Equity indices finished lower last week, with the S&P 500, Dow, Nasdaq and Russell 2000 declining 2.7%, 0.9%, 3.4% and 2.1%, respectively. Investors weighed the U.S. midterm election results as AI shares came under pressure. A Friday rebound in technology trimmed the week’s losses, and the S&P 500 Equal Weight fell 1.0%, holding up better than the cap-weighted index. The 10-year Treasury yield finished the week at 4.86% (-8bps WoW), even after ticking higher Friday as October payrolls rose by 165k and unemployment held near 4.1%. Oil fell sharply over the week, with Brent settling Friday at $98/bbl (-13.3%, January contract) and WTI at $91/bbl (-12.8%, front month December contract) on the increased hopes of a negotiated settlement with Iran following the U.S. midterm election results.
Moderna and Merck Share the Cancer Vaccine Opportunity. Moderna (NASDAQ: MRNA) has gained over 760% YTD while Merck (NYSE: MRK) has grown 42% YTD. The two companies split costs and any future profits equally on intismeran, a personalized cancer vaccine that reduced the risk of melanoma recurrence or death by 42% (when combined with Merck’s Keytruda, and versus Keytruda alone in a Phase 3 trial). Additionally, three ongoing Phase 3 lung cancer trials could broaden the opportunity considerably for both companies. These cancer trials are Moderna’s primary growth story, which we see developing as a pure play for cancer research while vaccine sales help buffer the company’s cash burn rate ($2-3B/year since 2024). Merck, on the other hand, has a more diversified revenue base led by Keytruda, Gardasil and Animal Health. In all, Merck has averaged $13.5B in Free Cash Flow for the last five years. For our clients, we would be more likely to consider Merck for exposure to both stable cash flows and growth opportunities. Nick gives more context for the long-term thinking needed for stock investing towards the end of the most recent episode of The Nick Stenger Show, Ep. 231 – Midterm Elections and the Stock Market.
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