Actions of Modern (NASDAQ: MRNA) This year it has more than tripled as biotechnology has rapidly boosted its coronavirus vaccine, mRNA-1273, through the clinical trial process.
MRNA data by YCharts.
Whether Moderna’s shares can go even higher from here depends on multiple factors, some of which are beyond the company’s control.
Let’s break them down one by one.
Will mRNA-1273 pass clinical trials and finally get regulatory approval?
Early trial data suggests that mRNA-1273 is likely to create antibodies against SARS-CoV-2, the new coronavirus that causes COVID-19. It remains to be seen whether those antibodies will protect patients from SARS-CoV-2. There is also a chance that a rare side effect will be revealed when Moderna tests the vaccine in a larger clinical trial.
While the likelihood of a efficacy failure or side effect ending the clinical trial is low, investors should still consider the possibility of a catastrophic event in their valuations, especially given that Moderna’s actions have a long way to return to its previous values. COVID-19 days.
How much will Moderna charge for mRNA-1273?
The price of the vaccine is unknown at this time, but we can make an assumption based on the price of $ 9.40 to $ 59.53 that the Centers for Medicare and Medicaid Services pays for the seasonal influenza vaccine, which is 95% of the average wholesale price.
Given the need for two doses and the vaccine is likely to have a higher compliance rate compared to the influenza vaccine, priced at $ 10 to $ 20, near the low end of the cost of the annual vaccine against influenza. Flu seems like a reasonable assumption.
How many doses of mRNA-1273 can Moderna make?
Moderna plans to produce 500 million doses per year with the possibility of increasing production to one billion from 2021.
Image source: Getty Images.
How much of the market will mRNA-1273 capture?
Unfortunately, Moderna’s market share is beyond the company’s control. Biotechnology has a lot of competition, even from companion messaging companion RNA (mRNA) BioNTech (NASDAQ: BNTX), which published positive initial data for its COVID-19 vaccine, BNT162b1, which is supported by Pfizer (NYSE: PFE). Moderna also faces competition from other large pharmaceutical companies, such as AstraZeneca (NYSE: AZN) and Johnson and Johnson (NYSE: JNJ), who are also developing vaccines against coronavirus.
The good news is that Moderna’s competitors are likely to have a limited supply with their vaccines as well, so if mRNA-1273 works, but is inferior to its competitors, the vaccine is likely still in use, albeit a thousand Millions of full doses per year may not be needed.
Does mRNA-1273 produce lasting immunity to SARS-CoV-2?
Lasting immunity is a double-edged sword for Moderna. If mRNA-1273 protects patients from infection for many years, it will limit potential sales to a single regimen (two doses) per patient.
On the other hand, if the vaccine does not offer lasting immunity, Moderna could capture Repeated sales of mRNA-1273 year after year, but only if competing vaccines also do not offer lasting immunity.
Adding it all
While there are many unknowns, this is the most reasonable and best-case scenario: mRNA-1273 is priced at $ 10 to $ 20 per dose, Moderna can produce and sell 1 billion doses per year, and the vaccine it must be administered every year. Given those parameters, Moderna could generate $ 10 billion to $ 20 billion in revenue each year. Assuming a price-to-sales ratio that ranges from 5 to 7, biotechnology would be worth between $ 50 billion and $ 140 billion, offering a substantial additional advantage from the current valuation.
Alternatively, there are scenarios where, even if mRNA-1273 hits the market, Moderna is overpriced at its current market cap of $ 27 billion. For example, if mRNA-1273 is a single therapy and multiple competitors hit the market within a year after regulators approve mRNA-1273, Moderna will only be able to sell 1.5 billion doses before vaccinating the entire population. At a price of $ 10 to $ 20 per dose, the hypothetical 1.5 billion doses would generate $ 15 billion to $ 30 billion in revenue (and less in actual profit). Even after adding the pipeline valuation, which was $ 6.6 billion before the pandemic, there isn’t much left (if there is any) up from the current market cap in that scenario.
Known unknowns
If Modern is a good value in the current valuation, it is mainly due to factors that are largely unknown and difficult to harm. Given the lack of knowledge, investors should be careful not to invest too much in Moderna with this inflated market cap.
