mRESVIA Approvals And Oncology Progress Will Create Future Opportunities

Key Takeaways

• Expansion into new international markets and oncology advancements could increase revenue, diversify offerings, and enhance market share.
  
• Strategic cost reductions and potential regulatory approvals for new products promise improved margins and significant future earnings growth.
  
• Decreased revenue and high cost of sales, coupled with uncertainties in market and product approvals, pose challenges to Moderna's profitability and future growth.

Catalysts

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

• Expansion into new markets for commercial products, such as recent approvals for mRESVIA in multiple countries and the opportunity to compete for COVID vaccine business in Europe, indicates potential for increased revenue from international sales.
  
• Advancements in the oncology pipeline, including Phase III progress in melanoma and non-small cell lung cancer, could lead to diversification and growth in sales as Moderna targets significant markets in cancer treatment, impacting future revenues and market share.
  
• Strategic decisions to streamline operations and achieve significant cost reductions, with a plan to cut an additional $1.4 billion to $1.7 billion by 2027, are expected to improve net margins and move towards a breakeven target by 2028.
  
• Potential regulatory approvals for up to 10 new product targets, estimated to address a market of over $30 billion, promise significant future revenue streams, enhancing overall earnings growth.
  
• Cost efficiencies achieved through reductions in R&D and SG&A expenses, alongside continued investment in a diversified late-stage pipeline, are likely to improve net margins and increase profitability.

Moderna Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Moderna's revenue will grow by 2.3% 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 -105.7% to the average US Biotechs industry of 16.4% in 3 years.
• If Moderna's profit margin were to converge on the industry average, you could expect earnings to reach $558.7 million (and earnings per share of $1.41) by about May 2028, up from $-3.4 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.4 billion in earnings, and the most bearish expecting $-3.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 40.0x on those 2028 earnings, up from -2.8x today. This future PE is greater than the current PE for the US Biotechs industry at 18.3x.
• Analysts expect the number of shares outstanding to grow by 0.91% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.24%, as per the Simply Wall St company report.

Moderna Future Earnings Per Share Growth

Risks

• Moderna reported a decrease in total revenue by 35% year-over-year for Q1 2025, driven by lower vaccination rates and seasonality effects in their respiratory vaccine business, impacting overall revenue.
  
• The cost of sales represented 104% of net product sales in Q1 2025, which was significantly up from 58% the previous year, attributed to lower sales volume and revenue mix, negatively impacting net margins.
  
• Moderna has experienced a substantial net loss of $1 billion for the first quarter of 2025, albeit an improvement from the prior year, but still reflecting ongoing challenges in achieving profitability, thus impacting earnings.
  
• The company highlights uncertainties in factors such as vaccination rates, competitive market environment, the size of the RSV market, and the timing of product approvals, which could result in significant variability in future revenues.
  
• The projected requirement for flu vaccine efficacy data before approval of the flu-COVID combination vaccine may delay potential revenue generation from this product, adding uncertainty to future revenue growth.

Valuation

• The analysts have a consensus price target of $46.962 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 $198.0, and the most bearish reporting a price target of just $20.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.4 billion, earnings will come to $558.7 million, and it would be trading on a PE ratio of 40.0x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $24.43, the analyst price target of $46.96 is 48.0% 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.