After rising more than 450% in 2020, the rapid rally in the stock of Moderna (NASDAQ:) continues this year. Profits — propelled by the biotech's breakthrough vaccine against COVID-19 — have been so strong that this 11-year-old company is now approaching a market cap of $100 billion.
The stock rose nearly 5% on Wednesday, trading at a record $246.92, before closing at $246.40, valuing Cambridge, Massachusetts-based Moderna at nearly $99 billion.
Modern weekly chart.
This high valuation level, which puts Moderna in the same league as global pharmaceutical giants such as Sanofi (NASDAQ:) and GlaxoSmithKline (NYSE:), also raises an important question: where are MRNA stocks going?
The answer to that question depends very much on the path taken by the global health crisis and the company's success in moving beyond vaccines to unlock the full potential of the mRNA technology on which the COVID vaccine is based. unlocking as a cure for other diseases. For now, analysts' forecasts for the company's near-term sales potential vary widely.
According to consensus estimates published on Investing.com, the majority of analysts surveyed currently have a buy recommendation for the stock, but a significant minority do not hold the same conviction about biotechnology.
Moderna, which had nominal sales before the pandemic, could range from $13 billion to $22 billion by 2021, according to analysts' forecasts. But after this year, predicting vaccine sales becomes trickier.
Morningstar analyst Karen Andersen says in a Bloomberg report that the global vaccine market could rise to $72 billion this year, then fall to $65 billion in 2022 and $8 billion the following year.
"The size of the slide will depend on how many people need booster shots, how often and whether Moderna, Pfizer (NYSE:) and others will be able to raise prices to compensate for a smaller market", says the report.
Already at peak valuation?
Analysts about biotech companies, who thrive on their first batch of products, say that in such cases, companies peak at about 10 times future sales, which they have the potential to make in the future. next three to five years.
Applying this rule to Moderna suggests that the company may have already reached its peak valuation and that it will be difficult for the stock to move higher from these levels. Companies as diverse as Alexion (NASDAQ:) and Gilead (NASDAQ:) have shown investors a similar path after launching their breakthrough drugs.
Gilead, which launched a groundbreaking hepatitis C drug in late 2013, saw its sales climb to $19 billion in 2015, but then began to decline as competition intensified. Gilead's value followed suit, falling as much as $100 billion from its high of nearly $180 billion.
In addition to the COVID-19 pandemic, Moderna executives are optimistic that their technology will bring a cure for other respiratory infectious diseases, such as respiratory syncytial virus or RSV; and cytomegalovirus, or CMV; as well as other potential therapies for conditions, including cancers and inflammatory diseases.
Betting on other breakthroughs may not yield windfalls as quickly as the emergency authorization for the COVID vaccines. Most of Moderna's experimental vaccines are still in the early stages of human trials, except for the cytomegalovirus injection. That could become a multi-billion dollar product if it works. Moderna also plans human trials this year with a vaccine against the Epstein-Barr virus, which causes mononucleosis.
Starting point
Moderna stocks have proven to be a great bet for early investors. However, the future path is still uncertain after such a powerful rally that has pushed the stock beyond the fundamentals of future vaccine sales.
