Multibagger in making? Here's why Moderna share price soared 7 times in 2020

Source: Reuters

I am basically from an engineering background but with a little knowledge about bioscience, I would try to explain key terminologies used in the pharma space that are being used in the treatment of COVID.

What is mRNA-based vaccine and why it is different?

mRna are not typical pharma molecules but we can simply say that they are "instruction transfer." Our cells produce proteins for our bodies to function and fight diseases.

So this mRNA - Ribonucleic acid copy of a DNA carries instructions to a mechanism called Ribosomes that help in creating proteins.

So far only Pfizer and Moderna have succeeded with mRNA-based vaccines. Efficacy of these has been so far highest among various vaccine companies.

How vaccine gives the opportunity for some companies?

Necessity is the mother of invention. Such research, trials, and results have triggered the growth of new areas of science and also we are going to need millions of doses soon as the fight against corona is crucial.

So far only a few companies have claimed to have vaccine phase 3 ready but only some of them are more accurate, distributable, and affordable backed by research and trial success data and approvals to come.

In vaccine, we have some companies emerging from biologics and pharma. Also, we need millions of vials, refrigeration systems that prevent nanoparticles from decay with weather, cold chains, logistics companies, and manufacturers of vaccine collaborating with inventors and hospitals and vaccination services. All of them will be beneficial.

Why Moderna share price soared?

So it is like what we call in operation research as Game Theory of the stock market. The prominent competition was among 6 companies. AstraZeneca and Johnson were having no profit approach.

Whereas for Pfizer two things worked in non-favor of stock prices like its own existing large size and earlier temperature required to store it in -70 degree like conditions.

In most of the underdeveloped countries, this kind of deep refrigeration, transport system, and storage is not plausible due to limitations of making as well as heavy cost structure.

Moderna was uniquely placed in both. As its vaccine can be stored at 2 to 8 degrees and size of sales of Moderna last year was relatively way smaller, just 60 million USD. No wonder the share price soared 7 times this year.

It became 3 times from my initial purchase and currently doubled on overall my purchase cost. My calculation was simple, say there are 700 crore people in the world. The average price of the vaccine was earlier estimated to be around $20.

On subsidising approach, let’s assume it can be around Rs. 700-800. Still, that translates to 50 billion USD plus sales. As there are only 6-7 companies that have reached phase 3 trials, even if Moderna like company gets 10% of it, it’s going to be huge for them.

The size of potential revenue was way higher than the size of the current revenue. The point here is future sales of the company should make a huge difference compared to its current size. Only then multibaggers are created.

What is the significance of such mRNA ?

Basically, such experiments of genetic code carrying and interactions were going on for a while but it had issues of its own and such practice was not in place earlier.

With the corona vaccine getting developed, it has opened a door of possibilities to the medical world where possibly such technique can be leveraged to cancer treatments, polio, TB or HIV-like diseases.

Off course it will require huge effort and tests, it does take a lot of validity but the human race is moving forward due to this.  E.g. Moderna has a pipeline of five other antiviral vaccine candidates in clinical testing.

They have another vaccine mRNA-1647, which is being evaluated in phase 2. They also have two cancer vaccine candidates that is developing in partnership with Merck.
What about non mRNA vaccines? Any opportunities there.

Yes, there are. E.g. Novavax – this company is very small in market cap compared to others and has been 20 times only in this year. Their vaccine is not mRNA based but just protein-based. Their pipeline is to experiment an influenza vaccine called NanoFlu.

If successful, a single shot vaccination can be done. Recently their last stage trial got delayed and a lot of success is dependent on it. This too has feasibility and viability with respect to storage and distribution with regular refrigeration.

Earlier a federal government program called “Operation Warp Speed” was awarded $1.6 Billion to Novavax. They are into the development and deployment of vaccines and Covid-19 treatments.

So as opposed to the vaccine race in news, it’s really not a “Winner takes it all” or only the first dose inventor will have all market pie.

There are still developments going on. Any vaccine which has more efficacy, accuracy, viability to store, contain and transport with high production capacity will be doing well for the company. Small players creating large sales will be having share price growth.

Such companies also involve risks with its new rapid developments and also of not bearing desired drug-making at times.

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