© Reuters. FILE PHOTO A sign marks Moderna Therapeutics’ headquarters in Cambridge, Massachusetts. May 18, 2020. REUTERS/Brian Snyder/File Photo
By Lewis Krauskopf
NEW YORK (Reuters) – Debate over the need for COVID-19 booster shots is clouding the outlook for Moderna (NASDAQ:) 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 .
Investors on Friday were awaiting comments from a panel of outside experts, which is weighing whether to recommend https://www.reuters.com/world/us/us-covid-19-booster-debate-moves-fda-vaccine-advisory-committee-2021-09-17 if U.S regulators should approve Pfizer (NYSE:) and partner BioNTech’s application for an extra round of shots for their vaccine. 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, but that is not expected to be taken up in Friday’s meeting.
Moderna, which is one of the most popular coronavirus vaccines in existence has seen its share price fall more than 10% after hitting an August closing high at $484.47. The rally’s stalling was due to a less clear outlook for booster COVID-19 shots.
“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 has 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. Experts have doubted whether such an idea is supported by evidence.
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.
SVB Leerink analysts stated this week that booster markets could add $3 billion to 4 billion more in U.S. revenues for vaccines.
The Leerink analysts stated that substantial booster revenues for these companies are “already contemplated” in consensus estimates. This makes Moderna’s stock impact dependent upon the size of the recommended populace and the 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.
Moderna’s current price is 15x its estimated sales over five years, which Hartaj Singh, an Oppenheimer analyst in biotech, said that this valuation represents the highest level large biotech stocks, with one product, have traded historically. Singh changed his August rating to “neutral”.
“I don’t expect the stock to go down unless there is some unequivocal bad news that comes across,” Singh said. Singh said, “But I think that the stock valuation already contains a lot more good news.”