Beware the Moderna Vaccine Hype

Jon Markman

Shares of Moderna ((MRNA) -Get Report) are shooting higher today after President Trump announced the company won a contract to produce 100 million doses of its COVID-19 vaccine candidate -- but the ask is not remotely possible, at least not yet.

Investors are over-reacting. Don’t chase shares higher.

Moderna is in phase III trials for a promising experimental vaccine. It contains genetic material called messenger RNA, or mRNA. The big breakthrough is this new vaccine teaches our immune systems to eliminate the virus before it takes over our bodies, causing illness.

The problem, and it’s a big one, is mRNA vaccines are hard to scale up. They haven’t been created at scale before. The idea that Moderna is going to pull 100 million doses out of facilities that don’t yet exist and haven’t manufactured mRNA drugs in the past is wishful thinking at best.

The announcement is theater, made to seem more real than it is.

An official press release from the U.S. Department of Health and Human Services and the Department of Defense is a nice touch. Comments from President that the Pentagon is ready to deliver the vaccine as soon as it is approved by the Food and Drug Administration makes it seem as though whipping up doses will be a snap, too. It will not be.

Bill Gates, in April, began construction of factories for seven new COVID-19 vaccines. The co-founder of Microsoft ((MSFT) -Get Report) said some of the factories would require special equipment, and that doses at scale will not arrive until the middle of 2021.

It’s not all bad news, though.

Moderna did begin a 30,000 patient trial at the end of last month. Managers expect key efficacy data ahead of Thanksgiving. Assuming the trials are successful and there is a fast track approval process, it’s reasonable to expect some vaccine doses will be available in the early part of 2021. But it will not be 100 million doses.


Speaking of those doses. The figure of 100 million has become a motif.

HHS reached a deal earlier this year for 100 million doses from Pfizer ((PFE) -Get Report), with an option for an option for 500 million more. Weeks later the agency announced a 100 million dose deal with Johnson and Johnson ((JNJ) -Get Report). A secondary agreement called for an additional 200 million units. Sanofi and GlaxoSmithKline got a deal for, you guessed it, 100 million does, with a 500 million dose option.

Aside from the math, the White House is seeking 1.6 billion doses, 100 million doses is clever marketing. The number is substantial enough to seem serious, yet not too large to detract from other news announcements. The secret of showmanship is to keep hitting the mark.

Moderna shares trade at 37x forward earnings. I’m not bearish for the stock. Longer-term I do expect its mRNA vaccine to be one of several that make it to market. Try to buy near the bottom of the recent range, around $60 to $65, after the initial over-reaction subsides.

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