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Is This a Setback for Moderna?

Investors have put their hopes in Moderna‘s (MRNA 7.13%) next potential product, a respiratory syncytial virus (RSV) vaccine. That’s because it represents a new revenue stream for a company that until now has relied on just one product, and a product struggling with declining demand: The coronavirus vaccine. Once the source of more than $18 billion in annual revenue, the vaccine is now bringing in considerably less — $6.7 billion last year — as fewer people seek vaccination.

The RSV vaccine promises to become another blockbuster, and one that could deliver high-level revenue steadily year after year. A potential approval will also show that Moderna isn’t just a one-product company and instead can build a billion-dollar respiratory vaccine portfolio, including several game-changing products.

But news last week disappointed investors, who were expecting a regulatory decision on the RSV candidate by May 12. Moderna said the U.S. Food and Drug Administration (FDA) wouldn’t be able to make that deadline and that it required a few more weeks to consider the application. As a result, Moderna stock slipped about 5% in one trading session. Is the FDA delay a setback for the biotech company? Let’s find out.

Moderna’s RSV candidate

First, a bit of background on Moderna’s RSV candidate. RSV generally causes cold-like symptoms, but the virus could be severe for certain groups like elderly people or infants. Moderna is seeking approval for its vaccine in people over age 60 in various countries around the world, including the U.S.

Last year, regulators approved two other RSV vaccines — from GSK and Pfizer — so Moderna isn’t the only player in this field. But there’s room for more than one, and Moderna may even excel thanks to a couple of factors. The biotech’s candidate wasn’t linked to any cases of Guillain-Barré syndrome in its late-stage clinical trials — but GSK and Pfizer did report incidences of the neurological disorder in their trials. So some healthcare providers may prefer the safety profile of the Moderna shot.

Moderna’s potential product is also the only one to come in a prefilled syringe. While this may seem like an unimportant detail, it actually is a significant plus. A prefilled syringe lessens the risk of administration errors, and it also saves those giving the shot valuable time. The use of prefilled syringes could result in the preparation of four times as many doses in an hour compared to vaccines requiring reconstitution, according to a study cited by Moderna. So, a pharmacy stocking potential vaccines for the fall season easily could choose Moderna over the others for this reason alone.

It’s also important to keep in mind that the RSV market size is $10 billion, meaning there’s room for all three players to carve out market share and generate significant revenue.

A delay at the FDA

Now, let’s consider Moderna’s latest news. The FDA is taking longer than planned to review Moderna’s application, but this isn’t due to problems with the efficacy or safety of the candidate or any particular questions about the data. Instead, the FDA cited administrative constraints as the reason for the delay.

So, this isn’t a setback for Moderna, and investors can breathe a sigh of relief. But it’s still important to keep a close eye on the situation for one big reason. To enter the commercial market, Moderna’s vaccine must be reviewed at The Centers for Disease Control and Prevention advisory committee meeting on immunization practices — and that meeting is set for June 26 through June 27.

The FDA aims to finish its review of Moderna’s candidate by the end of May, so for now the company is on track to meet its goal of entering the fall vaccine market. But if the FDA were to fall further behind and Moderna were to miss out on the fall vaccination opportunity, the company truly would be facing a setback.

Is this likely? Probably not. The FDA is aware of that situation and of the need in the RSV market, so it’s likely the agency is making a big effort to finish its review of the Moderna RSV candidate in the coming weeks.

It’s also important to remember that Moderna has many late-stage programs in the pipeline and has set a goal of launching 15 new products over the coming five years. So even though it feels like everything is riding on the RSV candidate, that isn’t actually the case. Even if Moderna falls short of its product launch goal, it’s still likely to become a multiple-product biotech company in the near future. That means that right now, it’s a great idea to buy the stock and hold on for the new phase of growth on the horizon.

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