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

Hi. Good morning, everyone. I'm Ellie Merle. I'm one of the biotech analysts here at UBS. Thank you so much for joining us at the UBS Healthcare Conference in person. Very happy to have Moderna here with us for a fireside chat. Joining us from Moderna is Lavina Talukdar, SVP, Head of Investor Relations. Thanks so much for joining us here today.

I guess to kick it off, high level, you guys have accomplished a lot in the past year or so with mRNA vaccines for COVID-19. Maybe beyond COVID, where do you see mRNA going next?

So thanks so much for having me, Ellie, and that is such a great question because we are not just a COVID-19 vaccine company. We have 46 programs in various stages of clinical development. But having said that, we have demonstrated the power of mRNA and lipid nanoparticles in the use of vaccine. So at our last Vaccines Day, we've highlighted that we now have 31 different programs in infectious disease vaccines that are also moving through the pipeline. But outside of that, we are also looking at therapeutics with the utility of mRNA and lipid nanoparticles in cancer oncology therapeutics, rare diseases as well as autoimmune and cardiovascular therapeutic areas as well.

Awesome. And obviously, mRNA has gotten a lot of buzz in the past couple of years. What makes the platform capabilities so unique at Moderna and particularly some of the platform enhancements that you guys talk about, such as at your Science Day recently? What makes these unique capabilities that will be harder for, say, another company to -- or even a pharma player to come in and be experts in the mRNA space like you guys are?

So that's such a great question, and I will highlight some of the things that we presented at Science Day just last week that I think will give you all a flavor for how data driven the company is and how for the last 10 years prior to actually being noticed as a vaccines company with the COVID-19 vaccine, we've been investing in this platform. And through those investments have done multiple experiments and collected data on various aspects of both mRNA as well as the delivery mechanisms that we use, like lipid nanoparticles. And this past Science Day was really a demonstration of what we've accumulated in data in the past that's actually helped benefit the COVID-19 vaccine development. And one of those things that one of the scientists at Science Day highlighted was looking for [ ADUCs ] within the actual formulation. So [ ADUCs ], for instance, will stop translation of the protein that is -- that one is interested in. And for the COVID-19 vaccine, that would have been the spike protein. By identifying the fact that [ ADUCs ] do exist in the development process, we were able to eliminate it, which led to higher protein expression, which we believe does -- will ultimately have a benefit on both the stabilization of the product as well as potential higher vaccine efficacy. And so as a result of identifying that, in the past, we were ready with a COVID-19 vaccine, for instance, that was much more stable at frozen temperatures, minus 20 degrees, at the very outset when we started shipping the product. Now let's talk about what we did during Science Day that speaks to the future of what we're doing with mRNA. So one of our other scientists presented data from our collaboration with Vertex on our inhaled lipid nanoparticle. So with Vertex, we have a program that's looking at cystic fibrosis in the part of the population that has nonsense mutation. So roughly 5,000 of those patients do not make any CFTR protein. And this first program that we're working with Vertex on is to have an mRNA that is inhaled, makes it into the lung epithelial and then expresses the CFTR protein. So preclinical studies look very promising. Vertex is moving that program into IND. We'll be filing for an IND later this year. And hopefully, we'll start that program in clinic later this year as well. And then -- so that speaks a little bit to the future of mRNA and what we want to accomplish there. But presently, there was another presentation at Science Day that looked at mathematical modeling and how mathematical modeling and pharmacometric modeling can actually help identify doses. And the dose that we identified in the contemporary time frame was the dose for the pediatric population prior to actually seeing that, that dose actually was effective in that below 6-year-old population. So lots of demonstration in terms of what we've done with accumulating data, and it's this data that we think will differentiate our products, both currently in the future and what we're doing with mRNA and the platform.

And it certainly is an unprecedented amount of data that you guys have in-house in terms of the real world as well as the platform work, which is exciting. Maybe turn COVID, I know a question that you probably get a lot is how to think about the long-term revenue opportunity for COVID-19 vaccines. And maybe particularly in the near term, how to think about this switch from a pandemic to an endemic market and what some of the dynamics such as on the pricing front might entail.

So you're right. We get that question a lot. And we are at a point where we're transitioning from the pandemic to the endemic setting. And so that has implications for the market and who should be getting or who will be getting booster vaccinations because it's the booster vaccination market that will form the tail of the COVID-19 opportunity. So we've identified that we believe that the high-risk populations, and those are people who are high risk because of age or health status are most likely to get booster vaccinations on an annual basis. This is typical of many other respiratory viruses, like flu for instance, where it's this high-risk population that is most at-risk for severe disease and hospitalization and sometimes even death. And so as a society, because we've done this -- we've protected those populations against other viruses, like the flu virus, we believe that COVID-19 or COVID boosters will actually follow a similar path. So if you look worldwide, there are about 1.7 billion people worldwide that fit into that category of high risk through either age or health status. And if you were to whittle that down into the OECD countries, it's about 350 million people. So that would be your eligible population for that high-risk segment of the market. That's not to say that people who aren't in that high-risk category may not -- may also elect to get vaccinated annually. And so that would be something that we would be striving for, but it's not in that base case scenario that we're modeling.

Absolutely. And there's been a lot in the news around evolving strains with Omicron from BA.1 BA.2 and beyond. How are you guys thinking about strain selection? Who would be responsible for strain selection, whether this is a government agency or worldwide sort of WHO or even within your own labs, what you think is sort of optimal in terms of when to change the strain that you're targeting from the vaccine?

So that's a great question. I think it will data-driven. I think that it will be in partnership with health authorities around the world. A strain in the U.S. may be different in terms of strain that's coming up in another part of the world. And so I think it will be a partnership with health authorities around the world. There are conversations already happening. I'll remind everyone that there was a preliminary VERPAC discussion in terms of strain selection just immediately for this fall. And while that was a very preliminary discussion, there is another discussion that will be taking place at the end of June. So I think we'll get a lot of insight into how the U.S., for instance, is thinking about strain selection. And then from the industry perspective, we are the ones that are actually doing the clinical trials and gathering the data. And the data will also inform strain selection going forward. For instance, we just show data on our 211 bivalent program, which, as for the sake of the audience here, is a combination of 1273, which is against the Wuhan strain as well as the beta strain. And from that bivalent data set, what we learned is that a bivalent approach does actually lead to longer durability. So we saw a persistence in the neutralizing antibody titers out to 6 months. We also saw that, despite being a beta variant that was in this bivalent vaccine, we did see neutralizing antibody titers against all of the variants of concern. So it's data sets like that, that may also help inform the decision of which variance of concern or multivalent vaccines may be most appropriate for future time periods.

And how should we think about -- I mean, I'll be getting bivalent hopefully in the fall, but how should we think about, going forward, the protection against evolving strains from what we've seen even today from Omicron and how it's evolved and how it might evolve further in the future? Is there thinking that it could look more like blue where we say have a quadrivalent? And I guess, how you're thinking about the protection, even just from this bivalent candidate that you mentioned?

Yes. So another fantastic question. And again, it's going to be data-driven. So for instance, with the 211 data set, even though 211 didn't have Omicron -- all of the Omicron mutations in it, there is some overlap with the beta mutations and Omicron mutations, we did actually see very good neutralizing activity against Omicron. So that leads us to believe that this bivalent approach is actually broadening the neutralizing repertoire -- antibody repertoire and having bivalence and multivalence, and potentially even a quadrivalent as you're talking about, maybe an option for the future to really broaden out the antibody repertoire or that soup of antibodies that you would need to actually thwart off even future variants.

And just from a commercial perspective, I mean, how does this play out, say, in the U.S. once it the end of, say, government contracts, and this becomes more of a typical pharma market, with both commercial as well as certain government payers doing purchasing? How should we think about the cadence? And first, when we could see this transition? But then also what this does in thinking about volumes and price?

So you're right in saying that the U.S. is a different market than the rest of the world, even with vaccines. It is more fragmented than the ex U.S. markets are, where ex U.S., you typically have country-level purchases, and a lot of those discussions that you have with health ministers like we did for COVID will likely continue, even in the endemic phase. And then when we're successful with other vaccines that we're bringing forward. The U.S. as I just mentioned, is a very fragmented market. You do and you will still have the U.S. government purchasing, but only for a segment of that market. So CMS, for instance, is responsible for purchasing for Medicare and Medicaid recipients. Outside of that, health insurance providers are the private -- predominantly the private market and discussions with them for the fall of this year are already happening. We are readying that market just in case the U.S. government doesn't purchase for everyone again for this fall season. So those discussions are already happening. In terms of the seasonality aspect, typically, you want to have these conversations prior to the start of the fall season. So think end of summer, in a typical environment, this year may not be a typical environment, and that's because there's still question around whether or not the U.S. government will actually pay for boosters for the fall. And so as we learn more throughout the summer, we'll obviously share that.

I won't pretend to be an expert in politics, and who's paying for what, but I can only imagine the dynamics around that. I guess, turning to some of the other respiratory vaccines in your pipeline, ones that you've said that long term could potentially be in combination with the COVID vaccine. Let's talk about your flu vaccine. We've seen some Phase II data, and you guys are heading into Phase III. Maybe just starting with what the conventional path market is for the current modalities with flu vaccines, what does that look like? And what should we expect in terms of Moderna's flu vaccine and potentially the past to market?

Sure. So we are quickly moving into a Phase III study. I think we've announced that in the second quarter of this year, we'll be moving into the Phase III. We are very pleased with the Phase I and Phase II study readouts for this very first flu vaccine that we want to take to market. So this approach is our speed-to-market approach, which basically is following all of the regulations and rules out there that are there in place for strain selection for instance. So we're following the WHO strain recommendations for the Southern and Northern Hemispheres and adding that into our flu vaccine. The conventional path for getting a new product on to market in flu is to do the 2 Phase III studies. One of them is an immunogenicity study, typically, and then that's followed up with a vaccine efficacy study. So a conventional path would want to see -- regulators would want to see both the immunogenicity from one of studies as well as vaccine effectiveness or vaccine efficacy. There is an accelerated path that may be available to Moderna in that we can show immunogenicity that is noninferior to an active comparator on already approved flu vaccine and get onto the market just off of that data. And then we would have to follow it up as a post-market commitment to do a vaccine effectiveness or vaccine efficacy study. We are in discussions with regulators at this point in time to see if that path is available to us. And if it is, then, obviously, we'll take it. But we will also be very ready with a follow-up study with a vaccine efficacy in Phase III later this fall as well.

Okay. So potentially, a very rapid path to market, but we'll have to see. And there's a possibility of being the full Phase III.

That's right.

Okay. We won't get ahead of ourselves. Just maybe taking a step back in terms of flu, there's a lot of flu vaccines available today. I guess, what are some of the challenges in reaching higher efficacy of the flu vaccine? I mean, it's not good from the efficacy -- or immunogenicity. Better than nothing, but it's not what we saw with the initial COVID vaccine. What are some of these challenges? And long term, how could mRNA potentially on that?

So you're right that the traditional flu vaccines have struggled to show vaccine efficacy that's better than the 20% to 60% range in a typical year. There are some thought processes in which why that may be the case. The flu virus itself is highly mutative, if that's a word. There are many, many mutations that happen even within the season. And as a result of the structure of bringing flu vaccines to market, the strains that are picked are picked 6 months in advance due to bottlenecks or lead time that's required for the traditional manufacturers. And as a result of that premature picking, if you will, of the strains, oftentimes, you see strain mismatches happen, which can lead to lower vaccine efficacy. So those are challenges that are kind of inherent to the traditional flu vaccine makers, but not inherent to mRNA. And so we can select the strains that are closer to the flu season and potentially bring a flu vaccine that's more matched to the circulating strains. We can also, however, add in additional antigens well. So I did just speak to our very first flu vaccine being a speed-to-market approach where we're following all of the guidelines and the WHO recommendations, but we do have mRNA-1020 that will include additional antigens that are not in your traditional flu vaccines currently. We believe that breadth of additional antigens will actually increase the breadth of HAI titers against those antigens, and that may be another opportunity to actually show better vaccine efficacy with our flu vaccines.

Absolutely. And maybe just from a public health perspective, what this means in terms of the need for better flu vaccines?

So 20% to 60% is really not that great when it comes to flu vaccine efficacy. We think that having higher vaccine efficacy of flu vaccines actually from a public health standpoint is going to be very beneficial for society. We'll keep people who are at high risk out of severe disease with flu and out of the hospital hopefully and, in fact, decrease the mortality rate as well. And so I think that having a better flu vaccine actually does have pretty significant implications from a public health perspective. And then ultimately, as you just mentioned, we do want to bring the respiratory viruses vaccines against respiratory viruses into one vaccine. So we will take our flu vaccine and our COVID boosters and combine them. In fact we're looking to start a Phase I study later this year with that combination and then ultimately add in RSV as well because of the seasonal patterns that overlap with those 3 viruses. We think it makes sense to put them all together in 1 vaccine.

Absolutely. And in terms of the RSV vaccine, sort of where are you in development? What have we learned so far? And what are the time lines for when we could potentially see more data?

So we are in a Phase III with our RSV vaccine. It's a fairly large global study with -- in excess of 30,000 participants worldwide. We are enrolling -- in the enrollment phase. It is a case-driven study where we will be looking for vaccine efficacy, so how effective is our vaccine from preventing RSV infection versus placebo or a sham injection and we're just waiting for enrollment to kind of happen. And then when that data is available, we'll share it.

Awesome. And turning to some of the other vaccines that you have in development, such as CMV or EBV, maybe we'll start with CMV in Phase III. Maybe high level, why has this been such a challenging disease to develop a vaccine for? And I think maybe there's lower awareness, perhaps an average person on the street, but this is described as a significant public health need. Can you tell us a little bit about challenging history with CMV vaccines as well as why this is such a public health need even if there might be many people that are not aware of what this is today?

Sure. So CMV is the leading cause of birth defects, both here in the United States and in other countries around the world. It leads to microcephaly, deafness, blindness. And I think the burden of disease over a year's time collectively can be in excess of $40 billion. And so it is truly a public health need. We are developing the vaccine for -- to prevent CMV infection -- primary infection in women of child-bearing age in order to decrease over time the transmission of the virus to the unborn baby. And that, as you said, is in Phase III. The challenges with CMV, it's a DNA virus that other traditional vaccine manufacturers have not been able to crack is related to the complexity of the antigens. CMV uses 2 different proteins. One of them is a simple protein, a gB protein, which is one single protein. The other is a complex pentamer that actually needs to have 5 different proteins come together. And both of those proteins enter host cells using that antigen of those respective antigens. Epithelial cells use the pentamer and gB cells infect fibroblasts. But once you're infected, this is where the virus causes havoc. And so the approach that we're taking is that we are showing the immune system through our vaccine, both of those antigens, to familiarize the immune system to look out for those antigens and for the virus, should the recipient of the vaccine see the virus at some later point. In the past, traditional vaccine makers have only focused on one of those antigens, the simpler GB antigen. And even with that simpler GB antigen, we were able to see through historical studies that there was a 50% vaccine effectiveness. So using mRNA, because we can address the pentamer antigen as well, we believe it should be additive to that 50%. So we're in Phase III. We're enrolling that study right now. And again, it will be case driven. So as soon as that data is available, we'll share that with you.

How's enrollment going?

So far, so good. We haven't said much on quarterly cadence, but enrollment is going as we would have expected.

Okay. I figured I would ask. And just in terms of the Phase II data, I guess, what have we learned so far? You mentioned sort of there's the pentamer and the sort of gB complexes. What have we learned from the efficacy from the data we've seen so far from you guys?

So the data from both Phase I and Phase II were very consistent and showed high neutralizing antibody titers against both the pentamer as well as fibroblast. So knowing now from our COVID experience and from many other vaccines that neutralizing antibody titers are a very good correlate and proxy for vaccine efficacy, we're very excited about those high-neutralizing antibody titers.

And how should we think about the fact that this can be, say, a latent virus or that there's a large portion of the population that might already have been exposed CMV or may even have it on a latent basis? How does this impact the trial and also thinking about from a commercial perspective?

So we are enrolling both seropositive individuals as well as seronegative individuals. So seropositives obviously have already been infected, and the reason for that is that there's still this opportunity to actually slow down the transmission from a seropositive person to the unborn child as well, although that is not the primary endpoint. The primary endpoint for the trial is to show that seronegatives remain infection-free from the virus. And so from a marketing standpoint, not having sero status as one of the reasons for not getting the vaccine, we think, will prove to be a positive from a marketing standpoint as well.

Absolutely. Makes sense. I can certainly see there being a very high incentive to get this vaccine. Maybe in terms of EBV, can you tell us a bit about the unmet need here? Again, another virus that probably has affected frankly everyone in this room. I'm seeing some, like, weird eyeballs now. But thinking about the unmet need here and the potential public health benefits of having a vaccine.

So EBV, like CMV is a DNA virus. In fact, they're from a herpes family of viruses. And just like CMV, EBV has multiple ways to infect as well using different antigens. And there are both near-term implications for having an EBV vaccine on the market in the case of preventing mononucleosis in the near term. But then as we recently discussed at our Vaccines Day, there is now a very strong link between EBV and the progression to MS. And so as a result of that study that was recently published, and Dr. Ascherio actually presented some of those findings at our Vaccines Day. We believe that preventing EBV infection will have major implications to public health in -- and the hope there is to just prevent MS from occurring. And so studies are ongoing for our month -- in a Phase I and our first initial indication will be to prevent mononucleosis. And we're in planning phases to see what type of a study we want to run to prevent actual MS cases down the road.

Yes. Certainly very interesting and relevant from a public health perspective. I guess, turning beyond vaccines, maybe you alluded to this at the beginning, but what are some of the applications of mRNA in oncology? And can you tell us a little bit about your programs there, both on sort of the therapeutic protein side as well as the vaccine side in oncology?

Sure. So I'll start with the intratumoral therapeutics, and then I'll finish with PCV, which is the personalized cancer vaccine. So in intratumoral immuno-oncology, we are -- and I like to think of this as like a Trojan Horse approach. We are injecting the tumor with OX40 ligand in our Triplet program along with cytokines, IL-23 and IL-36 gamma. And so those cytokines will be secreted into the tumor milieu and recruit or change the tumor milieu enough that it will recruit T cells. So the hope there is to have the T cells then recognize the tumor, be in the vicinity of the tumor and attack the tumor cells. So those -- that study is in a Phase I study looking at various tumor types. And we have updated some of the results at various meetings at SITC last year. And we plan to have additional data readouts as they are available. Now turning over to our personalized cancer vaccine. This is a Phase II program that is head-to-head against an active comparator in KEYTRUDA for adjuvant melanoma. And KEYTRUDA is already approved in that indication and shows about a 60% to 70% recurrence-free rate at the 12-month mark. And what we're trying to demonstrate in that Phase III study is that we can through the addition of PCV. So in the combination arm of PCV, plus KEYTRUDA, we'd like to increase the percentage of people that remain disease-free or recurrence-free at the 12-month mark. So that study was fully enrolled in September of last year, which, because it's a timed study that first interim analysis at the 12-month mark, will be available in the fourth quarter of this year. So we'll turn that card over, and we're very excited to see what we'll learn.

Yes, it's exciting. I mean -- and it's interesting that you're able to do it on a personalized basis as well for individual tumors. If this is successful, where do you guys go from there?

So that's a fantastic question because I think about it all the time. Having been on the other side, so KEYTRUDA, as you know, is a very successful molecule in immuno-oncology and has shown overall survival as well as response rates in a number of tumor types. And while this very first Phase II study that we're running is in adjuvant melanoma, the mechanism of action of the combination of PCV and KEYTRUDA, we think, should have translatability into other tumor type. I don't want to put the cart before the horse. Let's see what the Phase II head-to-head study shows in adjuvant melanoma. And if that mechanism proves to be successful in that indication, then it begs the question where -- what other tumor types can it work in. And so depending on what that data shows, we'll be evaluating moving that program forward into other tumor types as well.

Exciting. And I guess beyond oncology into some rare diseases, you guys have started some studies in PA and some others where you're looking at more rare disease applications. Can you tell us a little bit about these studies and why this could potentially a new application or modality for mRNA?

Sure. So here we are actually using the mRNA molecule to replace faulty or missing proteins in rare disease settings. So you mentioned 2 organic acidemias, which are PA, propionic acidemia, and MMA, which is methylmalonic acidemia. And here, children that are born with these diseases are missing the enzyme, particularly a couple of enzymes that actually help them reduce acid levels in their blood. And so what we'll be looking for is both biomarkers in these clinical trials Phase I/II studies that are ongoing, but also looking for clinical impacts on the disease itself. There aren't validated biomarkers out there currently because there aren't any products or medicines available for these individuals -- for these patients. So it will be an education process in terms of what impacts we're having on the biomarkers, but also having clinical endpoints that we're looking at, I think, will be very helpful for both patients, regulators to really discern whether or not we're having impact on the disease. So that data will be available, we said, later this year as well. It's exciting because it's a new modality or application of our mRNA and lipid nanoparticle technologies. And so stay tuned for that.

And in terms of adapting and maybe talk to some of the platform enhancements that enable this, what have been some of maybe the challenges in the past of being able to, say, simply replace a protein that's missing such as an enzyme and a rare disease? And why now are we sort of at the point that we can see this from the platform?

So great question. So I'm going to take it in 2 parts because there are challenges in replacing a protein in the traditional biotech sense. And then there were challenges that Moderna had to overcome as well. So let's talk about the first part first. So we know of many companies that are successful in replacing proteins by making the protein outside of the body and then administering it as a medicine or a product. So Genzyme, now part of Sanofi, is one of those enzyme replacement companies that did a lot for the rare disease field. However, most of those rare diseases and programs have only really focused on proteins that are replaced, that are secreted or act in the bloodstream. There very rarely have been, and I actually don't think we've ever seen, protein replacement for proteins that are missing, that are intracellular or inside of the cell. And the reason for that is because most protein products are large molecules, so they cannot cross the cellular membrane to actually make it into the cell, where they may be needed. And so the opportunity set for Moderna using mRNA, because mRNA is a small molecule, if you will, can make it into the cell and produce the protein intracellularly. So there's a lot of white space in the number of diseases we can go after that cannot be addressed by traditional protein manufacturing that happens outside of the body. So that challenge, we think we're on the verge of cracking. Let's see what the data shows us in PA and MMA. But there were challenges for ourselves in order to get the protein to the right place. And so with MMA and PA, we're using a lipid nanoparticle that's distinct from the lipid nanoparticles that are used in vaccines, for instance, that allow the mRNA payload to move into the liver as well as another compartment. The biodistribution is in myeloid cells in the spleen, but predominantly into the liver. And so this first study in PA will be the first demonstration of having liver cells make a protein that then it stays intracellular, inside of that cell. So still yet to be seen what the data is, but if we can crack that, then I think that opens up many other diseases that are mediated in the liver that we can go after.

Okay. Certainly would be no small feat and have vast implications in terms of the treatment of a lot of rare diseases. That's very exciting. Maybe with 1 minute left, I'll first turn it to the room and the webcast, if there's any other questions. Well, then, I'll have one. You guys have a lot of cash on your balance sheet. How are you thinking about that from a strategic capital allocation perspective, whether BD, M&A, more buybacks?

So roughly a year ago, we put out -- or about 9 months ago, we put out our capital allocation strategy. And first and foremost, it's to use our capital to reinvest in the business. This is why we have 46 different programs at various stages of clinical studies. And so that's going to be very -- it's paramount, and it's going to be very important. Priority #2 is to look outside of the company for partnerships and collaborations, particularly in that nucleic acid space because we do believe that we know how to deliver nucleic acids. I mean, mRNA is a nucleic acid, and the delivery of which we feel we have really moved that field forward. But in gene editing, we think that the technologies that are coming together actually are moving past generation 1.0 into generation 2.0, and we want to be a part of that as well. So we're looking for opportunities. We recently announced a partnership with Metagenome, and that's looking for novel approaches for gene editing enzymes. And so we're working with them and are keeping an eye out in other areas within that nucleic acid space. So something that you should stay tuned on. And then the third priority is to return capital to shareholders, and we've done that now through the 2 share repurchase programs that have been in place. One is now exhausted. At the beginning of this year, it was about $1 billion -- it was $1 billion. And we are currently in effect with the $3 billion share repurchase program.

Got it. Well, that was incredibly helpful. And thank you so much for joining us today and sharing all your insights with the many 46 programs ongoing and many more to come.

Thank you so much for having me.

Awesome.