Moderna has received its second Sell rating on Wall Street, but the downgrade has little to do with the drugmaker's commercial potential or pipeline prospects.
Rothschild & Co. Redburn analyst Simon Baker cut Moderna to Sell from Neutral in a research note Thursday. Although Baker lifted his price target to $81 from $40 it still implies shares could fall 45% from current levels. Moderna slid 3.3% to $145.84 on Thursday.
With the downgrade, Rothschild joins J.P. Morgan as only the second Wall Street firm to rate Moderna a Sell. The rest of Wall Street remains overwhelmingly cautious: Most analysts hold a Neutral or Hold rating following last month's historic rally, which pushed the stock to a record high.
Moderna shares have risen nearly fivefold this year, stemming largely from a jump on Aug. 19, after Moderna and Merck's investigational cancer vaccine, intismeran autogene, showed promising results in a Phase 3 trial.
A treatment combining the vaccine with Merck's Keytruda helped patients stay cancer-free longer than Keytruda alone after having their melanomas surgically removed. Beyond marking the first Phase 3 success for a cancer vaccine, the trial served as a powerful validation of Moderna's heavily scrutinized mRNA platform.
On the heels of those results, Moderna stock surged 156% in August to post its best month on record. The rally surpassed the previous record set in November 2020, when Moderna emerged as a Covid vaccine play-a label it has since struggled to shed.
Baker acknowledged that the Phase 3 data were "undoubtedly good, building on earlier successes." Intismeran had performed well in earlier trials, meaning the result wasn't totally unexpected, though it was no less significant given the late-stage failure rate of similar treatments.
However, the market's reaction to the news-which Baker characterized as "overexuberant" and impossible to justify-left the stock "considerably overvalued." In his view, the stock surge suggests "near-ubiquitous usage across tumour types," a conclusion that has yet to be proven as intismeran progresses through nine other clinical trials.
Rothschild's explicit bearish call sets him apart from an otherwise cautious Wall Street. Of the 24 analysts covering Moderna, two-thirds are sidelined on the stock, and very few actively recommend a Buy at current levels.
Shares have already started to decline. Moderna closed at $150.81 on Wednesday, down 14% from its peak on Aug. 19. In Baker's view, the stock has little room to run in the near term-at least until further trial data validates intismeran's commercial potential beyond melanoma.
Comments