Moderna, BioNTech Record Rally Loses Steam on Biotech Rout

(Bloomberg) — Top Covid-19 vaccine makers Moderna Inc. and BioNTech SE backed off recent record-setting highs amid a slump in biotech stocks Tuesday.

Moderna’s shares whipsawed and fell 5.7%, the most in three months, amid a broader selloff in tech and healthcare stocks. They briefly breached $200 billion in market value earlier in the day. The Nasdaq Biotech Index, which Moderna has a nearly 15% weighting on, dropped 1.6%, the steepest decline in more than two weeks.

Prior to today’s slump, the two companies had each surged more than 480% in the past year to record highs. Pfizer Inc., BioNTech’s partner on the shot, which has a fulsome list of other marketed drugs driving its valuation, closed at a record high on Tuesday.

New guidance on the need for boosters could offer the stocks their next leg up. All three drugmakers have raised their sales forecasts on Covid shots over the past two weeks with Pfizer estimating revenue this year of $33.5 billion on three billion doses manufactured.

With the delta variant spreading around the globe, U.S. virus expert Anthony Fauci has said the immuno-compromised should get additional shots, and investors are awaiting the Food and Drug Administration to lay out new guidance on who else could also be getting a third jab.

“It becomes a self-fulfilling prophecy, because if you don’t own it, you are obviously underperforming,” Michael Yee, an analyst at Jefferies said about Moderna in a video note. “Everyone has to buy it.”

The companies secured the first emergency approvals for the virus and have been slowly building a case for the need for booster shots, though there has been some pushback. Pfizer plans to seek regulatory clearance for a third shot of its vaccine while Moderna still needs to determine its dosage before filing.

A handful of nations including Thailand and Israel have been giving out new doses to select groups of the already vaccinated, while the FDA has yet to weigh in on when such shots may be needed. The agency is expected to release its strategy for boosters as soon as September, according to a Wall Street Journal report.

Goldman Sachs analyst Salveen Richter on Friday boosted her price target to $461 from $299 for Moderna, while Barclays analyst Gena Wang increased hers to a Wall Street high of $463 but the stock blew past those new targets in a Monday rally. Still, the sky high valuations on these stocks are facing unexpected resistance on Wall Street. Biotech analysts are notable for their usually rosy outlooks for the stocks in their coverage, but Moderna has more holds than buys and a price target that implies a roughly 39% downside.

For Yee and the bank’s strategist Will Sevush, tech and innovation funds have been driving the rally rather than hedge funds and investors that traditionally specialize in health-care stocks. Investment advisers currently make up the largest holder base in the stock with BlackRock Inc., the Vanguard Group Inc. and Morgan Stanley among Moderna’s top investors, according to Bloomberg data.

“They don’t trade fundamentally,” Sevush said “They’re in rare air.”

While Yee rates Moderna a hold with a price target of $425, below the current trading range, he expects booster shots to be available by 2022. The company is also expected to have flu vaccine results in late 2021.

“This story is not going to end,” Yee said.

(Updates share price moves and charts.)

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