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

Okay. Good morning. Welcome to the last day of the Bank of America Healthcare Conference. My name is Geoff Meacham. I'm the senior biopharma analyst here at BofA. I also have Alec Stranahan from my team with me as well. We're thrilled to have the Moderna team with us today for a session, and speaking on behalf of Moderna, we have CFO, Dave Meline. We also have Lavina Talukdar, who is Head of Investor Relations. Welcome, guys.

Good morning.

Good morning.

Yes. So we'll kick it off with David just giving us a couple of high-level comments post the quarter and an update, and then we'll get right into questions for Alec.

Okay. Thank you very much, Geoff. So just briefly to recap what we shared at our quarterly call last week, in the first quarter, the company had $1.9 billion of total revenue, including $1.7 billion coming from our COVID-19 vaccine. We generated $1.2 billion of GAAP net income, which was the first profitable quarter for the company in its history. And we announced that at the end of March, we had accumulated some $8.2 billion of cash. So things have gotten off to a nice start for us as a commercial company after we got the initial approval late in December last year. We also updated recently our plans for production supply this year. We upped the range of available doses at 100 micrograms to now some 800 million to 1 billion doses. So we continued to seek to increase the availability, and again, good ramping. We reaffirmed we expect to deliver some 200 million to 250 million here in the second quarter. We also have $19 billion of advanced purchase agreements that we've signed for delivery this year, and it's really, we can do as much as we're able to make available to the market. And then we're seeing interest, and we're having a lot of our discussions now are around 2022. So we announced this week, actually, our first contract with Australia where we'll be delivering some 10 million doses to them in the fourth quarter and then 15 million additional in 2022. We've also shared the -- we continue to progress on our TeenCOVE study, and we saw the initial analysis of the Phase II/Phase III study vaccine efficacy report out at 96%. So -- and well tolerated, no safety concerns that were identified to date. So that's looking very good. We plan to file our rolling BLA with the FDA this month. And then beyond that, just to comment that we dosed our first patient in rare genetic disease, that being propionic academia. And then finally, we've increased our investments across the company. So both in the portfolio of diseases, we're going after infectious disease vaccines, therapeutics, digital infrastructure, and as I talked about our production capabilities. So maybe, Geoff, with that, we can see what areas you guys want to talk about today.

Yes. Sure. Well, let's start with what you just finished with on the manufacturing side. So you guys have announced the expansion to up to 3 billion doses for next year for COVID. That's a bit of a capital investment, and congrats on getting expansion really from late last year into now, you guys have ramped up pretty massively. Just help us with how much of that capacity can be met when we look beyond COVID with the rest of the pipeline. And how do you sort of balance the investments today to meet COVID with maybe down the road the potential for lower volumes?

Yes. No, it's a good question, and maybe I'll just start with the current investment plans and the update that we've given. So as you commented, we opened the year, we gave capital expenditure guidance for 2021. We said we thought we'd invest some $350 million to $400 million this year. We then, in the call, where we updated Q1 and indicated that we're driving based on the evolution of the market and demand for our products, we updated to the fact that we're now targeting upwards to 3 billion doses that would be available in 2022 and beyond. And we expect now to invest this year some $450 million to $550 million. So a little bit of an increase. But as you said, we're -- most encouraging is the ramp that we've been able to accomplish, which, recall even 6 months ago, the company was not in a commercial situation. So that's been very exciting for us. In terms of beyond that, I think, importantly, for us, we're confident to invest now, not only because of what we're seeing with the initial results of this vaccine but the fact that this production capacity will be the same capacity, and by and large, the same raw material sourcing that we'll use for all of the other products in the portfolio. So it's not as if we have dedicated capacity by product or by therapeutic area or by type product but rather it's fungible across the entire portfolio. So people ask about, "Well, what about the sustainability of demand, which we can talk about?" But I think the important point for us is it makes sense to invest into this capacity because we know now that we've got proof-of-concept of our platform, and we'll be able to then use this capacity for the other products that are coming out of the pipeline in the future.

And just as a follow-up to that, what are the -- are there any general assumptions in capacity looking to 2022, 2023 for booster? Is that mostly for -- on the COVID booster side? Or is it across the portfolio?

Yes. It's a good question. I mean, of course, what is a booster? Well, it looks like the first course of treatment. It may be smaller quantities or one injection. We expect it to be one injection rather than 2. We're testing -- we've been testing at 50 micrograms or less versus the 100 microgram first course of treatment. And that all then allows, us when we quote the 3 billion of capacity next year, that would be the maximum available in the event of a 50 microgram single-booster shot. So -- but of course, we have the ability to vary the production depending on the demand of our customers, and that's exactly what we're in discussion right now. So for example, this Australian contract I mentioned, we expect it will be a mix of first course of treatment and boosters and will allow the customers to define, depending on their own needs as to the presentation that we provide to them.

Okay. And then David, just following along that line on manufacturing, you obviously have various supply agreements outside the U.S. So I'd be interested to see sort of how you plan to allocate manufacturing between your plants this year as you ramp up in the EU and then looking to next year, maybe expanding sort of outside the developed world as well.

Yes. No, it's a good question and an important one for us. So if you look at our strategy from the beginning, which, so far, so good, it's working well, we've got 2 distinct supply chains -- supply network set up. So we have one in the U.S., which thus far has been dedicated to supplying the U.S. government. That consists of our own factory in Norwood, Massachusetts, for a drug substance as well as we have Lonza as a factory also in the Northeast that supplies drug substance. And then we have relationships for fill/finish in the U.S. that's done by Catalent and Baxter. So again, all of that production, thus far, dedicated to the U.S. By the end of this month, we expect to have delivered some 200 million doses to the U.S. government, going to 300 million, which they've ordered by July. And then we had set up a distinct manufacturing supply chain arrangement to service the rest of the world because at the time we expected, which has come to pass, that there would be constraints on movement of product at least in the initial pandemic phase. So we set up a supply chain, which is drug substances coming out of Lonza's factory in Switzerland. And then we have fill/finish arrangements with ROVI in Spain and Recipharm in France. So -- and that supply chain has been thus far, and we expect that to go -- to continue to be dedicated to service markets around the world. What we do foresee is the possibility or the likelihood that, as we satisfy the requirements here in the U.S., we can imagine and that we'll be in a position to be able to share production coming out of our U.S. supply chain to other countries around the world. But initially, it's been -- and until now dedicated to ensure we can meet the contractual commitments to the U.S. government.

David, I want to talk a little bit about IP and the last week's controversial proposal. I know you guys have been pretty proactive on IP already, going even before last week, just for COVID, but maybe just give us kind of the Moderna stance, why -- from an industry perspective, what it could mean, maybe what kind of precedent it could set?

Yes. First of all, I would say, deeply held believes more than spend, but that's just choice of words, right? So -- and what's the point here? We don't believe that the solution to the pandemic here is an IP waiver. The issue that's at hand is the availability of supply, high-quality supply that one can trust. And as we've already talked about in this call today, we're doing everything that we can. And our people are completely -- when you talk 24/7, that's usually kind of a euphemism, but this has been true of our teams and the manufacturing supply area over this last year, have been working continuously to bring up the supply availability, and as we've talked about, that continues. So fully occupied to do that. That's the constraint, is availability of supply. These are specialized raw materials for which there's constraints to the availability of those materials. So the idea that an IP waiver is going to, in some fashion, address the supply constraints we think is not logical. And the important point here is that you have a network where you do have reliable supply and the quality is assured, which we can do when it's the supply chain under our control. The other point, which you mentioned, which is right, we made it clear last year, well before this discussion came up, that we don't intend during the pandemic period to enforce our intellectual property rights. So that's not been any type of a constraints in this area. So yes, so that's our thinking on the subject.

Got you. And looking beyond the pandemic phase, if we look to '22 and beyond, it's built to me, seems like it may take a long time for -- I wouldn't say generics, but let's say, a specialty manufacturer to come up with the skills and the -- even if IP were to be waived, the skills and the capabilities to produce something. I mean, I don't know. You guys have spent, as you said, 24/7 in the past year or more working on this. And so it seems a little unlikely that another company can do it in a high-quality way just given this IP waiver.

Sure. Sure. Yes, we would agree with that.

Yes. Okay. Yes. From a pricing standpoint, we want to talk a little bit about -- as we talked manufacturing and supply, maybe just walk us through kind of how you're thinking about pricing over the longer term when we get to a potential booster phase or the endemic phase, how do you balance those -- that transition? And then how do you balance looking at U.S. versus Europe versus rest of world for EM7 or developing world countries?

Yes. So maybe I'd talk about, first, specific to the pricing question, and then you can maybe come back to if I've missed some points. So in terms of the pricing, we expect -- once we get past this pandemic period and move into an endemic market, we expect that there will be your typical market dynamics that are going to dictate price. And what's top of mind for us are a few things. One is the competitive profile of the product itself, which we've been quite pleased with a very high bar that we've set in terms of the efficacy of our product as well as what we're seeing in terms of safety and tolerability. So to me, that's inevitably a key driver of the price and price differentiation. Secondly, of course, you have the competitive environment. So today, in most of the markets where we're participating, there are 4 -- upwards to 4 approved products that are competing in the market. And again, we feel good about our performance and acceptance of the product. And if you just think even 6 months ago, mRNA as a platform and the product, it was a very different environment and acceptance of that new technology, versus today when I would argue certainly in many places in the world, it's now really viewed as a preferred solution. Thirdly, we think that pricing will be also impacted by the ability that we have to update the product offering to meet, if you will, the virus in its current form around the world, which as we've now observed continues to mutate quite quickly. And therefore, we think success in the market will be also dictated by the ability of the manufacturers to be able to update their offering to align to what's circulating in the world. And then finally, and I think it's an important point, certainly, when we talk to customers, they've come to appreciate the ability to deliver. When you draw on a production plan, the experiences, as we've seen, those of us who have been able to deliver to our commitments is very important, and actually, in many ways surprising, the fact that you've got very capable and experienced competitors in the market who've been challenged in that area. Again, we've been pleased with the company's performance, and that's certainly influencing the ongoing discussions and interest in our products. So all of those are going to impact, both share in the market as well as the pricing as we move forward. And we feel good about our ability to compete.

And David, as a follow-up on pricing, I guess, as you're looking to maybe markets that are a little bit more price sensitive, like the developing world, and obviously, the availability of maybe cheaper AAV-based alternatives, even though they are less efficacious, how are you guys seeing that dynamic playing out over the next -- currently and also for the next few years? And I guess, maybe as an example, could you talk through sort of about the tiered pricing strategy that you're taking, say, with COVAX?

Yes. That's right. So we've indicated from the beginning that we've adopted a tiered pricing approach in recognition of the fact that you have affordability levels that vary and our own responsibility to seek to provide vaccine to the world, not just to a certain subsegment. So we adopted tier pricing. We just completed, as I mentioned earlier, the first contract with COVAX. People probably know that COVAX included in the countries that they represent is basically a buying consortium and includes the 92 lowest and middle-income countries in the world. And for a company like Moderna to be able to then negotiate and contract with a single-buying entity is actually quite helpful to us as a small company as we are. So we signed this deal for 500 million doses with the COVAX, which was good. We've indicated that the pricing in the deal, while we haven't disclosed the price, what we have indicated is the lowest tier of the pricing grid that we've offered. The lowest published price we've offered is actually the first 100 million doses to the U.S., which was at $15.25 a dose, and this lower-tier is below that. So we're seeking to balance our responsibility to provide product broadly with the constraints that exist in terms of supply. And we were, as I said, very pleased, after a very lengthy discussions, to be able to finalize this deal with COVAX recently.

And then, obviously, India has been in the headlines recently, and I'd be interested to hear how you see India, the situation in India playing out and whether it could actually drive new viral variance? And whether this could be sort of an initial entry point for some of your other boosters if supply could meet the demand?

Sure. Yes. So we haven't announced a specific contracting with India. But obviously, there's a very significant need that exists in that country, and that's likely to continue. So you shouldn't be surprised if you -- if we were to tell you or if you were to see some type of a deal in the future, whether it be direct or through a consortium. It could be different approaches. And yes, I think your observation, as long as -- where do mutations come from? Well, they are generated from people who are infected with the disease. And as long as that continues, you're going to continue to have mutations, which validates that it's not good enough just to vaccinate your own population, but we really need to propagate vaccine across the entire globe. And it's a very big challenge that -- again, hence, why we've been seeking to raise our capacity with the 3 billion announcement next year.

David, I just wanted to ask you last COVID question. When we think about kind of boosters in the context of the high efficacy that you guys have, we haven't seen necessarily any breakthrough kind of infections that sort of unwind all the progress in the, say, U.K. or U.S. or Israel. Does that inform the decision to invest and to continue to focus on some of these variants? Or is it just the goal to be one step ahead of the game, no matter what? You have kind of a next-gen vaccine ready to go on a number of different variants.

Yes. That's a good question. Let me give a couple of comments, and then I'll ask Lavina to share some additional thoughts. So yes -- so it's been our intention. It's been our belief, which I think is now playing out that this virus would mutate and migrate. And there was hope that maybe it would migrate towards something that was less of a concern for humans. But unfortunately, that's not, in fact, the case, at least at this time. The good news is that the initial testing we've done on boosters and on the original that still remains effective against all the variants that have been tested, but the way the virus is migrating, we do believe that breakthrough is either a possibility or even inevitable. And hence, the importance for us to continue to test against these mutants as they appear and to modify the offering as we've been doing now in this booster trial, which I'll let Lavina comment on. So maybe, Lavina, do you want to comment on that?

Sure. And good question, Geoff, in terms of what are we seeing in breakthrough diseases and what's informing the variant strategy. So we recently at the 1Q quarter result during our conference call released data from -- preliminary data from our Phase II with the variant boosters. And there, we showed a couple of data points that were part of the trial that may have been lost, which is that when we went to go boost these individuals, the participants who had already received the primary series of 1273, our COVID-19 vaccine, it was at a time point that was 6 to 8 months post the last vaccination that they got in that 2-dose series. And there, we were already starting to see the 2 dimensions that are important when it comes to looking at immunogenicity or that mutualizing antibody titer level. One is the time component, where at the 6- to 8-month time frame, we're starting to see waning of immunogenicity of those titer levels, both against the ancestral strain, the Wuhan strain, if you will, as well as the variants that are now circulating the globe. And one of the curious things from that dataset also showed that while you see the waning over time, you also see a step down in waning or neutralizing antibody titer levels against the variants. So against the South African variant as well as the Brazilian variant, there were 50% of the participants at the 6- to 8-month time frame, where you couldn't even measure their neutralizing antibody titers. They were below the level of quantification. And so that to us is a big piece of the evidence that, eventually, boosters are going to be the solution and needed in order to continue to protect people, particularly against variants.

Right, right. Okay. That's helpful. So if we move on -- 2 minutes we have left, so we have -- we haven't talked flu or the CMV program. But are there lessons to be learned from the success in COVID, looking at maybe combinations of different variants for either one of those programs, the ability to maybe add a little bit more runway to those programs? Obviously, you still have to derisk clinically and show pivotal data and even the case of flu proof of concept. But are there -- I'm sure there are lessons that you can implement that reflect the success that you've had in COVID.

Yes. Maybe I'd comment on again, and I'll invite Lavina to add. But I think, importantly, for us, we think -- and if you pick the flu as a good case study, we think this particular technology is going to be very applicable and quite disruptive to the flu market because of the speed of the ability to develop a product. And with the manufacturing process where you can have a shorter lead time, that will allow us then to bring a flu product to market, which is more closely matched with the strain that's circulating in the market at the time of launch versus the traditional technologies that are based on eggs, where they need to start earlier before they get to the market. We'll be able to come closer to the time of launch, and that should allow us to be more efficacious against these strains that are circulating at the time. So we're optimistic about this technology and its applicability, in particular, with the flu as an opportunity for us. But, Lavina, maybe you would want to comment also on combination strategies as well.

Sure. So very quickly, the ability to do multi-valent combinations is something that we think mRNA technology lends itself to. We've already shown that we can add in multiple antigens against one virus in the CMV example that you just talked about, where we do have 2 different antigens that we're presenting in our vaccine, the pentamer as well as the GB antigen. And then with antigens from 2 separate viruses, we do have an example in HMPV PIV 3, which is now currently in tabular. So that multivalency question is something that we feel very confident on because we've proven it out with the technology. But just one last point, Geoff, in these -- we're already over time, but one of the things we could leverage from our COVID-19 experience is operationally how we ran a 30,000 participant trial and had it enrolled and fully read out within a short time frame to be 4 months. That experience is absolutely going to help with all of the other vaccine trials that we'll be enrolling in the future.

Absolutely. Okay. With that we're out of time. So David and Lavina, thanks a lot for your time. Really appreciate it. Very productive.

Thank you, guys.

Thank you.

All right. Take care, guys.

Bye.