Should You Buy This Stock After a Regulatory Setback?
The past two-and-a-half years have been rough for Moderna (NASDAQ: MRNA). Though the biotech was highly successful in the COVID-19 vaccine market, investors rightly expecting this niche to shrink started selling off the stock in early 2022. The vaccine maker's shares are down by 43% since then.
Moderna isn't resting on its laurels, though. The company is developing several exciting candidates. Unfortunately, the most advanced of the bunch recently ran into a regulatory setback. Let's look deeper into that recent news and what it could mean for investors.
An unexpected delay
Moderna is developing mRNA-1345, a vaccine for the respiratory syncytial virus (RSV), which infects patients' lungs and respiratory tracts. Though the virus is generally not a grave danger for healthy adults and most children, some populations can get severe infections. These include older seniors, infants younger than one, and people with various health conditions that lead to weakened immune systems.
The RSV vaccine market is pretty young. The first products were approved just last year. So Moderna isn't too late to the party. The company issued an application for approval for its candidate last year. The U.S. Food and Drug Administration (FDA) initially set a Prescription Drug User Fee Act (PDUFA) date (by when it would complete the review of Moderna's application) of May 12. However, earlier this month, the FDA notified Moderna that there would be a delay due to administrative constraints.
The health-regulatory agency said it now expects to rule on Moderna's application by the end of May.
It's not that big a deal
Biotech investors aren't fond of regulatory delays. Brand-new products have a limited shelf life before they run out of patent protection. The less time they spend on the market, the less they will generate in sales. But in this case, the damage is pretty mild: It should be a delay of about three weeks. Furthermore, the FDA did not raise concerns regarding the safety or efficacy of Moderna's candidate.
Strictly speaking, that doesn't mean there aren't any. Perhaps the agency will reject Moderna's applications on such grounds. But at this point, it seems unlikely. If it intended to do that, chances are high that it would have notified Moderna of such problems at the same time as it announced the delay. In other words, there is an excellent chance that the biotech's RSV vaccine will hit the market soon.
Here's what that could mean for its financial results. Some analysts expect the vaccine to generate annual sales of $913 million by 2028. For context, the company reported revenue of $167 million in the first quarter, which was a significant drop from the $1.9 billion reported in the year-ago period. mRNA-1345's uptake will take some time, but it should contribute meaningfully to a company with somewhat uncertain year-to-year coronavirus-related sales and with no other products on the market.
Furthermore, it isn't as though all of Moderna's hopes are pinned onto mRNA-1345. The company is developing several promising products. Its late-stage pipeline is exciting. The company is running phase 3 studies for a combination COVID/flu vaccine, a cytomegalovirus vaccine (there are none approved in this area), and a personalized cancer vaccine.
Moderna might not have a 100% success rate -- no biotech does. But it has enough "shots on goal," especially when including its phase 2 pipeline, that it will be able to score at least a few times in the next couple of years. So, investors should expect solid clinical and regulatory progress moving forward for the biotech.
Moderna's mRNA vaccine platform proved its value in the coronavirus market. The company has many more unmet needs to pursue, especially given its highly innovative approach. Though it hasn't been keeping pace with the broader market since early 2022, Moderna can still deliver excellent results to those who stick with the stock for the long run.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
