Moderna Earnings: High-Level Long-Term Guidance Fits Our View; Maintaining $227 Valuation

Moderna MRNA 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.

We’re maintaining our $227 fair value estimate after assessing the firm’s high-level guidance through 2025, which overall implies lower COVID revenue than we had anticipated, but better cost control and flexibility.

In addition, with more than $1 billion in RSV vaccine sales between Pfizer and GSK in their first quarter on the market, we’re increasingly confident of our $2.5 billion peak annual sales estimate for Moderna’s own RSV vaccine (poised to launch in 2024). We see its efficacy and safety profile as similar to GSK’s leading product, but with potential convenience benefits from its prefilled syringe in 2024 and combination vaccine potential in the long run. 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 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).

We think shares look undervalued, as we think Moderna can execute its strategy without raising additional cash on the equity market at prices well below our fair value estimate. Based on very strong earlier data, we believe the upcoming three-year update on phase 2 data for the firm’s individualized neoantigen therapy in melanoma later this year should allow for an accelerated regulatory filing and serve as a positive catalyst for the stock.