Coronavirus vaccine stocks have been among the best performers in the market for the past two years. Novavax soared 2,700% in 2020 on optimism about its COVID-19 program. Modern (ARNM -1.79%) increased by 1,200% and BioNTech gained more than 600% between the start of 2020 and the end of last year. Even the pharmaceutical giant Pfizer increased by 59% during this period.
If you missed these big gains, you have to recognize that vaccine stocks are unlikely to repeat this outstanding performance. But there are still plenty of investment opportunities in the healthcare world, especially if you plan to buy and hold stocks for the long term. One of those strong opportunities happens to be a stockpile of coronavirus vaccines – today. But its next sources of growth could come from other indices.
Much more to this well-known company
The company I’m talking about is none other than Moderna. We all think of its popular COVID-19 vaccine when we think of this innovative biotech player. It’s natural – the vaccine is its only marketed product at the moment. But there is much more to Moderna.
The coronavirus vaccine gave him two important things that could help him achieve lasting success. First, it has helped biotech build up $19.3 billion in cash and continues to generate billions of dollars in revenue — funds the company can use to advance its candidates and make acquisitions.
The vaccine has also proven that therapies based on Moderna’s mRNA technology work in humans. This is important because its entire pipeline is based on this technology. As Moderna Chairman Stephen Hoge said on the latest earnings call, “we believe the success of our COVID vaccine has reduced the risks of our vaccine pipeline.”
And speaking of pipeline, that’s precisely why Moderna is my best biotech stock to buy and hold right now. The company has 46 programs in development. Apart from its COVID-19 program, three of them are in advanced development: vaccine candidates against cytomegalovirus (CMV), respiratory syncytial virus (RSV) and influenza.
Respiratory candidates — RSV and influenza — could launch in the next two to three years if all goes well, Moderna said.
The flu vaccine market is crowded. But there are no approved RSV and CMV vaccines, so these provide opportunities for Moderna to seize first-to-market advantage. If either gets regulatory approval (or both do), the opportunities could be significant. So I wouldn’t expect Moderna to be a one-product company for long.
Moderna shares now trade at less than 6 times forward earnings estimates, down from 18 about a year ago.
Of course, it is possible that revenues will decline from current levels. Many people who received their first COVID-19 vaccines may not opt for booster shots every year. But even if demand for the vaccine declines, sales could remain strong. Large percentages of these most-at-risk populations will likely opt for boosters. And Moderna plans to charge more for its vaccine once it is sold directly to pharmacies and healthcare providers rather than to governments.
So if Moderna’s vaccine revenue declines, it could be phased in. Meanwhile, the company is advancing pipeline products that could soon make up for lost revenue from the coronavirus vaccine.
The long-term picture
With so many programs in the works, Moderna is gearing up to become a multi-product company over time.
For example, the company has a combined coronavirus and flu vaccine candidate in preclinical studies. This could be a winning product of the future as it would be appealing to those who usually get their flu shot every year. Also in preclinical studies, Moderna is working with a partner Vertex Pharmaceuticals on an inhaled treatment candidate for patients with cystic fibrosis who cannot be effectively treated with today’s most effective drugs. And Moderna’s personalized cancer vaccine candidate, which is in Phase 2 trials, could be a game-changer.
All of this means that at the current price, Moderna’s stock is a bargain. His earning story right now may be big – but it’s possible there’s a lot more to come. That’s why it would be a great idea to buy the shares now and hold them for the long term.
Adria Cimino holds positions at Vertex Pharmaceuticals. The Motley Fool fills positions and recommends Vertex Pharmaceuticals. The Motley Fool recommends Moderna Inc. The Motley Fool has a disclosure policy.