<p>If you buy Modern (NASDAQ: MRNA) today, you probably did not look at its finances. Even though the MRNA share has had a good run, the future looks tough.
Throughout 2019, Modern had sales of $ 60 million. It lost $ 514 million, $ 1.55 per share. Operating cash flow was $ 459 million.
The market value of all this? Nearly $ 10 billion.
The reason, as with everything, is Coronavirus. Modern is one of two companies, Johnson & Johnson (NYSE: JNJ) is the other, which is preparing for mass production of a Coronavirus vaccine, even though human tests have begun.
Modern Beyond Coronavirus
As I wrote at the IPO in December, Moderna is part of the next big wave in biotechnology.
If you bought shares at the IPO, you felt stupid. A downward day in the rest of the market sent it $ 4.10 during the IPO. On March 31, you look golden. The stock price of $ 30 is a gain of over 20%.
Modern derives its name from Messenger RNA, called mRNA. This acts as a biochemical systems analyst. It is translated between DNA instructions and the creation of polypeptides and proteins by ribosomes. The idea is to create synthetic mRNA which, once injected, causes the body to create its own cures.
The modern founders come from MIT and Harvard. The technology had already given Moderna a huge pipeline of drug candidates before the IPO. Prior to the IPO, it was known as one of biotechnology’s most secret start-ups.
Critics accused it of a toxic work environment that drove away top talent. They said that it encountered barriers in many projects. To this I answer that William Shockley is also said to be a jerk, but transistors and integrated circuits are still cool.
MRNA layer and the virus
Our Vince Martin has called Modern a longshot speculation. Many drugs and vaccines currently being tested against Coronavirus will fail the test.
The success of Moderna’s IPO means that it has the capital to weather the storm. It may delay the testing of other drugs, even restarting them later, while focusing on its vaccine candidate, called mRNA-1273.
A trial has already begun in Seattle. Healthy volunteers receive different doses to test safety and efficacy. Modern could quickly produce it with its mRNA technology. Modern hopes that health workers will receive the vaccine in the autumn.
There are still three problems. First, there are many other candidates, including one from China. Second, the one who succeeds will not have the pricing that some believe they will do. The political pushback is just getting too big. Third, just because a politician talks about your mass production capacity does not mean you should make money.
The conclusion on the MRNA share
Speculating on Modern based on coronavirus is stupid, from an economic point of view. From the speculator’s point of view, it makes sense. Speculators are investing in encryption keys.
Win or lose, and we ask all Moderna to win, the price of the share will come down at some point. The winnings for the winner here will be limited.
If the Moderna vaccine is successful, however, it will be an important validation of mRNA technology. I have written many times before that the treatment of DNA as a programming language, as Moderna does, will be one of the three major technological trends of this decade and its longest duration.
But we are still at the Visicalc stage of this revolution. We do not know which company will be Apple (NASDAQ: AAPL) or Microsoft (NASDAQ: MSFT) in this new era. Then there was only one sure thing. International Business Machines (NYSE: IBM).
Dana Blankenhorn has been a finance and technology journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available in the Amazon Kindle store. Write him on firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. At the time of writing, he owned shares in MSFT and AAPL.