Is Moderna a buy for bad news?

We’ve gotten used to sales increases modern (MRNA 7.40%), so the latest earnings report may have felt to investors like a bucket of ice water being thrown over their heads. The coronavirus vaccine maker saw product sales fall 35% in the third quarter. And profit fell a whopping 68%.

The company also recorded a charge for inventory write-downs related to unused coronavirus vaccines.

Does this news mean demand is falling and it might be time to leave Moderna? Or is the stock actually a bad news buy? let’s find out

The timing of the permits

First look at the current picture. The decline in sales is due to the timing of the official approvals. Moderna received US approvals for its Omicron-specific booster in late August and approvals in Europe and Japan in early September. That means booster rollouts started late in the quarter — which corresponded to lower sales. Moderna expects higher product sales in the fourth quarter as it continues to ship more boosters.

The booster vaccination also plays a role in the residual vaccine situation. That’s because demand has shifted away from the original coronavirus vaccine and toward the strain-specific booster.

In more bad news, Moderna said it will postpone $2 billion to $3 billion in vaccine sales to next year due to supply chain issues — shipments from bottling contract manufacturers have been delayed.

But is all this really bad news? Not in the traditional sense. Moderna simply faces challenges that arise in the world of biotechnology — and in other companies as well.

Of course, it’s still important to keep in mind that the coronavirus vaccine business is headed for a transition. And this transition will likely result in more challenges and less revenue in the near future.

The transition to a private market

The company expects to move to a private market next year. That means Moderna won’t be signing any more multibillion-dollar government contracts. Instead, it will sell directly to pharmaceutical distributors and healthcare providers, so it will have to bear all distribution costs. The transition will also result in a transformation of the distribution process and even the product – Moderna will move from multi-dose vials to a single-dose product.

All of this means that 2023 may not be the easiest year for Moderna. However, since Fool.com readers are long-term investors, we’re more interested in the picture over time, rather than just a single year.

And the long-term picture looks much better. First, Moderna predicts that the coronavirus vaccine market will follow in the footsteps of the flu vaccine market. The influenza market is 500 to 600 million doses worldwide. Even if the coronavirus vaccine market is launched with lower doses, it can still be large. So Moderna could continue to generate significant revenue from its vaccine over time — even if 2023 turns rocky.

Second, Moderna has 48 programs in development. And outside of the coronavirus program, three candidates are in Phase 3 trials. If all goes well, Moderna aims to launch a flu vaccine and a respiratory syncytial virus (RSV) vaccine in the next two to three years. That would provide more than one revenue stream in the not too distant future.

Is it time to buy?

Given all of this, is Moderna a buy today? Shares are currently trading at 7 times expected earnings estimates. But since we don’t yet have a very clear picture of Moderna’s post-pandemic earnings, it’s difficult to evaluate them on that basis alone.

That’s where the breadth and progression of the pipeline comes in: This is where things are looking good for Moderna. At current levels, I think the stock is a buy. If you have the patience to complete some of the challenges ahead, Moderna’s innovation may reward you in the long run.

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