The past 2 weeks after seeing Moderna rise to an all-time high of nearly $230 and drop down to its current trading price of around $200, I decided to conduct an analysis to see the potential outlook for the remainder of this year and how this company values. Based on the information found, I believe Moderna will present an upside following their ER in August and potentially have a run-up leading up to their ER. With vaccination numbers still low on a global scale, I think this company can still rake in large revenue figures for the remainder of this year and the beginning of 2022. Beyond the COVID-19 vaccine, this company still holds tremendous potential because of their diversified pipelines. Based on a company comparable valuation, Moderna presents a bull case of $226.70 a share- representing an approx. 12% upside.
Moderna (NASDAQ:MRNA) was founded in 2010 and more recently has become popular in news due to the COVID-19 pandemic which Moderna created a vaccine for. The company was founded on the basis that mRNA could be used to create a new class of medicines with significant potential to improve the lives of patients.
Messenger RNA (mRNA) transfers the information stored in our genes to the cellular machinery that makes all the proteins required for life. Our genes, which are stored in DNA contain the instructions to make the specific proteins and serves as a hard drive, storing these instructions until needed.
“In 2021 and 2022 Moderna is going to scale at a pace that has never happened before in biotech.” - Bancel
Strategy: Moderna outlined their priority for 2021 as being to maximize the impact of their COVID-19 vaccine, in terms of access and the value creation of their product.
Some of the company's strategic principles include:
Pipelines: Moderna has 27 development candidates across their 24 programs with 13 having entered the clinic. Aspects of their pipeline have been supported through strategic alliances with AstraZeneca, Merck, Vertex Pharmaceuticals, and government-sponsored organizations and private foundations such as the National Institutes of Health (NIH), and the Bill & Melinda Gates Foundation.
Cash: Since their report for FY2020, cash and cash equivalents increased by $2,818M or 107.4% attributable to the increased product sales of their COVID-19 vaccine. Their increased cash position will be sufficient in funding their operations through the next 12 months.
Expenses: Total operating expenses FY2020 were $671M- just 34.6% of total revenue. Given the cash position, the company should have significant cash to execute its pipelines even if revenues remain low for the next few years.
Product Revenue: For the 3 months ended March 31 this year, Moderna had product sales of $1,733M (78.4% from the United States and remaining is rest of the world). Since their 2020 10K, they have had an increase of $3.7B totalling $7.5B in deferred revenue related to customer deposits. I believe their product revenue will continue to increase by 2021 as the demand continues to increase in a bid to vaccinate the world population. With only 2.45B doses of the vaccine administered (not just Moderna but in total all COVID-19 vaccines), that number is only enough to fully vaccinate 16.1% of the global population. This is a sure saying that while they do have a large revenue deferred, we can expect numbers to increase as countries continue to order more to compensate for growing demand across the population.
Grant Revenue: For 2021, Moderna has a remaining $194M in grant majority from their agreement with the Defense Advanced Research Projects Agency (DARPA). DARPA awarded Moderna up to $483M in April 2020 to accelerate its development of the COVID-19 vaccine.
Besides the COVID-19 vaccine, Moderna holds several other pipelines currently in development to create mRNA medicines for a wide range of diseases and conditions.
With several pipelines underway, if Moderna can successfully bring to market another vaccine, the company can bring in more product revenues. In the case that a trial fails, Moderna still has a strong cash position to sustain themselves and their operations further in the future to continue developing their research.
“Moderna has one of the world's largest and most innovative vaccine development pipelines” … “We believe we have a unique opportunity to develop new vaccines against viruses hurting people around the world, at a pace that is radically different from what the industry has previously done” - company CEO Stéphane Bancel
Moderna's business is highly dependent on the clinical advancements of its programs and modalities. Delay or failure to advance programs or modalities could negatively impact their business. Safety or efficacy problems, developmental delays, regulatory issues or other platforms may significantly harm the business by incurring additional costs or could cause Moderna to abandon their clinical trial which would decline the company value
Moderna has a limited history of recognized revenue from product sales and may not be able to achieve or maintain long-term sustained profitability. While Moderna's ability to generate revenue relies on the development and approval necessary to commercialize, there are many other factors that can impede the company's product sales such as:
Using a comparative analysis model, I found 4 companies that are of competition to Moderna both in the COVID-19 space and pharmaceutical. These companies are BioNTech (NASDAQ: BNTX), Merck & Co (NYSE:MRK), Pfizer (NYSE:PFE), and Gilead Sciences (NASDAQ:GILD).
Using analyst estimates of 2021 revenue numbers, I calculated EV/SALES for 2021 and used the values to come up with a bear, base and bull case using the low, mean, and high values respectively. For the base case, I arrived at a fair value of $195.99 share and $226.70 a share for the bull case.
Analyst Coverage - A report from CNN details a forecast of a median price of $190.00 and a high of $246. I believe that the share price of $246 is not far off as their next ER comes out on August 11, which will detail more realized revenues after the ramp-up in vaccine rollouts across the world. This value similarly aligns with my valuation using EV/SALES that gave me a bull case of $226.70 a share.
Moderna has enormous potential for growth here not just in their success in the development and rollout of their COVID-19 vaccine, but also in their other pipelines if successful. With mRNA technology being relatively new in the biotechnology and pharmaceutical space, Moderna presents a unique business model based on the mRNA research that separates them from other companies. Moderna is not just a COVID-19 vaccine company but rather they're a true pharmaceutical giant in the making that will compete with the likes of Pfizer, Merck, etc.
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