Moderna, Inc. (MRNA) Earnings Call Transcript & Summary

We'll be making a few forward-looking statements, so you can look at our forward-looking statements on our website or on the SEC website. So as many of you know, we started the company 9 years ago. We believe that messenger RNA could be a new class of medicines. We're very excited with that because we thought if mRNA could be a safe medicine in human, we could have a very large product opportunity making human proteins in humans, we'll be making antibodies and making vital protein in humans that are making vaccines. We thought because mRNA is an information where I feel that this will be a platform, meaning an incredible ability to learn from one product to be other and the ability to have an increased probability of technical success, take the drugs from preclinical models to the clinic to BLA. Well, so forth, because mRNA is an information molecule, I think, we invested in manufacturing processes, in robotics, in IT early, we should be able to go very fast. And we saw that because mRNA is made in water, it's a cell-free manufacturing process, has a capital intensity and the cost of good product will be well lower than recombinant. So because of all those value drivers, we decided that we have to be extremely focused on managing the risk. And there are 4 risks that we spend our time as a management team and the Board to talk about: biology risk, technology risk, execution risk and financing risk. So the 2 risks that are on this slide, which I keep using year after year because we literally use that to how we think about the business is technology risk on the X-axis and biology risk on the Y-axis. And so what we said is because mRNA is an information molecule, if one molecule gets it to BLA, then in that same type of technology, we should be able to get a lot of drugs because the sequence, we don't invent, we just take that from nature, and your technology is the same and only the sequences are different then the property or products in the clinic should be similar. And so we said, how do we get at least one drug to the finish line? And because of the unknown and known on the new technology, we said we have no other way but to do what you guys do is to build a portfolio to manage risk by diversification. And so we basically had 6 different technology of mRNA using different formulation systems to take in the clinic in parallel. We did not know what was going to work best, but we see if any work -- of those work, then you can make a lot of drugs in that same application in the same color on the slide. And we said because there's biology risk for every of those modalities of technology, we are not going to take -- pick only one drug because if we are wrong on the biology, then the drug will still fail in the clinic, but you will not have been the -- technology will have been the biology properties that was incorrect. So that's what we decided to do, and we took to the clinic already, so far, 16 different molecules and with a couple more INDs that are open as we speak. We believe that last year was a very important year for the company because we had clinical data informing us that 2 of our applications, the prophylactic vaccine on the left and the systemic secreted and cell surface therapeutics on the right, in our opinion, have been derisked from a technology standpoint. And so looking forward, this is how we think about the company. We think we have 2 core modalities that, in opinion, have been technology derisked for which we want to do much more. While we still want to explore in the clinic, those programs that are on the right in the exploratory modality to see what do we learn from the clinic. And consistently, what we've done in the past, we've said, if we're going to get positive results, we'll move those to core modality and do more of the same. If we know how to fix it because it doesn't work, we will fix it. If we have no idea how to fix it now, just shut it down. And so this really highlights how we're going to think about the business moving forward. A lot of investment in core modalities. No new investment in exploratory modalities, we just want to wait for the clinical signals before deciding or not to invest more shareholder capital. And so that's kind of a pictogram of what we want to do. We want to do many more vaccines, but with many more systemic therapeutics and just wait for clinical readout on the right. So if you now step back and think about the development of Moderna as a company. When we started the company in 2011, our goal was to get in the clinic safely, that was what we were trying to do. And what we were doing is we're investing in science process development to see how do we do that correctly, and we achieved that in December 2015. The next leg of our journey was how do we run all those experiments in the clinic in parallel, as what I just described with those 2 first modalities that are moving to core, which happened towards the end of 2019. So if you think about Moderna from the next leg of a journey, which is going to be in the next few years, our focus now is very simple, is how do we get multiple BLAs filed, obviously, in our core modalities? While we're still running parallel, the exploration of those modalities, and we still invent new ones. I just draw your attention to the fact that we are still working with Vertex on how to deliver mRNA into the lung. There's great progress there. It is not yet on the exploratory modality, but the teams are making good progress together. So that's really the next step of our company, get to BLA and multiple ones still exploring so that we can get to last leg of a journey, which is how do you scale the company once you get to a first BLA approved. So let me talk to you a bit about our first core modality, prophylactic vaccines. So we have now dosed more -- 1,000 healthy subjects with our vaccine. We have put 9 different vaccine in clinical trials. We have, as we speak, 6 positive Phase I clinical data set. We announced actually today that we just finished the enrollment of a Phase II for CMV, cytomegalovirus vaccine. Just to give you a sense, we're ahead of schedule. We started the Phase II dosing in January, and we just completed initially this morning the last subject enrollment. So as we said, there's going to be a few more readout. So in Q3, we should have -- be able to share the data. And I'll come back to CMV in a minute. So you can just read for yourself on the slide. There's a lot of program going on. Just drawing your attention, and I'm going to spend a bit of time on it. In February, we announced 3 new development candidates in vaccine, just highlighting this strategy to double down on our vaccine, now that the technology risk in our belief is off the table. So we announced a Pediatric RSV vaccine, an EBV vaccine for Epstein-Barr virus, which is a virus driving mononucleosis, I'll come back to it. And of course, we announced a few weeks ago that we shipped to the NIH of coronavirus vaccine for the NIH [indiscernible] Phase I. So let me spend time first on our bigger products that we get very excited about is CMV. So many of you have heard about CMV. What we're focusing on here is congenital disease, i.e., protecting a woman of child-bearing age before she becomes pregnant so that she has a protection against the virus, that she doesn't transmit if she gets infected during her pregnancy, does not transmit the virus to baby. This is another one cause of birth defect in this country. You can look at the numbers yourself, it's around 20% of newborn, and we hear a lot of horror stories of kids that are born death or blind, kids that dies within a few weeks after birth. Just a horrific disease. There is no CMV vaccine approved anywhere in the world. So we believe this is a great opportunity, which is a very good fit with technology. This is the 6th mRNA molecule vaccine in each vial. This is one of the reason we believe traditional vaccine manufacturers have not been able to develop a vaccine is, for example, Sanofi has been published, has taken up to Phase II, a vaccine containing an antigen to gB. But that was not sufficient, and so they stopped the program. So our vaccine has the gB antigen and also antigens with pentamer, which has a name says, is 5 different proteins that are included in the product that have to form a complex together to be presented to the immune system so that you can make an antibody to the pentamer complex to protect infection when you get the natural infection down the road. So what do we know so far about the product? So we shared in early January, and we had a full webcast that was done when we announced the result a few days before with JPMorgan Conference. There was a 7-month data we shared in September, a framework data. So what we showed is that the vaccine was well tolerated, which, of course, is critical for a vaccine. What we showed in the seronegative group is that we're able to induce a tenfold increase in titer versus what our goal was. Our goal was to get the seronegative group to the same titer with the seropositive group. And the idea is that most women who are CMV positive, do not transmit the virus to baby, if she get infected during pregnancy. So as the surrogate of the industry has used, that's what we want to shoot for in terms of antibody titer. And so we have tenfold above our target. We were dreaming to be 1.1 or 1.2. We have another vaccine by Merck, which has been published, which shows around 0.9 of the seropositive of their study, is what we achieved in seronegative. In the seropositive, as you can see, we've got 24 to 40 folds above their level before vaccination. So very, very happy. And we already have protection of at least 12 months that we shared in that webcast as well. So what's the plan moving forward? So we run those confirmation Phase II, which, as I said, has just completed dosing. 252 subjects, 3-dose level, observer-blind, randomized placebo-controlled study in the U.S. We should get the data in Q3. And what the team is doing now is to plan for a Phase III. We start making material for a Phase III, and the study will be a little bit less than 8,000 subjects in the U.S. and in a few European countries. We already have sent RFPs out to different CROs to run the Phase III, and we are working towards getting the study started next year in 2021. So we believe this is a very important product for the company. As we've shared in the past, we believe this is $2 billion to $3 billion annual fixed sales opportunity around full indication. The first one is woman in child-bearing age is where we want to start, then the GARDASIL HPV vaccine from Merck. Our goal is to go down from an adolescent study into adolescent and the target product profile is they go for HPV shot and then they go for a CMV shot. And then we want to do is to go down into toddlers. What most people do not appreciate about CMV that humans are the reservoir, not animals. And so like rubella in the '60s and '70s, we believe, and we had already discussions with the CDC, we believe that if you could vaccine toddlers, you could eradicate the virus. That was done in rubella, which is the R in the MMR vaccine that every kid gets in this country -- or should get in this country. We believe that those assumptions assume a price in the U.S. that's around the price of GARDASIL, which is $450 per cost of treatment. With that type of price, we believe our gross margin will be north of 90% and 50% EBIT margin on the product. What is very important is the probability of technical success. Sanofi has published their vaccine with gB only, and they showed 50% protection in their Phase II. That was probably in the New England, and we believe that driving gB and the pentamer, which would get above 50%, which is why we are already investing aggressively behind these assets because we believe we're going to launch this product. We do not know yet the rate of efficacy of a product. But we believe that even if it's 70%, 80% or 90% of what we will launch it because there's nothing on the market. There has been vaccines before that have been launched with 50% protection like ZOSTAVAX, the vaccine from Merck. If you look at the label, it's a 50% protection in the label. We own these products and the commercial rights around the world of this product, it is not partnered. So I believe that this is going to be a product that's going build the company to lead into a cash flow positive company, so that we can just scale the company around CMV. If you look at every biotech company has made it to the finish line, all had one product that has built the company. And we believe the product from Moderna is this one. So it has a lot of attentions from the management team, as you can imagine. We actually had a nice milestone in December. We hired the first marketing person in the company history, which is nice coming from, the case and the fewer employees 9 years ago in the basement in Cambridge working in nights. So first marketing employee joined in December, and we are now, as we speak, look actually and interviewing several candidates for our head of commercial vaccines worldwide who has big pharma vaccine experience. EBV is going to be a very similar story than CMV. EBV is a virus, Epstein-Barr virus, that drives mononucleosis. It is also associated EBV positive, IM positive to some disease like multiple sclerosis that has been published and reported in Epidemiology. It's a similar story. It is a herpes family virus, no vaccine on the market. Why? Because it's a very complex DNA virus for which need multiple antigens. So this is where, again, the technology works like a glove to this type of viruses. You see actually 5 glycoprotein that are included in our products. So this is a 5 mRNA vial product. That -- the preclinical data looks very good. You can look for yourself at the different antigen that the team selected. So this is a development candidate that we're going to take very swiftly into clinic. It's exactly the same story as CMV, just another of a herpes family virus. Nothing on the market today. RSV. So most of you are very familiar with RSV, one of the big respiratory viruses. It is the second killer in the U.S. in terms of respiratory infection. There's basically 2 big needs in RSV. And I remind you, there is no RSV vaccine approved in the market. There is RSV in the elderly and there is RSV into the infants. So our focus here is in the pediatric setting, for which there is no vaccine approved. So what we have done is we are basically cutting in this product, stabilized prefusion F glycoprotein. So it's a prefusion, which we think is a much more natural way to represent a natural infection to get the right antibody confirmation versus a post-fusion, which is undoable using prefusion, using recombinant. We are partnering with Merck on the elderly and that program continues to dose in the clinical Phase I. For all of you that are not aware, Moderna has already a product in the clinic with hMPV and PIV3 combinations. So if you look at respiratory virus, influenza is clearly the big killer; #2 is RSV; hMPV is #3; PIV3 is #4. So what we've done is we've combined a vaccine for hMPV and PIV3 into 1 vial. It has 2 antigens, it is in Phase Ib now, dosing into the toddlers. And so the target product profile here is basically to combine RSV pediatric with the hMPV/PIV Product to basically, ideally protect against those 3 viruses just with one injection. The last one I'm going to go quickly on it because it has been massively covered is the corona vaccine. So this vaccine is quite interesting. We have been working with the NIH on the Middle East Respiratory Syndrome in preclinical models. And so we were quite familiar, the NIH and ourselves, around coronaviruses. We had great preclinical data, including neutralization using the Spike (S) protein. And so as soon as the sequence was available from China, working with the NIH, we were able to pick a sequence, and the team is moving quite remarkable. In 42 days, we went from the day we pick the sequence to the day we ship the vials to NIH, and that included 2 weeks of sterility testing on the back end. So just to give you a sense of the speed that you can accomplish with a platform like Moderna, given the investments we have made in GMP over the years. So the product is with the NIH now. The IND has been filed. And so the NIH will communicate when they start dosing, which will be pretty soon, we believe So let's now turn to therapeutics. So the exciting revenues of last year was our core modality, where we showed with our chikungunya antibody program, the ability to dose safely in human into a very nice PK of the antibody in a dose response way was totally linear and was very well-predicted from nonhuman primate models into humans. And so what we announced at JPMorgan is 2 new development candidate in autoimmune disease. So after being infectious disease in cardiology, in concerning regenerative disease, this is a new therapeutic area for Moderna. So we're starting with the first program, which we like to do is to start P&L. So we start with IL-2 which is a very well understood target. What is good for Moderna on this one is going to be the first time we go subcu for therapeutic. The chikungunya antibody was an IV product. And so with this one, we're going to try something new with the same formulation. Instead of an IV wing subcus is, again, derisking the company step by step. So this product should in the clinic pretty soon. What we're going to do is wait for other companies that are ahead of us and where they're going to go in terms of indication, in, like, oncology or in autoimmune disease, we will pick an indication that is not crowded where this is going to work, and we're going to try to push it as hard as we can to BLA. The other one, which is much more interesting is a PD-L1. So this is not a PD-L1 antibody. The world has way too many PD-L1 antibody. This is a PD-L1 protein, and it does something that's really unique suited to the mRNA technology, emits a transmembrane protein. So I'm sorry to be a bit of a technical gig here. But basically, you inject the mRNA in IV, the mRNA gets delivered into the antigen-presenting cells and make the PD-L1 protein, which we designed to be a membrane-bound. So basically, we equipped APCs on their surface, outside surface, with a PD-L1 protein is stuck to the surface. And what does it do? It does a handshake with a PD-1 on the T cell. And if you take the label of any PD-1 or PD-L1 antibody, if you look at the side effects are autoimmune disease. And so we're trying to do with this, and just to start with this very high unmet need autoimmune disease, autoimmune hepatitis, for which today, the standard of care is very, very bad. It's very high dose of steroid for -- to mostly women who are affected with that disease, and we believe that we have a way to reestablish autoimmune studies of immune system with that program. We're very happy with clinical data. And same thing, this one is flying to the clinic. It is using exactly the same technology as the CHIK antibody. The same manufacturing process for the mRNA. The same manufacturing process for lipids, the same lipids, all the same. The only difference is the sequence of nucleotide on the messenger RNA. So those 2 programs are 100% owned by Moderna. So let me spend 2 minutes on exploratory modalities. So as I said, there are 4 exploratory modalities, so we're going to get a lot of clinical readouts in the months and quarters to come. Something with cancer vaccine, our cancer vaccine is now in Phase II is combined with KEYTRUDA is partnered with Merck. I remind you, Merck gave us $200 million for this program. We own 50% of the economics, and it's now running in a head-to-head versus KEYTRUDA alone. It's recruiting very well, and we'll share the data when that is finished. And of course, this is looking at survival, as it should, so it's kind of bakeoff with KEYTRUDA. The other program is KRAS. So this is a program that [ cause ] of a foremost prevalent mutation of KRAS including, of course, 12C, is also combined with KEYTRUDA. We saved a lot of time because the FDA, given it's the same technology as PCV, and we have already done the dose escalation of PCV ahead of the KRAS program, and so those don't waste 6 months doing escalation. So we started the KRAS program directly at the Phase II dose of a personalized cancer vaccine. So it's where you start to see that the regulatory agencies are trying to understand the platform and give us a lot of benefit by just growing faster because it's exactly the same technology. In intratumoral immuno-oncology, we have 3 programs in the clinic: an OX40 program that is in dose escalation as we speak, combining with durva. What we call the Triplet, it's OX40, the same molecule, plus IL-23 and IL36 gamma. What we're trying to do here with OX40 is to recruit T cell into the tumor milieu, it's a membrane-bound protein, OX40, which you cannot do using recombinant. It's attached to a cancer cell. And when you try to create a bit of inflammation with those 2 cytokines. And of course, you want to unleash or breakthrough the same using a commercial checkpoint. And then AZ as in a 50-50 profit share, an IL-12 product. The biology of IL-12 has been massively derisk of recombinant. It is massively toxic as a recombinant. But here, if you inject into a tumor, you get a massive amount of concentration of IL-12 protein in the tumor milieu. But for the blood dilution and circulation, you get very, very low level of concentration of IL-12 systemically. So you do not have the toxicity that you see using a recombinant. We have our VEGF program. So it's a VEGF protein, not antibody, protein that is in Phase II that is being conducted by AZ. It's injected in people's heart after MI. And the idea here, and you'll see the nature of paper on our website, both of a pig model, preclinical and the Phase I data, the idea is pretty simple. A bit risky biology-wise, is can you regrow new blood vessel into a heart -- post-heart attack to increase ejection fraction. The pig model, again published initially on our website, the data looks extremely exciting. The Phase I data show our product is safe. This is, by the way, our only product with no lipid. It's an RNA literally in water in the vial. And the data in the Phase I show a very good safety profile. There is no cytokine, there is no liver enzyme elevation, which were a very nice PK of VEGF in humans. And so we cannot wait to see the clinical data of this program. And then in regenerative disease, we have 2 programs that both have open INDs. MMA, we have our first subject enroll, it should be dosing pretty soon. And then PA, we are getting the sites up and ready, IND open, and we hopefully should be also enrolling kids very soon. For both of those programs, MMA and PA, there has never been a clinical trial for those diseases, and with both for having been fast-tracked by the FDA. So just give you a sense of a pipeline. So as you see, it's pretty both dense, and we kind of reviewed most of it, but not everything. But you can see the slide on our website. There's just a sense for all the results coming. As you see with Moderna, there are -- readouts will become -- on the very, very fast paced and regularly across all those products, we just see here the next step for everything. In terms of quick words on financials. Last year, we invested $491 million in the company. We look at it for net cash used in operating activities and cash used for PP&E. To give you a sense, it was an increase, of course, from last year. In 2020, we guided that will be around $500 million of investment into the company. As you can see with the quarterly burn, it's a similar curve enrolling number. If you look at the strength of our balance sheet, the company today has close to $2 billion of capital to invest in the business, and that goes from the $1.26 billion cash at the end of the year. We did a financing recently where we raised a net of banker fees, but including the $550 million, and we still have $185 million of grant money from BARDA U.S. governments and the Gates Foundation that has been awarded but has not been drawn down yet because the way brands work, we do the work according to the work plan. At the end of the quarter, we send them an invoice and they send us a check. So it's not on the balance sheet, but it's available for us. So as you can see, multi-year of cash runway so that we can invest in the business regardless of what's happening outside the company. So just a quick synopsis of the company today. One program, the CMV for which we are preparing the Phase III; 4 program in Phase II or preparing for 1 Phase II, 11 program in Phase I as we go; and 10 positive Phase I across the board. If you look at the product, we have now 7 vaccines in our pipeline in development. This is not research and development. Seven vaccines that are all first-in-class. There's no vaccine against any of those viruses that are on the market today. Five immuno-oncology drugs in the clinic that are all combined with a commercial checkpoint with a very simple question, can we improve the response of a checkpoint in monotherapy or not? Five rare genetic disease to autoimmune and a few more coming this year. So far, we have dosed more than 1,700 humans and when you look at healthy subjects and patients. The company has 830 employees as we speak. We have a big facility that I invite anyone of you interested to go visit in Norwood, Massachusetts. It's fully integrated. We make our raw material like plasmid. We make mRNA. We formulate the mRNA. We seal the vials. We do all quality control. We are fully independent from any CMO so that we can grow fast and ensure high-quality of our products, which is, of course, critical. The partnership, you are aware of, and we just spoke about the cash. So the priority for the year are pretty simple but very important. Priority number one is to execute on the development pipeline, with a big focus in management assumption on the CMV Phase III readiness. We want to get that Phase III up and running as fast as we can, and we also want that the ramp of those subjects because of what we are doing now is much faster as we start recruiting next year. The second priority is to invest and generate new development candidates in our 2 core modalities. If you look at it in the last 60 days, we've announced 5 new development candidates, 2 in autoimmune and 3 in vaccines. And it's just -- it's much further. So there's more coming in this space because we believe the technology has been derisked, and we're still investing like with Vertex to develop new modalities. We continue to believe that over a long time frame, and I'm talking 5, 10 years, there are many more modalities that the team is working on that we should be able to move from the labs into the clinic, like we have done successfully 6 times with existing modality in the past. We have a few events this year. So 2 more, we have a manufacturing and digital day, which are going to be webcast. It's going to be, I think, at 1 p.m., Chase , 1 p.m.? 100 p.m. tomorrow. I invite you to join us on April 14 in New York. We're going to have for at least half the day, a big vaccine day, where we spend a lot of time on data, business model, value because we believe there's a lot to talk about in vaccines in the pipeline and what's coming. We're going to have an annual science day in June in New York, where basically once per year in addition to all the publications that we publish. We basically do a few snippets of a key improvement in the platform. We are still investing heavily on the platform. We still believe solidly of mRNA. We have a leadership in the space. We don't want to lose it. We're still finding a lot of IP, but we're investing at a scale that nobody else in the world has ever seen in mRNA. And in September, we have our usual R&D day, which is mostly focused on clinical data and development programs. So with this, I'd just like to close. Thank you for your attention, and I think we are somewhere around next room for a session of Q&A for the next half an hour.