Company / Analytics

Analytics, 21 May 2020

Moderna - is the stock worth the money?

The Coronavirus has caused so many shockwaves in Wall Street that the market is sensitive to any news of a vaccine or treatment for Covid-19. Moderna, one of the biotech companies working on a vaccine, has seen its shares more than triple this year. Moderna’s COVID-19 programme – the frontrunner in the American market – has progressed at a breakneck pace, and on Monday the company reported promising early data from an ongoing Phase 1 trial.

Moderna’s announcement regarding the first eight patients injected with its mRNA-1273, its experimental coronavirus vaccine, was convincing enough to push the stock and the rest of the market higher. Moderna’s shares went up by 20%, putting the company’s market capitalization at almost $30 billion, which is astonishing for a company that currently sells zero products. Investors have been wondering what the figures mean. Is the stock worth the money?

What analysts are saying

Analysts pegged different targets for the stock, the most enthusiastic being from the investment bank BMO Capital which put a target price hike of $112 from BMO Capital on Tuesday, which would suggest Moderna’s $80 run on Monday is an indication of the onset of a much larger run-up.

Nevertheless, experienced pharmaceutical-industry investors familiar with the intricacies surrounding new drug developments weren’t convinced with the news. No wonder Moderna’s rise to fame on Monday, didn’t last long.

On Tuesday afternoon, the healthcare news site STAT published an article that downgraded Moderna’s announcements of positive data on its experimental COVID-19 vaccine. The news sent the markets tumbling, with the Dow Jones Industrial Average falling nearly two hundred points in 10 minutes.

Vaccine experts interviewed by STAT concluded that Moderna released very limited information, mostly words and not data, which was less convincing, and not enough to evaluate how impressive or not the vaccine may be. These also make it challenging to assess the company’s potentials in that regard, as well as its market outlook.

Moderna is selling stocks

Moderna is using its Monday gains to sell stocks at a higher price. Moderna price its stock offers at $76 per share, about 14% higher than what it was worth ($66.69) when markets closed on Friday.

Tuesday’s offer price was lower than the price at which Moderna shares closed on Monday ($80) and so the stock fell in kind. At the close of trading on Tuesday, Moderna was trading at $71.67. Moderna’s decision to sell stocks has forced some investors to take their profits off the table. The company intends to use the proceeds of the stock sales to fund the manufacturing of mRNA-1273 for distribution in the U.S. and international markets, after regulatory approval. Additional funds not utilized in the production of the mRNA-1273 will be used for the research and development of other drugs in its pipeline, as well as technology investments and general corporate purposes.

Is Moderna worth it?

Whether Moderna is worth it can be gauged by looking at Moderna’s drug portfolio, and the number of outstanding shares. Of course, in addition to other factors.

Moderna has about 371 million outstanding shares and is expected to issue about 20.2 million new shares of its stock to fund the development of a long list of messenger RNA-based new drug candidates that direct patients to produce beneficial proteins. That could put the company’s worth to around $44 billion, despite lacking any products it is authorized to sell.

Though Moderna has 13 experimental mRNA-based drugs in clinical-stage development, none has been proven effective in a large controlled trial yet. At the moment, the company is prioritizing the mRNA1273, which delivers a strand of genetic material that should lead to the production of proteins that bind to the novel coronavirus.

Though recent announcements regarding the mRNA-1273 are encouraging, it is too early to tell how effective the vaccine will be effective in preventing exposure to SARS-CoV-2. The field of new vaccine development is filled with abandoned programmes which appeared effective in pre-trials (phase 1) but eventually failed to provide meaningful levels of protection in later stages.

Considering potential risks suggests that Moderna is valuable but not near its current market capitalization. Results from phase 2 of the Moderna study should provide a clearer picture. The vaccine has gotten the green light to start the second stage of human testing.

Last week, U.S. regulators gave the vaccine “fast-track” status to speed up the regulatory review. Phase II trial is designed to further test the effectiveness and find the optimal dose.

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