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Investment Overview
Moderna, Inc. (NASDAQ:MRNA) held an investor event today to review its vaccines program and provide key business updates. Before we dive into that, let’s quickly review recent performance.
The company announced its Q4 and full year 2023 earnings and business updates on February 22nd. Moderna described 2023 as a “difficult year of transition to a seasonal endemic market,” and that is hardly surprising, as, in 2022, its SpikeVax COVID vaccine earned $18.4bn of revenues, and net income came to $8.4bn.
Moderna earned $6.8bn of revenues in 2023, but made a net loss of $(4.7bn), or $(12.33) per share, whilst retaining $13.3bn of cash and investments. Cost of sales expenses of $4.7bn and R&D expenses of $4.85bn accounted for the losses, as well as a tax bill of $2.1bn, and ~$1.6bn of inventory write down associated with dealings with Gavi, the vaccine alliance.
In 2024, Moderna is guiding for ~$4bn of product sales, $4.5bn of R&D expenses, SG&A of ~$1.3bn, and capital expenditures of ~$0.9bn, leaving ~$9bn of cash and investment remaining at the end of the year.
In short, the end of the pandemic, and mass purchases of Spikevax by governments and alliances globally, affected Moderna perhaps as severely as any company, and its share price, which had traded as high as $450 per share in mid-to-late 2021, valuing the company at a market cap of ~$150bn, sank from ~$195 per share at the beginning of 2023, hit lows of ~$70 in November last year.
Current traded price of $109 values the company at $42bn.
Moderna Vaccine Day Review – Latent Vaccines
With the value of an endemic COVID vaccine market remaining highly uncertain, it’s clear that Moderna needed to develop more commercial assets outside of SARS-Cov-2, and in fairness, it has always insisted that it is “more than just a COVID vaccine company.”
With that said, the initial excitement generated by Moderna’s ground-breaking messenger-RNA programming approach, which teaches cells to manufacture and then recognize proteins associated with, e.g., the SARS-Cov-2 virus, in order to build defenses against invading pathogens in advance, has faded somewhat, and Moderna is still waiting for a second commercial approval outside of its various iterations of SpikeVax.
Necessity often drives innovation, however, and Moderna revealed today that it has 28 vaccines in development, addressing “respiratory and latent and other pathogens”. The most prominent of these are cytomegalovirus (“CMV”), Epstein-Barr virus (“EBV”), herpes simplex virus (“HSV”), Varicella (chickenpox) (“VZV”) and norovirus.
The investor day began by discussing the latent vaccine opportunity. Arguably, these types of vaccine are a harder sell than SpikeVax, which answered an urgent and considerable unmet need, with infections and deaths spiraling out of control during the pandemic period.
There are no approved vaccines for CMV, or EBV, largely because they assimilate inside people cells, often remaining there for their entire lives, without causing any outward symptoms, unlike viruses such as flu or COVID, which have immediate and demonstrable effects on a person’s health.
Nevertheless, Moderna argues that cytomegalovirus is a leading infectious cause of birth defects – with ~12k – 20k congenital CMV cases each year in the U.S., and that 160k deaths globally were attributed to EBV related malignancies in 2017, and that it is potentially a major driver of the disease multiple sclerosis (“MS”). HSV can reactivate and cause genital herpes, while VZV can cause “painful and itchy lesions.”
Beginning with CMV, Moderna says its CMV vaccine, named MRNA-1647, combines 6 mRNAs, five encoding the pentameter, and the sixth encoding the gB antigen, which is a unique feature of its approach that other types of vaccine may struggle to match.
A Phase 3 CMV study is fully enrolled, across 290 sites globally, and the “primary efficacy analysis will be triggered based on accrual of primary infection cases,” as was the case with SpikeVax.
50 cases have been observed to date, and efficacy will be evaluated when the number reaches 81, which could occur this year. An adolescent vaccine, and vaccines for those undergoing transplants are considered potential expansion opportunities.
After a brief diversion to discuss how Moderna is leveraging AI to inform dosing decisions, and other factors, the investor day turned to EBV. Apparently, EBV “infects the vast majority of the world population by adulthood” – presumably a decent sized total addressable market (“TAM”), then – and those with the virus may have a 32x increased risk of going on to develop MS, while the risk of developing cancer may also be increased.
Moderna’s vaccine mRNA-1189 encodes for four antigens, apparently, and data were shared from Part A of a Phase 1 study, involving 272 EBV seronegative and seropositive healthy adults, receiving a shot at 0, 2 and 6 months.
The vaccine was “generally well tolerated” and binding antibody titers elicited by the vaccine were “numerically higher than those induced by natural infection” across all four antigens. EBC viral DNA was lower in mRNA-1189 treated patients than placebo. In short, Moderna seems confident its vaccine works, and for good measure, it is also running a Phase 1 study of a second EBV vaccine, mRNA-1195.
It was a similar story for the HSV vaccine – HSV apparently affects ~13% of adults globally, a Phase 1/2 study is fully enrolled, with 300 patients followed for 12m after study injection – although no study results were shared.
Data was shared from a shingles / VZV vaccine Phase 1/2 study, involving 500 “medically stable” adults, and Moderna suggested mRNA-1468 achieved higher CD4- T-cell responses than currently approved shingrix, marketed and sold by Pharma giant GSK (GSK) and earning revenues of ~$3bn in 2022, up from ~$1.7bn in the prior year. Moderna says it advancing towards a pivotal Phase 3 study in this indication.
Moderna Vaccine Day Review – Enteric & Respiratory Vaccines
Norovirus apparently causes ~20m infections per annum in the U.S., and ~685m globally, and Moderna presented fresh data from its Phase 1 study of mRNA-1403 and mRNA-1405 today, from 664 healthy volunteers.
Due to its broad variant variability, Norovirus is a tricky virus to vaccinate against, however Moderna reported “robust antibody titers” against vaccine-matched norovirus strains, with no safety concerns observed, and a good reactogenicity profile.
Next up was the next generation COVID-19 vaccine, which may one day enable combination vaccines (alongside influenza, for example), which will be made available in pre-filled syringes, a potential competitive advantage against vaccines that require complex stages of preparation in advance of administration.
Moderna shared a good deal of data, suggesting a superior safety and efficacy profile to previous versions of SpikeVax, and given Moderna enjoyed >40% market share in 2023 in the US, should the endemic, private COVID market take off in 2024 – and the company argues it has a better chance of doing so this year as last years launch was delayed by late identification of target strains – Moderna looks well positioned to take advantage.
Meanwhile, an RSV vaccine is closest to being to the next approved Moderna vaccine outside of COVID, with a Phase 3 study completed and marketing authorization requests submitted globally. Moderna is playing catchup in this market, as GSK’s Arexvy and Pfizer’s Abrysvo have already secured approval, with the former earning ~$1.2bn of revenues in its first year on the market, and the latter ~$890m.
Moderna’s pivotal study of mRNA-1345 involved 37k adults >60 years of age, and met primary and key secondary endpoints, with efficacy of 83.7% against RSV lower respiratory tract disease, and good durability. Moderna, with its sales, marketing, manufacturing and distribution infrastructure already highly evolved, ought to be a genuine contender for high market share in this market.
There is also the enticing prospect of a combo vaccine of RSV alongside influenza, that studies show offers protection as strong as individual shots, with a comparable safety profile. There is additionally a Phase 3 study ongoing of a COVID-19 / flu vaccine – mRNA-1010 and mRNA-1283 combined – data is expected this year.
Independently, it seems Moderna could file for approval of a flu vaccine, mRNA-1010 this year, after “immunogenicity criteria were met for all 8 co-primary endpoints for GMT ratio and seroconversion rates” in a pivotal study.
Moderna Vaccine Day Review – Commercial Opportunity
It fell to MD Bancel to discuss the commercial opportunity, and the company’s front man discussed his view that keeping healthy patients healthy is a key priority for the company. As mentioned, the company may find this a tougher sell when it comes to health insurers agreeing to reimburse for its vaccines – if it ain’t broke, don’t fix it – although some of the evidence around the damage latent vaccines can cause struck me as quite compelling.
Bancel suggested the respiratory vaccine market was a $27bn+ opportunity, stressing the risks of long-COVID, for example, and the need to improve public health. The company views RSV as a $10bn market opportunity, although, as mentioned, it is already playing catch up against two of the most experienced vaccine companies globally in Pfizer and GSK. The pre-filled syringe advantage could be significant, however.
Flu is regarded by Moderna as a static market that could be expanded with “next-generation,” premium vaccines, with combo vaccines also adding a new dynamic to the overall vaccine field, and potentially giving Moderna a first-mover advantage in a potentially explosive market.
CMV is forecast by Moderna to be a $2bn – $5bn market, EBV a $1bn – $1.5bn market (while MS prevention / treatment could be a $10bn market), VZV a $5-$6bn annual market, and Norovirus, a $3 – $6bn market.
In total Moderna sees a $27bn plus opportunity in respiratory vaccines, and $25bn plus opportunity in latent / other vaccines.
Manufacturing chief Jerh Collins discussed the scaleabilty of Moderna’s technology, and its global manufacturing presence in, e.g., the United Kingdom, Australia, Canada, and Norwood, U.S., and the ability to reduce cost of sales margin as sales grow, from ~35% at $4bn sales, to ~20% at $10bn sales.
Finally, Chief Financial Officer Jamey Mock suggested respiratory R&D would continue to be where the company spent most money, with oncology and rare disease also areas of focus outside of vaccines. The CFO noted that share buybacks had been suspended for the time being, and Moderna pays no dividend.
Concluding Thoughts – After Today’s R&D Day Would I Buy, Sell, Or Hold Moderna Stock
The key question that arises after today’s presentation is whether Moderna can establish itself as one of the world’s premier supplier of vaccine products outside of COVID, a market that seems destined to fall well below $10bn per annum over time.
The near-term RSV approval ought to represent a major positive for Moderna, and result in a second “blockbuster” (>$1bn per annum) product – if that does not prove to be the case, the company and its share price are poised for a substantial fall.
Likewise, Moderna must show it can compete in traditional markets such as flu, before testing the water in latent vaccines. Based on data shared today, I can’t see many reasons why it can’t achieve these goals, since it has plenty of cash, strong infrastructure, and a good product, seemingly.
Elsewhere, arguably you could make the case that Moderna is a little long on promise, and a little short on delivery. It seems surprising – to me at least – that many projects are barely out of Phase 1/2 studies, but that may be unfair, after all, product launches in flu, RSV, and CMV would represent excellent progress.
Besides winning the development and distribution races, Moderna also needs to win the battle for hearts and the best minds in the business, and it struck me that this could be potentially challenging for a company trying to challenge established market incumbents such as GSK, Merck (MRK), Pfizer (PFE), Sanofi (SNY) and AstraZeneca (AZN).
Arguably, Moderna has lost some of the sheen it had during the pandemic years when its vaccine was heralded as major breakthrough and mRNA technology as the future.
This undoubtedly powerful technology has largely failed to break through in other disease areas, however, an exciting partnership with Merck in melanoma treatment aside, and the company seems to shed senior management on a fairly regular basis.
Based on some of the presentations today, enthusiasm around the promise of some projects does not necessarily seem to be shared by everybody at the company – perhaps Moderna could have shown itself to be a champion of equality by, for example, not listing all of its male presenter before the female ones – Jacqueline Miller, M.D, Sumana Chandramouli, PhD., and Christy Shaw, PhD. on its webcast page.
Nevertheless, Moderna emerged after today’s vaccine day as essentially a pretty solid vaccine play – substantially ahead of almost any other small to medium, sized player, with funding most biotechs could only dream about, but with question marks hanging over its ability to challenge the globally significant players.
With a current market cap of $40bn, I would say Moderna needs to drive close to $10bn of revenues by year end 2025 if it wants to maintain this valuation, and that ought to be achievable, based on RSV, COVID, and Flu. The latent opportunity is exciting, although I wonder why the likes of Merck, Sanofi etc. have not attempted to target these markets – perhaps they did the due diligence and realized the appetite wasn’t there. Its unclear what bars for approval the FDA may set, and if Moderna will be able to meet them, although I suspect they might.
As mentioned, while, in my view, some of the sheen around Moderna has vanished, I am tempted to believe it is still there, and that the company can still make the most of the unique properties of mRNA technology and “keep healthy humans healthy,” whilst also, perhaps, helping some sick people get healthy also.
When I look at the valuations of four companies that drove between $9 – $15bn of revenues in 2023 – Regeneron (REGN), Vertex (VRTX), Biogen (BIIB), and Viatris (VTRS), their respective market caps are $108bn, $108bn, $31.5bn, and $14bn. As such, I’d say Moderna’s valuation hangs in the balance, with some momentous data and approval catalysts in play over the next 18 months.
I think the company may have done enough to join the likes of Vertex and Regeneron (REGN), and I broadly support the rationale behind developing vaccines for latent viruses, hence I can see the company’s valuation growing, but equally, acknowledging the risks of study setbacks, and a focus that is single-mindedly driven by a single technology, I can see the bear case for shares also.
The market’s lukewarm reaction to today’s event – Moderna, Inc. stock is +3% at the time of writing – ultimately makes the “hold” case better than I could, and I can only concur that I don’t feel inclined to buy Moderna stock at the present time, but if I were a shareholder, I’d be reluctant to sell.
