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

Okay. Good afternoon, everyone. Welcome to the afternoon sessions of the first day of the BofA Virtual Vegas Conference. My name is Geoff Meacham, I'm the senior biopharma analyst at BofA here, and I have Alec Stranahan from my team as well. And we're thrilled to have Moderna present this afternoon. And speaking on behalf of Moderna, we have Stéphane Bancel, who is CEO. We also have Lorence Kim who's CFO. Guys, are you there?

Yes.

Thank you for having us.

Okay. Perfect. Let's get right into it. So Stéphane, obviously, you've had a lot of success and a lot of visibility with respect to the COVID vaccine. I want to get a sense from you. What is the information that -- maybe just help us with what's coming up, with respect to the timing of kind of the Phase I data? And then, maybe, what is it in Phase II that you're hoping to glean that would be sufficiently derisking as you begin the plans for a pivotal?

Yes. So again, thanks for having us. So I think the Phase I data, we should start to have interim data probably soon. We're going to have to work with the NIH because, as you know, we are running the study to figure out the right timing for sharing the data. But if you look, we started dosing on March 16. So it's a prime-boost regimen, as we described before. So early data from the first subject should start coming. If I think about vaccines, what I think is very interesting about Phase I from vaccine is that we're only -- not only going to get safety, of course, but we're going to get immunogenicity. And what is very important is both the title of the antibody, i.e. how much antibody do we get per milliliter of blood, but even as important, we're going to get neutralization data, meaning, how good is the antibody that we find in human blood to bind and neutralize the virus from replication. And as you can appreciate, this is a very important piece of data. So the way we think about it is, on the one hand, we're going to get a complete data set from a Phase I and on the other hand, we are hoping to be able in weeks, not months, to be able to publish the preclinical work. And in infectious disease, as every manufacturer does, you can run challenge studies, which are very informative. And like, for example, oncology, where sometimes preclinical model are not very telling or not very predictive of what happens in the clinic. If you look at the history of infectious disease vaccine, they're actually quite informative. And so you are able to basically vaccinate animals and then giving them a very high dose of a virus. You have, of course, in a placebo-controlled way. So you can look at, basically, disease prevention. And if you look at the data we have shared so far on our MERS vaccine, so the vaccine against MERS, Middle East Respiratory Syndrome, which as everybody knows by now, is also coronavirus. What we showed in the rabbit model of a [ client ] study is very good protection and extreme viral load reduction in terms of the quantity of virus you can find in the nose, in the throat and in the lungs after such a challenge. And so I think we should be in, again, weeks, not months or quarters, be able to have those set of data, a very complete package of Phase I data, a very, I think, comprehensive preclinical package. And when you put those 2 things together, that I think will give us a very good sense of, do we have a serious vaccine candidate with a high probability of launch or not? The piece that we will not know until we run the Phase III is the efficacy. Is the vaccine protective to 70% of people or 80% or 98%? This would all have to wait for a Phase III data. But if you look at the program, and we've said that we should be able to aim at starting the Phase III early summer, again, with a prime-boost; you could see in the fall kind of efficacy data. And so that's the kind of a bit -- I think the revamp of the data ahead of us.

Okay. That's helpful. And when you think about the Phase II, I imagine it could enroll pretty quickly, but maybe just give us a sense for the size and the scope of how you're thinking about that. And maybe the other challenge would be to kind of separate out the seroconversion of patients that have already happened. What is the expectation in those patients as you think about the opportunity here? Some have talked about seroconverted patients are actually still susceptible. But is that something that you'll formally be excluding from the Phase IIs or the Phase IIIs?

Yes. So in a typical way you develop vaccine, because you give vaccine to healthy people, unlike, for example, oncology drugs, the #1 criteria is safety. And so if you think about the size of the clinical studies in vaccines, there are typically tens of people in Phase I, hundreds in Phase II, thousands in Phase III. Again, in every case, healthy volunteers. So the Phase I was 45 people for the first 3 cohorts, healthy adults, 18 to 55 years of age. That was how we designed the study back early in January. Since then, because as we've all learned, the elderly has a very high risk, we decided it would be nice to add 6 additional cohort: 3 cohort at the same dose 2,500 -- 250 microgram in the older adults, 55 to 70; and 3 additional cohorts, same dose level, into the elderly, 71 and above. So that's kind of a Phase I. The Phase II, as we said, is going to be 600 healthy subjects, 3 arms, placebo arm, 50 microgram, 250 microgram. And we'd have 2 groups, 300 people, 18 to 55; and 300, 55 and above. And so what we're going to try to do there, again, is to assess safety as a stepping-stone to a Phase III. What everybody is very eager to do is how quickly can we enroll a very large Phase III event, looking thousands, and thousands, and thousands of people. We have not yet disclosed the final size of the study, but if you just do some back-of-the-envelope, we shared publicly that we've got $483 million from BARDA a few weeks ago to fund the clinical program. That grant does not include stockpiling. It is purely funding the development program up to BLA filing and a little bit of money for the process -- manufacturing process scale-up. So if you think about it, we are anticipating to run fully large studies because we don't want to wait alongside because of the attack rate. Nobody knows with precision where you're going to see cases in early fall. The time by which we are hoping to have added the prime-boost of a Phase III down so you can start to observe in a placebo-controlled way. Can you protect or not from disease with a vaccine? And how many people can you protect from disease? So you can get a sense for your efficacy, which is the last piece you're going to need to be able to have to file your BLA. And so because time is so important given the public health crisis we are living and the economic crisis that is following that we decided with the government to do just as big a study as you can literally physically pull together. So that you increase your chance regardless of the attack rates being in Boston, in New York, in Alabama or anywhere, to just have literally sites all over the country and around the world that have enrolled. So that you don't have to be too smart to know where the attack rate is going to be because it's kind of truly unknowable because we don't really know how much herd immunity you're going to have in different places by the fall, that to say we cannot take a risk to be too cute by designing a study that is not big enough. And then what you have to do is to wait a much longer time to get to your outcome because of the attack rate in different geographies that you don't control. So that's kind of how we're thinking about it.

Okay. That makes sense. And I have a question from the webcast from an investor. It's related though, Stéphane, to what you said about the BARDA contract. Does the grant cover all the cost of new equipment necessary for scale-up? And what percent of the funds or what percent of the scale-up will likely be covered by government grants versus -- maybe versus shareholder funds?

Yes. So we have not disclosed the exact amount of the $483 million going to process development, but it's a smaller part. You should assume that most of the money is going to clinical studies. What we anticipate is to scale that we would now require in the time frame that makes sense for this vaccine, is most of those scale-up costs are going to be covered by the BARDA grant, and this is naturally a lot of equipment. It is mostly raw materials, processing engineers' time to be able to [ worn out ] a lot and all the different process parameters you're going to want to try. Because as you can appreciate, as you do bigger and bigger, and lots of money, if something goes wrong as you do the engineering work, the process development work, you basically put everything in the bin. And as you make bigger and bigger reaction, than the cost of the materials that you use is just higher and higher just because of MABs. And so the big enabler for us is to be able to be very aggressive in terms of a process scale-up without using shareholder capital. And that's, of course, because the platform will be used across the platform. So it can be used for CMV, for MMA, for any product we have, which is really one of the very powerful kind of network effect that we get from having a true platform.

Okay. That makes sense. I want to go back to your comments on the Phase III. And just given the fact that the immune protection in a general population is obviously the objective, and I want to get a perspective from you, Stéphane, about the -- maybe the geographic split of it. There's been a lot of discussion about maybe some of the more frontier areas today, for example, Latin America, South America or South Africa, that maybe -- are those some of the regions that you feel like will be targeted? I guess you have to really go into sort of hot areas to really ask the question about immune protection. But I want to get your perspective on that.

Yes. Indeed. You have to ask -- you have to go into hot areas because you want the attack, right? But you want to go where you believe what areas are going to be in a few months. And as we all know, there is a current scientific assumption that the weather and the kind of winter pattern plays a big role as we are seeing now. There were not many cases in the Southern Hemisphere in the first quarter of the year. You see an explosion of cases in Brazil, in India and Africa as we speak. And so as Dr. Tony Fauci and many others have said publicly, we are -- I mean we, subsequently, are expecting a big wave in the fall. Plus when we combine with flu -- I mean, if you think about it, we've got -- what we've got "lucky" is that this started in the U.S. and Europe in the February, March time frame. Think what it will have looked like if it started in September, October and think about the potential comorbidity with flu. So we think that being in the Northern Hemisphere in the fall makes sense. Should we be in the few hot spots in the Southern Hemisphere in the fall just to be sure? It might not be a bad idea. Again, we have not disclosed publicly the final kind of country plans and so on. Just be assured that given the severity of the pandemic, given we want to continue to be one of the frontrunner, if not the frontrunner up to BLA approval, and given we have the capital from BARDA, both the government and us are very, very eager to get the right data set so that we can file a BLA as fast as we can.

Okay. I think Alec and the team also had a couple of questions on the 1273 program. Alec?

Yes. Thanks. And thanks, Stéphane, for taking the time to speak with us at our conference. Really appreciate it. So on the Phase II, you're testing both the 50 microgram and the 250 microgram dose, and the proposed time line for moving into a Phase III gives the Phase II maybe 2 months or so to accumulate data. So I guess my questions are, how quickly do you think the Phase II will enroll the 600 patients? And is the primary outcome you're looking for just to confirm the safety profile and the dose level for the Phase III?

Yes. So that's a great question. And so indeed, first, we assume the Phase II is going to recruit very, very quickly. As you can appreciate, we have so many people sending us e-mail that they want to be part of studies. I don't know how much you read about it or not because there are discussions by some academic groups and government groups of potentially thinking about doing challenge study in human. While this way, you will give a virus to humans after vaccination to see if the vaccine works as an alternative to an efficacy study. And I've read in the media that it seems that there are already 14,000 volunteers to get infected with the virus. So just think about the potential number of volunteers to get vaccinated without getting infected just to try to do the right thing for their country and for their community, and potentially, give benefit to their own health. So I don't anticipate that this type of trial is going to be really hard to recruit. So we should anticipate a very good recruitment. And as you say, what we're trying to do, I think with the dose level is -- so first, data is as we discussed, which the data should be weeks away, not months away, should give us a good sense of 25, 100 and 250 microgram. The Phase III 60 microgram and 250, I think the way to think about it is 250 is more kind of a safety dose in a sense. You want to always push the dose for safety. As some of you might remember, we have tried this same technology in our personalized cancer vaccine up to 1 milligram. So 4x more material than what we are trying here at the high dose. And the human data, we're going to get at the 2,500 microgram in the Phase I and 250. And the early data, we're going to get out of a Phase II, should help us triangulate what dose we go into a Phase III with. We are collecting and so is the NIH human serum from people that have been infected to see how much concentration of antibody they have to try to kind of ballpark it. We also have preclinical models. We also have the 9 other vaccines on Moderna that we've tried in the clinic. And if you look at the H7 flu, we got to an FDA approval endpoint at 25 microgram. If you look at the Zika data, which was recently at the 10 and 30 microgram, we got great neutralization data. And if you look at the CMV data, yes, the dose are a bit higher. But I would like to remind everybody, this is a product with 6 mRNA. So when you think about it from a mass standpoint, it's not surprising that the product has 6 mRNA requires a higher mass of the dose than a product that has only one mRNA, like the flu product, like mRNA-1273, the corona vaccine product. So we're going to try to use all that data to kind of triangulate the dose to figure out what dose we think should be efficacious to be the dose that we use in our Phase III

Okay. Great. And just sort of along those lines, you spoke to the 6 components of your vaccine. And we've gotten a bunch of questions over the line from those on the call, and I'm going to try and synergize a couple of them together. When you think about how you guys have designed your vaccine using the full-length spike protein and your proprietary lipid nanoparticle, which you used in some of your other programs, how are you looking at this both in terms of other vaccines that are also in development from Oxford, and AstraZeneca, and J&J, and others? And also, how do you look at your vaccine design in the context of potential mutations that could arise over the coming months?

Yes. So you have a few questions here that I'm going to try to unpack. So I mean the first thing, let me say, I hope several vaccines make it to the finish line, just from a pure society humanitarian standpoint. No company in the world will have enough capacity in the next few years to supply the planet. So like you see in the flu business, where you see 4 or 5 large manufacturers making flu vaccine every year, I do sincerely hope that several vaccines make it to the finish line. I, of course, hope the Moderna vaccine is one of them, and I kind of like our chances, but we need several vaccines to get there. The technologies are very different. Firstly, I mean, the Oxford-AstraZeneca product, as you know, is an adenovirus vaccine, which might provide some benefit in the pandemic setting, even though picking the dose is going to be a tricky choice. And the challenge we might have in the mid to long-term is the question mark around the ability to redose. So that's super important. In the case of the Pfizer-BioNTech product, despite it being messenger RNA, it is impossible for me to give you any judgment at this stage of their vaccine because as some of you might know, we have never done a clinical study in infectious disease vaccine. This is the first time we are doing a vaccine. Again, to remind you, this is the 10th time we are doing a vaccine. So a lot of the data has been published by Moderna. There has been no publication of human data by BioNTech on infectious vaccine. So while I understand it's also messenger RNA, it's important to appreciate that the choice of which chemistry is used, which cap, which 5 prime -- 3 prime UTR domain, code of optimization by bioinformatics. Like there are so many technology choices that each companies are making, that until I have a good sense of what choices they made in terms of the scientific design of a vaccine, the manufacturing process of vaccine, which CPs are they using? How are they making their lipid? So all those questions are just not in the public domain. So without having that information, I cannot have a scientific judgment as to how does our vaccine compares to theirs.

And just -- this is Geoff, again. Just to follow up on one of the other questions, and we've gotten this a number of times. Give us a sense, Stéphane, when you think about the mutation, the virus -- looks like it has a couple of isoforms. There's not a dramatic mutation rate. I guess the fidelity of the RNA polymerase is still pretty good. But what's your sense in terms of the viability of a vaccine when you look at mutations and spike protein? And how could that affect, maybe, over the longer term? Have you guys done an analysis of that?

Sure. So because corona is an mRNA virus, unlike DNA viruses, they are much more stable because of the hydrogen bond, it is well-known that mRNA viruses mutate. It has been reported, and I want to be careful because it's a new virus, so we don't know what we don't know. But it seems that the virus is already mutating. There's a lot of mutations that have been reported. It seems to be mutating slower than the flu, which I think will be a good thing for the world, this mutating. So the way we think about it is the following, which is if a mutation occurs outside of a Spike S, which is the protein we got in our vaccine. I cannot comment about some of the other vaccines where the targets have not necessarily already been shared publicly. So if it's outside of the S protein, we think a mutation should not have impact on the vaccine performance. If it's a mutation inside the Spike S protein, we could see 2 scenarios. One is, it could be a mutation because Spike S is a very large protein. We got a full Spike S in our products. It's a 4,300 base pair message. So it's really a gigantic protein and a gigantic mRNA. It's one of the longest one we have ever made in a clinical product. So we made bigger ones in preclinical setting, up to kind of 8,000 base pair, but not in humans. And so you can imagine that if a mutation appears on a part of a sequence of the S protein, that is naturally shown to the immune system. It should have limited to no impact on the vaccine performance. That's what we believe scientifically. If on the other hand, the mutation happens on a part of the Spike S protein that is directly presented to the immune system, one should expect an impact on the performance of a vaccine efficacy because of the impact on the antibody neutralization potency. And so here is where I think the amount of technologies is sort of a game-changer versus other technologies. As we've shown already earlier this year, our ability to move from a new sequence to shipping GMP product is quite unprecedented. As you -- many of you know, the sequence was available January 11, 42-day or 42 -- or 43-day, I don't remember exactly, after, we shipped the product to the NIH, approved quality control over [indiscernible]. There is testing, everything. So that's kind of 42 days, the first time doing it. I doubt that the first time we tried to doing it fast is our fastest time. Could not see a world with the right investment in process, IP. We could go down to 30 days, maybe lower than 30 days. I think it's a serious possibility. And so if there was a mutation, let's say, 6 months from now or 2 years from now, 5 years from now, where it impacts potentially the potency of the antibody of any vaccine that targets the S protein, we think mRNA for sure is the fastest technology, and we believe that Moderna can be set up in a way that we could be the fastest company out of the gate, like we've shown in the past.

Okay. That's helpful. I wanted to ask you, I know we could spend hours on 1273, but I wanted to ask you just about the pipeline priorities. That obviously is the #1 priority, and you guys have had to reprioritize the rest of the pipeline. So I guess the question is, what would you say is still, beyond 1273, a major focus for Moderna. What has kind of moved down the scale in terms of pipeline priority? Maybe just a little bit meat on the bone about how you can further leverage the manufacturing capabilities and the BARDA funds to leverage across the company and across the platform?

Yes. So for people on the call who are not too familiar with the company. As you know, Geoff, we basically now since January, have announced that there are kind of 2 businesses within the company. There are products in our core modalities of our, basically, infectious disease vaccine and IV systemic, where we believe, based on the clinical data we've shown especially in 2019, that the technology risk of those 2 modalities or application is behind us. That is what we believe. And so in those modalities, we're investing aggressively to get cleanly -- clear product to move to the clinic, to get BLS (sic) [ BSL ] filed. On the -- over 4 modalities that are currently in development, we want to look at clinical signal to decide do we name those application, co-modalities and then double down, triple down and do more of the same? Or do we kind of shut them down? Or do we think there's a way to fix them as [indiscernible] will fix them? And so there, we want to be careful and be very disciplined about timing and scope of investments. So if I go back to -- with this framework to your question, I would say, in the vaccine business, as we've said before, the next 2 vaccines that should file a BLA's after COVID, assuming we can file a BLA, assuming the successful Phase III sometime this year is the Zika vaccine and especially in terms of turnover, the CMV vaccine. We believe CMV vaccine should be $2 billion to $5 billion annual fixed sales. There is no CMV vaccine approved on the market. Every woman near or bearing a child should get a vaccination against CMV to protect a baby in case she gets infected during their pregnancy and leading to be the #1 cause of birth defect in the U.S. and in the developed world. So that's kind of how I think about the company, which is if you have to think about kind of landing BLAs or getting product approved, I think there are 3 planes in the year, one behind the other. So the COVID plane, that should land first. Then you have the Zika plane just behind it, and then the CMV plane. So while the CMV is clearly, next to Zika, the bigger one, I think we should not underappreciate Zika. I mean first, it is fully funded by the U.S. government. So it's a free option to our shareholders. It's enabling us to learn a lot around the process of technology. And the way I think about Zika is that is it going to be a $5 billion product per year? No. At least not what we know today of the technology. But could it be a few hundred million bucks? I don't know $200 million, $300 million, $400 million, $500 million per year between regions where Zika is endemic, like around the equator and the tropical area and the travelers business? I think so. Could you see a world that Zika ends up looking like Tamiflu, where it's a $200 million to $500 million annual peak sales, 90% gross margin on most years? And sometimes you have a pandemic or an outbreak like we saw in Brazil a few years ago. And for a year or 2 you sell $1 billion or $2 billion of product because everybody is super worried and people will go get vaccinated. As you know, we were very scared that Zika was getting seriously into the U.S. And I think with global warming, we're going to see more and more cases of viruses carried by mosquitoes happening in the U.S., happening in Europe. I know that now in Spain, in France and Italy, you have cases of Zika and chikungunya from people that have never traveled to Africa. And as you can see, I mean -- I don't know how many ferries crossing the Mediterranean every day carrying people and mosquito at the same time. So I think this is how we should think about the Zika vaccine. Again, Zika has been added to the tropical list by congress of vaccine that could get us a voucher. The voucher, of course, could be either be sold or used for other product. And it could help us also with building the brand, building the sales force. You could see, again, a world that there's a lot of women, potentially, through the OB-GYN setting that are interested by Zika because they got scared during the Zika Brazilian outbreak a few years ago. It's exactly the same type of kind of mindset than what we're doing for CMV, which is going to launch after Zika. So you could see a lot of synergies happening there, commercially, to educate the market, to educate the clinician, to get the Moderna brand out and so on. So that's kind of how I think about kind of the next few BLAs. And then in the IV systemic, I would say, the autoimmune disease drugs sound very exciting. And in the PD-L1 protein, not an antibody, a protein-encoded product, I think we have a very unique biology that we can go after. So I think those are -- and of course, the oncology program. We have 5 immuno-oncology drug in the clinic, which is quite remarkable for most companies in the world. And even more, I think, for a company like Moderna, that has so many things happening at the same time, the rare disease program. The VEGF program, after a very exciting Phase I where we showed in above a VEGF expression and a proof of mechanism with increase of blood flow in humans, which is expected if a drug works because VEGF is supposed to grow new vascularization. This is now in Phase II injected in people's heart. Could that drug work? It's possible. Will it be a big drug if it works? Highly possible. So there's a lot of pieces about Moderna, and we have not even talked yet about the future. Like -- and we can go there if you're interested with the Vertex partnership.

Yes. Well, I think we're -- with that, I think we're running out of time, though. I'd love to cover that, but we'll probably get a couple of e-mail questions on that as well. So I think with that, we're going to have to wrap up. So Lorence and Stéphane, really appreciate the conversation. Maybe next time we'll do actual Vegas instead of virtual Vegas.

Okay. Thank you so much for the invite.

We really appreciate it.

Yes. Thank you. Take care.

Thank you. Bye-bye.