Analyst Note| Karen Andersen, CFA |
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.
Given that Merck had access to open label data from personalized cancer vaccine mRNA-4157 upon recently exercising its option to license the drug, we're also slightly more bullish on this higher-risk program, which should have Phase 2 data later this year. In addition, Phase 3 data for both RSV (older adult study) and flu (including an immunogenicity study and separate efficacy study) could be available in the first quarter of 2023, and we remain bullish on Moderna's broad respiratory vaccine pipeline. We see several launches possible beginning in 2024, with oncology and rare disease pipelines also poised to expand. With $17 billion in cash and investments, we also think Moderna is in a prime position to supplement its technology and pipeline with other novel technologies, such a gene or base editing. Given Moderna's strong positioning for diversification beyond COVID-19, we think shares remain significantly undervalued. That said, we think the firm is still in the process of building a moat around its innovative mRNA technology.