[Editor’s Note: One reference to the monetary award Moderna received was incorrect. This article was updated on April 27, 2020, to correct that reference.]
The novel coronavirus has wrecked the economy and caused unbelievable chaos for many Americans. While the government is doing its best to mitigate the negative impacts of stay-at-home orders, it’s clear that a bigger solution is needed. Preventative measures such as mask wearing and contact tracing are helpful, but they’re not a solution. To get back to normal, we need a treatment or vaccine. Moderna (NASDAQ:MRNA) stock offers investors one such possibility, as the company is the leading vaccine developer targeting the virus.
The company’s efforts recently earned a high form of validation. The company scored a massive contract with the government to develop the vaccine. In fact, the $483 million the U.S. government gave to Moderna earlier this month may be the most fruitful “bailout” of them all.
After all, the government just wrote a $50 billion check to the U.S. airline industry, and we already know where that money will be going: dollar-bill heaven. Moderna, by contrast, has the potential to spin its handout into gold.
MRNA Stock: A Wise Half-Billion-Dollar Investment
The $483 million will help Moderna develop and test its promising Covid-19 vaccine. While plenty of biotech companies are racing to formulate a vaccine, most are unproven companies with tiny market capitalizations and little track record of commercial success. It would be great if a smaller player, like Inovio (NASDAQ:INO) or Novavax (NASDAQ:NVAX), comes up with a working vaccine quickly, but they are longer shots at success.
Moderna, by contrast, has a market cap of nearly $20 billion. It’s a well-respected leader in the field. So it’s no accident that the U.S. government chose them as the key partner for a $483 million Biomedical Advanced Research and Development Authority (BARDA) grant to expedite the company’s Covid-19 vaccine development.
Trials Are Advancing Quickly
Moderna’s vaccine is one of the first to begin human trials. A small human safety study with 45 healthy patients has been underway since March. Recently, the National Institutes of Health (NIH) greatly increased the power of this study, adding six new patient cohorts into the trial. With this increase in the funding and size of the study, Moderna should be able to reach statistically significant conclusions about the safety of its potential vaccine much more quickly.
In turn, if that goes well, Moderna will launch a Phase II trial of the vaccine by this summer. And if it passes that test, it could reach final-stage testing by fall 2020. This is truly lightning speed for a new drug or vaccine in development. They are pulling out all the stops to get this coronavirus blocker up and running as fast as humanly possible.
Additionally, thanks to the influx of funds, Moderna plans to hire as many as 150 new employees in the United States this year, and to expand its manufacturing capacity to three shifts every day of the week. If the vaccine passes all its trials, Moderna will be able to produce it in huge quantities in a matter of months.
Moderna’s Vaccine: Even More Vital Now
In recent days, investors had built up hopes of an imminent treatment for the coronavirus. Two leading candidates have gotten the most attention. There is hydroxychloroquine, an antimalaria drug that has reportedly shown some efficacy in fighting the coronavirus. And there is remdesivir, an experimental drug from Gilead (NASDAQ:GILD). Hydroxychloroquine has shown mixed results in clinical use with some less-encouraging reports recently.
Meanwhile, on Thursday, news leaked that Gilead’s remdesivir had come up short in its trial. According to StatNews, a journal article was posted showing that Gilead’s drug didn’t conclusively help patients in a Chinese trial. Gilead disputed that interpretation of the story, saying that the drug could still possibly offer a benefit. We’ll see as they release more data in coming weeks.
In any case, it was enough to rattle investors. Gilead stock dropped Thursday following the news, and the overall stock market slipped into negative territory on the day as well. It seems less likely we’ll find an immediate treatment or cure for the virus. As such, Moderna’s efforts to find a vaccine have taken on even greater importance.
Moderna Stock Verdict
Biotech is a complicated matter. There’s usually a long road between a proposed drug or vaccine, and when it is approved for treatment. Moderna may be on the fast track through testing, but it’s still not a sure thing. So be prudent with investments in this space, as both risk and reward are elevated given the life-and-death stakes of the vaccine’s success.
As far as potential Covid-19 stocks go, however, Moderna is a solid pick. It’s got the expertise and the funding to have a real shot at producing a working vaccine quickly. I’m rooting for them!
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.