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

Okay. I think we're live. So great. So thanks, everybody, for joining us for the next presentation. Very pleased to have Stéphane Bancel, who's the CEO of Moderna. I just need to read a quick disclaimer statement. So for important disclosures, please see Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. [Operator Instructions]

So Stéphane, thanks for joining. Nice to see you again. I thought we'd start with COVID, which is a big surprise to everybody. Look, we've got data on 3 vaccines now, including yours. Maybe you could put your data into context, how you see your data versus the field, and we can go from there.

Yes. Well, thanks, Matthew. It's good to see you. So I would say, as everybody knows, the mRNA vaccine don't look so bad. And so the piece about ours that I think is going to be the differentiation is, first, the severe cases. As you know, Matthew, we had quite a high number of severe cases in the Phase III study, which I think confirms that the study was set up with people at very high risk. It's almost 3 times, I think, what we saw in the Pfizer study that they reported so far. And we had 30 in the placebo group and 0 in the active group. And so I think what the vaccine looks like, it has a very high efficacy, at 94%. And if you get disease, you will get mild disease. With data, we have no severe disease. And of course, as you can understand, massive impact in the risk of hospitalization, the risk of getting to the ICU and the risk of dying. So that's why I've said, I think this vaccine is going to be a game changer. The other piece is supply chain. We store a vaccine at minus 20, not minus 70, as has been sometime incorrectly reported in the media, minus 20 for [indiscernible] vaccine for 6 months. And then what we've done, and that was communicated recently, we have 30 days at 2 to 8 Celsius like a regular fridge-like insulin. So -- and then you have 12 hours at room temperature at the site of inoculation. And so if you think about it, we designed the whole technology, and this comes from a lot of investments we made over the years in terms of technical development and science to be able to get to that type of performance where we design it at minus 20 between, let's say, the factory and the big distribution centers. And then what I call the last mile to a CVS store, to a hospital, to even a GP office, you can do in a regular fridge where there are plenty, and those are easy to set up and so on if you don't have a fridge, but all the pharmacies have because of insulin, for example, regular fridge. So we think that's the differentiation of our products.

Okay. And do you think governments, as you're starting to talk to more people after the data, do they appreciate either the difference on supply chain or the difference on the data? And how do you think that plays out in pricing?

Yes. So yes. So the answer is yes. They do appreciate it. We've got quite a number of calls in the last few weeks once the data got out. But also, I would say, I think the U.S. has done the best job that I have seen, and I've not talked to every country in the world, but we have talked to a lot. I think that's one of the best job that I have seen in terms of getting ready for the vaccination, the execution of vaccination, the supply chain and so on. I think a lot of countries just realized in the last [ 3 months or 2 ], that one vaccine is at minus 20 and the other one is at minus 70, yet it is not the same. We've announced, I think, this morning, Israel buying more products. There's quite a number of countries that have come back, say, actually, I want more because I realize that now that all my teams are in full actions to get ready and so on. I think most countries were anticipating vaccine data more in 2021, not at the end of 2020. The U.S., because of Operation Warp Speed that has funded a lot of that work has been very close to all those clinical development. And so I think that's where the differentiator comes, which is why we think we can maintain a premium price. As you know, we have been selling product initially at $32 for small volume, which I call millions of doses type of deals, then $37 because we have much more data, much less risk to a product, and in the big volume like with U.S. government around $25 per dose, including the BARDA grant. So I think we believe we have a premium product, and we're going to keep program positioning, which I think is well adapted for people at high risk. If people want to use other vaccine for 25-year-old, well, that's fine with us. It's a big planet out there.

Okay. Okay. Helpful. So I guess, that leads to the other question, which is you've set a bar in terms of supply, 500 million to 1 billion doses for next year. And I think you've commented a handful of times before that the delta there depends on raw materials and being able to produce things. I would think, and it sounds like from your commentary, that the demand side has gone up since data. So where are you in terms of pushing yourself to the higher end of that range? Or would you even consider going above that range?

So those are good questions. So the way I framed it, and you've heard it, it's more for people on the call, the 500 million dose, I am very comfortable we're going to get there. The 1 billion dose today, and we're still in early December, requires, as you said, raw materials to work well and also yield and so on to work well. So that's why it's a bit too early, and we don't want to disappoint. I don't want to take orders that I cannot deliver. The relationship with governance is going to be very important in the long run for Moderna given the portfolio we have of 20 products. And so I would rather surprise on the upside than surprise on the downside in '21 to the customers and also to the market, of course. And so the way I think about it is we're working really hard to get to 1 billion. As you know, Juan Andres, who is running manufacturing for us, used to be Head of Manufacturing of Novartis worldwide, including Alcon and including also Sandoz. So he ran more than 100 plants. He has 30 years of manufacturing GMP experience. He was my colleague at Lilly 20 years ago. We had the same boss. And so I will not bet against Juan to get very close to 1 billion. But today, our base plan is 500 million. And as we get more comfortable in the year, and we learn more about the yield and yield consistency, we will kind of refine the window, both up and down, to give people more and more color. But I think today, saying with the 1 billion, for sure, will be way too aggressive. I would rather say it's 500 million, for sure. But we're working toward 1 billion. In terms of doing more, that's something that we will continue to consider with the Board. We just got the data 2 weeks ago, as you remember. So it's new. I also want to understand a bit more what's the competitive landscape look like because it's, of course, a very different world. If you have 6 vaccines, like the 6 sponsored by the U.S. government getting to a finish line or not. I think our vaccines are going to have a much harder time sometime in the media. People say there's 50 vaccine being developed. A lot of those companies were never going to be able to fund it. We will not have been able to fund $1 billion to run a 30,000 people Phase III study if the U.S. government had not helped us. And of course, Pfizer or AZ can, but all the companies that are small and don't have the balance sheet to support it, I think, is going to have a very hard time because I don't see governments. Now we have already 2 products that are most probably going to get approved very soon. Pfizer already got approved in U.K. this week. I don't think there's going to be 50 vaccines out there.

Okay. Helpful. Helpful. So let's talk about the process because people care about what happens and what happens next. So maybe you could talk about the process in the U.S. and then what you expect for the process outside the U.S.

Sure. So let me start with the starting point, which is, on Monday, we filed the same data to all the key regulatory agencies around the world. So U.S., Canada, U.K., Europe, Switzerland, Singapore, Israel and WHO. What we had done in the last month or 2 is to get the non-U.S. agencies catching up with the FDA. Why do I say that? Given we've done all the studies in the U.S., FDA has seen preclinical models, challenge models, Phase I, Phase II data. We are very familiar with a protocol that we approved on Phase III. And so what we are trying to do is to catch up everybody else, so that when the Phase III data come, that could be the last data package we give to everybody. And the other piece that we have been doing this on manufacturing front is filing all the manufacturing components of an EUA as we got the data, so FDA could start reviewing them. So we will save time on the back end. So it will only be basically about the safety and efficacy of a Phase III, not about CMC anymore. So in the U.S., process wise, as it has been highly reported, the FDA has informed us that VRBPAC meeting is December 17. Assuming it's positive, which is what I believe today given the data, we expect within a few days, maybe 24 to 72 hours an EUA approval. We're going to learn a lot, I think, next week with Pfizer and VRBPAC. That's one of the benefits of not being the first one is somebody else is going through the training before you. So we're going to be, of course, learning a lot there. Outside the U.S., we are in very close discussion with all the countries I mentioned. I will not be surprised if some go before U.S. and some, of course, will come, I think, a few weeks after the U.S. In Europe, we got a notification on Tuesday that was made public by the EMA in Europe, that our scientific meeting will be January 12 at the latest. So let's see if that's the date or if they are able to compress the time line a little bit. In terms of products, we will be ready to ship product as soon as we have approval. So if we have approval, a couple of days after the VRBPAC meeting, we will have already millions of dose to be delivered. We have 20 million dose forecast for the end of this year. Next year, as you said, 500 million to 1 billion. And yesterday when we had the New England Journal Medicine update on durability of antibody, we also gave an update for the first time on our estimate for Q1. And we believe that in Q1, we should bring to the market between 100 million and 125 million doses. It's still a ramp, as you can see, to the $500 million number, I said. But as we've said all along, we're going to get to peak capacity around the May time frame with all the line coming online between Lonza and our own plant in Massachusetts. So I expect around May time frame to be going full speed.

Okay. When you think about capacity, if you were to make a decision to push north of 1 billion, I mean, is there -- what kind of lead time would you need to bring more lines on to be able to hit that? Is there a window that you need to say, we need to make that decision by a certain date?

Yes. I would say, 6 month lead time from decision to valves coming out of the line because you need to buy equipment, you need to hire people, you need to install the equipment, validate it, qualify everything, train the employees, get more raw material, of course. Some are longer lead time. So I think a 6-month time frame is a good order of magnitude for increments. There are a few things you can do to shorten some stuff, but the 6 month is a good number.

Okay. Okay. Helpful. And then, I guess, in terms of the AdCom, I mean, anything you're expecting at the AdCom or anything -- I mean, I assume we'll get detailed safety data, which we haven't seen already, but any other information that investors should expect to be able to see at the AdCom?

Yes. So I would assume detailed by -- at mixed groups, age group, comorbidity group, as you know, we had a lot of people with diabetes, lung disease, heart disease in the study by design. We had a lot of minority communities, 10% African-American, 20% Latino/Latinx. And so age groups, we have a lot of age groups. So I think people are going to see a lot of data cuts at the VRBPAC meeting, the safety for all of those groups as well. So that's I think what people should be expecting.

Okay. Okay. Helpful. And I guess, last thing before we maybe talk about outside after the pandemic period, how this plays out, but pediatrics, lower age groups. I think yesterday -- I think you've posted -- maybe it wasn't yesterday, but you've posted on ClinTrials, 12 to 17. Just walk through people, how pediatrics play out and what time lines you think should be for them.

Sure. So indeed, we posted on Wednesday, ClinicalTrials.gov, the 12 to 17 age group at 100-microgram dose, the same dose as a Phase III. It's a Phase II/III. So our goal is to try to get the data in the spring/late spring. What I would really hope we can get to is, let's say, end of June, July label extension to go down to 12 years of age from 18, which we expect in the EUA. So that in the summer, kids going to middle school and high school can get vaccinated because I believe their teacher and the school staff will be vaccinated in Q2 or Q1, if there are high risk, but most probably Q2 for most of them, that by the time we go back to September 2021, the kids can go back to school with a normal school year, which is so important in terms of equality and kids development and education and mental health and so on. So that's our plan for adolescent. For pediatric, we're going to start tiny bit after, I mean not in months, but a tiny bit after. As you know, Matthew, for pediatric, we have to go down in age very slowly. That's what -- how it always happen in vaccines because you give vaccine to healthy people and, of course, healthy children and young children. So we are going to have to go down in age slowly. And you're going to start at a lower dose, potentially much lower dose. We're finalizing the dose selection, and titrate up, which also takes time. So I would anticipate maybe towards more the end of the year full data in the younger children. Again, we believe there's much less of an urgency because of what we have observed in terms of disease and transmission. We think it's an important add. So that's kind of a plan to be able to have a vaccine to go from pediatric down to 80, 90 years of age.

Okay. Okay. Good. So let's just talk for COVID. One of the big debates out there is, post pandemic, what this market looks like. Maybe you could just give us sort of your thoughts on that. But specifically, I think the question is, who's going to need to be boosted, if anyone? And when are we going to figure that out?

Yes. So I think this is the big question for everybody. I mean, we're all focused on making as much vaccine as we can for '21. The question of boost, I think with the data that we published yesterday in the New England on 90 days after a boost of a Phase I, you can't -- you start to see that the curves are going down slowly, which is a good sign. I think it's tough to know at this stage, are you going to need to boost every 3 to 5 years a young healthy person, every year or 2 years an older person? I think what is clear from the data we showed yesterday, at least for all vaccine, I do not know about the other vaccines, that the worry that was in a scientific and medical community, if you recall back in the spring, oh boy, the vaccine are only going to last 3 months, they might never work, and if they work, they might only last 3 months. I think this worst-case scenario is out of the window, in my opinion. I think we're going to be in a world where people are going to have -- must ready to get boost. But in the multiyear time frame, and we'll have to figure this out, we're going to of course monitor the Phase III participants that enroll for several years and to get that data to look at how is efficacity moving down or not because nobody knows the coverage of protection yet for this new virus. So I think there's a lot of things we're going to learn in '21 clinically that will inform us and the governments and the payers what to do in terms of boosting. Job #1 now is just to vaccinate as many people as we can in 2021 to stop this awful pandemic. And then by that time we have to consider boosting, we will have that data. I will not be surprised that somebody with at high risk, i.e., older age and comorbidity factor, might be interested in getting a boost before the winter '21, '22. So this will see how things play out. In terms of the market size because of cost, if there is no indication for boosting, we cannot promote the product. It's really more of a discretion of people and their doctors. But if we have that data, which I hope we will have and we can promote it to a medical community.

And then I guess one last thing maybe before we move on because you obviously have other things in the pipeline beyond COVID, but sterilizing immunity, asymptomatic transmission, when do you think we'll have some idea of how effective the vaccine is in that regard?

Yes. I think we'll have a sense around Q1, I would say. We need a bit more data. As you know, the study has been designed to answer that question. So we will know the answer to that. It's very important for us and for, of course, public health experts in terms of strategy. We believe that we have a high chance to get protection -- sorry, yes, of transmission, sorry, transmission or protection. It's impossible to know now the rate of protection. I'm just referring to the nonhuman primates data published in New England earlier this year where we show that if we inject 10^6 copy of the virus in the nose of a monkey that has been vaccinated, if you get the viral load in the nose, at Day 2, it's massively down, at Day 4 there is no more viral load in the nose, which gives you a good sense because the 10^6 is extremely high of -- in natural infection will get you. So it's a good sign that if you get some copies of a virus through a transmission from somebody else in your nose and or your mouth, you antibodies should be able to do the trick. So again, we have to confirm that. So today, it's just too early to have a judgment. But I think in Q1, we should know.

Okay. Great. So let's turn, I guess, to the rest of the business and also just sort of think through a couple of topics. So I guess, the first one is, right, you've seen a dramatic rise in your valuation throughout this as you've achieved success with COVID. And I think one of the kind of questions that I get pretty often is how do you think about the business growing from here? What are you focused on as you think about being a much larger company?

Yes. So first, I think we should go back to first principle. Since we started the company, we've always said this will be ever a failure, and there will be no drug coming out of this company, or we're going to be several thousands because demand is an information molecule. And so the first big thing for me, and we talked about it back in JPMorgan earlier this year at the conference, which is now that we had a good sign of a Phase II data last year of CMV, we want to do many more vaccine. But trust me now that you see the data that we have looked at, we want to do even more. So as we've said strategically now for a year, vaccine is going to end up being a cornerstone of this company, high-value vaccine. As we've said, the CMV, we believe, could be a $2 billion to $5 billion annual peak sales opportunity. There is no CMV vaccine on the market. And so I think vaccine is going to be important for us. But as you say, we have therapeutics in the heart. We have rare genetic disease. We announced earlier this year it's going to be in the clinic soon autoimmune disease, of course, cancer product. So with 20 products in the pipeline, I think we're going to be playing to the strength of a platform, which is where we know it works clinically. We're going to do much more because now we have $4 billion of cash on the balance sheet. What I think people have not always appreciated now is that we generated $1 billion of cash flow from operation in Q3 to a $4 billion balance sheet, no debt. And so if you think about this platform that we built, what has limited us in the past was capital. And so with capital now, we can accelerate programs, we can take more calculated business risk. There's been a lot of learning from COVID and how COVID was developed. Can I think we can develop the next vaccine like flu on the same time line? No. Because my team will not allow me to make them work 24/7, 7 days a week, for almost a year now. And the FDA has done extraordinary things to help us in terms of feedback, response time and so on, including 2:00 in the morning e-mail from the FDA. So -- but there's a lot of learning still of what we can do different. And the type of business risk, we, as a company, are going to be willing to take because we know our [ mRNA ] technology works in the clinic. And so I think when you put all that together, there's going to be more infectious diseases vaccine. We're going to be pretty aggressive there. And for things that we know work also like repeat dosing of an IV systemic like the chikungunya antibody that we showed at our R&D Day in September, I think more disease like in the rare disease space, autoimmune disease. As you know, we are working hard also with Vertex to finish and fine-tune the delivery into the lung. If that one moves to the clinic, the partnership with Vertex is only around CF, so we can do more things. And another piece that I don't think everybody has always appreciated is in the new partnership we announced with Vertex in September, we are entering gene editing, using mRNA and using our delivery system. And so that's another kind of big horizon, where you can do a lot of different things for Moderna. So I think if you think about the company now with the balance sheet we have, but even more, think about the balance sheet we're going to have at the end of '21. That's another piece that if you think a bit ahead and you look at how much cash we could generate, if you take $500 million to $1 billion, and you pick a capital ranges of average selling price, given this product is not partnered. The big difference with a Pfizer BioNTech product where they are sharing the profit, we have no partner. And so this -- the profits are going to be for our shareholders, and they're going to be reinvested in the business. And so you could see us sitting on a very substantial balance sheet at the end of '21, which I think will be an incredible stepping stone for us to scale Moderna. And so what I believe is 2021 is going to be the most important inflection point in the company history. We're going to scale at the pace that I think is going to surprise a lot of people. You know as well, Matthew, you have been following the company since pre-IPO, but I don't think people realize the capability we have at our plant, where we could make up to 100 different mRNA per year for clinical trial for different products. And once you know something works like the vaccine or the IV systemic, you can take much more risk of your capital allocation on those applications because you know they work in the clinic.

Can you talk about maybe just aspiration for vaccines, right? I mean, we can look at other successful vaccine business. Merck, as an example, right, has a very large vaccine business. Do you think you can aspire to look like them, on the vaccine, irrespective of the other things that you're investing in?

I think so. I think we have a sales chance now to build one of the biggest vaccine business in the world. If you think about the opportunity since 1980, there are more than 80 viruses that were discovered by scientists and clinicians around the world that hurts humans. They are today vaccine against 2. And soon, I hope, there's going to be a vaccine against the third, which is, of course, SARS-CoV-2. But to just give you a sense of the incredible opportunity that exists in vaccine, and also [ I'll remind ] you, you can combine vaccine. I mean, we announced in September, we're going after the flu business. Again, as a premium product, because like we've shown with SARS-CoV-2 vaccine, we're able to a very high neutralizing antibody in all the adults in the study. As you know, the flu vaccine efficacy is pretty bad, plus you have a strain mismatch issue sometime. This technology's speed is unmatchable by recombinants or by [ ag ] technology or anything else. We've shown this year 42 days from sequence of a SARS-CoV-2 virus to shipping GMP product out the door, including a 2-week sterility test, as, of course, everyone has to do. I think we can do better than that. This was a first time trying to go really fast. And so as we invest in manufacturing, we invest in IT, can we shrink that to 30 days? I think it's possible. So when you combine all those pieces, strong antibody in the elderly, the ability to do quickly, even if there's a strain change, you can chase that mutation very quickly even in the same winter. And at least we vaccinate people that have high-risk like the elderly. So I think -- and then you can combine it with COVID, we talk about the boost business, how we will differentiate ourselves compared to adeno or compared to the protein plus adjuvant, while you could have a new Moderna through vaccine, and in the same variant, a COVID boost, one shot. That would be extremely differentiating product. We could get premium price by providing protection against 2 virus versus one. So there's a lot of things like this that we can do with technology, and we've shown we can do that. CMV has 6 mRNA in each vial. We know we can technically do it, and the FDA has let us go to the clinic right away with 6 mRNA from Phase I.

All right. Good. We're close to time here, but maybe just one final question. Maybe just highlight over the course of the next year, you've got a handful of cancer vaccine as well as potential rare disease inflection. So maybe just highlight for people those things that you're looking out for.

Yes. So next year, I'm excited about, in addition to, of course, the COVID sales, I'm excited about CMV starting Phase III. We're going to have several results in vaccine. We're going to get into the clinic several new vaccine that are going to read out pretty quickly. I mean, look at what we did in the spring, it took us about 3 months without the Phase I of a COVID vaccine and like 2 months to enroll, so in the 6 months time frame. So you have something that you start in March in the clinic, you can have data by the end of the year. As you see, we have 5 drugs in the clinic for cancer. We just announced a SITC based on the encouraging, but early data, in head and neck HPV negative that we're expanding that cohort. And then you have -- VEGF is in Phase II with AZ. It could read in 2021. I'm very excited about this product because I think it has a high chance of working. And then the rare disease and the autoimmune disease. So I think there's going to be a lot of readout in addition to progress on our sales in 2021.

Well, great. Stéphane, thanks for being here. Appreciate it.

Thank you, Matthew. Thanks, everybody. Stay safe.