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

[Audio Gap] Inaugural Health Innovation Conference. I'm Evan Wang, one of the senior biotech analysts at Guggenheim. I'm joined by Stephen Hoge, who is Moderna's President, Head of R&D and now Head of Commercial. I appreciate you being here, Stephen. I'm glad you've added another hat to your responsibilities. This was announced with earnings last week. So I guess why now? And what can we expect to change?

Yes. Well, thank you. First of all, it's a pleasure to be here. Thank you for the opportunity. So maybe the role change is just a continued evolution of what we've been doing as we've been building the company. I now have responsibility across all of the product life cycle. In the earliest days, that was just research and then research and development and then research, development, manufacturing, regulatory and now moves into the commercial space. As we transition out of the pandemic and really try to build our commercial capabilities, it made sense for me to take that on. It also allows my partner in crime, Stephane Bancel, who I've worked with for the last 12 years to focus on his responsibilities as CEO.

Great. So I guess, what exactly -- how are you planning to build up the commercial organization? Is this something we can see results of in the next year? Is this a several kind of year build? How are you tracking success there?

Well, so we obviously are already a commercial organization. This year, we're guiding to about $3 billion of revenue from a purely commercial sales of the Spikevax product with a very, very small amount from our RSV product. And what we're trying to do over the next year is rapidly build out our marketing and sales capabilities. We do have the benefit of now 2 products, one very large one. But we're trying to be very careful, recognizing both our scale and the complexity of what we're trying to do over the next few years in focusing on a few markets and really building up those capabilities, trying to make ourselves as effective as possible. The challenge for us, as you know, is we are now -- we're submitting up to 3 products for approval this year. We're expecting to do that almost every year for the next 3 years, a total of 10 product launches in the next 3 years, moving into oncology, moving into rare diseases. The time is now to establish a lot of these capabilities, so we can effectively launch products, which is going to be our driver of growth from here.

Great. And just talking a little bit about some of your major markets. We're reasonably into the vaccination season this year. We're seeing vaccinations already kind of slope downwards. I guess what's been your takeaway from this season? And I guess, would you guys consider success for this year?

Yes. So at a company level, obviously, we've sort of reaffirmed our earlier guidance, $3 billion to $3.5 billion. And obviously, that's our baseline measure of success. If we look to the market itself, the COVID market got off to an earlier and very strong start this year. I think technically, in the retail channel where there's the most data, it looks like we're still ahead of last year on volumes. But as you alluded to, it started earlier and we're sort of probably at a point here where it's trending a little bit lower for the back half, the last 6 or 8 weeks here of the vaccination season. And that would suggest to us that the market may or may not be the same size or maybe 10% smaller. We just don't know. We have to see our way through the next 6 to 8 weeks. There is a decent amount of vaccination that happens in the run-up to the holidays, particularly folks who are going to be traveling, don't want to miss vacations are going to be around family members. And so we'll just have to see. Overall, we take a good amount of reassurance from that. This is now the second, fully commercial year in the United States, and the market is setting up to be relatively stable, particularly on the retail side. I think on the nonretail side, which would be the government and the physician practices offices, what we call integrated delivery networks that's where we see the biggest opportunity as we alluded to in our Q call. That's where is the biggest disconnect between flu vaccination rates and COVID vaccination rates. And it takes a little bit longer to change medical practices, particularly it takes longer to make sure that the vaccine is available there during the fall season as people get their flu vaccines in their doctors' offices. So that's a place we'll be watching closely this year. I think our hope is that we see a slightly higher volume. Again, it's a smaller fraction of the market right now, but evidence that we can start to build the market in terms of vaccination coverage rate. The goal here is compliance with public health recommendations. COVID vaccines save money for health systems, insurers for Medicare in the year they're given because they prevent hospitalizations that cost much, much more.

Great. And talking on that, one of the, I guess, new elephants in the room or in the White House, new administration next year. We've heard debate on both impact of both biotech and vaccinations broadly. Interested if you could share some of your thoughts on implications towards reassuring the public health and public interest in vaccinations. I know we've seen vaccinations decline since the pandemic. Is this vaccine fatigue, a broader shift. Does our -- can the new administration impact this?

Well, a lot of questions in that. So look, I'll start by saying we work with governments around the world, and there have been a trend towards changes in government and the United States is no exception to that most recently. We had the pleasure of working with the first Trump administration during the pandemic and during some of that initial response. And we will absolutely continue to work with governments, including the new U.S. government and the new President and the public health officials in trying to address the public health threats that are prevented by our vaccines. The most important thing to recognize is maybe where I started my last comment, which is vaccines, the data behind them are incredibly strong. There are very few interventions in public health that actually save you money in the year you started. And that's what vaccines do because they prevent, particularly against respiratory diseases like flu and COVID and RSV. They prevent outcomes that are much worse for hospital systems, much worse for payers like Medicare. And so in any environment where you're trying to prevent or control the cost of disease, we believe vaccines are going to be a part of that solution. The data on it is incredibly strong. The aggregate information that we develop on COVID vaccines, RSV vaccines, flu vaccines over decades is really quite compelling. And so we'll look forward to partnering with public health officials to address those threats, particularly for those that are highest risk, those of the age of 65, those with medical comorbidities because at the end of the day, those are the ones that get hospitalized the most frequently and ultimately, the most cost. So we'll look forward to continuing to partner with the new administration in the United States and with governments around the world to try and help them decrease their current year costs from these viral threats.

Great. That's helpful. And then I guess, what about programs that are -- or pipeline assets that you're advancing to approval and recommendation. It seems like that's a little bit of a focus in terms of what happens at FDA, ACIP. So I guess, are there any kind of guardrails as we think about data to support new vaccines? And I guess, is that kind of protected?

Protecting in what sense, sorry?

In terms of -- I guess, do you expect any kind of impact of new administration on FDA, CDC or the ACIP in terms of, I guess, data requirements for a new vaccine or newer vaccines.

Yes. I mean, look, at the end of the day, we have to defer to government to exercise their privileges. And ultimately, public health officials employed in government, whether it's the HHS, FDA or external advisory groups, like the ACIP, which again are not government officials or external advisers. We have a high degree of confidence in the science behind those decisions. Ultimately, that science is what should really guide public health and the cost effectiveness. And as I said, I think on both fronts, the data is quite strong. Vaccines are one of the most cost-effective solutions. If you sort of take the completely hypothetical and say, well, what if we remove vaccines from the country for a given year, you would expect a huge increase in the risk of disease and actually a huge increase in costs. Much of that might overwhelm public health systems, hospitals, doctors' offices and so on and so forth. So we're quite optimistic about our opportunities to partner with public health. That said, we will work with governments, both in this country and around the world to understand what they're looking to achieve from a public health perspective and develop products to do that. We do think our pipeline beyond vaccines is quite compelling as well, and we'll talk about that in a minute. But our work in cancer, our work in rare diseases, obviously, will have an even different character in those discussions.

Yes. We have a lot to cover in a short amount of time. So I guess maybe just to kick off with pipeline discussion, any specific program as you're looking forward that you're most excited about?

That's a difficult one. I think one that I'm recently quite pleased with. So we have -- of our 10 programs, we have pivotal data in more than half of them, and we're in pivotal studies for the other half. And one that we just started enrolling this year is our norovirus program. It is a huge burden of disease. Much like respiratory disease, it goes through waves and has a season in the fall, but particularly is quite detrimental to people in nursing homes or over the age of 65 that are higher risk. It also has to impact a lot of young children. There are certain people with occupational hazards, whether that's working with in kindergartens or otherwise that -- or on cruise ships that can be a problem. So it's a big, big burden of disease. And that study, that Phase III study, our Nova 301 study is up and running, has enrolled really quickly. And so we're looking forward to those results. The other one that I think we're all excited about, obviously, is our work in cancer with INT, which I'm sure we'll talk about.

Great. I guess, starting with norovirus. Can you help frame that study? I think it's a relatively large study, potentially over 2 seasons or I think looking over 2 years. And I think you just revealed some of the serotypes a few weeks ago. Can you talk about what gives some confidence of success here, and how soon we could see some of this data?

Yes, for sure. So it's -- you can think of it a lot like -- norovirus is a lot like a respiratory virus of the gut, a lot like influenza in that sense. There are multiple different strains that circulate, multiple serotypes. We have to pick -- there's no precedent for a norovirus vaccine despite the high burden of disease. And so you have to pick a number of strains, and we chose to go with a trivalent into our first Phase III study. Those 3 strains that we put in there, we think will cover more than 50%, hopefully, towards 70% of the circulating strains that will impact people in that study. Now year-over-year, that will shift, and they will probably need to switch the serotypes. And maybe over time, we'll add more serotypes. And so as you know, we have a pentavalent, that's 5 serotypes that could maybe add another 10% or 15% of coverage on that. It really doesn't matter for measuring the vaccine efficacy, though, because the study that we're running right now, that Phase III study will be strain matched. So we'll be looking against efficacy against strains that are in the vaccine because in the future, it'd be very easy if we wanted to go to a pentavalent or update the composition to do that. That study is potentially 2-year, but could be 1-year study depending upon the rates of infection. It's quite large, tens of thousands of participants, but smaller than some of our recent respiratory studies. So it's something we've been able to do a number of times here. And depending upon the case rate, particularly in older populations, so we've enriched in populations over the age of 60 in that study, to enrich for that efficacy. Depending on that case rate, we could see efficacy at the end of the current norovirus season, which really runs in the first quarter, and so it would be next year. The study is designed for powering reasons to go for 2 seasons, if necessary. We enrolled the second cohort in that second year next year. So there's a possibility that it would be a year beyond that. But again, it will entirely depend upon the rate of gastroenteritis and presentation for severe gastroenteritis that happens in the current season.

Great. And can you talk about -- I think we've had some recent trials there, more in the infant population. Can you talk about any kind of learnings you can incorporate from that? Or I guess, how you thought about successfully designing this trial for success?

Yes. So we focused on seropositives, so adults, adults at high risk. There was one other study, a Phase IIb study, I think, that had been in seronegative infants. And so again, this is vaccinating people with multiple doses, a couple of doses who had never been exposed to norovirus. That is a very different population than those, let's say, 65-plus who have seen norovirus or flu or other types of circulating viruses multiple times in their lives, but they have waning immunity and you really need to boost it up to a high level. And so we don't draw too much parallel between those sort of primary vaccination studies and your boosting studies because they really are very different immunologically, both from a population perspective and what you're trying to do. We are reassured that there have been prior studies in adults, one study in naval recruits that showed some potential for efficacy. And obviously, we're quite pleased by our own immunogenicity data showing we can boost neutralizing antibodies and T cell responses to quite a high level. And so we're quite optimistic that norovirus is going to be very amenable to vaccination. You tend not to get norovirus every year. It's every few years. And if you think of that as a parallel to, let's say, RSV or other respiratory viruses, it's sort of evidence that if your immune system can get boosted, you'll be protected for a period of time, but we'll have to prove that in the Phase III study right now.

Great. Great. And the goal here is, or the profile here would likely be somewhat durable vaccine maybe adapted with some genotype shifts?

Yes. I think if we are able to get several years of durability that will be terrific. It could also -- we could also find that if we're able to prevent norovirus, there'll start to be more seasonal evolution, again, there are lots of strains. And in fact, there's a new strain out that's expanded quite dramatically in this past year, GII.17. And you may see a bit more of an arms race in that sense, which would be more seasonal, annual boosting kind of like your flu vaccine to make sure that you don't have a risk of, let's say, interrupting a vacation or if you're over the age of 60 being hospitalized from acute gastroenteritis.

Great. I guess let's move to your CMV program that you've talked about data or interim data by the end of the year. Can you talk about some of the work that builds confidence here? You've done a lot of immunogenicity studies, actually done a head-to-head, I think comparison or directly compared serum against the Sanofi vaccine. So I think there's some pluses and minuses there in terms of immunogenicity. I guess what gives confidence in some of the efficacy here that we'll see.

Yes, perfect. So there's -- so our CMV program, as you know, we expect to read out imminently for the first interim analysis. The final analysis could be very quickly thereafter that. That's just whether we get an early strong efficacy signal or whether we achieve our target product profile. It's the difference between the interim and the final. It is a study that's been going on for several years because we have -- want to show several years of durability from that interim analysis. And so it's not like the respiratory studies, which go one season. We'll be looking at 18-plus months, maybe even 2, 3 years of follow-up. We have immunogenicity data from the Phase II that you referenced, so our Phase I/IIs and work done by others. Two prior attempts, one by Merck, one by Sanofi, you referenced them, with different vaccines that did not either have all the same antigens or did not achieve the same level of immunogenicity, antibody titers, had both shown a trend towards potential efficacy, 50-ish percent in prior work. We took that as a real positive sign because we have added more antigens that we think are really essential in terms of driving protection. And we've generally seen higher immunogenicity. Now just to correct one thing, we don't have direct comparison of sera from their studies. But what we -- and we don't even have the same assays, and so you have to caveat that. But we both -- the prior work that had been done by others and ours, we all use seropositive controls, meaning you look at somebody who's had CMV their whole life, you get a group of those people and you see what are the level of antibodies and T cell responses they have. And you can quantify your vaccine performance as a multiple of that. And we've generally seen substantial multiples above that, whereas some of the other prior efforts had not been able to achieve seropositive levels on all of the antigens. So for that reason, we're pretty confident that we're boosting to a higher level. And as I said, the proof will be in the pudding, but we're cautiously optimistic that we're going to be able to achieve our objectives for the study.

Great. So can you talk about, I guess, what the goal efficacy that you're thinking about here for a robust ACIP recommendation?

Yes. So it's an important -- so the trial that we're running is prevention of infection. And it's actually quite a high bar for a herpes virus to prevent infection because the majority of humanity gets infected by these things over time. The actual indication that we would expect to be commercializing for is prevention of congenital transmission from the mother to a pregnancy, which is a leading cause of birth defects, as you know. That indication is more of a severe outcome and probably, we believe, easier to prevent than prevention of infection. Just as an example, if you're seropositive, meaning if you have CMV before you get pregnant, you have a dramatically 10, 20, 100-fold lower risk of vertical transmission to your fetus, to the developing pregnancy than if you were seronegative if you become exposed. So we already know being seropositive gives you an opportunity to prevent that transmission. So the question from an ACIP and even from an FDA perspective, from a label perspective is everybody recognizes prevention of transmission is the right thing to be recommending these vaccines for. Also, people recognize any prevention of infection is actually going to be incredibly hard and impressive to pull off. And so you could think of it as if your primary indication is prevention of infection, do you end up with an accelerated approval on the prevention of transmission and then you do post-approval effectiveness data. The reason you can't do the study in the vertical transmission context is it would require well north of 100,000 participants, maybe 200,000 because the rates of transmission are so low that in order to capture that many pregnancies, it would be quite large and dramatic. So everybody recognizes that's a post-approval real-world effectiveness thing to go monitor with an integrated health delivery system. So that gets to the point, which is then what's the threshold for prevention of infection that gives you confidence that actually that's a surrogate, reasonably likely to predict prevention of transmission. And our view on this is you can see it in the powering of the study, we think an early effectiveness and home run read would be north of 57%. That's that interim analysis. The overall powering of the study could be positive at 49% or 50% efficacy. And we think if we can prevent that kind of infection rate, the odds of having an even more dramatic effect on the prevention of transmission is there. Think of it as this, it's the difference between preventing you from getting the sniffles from a respiratory virus versus preventing you from being hospitalized. We all recognize those severe outcomes are much easier to prevent. So we believe if we can achieve those objectives, we'll have to work with regulators and ACIP, but we believe the public health interest will be in prevention of these birth defects. And with real-world effectiveness post approval, we'll confirm that. But we do believe that those sorts of efficacy numbers on infection, we should be in a strong place to make that case from a health economic perspective.

Great. And I do want to touch on your respiratory franchise. You've been pretty unique in some of the success you've had in influenza and the combo. You're enrolling a new influenza study, P304, pretty large study. I think maybe your largest one to date. Can you just characterize goals for the study and maybe help contextualize it in light of what we saw with P302.

Yes. So we have efficacy for COVID. We know that we have efficacy for RSV, and we have really strong immunogenicity in the combo products and then the second-generation COVID -- sorry, flu product. But in any world, you're going to have to show efficacy for flu. And so we always plan to run a confirmatory follow-up efficacy study. That is the P304 study. It is being run with a second-generation flu product. And so we made a series of platform improvements, technological improvements to our flu vaccine after we saw the results from our first Phase III effort, where we did not see a strong immunogenicity and performance against the B strains of influenza, so the B/Victoria strain specifically. And because of that, we quickly learned, pivoted, made some improvements. We've subsequently run a Phase III study, someone in between the 303 study that confirmed the immunogenicity of our improved flu vaccine is now above the level of the high-dose flu comparator, the Fluzone HD in that product, superior to standard dose flu, which is where we wanted it to be. And now we're rolling into the confirmatory efficacy study. It's a large efficacy study because we're hopeful to see first season efficacy. But the goal for us is really to establish our mRNA-1010 product as a superior flu vaccine. And so we are looking to try and show superiority to standard dose flu in that study. That may require a sufficient number of cases from a powering perspective. It's harder to show you're better than you show you're non-inferior. It takes a little bit more -- that may require 2 seasons, again, just to enroll enough people and get enough cases of flu. And so we'll -- that study is ready to go into a second year if necessary. But we'll have our fingers crossed that in the spring, sort of at the end of the flu season, I think in the late spring or early summer time horizon, we might have the results we want already, in which case, we wouldn't be going to that second season to demonstrate superiority.

Great. So just given we have 2 minutes left, some rapid-fire questions on INT and therapeutics. So INT, you've enrolled a bundle of studies with your partner, Merck. As we're thinking about some of these readouts, it looks like a lot of them are -- most of them are several years away. Is there anything that we can see in '25, '26 that gets us excited? Is the first trial going to be that adjuvant melanoma trial?

So there's a few studies. Adjuvant melanoma is really important because as we said a few months ago, it's already fully enrolled. We are going to be monitoring events. We do not have enough events to predict when it could read out. But if you look at our Phase II study at the event rate there, it started to show statistical significance at about 18 months median follow-up. So you could imagine if it was exactly the same, which there's no evidence that it is or isn't, we don't know. We don't have the event rates yet. But if we're exactly the same, you could imagine 18 months after that median enrollment. And obviously, we completed enrollment, we announced sort of in the September time horizon. So median was a little bit before that. And I think that will be the first really strong pivotal confirmatory study. There are a couple of other Phase II studies in bladder cancer, renal cell that could read out as well. Again, the event rates there are a little bit higher, and so they could read out sooner. And then obviously, we've got longer-term studies in non-small cell lung cancer and others. So I think it's -- we're in the sort of 1- to 2-year window on that, and it entirely depends upon event rates in these studies, which we don't have enough information yet to predict.

Great. I guess, CF, you're partnered with the guys who are just in this room. We'll have a number of readouts next year from different mRNA manufacturers. I guess, what are you looking for, I guess, as you're looking at across the data sets? Is it just FEV1 benefit that's going to be the determinant?

Yes. I mean, obviously, you want to see a good safety and tolerability profile first and foremost. But after that, improvement in respiratory measures like FEV1 will be essential.

Great. And then just to wrap up, what do you think the biggest disconnect is in the stock price versus, I guess, where you think Moderna should be? Is there anything that gets investors more confident in the stock for the next year?

Look, we have -- we just got to put our head down and execute. We've got to show that we can continue to deliver stable, commercial business. I do think we can improve upon our performance in things like RSV. We need to stabilize and improve upon our performance in things like COVID. And we need to show we can diversify our sources of revenue. New product launches will do that and turn around the growth. I think as soon as we show those things, we're already showing discipline on operating expenditures. I think we'll be through this period of transition. But at this point, it's -- let's just focus on delivery. 2

Great. Thank you so much, Stephen.