CureVac (NASDAQ:CVAC) is a bet on a newly listed Germany-based biotech firm working to produce a novel coronavirus vaccine. CureVac stock went public on Aug. 14 at $16 and immediately started trading in the mid $55 dollar range. As of Aug. 21, it was at $67.20. Given recent news, it looks like the stock has further to go on the upside.
CureVac is developing messenger RNA (mRNA) based drugs, like Moderna (NASDAQ:MRNA). On Aug. 20, CureVac announced it was in advanced talks with the European Commission for 225 million Covid-19 vaccine doses. There is also a possibility of a follow-on 180 million doses once the vaccine is proven safe.
The company is still in Phase 1 clinical trials of its vaccine. Its results won’t be available until the fourth quarter. The 405 million doses could be ready for distribution by mid-2021.
Others Are Ahead in the Race
Other biotechs and drug producers are further ahead than CureVace in the Covid-19 vaccine race. Barron’s pointed out on Aug. 20 that Pfizer (NYSE:PFE) seems to be quite far along with its Phase 2/3 vaccine trials.
Moreover, Barron’s says that Pfizer’s vaccine might be the one that the FDA is going to discuss in a meeting of external advisers on Oct. 22. Pfizer has said it hopes to have its Phase 3 data by then.
Moreover, the European Commission reached an agreement recently with AstraZeneca (NYSE:AZN) for 300 million doses of its vaccine. It also is in similar talks with Johnson & Johnson (NYSE:JNJ) about their vaccine, along with Sanofi (NYSE:SNY).
What CureVac Might Be Worth
Seeking Alpha quoted a Financial Times article where the CEO of CureVac said it aims to make an “ethical profit margin” on their vaccine. He ruled out selling it at cost.
The article said that some companies were selling their vaccines at $3 to $4 per dose, but Johnson & Johnson expects to sell its vaccine at $10.
Let’s say CureVac can sell its doses at $4 for 405 million doses. That represents revenue of $1.62 billion. If it can repeat that twice a year that could be $3.24 billion annually.
As CureVac has 177.857 million shares and CureVac trades for $67.20, its market capitalization is $11.95 billion. That means it trades for just 3.68 times revenue. If that revenue becomes a recurring stream for the company, the stock will attain a much higher multiple.
In addition, if it picks up other buyers for large doses around the world, assuming its messenger RNA vaccine proves effective, the stock will have a higher multiple.
At 10 times revenue CureVac stock would be worth $32.4 billion. That works out to $182.17 per share. Currently, it is trading around $59.
What to Do With CureVac Stock
That is a lot of “ifs” and assumptions. In effect, CureVac stock is a back-of-the-pack horse betting gamble. However, it’s not necessarily a winner-take-all situation. For example, the EC may want to have a stable contract with a European producer of their vaccine, not just with American companies.
In fact, that is the main selling point for this stock. A lot of governments may not want to be beholden to an American company for their main Covid-19 vaccine supply. Moreover, this is despite the fact that many U.S. companies have European or Asian subsidiaries working on their vaccines.
Therefore, for that reason, let’s give it a 60% probability of having a recurring stream of revenue over the next 10 years. That would put its value at $19.44 billion, or $109.30 per share. It represents a potential gain of about 60% over the current price.
As a result, if that price target took two years to achieve, assuming it receives EC approval for its vaccine, the investor would make an annualized ROI of about 27.5% compounded annually over the next two years.
That represents a nice ROI for most investors. It also is a way of putting some form of odds or probability of making money on this stock, despite its post-IPO runup.