Best Stocks of the Year: Moderna Is Number 3

Biotech was in the right place at the right time with the right technology this year.
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As we did in 2019, TheStreet has compiled a list of the best 25 stocks of the year, evaluating everything from stock performance and quarterly results to execution and each stock’s overall story.

After publishing round-ups for the 25th-ranked through the 6th-ranked stocks, we're now running individual articles on each of our top five picks, with the winner to be announced on Monday, Dec. 21.

Picks 25-21 20-16 15-11 10-6 No. 5 No. 4

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Moderna  (MRNA) - Get Report, the biotech company whose coronavirus vaccine candidate is likely to be approved for emergency use by the FDA this week, has seen its stock rise close to 700% this year by being in the right place, at the right time with the right technology.

The Cambridge, Mass.-based company used its novel approach to vaccine development to rapidly develop and test a candidate in mere months, compared with a more standard multi-year process.

Moderna develops vaccines and other treatments through the use of messenger RNA. In the case of the vaccines, the substance is used to induce an anti-body response in healthy people that will fight off infection by disease.

The approach has a couple of key benefits since it in effect gets the body to manufacture its own defenses against a disease, and allows for much faster development of vaccine candidates.

As Moderna says on its web site, “we believe mRNA has the potential to transform how medicines are discovered, developed and manufactured -- at a breadth, speed and scale not common in our industry.”

The coronavirus vaccine is the first Moderna product to advance through late-stage trials for consideration by the FDA, albeit as an emergency use approval.

Moderna’s approach is similar to that of Pfizer  (PFE) - Get Report and BioNTech  (BNTX) - Get Report in their vaccine candidate, which also uses mRNA technology and was approved for emergency use by the FDA last week. 

But with this year’s huge price gains -- up 693% as of Monday's close -- Moderna's future appreciation will depend on near-flawless execution of its production ramp and distribution for the coronavirus vaccine.

Needham analyst Alan Carr recently cut the shares to hold from buy and said that while the stock had performed remarkably well, “we now believe it is fully valued.” Approval from the FDA wouldn’t justify a “meaningfully higher price target,” he said in a note.

Moderna may stand to gain an advantage in the early going of U.S. vaccinations because much of Pfizer’s initial production has been put under contract in other countries. Moderna expects to be able to produce several million vaccines before the end of the year, and up to a billion in 2021.

Indeed, late last week Moderna said the U.S. government had doubled its order for the vaccine to 200 million doses.

Carr acknowledged that stumbles by other vaccine candidate developers such as AstraZeneca  (AZN) - Get Report, Johnson & Johnson  (JNJ) - Get Report and Novavax  (NVAX) - Get Report could offer additional support to Moderna.

TheStreet’s Jim Cramer has said he's a believer in Moderna, but has called the distribution question “a transition issue," as the company moves from being a developer of treatments to a full-scale producer.   

Future stock appreciation will also depend on Moderna's pipeline of other treatment candidates that are still under development.

Those include vaccines against Epstein-Barr virus, Cytomegalovirus (CMV), Zika and Pediatric respiratory syncytial virus (RSV) vaccine.

Moderna is also pursuing exploratory work developing personalized cancer vaccines, as well as other oncology treatments against ovarian cancer and lymphoma. 

Of the other vaccines in development, the Cytomegalovirus, lymphoma and personalized cancer vaccines are in phase 2 testing. Others are in earlier stages. 

How TheStreet Chose the Best Stocks of the Year

TheStreet polled a group of 16 writers and editors at TheStreet, RealMoney, Action Alerts Plus, Stocks Under $10 and Trifecta Stocks and asked them to nominate candidates, and then narrowed that list down to the top 25 stocks. We then asked each of those writers and editors to rank the top 25 from top to bottom, assigning 25 points for a No. 1 ranking, 24 points for a No. 2 ranking, etc. We then totaled the points for each stock to arrive at our final rankings.