Moderna Therapeutics (MRNA) was once the darling of the healthcare space for investors. The company emerged as one of the biggest names of the COVID-19 pandemic with its vaccine. While COVID has not gone away, the virus is no longer top of mind, and fewer people feel the need to update their vaccination for the illness.
With the stock now more than cut in half from its 52-week high, the company recently laid out a plan for its business at its 2024 Investor Day. While these events are often catalysts for stock, investors did not like what they heard, and that sent Moderna shares lower.
New path forward
Moderna laid out three priorities at its Investor Day.
The first was to increase usage of its Spikevax and mRESVIA vaccines. Spikevax is the company's current COVID vaccine, which was recently approved by the U.S. Food and Drug Administration (FDA) to help combat the newest strains of the virus that are expected to be prevalent this fall and winter.
While the company touted the vaccine's effectiveness against long COVID, increasing COVID vaccine usage appears to be an uphill battle. Moderna's COVID vaccine sales have fallen off a cliff, with a revenue of just $241 million in the second quarter, down 30% from $344 million a year ago. It had $19.3 billion in total revenue for the full year 2022, mostly from COVID vaccines, but that fell to $6.8 billion in 2023.
mRESVIA is Moderna's vaccine for lower respiratory tract infections caused by respiratory syncytial virus (RSV). It's for adults 60 years and older. The vaccine is approved in the U.S. and European Union, as well as Qatar. Uptake of the vaccine has been slower than expected in the U.S., but recent approval in the E.U. should help boost international sales as it launches in new markets in 2025. Moderna is also expecting to get approval to expand the label to high-risk people under the age of 60. It sees the expansion of the product to younger adults as having a $10 billion total addressable market (TAM).
Moderna is also looking to bring 10 new products to market over the next three years. This includes the expanded label use of a vaccine for RSV, as well as a new COVID vaccine and a combined flu plus COVID vaccine for adults 50 and over that it expects to file for this year. It's also looking at a new flu vaccine that can be more rapidly updated to attack the latest strains. It sees this as a $7 billion total addressable market, and its new COVID vaccine as having an $8 billion TAM.
Moderna is looking at vaccines for illnesses such as norovirus and cytomegalovirus, which can cause a number of birth defects. In addition, it's working with Merck to develop a cancer vaccine.
The company said it's looking to reduce the pace of its research and development (R&D) spending, while still focusing on its major clinical programs. Overall, it's looking to reduce R&D by $1.1 billion annually starting in 2027. That would drop it from around $4.8 billion this year to $3.7 billion in 2027.
Moderna expects to be operating cash flow breakeven in 2028 with revenue of $6 billion. It said its balance sheet was sufficient to fund its current R&D investments without having to raise capital.
Looking ahead, management forecasts 2025 revenue to be between $2.5 billion and $3.5 billion, and roughly expects a 25% compounded annual growth rate (CAGR) between 2026 and 2028.
Image source: Getty Images.
Is it time to buy the beaten-down stock?
Moderna put forth an ambitious plan to grow revenue and get to operating cash flow breakeven over the next few years. However, it will need to see its new vaccines get approved by the FDA and for them to gain acceptance as well. With many of the products initially aimed at respiratory illnesses, the lower-than-expected initial uptake of mRESVIA and skepticism around COVID booster vaccines may not bode well for getting the sales uplift the company is hoping for.
At the same time, Moderna will be burning through the nice cash pile it has accumulated. It currently has $8.5 billion in cash and no debt on its balance sheet. It had cash outflows of $2.6 billion the first six months of this year.
With a market cap of around $27 billion, meanwhile, the stock is pricey for a company projecting around $3 billion in revenue next year that is losing money and burning through cash. That's a forward price-to-sales ratio of about 9 times.
As such, I think investors should stay on the sidelines with Moderna. Even after its big declines, there appears to be more potential downside ahead.
