The unprecedented nature of the coronavirus outbreaks around the world has created a race among biotechs to develop a usable vaccine. What normally takes nearly a decade to accomplish has been compressed substantially to just a matter of months according to Moderna (NASDAQ:MRNA). MRNA stock has surged in recent weeks as the company touts the possibility of a viable coronavirus vaccine as early as next fall.
But is that really possible? The answer is yes, though it’s very unlikely. That’s not to take away from Moderna’s impressive mobilization on a coronavirus vaccine. But from an investment standpoint, choosing the right Covid-19 vaccine to back is akin to finding a needle in a haystack.
Moderna Leads the Pack
One of the reasons MRNA stock has emerged as a favorite among investors is the company’s head start on vaccine creation. Back in February before Covid-19 had become a pandemic, the biotech used the blueprints from a vaccine in development for another type of coronavirus. That gave Moderna an incredible jumping off point from which to develop a vaccine.
Moderna is using RNA technology to create its coronavirus vaccine and if successful, it will teach the body to develop specific viral proteins. Then, the immune system responds with its own antibodies to protect against the virus.
When you inject a person in the arm with Moderna’s vaccine, what you are really injecting is instructions for their body to make thousands of copies of proteins from the surface of the virus.
The Trouble with Moderna’s Vaccination
This type of technology, while incredibly promising, hasn’t seen much success in the vaccine world. There’s no approved RNA vaccine on the market right now for any disease, leading to questions as to whether there ever will be. So far, the technology appears safe. But some question whether it might create a dangerous immune response in some patients.
Not only that, the enormous scale of production has created an all-hands-on-deck approach to creating the vaccine. Moderna is tiny in comparison to industry giants like Johnson & Johnson (NYSE:JNJ), who have a much better shot at ramping up production to meet the world’s demand for a viable vaccine.
Moderna president Stephen Hoge says it will take cooperation unseen in the industry before to quickly manufacture a vaccine to distribute globally. Hoge stated:
There aren’t a lot of drugs in the industry that are filled at these scales, period. Even large pharma companies don’t usually operate on this kind of a scale. No one entity or one company [can do it alone].
Production isn’t the only limit for Moderna, though. The firm has had to put many of its other drug trials on hold to focus on the development of a Covid-19 vaccine. Again, Moderna’s commitment to the fight against coronavirus is to be applauded. But from an investment standpoint, it raises more red flags.
There’s no guarantee that any vaccine will be viable against coronavirus, let alone Moderna’s specific candidate. If the firm doesn’t come out the other end with a vaccine, pausing its other trials takes away from its near-term value.
The Bottom Line on MRNA Stock
As of right now, Moderna looks like a clear leader in the race to develop a coronavirus vaccine. The firm’s head start on creating a potential candidate makes it a unique play among biotechs working in this field. However, betting on Moderna, or any biotech working on coronavirus for that matter is risky.
It’s one thing to put your money on a huge, well-diversified company like Johnson & Johnson in hopes they are able to create a vaccine. The size and relative stability that JNJ stock represents gives the firm some cushion if its vaccine isn’t successful. The safety net that comes with Moderna is considerably smaller.
In today’s market with wild swings and an uncertain economy, investors should be looking toward stability, cash flow and staying power. Buying a stock based solely on its potential to deliver a vaccine in record time is risky at the best of times. With a recession casting a shadow over the future of the market, I’d avoid vaccine makers who’ve seen massive gains and stick instead to quality, cash-rich blue chips.
Laura Hoy has a Finance degree from Duquesne University and has been writing about financial markets for the past 8 years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.
