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

Good morning, everyone. Welcome to the third day of Cowen's 42nd Annual Healthcare Conference. My name is Tyler Van Buren. I'm a senior biotech analyst here at Cowen. For this next session, we have a fireside chat with Moderna. It is my pleasure to introduce Stephane Bancel, the Chief Executive Officer. Stephane, it's a privilege to have you. Thank you very much for being here.

Thank you, Tyler, for having us.

Of course. [Operator Instructions] And so first, I'd like to start with a couple of general questions before I get -- Stephane, before we get into COVID and the pipeline. First one is, in 2030, what percentage of your business do you foresee being in therapeutics as opposed to vaccines?

So it's tough to be precise because, as you know, we have a very big pipeline with 44 programs and growing. But what I think we can say with some certainty is I think the vaccine franchise will still be bigger than therapeutics just because of how big it will be. If you think about what we're trying to do, Tyler, is develop a pan-respiratory vaccine. And if you just do a couple numbers, if you believe it's going to be 1 billion dose per year, and we have 20%, 30% share, and then you can pick your price of a combo product that has COVID and flu and RSV and a few things, that's going to be a very big franchise. And then you have the latent virus vaccines, which if you look at things like HPV and VZV just as a proxy, those are always in the $2 billion to $5 billion vaccine, and we have 5 right now. And as we said, we are developing all the vaccine against latent viruses in the labs. And so if you just look at the size of those 2 franchises, that's going to be a very big number. So what I believe we'll have quite a number of rare disease program and oncology program and so on launched at that time because 2030 is still a few years out. Actually, that just a gigantic size of a vaccine franchise will make it the biggest part of the portfolio in terms of revenues.

That's great. So beyond COVID, how do you plan to stay ahead of the mRNA competition from Pfizer-BioNTech but also from players like Sanofi, Glaxo and others?

Sure. So let me maybe take those one by one because we're in a very different place. Obviously, BioNTech has done a lot of science over the years, has a very good vaccine on the market. What is not clear yet is what's going to happen between BioNTech and Pfizer because Pfizer said they're going to go alone and then they do the VZV vaccine together. They have, as far as I remember, we are still the flu vaccine together as well. And as now historically, pre-COVID, BioNTech was very focused on oncology. And not only on mRNA, whereas Moderna is a pure player in mRNA, BioNTech is on small molecule, large molecule, cell therapy and mRNA, of course. So it's not very clear where BioNTech is going to go in term of infectious disease, solo versus with Pfizer versus not going after everything like we are going after holistically. And you might have seen the announcement just came out as part of the SPI conference yesterday that we're going to go and develop 15 vaccine for 15 highest-priority pathogen. That's on top of respiratory. That's on top of latent viruses. And so that's for that one. The Sanofi and GSK piece is quite interesting to see how it's going to evolve because I think they're going to have a big challenge in term of IP. As you know, we have a lot of IP. We've done this for 10 years. So when you come in and you feel 10 years after people, we're going to have a lot of mines everywhere, IP-wise. And then there's just scale. I mean if you look at it, Sanofi made the announcement after buying Translate that they're going to have 400 people in mRNA. Well, we have 3,000, and we have more than 400 just in process development. The process development team itself is 400 people at Moderna. And so I think scale is going to play a big role. The other piece, too, is, as you know, we've invested a lot in digital, in robotics. And now we're doing a very big push in AI. And so I think those big companies, as you know, they are -- and I used to work for one before. They are mostly analog companies. And so I think the sphere, which we can learn and we believe in the laws of exponential and compounding the speed at which we can learn, we're already at the sixth generation of manufacturing process. And just before Christmas, I was with the team in our Woodford, having fun in reviewing all the things they're working on. And they're going to disrupt themself and invent new things. They're going to take manufacturing process parts out of the process as we get higher and higher purity as we understand better and better what is in the vial. And so GSK and Sanofi, I think they're going to make some noise. I think they're going to try to do it. I think they don't understand how hard the science is because you have to integrate everything. And as you know, those big companies are very much run in silos. And when you're going after a brand-new technology, you have to do a lot of trade-off between the talks and the chemistry and the biology and so on. And this doesn't work very well when you do it across multisites, which I think they're going to do it in France, in Marseilles, one of the historic vaccine sites, and the Translate -- the old Translate team, which is in Cambridge. So I think they're going to talk a lot -- they're going to realize it's much harder than they think. And then they're going to realize they have IP landmines everywhere.

Very interesting. So now we'll get into COVID. Are there any updates on the negotiations you have for the U.S. for 8-Ks potentially for the fall/winter second half since it's currently not in order?

As we have not issued a press release, there's no update that I can give you. The discussions are ongoing. What is clear is we will have vaccines for the U.S. market in the fall. Whether it's sold to the government also to the private market or mixed, we have in our schedule to be making doses for the U.S. I don't see how we don't supply the U.S. market as the U.S. population with a fourth dose booster for the fall.

So I guess, to be clear, those ongoing discussions are about what -- who the order would come from and what it would look like. Whether it's government versus private market, you guys are trying to figure that out at the moment?

Correct. I mean, as you know, for most of our products, there's a very well-established route of getting vaccines to consumers. And what is not clear, as you know, what has happened in the last 2 years is the U.S. government has been buying directly from companies under the EUA. By the way, most people don't realize, but it's all public stuff. We were not allowed to sell to anybody but the U.S. government under EUA. That was part of the EUA that the authorization we got was to sell to only the U.S. government. But now that we have a BLA, we can sell to any of the PBM, CVS and pharmacies and so on, hospital networks and so on. So just need some clarity from the U.S. government what do they want to do for the fall. But we are planning the schedule to make vaccine in the U.S., so nobody should worry about access to a vaccine in the U.S. for a fourth dose. And as you said, we have put 0 in term of sales, in term of either of the APAs or the options because just technically, we have not signed a PA to U.S. government or there is no more option contract available to the U.S. government.

Got it. And when does that clarity need to come for you guys to be able to produce the number of doses for the fall/winter? How much lead time do you need? And there's a client question, just if you guys have capacity to produce a significantly greater number of vaccine shots above the 19 billion in confirmed APIs.

Yes. So we are planning to make at least 100 million dose for the U.S. market, whether they are bought by the government or they are going through traditional channels. And so -- and this is in the schedule. So yes, we have a capacity to do it. Again, I never contemplated a world where there will be no more vaccine in the fall in the U.S. So it's in the schedule.

Okay. Fair enough. So you've mentioned the potential to increase COVID vaccine market share. Will that primarily come from increased manufacturing capacity? Or what other factors might be at play? And does the -- will the early kind of booster dose data give you confidence?

So I think there's a few factors as we discussed on our Q4 call. Clearly, the supply has played a role because, as you know, last year, because we need 3x more mass in drug substance than the Pfizer vaccine. So we were roughly making the same number of kilos, if you look at the output of how many vaccine Pfizer supplied and how many vaccine with our supply, it was really a ratio of 3.3, which is exactly the mass ratio between our 100-microgram and their 30-microgram. And so as we've increased capacity and as the booster is now 50 microgram, we have a lot of suppliers we've been communicating for a while now. And so supply is not an issue, which was an issue in term of us losing share to Pfizer, especially in places, for example, like Europe in the first half of 2021. So that's out of the picture now. The other piece too is, I think, if you look at what happened over time, in the fall of -- sorry, December of 2020 when the vaccines were authorized, the weaker part, and in the beginning of 2021, most people on the planet for more vaccines were similar. And as the real-world evidence has gathered, I think there are more and more people now who know at the government level, at the health care professional level, GPs, nurses, pharmacists, and at the consumer level, there are more and more people who know that the 2 vaccine don't look the same over time, that the Moderna vaccine hold efficacy much better. And that's the reason why you see the market share data we shared at our Q4 call that are very telling and very significant in our job. And as I said, in Germany, we used to have 6% market share in the fall -- early fall. Why? Because we had no supply, and this is BioNTech's country. But we have close to 40% share as the third dose booster was happening. And that's really a consequence of supply but also people, including government seeing the data. I mean it's again widely public information, but the Health Minister in Germany in the fall said the BioNTech vaccine is like a Mercedes car, but the Moderna vaccine is more like Rolls Royce because he had seen the data. And it was quite telling on national TV in Germany, the home country of BioNTech. So I think people are already saying to understand the 2 vaccines do not perform the same over time. And yes, to your second question, the data that we have seen time after all the variants that we have done, the Beta variant, the Delta variant and now the Omicron variant, for which we don't have human data on Omicron, but it's molecular biology. I think what a lot of people still do not understand about the power of this technology is its molecular biology. This is not black magic. It's like small molecule where you change an atom, and you have a totally different tox profile, efficacy profile. It doesn't work like that. If you do a 100% copy of the genetic information of a virus and you put it in exactly the same lipid, same mRNA with same molecules, same manufacturing process, you're going to get exactly the same outcome because molecular biology is not black magic.

Okay. Getting a lot of client questions flowing in, which is not a surprise, but we'll try to stay on track. Maybe we could answer a couple of them that are similar and on topic. So is that 100 million doses you mentioned for the fall/winter only or inclusive of doses shipped year-to-date? And the other one was, which is similar, what about all the doses in the U.S. that have not been used yet?

Yes. So there's a lot of things to unpack here. So the doses that have not been used, a lot are being given away, number one, to low-income country, most of the time, via COVAX or sometimes through U.S. donation. Second, the product they have is 1273, so Spikevax, the original vaccine. If you look at the data, I think the data we shared at our Q call a few weeks ago, we believe the vaccine you're going to want to get as a fourth dose in the fall is 214. That's what I believe. I've not seen the human data yet, but again, molecular biology not being black magic. If you look at what we've done with the Beta variant booster last year, for which we have human data, which we shared many times, it was very clear that bivalent vaccine with 2 mRNA, one with 1273, the original vaccine, and one with 2 -- with the variant-specific Beta last year Omicron that is in the clinic now, will give you better duration of protection. Because the piece that is very clear is none of us knows what will be circulating in the fall. Is it going to be a genetic daughter of Omicron? Is it going to be a new variant that is not a genetic daughter of Alpha or Beta or Delta or P1, the Brazilian strain at the time? Nobody knows. And so we think that the best way to protect oneself or the population if you're a government is through this bivalent approach, where if it's a daughter of Omicron, given Omicron was such a genetic drift, as we all know, from the original strain, we provide with a [ timing ] system. If you have never been infected by Omicron, all the neutralizing antibody specific to Omicron. If you got Omicron, as a natural infection, will boost those antibodies, will be even better protected. And if it's a new variant coming from left field, like a daughter of Alpha or Delta or something else, by giving you the original vaccine, will boost your entire library of antibodies. I think sometimes people forget that unlike an antibody that you get from Lilly or somebody else, when you get a vaccine, you make a super antibodies. You don't make 1 or 2. You make a super. And so by basically getting all the antibodies back up, there will be a huge protection against infection, but especially hospitalization and deaths.

Okay. And on the topic of booster durability, you guys have also shared some initial data there. But would you say now, especially with the potential emergence of still new variants, that it's highly unlikely that the immunity provided from the third or even the fourth dose ends up lasting years as opposed to months? And how are you -- I know you guys have said you'll probably get annual doses, but how are you going to differentiate versus old versus young or healthy versus immunocompromised?

That's a great question. And I think this is why sometimes people get also a bit confused about all those moving pieces. Our vision is that people that have high risk, which I define as 50 years and older, immunocompromised, couple factor of comorbidity, plus people who can get exposed a lot by their work, like health care worker, people working in stores and stuff like that. If you are not young -- and I qualify. I'm 49. If you are not young, it's very different from if you were infected or vaccinated as a young person. I mean I've never been exposed to COVID when I was young because it's a 2-year old virus. And so I don't have the same T cell memory than if I've been vaccinated or infected young. So my best protection, as I go into the fall/winter of '22, '23, is my antibodies. And my antibodies, as we know, they're waning. This is not linked to money. That's linked to biology. Antibodies wane over time. And the waning goes faster if you do not have the right vaccine for the variant that is circulating, which is why if it was all one strain circulating, we would have great protection. But because it's a new strain with a lot of mutation, you see a 5, 10, 15-fold reduction of antibodies, because you don't have all the perfect neutralizing antibodies to attach everywhere to this new virus. And that's a piece that I think makes it complicated for people to understand. This is going to end up being an annual flu shot. And we have said it for a long time, we are very convinced about the virology. The virus is not going away. The virus is going to keep evolving. And if you are at risk, you're going to want an annual booster. But if you are younger and you don't want to get sick, you're going to want an annual booster. I mean the example I use is myself. I've been taking flu shot for the last 20 years, every year. Have I taken it because I'm scared of dying or flu? No. I've taken it because I don't want to be sick because I want to be working. I want to be having a normal life. I want to be able to enjoy my life. And so I don't want to be in bed for a week because I got a bad flu shot 1 year, but it's never because I've been afraid of being hospitalized. And so I think a lot of people, because we all have been traumatized by this pandemic, we just want a flu -- sorry, a COVID shot as they go into the fall/winter. And as you know, our vision, and that could be as early as '23, is to combine flu and COVID in a single shot so that you get your one shot and then you spend a nice winter.

Great. Well, it's a perfect segue into flu. So the Phase II flu data, you guys have said early 2022. So that's -- is that data essentially imminent, it could come any day?

So the data is going to come soon. As you know, when we presented the Phase I data, I think just after Thanksgiving, we have said that the study was fully enrolled. It's a 1-dose study. It's a booster. So you need to get the blood work to analyze it to see it. The data is coming soon. As soon as we have it, like we've always done, we will communicate it. We're not going to keep it under wraps for weeks or months. That is not what we have done. And we need the data for us to decide what's the dose for the Phase III. So to remind people, in the Phase I, we had no dose response. So again, for people that are not familiar with drug development, it means that at the 3 dose we tested with the same level of antibodies, which tells you, you tested -- you dosed too much, which is a good prime in drug business because if you dose too much, you can always dose lower. And so what we want to see is a dose response. And so we tested the 50 microgram, which has the lowest dose in the Phase I, and the 25 microgram to figure out which dose we want to pick. And as soon as we have that data, we're going to make 2 decisions, and it's important for people also to understand the 2 decisions. One is what dose we're going to run the Phase III, and the Phase III will start right away in the Southern Hemisphere because we need, of course, fall and winters to have cases, and that's going to happen in the South. And at the same time, we're going to do a Phase I of a COVID plus flu combined single dose, the product 1073. And that's why we need the dose. So if you're on the IND, is ready to go to the FDA for the combo, what we just missing is what dose we want the flu component of the vaccine to go into the clinic, and that's going to be going. And that's going to move very, very fast because, again, the way we're going to do those authorization for the combos is by getting the monos approved, where you have a Phase III, where you get neutralizing antibody on the one hand, efficacy on the other hand. And then if you can show in your combo that you have a similar level of neutralizing antibodies, that's how you'll get the label on the combo. So the combos, if you think about it, they're going to be a Phase I where you're going to do dose finding and so on. And then it's going to be a Phase II/III happening at the same time, and it's going to be only looking at neutralizing antibodies. So if we were to start as soon as we get the flu dose from the Phase II, the Phase I for the combo, flu plus COVID, that Phase III for the flu plus COVID combo most probably will start this year. And we'll go flu season. We are still exiting the winter of '22. So you could see a time line where we'll have data early in '23, which allow in some countries that will be moving fast to be able to file in '23 for fall '23/winter '24 season.

So just a quick point of clarification. With the Phase II update, will we also get durability data from the Phase I? Or is it going to be solely focused on the Phase II data?

Yes. I think we'll see what we have data-wise because the time points might not going to work with when we present the Phase II data. If we have it, of course, we'll share it. And as always, we publish everything, as we've always done. So just a question of timing is do we have a data set and data cut reviewed in QC by the time we present the Phase II data.

Got it. And since you guys had immunogenicity that was roughly in line with Fluzone HD now that you're using a standard dose, is it possible, you think, that you guys show superior immunogenicity?

It's possible. The piece I want to be careful is, while there is some correlation between neutralizing antibody and efficacy, there's a lot of things that you cannot see in neutralizing antibody because, first, you don't have one. You have a soup, as we discussed on neutralizing antibodies. That is what happened to the T cells, which we've shown in our personal cancer vaccine, and we've shown have been published in the COVID vaccine is also an important component. So I just will be cautious on driving a direct correlation. The other piece, too, is about the quality of binding affinities of those neutralizing antibodies because with mRNA, those antibodies are made because the protein in making the antigen of a virus is made in a human cell. So that's kind of -- that's a very natural 3D configuration, post-transaction modification and things like that, that you don't really have over protein. So I know protein have adjuvant. But I think it's going to be quite interesting to see, and I think there's some very interesting upside to the efficacy data, even though if the neutralizing antibody is similar.

Okay. And I guess just on the 25-microgram dose. You saw a trend towards lower reactogenicity when you went to the lower doses. But what do you think is the threshold here in terms of reactogenicity that we need to see for it to be potentially widely accepted relative to other flu vaccines?

I think it depends to which population you are targeting, which if you look at people at high risk, which we talked about, those are the people who are already willing for the trade-off of a bit of 24 hours of side effects and that they know what they look like. Again, I might have fever. I might have headache, but it's going to last 24-hours. It's not like a week or 5 days or whatever. And we want the efficacy. I think sometime we confuse and we think every consumer is the same, and that is not true. I mean look at the number of people who, when they go to a pharmacist, ask for Fluzone HD even though they don't qualify for it. Because I think it depends on what you're solving for. If you're solving for efficacy, and then if you have a week, I'll take 24 hours where I don't feel awesome for high efficacy so I know I won't be sick. Because at the end of the day, if you decide that you want to be vaccinated is that you want to be protected, is that you want to maybe think you are protected if you want to be protected. And so if you talk to consumers in that at-risk group, which is really our #1 priority focus, is they will always tell you, look, if you grant me efficacy, I'll get 24 hours of side effects because I need to be protected. I want to be protected.

Okay. The client asked if the strategy is to get on the market with a non-inferior flu product and then superior product later on with the other antigens.

That's exactly the strategy. When we looked at the market, and we spent a lot of time looking at the flu market, the science or the biology, it was very clear to us that 1010, the first product that we've shared the Phase I and soon the Phase II, was never going to be the best product. The trade-off we have to make was how do we differentiate ourselves in the post-COVID world by having the combination. And because it was taking more scientific work to get what we call 1020 and 1030, which are what we believe will be much better flu vaccines, it was going to potentially make us lose a year or 2. Because if you think about this, these are seasonal business. If you get your authorization in November, you missed the season. And so we're obsessed about speed and obsessed with say, okay, how do we get to a place where, because we have COVID and flu, because we believe we could be the first company in the world to have COVID and flu on the market, we can convert all the Moderna people on COVID-19 to the combo. But also we can go after people that have been Sanofi and GSK flu consumers into the Moderna combo product. And so speed for us add a lot of value, and we prefer to have a non-inferior product to get a foot in the door, to get a lot of sales, to get a lot of market share because the way we think about that business is in a very long term, 5, 10, 20 years increment. Respiratory viruses are not leaving the planet anytime soon. And you cannot eradicate them because they also exist in animals, unlike things like rubella or CMV. Rubella was eradicated. CMV, we believe, can be eradicated because they only exist in humans. And so we believe that because it's such a long tail in this business, share is going to be really important for us to get sales and to get to recurring sales. And so that's what we're solving for. We never solve for the best product. I believe 1030 will be an awesome flu product. It's what's going to be at the end, we're going to take all the shares from the mono flu product because WHO, in a couple of years' time, is going to want a flu shot and a COVID shot if they can get the best product in the combination from Moderna.

Maybe to wrap up on flu, we have a couple of clients asking questions, so I think it's all getting to the same point. One client asked how large will flu trial be needed for approval? Won't these be very large studies? And a second client asked, will you be held to the same standard as traditional flu vaccines? And what implications are there for long-term follow-up? So again, I think they're all getting to the same point, but it would be great if you could answer that.

Sure. I mean if you look at our ISV, for example, we say around 30,000 people. But again, those are healthy volunteers. So it's not like you're running an oncology study and it will take years to recruit a 5,000-person study. This is healthy volunteers. As you saw quickly, we did the Phase II for flu. Quickly, we moved to Phase III in RSV. And we can put a lot of sites. And given the very strong brand Moderna has with health care professionals and clinical trial sites and consumers, we are seeing a very quick uptakes. So I don't think anybody should be worried about, geez, can we recruit 30,000 people heading into a season. We are very confident we can. We have done it in the last couple of years. And we're just getting stronger, and we're getting more and more digital tools available to help us speed up. So this is not something that worry us at all.

Great. I have another client question that's interesting because it's related to where we started the discussion. It says now that vaccines may be the dominant franchise midterm, is it worth for Moderna to look at technologies for nonviral vaccines, such as bacterial with glycosylation beyond MMA?

So on the vaccine front, we think we have the right technology to go after all the viruses, even with the very complex viruses. So we think we have a technology because basically, we mimic life using an mRNA platform. And if you look at the portfolio of respiratory disease latent viruses, now with what announced this week, the 15 high-risk pathogens. And then there's also topical disease that we have not talked about yet, things like dengue and so on that still need a vaccine. So if you think about the stack of vaccine we can do with this technology, it's really pretty impressive, bigger than anything that anybody has ever done in vaccinology ever from an industrial standpoint. And so I still think we can build a gigantic vaccine franchise. But then it's really about patient impact, diversification of revenues. We believe the rare disease have a chance to build a platform like we've done with vaccines. And they are in our 20 to 40 rare genetic disease in the liver. And so we think we can do something like what [indiscernible] did in the liver where they knock things off. We're going to turn protein up, so exactly the opposite of what they do. But we're going to do it at a much faster pace because of the platform. This company has been industrialized since the beginning because we said this cannot be a one-drug company. It will be 0 or a lot. So we still industrialized Moderna that you're going to see those franchise as we get one proof of concept, we want to scale them very quickly. Same thing in oncology, same thing in cardiology, same thing in autoimmune disease. We just need one to show us it works in a clinic, and you're going to see a lot of drugs moving into the pipeline. I mean, as you know, today, we have 44 programs in development, which is a very large number. We've announced 15 more coming this week. But if you look at what's in the lab, it's another 40 to 50 programs that are in the lab. So as we see this year, clinical readout with PA on rare disease. As we see the personal cancer vaccine towards Q4, we are ready by a lot of preclinical work we have done to scale if we see positive signals. So that's going to be quite fine.

Great. I'm glad you touched on a few of those other programs. We weren't able to really touch on RSV or CMV. Hopefully, we have more time as we approach the data later in the year or the other 30 to 40 programs. But since we're out of time here, Stephane, maybe to wrap up, you could touch on what aspect of the Moderna story you believe is most underappreciated by investors.

Yes. I think people don't really appreciate the platform we have. And I've had some question mark on how big the sales of COVID are going to be in '23. Of course, they are. I've never managed a transition from pandemic to endemic, and I don't think anybody that's alive has either. But if you think about what we're doing on respiratory vaccine, with combining flu and RSV, the RSV data are amazing. So if you look at the '23, '24, '25 time frame, you're going to have flu plus COVID launch, flu plus COVID plus RSV very quickly after and CMV. There's EBV right behind. We think EBV can also move very fast. So I have some question mark on the size of the sales. We have the same range in '23, for sure. Do we going to have a very strong business for sure in '24, '25? Yes. And so I think people don't appreciate that the size of those sales and the speed at which we're going to move is going to allow us to get a lot of share in the respiratory and in latent viruses.

Wonderful. Well, Stephane, I really enjoyed the discussion. Thank you for your time.

Thank you very much for inviting us. Have a good day.

Of course.