Shares of Moderna Inc. rallied toward a fifth straight gain Tuesday, after Morgan Stanley analyst Matthew Harrison added nearly $150 to his price target on an increased outlook for the biotechnology company’s COVID-19 vaccine sales.
Meanwhile, he downgraded several other biopharma stocks, including those of COVID-19 vaccine producer Johnson & Johnson
citing valuation concerns, of Merck & Co. Inc.
given lack of potential upside catalysts and of Amgen Inc.
on valuation. All three of those stocks are Dow Jones Industrial Average
shot up 4.8% in afternoon trading. It has now rallied 17.8% over the past five days, but remains 9.9% below its Aug. 9 record close of $484.47. The stock is headed for its longest win streak since the five-day stretch of gains ended May 28.
Harrison raised his price target on Moderna’s stock by about 77%, to $337 from $190.
He also raised is COVID-19 sales estimate for 2021 to $20.25 billion from $19.13 billion and his outlook for 2022 sales to $30.38 billion from $13.50 billion. The new estimates account for greater vaccine usage, including a third booster shot as part of the primary series.
“We continue to see COVID-19 revenues declining over time, but we do not see that starting to happen until 2023/2024 versus our prior estimate of 2022,” Harrison wrote in a note to clients. “We have also added in the potential for a combination COVID/respiratory vaccine.”
He reiterated his equal weight rating on the stock, as his price target is about 23% below current levels. “While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” Harrison wrote.
The stock has rocketed 597.5% over the past 12 months, while shares of J&J have gained 15.8% and of Pfizer Inc.
which also has a COVID-19 vaccine along with its partner BioNTech SE
have advanced 35.4%. Over the same time, the SPDR S&P Pharmaceuticals exchange-traded fund
has tacked on 12.4% and the S&P 500 index
has rallied 32.1%.
Separately, Harrison downgraded J&J to equal weight from overweight, while keeping his stock price target at $187.
“Management is delivering solid financial results, but stock has run up in recent months and we see limited news flow in the midterm to drive shares higher,” Harrison wrote.
The stock, which shed 1.7% in afternoon trading Friday, has gained 4.4% over the past three months, and reached a record closing high of $179.47 as recently as Aug. 17. In comparison, the pharmaceutical ETF has declined 5.5% over the past three months.
Harrison said the next key event for investors to watch is Pharma Day on Nov. 18, at which time J&J is expected to share pipeline product details and highlight drug candidates with significant market potential.
Merck was also downgraded to equal weight from overweight, and had its price target cut to $85 from $90. He said while management is likely to keep driving upside for it key cancer treatment Keytruda, he doesn’t believe investors will pay for that upside given concerns over lack of loss-of-exclusivity (LOE) diversification.
“Investors are not convinced that the current pipeline assets, including HIV drug islatravir and early oncology assets, are enough to offset the Keytruda cliff at the end of the decade given pivotal data will not read out until 2024-2025,” Harrison wrote.
The stock fell 1.8% in afternoon trading.
Amgen’s stock shed 2.6%, putting them on track for the lowest close since late-November.
Harrison also cut his rating to equal weight from overweight, while also slashing his price target to $251 from $280.
“Our new thesis is based on a more balanced risk/reward as investors focus on the mid-decade LOEs for Evenity, XGENA and Prolia, offset by continued pipeline progress,” Harrison wrote.
Among other ratings moves, Harrison also downgraded argenx SE
Shares of argenx dropped 2.9% in afternoon trading, Genmab gave up 3.7% and Vertex declined 2.9%.