What are Moderna investors actually betting on?

Moderna’s stock price has continued to climb to record highs on the premise that their novel mRNA-based vaccine technology can take control of the spread of COVID-19. Since the beginning of January 2020 to the time of the writing of this article, the stock has increased by an astronomical 385 percent, based on preclinical and phase I data alone. Moderna, a vaccine-biotech company with no vaccines on the market, is currently valued around $37 billion dollars, which is equivalent to over half the amount of the $54 billion in revenue brought in by global vaccine sales in 2019. Clearly, those buying stock in Moderna believe that their vaccine could end the pandemic. As innovative as Moderna’s mRNA-vaccine platform poses to be, one of the biggest questions that no one is asking is whether Moderna’s COVID-19 vaccine is actually a good financial investment from the investor’s perspective?

Moderna is on track to commercialize a pioneering COVID-19 vaccine utilizing novel mRNA-vaccine technology to trigger immunity in patients. This will be the first of its kind if the FDA approves it as there are no approved mRNA vaccines on the market. The latest phase I data published in the New England Journal of Medicine earlier this month demonstrated the safety of the vaccine as well as showing the induction of neutralizing antibodies in a group of 45 patients.  These antibodies were shown to prevent the coronavirus from entering human cells in vitro (in a laboratory setting). Although this is hopeful and encouraging data, the justification of the soaring stock of Moderna seems premature at best. For any new vaccine, the true efficacy can only be determined by a large randomized control phase III trial where the vaccine efficacy is defined as the percent reduction in the incidence of disease among the vaccinated compared to the incidence of the non-vaccinated. Until that data is released, the investor has no way of knowing if the Moderna’s COVID-19 vaccine or its mRNA platform definitely works.

Another challenge investors face is determining if Moderna’s COVID-19 vaccine is going to be a one-hit-wonder or whether it will continue to be needed in the years-to-come. The best-case scenario for Moderna is that COVID-19 becomes a seasonal upper respiratory infection like the flu, and the vaccine has to be administered every year, providing a continuous source of revenue for Moderna. On the other hand, the worst-case scenario for Moderna is that the vaccine works extremely effectively and provides long term immunity against COVID-19 making administering the vaccine every year obsolete. Blockbuster drugs like Lipitor and Humara are big money makers and great investments because patients continuously need to take the drug. It is still too early to determine if Moderna’s COVID-19 vaccine will be needed beyond 2020-2021.

Lastly, a big unknown for investors is how Moderna will choose to price their product. Gilead is treading carefully in its pricing of Remdesivir, an anti-viral that shortens hospital stays for COVID-19 patients by three to four days. Gilead’s chief executive Daniel O’Day has made clear that Remdesivir “is priced far below the value it brings to the health-care system.” Gilead is not charging the maximal price for the drug due to fear of public scrutiny in light of the global pandemic. Moderna faces a similar issue and may not charge the true market value for the vaccine to avoid accusations of price-gouging during a pandemic. However, unlike Gilead, Moderna currently does not sell any products. Moderna’s market debut will be the COVID-19 vaccine, and they could potentially be selling their first source of revenue at a discount.

In the case of Moderna, investors should at least raise an eyebrow at its soaring stock price. There are still many unanswered questions, and only time will provide clarity. I would feel a lot better investing in Moderna knowing the efficacy of the vaccine, knowing the vaccine will be used in perpetuity similarly to the HPV vaccine, and know Moderna will price the vaccine in a way to ensure I receive a return on my investment. A good investment should promise the safety of the principle as well as provide a reasonable return of investment. At this time, an investment in Moderna can do neither.

Christopher Grivas is a medical student.

Image credit: Shutterstock.com

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