There are no true “overnight success” stories in biotech, but Moderna comes pretty close.
Three years ago, nobody outside the research world had heard of the messenger-RNA vaccine developer from Massachusetts. Today, it’s a $US54 billion ($77 billion) household name, and there’s a fair chance you’ve received one of Moderna’s shots to protect you against COVID-19.
Dolly Parton was an early backer of Moderna.Credit:Matt Absalom Wong
Moderna’s vaccine trials attracted backing from high-profile donors, including Dolly Parton. For both institutional and retail investors, the business has delivered huge returns. However, stock watchers are now wondering what a cashed-up Moderna looks like after the pandemic – and whether the growth can last.
How it started: In 2010, Harvard University researcher Derrick Rossi joined with immunologist Timothy A. Springer and a group of investors, including biotech royalty Robert Langer, to form a company investigating messenger-RNA therapies. Messenger-RNA treatments transmit genetic instructions to cells to teach them how to fight disease.
How it’s going: Since listing on the Nasdaq in 2018, Moderna has returned more than 630 per cent. Most of that has been generated over the past two years. In 2020, the stock was trading at $US18.89, compared with $US147.66 this week. Moderna’s COVID-19 vaccine has propelled it into global markets and the company will be setting up an Australian manufacturing facility it hopes will be ready by 2024.
Industry: Pharmaceuticals, biotechnology
Main products: The Spikevax COVID-19 vaccine.
Key figures: Chief executive Stéphane Bancel, co-founders Noubar Afeyan, Robert Langer, Derrick Rossi, Timothy A. Springer and Kenneth R. Chien.
The bull case: Moderna wowed the market when it released first-quarter earnings at the start of this month. Its $US6.1 billion ($8.1 billion) in revenues and $US3.7 billion ($5.1 billion) in earnings smashed analyst expectations, showing that global demand for vaccines is translating into cash.
The business has always been focused on more than COVID-19, however, and has a strong pipeline of other messenger-RNA based vaccines and therapies. It recently committed to prioritising research for 15 new vaccines for diseases affecting low- and middle-income countries.
“Most of the company’s programs are in an early clinical stage, and we expect a steady stream of early [data] readouts.”
“While the long-term COVID-19 market opportunity remains debatable, the potential of a combinational respiratory vaccine with COVID-19, flu, and respiratory syncytial virus, together with favourable pricing in private markets would support an opportunity for [the] Moderna vaccine franchise,” Barclays analyst Gena Wang wrote in a research note this month.
JP Morgan’s Cory Kasimov says if Moderna can replicate the success of its COVID vaccine with other products, it has an opportunity to disrupt the biopharma landscape for the long term: “Most of the company’s programs are in early clinical stage, and, accordingly, we expect a steady stream of early [data] readouts to further validate and de-risk the platform.”
The company has close to $US20 billion ($28 billion) in cash on hand and is expected to diversify through mergers and acquisitions.
The bear case: The company has shot the lights out on its performance after experiencing once-in-a-lifetime market conditions – and those watching the stock agree that the demand seen over the past two years cannot last forever.
Moderna surprised the market with its earnings but reiterated guidance, and it is expecting $US21 billion ($29.2 billion) worth of advance purchase orders for vaccines this year.
The company also farewelled a key personnel figure, chief financial officer David Maline, last month. The transition to a new CFO was rocky, however, with the incoming Jorge Gomez exiting the role in his first week after his former employer announced it was investigating the use of incentives to sell products to distributors.
As it stands, Maline has returned to role while Moderna finds a new successor.
Platinum Asset Management was the earliest Australian investor in Moderna stock, having backed it before its stockmarket listing. Portfolio manager Bianca Ogden says while Moderna remains on her radar, it is not in her healthcare fund – a decision which came down to a call on market conditions.
Ogden says one of the big challenges for investors is not yet knowing how the business will spend its huge cash reserves, and what its strategy would be post-pandemic.
“These are all unanswered questions – and investors hate so many unanswered questions,” she says.
There’s not one particular trigger that would make Platinum buy back into the stock, Ogden says, with the team being patient on deploying capital during a period of volatility for biotechs. One positive is that Moderna is being cautious with spending its cash.
“I think it would be worse if they have just gone out and burned all that money.”
Bloomberg analysts also point out we do not know what the long-term need for COVID-19 shots will be, with evidence still being collected on their effectiveness.
“2022-23 vaccine sales for Pfizer-BioNTech and Moderna remain at risk unless a variant-specific shot is proven to be better [than what’s currently available],” analyst Sam Fazeli said in a research report this month.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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