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

All right. Well, good morning, everyone. Tyler Van Buren here, senior biotech analyst at TD Cowen. Thank you very much for joining TD Cowen's 45th Annual Healthcare Conference. We're on day 3 here. Excited to kick things off with the company sessions with a fireside chat of Moderna. It's my pleasure to introduce Stephen Hoge, the President of -- Hoge.

Hoge, you got it.

Hoge. Okay. Good, good. President of Moderna. Stephen, great to have you here again. Thank you very much for joining me.

Thanks again, Tyler.

Before we get started, for those in the audience, if you have questions, feel free to raise your hand. We'll do our best to get them asked.

But I want to start with some high-level questions. To level set, you guys reiterated the $1.5 billion to $2.5 billion of vaccine sales guidance for '25. So can you give us a high-level overview of how you guys arrived at that range?

Sure. Again, thanks for us -- having us here again this year. It's always a pleasure. So yes, we reiterated that $1.5 billion to $2.5 billion sales. At the top end, that's basically consistent with last year. Now let me walk you through that. We had about $3.1 billion, $3.2 billion of revenue last year, but there were about $600 million of nonrecurring items in that. It's about $200 million for returns reversal in the first year of launch. We weren't sure how much returns we would have, but now we have that experience. And so we don't expect that to recur. And there were still about $400 million of international advanced purchase agreements that sort of holdover from the COVID or the pandemic era. And we don't expect those to recur. So about $2.5 billion of product sales in 2024. So at the high end of the range, it would just be essentially a flat market and performance for us. We did think that it was prudent to recognize a lot more conservative scenario. And so at the low end of the range at $1.5 billion. We allow for a lot more headwinds really across the business, 4 things I would highlight specifically. The first would be lower COVID vaccination rates, particularly in the United States, which would obviously decrease the size of the market. The second, again, in COVID would be just continued intense competition on price and market share that we would face in the market internationally from a COVID perspective. The third is continued uncertainty about RSV and the performance of the RSV market. And so -- which could impact a lot of different things, obviously. And then the last one is we have 3 big efforts in Canada, Australia and the United Kingdom to establish manufacturing facilities that will then be associated with purchase agreements out of those countries. We wanted to reflect that there's still uncertainty. We got to get those sites licensed and manufacture those products. And if there's any delays, that would push some of the revenue recognition perhaps into 2026. And so for all of those reasons, we expressed a lower range at $1.5 billion, and that would be essentially materializing all of the headwinds I described.

Okay. You guys have mentioned your goal of breakeven in 2028. So it would be helpful if you could elaborate on the assumptions for that breakeven by '28.

Yes, sure. And first important note, we call that cash breakeven. And what do we mean by that? As you know, Tyler, we've been talking for years about this. We generated a large amount of cash profits during the pandemic, north of $20 billion. And we're in the process over the last couple of years and the next couple of years of investing that in growing our business, growing our business principally through product launches and product diversification away from the COVID vaccine franchise alone. And we're kind of in the middle of that process. We ended last year with $9.5 billion, and we continue to invest some. It won't be all of that in growing our product. And therefore, we're using, investing a little more cash than we're generating from a sales perspective. But our goal, as you said, is by 2028 to generate or use cash investment in the business that's equivalent to our revenue from product launches. So how do we intend to get there? We're on a path already of reducing our cost of investment in the business. A couple of years ago, that was approximately $9 billion in the middle of the pandemic. Last year, we had reduced that to about $6.4 billion of cash investment. And this year, we've guided to about $5.5 billion. So about another $900 million, almost $1 billion reduction from '24 into '25. And we've already indicated that through momentum alone, we expect that number to fall to about $5 billion of cash investment in the business in 2026. Now where do we need to go for 2028? Well, it'll depend upon the pace of new product launches and introduction. But what we've been very clear about is we will continue to reduce cash use by the business to make sure that we are cash flow breakeven by 2028. And if we need to reduce cash investments below $5 billion in '26 and towards a number in the 4s or whatever will be necessary, we will, of course, continue to do that. We hope we've shown over the last 2 years with a near $4 billion reduction that we have the tools available to do that, and we're going to continue to be disciplined about how we manage the cash profits from pandemic and investing in our business.

Great. Let's go into some of the specific programs, RSV. So you all learned a lot, obviously, last season, unfortunately, didn't get the market share you wanted. How might things be different this year, this upcoming season? And have you learned anything year-to-date? I hear contracting starts earlier than some might anticipate. So curious to hear the latest.

Yes. Yes. So contracting discussions are ongoing. And for the first time, we are engaged throughout the season. I think the thing we most painfully learned last year was we were not really able to engage productively in contracting in RSV vaccines until after the ACIP decision that happened in June of last year. As a result, most of our customers had already sort of provided for a large amount of supply from the 2 competitors, so Pfizer and GSK. And then the second big thing that happened and I think we all learned and nobody quite anticipated was that the RSV market following that ACIP sort of narrowing of recommendation came down substantially in volume in size. And so to the extent that there was an opportunity in the second half, it contracted dramatically as the market adapted to that narrower recommendation from ACIP. So that -- we still believe that there's opportunities in RSV. There are some growth opportunities this year. We have 3 files with the FDA under review. I hope we'll talk about all of them, but one of them is an expansion of the label for our RSV vaccine, mRESVIA, to 18- to 59-year-old high-risk populations. That is nearly a doubling of the market opportunity. Now of course, higher-risk, younger populations are sometimes slower to comply with those vaccinations. We've got to get a product approved and then recommended to move forward. But we do believe that, that's an opportunity for us to grow our label, put us on a really favorable label profile relative to some of the -- to one of the competitors and ultimately give us an opportunity through contracting and the rest of our portfolio to grow the business for RSV. So RSV is a long-term game. The virus isn't going anywhere. It's been around for hundreds of years, and it continues to infect people regularly throughout their lives. And so we do believe there's going to be a long-term opportunity there, and we hope to start capitalizing on this year.

That's helpful. So following up on the high risk in 18 to 59, June 12 PDUFA. So I guess that coincides nicely with a potential ACIP meeting, right, in June hopefully.

Correct.

We'll see if that happens. But I guess the ACIP meeting last year, 65 and above is for everyone; but 50 to 65, if I'm not mistaken is high risk, right? So it would essentially be taking the same tact with 18 all the way up to 59 or 65, right?

Correct. Yes. So there are -- currently, there are no recommendations below 60. In fact, one of the things that was going to be discussed at the February ACIP meeting, which is being rescheduled to our knowledge, was canceled, though, to our knowledge is going to be rescheduled, is that they were going to expand that to 50 to 59, as you just alluded to, and 50 to 59 high risk. And then our expectation was at the June ACIP meeting, that may go to 18 to 59. Given the delays in the February meeting, it's possible that none of this happens until June or it's possible it doesn't happen necessarily in June. Again, it will be dependent on the scheduling of that meeting. But we do see a high unmet need in that population. And I think it's important to recognize that while public health groups like the ACIP have a really important role in recommending vaccines and ultimately, making clear their expectations for reimbursement, private payers are ultimately the ones that are going to be covering 18-plus or 50-plus populations. And those payers can act once the FDA product is approved. And let's not forget that vaccines and preventative measures are actually highly cost effective in the current year and particularly for high-risk populations, think people with underlying comorbidities, respiratory disease, heart disease, cancer, there's an extremely high value to vaccinating against viruses like RSV, COVID, any of them. And so even right now without the ACIP recommendation, there are some private payers, large payer systems that are reimbursing the products that are on label for it. And we would want to capitalize on that market regardless of whether there's a recommendation or not.

That's a great point. I think that's an underappreciated dynamic about this label expansion. Revaccination, do you think that could happen for this upcoming season? We could get that recommendation? Or do you think the ACIP needs a longer time and more follow-up?

It's ultimately a question for ACIP and public health officials. And so I think they -- I can't speak for them. I would say that we are all looking forward to this year, probably in the middle of the year, the real-world evidence data from folks who got vaccinated in the first launch year, principally from Pfizer and GSK's products. And what we'll understand is 2 years later, are we starting to see breakthrough, not just infections? We know that will happen. All 3 of the Phase III showed that. But do we start to see breakthrough hospitalization, real burden of disease? Because when that starts to happen, that will be the trigger that revaccination with any of the product starts to make sense from a value perspective. So I can't speak to what ACIP's views will be, but from our perspective, we look to that data to help guide the timing for revaccination going forward.

Okay. Let's move to flu, I guess, starting with the flu/COVID. Yes?

May I ask a couple of questions on the vaccine?

Yes, sure. Of course.

Your advantages or disadvantage relative to [indiscernible] GSK and Pfizer, how do you guys look at your proposition there to gain share?

Yes.

Maybe just repeat the question.

Yes. So the question is, how do we view ourselves relative to our competitors, so Pfizer and GSK in the RSV vaccine category. So first, we want to expand to have the broadest level. And so that requires a license for 18-plus. As it stands right now, Pfizer has 18-plus, GSK has a 50 and up and won't have 18-plus till later this year. And so our goal is to get to that broadest coverage label because generally speaking, doctors' offices, networks would like to carry a single product with the broadest possible application. So that is something that we're -- we hope to complete with the ongoing current FDA review. We have a pre-filled syringe, which provides some advantages from a use time and storage time. And so rather than a lyophilized reconstituted product that takes a little bit more time to pull together, that pre-filled syringe is more like the higher-volume flu and COVID vaccination people are used to and generally preferred by providers for the convenience factors of it. We do believe we have really strong efficacy and a really strong tolerability profile. And there are other features that we'll continue to watch. But so far, we have not seen evidence of association with some of the more severe outcomes like GBS that have been reported. Now that's in the real world. We need more data to be sure. But over time, we really do believe in the clinical profile of our product will also stand up. So those are the factors that we hope will allow us to compete. The last is ultimately contracting, which is that we were not able to commercially position our product last year. In combination of purchasing with the other products that we bring to market, we hope to be able to grab share.

Is there a difference in price?

The list prices are very similar between the 3 products as it stands right now.

And is there a difference than reactive [ immunogenicity ]?

There's no head-to-head data between the products. Generally, we think our profile is quite favorable.

And last thing, RFK and ACIP meetings and his approach to vaccinations, both COVID and RSV. What's your latest and greatest intelligence on that?

So I think we -- we don't have any specific inside knowledge or intelligence around it. So we know what's out there. I would just say, generally, we look forward to working with public health officials at every level of government, whether that's communities, cities, states and at the national level and continue to do that, both with the CDC, through the working groups, although the ACIP meetings haven't been happening and with the FDA and other public health officials. Those dialogues continue, and our goal is to present solutions with our products that actually are cost saving in the current year. And ultimately, we think that the benefits that we bring through vaccination will shine through. We recognize that there may be differences in the messaging that have to be done around that, and there may be differences in the strength of recommendation that go with it. But as we alluded to a moment ago, as I alluded to a moment ago with the private payers as an example, or think Medicare Advantage programs, they're very aware of the cost benefit of preventing expensive outcomes, and we'll work closely with them to make sure that we provide those to them.

Getting to other products reaching the market for you all, the flu/COVID combo filing. What's the latest on that? Is feedback from the FDA in terms of needing that vaccine efficacy data or being able to launch with the combo at the end of the year for the fall/winter season?

Yes. So we filed late last year. And as we said, we don't expect any revenue contribution for 2025 at all. And that's because even if there is an approval, it's late in this year and flu contracting is largely happening right now, sort of like the RSV example. So from our perspective, it's really a 2026 opportunity. We also filed without a priority review voucher, and that's because we recognize that it's the first flu/COVID product. And the reality of our current flu efficacy study was that there was a chance early in the process that it would read out this year. That chance has gone to what we think is a pretty high probability, I would put it that way. It's been a very large flu season. And as we said in the quarterly call, we now fully expect that we'll be seeing the efficacy data at the end of this flu season from the 1010 flu monovalent vaccine program. Because of that, it's entirely prudent that, that would be submitted to our ongoing file for the flu/COVID combo and be relevant for that review. And so we wanted to recognize that. Now different regulators will take different views. We haven't provided guidance on which ones, but different regulators may require seeing that data before, others may not. They may be comfortable with the prior Phase III results that we provided. But given the timing of everything right now and the fact that we're at the very end of the flu season, the big flu season when we expect to have an efficacy readout, we do expect those to start to intersect. We don't have that result, but we'll look forward to it. And we're quite enthusiastic about the flu profile, which I'll remind you, we saw levels of immunogenicity in the Phase III study there, the P303 study for that product. They were at or above enhanced flu vaccines, which we really think does set up our flu vaccine nicely in the efficacy study that we're looking forward to the readout on.

Do you know why the flu season was so bad? We had our vaccines panel yesterday, and they didn't have a great explanation, to be honest. They said matching was decent. Enough people aren't vaccinated, of course, and that might continue to get a little worse. And obviously, there's not as much, I guess, herd immunity, but curious to get your latest thoughts.

Look, the vaccine coverage rates have been declining for flu, and that's part of a waxing and waning but also part of a relaxation in terms of compliance with those recommendations. That's happened post the pandemic as everybody kind of resets. And so it's not necessarily surprising when you see decreasing coverage against a virus that you'll see more transmission or circulation. It's also natural history for flu that it evolves, and sometimes it's more virulent and sometimes it isn't. And so it's unlike measles where we've seen a breakthrough because of lower vaccination rates recently in Texas and those concerns. This is one where the virus is also evolving, just like COVID, and is going to do its best to compete. In the case of flu, it's 3 different strains of the virus, 2 different ones that were evolving quite substantially this year. So I think the hard reality we can't forget is that these viruses aren't going anywhere. They circulate every year. They cause massive costs and burdens to health care systems. And that's why over decades, the best public health intervention has been to prevent the most severe outcomes through vaccination, prevent hospitalization, prevent presentation for care. We still think that's the best answer. The other answer is much more expensive, and you will see years like this. And if vaccine rates continue to fall, you would expect to see more years like this and maybe even more intense.

To wrap up flu, how do you think about the flu/COVID combo being positioned versus flu monotherapy? Obviously, the monotherapy might be attractive to some folks who don't want to get a COVID vaccination. So curious how you think that market will split over time?

Yes. Our market research in that space as well as some by others, but we've obviously looked very intensely at it, suggests that about 2/3 of people probably would prefer the combination, and we'll opt into it pretty substantially. A whole bunch of reasons on that. People generally don't like needles and generally would prefer injection in one arm rather than two. And so while a very large number of people presenting to pharmacies or doctors' offices are getting both a flu and a COVID vaccine in the current season and last year and we expect going forward, they would all prefer -- 2/3 of them would probably prefer one. There is a sizable population, call it, roughly 1/3, that actually still takes the other perspective, which is I'd prefer the independent products or alternatively would prefer only one, and I'll come back in a month and get the other. And so we do think that there's a positioning for both products in the long term. And then there's the question of do we continue to see summer waves in COVID or not? And is there a sense that there's -- whether it's a strong recommendation or allowing people with their health care providers to make their own decision, is there a desire for a slightly different second vaccination or second season for COVID? And that's a possibility. And again, another reason why you'd want to continue to position a mono product. So we expect there will be a market for all of them. We do believe that the combination product is the majority for convenience. And ultimately, on health care systems is much less of a burden. You can do twice as many injections and take half as much time, half the infrastructure, much more efficient from a storage perspective, all of the above. So for all those reasons, we really do believe the combo is the best. But actually, the data suggests there's still going to be a sizable mono market.

Great. Let's move to the latent vaccines where Moderna is really pioneering with their programs. Norovirus, which you guys seem pretty excited about, also was circulating this season, unfortunately for a lot of folks.

Yes.

What's the latest on that trial with the hold that you mentioned in enrollment? And when might we get data? And what do we need to see there to be excited?

Yes. So we are very excited about that product because it would be a first of its kind. There are vaccines against other viruses like rotavirus that are given to kids, but norovirus really is a threat for particularly those high risk, sort of older adults. And in particular, in care settings like long-term care facilities, nursing homes, those who are domiciled together. What is a terribly inconvenient infection for younger and healthier adults actually can be a life-threatening one that leads to hospitalization in those over the age 75, over the age of 65. So for all those reasons, we're excited about that product. It does circulate very high. The rate of infections are shockingly high when you look at it, not just this year, but year-over-year. And in that sense, we do think it's an opportunity to really reduce that burden of disease pretty dramatically. So our study is primarily focusing on older adults, I think very similarly to the RSV- and COVID-type populations that we're talking about right now. We are fully enrolled for the Northern Hemisphere. And so we enrolled heavily in the U.S. but also U.K. and some other places have dosed everybody. There was -- you referenced it. There was -- at the end of that enrollment, there was a case of -- one case of GBS that was identified. We proactively paused enrollment to update the study materials. It's not completely unexpected. You do see Guillain-Barre syndrome about 2 per 100,000 in the population. It's a 25,000-person study. So while we have not seen it before in our COVID vaccine studies or in the RSV study, it's not completely unexpected that you might see a case. You may never know whether that case is related to the vaccine or not. But the prudent thing to do is pause and update your protocol and documents. And when we submitted all that information proactively to the FDA, they put us on hold and said they want to review that, but it has no impact on study conduct because we're completely enrolled at this point in this time. We do have a Southern Hemisphere cohort that's enrolling or enrolled in Panama. And going forward, it's smaller. And again, that's just to capture different epidemiology. It's not affected by what we're doing in the U.S. And then we're going to wait for data. And we've said before, we expect that data in 2026. You got to roll through a couple of our norovirus seasons here to get that efficacy. We're quite optimistic about it. I think it would be very important from a public health perspective to start to protect high-risk individuals for norovirus infections.

Is the bar for efficacy there like 50%? And are there secondary endpoints with this specific infection that are important?

So we're studying it in high-risk populations because we do think moderate and severe disease, the kinds of things that lead to -- can lead to hospitalization, but definitely lead to health care utilization, particularly for older populations are really important. And we have stratified to make sure that we're looking -- it's highly enrolled in older populations for that reason. We haven't actually guided to what the efficacy number will look like, but the right mental model for these things is it's sort of like the flu/COVID/RSV category. This circulates every year, and we want to take those at highest risk and make sure they don't present with more severe and very costly outcomes. And so there's a range of efficacies that we look to. We have designed the Phase III and powered it to what we think is the minimum TPP. Obviously, we always hope to do better than that minimum from our target product profile perspective, but we haven't yet said publicly what that is.

Okay. Let's move to INT or individualized neoantigen therapy. The Phase III melanoma trial is ongoing. I guess is still '27 for potential approval following data?

Yes. We still feel like we're in good shape for 2027. The study is the Phase III fully enrolled. I think we announced that in September '24. So now it's fully enrolled. We're just waiting for events. To state the obvious, we don't control the event rate. Ultimately, people's disease does. And so we'll have more information as we roll through this year. But I think having it fully enrolled and knowing the natural history of when we'd expect those events to be, we're cautiously optimistic that '27 is right on path.

And the size of that adjuvant melanoma market, which is your initial indication, I understand you're going into other indications as well. But what's your latest thoughts on the size of that market potential?

Well, so we are showing quite dramatic improvement over, in this case, KEYTRUDA, but checkpoint inhibitors. And the types of benefit that they've shown is several -- has resulted in several billion dollars of sales in that market. Because of the magnitude of benefit we're seeing and the fact that we would expect a price to value, we would hope it is commensurately a large and attractive opportunity for us. We and our partner, Merck, have not guided to pricing, which would be an important piece of understanding that. So I won't say more than that, but we do think it's a large indication. You alluded to the other piece of it, though, which is we're rapidly expanding beyond that. And once approved and hopefully launched, and again, we have to get the Phase III data, submit it, get it approved and then launch it, we would hope to expand very quickly into non-small cell lung cancer. We're starting in renal cancer, we're starting in bladder cancer. And those indications could expand quite quickly, both through the pivotal studies that we're currently running and other data that we generate.

Okay. I need to go back to latent quickly, CMV data still by the end of the year.

Yes, please.

And what do you need to show there? Obviously, you guys have shown the potential, I guess, breakpoints and efficacy to be successful with the first interim, which passed and the final analysis. But what do you need to show to see significant uptake in that category?

So our Phase IIIs are always powered towards our minimally acceptable target product profile. And I think the powering on that is about 49%, 50% as a vaccine efficacy endpoint. We obviously recognize that the lower the efficacy, the more convincing you'll have to do in building that market. But there are many products out there, not just in the respiratory vaccine space, but there have been products in the past that have had efficacy similar to that on prevention of infection that have actually gone on and seen good adoption in the marketplace. So more work to do to lower the efficacy number, but our minimum there is 49% to 50%. We hope to beat that. I mean to be clear, we are still blind. We know that we didn't have the power for an early declaration of success. That doesn't mean that we won't see sizable efficacy. It just means that we need to proceed and accrue more cases. And so we still are optimistic that we'll do better than that, but the minimum for us will be about 50%.

Okay. 15 seconds left. Bird flu.

Okay. Bird flu.

Is there anything you could say on that with respect to some of the headlines we've seen recently with the government's commitment or in general, whether you think it's still a big risk?

So the history of pandemic influenza is that they are a big risk. And you don't have to look past 2009 and know that they happen relatively regularly. The rate of transmission for the H5 bird flu across different species is quite high. We're starting to see it increase in humans. It seems entirely prudent that we have countermeasures because you have to plan in advance on these things. And so we have been. We have a very -- we're very pleased with our Phase I/II data and are preparing to move forward in Phase III. That is under agreement that was signed actually a while ago, a good while ago, that would run a Phase III study in the United States and ultimately support licensure if the product is needed. We still believe that, that's prudent from a public health perspective. While there are headlines in the United States right now, we believe that, that is prudent generally globally as well. And through all of our agreements with governments, we want to make sure that we are doing our best and doing our responsible part to make sure that there are countermeasures available if they're necessary. I couldn't speak to any of the other sort of headlines or things that are obviously not ours.

Fair enough. So we didn't get to the rare disease portfolio, unfortunately, which is entering registrational phases or generating registrational data. But to close, I'd like to ask you, Stephen, what do you believe is the most underappreciated aspect of the Moderna story by investors right now?

I think the -- I'd say three things real quickly. The first is the level of product diversity that we're going to try and bring forward over the next 2 to 3 years. We are trying to launch, as you know, 10 products in 3 years. We've got 3 files under review with the FDA, and we've talked to the fact that we're now going to be adding a flu component to that. We've got INT, which hopefully reads out shortly. And then the rare diseases, norovirus and CMV. That level of diversification of our revenue is a core part of our strategy for growing from where we are, midpoint is $2 billion today to where we hope to break even in 2028. And it is that, that we are using the cash. And so that level of diversification that we are manifesting is, I think, point one. Point two is I don't think people have appreciated maybe -- or maybe don't fully appreciate what INT could be and the timing on that because fully enrolled in that Phase III, that could be a quite large, we think, revenue opportunity that could come together quite quickly as we expand that portfolio. And again, we'll be launching with Merck, and there's -- the safety profile of that product so far has been terrific. The benefit risk profile is really strong. I think our move into oncology quickly in the very near term, we're talking about '27 for a launch, data even sooner is maybe not as -- maybe people don't appreciate how proximal that is and how late stage it is. It's not just in the early stages. And the third thing is our discipline on cost. We have reduced by $3 billion, $4 billion just in a couple of years, $1 billion this year. And going forward, we continue to reduce because we will ultimately balance our investment in the business and revenue by 2028. And I hope we've shown that we will continue to lower those costs to make sure that we were able to do that. So those three things.

Wonderful. Stephen, thank you for your time and another excellent discussion.

All right. Thank you, Tyler.