Moderna's 2022 COVID-19 Vaccine Guidance Steady as Pipeline Advances; Shares Remain Undervalued

Moderna reported solid 8% growth for COVID-19 vaccine sales in the second quarter, with sales reaching $4.5 billion and still poised to hit roughly $21 billion for the year. We're maintaining our $232 per share fair value estimate after making some slight changes to our non-COVID-19 vaccine pipeline forecasts, and we continue to see shares as undervalued, even after the strong share appreciation following Moderna's earnings release. Moderna's net income fell roughly 20% due to cost of sales write-offs (mostly from unused vaccine intended for Covax-related contracts that were not completed) and higher research and development spending as the pipeline expands. We still expect lower net income for full-year 2022, as well as a step down in demand for COVID-19 vaccines in 2023 as the current pandemic begins to shift into a more endemic demand level, likely focused on higher-risk individuals rather than the general population. Even with these assumptions, we're encouraged by the potential for Moderna's mRNA technology to support combination respiratory virus vaccines as well as vaccines for other infectious diseases, and there would be significant upside to our fair value estimate if proof-of-concept data in oncology or rare diseases is positive later this year. Given several competing vaccine technologies and other nucleic acid-based technologies in development, we still think Moderna is in the process of solidifying a long-term competitive advantage and economic moat around its business.