Company Reports

Moderna reported $6.8 billion in revenue in 2023, a 64% decrease from 2022, as demand for covid vaccines faded, but we’re maintaining our $227 fair value estimate as we think the firm is well positioned in a steadying covid market, with multiple new launches on tap for the 2024-26 period. Beyond the lower reported revenue, a combination of heavy charges to reduce the firm’s manufacturing footprint, expansion of commercial capabilities, and a growing number of large clinical trials swung the firm to a $4.7 billion net loss in 2023. Moderna has gained significant share in the premium-priced US covid vaccine market, and still retains $13.3 billion in cash to help power two years of heavy investment before we expect the firm to break even in 2026. We think Moderna is on track to generate $4.3 billion in revenue in 2024, slightly ahead of the firm’s $4 billion guidance, given the upcoming RSV launch (we assume $500 million in 2024 RSV sales). Pipeline progression is helping Moderna build an economic moat, although we still see very high uncertainty surrounding its shares. Overall, we think shares look significantly undervalued, as the market is failing to incorporate the value of mRNA technology beyond covid.

We’re maintaining our $227 fair value estimate for Moderna following positive long-term data that we believe supports the value of the firm’s mRNA technology as a novel cancer treatment. Moderna and partner Merck released three-year follow-up data for melanoma patients in a phase 2 study who were given a combination of Merck’s Keytruda and Moderna’s mRNA-based therapy mRNA-4157. These patients saw a 49% reduction in the risk of recurrence or death and a 62% reduction in the risk of distant metastasis or death relative to patients who received Keytruda alone, which is the standard of care for patients with resectable disease that is at high risk of recurrence. This data is quite similar to two-year data disclosed earlier this year, which showed a 44% reduction in risk of recurrence or death and 65% reduction in risk of distant metastasis or death. Merck and Moderna have already moved the program into phase 3 studies in both melanoma and lung cancer, and we expect several other studies to begin soon, as we think the personalized nature of the treatment, as well as phase 1 data already released in lung cancer, strongly point to its potential across multiple types of cancer.

We're maintaining our $227 fair value estimate for Moderna after reviewing Pfizer's lowered 2024 guidance for its own COVID-19 vaccine. Pfizer gave guidance for $5 billion in 2024 sales of Pfizer/BioNTech's COVID-19 vaccine, which is materially lower than our prior Pfizer forecast as well as Pfizer's $11.5 billion guidance for 2023 COVID-19 vaccine revenue. We continue to expect a tougher market for these vaccines going forward as the U.S. and some smaller markets transition from large, government contracts to commercial sales based on demand. However, we're comfortable with our Moderna assumptions, which call for another significant drop in COVID-19 revenue in 2024 to $3.9 billion, followed by a smaller drop to $3.5 billion in 2025 as some international contracts could wind down further. We then assume modest 3%-4% annual COVID-19 vaccine sales growth for Moderna following the expected launch of the firm's COVID-19/flu combination vaccine in 2025.

Moderna's mRNA technology has gained rapid validation as sales of its COVID-19 vaccine soared in 2021 and 2022, but we think the firm has yet to secure a narrow economic moat around its business, largely due to uncertainties tied to an evolving virus and the changing competitive landscape for innovative vaccines.

Moderna reported third-quarter results that were weaker than we had anticipated, largely due to significant manufacturing resizing expenses to allow the firm to adjust to the endemic phase of COVID-19 but retain more flexibility in the future.

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.

Moderna's mRNA technology has gained rapid validation as sales of its COVID-19 vaccine soared in 2021 and 2022, but we think the firm has yet to secure a narrow economic moat around its business, largely due to uncertainties tied to an evolving virus and the changing competitive landscape for innovative vaccines.

In conjunction with its research and development day, Moderna announced positive data for its flu vaccine and rare-disease treatments, additional insights into its oncology strategy, and aggressive goals for moving 15 new products to market and 50 new candidates to clinical trials over the next five years. We’re maintaining our $266 fair value estimate. While investors reacted positively to the announcements, we still see the shares as significantly undervalued, with too much focus on the near-term COVID-19 vaccine sales decline and not enough focus on the multiple avenues of longer-term growth. We’ve removed smaller, earlier-stage programs that have been discontinued but added in new programs in phenylketonuria (rare disease) and norovirus (latent vaccine). We’ve also slightly boosted our long-term assumptions for R&D spending to fit guidance.

Moderna reported second-quarter results that were largely in line with our expectations, and we’re maintaining our $266 fair value estimate. The second quarter is an off-season period for Moderna’s COVID-19 vaccine, which only generated sales of $293 million. In addition, manufacturing costs as the firm approaches the fall vaccination season are now largely fixed; Moderna is anticipating higher costs due to the switch to a new monovalent XBB vaccine, which doesn’t make use of any part of the prior BA.4/5 bivalent vaccine. However, our $7.5 billion forecast for full-year COVID vaccine sales for Moderna is in line with the firm’s $6 billion-$8 billion guidance, and we think our forecast for COVID vaccine sales in 2024 and beyond of roughly $5 billion annually fits well with this guidance, as it essentially eliminates the COVID sales from the first half of 2023 that are unlikely to repeat as vaccinations become increasingly focused on the fall season. Overall, we think that Moderna is still in the process of building a moat around its mRNA technology but that the current market valuation is out of step with the firm’s significant long-term potential in respiratory diseases, the broader infectious disease space, and cancer and rare diseases.

Moderna and Merck announced new data for individualized neoantigen therapy mRNA-4157 on Monday at the annual meeting of the American Society of Clinical Oncology that was consistent with our view of the therapy's solid safety and efficacy. As such, we're maintaining our $266 fair value estimate for Moderna. Phase 2b data presented at the meeting showed that a combination of mRNA-4157 with Keytruda led to a 65% reduction in the risk of distant metastases or death relative to Keytruda alone in adjuvant melanoma patients, building on prior data showing a 44% reduction in the risk of recurrence or death. Given Keytruda's position as the standard of care in this setting, as well as the novelty of Moderna's technology, this result bodes well for Moderna's technology in other combinations and other forms and stages of cancer. While the U.S. Food and Drug Administration could agree to approve the drug based on further updates from the phase 2b study, we expect they will require the start of a confirmatory phase 3 trial prior to approval, and Moderna and partner Merck expect to begin this trial in the third quarter. Moderna also hopes to start a phase 3 trial in adjuvant non-small cell lung cancer in the fourth quarter and expects future trials at other stages of disease (perhaps metastatic disease) and other cancer types. Moderna's results are also encouraging for BioNTech, which will have phase 2 data in the second half of 2023 in first-line metastatic melanoma trial (Keytruda with or without BNT122). We assume a 60% probability of approval for mRNA-4157, with probability-adjusted sales to Moderna of roughly $2.5 billion by the end of our 10-year explicit forecast period (Moderna's portion of a 50/50 split with Merck). We continue to see Moderna 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.

We’re maintaining our $266 fair value estimate for Moderna following first-quarter results that keep the firm on pace with our expectations for the full year. Covid vaccine revenue of $1.8 billion represented a 69% decline from the first quarter of 2022, as Moderna works through prior contracts that have rolled over from 2022. We expect a significant further drop in sales to roughly $200 million in the second quarter before new and existing contracts tied to an updated vaccine for the 2023/2024 season come into play in the second half of the year. Management maintained guidance for more than $5 billion in sales for the full year, and our own forecast stands at $7.4 billion assuming roughly $1.75 billion from a new U.S. contract, to be negotiated in the second or third quarter (using an average $70 net price and 25 million doses, or roughly 25% of a potential 100 million dose market). We think the firm’s lead in mRNA technology and expanding evidence of efficacy across multiple therapeutic areas could support an economic moat, if the firm stays on track to launch several new vaccines over the next few years.

Moderna’s vaccine day provided more support for our belief in its ability to expand vaccine revenue beyond COVID-19, given the firm’s rapid pace of development and flexible manufacturing. We’re maintaining our $266 fair value estimate. Management offered a range for 2027 respiratory vaccine sales—including the COVID-19 vaccine and leading phase 3 programs in RSV and influenza—of $8 billion-$15 billion, which is above our own $7.7 billion estimate. While Moderna’s phase 3 efficacy study for flu vaccine mRNA-1010 did not show non-inferiority to approved flu vaccines at an interim look, we expect this was due to the small number of cases seen so far in the study and not an indicator that the vaccine is inferior. We still think the vaccine is positioned to launch in 2024, and we’re bullish on the firm’s pipeline of next-generation respiratory vaccines and combination vaccines, as well as advancing programs in other infectious diseases (including latent viruses like HIV and CMV), oncology, and rare diseases. Research and development costs are growing substantially in 2023 and are likely to continue to grow over the next few years, and we now forecast losses at Moderna through 2025. However, platform costs are shrinking over time, and costs could begin to drop as more of the first wave of programs complete clinical studies and smaller studies are initiated for combination vaccines. We think the firm’s lead in mRNA technology and expanding evidence of efficacy across multiple therapeutic areas could support an economic moat if the firm stays on track to launch several new vaccines over the next few years.

We’re maintaining our $266 Moderna fair value estimate following 2022 results that were in line with our forecast, with the exception of higher costs of goods sold due to a catch-up royalty payment for a new agreement with the NIH in December. In 2022, while COVID-19 vaccine sales grew 4% to $18.4 billion, net income fell 31% to $8.4 billion, as Moderna’s lower gross margin (due mostly to higher royalties and inventory write-downs given lower demand), higher operating expenses (as the firm’s pipeline and commercial capabilities advance), and more normalized tax rate all contributed to a weaker bottom line. Given several programs in late-stage development and upcoming launches, we think Moderna will report net losses in 2023 and 2024, with the potential to break even in 2025 if new launches for influenza and RSV vaccines proceed on schedule. We think Moderna is still in the process of building an economic moat, with competitive advantages potentially arising as the firm makes progress with combination respiratory vaccines (still in phase 1) as well as rare disease and cancer therapies. The market’s negative reaction to earnings appears to reflect a focus on higher cost of goods and operating expenses and continued uncertainty around the flu vaccine program but not the improving potential of the firm’s pipeline (particularly in RSV and oncology). In addition, with $18.2 billion in cash on its balance sheet at the end of 2022, the firm has plenty of flexibility for further business development deals, such as the recent collaboration with Life Edit focused on in vivo gene editing and base editing.

We’re maintaining our $266 fair value estimate for Moderna following positive phase 3 data from the first interim analysis of the firm’s respiratory syncytial virus vaccine, mRNA-1345. While we’ve raised our assumed probability of approval for the vaccine to 70% from 50%, we’ve also boosted our long-term assumptions for annual research and development expenses following the firm’s massive $4.5 billion guidance for 2023 R&D expenses at a recent healthcare conference. This spending would be significantly above the roughly $3.3 billion spent in 2022, so we’re boosting our long-term annual R&D expenses to roughly $3.5 billion annually from our prior estimate of $3 billion (still roughly 20% of sales by 2031). The positive RSV data comes on the heels of positive data for Merck and Moderna’s personalized melanoma vaccine. We continue to think the market underestimates the potential of Moderna’s mRNA technology to address multiple types of diseases in both prevention and treatment. However, we think Moderna is still in the process of building a moat, as multiple other firms could have the technology to compete, and the overall market opportunity remains unclear. We look forward to more early-stage data from Moderna’s rare-disease programs this year, which we think could open up a very broad opportunity, but due to the higher-risk nature of the programs, we currently assume only a 25% probability of approval.

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.

Moderna's mRNA technology has gained rapid validation as sales of its COVID-19 vaccine soared in 2021, but we think the firm has yet to secure a narrow economic moat around its business, largely due to uncertainties tied to an evolving virus and the changing competitive landscape for innovative vaccines.

Moderna reported third-quarter COVID-19 vaccine revenue of $3.1 billion, down 35% year over year and below our expectations. Management lowered its anticipated COVID-19 vaccine sales for the full year to roughly $18 billion-$19 billion, down from prior guidance as Moderna experienced supply constraints during the shift to bivalent vaccine production and as countries deferred contracts to next year. Moderna's gross margins have also fallen significantly as the firm operates below capacity, shifts production to new bivalent vaccines, and accounts for unsold, expiring doses. Although we've factored this new guidance into our model, we are maintaining our $232 fair value estimate, which now includes a higher U.S. price starting in 2023 as the COVID-19 vaccine market transitions from government contracts to commercial sales.

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.

We're not making any changes to our Moderna or Pfizer/BioNTech fair value estimates following a U.S. Food and Drug Administration advisory committee meeting on June 28 that was supportive of adapting mRNA-based COVID-19 vaccine booster shots to contain an omicron-based component. The committee voted 19 to 2 in favor of a strain change, with some members citing as part of their rationale the waning efficacy (55%, according to Centers for Disease Control and Prevention data presented at the meeting) of approved boosters against hospitalization from BA.2 omicron subvariants. Most committee members supported the use of a bivalent vaccine that would offer protection against both the ancestral (original) SARS-CoV-2 virus as well as the BA.1 subvariant of omicron, rather than switching to an omicron-adapted vaccine. Data presented by Pfizer and Moderna were generally supportive of using this bivalent approach, as duration of protection appears to be longer with such vaccines (based on six-month data from Moderna's beta-adapted bivalent program).

Moderna produced data for its bivalent COVID-19 vaccine mRNA-1273.214 that we think puts the firm in a solid position ahead of the Food and Drug Administration advisory committee meeting scheduled for June 28, with data that supports the use of a new vaccine that targets both the original virus and the omicron variant. We're maintaining our $232 fair value estimate, as we see this data supporting near-term dominance of mRNA vaccines heading into next winter (we expect Pfizer/BioNTech to have similar data available by the June 28 meeting as well). We continue to model $20.6 billion in Moderna 2022 COVID vaccine sales, in line with management guidance for $21 billion in COVID vaccine sales, and roughly $4 billion in annual COVID vaccine sales beginning in 2024. We see Moderna shares as undervalued, with significant potential for the firm's mRNA technology to support further updates to COVID vaccines as well as additional respiratory virus vaccines in the near term, and a broader portfolio of mRNA-based therapeutics in the long run. While we're encouraged by the firm's progress and validation of its technology, we have yet to award the firm an economic moat.