Is Moderna Stock A Buy Following Skin Cancer Vaccine Progress?

MRNA: Moderna logo

Moderna (NASDAQ:MRNA) stock rallied by close to 20% in Tuesday’s trading, after it announced positive results from mid-stage trials for a messenger RNA-based vaccine for skin cancer patients that it is developing with Merck. A combination of the vaccine and Merck’s blockbuster Keytruda immunotherapy resulted in a significant improvement in recurrence-free survival time in patients with phase three or four melanoma – the deadliest form of skin cancer. The vaccine also cut the risk of recurrence or death by 44%, versus Keytruda alone. Although the vaccine is only likely to see phase 3 trials commence next year, with commercialization likely some way off, the developments are positive for Moderna, as they demonstrate the potential of the company’s mRNA technology – which was the basis of the company’s Covid-19 vaccine – in areas such as oncology. Moreover, this comes at a time when demand for Moderna’s Covid-19 vaccine – its only revenue-generating product – is on the decline with the disease moving into an endemic phase.

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Now, even following Tuesday’s rally, Moderna stock remains down by about 22% year-to-date and is down by close to 56% from its all-time highs, given the decline in Covid-19 vaccine sales and broader uncertainty about modeling the company’s future revenues. Despite the sell-off, Moderna still trades at a relatively lofty 37x consensus 2023 earnings with the number falling to about 29x if we exclude the company’s sizable cash holdings of over $17 billion. That said, there are a couple of reasons to consider the stock. Moderna should see some level of recurring revenues from updated versions of its Covid-19 booster shots, which are likely to continue much like flu shots. The company has projected that the booster shot market could be worth between $5.2 billion to $12.9 billion per year in the U.S. alone. Moreover, the recent positive data from the skin cancer vaccine trials should give investors more confidence regarding the company’s pipeline, which includes over 40 other drugs targeted at oncology, rare disease, and infectious diseases. The company’s sizable cash holdings could also enable it to make some acquisitions in the biotech space. We value Moderna stock at about $210 per share which is slightly ahead of the current market price. Check out our analysis Moderna Valuation: Expensive or Cheap for more details. See our analysis on Moderna Revenues: How Does MRNA Make Money? for more details on Moderna’s business model and how its revenues are expected to trend.

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 Returns Dec 2022
MTD [1]
YTD [1]
Total [2]
 MRNA Return 12% -22% 1194%
 S&P 500 Return -1% -16% 80%
 Trefis Multi-Strategy Portfolio 0% -18% 231%

[1] Month-to-date and year-to-date as of 12/14/2022
[2] Cumulative total returns since the end of 2016

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