Hi there, everyone. It's great to see you all on Friday of the conference. I'm Courtney Breen. I'm a U.S. biopharma analyst here at Bernstein. I am privileged today to be sharing the stage with Stéphane Bancel, the CEO of Moderna. Stéphane has been at the helm of Moderna for the last 13 years. It's been a period of great change and growth for Moderna, and we are thrilled to have him join us for this fireside. We will first kick off with a bit of a talk from Stéphane, some slides that he's prepared, and then we'll dive into Q&A. To make sure that this Q&A is as relevant to this audience as possible, please feel free to post additional questions to the Pigeonhole.
I'll be making sure to check that, so that we can make sure that we're answering as many of your questions as possible. But with that, I'll hand over to you, Stéphane, and, and look forward to the conversation.
Thank you so much. Good morning, everybody, and thank you so much for being here on a Friday. We really appreciate it. We, of course, will be making forward-looking statements, and you can find those on our website or ECC website. As all of you know by now, because of what happened during COVID, we started building Moderna, yeah, 13 years ago. It feels like yesterday on this very interesting premise that we could potentially move medicine into digital medicine because mRNA is an information molecule. I think it's the most profound and important thing about the whole presentation. So if you think about small molecule and large molecule, which I had a chance to learn when I worked at Lilly, those are analog medicine. You have to relearn in the clinic everything every time.
You have to learn how to make the molecule and to build factories for the molecule. With mRNA, if we could make mRNA work, mRNA is the source of life. You send mRNA to the cells, like many of you got a COVID shot, and your own cells make a protein, in that case, the spike protein, and then your body does the rest of the job. And that's the notion that was so profoundly new that made me decide to join Moderna.
If you think about what this could do, and that's a bit how we thought about it and what I was asked earlier this morning, "Why did you decide to resign from the CEO of bioMérieux to go and join Moderna with $2 million in the bank and one scientist in the flagship office of VC?" It's because actually of this slide, which is actually the most useful slide I've seen and used the last 13 years. Is we thought if mRNA could work, we'll be able to do a lot of drugs that are not doable using recombinant or small molecule. We could do secreted protein, like what BioNTech and pharma does. We could do transmembrane protein. Protein that are stuck at the surface of a cell, is where they need to be to do the biological effect you want.
We could do protein inside the cells, which we have done so far. We have in the clinic, drugs working with clinical outcome, where we change the protein inside the mitochondria of patients. So that's why it was really exciting, what we could do for patients, because 2/3 of a protein coded in your DNA are protein that are not secreted, meaning they're undruggable using biotech technology. The second piece that was very exciting to me was the notion that we should have a much higher probability of technical success of our drugs versus the industry. Why? First, we code protein that exists in nature, either in your DNA or in viruses. If you think about most small molecule, they do not exist in nature, which is why most molecule you put in a human, and you have tox issues.
And in our case, the chemistry, the chemicals we put in your body for every product, for the mRNA molecule, will be 100% the same. When we did the RSV phase III, not one day as CEO, I worried about the safety of our RSV vaccine. Why? It's exactly the same chemistry as a COVID vaccine that has been given to billions of people. So that's another piece about the mRNA technology that made me think a lot that, geez, we could have a technology with very different profile of the safety of the drugs. The third piece that excited me is what we could do for patients and creating value for investor by going faster.
I think for COVID, I don't have to make the point anymore, but because it's a platform, because it's always the same manufacturing process, you don't have to reinvent it every time, and you can scale very quickly. Because you just change one raw material. All the other raw materials are the same between drug 1, drug 2, and drug 50. That's really the power of this technology. And the icing on the cake, massive capital efficiency, because it's all synthetic manufacturing processes, no life cells. So because of that, and because mRNA is information, we say we have to be the platform company, like has never really been built before us in biotech. Why? Because we say it will be zero drug, because we'll go out of cash before the first drug can generate cash, and we'll go bankrupt. All these companies that will have a lot of drugs.
The notion, this will be a one-drug company and zero scientific sense. So we build from day one for scale, saying: How do you do 10 and 10 and 10 of medicine? So we build massive investment in science to really be the best mRNA company in the world, massive manufacturing investment, IT, robotics, and now a lot of investment in AI. We just spoke about probability of technical success. I got to go very fast. You see in blue on the left graph, the industry average of a probability of a drug to be successful in phase I, phase II, and phase III. And you see in red the probability of the Moderna portfolio so far. And we've counted all the drugs, including the drugs we designed to never move to the next stage.
For example, with the Zika vaccine, with the H7 avian flu vaccine years ago, we never wanted to take it to phase II. So it count as a failure in phase I in this map, because we want it to be consistent with method used in the blues, because you only get positive, you move to the next stage of the study. We're investing a lot in R&D, and we're now at the scale of our investment that looks like an Amgen type of investments. With a very strong pipeline, 28 vaccines, 16 programs in therapeutics, oncology, rare disease. If you look at the vaccines, they address a very large TAM. Respiratory vaccine through COVID, RSV, and others, it's around 2027, $30 billion of TAM.
The latent virus, those virus like HPV, like VZV shingles, like HIV, that are in your body, and once in your body, are in your body forever, cause massive long-term health issue. EBV and MS, EBV and mononucleosis, EBV and cancer. Recently, more data, CMV and cancer. And those virus are very complicated, cannot be done using protein, and we think mRNA is a very important answer for that. In terms of the therapeutics, if you think about the TAM... Sorry. If you think about the TAM, and we talk about cancer, I'm sure, especially ASCO starting this weekend in Chicago. We think we have a technology that is quite unique to be able to individualize the treatment to every person, to amplify the response of a checkpoint like Keytruda.
And then rare disease, we think the TAM is north of $10 billion with what we're doing in the liver today. So as I said, because we always thought about building a platform company that can enable all those drugs and maximize impact on patients, maximizing value as a consequence, we build a platform company. We invested a lot in the beginnings in IT, so the company has been cloud-enabled since day one. We've never had a server in the company history. We have invested a lot in the quality of our data, which became very handy when machine learning, pre-COVID, started deeply in the company, in science. We've been doing machine learning since 2016, and of course, now with GPT, we're doing machine learning everywhere. And also in robotics.
We are doing a lot in robotics, and we are doing a lot around 3D printing to be able to accelerate our development. So you see this being applied across the business. We have a lot of examples. I'm happy to talk about them if you're interested. If you look at the pipeline, last couple of slides, we have up to 15 drugs to launch in the next five years. That is an incredible opportunity to impact patients and to create value. And you see that kind of two waves of products, in front of you across the board. So now we're already known as a vaccine company. I believe we're gonna become the biggest vaccine company in the world in that time frame, just because of the number of products we have.
If you look at the number of products we have in late-stage development in vaccine, it is more than the rest of the industry combined. And those are amazing investments. You invest well in the phase III study for a vaccine, and then you have an annuity of, say, four decades to come. So I think it's a really amazing opportunity. There's a lot of milestone. I won't go through even the whole slide. I know we should have RSV approved this month, and I know we're towards the end of the month, so I'm waiting for any minutes from the FDA. We're waiting for the flu plus COVID phase III data, and we said it should come this quarter.
If it's positive, which I believe it should be, because of what we showed in the phase II, and now we have COVID, flu, RSV, and the next-gen COVID, also positive phase III. We should be able to potentially have a product available in the market, flu plus COVID single dose, as early as fall of 2025, because you could file, you know, late summer, early fall, for a voucher, get this through the June 2025 ACIP meeting, and get this for the fall season. The CMV phase III data, our first latent product with six mRNA in each vial, which is why partners have all failed to do a CMV vaccine. They all failed in phase II. Six mRNA in each vial, which are phase III data, second half of the year.
The cancer, I cannot go on the—how excited we are about the data. We think we should be able to file for accelerated approval next year, and the rare disease in the liver. Those are the financials. You can read for them yourself, and I propose to move into questions.
Thank you. Thank you so much, Stéphane . You mentioned a little bit about the premise of where Moderna began, and that it's built on mRNA and kind of its potential. You've then had the catalyst of COVID that really shot you to a revenue-generating company.
Yeah.
And now you're at the point of launching a number of respiratory vaccines and this ambition to bring another 15 over the next few years. As you look 10 more years into the future, what does Moderna look like to you then?
Well, 10, 10 years is a long time. So, I mean, look, we just started 13 years ago.
Exactly.
So I think if you look 10 years out, as I said, we will be the largest vaccine company in the world because there are more than 200 viruses that hurt human, 200. There are vaccine against 20 of those. There's a great opportunity to do more vaccines and then to combine them, because, of course, we don't want to have 200 shots. But if you think about vaccines preventing cancer, you know, numbers are all over the place. We believe at Moderna that up to 50% of cancers are caused by viruses, and the latent virus I talked about are the cause of it. Why? Because having a virus in your cells for a long time, it's not good. It causes inflammation, and we know what inflammation does over time.
And so we think that between going after the respiratory franchise and the latent franchise of vaccines, we could have the largest vaccine company in the world. I think in cancer, we're gonna end up being larger than Keytruda in terms of sales, because we're gonna be able to improve Keytruda everywhere where Keytruda works. The safety profile is the same as Keytruda alone. So if you have a better efficacy for the same tox profile, you, as you can imagine, the doctors and the patients would be very, very interested. We are seeing our phase III study is enrolling super fast, and as we spoke to some of our doctors, and they're telling us they're putting everybody on the study because it's high efficacy. One in two people respond to a drug and seems to be cured from a cancer.
The safety profile is the same with that. What they're gonna give them anyway, which is Keytruda, and it's a clinical trial, it's free. It's like, it's not a very hard decision to make in terms of risk-reward trade-off. But I believe we're gonna be able to go earlier in disease. As we know, checkpoints are not given in stage 1 or stage 2 because of the tox profile that they have. When those drugs work, they're amazing, but they come with a very heavy tox profile, as we know, because of the mechanism of the drugs. But think about the world in which you could go after stage 1 or stage 2 cancer with just INT. It's the same chemistry as your COVID shot.
So think about a world where you could have potentially a liquid biopsy, which is, I think, a piece of technology that is not Moderna related, but it's happening as we speak, and it's improving as we speak. Think about a world where you could have a, an annual checkup with a liquid biopsy, cancer caught early because you didn't have it last year. We make an INT for you, and because we don't need Keytruda drug, I can send to your pharmacy.
Mm-hmm.
Because it's just an intramuscular, and you need maybe four or five shots. Now it's nine shots, but we have clinical data showing that four shots might be enough. So of course, we're going to launch with the nine shots of a protocol, but we're gonna go in the real world, try to reduce that a little bit. So think about a world where you do an annual blood work, and then you get a INT, maybe three, four, five dose at your local pharmacy with a QR code you show, and you have exactly the product for you sent to a pharmacy next to your home. This is untouchable by checkpoints. And that's why we should, as a society, take cancer to which it should become a disease as we improve the technology or understanding of cancer, it should become a disease that most people don't die from.
That's, that's very exciting to hear, and I'm gonna build on just one of the points that you made and ask the question, because scaling is really important, and scaling is tough when you have an individualized asset like an INT. And so tell me a little bit about kind of how this future that you just laid out in terms of early stage treatment in cancer might be possible, given your platform.
Sure. So I spoke in my intro that because we have a platform, all the products are made in the same reactors with the same material, all but INT. So RSV is made by the same people in the same room, of the same reactor, with the same material as COVID, and then will be our flu, and will be our rare disease, and so on. The only exception is INT, because it's individualized.
Mm-hmm.
So if you think about it, I don't need, you know, big reactors. I need, you know, micro, microliter. And so it's all about shrinking. The good news, because our manufacturing process is cell free, as I say, it's all synthetic, it's all enzymatic. The more you shrink things, the faster the reaction goes, because things are just closer to each other. And so if you think about it, the manufacturing process we use for the phase II study, the one we're going to give an update at ASCO, on Monday, was basically five-day cycle time on the machine that looks like a big American fridge for the, the mRNA, just to make the mRNA. Then you put the lipid, and you put in the vial. The mRNA was five days.
In the new plant we're building in Marlborough, which is a gen two of that technology, it's one day.
Mm-hmm.
It's a much smaller print. What we're going to do for the scale of this property to individualized product is to shrink the footprint, because in a given room, I can put many more machines.
Mm-hmm.
If I can shrink the footprint, and I can shrink the time I need for one person on that machine-
Mm-hmm.
I can increase the throughput tremendously. If you think about it, in the phase II, we are working five days a week, and we make so one patient a week. Now it's seven days a week and night, and I need only one day, one working day.
Mm-hmm.
Basically, I have a 14x simplification-
Mm-hmm.
Just by those two things. Then we have 20 more examples of things like that, that we're doing. So what I love about it is there's no silver bullet. It's purely an engineering manufacturing program.
Mm-hmm.
So the risk is very, very low. Not everything might be working. I think the current brick wall, as I call it, internally, is around 20-day needle biopsy-
Mm-hmm.
-to needle first dose. The phase II was 90 day. We're currently at 60 days. I have a very strong line of sight around 30 days-
Mm-hmm.
-that I think will happen by the time we launch, which, as I said, could be next year, if we get accepted approval by the FDA. I think the brick wall right now is around 20 days, based on known technology.
Mm-hmm.
But we're working internally and with our partners or our suppliers to invent the future, which is-
Mm-hmm.
Can you go even lower than 20? But today I have no line of sight less than 20 days, but we're gonna keep trying.
Fantastic. Fantastic. So we've touched on some science already, some manufacturing, some engineering, and I think there's also a really big other decision that you've made in, in the last kind of 18 months or so, where in many ways, Moderna is at a point where it's about a commercial show me story.
Mm-hmm.
And so you have taken this decision to not only play the CEO role, but also play the Chief Commercial Officer role in delivering on that show me of delivering a revenue generation-
Yeah.
and a competitive commercial market.
Yeah.
Tell me a little bit about that decision, why you took it, and how on earth you're doing both of those simultaneously?
Good. So I took it because we were building commercial, and it was being built the pharma way.
Mm-hmm.
And not that pharma does not things right. It's just that they are not running a platform. The use of technology was also a bit old school à la pharma. It was not Moderna. And as I reflected on it, it became very clear that we've done; most of the team has done an amazing job, build a platform from an idea of a drug to animal data, to phase II data, to approval. We need to still show the world and with RSV and flu and a few approvals coming, I think the skeptics will see in a couple of years that we'll have a lot of products approved. So I think we've done a really good job. We're still improving, it's not finished, and we're always going to keep raising the bar on building an amazing machine for what I call generating assets.
I think Moderna has an amazing—and if you get another look who, and you come visit us in Massachusetts, and there's always open invitation. Like, she's the host, Lavina. So I think once you get into our factory and you see how we do research, how we do manufacturing, how we scale, how we do three different things to go faster, to develop processes, you get a sense about the platform we're building. And now AI, and we're very lucky again. Actually, we're lucky with the cloud, because when we build the company, the cloud was just starting, and we built the whole company on the cloud and scale with the cloud. And now we're scaling the company in a big way, and there's a GPTs coming. We've just been lucky on the timing.
We're more than 1,000 GPTs already working in the company and going up by the day. But the observation I had is we need to build a commercial machine and to build a commercial platform, and it was not being built with a platform mindset. And we tried, and we tried, and I tried to coach, and I tried to coach, and it was not going fast enough. And so I came to the conclusion just before Christmas, that the best use of my time in the next number of years was to lead personally the build of the commercial platform, because as Stephen Hoge, who is the president of the company and has been my partner since early days, reflected on that, every time we had to build the rest of the company, because we started as a research company. We're a research company for four years.
He and I were running research, and then we build manufacturing, and I was very involved because of my background at Lilly, and I'm an engineer by training, and I worked at factories at Lilly. And then we built together the clinical development team, which he really led, and I helped him. We realized that he and I had our sleeves up here to build all those things and to rebuild them and rebuild them. And every time we gave a piece to somebody coming from industry, they build a replica of what they've seen and experienced. And I think it's interesting that Stephen comes from McKinsey.
Mm-hmm.
And he—I gave him research after trying two chief scientific officers coming from industry that were giving me a pharma type of science, and he's done amazing with the science, and he did the same in development. And Stephen is really, because now manufacturing is really strong and standing with an amazing head of manufacturing, but I'm still coaching and raising the bar, and Stephen is running R&D. And so that's part of the asset generation platform and machine that we have. I'm keeping an eye on it, I'm raising the bar, but I have amazing leaders, and it has been mostly built. So we're talking about the last 10% of the tail to build there.
But on commercial, most of the heavy lifting is ahead of us, and we just need to do it the Moderna way, and we're just gonna have to sweat it. Sweating it. And so to the second part of your question, how am I doing both jobs? Well, is I have a great team.
Mm-hmm.
I didn't go to the JP Morgan conference. It's the first time in 20+ years. I sent Jamie, our CFO. He did a presentation with Lavina. We have a great team. I told him, "Guys, I need to go and be with the US commercial team," and I didn't even get on a plane for JP Morgan. Stephen, as I said, is really running the asset generation machine. Jerh, our head of manufacturing, is amazing at raising the bar in manufacturing, and he's building the INT. We build. We actually have our Moderna leader who run the COVID scale up during the pandemic.
Mm-hmm.
We sent him on a one-month sabbatical when we got the phase II data of INT. I told him, "Your next climbing of Everest is called cancer, and you're gonna have 18 months to build a cancer product from scratch." And he's doing an amazing job. So we have a lot of great people. So I just rearranged my job.
Mm-hmm.
As you know, because you know her, I have an amazing head of HR as well. So having the team and not doing things like a silly example, but give you a sense. There was an industry meeting in Greece for all the CEOs of industry in April, and I was invited, like, every year. And I told them, "I'm not going. You guys deal with industry matters. Thank you very much. I'm gonna stay behind, and I'm gonna build the commercial organization." So I've just reprioritized my time very differently because I really believe the most important thing I can do over the next few years is to build an amazing, an amazing Moderna-like commercial engine, because I need to catch all the drugs that Stephen is throwing at me.
Mm-hmm. Absolutely, and hopefully-
Yeah
It's coming. As you think about that commercial machine and kind of this first test, which really will be RSV.
Yeah.
What are some of the components that will be critical to deliver on? And particularly when you think about the RSV opportunity?
Sure.
How are you using the asset that you have in hand to run against kind of the opportunity at hand?
Sure. So if you think about it, another innovation that we're bringing in RSV is the prefusion approach.
Mm-hmm.
As you know, the Pfizer product has nine-step lyophilization process to prepare. The GSK product for RSV has four steps. You know, we clean. You clean up your arm, you just do a needle, you're injected, you put a Band-Aid. And that's an innovation that's important in a world where there is a lack of labor in pharmacies. You see, you know, CVS has got a couple pharmacies unionized recently. Last week, last year, during the peak fall season, which is very busy in pharmacy because you have flu and COVID, and now RSV vaccine on top of the GLP-1 and Eliquis and everything else. And unlike a Walmart store, unlike an Amazon warehouse in the busy fall season, you cannot hire people because they need qualification. It's a regulated business. You know, pharmacies, you know, coming easily.
And so I think that innovation is gonna help a lot. We are hearing it from pharmacists, we're hearing it from independent pharmacists. We're hearing it from hospital network CEOs and CMOs. I think that's gonna be an important feature, and then the ability to bundle. And then in 2025, I would say it's actually the combo. So we're gonna start to be a player that has also the ability to bundle products. We don't have the ability when you have one product, like COVID, and the other guys can bundle their product in the retail channel. But I'm gonna start with this ability a little bit in 2024-
Mm-hmm.
-a lot in 2025.
Mm-hmm.
I think those are the type of things that's gonna help us. How do we build customer intimacy? You know, we are right now spending a lot of time with the big retailers to think about, okay, how do we help reduce your waste? Because in the vaccine usual business, it's industry practice. At the end of season, you return your waste to the manufacturer. That's how we proved it as well. Because the products obviously obsolete, you use a different product next season. But I don't know if you like to spend time returning your Amazon purchases. I don't. Because I mean, for pharmacists, because to be reimbursed for a product, they have to make sure there is no vial broken, that the box is not damaged, and then they have to, you know, put the barcode in the package and send it back.
Nobody likes to do it. Well, we're building EDI networks between us and the pharmacy chains, so that they can tell us that every store, based on usage by store, what type of product they want, and we're gonna manage that for them. So we're putting those in place. We are looking at the size of a box. Why? Because when you go out and spend time and sweat in the pharmacy, you realize that space is really important. And when you have an RSV box like this, which is a Pfizer box size, and the Moderna box is much smaller, that's another advantage that you have. I'm actually now working with a team, okay, how do we have for, maybe the tail of a season or smaller doctor's office or independent pharmacies, a smaller box.
So we are gonna work on COVID and RSV, and then flu products, a smaller footprint or an orange box. And so there's a lot of things like that, that we're just sweating with the customers, with the hospital network, is how do we help them educate their doctors? So we're running a lot of medical content, working directly with CMOs of all the big hospital networks. So we're just trying to create that intimacy with the customers to sweat every detail, that there's no detail small enough. If it matters to them, it matters to us; we changed even how our QR code and the type of information it contained, because by spending time in the pharmacy, we realized during the season that after scanning the barcode on Moderna product, they had to input some information by hand. That's insane. So let's get rid of that.
'Cause I want the pharmacist, when they reorder in the stores, they want to pick the Moderna products, because we're an easier product to give the consumer that walks into a pharmacy than any other product.
That makes a lot of sense, and you did make reference upfront that we're at the 31st of May, and there's obviously decision coming from the FDA, and they're doing work at the moment. Can you speak a little bit about kind of the efficacy, the duration response and kind of any signals you can give on-
Sure.
kind of when we might hear from the FDA?
So the FDA is already in the hands. I don't know, because I'm not online, Lavina is online. And I know it's the last day of May. So all the—I mean, we've stopped having questions from FDA, you know, a while ago, which is a good sign.
Mm-hmm.
At the end of the process, every time I've done this thing. When you still have questions and back and forth is not a good sign that you are converging and closing. So I think they're just running all their processes of approval and so on. If you look at the products, I think it's really hard at this stage because there's no head-to-head study, to be clear, of all the different products performing in humans at scale. What we believe is important, and there's an important ACIP CDC meeting at the end of June, which is why having the approval before the ACIP meeting is key for us to make this season, obviously. CDC cares about having a product that is in your arm.
Mm-hmm.
And so if you look at it, it's very rare that CDC recommends a product. It has happened sometime, but when they have a large set of data showing that the product drastically drives difference in hospitalization. If you look even at COVID, it's interesting between our product and Pfizer, there's no recommendation. If you look at the data even published by the U.S. government, like the VA ran a massive study in the real world, showing very different hospitalization rate between the Moderna vaccine and the Pfizer vaccine in millions of people. Much less hospitalization with Moderna, which is not surprising. The Moderna dose is 2x the Pfizer dose, so it makes twice as much antibody. It's gonna last longer. It's just simple biology.
Mm-hmm.
They still have not made a recommendation because they don't want to drive diffuse worry by the public or the medical professionals. So what we need from ACIP in June is pretty simple, is we need to be recommended for vaccination, and then up to the physicians. I think it will take a year or two before there's enough real-world evidence to get a good sense for safety, efficacy, and durability on the different vaccines. As you know, the three vaccines were done in different seasons.
Mm-hmm.
Pfizer and GSK got a little bit lucky because as we are doing the study, then Omicron happened, and everybody went back home, or mask, and if you look at the number of RSV, it just drops. Of course, on drug or on placebo, there was no cases. So your efficacy looks amazing when there's no cases. I think we're just gonna have to wait. I think on the safety, we might end up having a massive advantage on the Guillain-Barré syndrome. As you know, in our phase III study, there is no reported case of Guillain-Barré. It was twice the size of the GSK or Pfizer studies. But more important, if you look at COVID, going back to the platform, look at COVID, there is no Guillain-Barré syndrome.
If you look at the Pfizer cases reported by the CDC at the February ACIP meeting, they were around 3x higher than GSK. So I don't know about your parents, but for my parents, I would rather them be on the GSK vaccine than on the Pfizer vaccine, because, again, we don't really know for efficacy at this stage, but we know for safety, 3x case of Guillain-Barré, even though it's a rare event, as you know, Guillain-Barré is a very, very bad side effect to get. And we believe we might have a case where with Moderna, you might not get Guillain-Barré syndrome on the Moderna platform. That would be a massive differentiator.
Again, it will take a year or two for the CDC to report at the national level all the safety data, but in a year or two, we might have a nice upside, that in that case, we might get a recommendation because of safety, actually. So those things are just too early to tell, but I kind of like our chances.
Fantastic. That, that's really helpful to understand. I do wanna make sure we get to oncology-
Sure.
-because of ASCO. But I'm gonna take one pivot before we get there. And I know there have been some questions that have come through Pigeonhole on this, so and it's a highly topical event at the moment. We've seen your stock price moving a bunch recently in response to the bird flu-
Mm-hmm.
kind of scenarios that might play out.
Oh.
Yesterday there were reports on a potential collaboration with the U.S. government in advancing a vaccine candidate. I'll ask you to share what you can on that.
Sure.
I would be silly not to. But I also want to ask you to share perhaps what you learned from COVID that might be guiding the way you're thinking about this opportunity differently, and also, how, as you think about the mRNA platform, may that change over the long term, your approach to stockpiling-
Mm.
-when it comes to these kind of things because of the rapid nature of an mRNA platform?
All right, those are all great questions. So let me start with the virus for a minute. As you know, the medical and public health leaders have been worried for the 28 years I've been in infectious disease about avian flu. When COVID started, I was made aware of the first cases in China between Christmas and New Year, 2019. I assumed it was an avian flu. That's just how my brain was brainwashed for 28 years. And so we at Moderna started to be worried, the first half of 2020, because we had to see in so many countries, in so many mammal species, including wild animals, farm animals, the H5 strain circulating everywhere.
As we know, again, for all of those that have spent our careers in infectious disease, that people that are close to animals get infected. I'm not worried in terms of avian flu about people that are directly working close to animals getting infected, like what have been reported, like in the eye or whatever.
Mm.
I'm not worried about that. What I'm worried a lot about right now, and I have no data, is do somebody working close to animals who is immunocompromised because of HIV, because of cancer, because we have some type of diseases, has been growing the virus in their body, with the virus having a chance to mutate. It's unknowable. It might be zero cases of people working like this around the world. It might be thousands. I have no idea. I have no data. The day I'm gonna start to worry is if there are cases of somebody not working on a farm, reporting flu-like symptoms, like coughing and/or fever, because you will have confirmation with human transmission.
Mm-hmm.
Because you will probably a bit like... If you look at COVID, it seems to have been cases of COVID as early as October 2019, circulating in China. And that's what I would start to really worry about. So because of the animal situation that I described, last year, in the first half, we decided with the team that it was wise to get an H5 vaccine into the clinic. We started a large phase I/II study that has been since then on ClinicalTrials.gov. Nobody looked at it. We didn't advertise it because there was no need to worry anybody about it.
We were in a large phase I/II study, where we were looking at dose, because humans would be naive to a virus, so we were not sure if you need a higher dose than a seasonal flu booster, which, as we know, we have phase III data on, much higher dose. So we need to figure out what is that dose with our mRNA platform, which is what the goal of a phase I. With the phase II inside the phase I, by giving a big enough N of participants for every dose, so that we have enough safety database to move straight into a phase III, which we have done many times now with our platform. The idea was, let's get the data, so that if something bad happen, we know the dose.
And to go in COVID timelines, to your last question, that will put us in the June 2020 timeframe when the phase III issue starts. So think if we had known the dose of COVID on our platform in January 2020, that would have moved the launch six months, right? Plus, because it's flu, the FDA believes that there is a surrogate endpoint for approval, which is the level of antibodies.
Mm-hmm.
That's what they use every year. So the phase III will be much shorter, it is basically 29 days post-dosing. The study will be smaller. So would I see a three-month phase III study, start to finish? I do. So, they've been reported, and HHS have made some comments that they're in discussions with us to potentially work together for a phase III study of H5. That study, as I said, could be completed in as short as three months. So if we're to start it soon, when we get the dose from phase I/II , you could see the study completed late summer, early fall.
Mm-hmm.
The other piece of learning from COVID is the manufacturing capacity.
Mm-hmm.
Which, when COVID happened, we had made 100,000 doses in 2019. And I walked into the office of my head of manufacturing at the time and said, "How do we make 1 billion doses next year?" And he looked at me funny. He's like, "You realize it's 10,000x more." I'm like: "You're wasting time. How do we make 1 billion doses next year?" And they made 850 million doses, so pretty good for a crazy target that I literally picked out of thin air. And so but now it's very different. We have massive scale. We have a plant in Canada that I visited two months ago that is almost ready. We have a plant in the U.K. that is being built. We have a plant in Australia. So we have a big difference.
It's not only in how quickly we get the H5 vaccine approved by FDA, maybe a few months from start of problems-
Mm-hmm
versus a year, which was already amazing. And unlike for COVID, where we only shipped 20 million doses, the saddest day for me in 2020 is the day we shipped the product. It was the day after it got approved on a Friday night by FDA. Saturday morning, we shipped to CDC. We shipped only 20 million doses because we worked one year to make 20 million doses.
Mm-hmm.
So now we could literally make 20 million doses in a month. So think about a few months as you do your phase III, but you could start looking at risk if the governments want to start buying.
Mm-hmm.
You could have two doses for every American by the time you launch a product. A few months after, you start to have first cases of trouble. To think about the world could look so different, you'll be talking about an April launch of a vaccine, if I go back to the 2020 timeline that we are all too familiar with, with doses for everybody. It will look quite different.
Mm-hmm.
That's why we're doing all the things we're doing. It's impossible to put a probability on it. It was gonna be 0 or 100, and I don't know which one.
Mm-hmm.
I'm preparing for 100.
Mm-hmm. Makes a lot of sense. And, and I think kind of you've got utility across-
Yeah
your platform to be able to scale.
Right.
Without having to invest.
I don't need to spend $1 CapEx from my shareholders to get those doses done from the government.
Makes a lot of sense when you put it that way. Pivoting a little bit to oncology, because I mentioned that I did wanna get there. You've seen kind of... You've outlined three key areas that you want to be confident on when it comes to the seeking accelerated approval when it comes to melanoma.
Yeah.
You've spoke to kind of the durability, and you feel like you've checked that box.
Mm-hmm.
You're expecting a milestone this year on the study enrollment for the phase III, and you need this Marlborough manufacturing facility in a ready enough state. You gave us some alluded a little bit to where you're at on that process, but can you qualify a little bit further about how far you are on that journey with Marlborough and kind of what you might kind of be able to share in terms of the journey to INT becoming a commercial product?
Sure. So, we bought the Marlborough plant, which was an empty, finished box-
Mm-hmm
in March 2023. And if you look at what we done during COVID, 18 months to 24 months doesn't seem like a crazy timeline.
Mm-hmm.
Compared to industry standard, it is a crazy timeline, but given what the team has done, it is not a crazy timeline. I go to the plant at least once a month. The team goes once a week. They literally have a room the size of this room with day-by-day posted scheduling of building the plant and all the equipment, and when they're gonna be dropped in every room, and when they're gonna be validated. Because, as you said, to file an accepted approval, I need in the file I sent to FDA, I need the manufacturing dossier.
Mm-hmm.
I need to have run all the testing on the machine in that dossier. And so I believe the plant is gonna be the critical path item to filing.
Mm-hmm.
Because as I said, the phase III study, melanoma, is enrolling extremely nicely.
Mm-hmm.
I think the plant is a critical path item. And so we're working as hard as we can. We know lives are on the line, 'cause when you have 22 people with melanoma, being disease-free is pretty cool.
Mm-hmm.
And we want to make that available to as many people as we can. And so, as I said, you know, the 25 filing and the 25 launch assuming a six-month-
Mm-hmm
Accelerated approval is what I believe will happen.
Mm-hmm. Right. That's exciting to hear. And I do see that we've got a specific question on the cancer vaccines opportunity in terms of indication selection. And the audience member is asking, kind of, are you thinking about where others are going in terms of BioNTech and Roche, in terms of chasing down other indications? Is that coming into the frame as you're making decisions about which indications to go after next beyond melanoma, non-small cell lung cancer, et cetera?
So we are looking at where other people are going, but we always look at things as a data point, not as a strategy. We always go back to science. It's very boring how we run the business, but we're a science-based business. I don't know how to do it, but-
Mm-hmm
Looking at science. I think we get the best scientists and doctors, and in that case, you have Moderna team, the Merck team together. We have advisors, of course, to figure out based on our understanding of how our drug works, which is using your immune system. It's an important point, maybe because you mentioned BioNTech. The two technologies are very different in cancer. I think a lot of people miss that.
Mm-hmm.
We are an intramuscular, they are an IV. We use a lipid, they use a Lipoplex technology.
Mm-hmm.
So I have no idea where the mRNA goes. I have no idea how they design it. I have no idea of the algorithm they pick. The only thing I know is we have it. In 2020 presentation, we have 34 in our product. That is the only thing I know for a fact as a differentiation between the product and the mRNA and the lipid, the partner. That's the only thing I know. What I know for a fact is all mRNA, when you inject in the muscle in humans, it goes into it, it goes into your lymph nodes.
Yeah.
We know that for a fact, which is where the immune system is, for those who don't know the immune system, which is why you want it to pour out this cell. I have no idea where theirs is going. So we look at their data as a fact, but we go back to the basic science, which is where can we improve on Keytruda monotherapy based on what is understood of immunology, what has been looked and understood from a lot of trials that has been run in our immunology. And in terms of the latest understanding of the immune system, because, again, a bit like the CNS, the immune system still is a world that we know some things, and as a global scientific community, we have hypotheses on other things that we don't know for sure.
And so you really want to be very thoughtful and critical as you get ideas about what people believe is what we know.
Mm-hmm.
We try to take this to build a portfolio of indication to manage risk. Like you guys build portfolios of stock, because if I tell you the stock going 100% for sure in the next 10 years, you will buy only one stock, right? But you don't know, so you build portfolios, so we do the same thing.
Mm-hmm.
And as you see over time, we started in places that were the most obvious. But as you see over time, we're gonna go more and more in places where we have strong hypotheses that we could do something different. Like, we might go in places without Keytruda. We talked about, you know, a liquid biopsy recently, and Merck cannot block us. It's another important piece to know about this partnership. It has been set up by contract where no party can block the other one. So if I decide to go in stage 2 cancer, in melanoma stage 1 as a monotherapy, they might say, "This is crazy. We don't want to pay for it." You're right. We will pay 100% of the R&D cost. If the data is positive, they gonna have to reimburse us half of it-
Mm-hmm.
plus cost of capital, and it's symmetric, which is they want to go in stage four pancreas, and we say it's crazy.
Mm-hmm.
They say, "We want to go because biotech is doing it there," and we say it's crazy. They can go alone.
Mm-hmm.
They'll pay 100% of the R&D cost. If they are right, which would be great for patients and the business, I wish they are right. We'll pay them back half of the cost, plus the same cost of capital. So both parties can be very creative and have different beliefs. So initially, you see us doing all things together because we're going after the lowest hanging fruit in terms of risk.
Mm-hmm.
But as time is gonna go by, because we've only had five programs that are currently known to the public, but they are working on the next wave and the next wave and the next wave. Even... You see how Merck was aggressive with Keytruda. This is one thing we liked about Merck when we were talking to a few companies about who do we partner with for INT back in 2016, and we like that aggressivity because it's very more than I like.
Mm-hmm.
Um-
There's a lot of trials.
Yes. And so expect to see a lot of trials in INT coming in the next year also.
Fantastic. That's exciting to hear for patients around the world.
Yeah.
I want to pivot. You flashed up on the screen very briefly, the guidance-
Mm-hmm.
for 2024, for 2025, and also this guidance, this longer term guidance-
Yeah
... for 2026 breakeven. Speak to me about kind of the trade-offs that you think might be important to make when it comes to achieving that breakeven in 2026.
Sure.
Are there any decisions you might choose to take that prevent you from getting to that breakeven, but you think they're the right decision for the business?
Sure. Yeah, sure. So, an important thing to know about us is we've always been obsessed about creating returns. The thing you see everyone on our team, because Noubar, our chairman, has been here since day one.
Mm-hmm.
Stephen has been here since almost day one, our president. And, we're always obsessed about cash on cash returns. We're not obsessed about how do we manage the one cent of EPS next quarter. This is not who we are.
Mm-hmm.
Because we are thinking, how do we get 10x return on your cash? That's how we think every day, and it's always a question, 10x, 10x, 10x. So because of COVID, we got very fortunate. So not only doing great things for humanity-
Mm-hmm.
We got a very big balance sheet thanks to COVID, and this came at a very nice moment where the platform was clearly working. Because if you think about the parallel universe without COVID, we might have had the platform working, but at the same time, but not the cash to fund it, and that would have been a really painful problem. And so you see us investing very aggressively to learn things. That's why we're doing a lot of phase I/II in vaccines. And in general, we're very clear, if the result is negative, we are done.
Mm-hmm.
And so if you look at the VZV Shingles, it's a head-to-head to Shingrix.
Mm-hmm.
It's 800 people, phase I/II , which is really on the super size for phase I/II in vaccine versus people doing 20s and 30s. But the question was very clear: I want to know, is it noninferior to Shingrix or not? Because if it is not, we are done. If it is, we're going to a phase III, because I think even if we get only 20% or 40% market share against Shingrix, it's gonna be a $6 billion-$10 billion franchise. I don't need to invest $1 of CapEx at a 95% incremental gross margin of a product I can make off season, so it's not seasonal product. I can make in Q1, when I don't do COVID and flu, and so on, with not $1 of CapEx, 95% gross margin on $2 billion.
You can do the math easily. For $400 million phase III cost, I don't need the finance team to do the ROI for me, I can read it myself. It's a very good ROI. And so that's the type of investment we're doing a lot right now. The good news about those phase III is we only do them once.
Mm-hmm.
The thing about the respiratory portfolio, COVID is behind us. RSV is mostly behind us because we have to do safety monitoring, but it's mostly behind us. Flu and COVID, and flu post-COVID are gonna go down. If you look over the next few years, the cost of R&D for respiratory is gonna go almost to zero. You see kind of in that timeframe.
Mm-hmm.
Cancer is expensive, but it's actually less expensive than respiratory. Merck is paying half the tab.
Mm-hmm.
And so we are trying to really manage the R&D cost. At that scale, I mean, if you look at it, we have $4.5 billion. We have pretty nice scale.
Mm-hmm.
So, as you saw in 2024, we're gonna be roughly in the same range as 2023. 2025, we're gonna be, you know, in the same range. And we can flex down because a lot of 2025 and 2026 costs are not committed yet. So we can manage R&D line. Manufacturing, as you know, we've done massive restructuring post-COVID. We stopped Lonza and did a lot of things. And so as we launch products and grow sales, the cost of goods is gonna go only one way, which is down, which is great. And as you saw in Q1 already, SG&A was flat or actually down compared to last year, because we're starting to get economies of scale and a lot of tech return on our tech investment. And so we're gonna manage very carefully.
We're seeing the Blackstone deal, I think, was a good example of an off P&L partnership that we've done to allow greater returns for our investors by getting those phase III done. But we're sharing, you know, small royalty, to manage the P&L. We know for our investors, us being breakeven is important, so we're gonna get there. But we're obsessed about creating returns.
Mm-hmm.
Obsessed about creating returns.
Fantastic. I think that's a wonderful way to finish.