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

Good afternoon, everyone. Thank you for joining us on the next session. This afternoon, we have the pleasure of having Moderna here with us and up on the front is the Head of Investor Relations, who everybody knows, Lavina Talukdar. Thank you for joining us. I would say quite a timely discussion because there's a lot going on in the news and politics and headlines and rhetoric. And obviously, Moderna continues to be focused on execution.

And so I wanted to open up first by just offering you an opportunity to speak to what I think is on everyone's mind, which is a lot of rhetoric and speak to what Moderna's perspective is on some of these headlines and how you guys are adapting and adjusting for what could come?

Great. Thank you, Mike, for having us here and for the invitation, a great conference, as always. So yes, you pointed out a lot of the changes in the administration and what that could mean for the broader biopharmaceutical space, including vaccines, which is where we are a big player and plan to remain being a big player. But we are focused on execution. We -- I would like to address some of the headlines that are coming out because RFK is nominated for the head of HHS. There has been some rhetoric in the past around his stance on vaccines, in particular, for children, an area that we are not in right now, but we do have vaccines for adults. However, if you listen to where his stance is on vaccines most recently, so starting -- dating from 2022 and as recently as shortly after the election results, he is a lot more moderate than I would have thought. And so I will quote what he said, when asked about vaccines, he said, "he's not in the business of taking away vaccines for anyone, any of the American people." What he would like to see is choice on the part of the American people based off of sound scientific data and transparency, as you just pointed out, which we embrace. I'll remind everyone here that during the COVID pandemic, we were the first company to put out the protocol for our Phase III study before the results read out in an effort to increase transparency. And we've been very transparent on all of our programs in the clinic as well as those that we're anticipating bringing to clinic.

That's fantastic. I agree with you. I appreciate that because so much is getting in the broader market diluted down and obviously, more fundamental biotech analysts have identified that it's been frustrating because obviously, it's had an impact on the stock and people's perceptions about what lies ahead. To what extent then do you anticipate any changes at all in terms of things that are either strategy changes or, in some cases, adjusting away from, obviously, COVID. Actually, I think GSK as well as some others we're talking to this. And just -- maybe just comment about if he's -- even though he's not against taking away vaccines, are you just going to continue along the same path? It's all business as usual. Don't worry. In one case, some people think COVID vaccine use will go down just because of rhetoric?

Yes. So we are staying the course. We believe that vaccines provide public health benefits that outweigh the risks associated with vaccines. I think another thing that the administration as well as RFK would like to see is an open dialogue on the benefits of vaccines over the risks associated with them, and that's the way the FDA and other agencies under HHS have viewed vaccines. And so in an effort to help public health, particularly for vaccines that do not exist today, for instance. That's our combination flu COVID vaccine. That's vaccines for norovirus or CMV, where there are unmet medical needs and yet people are suffering the consequences of infection because vaccines don't exist. We are staying the course and bringing forward our products, 10 of products that we have coming to market, 6 of those being vaccines are on the docket for our strategy going forward.

Makes sense. I would say it has been our stance that fundamentally, I don't think anything is going to change. A lot of this is on the margin, like on the margin? Is there going to be more uptake of COVID vaccines or less, but you guys are adjusting for that and presumably, small changes in the sales that are not driving the bigger NPV value of the company. But it's that kind of stuff that's been impacted. Another thing that I think people think about for 2025, and maybe you can comment is about the ACIP and how maybe if you've been following RSV that even there, there's been a lot of pressures. And I would say hesitancy to add more use of RFS jabs or expand labels to more. And that was also a recent thing even before RFK came in. The RSV panel was already a little bit hesitant, and that has obviously caused problems for GSK and Pfizer stock. So can you maybe speak to that if all, but otherwise, we should probably just talk about the pipeline?

Sure. So I will address your RSV questions, but on the COVID side of things. One of the things that we've been waiting...

COVID flu combo too particularly, yes that's a big one.

I will address that as well. But on the COVID side of the equation, one of the things that I think investors have been waiting for. I know that personally, we have been working towards in the office as well, is to see the stabilization of COVID uptake, and now 2 years into the commercial market, we're in the midst of the second season here. And so far, the signs are that this is a stable, sizable and durable market, which gives us all confidence about the recurring nature of this vaccine and the revenues from this vaccine. The other point to point out here is that COVID is not a mandated vaccine. So the people who are getting the COVID vaccine today are doing it through choice. And so because we have 2 to 3 years of data post the pandemic where people are electing to get their COVID vaccine, you can use that as a go-forward look on how durable and sizable this market is.

We're certainly more near the trough than away from it. Yes, I mean I think it's a little bit lower than last year, probably will pan out that way, but it's not far off.

It's not far off. And so far we're 12 weeks into the season, we're right on top of the curve than last year. We still have 7 weeks to go, so let's see what the season turns out to be. Our guidance for 2024 assumes a 10% decline on the low end, and we'll still meet the low end of our guidance for 2024. On RSV, do you want to address the RSV question? You're right, ACIP, I think, is trying to figure out the frequency or the revaccination rate for RSV. They're awaiting additional data, and through that additional data, they'll be able to make a determination of how frequently one should get their RSV vaccine. Until that happens, there is a lack of clarity for those who have gotten their RSV vaccine in the past whether or not they should get another vaccine in this year.

What is the timing on that for -- to be specific, because I care about catalysts and the audience cares about things that are going to change. We did have GSK and I thought, correct me if I'm wrong, that they are waiting on the 4-year data, but that our GSK analyst says that's probably not going to be a decision that they take up to give a 4-year recommendation until 2026. So they'll evaluate the 4-year data during '25, but probably just want to follow -- keep following. So it's a 2026 thing but that is probably something I think in our GSK analyst and certainly, GSK is pushing for once every 3 years or once every 4 years. So people are going to get another dose.

Yes. So the ACIP meets 3 times a year in February, June and October. So they'll have 3 opportunities next year, 3 opportunities each year after that to evaluate data as it's coming in to make the determination on revaccination. It's really unclear if that decision is going to be made next year or the following year. But what are we dealing with in terms of the size of the market until that decision -- vaccination decision is made. So the eligible patient population going into the start of the COVID -- sorry, the RSV market is roughly 50 million to 80 million Americans who are of high risk, either because they're older age or have comorbidities and not as old as the 60-plus age requirement. And so that number will go down until revaccination happens by the level of people who get the vaccination in each year. Last year, it was about 12 million people, which makes the opportunity for this season 40 million people in just the United States that are eligible for the RSV vaccine. Whatever that level of vaccination is later this year, you subtract that from the 40 million. I'm assuming it's going to be somewhere in the 30 million arena, which is still a very sizable market until that revaccination decision is made.

Look, I think that we will see a recurring revenue. It will be once every x years. Obviously, the market has, I think, priced a lot of that in at this point anyways. So while it is definitely for a while, not looking like $3 billion or $4 billion per year, there will be a recurrence of it. It's just been a smaller market. So we will come back to that. Okay. So maybe in the half of the time that we have left, we could talk about maybe the 2 or 3 key growth drivers for maybe 2025. We have some potential CMV data coming up, Phase III for that, talk about that briefly. We have a COVID-flu combo coming up. And I would say, since I'm just an analyst, maybe the guidance is that the Merck cancer vaccine Phase III actually, I think you've actually guided, could be as early as the end of next year. So that's within a 12-month window?

So let's talk about all of those catalysts. So we'll start with CMV, which is in a Phase III vaccine efficacy study. We are accruing cases against placebo, which is the control arm. And 81 events is the potential for us to look at the interim analysis what we've guided to is that we believe the 81 events will occur by the end of this year. And once it occurs, that data set will move over to an independent data safety monitoring board, which will then take their time to give us the results on whether or not we hit the statistical significance for calling the study. Because we are late in the year...

With a vaccine efficacy of around 57%?

With a vaccine efficacy of around 58%.

57.7%.

You're right. And so that's the minimum bar we need to hit at that interim analysis. Because we're so close between holidays, Thanksgiving and Christmas, if the data set is reached that 81 events has reached some time in this time point, the likelihood that the DSMB, an independent body that would take some time to do the analysis, gets back to us before December 31 is probably low.

Yes. They're not like, oh, hey, Moderna promised that by December 31, they're on vacation. So if it does or does not, they -- it could fall into early part of that. That's what you're saying.

So don't panic if it does, but that is...

Hedge funds love to...

That's part of just the timing. And then the other part that's important on the CMV trial is that 81 events is the interim analysis. 112 events is the final analysis. We do have a view of how fast these cases are accruing. And so we anticipate that if we do not hit the bar at the 81 events, that the likelihood that will go into the 112 events and the timing for when that reads out is pretty short-lived, weeks, potentially several weeks to a month.

But can I comment that even if you "get to the second or third one" because quite frankly, it's really just a time thing. But I personally don't want to see it fall too much into January or whatever because it means you didn't break 57.7%. And we want higher efficacy, not lower efficacy. So if we got into the final analysis, it means it wasn't really 58%?

Yes. No, it's a good -- it's a fair question. However, the way these trials work is the powering assumptions and everything around it. It doesn't mean that because you didn't hit it at the time point of the initial analysis at 58%, that it's going to be markedly lower. In fact, it can be higher at the...

Actually, it can move because if you look at RSV and COVID then it was moving like 5% or 10% or something...

So it could go in either direction. And so it doesn't necessarily mean that we didn't hit that minimum bar.

So if we get the result just in a minute or so, describe why you'd be optimistic that this would be a successful vaccine because we're trying to prevent CMV. So just describe for the audience?

So the population that we're going after is women of childbearing age at first. It ultimately will move into the adolescent population. But the first initial indication will be women of childbearing age. CMV is the leading cause of infectious birth defects. So think small head or hearing loss. That's the most common one. And sometimes even death. And so as a result, because there is nothing else on the market, we believe that this product will actually prevent many of those birth defects from happening. The indication we'll be going for is prevention of primary infection so women who do not have CMV infection won't get it because they are vaccinated with our vaccine. Ultimately, as we move down into the adolescent population, there is a potential where we can eradicate this virus because CMV is a virus where the host is the human being only. It's not zoonotic like COVID, where it can jump from species to species. And just like rubella, where it is also a -- the host is only the human, we were able to pretty much in most developed countries eradicate rubella, which happens to also cause hearing loss in utero when the mom passes it on to the baby. And so over time, we do want to get into that adolescent population, 9 to 15 year-olds is that study that we're doing now. And it would very nicely overlap when most children are getting their Gardasil vaccine.

Right. So do you -- appreciating that we want to prevent primary infection to the women because we don't want her to get infected, such that it passes to the baby, which has a 1 in 200 chance of getting infected, which would drive a birth effect or 1 in 1,000 death that the most people would be primarily taken in each year would be the women who are planning to get pregnant that year, generally speaking. And there's 3 million births per year in the U.S. on those numbers?

So it could be when your family planning that year. However, at the time of launch, we expect to have 3, maybe 4 years of durability data, so it could be over that time horizon as well.

By the time it's launched. Yes, you would have followed the antibody levels out and that -- I don't know. I don't know how to project that because people are looking at the RSV and the COVID ones when it comes down. And so that's why for COVID, you need to be vaccinated every year.

It's a little bit different with COVID and flu where the viruses are still mutating. In CMB, the proxy to really look at durability...

Which is why for RSV, right? That's why it's multiyear and that, therefore, for CMV, you can take it and you should be protected for a few years. Is that what you're saying? So for family planning purposes, as long as you're planning to have a baby within the next few years, then we could do that.

You can do that.

It won't just be that year.

In CMV, once you're infected, you're infected for life. And so we use the seropositive people and the levels of antibodies as a comparator. And what we've seen thus far is that there is a flattening in terms of the antibody titers against pentamer and GB. .

So that's one, and that's coming in the near term. Number two, talk to us about COVID-flu combo. This is a view that maybe you will get more uptake of COVID because you're getting 2 in 1. But since you're not booking any revenues on flu, if you charge a little bit for that, in this combination, that could be definitely accretive revenues that you're not currently booking. So are you going to get approved? First of all, you're going to file the COVID flu? And are you going to get approved because there's no infection data, it's all antibody data?

So we are planning to file 3 different applications this year. The 3 includes the flu plus COVID vaccination combination also includes our next-gen COVID product as well as the sBLA for RSV to broaden the indication to 18 to 59 year olds at high risk. So let's talk about COVID flu. So for the flu COVID combination, we do have antibody data for our flu vaccine, which that path for approval in the flu setting already exists, where you can use antibody data as a proxy for vaccine efficacy, so...

For current flu vaccines, you're absolutely...

For current flu vaccines and new ones coming to market as long as you do a flu vaccine efficacy study, and that efficacy study can either come pre or post licensure, okay? So because that path exists, we will attempt to do -- use that path for the flu component...

Because the COVID is approved and then the flu part you should be able to get approved on antibody titer data and you're telling me an infection study could be before or after. That's I should ask Peter during the keynote.

You should have asked Peter. And so where are we with the infection study? We have already started that Phase III infection study. It is enrolling very well. We anticipate enrolling 40,000 participants right now this season, which could get us should it hit in that first season, the data by June or midyear next year. And if the file is already in with the FDA that there is an opportunity to share and strengthen...

So first year data could be available in the summer when that thing is going in any way. So the whole package will be right there for them to look at. All right.

Correct.

And then third, obviously, significant enthusiasm if you're Phase III. Merck partnered cancer vaccine works, and I understand based on some math that we have done and looked at that. And you've guided to, but we looked at it more closely that it could come by the end of '25 at the earliest, which was next year?

So let's walk everyone through that idea. We are fully enrolled in our adjuvant melanoma study for Phase III. We have a Phase II data that was controlled similar study design to the Phase III, where we were looking at the combination of INT plus KEYTRUDA versus KEYTRUDA as an active comparator in that Phase II study. That data was now published at 2 ASCOs, 2 years in a row where we've shown the separation of the survival curves start to happen at 12 months between INT plus KEYTRUDA versus KEYTRUDA and widens becomes statistically significant at 18 months. So we're fully enrolled as of September of this year. 12 months from September of this year, fully enrolled in the target population is September of next year, 12 to 18 months is when the separation of the curve start and 18 months, you start to see it becoming statistically significant. Is it reasonable to expect sometime after September 2025, all the way through first half of -- few more months to be even...

What triggers that? Is that an event-driven?

It's an event driven, which is what the Phase II was. It's not unreasonable to expect a readout potentially in that timeframe.

And if the event rates go longer, it must be that the drug is working?

That could be.

That could be the case or KEYTRUDA is outperforming, oh my Gosh. Okay. So that's one. All right. In the last 1.5 minutes, I would say that if all these things play out, great. But in the bigger picture, the street is highly concerned and skeptical about the P&L. We got revenues that need to go from $2.5 billion to $3 billion. They got -- you've guided, they got to get to $6 billion. And then the expenses, you've already taken some cut. But even under -- after already the cut, we got to get to $6 billion of revenue to even approach profitability by 2028. And the current cash is going lower. So are we going to be able to adjust this because people think you're running out of money down the line, but it's a concern. And so can you talk to that and reflect on people's concerns about that. They don't believe you can get to $6 billion.

No, they don't. So let me start with, we have at the third quarter call, $9 billion in cash. This quarter will be a cash collection quarter for us. So we expect to end the year with $9 billion in cash. Our investment rate, burn rate for some people out there is declining each year going forward. And we anticipate that $9 billion will have us launching 10 products over the next 3 years that will start to contribute to revenue a year after approval. We talked about 3 that will be approved next year, contribution to revenue is in 2026 for those 3. We'll have 2 others or 3 others approved in 2026. Contribution to revenue is in 2027.

Norovirus could be one of those...

Norovirus is one. We didn't even go through all of those. So from these 10 products, we're looking for an incremental of $3 billion in revenue on a conservative basis to come to fruition by 2028, at which point, we will still have $2 billion to $3 billion in cash on the balance sheet, where we -- after we break even. So we expect to become self-funding after that.

So the revenues are based on how you guys are projected, which to be fair, Wall Street, I mean that's not me, per se, I don't dictate the stock price, but the market says that, that's skeptical. And the expenses are what you think that's more likely because you can predict your expenses, then you will still have a couple of billion by 2028 when you hit profitability. If you are not along those lines, the company is strongly committed to have to make tougher decisions on the OpEx, and you guys are committed to doing that?

Absolutely. So if we are not seeing the top line come to fruition, we have the opportunity to take the cost structure down more so than we have talked about already. And we're committed to executing on this plan.

Okay. Thank you very much, everyone. I appreciate it. Lavina, thank you for walking us through this. Looking forward to 2025.

Thank you for having me.

Thank you.