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

Good morning, everyone. My name is Ted Tenthoff. I'm a senior biotech analyst at Piper Sandler. And before I begin, firstly, thank you all for joining us. And before I begin, I am required to point out certain disclosures regarding the relationship between Piper and Moderna that are posted at the back of the room and also at the registration desk. So I don't think Moderna needs much of an introduction these days. I remember when we first did the IPO, it took a little bit more, but now pretty much a household name, thanks to all of your hard work in protecting us against the COVID pandemic. But what I really love about the story, I think it's just getting excited now, because you have a dramatically strengthened balance sheet and really a fundamentally derisked technology and are developing a pipeline of new mRNA vaccines and medicines that I think are even going to have a bigger impact. I'm very pleased to have my good friend, Stephane Bancel. Thanks for taking the time. I know your schedule is just crazy busy these days, and we really appreciate the time that you take.

So Stephane, I'm only going to spend a little bit of time on COVID, but then I really want to try to get into the pipeline, because there's so much going on. Maybe you can start off by describing where we are in the pandemic? And what do you foresee as sort of the transition to the endemic phase of the -- with COVID vaccines?

Sure. So good morning, everybody, and thank you for having us. It's nice to be back in New York in-person. I am kind of really sick of Zoom. So I mean, on COVID, I mean, as you guys know, because you all follow it very closely, we already believe like most people that we're moving into an endemic setup. We think it's going to be a new evolving virus like flu. I think the crazy people who think that this virus is going to disappear from the world, don't obviously understand science. And really going to be a bit like flu in terms of potential annual updates. We think people who are at high risk it's going to be very important that they get vaccinated annually. And one of the things that people forget is that, we would have seen flu as kids and teens with great, great immune system and great memory. Well, I have not seen COVID as a kid. And so I think the 50-plus category, people at high risk because of clinical conditions and so on, will need an annual booster. As you know, we are trying to make it better for people by combining it with flu. We have flu in Phase III, I'm sure we'll talk about that. We have also RSV in Phase III, and then combining COVID, flu and RSV in a single dose. So just kind of doing annual update. And we'd want to kind of use the technology to really get people not sick, at the hospital and not dying by customizing the product by regions of the world. Because as you know, sometimes the strain circulating in Europe or U.S. are not the same as one that [indiscernible] is in February, where as we've shown this summer, it took us 60 days, from the FDA telling us with Peter Marks letter after VRBPAC on June 28 around BA.5 to get products in pharmacies. So I had a chance to meet with Peter in September and he's like, I notice you guys can do 60 days and Pfizer too, so I'll be heading for flu, which going to be interesting in terms of competitive dynamics with the protein guys, which just technology cannot do that. And I even think from a technology standpoint, we should be able to shrink the time even further. I think us going down to 30, 45 days in a few years is not crazy. It's going to require work, but it is doable. So I think we're in the place where the thing is manageable, but like flu we might have from time to time a bad year, because we might have a more severe strain. And that we'll just have to be humble and just look for other signs.

Stephane, I want to use your comment about this speed to being able to develop a vaccine against new strains and really kind of use that as a segue into flu, because it is one of the big challenges with current seasonal flu and really a result of the low -- I mean, shockingly low -- almost shockingly low protection rates. I mean, people don't get flu vaccine because they still get flu every year. So tell us how the mRNA technology can work in there. Maybe use that as a way to start to discuss some of your multi-effort approaches in flu.

Yes. And the vision we have -- maybe before talking about flu for a second, let's talk about respiratory viruses. Which is, as you know, we're on 10 respiratory viruses, causing people to get sick, hospitalized, dying. And none of us have already done PCR when we got sick before. So I'm sure I got hMPV before and RSV -- many of the viruses over years and I thought I have flu. And by the way, some may also might have thought that flu vaccine didn't work, because I thought I got flu because I got flu-like symptoms, but I didn't get flu.

All right, something else.

Scientifically, I got something else. And so our vision is really to get all of those things combined so that we get one shot for all, and we're done. So that's the vision and will take a few iterations together, including -- because regulatory requirements. And so the technology, I think, is going to be very differentiating versus what protein can do. And my opinion is protein vaccine for flu are going to get out of business over time. It's going to take a few years, but out of business. Because we're going to increase the efficacy by adding strains of the moment, not the strain before. We're going to increase efficacy by having the possibility to put more H3s. The H3 components of flu drives 90% of hospitalization. So why do you put only one H3 like the protein guys do? Why do you put 2 or 3 H3s looking at all the ones that are on the watchlist of WHO, not the one that is the highest on watchlist. And the other thing is adding more antigen, which if you think about it today with the quadrivalent vaccines for the 4 strains of flu, that use the H3 antigen. People have not used in nowadays. And so it's known that flu has 2 pathways to get into human cells. So we only kind of try to block one pathway, we like CMV, we have a gB and the pentamer, which is the reason there's no CMV vaccine as people only have been able to drug the gB and not the pentamer. And so it's the same thing here. We believe by going to 8, by having for each flu strain, 4 HA component and 4 NA components together, plus adding a couple of more H3s on both sides, we believe scientifically, we you should get an efficacy of 95% plus like we had for COVID. Again, it's going to take us a couple of iteration with 1010, 1020, 1030 programs. But that's exactly one of our strategies, which is the way to think about this company and this platform is not like traditional pharma where they all live in analog world where you have a product, if you change one thing, you have to go back to square one. This is an information molecule where we have a platform when you can combine things in a way that feels a bit like cheating versus what is done in the analog world that I used to work in. And so we're trying to think about how do we get an amazing product, but how do we stop getting there. We were kind of 1.0, 2.0, 3.0, because we want to start helping people and creating value.

And there's such an enormous amount of space to work here. You know, it's so funny, we finally get COVID more or less under control, and we could probably spend a whole hour talking about that. Now RSV pops up, and it's the worst RSV season, because everyone hasn't built their things. So tell us about what you're doing on the ConquerRSV trial, and really why that can be such an important next vaccine?

Yes. So RSV is in Phase III, fully enrolled. As you know, RSV infection is everywhere, so cases are going up very quickly. And so, the good news about RSV for all vaccine is we're coding for the same protein that GSK and Pfizer have. So it's good that they have good results in terms of derisking the biology. I believe that we could have better antibodies than theirs, which is protein-based. Because theirs is made in CHO cell and E. coli cells. So if you think about -- from a scientific standpoint, the post construction and modifications are not done in the human system, ours is made in your body, in human cells. And because it's very complex premier protein, it's not a simple protein. It's a very complex protein. So from a scientific standpoint, I believe we have to wait for data that the quality of binding antibodies, neutralizing antibodies could be much higher, and much closer to the real thing. Because if you think about what we're trying to do is to educate your immune system with an antibody, so as you get the real virus, it's going to bind super well. And so could we have better binding antibodies, neutralizing antibodies then the protein guys? I think it's possible. And so could we have an efficacy like them or higher? I think it's possible. And then that's a product we'll combine with COVID and flu as part of a strategy we're just talking about.

And we could start to get some data from the interim readouts this winter. Is that correct?

That's correct. And given the kind of pace at which things are going, if you look at the way the study is done with -- I mean, I'd be very surprised by the end of Q1, we don't have the study readout and most probably its later.

Yes. And again, so just to kind of keep score here, COVID on the market, flu in Phase III, RSV in Phase III, there's other ones. You know, one question that pops up is, is there a limit to the number of antigens or mRNA strands that can be introduced in a vaccine? So do we start to get immune attenuation if we kind of overwhelm that system, I mean?

So it's interesting. We are playing a lot with it, as you can imagine, because my team asked that question long time ago. We've done up to 15 in the lab, as you know up to 6 mRNA in the clinic with CMV, and so on. Steven likes to remind everybody, so he's the head of R&D. He likes to remind everybody that sometimes you get a lot of infection at the same time and your immune system has to be able to deal with all those things or we will be dead species already. Between cancer in your body -- you know, cancer cell appearing and you have an infection with several viruses and so on. So he thinks that from a scientific, clinical standpoint, it's unlikely. We've already a big and with 15 that it looks pretty good. But again, with science, you want to be humble and wait to get the data out to people.

Yes. Great. So I'm just going to pause right here and just see, there's a lot to cover. We really are just scratching the surface on some of these vaccines. Are there any questions from the audience? I did get one this morning about China. And what are your plans to potentially bring COVID vaccine to China?

Sure. So let me share what I can, which is, we know China is a big market. We have a very good vaccine, most probably the best vaccine in the world, if you look at the real world evidence data in terms of -- much less [ substitution ] than the Pfizer vaccine, as you know. And so we've tried for quite a while to be helpful to China. And there has not been a lot of engagement in the past. We have active lines of communications to the highest level of Chinese government and way below. And so when there's something to talk about, we'll talk about it. But like every time we talk to a sovereign, until it's -- something is done, it's not done.

Yes, understood. Appreciate it. Now, we also have the Phase III CMV trial. I'm going to skip that one this time only because --

I know that we've probably been in our products, you're going to just skip that.

Yes. And it's -- well, it's an amazing product too. But I want to touch base on something that I think is really temporal. Merck just wrote you guys a check for a $0.25 billion for your personal cancer vaccine. This is a program that I don't think investors have had as much faith in. But I think the Merck news kind of shifts the ratio here. Start off by describing that vaccine, because again this is 32 or 34 antigens in a single vaccine --

34.

And we should get data soon, so.

Yes. They started before the end of the year and during this December, all data is December. So the idea is, you know, Ted, is to use the vaccine to teach T cells antigen of your cancer that they have missed. Because that's we all know, we have cancer all the time before the tumor, it's because of T cells that missed our cancer cells. And so what we're trying to do, because we saw very strong data in monkeys and in humans in our early infectious disease vaccines way back when nobody cared about Moderna, that with very strong T cell and oncologists were like, wow! And I remember at the time [ Tallett ] we know well came to my office and is like, all the robots you used for monkey stuff and so on the way you make [indiscernible] mRNA up, could we do that for GMP? I'm like, sure, it's just a lot of time and money, but there's no reason why you couldn't get that type of capability for humans. And like why? Because, well, given the T cell data we have in monkey and humans now and the ability to do a lot of antigens together, 34 now, and we could do more, could we make a vaccine for every patient? I'm like, sure. And it's like let's try. And so the thing that was really exciting at ASCO 2019, where again nobody cared, we showed from a Phase I in cancer patient, obviously, that we were able to teach cancer patient T cells to recognize the epitope that they didn't see before. And what we did is very simple. We took the blood of people before starting dosing Moderna. We tested against the antigen that we put in the vaccine, and so we know which ones those are 34, obviously. And we take blood after 3 or 4 doses. They are 3 weeks apart, intramuscular, like a normal vaccine, you could get at CVS down the road commercially, much better than going to oncology out, much more fun. And we saw after 3 or 4 dose that we had a lot of epitopes that were recognized by the T cells. So they held the proof of mechanisms. Now the big question as where the Phase II comes is, do you have clinical relevance? And so, because it's an important thing about Moderna culture, given that its amazing platform and so many products and we always spend so much time thinking about what do we not do given there's so many ideas of cool drugs to do. We don't want to do like most biotech companies are doing like futile studies to stay alive. We want to do studies where we know is it a boy or a girl? Is it working or not? And so we designed the study from the get-go stage, it used to be powered up. And the control arm is going to be KEYTRUDA immunotherapy. Because it's better in KEYTRUDA and we're very interested, or it's not, I'm going to do something else. And that's how we designed the study. So it's coming out with one year survival free in December compared to KEYTRUDA. So Merck -- to go back to the Merck piece, so Merck as an option, because at the time, we didn't have a lot of money when this happened way back then. And given the graveyard of cancer vaccines, we're putting almost half of our balance sheet at the time on something that has maybe hundreds of failures before us. Didn't seem like a very wise risk management idea for a cash flow negative company. And so given Merck's amazing work on KEYTRUDA and their ability to do so many phases for the symptoms and so we were like you might be a good partner, and we needed access to KEYTRUDA without paying for it. So Merck paid for everything. So we paid the manufacturing GMP capability we had to build, the Phase I, the Phase II. So we paid everything. So basically we had 3 options for shareholders which we like to build business like this. Like we got [ checks ] on the line. And they had the rights with Phase II data to opt in for $0.25 billion. And then moving forward with 50-50 cost share GMP and R&D and commercial and 50-50 profit share. So they decided to exercise before their option expired, because the data came out clear. It's public information on clinicaltrials.gov that it's an open label study. So you could get that previous study, there's some data. We have not run the final analysis. It's being run right now given it's so critical, we're having the team double, triple check every scan and everything so that the data is -- when it comes out is super robust and not going to change. And so the data should come out in December.

Very excited to see that data set. And, you know, intriguing to see the synergy between KEYTRUDA in terms of turning off the blocks of the immune system with the vaccine to really educate the immune system. So one of the reasons I skipped CMV is because, you know, my favorite topic is orphan diseases.

I know.

Literally, I never leave this guy alone, and so he knows --

I'll lead that. I love provide this to you, but it's not so empirical to --

And it just to me, it makes so much sense like you were saying before about having the body actually produce the protein or the antigen or the enzymes in this case that the body can't make, rather than having, you know, a facility in Cambridge or Switzerland or wherever to produce it and ship it.

Or getting a liver transplant, like some of those kidneys.

Yes. And there's so many of these small diseases that you can go after from a genetic basis. So there's, again, way too much time to cover in half an hour, let alone in the few minutes we have. But you have started to generate some human data on PA or propionic academia as well MMA. Just maybe touch on that. And where can orphan diseases go for Moderna?

Sure. So just for precision it's PA and GSD1a that we're starting --

Yes. Sorry, yes.

I just want to be clear. So as you know, because you've seen the data that we showed in September, which was really like a time cut on the data as of August, because it probably had been going for years, so we wanted to share some data. As you know, we didn't declare victory because we need to do a bit more work. But as I qualified at the time, it's running really good. So basically, as you know, we're looking at medical, the composition of events where the kids have to go back to the hospital and to the ICU. We showed the swim lanes of all those kids by cohort, pre-dosing and post-dosing. Some of the kids in the first cohort are 2-year on study. So first news on safety, which we're so excited about the data that we would share, I did a fantastic job and she went so fast on safety. It's important that so kids have been dosed for a year, 3 weeks apart and now even 2 weeks apart. The safety data is pristine. There is no, you know, I mean, if you look at all the parameters that we shared and shown on the data, the safety look fantastic, which is [ super ] to have, because it's an area and piece of a platform, which says we can dose IV and only with different lipids in the vaccine that goes to the liver. And that can be used in cardiology in a lot of other application. I hope we can talk about Relaxin for 1 minute because I think it is going to change heart failure treatment forever. So we're ready that you see 2 very obvious use of a technology. You could get an IV with lipid targeting the liver, and here, you make inside the liver cells of those kids with all human machinery, you make the protein that they're missing because they have the wrong instruction from MDMA in side DNA. And if you get the mRNA in the right cell, it should work. We've shown it in animals so many times and so many publications that it works from various standpoint it makes so much sense that it should work. And so, the pediatrics, I think about the data because when we started just wanted to remember the context because nobody has ever done IV with this mRNA in the world, we have no idea of a frequency of dosing and the dose. Because those kids are so sick we want it to be super careful that we didn't keep them into metabolic imbalance to send them to the ICU because of a drug. And so we started super low dose. And we started every 3 weeks as the best informed guess, based on the animal work. But the metabolism -- because they are metabolic disease. The metabolism of a mouse in a cage eating the same thing for [indiscernible] or humans with every different things, different metabolism, the genetic diversity of human is much wider than the same breed of mice in a cage. And so we started very low and at 3 weeks. And what was interesting when we got the first data, I remember very vividly we were meeting, with so less decompensation events after which is very good news, some more and we want to be always very careful. But when I saw data out of a team, so those events, when do they happen, and the team has a big smile to their face, because at the second slide, we have a shot with different color, like we showed at the R&D Day. That most of the events were between week 2 and week 3. So like could it be because of the decay of a protein that you have a good protection at the beginning, also a good treatment at the beginning. And then because you don't have enough between the dose and the frequency, you have decomposition again. So second cohort was same dose, but every 2 weeks, and bingo. If you look at the data, you ever less events. So of course, there's less data because we recruited later. So you have, as you look at the time lapse, you have less time. And then we took the dose higher, and then even higher. So we have more time on all of those kids now. And we have higher doses. So at the right time we'll share more data. But as I started it -- as we saw that any data is good. And the good news there is that there are 30 plus rare disease in the liver with the same thing, the disease is very well understood, it's one gene that's missing. And those drugs are undoable using recombinant or small molecule. So those kids have no options. As we all know, rare disease kids will need the treatment forever. Most of them cannot really be done with gene editing with current technologies, because there's so much genetic diversity that you cannot go after them. They're just a very few. I think a lot of time people get very excited about gene editing, which we love, as you know, with a big force with 100 plus people in gene editing. But a lot of those disease actually very unpredictable with gene editing because of the genetic diversity of humans. And so you could have up to 34 arms, where you might run that franchise for a long time. Because how do you run a clinical study after, let's say, a 70%, 80% reduction in medical events? How do you do a study and take the kids off drug?

No one is going to --

Yes. And as we all know, quick to market because if we have good data, there was a Phase I, II to go straight into pivotal obviously. That manufacturing process we can go very, very fast. We can scale like we did in vaccine. When we were -- 5 years ago, we're like 3 or 4 vaccines. Now we have 30 vaccine in the clinic. So you'll see the same thing happening in rare disease. We already name OTC as a 6-program in rare disease. And you don't have to be a genius of what we like, go to see the publication on the website in mice. Those form were just waiting to go into talks just to manage investments at the time, because wanting to make sure technology was working.

Yes. No, I really appreciate you're spending time on that, because it's super exciting. I'm glad you mentioned gene editing because we did just publish a big gene editing piece on Monday and profiled Moderna Genomics efforts in that. But I can't resist if you're going to leave us with a teaser about Relaxin and changing heart failure I've got to ask --

Sure. And it's very simple. So the first piece is Relaxin is the same technology as PA, propionic acidemia, same lipids, same everything. So from a technology standpoint and safety standpoint, I just tell you we can dose kids that are very sick every 2 weeks with no safety issue. So that's pretty cool. The other thing about Relaxin that I love, because I love to copy nature, is this is a human protein that pregnant woman make a lot during pregnancy. Why? Because the pregnant woman during pregnancy has very quickly to have a much stronger heart function to protect her and her baby because the increase in weight is very quick between the baby, the placenta and the liquid. And so, nature has done a beautiful thing where women will secret a lot of Relaxin. And when after the birth of a baby, the Relaxin goes down. Novartis based on that biological insight that was published by academics run a program that you might be aware, Serelaxin. But the problem they had is the half life of that protein because very small peptide is super short. Very short. So what did they do with 48-hour infusion and because the commercial team told them -- I spoke to -- with many Novartis people spoke -- told them, a, nobody will be going back to hospital in 48 hours. So the way we designed the trial was one infusion at 48 hours, the 48 hours before leaving hospital. So if you look at the data with Phase III which was power, it was [ recession ] study. So far us it's beautiful science. At the beginning of a study after dosing, it is amazing. The placebo super drug is like, you don't have to be a genius to see if it's working. But 6 months out, the 2 comes on top of each other. And what if you could do that every couple of weeks and with dose, because mRNA is going to make the protein in the body for 48 hours. This we've shown and published many times. So that's perfect for us. One does, bingo, you're done. So for 48 hours your body makes Relaxin, it's as short life. After 48 hours, mRNA will be gone, Relaxin will be gone, but Relaxin will do is good. We saw in the Novartis trial. And it might be even better because as a human protein would like, not again E. coli stuff. So it's natural biology providing the Phase III of the biology, if you could repeat those, it works, maybe even better made in your own cell. That's why I like it.

I look forward to hearing more about that program and everything else. Thank you so much for being with us.

Thank you very much.

It is a pleasure. And thanks, everybody, for joining us.

Thank you, Ted.