Biotech’s stock falls for nine straight days toward a three-year low, but UBS’s Eliana Merle targets a doubling over the next 12 months
Shares of Moderna Inc. were in danger of breaking their record for consecutive declines as investors express increasing caution over slowing sales of COVID vaccines.
UBS analyst Eliana Merle indicated that investors appear to be overly focused on COVID issues in the wake of Pfizer Inc.’s PFE, +0.62% sales warning, considering that Moderna recently reiterated its 2023 vaccine-revenue guidance, and that they are underappreciating the biotechnology company’s drug pipeline.
Merle reiterated the buy rating she’s had on the stock MRNA, -2.19% since late June. Although she trimmed her 12-month stock-price target by 6.8%, to $178 from $191, her new target still implied 122% upside from current levels.
The stock fell as much as 2.0% intraday before paring losses to be down 0.6% in midday trading. It has plunged 23.5% during a nine-day losing streak, which would break the previous record of eight straight losses that ended Jan. 25, 2022.
“We think investors remain focused on the trajectory of COVID vaccine revenues, though we think investor caution remains high,” Merle wrote in a note to clients. “For [the third quarter], we think the revenue number itself matters less given the majority of [second-half 2023] revenues are expected to be in [the fourth quarter] (given COVID vaccines were authorized in mid-September, so most shipments will be in 4Q).”
She believes if expectations for annual COVID sales were cut in half, and with no revenue expected from flu or respiratory syncytial virus vaccine sales or credit given to Moderna’s pipeline, the stock would still be worth $50 to $55. Adding in potential peak RSV and flu sales, the stock would be worth about $85 to $93.
She believes Moderna’s broader pipeline beyond COVID is “underappreciated,” particularly the company’s latent virus portfolio. Adding in the expected pipeline value drives her target up to $178.
“[W]e we think flu vaccines could serve as a key component to the company’s longer-term combination vaccine strategy and notably help broaden the use/adherence for COVID annual boosters,” Merle wrote. “We note [Moderna] is developing many different combination vaccines, with the first launch expected in 2025 (likely COVID/flu).”
The stock has tumbled 55.5% year to date, while the Health Care Select Sector SPDR exchange-traded fund XLV, of which Moderna is a component, has slipped 5.8% and the S&P 500 SPX has gained 10.4%.