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

Great. Thank you, Brad. Thanks for getting us going here. Hey, everybody. Welcome this morning to the third day of the Oppenheimer Healthcare Conference. My name is Hartaj Singh. I'm one of the biotechnology analysts over here. And it's a real pleasure to have one of the most innovative companies on the planet, in my opinion, with us today, the CFO, David Meline; and Lavina Talukdar, I still can't say it. Sorry, I'm just spelling names, but I have both of you here. We'll get going with David doing a quick presentation and then go to our fireside chat. So David, please take it away.

Yes. Thank you very much, and good morning, afternoon to all. So what I'll do is just cover briefly '21, '22 and events that have occurred more recently since our last quarterly call. So in terms of 2021, we delivered during the calendar year, some $18.5 billion of total revenue. Obviously, primarily our COVID vaccine, which is, as I go to events nowadays, I feel very happy and satisfied of the impact we've had on global health. We also -- that resulted in some $12.2 billion of net income and $28.29 of earning per share, and we exited 2021 with some of $17.6 billion of cash and no debt. If I look at 2022, which I think I'm sure we'll have a chance to talk about, Hartaj, what we indicated in the last call is that we signed contracts, events, purchase agreements that contemplate delivery of some $19 billion of COVID vaccine during the calendar year 2022. And we have another -- on a probability-weighted basis, another $3 billion of [ option ] contracts that we've signed with our country customers. In terms of other financial information, we've indicated that we expect cost of sales this year to be somewhere in the low- to mid-20% range, which is primarily -- that's higher than last year. And it's driven by the fact that we have plans to deliver a lot more vaccine to the low-income countries at our lowest price as well as the new presentations that as we move to less doses per vial that has an increase in terms of our cost of goods. We expect our R&D and SG&A spending -- we're going to increase it to some $4 billion in 2022, primarily driven by R&D expense increases. And then finally, our tax rate, we guided we expect to be in the mid-teens percentage range this year. A few things that have happened since our last call a few weeks ago, which I'll just tick off and again, we can talk about. We announced the opening of our Enterprise Solutions Hub in Atlanta. This is to provide services to the company, in particular, in the Americas. We've already got a hub of this sort up and running in Warsaw. So that business complementing that. Secondly, we announced our global public health strategy, which includes the development of vaccines against 15 pathogens, which are identified by the WHO and CEPI as being the greatest threat to health globally. We've launched our mRNA access initiatives. We've announced that we're going to place our manufacturing plant for Africa. We're going to do that out of a hub in Kenya. We've also pledged not to enforce our COVID vaccine patents in the 92 low- and middle-income countries. We've recently announced that we're dosing our first participants with our Omicron-containing bivalent booster vaccine in a Phase II/III study as well as dosing our first patient in our HIV [ trimer ] study, which is mRNA-1574. And then finally, yesterday, we announced a new agreement with the Japanese government, where they'll be purchasing an additional 70 million doses from us in 2022 in the second half. So busy few weeks for the company, but I'm happy to go into any questions that, Hartaj, you want to raise or from the audience.

Absolutely. And I'm actually in the Internet portal, but I can't seem to be connecting. So if anybody has a question, you can e-mail me also at [email protected], again, that's [email protected]. So David, having you on here is fantastic. I mean, you've kind of seen this company go through some significant changes in, I think, a year plus 2 years you've been there. One of the first -- let's just get to the P&L first. So one of the first questions we have is that if there is -- assuming 2022 could be a peak year because we are transitioning from pandemic to endemic, right? So maybe peak year for sales, right, of COVID-19 vaccines, but then you will have an organic kind of tail revenues, right, from those vaccines. Can you talk a little bit about how to think about that going forward? And then what impact does that have on margins? So we'll discuss that a second, but maybe how do you think about the pandemic for some revenues here.

Yes. No, it's a great question. And if we look at the endemic phase, which, in fact, I would observe that, I believe, at least in these developed markets, we're clearly in that phase already, fortunately. What do we think is going to happen? Well, and then again, this is reflected in the discussions we're having with our country customers, where we think that there's really a core focus market on an ongoing basis for COVID vaccine, which is going to be applicable to older adults. So age 65 and over broadly and then those 50 and over with comorbidities, who are at the highest risk of contracting severe case of COVID and are going to benefit from an annual booster cycle. So core market, we also believe that there is going to be a market, like in the flu market, where you have all adults that are aged 18 and older, who will choose to be vaccinated as again, as with flu, which is not just the high-risk individuals, but people elect to avail themselves of boosters. And particularly given the recent memory of what we just went through, we think, certainly for the foreseeable future, there will be strong interest in that booster market on a voluntary basis. And what we also quite clearly see is a very strong interest in this mRNA technology, which has proven to be highly effective and also very safe as it's been used by hundreds of millions, if not billions, of people already.

No, no, David. That is very helpful. And then just go specifically about margins, but just how to think about them. But maybe another question at the last earnings call, you showed and Stephane showed a slide on market share, right? Now there's many people that would argue that maybe the Moderna vaccine is probably best risk benefit profile out there. But Pfizer seems to have taken a little bit of a lead on the commercial side. How is Moderna, how are you thinking about market share going forward? Do you think you could kind of claw back some of that market share in some of the countries where Pfizer got to early?

Yes. Yes. Thank you for the question. So yes -- so from our perspective, there's clearly been a couple of different phases of the market evolution, that first phase where we and Pfizer were entering the market, we were bringing the company up from basically a pre-revenue state in building the commercial and most importantly, the manufacturing capacity through 2021. And in part because of the higher dose, the higher amount of content per dose, we -- it took us some time to bring up our capacity through 2021, where we had a smaller share than Pfizer, who was able to deliver more product to the market initially. What we've seen since, and there was a good chart that we shared in the quarterly call, where as we've gotten to a stage where we now have plenty of capacity available to respond to the market need and given the strength of the product offering, as you mentioned, we've seen a very good share position, which is more reflective of the strength of the product. I won't predict exactly where we land with share, but I don't see any reason why we can't compete with the best of them share going forward, and that's our plan.

And then, David, going hand in hand with that, one of the questions we get is we model, for example, as you've had these big increases in OpEx over the last couple of years, which you're becoming a multinational company. You're growing out your R&D pipeline because now you're not capital constrained anymore, like Stephane says. So that makes sense. But how to think about -- if you do see at least some -- before we get to the organic revenue phase, right, stable and growing with COVID-19 vaccines, and maybe that might not occur, maybe you might just keep growing, who knows, right? But my point is how to think about OpEx? Like you've had some pretty dramatic increases, how to model that going forward? Is that dependent on revenues? Is that dependent on pipeline? How to think about that?

Yes. No, it's a great question. I mean, certainly, what's true for the company today, and we expect that to be true going forward is it's really the majority -- the vast majority of our expenses on an operating basis are based on our spending for R&D. We've got now some 40-plus programs that are in various stages of clinical trials. And certainly, as we move forward to the later stages of development, I expect, and frankly, we have a very strong input from our investors who are encouraging us to continue to drive our R&D spend and increase to the extent that we see opportunities to do that. And if I look at this mRNA space, it has a tremendous amount of potential. I believe it's going to get built out over the next 5 to 10 years. And given the technology lead that we have as a company, it's incumbent on us to grab as much event pie as possible, and that's around how quickly and how broadly we can drive our R&D pipeline. So you can expect to see us continue, at least for the foreseeable future to see continued spending increases in R&D. By the time we get out to 2024, we'll start to see the results of our current late-stage trials, such as CMD, flu, RSV, which we think will address some very serious unmet needs and underserved populations. And we'll have to look at the data from those trials to make decisions on the aggressiveness of our continued funding. So I think the key theme is -- we have the financial wherewithal. We have proof of concept of the technology. We have a technology lead, and it's up to us then to drive that and seek to maintain that lead. And then in terms of margins, it gets back to, frankly, a series of unknowns about how the revenue from the COVID business is going to evolve, which if you could give me the answer on that, I'd be very happy. But we've proven to be quite unpredictable. But we think we have a very solid value proposition with this pipeline that's going to be coming in contributing here to revenue in the foreseeable future.

Yes. No, David, that makes a lot of sense. I mean, I think for us, it's interesting to see market share is key on the revenue side because, again, like I said, I would argue your vaccine is potentially the best in class. And if you can get to that #1 position or very close to it, that's actually a pretty significant delta on the revenues going forward, right.

If I could just add, Hartaj, the competitive profile you're highlighting for the COVID-19 vaccine is really becoming evident with these large real-world evidence studies that are done independent of Moderna at the country level. So in Singapore, for instance, or Switzerland, we've now seen the separation of the curves on between ourselves and the next leading mRNA vaccine in terms of the number of hospitalizations and the number of deaths. And in particular, for that focused market that David just spoke to, the 65-year-old plus or the 50-year-old plus with comorbidities, data out of Singapore is really highlighting the strength of our mRNA vaccine versus the other mRNA vaccine in the market. And these, again, are data from country-level health ministries where there are millions of patients that have been treated with both vaccines.

Got it. That's very helpful, Lavina. And I guess another question would be just on this. Heterologous boost is becoming kind of a thing, right? I mean, where you do the you get the prime and the second vaccine of one manufacturer and then there's increasing data that suggests that if you get a separate different vaccine on the third one or the fourth one, you get a better immune response. And that might be actually useful if we have to go to annual, right, for example. And yes, I think 60 -- 50% or 60% of the world has gotten the adeno vector virus shots. Do you see that as an opportunity as a booster with mRNAs as part of that heterologous boost also going forward?

So David, I could take this. Sorry.

Yes. Go ahead, Lavina.

I was just going to say that's an excellent question because you're right, some of the vector-based vaccines have been used broadly across the world. There is data. I think the U.K. government has put out the COV-Boost study that shows what exactly happens when you get an mRNA boost after the AstraZeneca vector vaccines, for instance. And the good news is, is that there is a very strong response after the AstraZeneca vaccine when you boost with an mRNA vaccine. And in particular, from that study, it's now published in the Lancet. You can see that mRNA-1273, our vaccine, features very prominently when it comes to a number of immunological factors, neutralizing antibodies, first, as well as T cell responses, where we show that we generate the best T cell responses.

Yes. If I could add, I think the proof is in the fact that the EU has made a decision only to offer mRNA-based vaccines as boosters to their population of some 500 million people. Even the U.K. with their home field player has chosen to focus boosters on mRNA and many countries around the world as the status become available, have been in very active discussions with us about focusing on our product on the mRNA product, including most recently yesterday, the announcement in Japan.

No, that's very helpful, David and Lavina. And I know that I think the last time we spoke about this, you had indicated that your vaccine from the time it's actually manufactured to the time it's actually shot. You've got a 9-month window, right? It can be sitting on the shelf for 5 to 6 months. You've seen from real-world data. Lyophilized mRNA vaccines were a potential a couple of years ago. How are you thinking about that aspect of just the stability, shipping, lyophilization, et cetera?

Yes. Let me give some general comments and Lavina can add. Obviously, especially as you move into these markets that have less sophistication in terms of their own supply chains, we continue to challenge ourselves on shelf life, on refrigeration status and what the requirements are because ideally, you would address those room temperature or refrigerated temperature and long shelf life. So we continue -- we haven't always announced exactly what we're doing, but that's -- suffice to say that that's an important attribute that we continue to work on. Frankly, we are working on that already. And then the pandemic kind of showed up and we didn't have the luxury to continue to refine. We had the launch with what we had at the time. And again, I think the proof is out there that, that worked out very well for the global population. But yes, we'll continue to work on that because that's what you want to get to ideally.

Yes. And I've just got a couple of questions here. So maybe just kind of go through them. I got them via e-mail. One is, you received an EUA for India last year. Will you enter that market or China?

In terms of India and China, I don't believe we've made specific comments externally. I don't know, Lavina, can you confirm?

Sure. The only comments on both India and China that we've made, Hartaj, is that just like every other country, we're in conversations with all the country leaders and understand that those are very large markets.

Understood. And what is the status of the trials for mRNA-1283, I guess that's your -- is that the bivalent or is that the Omicron-specific vaccine?

So 1283 is the refrigerator stable next-generation COVID vaccine with, again, the antigen from the Wuhan strain, the spike from the Wuhan strain. And so that is in Phase II currently. It's one of the options going back to your earlier question in terms of shelf life as well as distribution improvements because it is only refrigeration. All you require is refrigeration. That could be one product offering in the future when that product is ready.

Yes. Understood. Another question is what is the best way to forecast vaccine revenue? Is it government procurement versus -- or is it just difficult to predict?

I'll choose the latter based on my experience, thus far. Yes, I mean the fact is that given the national implications of successfully acquiring and distributing vaccine, we, of course, had only customers who have been the country representatives, and that's true today. It's been our view and we've been quite clear that if you look at vaccine markets, some of these countries, including the U.S., then transition in an endemic phase to a private commercial market. The verdict is still out as to when that will happen in markets, including our own. And frankly, we're watching closely the developments. Those who are familiar with this saw that the U.S. government has not yet procured a budget to buy additional boosters for the fall in 2022. And we don't have those figures in our outlook for the year, of course, but it would be our view that, that will be something that will be necessary, and we'll have to see. Ultimately, the base plan is that the U.S. government is going to allocate funding. But stay tuned. You may have a commercial market develop as well.

No, that's very helpful. I imagine that probably what kind of varied evolution we see over the next few months might shape the U.S. government, are government's thinking, maybe, David, it gets worse, then maybe go back to government program. If it stays as it is, then maybe we go back to private, or will we go to private?

I think that's a fair. Yes, I think that's right. And that all adds up to an amount of uncertainty. I think the key point behind that is, yes, one, what's the evolution of mutations and the disease which is unknown. Secondly, the good news is that the capacity constraints that existed have now been largely addressed. So we're ready and continue to work to ensure availability. And then thirdly, as we've talked about, we're working on a number of alternative presentations and formulations, including this bivalent product, which we think could be quite effective, and we're awaiting the data.

If I could just add in the endemic market. It is really just the U.S. market that's going to change pretty dramatically in terms of moving from a 1 payer system purchase, right, with the U.S. government being the purchaser, to a more fragmented market where the commercial insurance providers will likely be negotiating with us.

Yes. Lavina, that helps a lot. We're getting to the last 3, 4 minutes, so I'll just -- we'll do the -- what I call the final jeopardy version of this. It seems like just from commentary, recent commentary that Moderna is feeling more comfortable with the regulatory path to the flu [indiscernible] vaccine, the flu combo, maybe that -- our regulators, could they be comfortable with you getting approved with flu mono and flu combo with COVID-19 on immunogenicity data versus running a full Phase III?

So we are going to ask for that path as an approval pathway for ourselves, immunogenicity and, obviously, safety and tolerability as well. Should they not provide us the opportunity to use that path, we can obviously very quickly move into a clinical vaccine efficacy program. Regardless of whether you're -- given the accelerated path or not, the question of when you do that Phase III clinical efficacy study is the key question. Is it pre-approval or post-approval as a Phase IV commitment. And since we're going to have to do in any way, we can be strategic in terms of when we start that study.

Yes. And then just going back, David, you had started off the call by talking about how your core market is people over the age of 60 going forward. The organic tail revenue, so to speak, people immune compromise potentially and then also the 18-plus year old who tend to get flu vaccines. What percentage historically is that? Like what's the percentage in the developed versus developing world, where people have gotten flu vaccines? And is that how you think would be the percentages roughly that apply to COVID vaccines going forward?

Lavina, do you...

I do. I do, actually. So if you look at flu vaccines and even in -- during the pandemic, the COVID-19 pandemic and look at the uptake of vaccines as well as boosters now stratified by age. You will see that over 90% of people in that 65-plus category do, in fact, get flu vaccines as well as, obviously, they got the COVID-19 vaccine as well as boosters. So we do anticipate that, that's going to be a very compliant subcategory or age group that we're going to go after in the endemic phase.

Yes. And then Lavina, just on the 18 plus, what's historically been the pattern there?

So it's a little bit more varied. We just anecdotally, I get my flu vaccine every single year because my employer makes it very easy for me, right? We have a nurse that comes in. Many employers do actually encourage flu vaccinations because of the productivity gains that they can get through it, right? And so it is varied kind of more personal choice, if you will. And so we'll see how much of that market we think we can get once we move into the endemic phase.

Great. Great. And then just the last question, we're on time, but just the last question. If you could just update us where you are with the adolescents and the younger folks in terms of data and approvals. I know we have the vaccine day next week, so -- but just any quick update.

Sure. So we have said that for the pediatric populations that we would have data available actually relatively soon. And we're eager to share that data with regulators as well because, as you know, the under 6 years old population is that underserved or unmet market right now. There isn't any vaccine available for them. And so that could be an area where you see regulators actually moving relatively quickly given the unmet need there. For the adolescent population, we continue -- the 12 to 17 year olds, we continue to have dialogue with the FDA, and we're making headway on that dialogue.

Great. Well, we're at time. I see no other questions. Lavina, David, thank you so very much. This is a lot of fun. We kind of kept on going, I'm sure. But thank you again for taking the time to join us.

Okay. Thank you.

Thank you, Hartaj.

All right. Look forward to seeing you again. Take care. Take care. David, bye.