Here in Canada, the Moderna (NASDAQ:MRNA) Covid-19 vaccine has made its way across the country, and as I write this with the most vulnerable expected to receive their first doses any moment. You would think the Moderna rollout in various countries around the world would be good news for MRNA stock, but the opposite appears to be true.
Moderna stock has lost 18% of its value since the Food and Drug Administration approved its vaccine on Dec. 18. Is this merely a case of selling on the news, or is there something afoot that’s causing investors to run for the exits?
Let’s have a look.
MRNA Stock Is Down 36% Since Hitting 52-Week High
Moderna’s stock hit a 52-week and all-time high of $178.50 on Dec.1. It’s lost 36% of its value since then through Dec. 29. Since hitting the record high, it has fought valiantly to remain at or near those levels.
Unfortunately, for anyone who bought at the beginning of December, the final month of the year has turned out to be a major dud.
So, what’s driving the selloff? An article from Trefis and Forbes gives us some insight into the matter.
“While Moderna trades at a reasonable valuation (about 6x consensus 2021 Revenue) for a biotech poised to post big growth next year, the impact of the Covid-19 vaccine is likely to be fleeting for the company (likely only 2021 and 2022) and investors are possibly looking beyond the pandemic,” the Dec. 29 article stated.
“While Moderna has validated its mRNA technology with its Covid-19 shot, investors will likely be waiting for more data and developments relating to the company’s other products before the stock can see further gains.”
This was always a sticking point with investors when it came to Moderna because this is the company’s first commercial drug, albeit a critical one.
To make it in the big bad world of biotechnology, you’ve got to bring another drug to market, and another, and so on. It’s very much what have you done for me lately.
And, let’s not forget that if you bought MRNA stock at the end of 2019 and sold near the all-time high, your realized gain would have been almost 800%. It’s pretty hard to look a gift-horse like that in the mouth.
Profit-taking seems to be a perfectly logical explanation for the downdraft.
Further, in the world of professional investment management, you’re judged by quarterly and yearly performance. To leave these kinds of profits unrealized might look good in the end-of-year holdings report, but it does little for long-term results. A bird in the hand is worth two in the bush.
Other Possible Concerns?
I think the elephant in the room for Moderna investors is the fear that something happens with the vaccine that puts one or more people in the hospital with adverse reactions.
I’m not enough of a biotech expert to know whether that’s likely given mRNA-1273 has already been proven to be 94% effective in Phase 3 clinical trials, and people who had their second dose were found to have elevated antibodies three months later.
However, unlike Pfizer (NYSE:PFE), who has been commercializing drugs for years, and whose scientists “pioneered the mass production of penicillin,” a negative event would not be the end of the company.
On the other hand, the public relations nightmare that would befall Moderna, while possibly overcome with a deft hand, would surely give investors second thoughts about the rest of its potential pipeline of vaccines and therapeutics, including products for cytomegalovirus, influenza, and respiratory syncytial virus.
Another possible concern of investors was mentioned in a recent article by The Motley Fool’s Keith Speights. He suggested that Dr. Anthony Fauci’s comments that we might not need a yearly vaccine made investors consider the possibility that the long-term recurring revenue benefits for Moderna might not be nearly as significant as once thought.
I had never even taken into consideration the recurring revenue possibilities of its vaccine. To me, it always seemed like a one-and-done experience, so any possible recurring revenue, even if it’s every second or third year, should be positive news.
So, I’ll call that one a draw.
The Bottom Line
I haven’t written about Moderna since late September. At the time, I argued that aggressive investors had no excuse for not owning Moderna.
“InvestorPlace contributor Mark Hake recently labeled Moderna a stock to buy, suggesting that if it delivers on 1 billion doses, the company could generate $35 billion in revenue. If you could flick a switch and make that happen, Moderna’s P/S ratio magically drops to less than one,” I wrote on Sep. 23.
Its share price was $67.
I believed that the upside was so much greater than the downside, given all of the good news that happened over the summer. I wouldn’t have been a buyer because the risk was real that it wouldn’t be successful in its hunt for a vaccine.
Now that it has been, I don’t know how those same investors aren’t buying at $114 and change. If this isn’t a buy-on-the-dip moment, I don’t know what is.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.