If you’re buying Moderna (NASDAQ:MRNA) today, you likely didn’t look at its financials. Even though MRNA stock has had a good run it’s future looks dicey.
During all of 2019, Modern had revenue of $60 million. It lost $514 million, $1.55 per share. Operating cash flow was a negative $459 million.
The market cap on all this? Nearly $10 billion.
The reason, as with everything, is the Coronavirus. Moderna is one of two companies, Johnson & Johnson (NYSE:JNJ) is the other, preparing for mass production of a Coronavirus vaccine, even as human testing is just beginning.
Moderna Beyond Coronavirus
As I wrote at the time of its initial public offering in December, Moderna is part of the next great wave in biotech.
If you bought shares at the IPO, you felt foolish. A down day in the rest of the market sent it $4.10 below the IPO price. On March 31, you’re looking golden. The stock’s price of $30 is a profit of over 20%.
Moderna gets its name from Messenger RNA, called mRNA. This acts as a biochemical systems analyst. It translates between DNA instructions and the creation of polypeptides and proteins through ribosomes. The idea is to create synthetic mRNA that, once injected, causes the body to create its own cures.
Moderna’s co-founders come out of MIT and Harvard. The technique had already given Moderna a huge pipeline of drug candidates before its IPO. Before the IPO it was known as one of biotech’s most secret start-ups.
Critics accused it of a toxic work environment that drove away top talent. They said it ran into roadblocks on many projects. To this I respond that William Shockley was also said to be something of a jerk, but transistors and integrated circuits are still cool.
MRNA Stock and the Virus
Our Vince Martin has called Moderna a longshot speculation. Many medicines and vaccines now being tested against Coronavirus will fail the test.
The success of Moderna’s IPO means it has the capital to ride out the storm. It can delay testing on other drugs, even re-start them later, while it focuses on its vaccine candidate, called mRNA-1273.
A trial has already begun, in Seattle. Healthy volunteers are being given different doses to test safety and efficacy. Moderna was able to produce it quickly using its mRNA technology. Moderna hopes to see health workers getting the vaccine by this fall.
There remain three problems. First, there are many other candidates, including one from China. Second, whoever does succeed won’t have the pricing power some people think they will. The political pushback will just be too great. Third, just because a politician talks up your mass production capability doesn’t mean you’re going to make money.
The Bottom Line on MRNA Stock
Speculating on Moderna based on the coronavirus is dumb, from a financial standpoint. From a speculator’s point of view, it makes perfect sense. Speculators will bet on encryption keys.
Win or lose, and we all pray Moderna wins, the price of the stock will be coming down at some point. Profits for the winner here will be limited.
If the Moderna vaccine succeeds, however, it will be an important validation of mRNA technology. I’ve written many times before that treating DNA as a programming language, which Moderna does, will be one of the three great technology trends of this decade, and the longest-lasting.
But we’re still at the Visicalc stage of this revolution. We can’t know, now, which company will be the Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT) of this new era. Back then there was only one sure thing. International Business Machines (NYSE:IBM).
Dana Blankenhorn has been a financial and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT and AAPL.
