It seems to me that the market is basing Moderna’s price on its estimate on how many COVID shots it’s going to sell in the long term.
Doing a bit of back of the envelope math:
- 807M doses sold for $17.7B = average selling price of $21.9/shot. Moderna said on the call that it expects to be able to raise its prices once we come out of the pandemic. Flu shots in the US by comparison are somewhere between $30-$50. Let’s use the low-end ASP of $30/shot.
- Global production of flu vaccines (potential comparable long-term demand) in 2019 was roughly $1.48B shots
- Valueline expects revenues of $7.5B in 2025-2027
- Working backwards, we get demand of 250M shots/year in an endemic state
So market is probably expecting the need for annual COVID shots (potentially big assumption) capturing around 17% (250M/1.48B) of global demand (assuming similar demand as the flu), which seems reasonable (maybe a bit low) given the number of COVID vaccines available.
So if we project earnings out (roughly):
- 2022 - $26 (next year’s estimate)
- 2023 - $19
- 2024 - $13
- 2025 and beyond - $7 (Valueline estimate for 2025)
We get $26 + $19 + $13 + $7 * P/E (15-20), roughly a price of $163-$198, which is around today’s price.
There are some big error bars though:
- Will we need annual boosters for COVID?
- Will there be more demand for COVID vaccines than we expect (e.g. new variants)?
- How much will Moderna’s other vaccines in the pipeline contribute to revenue?
Seems like the first question is the biggest downside. Although based on my limited knowledge, I think it’s likely that we’ll need it to some degree (e.g. elderly, immunocompromised etc.), which is not too different from the flu. The latter two questions seem like big potential upside.
I really like the idea of MRNA vaccines and how quickly they can be developed. Still waiting on the sidelines for now hoping for a better price for more safety (like last week at $126).