Because of the wide scale of destruction from the novel coronavirus, very few publicly traded companies have been able to escape from its wrath. The ones that did are likely biotechnology firms that have direct relevance toward the crisis. Such is the case with Moderna (NASDAQ:MRNA). A relatively young organization, MRNA stock shot to prominence when the underlying firm disclosed encouraging results from its early stage clinical trial for a coronavirus vaccine.
However, some very lucrative trades have brought more attention to Moderna than executives would have liked. As CNN reported, its vaccine announcement created a buying frenzy for MRNA stock. Suddenly, a company that wasn’t well known outside of the biotech space became a household name. Most significantly, it acquired a market capitalization of $29 billion despite not having a single marketed product.
Not surprisingly, several company executives, insiders and major stakeholders wanted to cash out on their bonanza. Key individuals and entities pocketed several million dollars within days of the vaccine announcement. Logically, as the selling pressure picked up, MRNA stock slipped substantially.
Recently, a number of financial experts have suggested that the timing of the equity sales is problematic, warranting an investigation. For example, Thomas Gorman, a former Securities and Exchange Commission official, stated that the agency should “absolutely” scrutinize the company.
Having worked with several people in the biotech space, I’m not entirely surprised. Frankly, biotechs, especially the smaller outfits, have two classes of people: the scientists who almost always genuinely care about their research and the executives, who are a mix of well-intentioned experts and total dirtbags.
I’m not suggesting anything bad about Moderna’s insiders. It’s just that this type of stuff is somewhat mundane.
A Troubled Narrative for MRNA Stock
One thing is very fair to point out: whether Moderna’s stock dealings are legitimate, it’s not a great look for the public. With the nation (and the world) suffering from this pandemic, you like to think that the entire scientific community is doing this for the greater good.
Rest assured, they’re not. The quicker you get this naïve idea out of your head, the clearer you can see MRNA stock – or any biotech name, for that matter.
But in Moderna’s case, the millions of dollars pocketed isn’t the main issue. Rather, it’s that management’s disclosure of its Phase 1 results seemed tied to monetary rather than scientific interests. In other words, the vaccine news may have been released with ulterior motives, drawing suspicions because it didn’t quite meet industry muster. Shortly after the announcement, I wrote the following:
For one thing, Moderna’s Phase 1 trial involved a very small sample. Yes, the granular science and its implications were very encouraging. At the same time, the scientific community has a responsibility to ensure the efficacy of this vaccine and that the results didn’t come from a fluke occurrence.
Specifically, the study included results from only eight volunteers, which many people found strange. That included Peter Hotez, a leading expert on infectious disease and vaccine development at Baylor College of Medicine. Hotez described Moderna’s press release as “uninterpretable.” He later went on to state that the study “…didn’t contain any data…So basically — it’s opinion. It was spin and opinion.”
To be fair, we will soon find out if the company’s vaccine justifies prior hype for MRNA stock. It has already started the process for its Phase 2 trial, which includes hundreds of volunteers.
Should You Bet on Moderna?
To add another layer into the mix, White House health advisor Dr. Anthony Fauci described Moderna’s vaccine as “very promising.” This despite the fact that he criticized the company for prematurely releasing early stage data.
Also, the social unrest that has been brewing due to the death of George Floyd, who was killed in police custody, offers a compelling need for a Covid-19 vaccine. If you’ve watched coverage of the protests – and the unfortunate rioting by those seeking to subvert the message – it’s clear that social distancing isn’t a top priority.
And that’s the reason government leaders and health officials have sounded the alarm. Worryingly, new daily coronavirus cases in the U.S. seem to be stabilizing at the 20,000 mark. Obviously, you want to see this figure drop significantly, not meander for weeks.
Still, I’m not convinced that buying MRNA stock right now is the best call. With shares having bounced so high, along with the ever-present risk of disappointing in advanced trials, I’m going to sit this one out.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
