The record rally in Moderna (MRNA) stock has hit a pause as rivals Merck & Company (MRK) and Ridgeback Biotherapeutics came out with an oral antiviral COVID-19 pill, Molnupiravir, which significantly reduces (by about 50%) the chance of hospitalization or death from COVID.
Following the announcement, vaccine stocks, including Moderna, witnessed a sharp selloff and closed 11.4% lower on Friday.
Merck’s CEO, Robert M. Davis, is highly optimistic about Molnupiravir. He expects it to become “an important medicine as part of the global effort to fight the pandemic.” Merck is filing an application with the U.S. FDA (Food and Drug Administration) for emergency use authorization.
Whether Merck’s Molnupiravir dents Moderna’s prospects remains a wait and watch story. For now, Piper Sandler analyst Christopher Raymond termed Merck’s Molnupiravir as a “game changer.” However, Tejas Savant of Morgan Stanley doesn’t expect Molnupiravir to impact the need for vaccines.
Even before Merck’s announcement, investors’ interest in Moderna stock had started to wane. Interestingly, TipRanks’ Stock Investors tool indicates that investors who hold portfolios on TipRanks currently have a Very Positive outlook on Moderna stock. Still, about 1.1% of these investors have reduced their exposure in the last seven days.
Moderna, which became a household name due to its COVID-19 vaccine, saw its stock rally over 226% this year. The strong demand, multi-billion-dollar advance purchase agreement ($12 billion already signed and an additional $8 billion in options for FY22), and profitable growth are the reasons behind the appreciation in its price. (See Moderna stock charts on TipRanks)
Furthermore, the U.S. FDA’s authorization for Pfizer (PFE)-BioNTech’s booster shots in the elderly (65 years and above) and the immunocompromised population could be a positive development for Moderna, as it increases the likelihood of approval for its booster shots.
It’s worth noting that Moderna has received emergency use authorization for the third dose in immunocompromised individuals.
However, I maintain a Neutral view on Moderna stock, primarily due to the steep growth in its price.
Taking a note of the rally in Moderna stock, Needham’s Joseph Stringer stated that “success in COVID vaccine programs is fully reflected in the stock.” Stringer has a Hold rating on Moderna stock.
Meanwhile, on TipRanks, Moderna stock has an analyst rating consensus of Hold, based on 3 Buys, 7 Holds, and 2 Sells. The average Moderna price target of $363.13 implies 6.5% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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