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

Well, thank you, and good morning, and welcome to another great session here at the Jefferies Global Healthcare Conference. Obviously, very pleased to have with us here the CEO of Moderna, Stephane Bancel. Thank you for joining with us. I know it's crazy and busy times for you but certainly exciting times and certainly a lot to talk about. So thanks for being here with us.

Thank you, Michael, for having me.

Let me just start first by talking -- asking you about your perspective on the 2021 outlook for COVID vaccines for Moderna and bridge that into your thoughts and visibility into 2022. This seems to be a big debate, but I'd love to hear your perspective as how that evolves.

Sure. So '21, from a supply standpoint is really kind of a done deal in a sense. It's impossible now, being June 3, for any manufacturer to add any meaningful manufacturing capacity because of the lead time between CapEx, hiring people, training them, raw materials and so on and so forth. So I think the capacity for the planet is called for 2021. If you look at the environment, as you know, there's been a lot of changes versus what we believed a year ago between the high efficacy of mRNA vaccines, the safety cloud on the adenovirus, the protein vaccine still not authorized in any of the Western countries. And so I think it's really all about delivery right now. So far, we are well on track to the 800 million to 1 billion dose -- 800 million to 1 billion dose number. And as you know, Michael, we've raised that number slowly as we got more and more comfortable for our ability to deliver. We delivered the 100 million dose to the U.S. government by end of Q1; delivered by end of Q2 -- end of May the second 100 million dose; and are well on track to deliver a 500 million dose in the U.S. by end of July. So the team so far is doing great, and we are getting good visibility on yield, on scale up. So I feel cautiously optimistic. I always want to be careful with manufacturing, but I feel cautiously optimistic. We do not have a biologics process like the adenovirus companies that have had manufacturing issues. And if you look at it, I think both Pfizer and Moderna have delivered on their manufacturing commitment. So as I look into '22. So what has really changed, as I shared on the call, Michael, is that in the last couple of months, which is why we decided to increase our capacity to up to 3 billion dose next year, we got a lot of call from governments around the world basically telling us, "Look, guys, we want more mRNA vaccine for this year and for next year." And they were saying, look, there are 4 things we care about as a government is we want the highest-efficacy vaccine to protect as many people as we can. We want good safety profile. We want good manufacturing reliability because, as you know -- and you've seen in the media, when a country orders and set up all vaccination campaign, which is a very big logistics effort, and then they don't get delivery, they are very, very upset. People in the countries are very upset and politicians do not like when their voters are upset. So manufacturing reliability is really important for the countries. And as well I think, having a manufacturing process that came on, it is not the biologics process, is a huge competitive advantage.

Yes.

And last but not least is the speed to variant and to boosters. Because as we all see, the virus keeps evolving. You see now the new lockdown because of Indian variant. And so I don't think this virus is over because there's still so many people that can get infected. As I've said before, we believe the kind of spring/summer time frame in the North, which is the full winter time frame in the South, is going to be very problematic because there's almost no vaccine in the South given the population that's down there. There's very high-density in household because of low GDP per capita versus the North. And so you have a lot of time, several generation family in the same home, cousins and cousins in the same home. And as they get into the winter, they spend more time indoor like we do in the North. And the last piece, what a lot of people that are not familiar with infectious disease, I think, tend to not appreciate is that you have a lot of immunocompromised people in the South because of -- including your HIV and tuberculosis and other disease. And it is not surprising that you've already seen in the South, P1 Brazil -- or I should call it -- is it gamma?

Yes. I don't know which Greek letter it is.

Yes. It's one of the Greek letters. I just remembered that delta is the Indian one because it's the last one. And so as you look at all those things, this is what governments have been telling us. When I get to talk to health minister, prime minister, presidents of countries, "Give me more mRNA vaccine. That's what I want. That's what my people want." And that's a big change. So what we've said is that we are talking about '22 and have already signed countries, like Israel and Switzerland, which were the first one to sign last year. So the same country that were early are early again. And all the countries that have already deals with Moderna, it's 80-plus countries, are negotiating more deals for '22 right now.

Okay.

And countries that did not get Moderna for '21 and are calling now for Moderna vaccine, I'm like, "Guys, I have no more. It's all sold out." They are interested to get booster for '22. And so I think the market dynamic has changed drastically from early last year. No data in the clinic, everybody betting on older technology to a world where people are just following the data and the facts and they just want mRNA vaccines.

That's really important. So let me take a couple of those and expand. Number one, do you believe that you -- we don't have -- this is going to be all stockpiling, right? It's all government purchases, right? That the government purchases, if it's all the same people in '21, and more people would need it and more countries would need for '22, that you would be selling more conceptually in '22 than '21 doses?

Yes. So that's why we are getting the capacity to 3 billion. If I didn't think we're going to sell more, I will not get my team going crazy.

Why would a country order less in '22 than '21? Is that even -- that wouldn't happen, would it?

So yes, a few things to think about, and that's way it gets a bit complicated. You have, first, the young children will be mostly vaccinated next year, some on the tail end of this year, but the bulk will be in '22. So that's...

That's new.

To 11 -- yes, that's new doses and it's 2 doses. The booster is going to be one dose.

Okay.

And so what governments don't know now, because the virus is still evolving quickly, is do they need one boost per person in '22 or 2 boosts? So some governments that are smart are basically buying at least 1 per citizen of a booster, 18 and above teens and young...

They buy 2.

Yes. And some governments are making -- are putting down money to get option that we have a 3-month or 6 months to exercise before delivery. Where they say, "Look, if there is yet another variant of concern in the fall of '22, I want to boost people around their 1-year anniversary, 9 months to 1 year of dosing." Because what I'm also hearing from countries investing -- because there is no data or how long protection will last, especially if you get infected with variants whether the vaccine you got is for the original strain, they're saying -- I mean, the smart countries are saying, "I would rather be 2 months too early than 2 months too late boosting." Because the most threat is going to be, again, lockdown and hospitals exploding.

So a demand perspective, the demand from a government purchasing perspective should be at least the same, if not greater number of citizens to be covered -- not doses because I know it's -- so same number of people covered adults, plus pediatrics would get to the same number of people covered. And then Moderna should sell more to more people because you have more capacity and more countries that didn't get the chance to order. So from a citizen's perspective, it should be more in '22 than '21?

Yes. And there's another aspect that I think people forget, Michael, which is stocks, which is today, there is no stock in the system, meaning we finished making a lot. It's QC-approved, it's on a truck, it goes somewhere.

Okay.

And in the country, it's the same. There is no stock between the wholesaler, hospital, GP's office, pharmacy. And so if you start to factor stock in the channels, which is true of any industry, people are starting to think about how much drug do they need in the channel so that they don't operate hand to mouth? Because people think that for boosting, you might not be having people willing to come to, like, vaccine stadium to just line up and spend another day waiting. That it might be more decentralized in more traditional health care settings, like GPs, pediatricians.

Your point is more orders because this was more a one-for-one demand, and they need to have more than just one-for-one because there needs to be convenience to be able to get it, right?

Correct.

Okay. That's another bar.

And the other piece that people also underappreciate is wastage. There's actually a lot of wastage, which is so sad to see. There's a lot of wastage. Again, think about it, in the early months of the pandemic vaccination phase in the U.S., people will line up a stadium when they would not qualify to get the last dose at the end.

How much do you think is wasted, 10% to 20%?

So it's interesting. If you look at flu -- seasonal flu, which is pretty similar because it's seasonal.

We'll get to flu too here, yes, yes.

It's around 20% to 30% wastage.

Okay. So when they're building their models, they're actually having to need to order, make build in a 20% to 30% adjustment factor. Okay. What about pricing philosophically? I would argue it's not the price per dose, but the price per person. And it's a variant, which there's a premium on a variant? Plus...

Yes. So I believe the price of this market is going up, not down.

Going up, not down.

Yes. And the reason is the following. When we're negotiating at the same time last year, we had no efficacy data and we are in the marketplace with very established players like protein or adenose, and there is a company, which we all know is called AstraZeneca, who was going out there saying, "We will sell for no profit at $3 to $4 per dose." So as you know, Michael, our price outside the U.S. has been $20, $30, depending on the country, the volume and so on. So imagine how funny to us to negotiate with countries telling me, "Hey, Mr. Bancel, why am I buying from you at $25 or $30? I can buy the AZ vaccine at $3."

That's off the table now.

It's off the table, exactly.

But more importantly, I don't -- I mean, again, I'd like to be proud of using this analogy that -- does it really matter for 3 or 4 cups of coffee. And there you go drinking the coffee at the same time, when you're talking about 1 year of protection, ballpark. Does that even matter? So if you're telling me that the number of horses in the game has been narrowed down, that you're meeting the 4 criteria of manufacturing, efficacy, safety and variance, I think those are the 4, that you don't see any material pushback to healthy pricing that should be higher, not lower.

Yes. And there's another piece that's important is there are many players, of course, Pfizer. And the Pfizer management has said on the record on their Q calls that they think that as the market becomes more of a commercial market, prices are going up.

They said that, too. Okay.

And Pfizer, as we all know, is a company that has a tendency to raise prices and push prices up, not down as a company culture. And so I think that's an important piece, also the dynamic of what we are seeing, which is low-cost players are really out of the market because of the issues, and the only other player in mRNA has more tendency to want higher price than our price.

Philosophically, I do see the concept of higher pricing, whether that's pricing per person rather than per dose per se, but the value per person will be higher is what you're saying. Now if I'm going to pen you, is that it makes sense that it's -- if it's $25 a day per dose, it's $50 per person. Is that, conceptually, the $50 per person still valid?

Yes. I don't think the governments are going to go that far. But a premium versus the price of last year is definitely on the table.

Okay, okay. And you're not seeing any pushback on that?

No. Again, people know there are 2 companies that have what they need. And think about how much are wasting on testing. I mean, think about -- I don't know how many test you did.

How much is a test? I don't know how much is a test.

The test last year. Think about the money that was wasted doing testing, and the test numbers are dropping. So people would rather -- especially now that they know there's high-efficacy vaccine.

Yes, yes. That's fair, right? So if you can consider the idea of the testing and the price and the scarcity of the product and the attributes, then you're not seeing pushback. Now why has Europe signed a huge deal with Pfizer? Correct me if I'm wrong. I don't think there's any major announcement out of your side. But also the U.S. hasn't signed anything yet. What's going on there?

So as I said on the Q call a few weeks ago, we are talking to every government who ordered already. Europe is part of those. So I'm not going to comment more on that for obvious regulatory reason. But yes, we are talking to Europe, obviously. And in the U.S., as you recall, the U.S. has a few more options that they have the right to exercise. And so again, when there's something to announce, we'll talk about it. But the U.S. government, as you just look at the data on the CDC website, it's mostly Pfizer and Moderna a vaccine that's being used in this country.

Yes, yes.

So the government is indeed getting ready for boosting.

Yes. The U.S. government is good. All right. So you're in talks with both of those, and those are obviously important geographies. Okay. What about variants? What can you say about -- not selling the vaccine, but the demand utilization even beyond '22? And the reason I ask that is because if the number of infections is going down and the vaccines you're using, generally speaking, are blunting the virus and are maybe not 95% effective, but effective in blunting variants, concept of herd immunity or whatnot, don't you think that, that concept means that the demand urgency for people to use it is less? Make a comment about that.

Sure. So I think it depends on what you believe about the science. So what we believe, as we showed at our vaccine data is that like natural coronavirus infection, protection is going to be 1 to 3 years if you get infected by the same virus, same variant, from what you get vaccinated to what you get infected later. And the 1 to 3 year depends on people's health, age, co-morbidity factors and so on and so forth.

But if it was the same strain.

If it's the same strain.