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

Hey, guys. Thank you all for joining us. It's a huge pleasure to have Stephen Hoge from Moderna join us. My colleague Jon and I will be cohosting this.

And just to jump right into it, maybe let me just first ask Stephen for opening comments. What's on top of your mind? Because I'm sure it's very hard to prioritize all the things that are happening in parallel.

Yes. Well, thank you for the opportunity to talk today. Look, I think maybe what's just under the surface is we're still sort of feeling wonderful about the news from yesterday, where we filed for emergency use authorization in the United States and similar conditional marketing approvals across the world, including in Europe. And that was based on our final interim efficacy -- or final, it's no longer interim, efficacy analysis on our Phase III COVE study showing 94% efficacy of our COVID-19 vaccine. What quickly happened, Umer, and maybe this is going to be something we talk a lot about today, is the relief of knowing the vaccine works has washed over us. And what's left now is the work of manufacturing it and making sure we can distribute it as fast as possible. And so within minutes, that had turned into the anxiety at the moment. I think we're all working 24/7 right now and likely will be for the next year.

Makes sense. So maybe just to kick things off then, may I start by asking the question a lot of people are asking? And there's an element of confusion about it from folks that are still understanding, among the generalist investors, the vaccine efficacy parameters. Asymptomatic infections, how should we think about that? Is that something we will have a sense for from your trial?

Yes, absolutely. And so as you would see in our protocol, we actually have a secondary endpoint exactly on that, asymptomatic infections. And when you see vaccine efficacy of 95% like we've been seeing with our vaccine, usually, you'd start to expect some benefit perhaps in infection. It will never be the same as you're seeing in prevention of disease. And frankly, everybody is developing to try and stop the disease of COVID-19. But you would -- there's a good reason for hope when you see efficacy like that against the disease. In terms of data and how we collect it, so the secondary endpoint that we're monitoring for asymptomatic infections is a little more complicated than the primary endpoint of disease because when somebody has disease, they can call you and say, "I feel sick, test me." Asymptomatic infection, you can really only monitor over time, where people come in for their regular follow-up visits. And so at 2 months and at 3 months and at 6 months, we're taking blood from people, and we're testing whether they have antibodies against proteins that are not in the vaccine. And if they do, then they probably became infected. And over time, we'll develop a data set on whether or not there's a decrease in those asymptomatic infections on vaccine. The first interval point for that is day 57. So those are people that have followed up for 2 months since their first dose of the vaccine. And we need to get a decent sample size. So what we're doing right now is turning our attention to running those assays, running all that serology data. And I would expect some time in the early part of the new year, we'd have that data together, and we could also provide an update on that secondary endpoint. Now there is a chance to look earlier in some of the other more exploratory areas. And so as folks who know the protocol well will know, for those who aren't, we also do at day 29 -- so just before your second dose, it's a 2-dose vaccine, we'll come and give you a PCR swab to see if you were infected in the month in between. It's not the same thing as looking at after 2 doses, but it will give us an early read perhaps on whether or not there's prevention of infection over that first month. And that's another endpoint that we do have some of the data already and we're looking closely at. And if we can get to a high-quality analysis, obviously, we'll provide updates, both in VERPAC and beyond. But those would be the 2 main ways. But the per-protocol way is to look for serology, look for bloods, and that's after 2 months and 3 months and 6 months.

Jon?

Just as a follow-up, I know people have been curious about effects on asymptomatic infection rates, but what is your take on the meaningfulness of asymptomatic infections in the context of an efficacious vaccine? If we're reducing symptomatic infections to very low levels, how worried should we be in general about asymptomatic infections that may yet remain?

That's a great question. And I think again, with 95% -- 94%, 95% efficacy in these vaccines, I think, frankly, we all feel great about our chance to stop the burden of the pandemic, which is what's happening to our health care systems. If you can stop people from having to be hospitalized, stop them from even having symptoms, you've really mostly won the war. But the benefit of, let's say, 50% or 60% reduction in infections, and I just picked that number out of the air, but if you saw that kind of a number, would be you'd be taking a reproductive rate that the virus is doing as it's passing between people and you'd be cutting it in half. And with public health measures and masks and social distancing, people are reporting numbers around 1.5 right now. You'd actually push that below 1, and that would kill the pandemic even faster, right? Even if you didn't protect everyone against disease, which is what the vaccine is doing, you would actually slow down and substantially impede transmission, particularly if you give the vaccine of people that were essentially high spreaders. And so I think the reason to focus on it is just, if there is going to be a benefit from these vaccines in transmission that pushes the reproductive number down low, actually, this means it could end faster, if we can deploy enough dose of the vaccine.

Stephen, that 5% of people that -- on the vaccine that did develop infections, do we have a sense for what their neutralizing titers were?

Not yet. That's a great question. It's one we're looking for the data on. Like I said, we focused intensely on the primary analysis, and that's clearly what it's about. But we would hope to have that data in the same time horizon that we're looking at asymptomatic infection, in the next month or 2 as we pull that data together. It -- sorry, go ahead.

And is that the data you'll use to inform whether you need a second -- a third shot at month 12 or month 18? Is that the data that will inform that? Because there's no more randomized data now. I mean I'm curious how you guys will think about what's the true durability.

Yes. And I think there's 2 points to that maybe I'll pull apart. And the second one will be about durability. The first -- I think the reason why it's a great question is there was a lot of attention paid on developing correlates of protection, right? I mean that's what we all really want to know. I think that's what's underlying your question about those 5% of folks, the 11 people who got vaccine and still developed asymptomatic disease. Fortunately, none of them developed severe disease, but they were technically asymptomatic disease. The question is can we learn anything about the level of protective immunity in their blood that says, "Okay, you need to be above this level to be protected?" I think the challenge is 11 is a pretty small number. And I think in many cases, when you're working with the correlate of protection, you want to be working with dozens, hundreds of people who've broken through. And so I think we no longer are as confident -- and this is a good news for the vaccines but bad news for correlates. We're no longer confident that if we and Pfizer so far are looking at 10 breakthroughs, that you're going to be able to read through a lot on that on the correlate, which means you probably can't use the correlate as much as you'd hoped, at least initially, to accelerate other vaccines development. I think in terms of the long-term benefit, that's actually one where I think it will be the data that we have in January when we start -- in February, whenever we start to look at the correlate data or the breakthrough data, the serology data. It will probably -- that will come more over time where you've got 30,000 people or 15,000 people that are vaccinated on active. As they become -- if they become sick 6 months from now, 12 months from now, you start to see breakthrough infections. 95% now starts to feel like 92%. And you look at who's breaking through and why. Then you'll have blood from those visits and you'll be able to say, "Here's the level at which they're breaking through." And I think that's more likely to guide when we think we'll need a booster, whether there's an annual booster market or an every 5-year booster market. And so that will continue to evolve, but we will know that in the next 2 or 3 months.

Okay. Jon?

Sure. I would love to ask on vaccine stability, which obviously has been in many investors' and in the general populace's mind a lot recently. We know that you have a better stability and distribution profile than some of your competitors, and a lot of people are very curious about what the genesis of that delta is. Now in earlier conversations with the rest of your management team and in your comments, you've mentioned your long history of working with the mRNA vaccines and your expertise there, and that makes a lot of sense. But is that coming from, specifically, formulation and packaging of the materials? Or is there something in the API itself that is driving a difference in stability, perhaps the identity of modified immuno -- sorry, identity of modified base that you're using, the identity of the lipids in your LNPs? Is this something we think that we ought to expect competitor mRNA vaccines to be able to mimic? Or is this inaccessible to them just fundamentally based on what's in the drug?

Great question. So the first thing I can say is, and this will be the only simple declarative statement, it isn't the modification of the uridine per se that's providing this delay. So it's not the 1-methylpseudouridine that we use. Generally, Pfizer uses the same substitute nucleotide. It is -- big picture, it is 4 things. So there is some aspect of how we make the mRNA that confer stability, but that's more of a process than a chemical composition point, and then 3 things related to the formulation of lipid nanoparticle itself. So one is the composition, the components you bring to the other. The second, and this is probably really big, is the process by which you make it. And then the third is the actual excipient that go in to stabilize. I would love to tell you that there's one thing -- well, I wouldn't love to tell you. I wouldn't tell you if this were true. But I could -- if I could tell you there was one thing that was the magic ingredient that made it all fixed, I think I'd be lying. What's really been our experience is we -- this is the 10th vaccine we've manufactured. And the reason we often talk about the 10 years we've been doing this is we've probably -- there are probably about 40 or 50 different things that each contribute 1%. And what you get by that long history of making those subtle changes, either in the composition of lipid nanoparticle, the way you made the messenger RNA, the way you put the whole thing together from a know-how and process perspective or the excipients, they total this very different profile. Could somebody else get to the same 40-odd, 50-odd insights? Sure. With time and money and effort, they could. But I'll tell you it's not going to be one simple step.

Great, great. Makes sense. One other major question, I think, on everybody's mind is what the actual manufacturing capacity is going to be at equilibrium and what the rate of getting there is going to be. Now Stéphane recently mentioned that raw materials availability is going to be a major bottleneck, determining whether you're capped at that 500 million that you're pretty sure you're going to get or whether you're going to be able to expand all the way up to that 1 billion dose per year stretch goal. Can you expand maybe that a little bit more? What specific raw materials are limited? Are you competing for these raw materials with other players? And how could we sort of tease out what would drive that number higher or lower in terms of the total number of doses available?

And Stephen, Jon's a biochemist so you can go deep into those raw materials.

Very good. Yes. Well, I'm going to disappoint a little bit.

[indiscernible] I'll get it.

I'll disappoint a little bit. So the -- look, I think when you're going to try and make 1 billion dose of something, that's never happened before. And that's not a Moderna problem. Like that's not happened. Nobody has made 1 billion doses of a vaccine in a year. It's just not something -- maybe a few sort of more generic vaccines, but it's just not something you do a lot out of a new vaccine in the first year of launch. I would argue that despite what Stéphane said, everything is potentially rate limiting, right? You have -- when we say 1 billion doses a year, when we say -- and you can do the back-of-the-envelope math. That says 80 million a month maybe, right? And the low-end estimate is 40 million a month, right, maybe, and that's kind of 0.5 billion to 1 billion. You can imagine that, that range is -- when you hit 80 -- when you're firing on all cylinders, everything has to be showing up on time and every step has to go right, right? And whether you're making cars or you're making vaccines or you're making, I don't know, meals for people, there's just a lot of different things that have to come together to make that happen. And so we're -- the reason we're presenting that wide range and what Stéphane was really trying to illustrate with that pointing at the raw materials is some of these things are within our control. We can hire more people. We can set up more production lines. We can have redundancy in a lot of systems. But we can't solve for the fact that things will happen, right? There will be -- things will happen to people. Obviously, some people get sick, some people fall ill. But some things will happen to our supply chains. The people for all -- with all the right intentions will just, for whatever reason, come up, I don't know, a month late on a delivery on a raw material, as one narrow example. If you do that, you lose that portion of that month and you don't get it back. And so what we're trying to do with the 500 million to 1 billion is say, look, we're really confident on the 500 million. In fact, we think we can do that, and we wouldn't want to guide lower than that. But -- and if everything goes perfect, and it won't, but if everything goes perfect, we could hit 1 billion. And that's kind of the way we think about that range. But it's an orchestra, right? I mean it's a -- think about the pieces that have to come together.

Stephen, can you maybe spend one -- just one quick minute on that a little further. Is -- are the LNPs made in-house? And is there like a one real-bottleneck raw material that you guys are more nervous about than anything else? Like just so we sort of start to understand what are the bottlenecks from "external stuff that you're buying" perspective.

Yes. So first, the LNPs are made in-house, but I include in that both us and Lonza. And so we've -- I think we've said this previously and we have -- essentially, 50% of our capacity is internal and 50% is external for the manufacturing process. And the external part's at Lonza. And that's really roughly divided both U.S. and international. And so that's how we sort of have set up the supply chains, the manufacturing chains. In terms of any individual raw material, at any given moment, any one could be. The ones that are more bespoke to us are the amino lipid, right? So that's a proprietary chemistry that we've developed. But we have a very -- we've known about that for a while, and I think we're pretty confident in our supply chain there that had been making it. And there are other aspects of even -- we talk about raw materials, but you can imagine consumables, plastic bags, tubing, things that literally we depend upon world-class manufacturers for. But if, for whatever reason, one day they were a month late in delivery because they had a production line problem, which happens in manufacturing, then we would be [ in trouble ]. But honestly, in terms of raw materials, there's not one specific one. It's that there are a few hundred things that have to come together to make every batch. We have been doing this now at a pretty steady clip. As you all know, we're heading towards 20 million doses by the end of this year. As we've been bringing those production lines on, they're actually cruising along, and we feel very comfortable with them. We're now opening up more lines, but they have to maintain that pace almost perfectly all the way through the year. And I think that's why we hedge and say not 1 billion, somewhere between 500 million and 1 billion.

And who makes the immuno lipids?

We haven't disclosed. There's a couple of different contract manufacturers though. And so we obviously invented the process chemistry and we've transferred it. And so there's not one place, and that's for redundancy for obvious reasons. You don't want to have single-source risk on something that important. And then the other point, Umer, is we purchase that in bulk. And we'll make sure that we build stocks in all of these critical raw materials so that we can maintain operations while you're -- if and when somebody were to come up a few weeks or a month late.

Got it. Jon?

One -- I think we're running out of time here, but I want to make sure that we get a couple of other things in here out of the way. We've heard some of your competitors, especially Pfizer and BionTech, talk directly about lyophilized formulations as a means to extend stability and especially distribution around the world where probably cold chain is not as easy, even just for freezer availability. But when we spoke to Stéphane, he was pretty explicit about rejecting lyophilized formulations as having insufficient capacity. Could you expand a little bit on that dichotomy there? And is lyophilized formulations something that is feasible? And if so, is it going to be important for getting vaccine to the rest of the world?

Yes. I mean -- so first, I'd point to our vaccines, being our priority. We've got 3 vaccines that have already had clinical trials that are lyophilized, right: so CMV; our hMPV/PIV, which is in kids; and Zika. So we've got a hit. We've -- it's not that we even -- don't even know about it. We've done it in clinic in Phase II studies. And actually, we're going into Phase III with CMV in the months ahead with the lyophilized formulation. So -- and we presented the fact that we think that will have a 1.5 to 2 years refrigerated stable shelf life. And that was actually from our vaccines data earlier this year. So well understood for us what that is, and we've already demonstrated the ability to do it. I think it's a question of capacity for those freeze-drying operations. And when you add freeze-drying operations on the back end of manufacturing, that is even more precious, far more precious than filling, right? Because that is -- cycles can run days to a week to get that freeze-drying process down. You put that at the end of the process. And again, these are large freeze dryers, and so there's a physical limitation on that infrastructure. It's not clear to us how you could ever manufacture hundreds of millions of doses in those chains. It's possible others have solved that problem. But that's not a clear thing to us. So we've focused on trying to make sure that we have a liquid form that's refrigerator-stable. And we're going to try and extend that over time from where it is right now, which is already quite good. But if we were go to lyophilization, we'd have a whole another piece of infrastructure we have to solve. So we don't think that's probable. But it's not that it's not going to work. It works for the vaccines that we intend to launch at 5 million doses a year or 10 million dose year, but not the ones you need to do at 500 million.

Stephen, so we're at time. But if you'd allow us to, maybe we can spend the next 2 to 3 minutes, if that's okay with you, to take a few sort of rapid-fire investor questions. Do you want to do that?

Please. Of course. Go for it.

Literally one phrase answers are fine too. One is how do you think about long-term safety with an mRNA vaccine? And some of these are...

Yes. I mean, I think we have to prove it over time. Just as a reminder, we're following everybody in these studies for 2 years. The great news is well over 99% of adverse events that show up in vaccine studies tend to show up in the first couple of months, which is why the FDA set that 2-month safety follow-up. And so we think we've cleared most of that hurdle, but we'll have to build it over time, over the next 2 years.

Next one, as we think about beyond U.S. and Europe and developing world, what would be a reasonable price for some of those markets and rights to the vaccine?

So we definitely want to find a way to make sure it's broadly available everywhere. I think what we're doing right now is -- most of what we've been doing in negotiating with governments has had multiple tiers, including even talking about access tiers for lower-income countries. We haven't disclosed any of those numbers at this point, but as we enter into agreements with governments, sometimes they do. So I won't provide any guidance on what that is. But obviously, we recognize that it may need to be more affordable in certain geographies.

Got it. I'll tell you -- Stephen, I'll leave this case in point. I was born and raised in Pakistan, and they set aside $100 million, which will only immunize less than 5% of their population at the $20 price point. So these countries, they -- okay. Another one quick one was have any of the hundreds of subjects who participated in your Phase I and Phase II had severe COVID or died?

So I don't think we've -- I want to answer the question, I don't know, and I don't want to mis-answer the question. But my sense is no, but that's just means that I'm not aware of it. It's not been brought to my attention. So I don't think that there have been any deaths. I don't think there have been any severe cases of COVID. But I would caveat that as saying I don't know on the placebo arm in the Phase II study whether there were one or the other. So I'm sorry I don't know off the top of my head.

No, no problem. Mobile manufacturing prototype, is there something like that for you guys?

We -- so we do have a relationship with DARPA we actually announced a couple of months ago, where we've been miniaturizing manufacturing and the goal being on the back of a truck. That's an effort that's going to go forward over the next few years though with the idea being that you'd be able to deploy these, including into low-resource settings, in the future to respond to a pandemic. That really won't impact 2021.

Got it. Last one is really distribution because Pfizer is taking it so that there's no lot of exchanging of hands, like you guys on your distribution plans.

So our distribution goes into standard refrigeration and freezing. So we were going to use OWS, but the same sort of things that McKesson does to distribute all the way across the country and globally as well. We work at minus 20C for 6 months, and we refrigerate it 2 to 8 Celsius for 30 days. That's the same temperature as ice cream and milk. So any place you can get ice cream or milk in the world, you can get this vaccine without any special infrastructure. And we're hoping that, that means also that you can put this into refrigerators in small doctors' offices, in rural health clinics and rural pharmacies without any difficulty.

Fantastic. Well, speaking of ice cream and milk, I think that will be a good place to stop this conversation. Thank you so much, Stephen, for joining us. It was a good chat.

My pleasure. Thanks very much.

Thank you.