A healthcare worker administering a vaccination for Covid-19 in Munich. Moderna has sold or contracted to sell $36 billion worth of its Covid-19 vaccine since the start of 2021.
Michaela Handrek-Rehle/Bloomberg
In 2019, four pharmaceutical giants shared virtually all of the $33 billion worth of vaccine revenue earned worldwide.
Moderna (ticker: MRNA), meanwhile, had just 830 employees and no product sales.
The pandemic has upended the vaccine business. Moderna has sold or contracted to sell $36 billion worth of its Covid-19 vaccine since the start of 2021. Now, as the pandemic begins to ease, the vaccine heavyweights, led by Sanofi (SNY) and Pfizer (PFE), are ready to reclaim their turf.
Moderna shares, which rose more than 1,100% between the start of 2020 and the middle of 2021, are sliding. Today, Moderna’s market value is $134 billion less than it was in August. The stock is down 41% in January alone. If the disruption of the vaccine market caused by Covid-19 outlasts the pandemic, its shares are cheap for a company that delivered 800 million doses last year. Investors, however, should be ready to ride out a transition to a postpandemic world that could take a number of years to play out.
Moderna’s shares were below $15 when Barron’s highlighted the company in a cover story in August 2019, and at $168 when we recommended the stock in April 2021. Shares rose to almost $500 in early August, but are back down to a recent $150.
The case we made in April, that Moderna’s odds of repeating its Covid-19 vaccine success are good, still holds, with a caveat: A gap in infrastructure, personnel, relationships, and organizational maturity between Moderna and the vaccine incumbents will pose hurdles over the next several years. If it can use its huge pile of cash to grow up, Moderna can be an attractive long-term play.
“We are still probably culturally like the biotech that fought its way into existence,” Moderna’s president, Dr. Stephen Hoge, tells Barron’s. “I think there’s some maturing that we are all going to have to do as we become clearly an enduring company.”
The market for vaccines is different than it is for other drugs. Vaccines are largely commoditized, which means that manufacturers compete on price for mostly government buyers. On the U.S. private market, adult influenza vaccines generally cost around $18. Even vaccines that face little competition are inexpensive relative to other branded pharmaceuticals.
To avoid commoditization, Moderna plans to sell a premium combination vaccine that protects against Covid-19, the flu, and, eventually, other respiratory viruses.
Yet the big vaccine players are already edging into Moderna’s turf. Whenever global regulators approve an mRNA-based flu vaccine, it’s likely Moderna won’t have the only one. Sanofi and Pfizer are testing their own mRNA-based flu vaccines.
Early data on Moderna’s flu vaccine, meanwhile, has been uninspiring. In an interim readout from a Phase 1 trial, a majority of participants ages 18 to 49 reported reactions like fatigue and muscle aches, which present a serious barrier when competing against approved flu vaccines with milder reactions.
Actually selling the shots is hard. Despite having what might be the best Covid-19 vaccine in the world, Moderna has already seen its market share slip. It isn’t clear if Moderna has the infrastructure to compete with the big vaccine makers. That’s a case that Sanofi’s CEO, Paul Hudson, makes.
“You don’t need a big infrastructure if you’re negotiating in a pandemic, where everybody’s calling you and asking, ‘Can we order some?’ ” Hudson recently told Barron’s. “When you’re in a competitive world across 100-plus countries, you need experts on the ground to do [monitoring for adverse effects], local regulatory. You need a lot of things that you don’t need in a pandemic.”
Vaccine Heavyweights
Moderna will face down four big pharma giants in the post-pandemic vaccine market.
| Company / Ticker | Recent Price | 52-Wk Change | Market Val (bil) | 2022E P/E | 2019 vaccine sales (bil) |
|---|---|---|---|---|---|
| Moderna / MRNA | $154.96 | 2.0% | $62.9 | 5.6 | None |
| BioNTech / BNTX | 160.70 | 51.2 | 39.0 | 4.3 | None |
| Pfizer / PFE | 53.01 | 42.1 | 297.5 | 8.2 | $6.5 |
| Sanofi / SNY | 51.32 | 4.4 | 129.7 | 12.5 | 6.4CK |
| Merck / MRK | 79.14 | 3.4 | 200.0 | 10.9 | 8.0CK |
| GlaxoSmithKline / GSK | 44.15 | 12.5 | 111.1 | 13.9 | 9.3 |
E=estimate
Sources: Bloomberg; company reports
Moderna now has nearly 3,000 employees and says it has staff in the 10 most important countries. That’s a quick ramp-up, but it’s well short of the 15,000 people employed by Sanofi’s vaccines division alone. Sanofi has a presence in 90 countries, and manufacturing sites in 32.
“We don’t have the gift of 175 years of revenue and 100,000 employees,” Hoge acknowledges. He argues, though, that Moderna’s work during the pandemic built relationships with buyers that will help long after.
Moderna also has plenty of cash. Wall Street analysts estimate that the company will have $27.4 billion by the end of this year, according to FactSet. That enormous bankroll constitutes the best case for Moderna. With that cash, perhaps it can bulk itself up quickly enough to compete on a level with Pfizer and Sanofi.
Other challenges await. In December, a federal appeals court sided against Moderna on a patent issue. That sets the stage for a possible legal battle involving Moderna and Arbutus Biopharma (ABUS), which holds the patents, and Roivant Sciences (ROIV), which has licensed them. The companies won’t discuss possible future litigation. SVB Leerink analyst Dr. Mani Foroohar has estimated that any settlement Moderna might reach would likely include a “single-digit royalty on vaccine sales.” A 3% royalty, he wrote, would cost Moderna about $330 million plus a share of royalties through 2029.
A bigger issue is a dispute last year between Moderna and the National Institutes of Health over credit for inventing the genetic sequence used in its Covid-19 vaccine, which resulted in the NIH director publicly threatening legal action.
Moderna has since backed down, but the spat wasn’t great for a company whose customers are generally government entities. “Taking actions that sour one’s relations with governments, potentially, or create the appearance that one is not playing by the same rules as others, is generally bad for one’s brand value with governments,” Foroohar says.
Hoge says he regrets “the way this has been politicized, and the way the story has played out.” He portrays the dispute as a technical disagreement that Moderna thought it had time to work out privately with NIH. “I think there’s almost naiveté to the way we approached some of these things,” he says. “If we had hundreds of people in PR and government affairs, they would have said no, no, no, we need to be careful about these things.”
Two years ago, no one outside of biotech had heard of Moderna. Now, it is the most famous biotech in history.
Every day, Hoge says, “we are humbled by, oh we’re on a big stage now. And we’re still kind of the gawky kid who made good, but like you can point out our flaws because we’ve got them. We are not polished.”
How long will it take for that gawky kid to grow up? Foroohar isn’t optimistic: “It is, in our view, the Shakespearean flaw in Moderna’s current management and operational structure. It’s reparable, of course. One can build infrastructure, one can change leadership, one can alter one’s approach. But thus far Moderna has shown no intent to do so.”
It’s up to Moderna to prove him wrong. For patient investors, it’s an opportunity to bet on a powerful platform that struck gold once before.
Write to Josh Nathan-Kazis at [email protected]
