At the start of the year, I opened a speculative position in Moderna (NASDAQ:MRNA). Moderna stock was about $110 per share.
Back then, I saw the shares as overvalued, but I had also spent two years praising its drug discovery system using messenger RNA. I figured on taking a short-term loss. However, I also believed the success of its Covid-19 vaccine, mRNA-1273, would give the company a financial base to capitalize on that mRNA system.
Yet, Moderna opened for trade on Jan. 27 at about $151. In a down market, it quickly rose to nearly $156. Now the stock is trading well above $160.
I’m no trading genius. I like to hold investments for at least three to five years. But Moderna has gotten caught up in the speculative frenzy over the Covid-19 vaccine fight as well as desperation for economic reopening.
So, is it time for me to sell MRNA stock?
Moderna Stock and Covid-19 Riches
There is no doubt there are riches in store for Moderna in its vaccine.
For one, President Joe Biden wants as many doses of the vaccine as the company can produce. As such, the drug maker could land among the top vaccine sellers in the industry this year, from what was basically a standing start. It hopes to produce 1 billion doses in 2021.
This is a company that had revenues of $60.2 million in 2019. Conversely — assuming it can execute on its plans — Moderna could rake in over $11 billion from mRNA-1273 this year. To do that, it’s signing as many manufacturing deals as possible.
But its market capitalization is now over $65 billion. How can that possibly be justified?
The answer lies in its pipeline. The company is now working on vaccines against HIV, the Nipah virus and the flu. Its pipeline also includes vaccines against cytomegalovirus, Zika, respiratory syncytial virus and more, as well as drugs against heart disease and cancer.
However, the total vaccine market was worth under $47 billion in 2019. Even if projections are right and it passes $100 billion in 2027, MRNA won’t have all of the market to itself. Still, Jefferies analyst Michael Yee says the company is tracking ahead of estimates. That’s promising for Moderna stock.
Growing Criticism
Moderna’s success has also put it in the firing line of critics, though. For example, the Lown Institute gave the company a 2020 “Shkreli Award,” named for convicted pharma fraud Martin Shkreli. That’s because its vaccine development costs were funded by the U.S. government, but its latest vaccine order still shows a price of $15 per dose.
The drug maker has responded, in part, by boosting its executive suite. Recently, Moderna has hired Corinne Le Goff from Amgen (NASDAQ:AMGN) as its chief commercial officer (CCO). Le Goff has called Moderna’s mRNA technology “game changing,” saying it “will undoubtedly disrupt the traditional biotechnology world.”
I agree. But the current price of Moderna stock still makes no sense to me. Tipranks has 16 analysts on the MRNA beat, calling it only a “moderate buy” with seven analysts saying buy, seven saying hold and two screaming that shareholders should sell. What’s more, the current price is above their average target of $148.62.
Bottom Line
There is an argument to be made that Moderna has changed the vaccine game.
AstraZeneca (NASDAQ:AZN) is having production delays. Johnson & Johnson (NYSE:JNJ) has yet to finish its Phase 3 trial. Meanwhile, MRNA is already lining up plans for “booster shots” against new variants of the novel coronavirus.
That means the Covid-19 gravy train may just be leaving the station. Moderna CEO Stéphane Bancel says that the novel coronavirus will likely be around “forever.” That would mean yearly booster shots as well as the sustained success of the company’s vaccine.
But still — $65 billion? Moderna stock’s current price is built on a white-hot market as well as on assumptions that competition could turn to dust. I like it for the long-term, but you don’t have a profit on anything until you sell and have the cash in your hand.
On the date of publication, Dana Blankenhorn held shares in MRNA.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.
