What happened
Actions of Modern (NASDAQ: MRNA) were traded down by 2.5% from 12:07 pm EST Tuesday, after dropping up to 6.1% at the start of the session. The company said on Monday that it is proposing to start filling bottles with up to 15 doses of its COVID-19 vaccine, instead of the current 10 doses. This approach would help Moderna ease supply restrictions, as its ability to deliver more vaccines to the public is being limited in part by the speed of processing the bottles on its production lines.
However, investors are unlikely to be very concerned about Moderna’s proposal, which the Food and Drug Administration will have to approve prior to implementation. Instead, the decline in biotechnology stocks on Tuesday morning was likely spurred by continuing concerns about its appreciation. That issue was emphasized again when Bank of America analyst Geoff Meacham downgraded shares from neutral to underperforming on Monday.
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And
Is valuing Moderna a cause for concern? Possibly. The company’s market capitalization is now close to $ 60 billion, after a notable increase that started in 2020 and continued this year.
However, Moderna will soon see a massive influx of money by recognizing revenue from sales of its COVID-19 vaccine, mRNA-1273. This revenue can easily reach $ 12 billion in 2021.
A sales price multiple of about five is not uncommon for biotech stocks. The big question for Moderna, however, is how much recurring revenue mRNA-1273 will generate in the long run. Investors who expect the company’s sales to plummet in 2022 and beyond cannot be blamed for worrying about the stock’s appreciation.
On the other hand, there are reasons to expect that sales of mRNA-1273 will remain high for years. Moderna itself predicts that people will likely need annual booster doses.
What now
Moderna’s biggest catalysts for mRNA-1273 in the future are likely to be additional supply agreements. The Biden government is in talks with the company about supplying an additional 100 million doses to the United States. If Moderna accepts this contract and additional supply agreements, its 2021 revenue forecast will increase – and the stock price is likely to increase as well.