Moderna (NASDAQ:MRNA) is one of the darlings among healthcare equities this year, but as MRNA stock recently proved, life comes at novel coronavirus fighters fast. After topping $95 just a few weeks ago, Moderna pulled back nearly 28% from those highs.
That decline highlights the risks and volatility facing investors when making bets on Covid-19 vaccines. On a brighter note, Moderna’s pole position in the race to develop that vaccine is intact and its mRNA-1273 was the first coronavirus fighter to be tested on humans.
Yes, Moderna is advanced, relative to many rivals, in its efforts to bring a Covid-19 vaccine to market.
However, the combination of the gravity of this situation – industries, jobs and most importantly, human lives, hang in the balance – and the timeline of getting a treatment to market make for a situation where upside in MRNA stock is unlikely to be linear.
That much was on display on Aug. 11 when Moderna slumped 4.22% on news that Russia’s Gamaleya Institute has a ready vaccine. Not making political commentary here, but over the past several years, many Americans grew increasingly leery of almost anything having to do with Russia.
In the case of a Covid-19 vaccine, anyone observing the Russian developments would be right to do so with some pause for the simple reason that it looks this treatment did not go through anything close to a three-stage Food & Drug Administration (FDA) trial.
For example, the Russians say their vaccine was tested on two groups of 38 humans apiece. By comparison, Moderna will rest efficacy in 30,000 adults. Regardless of the results, 76 isn’t nearly enough to pass FDA, indicating that Moderna’s slump may be a knee jerk reaction.
There’s Good News for MRNA Stock
Proving that the coronavirus vaccine competition is a rapidly evolving fluid situation and that the related equities are responsive to those trends, Moderna rallied in the Aug. 11 after-hours session after announcing it landed a $1.52 billion deal from the U.S. government for 100 million doses of mRNA-1273.
“With the previous award of up to $955 million from the Biomedical Advanced Research and Development Authority (BARDA) for the development of mRNA-1273 to licensure, today’s announcement brings the U.S. government commitments for early access to mRNA-1273 to up to $2.48 billion,” according to a Moderna statement.
That after the government previously invested $955 million in Moderna’s vaccine development efforts and there’s room for Uncle Sam to purchase much more mRNA-1273.
“Under the terms of the agreement, the U.S. government, as a part of Operation Warp Speed, will also have the option to purchase up to an additional 400 million doses of mRNA-1273 from Moderna,” according to the company.
Another Point in MRNA Stock’s Favor
Something else to consider with Moderna is that the company carries no debt, a remarkable trait when evaluating the cost-intensive nature of the vaccine development business. That trait is all the more remarkable when noting interest rates are at historic lows and Moderna could likely borrow on the cheap, but it hasn’t done so.
There’s more to like with Moderna. Obviously, investors are focusing on the fight against the coronavirus, but historical data confirm the world has contended with dozens of related illnesses from the coronavirus family and dozens of pandemics were fought in the previous decade.
The way to look at those ominous factoids is that if mRNA-1273 proves successful, markets should recognize that Moderna has the capabilities to fight other viruses as they emerge, meaning the company should deliver growth for investors beyond the expiration date of Covid-19.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.
