Curevac Stock is a bet on a Covid 19 vaccine with a potential return on investment of 68%

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CureVac (NASDAQ:CVAC) is a bet on a newly listed German-based biotech company that is working to produce a new vaccine against the coronavirus. CureVac stock went public on August 14 at $ 16 and immediately began trading in the mid range of $ 55. As of August 21, it was $ 67.20. Based on recent news, it looks like the stock has gained further momentum.

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CureVac is developing messenger RNA (mRNA) drugs, such as Modern (NASDAQ:RNAm). On August 20, CureVac announced that it was in advanced talks with the European Commission for 225 million doses of the Covid-19 vaccine. There is also a possibility of 180 million follow-up doses once the vaccine is proven safe.

The company is still in phase 1 clinical trials for its vaccine. Its results will not 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 biotechnologies and drug producers are more advanced than CureVace in the race for the Covid-19 vaccine. Barron’s pointed out on August 20 that Pfizer (NYSE:PFE) appears to be quite far away with its Phase 2/3 vaccine trials.

Additionally, Barron’s says Pfizer’s vaccine may be the one the FDA will discuss at an external advisor meeting on October 22. Pfizer said it hopes to have its Phase 3 data by then.

In addition, the European Commission recently concluded an agreement with AstraZeneca (NYSE:AZN) for 300 million doses of his vaccine. He is also in similar talks with Johnson & Johnson (NYSE:JNJ) about their vaccine, as well as Sanofi (NYSE:CUT).

What CureVac could be worth

Seeking Alpha cited a Financial Times article where the CEO of CureVac said he aims to make an “ethical profit margin” on their vaccine. He ruled out selling it at cost.

The article says some companies sell their vaccines for $ 3-4 a dose, but Johnson & Johnson expects to sell their vaccine for $ 10.

Let’s say CureVac can sell its $ 4 doses for 405 million doses. This represents a turnover of 1.62 billion dollars. If he can repeat it twice a year, it could add up to $ 3.24 billion a year.

As CureVac owns 177.857 million shares and CureVac is trading at $ 67.20, its market cap is $ 11.95 billion. This means that he is trading for only 3.68 times his income. If that income becomes a recurring stream for the business, the stock will hit a much higher multiple.

Also, if he chooses other buyers for large doses around the world, assuming his messenger RNA vaccine is effective, the stock will have a higher multiple.

At 10 times revenue, CureVac stock would be worth $ 32.4 billion. This works out to $ 182.17 per share. Currently, it is trading around $ 59.

What to do with CureVac Stock

It’s a lot of “ifs” and assumptions. In fact, the CureVac action is a horse racing betting bet. However, this is not necessarily a winning situation. For example, the EC may wish to have a stable contract with a European producer of their vaccine, not just with US companies.

In fact, this is the main selling point of this stock. Many governments may not want to be beholden to a U.S. company for their primary supply of Covid-19 vaccines. Moreover, this despite the fact that many American companies have European or Asian subsidiaries working on their vaccines.

Therefore, for this reason, let’s give it a 60% chance of having a recurring income stream over the next 10 years. That would put its value at $ 19.44 billion, or $ 109.30 per share. This represents a potential gain of around 60% from the current price.

As a result, if it took two years to meet this price target, assuming he received EC approval for his vaccine, the investor would realize an annualized return on investment of approximately 27.5% compounded annually. over the next two years.

This represents a good return on investment for most investors. It is also a way to put some form of odds or probability of making money on this stock, despite its post-IPO momentum.

At the time of writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. He runs the Total Return Value Guide which you can consult here.

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