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

Welcome to Barclays Global Healthcare Conference. My name is Gena Wang. I cover SMID-cap biotech. It is my great pleasure to introduce our next presenting company, Moderna. With us today, we have Lavina Talukdar, SVP, Head of Investor Relations.

So Lavina, I think we don't need to have an overview. Everyone knows Moderna's very well. I will start with COVID revenue regarding 2024 guidance. You do give a guidance of a $4 billion total revenue. And within that, you have, say, $1 billion is from COVID APA and the $2-plus billion in U.S. revenue and additional $1 billion is ex-U.S. COVID-plus -- sorry, the RSV and the international COVID, right? So maybe starting with APA, how confident we are with this $1 billion that will be executed in 2024?

Well, thank you, Gena, for having us. I'm delighted to be here. And you're right. So we gave guidance for COVID this year of $4 billion in total, and that is just as you said, international contracts signed with a number of companies that amount to $1 billion, and those are signed contracts. So we'll be delivering the signed contracts in the second half of the year for that all season in the Northern Hemisphere mostly. The second bucket is a revenue guidance of about $2 billion in the U.S. and that assumes similar kind of uptake to what we saw in the 2023 season for U.S. COVID result. And then that third with additional international COVID sales plus RSV makes up the remaining $1 billion. And in that international COVID bucket, usually we'll having conversations with other countries, we've not included any APAs that we talked about earlier, and that includes the EU, for instance, with who -- recently opened up a tender process that we said we would be participating in. And that tender process is for up to 36 million doses for up to 4 years each year. And so that process is still very early currently, but that would be an example of what we got that bucket. And then also, as you mentioned, whatever our revenues are for the RSV launch later this year.

Good. So maybe I'll start with that CDC product and your 36 million doses up to 4 years, is that every year, 36 million? or up to 36 million...

In all fairness, it could be 0 to 36 million doses. And when we know what that process is looking like because it's still early. We were participating in it, and it's early -- that's the update that we have at this point in time for EU.

Okay. And that will be every year?

Every year.

And then what could be the price like EU compared to U.S., and during pandemic time, I think, that the EU price is actually higher than the U.S., right now, the commercial perspective is [ $130 ]...

[ $129 ], For the U.S.

Okay. Yes and that price maybe even in [ $90 range? ]

We haven't said, but then prices, it's just based on the contracting season. And typically, within the corona vaccine space, you can assume anywhere between 30% and 50% discount off of that price in the U.S. market.

So then if we use that price as a benchmark, how the Europe price will be like?

So this is a tender process and pricing comes into that play as that conversation as well, we haven't said anything, but it's safe to assume that it's not going to be near the U.S. price, yes, it's safe to assume that it's not going to be like commercial pricing in the U.S.

So if we use Pfizer price because they were being launched in Europe, right, even 2023. So would that be a good benchmark for your price as well?

So we haven't really given guidance and we haven't said anything about what that tender pricing may look like. But it's a fair assumption for modeling purposes, you should think pandemic like pricing plus or minus. I don't know, some percentage.

Okay. So that will be like $30 plus/minus, or $35 plus/minus?

During the pandemic period ex-U.S. APAs were ranging anywhere from the low 20s to the high 20s, low 30s, for international.

Okay. So that would be a good range for starting point. Okay. Good. And then for the U.S. part, last year, if we look at the 2 quarters, that's $1.7 billion. So what makes you confidence this year can do more than $2 billion or around $2 billion?

So good question. So last year, the number that you see reported as revenue from the U.S. also includes our assumption or estimates of return reserves. And since it was very first year that we were entering in the commercial market, we took a pretty conservative stance into what those returns may end up here, which is, again, all packaged into that $1.7 billion in revenue. So as we gain more experience in terms of what level of shots were actually used in the marketplace like we saw last year, we couldn't get to a more the closer to the real return number. And over time, that should get even more stronger in terms of the predictability of those returns, which could get us to close to the $2 billion. And that's just kind of mechanical. The other important thing to note is that public health officials in the U.S. have been pretty disappointed with the uptake of COVID vaccines given that the burden of disease for COVID is still 3, 4x higher than the hospitalization rates and burden of disease versus flu or RSV. And so as a result, I think there's going to be a big push from public health authorities to get the message out there and really educating people on why it's important to get your annual COVID vaccine. So that we could see vaccination rates kind of trend up. Is it going to go where flu is today this year, unlikely, obviously, but it could trend higher.

Okay. And then you did say you have a very conservative in terms of reserve -- return reserve, right? So can you share the numbers of that? And I know it's in the 10-K. But...

It is in the 10-K. And the number in the 10-K that we've shared includes a return reserve, but also some additional fees in there as a lot, but the vast majority is for return reserve, and it's in excess of $500 million.

You think about this year, if you -- now you have a much better understanding, what is the real world -- realistic return...

Yes. So we're still going to be collecting data this year as well to see how this goes as well. So over time, it should get stronger and stronger. I can give you what that return reserve is over time, we'll get a better sense of it. It's more and more years go by when we have additional data, but I can give you a proxy for flu, typically in the flu market, return reserves can be in that into 10% to 20% range.

Very helpful. And maybe also ex-U.S. [indiscernible] additional countries? Do you think that there could be potential upside other than Europe?

So yes, we just talked about the EU tender. We are in active conversations with other countries around the world. Some examples include [indiscernible] and the Middle East as well as South American countries. Japan is also something that we look at, despite-- and what I think everyone knows this from our fourth quarter call, we weren't very pleased with the performance in Japan last year, but it is still a potential for this year.

Okay. Good. Another important component is RSV. So maybe I will talk a little bit more on that and also since ACIP meeting and it just show updated data with the GSK enterprises using their own analysis, CDC did announces on season 2, that data would look very different from the clinical trial data and we did see a huge drop from GSK, the data after season 2 escalate efficacy, VE rate is much lower than Pfizer's, previous everyone is also thinking GSK is the best, Moderna maybe the second, and then the last will be Pfizer now when we look at it, actually now the dynamics change. So maybe from your perspective, like how do you see your RSV data, also share that ACIP meeting in February? And then will CDC also do similar analysis of your data? And then what is your expectation for the approval. I know the PDUFA date is in line.

Sure. So the ACIP meeting that just took place at the end of February did review some data from our competitors. I think the best way to think about it is that when all 3 of the vaccines went through the 2022, 2023 season, where we saw an unusually strong RSV season. Every single of the vaccine saw a drop of roughly 20 percentage points. And that can be due to the very strong course of infection during that season. And so best way to look at the data by really kind of [indiscernible] background -- when trials will enroll, what season the original [indiscernible]. And when you do that from what we've seen from some of the competitors as well as our own neutralizing antibody titer level, those graphs really look like they're on top of each other. So at Day 29, for instance, all 3 vaccines show an 8- to 10-fold increase over baseline for RSV neutralizing antibody titers. And then at month 12, they all kind of are around that refold higher than baseline level. So that particular analysis on neutralizing antibody titers will probably be the best way to compare because none of these studies were done head-to-head and cross-draw comparisons are very difficult, and would be the best way to kind of look at the data. And so far, it looks like all 3 competitors are strongly similar neutralizing antibody titer. And in terms of your other question on the PDUFA date, is that we remain confident that we will be approved and in time for the June ACIP meeting, which will then allow us to get to market by the fall of this year.

So now given the update, I know that's also up to CDC discussion, like do you foresee this as the once every 2-year vaccine? Or do you think it's actually giving any [indiscernible] analysis and data is slightly different from clinical trial data from all those companies. So since the VE dropped so much in the [indiscernible] range, do you think that actually CDC will recommend once every year dose?

So you're right, that is a CDC ACIP recommendation. And I think what they'll do is collect data, before making a decision on frequency of vaccinations and that can come in a number of forms. So as I was just talking about neutralizing antibody titers, I think would be one of the ways that they would collect the data to try and figure out a correlative protection. And so what level of antibody does -- do you then get a vaccine level of X, for instance. Once they've established that correlative protection level from the data from ourselves and competitors, I think that will help them decide on the frequency of vaccination. And so they may set a level of 60% or 50%. It really is up to them. And that level of antibodies is when -- depend on when you get to that level of antibodies is what I would say, this is when it makes sense to have another vaccination. So there's that data. I think that some of our competitors have shown revaccination at 12 months. We're also running a study of revaccinating participants from our Phase III study at 12 months, and also at 24 months. So as those data come in, that will ensure the best decision on vaccination schedule RSV. So it doesn't feel like there's a rush to do it, either at the next [indiscernible] you could potentially come at the October ACIP, but it could also move into 2025. And the rationale for why you can wait that long is the penetration into the U.S. marketplace right now, it's really just 10%. And you still have 90% of the population of the market, that it doesn't matter what that vaccination schedule because it would be the first time they're getting it this year, for instance.

Okay. I know you don't have a real-world experience yet. But have you see any Guillain-Barré Syndrome in your clinical studies, yes.

So no, we have not seen any GBS in the Phase III study, but also, we ran a co-administration study where we were testing our RSV vaccine co-administered with our COVID vaccine in arm. And then another arm, we were co-administering our RSV vaccine with marketed a flu vaccine as well. And so we also didn't see any GBS in that study either.

Okay. Now since you are very close to approval. How is your launch operations there? I think there are some pushback, and how could Moderna compete with GSK and Pfizer both have very big footprint in the vaccine space and put the COVID aside.

Sure. But the experience in COVID doesn't actually help in the RSV setting because it is the same commercial infrastructure, the same people that we'll be speaking to in that retail pharmacy space. So our experience in COVID is highly leverageable for RSV. And having delivered for our customers in the COVID -- first commercial COVID season last year, I think builds up the strong relationships that we have made. And in the retail pharmacy area, which is at least 75%, 80% of the market, it's a good starting point to have those strong relationships when we're going into this RSV market.

So how many doses will you prepare before like the season starts?

So the good news is that before the season starts, we should be through contracting, and we'll have a view on what the contract will yield in terms of volume that we need to make. So as in the case of COVID, we only really needed 2 months notice, if you will, in order to fulfill supply needs in the market. And I think it will be similar for RSV. We will have a view into what the contracts look like for 2024 prior to actually launching the product and should be able to meet the supply needs.

So what would be your idea, of course, the larger market share is better. But what would be like a realistic market share, you will gain giving second or third to the market as 2 drugs are already in the market.

I think it would fair, for people to assume 1/3 of the market, obviously, we want to do better than that. But being the third player on the market and again as you pointed out pretty big companies and competitors, 1/3 of the market is a good assumption, and obviously we want to do better than that.

Okay. Now move on to flu. Maybe any update regarding in the conversion with FDA about the approval pass for -- based on the current data.

So we're still in discussions with regulators around the world really. And since we're in the midst of those discussions, we typically don't even talk about discussions with regulators. But our intention is to file, once we have those discussions conclude, but let's see when those discussions will go.

Okay. So when will be the time you will share the update with us?

As soon as those discussions kind of wrap up and we have a sense of what the next steps are, we will share that for patients.

Like are we talking about 2Q or...

We should have a view in 2024.

Okay. So you will not give any more...

More color than that.

Color, okay. I think we have 2 more or maybe another question, more like commercial perspective. Like where do you see that if fast forward, you have a flu, RSV and a COVID, 3 vaccines? Like what do you think will be the major uptake? Do you think of the combo, if you have available, does the combo would help you to gain additional market share? Or do you think that each individual that will be sufficient?

Yes, that's a great question. We actually are big believers in the combination strategy for a number of reasons. One is the combination does offer many benefits to different stakeholders. So for the payer system, for instance, eliminating the administration fee for an injection or a vaccination something that with millions of doses to be very meaningful in cost savings for the sake of the medical system. Most people don't want to get 2 shots if they can get 1 and be protected from 2 or more viruses. And then physicians like it because compliance is very high with combination vaccines. So we do think that the combination strategy is one that will help us gain market share. It could also be margin improving because you have 2 vaccines in 1 vial or 1 prefilled syringe, for instance. And that is, as you know, the fill-finish or the glassware is the most expensive part of the manufacturing process. So we're very much excited about that combo approach.

Good. So maybe switching here on your cancer vaccine program. So any potential -- I know your Merck partner is enrolling melanoma Phase III studies. Is there any sense how soon that Phase III enrollment could complete?

Well, we're very pleased with how enrollment is going so far. And I think that's really part of commitments that both Merck and Moderna had to really stand up that study as soon as possible. We've been enrolling that study now since the summer of last year. And as more sites come online, as you know, typically enrollment gets better and better. So we're pleased with how enrollment is going there. I think that presenting some of the data at major medical meetings like AACR and ASCO we get the word out there in terms of what we've seen from the Phase III study thus far. So there's a lot of buzz in the medical community as well. So we're very pleased with how it's going thus far. If you were to use a proxy, 12 to 18 months is typically what has taken some of the other checkpoint inhibitors to enroll their studies, and that was against placebo whereas this is against an active comparison and standard of care. So somewhere in that range is when we're hopeful to see full enrollment of ours Phase III.

Okay. So which means for the -- so it could be the end of 2024, a complete enrollment might finished?

It could finish, yes. Hopefully at end of the '24...

I think the reason I'm asking is this one of the conditions that you could find accelerated approval is completed enrollment of ongoing Phase III and, of course, the manufacturing status durability data you're collecting [indiscernible]. So maybe manufacturing part, how ready you are? And then that translates the next question is how realistic or how soon you think, you should file accelerated approval?

So in the minds of Moderna, there are really 3 things we were looking forward to even ask the question for accelerated approval. And that was looking at that second cut of data, which just happened at the end of last year that really speaks to the durability of IND. So that's -- if you want to consider a checkmark, it will looks great. So its checkmark there. The FDA actually wants to see the Phase IIIs up and running and substantially and ultimately, it's not necessarily full enrollment, but it's substantially enrolled, which is a subjective term, but as I said, the enrollment is going well, and we're pleased with it. And then the third is really a Moderna hurdle, if you will, where we want to make sure that in the event that we do have accelerated approval, we want to be able to supply the market. So what we've been doing with our Marlborough facility, which was one that we bought for the purpose of IND build-out. This was spring of last year for a good part of the last year, we've been building that facility out. So there are stages that the executive committee looks at. And so far, it's been going pretty smoothly, getting through the stages we want to get to. So as soon as we get to a level of manufacturing completion around the Marlborough facility, that's when we think we'll be in the best position to approach regulators about that accelerated approval, which again could potentially happen in 2024.

Okay. So that could be as early as 2024, the completion. Okay. Great. I know we don't have too much time left. I do want to ask one question that I get from lot of investors and a shareholder ask and I wanted to ask this question is how you can cut your burn, so that you can turn it into profitable a little bit early, you can have an extra cash reserve. I know you have a very strong cash position, but in Q3 the revenue was trajectory at giving how much you spend with the R&D cost. So is there a way you cut the cost? And how much actually the R&D cost is essential, say, for the late-stage clinical development.

So all very good questions. And so let me unpack that. We did say to the Street that we're aiming to break even by 2026. And that's really predicated on a number of things, which is we'll look at what the revenue line looks like at that point in time. Our R&D cost are for this year, $4.5 billion. And if you assume that the R&D costs for next year and the following year, that would be [indiscernible] it's been like what we have in the past. And so that $4.5 billion most of it, a good portion of it in '24 and '25 are committed to like larger Phase III studies that are either ongoing already or in the plans. And so in 2026, however, less of it is committed. So we could and look to privatize our pipeline, pace it out, defer some programs really depending on what that top line looks like if it's still necessary. We could also look at partnerships for the pipeline and even project financing. So there are multiple things that we can get at, making sure that promise of breaking even is something that you've got to know that we take through for...

That's very good. Thank you very much, Lavina.

Thank you so much for having me.

Thank you, everyone.