Moderna: Shares Remain Deeply Undervalued, Despite Our Lower COVID-19 Vaccine Projections

In conjunction with Pfizer’s decision to reduce its own COVID-19 vaccine revenue guidance for 2023 from $13.5 billion to $11.5 billion, we have slightly reduced our Moderna COVID-19 vaccine sales forecast for 2023 from $7.5 billion to $7.2 billion, which is closer to the midpoint of Moderna’s $6 billion-$8 billion guidance for the year. Moderna management reiterated this guidance in a statement Oct. 16, noting that it would have more information on U.S. demand by the quarterly earnings call on Nov 2. We think Moderna’s guidance is less likely to change significantly, as management did not issue guidance on the U.S. market until the second quarter, when initial sales contracts were put in place. That said, we’re lowering our Moderna fair value estimate from $266 to $227, as we now assume that demand for COVID-19 vaccines will remain at these trough levels for the foreseeable future, with roughly $4 billion in annual COVID-19 revenue for Moderna beginning in 2024 (down from our prior $5 billion estimate for sales in 2024 and beyond). Moderna is likely to launch a combination flu and COVID-19 vaccine in 2025 that could help pull demand for COVID-19 vaccines slightly closer to the 150-million-dose demand for flu vaccines in the U.S. annually, although we think there are too many uncertainties in the market relating to duration of vaccine protection and severity of new COVID-19 variants to assume additional demand at this point. We think Moderna is still in the process of building an economic moat around its mRNA technology, although we are increasingly bullish on the firm’s ability to translate success in COVID-19 into other respiratory diseases (led by RSV and flu), cancer (positive phase 2 data in melanoma), and rare diseases (positive proof of concept data in two leading programs). Aggressive spending on the firm’s growing pipeline is likely to push Moderna into the red through 2026, however, which likely discourages investors with a short-term horizon.