If you had invested $100,000 in Moderna (NASDAQ:MRNA) in early 2020, you would have well over $1,500,000 today, as shares of the biotech have skyrocketed thanks to its successful development of a vaccine for COVID-19. Any investor would be proud of such returns, particularly given the relatively short period it took the vaccine maker to accomplish this feat.
But that raises an interesting question: After crushing the broader market over the past year and a half, how much upside does Moderna have left? Is it too late to get in on this high-flying biotech? Let’s look into Moderna’s prospects, both within the coronavirus market and beyond, to determine whether it is still worth purchasing its shares.
Is the coronavirus vaccine tailwind over?
According to the U.S. Centers for Disease Control and Prevention (CDC), as of July 21, 161.9 million people in the U.S. have been fully vaccinated against COVID-19. Many more have received vaccines elsewhere in the world. The two leaders in this space — Moderna and Pfizer — have both reported that their respective vaccines are still effective after six months.
There is evidence that Moderna’s vaccine, mRNA-1273, is also potent against newer variants of the SARS-CoV-2 virus that causes the disease, including the delta variant that is now responsible for over 80% of new cases in the U.S. One could conclude from these facts that Moderna won’t benefit a whole lot more from mRNA-1273. After all, the company’s shares have already skyrocketed, and with the number of vaccinated people rising, how much can the biotech continue to profit from its success in this market?
However, there are good reasons to think Moderna’s coronavirus vaccine-related tailwind isn’t over. First, Moderna continues to seek (and earn) regulatory wins, both in the U.S. and abroad. Back in June, the company applied for an Emergency Use Authorization (EUA) to the U.S. Food and Drug Administration (FDA) for its vaccine to be administered to adolescents between the ages of 12 and 18. Moderna submitted a similar application to regulatory authorities in Switzerland last month, and the company’s vaccine recently earned an EUA in India.
Second, the biotech continues to sign new supply deals for mRNA-1273. Moderna announced a supply agreement with the government of Argentina on June 12 for 20 million doses of mRNA-1273, while both the U.S. government and the European Commission have purchased millions of additional doses of the vaccine.
Finally, and perhaps most importantly, it still isn’t clear how long mRNA-1273 provides immunity. During Moderna’s first-quarter earnings conference call, CEO Stéphane Bancel said: “we believe booster shots will be needed as we believe that the virus is not going away. We also believe from the scientific standpoint, that the highest efficacy booster over time will be provided by multivalent variant-specific booster.”
Moderna started evaluating booster candidates for its vaccine earlier this year. Meanwhile, Pfizer’s CEO Albert Bourla has said that he believes demand for COVID-19 vaccines could become seasonal, much like the demand for flu vaccines. Of course, none of this is set in stone. The CDC and the FDA released a joint statement on July 8 saying that vaccinated Americans do not need booster shots right now.
That may be true at the moment, but data from Pfizer has already strongly suggested that a booster dose administered six months post-vaccination produces higher antibodies titers in patients. This is important — while Pfizer’s vaccine remains effective after six months, its efficacy does seem to decrease.
And with new variants like delta emerging, there are good reasons to think that a booster dose will eventually be needed for vaccinated people. Given these factors, it seems highly likely that Moderna will continue to benefit from its coronavirus vaccine financially, and its shares could still experience significant upside as a result.
What else does Moderna have to offer?
Beyond COVID-19, Moderna’s mRNA vaccine platform shows huge potential. The company’s pipeline currently boasts more than a dozen programs, most of which are potential vaccines against various infectious illnesses. In early July, the biotech started a phase 1/2 clinical trial for mRNA-1010, an investigational flu vaccine.
The company argues that despite the wide availability of approved vaccines for the flu, this disease continues to cause serious health problems, in part because current vaccines are only 40% to 60% effective. Moderna is also looking to develop combination vaccines — that is, vaccines that can confer immunity against more than one disease.
There is no doubt the long-term opportunity is there for the company. As Moderna argues, of the more than 80 viruses discovered in the past 40 years, only 4% have commercially available vaccines in the U.S. The company thinks its mRNA approach to vaccination could help it create a raft of effective vaccines against some of these viruses.
Not too late to get in
There are two important reasons why it’s not too late to buy shares of Moderna. First, the company will continue to benefit from its COVID-19 vaccine. Second, the biotech’s long-term thesis (supported by the success of mRNA-1273) is attractive. Moderna is currently trading at just 12.5 times forward earnings, which, in my view, is more than fair given the company’s prospects. Investors looking for solid biotech stocks to buy need look no further than Moderna.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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