December 2, 2021

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Moderna’s New Vaccine Business Could Be Bigger Than COVID, Says 5-Star Analyst

Coronavirus is a monster, a pandemic, a threat to humanity on a global scale.

Do I overstate the case? Perhaps, but after nearly 375,000 deaths globally, and 6.2 million infections — meaning there will be more deaths to come — I don’t think I overstate the case by much.

Coronavirus has already tipped the United States into a recession, and most of the rest of the world as well. Airlines are barely flying, restaurants half-open — if they’re lucky — and amusement parks even in countries such as China, which claims to have largely recovered from the epidemic, operate at a fraction of capacity. Before the world economy can recover, we simply must have a vaccine that permits businesses to open back up, full force.

But here’s the problem with that (for investors). The urgency of the need means that there will be intense pressure upon the companies, that discover COVID-19 vaccines, to distribute them regardless of whether they make a profit — or even give their vaccines away for free. (Witness, for example, Gilead Sciences’ commitment to distribute its first 1.5 million doses of the remdesivir anti-viral drug free of charge).

And how is a company supposed to make a profit off of that kind of business model?

The answer, as 5-star Chardan analyst Geulah Livshits explains in her latest note on Moderna (MRNA), could include the ability to use lessons learned from making one vaccine at low or no profit, to the production of other vaccines for a profit.

Moderna, you see, is working to get U.S. Food and Drug Administration (FDA) approval of its new mRNA vaccine candidate (mRNA-1273) to prevent infection with the novel coronavirus SARS-CoV-2. In so doing, Moderna is perfecting such processes as using DNA plasmid templates, along with enzymes and buffer systems, “to assemble nucleotides into mRNA, which can then be formulated into lipid nanoparticles (LNPs) that can then be filtered, fill-finished into vials, and quality controlled” to produce safe, effective vaccines against COVID-19.

In previous notes, Livshits has cautioned that Moderna’s work on mRNA-1273 might produce only “modest” sales and perhaps even weaker profits. However, Moderna should be able to take expertise, generated in creating vaccines from mRNA without the need to grow chemicals in live cells, and apply it to the development of other vaccines in its pipeline. Such pipeline products include the company’s vaccine against cytomegalovirus, which can cause permanent neurological injury in newborns, its Epstein-Barr virus (EBV) vaccine, and other vaccine programs aiming to defend against autoimmune diseases — all of which may have longer-lived commercial potential than a COVID-19 vaccine.

This is more than just a theory, by the way. As Livshits explains, Moderna has already used lessons learned from its Chikungunya (a virus transmitted by mosquitoes) vaccine program to optimize mRNA stability when manufacturing long mRNA strands such as those used to create the SARS-CoV-2 vaccine. Taking lessons learned from creating its coronavirus vaccine, and applying them to the creation of yet more vaccines against other diseases, would just be adding one more link in the chain, ultimately resulting in “faster production and easy switching from 1 program to another” — and hopefully, reducing development costs and enabling fatter profit margins in the process.

Overall, based on the 10 Buy ratings vs just 2 Holds assigned in the last three months, Wall Street analysts believe that this ‘Strong Buy’ is a solid bet. It also doesn’t hurt that its $89.33 average price target implies nearly 50% upside potential from current levels. (See Moderna stock analysis on TipRanks)

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