Pfizer Inc.'s (PFE) blockbuster news has lit a fire under Moderna, Inc. (MRNA) stock, lifting the lesser-known biotech more than 20% in four trading days. The company just completed case accrual for first interim analysis of the Phase 3 mRNA-1273 study, meaning it should release COVID efficacy data soon. This vaccine candidate is derived from similar compounds as Pfizer's BNT162b2, prompting Dr. Anthony Fauci to declare that it's likely to be effective as well.
- Moderna has rallied more than 20% since the Pfizer news.
- Vaccines of both companies utilize state-of-the-art mRNA compounds.
- Moderna stock could test July's all-time high in the $90s in coming weeks.
- A competitor's vaccine could sap buying interest if it overcomes mRNA logistical issues.
Both companies have entered distribution and manufacturing deals to ensure rapid release in first world countries, but this vaccine class requires deep-freeze production, storage, and transportation, increasing cost and logistical issues. As a result, rollouts are likely to be slower than expected, raising doubts about a quick end to the pandemic. In addition, many Americans are likely to skip the vaccine due to anti-vax fears and misinformation campaigns.
Moderna now expects positive net cash flow for fiscal year 2020 and hopes to diversify revenue by applying state-of-the-art mRNA technology to other drug applications. For example, personalized cancer vaccine mRNA-4157 is now in Phase 1 study, while Moderna has regained all rights from Merck & Co., Inc. (MRK) to the respiratory syncytial virus vaccine mRNA-1172 and is set to investigate a number of applications for adult populations.
Wall Street consensus on Moderna is bullish, with a "Moderate Buy" rating based upon nine "Buy," one "Hold," and one "Sell" recommendation. Price targets currently range from a low of $88 to a Street-high $136, while the stock is set to open Thursday's session about $3 below the low target. This humble placement raises the odds for a quick advance into the triple digits if initial Phase 3 results approach Pfizer's level of success.
Clinical trials are scientific studies of the safety and efficacy of a new medical drug or other treatment, conducted on human volunteers. In the U.S., the results of the studies are a key component of a pharmaceutical or biotechnology company's application for approval from the Food and Drug Administration (FDA) to introduce the drug to the market.
Moderna Daily Chart (2018 – 2020)
The company came public at $18.90 in December 2018 and fell into a trading range between the low $20s and mid-teens. An April 2019 breakout failed in May, generating a strong selling impulse that posted an all-time low at $11.54 in August. The subsequent uptick made modest progress into February 2020, reversing just above $23 in a quick decline into the upper teens. Committed buyers and the momentum crowd then poured into long positions, triggering a vertical buying spike, followed by six weeks of high volatility.
The stock cleared resistance in the $30s in mid-April and carved a three-legged impulse that ended at $95.21 in July. Price action then settled into a rounded correction, crisscrossing the 50-day exponential moving average (EMA) repeatedly into the Pfizer news. The uptick since that time has now reached the May peak and .786 Fibonacci selloff retracement level in the mid-$80s, raising the odds that price will dance around this zone until we find out more about the vaccine's efficacy.
The on-balance volume (OBV) accumulation-distribution indicator lifted to a new high in July and settled into a narrow consolidation that has exhibited less volatility than price in the last few months. In turn, this tells us that shareholders are hanging tough, expecting to book high-percentage profits in coming months. This is a high-risk/high-reward strategy despite the huge potential because competitors might come along with more effective compounds that don't require the deep freeze or multiple doses.
A high-risk investment is one for which there is either a large percentage chance of loss of capital or under-performance – or a relatively high chance of a devastating loss.
The Bottom Line
Moderna stock has rallied more than 20% since Pfizer's vaccine announcement and could test July's all-time high in coming weeks.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.