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Moderna (MRNA) Rallies on Booster Hopes Amid Omicron Concerns

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Shares of COVID-19 vaccine maker, Moderna (MRNA - Free Report) jumped almost 35% in the last two trading sessions, following reports of a new, highly transmissible COVID-19 variant, Omicron. The potential risk of the rapid spread of the mutant and thereby a rise in infection cases is boosting prospects of booster doses of the company’s COVID-19 vaccine, mRNA-1273 (Spikevax). Moderna has stated that it will be able to produce an Omicron-specific booster, if required, by early 2022.

The Omicron mutant is raising concerns of high transmissibility and lower protection against infections following vaccination due to the presence of multiple mutations. The potential high risks of this latest variant prompted WHO to add it to its “Variant of Concern” list on Nov 26, two days after putting it under the list titled “Variant Under Monitoring.”

Last week, Moderna announced a three-pronged strategy to provide protection against the Omicron variant. First, it is developing a 100-microgram booster dose compared to its authorized booster dose of 50-microgram of its COVID-19 vaccine, mRNA-1273. MRNA stated that the higher dose of its booster dose led to the higher neutralizing titers against the prior SARS-CoV-2 strains in an ongoing study conducted by the National Institutes of Health in the United States. Moderna is now rapidly testing sera from participants of high-dose booster studies to see if the dose provides neutralizing protection against Omicron.

Secondly, MRNA is already developing two multi-valent booster candidates, designed to target mutations in the Beta variant and the Delta variant. Many mutations in the Beta and the Delta variant are also present in the Omicron variant.  MRNA is working to rapidly complete the studies to determine whether these multi-valent candidates are able to provide superior neutralizing protection against Omicron. Thirdly, MRNA is also planning to develop an Omicron-specific booster candidate.

The recent surge in Moderna’s stock reflects that investors are hopeful about a rise in demand for the company’s booster doses amid rising Omicron fears. Moderna already has advance purchase agreements worth approximately $20 billion for 2022 for the vaccine. Moreover, delivery of a portion of contracted doses for 2021 has been re-scheduled to 2022 as the company faced production snags and supply chain issues during the first nine months of 2021.  The rescheduled delivery of doses contracted for 2021 will bring additional revenues. The successful development of an Omicron-specific booster dose may drive demand amid rising fear of the new mutant.

The company has been ramping up its production and fill/finish capacity through collaborations and building new facilities this year. It has also addressed production issues that led to the suspension of immunization with its vaccine in Japan earlier this year. These steps are likely to boost the company’s ability to deliver its promised doses on time.

The United States and Europe are already facing a high number of breakthrough infections in already vaccinated people. The cases are likely to accelerate with the presence of another deadly mutant. A potential rapid spread of the Omicron variant can also fuel infection rates in countries like India and Brazil where infection rates seem to have subsided in the last few months.

We expect the positive sentiments of MRNA’s investors to continue and it will likely push the stock to its all-time high and beyond.

This year so far, Moderna’s shares have gained 252.7% against a decrease of 15.8% for the industry.

Zacks Investment ResearchImage Source: Zacks Investment Research

We note that investors of other COVID-19 vaccine makers— Pfizer (PFE - Free Report) /BioNTech (BNTX - Free Report) and Novavax (NVAX - Free Report) — are also encouraged about their potential to gain from the recent turn of events.

Shares of Pfizer and its COVID-19 vaccine partner BioNTech were up 6.1% and 14.2%, respectively on Nov 26 while Novavax gained 9%. Pfizer and BioNTech extended their gain on Monday. However, Novavax failed to replicate the same.

We note that Novavax’s COVID-19 vaccine received its first authorization in the Philippines and Indonesia earlier this month but it is yet to gain authorization in large markets like the United States and Europe. Moreover, unlike Pfizer/BioNTech and Moderna’s mRNA-based vaccines, Novavax is developing a protein-based COVID vaccine, which may need a longer time for modification to fight against a new variant. A faster authorization for the vaccine in the United States and Europe will certainly drive the company’s shares going forward. A regulatory application for the same was filed by Novavax in Europe earlier this month and a similar application is expected to be filed with the FDA by the end of 2021.

Zacks Rank

Moderna currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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