Moderna (NASDAQ:MRNA) stock is now down 3% over the past 12 months and down 60% in the past three years. It surged in late spring on concerns about bird flu but has sunk after its RSV vaccine proved less effective than the market had hoped for. Despite a promising pipeline, Moderna remains a speculative investment, and that’s why I’m neutral on the stock. Without any new positive catalysts, the stock could fall further.
Recent Catalysts
Moderna’s stock rose to $166 per share in late spring, driven by concerns over a multi-state outbreak of the H5N1 virus in dairy cows and infections among three dairy workers since March.
The company was quickly identified as a leading candidate to develop a vaccine for bird flu and subsequently was awarded $176 million to accelerate the development of its bird flu vaccine.
U.S. officials announced that late-stage testing would commence in 2025, contingent on the results of Moderna’s phase 1 trial, which are expected soon. The contract also includes provisions to expedite the development timeline of the vaccine if the virus’s human impact intensifies.
Despite these developments, I previously argued that investing in Moderna purely based on bird flu concerns may be premature, as such outbreaks rarely escalate into pandemics. From what we know so far, there have only been three people who have contracted the virus from cattle in the U.S. The first two only reported mild symptoms — conjunctivitis and fatigue. A further six human cases appear to have come from a poultry farm in Colorado.
Concerns were also likely driven by what we know about avian influenza. Since it was first identified three decades ago, there have been 860 human cases in 23 countries, including China, Egypt, Vietnam, and Turkey, and 52% have died. However, it is worth noting that many non-lethal cases may not have been registered.
Moderna’s RSV Setback
Moderna has also faced setbacks with its newly approved respiratory syncytial virus (RSV) vaccine — its second approved product. In May, the FDA approved Moderna’s mRESVIA for adults aged 60 and older to protect against lower respiratory tract disease (LRTD) caused by RSV.
However, ahead of a CDC advisory committee meeting, Moderna revealed that mRESVIA’s efficacy against two or more LRTD symptoms was only 50%, disappointing Wall Street and analysts.
The RSV market is already dominated by GSK (GSK) and Pfizer (PFE), whose RSV vaccines, Arexvy and Abrysvo, were approved last year.
GSK’s vaccine, Arexvy, was 68% effective over 23.3 months in a clinical trial. Trials have shown Pfizer’s Abrysvo to be 78% effective after 16.4 months. Given these figures, Moderna may struggle to gain any share in the market.
CDC figures suggest that some 60,000 to 160,000 older adults are hospitalized with RSV every year.
Moderna’s Patent Battle
Moderna recently secured a partial victory in its patent dispute with Pfizer and BioNTech. The High Court in London ruled that Pfizer and BioNTech’s COVID-19 vaccine infringed on a 2011 Moderna patent, which is central to mRNA technology.
The patent, which is crucial for mRNA treatments, concerns reducing immune responses when mRNA is introduced into cells. As a result, lawyers and analysts believe Moderna might be entitled to damages from UK sales of Pfizer and BioNTech’s vaccine from March 8, 2022 — the date Moderna withdrew its temporary forbearance on enforcing its intellectual property rights during the pandemic. It may also be a positive outcome for Moderna’s pipeline of mRNA treatments.
However, the court also invalidated another Moderna patent related to mRNA vaccines for respiratory viruses, which specifically impacts COVID-19 treatments. This mixed ruling has led all parties to consider appeals. This London judgment is part of a larger, global legal battle over mRNA technology, with parallel proceedings taking place in Europe and the U.S.
High Valuation Is Nothing to Get Excited About
Moderna’s pathway to sustainable, post-COVID profitability is somewhat problematic. According to analysts’ forecasts, Moderna is not set to turn a profit until 2027. It’s currently trading at 39.6x forward earnings for 2027. This is not something I find overly attractive. Moreover, at 11.2x forward sales, it’s trading at a considerable premium to some of the biggest names in the biotech and pharma sector.
The company may have an exciting pipeline of treatments, but this valuation isn’t anything to get excited about.
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 $143.19, implying 18% upside potential.
The Bottom Line on Moderna Stock
Moderna stock is expensive, and the recent setback related to the RSV vaccine doesn’t make the valuation any more appealing. Personally, I believe the market has gotten ahead of itself and potentially placed too much emphasis on a possible near-term win in the form of a Bird Flu vaccine. While the company’s extensive pipeline may hold promise, there’s not enough evidence to justify the stock’s current valuation.
