FINANCE TODAY | ISSUE NO.27
MODERNA TAKES COMMAND IN THE COVID-19 BATTLE
As we experience the rollout and administration of the COVID-19 vaccine, it is somewhat unsurprising that the vaccine frontrunner Moderna Inc. (NASDAQ: MRNA) has seen a rally to begin the year. Falling slightly behind Pfizer (NYSE: PFE) in the initial development stages, over the past year, Moderna has been able to instill confidence in the public regarding its vaccine and has become the popular choice on the global stage. Its share price increased by 60.51% year-to-date (Feb. 10) and now hovers near US$180 per share. For comparison, Johnson & Johnson (NYSE: JNJ) has only experienced capital gains of 6.59% year-to-date, and Pfizer has seen a loss of 5.62%. Moderna has climbed to surpass Johnson & Johnson while far outperforming Pfizer, which at one point was the name that was almost synonymous with the COVID-19 vaccine.
Part of this rally should be credited to the sheer amount of demand for the Moderna vaccine. In late January, the company said it was in talks with the U.S. government to sell 100 million more doses of its vaccine (Team, 2021). The Canadian government has secured 40 million doses of the Moderna vaccine for its 2021 administration plan. Other international events have worked in the company’s favour as well to boost demand for their vaccine. For instance, South Africa has halted the rollout of rival vaccine maker AstraZeneca’s (NASDAQ: AZN) COVID-19 vaccine as data from a clinical trial showed that their vaccine only provided minimal protection against the COVID-19 strain that is rapidly spreading across their country (Tenebruso, 2021). Moderna claims it can effectively combat this strain in South Africa, which is possible since their mRNA technology would provide them with the ability to alter their vaccine quickly.
Unrelated to the COVID-19 vaccine, Moderna has also made announcements that hint at a strong future for the company. The drug developer recently announced plans to expand its drug pipeline, aiming to develop three new vaccine candidates against the seasonal flu, HIV, and the Nipah virus. Moderna is hopeful that their mRNA technology will be pivotal in developing vaccines for these diseases, as some have been eluding traditional vaccines for years (Team, 2021). If Moderna’s mRNA technology proves to be ground-breaking, it could change the pharmaceutical industry’s landscape and foster its company’s growth post-COVID-19.
POTENTIAL OBSTACLES IN MODERNA'S PATH
To no surprise, there are obstacles to Moderna’s current growth that would significantly decrease its current rate of change. The most glaring obstacle Moderna will face in the future is competition. Despite its low stock price in comparison, Pfizer is still expected to be profitable in the near future. With the rollout of their COVID-19 vaccine, Pfizer’s revenue growth is expected to be 44% for 2021 (Hawthorne, 2021). They have also anticipated allocating US$9.7 billion into innovation in 2021, indicating that they as well have plans beyond the COVID-19 vaccine. Moderna must also be aware of newcomers to the playing field. Ocugen Inc. (NASDAQ: OCGN), who has entered the spotlight recently after finalizing a deal to co-develop and commercialize Indian company Bharat Biotech’s vaccine, which raised $23 million at a considerable premium to fund the project (Cimino, 2021).
THE LASTING EFFECTS OF THE GAMESTOP RALLY
To add, the short-term potential of Moderna continuing to rally is almost entirely dependent on how the COVID-19 situation continues to play out. As the virus continues to mutate, we are seeing new variants of the virus appear globally, which raises questions concerning the effectiveness of the vaccines currently being developed. Moderna’s mRNA technology does give them the upper hand in combating this issue, and there is always the possibility of their vaccine being rendered useless against a specific variant. The company’s success in this area will have a significant impact on the returns it can generate for shareholders.
Finally, there is ongoing concern regarding the overall effectiveness of the mRNA technology. The technology is currently proving to be ground-breaking in the development of vaccines against coronaviruses, but how effective will it be against different types of viruses? Viruses whose harmful regions are contained on the inside rather than their outside surfaces make it increasingly difficult for mRNA to address (Team, 2021). This ultimately limits the avenues that Moderna can explore regarding drug development for existing viruses, infringing on their future earnings potential.
Cimino, A. (2021, February 09). Can COVID Vaccine LATECOMER Ocugen Beat Pfizer And moderna? Retrieved February 11, 2021, from https://www.fool.com/investing/2021/02/09/time-sensitivecan-covid-vaccine-latecomer-ocugen-b/
Hawthorne, J. (2021, February 03). Is it too late to buy pfizer stock? Retrieved February 11, 2021, from https://www.fool.com/investing/2021/02/03/is-it-too-late-to-buy-pfizer-stock/
Team, T. (2021, February 10). Why has Moderna stock Already RALLIED 75% in 2021? Retrieved February 11, 2021, from https://www.forbes.com/sites/greatspeculations/2021/02/10/why-has-moderna-stock-already-rallied-75-in-2021/?sh=4530d28c49f2
Tenebruso, J. (2021, February 09). Why moderna stock rose today. Retrieved February 11, 2021, from https://www.fool.com/investing/2021/02/08/why-moderna-stock-rose-today/