Moderna Has Big AI News. Is the Stock a Buy?

Moderna (NASDAQ: MRNA) isn't new to artificial intelligence (AI). The biotech best known for its billion-dollar coronavirus vaccine has been using this hot technology for years to help it save crucial time in the laboratory.

For example, Moderna uses AI to produce mRNAs for researchers to work with, so they no longer have to create mRNA manually to run experiments.

And last year, it signed a deal with International Business Machines to use its AI and quantum computing tools to advance the biotech's research. CEO Stéphane Bancel has spoken often about his commitment to this technology and even set up an AI academy to educate employees about ways to integrate it into their jobs on a daily basis.

But the latest AI announcement could be its biggest yet. A few weeks ago, Moderna said it has expanded its collaboration with OpenAI, and their work together is bearing fruit. The company not only expects AI to help advance the drug discovery process, but also says the technology already is making the entire company more efficient.

The biotech could become an AI winner down the road, but does this make the stock a buy? Let's find out.

Researchers look at a screen with AI-generated images floating around it.

Image source: Getty Images.

Moderna's peak vaccine revenue

First, a quick summary of where Moderna stands right now. The company generated billions of dollars in revenue from its coronavirus vaccine, with annual sales peaking at more than $18 billion.

But as we move toward a post-pandemic world, demand for vaccination is on the decline, and revenue has followed. In the most recent quarter, management reported $167 million in vaccine sales and predicted product sales of $4 billion for the full year.

But Moderna never planned on being a one-product company, and its solid late-stage pipeline shows that it has what it takes to continue toward its goal. Bancel says the aim is to launch as many as 15 products in the coming five years, including more vaccines in the respiratory category -- such as treatments for respiratory syncytial virus (RSV) and flu -- as well as products in other treatment areas.

Moderna says these products could deliver as much as $30 billion in annual revenue after a few years. Even if the company makes it part of the way to this goal, we could be looking at significant revenue growth over time.

Meanwhile, it has focused on investing in AI, and this brings me to the OpenAI collaboration. Moderna has rolled out AI throughout every department to gain in efficiency. Just a few months after signing on to ChatGPT Enterprise, the biotech constructed more than 750 large language models to be used for various tasks, like legal matters and payment processes.

Choosing the best vaccine dose with AI

The technology is making a difference in the laboratory, too, with ChatGPT's analytics tools helping Moderna choose the best vaccine dose for a clinical trial, for example. This is a key decision that could determine whether a particular candidate succeeds or fails in development. So this saves time and increases the chances of success.

This recent and ongoing investment in AI already is showing results, reducing Moderna's need for purchased services and outside consulting. This helped lower selling, general, and administrative expenses by 10% in the first quarter.

Considering the company just started working with ChatGPT Enterprise, it's likely that the efficiency gains and cost savings are in their early stages, so more could be on the way. At the same time, Moderna's use of ChatGPT tools and its alliance with IBM also could improve the drug development process.

All of this means that, at the very least, the business should be more efficient and cut costs thanks to its investment in AI. In a best-case scenario, the company might develop and bring better products to market more quickly. In either case, we're looking at a win.

Is Moderna a buy?

But does this make Moderna a buy? I wouldn't buy the stock just for the investment in AI. It's also important to look at a biotech's pipeline and its potential to bring some of those candidates to market. As mentioned above, these indicators look positive for the company.

Investors might now be starting to take notice of this long-term potential. After a couple of years in the doldrums, the stock has climbed about 40% this year. Positive momentum could be resuming, making now a great time to get in on this innovative biotech and hold on to benefit from all of the potential products that could drive lasting revenue growth.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends International Business Machines and Moderna. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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