Oppenheimer & Co Analyst, Hartaj Singh, recently upgraded Moderna (MRNA) shares to "Outperform," with a price target of $142 per share. News of the upgrade has caused shares of the stock to trade over 13% higher on Tuesday. Hartaj Singh joins the Live show to discuss why he upgraded the stock and take a deeper dive into Moderna's performance going forward.
Singh explains that with he expects Covid-19 demand to be bottoming, adding that "if you believe that Covid-19 vaccine sales have... hit a bottom going forward, that essentially funds their pipeline and that pipeline is very important... there are some material catalysts that are coming."
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
- Moderna may have seen shares slide nearly 45% in 2023, but it is kicking off the new year in positive territory. The stock surging today after Oppenheimer upgraded the stock to outperform. The move comes in part due to the biotech company's COVID-19 vaccine sales expected to rise in 2025. Joining us now is Oppenheimer analyst Hartaj Singh. Hartaj, it is good to see you. So you're a believer now, Hartaj. Moderna, you go to outperform. Your target is 142. How come, Hartaj? Explain to us why you think Moderna is now a buy at these levels?
HARTAJ SINGH: Great. Thank you, Josh and Julie. Thanks for having me. And happy new year to everyone, the best in 2024. I mean, look. When we downgraded the stock in 2021, we actually pointed to a few things that we thought were worrisome. We've been checking those boxes, especially over the last six to nine months, starting with COVID-19 vaccine revenues.
There were about 100 million shots given in the US last year and this year, looks more like 50 million. And we expect that trend to be the bottom going into 2024 and moving forward. So if you believe that COVID-19 vaccines sales have hit a bottom going forward, that essentially funds their pipeline. And that pipeline is very important to us. There are some material catalysts that are coming.
This in 2024, more catalysts than the companies had in a while. Catalyst with RSV vaccine phase 3 in flu and next generation kind of flu vaccine using the mRNA technology. Cancer vaccines, et cetera. And then lastly, operating expenditures. Their CFO who has been in the seat for about a year and a half has clearly outlined how OpEx now going forward will be tied to sales. So we expect OpEx to go down in 2024 and 2025 and then start slowly growing as sales start growing in 2025. So you check these three boxes, and the company sets up really well, which is why we upgraded.
- Hartaj, it's Julie here. It's good to see you. Thanks for being here. I want to dig a little bit more into this idea that vaccine uptake might have seen a bottom. Now does that imply not just that it's not going to get worse? Does it also imply that we're actually going to see an increase? And if so, what would catalyze that? What would drive that?
HARTAJ SINGH: So you know, Julie, we were in the thick of COVID-19 pandemic as a team that covered Moderna in 2020. But not just Moderna. Regeneron also and Gilead, which had products to help us deal with the pandemic. And it was pretty clear to us by 2021 how politicized the issue had gotten. And that created a lot of fatigue.
There were competing stories back and forth, and that polarized people a lot. So it got away from being a health issue and to a sociopolitical issue. So you combine that vaccine fatigue with a lot of people, especially on the margins, which is the vast majority of people also with flu who get their vaccine shots.
And then secondly, we transitioned into a commercial market this year, meaning that the government wasn't just taking orders in the United States. You had to go to 300, 400 commercial payers, 50 plus state organizations, and sell to them. And both these things actually led, we believe, to the market sort of hitting this low this year.
I think that with more education, more awareness, more spending, marketing spend, we should start seeing an uptick. It happened with flu. It happens with flu all the time. As the season goes on, more people get the shot. We expect the same thing to happen with COVID-19 going forward.
- And Hartaj, you also mentioned the company's pipeline. What in that pipeline, Hartaj, should investors do you think be especially optimistic and excited about? Is it RSV? Is it is it flu, CMV?
HARTAJ SINGH: You know, it's interesting, Josh. I would say it's all of the above, and I'll tell you why. One of the things we as analysts look for when we talk about a platform company, you know, quote unquote, like a Moderna, and not every biotech is a platform company, in fact, they are very few and far between, is can the platform help the company get better clinical and regulatory success rates?
If you go to Moderna's R&D presentation for a couple of months ago, they actually have very interesting slides where they show that their clinical and regulatory success rates are actually higher than historical norms by a decent bit. So this is a company that's using the speed and the scalability of their platform, and great science, and great clinical trials to bring products to market.
So we think all those three products you've mentioned are great. I think the one in oncology is especially important because what we're going to see is not just a company that can use its mRNA technology in infectious diseases like COVID-19, like RSV, like flu, but now can go into cancer, completely different area, and have a really, really significant effect on patients' lives and especially if it gets approved earlier. We'll know this year if they can file for an early approval.
- Hartaj, finally, I want to ask you about something that doesn't have to do with drug development but rather selling the drugs. And that's that the company doesn't have a chief commercial officer right now. The person stepped down. Stephane Bancel is effectively doing that job in addition to being CEO. Is that a good thing? Is that something that's going to help Moderna? How should investors be thinking about that?
HARTAJ SINGH: Yeah. We dug around that a little bit before the holidays with the company. I've known the company since the IPO. And we spent some time talking to them. Moderna is a very high performance culture. It really is. It's a company again, like I said, I've known through the IPO. It is a company where the pedal is to the metal, which is why they got COVID-19 vaccine approved in one year. Took a much larger organization like a Pfizer to do the same thing.
So there's a very high performance culture where if you're not performing, usually there's change. So I think that's happening right now in the commercial team. I think the reason why Stephane is probably taking it over is because he understands how important this year and next year is. And he actually came from a commercial background himself, commercial and marketing.
So while they're looking for a chief commercial officer, probably take them a few months to find the right person, I think Stephane will be very much hands on to make sure that there's no hiccups on the commercial side.
- Interesting stuff. Thanks as always for your perspective. I appreciate it, Hartaj, and happy new year to you.
HARTAJ SINGH: Great. Thank you for having me.
