Investors who followed my advice from last December to buy Moderna for its Messenger RNA technology should now take some profits. Shares are up 379%.
Unlike Novavax (NASDAQ:NVAX), however, which may not have a second act, Moderna now has a proof of concept and a runway for more growth. As I wrote at the time of the IPO, “like Regeneron Pharmaceuticals (NASDAQ:REGN), Moderna is less a bet on particular drugs than on a method for finding them.”
mRNA-1273 For the Win
Messenger RNA is a genetic systems architect. It translates between instructions DNA has encoded within it, and the chemicals made to carry them out. Change the mRNA and you can change the organism.
The apparent success of mRNA-1273, Moderna’s candidate vaccine, in preventing infection means their drug discovery system works. Of 95 people in the study who contracted Covid-19, 90 were taking a placebo.
But the current valuation of Moderna, $36.7 billion, is out of line with any Covid-19 revenue stream. Moderna won’t be manufacturing or administering the drug. Prices will be controlled by existing contracts. Even Moderna CEO Stephane Bancel says mRNA-1273 isn’t a “silver bullet.” Masks and social distancing will be required for some time.
This doesn’t mean you should sell out your Moderna stake. Get back your investment, take some profits, and wait for the next wave. Moderna has only issued a news release. The results need to be verified by independent scientists. Authorizations for using it must be obtained. The release itself is clear. The vaccine “meets its primary efficacy endpoint in the first interim analysis.”
Beyond the Vaccine
Moderna reported revenues of $158 million for the third quarter. The release described dozens of other drugs. There are cancer drugs that can be injected into tumors, vaccines to treat rare diseases, and a drug to treat heart failure called Relaxin.
Some represent partnerships with companies like AstraZeneca (NYSE:AZN) and Merck (NYSE:MRK), from whom Moderna received funding before it came public. Others represent the company’s own efforts. All of them must still go through clinical trials, approvals, and manufacturing before they generate income.
The difference is that instead of being funded by diluting shareholders or pre-selling rights, these drugs may now be funded directly by Moderna. Moderna may also work with other drug companies as the senior partner funding research instead of the junior partner seeking funding.
A Victory Lap
Analysts are now sharply divided on where MRNA stock will be in a year.
While eight of 13 say buy, two say sell. Price targets on Tipranks range from a high of $166 to a low of $59. These analysts are saying what I’m saying. You don’t have a profit until you sell and have cash in your pocket.
Moderna’s news has people both inside and outside the company taking a victory lap. This includes singer Dolly Parton, whose $1 million donation helped fund trials. After the strains of 2020, the palpable relief is welcome.
The Bottom Line in MRNA Stock
You don’t need to sell all your Moderna stock.
Look to get in, six months or a year from now, after the excitement over Covid-19 has died down. By then we should be able to evaluate other Moderna drugs for both efficacy and profitability.
This is the climax of one story, but it’s just the first chapter for MRNA stock. As I said a year ago, you want to be there as this book is written.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn.