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

Good morning, everyone. My name is Ted Tenthoff. I'm the senior biotech analyst at Piper Sandler. And before I begin, I am required to point out certain disclosures regarding the relationship between Piper and our next presenting company, Moderna, which are listed both in the back of the room and also at the registration desk. So as many of you know, Moderna is a leading developer of messenger RNA or mRNA vaccines and medicines. mRNA shares have been under pressure over the last 2.5 years, and most recently now with the RFK nomination concern over COVID vaccination rates. However, we believe the company is in the strongest position in its history with a very strong balance sheet, fundamentally derisked mRNA technology and the late-stage clinical pipeline with several approvals in the coming years. Here from Moderna is my very good friend, Stephane Bancel, CEO of Moderna. Stephane, always a pleasure. Thank you for being with us.

Thank you for your kind welcome.

So let's just start with RFK thing. I'm sure you're tired of talking about by this point. Piper's Head of Policy Andy LaPira, who lives down in D.C. does not believe he actually will get appointed. I mean who knows about speculation on that. I guess, there's a list of targets for who won't get approved -- he's maybe on the top, I don't even know at this point. But what are your thoughts on that? How do you manage around a potentially hostile HHS? What could really be the impact?

Sure. So if you think about us as a business and instead of any health care company, we work with governments around the world, regardless of which party they are from regardless of their etiology. And if you think about the U.S. and what has been the rhetoric around RF care, it has been about making America healthier again, which I'm all for lucky America. That's why of us working in health care is what we're trying to do. If you look at the vaccine, there's been historically some rhetoric around vaccines for pediatric setting. I'm not aware of an rhetoric vaccines for the elderly. As you know, Moderna is focused on the elderly setting with our respiratory portfolio. So the other piece to me is that, as you know, the way the U.S. system is set up is that it's a system. I think there's a lot of different points between what the doctors are doing, what the CDC is doing, what HHS is doing, what Medicare is doing. And if you think about the vaccine, they're actually the #1 tool to prevent hospitalization in the elderly. And as you know well, because you know our field very well. If you look at just last season, the season of fall '23 winter '24, there were 3x more hospitalization in the U.S. in the season of COVID than flu. But if you look at the numbers, there was only 1/3 of the flue vaccination into Covid vaccination, which kind of makes no sense when you get it from a scientific standpoint. And so what we're going to continue to do is to work with doctors, nurses, consumers to understand the facts. I think, as you know, COVID because this pandemic was traumatic for all of us, all the families and so on. There was a lot of misinformation. So our job is really to get the facts out, the data out, another rhetoric has been we want more transparency on the vaccine, which we are all for. By the way, if you look we all our reporting obligations that we have, there's already -- the U.S. government has all the data. And so if we want to have more data shared with the public, I think it's wonderful.

Yes. And it's such a good point you bring up, thanks to you and your company's work and Pfizer too, but you guys saved the world. And I don't know how we all of a sudden became the bad guys. So I guess, no good deed goes unpunished, it is probably where it is. But let's talk about your current outlook for COVID vaccination rates and spike vacs. You guys have a new -- a next-generation vaccine mRNA-1283 that you're getting approved, also a combo. So how does this all fit together to deliver what patients are looking for or the subjects are looking for vaccination going forward?

Sure. I mean if you start at the 30,000 feet level, respiratory disease in the U.S. are third or fourth killer depending on the year. So our strategy has been for quite a number of years now to build the right tools to prevent those steps. If you think about it, if we get a vaccine against heart attack or a vaccine against cancer, I think people will be lining up in the streets because those are the #1, as you know, and #2 killer. But if you think about respiratory disease, we have a great opportunity. And because the mRNA technology allows combinations, our vision has always been how do we get simplification of vaccination with very, very high efficacy. So if you look at the portfolio, you just we're building all the pieces to get to that destination. So our goal is to have a combination vaccine. The flu COVID combo, we think is going to be really important because COVID is the #1 killer for respiratory in the U.S. flu is #2. So if you can combine it and increase the vaccination rate on COVID, which is currently the issue, you could prevent a lot of hospitalization, you could save a lot of lives and save a lot of cost. If you think about the next-gen COVID, for us, it's all about efficacy. As we've shown in our Phase III data, the next-gen COVID has a higher efficacy than 1273, as you know, Ted, because you followed this very closely, some people in the room might not be aware. During the pandemic, there's been a lot of very large-scale studies done by the VA and many governments around the world, actually showing that 1,273 more than as [ Spikevax ] products actually has less hospitalization, has less death then the Pfizer vaccine, and we believe it is because it has a higher dose. So if you think about it, we're showing that the next-gen COVID Moderna is better than [ Spikevax ], which is better itself than the Pfizer vaccine, and this is a big deal for the elderly. So our positioning of a NexGen COVID vaccine is for the 65 and above, to gain share because we're going to provide a better product. It's a bit like what happens in flu as you're highly familiar Fluzone HD has been a transformation into the elderly setting versus the standard flu vaccine given to the young population. That product has come up a premium price. We have not yet disclosed pricing strategy, but with high efficacy, you could expect a premium price, which, by the way, will be a great incentive for the retailer as well. As you know, in the U.S., the retailers play a huge part in COVID vaccination, the biggest share of vaccination in the U.S. is through the retail channel. And the retail channel, as you know, is mostly driven by financial incentives because when they sell a vaccine, they get their administration fee from the insurance company, but also they get the discounts from the list price from the manufacturers. And so if you have a higher list price because you can convince the payer that for higher efficacy, you're going to save them money, who are having less hospitalization you can justify a higher price on the next-gen COVID. And so the retailers will make more profit. And if you look at the retailers, the reason vaccination is so important for them is that sometimes they don't make profit because of the PBMs in the middle on small molecule products. And if you think about the type of profit they make on vaccines, it's actually a very large part of the EBIT as an enterprise. And so we think the next-gen vaccine is going to be good for patients, good for the retailers and good for Moderna. And that's what we're trying to do with all other products. And in the next-gen product, the 1083, which is COVID flu. It has the next-gen COVID inside it. So you're going to get a very strong product with a high dose performance for COVID with the 1283 component. And then same thing we have shown non-inferiority to Fluzone HD. So think about the 1083 product, if you're a doctor, you're basically going to get the best of both worlds on both the flu and the covid and that's the product that we have showed strong Phase III data. And as we said, we'll be planning to file before the end of the year, it's going to be great...

So really any day now on some of those. So that's really exciting. I'm just going to pause and just kind of checking with the audience if there's any questions on flu or COVID, and we'll kind of continue to transition to the pipeline. So on the other big approval was mRESVIA for RSV vaccine often maybe a slower start than some people expected. How do you see this comparing to Pfizer and GSK's RSV vaccines and what's your guys plan to grow the revenues?

Sure. So let's start first by the disease, talk about the vaccines and then talk about the launch, if that's okay. So RSV is the third cause of hospitalization. So COVID flu RSV in terms of older people in the U.S. So it's a big unmet medical need. As you know, because there's been no RSV vaccine recently on the market. CDC is still working on the recommendation guidelines. And if you look at the history of CDC, when you have a new class of vaccines being launched, it takes a few years for a vaccination guideline to hold because they are learning based on data. And that's what we expect our public health leaders and our scientists to do is make a hypothesis on coverage, look at the data through a season and took it a couple cycles a couple of years to get to a stable place in our recommendation. And so we believe, because just of hospitalization that RSV is an important unmet medical need, and we need to vaccinate people that are at high risk of getting hospitalized or worse dying of RSV. And again, the elderly and of course, the pediatric setting. So the -- so Pfizer GSK launched a season before us, we launched this year. There's been a lot of discussions about the efficacy of the vaccine. I'd just like to remind people that the GSK Pfizer Phase III study was done during, what we call, the Omicron winter. If you recall, when Omicron happened around Thanksgiving, then everybody shut down, JPMorgan conference was canceled and we spent most of us working from home in January. Because of that, those 2 vaccines were run in seasons with very low cases of RSV. We came one season after in our Phase III, which if you look at the last 10-plus years, the highest level of RSV ever. Why? Because for a couple years, we are all been masking and so on, people have not been naturally boosted by being effective. And so a very high case of infections. If you look at the antibody levels across the 3 vaccines, they are very similar. Of course, this is not a head-to-head study. Sometimes the assay are different. So you have to take all this with a grain of salt. But we believe that over time, we're going to be in the same ZIP code in terms of efficacy. The decay of antibody across the 3 vaccine is very similar. And so what's going to be interesting is because the CDC monitors all the data at the national level. We're going to get the efficacy like we've already seen at the last CDCs of GSK vaccine, Pfizer vaccine, soon Moderna vaccine. And my bet is that the 3 vaccines are going to be in a very similar ZIP code in terms of efficacy over time. And by the way, the public health leaders do not really care. We just spoke about COVID, it is highly documented that the Moderna vaccine is a higher efficacy than the Pfizer vaccine. There's been the same recommendation. Why? Because the public at leaders want people to get vaccinated. Yes, they would rather you get vaccinated but not vaccinated. They want to have more confusion, more operational complexity. And so the 3 vaccines, RSV from the 3 manufacturers have exactly the same recommendation. I think time will show we're on the same ZIP code on efficacy. I think there's a potential upside for our vaccine in terms of safety. If you look at the Phase III studies, the 2 vaccine had Guillain-Barre syndrome in their studies. This is, as you know, monitored very closely by the CDC. I think when there was a decision by the CDC in June of this year, not to do recommendation in the 50-plus bracket. Some people were surprised. There was a lot of discussion, I'm sure that you and your team listen to the CDC call. Because of Guillain-Barre syndrome, that was a key element from the CDC ACIP team to be cautious at this stage, again, early in the life of a new vaccine. So let's be cautious, let's gather more data. If you look at the Moderna Phase III study, we had no Guillain-Barre syndrome. So it's only 30,000 people. So we see at scale when again, the CDC start to report the data. But again, if you think about the platform, it's the same chemistry as the Spikevax COVID vaccine. So I expect that the Guillain-Barre syndrome rate on the RSV Moderna is going to be really low. And so I think that's going to be interesting. If we end up with a world where the flu vaccine are in the ZIP code for efficacy, but potentially our vaccine looks better than [indiscernible] vaccine, we could have actually a very interesting profile. And as you know, we are the only vaccine #3 that is in pre-fill syringe that will help. So everything and -- as I told you, of course, you're going to ask me why Stephane, you have a slow uptake at launch. And I think goes back to the mechanics of how the market works in the U.S. In the U.S., most of the RSV sales are done through the retail channel. The retail channel because so much of a profit happened during the vaccination season. They don't want to take risk, not to be able to be ready to maximize their sales and profits through the vaccine. So with us coming with a June ACIP recommendation at the end of June. If you think about a big chain like a CVS or Walgreen, you need to do a lot in terms of getting the product to your system, the training of your staff in all of your stores and so we just came really late in the season. And if you see whether RSV vaccine is used now, it's mostly independent pharmacy because all the logistical problems, you don't have when you are one store owner. You can decide very quickly actually the pre-fill syringe component is quite good for you because you don't have to be in the back of a store preparing a product when you have important customers for you coming and waiting in the stores, we might decide to work out and walk 2 blocks and go to the chain. And so I think the real season for us is going to be the season coming. We're going to start doing contracting like the whole industry does early in the year. We're going to have for the first time the ability to do bundling, which is what our peers have done. If you think about CVS, you work with Pfizer and they have Prevnar, they have COVID, they have RSV, imaging the bundling opportunities if you are GSK, you have Shingrix and other vaccines. So last year, we had no ability to bundle for Moderna, we just had Spikevax. This year, we're going to have the 2 products. Also, with 1283 being on the horizon, the next-gen COVID, there is no next-gen COVID from Pfizer or BioNTech. There's no from anybody else. And if you think again about the elderly segment and look what happened with Fluzone HD we might actually be a great opportunity for the retailer to do something pretty special in terms of growth next year.

In terms of increasing vaccination, that's really cool. So we're looking forward to the Phase III CM victory data on mRNA-1647. Tell us about the vaccine and the CMV market? And what is the latest in terms of timing on data?

Sure. So CMV is a horrible latent virus. Some of you are familiar with some latent virus, like HPV is a great example of a great vaccine that our colleagues at Merck have developed to prevent cancer. Of course, shingles and the Shingrix vaccine from GSK. So a great product from public health. CMV is one of those virus that has been the #1 priority of the National Academy of Medicine for 20 years, and no vaccine available. Everybody has tried to do a CMV vaccine. You can go back to publication, Merck has tried, Sanofi has tried, GSK had tried. All the big vaccine players have tried because it's a very bad virus. It's a very bad virus because it creates a lot of damage into the human body. One of them is its #1 cause of birth defect due to an infectious agent during pregnancy in this country around 20,000 kids in the U.S. this year are going to have birth defects with lifelong liability in terms of brain cognition, a lot of miscarriage actually due to a CMV infection where the baby is so damaged because of the virus transmitted from the mother that the nature takes care of the baby, unfortunately. And so huge unmet medical needs. There's also more and more data, if you look at long-term epidemiology study, like run in Sweden and so on. How CMV has an impact because of inflammation on cardiac disease in the later years of life in some form of cancers because of how much he puts a lot of weight on the immune system. And of course, the immune system is important to fight cancer. So a lot of bad things happen with CMV and CMV because it's a latent virus, meaning that once in your body, in your body forever. So it's a very, very bad thing. And so we are very pleased to have developed a vaccine that looks very exciting. If you look at the preclinical model, the Phase I and Phase II data, it's a 6 mRNA product. It's a very complex product from a biological standpoint trying to do what we believe and a lot of scientists in the field believe is the right biology. There's an antigen to GB, which is what others have tried in the field and an antigen to pentamer, which as the name says, is a very complex protein structure, made of 5 different protein folding together. That is the second route that the virus used to go into human cells. So what people have done in the past, which is why we believe the vaccine have failed, is only give you antibodies against one route of the virus getting into human cells, but the other route was not available because of protein technology, but with mRNA even we can do cocktails, we were able to do both. The clinical data are very exciting. Of course, the proof in the closing is going to be efficacy. And that's why the Phase III is working to demonstrate. As we've said, like any vaccine study, the way things work is its case driven. You need enough case in the study, it's, of course, 50% placebo, 50% active in some of the study design as you see most of the time in vaccine. And when there is enough cases across both arms, the independent safety board will look at the data and based on the data will inform the company that's how things work. And so what we said is -- we said we believe we should reach the number of cases the first interim readout this year. We confirm that recently, I confirmed again this is the old design. When that is rich then we will inform the DSMB, then this DSMB will run the analytics and will then inform us of what is the outcome. Did we meet the primary end point? How do we not meet it? If we don't meet it, then the study keeps on going. As you know, because you were there, we gave a lot of detail of what the statistics mean. And so we are, like everybody waiting when we'll have data, of course, we'll share the data. I know nothing more than I knew yesterday when I last time I saw you. But we're totally on track with this plan. And when we'll have the data, we will be very happy to share it. I know a lot of gynecologists have spoken to are very excited about the vaccine are waiting for the data and are waiting to have a tool to protect women before they become pregnant. There's a low awareness of CMV in the general population. It's around 9%, 10% in the U.S., and it's mostly women who are aware because of [ friends ] has been impacted. If you think about the incidence rate I mentioned, and you think about a women's network, friends from high school, college, family members and so on, coworkers, the women were aware of CMV is because somebody they care about has to go from the trauma having a baby with CMV disease. So we need to do more on education. But if you look at the OB/GYN, it's going to be a key component of this, they know. Why? Because if a woman gets infected during pregnancy they have to manage the very complicated pregnancy and the baby. So there's no OB/GYN, we doesn't know about CMV, very high awareness. The reason they don't talk about it, which I've seen a big part of Focus Group myself with OB/GYN is because you can do nothing. And what I've heard many times by KOL or practicing daily OB/GYN they say, we don't talk about it, Stephane, to women that we take care of because they can do nothing. And we don't want to freak them out about something that could be terrible for what should be a very joyful moment in bringing the child to life. But as soon as there is a vaccine that's working, oh boy, we're going to make sure they know.

And everyone will use it because if you don't, maybe you're at liability. So usually, when the pregnancy work up, anything that's proven and safe is going to be incorporated, especially something that's profound.

Yes. And as you know, because you have children, I have children. I remember, I mean, it's a long time ago now, it's 20 years ago, but I remember how we care deeply about the health of the baby, it's such an important and magic moment for women to bring a baby to [ earth ]. I mean, as you look at all the magazine that exists and all the books and so on that women read to understand -- to ensure the baby is healthy and they do everything they can. And so again, we have not want to do much right now because we don't have a Phase III data. But assuming the Phase III data are good, trust me, we have already a lot of plans set up by our marketing and media team to start educating consumers. And again, there's so many between books and pregnancy magazines and so on, there's so many conduits and TV shows and so on to really get the world out. We are very close to the CMV association, which is a patient association. So there's a lot of things that we're ready to do in the starting blocks. We have not done it because we don't want to raise hope to woman in case, God forbid, that the Phase III is not positive. But if Phase III is positive, you're going to see us to be very active, because we're going to use the time of preparing the BLA to our advantage to a lot of education, of course, of OB/GYN. So I want all the team every OB/GYN in the world to know before we launch the Phase III data. And we'll do a very typical KOL cascade through conferences, both international conferences, domestic conferences, local KOL focused group and so on to get the data out to OB/GYN, just that they are aware of the data and the vaccine is coming soon, but we'll do also awareness on consumers, women to make sure they well aware of vaccine. Also strategy like playing with educating older women because, again, think about the role of a mom or gramma to be in terms of their daughters. You could have a huge leverage there. You see social media because you can do so many cool things today to address very targeted population to go after, let's say, the grandmother and grandfathers category for them to go and to really drive to the mom, just the awareness about that these virus are you aware, and by the way there is a vaccine. So there's a lot of things that we have prepared that people have not seen yet, that is in the starting blocks ready to go.

I'm glad we spent a lot of time on this because this is going to be a really important vaccine for you guys in the next couple of months.

If you think of it -- sorry, just to finish, if you think about it, we've said we believe it's a $2 billion to $5 billion opportunity per year. The higher end of the range will depend on our ability to go the down in age because what most people don't appreciate about CMV, it's like rubella, meaning it's only in humans. So we already have discussions with the CDC, who is very interested to go and to take the vaccine down to the pediatric setting. Because if you were to run a 20-year campaign on CMV for newborns, you will eradicate CMV, like rubella was eradicated. And the CDC is very, very interesting. And so because of COVID that's what the beauty of the mRNA platform, we know our vaccine technology is safe in children because the COVID vaccine has been tested down to 6 months of age. And it's being used with a lot of safety data over many countries over several years now of the safety of a vaccine in children. As you know, vaccine has no adjuvant, going back to where we started the discussion earlier about the political noise and so on. And so it's quite interesting that if you play this movie with -- this actually cannot be done using recombinant. mRNA could be the only way to do it. We are the only company that is even in the clinic and we had days or weeks to get Phase III data, and so this could be an extraordinary franchise for Moderna. And from a cost of goods standpoint, because we use the same manufacturing platform. If I make CMV vaccine production in Q1 where our respiratory vaccine is long. I use basically free capacity. So think about the product that would be in the 90%, 95%, 98% gross margin that used at the $2 billion to $5 billion range forever. In terms of DCF. This is an incredible opportunity for the company, for which we're going to be pushing very hard, and I'm very, very pleased, and I'm hopeful that we're going to get good data.

Well, we're excited for that data card to flip pretty soon. So thank you so much Stephane for being with us. It's always a pleasure. We could have spend an hour. We didn't talk about cancer -- we didn't talk about cancer or my favorite stuff, but appreciate you being with us and keep up the great work. It's really good to see you.