Biotech Firm's Focus On New Vaccines Positions It For Future Revenue Diversification

Key Takeaways

• Focus on high-value programs in varied fields could drive sales growth, reducing reliance on COVID-19 products and diversifying revenue streams.
  
• Strategic reduction in R&D and operational costs aims to improve net margins, enhancing profitability and supporting long-term earnings growth.
  
• Declining COVID product sales and increased costs led to financial instability, while uncertain vaccine demand and regulatory challenges threaten revenue and product pipeline growth.

Catalysts

A biotechnology company, provides messenger RNA medicines in the United States, Europe, and internationally.

• Moderna's focus on 10 high-value programs for approval over the next 3 years, including diverse areas like respiratory vaccines, oncology, and rare diseases, is expected to drive future sales growth and diversification from a reliance on COVID-19-related products, thereby positively impacting revenue.
  
• The company's strategic reduction in R&D expenses through program prioritization is likely to improve net margins by optimizing resource allocation towards high-priority projects, while reducing costs associated with less viable initiatives.
  
• Progress towards multi-product commercialization with approvals of new vaccines and positive results from ongoing clinical trials is positioning Moderna for potential market share expansion, which could significantly boost revenue.
  
• Moderna's continued commitment to operational efficiency and cost optimization, including a substantial reduction in cash costs, is expected to enhance net margins and contribute to long-term earnings growth.
  
• Potential expansion of vaccine approvals and market access, particularly with RSV and flu-COVID combination vaccines in multiple jurisdictions, could lead to increased sales volumes and revenues if approvals are secured and market uptake is favorable.

Moderna Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Moderna's revenue will grow by 1.1% annually over the next 3 years.
• Analysts are not forecasting that Moderna will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Moderna's profit margin will increase from -110.0% to the average US Biotechs industry of 19.6% in 3 years.
• If Moderna's profit margin were to converge on the industry average, you could expect earnings to reach $655.7 million (and earnings per share of $1.66) by about March 2028, up from $-3.6 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 39.4x on those 2028 earnings, up from -3.7x today. This future PE is greater than the current PE for the US Biotechs industry at 19.6x.
• Analysts expect the number of shares outstanding to grow by 0.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.32%, as per the Simply Wall St company report.

Moderna Future Earnings Per Share Growth

Risks

• Moderna reported a net loss of $3.6 billion in 2024, driven by a significant decline in COVID-related product sales and increased costs, which raises concerns about future earnings and financial stability.
  
• The company's 2025 revenue guidance of $1.5 billion to $2.5 billion includes uncertainties related to vaccination rates, market competition, and regulatory approval timelines, potentially impacting revenue targets.
  
• Inventory write-downs remain a challenge for Moderna due to overproduction and adjustments in market demand, affecting cost of sales and overall profit margins.
  
• The clinical hold on the Norovirus vaccine trial following a reported case of Guillain-Barré Syndrome and uncertainties over flu vaccine efficacy can delay product launches, impacting future revenue streams.
  
• The decrease in R&D and SG&A expenses shows efforts in cost reduction, but further cuts in R&D spending may impact the pipeline's ability to deliver new product growth necessary for revenue diversification and future earnings.

Valuation

• The analysts have a consensus price target of $54.614 for Moderna based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $212.0, and the most bearish reporting a price target of just $25.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.3 billion, earnings will come to $655.7 million, and it would be trading on a PE ratio of 39.4x, assuming you use a discount rate of 6.3%.
• Given the current share price of $33.81, the analyst price target of $54.61 is 38.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.