Raising Our Moderna FVE to $266 Following Positive mRNA Cancer Vaccine Data

Moderna’s personalized cancer vaccine, mRNA-4157, has generated positive phase 2 data in combination with Merck’s immuno-oncology drug Keytruda, and we’re raising our Moderna fair value estimate to $266 per share from $232 after updating our assumptions regarding its probability of approval. The combination extended recurrence-free survival over Keytruda alone in patients with late-stage melanoma following resection (the adjuvant setting), reducing the risk of recurrence or death by 44%. Given Keytruda’s position as the standard of care in this setting, as well as the novelty of Moderna’s technology, we see this as a significant result that bodes well for Moderna’s technology in other combinations and other forms and stages of cancer. Merck recently exercised its option on mRNA-4157, giving the two firms equal profit shares for the cancer vaccine, which is expected to move to a phase 3 study in 2023. We continue to see Moderna's shares as undervalued, given strong potential for its mRNA technology across infectious diseases, cancer, and rare-disease therapeutics, although we still think the firm is in the process of building an economic moat.