MODERNA, INC: 2021 AND BEYOND

By now, you may be aware that Moderna, Inc ($MRNA) has gained global acclaim as the start up that pioneered mRNA technology to produce a powerful Covid vaccine in record time. The share price has responded accordingly, skyrocketing as the company’s new technology went from theory to reality. But now the company faces new challenges; from patent threats to fierce global competition for Covid business, some analysts wonder whether $MRNA is a “one trick pony.”  How will Moderna respond to these new threats to their business? What else do they have in their pipeline? Aidan Asbill, biotech analyst, investigates….

With the appearance of the Covid-19 outbreak, the global economy halted in its tracks. The whole economy was forced to adapt to a new reality with many sectors struggling to stay afloat. However, Covid-19 would become the next gold rush for whoever could produce a safe and effective vaccine. The companies who could successfully create a vaccine stood to make billions, as well as save countless lives. All the big biotech players such as Pfizer and Johnson and Johnson rushed to work on a vaccine. Historically vaccines have taken years to find, but with the stakes being elevated, some companies turned to new research in mRNA. This research had the potential to create a safe and effective vaccine faster. One relatively unknown company was set up to capitalize on the newfound interest in mRNA, this company was Moderna. With the company’s research in mRNA, they were a step ahead to create an effective mRNA-based vaccine. Moderna was a relatively unknown company, but with the creation of their Covid-19 vaccine, the company would go up 434% in 2020 alone. Still, this begs the question, does the company still have room to grow? To figure this out, let’s look at Moderna’s unlikely rise to the top.

Moderna is a relatively young company that was started in 2010. Early on Moderna differentiated itself from other biotech companies with its revolutionary research into synthetic messenger RNA. Moderna explains this technology best by calling their mRNA research the “software of life.” What Moderna sought to do was make precise tweaks to synthetic mRNA that when injected into someone, could allow any cell in the body to transform to fight against rare diseases. In layman’s terms, this means Moderna can inject mRNA into one’s body and decide which proteins the cells produce or do not produce.  This has massive implications, not just for stopping Covid-19, but for treating cancer with a simple shot, or even stopping the number one cause of birth defects in the U.S. Moderna is also led by incredible leadership under their CEO Stéphane Bancel. Bancel is known as a business first CEO, who climbed his way through the ranks as a French CEO. When Bancel entered the company he was able to secure 1 billion in funding. Furthermore, Bancel is a co-inventor of more than 100 early patents is, unusual for a CEO who isn’t a Ph.D. scientist. Bancel’s leadership helped Moderna get a billion in investments before even having clinical trials. Despite this, Bancel knew the risk of a young biotech startup, such as Moderna. In an interview with Advisory Board President Eric Larsen, when asked about his move to Moderna, Bancel responded, “When I resigned from my last company, bioMérieux, to start on this journey at Moderna, I told my wife there was only a 5% chance it would work out. He went on further to state, “But it was very clear that, if we could make drugs in this new modality, it would change medicine forever. In March 2020, Bancel and his company would get their chance to change medicine forever, with the Covid-19 outbreak.

Modernas Competition and Obstacles

Besides having a great leader in Bancel, some credit also has to go to the very impressive team around him. While every biotech company in the world was racing to make a covid-19 vaccine, Moderna was able to design their mRNA Covid-19 vaccine in just 2 days. The team was able to do this without even using a sample of the physical virus. Like many young companies, Moderna was not profitable until recently. The company lost 514 million in 2019 until Covid struck which positioned the company’s unlikely rise. Since then, the company has raised 5 billion of cash on hand and has increased revenue every quarter. When looking at valuation Moderna trades at 8.1 times earnings expected over the next 12 months. While this figure is high its other competition also trades at a premium. Novavax trades at 8.6 times expected earnings, Biogen trades at 14.3 times and Regeneron trades at 11.1 times.

When looking at Moderna’s competitors, it is clear that Pfizer has a clear head start against Moderna. Pfizer is a massive company with revenue of 41 billion last year, while Moderna made just under a billion. This has allowed Pfizer to get bigger deals, such as securing the biggest deal yet for 1.8 billion more Pfizer vaccine in Europe. Europe will still utilize Moderna vaccines but Moderna will have to focus its efforts elsewhere to secure bigger deals. Pfizer is also set to make 3 billion vaccines by 2022, while Moderna is only set to make 1 billion. However, in a world of nearly 8 billion people and 2 shots being needed, Moderna still has a massive opportunity to distribute billions of vaccines across the globe. One key competitive advantage Moderna has against Pfizer, is that the Moderna vaccine is able to be stored at warmer temperatures. The Pfizer vaccine has very strict temperature requirements, which require expensive refrigeration equipment to store it. For some less privileged countries, this may not be a viable option. Countries like India, Brazil, and Indonesia are all countries where Moderna could become the preferred vaccine of choice. Moderna has done a good job targeting these markets by securing a new deal that they announced on May 3rd in a press release. The company announced that it had reached an agreement to supply up to 500 million doses of its vaccine to Gavi, the Vaccine Alliance, an organization that works to improve access to vaccines in the world’s poorest countries. This is a great sign for Moderna playing to their strengths and proving they can still find new markets for growth, despite plummeting demand for vaccines in the U.S and Europe.

Pipeline

Moderna isn’t limited to just its Covid vaccines, the company’s future looks very bright with its array of vaccines in the company’s pipeline. Cytomegalovirus is the number one cause of birth defects in the United States infecting approximately 25,000 newborns a year in the U.S alone. About 20% of these infected infants will experience disabilities such as hearing loss, vision impairment, decreased muscle strength, and more. Moderna is looking to solve this with their CMV vaccine, which seeks to stimulate a strong antibody response against the virus that causes birth defects. Modernas CMV vaccine is expected to enter phase 3 in 2021, where they will test 8,000 participants across the globe. In addition, Moderna is also in Phase 2 of their PCV vaccine, which will help to treat and cure cancer by enhancing the body’s response to tumors. The PCV vaccine will safely expose the patient’s immune system to tumor antigens in order to help the body induce an immune system response. In an April 14th press release, the company also announced plans for its  Phase 1 mRNA flu vaccine, as well as a Phase 1 study evaluating HIV vaccines. Modernas is taking one novel approach that will broadly neutralize HIV antibodies. The Phase 1 study will expand upon a previous HIV vaccine, which had promising results but has yet to be tested on humans. Moderna is aiming to make a more efficient flu shot, that will be 90% effective compared to 40-60% effectiveness of traditional flu shots. The flu shot is approximately an 11 billion per year market and that’s just in the U.S. With the companies intriguing pipeline, the company is set up very well for the years to come.

With the recent announcement, that the United States will be advocating to waive Covid-19 vaccine patents, this would allow other countries to mimic Modernas and other Covid vaccines. Patents are extremely important in the biotech industry for long-term revenue growth. To make matters worse, countries like India, where Moderna may have an advantage, could produce mimic patents similar to the Moderna Vaccine. This could force Moderna to sell at a heavy discount, to compete in these markets that produce their own vaccines. There is also a negative stigma developing around Moderna that it has worse side effects than its competitor Pfizer. According to Pfizer, 3.8% of their trial participants had fatigue symptoms and 2% had head pains. Moderna numbers are slightly higher with 9.7% of participants feeling fatigued and 4.5% having headache symptoms. Although these symptoms are very minor, some consumers may go out of the Pfizer shot, over the Moderna shot, due to the harsher symptoms. This is made worse by the growing skepticism surrounding the Covid-19 in the U.S. From here, it is clear, that Pfizer has a clear edge over Moderna in the U.S and Europe. With that being said, it’s a natural assumption that Moderna will have the most success selling to different markets, however, with the patents being lifted this could prove to be a difficult task for Moderna.

Should you buy the stock?

The company had 5.2 billion in cash on hand at the end of last year which sets the company up amazingly to invest in production for more Covid-19 doses, as well as further investment in new mRNA products. One of these new products that they are working towards is a booster shot that would combine their Covid-19 vaccine with a flu shot. The booster shots are set to come out in 2023 to help stop future strains of Covid-19. In 2017, only 37.1% of adults got a yearly flu shot, down from 43.6% in 2014. However, after the Covid-19 outbreak, yearly flu shots should skyrocket, as people become more health-conscious. If Moderna is able to administrator their booster shots yearly, the company is positioned for a very bright future. When looking at earnings it’s not a new phenom that the stock price of Moderna and other biotech stocks fall after earnings. This was especially unfortunate this time because their earnings were slightly missed and the news of the Biden administration’s support of removing Covid-19 patents caused the stock price to tank 10% on the news. However, the stock has been already recovering from post announcement lows, despite the market, in general, having a setback. With the Covid-19 outbreak, Moderna secured itself as the market leader of mRNA research. Moderna is set to have a breakout in 2021 and 2022, but its long-term growth comes down to if you trust its leadership and the company’s ability to pioneer future mRNA vaccines.