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

Hi, everyone. Thank you. Good morning, and thank you for joining us on our next discussion here at the Jefferies Healthcare Conference. I have the pleasure of having the President of Moderna. Stephen Hoge up here with us. Obviously, quite timely, a lot's going on in the world, both from a regulatory administrative standpoint. We had Marty Makary here yesterday. Obviously, a lot going on with your commercial business, the pipeline, all of that. So I look forward to getting into some of that.

Maybe it would just be a great place for Stephen to start about the outlook for 2025. At the beginning of this year, there was some guidance. I think a lot of people are trying to think about the outlook for 2025 and thinking about the changes that are going on with the administration, how that's going to change. So maybe just make some opening statements about how you feel about this year and the guidance. And obviously, what's weighing on people's minds, which is what's going on with the administration, and is that going to impact your business, starting with this year, like hitting numbers.

Yes, for sure. So first, Mike, thanks for having us. It's always a pleasure and a privilege. So yes, in terms of 2025, it's pretty important to separate where we are from maybe how we got there, okay? In some ways, I think where we are in our last quarterly call in just a few weeks ago, we reaffirmed our revenue range and our cost range for this year for what we're trying to achieve. We did indicate that there are -- we thought we were making progress with our next-generation COVID vaccine approval, mRNA-1283. We also...

And you got it?

And we got it. We also indicated that the FDA had let us know we would probably need to file efficacy on the flu for the flu-COVID combo. And I think the discussion at the time would be whether we withdraw or try to do a major amendment to that file. And I think that ended about where we expected, which is, as you know, we withdrew that BLA.

Pulled that BLA. Okay.

Waiting for the efficacy data now this summer, so very soon, and then we will resubmit hopefully later this year. And in terms of overall sort of business and financial performance, I think the thing that we went into the year with the most anxiety about, probably most investors was just the uncertainty of what would the change in administration mean for our products, we're getting them approved, recommendations around COVID vaccines. And I feel like in the last month, a lot of that uncertainty has clarified. And now we have a clear path forward for without strain selection, clear indication of what populations are going to be recommended for COVID vaccines this year and hopefully going forward. And a clear set of expectations around what data we're expected to generate if we want to expand that population. I know that you mentioned Commissioner Makary was here in the New England Journal article that he authored with the Head of CBER, Vinay Parsad. They indicated that there's 100 million to 200 million Americans that should be getting a COVID booster in that New England Journal piece. And we only had 40 million last year. And so we see this as an opportunity for us to do a better job, making sure we communicate around the value of COVID vaccination because there's a large untapped market there. So you put it all together, and I think what we feel like is a lot of the uncertainty that we had maybe in the first half of the year has started to crystallize and clarify. And honestly, from a company perspective, what we need is predictability. What we need is that clarity because whatever is necessary, we'll go off and then do.

You'll be able to adjust and plan based on that. So just starting for this year, the latest development was that they approved the new COVID vaccine for a specific label. I mean to maybe get some of the exact data, but 65 and over, and then people under 12 to 64, but with a comorbidity. And so that's the label. And then we understand that without following every detail, the ACIP and the CDC, they had some recommendations, but you can still sort of get it if you talk to your doctor. Can you just try to triangulate what happened in the last couple of weeks? And does that impact the guidance and the utilization of COVID vaccines for 2025?

Yes. So we didn't update our guidance a couple of weeks ago. I won't do that here, except to say that the news of the last few weeks is broadly consistent with what we expected to have happen. And so what we see is a narrowing of the recommended population for COVID vaccines. Whether that was done through the ACIP or through the FDA label, again, was a bit of a dealer's choice, I guess, for the administration, how they wanted to do that. But we...

So it's like a label, is a label. It's like cancer label or whatever, it's a label. But recommendation is a recommendation, and whether payers pay for or whatnot, all of that is, people are sophisticated enough, but label is a label and the recommendation is a recommendation.

Yes. That's correct.

And that most people who are getting the vaccine anyway, generally speaking, fit within...

Are in a label. If you look at the. The majority of doses given last year, even before any of this change, that was in the 65-plus population. That's clearly on label. And if you look at the balance of what's left, the majority of that overwhelming majority of the overall number of doses are to people 12-plus with some risk factor or 65. Bear in mind that the risk factors that were listed in that framework and that the ACIP has presented on covers 74% of Americans. And that's why when you look at the total you're talking about...

Hoge, 74% is what, 65 and up?

74% of the population under 65, has a risk factor for severe COVID-19 because everything from obesity to physical activity, blood pressure issues, a whole range of...

So definitely the comorbidity is fairly broad.

Very broad. And so if you actually look at the indicated population, I'll come back to it, the indicated population even for our new product or the Novavax product or where these recommendations are headed, it is still 4 to 5x larger than the number of doses that happened last year. So we think this is an opportunity for us to focus on growing the market or at least stabilizing it through this cycle. But what's great is a lot of the uncertainty that maybe existed before this news has now kind of falling away.

But they are making a clear statement about how they want to either through the label or their own commentary that they just don't want a super broad indication and tell everyone, young kids, and there's other stuff going on that they can and but you can get it if you want, if you talk to...

For sure. And if you look at the recent CDC publication on children, that said shared clinical decision-making, which really means talk to your physician, talk to your health care provider.

How about going forward, two things have come up. One is in order to get COVID vaccines approved, you have to have placebo -- vaccines approved, you have to have placebo-controlled studies. How does that impact the COVID vaccine. And then other vaccines like the flu vaccine or other things, how did that commentary coming out, we got a lot of question about that, how that's going to change the ability for Moderna to get either the COVID vaccine, new ones or other non-COVID vaccines.

Yes. Well, I'd start by saying our COVID vaccine, the 1283, mNEXSPIKE was approved just a week ago. And so that's somewhat settled as a question. We did, as a part of that, agreed to a post-marketing commitment to run a placebo-controlled study. Not in the indicated population, but in a population that would expand the label to healthy people under the age of 64 -- 50 to 64. And that's consistent with the...

50 to 64?

Correct. And that's consistent with frankly, with a framework that was published by the Commissioner, and with the Novavax label, and we understand now to be the rules of the game. And from our perspective, we are not public health officials. We are a company. Our responsibility are to generate data to allow them to make the decisions they want. And at the end of the day, if the FDA feels they need data to know whether they can expand our labels into healthy people, then it's our obligation to go get that and that's what we'll do.

So that's the COVID situation. On -- let's take up some of the other upcoming like COVID-flu. Covid-flu is when you said you think you can get approved because the flu infection data is coming later this summer. Help set our expectations about that should be positive, and then you're going to file that. Now that would be a vaccine that's a combination, but you're kind of using flu data and COVID data, but the vaccine study was not the two together. I mean, I could come up with a many scenarios. So what are the?

Well, combination products generally get approved through a different mechanism. You want to show that you can put the two products together, and they don't interfere with each other. But if they're separately licensed products, not just with vaccines, but with medicines, generally, that path is a little bit different. So we have an approved COVID component now because it's the same component in mNEXSPIKE. And the flu study that you just referenced, we've run a 40,000-person randomized controlled trial, Phase III study. And generally, the flu guidance hasn't changed to our knowledge. And so we'll expect if that data is positive that we'll be able to get the flu product approved. Once you have the flu product and the COVID product approved and you've run a Phase III showing you combine them. I think we have -- we believe we have a pretty straightforward...

So I mean, flu, If it's positive, you want to file that one as a monotherapy or it is filed? Or do you want to get it approved that one?

Correct. We would intend to do both mono...

I mean, the combo. Sure, clarify that.

Yes. We would still think there's going to be a market for mono COVID. We still think there's going to be a market for mono flu. We think the bigger market is going to be for the combo. And so we will intend to register all three products. If the flu is positive. We've already got COVID approved. If the flu is positive, we would then expect towards the end of this year or the second half of this year to file flu for approval and flu-COVID combo for approval. Because we want both options available. There may be some people who still want to do them separately for [indiscernible] reasons.

What you would expect that the label and all these types of things, you're probably going to be something similar to the COVID label. That a reasonable expectation.

Yes. For the COVID component, I think the FDA has been very clear about that...

Yes, the label -- the combination is probably going to reflect the COVID label.

Yes. Yes. I think the FDA has been very clear on that.

Okay. What else? So then with this administration and more clarity over the last few months, how does that change the development plans? Is Moderna? Yes, we go forward. We got it. We got it. So norovirus, CMV, others. And we just keep going because don't worry, nothing has changed. It's -- administration focused on it, but they're still going to be able to approve all these things. So...

Yes. Well, I think it's important to note that for all the rest of our products, including, by the way, our COVID product, we've run placebo-controlled efficacy right? So norovirus right now is 25,000, 30,000 people as a placebo-controlled efficacy study. There's over...

By the way, restarted, right? It's back up. It was paused and then it's back up...

Yes. So the FDA removed the clinical hold from a couple of months ago. And so that's been resolved. And it is enrolling in the Southern Hemisphere, Panama and Australia and a few other countries, because like flu, it bounces, Northern Southern Hemisphere, a different season okay. And so norovirus, we think we're right in line with expectations in that regard. And then I would say CMV, same thing. It is a placebo-controlled 7,000 person very large Phase III study should answer all the questions both about safety and efficacy. And our follow-on vaccines after that, whether you want to talk about Epstein-Barr virus or lyme or any of them, we would expect to be placebo-controlled. And so from that perspective, because there's not an approved therapy you'd compare it to, it doesn't feel like this framework change in COVID impacts our path in the other programs.

Because you're going to be running placebo-controlled studies?

Correct. We already are.

With CMV, can I just ask, we care about things coming up and news flow and things that are going to say, "Hey, see, there's new products coming. We're going to get to P&L and revenue and cash flow," that's important. That for CMV that it had hit at least 1 or 2 of the first interim analysis and then now it's been many months. And so I can assure you, and you probably look at and read investor reports, I don't know if you do. Now Wall Street is like, where is the final analysis? And people hang on every word because it was like it's coming and -- but then it's just this year. So it doesn't make any sense to me because it's not really a seasonal infection. So how could you have a bunch of interim analysis that didn't stop or didn't hit? You said that, that's public. Again, the final here we are INT June...

Yes. So to be clear, one sort of point. We only had one interim analysis that was conducted at the very end of last year. And the reason is you want to preserve as much alpha as much statistical power for the final announcement. And so there was only ever one. At that point, we didn't have all the number of cases. You're right, it's not seasonal, but you -- it's event-driven, you accrue cases. And at that point, we didn't meet the threshold for declaring early success, early efficacy, but the study was powered, our label expectations really are based on that final analysis. And at this point, I can tell you, we are still blinded. We do not have -- there haven't been other data. We haven't slow walked anything. We are literally just waiting for cases to accrue, events to happen so that we can trigger the process of conducting that analysis, that final analysis...

You can see that, just to be clear, that a certain number of events happened, people have tracked that. That was by the end of 2024. Here we are in June. If you look at the accrual of the events, and I remember, it's like 58% and then final analysis is around 50% or so. That -- we've gone 6 months, and we haven't gotten to those number of events...

Yes. I mean it was in the previous 18 months, we got -- no, I appreciate it. In the preceding 18 months or 2 years, we accrued about 2/3 of it. And we're -- we expect it this year. It's all I can say at this point.

All right. You must have been working very well. No one's [indiscernible]...

That would be -- it's possible. But the other thing...

That's a common thing. It just does not make any sense...

To point to on that, Mike, which is fair, is that there are a lot of other endpoints in that final analysis. So I don't want to lose this. The first interim analysis only looked at immunogenicity as a surrogate per infection. But if you look to the final analysis, there are many things that matter in a latent virus vaccine, one of them, things like virologic shedding, the presence of -- in the urine or the blood of the virus because that's ultimately what will lead to transmission, in this case, from a mother to a baby. And a whole other host of things that we'll want to look at and capture. So the final analysis is not just an unblinding or a repeat of that same interim. It actually is this much more robust set of information about whether the vaccine was effective. It's possible the vaccine didn't prevent, let's say, you from generating a little antibodies, but it prevented you from becoming latently infected and shedding the virus. And those sorts of end points, we've got more data to collect more data to pull together. And once you unblind in the final analysis, you unblind for all of them. And so you can imagine there's a -- it's a much more labor-intensive and robust process to conduct that final analysis.

Okay. I mean, I'm got at interpreting words. But if you basically have an analysis, which just looking at seroconversion, that seems pretty straightforward. You're telling me there's in the final analysis, there's all sorts of other endpoints. That would require more, I don't know, blood work or urine work. That's what you're saying...

PCR, or urine...

But you would say if the events have been hit, wouldn't you? Events have been hit. Then I would just say, okay, it's been hit, and we still have many months of work to go look at all the urine analysis and all these other things.

Generally, we will complete the work before we trigger the DSMB process. right? And so we have an obligation. It's not a -- we have an update on our event count, but we want to make sure we deliver a robust final analysis, all of the end points, including the key other endpoints like shedding. And as you just said, that's a lot more testing, a lot more work. You got to get it done right. And so we're completing that. We're going to get it in the hands of the DSMB. And once the DSMB has rendered their verdict, of course, we will share it.

One of the big things that continues to be a point for investors is that the company's revenues are guidance of $1.5 billion, give me the exact...

$1.5 million to $2.5 billion.

$1.5 billion to $2.5 billion. The OpEx guidance or the formal guidance, but you have cash burn guidance for this year.

Correct. Yes.

Guidance year-end of $6 billion. And...

Year-end cash of about $6 billion. And we expect cash use this year, cash investment in the business, that's OpEx plus cost of goods. So our cash use of about $5.5 billion. That's the guidance. So it's net use of about $3 billion.

Okay. And so it's basically $9 billion at the end of '24, going to around $6 billion further in '25, analysts have various estimates for '27. And people basically believe that the revenues could grow, but there's some guesses what that is. And then expenses are we can guess what that is. And when you do that math, that's still another negative X billions of dollars. So $6 billion is going down. So the question is, Wall Street doesn't believe that the revenue streams are going to pick up significantly. And at the cost basis, so the cash burn is going down. How do you respond to that math? And do you believe that Wall Street doesn't understand that it's going to be okay because it's the cash burn is going down and people see this as a problem.

Yes. Well, look, I...

Respond to that.

Yes. No, it's a fair question. It's a very fair question. Look, our goal should be and I think our track record is that we want to make or beat our cost guidance. And then we hope, over the course of this year to show where we've stabilized COVID as a business, and we'll grow from there. But we want to make or beat our revenue guidance. If you look at the cost numbers, we have decreased -- this year, we've guided to $5.5 billion. If you look at the first quarter, that is a year-over-year decrease, actual cost reductions of 20%. And that isn't -- that is the second or third year in a row that we've done that. So we've been eliminating 20% or 30% of cost per year. In fact, if you look at where we were through the first quarter, we're actually ahead of what you'd predict for current year. So we are trending favorable to our $5.5 billion cost guidance. We've indicated that the midpoint of our range is $4.7 billion for next year and $4.2 billion for the year after. And that means we're settling into about a $4 billion cash cost base inclusive of cost of goods in that. And I hope what we've shown is our ability to regularly meet or exceed our cost targets, take that 20% cost out, if necessary, year-over-year is there. We have to pick a number to aim at in '28, and we do think $4 billion is the right number. But if you -- if the number has to be $3 billion, then it will be $3 billion.

How do you get there?

The same way...

This is very helpful. So yes, we agree. $4 billion is where you're kind of aiming at. But if the -- based on revenues, minus expenses and cash burn, if you need to get to $3 billion because revenues are only $1 billion or whatever it's going to be, do you think you can get there?

Again, we've reduced about $1 billion a year for the last couple of years. We're looking forward to reducing another $700 million, $800 million for next year. It is the same path, the same types of discipline that we've been executing. For the most part, what you see happening is that, as you remember, a couple of years ago, we said -- about 1.5 years ago, we said we're not going to start any new Phase IIIs. And what you will see is a rundown of our R&D investment for these 10 products that we intend to launch and grow our revenue. And then we don't start new Phase IIIs that R&D line is just going to every year come down by a sizable chunk. And that's essentially what's been happening. That is what's driving over the next 18 months, that's going from whatever is $5.5 billion and '25 to $4 billion, $4.2 billion in '27. And if we need to continue that trajectory, it just straight line. We will keep -- we will avoid...

The $3 billion that you could get to, that's COGS, SG&A and R&D?

All cash cost.

You can get that.

All cash cost. So when we say $4 billion, $4.2 billion for '27, that is all of it. That is all cash used in the business, inclusive of cost of goods. So sometimes people think it's OpEx. I actually think that's -- people get twisted on that one because actually, the OpEx number, if you back into it, is probably more like $3 billion, $2.5 billion to $3 billion because the rest is in the cost of sales. And sales, look, if sales is down, cost of sales comes down with it. And we will continue to hold on starting any new Phase IIIs, which does not lead to any growth in R&D in '27 and beyond. It actually leads to this decline. We will hold until we have confidence on that revenue trajectory that we're all...

Let's take it one step further. So let's say you could get down to $3 billion. Revenues have to be above $3 billion in order to be profitable and people are not seeing anywhere in the next couple of years that is going to happen. So therefore, the cash is going from $6 billion, and you can do your own math. Do -- what is that -- how does that work?

Yes. Well, I think we would -- I would disagree, I guess, that there's not opportunities to grow revenue. So midpoint of our range is...

That's because we have new vaccines coming...

So midpoint of $2 billion this year. We have very little RSV in it. A lot of that is because it's still the first contract year. We're not into the second year of contracting in RSV. That starts in July of this year. And we do think we will grow over time to a share of RSV. Our flu and flu-COVID product launches are both, we hope to file them later this year, and that would mean that there would be approvals and contributing by '27 for sure, in '27, '28. And then you have norovirus, which we spoke about. And CMV...

Pfizer is not anywhere in the COVID-flu game or are they still there? Because if that does happen, that's a material change that could...

What I'm aware of...

People do believe that would be a value proposition to take $2 billion.

Yes. I think we believe strongly in the flu-COVID. It is clear from the FDA guidance, the market really is in that older adult and high-risk populations. I don't believe Pfizer is currently in a pivotal study in any of those areas. And so I think they focus more on younger and healthier populations, which obviously is not consistent with the FDA guidance now. So anyway, I just listed RSV moving forward, but then flu and flu-COVID, norovirus and CMV. That's 5 products. We additionally expect to launch two rare diseases and have, we would hope our first launch of our INT, and Intismeran cancer program with Merck, which will be three more products. And so if at the end of the day, we're heading towards $2 billion this year, midpoint of the $1.5 billion to $2.5 billion. And we launch 5 to 7 products, depending on your handicapping of that. By '27, '28, we would hope that, that has grown to a number bigger than $3 billion. And that $4 billion seems quite reasonable. That's where we're planning to. But again, we're going to match cost and revenue in the future. And we have, I think, shown -- I do think that we haven't gotten maybe all the credit about how we've been able to control consistently those costs and bring them down on a glide path.

You definitely have. And I think we got to definitely congratulate and give credit to the fact that the company has been doing that. I think Wall Street is struggling with, can they do it fast enough, do it more. And then one thing is where is the revenue growth. The other thing is managing expenses. But those things have to happen.

And I think the reality is...

And you ever trying to get that...

Yes, totally fair. I think the reality of those 7 products is seeing them through to their approvals is actually the biggest driver of that cost now.

Let's tie that together then because you mentioned INT, which is individualized neoantigen therapy, otherwise to some people have known as cancer vaccine. But first, is that a data readout that could happen next year? Talk about the probability of that happening because I feel like you're saying, I think that was my question last earnings call, but the timing of that? And then secondly, one of the differences or one of the options between you and some -- another peer BioNTech, is that they have very much pivoted or spent a lot of time focusing on cancer program, which seems to be hotter these days. And so there's a question as to whether Moderna, given the administration, given the environment we're in, would make more portfolio strategic decisions. I appreciate we also want to keep costs down, but more pivoting towards areas where they might not be so much about respiratory vaccine.

Yes. So great question. And so first of all...

Cancer vaccine and that...

On the cancer vaccine timing question, we...

Cancer overall.

We still expect that in interim analysis, that readout on efficacy next year in 2026. We -- it is an event-driven analysis. So my ability to predict when people's cancer relapse is imperfect, and yet, we still feel like 2026 is the year where we will see...

You know the event track rate. I mean, we're...

We do.

We're in the middle of '25, so it's early. But you're tracking along...

And again, we're standing behind, we think '26 is the year that, that happens. If you look to the portfolio question, I'll point to the fact that in the second quarter, we did update as a part of our annual portfolio review, we actually removed the tenth product on our 10 product launches was a younger adult combination flu-COVID vaccine. And we removed it and said, we're going to take that money and invest it in a new cancer therapeutic, something called 4359. And we're quite enthusiastic about the early clinical data we're seeing there.

What is 4359?

It is a combination -- it used to be called checkpoint as a therapy approach. We'll say more about it in the future, but it is a combination immunotherapy that expands T cell responses against your immunosuppressive tumor microenvironment. We've been testing it in a Phase I study in multiple histologies. We've seen some early -- we're quite encouraged -- they're early, I don't want to overstate it.

Is it a novel target?

It is a novel approach to generating T cell immunity against immune suppressive signals.

Right. It's an mRNA that induce -- creates an antigen, it creates antibodies against some target that you think is...

So we're looking forward to sharing that data at an upcoming medical meeting. But it was sufficient for us as a strategic decision to say, we're going to take one of these respiratory vaccines away, take that money and allocate it to another cancer therapy. So to your question, I think we've already started making those moves. And in fact, at the end of this next couple of vaccines, respiratory vaccines, there are no more coming in our pipeline. And so we are completing the work, we do expect to have a really strong portfolio commercially at that point, but we don't expect to continue investing in respiratory beyond that.

We've got a lot of great FDA and regulatory clarity recently. You got the COVID vaccine approved a week or so ago. So you can see that the agency is pushing forward and reasonably rational. You heard about that from Marty yesterday. And the recommendations and things, these are not surprising. In fact, the stock went up anyway after that. And you're working on the cost structure and you've got some more things coming. So we continue to look forward to the progress this year. People are watching this and trying to obviously figure it out. And so we appreciate your time and given us the outlook. So thank you very much Stephen.

Thank you, Mike.

Okay. Thank you.