Moderna: Citi says oncology optimism is priced in, cuts rating to sell

Citi has downgraded Moderna to a Sell rating, asserting that the stock's rally has become overly inflated. The bank has raised its price target for Moderna to $80 from $60. Over the past year, Moderna shares have surged by 222%, whereas the biotech index XBI has slipped by 2% and the S&P 500 has remained flat.

Moderna's oncology treatment, IMTISERAN, holds promise for melanoma, according to analyst Geoff Meacham. However, Meacham contends that the stock price presently presumes success across various tumor types, suggesting unrealistic sales. He finds it challenging to justify the valuation using public company comparisons or pipeline NPV. Meacham notes that Moderna's market capitalization of approximately $80 billion is comparable to Regeneron's, despite having a lower expected revenue and earnings.

Even if IMTISERAN achieves a 100% success rate in its leading cancer programs, Citi's net present value analysis supports a valuation of only around $100 per share, which is over 50% below the current price. For the stock to reach approximately $200, it would require nearly $26 billion in annual cancer sales, of which $13 billion would go to Moderna—a figure nearly seven times Citi's forecast.

While the INTerpath-001 trial met its endpoints, the numerical results have not yet been disclosed. Meacham advises that investors must now witness a strong treatment effect, clear benefit, and consistency across patient groups to validate the current valuation. He also warns that melanoma may not broadly validate the technology, as the disease responds well to immunotherapy.

Citi concludes that the present valuation leaves a negatively skewed risk-reward profile. Moderna shares have fallen by around 5.4% in premarket trading.