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Vaccine stocks have been all the rage this year as pharmaceutical and biotech companies work feverishly to find a way to stop the spread of the coronavirus. IS Modern (NASDAQ: MRNA) leads the pack, after announcing on November 16 that its mRNA-1273 vaccine was 94.5% effective in preventing COVID-19 infection. On November 30, the company announced that it was applying for Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA). Moderna’s stock eventually doubled in November, going from under $ 68 at the end of October to more than $ 140 on November 30th.
However, despite the price increase and Moderna’s shares have risen an astonishing 640% this year (while the S&P 500 increased by 13%), it may not yet be too late to invest in the company. There are plenty of reasons to be optimistic about Moderna right now, and while investors may want to cash in on some of their gains, the stock may continue to climb even higher in the weeks and months to come.
Image source: Getty Images.
1. Moderna has not yet obtained authorization for emergency use
The solid results of its late-stage trial are encouraging news for Moderna, but the company has yet to get EUAs from the FDA before the party can really begin for investors. On November 30, its shares rose more than 15% on news that the company would file for EUA of mRNA-1273. Although technically not the first to finish – Pfizer (NYSE: PFE) applied to EUA for its vaccine days earlier – Moderna still achieved an incredible achievement by competing with many large companies around the world working on a vaccine, including giants like Johnson & Johnson (NYSE: JNJ).
If Moderna’s vaccine gets the EUA, and there is little reason to doubt that given its high efficacy rate, the stock will likely get another boost in the news. While investors are likely considering such approval in the current valuation of the stock, the news of the EUA will provide the markets with some reassurance that help for COVID-19 is (officially) on the way, which could lead to further rise between the exchanges.
2. The results of other vaccine stocks may be disappointing
Another reason Moderna’s stock could continue to grow is if other COVID-19 vaccine manufacturers weren’t able to report impressive results. Pfizer and Moderna’s vaccines are over 90% effective and this set a high level for their competitors, well above the 50% effectiveness the FDA was looking for. This does not mean that other vaccines will not get EUA if their effectiveness is lower than that of Moderna. However, it could ensure that Pfizer and Moderna’s vaccines are the most sought after. This means that a larger share of the $ 100 billion COVID-19 vaccine market could go to those two.
Even though Pfizer and Moderna’s efficacy results are similar, Moderna’s vaccine still holds an advantage over Pfizer, which must be stored at -70 degrees Celsius to be effective. Moderna’s mRNA-1273 needs to stay at just -20 degrees Celsius.
Pfizer and Moderna’s vaccines both use messenger RNA (mRNA) technology, which is a relatively new approach in the industry and that means there will be even more question marks, especially when it comes to potential long-term side effects. Novavax, which has yet to release the results of the coronavirus vaccine trial, uses synthetic spike proteins instead of mRNA. Meanwhile, Vaxart is working on a tablet that can be given orally.
Another vaccine manufacturer, AstraZeneca (NASDAQ: AZN), announced positive Phase 3 results in late November (a week after Moderna released its own) that its vaccine candidate was also up to 90% effective against COVID-19. But that excitement quickly subsided after questions arose about her data from a two-dose program: Using a lower first dose her vaccine was 90% effective, but with a higher first dose, that metric dropped to. 62%. The company then reported an average effectiveness of 70%. But experts aren’t convinced it makes sense to average those numbers. If AstraZeneca’s vaccine receives approval, it will offer the most effective dosing schedule of treatment.
Although AstraZeneca has published encouraging numbers from its study, the ambiguity surrounding its findings has actually increased Moderna’s actions. Following the news, AstraZeneca stock fell 3.5% on the trading day, while Moderna was up nearly 2%. The fact that AstraZeneca’s results were well above FDA expectations but still led to a drop in the share price, simply because they were worse than Moderna and Pfizer, shows that Moderna investors need to pay attention to all. results of the runners.
Should you buy Moderna stock today?
With Moderna’s stock trading at an all-time high, some investors may be reluctant to accept the hype. There is certainly some risk given that vaccine stocks can be particularly volatile and if multiple companies release the same or similar positive results as Moderna, this could have a negative impact on its share price. It seems the EUA should be as close to the company as possible for a “sure thing”, but if the FDA comes back with questions or it’s not a regular process, that too could trigger a sell-off of Moderna stock.
Investing in any vaccine stock, especially those that do not yet have other products on the market, such as Moderna, can be risky. Part of the reason is that they are smaller in size and more dependent on a successful vaccine than other, more established companies. Here’s how Moderna’s shares fared this year versus Pfizer and AstraZeneca:
YCharts MRNA data
Today, the health stock is trading at a staggering 160 times its sales. However, if its vaccine can generate $ 5 billion in annual revenue, as a Jefferies analyst predicts, that could bring that multiple to around 12, assuming its market cap remains unchanged.
It would still be more than 1.6 times the sales of the average stock in SPDR Fund for the selected healthcare sector trades to. But the company’s sales could also climb higher if Moderna were able to reach a larger share of the COVID-19 vaccine market, which could happen if there weren’t many viable options or if Pfizer and other players encountered challenges of important distribution.
Moderna is not a stock to buy if you are a risk averse investor and it is certainly not cheap; but it is set to become a long-term leader among COVID-19 vaccine manufacturers. While it may not grow back to the extremes it reached in 2020, there is still plenty of potential for the stock to generate strong returns if you buy biotech stocks today.
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