The shortened trading week that ended on May 31 was a strange one for the vaccine developer Moderna(NASDAQ: MRNA). Biotech stocks generally rise after a product they spent years developing earns marketing approval, but this isn't what happened.
On Friday, May 31, the Food and Drug Administration (FDA) approved mResvia, a vaccine for respiratory syncytial virus for those 60 and older. The stock finished the week about 14% lower even though the green light doubled the number of products Moderna can sell.
Can Moderna bounce back for investors who buy the dip? To find out, let's look at some reasons the stock fell despite the good news.
Why Moderna stock fell
Moderna's bizarre stock price performance during the week ending May 31 had two main factors. First, enthusiasm for the vaccine developer's artificial intelligence (AI) initiatives rose sharply after the company announced an expanded collaboration with OpenAI in late April.
From the date of Moderna's OpenAI announcement on April 24 through May 24, the biotech stock shot 53% higher, which raised the company's market cap by roughly $20 billion. This is a real head-scratcher because AI applications can't run clinical trials or predict their outcomes.
In theory, AI could help Moderna find new candidates to develop in a clinical setting. If you were paying attention when it developed Spikevax in 2020, you know that rapidly discovering new candidates is something Moderna can do without any assistance from fancy new chatbots.
Anticipation of mResvia's approval also drove Moderna higher, but the stock sold off in response to the news. As is often the case, investors who drove the stock higher didn't consider the competition its new vaccine was facing.
Launching mResvia won't be easy
In May 2023, the FDA approved Arexvy, a respiratory syncytial virus (RSV) vaccine from GSK, for the same population of people 60 or older. Abrysvo, another RSV vaccine from Pfizer, also earned approval last May for those 60 or older. Abrysvo has since been expanded and is now approved as a maternal vaccine that protects newborn infants.
Moderna's RSV vaccine isn't just a year late to the party. It's no more effective than vaccines marketed by the company's larger competitors. In a population of older adults, Arexvy reduced the risk of lower respiratory tract disease (LRTD) caused by RSV by 82.6% compared to a placebo. Abrysvo reduced the risk of RSV-associated LRTD with three or more symptoms by 85.7% compared to placebo.
In the study underpinning mResvia's approval, it reduced the risk of RSV-associated LRTD with three or more symptoms by 80.9% compared to the placebo group.
A lackluster efficacy profile isn't mResvia's only downside. Abrysvo and Arexvy don't need to stay frozen and can be stored for the long term in the same refrigerator as other traditional vaccines. Moderna's RNA vaccine is less stable and requires frozen storage below 5 degrees Fahrenheit.
A buy now?
With dozens of new drug candidates in clinical-stage trials, Moderna's research and development expenses exceeded $1 billion during the first three months of 2023. Before you think about buying this stock, you should know the company isn't selling nearly enough Spikevax lately to cover its expenses.
First-quarter sales of Spikevax plummeted 91% year over year to just $167 million. As a result, Moderna lost a whopping $1.2 billion in the first quarter. The company expects about $4 billion in total sales this year, although the vast majority of that revenue is expected near the end of 2024.
Don't expect mResvia sales to bring Moderna's bottom line back into positive territory. GSK reported that first-quarter Arexvy sales reached $232 million. With a similar efficacy profile and a late start, we can expect a significantly less successful launch from Moderna's RSV vaccine.
The company is sitting on a lot of cash, but it's also in expensive late-stage clinical development with several vaccine programs. On March 31, it had $12.2 billion in cash and investments, or $1.1 billion less than it had a year earlier.
I don't expect much from mResvia, but there's a chance that Moderna's late-stage pipeline can deliver at least one blockbuster over the next several years. While the company might be able to shepherd its bottom line into positive territory before its huge cash cushion dwindles to nothing, that isn't enough to make it an attractive stock to buy now.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends GSK and Moderna. The Motley Fool has a disclosure policy.
