3 things about Moderna that smart investors know

There’s more to Moderna than its COVID-19 vaccines, which investors may not appreciate fully.

| More on:
woman preparing Moderna vaccine

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Prior to the pandemic, Moderna (NASDAQ: MRNA) was like many other small biotechs. It had a promising technology that had yet to be proven, and no products available commercially. In fact, for the full year of 2019, Moderna had only $60 million in revenue, entirely from collaborations and grants, and it posted a net loss of $514 million. While this is not uncommon for biotechs, it's a stark contrast to what was to come. 

As we know, Moderna's ability to rapidly produce a vaccine for the COVID-19 virus changed the financial prospects for the company and put it in a completely different position today. In the most recent quarter, Q1 of 2022, Moderna's revenue was $6.1 billion and net income was $3.7 billion. That's a far cry from the full-year results of just a few years ago.

But the past is the past, and what matters is what happens next. Here are three things about Moderna that smart investors know.

1. COVID-19 revenue will decrease but remain

As much as I wish it were not the case, it appears that Moderna will see COVID-related revenue for the foreseeable future. The most immediate catalyst is the recently received Emergency Use Authorization for Moderna's COVID-19 vaccine for children 6 months of age and older. This was the last age group in the U.S. to receive approval to be vaccinated and should help sustain COVID-related revenues for Moderna.

When you consider the global vaccine demand, as well as the need for boosters and possibly new vaccines to combat future variants, there's still a large market for sales worldwide. In Q1, Moderna reported it had approximately $21 billion in advanced purchase agreements for 2022. The company also believes that sales in the second half of 2022 will be slightly higher than in the first half. This revenue is a far cry from the pandemic highs, but it won't decrease to zero anytime soon.

2. There's more in the pipeline

While Moderna's COVID-19 vaccines get the headlines, there are another 46 development programs in the company's pipeline. Of these programs, Moderna has three programs in phase 3 trials. One program is its COVID-19 boosters, but there are also vaccines for two other viruses nearing their trial endpoints.

Respiratory syncytial virus is one of the leading causes of severe respiratory illness in older adults as well as younger children. The vaccine for older adults is currently in phase 3 trials, and the vaccine for children is in phase 1. A vaccine for cytomegalovirus, the leading cause of birth defects in the U.S., is also undergoing phase 3 trials.

By the end of Q2, Moderna hopes to add an Omicron-specific COVID-19 booster as well as a flu vaccine to its list of programs in phase 3 trials. 

There's no guarantee that any of these programs will reach commercial sales, but with dozens more products in the pipeline at various stages, it would be reasonable to invest with the expectation that Moderna is able to bring additional products to market.

3. The current valuation is a double-edged sword

It's clear that the market has priced in the uncertainty around Moderna's ability to bring future products to market. At the time of this writing, Moderna has a price-to-earnings ratio of 4.3, near its all-time low of 3.4. This is for good reason. While COVID-19 revenue is likely to remain, it won't return to its peak levels, and even if all the programs in phase 3 trials come to market, the revenue won't replace what's lost in COVID-19 sales. 

That said, the COVID-19 vaccines have shown that mRNA technology can be successful, and the revenue generated over the past few years has put Moderna in a much better position to finance the development of future products. There's risk in buying shares, but there's also reward if Moderna can replicate its past success with future vaccines.

The bottom line for investors

Whether or not to buy shares depends on each investor's risk tolerance and investing timeline. There's reason to believe that over the long term, Moderna can grow to be a mainstay in the biotech space. As biotech investments go, there are certainly more risky investments out there. If Moderna is able to bring more and more products to market over the coming years and decades, it has the chance to be a smart investment for shareholders.

I think Moderna provides a nice balance of risk/reward because the valuation is such that investors don't need a COVID-like pop for the investment to be successful. However, investors who buy shares expecting another short-term run-up like we've seen over the past few years are likely to be disappointed. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Jeff Santoro has positions in Moderna Inc. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

happy business people celebrate, share rise, record price, increase
International Stock News

2 cryptos that could lead the market recovery

Bitcoin and Ethereum are uniquely positioned to lead the entire crypto market higher in 2022.

Read more »

A young couple look upset as they use their phones.
International Stock News

Not a risk taker? Here’s how that may cost you in retirement

With no risk comes little to no reward.

Read more »

woman working on tablet
International Stock News

3 top US tech stocks that could help make you rich by retirement

Buying and holding these three technology stocks can help grow your portfolio by leaps and bounds.

Read more »

A piggy bank blasts off into the sky.
International Stock News

Why cryptocurrency EOS soared 19% while the market took a breather today

The move follows a positive court ruling over a settlement tied to allegations of unregistered security sales.

Read more »

A worried man holds his head and look at his computer.
International Stock News

Why Bitcoin, Ethereum, and Dogecoin are slumping today

High correlation to equity markets is back, with the price action for major cryptos closely tracking major indices.

Read more »

Amazon boxes stacked up on a front doorstep
International Stock News

Why did the Amazon share price fall today?

The e-commerce giant continues to get pressure on its Prime loyalty program.

Read more »

woman looking surprised watching netflix
International Stock News

Did Bill Ackman give up on Netflix too soon?

Pershing Square sold Netflix in April and isn't looking back. It could be a mistake.

Read more »

Man pointing at a blue rising share price graph.
International Stock News

Why cryptocurrency Chillz continues to surge higher today

This little-known token is now up more than 65% since the beginning of the month.

Read more »