Moderna’s (-2.01%) challenges might endure longer than initially anticipated. The biotech firm witnessed a decline in both sales and stock price as demand for its coronavirus vaccine diminished, yet it appeared to be on a path to recovery. Approval for its new respiratory syncytial virus (RSV) vaccine was granted, it reported promising data from late-stage trial candidates, and shares rose by approximately 20% in the year’s first half.
However, Moderna’s recent updates haven’t been as favorable. Last month, the company adjusted its coronavirus vaccine revenue projections downward due to reduced sales. In its latest announcement, Moderna unveiled significant strategic changes. The company intends to cut over $1 billion from its annual research and development (R&D) budget starting in 2027 and will discontinue five programs, forecasting a break-even point in 2028 instead of 2026.
Given this surprising update, should investors consider buying the stock in hopes that these efforts will drive growth, or is it time to sell? Let’s delve deeper.
Understanding Moderna’s Decisions
To comprehend Moderna’s current strategy, we must examine the key points discussed during its annual R&D day and the rationale behind its decisions. By reducing R&D expenditures and trimming certain programs, Moderna anticipates launching fewer products in the coming years. The company now projects 10 approvals over the next three years, a reduction from last year’s forecast of up to 15 new products within five years.
“The scale of our late-stage pipeline, coupled with the challenge of launching products, necessitates a focus on delivering these 10 products to patients, slowing the pace of new R&D investments, and expanding our commercial operations,” stated CEO Stéphane Bancel.
Moderna had been expanding too rapidly. Now, to achieve breakeven and future profitability, the company is concentrating on key initiatives, guiding them through the final development stages.
As part of this strategic shift, Moderna will reduce its R&D investment by 20% for the period from 2025 through 2028, bringing it to $16 billion. This doesn’t imply neglecting high-priority programs; for instance, investments in oncology will increase, while funding in other areas like rare-disease therapeutics will slow.
Moderna’s Challenges
The downside is that Moderna will take longer than initially anticipated to reach the break-even point. Shareholders, already disheartened by declining sales in recent years, may not react favorably. Potential investors might not see the biotech as a compelling growth opportunity at present.
These factors could impact the stock’s future. However, it’s crucial to adopt a long-term perspective with Moderna and recognize its positive attributes. The company’s efforts to prioritize and refine its strategy to achieve its objectives are commendable, even if milestones like breakeven are delayed.
Moderna has some promising prospects ahead. The company expects its respiratory vaccines to be profitable this year and beyond. Additionally, it plans to seek regulatory approval for three potential products by year’s end: a next-generation coronavirus vaccine, a combined influenza/coronavirus vaccine, and an RSV vaccine for younger high-risk adults.
Moreover, Moderna possesses the financial resources to execute its strategy and evolve into a multiproduct, profitable enterprise. It has sufficient funds to achieve its break-even goal without requiring additional equity, a significant advantage.
Evaluating Your Investment Strategy
Returning to the question: Is Moderna’s stock a buy or a sell? The answer largely depends on your personal investment strategy. If you’ve held Moderna shares for some time and could secure a profit by selling, while seeking other opportunities, you might consider trimming your position.
Conversely, if you’re willing to hold on for a few more years, it could prove beneficial. (Purchasing the stock now, amidst its dip, might also be a savvy decision.) Moderna has five respiratory vaccines with positive phase 3 data and five non-respiratory candidates engaged in pivotal studies. There’s reason for optimism regarding the company’s product approval forecasts and, consequently, its future revenue potential.
Therefore, Moderna could be an excellent investment if you’re patient enough to wait for the storm to pass.
Seize This Second Chance for a Potentially Lucrative Opportunity
Have you ever felt you missed the opportunity to invest in the most successful stocks? Here’s an opportunity you won’t want to overlook.
Occasionally, our expert analysts issue a “Double Down” recommendation for companies poised for significant growth. If you’re concerned that you’ve missed your chance to invest, now is the perfect moment to buy before it’s too late. The numbers tell the story:
Nvidia: If you had invested $1,000 when we doubled down in 2009, you’d now have $308,911!*
Apple: A $1,000 investment when we doubled down in 2008 would be worth $42,142!*
Netflix: A $1,000 investment when we doubled down in 2004 would have grown to $370,385!*
At present, we are issuing “Double Down” alerts for three exceptional companies, and such an opportunity may not arise again soon.
Discover 3 “Double Down” stocks ›
*Stock Advisor returns as of 09/14/2024
