Modern (NASDAQ: MRNA) and the Pfizer/BioNTech partnership may not enjoy a duopoly in the US COVID-19 vaccine market much longer. Johnson & Johnson (NYSE: JNJ) announced results for its coronavirus vaccine candidate last week. The health giant now plans to obtain emergency use (EUA) permission from the Food and Drug Administration.
Is Moderna share a buy after the announcement of J&J? Or is the more sensible way to sell the biotechnological stock? The answer is probably more complicated than you would expect.
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Complex dynamics
Let’s first look at Johnson & Johnson’s results. The main story was that the company’s COVID-19 vaccine candidate achieved an overall efficiency of 66%. At first glance, you would think that this is really disappointing. The two coronavirus vaccines that have already won EUA have achieved an effectiveness of more than 94%.
However, there are some important things to note about the results of J&J. The company’s study included only a single dose compared to two doses for the Moderna vaccine. J & J’s data also included new variants discovered in the United Kingdom and South Africa. The South African variant especially weighed the efficiency. And despite the lower overall efficacy, J & J’s experimental vaccine was 85% effective in preventing severe cases of COVID-19.
What does all this mean for Moderna? There are some complicated dynamics going on.
Johnson & Johnson is likely to win EUA for its COVID vaccine. An effective single-dose vaccination should play an important role in curbing the pandemic. Also remember that J&J will sell the vaccine at cost price during the pandemic. This lower cost, combined with a single dose regimen, will be a major competitive advantage. If J & J’s results were bad, it would probably have opened up more sales opportunities for Moderna in Europe and elsewhere. These opportunities are likely to be more limited now.
However, the Biden government wants to buy another 100 million doses of COVID-19 vaccine from Moderna and Pfizer. That would mean that the total doses secured by the US are enough to vaccinate every American adult. Any short-term financial impact for Moderna due to increased competition in the US market is negligible.
My opinion is that Moderna should not sell one just because of J & J’s results. On the other hand, I also do not think that the results make Moderna a must-buy on their own.
Analysts’ enthusiasm wanes
But what about some analysts’ declining enthusiasm for Modernity? For example, Bank of America analyst Geoff Meacham recently downgraded the stock to underperform (equivalent to a sell) of neutral. Could J & J’s vaccine results be a factor behind this more pessimistic view? I do not think so.
Meacham’s main concern is valuation. Moderna’s shares have soared by more than 670% over the past twelve months, and the market capitalization of the biotechnology is now higher than $ 60 billion. It has nothing to do with Johnson & Johnson.
So should investors sell Moderna shares due to concern valuations? Not necessarily.
The company is likely to earn more than $ 13 billion from its mRNA-1273 vaccine in 2021. The total will make the market capitalization of Moderna much more palatable. There is a good chance that the biotechnology will also see significant recurring revenue from its COVID-19 vaccine.
Think long term
My recommendation is to consider Moderna as a platform piece. The messenger RNA (mRNA) technology has worked incredibly well with COVID-19. There is a high chance that Moderna’s mRNA approach will also be very effective in other vaccines and therapeutic candidates. And biotechnology can develop new applications very quickly because of the inherent benefits of the technology.
It is Moderna’s long – term prospects that make me believe the stock is still a buy. Certainly, there are unlikely to be many catalysts in the short term. But I totally expect it to be a very different story the next decade and beyond, as Moderna applies its mRNA approach to a wide range of diseases.