Summary
- Moderna’s COVID-19 vaccine candidate, a frontrunner to win the FDA emergency use authorization, is ahead of an interim data readout.
- After a sharp sell-off over the past two months, a positive outcome could spark a major rally as confirmed by our technical analysis.
- With even conservative estimates for sales indicating a sharp premium based on relative valuation, we, therefore, turn ‘Bullish’ on the stock.
- Though long-term outlook hangs in the balance as rivals advance cheaper and more convenient vaccine regimens.
Investment Thesis
Moderna, Inc. (MRNA) is a front runner to win the emergency use authorization for its COVID-19 vaccine candidate. Despite more than quadrupling in value over the past twelve months, the stock has, however, witnessed a sharp correction in the last two months, and our technical analysis has just uncovered a bullish signal. Meanwhile, the FDA approval will validate Moderna’s broad therapeutic platform, and CMV vaccine, a leading candidate awaiting a Phase 3 trial next year, looks promising as it seeks a peak sales opportunity of billions of dollars. Our conservative estimates for sales indicate a revenue forecast nearly double the size of consensus estimates for 2022.
However, the premium pricing and rigorous storage requirement can hurt the vaccine’s long-term potential as risk-averse peers, prioritizing safety over speed, are set to unveil cheaper vaccines for greater market access. With our sales forecast for 2022 implying a sizable premium based on the price to forward sales ratio for the year, we turn ‘Bullish’ on the stock ahead of a period of major catalysts for the company.
Source: Moderna - Vaccines Day Presentation
Early Winners are Emerging
The vaccine developers scrambling for success against COVID-19 have entered the home stretch. Out of the eight candidates in the late stages of clinical development, many are ahead of interim data readouts later this month or early October as the developers await emergency use authorization from the FDA. Faster to develop and scale, the mRNA (messenger RNA) vaccines had the edge over traditional vaccines when the severity of the pandemic compressed years of vaccine development into a few months. The breakthrough technology triggers natural immunity by directing the human cells to produce viral proteins and mimic the actual infection.
Two leading candidates based on the mRNA technology, mRNA-1273 of Moderna and BNT162b1 of Pfizer Inc. (PFE) and BioNTech SE (BNTX), are currently undergoing Phase 3 clinical studies expecting their preliminary data readouts next month. Late August, the CDC urged the public health officials across the country to prepare for COVID-19 vaccine distribution in late October/ early November. The technical specifications were outlined for two vaccine candidates closely resembling those of Moderna and Pfizer/BioNTech, the shares of which rallied subsequently on the hopes of their early success. Yet, Moderna remains ~29.5% lower than its peak in mid-July, under-performing the ~21.5% and ~5.5% decline in BioNTech and the NASDAQ Biotechnology Index, respectively.
