Maintaining Our Moderna FVE Amid Lower Vaccine Guidance

We're maintaining our $158 fair value estimate for Moderna (MRNA) following disappointing third-quarter results and updated COVID-19 vaccine sales guidance. Moderna sold 208 million COVID-19 vaccine doses in the third quarter for $4.8 billion, lower than our $7 billion estimate for the quarter, due to a combination of dose release bottlenecks, greater complexity of distribution to more global markets, and lower average global pricing (as more vaccine is delivered to less-developed countries). While some of these sales will be pushed into the fourth quarter or early 2022, we think demand for booster shots could be lower than we had originally anticipated, based on the updated status of Moderna's advance purchase agreements for 2022 and management's discussion of a potential seasonal booster in the U.S. beginning in 2022. We have lowered our sales forecast for Moderna's COVID-19 vaccine to account for a potentially faster transition from a pandemic market to an endemic one, where doses may be reserved for higher-risk populations (including adults over age 65). However, this was countered by our decision to include probability-weighted sales for two rare disease programs in our model; mRNA-3927 (propionic acidemia) and mRNA-3705 (methylmalonic acidemia) have both entered phase 1. While this only adds $500 million in sales to our 2030 projections, the recurring nature of these potential sales is more meaningful to our DCF valuation than temporarily inflated COVID-19 sales. That said, we have only assigned these programs a 25% probability of approval, as proof-of-concept isn't expected until 2022 and intracellular protein targets are considered an unproven, higher-risk modality. Despite Moderna's massive success with its COVID-19 vaccine, we think the changing competitive landscape, virus evolution, and evolving safety and efficacy of its technology beyond COVID-19 create too many questions to grant the firm an economic moat, and we see shares as overvalued at recent prices.