@Morrischiano - Follow-up to my post above. Morningstar super bullish on Moderna:
Moderna: Long-Term Guidance at Vaccines Day Represents Upside to Our $266 Fair Value
Analyst Note | Updated Apr 11, 2023
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.
Business Strategy and Outlook | Updated Dec 13, 2022
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.
In a record-breaking span of just 11 months, Moderna created, developed, manufactured, and got regulatory authorization for mRNA-1273, a two-dose COVID-19 vaccine that is one of the first two mRNA vaccines ever authorized (alongside Pfizer/BioNTech's BNT162b2). The pandemic accelerated Moderna's evolution into a commercial-stage biotech, and we expect that the firm's ramp-up in manufacturing and clinical know-how will pave the way for faster timelines for additional programs. Moderna's mRNA platform, involving rapid design and similar manufacturing across programs, allows the company to pursue multiple programs in parallel. Moderna also retains full rights to most of its programs, although partnerships with Merck and Vertex help support its efforts in oncology and cystic fibrosis.
Moderna reported $17.7 billion in COVID-19 vaccine sales in 2021, and we model nearly $19 billion in sales in 2022 as demand for first doses has declined but demand for boosters expands. We see potential for continued revenue in the mid-single-digit billions annually if higher-risk populations continue to receive annual vaccines beyond the pandemic, although there is high uncertainty around the number of long-term competitors (including new mRNA players) and pricing.
Moderna's most advanced program outside COVID-19 is for cytomegalovirus, a leading cause of birth defects, but several other vaccines are advancing into late-stage trials, including respiratory virus vaccines for RSV and influenza. We see each of these as more than $1 billion annual sales opportunities. Moderna is also pursuing a broad spectrum of other therapeutic indications, from cancer to cardiology to rare diseases, with an expanding early-stage development pipeline.
Fair Value and Profit Drivers | Updated Dec 13, 2022
We're raising our fair value estimate to $266 per share from $232 following positive phase 2 data for Merck and Moderna's personalized cancer vaccine, mRNA-4157. We have raised our assumed probability of approval to 50% from 20% and now assume Moderna could record $2 billion in sales from the program by 2031.
We think mRNA-1273, the firm's authorized COVID-19 vaccine, should generate $18.6 billion in sales in 2022, followed by roughly $6.9 billion in 2023 and $4 billion in annual sales beyond, due to recurring boosters in high-risk populations. We expect that Moderna could launch its next prophylactic vaccines for CMV (phase 3) and influenza (entered phase 3 in 2022) in 2024, followed by other potential launches (hMPV/PIV3, RSV) in 2025. We see 70% probabilities of approval for the firm's most advanced vaccine programs in CMV and flu, and 50% probabilities for hMPV/PIV3 and RSV. In oncology, beyond mRNA-4157, we assign a 10%-30% probabilities of approval to the firm's programs, including Moderna's KRAS program and intratumoral triplet. Overall, this results in more than $16 billion in total probability-adjusted annual revenue by 2031. We expect operating margins will easily surpass 40% by 2030 and model margins above 50%, even with continued strong investment in research and development. We assign Moderna an average level of systemic risk, resulting in a cost of equity (and weighted average cost of capital) of 9%, in line with its early commercial-stage biotech peers.
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