Here's how Moderna plans to beat the biggest threat to its vaccine

Moderna's strengths in technology may give it an edge.

| More on:

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Moderna's (NASDAQ: MRNA) vaccine is successfully helping people avoid the coronavirus. The billion-dollar product has demonstrated more than 90% efficacy in adults. And new data show it's 100% effective in teens. But Moderna faces one big challenge that could wreak havoc on how well its vaccine protects the population. And that's the rapid emergence of variants.

The vaccine has handled them so far. Moderna even says one of its booster candidates may be ready by fall. One of the candidates specifically targets the South African variant. But the biotech company realizes it can't constantly chase the next variant. It has to stay a step ahead. Let's take a closer look at how Moderna plans to do that -- and what it means for investors.

Investing "intensively"

Moderna gave us a hint a few weeks ago. During the company's earnings call, CEO Stephane Bancel emphasized Moderna's commitment to artificial intelligence (AI). He said the company planned on investing "intensively" in AI, automation, and digital over the coming five to 10 years.

Fast forward a few weeks to the company's annual Science Day. Here, Moderna said one major way to stay ahead of variants involves AI and machine learning. They help predict strains that may "escape" protection provided by current vaccines. Based on this, Moderna will be able to create next-generation vaccines and boosters before need becomes critical.

Researchers worldwide have made available on a database more than one million genome sequences of SARS-CoV-2 since the virus emerged. Moderna uses a special app to quickly review sequences as soon as they appear. The company then selects variants to explore in-depth.

From here, Moderna examines the situation from various angles and using various tools. Researchers look at the prevalence of particular variants over time by location. They use structural mapping of neutralizing antibody contact sites to determine where "escape" from protection is likely to happen. And they perform deep mutational scanning on a library of mutations. This helps scientists understand the possible mutations available to a virus so that it may continue to progress and infect. Moderna also examines sequencing information from coronavirus infections that may occur in its clinical trials or out in the real world.

Tomorrow's coronavirus

All of this is key for one big reason: The coronavirus we're fighting today may not be the same as the one we'll fight a year from now. We've seen a steady emergence in variants over the past several months. It's possible that will continue. To maintain leadership, companies must be able to address new variants before they gain ground.

Moderna is a leader now. The company is set to generate $19.2 billion in product revenue this year according to advance purchase agreements. And the potential availability of a booster this fall may get the ball rolling when it comes to handling variants. But what makes me even more confident about Moderna's prospects in the coronavirus space are the efforts to stay ahead of the variants rather than chase them.

Of course, rivals are working to handle variants too. Pfizer is testing a variant-specific vaccine and expects to report data this summer. Smaller rival Inovio Pharmaceuticals is investigating a "pan-COVID" vaccine to handle all variants -- the company expects to start a clinical trial this year.

But here are two reasons why that shouldn't worry Moderna investors. First, considering the worldwide need for vaccination, there is room for more than one player to generate billions annually in this space. And second, from a timeline and technology perspective, Moderna seems to be ahead of the pack right now. So, Moderna has a good chance of becoming a leader when it comes to handling variants.

All of this means Moderna's nearly 180% share price gain over the past year isn't the end of the story. It's probably just the beginning. It's important to remember that the stock is trading at only seven times forward earnings estimates. And it's trading at 26 times sales.

MRNA PE Ratio (Forward) Chart

MRNA PE Ratio (Forward) data by YCharts

Considering these numbers and the points I mention above, Moderna shares aren't expensive at these levels. The good news for Moderna investors and potential investors? It's not too late to get in on shares of this biotech company -- and reap rewards over the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.

More on International Stock News

A male party goer sits wearing a party hat and with a party blower in his mouth amid a bunch of balloons with a sad, serious look on his face as though the party is over or a celebration has fallen flat.
International Stock News

What snapped the S&P 500 winning streak last night?

The S&P 500 almost made October a winner, but fell at the final hurdle.

Read more »

Man going down a red arrow, symbolising a sliding share price.
International Stock News

Why Nvidia stock is sinking today

Investors were spooked by economic data and the ambitions of a deep-pocketed rival.

Read more »

Rede arrow on a stock market chart going down.
International Stock News

Why Microsoft stock is sinking today

Microsoft just beat quarterly earnings estimates. So why is the stock falling?

Read more »

US economy and sharemarket with piggy bank
Share Market News

Here's why Goldman Sachs sees a decade of lower returns ahead for US shares

Aussie investors have placed a lot of faith in US shares this year.

Read more »

ETF written in gold with dollar signs on coin.
ETFs

Here's why the iShares S&P 500 ETF (IVV) flew 6% higher in October

Investors are very keen on US shares at the moment.

Read more »

Man pumping petrol
International Stock News

Where will Tesla shares be in 10 years?

This historically booming stock might not live up to the hype.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

46% of Nvidia's revenue came from 4 mystery customers last quarter

Nvidia's incredible growth is increasingly reliant on just a handful of customers.

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
International Stock News

Should you buy Nvidia stock before November 20?

History could repeat itself with Nvidia's upcoming quarterly update.

Read more »