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

Good afternoon, everyone. Thank you so much for joining us. It's my pleasure to introduce Moderna. And with us, we have Jamey Mock, CFO. Jamey, thanks for joining us.

Thanks for having me.

So to start here, maybe frame for us how you see the company positioned today. There's been an evolution, I think, with regard to the growth outlook for the commercial business with COVID in combination flu plus COVID vaccines, where you've gone to the point, I think, here of kind of returning to this positive revenue growth cycle and you have an opportunity set with your late-stage pipeline. So what are you most focused on when you look at this from a strategy and execution standpoint as we head into second half and beyond?

Yes. Great. Well, again, thanks for having me. Good -- So yes, we're super excited. The last 3 years have been hard, but we've been hard at work, really trying to build the next chapter of Moderna. And so that chapter, I think, is defined by growth, diversification and really an improving financial profile as well. And so from the growth and diversity perspective, if you look at -- we're going to have market expansion across the globe with our commercial products, as you just mentioned, we will grow from a product diversity perspective, and I'll kind of walk through some of these. So I think we're really set up and I -- we think we started that at the beginning of this year. And I'm sure we'll get into some of the financials and that kind of thing. But we laid out 10 growth drivers a handful of months ago, and over the course of 2026 through 2028, we think can be pretty substantial. And so in 2026, we think that Temexpike, which more -- have better relative vaccine efficacy versus Spicetec had tremendous share last year for its first year, was approved in June, had 24% share in retail. So we were excited by that, and we hope to grow on that. And then our international partnerships in the U.K., Canada, Australia. In 2027, and we can talk about it more. Europe opens up for us. We have a flu PDUFA date this year that we hope to sell in 2027. We've announced some other market expansion opportunities, particularly in Latin America, but we're working across the globe as well. And then 2028, additional product expansion, hopefully, with neuro virus, which I'm sure we'll get into, as well as the combination vaccine in the U.S. And that's just infectious disease. Then we have IMT, which I'm sure we'll talk about, 4359 as well as rare disease. So we're really set up for growth. I think underpinning that really, though, is really financial -- is disciplined execution. And that's commercial, that's R&D, that's CMC. And I think that's really starting to show up in the financial profile, and I'll just mention a couple of things. So first, over the last 2 years, we took out nearly $5 billion in cost and investment. So in 2023, we were at $8.9 billion. Last year, we were $4.3 billion, so over 50%. And we've been trying to really make sure we navigate this so that we can grow in this next chapter that we still are investing. So that's the tricky balance. So of course, you can find efficiencies. But we also wanted to make sure we were making the right investments for this next chapter, which is here, which is what we're so excited about. And we ended the year with $9 billion in cash and liquidity, which was ahead of our profile. So I think the execution has been terrific. We've set up this next chapter. We're in the midst of it right now. So -- and I think big picture strategy, what we're trying to do is build an infectious disease business that is leading in its place with various vaccines that is a cash cow, generates a lot of cash and has a lot of growth over the next few years and then invest that into oncology. And so we hope to diversify and have additional therapeutic areas in the next couple of years and really a vastly improved financial profile. So that is what we are focused on. That's what we've been focused on for the last 3 years, and we're in the midst of it.

Great. On the 1Q earnings report, you reiterated expectations for up to 10% year-over-year revenue growth on the -- with guidance accounting for a potential decline in U.S. COVID vaccinations. Now that the winter respiratory virus season has ended, do you have any more granularity on expectations around next season? And what are the puts and takes on the revenue guidance and where there could be upside?

Yes. So I think it's important to start with 2025. And in 2025, we had $1.2 billion of revenue in the U.S. and $700 million of revenue, OUS. And we said we were going to grow -- we will grow up to 10%. We hope to beat that, but that's what our guidance is, so that's $2 billion to $2.1 billion. And we said that we are going to be 50-50 geographically split U.S. versus OUS. So roughly $1 billion each. And [indiscernible] thinking in the U.S. and then what are we thinking outside the United States. So in the United States [indiscernible] [ $1 ] billion this year at some kind of midpoint here. That really takes into account a couple of things. One is vaccination rate decline. And so you were just mentioning what happened in the winter season. So if you look at fall last year, it was down 27%, but fall was a wild time. So there was many different reasons, and I'm sure we can get into it if we want to. But -- if you look at the spring booster, it's actually improved quite a bit. So it's encouraging the trend in terms, but it's a small sample size. But -- so nonetheless, we've provided 4 vaccination rate declines again in the fall of 2026 and winter of 2027. So we've kind of sized that in to be prudent. What could offset that though is everything I talked about in terms of So if we can grow share, particularly in retail, we were 24% share overall last year. If we can grow that, that's great, number one. Number two, it comes at higher value. So that's the U.S. dynamics. If it really comes down to the upside question, what happens to vaccination rates? We plan for a sizable decline relatively speaking. And what happens to the next big share and how much penetration can we have? Outside the United States, we were $700 million last year. And you and I talked about these international strategic partnerships. And you saw that in the first half already this year. So in the first quarter, we had $400 million in revenue. We said there was $200 million in the U.K. That's just for the spring booster. We're going to have another fall campaign as well that we'll supply for. So that's substantial growth. Last year, we had next-to-no revenue in the U.K. and now all of a sudden, we have $200 million in the first half alone. So when you step back, if we -- if I just want to really simplify the math for people. So we guided to $450 million to $500 million in the first half. And last year, we did $250 million. So that's up $200 million to $250 million. On $1.9 billion, that's 10% plus by itself, if we're just flat in the second half. So if you're just flat in the second half and how do you get to flat, that's if the U.S. comes down a couple of hundred million dollars in U.K. backfills [indiscernible] That's why we're so confident in growth this year, up to 10%, and we hope to do better.

Great. You're also still guiding to cash flow breakeven in 2028. Can you walk through what's needed from an OpEx and revenue standpoint to achieve it? Moderna's ability to be flexible on the spend side and your confidence in meeting this goal?

Yes. So I've always -- I've always said that this is both a revenue increase story and a cost decline story. And so I'll start with revenue. I already kind of laid out all the variables. But just to maybe emphasize just how big these are because I said substantial. I mean there's 10 variables for several hundred million dollars each. So if we have a 50% head rate, and it's a couple of hundred million each, that's a $3 billion-plus business. And so that's kind of the revenue side. You have to assume what do you think these 10 things are going to do. If you got a 50% hit rate, you can be at least a $3 billion business. If you hit on all of them, it could be much more than that at on the revenue side. We do obviously got to grow over the next 2 years. On the cost side, we've already guided to 2027 because we have such clarity of what we want to do, and we guided to $3.5 billion to $3.9 billion of cash costs, so that's down another $400 million to $800 million from last year ending point. And so we're trying to manage what is that growth line and what is that cost line? And maybe say one more thing about 2027, we know what we're going to take out. There's efficiencies that we were going to go have. There's Phase III trials that are going to run off. So that's obvious to us. Then it comes down to this choice of, okay, how are we growing? How much are we going to invest? We're building the next chapter? How are the readouts happening? What investment level do you want to make? And of course, you can always drive efficiency to some degree. But that becomes more of a choice coming 2028, and that's why we haven't guided 2028, which is let's see where the revenue line is, let's do the things that we know will happen on the cost side. And then let's make a choice based upon the data that we're seeing on readouts, the execution on commercial sales. So that kind of paints the picture of what has to happen on both sides.

Perhaps we can pivot over to your pipeline. So intesmarin data, you recently presented 5-year follow-up data in adjuvant melanoma at ASCO. Just to level set, remind us the high-level takeaways here and the importance of the translational data that was presented.

Yes, I'm glad, yes. It's quite an exciting year for Intismeran -- for both Merck and Moderna this year. And so I think the key -- there's two punch lines, but the headline I would say is that Intismeran continues to be a strong benefit and meaningful benefit, a durable benefit. So we've now have 5 years data that we're seeing the same recurrence-free survival, right, a 49% improvement. We saw it in 3 years. We saw it in 5 years. So we're really encouraged by the consistency of that, point number one. You mentioned translational data, point number two. So now this is the first time we actually tried to show, what is the underlying biology and how is it affecting the clinical outcome here that we're seeing. And what we saw is that tumor-targeted immune responses are better with Intismeran versus KEYTRUDA alone. And that's largely due to T cell clonal expansion as well as the number of T cell clonotypes that you have. And we sound like a 2x fold improvement on those patients that survive till 5 years or reference pretell survivor for 5 years versus just KEYTRUDA alone. So that gives us a lot of confidence in the underlying mechanism of action behind this overall program. And that's why Merck and ourselves have invested so much behind this program in various indications, and we're pretty excited about it.

Great. What is your confidence level for success on the Phase III interim study that's reading out in the second half? And maybe in the context of the Phase II results translating to Phase III, but being able to get it on an interim versus the final analysis?

Yes. I won't assign a probability to it. I'll just say a few things. One is, obviously, we're super encouraged by the Phase II results. We're super encouraged by seeing some amount of translational data that supports the program. And I think this isn't a transient response now. This is now 5 years that we're seeing this kind of impact. That's a very long time. So into Phase II, it's 107 patients on the -- on INT versus just KEYTRUDA alone. But that gives us a lot of confidence in what's going on. And again, we've continued to invest -- both Merck and ourselves have continued to invest. So I want to sign a probability to it, but we are quite encouraged. On the interim point, I mean we've set up the Phase III to have numerous readouts. So I want to dwell on just the first interim analysis. Of course, we are hopeful and optimistic that it will be just as successful as what we've seen on the Phase II. But there will be other data points, and we will look at the totality of the data in terms of DMFS, RFS and how long from a durability standpoint. So there's other things to look at, but hopefully, the first interim analysis will be strong as well.

If you had to speculate what are the key risks here to the first interim Phase III not working?

I'm probably not the best person to speculate on the risks of why it wouldn't be that well. But I mean, we always talk about it that you never know in clinical development until you actually get the data. So -- what we've seen is very strong, very durable and very consistent, and so that gives us a lot of confidence, but you never know. So clinical development being one. And then -- it's the first interim, like I just said. But if I step back, this trial was enrolled in very quickly. So I think that speaks to investigators and patients and just how encouraged they are and optimistic they are by this therapy. So -- but we'll see when it comes out.

Can you frame for us the commercial opportunity here for this drug in adjuvant melanoma, but also lung and RCC or where we have the best site, I guess, of line of sight to data this so far?

Sure. So all three of those are going to be multibillion-dollar opportunities. Merck and ourselves have not yet released what we think the addressable size will be, but they're quite sizable, and we're really excited. And so we think, overall, if this works across a lot of indications, it can be a very large product and a platform that is and very meaningful from a revenue standpoint, but we haven't given specific estimates yet.

How are you accounting for this asset with Merck? Will you recognize it as top line revenue? And how will commercialization expenses be split?

Yes, it's a great question. So -- first, yes, it will be top line revenue for us. I'll come back to that because that's a little bit more complicated. But broadly, it is an overall, we share the economics 50-50 split down the middle. So at the end of the day, the cash is reconciled to make sure that both partners are on it or benefiting from it from a 50-50 standpoint. So the expenses -- commercialization expenses are actually much easier. It will be 50% on Merck's P&L, 50% on our P&L. The reason why revenue and gross profit is a little bit more complicated is because we're manufacturing the products. We are selling it to Merck because they are the market authorization holder, and then they will sell it on to the end customer. And so we'll recognize whatever our COGS are with revenue because Merck will pay us for the COGS. And then that gross profit split, split 50-50 will be added on top of our COGS and revenue for extra revenue. So it won't be 100% of the revenue on behalf of Moderna. Merck will recognize 100% of the revenue. We will not recognize 100% of revenue. We will have something in between, and we will recognize the full COGS as well.

Is there any commercialization effort from your side? Or is the sales force fully on the Merck side here?

There's an agreement to jointly commercialize in some areas to a small degree. But I would say the lion's share is certainly on Merck side.

Got it. At your Analyst Day, you discussed a line-by-line expansion strategy for manufacturing. Can you touch on what this means and how it leads to efficiencies over time?

Yes. We're super excited and the team did an amazing job. We have a facility just outside of Boston and Marlboro, Massachusetts, that is a stand-alone facility only for INT and it was purchased and built in a matter of 2 years is just incredible. And what -- to your point, we said it's a line-by-line strategy. So the facility has the ability to have 7 lines. We have only built one of those lines, and that was very intentional for two reasons. The first reason is why invest if you don't have -- if you don't have the demand for the second, third, fourth, fifth, sixth sign, don't spend the money yet. So that makes sense. It just keeps our overall cost down and a better return. But then more importantly is the ability to drive additional productivity. So we are continuing -- we already have 3 phases of how we are going to manufacture this product from inception that we've been doing for our clinical trials. We have a second phase that is already in Marlboro right now, and then we already have vision for a third phase. And what do I mean by that? So what I mean by that is think the footprint of the boxes to manufacture these are much more automated, so therefore, less labor and much smaller footprint. So you can get a lot more throughput through the lines, and therefore, your cost comes down as well. So as we have the demand, hopefully, for a second, third, fourth line, we'll be able to put in the latest technology. And therefore, the overall cost of goods sold will come down because it will be the latest technology on the second line. And we have already started to envision a fourth line, frankly. And so that's the key to making this as efficient as possible and most importantly, to give it as much market access as possible across the globe to drive our COGS down.

And could you discuss the cost component here of manufacturing, noting it's a personalized product. How should we think about margins initially in longer term?

Yes. We're very confident that the initial margins will be solid, and the long-term margins we have -- based on what I just said, we have a lot of productivity roadway here. And I think that's natural in a product like this, and I've seen it in other industries as well that you will continuously automate, take labor out, make it simpler, make it smaller. And so therefore, the cost of goods sold should go down. To step back and just think on behalf of Moderna, in terms of margins, they will start on from a rate perspective, smaller but a revenue perspective higher because you're selling at a cost of goods sold that's higher. So if you have to do that and then you split the gross profit on top of that, you actually have more revenue but less margins. Then as costs come down, you don't sell as much from that initial transaction with Merck, but then you get a greater portion of the gross profit split so your margin rate goes up, but the revenue per patient comes down a little bit over time. So that's the way to think about it. But as the patient ramp goes up, that will more than offset the small decline on a revenue per patient basis, and the margins will improve over time.

What is the view from Moderna at this point on the read-through from INT and adjuvant melanoma to other distal tumors, lung, among others. And the confidence that this is going to translate beyond.

Yes, we get that question a lot, rightfully so. So INT wasn't really made just for melanoma. So that's how we think about it. It wasn't designed for melanoma -- was designed for cancer, and it was designed to target specific neoantigens on a tumor cell and train the immune system to attack it. And so we're hopefully seeing that already in our Phase II with melanoma should that work and the biology is different to some degree, but at the same premise should be there for other indications, albeit that biology can change and maybe you have different neoantigens and that kind of thing. But -- so we are optimistic that, that mechanism of action and what we just showed in terms of translational data at ASCO, can apply to numerous indications. And again, that's why I think we have 10 trials going on right now. [indiscernible] and maybe 5 Phase IIs and [indiscernible] are confident that this could work and starting to invest aggressively behind it.

And we're on track to see Phase III data in renal cell carcinoma and non-muscle invasive bladder cancer this year, too?

I don't think we've given an exact state. There is a chance, I mean, if you look at events and that kind of thing, but we have not said that specifically that we would have renal cell data in 2026.

Got it. Perfect. Norovirus here. So -- can you discuss the commercial opportunity for the Phase III asset here and when -- where you'll likely have data this year and your confidence here that this could be successful?

Yes. This is an important product for us. And so as we -- as I said earlier in my prepared remarks or my initial remarks, we want to build a leading vaccine franchise in infectious disease, and we want to have various products to bring to patients and customers. And so having two COVID products, one RSV flu hopefully, later this year, our combination vaccine was approved in Europe. Adding norovirus to it, where there is no other vaccine is really a competitive advantage. And so we're quite encouraged by that. So maybe just speak to the commercial opportunity. The burden is pretty severe with norovirus. And I think there's 20 million cases a year. There's nearly 1,000 deaths. There's maybe 100,000 hospitalization. So it's severe and anybody that's had it, I think, knows that. And so the burden is obviously substantial. We think the patient population that we would target is a little over 150 million individuals in the United States. I think older adults that get dehydrated and it really impacts your in hospital, it really impacts it even further. So older adults think occupational therapy, health care workers, where it might spread. So -- but if we even got a fraction of that, a fraction of $150 million from a vaccination perspective, that would be a very sizable opportunity to which there is no competition. So I say it's an important product. I think it's very meaningful from a revenue perspective. And so that's that. And the second part was on the trial and our confidence around it. So we'll see this year. We've -- we know that -- we believe it will happen this year that there will be enough events that it will read out. And from an approval perspective, what we see is where there is no other standard of care, anything that has relative vaccine efficacy of 50% above versus placebo normally is encouraged and approved. So that's kind of the limit that we're looking for is to be above that, and we hope to bring it to market in the not-too-distant future and we've said, hopefully, by 2028.

On the for trajectory here for the COVID vaccine, given Pfizer's pandemic era contract in the EU will expire this year, that geography could meaningfully contribute to your growth in 2027 plus, as you mentioned. Can you discuss the size of the market and your strategy here to gain greater share and what steps you can take now for success?

For sure. There is a lot of active work going on right there. So to size the market, the flu market is about $1 billion. These are our estimates in Europe in the year 2027. COVID market, again, in the year 2027, from an actual demand perspective, there might be sales going into it right now, but we think it's a $700 million market and RSPs like $100 million market. So a $1.8 billion market, pretty substantial to which we have less than $100 million is what we've said. So even 20%, 30% share across that would be pretty substantial for us. So that's kind of the market size. In terms of where we are, so number one, I mentioned earlier, we got our flu plus COVID vaccine approved in Europe. So we're excited to bring that to market next year. We got mNEXSPIKE approved as well. So we're kind of ready to go. And so what are the actions we're taking now. Europe is normally a single payer system where you go tender by tender with countries that are the decision-makers, so we are working with them right now to shape tenders. The second thing is you need to work with health authorities and to make sure that you have the right recommendation as well as reimbursement. So we're working with various countries across Europe to make sure that when the tenders come out at the beginning of 2027 or maybe even some of them come out late 2026, we are -- we have market access, and we have two products approved that we can go compete in. So -- yes, I mean, 20%, $360 million versus less than $100 million, it's another couple of hundred million growth, maybe $300 million growth driver for us. So that's why I keep going back to you have to believe that if we get 50% of these hits, we could be about $3 billion, and we've already motioned that where our cost could go at least in 2027.

And your flu COVID combo vaccine and Combriax was approved in April by the European Commission as the first COVID/flu combination, while not included in revenue guidance for '26. Can you speak to the commercial launch preparation underway, the kind of education and patient access efforts needed and your expectations for top line contribution in 2027 plus and expectations on timing for approval the...

Yes. Kind of sized the market in Europe already flu being $1 billion, COVID being $700 million, so call it $1.7 billion. So first, you got to shape tenders to actually allow for a combination vaccine as opposed to discretely COVID or discreetly flu. So whether that is large in the first year or it takes time to develop and maybe have additional competitors also, we'll see. But that's number one. And then it's the same thing that I just talked about in terms reimbursement and getting recommendations and that kind of thing. So that's kind of the size and the tender process. I think what's unique though and what we're trying to educate on is it brings a lot of simplicity that brings simplicity to the health care system because they don't have to run 2 campaigns. They don't have to run a flu and a COVID campaign, you can run one campaign so that should simplify things and increased compliance, frankly, as well. And it's better for patients as well. So that instead of going and having two vaccination appointments, you can have one vaccination. So that's really what we're trying to educate every country and every health authority in Europe right now. And I think it's resonating well. We'll see how much it can grow over time, but it could be a very substantial opportunity over time.

Great. And for flu itself, you have an August PDUFA date for the seasonal flu monotherapy vaccine -- you expect to start contributing to revenue in 2027. How big is the U.S. market for an mRNA flu vaccine? We know how the flu market is, but what is the willingness to take an mRNA version?

Well, that remains to be seen. Yes. So it's a sizable and hence dose market. That's where we'll play. What we think we're bringing is a lot of innovation to this space. And I think actually, we've got quite a bit of education on that over the recent history because of everything that transpired around this. So the fact that -- and why do I say we're bringing innovation to the space? So we're bringing innovation in the space because the current flu vaccines take a long time to produce. And since they take a long time to produce, you have to pick the strain well in advance of the actual season. Whereas with mRNA, the innovation is you can be ready in 60 days. And so you can pick a string that is more likely to circulate during the actual season and perhaps have a better impact and a better clinical meaningful impact to patients because it could be more effective. So I don't know exactly the consumer angle on that. But I mean, I think people recognize that a better strain matched vaccine, if allowed could be much more effective. And the burden of flu is still in the tens of millions of people in the United States, the hospitalizations are in the hundreds of thousands of deaths are in the tens of thousands. So it's very meaningful. And so -- but we have to continue to educate on what that can mean, and we're excited to bring the innovation to the flu market.

On the education front, in the context of just the use of mRNA during COVID. And -- to the period now, how much education do you need to do on side effects and safety just to have people recalibrated to real-world data as it exists today?

Yes. So we've done a lot of that. We publish everything. We're super transparent on our website to make sure every single in our view, that is out there. I think there is [indiscernible] I say, look, last year, we had 40% to 45% market share. So that tells you 40% to 45% of the people that are willing to get vaccinated or willing to get our vaccine, I get that our competitors also mRNA. But maybe then the better metric is look at COVID to flu. I mean there's still over 30 million people that are getting a COVID vaccine that is mRNA right now. So hard to say we try to debunk what will come with -- it's a journey, I would say, but we're -- we stand tall behind our science, and we put it out there transparently. And there's still at least 30 million individuals that are willing to get on an mRNA vaccine at this point. And hopefully, if the flu vaccine is better or a combination vaccine is more effective than maybe that will grow over time and maybe the sentiment will change over time in the country and the world.

Jamey, is the last question. Anything we didn't touch on that you want to highlight?

I think we touched on all the really pertinent stuff for the next 3 years, which is our next chapter, and that is what I know is on investors' mind. And rightfully so, particularly since the journey we've been through. That said, there is a lot going on behind the scenes for the chapter after that, so to speak, which is why we are having a Science Day on June 25. But there's been a conscious and disciplined investment around our science, around our platform and around programs we announced one this morning or last night, I think. So there's more to come beyond this chapter, but we got to get this chapter right, for sure. That's what we're focused on. The only thing we didn't touch on is there still is a lot of great work going on for the next chapter as well.

Great. Well, with that, thank you so much. We appreciate the time.

Yes. Thank you, Salveen.