Moderna gets a shot in the arm

Today, great news for patients was also great news for investors.

An experimental new cancer vaccine created by Moderna and Merck showed positive results in a late-stage trial, a key step in eventually bringing the treatment to market.

Shares of Moderna exploded 176.97%, its largest single-day leap ever, while Merck jumped 12.61%. The two pharma giants added over $50 billion in combined market cap in just one trading session.

Remember mRNA? The technology behind the Covid-19 vaccine is being used in conjunction with Merck’s immunotherapy drug, Keytruda, to target cell mutations in tumors. In the study, the treatment extended the time that melanoma patients who had undergone surgery to remove a tumor remained in remission, and it also stopped the cancer’s spread to other parts of the body. If these results continue to be replicated, this would be a huge gamechanger for melanoma, one of the deadliest skin cancers.

The news is also a big deal because it’s the first promising late-stage trial for any cancer vaccine using mRNA. Other treatments using this technique are being developed for pancreatic, breast, and lung cancers, according to Reuters.

“It’s a big moment for medicine, a big moment for patients,” Moderna CEO Stephane Bancel said in an interview with CNBC.

Big Pharma’s big reset

Moderna has been searching for a second act after struggling to keep up the momentum of the Covid-19 vaccine. With this new drug, it could break into the massive $240+ billion cancer treatment market, and investors’ anticipation has already propelled Moderna shares 491.32% higher this year alone.

Analysts are largely bullish on the news, citing potential uses of the technology for treating other cancers down the line. “[It] reflects a watershed moment for Moderna, in our view, effectively allowing the company to diversify away from infectious disease and potentially easing persistent capital overhangs,” wrote Bank of America research analyst Alec Stranahan. He upgraded the stock from Underweight to Neutral and raised his price target from $40 to $170, just shy of where shares ended up today.

For Merck, the drug would be a lifeline rescuing the company from the impending patent cliff. The patent for Keytruda, one of the most popular drugs in the world and a cash cow for Merck, will expire in 2028.—LB