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

Good afternoon, everyone. My name is Ted Tenthoff. I'm a senior biotechnology analyst at Piper Sandler. Thanks for joining us for this year's Virtual Healthcare Conference. Sorry for the slight delay, but as you guys know, Stephen Hoge, President of Moderna literally is on the front lines of fighting Omicron. So we're going to jump right in.

Stephen, what can you tell us about this new variant and retain protection by the current vaccines?

Well, first, I want to say thank you, Ted. We'll jump right in, of course. I do apologize to everybody for being a few minutes late here. As you can imagine, we're urgently dealing with some things related to Omicron, which makes us a very good starting question. So where -- we don't know yet, is the short answer. We're looking rapidly to test sera from people who've been vaccinated with our vaccine, as every other manufacturer is, against assays that don't yet exist, which are assays that specifically are for the Omicron variant of the virus. We expect to have that data in the coming couple or 3 weeks. So sometime in the middle of December. And I think that will be a large international effort across all manufacturers and academia and government to try and produce that initial data. What we know is that our vaccine and others have done a very good job at stopping prior variants. And so there's reason for some optimism that it will hold up. We were able to -- with our vaccine 1273, have very high efficacy with Delta this past summer. Actually, we saw the highest titers and the best protection. So a good efficacy against Beta before, which is the variant that was first identified in South Africa earlier this year. The concern for us is that this looks like a hybrid, a chimera of Beta and Delta. And if these are just additive effects, we think we're probably fine. If they're multiplicative or something like that, then we really don't know where we are. The good news is we don't start with nothing. We have vaccines. We know vaccines can stop this virus. And so our first line of defense is we're just going to use the existing vaccines and boost more frequently or possibly give a slightly higher dose to high-risk people. And we actually are pretty optimistic that will be good enough to get us to the second line of defense, which would be a new updated vaccine if necessary.

So tell us about your efforts there because I know that you guys for a long time, have firstly been anticipating mutations like this, and preparing for them. And are already testing multivalent mRNA vaccine boosters. So tell us about some of those efforts and what it would take to actually develop a Omicron-specific vaccine?

Great question. So first on the multi valence. What we've been doing is, as you said, we've known this virus was going to keep evolving. And it was entirely predictable that it was going to try and evolve to evade immunity, which is whether it's vaccines or natural infection, what it's ultimately going to trying to do to keep reinfecting people. So we have, throughout the year, as we've seen variants that have mutations that worried us for evading immunity or other features, we make sure that we added them to our multivalent platform. And so we have 2 multivalent vaccines, 1 which includes the Beta variant, what I first described, has had the best immune evasion we've seen so far earlier this year. Fortunately, it didn't take off globally. And the second includes both Beta and Delta, and we all know the Delta story from this summer with high infectivity and present story. And that -- those 2 multivalent vaccines, we've actually already dosed them in pivotal studies, Phase II/III studies. We've got hundreds, upwards of almost 600 people in some of those studies that have been received those vaccines. We've got safety data, we've got serum. And so in parallel the testing against our prototype vaccine over the next 3 weeks, we're going to be testing those new updated multivalent boosters. There is a reasonable chance, I believe, that if there is a big decrease in protection from the prototype vaccines that actually we'll be able to get most or a good part of that back from the multivalent platform. And again, the reason is, if there's a decrease, we think it's because of these mutations, and many of these mutations are present in those multivalent vaccines. So those would be tools that will be available really at the very beginning of next year in January, if we needed to roll them out, January, February. I think the challenge is, if that's not good enough or if we want to take a more long-term view and say, let's bring forward an Omicron-specific booster. That really you start talking about 3 to 4 months. And the reason is, it takes a couple of months to get into a clinical trial. It takes you about a month to run that clinical trial, and then you have to file and process that data and move forward. So that would be more in the early spring, maybe late winter, but sometime in the March, April time horizon would be the time line -- which would normally have those things rolled out in large numbers. You have a small amount, you have the data sooner, but ultimately, large production volumes will take little more time.

And as you said, this isn't a still start. I mean we've -- what you guys have accomplished over the last years in terms of preparing the vaccine, certainly in terms of manufacturing. So this really is a rapid response to a new threat and something that we can kind of consider as something to look forward. I'm going to transition a little bit because there's so much ground to cover. We could probably talk for an hour and not that you have the time to do that. But 1273 is presently approved as primary in 18 and older and as the booster. I believe it's available to teens in Europe. But we're still waiting for FDA emergency use authorization in teens here and then ultimately, we'll move down to the younger children. Tell us about sort of what that hold up is with the FDA and with the process to get the initial vaccine approved in younger kids?

Yes. So first, it's actually not just in Europe, it's in Canada, it's a number of other countries. Actually, our vaccine is fully approved in many geographies for 12 plus. In the United States, as you said, it's 18 plus. And the difference has been, as we announced a few weeks ago, is that the FDA has been more cautious in trying to follow up the data on the rates of some side effects that are seen with the vaccine and particularly this incredibly rare rate of -- very rare rate of myocarditis, 10 per million roughly. And the truth of the matter is, it's the same data that everybody is processing everywhere, but different regulators have the -- their prerogative. It's the thing we want them to do, to independently review them and decide when they get to a position of deciding to move forward with a booster -- sorry, with approval in any population. In the case of the United States, they've let us know that they just feel like they need more time to evaluate that signal, which is totally appropriate. We encourage obviously -- we always want [Indiscernible] to do that. I think there is also the reality, which is that in the United States, purely as a function of some of the timing of the emergence of that signal, which happened between when Pfizer filed and when we filed, many people who wanted to get in the adolescent age group who want to get a vaccine, actually received Pfizer's vaccine over the course of the summer. And there's not as much of a need, a strong sense of need in the emergency use context for the Moderna vaccine in that population. So I'm sure that that factors in a little bit as well. I think it would be in a different situation. We didn't feel like largely that population are already been vaccinated in this country. But again, we will work constructively and we're very grateful to the FDA for their continued due diligence on this, and we'll continue to work with them as they evaluate that signal and make a decision about the best path forward. We are also pursuing under 12 approvals and authorizations globally. I expect to hear about those in the coming weeks and months, I mean, depending on the different geographies. In the case of the U.S., as we said, it's obviously appropriate to wait on those filings, although we've shared the top line data, which we think is terrific, and we're very encouraged by. We've decided to hold off on filing in the U.S. at younger ages until we make sure the FDA is comfortable with the adolescent population data that we've already produced for them. So the U.S. may continue to lag, but we think globally, we'll move forward very quickly in kid population.

That's really helpful. Now you guys have gone in to deliver 700 million to 800 million vaccine doses this year. Spikevax revenues of $15 billion to $18 billion. Next year, somewhere in the $17 billion to $22 billion range with a booster market in the fall of around 2 billion of next year. What do you see as sort of the long-term outlook here for SARS-CoV-2? What does this curve look like?

Yes. It changes on us day to day. So whatever I say has to be qualified by -- it's only today valid and who knows what tomorrow brings, because none of us would have predicted Delta, none of us predicted Omicron. And I think it's really hard to predict what 2023 looks like. Let alone 2022, just changed dramatically on us. But I think if I take a very long view and say, "I'm out 5 years from now." And we're through these waves of variants, where do I think this virus leaves in the long term for us. Look, we know that coronaviruses infect in young and old, every year they need hospitalization and some death in both those populations. And the burden of that disease is quite significant. We don't tend to think about it. I used to call it a common goal, but it can be very significant in the 65-plus population. In that sense, we now also know that if corona -- SARS-CoV-2, COVID-19 drifts into that category, it may or may not continue to be as severe a disease as it is now, but it is certainly a disease that's preventable with vaccine boosters. And so given that, we believe that for those older populations, as well as those over the age, you will decide over 40 or 50 over 65, those who are at high risk of infection, either because they have medical conditions or they have jobs that put them at risk of that infection, may benefit from a seasonal booster. And the more we see the SARS-CoV-2 virus evolve, the more, I think we have to accept that, that actually might be something that needs to happen almost every year going into the winter season. And that has been our operating model as a company. So this heads towards, we believe, something that looks sort of like the traditional flu market globally right now. It could be larger, and a lot of that depends upon how severe to the diseases and how much the virus continues to surprise us with over Omicron-like opportunities. Now what is the pricing of that? I wouldn't say that's like flu, we don't know yet, we have no idea what the future brings. And it also depends a lot on how much does this continue to be a largely government-procured market, or does it start to become more traditional private. And we just don't know if and when that happens.

Yes. Awesome. So switching gears to set it up perfectly, just to talk about flu. Tell us about your efforts in flu because, again, if we -- if you guys deliver comparable efficacy as you have in COVID, what you could do to flu, it would fundamentally transform the seasonal flu market. So -- what are your plans there? And what are your plans ultimately to develop pan-respiratory vaccines?

That is our passion, as you know, and that's the place we're going, for sure. And so I'll talk -- try and talk most about pan-respiratory stuff, but just quickly on the flu space. We do think that mRNA technology will add substantially to the efficacy as potential in flu. And we have a long-term vision of getting there by adding additional antigens, so more variance of the hemagglutinin antigen, more flu strains, if you will. As well as additional antigens in the form of neuraminidase, other parts of the flu virus that we think will provide higher protection. And then of course, we've all seen how mRNA can allow us to move quickly and respond to changes in the variance. We just have in that conversation. So different strains of flu, which sometimes the vaccine mismatches, we would hopefully be able to resolve with our platform quite quickly, which will give us more durable performance on the average. And so all of those approaches are in flight in different studies. But it's important to note that our first program in flu is actually one whose objective is to fast to market. And so that is our 10-10 program. That's why we'll have data very soon. Our goal there is we want to quickly get that approved and combine it with COVID to do pan-respiratory vaccines at the beginning of that. But in order to that, we have to work within a familiar regulatory framework. And so in the case of flu, that is they pick 4 antigens every year, HA antigens, WHO does and vaccine manufacturers roll those out. And so the fast path for 10 10 is to try and go do that. And I think it's important to characterize that we would expect that -- we hope that, that will look really strong in performance. But I think because we're doing something that's more in line with what other enhanced vaccines, high-dose vaccines would hopefully do in terms of efficacy. I don't think it's going to be the game changer that we were just talking about. I mean, the game changer is what happens right behind that, which is the faster market 10 10 will go through, but then we're following behind with more antigens, more hemagglutinins strains, more variants. And we think that that actually will lead to the next step change in hopefully, efficacy in the flu market. Now the second thing which we talked about, which you just mentioned is combinations in a respiratory. So we hope to have at least as good as the best flu vaccines, maybe a little better, but we'll have as our first generation program, but that's our target. No add over time. But the first thing we want to do when we get that 10 10 program, if we can get that 10 10 program to authorization approval, will be to then combine it with a COVID booster. And then the next step is actually combine it with our respiratory syncytial virus program, RSV program. And the goal for that is we really think that these are syndrome -- syndrome of viruses that impact -- syndrome as disease. A group of viruses that impact older adults every season, and it makes a ton of sense to just boost everybody with a single shot every year. One way to think about it is, flu maybe creates half of this disease today if you compare it with coronavirus and RSV, wouldn't it be nice to have a single flu shot that covers you against all of it. And that is our principal objective in the near term is to get to a pan-respiratory, flu, COVID and then flu, COVID, RSV combination subsequent to those approvals that you would get seasonally for older adult populations. We would eventually want to look at that as a second-generation or third-generation product, add more features to it, add a better and better flu performance of 10:20 and 10:30 are 2 other few programs that we hope to demonstrate -- And then lastly, moving into other populations. So higher risk populations that are younger and including eventually pediatrics. The reason we're not doing that right out of the gate, is that all of that will take more time. We have to reshape the regulatory landscape in the case of the change in the flu antigens, you have to reshape the WHO approach to selecting these things. And that just can't happen in a couple of years here. And so we'll work to build that data over time. So we're very excited about the flu program. We are actually quite optimistic about the performance of it relative to current vaccines, but it won't be our last best shot. It's actually just going to be our first shot at trying to get to that combination product quickly.

Really exciting, especially considering how much 1923 has derisked the whole mRNA vaccine franchise. I've got a bunch of questions coming in. So I'm going to kind of try to ask some of these as they came in. Firstly, what is the impact of Omicron on children, on toddlers, based on early data, given that children almost never or caught COVID at lower rates?

Yes. So I will say, first of all, I have only the information that comes to us through our medical community internally and externally. And so I would defer to others if they are reporting. What we have seen reported is particularly out of South Africa, which is a country in terms of a tremendous amount of credit for their transparency and the quality of the data they're producing right now. But we have obviously seen these reports of higher infection rates in the under 4s in children. I think what's not totally clear to any of us yet, is that Omicron has evolved in a new way that allows us to create more symptomatic disease in young children, which would obviously be a huge concern. Is it a reporting bias? Just right now, we're early in this phase and we're capturing all of those cases. And conservatively children are being hospitalized, but we'll get a little bit less conservative over time. Or is this actually a feature that was always there. It was always in the background with this virus. But what has happened is we've really relaxed so much of our social distancing and other work that actually you're starting to capture those infections. Whereas a couple of years ago or a year ago, I should say, we were in locked down, many schools were closed. We were being much more conservative about exposing young children to this disease. I just don't -- we don't know yet. All of these are credible hypothesis. There are probably many others. It is certainly concerning that we're seeing higher infection rates right now with Omicron. And I think it's reasonable to assume that there's something maybe in the transmissibility of that virus that's leading to more symptomatic disease in young, but we just don't know enough yet.

Yes, that's helpful. And I appreciate you answering it. I'm also getting actually several questions on the Arbutus court ruling today on what that could potentially mean to Moderna? And maybe you can just give a 2-second background and any thoughts if you do have any.

Sure. So Moderna in a company called Arbutus had entered into a series of a dispute around some claims that Arbutus have made around their patent state and whether it related to what we were doing. That is a dispute that existed years ago, Ted, as you know, and 1 that really substantially in our mind is in our rearview here. The way these disputes run, there were a number of patents that have been advanced. Some were -- we had challenged and were disallowed and the Federal Court held up those -- those disallowances, which would be great. Some were ultimately the court said we're ultimately allowed. And subsequently, if we felt the need to, we would to go back and challenge those in [Indiscernible] But the most important thing for us is to say, and we've said this consistently in our regulatory filings over the last couple of years, is that we do not believe any of these patents read on our vaccines portfolio or COVID-19 vaccine specifically. In fact, we've moved on substantially from the compositions and technology described in those Arbutus patents. And that's been actually a story Ted. I know you've followed for years. That's hard work that we've done. And so at the end of the day, while it was a dispute that started 3-plus years ago, and has now come to a possible conclusion, it's not 1 that we think has a direct impact on what we're doing.

And this primarily has to do with your lipid nanoparticle technology and the encapsulation.

And in an older lipid nanoparticle technology that we had in-licensed from a prior partner of our Arbutus, not that subsequent version of that technology that was invented.....

Yes. Exactly. Great. So we're actually just about out of time. And literally, I think we're on question 5 and I had like 20. So we barely even got to scratch the surface on the pipeline. But I think that's a lot of the conversation on Moderna today, really focuses in on COVID because it's such an impact. And before I forget to say, just thank you to you and everyone and Moderna for what you guys have done over the last years to keep us safe. My last question for you is beyond the impact and the validation and the expansion of the company, obviously, money has flowed to the bottom line. I think you guys ended the third quarter with something like $15 billion, which is just incredible. How do you envision deploying that capital and investing in all these other areas? I know you're doing a lot of work on vaccines. You know my favorite area, it's orphan diseases, where I think the technology makes so much sense. How do you really envision investing back into the technology over the next 5 years or so?

Yes. Great question. And the short answer is absolutely, we think we have a huge number of opportunities to reinvest over that time frame and even more aggressively. Let me just describe a little bit -- that you know this Ted, but -- we built this company not to make a COVID vaccine, not even just to make vaccines. It's a technology company. It's a platform technology company. The principle was that we were going to change the way medicines are made. So if we could do one, we could actually do 10 and 100 very quickly. And in fact, if you look at the company even as it stands today, well, we're really well known for the first product, it wasn't a product we thought we were in first, but its COVID -- the COVID-19 vaccine. We have 34 other programs in development, and we're entering multiple respiratory vaccines in the pivotal studies right now and other studies, as you mentioned, rare disease and oncology that are also in proof of concept studies as we speak. So we've got this huge number of, I guess you'd say, Canada shots on goal that are already up and running. And we're still a relatively small company. Most of our dollars get reinvested into those programs because our platform allows us just to add them at incredibly low marginal technical cost to risk, and we can just do more and more. So what you should expect us to do is just what we've been doing for the last number of years. Realistically though, we have 10 times the resources that we've ever had to do this. But it's the same idea, which is we always believe once the platform got proven, we would be able then to more rapidly expand the number of programs we have and much more forward in parallel. And so even in the last year, I believe we added almost 10 pipe programs to our pipeline. We started many more Phase III studies. We will continue to do that. And we think that the technology demands it. That's ultimately what being a platform company mean. So the single best place for us to reinvest that $15 billion is in the core platform technology that created it in the form of new medicines. Something we will do in every 1 of these diseases. We talk a lot about respiratory disease. But Ted, I agree with you, I am very excited to see what happens in the rare disease space in the near term. And then the corollary to that is how we move into genetic medicine, so gene editing and all the associated technologies, which we've also announced we're moving into in a substantial way, right on the back of that rare disease proof of efficacy, proof of concept. So I'm really excited about it. I think it's early. I think we will -- you will see us do much more of what we've done that has made us successful so far.

Yes. Excellent. Well, Stephen, thank you for your hard work. Thank you for being with us today. It's really an honor to have you. And again, I appreciate your time we could have talked for an hour at least and discuss more of these programs, but looking forward to additional updates in the new year. So thanks so much.

Ted, thank you for the great questions.