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Few companies have enjoyed the kind of extraordinary rise in fortunes like Moderna. The US biotech company, founded in 2010, never made a profit in the first decade of its existence. Then came the pandemic. The mRNA technology pioneer was among the first to develop a Covid-19 vaccine. Sales have shot up from just $60mn in 2019 to $19.2bn last year. It made over $20.5bn in profits between 2021 and 2022.
But demand for Covid shots has fallen dramatically. Vaccine sales are expected to more than halve this year. The stock, worth nearly $500 at its peak in August 2021, currently trades at just $111. The pressure is on for Moderna to find a second act.
Progress made on developing a mRNA-based flu shot is a start. Moderna said on Wednesday its flu vaccine elicited a better immune response than existing jabs in a late-stage trial. This could potentially pave the way for it to enter the $6bn-a-year market.
Existing flu shots have efficacy rates of around 50 per cent. A flu shot that can improve on that would have an edge, particularly among the elderly. The problem is Moderna did not give out much data on this front. It is too soon to get excited yet.
Similar caution needs to be applied to Moderna’s other forecasts. It expects to add $10bn-$15bn in annual sales after launching new products in oncology, rare and latent diseases by 2028. This is in addition to the previously announced $8bn-$15bn of expected sales from respiratory vaccines in 2027. That is a lot of assumptions and a long time for investors to wait.
Until then, falling revenue and heavy investments in research and development — to the tune of $25bn between 2024 to 2028 — mean Moderna will remain lossmaking for at least the next three years. Despite its recent share price slump, the stock is hardly a bargain. It trades on around 4 times revenue, more than France’s Sanofi and GSK in the UK. Both of these are profitable. Moderna needs to show more proof that it is not a one trick pony.
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Moderna, a US biotech company established in 2010, has experienced an extraordinary rise in fortunes. Despite lacking profitability for the first decade, the company’s fate took a turn with the emergence of the pandemic. As one of the pioneers in mRNA technology, Moderna swiftly developed a Covid-19 vaccine. Sales skyrocketed from $60mn in 2019 to an astounding $19.2bn in the previous year. The company generated over $20.5bn in profits between 2021 and 2022.
However, the demand for Covid shots has drastically declined, leading to an expected reduction in vaccine sales this year. Moderna’s stock, which peaked at nearly $500 in August 2021, currently stands at a humble $111. The pressure is now on for Moderna to discover a new breakthrough.
The company’s progress in developing an mRNA-based flu shot shows promise. Moderna announced that its flu vaccine elicited a superior immune response compared to existing inoculations during a late-stage trial. This achievement could potentially open doors for Moderna to enter the $6bn-a-year market.
Existing flu shots typically possess efficacy rates of around 50 percent. Thus, a flu shot that surpasses this standard would provide a competitive advantage, particularly for the elderly population. However, it is important to note that Moderna has yet to release substantial data on this subject, making it premature to become overly enthusiastic.
It is also crucial to exercise caution regarding Moderna’s other forecasts. The company anticipates adding $10bn-$15bn in annual sales through the launch of new products in oncology, rare diseases, and latent diseases by 2028. In addition, Moderna foresees $8bn-$15bn in sales from respiratory vaccines in 2027. These predictions rely on numerous assumptions and involve a considerable waiting period for investors.
Until then, Moderna will experience falling revenue and significant investments in research and development, amounting to $25bn between 2024 and 2028. Consequently, the company will remain unprofitable for at least the next three years. Despite its recent decline in share price, the stock is far from a bargain. It currently trades at approximately four times revenue, exceeding the valuations of profitable companies like France’s Sanofi and the UK’s GSK. Moderna needs to provide further evidence that it is not solely reliant on one achievement.
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