Moderna Analysts Say COVID-19 Vaccine Contract Reflects Pricing Risk, Shows Ability To Scale

After hinting at ongoing negotiations for larger vaccine deals on its earnings call, Moderna Inc MRNA said late Tuesday that it signed an agreement with the U.S. government to supply 100 million doses of its coronavirus vaccine candidate mRNA-1273 for $1.525 billion.

The Moderna Analysts: SVB Leerink analyst Mani Foroohar maintained a Market Perform rating on Moderna shares and lowered the price target from $60 to $58. 

Chardan analyst Geulah Livshits maintained a Buy rating and $95 price target.

Morgan Stanley analyst Matthew Harrison maintained an Overweight rating and $90 price target.

SVB Leerink Sees Long-Term Pricing Risk: The contract award from the U.S. government implies a price of $15.25 per dose, materially below the previously modeled $22 per dose, as well as the Pfizer Inc. PFE/BioNTech SE – ADR BNTX combine's $19.50 per-dose pricing for the government contract, Foroohar said in a Wednesday note.

Moderna's contract with the U.S. government includes incentive payments for timely delivery, with some portion of the pricing at risk if the company is not able to obtain emergency use authorization or BLA approval by Jan. 31, 2021, the analyst said. 

An EUA by this timeframe is likely, given the flexibility of regulatory agencies with respect to SARS-CoV-2 vaccine candidates, he said. 

Even this assumption carries a risk if Moderna experiences a delay in clinical trial execution or reports disappointing interim data from the ongoing Phase 3 trial, Foroohar said. 

"We see this lower price point and risk-sharing with the U.S. government as further evidence of competitive intensity in the SARS-CoV-2 vaccine market driving price erosion." 

Moderna shares will likely trade up initially on the announcement despite negative implications for pricing in the coronavirus vaccine market, according to SVB Leerink.

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Moderna Enters Big Leagues With Deal, Chardan Says: The move to secure mRNA-1273 doses as part of Operation Warp Speed is not surprising given the involvement of various government agencies in supporting the development of mRNA-1273 since January, Livshits said in a note.

Despite the $15.25-per-dose pricing implied by the contract, the value of the first 100 million doses will work out to $24.80 each when taking into account the investments made by government agencies such as BARDA, the analyst said.

This leaves Moderna's pricing at the top of the range of disclosed COVID-19 vaccine agreements is above Chardan's expectations of "mid-to-high teens" pricing, she said. 

The news is positive and signals Moderna's potential entry into a commercial space often dominated by big-caps, according to Chardan. 

Contract Shows Moderna Can Scale Up, Morgan Stanley Says: With the deal, the government's total commitment for early access to mRNA-1273 has increased up to $2.48 billion, Harrison said in a note.

The agreement with the U.S. government also carries an option to buy an incremental 400 million doses, the analyst said. 

This is above the Pfizer/BioNTech combo's contracted pricing of $19.50, he said — and the combo hasn't secured any BARDA funding. 

"Overall, we believe the contract provides further confidence that Moderna can supply and produce vaccine at scale." 

MRNA Price Action: At last check, Moderna shares were rising 1.41% to $69.94.

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