Moderna stock is up by about 270% year-to-date, as it emerged a front runner in the race to develop a vaccine for the highly contagious novel-Coronavirus. Earlier this week, Moderna said that its vaccine candidate – mRNA-1273- produced protective antibodies in a small group of healthy volunteers, based on data from its phase 1 clinical trial, sending its stock and the broader U.S. markets sharply higher. Moreover, the company is proceeding to phase 2 studies, and it indicated that it could begin phase 3 studies around July. However, what happens to Moderna stock if the vaccine fails? It would be unfortunate, but still quite possible, as we outline below.
Our indicative list of 7 U.S. listed companies working on Coronavirus vaccines, which includes Moderna, Inovio, and others, have gained a 270% YTD return on an equally weighted basis. For more details on these stocks and their financials, view Trefis Theme: Coronavirus Vaccine Portfolio
Probability Of Failure Over Phase 2 And Phase 3 Trials
The probability of success for a drug moving from phase 1 of clinical trials to phase 2 stands at about 63%, and for phase 2 to phase 3 the metric is quite low at about 31%. For phase 3 to the new drug application – a stage just before approval – the POS stands at 58%. Overall, the probability of success for a new drug moving from phase 1 to approval stands at just under 10%. This means that there is a reasonably high probability that Moderna’s vaccine could still fail later stage trials. The early data Moderna has provided is based on phase 1 trials which are meant to evaluate the safety and not the efficacy of the vaccine. Moreover, health experts have raised concerns that the data was not sufficient to judge the vaccine. For instance, the company provided data on eight of the 45 subjects who took part in the early study and did not provide data on the ages of the subjects – an important factor as COVID-19 is more serious for older patients.
Johnson & Johnson is also working on COVID-19 vaccines & could offer better downside protection compared to Moderna. Find out more about J&J’s valuation in our analysis Why Johnson & Johnson Looks Undervalued At $145
A Lot To Fall Back On Even If COVID Results Are Unsatisfactory
Even if the COVID vaccine does not yield satisfactory results in later-stage trials, Moderna could have a lot to fall back on. The clinical-stage biotech company has focused on a messenger RNA-based platform for its drug development. mRNA molecules, which provide a temporary set of instructions for cells to generate a protein, can be engineered to bring about therapeutic or preventive effects, making them a “software” of sorts to fight a variety of diseases. The company’s core developments at the moment include 8 other vaccines, which are focused on areas including Zika, Cytomegalovirus, and respiratory syncytial virus, and five therapeutics for areas that include heart failure and Chikungunya. The company’s experimental modalities include cancer vaccines in partnership with Merck. While the stock is likely to correct sharply if there is unfavorable news over phase 2 or phase 3 of the COVID vaccine trial, Moderna remains well-capitalized with plans to raise $1.34 billion via a stock sale shortly, meaning that it should be in a comfortable position to execute on its pipeline.
Another battle being played out for COVID testing: Abbott’s launched a 5 min test. Is Abbott more attractive than Co-Diagnostics, find out in our dashboard for Coronavirus Testing Stocks