Why Moderna Could be a Good Short

Short sellers might want to take a hard look at Moderna, Inc. (MRNA), in my opinion.

Shares of the Cambridge, Massachusetts-based biotech have climbed more than 50% in just the past month. On Monday, the stock price rose more than $13 to trade around $80 per share on news its Covid-19 vaccine candidate showed promise in a phase 1 clinical trial.

The gains in Moderna stock have pushed its market value to nearly $30 billion, which seems pretty high for a company that has yet to turn a profit and has lost more than $1 million over the last three years. In fact, the firm’s only revenue to date has come from research grants and the licensing of its technology. Moreover, vaccines are a famously unprofitable area of development, which is why companies tend to focus on drugs instead.

Of course, there is a chance that the vaccine could be successful, but the euphoria over the Moderna announcement needs to be put into perspective, in my opinion. The vaccine is still in the earliest stages of development, and the company will have to negotiate a number of huge obstacles before it reaches the finish line.

Additionally, few drugs in phase 1 ever make it to market. What’s more, the sample size in the Moderna trial was small, just 45 patients, eight of whom showed an immune response after the vaccine. The company didn’t say what happened with the other 37, and the study results have not yet undergone peer review.

An article in the New England Journal of Medicine emphasized that vaccine development is a lengthy, expensive process. Attrition is high and it typically takes multiple candidates and many years to produce a licensed vaccine.

Certainly the results of the Moderna study are encouraging, especially in a world looking to the pharmaceutical industry for any good news. However, not only can much go wrong in clinical testing, there’s the challenge of manufacturing an approved vaccine and getting it distributed quickly.


Then there’s the matter of side effects. The vaccine could be knocked out if studies show it makes people sicker and more susceptible to infection. This has happened with vaccines in the past.

Another potential issue is Moderna’s technology, which uses molecules to coax the body into producing proteins. As I pointed out in a previous GuruFocus article, the technology has yet to be proven.

Recently, the U.S. Food and Drug Administration gave Moderna the green light to begin a 600-person phase 2 trial of the vaccine candidate. The potential for volatility in either direction for Moderna stock is likely to be incredibly high when news is eventuallky released on the phase 2 trial.

Disclosure: The author holds no position in any of the stocks mentioned in this article

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This article first appeared on GuruFocus.

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