Moderna has big news for AI. Is the stock a buy? | The motley fool

Modern (mRNA 3.08%) is not new to artificial intelligence (AI). The biotech best known for its billion-dollar coronavirus vaccine has used this hot technology for years to help it save crucial time in the lab.

For example, Moderna uses AI to produce mRNAs that researchers can work with, so they don’t have to create mRNAs manually to run experiments.

And last year, she signed an agreement with International Business Machines to use its artificial intelligence and quantum computing tools to advance biotechnology research. CEO Stéphane Bancel has often spoken about his commitment to this technology and has even created an AI academy to educate employees about ways to integrate it into their jobs every day.

But AI’s latest announcement may be its biggest yet. A few weeks ago, Moderna said that 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 is already making the entire company more efficient.

The biotech could become an AI winner on track, but does that make it a stock buy? Let’s find out.

Image source: Getty Images.

Moderna’s peak revenue from vaccines

First, a quick overview of where Moderna stands 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 declining and revenues have followed. In the most recent quarter, management reported $167 million in vaccine sales and forecast product sales of $4 billion for the full year.

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

Moderna says these products could bring in up to $30 billion in annual revenue in a few years. Even if the company makes it part of the way to that goal, we could see significant revenue growth over time.

Meanwhile, it’s focused on investing in AI, and that brings me to the OpenAI collaboration. Moderna has spread AI in every department to gain efficiency. Just months after signing on to ChatGPT Enterprise, the biotech built more than 750 large language models to be used for various tasks, such as legal affairs and payment processes.

Choosing the best vaccine dose with AI

The technology is also making a difference in the lab, with ChatGPT’s analytics tools helping Moderna choose the best vaccine dose for a clinical trial, for example. This is a key decision that can 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 is already showing results, reducing Moderna’s need for outsourced services and consulting. This helped reduce 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 there could be more on the way. At the same time, Moderna’s use of ChatGPT tools and its alliance with IBM could also improve the drug development process.

All this means that, at the very least, the business should be more efficient and reduce costs thanks to its investment in AI. In a best-case scenario, the company can develop and bring better products to market faster. In both cases, we are looking for a win.

Is Moderna a buy?

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

Investors may now be starting to take note of this long-term potential. After several years of decline, the stock is up about 40% this year. The positive momentum could resume, making now a good time to enter this innovative biotech and continue to take advantage of all the potential products that could drive sustainable earnings growth.