You can’t evaluate MRNA stock based on sales or earnings, because there aren’t any. But over the last six months, the shares are up 134%.
Moderna opened April 14 at $34.50 per share, up another 5% overnight. The market cap is now $10.8 billion. Its revenue during 2019 was $60 million.
The stock is skyrocketing because it is working on a coronavirus vaccine. CEO Stephane Bancel said a vaccine could be available for healthcare workers by fall. The vaccine, called mRNA-1273, has already entered human trials.
The Race for a Vaccine
Moderna is racing with Johnson & Johnson (NYSE:JNJ), which has yet to start human trials, and with dozens of other companies worldwide. It has signed a deal with the Department of Health and Human Services to speed manufacturing.
All this assumes the vaccine works, and that it’s safe. Researchers in China posted the virus’ gene sequence in January. Moderna had its candidate vaccine ready by Feb. 7.
This was possible because of Moderna’s drug-making methodology. It’s based on messenger RNA, which directs ribosomes to produce proteins. I liken it to a computer systems analyst, which translates between DNA code and the chemical requirements of cells.
From a business standpoint, this makes Moderna similar to Regeneron (NASDAQ:REGN), which has also been a big winner this year. It’s not just producing candidate drugs. It has a drug design system, and a large pipeline of drug candidates built on that system.
Bancel talks, not of manufacturing a drug, but of building a platform. Before the virus hit, the company’s most advanced products were just entering Phase II trials. (There are three phases of drug trials. These ask, first, whether the drug can work against a target disease, second whether it’s better than a placebo and third whether it’s safe and effective.) Bancel wrote we were “early in the story.”
In the case of Covid-19, Moderna was also able to act quickly because the virus, called SARS-CoV-2, is a lot like Middle East Respiratory Syndrome (MERS). Moderna had been researching MERS for two years. The company is also working on tests for immunity from the virus, to get the economy restarted.
I have been intrigued by Moderna for some time.
In December 2018, I wrote it was ushering in “the next wave of biotech,” in which DNA becomes virtually a programming language. At the time, Moderna had just gone public, at $23 per share, the single biggest drug IPO ever.
Still, it’s easy to be skeptical of a company that has almost no revenue but a market cap bigger than Teva Pharmaceuticals (NYSE:TEVA), a generic drug maker with nearly $17 billion in 2019 revenue.
Our Vince Martin is one of the skeptics. He thinks the gains in biotechs generally are overdone.
Matt McCall has also written about the huge 2014 gains in makers of protective equipment during the Ebola crisis. These quickly faded, as did other drug industry rallies based on hype and hope.
In cases like this, you’re buying a lottery ticket. The odds of having the winning drug are low, and their odds of big profits from being right are even lower.
The Bottom Line on MRNA Stock
Moderna could be the exception.
It’s probably overpriced, based on a single drug candidate. Governments won’t pay a huge per-dose price on mRNA-1273, even if it works.
But it would be a convincing demonstration of a new drug discovery system. Moderna was founded just 10 years ago. Before the current panic it was spending twice as much money as it was taking in. If its vaccine works, however, there are dozens of others behind it.
That’s what you’re speculating on if you buy MRNA stock. Just know that, at its current price, this is a speculation.
Dana Blankenhorn has been a financial 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. Follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.