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Moderna Stock (NASDAQ:MRNA): Is There Life Beyond Disease Outbreaks?
Stock Analysis & Ideas

Moderna Stock (NASDAQ:MRNA): Is There Life Beyond Disease Outbreaks?

Story Highlights

Moderna stock doesn’t look cheap at 12.9x forward sales, and the stock’s recent resurgence, partly on the back of avian flu fears, looks like an overreaction. However, its broader pipeline holds promise.

Moderna (NASDAQ:MRNA) stock has surged 40.8% since the turn of the year. Some of this momentum can be traced to fears of new infectious disease outbreaks, which may represent a short-term supportive trend rather than a pipeline success story. While Moderna has a significant and promising pipeline, MRNA stock looks pricey, and the firm is yet to release a second commercial product. This is why I remain neutral on the stock.

Moderna’s Resurgence on Disease Fears

According to reports, the U.S. Department of Health and Human Services (HHS) is considering stockpiling 4.8 million doses of a H5N1 avian flu vaccine for pandemic preparedness. It was suggested that the HHS was in discussion with mRNA vaccine makers concerning the development and production of a vaccine following the transmission of the highly pathogenic avian flu from cows to humans. 

The U.S. Centers for Disease Control and Prevention (CDC) recently reported that there had been a second human case of H5N1 related to a dairy farm in Michigan. The individual, as with the first U.S. case in Texas, worked on a dairy farm where an outbreak of the virus had been identified in cows. While the CDC suggested that the risks to the general population remain low, the reports have seemingly provided some additional momentum for Moderna stock. 

According to Scientific America, Moderna is already trialing an mRNA vaccine — currently in phase two — that targets the same evolutionary group as the avian influenza virus that has been identified in the U.S. It believes that this vaccine could be easily tweaked for new mutations, reflecting one of the key benefits of mRNA technology — the ability to rapidly adjust or fine-tune the vaccine.

However, analysts have suggested that the market has “overreacted” to the fear of an avian flu outbreak. The CDC contends that the risk to human populations is low, and there has been no human-to-human transmission to date. There have been no reported deaths, and a child who contracted the illness in India in March has since made a full recovery. 

From an investment perspective, we also have to assess the logic of a stock resurgence on the back of a low-risk avian flu outbreak. Having worked in a newsroom myself, I’m aware of how frequently these contagious diseases become headline news for a few days.

In the vast majority of cases, these outbreaks don’t represent a widespread risk to humans. In this case, it’s also worth highlighting that 4.8 million vaccines – assuming Moderna won the contract – would be hugely insignificant compared with the billions of COVID vaccines sold. 

Furthermore, although one of the advantages of mRNA technology is the rapid development and adaptation of vaccines for emerging diseases, Moderna could greatly benefit from a more stable revenue stream. This stability could be achieved if its vaccines for cancers and regenerative therapies prove to be successful and safe in clinical trials.

Moderna’s Ambitious Pipeline

The scale of Moderna’s ambitions is impressive. The company has 48 products in the pipeline and 35 in clinical trials. It’s also worth remembering that most of these are not label extensions, as Moderna only has one commercially available product — Spikevax. Reports suggest that it has proven harder to replicate Moderna’s infectious disease success in other parts of the pipeline. 

However, Moderna recently released promising results from its Keynote-942 study, which builds on encouraging data from Keynote-603. The 942 study used the mRNA-4157 vaccine in combination with pembrolizumab to treat patients suffering from stage III/IV melanoma. The study found that a pembrolizumab combination reduced the risk of recurrence or death by 49%. Pembrolizumab is an immunotherapy treatment and a standard of care post-surgery. 

mRNA-4157 is designed to treat tumors in the head and neck, and it represents one of the most critical areas of treatment. Tumors in the head and neck are among the most deadly, given the challenges of operating near these sensitive parts of the body. This complexity necessitates advanced therapeutic options, making mRNA-4157 a promising candidate in this high-need area.

I think most investors would agree that this is one of Moderna’s greatest opportunities, as treating life-threatening illnesses offers more stable revenues than disease outbreaks. While mRNA-4157 does not specifically target brain tumors, it demonstrates the promise this personalized holds for areas of treatment, like brain tumors, that are restricted by current capabilities. The global market for brain tumor treatments was valued at approximately $2.9 billion in 2022 and is expected to reach $5.7 billion by 2030. 

Despite this highly promising development, we need to be pragmatic. Drug and vaccine development can often end in failure, and Moderna doesn’t look particularly cheap at 12.9x forward sales. As with many biotech stocks, assessing the value of the opportunity is challenging. 

Is Moderna Stock a Buy, According to Analysts?

On TipRanks, MRNA comes in as a Moderate Buy based on eight Buys, seven Holds, and two Sell ratings assigned by analysts in the past three months. The average Moderna stock price target is $145.81, implying a 5% upside potential.

The Bottom Line on Moderna Stock

Moderna is a company with a lot of promise, but as with all companies in the sector, there’s no guarantee that it will deliver on these promises. I believe there is little cause for the stock to rise on fears of an avian flu outbreak, given the low risk to humans. However, recent developments in cancer vaccines are promising and could be a sign that the company can move towards more stable revenue streams in the future.

Disclosure

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