Moderna and Merck Just Made History With the First mRNA Cancer Vaccine to Succeed in a Phase 3 Trial. Here's What That Means for Investors.

A late-stage trial that combined a messenger ribonucleic acid (mRNA) shot jointly developed by Moderna (NASDAQ:MRNA) and Merck with Merck’s Keytruda yielded strong results in what's being viewed as a potential game-changing cancer treatment.

The Phase 3 trial enrolled over 1,100 patients with melanoma whose tumors had been completely removed by surgery.

Patients who received the personalized vaccine alongside Keytruda went longer before their cancer returned, and longer before it spread to distant parts of the body, than patients who received Keytruda alone.

Whether that means some patients are cured or simply go longer before their cancer returns isn’t yet known, as Moderna and Merck have only released top-line results.

"It's a big moment for medicine, a big moment for patients," Moderna CEO Stéphane Bancel told CNBC.

This is the first Phase 3 trial of an mRNA cancer therapy and individualized neoantigen therapy (INT) to show better results over the sole use of Keytruda for such treatment.

Here's what it means for both stocks.

Image source: Getty Images.

Moderna and Merck stocks soar

There's perhaps no clearer signal of how important these results are than the fact that Moderna and Merck stocks had ripped roughly 128% and 1%, respectively, as of 12:30 p.m. ET.

It's not uncommon to see biotech stocks move sharply following a significant trial. A phase 3 trial is the final test required before a company can begin discussions with regulators about commercializing a drug.

Beyond potentially changing the reality for melanoma survivors, the new method demonstrated how a more personalized cancer treatment could be applied for other types of cancer.

Dr. Jane Healy, Merck's head of oncology early development, told CNBC that the personalized approach goes after certain mutations in a tumor, teaching the immune system to attack and eliminate those mutations. Keytruda helps the body fight cancer more effectively.

Following the trial results, William Blair analyst Myles Minter upgraded Moderna stock to Outperform and said the company now has a clear path to adding new revenue sources beyond infectious disease and its COVID-19 business.

Despite the strong rally, Moderna stock trades roughly 64% lower than it did in August 2021, as investors have struggled to understand what would be next for the business after the pandemic.

Merck is a much larger company than Moderna, which is likely why its stock moved more modestly, albeit still a significant one for a company of its size. The stock is up over 41% this year and has hit an all-time high.

The combined treatment could be very important for the company, which faces a patent cliff on Keytruda in 2028, according to Barrons.

At that point, other companies would be able to make and sell similar drugs.

What's next?

In a joint press release on the phase 3 trial results, both Merck and Moderna said they plan to present the findings to regulators at an upcoming international medical meeting.

With both stocks now soaring and Merck at an all-time high, investors may want to let them breathe for a minute.

Both companies still need to present the results and obtain regulatory approval. Merck now trades at 54 times forward earnings, and Moderna is still not yet profitable.

That said, investors can certainly take at least a small position in either stock, given the potential of such a treatment in other cancers. However, they should continue to closely follow developments in this treatment to ensure it meets other important milestones necessary for commercialization.

The news today should also give Moderna investors more confidence in the company's ability to follow through on its oncology pipeline.

Given its smaller size and less-diverse product line, Moderna will be the higher-risk, higher-reward stock.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Moderna. The Motley Fool has a disclosure policy.