As Competition Rises, the Bull Case for Moderna Stock Is Beginning to Fade

Biotech giant Moderna (NASDAQ:MRNA) was a key player in the Covid-19 race, and MRNA stock will be witnessing a massive surge in revenues this year.

The Moderna (MRNA) logo surrounded by syringes, pills and disposable face masks.
Source: Ascannio / Shutterstock.com

According to estimates, frontrunners in the race, Pfizer (NYSE:PFE), BioNTech (NASDAQ:BNTX), and Moderna will generate roughly $32 billion from the vaccine. Despite the news though, MRNA stock is down 28.4% since last month.

There is enough reason to believe that the upside from its vaccine win is priced in. Revenues are expected to gradually drop in the coming years, which is down to the intense competition in the field.

Insider sales seem to be weighing in on MRNA stock at this time. The restrictions imposed on executives and board members were removed in early December.

The stock now stands at $109, approximately 36% lower than its value on Dec.8. Hence, MRNA stock faces multiple growth challenges as we welcome the new year.

Vaccine Sales Will Slow Down Over Time

Pfizer currently has the first-mover advantage, which means it will be making a few billion dollars in additional sales. Moderna will be making an estimated $13.2 billion, from vaccine sales this year.

It stands to make an additional $10 billion to $15 billion in added revenue in 2021. Considering it only made $60 million in revenues in 2019, these numbers are dumbfounding. The massive increase in revenues should be more than enough in helping it turn a profit.

However, 2022, will be more challenging, as the Covid-19 vaccine market will fall by at least 40%. Demand depends upon whether Covid 19 turns out to a seasonal problem or a long-term concern.

There should be a spike in demand after every three years, assuming the need for booster shots. Moreover, the competition is also stiff in the industry, which will further erode margins and revenue possibilities.

Growing Competition

Many believed that Moderna, Pfizer, and BioNTech would be the three juggernauts of the Covid-19 vaccine market. However, with the approval of newer vaccine candidates, their shares are likely to shrink in the not-so-distant future.

Companies such as Novavax (NASDAQ:NVAX), Johnson & Johnson (NYSE:JNJ), and AstraZeneca (NYSE:AZN) are all on the heels of the competition. The recent approval of AstraZeneca’s vaccine represents a turning point in the race.

The vaccine prevents symptoms by only 70% compared to the frontrunners at 95%.  However, it was given the green light by several different countries which opens the door for more entrants in the future.

In particular, AstraZeneca’s vaccine is cheaper, can be stored at normal refrigerator temperatures, and is much easier to transport. Hence, its approval will put competitive pressures on Moderna and its peers.

Another element of the virus that has surfaced is its mutative ability. A new variant of the virus was detected in the UK, which raises questions about the existing vaccines’ efficacy in the market. Therefore, newly approved vaccines might get the edge over those approved first.

Most countries won’t be relying on a single vaccine in combatting the virus either way.

Bottom Line on MRNA Stock

Moderna is will make it big with its Covid 19 vaccine candidate this year. However, with the growing competition, the mutative ability, and the uncertainty with the virus, things will be challenging.

It appears that the upside from its Covid-19 gains is priced in and investors are looking at the challenges ahead. Moderna will have to diversify its product mix to stay relevant in the long term. Therefore, I’m bearish on MRNA stock’s long term prospects.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article


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