what happened
Shares of Modern (NASDAQ: MRNA) traded 2.5% from 12:07 EST Tuesday after falling to 6.1% earlier in the session. The company said Monday it intends to fill scales with up to 15 doses of the COVID-19 vaccine rather than the current 10 doses. This approach will help Moderna alleviate the supply constraints, as the ability to send more vaccines to the public is limited in part by the throughput of the vials in the production line.
However, investors are unlikely to be overly concerned about Moderna’s proposal, which should approve the Food and Drug Administration before it is implemented. Instead, the decline in the biotechnology stock on Tuesday morning would likely be spurred by ongoing concerns about its valuation. The issue was again highlighted when Bank of America analyst Geoff Meacham downgraded the stock from neutral to underperformance on Monday.
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Approximately
Is the valuation of Moderna a cause for concern? Perhaps. The company’s market capitalization now stands at almost $ 60 billion after a remarkable increase that began in 2020 and was carried over to this year.
However, Moderna will soon see a massive influx of cash as he recognizes the revenue from his COVID-19 vaccine mRNA-1273. Revenue could easily reach $ 20 billion in 2021.
A multiple of about five to the sales is not uncommon for biotechnology stocks. The big question for Moderna, however, is how much recurring revenue will mRNA-1273 generate in the long run. Investors who expect the company’s sales to decline in 2022 and beyond cannot be blamed for worrying about the stock’s valuation.
On the other hand, there is reason to expect mRNA-1273 sales to remain high for years. Modern itself expects that people will probably need annual boost shots.
Now what
Moderna’s largest catalysts for mRNA-1273 going forward are likely to be additional offerings. The administration of Biden is in talks with the company about supplying another 100 million doses to the US. If Moderna takes up this contract and additional supply agreements, the forecast of its income for 2021 will increase – and the share price will probably do the same.