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Moderna – Not Your Hot-Tip-From-Your-Brother-In-Law Biotech Stock

Over the span of a couple of years, Moderna
sprang from a relatively obscure biotech company known by relatively few to global fame and fortune, given the spectacular success in the efficacy and distribution of its Covid-19 vaccine.

No doubt, helping save the planet had its rewards. Believe it or not, Moderna saw adjusted EPS soar to $28.29 in 2021, up from losses of $1.55 and $1.96 in 2019 and 2020. Revenue also exploded, jumping from $60 million in 2019 to $803 million in 2020 to $18.5 billion in 2021.

Incredibly, the stock rocketed more than 25-fold from $19 at the end of 2019 to as high as $480 in 2021, thanks to the sensational top- and bottom-line results, but the shares have since beat a hasty retreat, skidding more than 60% from their peak, even as revenue is expected to hit $21.9 billion this year with adjusted EPS eclipsing $26, not too shabby for a stock trading near $170.

Of course, demand for Covid-19 vaccines and booster shots has waned, with the summer typically seeing slower spread of the coronavirus. But the heat-wave much of the country is now experiencing will eventually give way to fall and winter, with folks spending much more time indoors, enabling the easier spread of viruses.

While I am not suggesting that Moderna will continue to reap massive rewards from Covid-19, I think fickle biotech investors are not giving the company enough credit for the science behind its coronavirus vaccine.

Moderna CEO Stephane Bancel recently said, “We have a unique mRNA platform, enabling the generation at unprecedented speed of innovative medicine. We have a strong team of 3,400 mission-driven employees. We have $18 billion of cash on our balance sheet and with a strong commercial momentum. We have no intention of slowing down our growth. We are putting our head down and doing the work. I have never been as excited about the future of Moderna. Now is not the time to slow down, patients are waiting for innovative medicine.”

The $18 billion cash hoard on the books ought to also allay one of biotech investors biggest concerns – dilution. Indeed, management has been a net buyer of shares over the past year (purchasing 9 million shares for $1.3 billion in the second quarter) while the board recently approved an additional buyback program worth another $3 billion.

To be sure, Moderna lacks the size and distribution capabilities possessed by several of its peers. Also, the challenges in producing revolutionary vaccines are numerous, as revenue from the Covid-19 drug is expected to fall dramatically in the coming years, even as sales in the second quarter came in 19% above Wall Street consensus estimates.

Nevertheless, the company has many pots on the stove, including a Monkeypox vaccine in a pre-clinical trial, with momentum in late-stage clinical trials for flu, RSV (Respiratory Syncytial Virus) and CMV (Cytomegalovirus) vaccinations. Goodwill and partnerships garnered throughout the pandemic should also prove valuable, and Covid-19 vaccine sales will not likely dry up overnight as many continue to seek annual boosters, and with efforts to develop combination shots underway.

Given its unique mRNA platform, one might think of Moderna as equal parts Health Care and Technology. Investors may find success should even a handful of the company’s trials make it through to become marketable disease-fighting systems. And, most importantly, the cash hoard and inexpensive current valuation provide plenty of comfort for those of us with a value-investing bias.