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Moderna Valuation a Concern for JP Morgan

Moderna (MRNA) has surged over 300% since the start of the year. Analysts at JP Morgan, concerned about the company’s valuation, have downgraded the stock to neutral.

Other industry experts agree. Mani Faroohar, a top analyst at SVB Leerink, outlined a scenario this week where Moderna may drop to as little as $19 a share by the end of the year. He called their current valuation of $32 billion “unappealing” when evaluating risk versus reward.

The main area of concern is whether or not the smaller Moderna can compete against pharma giants like AstraZeneca and Pfizer. Despite receiving $483 million in Covid-19 funding from the federal government, Moderna president Dr. Stephen Hoge refuses to discuss pricing.

“We will not sell it at cost,” Hoge stated at a hearing before the House energy committee this week. He may not have a choice. The NIH is claiming intellectual property rights due the government’s investment into the vaccine’s development. They want it at or below cost.

Moderna has never successfully brought an approved product to the market. Their vaccine is considered one of the frontrunners in the race due to positive clinical trials, but there’s still a long road ahead. Maneuvering for profit may not be the best approach right now.

Kolanovic: Market not Properly Pricing Covid-19 Surge or 2020 Election

In other news, Marko Kolanovic, JP Morgan’s global head of macro quantitative and derivatives research, has released a report on pricing anomalies during the Covid-19 surge. It attempts to explain why value stocks are vastly underbought while growth stocks continue to thrive.

“Investors are worried about the surge in Covid-19 infections,” Kolanovic stated. “The possible election of former VP Joe Biden also raises concerns about long-term value investments.”

The study shows that buyers are opting for growth stocks while the market is still in an uptrend. Meanwhile, Aroon and momentum indicators are driving traders away from value positions. It’s possible that the trend may reverse after the election, depending on results.

Pfizer Signs $1.5 Million Vaccine Deal with Pentagon

The US Department of Health and Human Services announced a $1.95 billion deal to buy 100 million doses of a Covid-19 vaccine being developed by Pfizer and their German-based partner BioNTech. The deal is dependent on the completion of successful clinical trials and FDA approval.

BioNTech announced a share sale on Tuesday to raise cash so that Pfizer can become a shareholder in their company. Their current market cap is $21 billion.

JP Morgan, along with Bank of America, and Berenberg, is organizing the deal.

In January of this year, Albert Bourla, CEO of Pfizer Inc, was a fireside chat speaker at JP Morgan’s Healthcare Conference in San Francisco. At the time, he claimed that his company was “underappreciated” and touted their recent and upcoming successes.

Stephane Bancel, CEO of Moderna, was not on the speakers’ list for the conference. Vaccine development wasn’t on the agenda. US consumer drug pricing was a hot topic.

AstraZeneca, formerly considered a frontrunner in the vaccine race, released data on their clinical trials this week. Analyst Ronny Gal from Bernstein said it “failed to impress.” Peter Wellford at Jefferies claimed the share price move was “overdone.”

It looks like a two-horse race. JP Morgan appears to be betting on Pfizer.