Surava Capital
Context
In August, Moderna and Merck announced that their personalised melanoma vaccine had met its main goals in a final-stage (Phase 3) trial. The stock jumped 177% in a single day and now trades around 246 dollars. That makes Moderna worth almost 100 billion dollars, while it sells only about 2 billion dollars a year and still loses money. Part of the rally since that jump has nothing to do with new data: Moderna's return to the Nasdaq-100 in October meant index funds tracking it had to buy the stock, regardless of price or fundamentals.
What the companies have not revealed yet is how well the vaccine works. That comes out on Saturday, 24 October, at the ESMO cancer congress. Two numbers matter most: the hazard ratio (HR), explained below, and any early sign that patients on the vaccine also live longer. Survival data is still early, but even a first hint would make the case much stronger.
HR explained
In the trial, every patient gets Merck's cancer drug Keytruda, which is already the standard treatment. Two out of three patients also get intismeran autogene on top, the personalised cancer vaccine Moderna is developing together with Merck. It is built from each patient's own tumour, so every dose is made for one person. The hazard ratio (HR) compares the two groups: how much adding the vaccine cuts the risk of the cancer coming back (or the patient dying) compared with Keytruda alone. Lower is better: an HR of 1.0 means the vaccine adds nothing, an HR of 0.5 means the risk is cut in half compared with Keytruda alone.
The earlier Phase 2 trial, run on 157 patients with stage 3 and 4 skin cancer (melanoma), scored an HR of about 0.51, roughly halving the risk compared with Keytruda alone.
Saturday's numbers
The Phase 3 trial, run on about 1,100 patients with stage 2 to 4 melanoma, already met its goals at a planned early check (an interim analysis). That makes a weak result less likely. But big trials almost always look somewhat different from small ones, so the effect will probably be a bit smaller, meaning an HR above 0.51.
| Saturday's HR | What it means | Likely reaction | Odds |
|---|---|---|---|
| 0.55 or lower | Matches the early trial | Squeeze higher, +15 to 30% | ~20% |
| 0.56 to 0.65 | Clear win, a bit weaker | Jump, then likely fade: flat to −10% | ~45% |
| 0.66 to 0.72 | Positive, clearly weaker | "Sell the news", −15 to 25% | ~25% |
| Above 0.72 | Weak for the hype | Sharp gap down, −30 to 40% | ~10% |
Our own scenario estimate, based on the early trial, the early success of the Phase 3 trial and the bars analysts have set. Judgement calls, not a forecast and not investment advice.
The most likely outcome is the second row: an HR somewhere between 0.56 and 0.65. That would describe a very good drug. Whether it is good enough for the stock is a different question.
Why good news might not be enough
The price already assumes a spectacular result, so a merely good one can disappoint. Moderna is valued at almost 50 times what it sells in a year, and it still makes a loss. That means the price rests on expectations, not on profits the company earns today. Expectations can change overnight, so even a small surprise can move a stock like this by double digits in a single day, in either direction.
A few more things worth knowing:
- The average analyst price target is about 124 dollars, roughly half the current price.
- Moderna shares the profits from the vaccine 50/50 with Merck.
- Insiders have sold shares worth around 0.05% of the company, a small amount, through sale programs set up months in advance. None have bought, but that tells us little right now: before results and with unpublished trial data in hand, insiders are not allowed to buy.
The HR is not the only thing that counts on Saturday. Three other details can move the stock:
- Survival: any early sign that patients on the vaccine also live longer.
- Safety: whether the vaccine causes new or serious side effects.
- Earlier-stage patients: whether it also works for people whose cancer was less advanced, since they make up a big part of the market.
Where buyers stepped in before
Take these levels with a pinch of salt. Chart analysis only shows where buyers stepped in before, not where they will next time. What really decides the direction this time is Saturday's data. And because it lands on a weekend, the full reaction hits at Monday's open, so the price can jump straight past these levels.
Read the conclusion