Moderna's Fresh Blow As RFK Heads To HHS - A Tough 2025 May Be In Store

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Moderna, Inc.'s stock has plummeted over 75% in 2024, driven by disappointing earnings, reduced revenue forecasts, and now the threat of a vaccine skeptic, RFK Jr.'s potential confirmation to lead HHS...

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PeerCreative/iStock via Getty Images  Investment Overview 2024 has been an “annus horribilis” for Moderna, Inc. (NASDAQ:MRNA) — although it began brightly, with the stock reaching a high of $165 per share in May. That was after the company beat analysts' consensus forecasts in Q1, reporting $167m in revenues, and forecasting for $4bn across the year as a whole, stock currently trades at ~$38 per share — down >75%. Ahead of Moderna's Q2 earnings, I shared a bearish take on the company, which proved prophetic — the company reported $184m of revenues, a net loss of $1.3bn, and slashed full-year guidance to $3-$3.5bn — shares fell from ~$120, to ~$80 on the news. In September, I shared another bearish note after Moderna reported cost-cutting measures, guided for $2.5bn-$3.5bn of revenues in 2025, with R&D expenses alone forecast to be $4.2bn-$4.5bn, and $11.5bn for the period 2026-2028. Once again, Moderna stock dropped again as analysts downgraded the stock, and again after the company held an R&D day, advising that profitability was unlikely to be achieved before 2028. Moderna reported revenues of $1.9bn in Q3, net income of $13m, and cash and investment of $9.2bn, but even a resounding beat of analysts' consensus estimates on revenue and earnings, and a reduction of operating expenses by $0.5bn failed to halt the bear run just over one week ago, Moderna stock took yet another hit after it was reported that Robert F. Kennedy Jr, known for his vaccine skepticism, was selected by President-elect Donald Trump to lead the Department of Health and Human Services (“HHS”). Shares, which had been falling post Q3 earnings, dropped another 5%, and the current stock price of $38 is now the lowest price since before the pandemic began. Remember, in September 2021, shares traded at $450 per share, and Moderna's market cap was >$150bn. Today, the market cap is <$15bn. Kennedy's Appointment To Head Up HHS Would Spell Trouble For Moderna Moderna's only two commercialized products include its COVID-19 vaccine. This is in several iterations, the latest targeting strains JN.1 and KP.2, as identified by the Vaccines and Related Biological Products Advisory Committee (“VRBPAC”). There is also its RSV vaccine, approved earlier this year. According to CNBC, Kennedy is the “founder of the nonprofit Children’s Health Defense, the most well-funded anti-vaccine organization in the country.” It's not yet 100% certain that Kennedy will be confirmed to the role — a Republican-held senate will make the final decision — but it seems likely. Kennedy has formerly said that he “wouldn't take anyone's vaccines away” if in charge of the agency, but has also been quoted as saying: I’m going to make sure scientific safety studies and efficacy are out there, and people can make individual assessments about whether that product is going to be good for them. In a press release for Moderna's R&D Day, CEO Stéphane Bancel was quoted as saying: Moderna now has five respiratory vaccines with positive Phase 3 results and expects to submit three for approval this year. In addition, we have five non-respiratory products in pivotal studies across cancer, rare diseases and latent vaccines with potential for approval by 2027. Moderna has a next-gen COVID vaccine, a flu vaccine, a flu/COVID combo vaccine, and norovirus and CMV vaccines in its pipeline. It also has a cancer “vaccine,” indicated for melanoma, and is being developed alongside Pharma giant Merck & Co., Inc. (MRK) and its best-selling cancer drug Keytruda. In short, the appointment of Kennedy to lead the HHS — if confirmed — can be interpreted as a worst-case scenario for the company. Moderna is attempting to put a positive spin on the news, however. At the Jefferies London Healthcare conference yesterday, during a “fireside chat,” Lavina Talukdar, Moderna's Head of Investor Relations, told analyst Michael Yee:  There has been some rhetoric in the past around his stance on vaccines, in particular, for children, an area that we are not in right now, but we do have vaccines for adults... We are staying the course. We believe that vaccines provide public health benefits that outweigh the risks associated with vaccines. I think another thing that the administration as well as RFK would like to see is an open dialogue on the benefits of vaccines over the risks associated with them, and that's the way the FDA and other agencies under HHS have viewed vaccines.... We are staying the course and bringing forward our products -- 10 products that we have coming to market, six of those being vaccines are on the docket for our strategy going forward.  In terms of Moderna's commercial vaccines, Talukdar pointed out that: COVID is not a mandated vaccine. So, the people who are getting the COVID vaccine today are doing it through choice. There has long been discussion over the size of a private COVID market and whether people would opt to pay for vaccination (or potentially be reimbursed for them by their health insurer). Moderna says (source: Q3 earnings presentation) that because its vaccine was approved earlier in 2024 — in August — than it had been in 2023 – September - it has been able to ship twice as much vaccine product, and has a 40% share of a market that reached 19m doses by Week 9. Moderna says that the retail segment “represented 73%” of the total COVID market in 2023, and reported $1.2bn of COVID vaccine revenues in Q3, while guiding for a 4Q product sales range of $0.8 billion to $1.3 billion (source: Q3 earnings call), and U.S. 4Q product sales to be between $200 million and $500 million. In summary, Moderna remains confident that a private COVID market is a “stable, sizeable, and durable market,” with some justification, however, Moderna also suggested at its investor day it is expecting to reach $6bn in revenues by 2028. Even in an optimistic scenario, it's difficult to see a global COVID vaccination market reaching >$5bn in size, and with a 40% market share, challenging to see how Moderna generates >$2bn per annum from a COVID shot. Moderna reported $10m of revenues from its RSV vaccine, mRESVIA, in Q3, which is now approved in the US and Europe and has discussed a total addressable market (“TAM”) of ~$10bn. The problem is that both GSK plc (GSK) and Pfizer Inc. (PFE) have launched RSV vaccines, and recent data has indicated vaccination may be required once every 36 months, as opposed to 24, reducing the TAM. There is also debate around what age groups ought to receive an RSV vaccine, and this could be an area where the HHS under Kennedy is much more conservative — for example, advising that over-75's only ought to receive vaccines. In Q3, GSK's Arexvy revenues were just $244m, while Pfizer's Abrsyvo revenues were $356m, which seems to imply that it may be challenging for Moderna to extract a “blockbuster” (>$1bn per annum) revenue stream from its RSV vaccine. A combo COVID / Flu vaccine has been much discussed. However, it is another opportunity that could be impacted by a regime change at HHS. As for latent vaccines, it is difficult to see Kennedy — if confirmed — being receptive to creating new vaccine markets for norovirus and CMV. This is even if Moderna has made the case that a vaccine for the latter could be essential for families planning to have children. Moderna has dumped several other programs this year to focus on these vaccines. It has promised to release Phase 3 CMV data this year. However, with R&D cost savings being prioritized, it's possible this entire program could be shelved, if Moderna does not receive any encouragement from the FDA around formally submitting the vaccine for approval. Looking Ahead: An Uncertain Outlook Just Became Cloudier Moderna has been making a habit of downgrading expectations with each new set of quarterly earnings released, or event held, and unfortunately, my suspicion would be that further downgrades may be in store. The TAM for the private COVID market is still unknown, likely <$1bn per annum for RSV. A proposed latent vaccine market TAM of up to $10bn per annum may have to be parked altogether, and rare disease — Moderna is targeting Propionic Acidemia and methylmalonic acidemia (MMA) — is thought by the company to be a <$500m market. That leaves oncology, and the Merck partnered cancer “vaccine.” Again, it is very difficult to assess the opportunity here. On one hand, the melanoma combo could be approved next year, and melanoma is a double-digit market opportunity, while Phase 3 studies in non-small cell lung cancer — an even larger market — are underway. These markets are highly competitive, however. Despite some positive Phase 3 data in melanoma — studies suggest patients given Keytruda plus mRNA-4157 were 49% less likely to relapse or die than those who received Keytruda — it may be premature to suggest the drug will make it to market next year with an accelerated approval. Even if it did, whether there is a long-term “blockbuster” revenue opportunity in play — Keytruda's patents expire in 2027, and the rise of VEGF / PD1 blocking cancer drugs, antibody-drug conjugates, and other approaches threaten the drug's long-term status as standard-of-care. It has been bruited about that Merck & Co., Inc. (MRK) — which is also a vaccine developer — could move to acquire Moderna. This is an intriguing prospect. My estimate would be that Merck may be willing to pay ~$15-$20bn to make that deal happen, given that messenger-RNA technology remains a highly promising field of research. In Moderna's case, the company has struggled to make mRNA work outside of COVID, let alone outside the vaccine business. This is surprising given the hype around the technology in the pandemic era and has dumped numerous projects to trim its R&D budget. Perhaps it is time for Moderna to think seriously about the future direction of the company. The best possible outcome perhaps would be for a Big Pharma to bring fresh R&D eyes to the mRNA field and see what it can make of Moderna's technology platforms, and if it can exploit its vaccine infrastructure. That is the main reason why I am opting to give Moderna stock a “hold” rating at this time. Moderna does not need to generate $6bn of revenue by 2028 to justify its current market cap valuation. To accomplish that, it may need to drive long-term ~$2bn per annum revenues from its COVID franchise, and $500-$1bn from its RSV franchise, while continuing its work with Merck. I'd be skeptical that norovirus, CMV, or other new vaccines can be converted into meaningful revenue opportunities at this time. This is given the likely changes at the top of HHS. Therefore, if I were Moderna, I'd be thinking about whether further programs may need to be dropped, so that R&D expenses can be reduced and profitability achieved with a lower revenue figure. If that can be done, we can certainly make the case for a ~$15bn company valuation, and perhaps a higher one.  Because Moderna has ~$9bn in cash, a bid to acquire the company could rise to ~$25bn in size, I estimate. This is at least one positive shareholders can take from what has been a disastrous year for Moderna, with early signs suggesting 2025 will not offer much in the way of respite.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"Policy And Regulatory,analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485581293"}