Nov. 4, 2022

What Moderna Earnings Reveal About The Pandemic

While it may not be intentional, vaccine maker Moderna provides us with the most accurate measure of the Covid-19 Pandemic. The data is all here, in Moderna’s earnings report released yesterday. And to understate the case, these results are dismal. Top-line revenue is down a third, and net income is down two-thirds.

Now you may be asking why these Moderna earnings are so important, and the answer is that Moderna results may be the most accurate account of the current state of the Pandemic for you and me. 

For anyone who has researched this topic you’ll note that the CDC data, our country’s most thorough accounting for Covid, needs to be updated. Most mortality numbers from the CDC are a year old and tell us little about Covid’s current status.

Even Covid’s overall lethality is hazy at best. Current estimates are that Covid has killed somewhere between 5 and 25million victims worldwide. That’s an 80% range between the high and low end. Or about the same degree of mortality that we currently estimate the Black Death or the Plague of Justinian nearly a thousand and fifteen hundred years ago.

Comparing the Covid Pandemic to the only comparable recent Pandemic, the HIV/Aids pandemic is like night and day. For Aids, scientists can provide the exact number who’ve perished to likely the nearest hundred. We know, for instance, that 40.1 million died from HIV/AIDS.

For Covid, there is an 18 million range between high and low deaths worldwide. It is a remarkable lack of precision.

On the other hand, Moderna, a publicly traded company, must report quarterly earnings. And those earnings must accurately reflect the company’s financial performance.

Making Moderna such an excellent proxy for the status of Covid is that the Covid vaccine is essentially the only money-making product the company has had over these past couple of years. Moderna is bringing on new products, but they have yet to reach the marketplace.

Moderna’s financial statements closely track the ups and downs of Covid. The company was in the development stage for ten years until 2021. During that decade, Moderna operated at a loss, awaiting the time that one of its products would become viable.

Moderna Stock 

As bad as Covid was, it did wonders for Moderna. Like a rocket, Moderna’s income exploded in 2021, the first full year of the Pandemic. From a $700mm loss the year before to a $12 billion gain in 2021. And for the first time, Moderna became profitable.

These results point to the high point of the Pandemic. Most Covid deaths occurred in 2021 and the first half of this year, and Moderna distributed the most number of vaccines.

This decline in the number of vaccines currently administered is clearly shown in the Moderna sales record. At the peak of Moderna sales last year, the number of vaccines administered was nearly $5 billion worth per quarter. The latest quarterly sales were slightly over $3 billion. They were reflecting that one-third decline in sales we mentioned at the beginning.

In management’s statement yesterday, they predict that sales for the last quarter will be in the $4 billion-plus range. What makes this, so telling is that next quarter will be the fourth quarter of the year, winter — the time when respiratory illnesses are the most virulent.

So, Moderna estimates that this year’s fourth quarter sales will be lower than last year’s fall quarter. An accurate indication that we see a rapid decline in the number of shots administered. And by inference, fewer Covid illnesses in the general population.

Wall Street, of course, is none too happy with these developments. The Street is always looking for higher, not lower, profits. Moderna’s stock began the year at well over $300 per share and today trades for less than half that as analysts continue to reduce Moderna’s profits estimates for 2022.

We will know much more at Moderna’s next earnings call early in January. But for now, Modern’s earnings look to continue to slide. Which likely means that the worst of the Covid Pandemic may be behind us.

But what’s bad news for Moderna’s earnings may be excellent news for the rest of us.

Econ Briefs

The labor market turned decidedly negative, according to two reports this morning.

First, the Payroll Report showed a massive decline in new jobs added. Monthly job gains have averaged over 400k this year. But in October, October saw just 261K new jobs. That’s a drop of 35% in new workers added to the payroll — a dramatic change in this usually staid Payrolls Report.

Next came the nail in this two-part decline in the labor market. The Unemployment rate ticked up two ticks to 3.7%. It matched the August rate for the highest level of unemployment in the last eight months.

This could not happen at a worse time for incumbents running in Tuesday's election. Those in office like to claim that their policies create jobs. Here are the two most closely followed measures of the labor market, both showing very dramatic declines. You can bet that people will take these measures with them when they go to the polls to vote.

Rounding out this plethora of bad labor news, we saw significant declines in private companies' average hourly earnings and payrolls. Only manufacturing and government employment showed gains in this report.

Later today, we’ll get the latest reading on the number of active oil wells in the country. Don’t forget. We’ve never recovered to the oil drilling levels we achieved in 2019.