Should You Buy Moderna Right Now?
Key Points
Moderna may look appealing right now, given the company's high cash balance and extensive drug pipeline.
However, as Moderna's cash burn dilemma persists, the company's net value will likely keep declining.
For now, it's best to assume that shares will continue to slowly, but steadily, drop in value.
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Has Moderna (NASDAQ: MRNA) finally bottomed out? You may be asking that yourself right now, as shares in the biotech company have held steady at around $25 per share over the past six months.
Moderna might be a shell of its former self, no longer making billions from its COVID-19 vaccine, but it's still sitting on billions of dollars in capital. The company also has many promising candidates in its drug development pipeline.
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Even so, don't assume the risk/reward proposition here is favorable. As an ongoing issue persists, the stock may be at risk of further losses in the months ahead.
Moderna's cash burn dilemma
Currently, Moderna has a market capitalization of around $10 billion. This valuation is only moderately above the company's $9.4 billionbook value, or the net value of its assets minus liabilities. Some $5 billion of this figure consists of cash and short-term investments. Another $2.4 billion consists of non-current, but still liquid, government and corporate bond investments.
However, a year ago, this $7.4 billion war chest was worth over $10.8 billion. With COVID vaccine revenue steadily declining, there hasn't been enough cash coming in to cover R&D (research and development) expenses for the company's drug pipeline.
Worse yet, this cash burn could not only persist, but worsen. Sell-side analyst estimates call for Moderna's revenue to drop another 41% this year, from $3.2 billion to $1.9 billion, with only a slight, partial rebound expected for 2026.
For now, skip this melting ice cube
Admittedly, Moderna's cash burn wouldn't be a major issue, if the company was on the verge of launching a blockbuster drug. However, most of Moderna's non-COVID candidates remain at the clinical trial stage.
One candidate, a RSV vaccine marketed as mRESVIA, has made it to market, but last quarter, mRESVIA generated just $6 million in total sales.
Put simply, it's best to assume that Moderna shares will keep slowly, but steadily, dropping in value. Until more promising developments emerge, it may be best to skip this stock.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
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