Analysis-Torrid Moderna stock rally cools over booster shot doubts

·4 min read

By Lewis Krauskopf

NEW YORK (Reuters) - Debate over the need for COVID-19 booster shots is clouding the outlook for Moderna Inc's high-flying shares after the U.S. biotechnology company's stock price soared as much as 360% this year, making it the best performer in the S&P 500.

A panel of expert outside advisers to the U.S. Food and Drug Administration on Friday voted to recommend https://www.reuters.com/world/us/us-covid-19-booster-debate-moves-fda-vaccine-advisory-committee-2021-09-17 COVID-19 vaccine booster shots for Americans 65 and older and those at high risk of severe illness, but rejected a request for broader approval.

The application for boosters for all Americans age 16 and older had been brought by Pfizer Inc for the vaccine it developed with German partner BioNTech SE. Moderna, whose vaccine is based on a similar messenger RNA (mRNA) technology, applied earlier this month https://www.reuters.com/business/healthcare-pharmaceuticals/moderna-submits-initial-data-covid-19-vaccine-booster-us-fda-2021-09-01 to allow use of a booster dose.

Moderna has benefited from being one of the dominant coronavirus vaccines, but its shares have pulled back 11% since hitting a closing high of $484.47 in early August. One factor in the rally stalling, analysts said, is a muddier outlook for additional booster COVID-19 shots, on top of the initial two-dose regimen.

“When (the stocks) ran up, I think it was expecting a booster shot to be given to everyone,” said Jeff Jonas, a portfolio manager at Gabelli Funds. "Now I think it’s maybe a little less certain that that extra demand is going to be there.”

The U.S. government had said it plans to start offering booster shots https://www.reuters.com/world/us/us-start-offering-covid-19-vaccine-booster-doses-september-2021-08-18 widely as soon as next week. But experts have questioned whether there is evidence to back such a plan.

This week, leading scientists, including two departing U.S. Food and Drug Administration officials, said in an influential medical journal that additional booster shots are not needed https://www.reuters.com/world/us/covid-19-vaccine-boosters-not-widely-needed-top-fda-who-scientists-say-2021-09-13 for the general population.

In a note earlier this week, SVB Leerink analysts estimated that the booster market is likely to add another $3 billion to $4 billion in U.S. revenue potential for existing vaccines.

Substantial booster revenue for the companies "are already contemplated in consensus estimates," the Leerink analysts said, "making the stock impact for Moderna in particular dependent on the breadth of the recommended population and boosting interval."

An already powerful rally in Moderna shares went into overdrive this summer, as index fund managers were forced to buy the stock after it was added to the S&P 500, and as concerns rose over a resurgence in COVID-19 cases due to spread of the virulent Delta variant of the virus.

The stock has been volatile since joining the index in mid July, with Moderna shares being either the biggest daily percentage gainer or loser in the S&P 500 in 10 trading days since the stock joined - a quarter of all the sessions over that time.

(Graphic: Moderna's 2021 share price performance, https://graphics.reuters.com/USA-STOCKS/MODERNA/gkplgwdnkvb/chart.png)

Analysts overall appear to be cautious about the stock, even as the company is developing other products, including a vaccine that combines a booster dose against COVID-19 with its experimental flu shot https://www.reuters.com/business/healthcare-pharmaceuticals/moderna-developing-single-dose-combination-vaccine-covid-19-flu-2021-09-09.

The median price target for Moderna shares among 12 analysts is $391, according to Refinitiv, over 11% below Thursday's closing price of $440.65

Using earnings estimates for the next 12 months, Moderna shares trade at a price-to-earnings ratio of 15.8, according to Refinitiv Datastream. That is more expensive than the 11.4 times P/E of S&P 500 biotech companies overall, but cheaper than the 17.7 of the S&P 500 healthcare sector.

However, Moderna is also trading at about 15 times estimates of its sales in five years - a valuation level that large biotech stocks with one key product have peaked at historically, according to Hartaj Singh, a biotech analyst at Oppenheimer. Singh downgraded his rating on the stock to "neutral" in August.

"I don’t expect the stock to go down unless there is some unequivocal bad news that comes across," Singh said. "But I do think that a lot of the good news is already in the stock valuation."

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Bill Berkrot)

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