Moderna: New Personalized Melanoma Therapy Data Continues To Support Our Bullish Expectations

Moderna MRNA and Merck MRK announced new data for individualized neoantigen therapy mRNA-4157 on Monday at the annual meeting of the American Society of Clinical Oncology that was consistent with our view of the therapy’s solid safety and efficacy. As such, we’re maintaining our $266 fair value estimate for Moderna. Phase 2b data presented at the meeting showed that a combination of mRNA-4157 with Keytruda led to a 65% reduction in the risk of distant metastases or death relative to Keytruda alone in adjuvant melanoma patients, building on prior data showing a 44% reduction in the risk of recurrence or death. Given Keytruda’s position as the standard of care in this setting, as well as the novelty of Moderna’s technology, this result bodes well for Moderna’s technology in other combinations and other forms and stages of cancer.

While the U.S. Food and Drug Administration could agree to approve the drug based on further updates from the phase 2b study, we expect they will require the start of a confirmatory phase 3 trial prior to approval, and Moderna and partner Merck expect to begin this trial in the third quarter. Moderna also hopes to start a phase 3 trial in adjuvant non-small cell lung cancer in the fourth quarter and expects future trials at other stages of disease (perhaps metastatic disease) and other cancer types. Moderna’s results are also encouraging for BioNTech BNTX, which will have phase 2 data in the second half of 2023 in first-line metastatic melanoma trial (Keytruda with or without BNT122). We assume a 60% probability of approval for mRNA-4157, with probability-adjusted sales to Moderna of roughly $2.5 billion by the end of our 10-year explicit forecast period (Moderna’s portion of a 50/50 split with Merck).

We continue to see Moderna shares as undervalued, given strong potential for its mRNA technology across infectious diseases, cancer, and rare disease therapeutics, although we still think the firm is in the process of building an economic moat.