Medical researchers are using what they know about our immune system and computers to make startling advances. There has never been a better time for investors.
Shares of Moderna (MRNA) closed Tuesday up 19.6% after company executives announced a jointly developed vaccine showed great efficacy fighting cancer in stage 3 and 4 melanoma patients.
Investors should buy Moderna shares into any future weakness.
Moderna has been working since 2019 with Merch (MRK) to develop mRNA-4157/V940, a personalized mRNA therapy. And Merck announced in October that the company would pay $250 million to pick up its option to take a larger portion of the partnership. Clearly, Merck executives were expecting positive results from the ongoing early stage patient trials.
Moderna is famous for its groundbreaking work with messenger RNA technology. The Cambridge, Mass.-based company develops vaccines that effectively teach a patient’s immune system to mobilize and fight illness. This is the same tech that was used to quickly develop a vaccine for the covid-19 virus. Now the company is pushing beyond respiratory illnesses, and working to develop drug treatments that can attack solid tumors, like cancer.
This is a big deal.
A vaccine that teaches a patient’s unique biology to fight these cell malfunctions changes everything. The uses cases are numerous, with far-reaching implications for medical research and health science.
Separately, Pfizer (PFE) executives said Monday at an investor presentation that mRNA technology will contribute $10-$15 billion in sales by 2030.
Moderna and Merck have a good head start on the competition. The jointly developed mRNA-4157/V940 is a truly personalized vaccine tailored to the neoantigens found is the patient’s tumor. Reuters reports that the treatment is being used in conjunction with Keytruda, Merck’s blockbuster cancer treatment. A phase 2B trial enrolled 157 people with stage 3 or stage 4 melanoma. Adding the personalized vaccine reduced the risk of recurrence or death by 44%, versus Keytruda alone.
Stephane Bancel, chief executive at Moderna called the results a homerun in an interview with CNBC, and he pledged to move development of personalized mRNA vaccines to many more types of cancers.
Bancel is telling the story that will drive big gains in the stock price.
He is reiterating that research is ground-breaking and scalable. He is branding the technology as immunotherapy 2.0. And he is promising many more potential drugs that can be made quickly, in the same way covid-19 vaccination doses were scaled.
The covid-19 experience is partially responsible for the current $17 billion cash hoard on Moderna’s balance sheet. It’s money that Bancel says will fund new research and development, and the construction of manufacturing facilities capable of producing personalized vaccines at scale.
The company currently has 30 vaccines in development, including an inhalable product for cystic fibrosis, being jointly developed with Vertex Pharmaceuticals Inc. (VRTX). Moderna will also work closely with Merck and its Keytruda portfolio for cancers that affect breast, skin, colon, uterus, cervix, stomach, kidney, guy, liver and bladder.
Shares closed Tuesday at $197.54, slightly below the August high. A rally beyond that level will set up an advance to $379, the level of the 2021 technical breakdown. That advance would represent a rally of 91.4% from current levels.
The stock trades at 37.5x forward earnings and 3.7x sales. Given the digital nature of Moderna’s research, the company has gross margins of 79.2%. Its profit margin is 55%. The comparable metrics from Pfizer are 65.5% and 29.9%, respectively.
The stock was a big winner on Tuesday, however, the upward trajectory is only beginning. Investors can buy the stock on any pullback to $185.
I recommended in October that members of the Weiss Technology Portfolio buy Moderna shares at $118 and reiterate that suggestion for everyone now. .
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