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Tuesday, July 21, 2020 9:12:40 PM
With a Phase 2 study currently in progress, and a Phase 3 trial of mRNA-1273 set to begin on July 27, Oppenheimer analyst Hartaj Singh sees a rocky path ahead, yet remains optimistic.
“MRNA's valuation, in our view, is reflecting an approval and fast uptake of mRNA-1273, in line with other historical biotech comps. Pricing dynamics, potential donation of free vaccine and distribution of mRNA-1273 are non-trivial issues. We believe these can be navigated, but transit could be choppy. As the leader in the COVID-19 vaccine space, we continue to find MRNA attractive,” said the 5-star analyst.
Should mRNA-1273 gain approval, which is by no means a certainty and given a 50% probability of success by Singh, it is expected to generate sales of $5 billion by 2023. However, in order for that to become a reality, there are “many hurdles that MRNA needs to navigate over the next 3-6 months.”
These hurdles include the drug’s pricing. Other big pharma names such as Johnson & Johnson and AstraZeneca have said they might distribute their vaccines “at cost” while the virus still rages on. Additionally, with Moderna’s use of shareholder capital to produce mRNA-1273 “at risk,” this means “threading the pricing needle for mRNA-1273 will require finesse.” Add into the mix the possibility that the vaccine might be donated to developing countries - like Gilead has done with its viral treatment, remdesivir - and pricing becomes further complicated.
Lastly, there are the distribution logistics. Singh believes Moderna will “work closely with US governmental and international agencies to distribute mRNA-1273 in an equitable manner,” and might even search for a partner to work with on the commercial side.
Despite the variables, all in all, Singh concludes these are “high-quality problems, and we continue to find MRNA attractive.”
Therefore, Singh reiterated an Outperform rating along with a $108 price target. There’s 33% upside in the cards, should Singh’s target be met over the next 12 months.
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