Is the worst over for Moderna (NASDAQ:MRNA) stock?
The Boston-based biopharmaceutical company had been riding high during the pandemic as its Covid-19 vaccine sold like hot cakes around the world. In the U.S. and Europe, sales of Moderna’s Covid-19 vaccine are second only to Pfizer’s (NYSE:PFE). This time last year, Moderna was the top performing stock in the S&P 500 Index, having gained 1,664% from $28.20 on March 20, 2020 at the market’s low point to $497.49 in mid-September of last year. However, since peaking at the end of last summer, MRNA stock has fallen 60% in the last six months, including a 35% decline so far this year.
Yet despite the steep selloff, MRNA stock appears to have bottomed at a 52-week low of $117.34 a share earlier this month. Since that trough, the stock has rallied 50% higher to its current level of $175.38 a share, leading some analysts to tentatively claim that the stock has turned around and is in the process of recovering, and that it remains undervalued even with the recent move higher.
Big Sales and Global Expansion
Moderna’s stock has fallen largely on expectations that sales for its Covid-19 vaccine will slow this year. As the pandemic becomes endemic, demand for inoculations against the virus should wane.
However, when delivering its most recent earnings report in February, Moderna forecast $19 billion in Covid-19 vaccine sales this year, which is $2 billion more than the $17 billion it had previously forecast. Moderna executives referred to the $19 billion in sales this year as a conservative estimate. They noted that it only reflects purchase agreements that have already been signed. More sales are possible as the year progresses, especially in the U.S. where the federal government hasn’t yet signed any advanced purchase agreements for 2022.
This year’s sales are expected to top 2021, when Moderna sold $17.7 billion worth of Covid-19 vaccines, delivering 807 million shots worldwide, bringing its revenue for all of last year to $18.5 billion. Additionally, Moderna has appealed to the U.S. Food and Drug Administration (FDA) to authorize a fourth shot of its Covid-19 vaccine as a booster dose for all adults. If approved, the new booster could lead to additional sales for Moderna, especially heading into the winter cold and flu season.
Additionally, Moderna is reinforcing its goal to expand globally and provide its vaccine against Covid-19 to all corners of the world. The company recently signed a Memorandum of Understanding (MOU) with the Government of Kenya to invest $500 million in a Covid-19 vaccine manufacturing plant in the East African nation.
CEO Compensation Concerns
It’s clear that sales of Moderna’s Covid-19 vaccine remain robust and that demand is likely to be strong for years to come. However, there are a few other issues that have given investors pause when it comes to the company.
One is the compensation and stock sales of Moderna CEO Stephane Bancel. It was reported in early March that Moderna’s board of directors had approved an massive $925 million exit package for Bancel. Even on Wall Street, news of Bancel’s golden parachute raised eyebrows given its largess.
Shortly afterwards, it was reported that Bancel sold $408 million in company stock since the onset of the pandemic. He sold on average roughly $3.6 million worth of stock sold each week. Moderna’s success in bringing a Covid-19 vaccine to market has made Bancel a billionaire. He now has an estimated net worth of $5.3 billion, comprised almost entirely of MRNA stock. While Moderna tried to explain Bancel’s massive sale of company stock as routine and procedural, the offloading by the company’s CEO raised questions about what is going on at the company with regards to compensation and internal operations.
A Weak Pipeline Softens MRNA Stock
A bigger concern for many analysts is that the Covid-19 vaccine is the only medication that Moderna has successfully commercialized and brought to market. The company, which was founded in 2010 and went public in 2018, only recorded its first profit last year. This first profit amounted to $12.2 billion as a result of $17.7 billion in Covid-19 vaccine sales.
Looking ahead, there are concerns about Moderna’s pipeline, which includes treatments for conditions ranging from herpes and cancer to shingles and HIV. All are at different stages of development but none are close to being approved by the FDA. Perhaps the drug candidate closest to commercialization is a flu vaccine modeled on the company’s Covid-19 shot.
Let’s See Where MRNA Stock Goes From Here
Moderna’s stock is moving in the right direction and it is encouraging to see its gains in recent weeks. It might turn out that the shares have indeed bottomed.
However, it’s still in the early days of the recovery process. Stock markets around the world remain fragile given the war in Ukraine, persistently high inflation, and shortages of products ranging from semiconductors to wheat. On top of the fickle macro-conditions, there remain unresolved questions about Moderna’s drug pipeline, as well as its senior leadership team.
Given all this, investors would be smart to sit on the sidelines until it becomes clear that Moderna’s future is secure. For the time being, MRNA stock is not a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
