Moderna’s (NASDAQ:MRNA) novel coronavirus vaccine could be derailed by multiple issues, and there are some signs that the vaccine may not be effective. Meanwhile, MRNA stock has jumped tremendously, and its valuation is very high.
Given these points, the company’s shares look quite risky.
Phase 1 Results Were Promising for MRNA Stock
MRNA stock and the entire stock market reacted very positively to the results of the Phase 1 trial of Moderna’s vaccine. And the results were indeed promising.
Specifically, the company reported that every volunteer who had received the vaccine candidate, mRNA 1273, generated antibodies against the coronavirus. Participants who received the lowest dose of mRNA 1273 had the same number of antibodies as those who had recovered from the actual coronavirus. And volunteers who were given a medium dose had significantly more antibodies than former coronavirus patients.
Finally, all of the eight participants who Moderna evaluated for neutralizing antibodies against the virus had such antibodies. According to Science Magazine, “what you want are neutralizing antibodies, ones that not only bind but do so in a way that shuts down the virus entirely.”
Moderna Must Overcome Multiple Hurdles
But on the other hand, eight patients constitute a very small sample size. As a result, the vaccine’s ability to spur the generation of neutralizing antibodies is still far from certain.
Meanwhile, the results of a study that Moderna performed on mice were a bit worrisome. Specifically, after testing its vaccine candidate on mice, the company reported that “vaccination with mRNA-1273 prevented viral replication in the lungs of animals” exposed to the coronavirus. The company added that the mice had developed antibodies that were “protective.”
While it’s good that mRNA-123 stopped “viral replication in the lungs” of mice, a vaccine is supposed to completely prevent any symptoms and negative developments from occurring from exposure to an antigen. And although Moderna stated that the mice had developed protective antibodies, it did not report that the vaccine candidate completely prevented all adverse effects in the mice.
Further, on the safety front, not all of the news was positive. Specifically, three of the 15 participants who received the highest dose of the vaccine candidate developed “Grade 3 systemic symptoms, only following the second dose,” the company reported. Moderna added that none of the side effects were serious.
According to Science Magazine, systemic symptoms “would generally be fever, flu-like symptoms, perhaps body rash,” while “ ‘serious’ is a regulatory term, meaning hospitalization, perhaps permanent damage, etc.”
Moderna stated that all three ill volunteers recovered without any medical intervention, and the company said that it would discontinue testing of the highest dose going forward.
Although it’s apparently not unusual for vaccines to cause fevers and rashes, it would have been better if Moderna’s vaccine did not cause any systemic side effects. If such side effects cause significant problems for even 20% of recipients, regulators could decide to choose another vaccine candidate that does not trigger negative reactions.
That’s especially true because Moderna’s mRNA technology is new and somewhat unproven, while those who would benefit most from a coronavirus vaccine are elderly and/or have weakened immune systems.
Speaking of other vaccine candidates, “more than 100 different programs are now under way seeking to develop a Covid-19 vaccine,” Barron’s reported on May 12. The publication added that “most {of the programs} will fail.” So, even though I remain upbeat on Moderna’s technology, I think that its chances of developing the leading coronavirus vaccine aren’t that high.
One more potential obstacle facing MRNA stock is that the company may not be able to recruit enough volunteers to successfully test its vaccine. An official at Oxford University, which is working on its own vaccine candidate in conjunction with AstraZeneca (NYSE:AZN), said that its vaccine candidate only has a 50% chance of succeeding.
That’s because there may be too few people in the U.K. who contract the coronavirus to determine whether the vaccine works. Moderna could face a similar problem in the U.S.
The Bottom Line on MRNA Stock
The Wall Street Journal recently called Moderna’s valuation “ultrarich” and warned that the shares carry a high level of risk.
Indeed, given the company’s market cap of $25.6 billion, the shares clearly price in billions of dollars of revenue from the company’s coronavirus. And the chances of that revenue materializing are well under 50%.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Lyft, solar stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he did not own any of the aforementioned securities.
