3 Reasons the mRNA-4157 Readout Could Revalue Moderna

Anand Chokkavelu: [MUSIC] Welcome latest Motley Fool Scoreboard. I'm on Choco Balloon. We've got longtime Fools, Karl Thiel and Keith Speights giving a 1-10 rating to a money ball wreck. It's Moderna, ticker symbol MRNA. First, we'll rate the strength of Moderna's business, including factors like industry and competition, 10 is invincible, a one is hopeless, Karl's at a seven. Keith, you're at a six. Keith Speights: I'm actually probably more upbeat overall about Moderna than that six score reveals, but Moderna's revenue remains highly dependent on its COVID vaccines. It still faces stiff competition in the RSV vaccine market. I think those are dings against Moderna. But the company's late stage cancer programs show a lot of promise, especially the personalized cancer vaccine that the company is developing with Merck. Again, I'm upbeat even though I'm giving it a six. Karl Thiel: It's funny you opened that way because I was looking at my seven and being I might actually be a little more upbeat than a seven, but anyway, they're about to open up a new chapter. This is the company we all know is selling a COVID vaccine that made them rich. They have a great balance sheet, but obviously it's been a shrinking market. I do think for years now we've been wondering where the bottom is in the market. I do think we've probably hit it, although it will continue to be volatile. They're expecting revenue to actually grow this year in the $2 billion territory and so, that starts to become a nice foundation to build on rather than just, a slowly unfolding, melting ice cube. But what's really exciting is their neoantigen cancer vaccine product. This is code named mRNA-4157. It should have registrational data later this year. Big deal. It's been a long time coming. FDA made them really produce the full dataset before they would do approval but it is a true pipeline in a product because while they're initially developing it for melanoma, the same principle should apply to a number of cancers. I think that's a great start for them and they've got another program, mRNA-4359 that is not quite as broad, but similarly has a broad range of applications. I think we're really getting into the next chapter. Anand Chokkavelu: For management, a 10 is Warren Buffett, a one is Homer Simpson. Both of you have six is Keith. Keith Speights: CEO Stephane Bancel and his team moved quickly to seize the opportunity with COVID, that really put Moderna on the map, so you have to Bancel kudos for that. He's helped build an impressive pipeline, but I think that Bancel over expanded the company's manufacturing infrastructure during the COVID boom days that led to some painful restructuring later on and the FDA's initial refusal to file letter that was issued for Moderna's mRNA flu vaccine, I think it was also a black eye for management. Karl Thiel: In addition to what Keith is saying, I can't forget just Bancel used to have this terrible reputation in the industry for being just an awful person to work for. I will say, in fairness, I don't really hear that anymore, so I don't know if he's mellowed or he's gotten the right team around him because there used to be a lot of turnover at the company. This is in the the pre COVID days. Maybe that's not as much of an issue anymore, but I don't know, maybe I was in a bad mood when I scored these. He deserves some credit. Certainly, they maneuvered through the initial COVID vaccine approval when you think that they were basically racing Pfizer and tied with them, essentially, that's not too bad. Anand Chokkavelu: For financials, a 10 is a fortress, a one is Yikes. Karl's had a six. Looks like Keith's the grumpy one on this one, with a four. Keith Speights: Maybe I was in a bad mood. Moderna continues to post hefty losses. Its revenue has declined sharply. Of course, that's because of the COVID vaccines. Break even for the company is still at least a couple of years away. The one bright spot for Moderna is its really nice cash stockpile of $8.1 billion. But overall, the company isn't in what I would say great financial shape. Karl Thiel: I do feel a little more generous than Keith's about the cash burn. It is a strategic decision to really focus on pipeline advancement, and they have controlled it somewhat. They're not going whole hog on everything just because they have a bunch of money on the balance sheet. But that cash pile, it really is a big cushion and if you believe in the Pipeline and in the return to revenue growth this year in particular, it should be more than adequate. Anand Chokkavelu: Karl let's talk valuation. How will earn a stock over the next five years? How safe is it? Tens short thing, one is a lottery ticket. Karl Thiel: I gave them 15% plus, given that they are at around six times enterprise value to sales with stable or hopefully growing revenue from this point. Again, if you view the COVID vaccine or the vaccine business overall as a foundation to build on rather than a melting ice cube, the pipeline should support higher revenue. I gave them a five for safety, reflecting some of the middling scores I gave them on some other stuff, just in that they are all in on mRNA and while the pipeline is pretty broad within that, there's a lot riding on both the mRNA technology and specifically on the 4157 program. Keith Speights: I agree with Karl here, 15% plus. I really am upbeat about Moderna's prospects for the company's pipeline. My safety score is a little lower, though, only a three. Everything from Moderna rise on clinical and commercial success for some therapies that really are just currently unproven. Anand Chokkavelu: Thank you to both Keith and to Karl. They've given Moderna pretty low overall score of 6.3/10. It's one I've happily owned for its upside potential, maybe a little less happily now because I trust both of these guys in this space. Some things for me to think about. But of course, the topic is Karl and Keith both prefer biontech for what they believe is comparable upside potential, as Moderna, but latched onto a stronger balance sheet. I own some of that as well from a prior episode so I'm rooting for both. Look out for a new Scoreboard every market day at 7:00 PM Eastern. Next up is United Therapeutics till then, Fool on. [MUSIC]