When Moderna and MSD announced that their personalized mRNA melanoma vaccine had met its primary endpoints in Phase 3, the market did not wait for the fine print. Within hours, both companies added tens of billions of dollars in market capitalization, without a peer-reviewed scientific publication or a complete breakdown of efficacy and safety yet available. Funds Society consulted three fund managers with exposure to the healthcare sector—Candriam, BNP Paribas AM, and Groupama AM—to understand exactly what that price is discounting, and what needs to happen for the bet to hold.
“Investors are assigning value to the possibility that this approach could work across multiple tumor types and treatment settings,” summarizes Sara Torrecilla, Senior Biotech Analyst at Candriam, regarding a stock rally that at its peak added roughly $90 billion in combined market value and settled around $60 billion net. It is, in her words, a warning sign as much as a point of enthusiasm: the peak sales estimates already circulating in the market, in the tens of billions of dollars, “should be viewed as market assumptions, not clinical evidence.”
Groupama AM, manager of the Global Disruption fund, reaches a similar diagnosis from a different angle. “The surge in stock prices for Moderna and Merck reflects a de-risking re-rating of both companies thanks to a historic validation of the mRNA platform, considered ‘first-in-class,'” explains Julia Kung, portfolio manager and international equity and convertible bond analyst at the firm. The market, she adds, “is also betting that this could be expanded beyond melanoma to other tumors, such as non-small cell lung cancer, bladder, kidney, and other cancer types,” even though all that has been published so far is “an interim summary of results across two endpoints” without the complete dataset on risk, statistical confidence, and safety. Stock prices, she reminds, “always look forward,” and reacted this way because this represents the first Phase III success for an individualized neoantigen therapy and for any mRNA-based cancer treatment.
From BNP Paribas AM, Senior Portfolio Manager Christian Fay agrees that the reaction is justified, though he emphasizes the underlying medical need: the interim data showed “statistically significant and clinically meaningful” improvements compared to treatment with Keytruda alone, in a type of melanoma—resected high-risk cutaneous—where unmet medical need remains high. “These results reinforce our conviction that targeted, personalized medicine can be a particularly effective strategy to treat specific types of cancer, such as melanoma,” notes Fay.
Merck, Keytruda, and the Defensive Play
There is a second layer to the story that relates specifically to Merck. Kung, from Groupama, observes that by combining the vaccine with Keytruda, “this collaboration generates a narrative of potential market dominance not only in melanoma, but also across other cancer types where Keytruda is used.” She goes further: “the rally in Merck’s stock price can be interpreted as a successful defensive narrative: that Merck can protect and extend the Keytruda franchise through combination therapies, while also signaling confidence in Merck’s ability to grow beyond Keytruda.” In other words, part of what the market is celebrating is not just the vaccine itself, but the possibility that Merck has found a way to extend the commercial lifespan of its flagship product.
Revolution or Intermediate Step?
It is in the scale of the promise where perspectives begin to diverge. Kung admits that, over the long term, this “could prove to be ‘revolutionary’ and, so to speak, mark the true beginning of the ‘cancer vaccine’ market.” But she qualifies: “at present, it is better characterized as a platform-level inflection point, analogous to the first kinase inhibitor that validated targeted therapy, rather than an immediate restructuring of pharmaceutical leadership.” The reason is two-fold: adjuvant melanoma is “a relatively narrow indication,” and large-scale personalized manufacturing—producing a distinct treatment for every single patient—”remains operationally complex and expensive.”
Candriam frames the same caution within its specific oncology mandate: personalized mRNA vaccines must be “evaluated with the same discipline as other treatment modalities,” in an increasingly multimodal therapeutic landscape where other innovations—such as antibody-drug conjugates and targeted therapies—have already found their place depending on the tumor type. Torrecilla expands the radar beyond pharmaceutical companies: the life sciences supply chain—tumor sequencing, mRNA manufacturing, lipid nanoparticles—added roughly $50 billion in market value on the day of the announcement, according to Jefferies estimates. But she clarifies the limits of that thesis: “no third-party vendor has been publicly confirmed as a direct manufacturing or sequencing partner,” so it is best not to get ahead of assigning that value to specific companies just yet.
BNP Paribas, without a dedicated thematic healthcare fund, resolves the dilemma differently: capturing the thesis through diversified portfolios that collectively exceed $5 billion, with exposure to healthcare and biotech companies that, according to Fay, act as “engines of innovation” for big pharma. The backdrop, he explains, is structural: nearly $200 billion in big pharma sales will be exposed to patent expirations in the coming years, which will keep both innovation and M&A activity high, because internal R&D at major companies is insufficient to fill that gap.
The next real test for all of this comes in October, with the European Society for Medical Oncology (ESMO) Congress, taking place from October 23 to 27 in Madrid. It is one of the most influential events on the global oncology calendar, where the full trial dataset will be shared.
According to Kung, “the gap between top-line data and granular details is where short-term valuation risk is concentrated.” Torrecilla speaks in similar terms: “The market will focus on the magnitude of the benefit,” both to confirm the commercial opportunity in melanoma and to build confidence in extending the approach to other tumors.
Meanwhile, each fund manager maintains their own list of catalysts. Groupama monitors the FDA submission and review of the Biologics License Application (BLA) for adjuvant melanoma, results in non-small cell lung cancer—which they view as “the most closely watched expansion opportunity given its significantly larger potential market”—pricing and reimbursement signals—since “custom production for every patient represents a major commercial constraint” and payers “will establish the revenue ceiling”—and BioNTech’s trial in pancreatic cancer with autogene cevumeran, which “will indicate the extent to which the concept can be generalized across different tumor types.” Candriam adds Phase 1 data in pancreatic cancer and expected renal cell carcinoma results by year-end to that list. BNP Paribas, for its part, closely tracks other industry milestones such as the JP Morgan Healthcare Conference, broadening its view to other areas of healthcare innovation where it identifies similar opportunities.
By Meritxell Sedo
By Fórmate a Fondo