV-2 from person to person.”
What’s more, while Pfizer/BioNTech and Moderna could initially carve up the market between them, they will in the longer term face competition from rivals including AstraZeneca and Novavax NASDAQ/NVAX).
Does the share price reflect Moderna’s potential?
While some analysts still have a ‘buy’ rating, caution is creeping in. BMO Capital rerated to ‘market perform’ from ‘outperform’, saying the potential from its Covid vaccine is priced in.
Needham subsequently cut its rating to ‘hold’ from ‘buy’, stating that there was no further upside until we see data on competitor vaccines and additional data from other Moderna products.
Both analysts did say, however, they saw future potential in Moderna, with BMO commenting that proven success of its platform would make it “a new vaccine development powerhouse”.
As a short-term investment, it’s risky with limited upside, some likely peaks and troughs to navigate, and therefore probably one to avoid. For brave and very patient investors, Moderna shares could have a lot of room for gains.