Moderna: searching for a second act after Covid

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Few companies have enjoyed the kind of extraordinary rise in fortunes like Moderna. The US biotech company, founded in 2010, never made a profit in the first decade of its existence. Then came the pandemic. The mRNA technology pioneer was among the first to develop a Covid-19 vaccine. Sales have shot up from just $60mn in 2019 to $19.2bn last year. It made over $20.5bn in profits between 2021 and 2022. 

But demand for Covid shots has fallen dramatically. Vaccine sales are expected to more than halve this year. The stock, worth nearly $500 at its peak in August 2021, currently trades at just $111. The pressure is on for Moderna to find a second act.

Progress made on developing a mRNA-based flu shot is a start. Moderna said on Wednesday its flu vaccine elicited a better immune response than existing jabs in a late-stage trial. This could potentially pave the way for it to enter the $6bn-a-year market.

Existing flu shots have efficacy rates of around 50 per cent. A flu shot that can improve on that would have an edge, particularly among the elderly. The problem is Moderna did not give out much data on this front. It is too soon to get excited yet. 

Similar caution needs to be applied to Moderna’s other forecasts. It expects to add $10bn-$15bn in annual sales after launching new products in oncology, rare and latent diseases by 2028. This is in addition to the previously announced $8bn-$15bn of expected sales from respiratory vaccines in 2027. That is a lot of assumptions and a long time for investors to wait.

Until then, falling revenue and heavy investments in research and development — to the tune of $25bn between 2024 to 2028 — mean Moderna will remain lossmaking for at least the next three years. Despite its recent share price slump, the stock is hardly a bargain. It trades on around 4 times revenue, more than France’s Sanofi and GSK in the UK. Both of these are profitable. Moderna needs to show more proof that it is not a one trick pony.