When reached for comment, Pfizer indicated that it was too early to tell what the WTO would do and its potential consequences on the business, but they would be closely watching the negotiations which will now begin. Pfizer also pointed out that they have been involved in gathering support from manufacturers since the beginning of their development, and there may not be much “idle capacity” in the market.

We see a risk to Moderna if ex-US sales were to drop significantly, given 1) this is likely to be the primary source of post-2021 revenues outside of boosters and 2) robust consensus sales expectations (>$5B out to 2030) likely assume sustained pricing power longer-term. As a reminder, Moderna has said that they will not enforce their IP estate while COVID-19 remains a pandemic, but would in the case that the virus goes endemic, citing broad patent protection for not only mRNA-1273 itself, but also variant-specific boosters and the broader mRNA vaccine platform. Moderna is set to report 1Q earnings today, where we expect additional commentary on their IP positioning.

CureVac could remain relatively insulated given 1) OUS IP protection and 2) less COVID- 19 valuation priced into the stock. Indeed, CureVac has intellectual property protecting CVnCoV from other major geographies (Europe, China, India, Japan, Korea, Singapore, etc). We admit we could see pricing come down in OUS geographies if governing bodies adopt policies similar to Biden’s proposal. Nonetheless, we see less downside to CVAC than the comp in MRNA, given relatively more conservative CVnCoV estimates priced in (consensus peak of $3B). We look forward to phase 2b/3 data in the coming weeks for more detail on CVnCoV.

 

Our $110/share PO is based on a probability-adjusted NPV of CureVac's pipeline, including its COVID-19 vaccine ($37/sh), its oncology program ($22/sh), its other prophylactic vaccines ($36/sh), and its earlier stage pipeline ($6/sh). We apply a 9-10% WACC and a terminal value ranging from -50% to 0% depending on the program (we project revenues out through 2035), in-line with other biotech companies of similar size and stage of clinical development. We also include approximately $9/share from CureVac's current cash position.

 

Downside risks are 1) clinical risk to early stage programs, 2) regulatory risk from newer mechanisms, 3) competition to key assets such as in COVID-19.

 

Our PO of $100 is based on a probability-adjusted NPV of six different parts including prophylactic vaccines ($68/share), systemic secreted cell surface therapeutics ($12/share), cancer vaccines ($3/share), intratumoral immune-oncology ($3/share), cardiovascular diseases ($-1/share) and systemic intracellular therapeutics ($1/share), and net cash ($13/share). We estimate sales of 24 pipeline programs that are slated to move forward with probability of success ranging from 6% to 37%. We use a WACC of 10% (core programs) to 12% (exploratory programs) and terminal growth rate of -7% to 1%.

 

Risks to our PO are: 1) faster than expected pipeline development, 2) cleaner than expected safety findings, 3) accelerated product approvals, 4) stronger than expected launches, 5) lower competition, 6) moderating cash burn, and 7) potential upside from coronavirus vaccine program.

 

Our $40/sh for Pfizer is based on a 50/50 blended average of our DCF analysis and P/E multiple based on the large cap global therapeutics group. For our DCF, we use a WACC of 6% and 1% terminal value for an intrinsic value of $43/sh. Our P/E analysis assumes a 10x multiple of our 2021 EPS estimate given the transient boost in earnings due to vaccine sales, which yields a $36 intrinsic value (supportive of our $40 PO).

 

Downside risks: 1) sales downside, 2) inability for pipeline to overcome patent LOEs after 2025, 3) M&A transactions that are perceived to be value destructive.