CureVac (NASDAQ:CVAC) is a bet on a newly listed Germany-based biotech firm working to produce a novel coronavirus vaccine. CureVac stock and immediately started trading in the mid $55 dollar range. As of Aug. 21, it was at $67.20. Given recent news, it looks like the stock has further to go on the upside.
CureVac is developing messenger RNA (mRNA) based drugs, like Moderna (NASDAQ:MRNA). On Aug. 20, CureVac announced it was in . There is also a possibility of a follow-on 180 million doses once the vaccine is proven safe.
The company is still in Phase 1 clinical trials of its vaccine. Its results won’t be available until the fourth quarter. The 405 million doses could be ready for distribution by mid-2021.
Others Are Ahead in the Race
Other biotechs and drug producers are further ahead than CureVace in the Covid-19 vaccine race. Barron’s pointed out on Aug. 20 that Pfizer (NYSE:PFE) seems to be quite far along with its Phase 2/3 vaccine trials.
Moreover, Barron’s says that Pfizer’s vaccine might be the one that the FDA is going to discuss in a meeting of external advisers on Oct. 22. Pfizer has said it hopes to have its Phase 3 data by then.
Moreover, the European Commission reached (NYSE:AZN
) for 300 million doses of its vaccine. It also is in similar talks with Johnson & Johnson (NYSE:JNJ) about their vaccine, along with Sanofi (NYSE:SNY).
What CureVac Might Be Worth
Seeking Alpha quoted a Financial Times article where the CEO of CureVac on their vaccine. He ruled out selling it at cost.
The article said that some companies were selling their vaccines at $3 to $4 per dose, but Johnson & Johnson expects to sell its vaccine at $10.
Let’s say CureVac can sell its doses at $4 for 405 million doses. That represents revenue of $1.62 billion. If it can repeat that twice a year that could be $3.24 billion annually.
As CureVac has 177.857 million shares and CureVac trades for $67.20, its market capitalization is $11.95 billion. That means it trades for just 3.68 times revenue. If that revenue becomes a recurring stream for the company, the stock will attain a much higher multiple.
In addition, if it picks up other buyers for large doses around the world, assuming its messenger RNA vaccine proves effective, the stock will have a higher multiple.
At 10 times revenue CureVac stock would be worth $32.4 billion. That works out to $182.17 per share. Currently, it is trading around $59.
What to Do With CureVac Stock
That is a lot of “ifs” and assumptions. In effect, CureVac stock is a back-of-the-pack horse betting gamble. However, it’s not necessarily a winner-take-all situation. For example, the EC may want to have a stable contract with a European producer of their vaccine, not just with American companies.
In fact, that is the main selling point for this stock. A lot of governments may not want to be beholden to an American company for their main Covid-19 vaccine supply. Moreover, this is despite the fact that many U.S. companies have European or Asian subsidiaries working on their vaccines.
Therefore, for that reason, let’s give it a 60% probability of having a recurring stream of revenue over the next 10 years. That would put its value at $19.44 billion, or $109.30 per share. It represents a potential gain of about 60% over the current price.
As a result, if that price target took two years to achieve, assuming it receives EC approval for its vaccine, the investor would make an annualized ROI of about 27.5% compounded annually over the next two years.
That represents a nice ROI for most investors. It also is a way of putting some form of odds or probability of making money on this stock, despite its post-IPO runup.
As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. He runs the which you can review .
