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Moderna, Inc. (NASDAQ:MRNA) is a great long-term biotech to own. That’s because it has many programs in its pipeline which use its messenger RNA ((mRNA)) technology. However, the main focus of the biotech so far deals with the FDA approval of its Spikevax vaccine for Covid-19.
You would think that as Covid-19 numbers are starting to drop in several countries around the world, therefore, sales of the vaccine should fall as well. That may ultimately happen, but, for the time being that will not be the case. That’s because Moderna believes that Covid-19 is moving towards an endemic phase that will still require the use of Spikevax and other vaccines.
This not just some educated guess. Moderna is already anticipating large purchase orders in 2022 and beyond into 2023 for Spikevax. I still think it will pull in billions of dollars over the next few years. From there, it just depends on what happens with Covid-19 in terms of variants and how it spreads. Moderna is not just reliant on Spikevax, though, it has several other programs. Matter of fact, it has 44 programs in its pipeline. Most notable ones would be an influenza vaccine and an HIV vaccine.
Based on the proven mRNA technology, plus continued growing sales with Spikevax, I believe Moderna remains a great long-term buy.
Spikevax Sales Expected To Grow Not Decrease
It is fair enough to assume that Covid-19 is not as prevalent as it was a few years ago. One can argue that the pandemic is starting to wane, but the future is hard to predict. Still Moderna believes that Covid-19 will be in an endemic phase. Meaning, a virus that will remain and everyone will just have to live with.
Of course, another aspect to consider is that it highly depends on what happens with variants and other mutations that take place. Although, for the time, being the variants are not as deadly as when Covid-19 first hit. Still, testing sites for Covid-19 are starting to shut down. There is a shift to moving to home tests as well, which is another factor.
I think that there is a drop off in terms of Covid-19, which is a great thing to see. This leads me to the point on why Moderna will still obtain substantial amounts of sales for Spikevax going forward. Consider that it produced $17.7 billion in full-year 2021 sales of its Covid-19 vaccine. This was because of commercial sales for Spikevax. That’s great, but shouldn’t sales start to drop off? That’s what many would believe, however, the company is equipped to increase sales for 2022 and 2023. This is proven in the large purchase orders that are expected.
The first example would be the $19 billion in advanced purchase agreements that was increased for 2022. In addition, there are about $3 billion in options for any potential updated Covid-19 vaccine booster candidates. This is what I noted above about the endemic phase expected in 2022. Moderna believes that sales of Spikevax should see a rise in the 2nd half of 2022 because of this.
A second example for why sales for Spikevax should increase in the coming years, would be ongoing discussions for its use beyond 2022. Moderna has already received firm orders for delivery of its vaccine in 2023 from the following:
- United Kingdom
- Taiwan
- Canada
- Kuwait
It is also in active discussions for additional Spikevax orders in 2023 as well. It remains to be seen how Covid-19 plays out over the next few years. One thing which remains is that Moderna is not a risky asset, because it already has established firm purchase orders for both 2022 and 2023. Not only that, but it doesn’t look like Covid-19 will ever go away.
Influenza And HIV Vaccine Expansions Possible
The good thing about Spikevax is that it will produce sales over the next few years, with good certainty for 2022 and 2023 because of the advanced firm purchase orders from several territories. There is an opportunity to expand the pipeline towards targeting other large multi-billion dollar markets.
The first of these involves several shots on goal for an influenza vaccine. Three vaccine candidates being advanced from Moderna which hold huge promise for prevention of influenza are:
- mRNA-1010
- mRNA-1020
- mRNA-1030
Okay, but aren’t there several influenza vaccines? That’s true, but where the huge potential lies here is to improve upon efficacy of currently approved seasonal influenza vaccines. In other words, it is taking a different approach to broaden the possible immunity. It hopes to accomplish this by targeting two main glycoproteins known as hemagglutinin and neuraminidase.
Why are these glycoproteins so special? They are glycoproteins found on the surface of influenza cells, which are responsible for attaching and releasing the virus into the cell. If these glycoproteins can be targeted properly, then Moderna can potentially do a better job of influenza prevention. The goal here is not to be a me-too influenza vaccine candidate, but one that can potentially achieve broader immunity compared to already approved ones. The company just recently announced that it dosed the first participants for the phase 1/2 study using either mRNA-1020 or mRNA-1030 as seasonal influenza vaccine candidates. Two other advantages that might be at play for Moderna are the ability to manufacture rapidly and targeting multiple strains. In other words, if a new variant comes to light for influenza, it will be able to scale new vaccines rapidly for such a predominant strain.
Another aspect to consider is Moderna’s potential to advance new preventative HIV vaccines. Again, lots of competition exists here, but the goal is to take a new approach with its mRNA technology. How will it accomplish this? Well, with the use of either mRNA-1574 or mRNA-1644.
As far as mRNA-1574 goes, it is being developed as an envelope timer. What an envelope trimer means is the combination of 3 molecules of the same substance. In other words, multiple mRNA encoded native-like HIV trimers. It is first important to see if the use of the HIV-trimer mRNA-1574 is safe in healthy volunteers. As such, Moderna initiated a phase 1 open-label study, which will recruit a total of 100 HIV-negative adults between the ages of 18 to 55, healthy volunteers to test the safety and immunogenicity of mRNA-1574.
The first patient for this phase 1 study was dosed about a month ago. Hopefully, the envelope trimer mRNA will not only be safe/tolerable, but also deliver on eliciting autologous neutralizing antibodies. Potential beyond HIV and influenza vaccines exists as well, where Moderna has already initiated studies for several other viruses. Other viruses it is going after are cytomegalovirus (CMV) with mRNA-1647, Epstein-Barr Virus (EBV) with mRNA-1189, and several others. I
n total, Moderna has 44 programs in its pipeline that it is advancing towards success with. Other areas being advanced include genetic diseases, autoimmune disorders, and oncology as well.
Financials
According to the 10-K SEC Filing, Moderna had cash, cash equivalents, and investments of $17.6 billion as of December 31, 2021. This is a biotech which has greatly benefited with Spikevax sales. As such, it is not susceptible for a great need to raise cash compared to other small-cap bios. This is evidenced by the fact that it generated $17.7 billion in full-year 2021 sales of its Covid-19 vaccine. Not only that, but sales are expected to rise in 2022. There are already firm commitments for firm purchase orders to 2023 for Spikevax. It has plenty of cash.
Having said that, it is looking for M&A transactions and accelerated R&D investments. Not only that, but returning excess capital to shareholders with share repurchases.
Risks To Business
There are several risks that investors should be aware of when investing in Moderna. Even though it seems like Covid-19 will move to an endemic phase, where the virus will remain, Spikevax is not the only Covid-19 vaccine available.
Pfizer (PFE) and BioNTech (BNTX) have been producing substantial sales of their Covid-19 vaccine known as Comirnaty. Matter of fact, sales of Comirnaty have exceeded Spikevax. Pfizer and BioNTech brought in $36.7 billion in sales of their Covid-19 vaccine in 2021.
It is projected that this vaccine will bring in roughly $32 billion in 2022. On the other hand, Moderna is projecting 2022 Spikevax sales of about $22 billion. Then, you may possibly have other players entering the space. For instance, Novavax (NVAX) filed an EUA with the FDA for NVX-CoV2373 as a vaccine for Covid-19. Although, it remains unclear whether or not regulators will approve it for the time being.
The potential competition doesn’t even include several therapeutics that exist for treatment of Covid-19. An example of this would be Regeneron Pharmaceuticals (REGN) which generated $2.3 billion in sales of its Covid-19 antibody treatment known as REGEN-COV. Antibody therapies are not generating as much as vaccines are, but still producing billion in sales nonetheless. There are many other competitors which are in the Covid-19 space, which is why this remains a huge risk for Moderna.
Another major risk to be aware of is that there has been a lawsuit filed against the company for patent infringement by Arbutus Biopharma (ABUS) and Genevant. Moderna attempted to invalidate patents at first many years ago. It has sought the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) to invalidate Arbutus’ patents then and again in Federal Appeals court where it lost yet again.
It remains to be seen how this will play out in court now, but I believe it will ultimately come down to a settlement agreement with a certain percentage. I believe this will be the case, because there are a few aspects to consider here. The first aspect is that it failed to have the patents invalidated with the PTAB and then again in Federal Appeals Court. I don’t think it will attempt to think it can win a third time in court, already having failed to invalidate Arbutus’ patents twice. Secondly, it is producing billions of dollars in revenues for Spikevax as noted above. I don’t believe it will be willing to gamble losing in Federal court, putting those billions of dollars on the line.
For these reasons, I believe there will ultimately be a settlement agreement. Had Moderna actually won both the PTAB appeal and Federal appeals court for the patents, then I would think it wouldn’t have to worry about a lawsuit. However, that wasn’t the case for Moderna.
Conclusion
I believe that Moderna is a great long-term biotech to own. It expects to produce roughly $22 billion in Spikevax sales in 2022. Even if ultimately it does settle with Arbutus Biopharma for patent infringement, it could still retain a pretty good portion of percentage of sales for its Covid-19 vaccine.
I can’t claim to know a number yet, because it depends on what happens in Federal court. However, I do think something will be achieved in terms of an agreement when all is said and done. The good news is that Moderna has two other major shots on goal to go after, for which I have stated above. These are several shots on goal for an influenza vaccine candidate (three shots on goal) and then a few other shots on goal for an HIV vaccine (two shots on goal).
Even then, it boasts about 44 total programs in its pipeline. With the ability to see an increase of sales for Spikevax, plus many other programs in its pipeline, these are the reasons why I believe Moderna is a great long-term buy. It’s important to note that a settlement or loss in court for patents for Spikevax could see a sharp temporary decline in the stock. It all depends how it plays out over the next few years in court. Regardless, Moderna has been producing substantial amounts of sales for Spikevax and should continue to do so in the coming years.
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