Insights

Moderna Stock: Bull vs. Bear

Moderna (NASDAQ: MRNA) has been a key player in the coronavirus vaccine market from the start. Along with Pfizer and BioNTech, the biotech company has vaccinated most Americans. And Moderna has brought in billions of dollars in revenue and profit.

Moderna shares soared during the earlier stages of the pandemic. From 2020 through last year, they climbed 1,200%. But in recent times, they’ve lost momentum. This year, the stock has dropped 47%. Are investors too pessimistic about Moderna these days? Here, Motley Food contributors Adria Cimino and Alex Carchidi present the bull and bear cases for this vaccine giant.

The bull case

Adria Cimino: Moderna is on track to remain a leader in the coronavirus vaccine market for the long term. It delivered a safe and efficacious vaccine when it was most needed. But Moderna didn’t stop there. The company began working on candidates that could address the coronavirus market as it evolves.

Early last year, Moderna said it would quickly develop vaccine or booster updates to address new variants. And it followed through on that promise. The company recently reported positive clinical trial data from its omicron booster candidate — and says it’s on schedule to bring that potential product to market in time for the fall booster season. This sort of product could be adapted annually with the most common variant and used even after the pandemic is over.

But Moderna isn’t stopping there, either. The company is working on a combined coronavirus/flu vaccine candidate. This sort of product could attract the population that goes for an annual flu shot. Here, we’re talking about 50% of Americans. That could represent a lasting source of revenue down the road.

Finally, it’s important to remember Moderna isn’t only a coronavirus vaccine company. The biotech has 46 programs in development in a variety of areas. Outside of the coronavirus program, three candidates are in phase 3 trials: vaccine candidates for respiratory syncytial virus, cytomegalovirus, and the flu. And, thanks to its coronavirus vaccine, Moderna has $19.3 billion in cash to support the development of these programs. All of this means Moderna may not have to depend uniquely on its coronavirus vaccine for revenue for very long.

The bear case

Alex Carchidi: Moderna faces one huge problem in the short and medium term: Global demand for coronavirus vaccine doses is falling, and the market is swamped with supply. In fact, in late May, Switzerland opted to destroy around 620,000 doses of Moderna’s jab because they weren’t used before expiring. What’s more, the World Health Organization’s (WHO) project to give away doses to less-developed countries could only find takers for 100 million doses out of its total of 436 million.

If countries have so many doses that they’re not interested in taking them for free, it’s unlikely that Moderna will have a chance to sell to them. Peak demand for shots is likely in the past, and 2022’s predicted revenue of $21 billion will likely be the high water mark for quite some time.

It’s true that the company could probably still find some buyers for booster doses if it updates its shot to protect against viral variants. But if the duration of the last few variants is any indication, it’ll be extremely difficult for Moderna to test and manufacture significant quantities of a new variant-specific version of its vaccine within the window of time where it’ll be useful. The biotech’s programs to make updated jabs for the beta and delta variants simply couldn’t get through the research and development (R&D) process fast enough to matter. Its omicron booster jab could be the exception to this trend, but investors will need to wait until the fall to find out, and things could change a lot between now and then.

So, with its primary revenue source drying up and its most likely near-term source of fresh revenue looking somewhat out of reach, Moderna is facing some powerful headwinds. Though its pipeline will eventually yield profitable new vaccines, that could take a few years, and it could be a tough time for shareholders in the interim.

The final word

Moderna has presented solid coronavirus booster data and could be positioned to lead in that market. But the company surely faces some challenges in the months to come. As explained in the bear case above, demand and the speed of booster rollout remain uncertainties. Still, due to the breadth of Moderna’s coronavirus program and general pipeline, there also is reason to be excited about this biotech company‘s future.

Adria Cimino has no position in any of the stocks mentioned. Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

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