Moderna $30 bln gain implies many cancer successes

Moderna’s mRNA personalized cancer vaccine, Intismeran, combined with Merck’s immunotherapy Keytruda succeeded in a late-stage clinical trial. The companies said on August 19 that the trial met its primary goal of extending recurrence free survival in patients with melanoma that had been completely removed in surgery and a secondary endpoint of preventing the spread of cancer to other parts of the body. The companies did not give any data, but said the combination generated statistically and clinically meaningful results at a pre-specified interim analysis. The trial will continue to evaluate other secondary goals, including overall survival. The data will be presented at a medical conference. The companies are testing the combination of Moderna’s cancer vaccine and Merck’s immunotherapy in multiple trials, including ones for non-small cell lung cancer, bladder cancer and renal cell carcinoma. Significant progress in preventing the recurrence of melanoma is great news, but it’s not worth over $30 billion to Moderna. Yet the biotech company added this amount to its equity value on Wednesday's announcement of the milestone. The market is counting on the company’s personalized oncology vaccine racking up wins in far more than just skin cancer. The trial of Moderna’s therapy in combination with Merck’s Keytruda, an immunotherapy widely used to treat multiple forms of cancer, met its primary goal of extending recurrence-free survival in patients whose tumors had been removed, and also prevented the spread of cancer. Data wasn’t disclosed, but the progress on an interim analysis probably implies excellent results. A good rule of thumb in biotech is that companies are valued at about five times revenue. Barclays estimated sales in melanoma treatments might reach $3 billion by 2035. That means this drug might be worth $15 billion if the investment bank is right. Moderna, however, must split profit equally with Merck per their collaboration agreement. Furthermore, it will take years to reach this level of revenue from melanoma. Discount for value of time, and it’s worth even less today. While Moderna's stock has been volatile in the past, it’s also clear this isn’t short covering. Merck added over $30 billion to its equity value on Wednesday too, and the pharmaceutical company is hardly a toy for speculators. It's a sign investors are counting on much, much more – Moderna’s gain implies around $13 billion in annual sales, worth some $65 billion to split between the partners. Indeed, the two companies are testing the combination against non-small cell lung cancer, bladder cancer and renal cell carcinoma. It might work in other forms as well. Moderna said in April that phase 2 bladder and renal cell trials were fully enrolled. That probably means news next year. And the kidney cancer trial may show enough evidence it works to seek regulatory approval for that disease. Success is hardly assured. The U.S. Food and Drug Administration under Robert F. Kennedy Jr. has appeared hostile toward the mRNA technology underlying Moderna’s therapy, but recently approved the company’s flu vaccine. It’s also unclear what margins might be on personalized vaccines. Those are questions for another day, however. Today, investors can dream of breakthrough after breakthrough.

Moderna $30 bln gain implies many cancer successes

Context from the companies' announcement

Moderna and Merck trial results lift valuations

Investors are pricing in broader cancer potential

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