Vaccine Expansion Plans Could Shape Future Despite Market Challenges And Legal Risks

Key Takeaways

• Strategic product innovation in combining vaccines could enhance long-term revenue streams and international market positioning.
  
• Improved operational efficiencies and leadership focus may bolster margins and support sustainable growth strategies.
  
• Missed opportunities and competition in key markets, coupled with declining sales and legal challenges, pose risks to Moderna's future revenue and earnings stability.

Catalysts

A biotechnology company, discovers, develops, and commercializes messenger RNA therapeutics and vaccines for the treatment of infectious diseases, immuno-oncology, rare diseases, autoimmune, and cardiovascular diseases in the United States, Europe, and internationally.

• Moderna is expecting long-term market expansion opportunities in the COVID vaccine segment by aligning COVID vaccination rates closer to flu, especially in underpenetrated channels like integrated delivery networks (IDNs) and government segments, potentially boosting future revenues.
  
• The potential approval and launch of a combination COVID/flu vaccine could increase vaccination rates and provide a new revenue stream, impacting future revenue positively.
  
• Expansion into international markets through approvals for its RSV vaccine outside the U.S. is anticipated to drive future revenue growth as sales in these new regions commence in 2025.
  
• Moderna's plans to improve cost efficiencies, including a reduction in R&D expenses by $1.1 billion by 2027 and current reductions in SG&A expenses, may help improve net margins and overall earnings.
  
• The strengthening of Moderna's executive team and strategic focus on commercial organization structure could further enhance operational efficiency and execution of their growth strategies, potentially impacting future earnings positively.

Moderna Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Moderna's revenue will decrease by 10.0% 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 -43.8% to the average US Biotechs industry of 15.2% in 3 years.
• If Moderna's profit margin were to converge on the industry average, you could expect earnings to reach $563.9 million (and earnings per share of $1.43) by about February 2028, up from $-2.2 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 52.8x on those 2028 earnings, up from -5.6x today. This future PE is greater than the current PE for the US Biotechs industry at 17.2x.
• Analysts expect the number of shares outstanding to grow by 0.72% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.7%, as per the Simply Wall St company report.

Moderna Future Earnings Per Share Growth

Risks

• The third-quarter mRESVIA sales were below expectations, attributed to missed contracting opportunities and significant competitor inventory buildup, which could challenge Moderna's future revenue growth and market share in the RSV market.
  
• The overall international sales were lower compared to the previous year due to fewer deferred orders, suggesting challenges in sustaining revenue from international markets.
  
• Despite efforts to drive efficiencies, ongoing reductions in R&D and SG&A expenses point to necessary cost management rather than substantial revenue growth, potentially limiting future earnings leverage.
  
• The decline in COVID vaccination rates and competition in the flu and COVID markets, along with uncertainties in market share retention, could negatively impact future revenues.
  
• Litigation risks, including a lawsuit from GSK concerning COVID vaccine technology, present a potential financial liability that could affect future earnings and cash flow stability.

Valuation

• The analysts have a consensus price target of $62.324 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 $27.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.7 billion, earnings will come to $563.9 million, and it would be trading on a PE ratio of 52.8x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of $32.6, the analyst price target of $62.32 is 47.7% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• 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.