Moderna, Inc.

MRNA Details 

In talks to Supply 40 Million Doses of mRNA Vaccine to Japan: Moderna, Inc. (Nasdaq: MRNA) is a biotechnology company involved in the designing and manufacturing of transformative medicines for patients. On 28 August 2020, the company announced that it is in talks with the Ministry of Health, Labour and Welfare of Japan (MHLW) for the purchase of 40 million or more doses of mRNA-1273, MRNA’s vaccine candidate against COVID-19. It is expected that the vaccine will be distributed in the first half of 2021 in Japan by Takeda Pharmaceutical Co., Ltd., subject to regulatory approval. On 24 August 2020, the company confirmed that it is in advanced discussions with the European Commission to supply 80 million doses of mRNA-1273 in Europe.

Q2FY20 Highlights: During the June 2020 quarter, the company made significant progress in the research and development of its vaccine candidates. Notably, it received positive 12-month interim results from the Phase 1 CMV vaccine candidate (mRNA-1647) study and positive interim results from Phase 1 Zika vaccine candidate (mRNA-1893) study. Over, the quarter, the company started building its commercial team, an important milestone for being a commercial-stage company. For the quarter, the company reported revenue of $66.4 million and a net loss of $116.7 million. At the end of the quarter, the company had a cash balance of $3.07 billion.

March 2020 Quarter Update (Source: Company Reports)

What to Expect: For FY20, the company expects that its net cash used in operating activities and for purchases of property and equipment to be between $0.65 billion to $0.85 billion. This is mainly due to the supply network expansion in the U.S. and outside the U.S. The company is currently conducting the Phase 3 study of mRNA-127. The enrollment for the study is expected to complete in September 2020.

Key Risks: The mRNA drug development has substantial clinical development and regulatory risks due to the novel and unprecedented nature of this new class of medicines. There is a possibility that FDA or such other regulatory agencies may not agree with the Company’s regulatory approval strategies, components of its filings, such as clinical trial designs, conduct and methodologies, or the sufficiency of data submitted.

Valuation Methodology: Price to Book Value Multiple Based Relative Valuation (Illustrative)

Price to Book Value Multiple Based Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last six months, the stock has provided a whopping return of 135.43% and is inclined towards its 52-week high of $95.21. We have valued the stock using the price to book value multiple based illustrative relative valuation method and have arrived at a price correction of single-digit (in % terms). For the purpose, we have taken peers like Vertex Pharmaceuticals Inc (NASDAQ: VRTX), Alnylam Pharmaceuticals Inc (NASDAQ: ALNY), ACADIA Pharmaceuticals Inc (NASDAQ: ACAD), etc. In view of the risks around the drug trials, and considering the stock price movement in the last six months and current trading levels, we give an “Expensive” rating on the stock at the closing price of $64.72, up by 2.21% on 2 September 2020.

MRNA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Novavax, Inc.

NVAX Details

Positive Results from Phase 1 Trial of COVID-19 Vaccine: Novavax, Inc. (NASDAQ: NVAX) is a late-stage biotechnology company involved in the development of vaccines for serious infectious diseases. On 2^nd September 2020, the company announced the publication of Phase 1 Data for COVID-19 Vaccine Candidate in The New England Journal of Medicine, reflecting both the importance of the data and the urgent need for an effective vaccine to slow the COVID-19 pandemic. The data demonstrated that all the participants of the trial developed wild-type virus neutralizing antibody responses after Dose 2. Based on the positive Phase 1 results, the company has started multiple Phase 2 clinical trials.

Agreement to Supply 76 million doses of NVX-CoV2373: On 31 August 2020, the company announced that it has reached an agreement with the Government of Canada to supply up to 76 million doses of Novavax’ COVID-19 vaccine, NVX-CoV2373. The agreement is expected to be finalized by the second quarter of 2021, subject to licensure of the Novavax vaccine by Health Canada.

June 2020 Quarter Highlights: For the June 2020 quarter, the company reported total revenue of $35.5 million and a net loss of $17.5 million. During the quarter, the company secured $2 billion in funding for the global coronavirus vaccine program through CEPI, DoD, and OWS. At the end of the June quarter, the company had cash, cash equivalents, marketable securities and restricted cash of $609.5 million.

June 2020 Quarter Update (Source: Company Reports)

Key Risks: The company is exposed to the risks related to stiff competition as several large players are involved in the development of a vaccine against COVID-19 and there is a possibility that the company may never see returns on the significant resources it is devoting to NVX-CoV2373.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Over the last six months, the stock of NVAX has provided a whopping return of 809% and in the last three months, it has provided a return of 132.54%. The company has made significant operational progress in the development of its product candidates. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method which suggests a correction of single-digit (in percentage terms). Considering the aforesaid facts and attractive returns in the past few months, we give an “Expensive” rating on the stock at the closing price of $102.90, down by 2.07% on 2 September 2020.

NVAX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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