Moderna

In a Phase 3 study, individualized neoantigen therapy intismeran improved recurrence-free survival and distant metastasis-free survival in melanoma patients when combined with Keytruda, relative to Keytruda alone. Moderna shares rose nearly 150% and Merck rose over 10% intraday on Aug. 19.

Why it matters: Declining covid vaccine demand and an uncertain US vaccine policy environment have forced Moderna to budget its cash and invest only in its most promising programs, but intismeran's success in phase 3 offers validation of the potential of its mRNA technology beyond vaccines. While the specific type of cancer studied in Interpath-001 (high-risk melanoma at the adjuvant, or post-surgery, stage) is a relatively small niche (30,000 patients in the US and EU), it bodes well for ongoing intismeran studies, including adjuvant lung cancer (more than 100,000 in the US and EU). The magnitude of benefit is not yet disclosed, but a positive readout at this first interim analysis is a good sign, as Merck and Moderna likely designed the trial with a high statistical bar for an early readout. Five-year phase 2b data showed a 49% reduction in the risk of recurrence or death.

The bottom line: We're raising our fair value estimates for wide-moat Merck (to $143 from $111) and no-moat Moderna (to $163 from $79) after raising our intismeran sales forecast to $16.8 billion (from $7.2 billion) by 2035, with profits from the program split 50/50 between the partners. We've increased our assumed probability of approval for intismeran in melanoma (from 60% to 100%) and lung cancer (from 40% to 60%), and we've added phase 2 kidney and bladder cancer programs to our model. We expect rapid approval, likely in the first half of 2027, once data is filed. We're watching for Keytruda/intismeran combination data in other areas where Keytruda has benefited patients, including phase 2 kidney cancer data expected this year and phase 2 bladder cancer data expected in 2027.

BLANK PAGEModerna and Merck's three phase 3 trials of intismeran in the largest potential indication of adjuvant lung cancer are all still enrolling, making it difficult to assess when they could read out, although we assume a potential launch in lung cancer in 2029. Also, Moderna and Merck are testing Keytruda and intismeran in higher-risk areas where Keytruda hasn't worked, with phase 1 trials ongoing in gastric and pancreatic cancers, although we do not include these in our model yet.

The latest intismeran data reflect Moderna's wise focus on earlier-stage cancers, where it appears that patients can still effectively mount an immune response against their cancer cells. This is in contrast to BioNTech and Roche's autogene cevumeran/BNT122, which moved slowly through midstage development in late-stage melanoma patients before the firm pivoted to earlier-stage cancers (phase 2 adjuvant colorectal cancer data is expected in 2027).

Intismeran also stands as one of the most advanced cancer therapies that relied on a machine learning algorithm—central to its design—to select the most promising neoantigens for each individual patient. This is one of the first direct links we've seen between application of artificial intelligence and phase 3 development success.

For more information on Merck's portfolio and pipeline, please see our recent in-depth report, "Biopharma Product Pipelines Rise to Meet Steeper Patent Cliffs."

We've raised our Moderna fair value estimate to $163 per share from $79 following positive data from a phase 3 study of individualized neoantigen therapy intismeran in adjuvant melanoma patients. We now forecast global intismeran sales of $16.8 billion in 2035 (up from our prior estimate of $7.2 billion), with profits split 50/50 between Moderna and its partner Merck.

We think Moderna's covid vaccine revenue could flatten around $1.8 billion globally in the long run. Despite continued regulatory headwinds on vaccines in the US, we think Moderna will continue to gain traction internationally with strategic agreements outside the US and potential new EU covid vaccine contracts beginning in 2027.

The company is facing several headwinds that are making its previously aggressive R&D strategy less feasible, including weak demand for covid vaccines, entrenched competition in RSV, no accelerated approval pathway for its melanoma treatment, and a shrinking pool of cash from pandemic covid vaccine profits. Moderna is therefore focusing its cash and R&D efforts on 10 programs it sees as likely to reach the market by 2028, and we estimate breakeven in 2029.

We expect that Moderna's launches of prophylactic infectious-disease vaccines for RSV (2024) and influenza (2026-27 in international markets) will help support sales growth, although competition could slow the sales trajectory. We assume $4.5 billion in annual infectious-disease vaccine sales outside of covid by 2035. We assume a 100% probability of approval for Merck and Moderna's personalized cancer vaccine, intismeran, in melanoma and a 60% probability of approval in lung cancer, and we expect Moderna could record $8.4 billion in sales from the program by 2035. We include $1 billion in annual sales from rare-disease therapeutics by 2034 (20%-50% probabilities of approval). Overall, this results in more than $16 billion in total probability-adjusted annual revenue by 2035. We expect operating margins will surpass 30% by 2030, even with continued strong investment in research and development.

Under our updated discount rate framework, we estimate Moderna's weighted average cost of capital at 9.2%, using a beta of 1.04 based on stock fundamentals and market returns.

The stellar safety and efficacy profile of Moderna's covid vaccine rapidly validated the firm's mRNA technology, and we expect returns on invested capital to exceed our 9.2% assumed cost of capital beginning in 2032. However, we see significant threats of value destruction that keep the firm from having a narrow moat. Moderna served a critical role in vaccinating millions of individuals during the pandemic and has several potential first-in-class vaccines and therapies in testing that could serve significant unmet needs. However, its ability to launch differentiated mRNA therapies beyond covid, ranging from prophylactic vaccines for other respiratory diseases to cancer treatments, will be key to establishing a moat, in our opinion. Also, lower covid vaccination rates have shrunk Moderna’s funding and forced it to narrow its pipeline focus. In addition, we see uncertainty regarding its defenses against other firms using mRNA technology and related to the US policy environment surrounding vaccines and mRNA.

Moderna's platform technology allows new genetic sequences to be easily inserted to create new therapies, and virtually identical, cell-free, low-volume manufacturing across programs should allow flexible manufacturing, but these characteristics—which allowed it to vault to the lead ahead of older technologies during the pandemic—could also make it more vulnerable to other competitors with similar technologies. Moderna's medicines use mRNA, which the company refers to as "the software of life," to deliver instructions for a patient's own body to produce a given protein, which can either trigger an immune reaction (prophylactic vaccines like the covid vaccine, or oncology vaccine programs) or replace a protein that is missing or faulty. Moderna's IP protection stems from the firm's broad mRNA technology (including sublicensed patents), formulation (including methods of using specific, proprietary lipid nanoparticle delivery technologies), and also the exact composition of matter (encoded antigen) for individual products. Protection extends through at least 2033 for issued patents and to 2036 (EU) and 2041 (US) for approved covid and RSV vaccines. Despite these patents, competition could come from established vaccine firms partnering with innovative mRNA firms (GSK/CureVac and Sanofi's Translate acquisition), other mRNA firms (BioNTech), or vaccines using other technologies (including Pfizer's and GSK's protein-based RSV vaccines). That said, Moderna's experience with artificial intelligence and proprietary digital technologies could allow it to design the best mRNA sequences for protein expression, and pandemic vaccine profits could give it an edge in ongoing proprietary work on new delivery technologies and lipid nanoparticles.

Despite the early lead that Moderna and BioNTech hold after developing their covid vaccines in less than a year and their clear dominance in covid vaccine sales, the long-term covid vaccine market is mired in uncertainty. The virulence of new strains and the population's willingness to continue to get vaccinated remain key questions. We assume that many high-risk individuals in developed markets continue to get annual vaccines, although we do not assume regular vaccination for healthy adults, leading us to a roughly $2 billion annual long-term covid vaccine opportunity for Moderna, well below peak sales near $18 billion annually in 2021 and 2022.

Among Moderna's infectious-disease vaccines beyond covid, the first to gain approval was mResvia for RSV. While it launched in time for the 2024-25 season, tough competition from Pfizer and GSK vaccines launched in 2023 as well as the multiyear protection of the vaccine have limited Moderna’s market opportunity here.

In the vaccine pipeline, influenza and norovirus (stomach flu) programs are leading, with launches aimed at 2027-28. While the $6 billion global influenza vaccine market is already crowded and has poor pricing power, Moderna's technology appears to allow higher efficacy than traditional vaccines, which in a good year are only 60% effective. With a shorter lead time due to faster manufacturing, Moderna should see a higher likelihood of targeting the key strains that will circulate in the upcoming season. Moderna's combination covid and influenza vaccine received approval in Europe in April 2026, and the stand-alone influenza vaccine is on track to receive approval in August 2026, despite a rockier path to approval due to controversy over its trial design and vaccine skepticism under the supervision of Robert F. Kennedy Jr., the secretary of Health and Human Services. We’re still waiting for clarity on the approval pathway for the covid/flu combination vaccine in the US, which we think is key to uptake; the convenience of a combination shot could draw some of the 150 million Americans who receive a flu shot each year to receive Moderna's combination shot instead. Data for a potential first-to-market norovirus vaccine is now expected in 2027.

In oncology, Moderna aims to activate a cancer patient's T cells by administering mRNA encoding neoantigens (antigens unique to tumor cells). One approach, in partnership with Merck, is an individualized neoantigen therapy that treats cancer by administering mRNA encoding multiple tumor neoantigens that T-cells can recognize, allowing a patient's immune system to recognize tumors more easily. Moderna and Merck have reported positive data for intismeran in a phase 3 melanoma trial, and we assume a 60% probability of success in an even larger adjuvant lung cancer indication (with three phase 3 trials in progress). Moderna's pipeline is also beginning to fill with off-the-shelf cancer therapies, including additional cancer antigen therapies, T-cell engagers, and in vivo CAR-T therapies, all based on Moderna's mRNA technology.

The stellar efficacy and safety profile of Moderna's covid vaccine offered rapid validation of the firm's mRNA technology.

Its mRNA technology could allow the firm to compete in a wide range of therapeutic areas, from other prophylactic vaccines (like influenza and other viruses) to enzyme replacement (various rare diseases) to cancer.

Moderna's cash infusion from covid vaccine sales in 2021-22, as well as newly established large-scale manufacturing facilities, positions the firm to rapidly develop new pipeline programs.

Moderna's Alexion partnership was terminated in 2017 after failure to find a safe but effective dose for the lead program, which could foreshadow difficulty finding a therapeutic window beyond low-dose vaccine programs.

Continued evolution of less threatening variants, society's vaccine fatigue, and uncertain US policy changes have significantly reduced demand for Moderna's covid vaccine.

Established, non-mRNA competition in RSV and influenza could make it difficult for Moderna to gain market share with new vaccines.