Moderna (NASDAQ:MRNA) stock is up 28.6% in the last 10 days as the company’s Covid-19 vaccine clinical trials near completion. Investors are anticipating good results and have pushed up MRNA stock hoping that it will receive FDA approval.
The runup in MRNA stock gives it a $26 billion market capitalization. Moderna’s vaccine is one of the few that has advanced to the final stage of testing, according to Reuters.
In May Moderna received the FDA’s fast track status for its mRNA-1273 vaccine, which speeds up the regulatory approval process. By contrast, Pfizer (NYSE:PFE) and BioNTech (NASDAQ:BNTX), which are both using a similar experimental RNA messenger method for the vaccine, received this designation later in early July.
On Sept. 17, the company said that it had already enrolled 25,296 of the 30,000 planned participants in their Phase 3 study. In addition slightly over 10,000 had taken their second and final dose.
Moreover, according to Clinicaltrials.gov, the Phase 3 study will be completed on Oct. 27, in terms of collection of data. I suspect that the results from that test will be available shortly thereafter.
In addition, the FDA’s Advisory Committee on Vaccines will have a meeting on Oct. 22 to discuss early authorization of Covid-19 vaccines. Moderna made a presentation at an August advisory meeting and so I expect they could have Phase 3 results by then.
Estimating the Company’s Revenue
Recently Moderna priced its COVID-19 vaccine, mRNA-1273. This allows investors to begin estimating potential worldwide sales for its vaccine.
For example, Moderna said that it would price the vaccine between $32 and $37 per dose for smaller volume deals. Their vaccine requires a two-dose regimen, 28 days apart.
However, apparently the U.S. Government is going to pay between $64 and $74 per person for the two doses. So, this is slightly higher than its baseline pricing.
Nevertheless, with this information, we can estimate the company’s potential revenue. Moderna will have to meet rigorous requirements by the U.S. Government to receive payments. This was part of a contract it signed under Operation Warp Speed in early August.
This includes up to $1.525 billion for 100 million doses if the vaccine is approved by the FDA by January 31. Another $600 million is paid out if the company can show it has industrial-scale manufacturing capabilities for the vaccine before then. Moreover, the U.S. Government has the option to buy another 400 million doses.
In addition, the company just announced it signed a deal in late August with Japan to supply 40 million doses. At $35 per dose, that works out to $1.4 billion.
So, assuming everything works out the company is due to make at least $3.4 billion and possibly much more within the next year or earlier. For example, if the U.S. buys 400 million doses, the estimated revenue could be another $3 to 4 billion. Americans will receive mRNA-1273 vaccine for free, although hospitals may charge for delivering the vaccine to people.
Therefore, no wonder the stock is at a $26 billion market cap. More countries around the world are bound to sign up as well if the FDA approves its vaccine.
What to Do With MRNA Stock
At a recent investor conference the company told investors that it could produce up to 1 billion doses, according to Barron’s. This could theoretically bring in up to $35 billion in revenue, if its pricing holds up. That is quite substantial for a company with no revenue yet.
Barron’s said that it also “showed off” a host of other vaccine protocols that are in various stages of approval and study. However, none seem as close to getting green-lighted as its Covid-19 vaccine.
Therefore, you can see why MRNA stock has been moving. In mid-July it hit a peak of just under $95 per share. I suspect that if the company gets FDA approval in October or before the end of the year, the stock will easily hit another high.
In effect, all signs look good, but everything depends on producing good results. The FDA says the vaccine needs to demonstrate a minimum of 50% efficacy for approval. This is a baseline to judge how much better than that a vaccine performs. So, if Moderna’s results are 80% and Pfizer’s are lower than that, watch out. The stock could then take on a second leg upward.
Therefore, mRNA-1273 vaccine could potentially be a $35 billion winner. Moderna is ramping up production processes based on what it sees so far. This could make its $26 billion market cap look very cheap.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Mark Hake runs the Total Yield Value Guide which you can review here.
