Morningstar Report-636d1778e26a17cb57991c7a

Morningstar Equity Analyst Report | Report as of 16 Dec 2023 05:16, UTC | Reporting Currency: USD | Trading Currency: USD
| Exchange: NASDAQ - ALL MARKETS Page 1 of 23
Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC
Last Price Fair Value Estimate Price/FVE Market Cap Economic MoatTM Equity Style Box Uncertainty Capital Allocation ESG Risk Rating Assessment1
86.01 USD 227.00 USD 0.38 32.74 USD Bil None 6 Mid Growth Very High Standard ;;;;;
15 Dec 2023 16 Oct 2023 18:17, UTC 14 Dec 2023 6 Dec 2023 06:00, UTC
Price vs. Fair Value
Fair Value: 227.00

16 Oct 2023 18:17, UTC
400
Last Close: 86.01
300 Over Valued
Under Valued
200
100
0
2018 2019 2020 2021 2022 YTD
— — — 1.60 0.68 0.38 Price/Fair Value
— 28.09 434.10 143.11 -29.28 -52.12 Total Return %
Morningstar Rating
Total Return % as of 15 Dec 2023. Last Close as of 15 Dec 2023. Fair Value as of 16 Oct 2023 18:17, UTC.
Contents
Analyst Note (14 Dec 2023) Moderna: Positive Melanoma Data Support Our $227 Fair
Business Description
Business Strategy & Outlook (8 Dec 2023) Value Estimate
Bulls Say / Bears Say (8 Dec 2023)
Analyst Note Karen Andersen, CFA, Strategist, 14 Dec 2023
Economic Moat (8 Dec 2023)
Fair Value and Profit Drivers (8 Dec 2023)
We’re maintaining our $227 fair value estimate for Moderna following positive long-term data that we
Risk and Uncertainty (8 Dec 2023) believe supports the value of the firm’s mRNA technology as a novel cancer treatment. Moderna and
Capital Allocation (8 Dec 2023) partner Merck released three-year follow-up data for melanoma patients in a phase 2 study who were
Analyst Notes Archive given a combination of Merck’s Keytruda and Moderna’s mRNA-based therapy mRNA-4157. These
Financials
patients saw a 49% reduction in the risk of recurrence or death and a 62% reduction in the risk of
ESG Risk
distant metastasis or death relative to patients who received Keytruda alone, which is the standard of
Appendix
Research Methodology for Valuing Companies care for patients with resectable disease that is at high risk of recurrence. This data is quite similar to
two-year data disclosed earlier this year, which showed a 44% reduction in risk of recurrence or death
Important Disclosure
The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of and 65% reduction in risk of distant metastasis or death. Merck and Moderna have already moved the
Conduct Policy, Personal Security Trading Policy (or an equivalent of), and
Investment Research Policy. For information regarding conflicts of interest, please program into phase 3 studies in both melanoma and lung cancer, and we expect several other studies to
visit: http://global.morningstar.com/equitydisclosures.
begin soon, as we think the personalized nature of the treatment, as well as phase 1 data already
The primary analyst covering this company does not own its stock.
released in lung cancer, strongly point to its potential across multiple types of cancer.
The ESG Risk Rating Assessment is a representation of Sustainalytics’ ESG Risk
1
Rating.
We assume a 60% probability of $2.5 billion in annual melanoma sales to Moderna as well as a 40%
probability of $4 billion in lung cancer sales to Moderna in 2032. With this encouraging data update, we
expect the U.S. Food and Drug Administration could become more comfortable with the safety and
efficacy of Moderna’s technology as a cancer treatment and opt to allow phase 2 data as the basis for
approval. We assume a launch in late 2024, with more significant sales building over the next several
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Morningstar Equity Analyst Report | Report as of 16 Dec 2023 05:16, UTC | Reporting Currency: USD | Trading Currency: USD | Exchange: NASDAQ - ALL MARKETS Page 2 of 23
Sector Industry
d Healthcare Biotechnology years. Overall, this data continues to point to Moderna’s potential to generate cash flows beyond its
COVID-19 vaccine and build an economic moat with its technology.
Business Description
Moderna is a commercial-stage biotech that was
founded in 2010 and had its initial public offering in Business Strategy & Outlook Karen Andersen, CFA, Strategist, 8 Dec 2023
December 2018. The firm's mRNA technology was Moderna's mRNA technology has gained rapid validation as sales of its COVID-19 vaccine soared in
rapidly validated with its COVID-19 vaccine, which was 2021 and 2022, but we think the firm has yet to secure a narrow economic moat around its business,
authorized in the United States in December 2020. largely due to uncertainties tied to an evolving virus and the changing competitive landscape for
Moderna had 39 mRNA development candidates in
innovative vaccines.
clinical trials as of mid-2023. Programs span a wide
range of therapeutic areas, including infectious disease,
In a record-breaking span of just 11 months, Moderna created, developed, manufactured, and got
oncology, cardiovascular disease, and rare genetic
regulatory authorization for mRNA-1273, a two-dose COVID-19 vaccine that is one of the first two mRNA
diseases.
vaccines ever authorized (alongside Pfizer/BioNTech's BNT162b2). The pandemic accelerated Moderna's
evolution into a commercial-stage biotech, and we expect that the firm's ramp-up in manufacturing and
clinical know-how will pave the way for faster timelines for additional programs. Moderna's mRNA
platform, involving rapid design and similar manufacturing across programs, allows the company to
pursue multiple programs in parallel. Moderna also retains full rights to most of its programs, although
partnerships with Merck and Vertex help support its efforts in oncology and cystic fibrosis.
Moderna reported roughly $18 billion in COVID-19 vaccine sales in both 2021 and 2022, but with
vaccine fatigue and uncertainty around the severity of COVID-19 infections in the coming season, we
assume $6.2 billion in sales in 2023. We see potential for continued revenue around $4 billion annually
if higher-risk populations receive annual vaccines, although there is high uncertainty around the number
of long-term competitors (including new mRNA players) and pricing, particularly as the U.S. market
moves from government contracts to a commercial market.
Moderna's phase 3 pipeline beyond COVID-19 is growing and includes potential 2024 launches in RSV
and oncology, as well as 2025 launches for a COVID-19/fllu combination vaccine and rare disease
treatments. Moderna and Merck's melanoma therapy has potential in a wide range of cancers in
combination with Merck's Keytruda. We think mRNA technology will eventually be used in a broad
spectrum of other therapeutic areas, from cancer to cardiology to rare diseases.
Bulls Say Karen Andersen, CFA, Strategist, 8 Dec 2023

u The stellar efficacy and safety profile of Moderna's COVID-19 vaccine offered rapid validation of the
firm's mRNA technology.

u Its mRNA technology could allow the firm to compete in a wide range of therapeutic areas, from other
prophylactic vaccines (like influenza and other viruses) to enzyme replacement (various rare diseases) to
cancer.
u Moderna's cash infusion from COVID-19 vaccine sales in 2021-22, as well as newly established large-
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Competitors
Moderna Inc MRNA Johnson & Johnson JNJ Pfizer Inc PFE BioNTech SE ADR BNTX
Fair Value Fair Value Fair Value Fair Value

227.00 164.00 42.00 177.00
Uncertainty : Very High Uncertainty : Low Uncertainty : Medium Uncertainty : Very High
Last Close Last Close

86.01 155.16 Last Close Last Close
26.63 102.20
Economic Moat None Wide Wide None

Currency USD USD USD USD
Fair Value 227.00 16 Oct 2023 18:17, UTC 164.00 19 Sep 2022 11:58, UTC 42.00 13 Dec 2023 17:41, UTC 177.00 16 Oct 2023 19:24, UTC
1-Star Price 397.25 205.00 56.70 309.75
5-Star Price 113.50 131.20 29.40 88.50
Significantly 15 Dec Under Valued 15 Dec 2023 Significantly 15 Dec Under Valued 15 Dec 2023
Assessment
Undervalued 2023 Undervalued 2023
Morningstar Rating QQQQQ15 Dec 2023 22:16, UTC QQQQ15 Dec 2023 22:16, UTC QQQQQ15 Dec 2023 22:16, UTC QQQQ15 Dec 2023 22:16, UTC
Analyst Karen Andersen, Strategist Damien Conover, Sector Director Damien Conover, Sector Director Karen Andersen, Strategist
Capital Allocation Standard Standard Standard Standard
Price/Fair Value 0.38 0.95 0.63 0.58
Price/Sales 3.67 4.11 2.22 3.40
Price/Book 2.44 5.24 1.55 1.11
Price/Earning — 29.11 14.55 8.25
Dividend Yield — 3.03% 6.16% 1.32%
Market Cap 32.74 Bil 377.63 Bil 147.54 Bil 24.71 Bil
52-Week Range 62.55—212.47 144.95—180.93 25.76—54.43 88.00—188.99
Investment Style Mid Growth Large Value Large Value —
scale manufacturing facilities, position the firm to accelerate timelines for new pipeline programs.
Bears Say Karen Andersen, CFA, Strategist, 8 Dec 2023

u Moderna's Alexion partnership was terminated in 2017 after failure to find a safe but effective dose for
the lead program, which could foreshadow difficulty finding a therapeutic window beyond low-dose
vaccine programs.
u Long duration of efficacy of vaccines or continued evolution of less threatening variants could
significantly reduce demand for Moderna's COVID-19 vaccine.

u Established, non-mRNA competition in RSV and influenza could make it difficult for Moderna to gain
market share with new vaccines.
Economic Moat Karen Andersen, CFA, Strategist, 8 Dec 2023

The stellar safety and efficacy profile of Moderna's COVID-19 vaccine has rapidly validated the firm's
mRNA technology, and we expect returns on invested capital to remain above our 9% assumed cost of
capital beginning in 2026. However, we see threats of major value destruction that preclude us from
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awarding a narrow moat rating to the firm. Moderna served a critical role in vaccinating millions of
individuals during the pandemic and has several potential first-in-class vaccines in testing that could
serve significant unmet needs. We think it has both the funding and the technological capabilities
already in house to bring most of these programs to market. However, we see uncertainty around its
defenses against other novel mRNA vaccine market entrants, and we think the firm is still in the process
of building a moat, as we expect multiple new competitors in the coming years.
Despite the early lead that Moderna and BioNTech hold after developing their COVID-19 vaccines in less
than a year, and their clear dominance in COVID-19 vaccine sales, the long-term COVID-19 vaccine
market is mired in uncertainty. The virulence of new strains and the population's willingness to continue
to get vaccinated remain key questions. We assume that most high-risk individuals in developed
markets continue to get annual vaccines, although we do not assume regular vaccination for healthy
adults, leading us to a roughly $4 billion annual opportunity for Moderna, well below peak sales near
$18 billion annually in 2021 and 2022. Moderna continues to innovate in this space, with updated
boosters as well as differentiated programs like next-generation vaccine mRNA-1283 (in phase 3), which
could be more stable at refrigerated temperatures and effective at a lower dose.
With both the efficacy/safety of the technology and the ability to scale manufacturing now largely
validated, we think this lowers the risk the firm faces as it expands into other markets and also shortens
timelines for further development. Moderna's ability to launch differentiated mRNA therapies beyond
COVID-19, ranging from prophylactic vaccines for other respiratory diseases to cancer treatments, will
be key to establishing a moat, in our opinion, and multiple competitors are lining up that could interfere
with Moderna's potential to see the kind of monopoly pricing power enjoyed by other innovative
vaccines (GSK's Shingrix, Pfizer's Prevnar) launched in recent years. Moderna's platform technology
allows new genetic sequences to be easily inserted to create new therapies, and virtually identical, cell-
free, low-volume manufacturing across programs should allow flexible manufacturing, but these
characteristics—which allowed it to vault to the lead ahead of older technologies during the
pandemic—could also make it more vulnerable to other competitors with similar technologies.
Moderna's intellectual property is strong and multilayered, similar in nature to IP at other

oligonucleotide-focused firms like Alnylam and Ionis, although the precise technology is different.
Moderna's medicines use mRNA, which the company refers to as "the software of life," to deliver
instructions for a patient's own body to produce a given protein, which can either trigger an immune
reaction (prophylactic vaccines like the COVID-19 vaccine, or oncology vaccine programs) or replace a
protein that is missing or faulty. Moderna's IP protection stems from the firm's broad mRNA technology
(including sublicensed patents), formulation (including methods of using specific, proprietary lipid
nanoparticle delivery technologies), and also the exact composition of matter (encoded antigen) for
individual products. Protection extends through at least 2033 for issued patents and beyond 2041 for
pending patents. Moderna gained access to valuable patents from the University of Pennsylvania
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covering modified mRNA technology through a nonexclusive license (via mRNA RiboTherapeutics and
its affiliate, Cellscript), so other firms could also license the fundamental technology allowing mRNA to
function as a therapeutic. In fact, while Moderna, CureVac, BioNTech, and GSK historically dominated
mRNA vaccine patent applications, the success of COVID-19 vaccines has likely led to an explosion of
patent applications for other innovators. It is possible that Moderna's experience with artificial
intelligence and proprietary digital technologies could allow it to design the best mRNA sequences for
protein expression, and ample cash could give it an edge in ongoing proprietary work on new delivery
technologies and lipid nanoparticles. However, we're not convinced that Moderna has erected enough
barriers to competitors, given the significant funding flowing into this nascent and extremely promising
market where Moderna and BioNTech have laid the foundation.
Moderna's mRNA platform has yielded a pipeline that can be sorted into seven different modalities, or
groups that share features like delivery technology, methods of controlling immune system interactions,
and manufacturing technology. Infectious disease vaccines are the key initial focus, with combination or
complex vaccines as potential differentiators. With manufacturing rapidly brought to a massive scale,
we think Moderna's technology platform could be applied in numerous areas but looks particularly
promising and well validated in other prophylactic vaccine markets. These vaccines require a finite
number of small doses of mRNA and have shown positive efficacy data (strong ability to generate
neutralizing antibodies) against several different viruses beyond COVID-19, and Moderna has several
such programs in clinical development.
Among Moderna's infectious disease vaccine programs, endemic respiratory viruses are a key target
and the lowest-risk programs, thanks to similarities to COVID-19 vaccines. For example, Moderna aims
to launch a combination COVID-19/influenza vaccine in 2025. While the $6 billion global influenza
vaccine market is already crowded and has poor pricing power, Moderna's technology appears to allow
higher efficacy than traditional vaccines, which in a good year are only 60% effective. With a shorter
lead time due to faster manufacturing (traditional vaccines take six to nine months, but mRNA vaccines,
once manufacturing and approval pathways are established, could perhaps take one to two months),
Moderna should see a higher likelihood of targeting the key strains that will circulate in the upcoming
season. This would also mean less time to allow for antigenic drift (accumulating mutations in the virus
strains), and manufacturing outside of egg-based systems would avoid the problem of egg adaptation
(the antigen code changing during manufacturing). The convenience of a combination shot could draw
some of the 150 million Americans who receive a flu shot each year to receive Moderna's combination
shot instead. Beyond influenza, positive phase 3 data for the firm's RSV vaccine should allow launch in
2024, although it will be competing with vaccines from Pfizer and GSK launching in 2023.
Competition could come from established vaccine firms partnering with innovative mRNA firms (GSK/
CureVac and Sanofi's Translate acquisition), other mRNA firms (BioNTech), or vaccines using other
ß
technologies (including Pfizer and GSK's protein-based RSV vaccines). That said, mRNA technology
theoretically allows vaccination against multiple pathogens at once, such as COVID-19/flu/RSV
combinations in early-stage trials. The broader the menu of first-in-class vaccines, the more entrenched
Moderna could become. Moderna is also tackling vaccines that are complex and difficult to
manufacture with established methods. Moderna's CMV vaccine program includes six pieces of mRNA
that create protein subunits that self-assemble inside the cell. Moderna aims to establish differentiation
with its ability to target such a complex antigen, and we expect the firm could launch as early as 2026 in
this nascent vaccine market. Epstein-Barr virus and HIV are other programs that are likely to be defined
by their complexity, which could make it difficult for other non-mRNA vaccines to compete.
In oncology, Moderna aims to activate a cancer patient's T-cells by administering mRNA coding for
neoantigens (antigens that are unique to tumor cells). One approach, partnered with Merck, is an
individualized neoantigen therapy that treats cancer by administering mRNA coding for multiple tumor
neoantigens that T-cells can recognize, allowing a patient's immune system to recognize tumors more
easily. Moderna and Merck have reported positive data for mRNA-4157 in a phase 2 melanoma trial,
and we now assume a 60% probability of success and multi-billion-dollar sales potential, with even
higher potential if successful in new indications like lung cancer. In contrast, another program targeting
KRAS mutations would broadly treat patients in this category, including a significant portion of lung
cancer patients harboring such mutations. KRAS mutations are seen in 22% of cancers but have been
difficult to directly target with existing small-molecule and biologic drugs due to the shape of the KRAS
protein itself. Intratumoral immuno-oncology therapies can be combined in an attempt to activate
microenvironments to drive T-cell responses to cancer and could be combined with existing checkpoint
inhibitors.
Beyond infectious diseases and cancer, we think Moderna's pipeline risk increases. Moderna also has
systemic programs for secreted proteins, which could compete with established biologic therapies
including recombinant proteins and antibodies, although these are in early stage development and have
had past challenges (see the former partnership with Alexion that failed in 2017) in getting dosages to
levels that are both safe and effective. That said, Moderna has achieved therapeutic levels of antibody
protein in its chikungunya program, which lowers overall risk in its therapeutic proteins pipeline and
could allow the firm to compete in the broader $200 billion secreted therapeutic protein market.
Intracellular and membrane-associated proteins make up two thirds of all human proteins but can't be
delivered using recombinant proteins (intravenously administered biologic therapies can't enter cells),
making them potential targets for mRNA therapies. Moderna is focused on treating rare diseases in this
modality and has two programs with early promising data. Given the early stage of development and
high technological risk, we assign probabilities of approval of 50%. Finally, Moderna and partner Vertex
are in phase 1 for an inhaled cystic fibrosis therapy, although this delivery technology is relatively
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unproven.
Fair Value and Profit Drivers Karen Andersen, CFA, Strategist, 8 Dec 2023
We're maintaining our fair value estimate at $227 per share.
We think mRNA-1273, the company’s authorized COVID-19 vaccine, should generate roughly $6.2 billion
in 2023 and $4 billion in annual sales beyond, due to recurring boosters in high-risk populations. We
expect that Moderna could launch its next prophylactic infectious disease vaccines for RSV in 2024 and
a COVID-19/influenza combination in 2025, with additional launches over the next several years,
supporting $10 billion in annual non-COVID-19 infectious disease vaccine sales by 2032. We assume a
60% probability of approval for Merck and Moderna's personalized cancer vaccine, mRNA-4157, and we
expect Moderna could record $3 billion in sales from the program by 2032. We include more than $1.5
billion in annual sales from rare disease therapeutics by 2032 (20%-50% probabilities of approval).
Overall, this results in $21 billion in total probability-adjusted annual revenue by 2032. We expect
operating margins will surpass 40% by 2030 and model long-term margins approaching 50%, even with
continued strong investment in research and development. We assign Moderna an average level of
systemic risk, resulting in a cost of equity (and weighted average cost of capital) of 9%, in line with its
early commercial-stage biotech peers.
Risk and Uncertainty Karen Andersen, CFA, Strategist, 8 Dec 2023

We assign Moderna a Very High Morningstar Uncertainty Rating, given the potential for rapid changes
in the competitive landscape and in the COVID-19 virus itself. Beyond COVID-19, Moderna's technology
is still largely unproved, and competing technologies could prove safer and more effective.
Our rating for Moderna is not materially affected by environmental, social, and governance risks,
although we see access to basic services (tied to potential U.S. policy reform on drug pricing, the
potential waiving of IP rights to expand access to vaccines, and vaccine hesitancy) as the biggest
potential ESG risk that Moderna needs to manage. Some countries may waive IP rights, allowing other
manufacturers to produce Moderna's vaccine and expand access. However, even if IP rights were
waived, we would expect this to have an immaterial impact, given the firm's proprietary technological
know-how. Lastly, vaccine hesitancy could plague vaccine-focused firms like Moderna if new concerns
about safety issues begin to emerge from the firm's novel mRNA vaccines. We model this into our
demand assumptions, but this is immaterial to our valuation (less than 10% impact).
On product governance, safety issues could also be a source of litigation costs for Moderna in the long
run. That said, as millions of individuals have received Moderna's COVID-19 vaccine with no serious side
effects, we assume less than a 25% probability of significant litigation occurring, and we don't include
potential future litigation costs in our valuation model.
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Capital Allocation Karen Andersen, CFA, Strategist, 8 Dec 2023

We assign Moderna a Standard Capital Allocation Rating. The rating reflects our belief that Moderna
possesses a sound balance sheet, fair investments outlook, and appropriate shareholder distributions.
With no debt and significant cash boosts from equity raises in 2020 and COVID-19 vaccine sales in 2021
and 2022, we have no concerns regarding Moderna's balance sheet. The mRNA treatment landscape is
shaping up to be competitive, but the market is also nascent, with the COVID-19 pandemic marking the
first commercial product from Moderna, the industry leader. We think Moderna is positioned to create
economic value by continuing to reinvest in its business. We think the firm's rapid development timeline
during the COVID-19 pandemic shows strong execution with its clinical, manufacturing, and commercial
investments, as Moderna quickly transformed from a development-stage biotech into a global, large-
scale vaccine maker. On distributions, Moderna's massive potential for building a moat by applying its
technology to new pipeline programs likely means that dividends remain far in its future, although
significant 2021 cash flow and a recent dip in Moderna's share price have driven some share
repurchases. Overall, we think the firm's aggressive spending on R&D supports its strategy for
advancing several new vaccines and treatments to the market.
Analyst Notes Archive
Moderna: Maintaining Our $227 Fair Value Estimate After Digesting Pfizer’s COVID-19 Guidance
Karen Andersen, CFA, Strategist, 13 Dec 2023
We're maintaining our $227 fair value estimate for Moderna after reviewing Pfizer's lowered 2024
guidance for its own COVID-19 vaccine. Pfizer gave guidance for $5 billion in 2024 sales of Pfizer/
BioNTech's COVID-19 vaccine, which is materially lower than our prior Pfizer forecast as well as Pfizer's
$11.5 billion guidance for 2023 COVID-19 vaccine revenue. We continue to expect a tougher market for
these vaccines going forward as the U.S. and some smaller markets transition from large, government
contracts to commercial sales based on demand. However, we're comfortable with our Moderna
assumptions, which call for another significant drop in COVID-19 revenue in 2024 to $3.9 billion,
followed by a smaller drop to $3.5 billion in 2025 as some international contracts could wind down
further. We then assume modest 3%-4% annual COVID-19 vaccine sales growth for Moderna following
the expected launch of the firm's COVID-19/flu combination vaccine in 2025.
We think sales of the combination vaccine could slightly boost demand for COVID-19 vaccines,
particularly among higher-risk adults and seniors who are already planning to receive an annual flu
vaccine. Given a U.S. flu vaccine market of more than 150 million doses annually, we think there is
ample room for sales of roughly 60 million doses of COVID-19 vaccines annually. We also think that
combination vaccines could address some of the vaccination fatigue that individuals are facing,
especially as Moderna's potential triple vaccine (COVID-19, flu, and RSV) is already in testing and could
launch by 2028. We think Moderna's shares are extremely undervalued, trading at a 65% discount to
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our fair value estimate, as the market underappreciates the potential of the firm's mRNA technology and
expertise in respiratory disease vaccines as well as cancer and rare disease therapies. However, given
the nascent stage of the mRNA market, we do not yet assign the firm an economic moat.
Moderna Earnings: High-Level Long-Term Guidance Fits Our View; Maintaining $227 Valuation
Karen Andersen, CFA, Strategist, 3 Nov 2023
Moderna reported third-quarter results that were weaker than we had anticipated, largely due to
significant manufacturing resizing expenses to allow the firm to adjust to the endemic phase of COVID-
19 but retain more flexibility in the future.
We’re maintaining our $227 fair value estimate after assessing the firm’s high-level guidance through
2025, which overall implies lower COVID revenue than we had anticipated, but better cost control and
flexibility.
In addition, with more than $1 billion in RSV vaccine sales between Pfizer and GSK in their first quarter
on the market, we’re increasingly confident of our $2.5 billion peak annual sales estimate for Moderna’s
own RSV vaccine (poised to launch in 2024). We see its efficacy and safety profile as similar to GSK’s
leading product, but with potential convenience benefits from its prefilled syringe in 2024 and
combination vaccine potential in the long run. We think Moderna is still in the process of building an
economic moat around its mRNA technology, although we are increasingly bullish on the firm’s ability
to translate success in COVID into other respiratory diseases (led by RSV and flu), cancer (positive phase
2 data in melanoma), and rare diseases (positive proof of concept data in two leading programs).
We think shares look undervalued, as we think Moderna can execute its strategy without raising
additional cash on the equity market at prices well below our fair value estimate. Based on very strong
earlier data, we believe the upcoming three-year update on phase 2 data for the firm’s individualized
neoantigen therapy in melanoma later this year should allow for an accelerated regulatory filing and
serve as a positive catalyst for the stock.
Moderna: Shares Remain Deeply Undervalued, Despite Our Lower COVID-19 Vaccine Projections
Karen Andersen, CFA, Strategist, 16 Oct 2023
In conjunction with Pfizer’s decision to reduce its own COVID-19 vaccine revenue guidance for 2023
from $13.5 billion to $11.5 billion, we have slightly reduced our Moderna COVID-19 vaccine sales
forecast for 2023 from $7.5 billion to $7.2 billion, which is closer to the midpoint of Moderna’s $6 billion-
$8 billion guidance for the year. Moderna management reiterated this guidance in a statement Oct. 16,
noting that it would have more information on U.S. demand by the quarterly earnings call on Nov 2. We
think Moderna’s guidance is less likely to change significantly, as management did not issue guidance
on the U.S. market until the second quarter, when initial sales contracts were put in place. That said,
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we’re lowering our Moderna fair value estimate from $266 to $227, as we now assume that demand for
COVID-19 vaccines will remain at these trough levels for the foreseeable future, with roughly $4 billion
in annual COVID-19 revenue for Moderna beginning in 2024 (down from our prior $5 billion estimate for
sales in 2024 and beyond). Moderna is likely to launch a combination flu and COVID-19 vaccine in 2025
that could help pull demand for COVID-19 vaccines slightly closer to the 150-million-dose demand for flu
vaccines in the U.S. annually, although we think there are too many uncertainties in the market relating
to duration of vaccine protection and severity of new COVID-19 variants to assume additional demand at
this point. We think Moderna is still in the process of building an economic moat around its mRNA
technology, although we are increasingly bullish on the firm’s ability to translate success in COVID-19
into other respiratory diseases (led by RSV and flu), cancer (positive phase 2 data in melanoma), and
rare diseases (positive proof of concept data in two leading programs). Aggressive spending on the
firm’s growing pipeline is likely to push Moderna into the red through 2026, however, which likely
discourages investors with a short-term horizon.
Moderna: R&D Day Reveals Potentially Superior Flu Vaccine as Well as Oncology, Rare-Disease
Promise Karen Andersen, CFA, Strategist, 13 Sep 2023
In conjunction with its research and development day, Moderna announced positive data for its flu
vaccine and rare-disease treatments, additional insights into its oncology strategy, and aggressive goals
for moving 15 new products to market and 50 new candidates to clinical trials over the next five years.
We’re maintaining our $266 fair value estimate. While investors reacted positively to the
announcements, we still see the shares as significantly undervalued, with too much focus on the near-
term COVID-19 vaccine sales decline and not enough focus on the multiple avenues of longer-term
growth. We’ve removed smaller, earlier-stage programs that have been discontinued but added in new
programs in phenylketonuria (rare disease) and norovirus (latent vaccine). We’ve also slightly boosted
our long-term assumptions for R&D spending to fit guidance.
We’re encouraged by recent data for several important programs. We’ve raised our probabilities of
approval for the firm’s rare-disease programs and boosted our long-term growth assumptions for its flu
vaccine (better odds of superiority in the long run) and Moderna/Merck’s individualized neoantigen
therapy (more confidence in extension to lung cancer). Altogether, our respiratory vaccine sales
assumption for 2027 remains at the low end of the firm’s $8 billion-$15 billion guidance range. However,
we assume $11 billion in respiratory vaccine sales by 2032 along with $5 billion in additional vaccines
(mostly latent viruses), $4 billion in oncology sales, and more than $1.5 billion in rare-disease sales. We
think these assumptions fit well with the firm’s guidance for $10 billion-$15 billion in annual sales from
new products within five years of a 2028 launch. While we do not yet think Moderna has an economic
moat, each progress update puts more distance between it and potential future mRNA entrants,
boosting the likelihood that the firm will develop long-term competitive advantages.
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Moderna Earnings: Maintaining $266 Fair Value Estimate as Broader Portfolio Catalysts Approach
Karen Andersen, CFA, Strategist, 3 Aug 2023
Moderna reported second-quarter results that were largely in line with our expectations, and we’re
maintaining our $266 fair value estimate. The second quarter is an off-season period for Moderna’s
COVID-19 vaccine, which only generated sales of $293 million. In addition, manufacturing costs as the
firm approaches the fall vaccination season are now largely fixed; Moderna is anticipating higher costs
due to the switch to a new monovalent XBB vaccine, which doesn’t make use of any part of the prior
BA.4/5 bivalent vaccine. However, our $7.5 billion forecast for full-year COVID vaccine sales for
Moderna is in line with the firm’s $6 billion-$8 billion guidance, and we think our forecast for COVID
vaccine sales in 2024 and beyond of roughly $5 billion annually fits well with this guidance, as it
essentially eliminates the COVID sales from the first half of 2023 that are unlikely to repeat as
vaccinations become increasingly focused on the fall season. Overall, we think that Moderna is still in
the process of building a moat around its mRNA technology but that the current market valuation is out
of step with the firm’s significant long-term potential in respiratory diseases, the broader infectious
disease space, and cancer and rare diseases.
In line with our expectations, investment in the firm’s pipeline is increasing substantially as more phase
3 trials are initiated. We’re looking forward to seeing Moderna’s broad range of potential pipeline
updates later this year (including phase 3 cytomegalovirus trial full enrollment and phase 3 data for a
modified flu vaccine that could improve on influenza B efficacy levels) and into 2024 (potential approval
of both respiratory syncytial virus and flu vaccines). In 2025, we think Moderna could begin to launch
combination respiratory vaccines, which we think would further improve convenience and uptake.
Moderna: New Personalized Melanoma Therapy Data Continues To Support Our Bullish Expectations
Karen Andersen, CFA, Strategist, 6 Jun 2023
Moderna and Merck announced new data for individualized neoantigen therapy mRNA-4157 on
Monday at the annual meeting of the American Society of Clinical Oncology that was consistent with
our view of the therapy's solid safety and efficacy. As such, we're maintaining our $266 fair value
estimate for Moderna. Phase 2b data presented at the meeting showed that a combination of mRNA-
4157 with Keytruda led to a 65% reduction in the risk of distant metastases or death relative to Keytruda
alone in adjuvant melanoma patients, building on prior data showing a 44% reduction in the risk of
recurrence or death. Given Keytruda's position as the standard of care in this setting, as well as the
novelty of Moderna's technology, this result bodes well for Moderna's technology in other combinations
and other forms and stages of cancer. While the U.S. Food and Drug Administration could agree to
approve the drug based on further updates from the phase 2b study, we expect they will require the
start of a confirmatory phase 3 trial prior to approval, and Moderna and partner Merck expect to begin
this trial in the third quarter. Moderna also hopes to start a phase 3 trial in adjuvant non-small cell lung
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cancer in the fourth quarter and expects future trials at other stages of disease (perhaps metastatic
disease) and other cancer types. Moderna's results are also encouraging for BioNTech, which will have
phase 2 data in the second half of 2023 in first-line metastatic melanoma trial (Keytruda with or without
BNT122). We assume a 60% probability of approval for mRNA-4157, with probability-adjusted sales to
Moderna of roughly $2.5 billion by the end of our 10-year explicit forecast period (Moderna's portion of
a 50/50 split with Merck). We continue to see Moderna shares as undervalued, given strong potential
for its mRNA technology across infectious diseases, cancer, and rare disease therapeutics, although we
still think the firm is in the process of building an economic moat. K
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Competitors Price vs. Fair Value
Johnson & Johnson JNJ
Fair Value: 164.00

19 Sep 2022 11:58, UTC
200
Last Close: 155.16
150 Over Valued
Under Valued
100
50
0
2018 2019 2020 2021 2022 YTD
0.99 1.11 1.07 1.02 1.08 0.95 Price/Fair Value
-5.10 15.94 10.62 11.36 5.86 -9.50 Total Return %
Morningstar Rating
Total Return % as of 15 Dec 2023. Last Close as of 15 Dec 2023. Fair Value as of 19 Sep 2022 11:58, UTC.
Pfizer Inc PFE
Fair Value: 42.00

13 Dec 2023 17:41, UTC
200
Last Close: 26.63
150 Over Valued
Under Valued
100
50
0
2018 2019 2020 2021 2022 YTD
0.95 0.85 0.92 1.30 1.07 0.63 Price/Fair Value
24.27 -6.94 1.12 64.66 -10.52 -44.83 Total Return %
Morningstar Rating
Total Return % as of 15 Dec 2023. Last Close as of 15 Dec 2023. Fair Value as of 13 Dec 2023 17:41, UTC.
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BioNTech SE ADR BNTX
Fair Value: 177.00

16 Oct 2023 19:24, UTC
400
Last Close: 102.20
300 Over Valued
Under Valued
200
100
0
2018 2019 2020 2021 2022 YTD
— — 1.25 1.46 0.69 0.58 Price/Fair Value
— — 140.61 216.24 -41.13 -31.97 Total Return %
Morningstar Rating
Total Return % as of 15 Dec 2023. Last Close as of 15 Dec 2023. Fair Value as of 16 Oct 2023 19:24, UTC.
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Morningstar Historical Summary

Financials as of 30 Sep 2023
Fiscal Year, ends 31 Dec 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD TTM
Revenue (USD K) — — — 101,536 176,974 122,512 48,000 274,000 17,736,000 18,875,000 3,941,000 9,090,000
Revenue Growth % — — — — 74.3 -30.8 -60.8 470 6373 6.4 -71.3 -56.0
EBITDA (USD K) — — — -208,657 -235,327 -356,450 -515,000 -732,000 13,534,000 9,952,000 -3,561,000 -1,816,000
EBITDA Margin % — — — -205 -133 -291 -1072 -267 76.3 52.7 -90.4 -20.0
Operating Income (USD K) — — — -223,771 -269,356 -413,266 -546,000 -763,000 13,296,000 9,420,000 -4,245,000 -2,665,000
Operating Margin % — — — -220 -152 -337 -1137 -278 75.0 49.9 -107.7 -29.3
Net Income (USD K) — — — -216,211 -255,916 -384,734 -514,000 -747,000 12,202,000 8,362,000 -4,931,000 -3,466,000
Net Margin % — — — -226 -152 -328 -1070 -272 68.8 44.3 -125.1 -38.1
Diluted Shares Outstanding (K) — — — 376,000 376,000 81,114 331,000 381,000 431,000 416,000 382,000 388,250
Diluted Earnings Per Share (USD) — — — -0.61 -0.72 -4.95 -1.55 -1.96 28.29 20.12 -12.89 -9.23
Dividends Per Share (USD) — — — — — — — — — — — —
Valuation as of 30 Nov 2023

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Recent Qtr TTM
Price/Sales — — — — — 23.1 92.6 666.7 9.7 3.7 3.9 3.3
Price/Earnings — — — — — -14.8 -12.2 -64.5 15.6 6.5 35.8 -8.4
Price/Cash Flow — — — — — -12.0 -14.3 57.5 9.3 11.4 -181.8 -14.5
Dividend Yield % — — — — — — — — — — — —
Price/Book — — — — — 4.7 5.3 15.1 10.1 3.8 2.3 2.2
EV/EBITDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.0
Operating Performance / Profitability as of 30 Sep 2023
Fiscal Year, ends 31 Dec 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD TTM
ROA % — — — -16.3 -21.6 -26.4 -28.9 -16.7 76.3 33.1 — -15.2
ROE % — — — — — -82.1 -38.0 -40.0 146 50.3 — -22.0
ROIC % — — — — — -81.6 -38.5 -37.0 136 46.4 — -22.0
Asset Turnover — — — 0.1 0.1 0.1 0.0 0.1 1.1 0.7 — 0.4
Financial Leverage
Fiscal Year, ends 31 Dec 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Recent Qtr TTM
Debt/Capital % — — — — — 2.1 10.1 7.5 4.8 5.0 8.6 —
Equity/Assets % — — — — — 78.0 73.9 34.9 57.3 74.0 69.2 —
Total Debt/EBITDA — — — — — -0.1 -0.3 -0.3 0.1 0.1 -0.4 —
EBITDA/Interest Expense Infinite Infinite Infinite — -1,782.7 -115.1 — — 796.1 343.2 -111.3 -43.2
Morningstar Analyst Historical/Forecast Summary as of 14 Dec 2023

Financials Estimates Forward Valuation Estimates
2021 2022 2023 2024 2025
Fiscal Year, ends 31 Dec 2022 2021 2022 2023 2024 2025
Price/Sales 5.5 3.6 5.0 6.7 5.5
Revenue (USD Mil) 18,471 19,263 6,510 4,914 5,946 Price/Earnings 9.0 8.9 -6.5 -17.1 -25.4
Revenue Growth % 2200.3 4.3 -66.2 -24.5 21.0 Price/Cash Flow — — — — —
EBITDA (USD Mil) 13,516 9,752 -4,549 -2,290 -1,466 Dividend Yield % — — — — —
EBITDA Margin % 73.2 50.6 -69.9 -46.6 -24.7 Price/Book 7.7 3.9 2.6 3.1 3.5
EV/EBITDA 7.0 6.3 -5.9 -11.6 -18.2
Operating Income (USD Mil) 13,296 9,420 -4,897 -2,486 -1,704
Operating Margin % 72.0 48.9 -75.2 -50.6 -28.7
Net Income (USD Mil) 12,202 8,362 -5,488 -2,086 -1,404
Net Margin % 66.1 43.4 -84.3 -42.5 -23.6
Diluted Shares Outstanding (Mil) 431 416 416 416 416
Diluted Earnings Per Share(USD) 28.29 20.10 -13.19 -5.02 -3.38
Dividends Per Share(USD) 0.00 0.00 0.00 0.00 0.00
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ESG Risk Rating Breakdown
Exposure Subject Subindustry (40.0) u Exposure represents a company’s vulnerability to ESG

Company Exposure1 38.3 risks driven by their business model
38.3
u Exposure is assessed at the Subindustry level and then
– Manageable Risk 36.7 Medium
2 0 55+ specified at the company level
Unmanageable Risk 1.6
Low Medium High u Scoring ranges from 0-55+ with categories of low, me-
dium, and high-risk exposure
Management
u Management measures a company’s ability to manage
Manageable Risk 36.7 ESG risks through its commitments and actions
45.6%
– Managed Risk3 16.7 Average
u Management assesses a company's efficiency on ESG
Management Gap4 20.0 100 0 programs, practices, and policies

Strong Average Weak u Management score ranges from 0-100% showing how
Overall Unmanaged Risk 21.5 much manageable risk a company is managing
ESG Risk Rating ESG Risk Rating Assessment5

21.52
Medium
Negligible Low Medium High Severe ESG Risk Rating is of Dec 06, 2023. Highest Controversy Level is as of Dec 08,
2023. Sustainalytics Subindustry: Biotechnology. Sustainalytics provides
ESG Risk Ratings measure the degree to which a company’s value is impacted by environmental, social, and governance Morningstar with company ESG ratings and metrics on a monthly basis and
risks, by evaluating the company’s ability to manage the ESG risks it faces. as such, the ratings in Morningstar may not necessarily reflect current
Sustainalytics’ scores for the company. For the most up to date rating and
1. A company's Exposure to material ESG issues 2. Unmanageable Risk refers to risks that are inherent to a particular business model that cannot be managed by more information, please visit: sustainalytics.com/esg-ratings/.
programs or initiatives 3. Managed Risk = Manageable Risk multiplied by a Management score of 45.6% 4. Management Gap assesses risks that are not
managed, but are considered manageable 5. ESG Risk Rating Assessment = Overall Unmanaged Risk = Management Gap plus Unmanageable Risk
Peer Analysis 06 Dec 2023 Peers are selected from the company's Sustainalytics-defined Subindustry and are displayed based on the closest market cap values
Company Name Exposure Management ESG Risk Rating
Moderna Inc 38.3 | Medium 0 55+ 45.6 | Average 100 0 21.5 | Medium 0 40+
Johnson & Johnson 51.2 | Medium 0 55+ 57.2 | Strong 100 0 23.9 | Medium 0 40+
Novavax Inc 42.4 | Medium 0 55+ 23.6 | Weak 100 0 32.8 | High 0 40+
Pfizer Inc 45.6 | Medium 0 55+ 63.2 | Strong 100 0 18.7 | Low 0 40+
BioNTech SE 42.0 | Medium 0 55+ 44.5 | Average 100 0 24.1 | Medium 0 40+
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Appendix
Historical Morningstar Rating
Moderna Inc MRNA 15 Dec 2023 22:16, UTC
Dec 2023 Nov 2023 Oct 2023 Sep 2023 Aug 2023 Jul 2023 Jun 2023 May 2023 Apr 2023 Mar 2023 Feb 2023 Jan 2023
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Johnson & Johnson JNJ 15 Dec 2023 22:16, UTC
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Pfizer Inc PFE 15 Dec 2023 22:16, UTC
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BioNTech SE ADR BNTX 15 Dec 2023 22:16, UTC
QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ QQQQ
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QQ Q QQ QQ Q Q QQ QQ QQ QQ QQ QQ
QQ Q QQ QQQ QQQ QQ QQ - - - - -
- - - - - - - - - - - -
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Research Methodology for Valuing Companies
Alternative location for disclosure can be found https:// our fair value estimates. An economic moat is a structural workingcapital accounts, and capital spending. Based on
pspdf-stg.morningstar.com/v1/disclosure feature that allows a firm to sustain excess profits over a these projections, we calculate earnings before interest,
long period of time. We define economic profits as re- after taxes (EBI) and the net new investment (NNI) to de-
Overview turns on invested capital (or ROIC) over and above our es- rive our annual free cash flow forecast.
At the heart of our valuation system is a detailed projec- timate of a firm’s cost of capital, or weighted average
tion of a company’s future cash flows, resulting from our Stage II: Fade
cost of capital (or WACC). Without a moat, profits are
analysts’ research. Analysts create custom industry and The second stage of our model is the period it will take
more susceptible to competition. We have identified five
company assumptions to feed income statement, balance the company’s return on new invested capital—the re-
sources of economic moats: intangible assets, switching
sheet, and capital investment assumptions into our glob- turn on capital of the next dollar invested (“RONIC”)—to
costs, network effect, cost advantage, and efficient scale.
ally standardized, proprietary discounted cash flow, or decline (or rise) to its cost of capital. During the Stage II
DCF, modeling templates. We use scenario analysis, inde- Companies with a narrow moat are those we believe are period, we use a formula to approximate cash flows in
pth competitive advantage analysis, and a variety of other more likely than not to achieve normalized excess returns lieu of explicitly modeling the income statement, balance
analytical tools to augment this process. Moreover, we for at least the next 10 years. Wide-moat companies are sheet, and cash flow statement as we do in Stage I. The
think analyzing valuation through discounted cash flows those in which we have very high confidence that excess length of the second stage depends on the strength of
presents a better lens for viewing cyclical companies, returns will remain for 10 years, with excess returns more the company’s economic moat. We forecast this period to
high-growth firms, businesses with finite lives (e.g., likely than not to remain for at least 20 years. The longer last anywhere from one year (for companies with no eco-
mines), or companies expected to generate negative a firm generates economic profits, the higher its intrinsic nomic moat) to 10–15 years or more (for wide-moat com-
earnings over the next few years. That said, we don’t dis- value. We believe low-quality, no-moat companies will panies). During this period, cash flows are forecast using
miss multiples altogether but rather use them as support- see their normalized returns gravitate toward the firm’s four assumptions: an average growth rate for EBI over the
ing cross-checks for our DCF-based fair value estimates. cost of capital more quickly than companies with moats. period, a normalized investment rate, average return on
We also acknowledge that DCF models offer their own new invested capital (RONIC), and the number of years
challenges (including a potential proliferation of estim- When considering a company's moat, we also assess until perpetuity, when excess returns cease. The invest-
ated inputs and the possibility that the method may miss whether there is a substantial threat of value destruction, ment rate and return on new invested capital decline un-
shortterm market-price movements), but we believe these stemming from risks related to ESG, industry disruption, til a perpetuity value is calculated. In the case of firms
negatives are mitigated by deep analysis and our financial health, or other idiosyncratic issues. In this con- that do not earn their cost of capital, we assume marginal
longterm approach. text, a risk is considered potentially value destructive if its ROICs rise to the firm’s cost of capital (usually attribut-
occurrence would eliminate a firm’s economic profit on a able to less reinvestment), and we may truncate the
Morningstar’s equity research group (”we,” “our”) be- cumulative or midcycle basis. If we deem the probability second stage.
lieves that a company’s intrinsic worth results from the of occurrence sufficiently high, we would not characterize
future cash flows it can generate. The Morningstar Rating the company as possessing an economic moat. Stage III: Perpetuity
for stocks identifies stocks trading at a discount or premi- Once a company’s marginal ROIC hits its cost of capital,
um to their intrinsic worth—or fair value estimate, in 2. Estimated Fair Value we calculate a continuing value, using a standard per-
Morningstar terminology. Five-star stocks sell for the Combining our analysts’ financial forecasts with the petuity formula. At perpetuity, we assume that any
biggest risk adjusted discount to their fair values, where- firm’s economic moat helps us assess how long returns growth or decline or investment in the business neither
as 1-star stocks trade at premiums to their intrinsic worth. on invested capital are likely to exceed the firm’s cost of creates nor destroys value and that any new investment
capital. Returns of firms with a wide economic moat rat- provides a return in line with estimated WACC.
Four key components drive the Morningstar rating: (1) our ing are assumed to fade to the perpetuity period over a
assessment of the firm’s economic moat, (2) our estimate longer period of time than the returns of narrow-moat Because a dollar earned today is worth more than a dollar
of the stock’s fair value, (3) our uncertainty around that firms, and both will fade slower than no-moat firms, in- earned tomorrow, we discount our projections of cash
fair value estimate and (4) the current market price. This creasing our estimate of their intrinsic value. flows in stages I, II, and III to arrive at a total present
process ultimately culminates in our singlepoint star rat- value of expected future cash flows. Because we are
ing. Our model is divided into three distinct stages: modeling free cash flow to the firm—representing cash
available to provide a return to all capital providers—we
1. Economic Moat discount future cash flows using the WACC, which is a
Stage I: Explicit Forecast
The concept of an economic moat plays a vital role not weighted average of the costs of equity, debt, and pre-
In this stage, which can last five to 10 years, analysts
only in our qualitative assessment of a firm’s long-term ferred stock (and any other funding sources), using ex-
make full financial statement forecasts, including items
investment potential, but also in the actual calculation of pected future proportionate long-term, market-value
such as revenue, profit margins, tax rates, changes in
weights.
Morningstar Equity Research Star Rating Methodology

3. Uncertainty Around That Fair Value Estimate
Morningstar’s Uncertainty Rating is designed to capture
the range of potential outcomes for a company’s intrinsic
value. This rating is used to assign the margin of safety
required before investing, which in turn explicitly drives
our stock star rating system. The Uncertainty Rating is
aimed at identifying the confidence we should have in as-
signing a fair value estimate for a given stock.
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Our Uncertainty Rating is meant to take into account any- Morningstar Equity Research Star Rating Methodology
thing that can increase the potential dispersion of future
outcomes for the intrinsic value of a company, and any-
thing that can affect our ability to accurately predict
these outcomes. The rating begins with a suggested rat-
ing produced by a quantitative process based on the trail-
ing 12-month standard deviation of daily stock returns.
An analyst overlay is then applied, with analysts using
the suggested rating, historical rating data, and their own
knowledge of the company to inform them as they make
the final Uncertainty Rating decision. Ultimately, the rat-
ing decision rests with the analyst. Analysts take into ac-
count many characteristics when making their final de-
cision, including cyclical factors, operational and financial
factors such as leverage, company-specific events, ESG
risks, and anything else that might increase the potential
dispersion of future outcomes and our ability to estimate
those outcomes.
Our recommended margin of safety—the discount to fair

value demanded before we’d recommend buying or
selling the stock—widens as our uncertainty of the es-
timated value of the equity increases. The more uncertain
we are about the potential dispersion of outcomes, the
greater the discount we require relative to our estimate of
the value of the firm before we would recommend the https://shareholders.morningstar.com The Morningstar Star Ratings for stocks are defined be-
purchase of the shares. In addition, the Uncertainty Rat- low:
ing provides guidance in portfolio construction based on QQQQQ We believe appreciation beyond a fair risk ad-
Morningstar Star Rating for Stocks
risk tolerance. justed return is highly likely over a multiyear time frame.
Once we determine the fair value estimate of a stock, we
compare it with the stock’s current market price on a Scenario analysis developed by our analysts indicates
Our Uncertainty Ratings are: Low, Medium, High, Very
daily basis, and the star rating is automatically re-calcu- that the current market price represents an excessively
High, and Extreme.
lated at the market close on every day the market on pessimistic outlook, limiting downside risk and maximiz-
which the stock is listed is open. Our analysts keep close ing upside potential.
Margin of Safety
tabs on the companies they follow, and, based on thor-
Qualitative Analysis
QRating ough and ongoing analysis, raise or lower their fair value QQQQ We believe appreciation beyond a fair risk-ad-
Uncertainty Ratings QQQQQRating
estimates as warranted. justed return is likely.
Low 20% Discount 25% Premium
Medium 30% Discount 35% Premium QQQ Indicates our belief that investors are likely to re-
Please note, there is no predefined distribution of stars.
High 40% Discount 55% Premium ceive a fair risk-adjusted return (approximately cost of
That is, the percentage of stocks that earn 5 stars can
Very High 50% Discount 75% Premium equity).
fluctuate daily, so the star ratings, in the aggregate, can
Extreme 75% Discount 300% Premium
serve as a gauge of the broader market’s valuation. When
there are many 5-star stocks, the stock market as a whole QQ We believe investors are likely to receive a less than
Our uncertainty rating is based on the interquartile range, fair risk-adjusted return.
is more undervalued, in our opinion, than when very few
or the middle 50% of potential outcomes, covering the
companies garner our highest rating.
25th percentile–75th percentile. This means that when a Q Indicates a high probability of undesirable risk-adjus-
stock hits 5 stars, we expect there is a 75% chance that ted returns from the current market price over a multiyear
We expect that if our base-case assumptions are true the
the intrinsic value of that stock lies above the current time frame, based on our analysis. Scenario analysis by
market price will converge on our fair value estimate over
market price. Similarly, when a stock hits 1 star, we ex- our analysts indicates that the market is pricing in an ex-
time generally within three years (although it is im-
pect there is a 75% chance that the intrinsic value of that cessively optimistic outlook, limiting upside potential and
possible to predict the exact time frame in which market
stock lies below the current market price. leaving the investor exposed to Capital loss.
prices may adjust).
4. Market Price Other Definitions

Our star ratings are guideposts to a broad audience and
The market prices used in this analysis and noted in the individuals must consider their own specific investment Last Price: Price of the stock as of the close of the mar-
report come from exchange on which the stock is listed goals, risk tolerance, tax situation, time horizon, income ket of the last trading day before date of the report.
which we believe is a reliable source. needs, and complete investment portfolio, among other
factors. Capital Allocation Rating: Our Capital Allocation (or
For more details about our methodology, please go to Stewardship) Rating represents our assessment of the
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quality of management’s capital allocation, with particu- other words, ESG Risk Ratings measures a company’s un- any specific recipient. This publication is intended to
lar emphasis on the firm’s balance sheet, investments, managed ESG Risks represented as a quantitative score. provide information to assist investors in making their
and shareholder distributions. Analysts consider compan- Unmanaged Risk is measured on an open-ended scale own investment decisions, not to provide investment ad-
ies’ investment strategy and valuation, balance sheet starting at zero (no risk) with lower scores representing vice to any specific investor. Therefore, investments dis-
management, and dividend and share buyback policies. less unmanaged risk and, for 95% of cases, the unman- cussed herein may not be suitable for all investors; in-
Corporate governance factors are only considered if they aged ESG Risk score is below 50. vestors must exercise their own independent judgment as
are likely to materially impact shareholder value, though to the suitability of such investments and recommenda-
either the balance sheet, investment, or shareholder dis- Based on their quantitative scores, companies are tions in the light of their own investment objectives, ex-
tributions. Analysts assign one of three ratings: "Exem- grouped into one of five Risk Categories (negligible, low, perience, taxation status and financial position. Morning-
plary", "Standard", or "Poor". Analysts judge Capital Alloc- medium, high, severe). These risk categories are absolute, star encourages Report recipients to read all relevant is-
ation from an equity holder’s perspective. Ratings are de- meaning that a ‘high risk’ assessment reflects a compar- sue documents (e.g., prospectus) pertaining to the secur-
termined on a forward looking and absolute basis. The able degree of unmanaged ESG risk across all subindus- ity concerned, including without limitation, information
Standard rating is most common as most managers will tries covered. relevant to its investment objectives, risks, and costs be-
exhibit neither exceptionally strong nor poor capital alloc- fore making an investment decision and when deemed
ation. The ESG Risk Rating Assessment is a visual representa- necessary, to seek the advice of a financial, legal, tax,
tion of Sustainalytics ESG Risk Categories on a 1 to 5 and/or accounting professional. The information, data,
Capital Allocation (or Stewardship) analysis published pri- scale. Companies with Negligible Risk = 5 Globes, Low analyses and opinions presented herein are not warran-
or to Dec. 9, 2020, was determined using a different pro- Risk = 4, Medium Risk = 3 Globes, High Risk = 2 Globes, ted to be accurate, correct, complete or timely. Unless
cess. Beyond investment strategy, financial leverage, and Severe Risk = 1 Globe. For more information, please visit otherwise provided in a separate agreement, neither
dividend and share buyback policies, analysts also con- sustainalytics.com/esg-ratings/ Morningstar, Inc. or the Equity Research Group repres-
sidered execution, compensation, related party transac- ents that the report contents meet all of the presentation
tions, and accounting practices in the rating. Ratings should not be used as the sole basis in evaluating and/or disclosure standards applicable in the jurisdiction
a company or security. Ratings involve unknown risks and the recipient is located.
Capital Allocation Rating: Our Capital Allocation (or uncertainties which may cause our expectations not to
Stewardship) Rating represents our assessment of the occur or to differ significantly from what was expected Except as otherwise required by law or provided for in a
quality of management’s capital allocation, with particu- and should not be considered an offer or solicitation to separate agreement, the analyst, Morningstar, Inc. and
lar emphasis on the firm’s balance sheet, investments, buy or sell a security. the Equity Research Group and their officers, directors
and shareholder distributions. Analysts consider compan- and employees shall not be responsible or liable for any
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Morningstar Equity Analyst Report | Report as of 16 Dec 2023 05:16, UTC | Reporting Currency: USD | Trading Currency: USD

| Exchange: NASDAQ - ALL MARKETS Page 1 of 23

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Price vs. Fair Value

Fair Value: 227.00

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Bulls Say Karen Andersen, CFA, Strategist, 8 Dec 2023

firm's mRNA technology.

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Fair Value Fair Value Fair Value Fair Value

Last Close Last Close

Economic Moat None Wide Wide None

Bears Say Karen Andersen, CFA, Strategist, 8 Dec 2023

significantly reduce demand for Moderna's COVID-19 vaccine.

market share with new vaccines.

Economic Moat Karen Andersen, CFA, Strategist, 8 Dec 2023

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna's intellectual property is strong and multilayered, similar in nature to IP at other

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Risk and Uncertainty Karen Andersen, CFA, Strategist, 8 Dec 2023

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Capital Allocation Karen Andersen, CFA, Strategist, 8 Dec 2023

Analyst Notes Archive

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Competitors Price vs. Fair Value

Johnson & Johnson JNJ

Fair Value: 164.00

Pfizer Inc PFE

Fair Value: 42.00

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

BioNTech SE ADR BNTX

Fair Value: 177.00

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

Morningstar Historical Summary

Valuation as of 30 Nov 2023

Morningstar Analyst Historical/Forecast Summary as of 14 Dec 2023

Moderna Inc MRNA QQQQQ 15 Dec 2023 22:16, UTC

ESG Risk Rating Breakdown

Exposure Subject Subindustry (40.0) u Exposure represents a company’s vulnerability to ESG

dium, and high-risk exposure

Management Gap4 20.0 100 0 programs, practices, and policies

Overall Unmanaged Risk 21.5 much manageable risk a company is managing

ESG Risk Rating ESG Risk Rating Assessment5

Johnson & Johnson JNJ 15 Dec 2023 22:16, UTC

Pfizer Inc PFE 15 Dec 2023 22:16, UTC

BioNTech SE ADR BNTX 15 Dec 2023 22:16, UTC

Research Methodology for Valuing Companies

Morningstar Equity Research Star Rating Methodology

Research Methodology for Valuing Companies

Our recommended margin of safety—the discount to fair

4. Market Price Other Definitions

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

India # The Conflicts of Interest disclosure above also ap-

For recipients in Japan: The Report is distributed by Ib-