Moderna stock MRNA fell nearly 6% in premarket trading on Wednesday after Citi downgraded the biotech company to ‘Sell’ from ‘Hold’, citing concerns that its recent valuation is difficult to justify.
Citi raised its price target to $80 from $60 while revising its sales and operating expense assumptions.
The new target remains well below Moderna’s Tuesday closing price of $203.46.
The downgrade comes after Moderna shares surged almost seven-fold this year, driven in part by positive late-stage trial results for its personalised cancer vaccine candidate intismeran autogene.
Citi questions Moderna’s valuation
Citi’s healthcare team, led by global head Geoff Meacham, said the company’s valuation was difficult to support based on public-company comparisons and its pipeline’s net present value.
Meacham said Moderna’s roughly $80 billion market capitalisation was similar to Regeneron’s despite significantly lower expected revenue and earnings.
Citi estimated that even assigning a 100% probability of success to Moderna’s leading intismeran oncology programmes would support a price target of about $100 a share.
That would still be roughly half of the stock’s recent trading level.
According to Citi’s analysis, Moderna would need to generate about $26 billion in annual oncology sales to justify a share price near $200.
The firm said that figure is almost seven times its current model, with about $13 billion of those sales accruing to Moderna.
Meacham also said the current valuation reflects aggressive sales expectations and probability-of-success assumptions that Citi considers unrealistic.
Cancer vaccine drives sharp stock rally
Moderna shares have rallied sharply since the company announced positive late-stage trial results for intismeran autogene on August 19.
The personalised cancer vaccine, when combined with Merck’s Keytruda, met trial goals in more than 1,100 patients with higher-risk or advanced melanoma.
Moderna shares have gained 223% since the trial results were released.
The stock rose from around $62 on August 18 to an intraday high of $208 on September 25.
The rally followed a broader strategic shift by Moderna, with the company focusing its mRNA technology on areas including oncology, rare diseases and autoimmune disorders.
Citi said melanoma is a favourable setting for demonstrating the potential of the treatment because the cancer is highly responsive to checkpoint inhibition.
However, Meacham noted that other potential applications, including renal, lung and bladder cancers, present different biological challenges.
Citi target implies significant downside
Moderna closed at $203.46 on Tuesday before falling nearly 6% in premarket trading Wednesday.
Citi’s new $80 price target implies roughly 61% downside from Tuesday’s close.
The bank’s analysis also suggested that a $100 valuation would remain around 50% below current levels even under a highly favourable assumption for intismeran’s lead oncology programmes.
The valuation comparison with Regeneron was another factor in Citi’s assessment.
Moderna and Regeneron have market capitalisations of roughly $80 billion and $77 billion, respectively, despite a significant difference in expected revenue and earnings.
Analyst sentiment remains mixed. According to LSEG data, 15 of 24 analysts rate Moderna as a buy, while six had buy or strong-buy ratings and three had underperform ratings.
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