Omicron, the heavily mutated coronavirus variant, has yet to be linked to any deaths, but multiple cases are starting to be reported outside South Africa where it was first identified as B.1.1.529. The World Health Organization believes this COVID variant is likely to spread further, posing a "very high" global risk. Current evidence suggests that the omicron COVID-19 variant may have higher transmissibility than previous variants and is likely to become dominant in the short-term, which should increase demand for antibodies that can neutralize the variant, Morgan Stanley analyst Matthew Harrison argued. The analyst upgraded Adagio Therapeutics (ADGI) to Overweight as he believes its ADG20 remains highly effective at neutralizing omicron and also possesses other "preferable characteristics" versus current leading antibodies, including those from Eli Lilly (LLY) and Regeneron (REGN).

BUY ADAGIO AS OMICRON EMERGES: Morgan Stanley analyst Matthew Harrison upgraded Adagio Therapeutics to Overweight from Equal Weight with a price target of $49, up from $33, noting that current evidence suggests that the omicron COVID-19 variant may have higher transmissibility than previous variants and is likely to become a new dominant variant in the short-term. The high transmissibility, once confirmed, should increase demand for antibodies that can neutralize the variant, but current leading antibodies, including those from Eli Lilly and Regeneron, are compromised by omicron, said Harrison. However, Adagio's ADG20 remains highly effective at neutralizing omicron and also possesses other "preferable characteristics," including coverage of multiple variants, Harrison tells investors. He has added 4M doses of government stockpiling for Adagio's ADG20 in 2022 to his projections and now forecasts about $1.8B in sales, Harrison noted.

Voicing a similar opinion, Stifel analyst Stephen Willey told investors that he believes the emergence of the omicron variant reflects his Adagio Therapeutics investment thesis playing out in real-time, namely that vaccines alone are unlikely to sufficiently address the COVID-19 pandemic and any transition to endemicity will likely be characterized by reservoirs of infectivity amongst susceptible populations influenced in size/severity by a fluctuating wave of variants. The analyst is "unsurprised" that none of greater than 30 spike protein mutations characterizing omicron would, per Adagio management, suggest escape from ADG20 neutralization in vitro - particularly given previously published preclinical data describing the highly-conserved nature of the spike protein epitope to which ADG20 binds. While there are obviously many omicron-related questions requiring answers over the coming days/weeks, Willey believes ADG20's neutralization breadth/potency, long duration of protection, and logistically friendly administration profile would represent an attractive option for combating these continued waves of variant-related uncertainty. He has a Buy rating on the stock.

On Monday, Adagio Therapeutics provided information related to the potential of its lead SARS-CoV-2 antibody, ADG20, to address the omicron SARS-CoV-2 variant, and other known variants of concern. ADG20 is an investigational monoclonal antibody product candidate designed to provide broad and potent neutralizing activity against SARS-CoV-2, including variants of concern, for the prevention and treatment of COVID-19 with potential duration of protection for up to one year in a single injection. Based on published epitope mapping and structural studies, Adagio anticipates that ADG20 will retain neutralizing activity against the omicron variant whereas other mAb products may lose substantial activity against this variant. Previously disclosed in vitro data demonstrated retained neutralizing activity of ADG20 against a diverse panel of circulating SARS-CoV-2 variants, including the recently emerged Lambda, Mu, and Delta plus variants. Notably, findings from these in vitro studies showed that ADG20 demonstrated potent neutralizing activity against all SARS-CoV-2 variants of concern tested, including those with reduced susceptibility to mAb products currently available under EUA or in late-stage development. Adagio Therapeutics trading was halted on Monday morning due to volatility but has since resumed trading.

PFIZER'S ORAL TO BENEFIT: Morgan Stanley analyst Matthew Harrison raised the firm's price target on Pfizer (PFE) to $60 from $50, and lowered his price target on Merck (MRK) to $82 from $88, while keeping Equal Weight ratings on both names as the new COVID variant omicron highlights the continued variant risk in an evolving pandemic. The analyst believes mRNA vaccines, certain antibody therapies and Pfizer's oral are most likely to benefit. mRNA vaccines are likely to be preferred for their speed to market and likely to take the vast majority of the omicron booster market, which could lead to $20B-$50B in additional 2022 revenues, he contended. Harrison thinks antibodies such as those from Adagio, Vir (VIR), and AstraZeneca (AZN) that have a broad neutralization profile against omicron could also benefit. Further, he also believes Pfizer is likely to sell out of all its Paxlovid inventory. While both Merck and Pfizer will sell what they can make, Pfizer's oral will likely be preferred given the more limited impact from the full Merck data and concerns around the profile of the drug, Harrison contended.

NOVAVAX VACCINE IMPORTANCE: B. Riley analyst Mayank Mamtani reiterated a Buy rating on Novavax (NVAX) with a $305 price target, saying the omicron variant reemphasizes the importance of a "highly effective" like NVX-CoV2373. Novavax's timeliness of a global vaccine rollout, amid omicron spread, could boost NVX-CoV2373 uptake curves, both as a primary vaccination series and as a booster, Mamtani told investors in a research note. The analyst continues to see upside to the Street's 2022 and beyond sales forecasts for Novavax.

MULTIPLE BOOSTER CANDIDATES: After Moderna (MRNA) announced plans to combat the new omicron variant, Piper Sandler analyst Edward Tenthoff reiterated an Overweight rating on the stock with a $348 price target. Moderna is measuring protection of a higher dose mRNA-1273 booster against omicron and is already testing two multi-valent boosters in the clinic including mRNA-1273.211 and mRNA-1273.213, Tenthoff noted. In addition, the company will rapidly develop an omicron-specific booster mRNA-1273.529, which could enter the clinic within 60-90 days, the analyst added. He believes Moderna is in a better position to develop a novel COVID-19 vaccine and now has capacity to manufacture several hundred million vaccine doses every month. SARS-CoV-2 "is not going away and will provide years of future revenues" for Moderna, Tenthoff contended.

Over the weekend, Moderna Chief Medical Officer Paul Burton said he suspects the new omicron coronavirus variant may elude current vaccines, and if so, a reformulated shot could be available early in the new year, Bloomberg's Joe Easton reported. "We should know about the ability of the current vaccine to provide protection in the next couple of weeks," Burton said Sunday on the BBC's "Andrew Marr Show." "If we have to make a brand new vaccine, I think that's going to be early 2022 before that's really going to be available in large quantities," he said. "The remarkable thing about the mRNA vaccines, the Moderna platform, is that we can move very fast," he added.

PRICE ACTION: In Monday morning trading, shares of Adagio have jumped almost 65% to $41.42, while Moderna's stock has gained about 10% to $360.36.