The most popular coronavirus stocks may lose half their value by 2023

This has been a difficult year for the United States and the world. The 2019 coronavirus disease (COVID-19) pandemic has infected more than 69 million people worldwide (nearly 16 million in the US) and killed nearly 1.6 million people. , according to the Johns Hopkins University of Medicine. The United States is approaching 300,000 deaths from COVID-19 since the outbreak began.

But there also seems to be light at the end of the tunnel. In November, a handful of drug developers released positive late-stage intermediate and final analysis data from their ongoing COVID-19 vaccine trials. Pfizer (NYSE: PFE) and BioNTech (NASDAQ: BNTX) announced a 95% vaccine effectiveness (VE) for BNT162b2 in a final analysis of its phase 3 study.

Meanwhile, Modern (NASDAQ: mRNA) announced that their vaccine candidate (mRNA-1273) produced an EV of 94.1% in a late-stage primary efficacy analysis in their COVE study. As researchers expect an EV more in line with influenza (50% to 60%), an EV greater than 90% gives the US and the world a real chance to stop the pandemic on its way over the next year .

However, what is good for humanity is not always good news for investors.

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From clinical stage company to overnight blockbuster

This year, few stocks have been hotter than Moderna, and the company’s shares are up 708%. Investors are clearly excited about the possibility of mRNA-1273 getting a positive review from a panel of the United States Food and Drug Administration (FDA) on December 17. Lonza GroupModerna expects to produce 20 million doses in December, another 100 million to 125 million doses for the first quarter and between 500 million and 1 billion doses in 2021.

A few days after Moderna released its interim analysis data, its chief executive, Stephane Bancel, told a German news publication that his company intends to charge between $ 25 and $ 37 per dose for its vaccine. The price will vary depending on how much vaccine a country buys (larger purchases will generate a lower average price). Like the Pfizer / BioNTech vaccine, Moderna’s mRNA-1273 is given in two doses a few weeks apart.

Assuming Moderna can hit the lower limit of its projection of 500 million doses in 2021, it would generate at least $ 12.5 billion in revenue from mRNA-1273. That would make it one of the world’s best-selling drugs overnight.

Additionally, Moderna’s vaccine can be kept for up to 30 days at standard refrigerator temperature (36 to 46 degrees Fahrenheit), and can be stored for up to six months at -4 F. That compares to the Pfizer / BioNTech candidate vaccine, It needs to be stored above -100 F during transportation. This creates distributional challenges for the latter that clearly favor Moderna.

Sounds like a spectacular investment, right? With a market capitalization of $ 62 billion, you may want to rethink that thesis.

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Moderna looks like Gilead Sciences 2.0, and that’s not good

Although Moderna seems to have a pretty clear path to being one of the first two entrants in the COVID-19 vaccine space, it is unlikely that it will hold onto the first or second move advantage for long. We know this, because we have seen him play before.

In 2013-2014, Gilead Sciences (NASDAQ: GOLDEN) It dazzled the world and the investment community when it launched the hepatitis C drugs Sovaldi and Harvoni. Before these therapies, hepatitis C treatments were notoriously unpredictable, and patients generally experienced a long list of unpleasant side effects. Gilead’s treatment solutions provided a cure for more than nine out of 10 patients, and the company was rewarded handsomely for it. In 2014, Gilead posted $ 24.5 billion in net product sales, up from $ 10.8 billion a year earlier, with Harvoni and Sovaldi combined for $ 12.4 billion. To sum it up, Gilead’s first-mover advantage allowed him to pick the ripe fruit (patients with obvious hepatitis C symptoms).

However, Gilead found itself in the following years with a steady increase in competition. With roughly half a dozen hepatitis C therapies competing and many of the sickest patients treated, Gilead’s hepatitis C drug sales declined to just $ 2.9 billion in 2019.

Moderna faces a similar fate. There are about two dozen COVID-19 vaccine candidates in development, and if even half a dozen are successful in the next six to 12 months, it could cut Moderna’s revenue potential in half.

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But wait, there’s more

Keep in mind that there is more to worry about than just two dozen drug developers seeking their share of the coronavirus vaccine cake.

For example, the Pifzer / BioNTech vaccine may offer more delivery challenges, but will be priced at $ 19.50 per dose. Russia’s Sputnik V vaccine, which doesn’t have nearly the same clinical data transparency you’ll find in the Pfizer / BioNTech study or Moderna trial, will be sold to international governments for less than $ 10 per dose. The point is that Moderna’s vaccine could be the highest-priced brand, which could cost the company orders or pressure it to lower its price.

We are also missing some very critical data from these COVID-19 vaccine trials. For example, we do not know if person-to-person transmission is possible after receiving these vaccines. But more importantly, we have no idea what kind of duration of immunity these vaccines will provide. Without this knowledge, trying to assess Moderna is like throwing darts at the dart board with a blindfold.

Moderna is also an act of a pony. Although its portfolio features over a dozen ongoing clinical-stage studies and eight other preclinical / associated programs, Moderna’s vaccine closest to achieving FDA approval and distribution is, at the earliest, about four years, assuming I hope all goes well. This is a company that will be uniquely dependent on mRNA-1273 for the next three to four years, at a minimum.

Typically, biotech stocks are valued at a multiple that ranges from 3 to 6 times their maximum annual sales potential. In 2021, with the sale of potentially 500 million doses ($ 12.5 billion), Moderna’s valuation would seem to make sense. But by 2023, total sales are likely to drop to between $ 4 billion and $ 5 billion as new vaccines enter the market. Paying 12-15 times sales by 2023 is absurd for what could be a one-trick wonder.

Moderna has a lot of cash, so it’s not a threat to just disappear overnight. But there is a strong chance that the world’s most popular coronavirus stocks will lose at least half of their value by 2023.