Wall Street Has Cooled on Moderna After Its Stock Jumped Over 5X. But Does the mRNA Leader Have More Room to Run?

Moderna (NASDAQ: MRNA) has been one of the better-performing large-cap biotechs this year. The company's shares are up 404% to date and have soared 515% over the trailing-12-month period (as of writing). The company's shares are changing hands for about $148 apiece. Notice that's down meaningfully from the $176.66 highs the stock reached earlier this year after a major clinical milestone. Does this pullback signal that Moderna has little to no upside left, or can the stock still deliver outstanding returns?

Moderna scores a major victory

Moderna's performance looks very different once we zoom out. Over the past five years, the company has lost a little more than 60% of its value. That's because Moderna failed to replicate the success it achieved during the early pandemic years. The company developed one of the leading coronavirus vaccines, but as the pandemic waned and demand for vaccines declined, Moderna's financial results worsened. The market also wasn't convinced that Moderna's mRNA platform could lead to massive commercial success beyond the coronavirus market and infectious diseases more broadly.

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But Moderna seems to have put these fears to rest. The company recently posted phase 3 clinical trial results for intismeran autogene, an investigational personalized mRNA-based cancer vaccine. It was being tested in patients with melanoma as a combination therapy with Merck's Keytruda (Moderna is developing intismeran autogene in collaboration with Merck) versus Keytruda monotherapy. Intismeran autogene was associated with significant improvements in recurrence-free survival compared to Keytruda alone.

This clinical win sets up intismeran autogene to earn approval, but that's only part of the story. The vaccine is also being investigated for several other cancers, including lung, bladder, and kidney cancers. There are important implications for Moderna even beyond intismeran autogene. Since no mRNA-based cancer vaccines have ever received approval -- and none had produced such impressive results in a phase 3 clinical trial -- the company's entire pipeline now looks far more valuable than it was before this clinical win.

Moderna has several other mRNA cancer vaccines in various stages of clinical development. We can't guarantee they will all eventually earn approval. In fact, at least some of them will fail. But intismeran autogene's phase 3 success significantly improved the probability of approval of several of Moderna's early stage assets, which explains why the stock soared by more than 100% on the news.

What's next for Moderna?

Moderna had another important milestone this year. The company's mFLUSIVA, a flu vaccine, earned approval. mFLUSIVA performed better than some approved influenza vaccines in phase 3 studies, so it may grab a decent slice of the $8.9 billion flu vaccine market (as of last year, according to some estimates). Further, some analysts estimate that intismeran autogene could generate $5.6 billion in peak revenue, which Moderna will split on a 50/50 basis with Merck.

Moderna should also make more clinical progress over the next five years. Even if some investigational products don't generate much -- or any -- revenue in this period, Moderna's shares could rise on important clinical wins. Still, the bears will point out that the stock is now worth $59.4 billion and has a price-to-sales ratio of 27.5, both of which make it look expensive for a company that currently generates little revenue and is not profitable. Even with that caveat, my view is that Moderna remains an attractive long-term bet.

The company's pipeline is full of highly promising mRNA-based candidates across various therapeutic areas, including fairly challenging targets, that should make progress in the next few years. In the meantime, we should see the company's revenue stabilize over the medium term. Its COVID-19 portfolio will play a smaller role, while new products drive consistent top-line increases. Within five years, Moderna could be a well-established mRNA leader with several approved products under its belt and a rich pipeline of candidates. It may reward patient biotech investors with attractive returns along the way.

Prosper Junior Bakiny 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.