OT: MRNA

Moderna rode their Covid vaccine rocket to the skies this year, peaking at $484 per share in August. Since then, investors have sold the news of huge profits while they apparently wonder if Moderna can sustain and grow current levels of earnings. Meanwhile the share price has relentlessly plunged down to a current price of $160/share, with no end in sight.

Trailing twelve months earnings are are robust $17.53 per share ($16.28 diluted) for a low, low PE of 9.1. Even better, earnings are expected to go even higher when they report the current quarter, up to a current earnings of $26.7/share, and a PE of 6. Next year’s earnings are also expected to be $26/share. So, the company is expected to pump out earnings of approximately 1/3 of current stock price this year and next.

Can they continue to earn the giga-bucks with their Covid vaccine? Do they have other promising drugs in the pipeline? On some very skimpy research, it appears yes (for at least another year or two, probably more) and yes (combined Covid/flu vaccine could be big, and others in development).

Looks like a promising stock to me. The Covid vaccine cash cow should keep pumping for a while, possibly for a long time to come, and they have all sorts of potential for applying their mRNA technology to other huge drug markets.

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They have only been reporting profit a for a year. Low PE implies investors think earnings will fsll.

They reportedly have 20 new vaccines in various stages of development.

They are a leader in Covid vaccines. Will we have annual boosters like flu shots? Will they develop better flu shots?

We hear of vaccines for tb and malaria.

New vaccine technology has much potential to explore. Moderns is likely to be in the middle of it. But will it be profitable?

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But will it be profitable?

Yes. How profitable is the question.

Looks like a promising stock to me.

You make a good case.
I’d love to hear more if you or anyone else has a deeper analysis or more insights.

For those who like 'em stodgier, Pfizer also looks pretty good too at $52 and change. (though obviously better at October’s prices of $41 and change, which may return).
If you look a their projections of vaccine profits, there is a chance that the run up in company value considerably exceeds the run up in price.
It’s a much more conservative wager, of course, with a bit more margin of safety and likely a more modest upside.
Single digit multiple of next year’s estimated profit and a dividend yield over 3%. The downside seems somewhat constrained even if the earnings boost starts to fade.

Personally, I have a fondness for Mr Buffett’s old thoughts on medical firms: picking winners is hard, so buy a slate of them.
My personal preference is medical device companies.
An equally weighted portfolio of all the medical device firms covered by Value Line in the last 25 years beat the S&P by a remarkable 7.3%/year.
No other selection criteria.
In the last decade that’s an average of about 60 stocks.

This includes some fairly speculative early-stage companies, so if you want to narrow it down,
I like the ones with the most cash backing up the market cap. Less likely to go pop.
e.g., limiting it to the top 20 by cash-to-market-cap ratio, equally weighted, added another 3%/year.
CAGR 25 year return 20.3%/year after trading costs, beating S&P by 10.6%/year, both with reinvested dividends.
As you can imagine, there is almost no portfolio turnover with either version, though regular
rebalancing helps a whole lot–relatively volatile and uncorrelated individual prices, I guess.
Say, every 2-3 months improves things even after allowing for generous trading costs.

Will this continue to be a winning sector? Maybe not.
But they’ll probably do OK.

Jim

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An equally weighted portfolio of all the medical device firms covered by Value Line in the last 25 years beat the S&P by a remarkable 7.3%/year.

IHI the IShares US Medical Device ETF is market cap weighted. Its top 10 holdings add upto 72%. How does it compare to your equal-weighted top 20? Any other possible candidates in ETFs?

https://www.etf.com/IHI#overview

Thanks.

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For those who like 'em stodgier, Pfizer also looks pretty good too at $52 and change. (though obviously better at October’s prices of $41 and change, which may return).
If you look a their projections of vaccine profits, there is a chance that the run up in company value considerably exceeds the run up in price.
It’s a much more conservative wager, of course, with a bit more margin of safety and likely a more modest upside.
Single digit multiple of next year’s estimated profit and a dividend yield over 3%.

Sign me up for Team Stodgy.

One way of looking at this is to add up the pre-covid stuff, and then figure out a value for the two recent home runs: the vaccine and Paxlovid.

So if you go back to 2020, they had a market cap of $194b based on earnings per share of $2.87. I back some of that out, because it was from their big one-time non-recurrent gain to earnings from merging their consumer health division with Mylan in 2019, so let’s make that $2.52 in recurrent earnings, with 5.675b shares, so $14.3b. This is all pre covid vaccine (Cominarty) and pre covid pill (Paxlovid), meaning they were then trading at 13.6 times those adjusted earnings.

For 2021, the company does us the favour of telling us what their operating earnings were for everything but the vaccine (and also excluding the covid pill, since that had not contributed to sales yet): https://s28.q4cdn.com/781576035/files/doc_financials/2021/q3… (p.34)

Their projection at that point was for non-covid eps of $2.60-2.65. Given their 5.725b shares, and using the same multiple, that would give us 2.605.72513.6 = $202b. Their current market cap, with shares at $52.30, is $296b. In other words, Mr Market is assigning them about a $94b value based on their new vaccine franchise and hopes for the pill.

So what are those 2 new things worth?

The vaccine had 36b in sales, with ‘high-20s’ pre-tax margins. Let’s call that 22% after tax, or $7.9b, on sales of just over 2.3b doses in 2021. They expect to make 4b doses in 2022, so another $10b in earnings is, I think, a safe bet. What’s that worth, in total? I have no idea, but it might be worth $50b. Counterproposals welcome, but I think people will be getting the booster for a while, and Pfizer (along with Moderna) have the best product, at least right now. (To be fair, much of the credit should go to their partner, BioNTech, but fortunately for Pfizer shareholders, most of the profit will go to the company (Pfizer) that chose the vaccine candidates, did the trials, and had the manufacturing capabilities needed to make and sell billions of doses of vaccine.)

What about the pill? Paxlovid is a pretty big deal, I think. It reduces severe disease (as measured by hospitalization) by 88%, according to their pivotal trial, with roughly equal numbers of patients with symptoms since less than 5 days randomized to placebo or Paxlovid, and 66 patients hospitalized in the placebo group, vs 8 in the slightly bigger Paxlovid treatment arm. 12 deaths in the placebo group, 0 in the Paxlovid. The company will sell all the treatment courses it can make, without doubt, if they continue to sell them for $530 US per treatment course as in their first big sale to the US government (10 million treatment courses for $5.3b. Since then, they have sold 10 million more to the US government, and expect to make 120 million courses in total. If that is all at $530 per course, that would be over $60b, just this year, and they expect to make a lot more in 2023. Some will be sold for less, on the other hand, as they have promised to modulate the price according to countries’ relative prosperity. Still, they could also increase the base price; for the sake of comparison, Merck is selling their oral anti-covid pill for $700 per course, and that one reduces severe disease by 30%, not 88%. By my calculation, using the Pfizer pill in people in their high risk triial group, it cost about $9000 per hospitalization avoided, or about $30,000 per death avoided. If you figure they probably avoided about 30 ICU stays to save 12 lives, that also means it cost about $2500 per ICU stay avoided, and needless to say that’s a lot cheaper than looking after someone for several days in an ICU; and that’s not counting all the other hospitalizations avoided and, of course, the deaths avoided.

Anyways, so how much is the pill worth to Pfizer shareholders? Given that this is a moderately expensive pill, not a fairly cheap ($20) vaccine with complex storage and administration requirements, I think it’s fair to say that the profit margin is much higher, maybe on the order of 50%, and half of these profits drop to the bottom line. If that means $30b this year and more next year, their big money earner will no longer be the vaccine, it will be the pill. It can’t reasonably be worth less than $100b, I would say.

One final thought in this too long post- I have ascribed no value to the additional vaccine products that their new mRNA know-how makes possible, nor their other covid-pill that they say they have high hopes for, nor the extra franchise value of a company that has come up with 2 spectacularly successful products in the last 2 years. And no extra value to the rest of their products, despite the fact that my baseline comparison was with the company at the beginning of 2020, when the S&P 500 was at 3/4 today’s level. So despite those conservative assumptions, I would say Pfizer is worth a fair bit more than $202b for their pre-covid products (using a 13.6 multiple of earnings), $50b for the vaccine, and $100b for Paxlovid, $350b total, compared to the current market cap of $296b.

That’s my pitch. It’s now a 2.5% position for me, and I expect to add more if it follows the market any further down.

Regards, DTB

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DTB,

I don’t know if this affects your valuation of PFE, but their consumer health venture with Glaxo is being sold/spun off. PFE owns 30% of the venture. They have just rejected a $68 billion offer from Unilever and believe it is worth over $100 billion as an independent company. PFE could use the proceeds for share repurchase or other investments.

PFE has now got rid off all its non innovative businesses to focus on innovative and growth pharma businesses. That is quite a change from old PFE which did a major overpriced acquisition every three years or so to boost growth while its own R&D lagged. The turning point was the vetoing of their Allergan merger and reincorporation in Ireland.

Their stock price was stuck in the $30s for about a decade. A great strategy was to buy in low $30s and sell in the low $40s. This has now changed with the Covid successes and narrower focus.

In the past, some PFE spinoffs have done very well. I forever regret selling the Zoetis spinoff shares I received.

Interesting research discussion with John Campbell on vaccines and heart risk. It`s taken me some time to get around to it. Worth a watch IMO

https://youtu.be/LEBGl8MVE-c

"We conclude that the mRNA vacs dramatically increase inflammation on the endothelium and T cell infiltration of cardiac muscle

and may account for the observations of increased thrombosis, cardiomyopathy, and other vascular events following vaccination."

No comments just fyi.

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Interesting research discussion with John Campbell on vaccines and heart risk. It`s taken me some time to get around to it. Worth a watch IMO

https://youtu.be/LEBGl8MVE-c

"We conclude that the mRNA vacs dramatically increase inflammation on the endothelium and T cell infiltration of cardiac muscle

and may account for the observations of increased thrombosis, cardiomyopathy, and other vascular events following vaccination."

John Campbell is a very interesting commentator on the SARS-CoV-2 situation. He may not be a genius, but he is well educated, and very thorough. While he is much more supportive of the injections than I am, he does report accurately and is as unbiased as I think possible. He is in touch with people all over the world for information (e.g., South Africa, England, Wales, Scotland, USA, Panama, …). He generally makes a post every day.

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Yes, he’s worth watching for informed updates. Used to watch him daily, now weekly and selectively. He’s based in Carlise UK.

Blackswanny: "We conclude that the mRNA vacs dramatically increase inflammation on the endothelium and T cell infiltration of cardiac muscle

and may account for the observations of increased thrombosis, cardiomyopathy, and other vascular events following vaccination."

No comments just fyi.

Sorry, this is misinformation.

And a video posted on Nov. 25 by John Campbell, a British retired nurse and science educator who has amassed a strong YouTube following during the pandemic, has received over 2 million views. In the video, Dr. Campbell, who has a doctorate in nursing education but is not a physician, reads the abstract and says that if the findings are correct, it would be “incredibly significant.” But are they? He’s not so sure.

Even though Campbell doesn’t mention the expression of concern, he says he’s surprised by the abstract typos, lack of clear data and methodology, and even by the fact that Gundry sells groceries on his website. “I must have worked with about 20 or 30 cardiologists over my career, and I can’t remember any having a grocery facility,” he says 20 minutes into the video.

But opponents of the vaccine have used the video as confirmation that the mRNA vaccines are going to provoke “a massive unimaginable amount of extra heart attacks.”

More here: https://www.factcheck.org/2021/12/no-credible-evidence-covid…

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Not an opponent I’ve had 3. Thanks for the fact check. :+1:

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Sorry, this is misinformation.

And a video posted on Nov. 25 by John Campbell, a British retired nurse and science educator who has amassed a strong YouTube following during the pandemic, has received over 2 million views. In the video, Dr. Campbell, who has a doctorate in nursing education but is not a physician, reads the abstract and says that if the findings are correct, it would be “incredibly significant.” But are they? He’s not so sure.

Even though Campbell doesn’t mention the expression of concern, he says he’s surprised by the abstract typos, lack of clear data and methodology, and even by the fact that Gundry sells groceries on his website. “I must have worked with about 20 or 30 cardiologists over my career, and I can’t remember any having a grocery facility,” he says 20 minutes into the video.

But opponents of the vaccine have used the video as confirmation that the mRNA vaccines are going to provoke “a massive unimaginable amount of extra heart attacks.”

More here: https://www.factcheck.org/2021/12/no-credible-evidence-covid…

Yes, but who will check the fact checkers?

https://www.corbettreport.com/episode-381-who-will-fact-chec…

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https://www.nature.com/articles/s41591-021-01630-0

largest study on myocarditis, pericarditis and MI with COVID vaccines out there. Nature is big time journal.

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No comments just fyi.

Sorry, this is misinformation.

No particular comment on this particular video, as I haven’t watched it. It didn’t seem to be a link I’d want to follow.

Personally, I tend to give greater weight from things at domains ending in (say) .gov than I do from things on Youtube or Twitter.
Some .org sites are pretty good too, like Mayo Clinic and Cleveland Clinic.

I’m not big on anything best summed up as “some guy said…”, even if the person in question is in fact a medical doctor.
Some medical doctors are not on speaking terms with reality, especially the ones with a book deal.
Give me a 20,000 person randomized trial published in Nature, even if the result seems a bit counter intuitive. Or especially if it does.

The most useful skill in modern times is the nous and skepticism necessary to source good information.
Whether for health, politics, or investing.
It’s surprising how many people place greater weight on something dodgy said by someone they perceive to be their “friend” over hard results.

Jim

I recently read a paper about the health benefits of consuming spicy food.
It was the result of a cohort study of 3.5 million person-years of observation: 200k men and 300k women.
I like that better than a compelling anecdotal testimonial.
"Spicy food consumption showed highly consistent inverse associations with total mortality among
both men and women after adjustment for other known or potential risk factors. …
Compared with those who ate spicy foods less than once a week, those who consumed spicy foods 6 or 7
days a week showed a 14% relative risk reduction in total mortality."

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He usually summarises the research papers, reviews the sources and provides an educated opinion. I watch him because this is what he does all day and provides a condensed 20min summary that I can understand in laymans terms.

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Thanks, RWR

I skimmed the document. The Nature article is too medical for my brain, but I found the summaries useful. I was fairly sure (after reading and watching medical professionals for 2 years) the risk to your health, short term and long term, was much greater getting Covid19 than with getting the vaccine. If you read Wendy’s post https://discussion.fool.com/severe-covid-causes-brain-damage-350… about getting dementia with severe Covid, you have to be crazy to refuse the vaccine. Dementia isn’t the only long term condition some people experience when they get Covid19 unvaccinated. I added the bold below.

In summary, this population-based study quantifies for the first time the risk of several rare cardiac adverse events associated with three COVID-19 vaccines as well as SARS-CoV-2 infection. Vaccination for SARS-CoV-2 in adults was associated with a small increase in the risk of myocarditis within a week of receiving the first dose of both adenovirus and mRNA vaccines, and after the second dose of both mRNA vaccines. By contrast, SARS-CoV-2 infection was associated with a substantial increase in the risk of hospitalization or death from myocarditis, pericarditis and cardiac arrhythmia.

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He usually summarises the research papers, reviews the sources and provides an educated opinion.

I think Jim’s advice to stick with more authoritative sources makes a lot of sense, but this particular guy on youtube is not so bad. He acknowledges that he is not an expert, he points out interesting things, and he has an open mind, which is something you can’t always say about the ‘experts’, who very often have seemed more determined to support government policies than really explore alternatives.

But in this case, he is a bit out of his league, and takes a very banal unpublished study, for which we only have the abstract, and an iffy one at that. Because people worry about the cardiac effects of the vaccine (although they are far less frequent and less severe than the cardiac effects of covid), they are bound to lap up these concerns about cardiac risk of a more serious nature, i. e. infarction.

But the study didn’t find more infarcts, it only found more markers of inflammation. Markers of inflammation anywhere, a few days after a vaccination, are not very surprising, including markers of endothelial inflammation.

Now these particular markers of inflammation ARE associated with 5-year risk of infarct, but in the studies that have showed that association, there’s always a certain implicit assumption, which is NOT fulfilled in the above-noted study - can you see what it is?

If you test someone’s inflammation markers, and then measure how many of those people have an MI in the next five years, the assumption is that the marker is elevated all that time, and the inflammation in their coronary arteries over those five years results in more inflammation, thrombosis and infarct. But if you look at the inflammation markers just a few days after the vaccination, but not a few months or a year later (when the marker would be expected to be normal again), that association you found in the first study is not likely to be reproduced in the second.

The other sensible thing to do (not done in this study) is to try to ascertain what the level if inflammatory markers would be, if you had covid. It is very likely to be much higher if you have covid, than if you just had a vaccine. So if the vaccine does increase the risk of MI in the days after vaccination (which has not been found to happen, but which is at least possible), that should not stop people from getting vaccinated, if the MI risk from covid is much higher, as it is very likely to be.

People who are already determined to believe that vaccines are dangerous will not care about these subtleties, of course. Go ahead and confirm your prejudices, because a youtuber retired nurse said the study was interesting. But it’s not, really.

dtb

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I don’t know if this affects your valuation of PFE, but their consumer health venture with Glaxo is being sold/spun off. PFE owns 30% of the venture. They have just rejected a $68 billion offer from Unilever and believe it is worth over $100 billion as an independent company. PFE could use the proceeds for share repurchase or other investments.

That is probably a good thing but it wouldn’t change my valuation exercise, given that it hasn’t happened yet. But to the extent that it’s a good move, of course it makes this investment just one bit more interesting than it already was.

But thanks for pointing it out.

dtb

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MRNA has tanked back down to the lows it hit last month. I picked some up at $140 and $141.

Love the combination of value and potential growth in this stock.