Why Moderna’s Capabilities Reach Well Beyond COVID-19
California Institute of Technology

Why Moderna’s Capabilities Reach Well Beyond COVID-19

The global pandemic unleashed a torrent of biotechnology innovation. Now, several firms are pushing the new technologies beyond COVID-19.

On Wednesday, managers at Moderna, Inc. (Nasdaq: MRNA) announced new agreements to further coronavirus vaccine production.

Investors should look forward to the future of mRNA technology. The possibilities are endless.

Messenger RNA (mRNA) has been around since 1961, when it was discovered by researchers at the California Institute of Technology, yet it took the enormity of the global pandemic to push the science mainstream.

The subsequent infrastructure changes the game for investors … but let’s back up a bit to better understand the complexities.

The human immune system is a powerful defense against pathogens such as harmful bacteria and viruses. It recognizes unhealthy intruders, then begins an immune response. T cells are dispatched to attack and kill the infected cells, and B cells produce antibodies that prevent further infection.

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Vaccines imitate pathogens, setting our immune system into motion.

Traditional vaccines actually use a tiny bit of the pathogen, either living or weakened, to trigger an immune response. The process creates antigens our immune system can then spot and memorize for the future. This works with varying degrees of success.

mRNA vaccines work differently. They send messages, or instructions, to tell our cells how to make the antigens from scratch.

This is the strength of mRNA technology: It unleashes the power of our immune system to figure out how to fight bacteria, viruses and maybe even cancers.

And when our immune system knows what it’s looking for, it’s much better at fighting pathogens than any human-made drug treatment. The only prerequisite for mRNA technology is a digital file with the genetic sequence of the virus.

And therein lies the huge investment potential.

With the immune system doing most of the heavy lifting, mRNA vaccines can go from finding the sequence in the lab to clinical trials within months, not years. Removing the hassle of developing proteins means many fewer moving parts. Progression is cleaner and more cost-effective with no discernable trade-offs.

In March, the Centers for Disease Control and Prevention (CDC) noted that Moderna and Pfizer Inc. (NYSE: PFE) mRNA vaccines proved to be more than 90% effective with COVID-19 prevention in real-world settings. Other studies reported in Nature Portfolio show the vaccines are also effective against Brazilian and South African variants of the virus.

Expedited approval put cost-effective regulatory and manufacturing infrastructure in place. And real-world mRNA data have yielded overwhelmingly positive results. It’s a perfect storm.

Moderna has 24 mRNA development programs, according to a Securities and Exchange (SEC) filing. Thirteen of these initiatives, including oncology, cardiovascular, rare genetic and infectious diseases, have entered clinical trials.

Every year, the common flu kills 300,000 people globally despite about 1 billion shots. The problem is twofold: Influenza mutates frequently, and current vaccines are not especially effective to begin with.

The CDC notes that almost 50% of people given shots in 2019 still contracted the flu.

An mRNA vaccine that targets the core variants and uses our immune system to build antigens for others that pop up is the holy grail in medicine. It’s a market that could be worth billions every year to mRNA firms.

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Analysts at Roots Analysis, a pharmaceutical research and consulting firm, predict the mRNA therapeutics and vaccine market will reach $10 billion in 2021. Researchers also found that 150 mRNA vaccines and other therapies are now in development.

Last week, when Moderna managers announced a new agreement with Thermo Fisher Scientific Inc. (NYSE: TMO), investors focused on the production of hundreds of millions of new doses of COVID-19 vaccines.

Although this is clearly positive, the company’s growing pipeline is more significant to investors.

The future and growth of mRNA technology should benefit Moderna tremendously because they’re already in a great spot to capitalize.

Just because the pandemic is, fortunately, getting contained largely due to vaccines — like Moderna’s — investors need to keep paying attention.

Moderna shares rose to a new high of around $206 last week. The stock trades at 11 times forward earnings and 28.7 times sales. Shares are currently trading around $221.11.


 

Both metrics seem inexpensive given the outlook, but longer-term investors should consider buying shares into weakness.

Best wishes,

Jon D. Markman

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