Summary
Moderna will be seeking regulatory approval for its young children's COVID-19 vaccines, ahead of Pfizer.
Assuming US FDA approval, there is upside potential to its projected revenue, given millions of children unvaccinated.
Moderna's two-dose regimen may be more popular compared to the three doses from Pfizer.
Based on its latest APA, Moderna also raised its FY2022 sales guidance by 10% to $21B.
Its pipeline is also highly promising, as its Personalized Cancer Vaccine cured two patients with head and neck cancer.
Anchiy/E+ via Getty Images
Investment Thesis
Based on CDC, Moderna's (NASDAQ:NASDAQ:MRNA) COVID-19 vaccine has been proven to offer the most effectivelong-term protection against hospitalization and serious illnesses. In addition, its children's COVID-19 vaccine could potentially be approved earlier than Pfizer's (PFE), given the lowOmicron variant protection offered by the latter. Assuming so, we may expect an excellent upwards rerating for its future revenues, given the majority of678M children below five yet vaccinated, other than those aged three and above vaccinated with theSinovac-CoronaVac and BBIBP-CorV.
MRNA May Receive Approval Earlier Than Pfizer
On 23 March 2022, MRNA announced that it would be seekingEmergency Use Authorization (EUA) from the US FDA and EU EMA, after reporting positive results from its COVID-19 vaccine clinical trials for young children aged five and below. Based on the data from the Phase 2/3 KidCOVE study, Spikevax induced a robust neutralizing antibody response for the age group at two doses of 25 µg, similar to the adults aged 18 to 25 years. At the same time, the company also reported minimal adverse effects, ranging from mild to moderate and often occurring after the second dose. In addition, MRNA observed no issues related to heart inflammations, such as myocarditis or pericarditis, during the clinical trials.
Most critically, MRNA reported that the vaccine could achieve an efficacy rate of 43.7% for children six months to two years and 37.5% for those aged two to under six years. Now, before we surmise that it is not enough, let's study the trials and conditions further. MRNA has highlighted that the Omicron variant had caused areduced vaccine efficacy, similarly observed in the adults and adolescents group, from 93% to 75.1%. PFE has also reported similar issues, with its vaccine efficacy falling to 65.5%, from its previous 91%. As a result, we will need to adjust our expectations in terms of vaccine efficacy for this analysis. It is also natural, given how the original vaccine is designed based on the Alpha variant, which is alreadyfour generations behind the globally dominant Omicron variant.
Both MRNA and PFE have also highlighted that their vaccines are less effective for those aged two to five, with MRNA reporting lower efficacy at 37.5% with a sufficient immune response, while PFE reported a total lack ofimmune response for those aged two to four. In contrast, MRNA released studies showing that both age groups report similar robust immune responses to the two-dose primary series in adults aged 18 to 25 years, offering better performance than PFE's young children vaccine. The study shows that Spikevax's COVID-19 neutralizing antibodies geometric mean ratio (GMR) are at a ratio of 1 (95% Cl: 0.9, 1.2), when comparing responses for children between two-six years old and young adults. In addition, the gap narrowed to a ratio of 1.3 (95% Cl: 1.1, 1.5), for those children under two to the young adults.
Naturally, we admit that these numbers are less impressive thanMRNA's trials for those aged six to twelve, with COVID-19 neutralizing antibodies GMR of 1.5 (95% Cl: 1.3, 1.8) comparing the age group to the young adults. Nevertheless, MRNA has indicated that the US FDA will most likely approve Spikevax for those aged six to twelve, with the company already initiating the submission process. In addition, we must also note that Spikevax for the age group six to twelve has been approved inAustralia,Canada, and theEU. As a result, we believe that MRNA has an excellent chance to be approved earlier or at least, at the same time as PFE ( sometime in April, based on theWall Street Journal article ) for those aged below five.
Given how MRNA is a two-dose regimen, and PFE's a three-dose regimen, we expect many countries, including the US, to order more of MRNA's vaccine for the younger children. Beyond the obvious cost-effectiveness, more parents and children obviously, will prefer lesser vaccine shots with potentially higher efficacies. In addition, more children are infected with COVID-19 during the peak of the Omicron variant, 5 fold compared to theDelta variant. We expect increased urgency for implementing young children's vaccination, as shown by theUS FDA's keenness to approve PFE's vaccine before results turned out to be disappointing. It is, of course, assuming that the regulators are convinced of MRNA's lowered vaccine efficacy for the Omicron variant.
Nonetheless, MRNA has also reported that studies are underway to administer booster shots and/or Omicron variant-specific vaccine candidate for the children group. As a result, we may potentially see MRNA emerge as a late winner for the COVID-19 vaccine race within the next few weeks.
MRNA's One-Hit-Wonder Vaccine Generated Sales Of $18.47B In FY2021
MRNA Revenue and Net Income
S&P Capital IQ
Due to the global success of its COVID-19 vaccine, Spikevax, MRNA reported blockbuster revenues of $18.47B in FY2021, representing YoY growth of 2300% from $803M in FY2020. Its Net Income margin is obviously also fat at 66.1% for the latest fiscal year. In FQ4'21, the company also reported excellent revenues of $7.21B, representing a 45% increase QoQ.
For FY2022, MRNA previouslyguided sales of $19B, with additional options ( probability-weighted ) of $3B. However, based on its latest Advance Purchase Agreements (APA), the companyraised the guidance to $21B, with the options at $0.5B. In addition, many countries such asthe US, the UK, Canada, Taiwan, Kuwait, and Switzerland have additional agreements for 2023 fulfillment. As a result, we may expect a potential upward rerating of MRNA's sales moving forward, despite the COVID-19 pandemic turning endemic.
MRNA Projected Revenue and Net Income
S&P Capital IQ
After a period of COVID-19 related sales, consensus estimates that MRNA will report revenue growth at a CAGR of 16.3% from FY2024 to FY2026. However, withMRNA andPFE recommending the annual COVID-19 booster shot, the future is uncertain, given how medical experts are pushing back, due to the lack of supportingscientific data. Nonetheless, governments inthe US andSingapore are already considering the second booster shot for the older population, potentially including those vulnerable and at higher job risk. Assuming that it is implemented, we may expect an upward rerating for MRNA's revenues moving forward, given how the company is also expanding its manufacturing capacity in multiple countries, includingKenya,Australia,South Korea, Singapore, Hong Kong, Taiwan, and Malaysia. In addition, with multiple clinical trials advancing to Phase 3, we may expect several regulatory approvals in the next two years, potentially slowing the decline of its COVID-19 sales.
MRNA Has A Promising Pipeline With Influenza And Cancer Application
MRNA Pipeline
Seeking Alpha
With the war chest of cash from the vaccines' sales at $6.8B in FQ4'21, MRNA is definitely not lacking in other pipelines. As of March 2022, the company has 44 programs in its pipeline, with two non-COVID-19 programs in Phase 3 and four in Phase 2. These include vaccines for Influenza, RSV, Cytomegalovirus (CMV), Zika, Personalized Cancer Vaccine (PCV), and VEGF-A Myocardial Ischemia (artery obstruction potentially leading to heart attacks). In addition, the company guided R&D and SG&A expenses of $4B in FY2022, an increase of 56.3% YoY from $2.55B, suggesting an aggressive ramp-up on its pipeline.
Others aside, given thehigh efficacy of its COVID-19 vaccine at 93%, compared to PFE at 91% and JNJ's at 68%, we may expect MRNA to produce a strong contender for the Influenza vaccine. Of course, this is assuming that its clinical phase 3 studies matched therobust immune response reported from the Phase 2 studies, which would then ensure its regulatory approval from the US FDA. Theglobal influenza vaccine market is expected to grow from $6.59B in 2021 to $10.73B in 2028 at a CAGR of 7.2%. As a result, the upside potential for MRNA is there, though we must also highlight that PFE and Novavax (NVAX) are developing their own Influenza vaccines too. NVAX may potentially be a more significant threat, given how its vaccine candidate reportedexcellent clinical trial results with an accelerated approval pathway with the US FDA. Otherwise, MRNA also had to contend with Sanofi (SNY), the largest manufacturer of influenza vaccines in the world, with FY2020's sales worth$2.9B for Influenza vaccines.
On the other hand, initial results from its Personalized Cancer Vaccine (PCV) are also promising, given how clinical studies have shown that two patients with head and neck cancers arecompletely cured of the tumors, with five showing tumor shrinkages. Given that the clinical trials have been expanded from the initial 10 patients to 40 patients with similar cancer, we may expect excellent news ahead.
With dozens ofmRNA-based clinical trials ongoing worldwide for cancer therapeutics now, we expect increased upside potential given how experts estimate 28.4M of global cancer casesworldwide by 2040, representing an increase of 47% from 2020. MRNA's stock may potentially hold its value long term, if the company can successfully tap into theglobal cancer therapeutics market, which is expected to grow from $265.1B in 2020 to $581.25B in 2030, at a CAGR of 8.2%. Only time will tell, since the PCV program is still in the Clinical Phase 2 stage now.
So, Is MRNA Stock A Buy**, Sell, or Hold?**
MRNA is currently trading at an EV/NTM Revenue of 2.5x, lower than its 3Y mean of 45.93x. Due to the departure of many COVID-19 investors, MRNA stock is currently trading at near-bottom prices of $178.73 ( as of 23 March 2022 ), a massive discount of 60% from its highs in August 2021. As a result, consensus estimates also rate MRNA stock as an attractive buy now, given the advancement of its pipeline.
However, we would also like to highlight that the normalization to these levels is expected, given how the world is entering an endemic phase while leaving single product COVID-19 stocks, such as MRNA and NVAX, behind. In addition, similar to all biotech companies, no one can guarantee the results of any clinical trials, seeing how PFE only reported a 53% of success rate in its Phase 2 clinical trials during its 2020Investor Day Presentation, compared to the industry average of 30%.$Moderna, Inc.(MRNA)$
Comments