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

Wonderful Hi, everyone. Thank you so much for being with us here today. My name is Courtney Breen. I am the pharma analyst here at Bernstein. And I have the privilege of sharing the stage today with Stephane Bancel, CEO of Moderna as well as David Berman, recently joined, Chief Development Officer at Moderna as well. I'm looking forward to a fun conversation.

There's lots going on with the company at the moment. Stock price is moving a huge amount at the moment as well. So there's lots of news ahead and kind of [indiscernible] excited for ESMO. Perhaps it's not really big and broad for those who haven't been following the companies closely, although I don't imagine that's many. Some may know Moderna as kind of a COVID or vaccines company. In a couple of minutes, what's Moderna today? And what is the most material things that have changed in the last 12 months?

All right, good morning. It's a great question. Actually, Moderna has never been a COVID-19 vaccine company. I know most people think of a company like this. Moderna has been, since day 1, a modern platform company, as you know. And we've always built the company in terms of how do we maximize the value of the company by developing the most exciting medicine for patients, doing things that cannot be done with other technologies across many, many therapeutic areas. That was a revision at the beginning. And I would say people will as well, I think in the IPO, S1, anybody who is interested in doing research? [indiscernible], the IPO S1, the intro. I mean, 10 pages, whatever. It described what we set as a company strategy since the beginning. We will enforce it during the IPO process. And then COVID happened. Of course, we never plan for COVID. We -- fully was as a company responsibility because we had done 9 vaccines in the clinic before, to try to get the COVID vaccine 19 in case this was going to become a pandemic help as many people as we could. And we are very thankful for what the team has achieved with all our partners to help protect so many people in the pandemic. But that was off plan. There was a off-strategy. Its not the strategy. It was a huge distraction, but it was the right thing to do for the world. And so what we've been doing since, there was no vaccine available kind of end of 2021 in the world is to kind of go back on strategy. But because it takes a long time in this industry to get moving, we are now starting to get to a place where I think people are -- we are doing the work because it's a platform company, so it's complicated. It's not a one product [indiscernible]. But people are doing the work, I think are trying to realize more and more in the last 12 months since our Analyst Day in November of last year, where people have inside to say, okay, this is a [indiscernible] companies to a platform company. I was actually -- just so interesting is that actually the only Moderna platform company left. Because if you think about it, CureVac was the first MRI company. The vaccine failed in Phase III during the pandemic, in the spring of 2021. I think because they made a big centric mistake of an insight we have because of all the research we did and all the investment with in science. We took a very different scientific route, which I think paid off nicely. They are gone. BioNTech just announced a splitting of the company, keeping their late-stage assets in the company and starting a new company. TranslateBio was bought by Sanofi, who recently announced starting the mRNA vaccine programs. So we have de facto because of what happened. The only MRI company is standing up and the breadth of a company is very exciting because basically, today, we have a vaccine business, with 5 proofed products and launches happening as we speak on product this year. So think about the growth over the next few years. We have a [ noncash ] business, and we took sure a lot of [indiscernible], but that's only our first oncology product. As Dr. David will tell you, there's many more comments are as exciting as in this Intismeran,and we own all of these because Intismeran, of course, is a 50-50 with a great partner, Merck. We have a rare disease business that we should know by the end of the year, pivotal data. But those kids have been on study and this is for years, and we've already shared the data many times. The drug is working. And because it's a genetic disease, there's no genetic biology risk. And so -- and because it's time-bound Phase III, we know we're going to have data this year. And then if you look at what we presented at Science Day in June, in liquid tumor multiple myeloma, shared antigen cancer vaccine, autoimmune diseases, what at least 3 programs, including CAR-T in autoimmune disease. The company is actually becoming a very broad mRNA platform and its core from a therapeutic standpoint today, a very, very important, I think, if you look at the next 20 years, immunology company, infectious disease, oncology, autoimmune disease. So I think what the team has already done an amazing job in the science and the labs is to figure out how can you exquisitely use mRNA technology and lipid delivery technology to interact with the immune system of humans. And that, I think if you think about the number of disease in an aging world, this is very, very powerful. So I think people who are doing the work over the last years are starting to realize that COVID was just our first product, not the company.

Absolutely. No, I think this platform basis is an incredibly important part of the story, and I'm sure we'll continue to discuss it as well as spending a decent amount of time on entismiran, which is incredibly exciting. David, you joined the company in March. There has been a bit going on. There was kind of some late-stage disappointments with CMV, Norovirus is being pushed out, some really exciting data with entismiran and some challenges with the FDA in terms of some of the filing strategies as well. Can you tell us a little bit about your background, first of all, and kind of why kind of this was the right opportunity for you to come into and kind of the critical things on your to-do list at Moderna.

Courtney, thank you for that. So I began my industry experience about 20 years ago at Bristol-Myers Squibb right when it was starting to work on ipilimumab, and I helped to develop ipilimumab. And that launched, of course, the checkpoint revolution. After about 10 years at BMS, I moved to AstraZeneca, where I led the immuno-oncology franchise and helped to launch Imfinzi there. And then 3 years after that, I joined a small biotech called Immunocore to launch the world's first TCR therapeutic called KIMMTRAK. So I've always been attracted to innovative immunotherapy programs. And if you look at the arc of my career and in fact, it mirrors the arc of the excitement of immunotherapy, it has really been an arc. It's almost been a bell-shaped curve, unfortunately, because there was a lot of enthusiasm for the PD-1 field, a lot of investment. And then it sort of seemed to plateau when the field came to believe PD-1s were the ceiling that there was nothing really you could maneuver on the immune system to really improve above PD-1s. And so enthusiasm has tailed up. The Phase II data that was presented by Moderna and Merck a few years ago, to me, radically rearranged that belief. And when I saw that data, and I tore apart that Phase II trial backwards and forth to try to find the flaws in it. And I -- and actually, when I joined and Stephane remembers, I said this will be a landmark Phase II trial because it's the most rigorous, beautiful Phase II immunotherapy cancer trial that I've seen. Most times, people go straight to Phase III. And so that's why I joined because I believed at the time that if Intismeran is positive. It will herald a new wave of enthusiasm. And it's been borne out, in my opinion. And we can talk more about Intismeran and my enthusiasm for it. In terms of what I'm doing here or what I'm doing in the first couple of months, it's really threefold. The first is to build a therapeutics development group. There's a superb infectious disease development group, obviously, from COVID and beyond 5 products. We need to equal that on the development side. So developing expertise in development therapeutics, number one. Number two is Intismeran. It was to bring it -- help bring it over the finish line and help it get launched. And then what else do we need to do with Intismeran? And then number three was what we are calling Emirate, Moderna Research and Early Development, which is to rapidly move forward those early-stage therapeutics programs that should be moved forward and rapidly stop those that shouldn't to make rapid decisions. And I think that's where maybe my effect might initially be seen is making rigorous decisions on Phase I and II trials.

Fantastic. Really, really helpful. And maybe just to spend a couple of moments on Intismeran purely from the perspective of we're going to get some new data presented soon. You already have it in hand. It seems like -- we've got a big conference coming up. Without kind of giving numbers ahead of that medical meeting, how should we be thinking about what clinically meaningful means? How should we be thinking about this Phase III relative to the Phase II and that path to getting this drug approved, especially given there was a potential with the Phase II and kind of it wasn't able to be delivered against.

Right. So I'll take the first stab and Stephane, please add anything. So if you remember, the initial approvals of pembrolizumab and nivolumab in adjuvant melanoma were against placebo, first initially in Stage II and then eventually also moving earlier into Stage 2. Those are both fantastic drugs. They beat placebo, and they are widely used and standard of care. This trial adds on to KEYTRUDA versus KEYTRUDA. So it's not a very easy control arm to beat. And the fact that it hit its primary endpoint at the first interim analysis, I think, tells you one thing. Secondly, it also hit distant metastasis-free survival at the first endpoint. That was the secondary endpoint. It's the first adjuvant trial to hit both primary and secondary endpoints at the interim. It's the first Phase III adjuvant trial to beat a PD-1 monotherapy as an add-on. And then I think the fact that it combined both Stage I and Stage II into a single population because Stage I is even harder to beat than Stage II and the fact that it still had a statistically cl significant endpoint tells you about the strength of this data. I think this -- the Phase II was a Phase II trial and Phase II adjuvant trials, of course, are not controlled well enough usually for FDA approval. This is an 1,100-patient trial, rigorously controlled, blinded Phase III trial. So I'm very confident that we have a strong case for approval.

Fantastic. And maybe just one of the big questions and debates around Intismeran at the moment is where else might it work. You've obviously got a development plan that spans different tumor types, predominantly, to your point, adding on to IO where it exists today. However, it's not just early-stage indications. You've got some metastatic indications. You've also got some indications that are perhaps not traditionally as immunogenic as others. How should we think about kind of that repeatability of this melanoma data in less hot tumors, but also in patients where their immune systems might not necessarily be as intact -- and I know you've got some Phase I pancreatic data anticipated later this year as well. Kind of how informative will that be for helping to unlock and answer those.

Yes. So there's a couple of ways that I think about it. One is if you look at the Phase II trial and you look at the subset analysis by tumor mutational burden, high TMB and low TMB, it's very interesting to see that the efficacy was the same, whether the patients had high or low TMB. So what you can do then is you can take that famous TMB figure plot, which plots every tumor by the distribution of tumor mutational burden, and you can put a line or a bar where low TMB cutaneous melanoma is. And you can roughly assume that, that bar is going to cover tumors where Intismeran is going to work. Because at the end of the day, we need 34 neoantigens in a cassette. We don't need 1,000 neoantigens. We need 34 good neoantigens. And we know usually only 1/3 of those are going to be immunogenic. So if you create that bar, essentially RCC, which is one of the next readouts that we're going to have, covers that lower TMB and cutaneous melanoma. So in essence, I believe that everywhere checkpoints work, Intismeran should be able to work. It acts upstream of PD-1s. It's actually the first step. It's alerting the immune system. So our initial approach has been in adjuvant melanoma, which is the right place, and then looking in adjuvant lung cancer. And, by the way, we've stopped screening on our leading Phase III adjuvant trial in patients who had no prior neoadjuvant therapy. We should expect to have randomization complete later this year. So that's -- that was posted on ct.gov. We have 3 Phase III trials in lung cancer. And then what we want to do is look in earlier-stage disease also. And this is something both Stephane and I believe Intismeran does not need, I believe, a PD-1 to be active, okay? You can combine it, the strategic reason. You say that's again sort.

[indiscernible]

Yes. Intismeran does not need a PD-1 to be active. I'll pause there for a second because this is a really important point. There was a belief in immunotherapy that everything had to be added on to a PD-1. And I don't believe that's the case. And if you take that to be the belief, which I do, Intismeran should be able to work in very early stages of disease where PD-1s don't -- aren't used. So we have a stage 1 lung cancer trial ongoing a Phase III. We have a non-muscle invasive bladder cancer, essentially stage 1 Intismeran trial with BCG that's ongoing randomized Phase 2. And so there is our belief that Intismeran can go into very, very early stages, and the risk benefit profile is very favorable also. After lung cancer, of course, we have RCC. We have kidney cancer and bladder cancer, which should read out hopefully over the next 12 months or so. And then we are studying metastatic disease. Now that's a higher risk because in this case, you are getting a sample of the tumor from 1 lesion. The patient may have multiple lesions. So there is a higher risk there, but it deserves to be studied. And then finally, we're moving into tumors where either the TMB is very low pancreatic cancer, exploring, or we're looking at tumors where PD-1s haven't been as successful, although some are, and that's gastric cancer. So we are studying the entire spectrum of opportunities for Intismeran.

Maybe just to add a couple of things and to step back. If you think about Intismeran, we are basically coding in 1 mRNA molecule, as David said, 34 mutation specific to the patient's cancer. And we know for a fact now we should ASCO in spring, the translational medicine data was presented by the MGH Group and our team showing that we know for sure now we believed it for the last 10 years now we know for a fact. Now when you inject our mRNA, we've only paid in somebody's arm. I cannot talk about any other mRNA approach. I don't know, our mRNA algorithm because we need to talk about data as well. That's very important for selection. We know for a fact now, we can create denovo T-cell in the patients who can expand T-cells. So based on that mechanism, as David is saying, I think our strategy is pretty simple, Intismeran is one, we believe we have to prove it in the clinic, obviously, that everywhere a checkpoint works, we should add value to patients. We have to do a clinical experiment or is it like we oversaturation of 0.5 in the Phase II study in Moderna or more or less, we're going to have to do that work, and we are doing. One thing we're going to do now with our colleagues at Merck, is to look at how do we accelerate new studies, because we have 9 studies ongoing right now, but the plan cannot be the same from when you believe something [indiscernible] in something. And now we know Intismeran working fit story, I think people will get a good sense of data as well. And we know the mechanism. And we've always been a very mechanistic company. We don't believe in Black Magic. We believe in science. And so based on that, what we want to do is to add to IO very quickly. And we have a lot of tumors where we know [indiscernible] great work Moderna years. We want to test that in the clinic within this month. The second piece, which is also very important, as David mentioned, is going early. Because in early disease, checkpoint also long-term side effect, in autoimmune disease, as we all know, that they are not in stage 1 disease. But I think about where the world is going, and again, talking about the next 5, 10 years, over the next 2 weeks, where the world is going is better and better diagnostic, earlier in the area of diagnostic. Think about the world where you could have potentially Intismeran as a monotherapy on Stage I lung cancer that is in Phase III study right now or any other cancer, and you can get your vaccine at your local CVS, because it's an IM. I have to go to a hospital, you can go it on your way to work for 9 dose every 3 weeks. How big that would be a deal for cancer patients. And we think lung is a great place to start because for a smoker and X-ray, very easy diagnostic, you can catch Stage 1 patient. So we're going to investigate that as strategy #2 pillar for incismiran. And the third one is to combine it with other agents that are helping patients because itisir is an orthogonal mechanism. We believe that adding the a mechanism will help patients. That's why we're going to go so aggressively look at that.

Fantastic. It's very, very exciting. And obviously, there's a personalized element to this that you've both highlighted that is critically important. And I have 2 questions kind of on that personalized element. The first is kind of there are partners that are involved in terms of sequencing and all the steps that occur here. I would love to understand, first, kind of how much of the proprietary work is within Moderna versus relying on any of those other players? And then the second is when you think about personalization, scale up is also really important. And so can you just help us understand where will be the most likely bottenecks as we think about the scale up? Is it going to be in the health care systems themselves? Is it going to be in manufacturing? How do we think about kind of the path to expansion for this product?

So that's a lot of questions. I'm going to try to give a shot and if I miss anything, I'm sure you'll keep me honest. The first one is very easy. All the proprietary information is with Moderna. What we get from our partners, we are doing great work and very important partners is sequence of a healthy DNA of a patient, healthy cells and the cancer cell. That's what we get from them, the raw data. Then everything that happened after in terms of selection of 34 is ours. And we keep it in a very tight wrap because I believe another piece that most investors do not appreciate yet is the tail that Intismeran is going to have. How do you copy Intismeran? How do you go to FDA and say, probably this has to generate, it's the same. How can you do that if you don't know what's in the product and every product is individualized. So manufacturing. So manufacturing, a few observations. First, this is a product where we only use from the patient the information of their genes, right? We don't use any biological sample from a patient. So it's very different from other technology that are individualized that people can think about. The other piece, it's a liquid manufacturing process of enzyme. So it's not like making T cells or whatever in biotech. This is actually a process you can compress. And I speak as a chemical engineer by train. You can squeeze things down, make things very, very tiny, which is what we have to do because we have to make product for one human. And so it's not a scale up like you have in traditional medicine, it's a scale out, which is the key of the game, how you scale this is make machines that are smaller and smaller footprint. Why? Because our biggest cost is depreciation of the clean room. So if I can do 1,000 machine versus 10 machine in this room, just you can do the math on my cost, right? And the second piece is cycle time. Because if I take 5 weeks or if I take a week to make the products, you can do the math as well, it's basic math. My output has a massive impact in terms of what happens economically. So on manufacturing, I think we're in a very good place because it's all synthetic cell-free manufacturing process. And by the way, it's the team who did COVID. And just as an important little piece, we scaled by ourselves as a start-up company, we have never done a Phase III, never launched a commercial product. In 2019, we made less than 100,000 doses across all our clinical trial studies. And we got 1 billion dose out of the system 18 months after. And we had to build everything, everything. And that team, when we got the Phase II data of Intismeran, I told Scott, who was the site head of Norwood, Scott, go take a month or 2 off. In the meantime, I'm going to look for a site to buy to build inisiran because when you come back, I need to do the same thing on COVID for Intismeran and go what you did to help some people with COVID with cancer. So I think the biggest bottleneck is going to be the hospital. I think the payers and so on Merck is an amazing commercial machine. They have great relationships. They know how to do this in their sleep. It's going to be the hospital, and we saw it in clinical trial in the Phase II, which is why in the Phase III, we did a much better job is you have to help the hospital with their hands off and getting the muscles of how do you get the biopsy very quickly from the lab, all the data, the patient, all the piece we need to be able to do our work as fast as we can with high integrity in terms of data and quality. And so we have now teams that Merck and are setting up as we speak to go basically to set up hospital by hospital. We're ranking the hospitals across the country in terms of the importance. And we're just going hospital after hospital with that team going around and making sure everything works well in the system. We built a great digital platform behind, so we can track everything, of course, anonymous respecting all the patient privacy, obviously. So all this is a thing we didn't even have in the Phase III. We didn't even dream of having in the Phase II. So we're just getting stronger, going faster, reducing cycle time. So is there a lot of work ahead of us in manufacturing? For sure. Do I worry about manufacturing and not a minute.

Got it. Super, super helpful. You mentioned, obviously, the scale is very different to the vaccine scale. The cost and the pricing is likely also going to be very different relative to the vaccines. Can you just help us think through kind of the economics of this and particularly with the collaboration with Merck, how does this commercial structure work?

Sure. The commercial structure, you want to think about it as a JV, as a virtual JV, like there's no legal JV. But basically, we are 50-50 cost in for everything. the sales rep or clinical study, manufacturing CapEx, OpEx, just cash, 50-50 cost in. And at the end, 50% profit left goes to each company. We wanted to align the 2 companies to be totally aligned that there's no funny games or whatever. And that's working extremely well. I have to give a lot of credit to the Merck leadership and to all our colleagues at Merck that are working with our teams. I think at this stage, we want to focus on the data at ESMO because once -- it's tough to talk about anything about value, we're talking about data, right? So let's wait for the data to talk about pricing and other things. And then we're focusing extremely on filing the BLA as fast as we can.