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

Good morning, everyone, and appreciate you joining us on our next session. I'm very happy to have the Chief Financial Officer of Moderna, Jamey Mock, up here with us. Jamey, it's great to be here. Last I checked you have a second product that is going to be generating revenues, so that's very exciting. We'll talk about that in RSV. You just go back from ASCO, long week at ASCO talking about the pipeline and with a particular focus on the INT adjuvant melanoma data, 3-year data, so that's pretty exciting. And obviously, a lot going on with financial guidance and trying to get Moderna back to a profitability standpoint and setting the stage for the next few years of growth. So maybe I would take the opportunity to ask you first, from a high-level perspective, the guidance this year, starting from a high level 2024. You have guidance, talk about the inputs in that guidance, the confidence in hitting that guidance, with a particular focus on what I think is the wild card, which is RSV. So financial guidance and your approval of RSV and how much is RSV going to contribute this year?

Terrific. Well. Good to see you, Mike, and thanks for having us. And thanks for your coverage and videos, including your new song. Appreciate that.

Very good. Very good. Next one I'll get Moderna into the lyrics.

Appreciate that. And thanks, everybody, for joining and your interest. Yes. So in terms of the guidance, maybe I'll just go through the categories that we've talked to in the past, which is our APAs, which we came into the year with $1 billion that we said. And we've learned our lessons on the APAs in the past in terms of not always being followed through. So we're hoping that, perhaps, there's a little upside there, but we're fairly balanced on that.

Clarify that. So in your APA guidance that you've taken some handicap to that.

Correct.

Such that in prior years, if they didn't all come through, that would have been a miss. But this year, 2024, because people have said, "Well, no, what is going to have all of it, you've already actually included some of that discount into that?

Exactly. So if I go back to 2022, when I stepped into the role in September, we had estimated $21 billion of sales from APAs in that 2022, we came in at $18 billion and deferred $3 billion into 2023. So there is this notion that deferrals can happen, and I think we've accounted for that in our guidance. The second category is the U.S. sales. Everybody is watching vaccination rates. So I'm sure we'll talk about COVID. We've assumed a pretty flat market year-over-year because it has declined, and we're hoping we've hit a base and, perhaps, there's reason for optimism of increasing vaccination rates.

Comment on that one. So U.S. COVID, so APA is outside the U.S. You've commented that you've been more conservative on some of that if people don't follow through. On U.S., you expect equivalent or flattish year-over-year jabs.

That's right.

There, people feel like, well, each year gets a little bit lower. So is that a risk, you think it might actually be better. Talk about how would it be better or why would it be lower?

Yes. So maybe I'll talk about the long term for COVID. Who knows exactly what will happen in 2024 and 2025. But I think, if you just look at the health burden of COVID, and we've just actually, about 5 minutes ago, published a report, an annual report, on COVID and our belief in what we think is driving the rate of vaccination rates and the disease. But if you look at the long term, if you look at the health burden versus flu, hospitalization rates, particularly in older adults are 5x what it is of flu. And the vaccination rates are about 1/4 or half of what we actually see versus flu. So if you have 5x hospitalization rates and 1/2 to 1/4 from a vaccination rates, it just doesn't make sense in the long term from a health burden perspective. So again, I don't know exactly what will happen in 2024. That's obviously a publicized topic. But long term, I think, science prevails here. So that's what I mean.

I hear you on that. So despite the fact that hospitalizations are 5x higher, the vaccination rate is much lower, that doesn't make any sense where there needs to be probably better promotion or an understanding by the public to do that. So just to be clear, though, while you're guiding flattish, people feel like jabs may go lower, but you feel that it should be at least flattish.

That's what we're assuming in our $4 billion guidance.

How about RSV?

It's a third category. Yes.

So RSV -- congrats on the RSV approval, nervousness that happened around that. But it did happen on the Friday. And so talk a little bit about your approval, the label, how competitive you feel. And how much will that contribute to your guidance this year?

Yes. So it is nice to have a second product. It's wonderful to actually be able to sell a second product and not be a one-product only company. So in terms of that, maybe I'll round out the guidance and then answer some of those questions. So round out the guidance, the last $1 billion and the $4 billion was both RSV and other countries that didn't have an APA already signed for COVID. And we said that, that combined was about $1 billion. We never guided an RSV-specific revenue target. But in terms of the product, I mean we think it competes extremely well. We think, from an efficacy standpoint, it is equivalent to the competitors. We think the presentation is terrific. In fact, yesterday, I was on with a retailer, the CFO and the head of the pharmacy group, and they are very encouraged by PFS and what that can mean for how they deliver RSV. And so we're encouraged by that and hope to be very successful.

So since not everyone knows the acronym, so you were -- you guys naturally are on the phones, hitting the phones with major pharmacy people who're going to be purchasing this and that you're having a good conversation and that the prefilled syringe one-step process. I think the one step is thought and then open to...

It should already be thought. Yes.

It should already be thought and one step is open the cap. And can you compare and contrast how that would be with the 2 other players, GSK and Pfizer. I've actually literally pulled down the instruction manual on this and tried to do it. Kudos to these who could do all this because they got to do it 10 times a day. And my point is there is multiple steps. Now that said, when we looked at it, GSK and Pfizer have sort of gotten it down to sort of like 4 steps. And like one of them, I think Pfizer is 9 steps, but then they turned 9 steps into 4 steps by literally just changing the numbers of the orders. I swear to you, it's 9 steps. It's gone to 4 steps but if you count the steps, it's still 9 steps. So can you just compare and contrast because 4 steps doesn't seem that hard but like what does that mean?

I mean it's a lyophilized product, so you have to mix it and swirl it and then take a jab and measure it out. And so that is prone to error or breakage and that is cost. And if you talk to the retailers or any customer for that matter, they have 2 things that they care about. One is their ultimate cost, and that's not just the price of the product, that is how we deliver on time. That is the number of returns, making sure that they have the right amount of inventory because it takes money and time to actually have a return. And they're also interested in how do we increase vaccination rates and marketing of the product. So that's what we're spending -- we have a lot of creative ideas to drive vaccination coverage. And so when you combine the PFS and being -- I think it's 1/4 the amount of time it would take to actually administer or deliver a dose as well as our marketing efforts. That's why we think we are competing pretty well and have good relationships. And we proved that a little bit with COVID. So in the U.S., we had 50% market share last year, thereabouts. And that was our first time, actually, ever competing commercially. So we're encouraged by that, and we hope that continues going into RSV.

And so, again, getting into the nitty gritty, but this is happening right now as you guys are on the phones, you're having contracting conversations. Literally, contracting is critical to getting this done. And how does that work? It's basically 3, 4, 5 major pharmacy CVS, Walgreens. And they're on the phone trying to allocate the volume this year for the winter to the 3 different players?

That's exactly right. So we think there's a relatively large retailers and there's a long tail. And so we talk -- we are now talking to those now that we're able to sell the product. Beforehand, we could only talk from a medical perspective on what the product would look like. But now we're actually contracting and talking about, hey, what that share looks like, what's the price look like and hope to resolve that in the coming months.

And how does the -- what would -- should our expectation be from a share and price perspective?

I'll talk long term. It's a bit TBD for 2024. So long term, I mean, we see no reason why we shouldn't be equivalent share in the long term, based upon all the reasons I just talked about. So that's, let's say, 33% share since there's 3 of them. In the short term, we'll see, again, did well from a COVID perspective, but that was one competitor. We are obviously third to market right now. They were here for the last year. So we'll see what that turns out in the short term, but in the long term, we are very encouraged.

Okay. And also coming up is the ACIP meeting later in June. What should our expectation be for Moderna's recommendation? And importantly, I believe you may present the further second season data. And what should Wall Street's expectation be around what that looks like? And does that matter for how you think about whether Moderna will be a single shot or every 2-year shot and how that plays into the profile of your drug? So ACIP recommendation and what should we expect?

We are expecting and hoping to be on par with our competitors from an ACIP recommendation perspective.

Which is a 1 jab for people above 60.

One jab. 60 years old, correct. And then over time, we will bring additional patient populations to market. So that's in the future, but this year, over 60 years old. And so we believe it will be on par for all the reasons I talked about, efficacy. In terms of the durability, I know there was some data around our 8.5-month time period, but that was because when we performed our trial, it was in the midst of a very severe RSV season. And when you look at the data after 2 years and you look at the efficacy drop or the antibodies, we think we're very much similar. No trial is perfectly comparable, but we think that there's no reason to believe that our product will have any differentiation versus the other 2 from a durability perspective.

Can you help put everyone on the same page? So people see the [ 79 84 ] or whatever the exact number was in the first analysis. And then there was 8.7 or whatever month follow-up. I don't want to give too much on the exact calendar year. But is that second season or that was just 8.5 months complete the full season plus some summer months?

Yes.

So there is not second season data in there? The second season or the second winter. That data has not been seen by the public or Wall Street. Will that be at ACIP?

That is our hope.

And if you were at [ 84 79 64 ] what would it look like then if you go to the second season because it's almost like one hand behind the back if you already started a lower number because you are in a very difficult breakout season, which you did your primary analysis? GSK and Pfizer did their primary analysis in an easier season. So when you drop 10% or 15%, they start from a higher number. You have one hand tied behind your back because you started your first season at a very difficult level, so falling 10% or 15% technically could put you below 50% from -- how do I interpret that?

Yes. So I mean we look at antibodies and what the amount of antibodies are there after 2 years. And I think those will remain strong. We hope those will remain strong. And so I think we've seen about a 20-point efficacy drop for our 2 competitors, and we see no reason that our data won't be something similar to that.

So 79-ish after the first season falls 20 points like others, so that should fall to like 60 or high 50s?

Correct.

Okay. And that's still above 50, and that's still the similar type of numerical result drop. And so do you believe that your injection or that the ACIP is going to move to a annual? Or are they going to keep it every 2 years or 3 years? Or would there be different recommendations for different vaccines? And that's kind of confusing to people.

Yes. I don't -- I hope that it wouldn't be different recommendations if we're seeing the same durability. So that answers that part.

Durability defined by antibodies?

Antibodies and efficacy over time. In terms of -- I think ACIP could move to an annual booster, based upon some amount of waning efficacy. But that remains to be seen, and we'll have to see that over time. And that could simplify things for people, for consumers, for the health care system that you don't have to measure which season did you take it, what season did you not take it? But right now, obviously, it's every other year, and we'll see what happens.

Now if I may push on that a little bit because GSK and Wall Street has seen the numbers, which is that in the last ACIP, GSK offered 2 injections, and they offered one injection. And when you compare those, literally, they were both like 56% in the second season. By the way, they're 56%, you were 80% to 60% in the same winter season, by the way. You're actually higher. But the point was that whether you gave someone 2 jabs or 1 jab, it was basically the same for GSK. And I have gone through a long debate. I was actually corrected by [indiscernible], but that is totally true. And that is why GSK people and others believe that GSK is going to be at least in every 2 years. And their third year data is coming. How do you -- why would you say it's going to be annual if it's pretty clear that GSK is at least in every 2 year?

It would mostly be if you believe in the convenience of it, I think.

Convenience.

So -- and it's still 58% or 56% versus 80-ish percent, it's still a drop. And so I think it would have to be a recommendation that says the convenience matters and that 20 and 25-point difference matters. But again, we don't know. We're not guessing. We're just saying that there is a chance that it could be an annual booster.

Okay. And then lastly on RSV to close out, the number of RSV jabs last year, I think, was 10 million-ish. And I believe that there are around 60 million-ish people, above 60 million, ballpark. So that 1/6 of the market has been vaccinated there. Do you believe that approximately the same number of 10 million should still get vaccinated for RSV this season. Some people believe, oh, all the people who are above 60 years old, yes, they want to get vaccinated. They care about vaccination and they got it. The next season, year 2, although there's greater awareness of it. That's like a second tier level of people above 60 who didn't have to get in the first season. What would Moderna's view be on the types and the numbers of jabs for the market? Higher, lower, same?

Yes. So we looked at all those possibilities. And that's what went into our $1 billion guidance in both RSV as well as international COVID. And I think the short term is difficult to predict. But like you said, I think we're very encouraged by the uptick. And I think, in the long term, it certainly should be much more than 10 million total out of those 60 million. So whether that's going to 20 million, whether that's going to 30 million, whether that's going to 40 million, exactly right, and revaccinate. So we're not trying to predict exactly whether it's 10 million or not this year, but I certainly think that the education and awareness is out there and that the burden is necessary.

Okay. Well, the good news is even if you have 1 billion, the Wall Street consensus is around 280, which is, at $200, not very many jabs, I think $200 times 1 million is already $200 million. That's 1/10 of the market share.

Correct.

Decent math. That's not a very big number, 1/10th of the market share in the consensus. Okay. And let's transition away from that -- one last question. What is going on in Europe? So Europe is a big market. Let me ask 2 points. You expect to file or GSK and Pfizer expect to be there? And what about COVID European tender? Give us an update overseas.

I have filed with EU for RSV and a few other markets. And I think that will be -- that will continue. I mean, we prioritized the market based on size. And in 2025, we'll continue to file in other jurisdictions as well. So I think it sets up a kind of a long term.

Those wouldn't be for this winter season?

Not for this winter season.

Or next one?

Yes, exactly. So I think that sets up, to your point, the $200 million or $300 million, we believe there's a long-term growth here. And I think we said our peak sales would be in the $2 billion to $3 billion range. That includes other patient populations as well. That's not just 60 and above, but I think it sets up for long-term growth. As for COVID in the EU, as we said, there is a tender for up to 36 million doses per year for 3 or 4 years, and that continues to progress well in terms of our negotiation and discussion with HERA. And there's really no news to report on that, but I would just say that it's progressing and the discussions are still ongoing.

And obviously, the winter season is approaching. And as I'm not familiar with the details of how a tender works. That means that they have [indiscernible] 4 additional supply. Generally speaking, that means they intend to follow through with that and that, therefore, it's contract should be signed and you're just negotiating the terms of those things ahead of the winter season.

Exactly right. And they are discussing with all the member countries that are in there. I think there's roughly about 20 around what is the demand for each one of those countries. How much do they want? Do they want a second source of supply because obviously, our competitor has a fairly big contract. But our belief is that, and our intel is that there are countries that do want a second source of supply, how much that will be remains to be seen.

Well, the tender was what [ 36, 26 ]?

36 million.

36 million per year or at least for the next couple of years each year. That is what the European Union has requested in the tender and that you have filed for that to compete with that. I'm not aware of any other major COVID players. So presuming you would be the major supplier to that and that there's a price in just sort of the finalization of that. Okay. And that is partially in the guidance. To be clear, it's probability...

Correct. That's part of that other international non-APA. We looked at every single market and said, what are the scenarios and how large could that opportunity be. And that category is Brazil. So we knew that Brazil was an opportunity going into the year. We probability adjusted it, and that's how we've looked at that entire $1 billion, both for RSV and every single international COVID market. What could the size be? And clearly, Brazil hit for us. So that's great. And we'll see how many other countries are being involved.

That was a Pfizer-only country, and then now you have some share there.

Correct.

Okay. Let's move to ASCO. So we talked about COVID, we talked about RSV. Now coming away from ASCO, you have reported strong 3-year randomized data for the INT cancer vaccine with your partner, Merck. I listened to your comments as well as Merck's comments, you remain very optimistic about the program and remain in some sort of dialogue with the FDA. Can you characterize what the conversations are around and/or what would be a gating step to file or what they would want to file? Or do you just have to wait for the full data. We're confused.

So it's our -- so I'm not going to get into too much of the FDA and regulator commentary. I think we've been very clear about what our belief would be and what would be necessary to actually file for accelerated approval, and that was 3 things. One was the Phase II data being durable, and we believe that has been evidenced now through the data we released at ASCO. I mean, we released it a little bit earlier, but also at ASCO. And we can get into that data, but it's quite strong after 3 years. The second is the Phase III enrollment, which is progressing nicely. There were some comments made at ASCO by some investigators on what percent enrolled we are.

[indiscernible] for fair disclosure?

I would just say that we are encouraged by the enrollment -- oh the disclosure of what that percentage? One of the investigators said that we were 80% enrolled.

80% enrolled?

On the Phase III trial, which is about 1,100 patients in total, 80% would obviously be a lesser number of that. So we're not commenting, we're not confirming denying that. We're just saying that there has been great enthusiasm for and which is encouraging just for the product, how quickly it is enrolling, and we're excited by that. And the third is manufacturing readiness. We purchased a facility in Marlborough, Massachusetts, just outside of Boston, to set up a commercial facility solely for INT. All of the -- all of the patients and drugs that we've made to date have been out of Norwood, Massachusetts, which is our R&D facility. Obviously, we could have made the commercial product there. But we are taking a long-term view here that a new commercial, fairly sized facility is the better approach for patients. And it has a ton of capacity to be -- continue to grow out. We will put in one line, which can serve a certain amount of patients, but it can take up to 7 or 8 lines in that facility. And we did -- started that in March of 2023. So we are -- whatever that is, 16 months along or something like that.

So you -- there's a new facility. This will be making INT and you do need to get CMC and FDA inspection on this factory in order to do that. Now that's for approval. There are certain steps in order to file that you would need. It's not getting a full sign office for approval. There are certain steps that at least file, they would have to have certain CMC requirements.

Correct. And we have to believe that we are inspection ready.

I see.

And so we're very far along, but not yet done.

What about this public commentary, so we're going to trade public commentary tidbits, that Peter Marks apparently has said that AI-based drugs are complicated and the FDA is not necessarily ready to review or approve those. Can you characterize this idea of AI drugs and what you think or maybe what Moderna thinks or put into context that comment versus the idea that technically you do use an algorithm? I'm not saying it's an AI algorithm, but there's an algorithm that, for each patient, it is a different mixture of the antigens, such that every product is different. Now [indiscernible] 30 minutes ago, that is also a personalized thing where every product is different. Yours, every product is different. How is the idea of AI versus just no, maybe it's more [ TIL ] like?

Yes. I think it's an algorithm, not necessarily AI. I think AI can fluctuate and you don't know the science behind the algorithm necessarily, whereas I think it's different here, where you actually do know the algorithm. And it obviously kicks out different neoantigens for individuals.

But there's a computer algorithm and that is applied to everyone. Now Lavina looks like she wants to say something. Lavina wants say something maybe we let her...

Feel free.

You want to use the mic right here?

I just wanted to -- yes. So I just wanted to highlight that the Peter Mark's commentary was really talking to a future state AI-driven product, which would learn the algorithm, would learn when there's a lot of data, in thousands, hundreds of thousands of people where we could then tweak that algorithm at this very first Phase III. The algorithm is exactly the same as the Phase II, it's static, and so there isn't any changes. So given your example of some of the other personalized products that have been approved, FDA does have experience with that.

Right. I kind of analogize more [ TIL ] like. There's an algorithm to how that is done. Every product is different. AI is this idea that, oh, next year, the same INT, the algorithm has changed, you don't know whether it's going to kick out and so that we don't have efficacy on that based on the change of algorithm. Thank you for that. So thank you very much, Jamey, for walking through all that. That's an exciting time period as you go on. One last thing, avian flu.

Avian flu.

Avian flu deserve 60 seconds. Where are you with that?

Yes. So we're in a Phase I/II trial, and I think we should have a readout in the not-too-distant future. And I mean the burden is unknown. [indiscernible]

There is data coming on avian flu in patients to vaccinate and that press release could be coming.

Correct.

Okay. Thank you, guys, very much. Appreciate it. I know you've got a busy day today.

Thanks, Mike. Thanks, everyone.