Moderna's stock dropped sharply late Monday after an analyst suggested that the novel coronavirus drug producer is "overvalued." JPMorgan Chase analyst Cory Kasimov acknowledged the biotech group's rapid development of a COVID-19 drug is "impressive," but he downgraded its stock to a Neutral rating after a 385 percent gain this year, as of Friday's close.
What made the ratings agency's analysts jittery is that Moderna has a $37 billion market valuation despite the many unknowns surrounding the ongoing pandemic and potential vaccines, like how long the vaccine would last, how much it would cost, and how rival vaccines might fare. Moderna has yet to produce an FDA-approved vaccine.
In a note released Monday, JPMorgan stated that the stock move itself is not totally surprising considering the fast execution on mRNA-1273, the huge investor interest on the program, and the clear unmet need or opportunity for a coronavirus treatment. "At these levels, we're having difficulty justifying more upside considering the uncertainty of the duration or characteristics of the pandemic," Victoria Scholar of IG quoted the statement as saying in her report.
Still, JPMorgan increased its price target for Moderna stock from $60 to $89, noting its bullishness about the long-term projection for mRNA. As a result, the stock witnessed an unusually large trade in options on Monday, and the share price dropped nearly 13 percent at the close to 82.68 on the Nasdaq.
Moderna's candidate drug is widely regarded as one of the frontrunners to become the first vaccine on the open market. It is the first pharmaceutical group to share data on how its experimental vaccine performed in a Phase 1 clinical test Its Phase III trial involving 30,000 participants is expected to commence on July 27.
In their equity research note, JPMorgan analysts said they remain bullish on Moderna's long-term forecast and disruptive platform. The momentum from its mRNA-1273 vaccine "could certainly drive the stock even higher, but we are simply not able to continue to fundamentally justify it," Zlati Meyer of FastCompany quoted the note as saying in his story.
In all, Kasimov sees Moderna's platform of treatments as being valued at around $25 billion. Though he trimmed his rating on the company's stock, he still maintained his 89 price target.
The global race to produce an effective and safe vaccine is huge. Over 100 pharmaceutical and biotech companies are laboriously working on one, including prominent groups like GlaxoSmithKline, Pfizer, Johnson & Johnson, and AstraZeneca.
