Fantastic. I am thrilled to be here today with Stéphane Bancel from Moderna. My name is Courtney Breen. I am the U.S. Biopharma analyst here at Bernstein. Before we dive into the Q&A, I will give Stéphane the opportunity to give us some context to where Moderna is at, and then we'll dive in. I've got a long, long list of questions, and we, I'm sure we won't get through all. As a reminder, and I think a few have already come through, we do have the pigeonhole function, so please do feel free to add questions throughout, and we'll integrate them into the conversation. Over to you, Stéphane, for a bit of an intro.
Thank you, Courtney. Good morning. I would say at a high level, we are trying to build a lot of products coming, impacting patients using mRNA technology. We are trying to diversify the company by having a very broad portfolio between infectious disease, cancer, but also rare disease product. We are working on autoimmune disease as one of the next frontiers for Moderna. Our priorities for the year are pretty clear, I hope. One is to drive sales, with the two products that we have approved, COVID and RSV. The second priority is to drive new product launches, to diversify the top line and to grow the top line. We have up to 10 launches for the next few years.
Mm-hmm.
We've already several BLAs filed and more BLAs coming this year. The third one is, of course, to resize the company from a cost standpoint.
Mm-hmm.
Because of COVID sales, as we move from pandemic to endemic. If I just point a number, you know, we have delivered 20% cost reduction in Q1 2025 versus Q1 2024. And if you look at what we announced on our Q1 earning calls, the 2027 target of around, you know, $4 billion of cash cost compared to $9 billion two years ago. It gives you a good sense of how we are resizing the business across the entire P&L. We are slowing down the pace of new products getting to the clinic. We have 40 now, which is a lot, and five phase III without coming. We are also reducing manufacturing footprint.
Mm-hmm.
Also on the SG&A side. I would say every line of the P&L. Because we have a platform, CapEx also is coming down tremendously, because we can launch new products using existing infrastructure. Because we have a seasonal business right now, as you can imagine, the teams are very busy in Q2, Q. In Q4 and Q1, there's not as much capacity utilization. We use it for clinical trial manufacturing.
Mm-hmm.
You could see us launching ready-to-use product, non-seasonal product like CMV, Norovirus, and so on that you can make off-season and help leverage the infrastructure without adding cost, both CapEx and also OpEx.
Fantastic. Very, very helpful. There is a lot going on in the industry and the sector, and I think we all wake up to a tweet or a news blast every morning. I would love to touch on some of those bigger pieces.
Sure.
Before we dive in. And as I think about it, there are lots of different kind of elements to this. There are tariffs, there is MFN or International Reference Pricing, there are Medicaid cuts potentially on the horizon, there is PBM reform, there are HHS changes in the including kind of strategy, but also organizational cuts. Some of those are really relevant for Moderna, and some of them are less relevant compared to the rest of the industry. Can you talk us a little bit through kind of the relative impact and size of that, the risk that you see with those various factors?
Sure. So indeed, Moderna has a quite different profile than most of us of industry that I will articulate in the next minutes. Let's start by the easy things, I would say. First, PBMs. There's most probably PBM reforms coming. For some companies, it might be good. For some companies, it might be a question mark. The good news for Moderna is we do not use PBM because we are selling vaccines today. If you look at the vaccine business across the industry in the U.S., they're directly contracted between the manufacturer and the pharmacy chain. So, Moderna has had for several years an annual contract with CVS and Walmart and Albertsons and all the different players in pharmacies. There's no PBM in between.
Mm-hmm.
Whatever happens there will have no impact on us. The other one is tariffs. We make product, drug substance for the U.S. market in the U.S. in our Massachusetts plant. Also, compared to companies that have, you know, most of their product made in Ireland or Singapore or somewhere else, we do not have that thing to worry about, which is great. Medicaid, for us, is very, very little impact, even if there is a huge reform on Medicaid, because if you look at the government side of the house, for us it is mostly Medicare for the elderly.
Mm-hmm.
which as far as we know in the current setup of a new tax reform is not impacted. Medicaid is very, very small impact. I think the biggest impact for us, and I'm sure we'll talk a lot about it, is what's happening with the agency, with the FDA.
Mm-hmm.
and the CDC.
Mm-hmm.
and the respective roles that seems to be changing a little bit compared to before. The rest I think is actually not really impacting us.
Makes a lot of sense. I think kind of with all these uncertainties around, everyone's trying to find anchors.
Yes.
To hold onto. It's useful to put that in context as we think about the agency.
Mm-hmm.
There's a few pieces that we've learned recently. Kind of in the last week or so, we've seen an update to the COVID expectations.
Mm-hmm.
In terms of, number one, who is recommended to get COVID vaccines.
Yes.
Also, number two, what is the evidentiary requirements for the boosters? Overnight, we've also heard some more information, more broadly in terms of mRNA vaccine perceptions and bird flu. Perhaps we just start with the COVID details. Can you give us a bit of context as to how you see those announcements in the context of your business and in the context of new clinical trials that you have up and running?
Sure. So indeed, last week, we were actually quite pleased to see a written policy by the FDA Commissioner and the head of CBER, in the New England Journal of Medicine. Because as you know, there was a lot of speculation, including people saying there won't be COVID vaccine next year in the U.S..
Mm-hmm.
I saw, say, for fall of 2025, which we never thought was a realistic scenario given the high burden of disease. Of course, you could never put zero probability to some scenarios.
Mm-hmm.
And so having a framework was very helpful. If you look at what they're trying to do is, to really focus on people at high risk, which is they define as the elderly, 65+ , and adults with high risk. If you look at the list of high risk, which is on the second page of that policy article, it's actually quite long. People that are physically inactive are considered high risk. People that have smoked before are considered high risk. You have, of course, all the traditional people with cancer, people with asthma, and a lot of disease. The list was actually surprisingly long, which is good. If you look at the table on the third page, they're actually describing their own assessment that those two populations, the elderly and the adults with high risk, are around 100 million Americans.
If you look at the market of COVID for the 2024, 2025 season, the season that just finished a few weeks ago.
Mm-hmm.
It actually was around 40 million doses, four-zero.
Mm-hmm.
If you think about it, if this administration is going to really try to push vaccination for people at high risk, I'm in.
Mm-hmm.
Because this is potentially a larger market than some of the confusion we have seen in the past and some of the skepticism that we have seen in the past. I think you can see, I think it's positive to see, the commissioner saying that people at high risk defined by age or comorbidity factors need COVID protection.
Mm-hmm.
We are quite pleased that we don't go into a very dark scenario. Actually, this scenario has potentially upside for us. Again, it's still early days. It's only a week old.
Mm-hmm.
We will have to process it and so on. I have read it several times personally, and I know my team has done the same. It is actually pretty clear in what they are trying to achieve, which I think is a net positive.
Absolutely. As you look at that guidance, there is kind of then the suggestion that if you do want to go into those other patient populations for boosters, there is then the requirement for efficacy studies. Can you talk about kind of does this impact your development plans or perhaps who you include in your studies going forward, or would you initiate any sort of efficacy studies to try and expand beyond that 100 million patients?
Yeah. It's a good question that, again, we are processing as we speak with the team because, again, it's literally a week old. If you look at the data of who got vaccinated, let's say, in the last couple of seasons as we are moving from pandemic to endemic, it is mostly the population that they are looking into. Of course, there are some healthy people that got vaccinated because they didn't want to get sick.
Mm-hmm.
They didn't want to have a loved one at home or parents getting sick. They didn't want to get the risk of long COVID.
Mm-hmm.
Because long COVID is still scientifically a thing.
Mm-hmm.
As you start to tee things apart, what's going to be interesting to really figure out is how big is the market. That's why the team, given the guidance, is very new. We are trying to analyze this as we speak. How big is truly the market right now of healthy adults that do not have risk factors? Because.
Mm-hmm.
If we have to run a study to access this market, but it's just a couple million doses, the math doesn't work financially. It's a very bad return on investment to invest in such a study. The fact that there's clear guidelines for what we always focused on, and if you look at Moderna's strategy for the last several years, we've said respiratory vaccine strategy is about people at high risk, which are defined by the elderly and adults with comorbidity factor. This is nothing new for us. As I said, if this is where they want to push in terms of the use of vaccination in that high-risk segment, it could actually be a net benefit compared to what we have seen in the last few years where there was a lot of confusion.
Mm-hmm. Perhaps a parallel for that is as we think about RSV and the change, the change to the inclusion criteria and making that more vague has kind of caused some confusion in the environment compared to there being quite an explicit recommendation for the particular groups. Perhaps where we need to.
Yes. If you build on even further on the RSV analogy, RSV initially was 65+ , and then you can see the going down in age. There's a discussion at the last ACIP meeting for potential vote at the June ACIP meeting of about the 18-49-year-old adults because it was 65. Now it's down 50+ .
Mm-hmm.
There's potentially an 18+ high risk.
Mm-hmm.
You kind of start to see this convergence, which again, you go back to the medical need. The medical need for those COVID, flu, RSV, respiratory vaccine is in those two populations.
Yeah.
If this administration wants to say, "Let's stop vaccinating everybody. Let's stop recommending everybody, but let's really go after those populations," again, I will take 100 million times
Mm-hmm.
Any day of your week.
Totally fair. $100 million is quite compelling.
It's much better than 40.
The other thing that you kind of alluded to in one of your initial comments was perhaps the changing relationship within the agency.
Yes.
The changing roles of the different parts of the agency.
Yes.
I think we saw that now just in the last couple of days with the announcement from RFK Jr.
Yeah.
specifically highlighting the pregnant female.
Yeah.
kind of options when it comes to boosters, and now no longer there's a recommendation there, and the same for children. Can you talk a little bit about perhaps your interactions, and how you're working to ensure that there's
Yeah.
Appropriate understanding and appropriate access.
Yes. Again, for those that might not be as familiar, because I know we have some generalists in the room, historically in the U.S., the FDA will review the clinical data and approve a product for use by a healthcare professional. The CDC will look at the data of the manufacturers, but also every year we look at the real-world data to make recommendations. Those recommendations are important, not only because it is what a lot of doctors and healthcare professionals use, but also because a lot of those things are important for reimbursement. Traditionally, this is the respective role of the two agencies.
Mm-hmm.
What we have seen recently, and it's really hard to have a judgment, is it an exception or is it what's going to be the rule moving forward, is do you see FDA having more of a role in recommendation?
Mm-hmm.
Of use of products that they approve or not approve? Again, I think it's just too early. We're talking about what happened literally in the last week.
Mm-hmm.
It is an unequal one. I think it is hard to make a rule out of something recent and such a small sample set. Are we going to really go into a direction where the role of CDC is going to reduce tremendously?
Mm-hmm.
Because that was its really, its key role. There's, of course, a surveillance role. If you look at the public health level, the recommendation of the CDC was historically really important. I think it's going to be interesting for the whole industry to see is that something that changes over time or not.
Absolutely. Absolutely. We have had a question come through, and I had thrown it into my notes for this morning because we all woke up to new news.
Yes.
This morning as well with, kind of the revocation of the BARDA funding.
Mm-hmm.
For the phase three for the bird flu influenza study, or program, that Moderna was engaged in with the administration. I think specifically in the commentary that we saw from the HHS director was language around kind of the fact that the mRNA technology remains undertested, and that they are done with repeating the mistakes of the past administration, which concealed the legitimate safety concerns.
Mm-hmm.
Which to me sounds like very, pointed language
Mm-hmm.
Is probably a very kind way of describing that language. And so I would love to hear kind of how you are reacting to that information. Does this require more education? Because, I mean
Mm-hmm.
mRNA has been tested and used in millions of people around the world.
Millions, yeah.
I would love to hear kind of how do you go about making sure that the right people in the administration understand this and your reaction to this in a
Sure.
From an immediate way.
I think there's a lot of questions here. First is, as you say, what is interesting in the quote that we saw from the spokesman of the agency is the fact that the technology isn't tested, given that, you know, we run a 30,000 people study, placebo control, which I think is what this administration is trying to aim at, placebo control. As you said, the vaccine has been used in several billion people. There's never been in the history of vaccines, vaccines that in their lifetime have this type of exposure to so many people. As you know, the way the regulation is set, which is we as manufacturers have to report any complaint from any countries to all the regulators.
FDA not only sees what's happening in the U.S., but in real time, companies like ours, but Pfizer or Merck or anybody who has the vaccine has to report to the regulators for their product.
Mm-hmm.
Complaints from all the countries in which you provide the product. The other interesting things about this quote, which I don't know if it was, you know, validated by leadership or just the spokesman, it happens in companies, as you all know too, because it was kind of a real-time thing. We literally got the notice yesterday afternoon, and as after the market closed, we issued the press release, is that it's actually the Trump administration and the Trump one.
Mm-hmm.
Who funded for BARDA, not only, the Moderna vaccine phase III, but also a lot of our product. As we know, Operation Varspeed was an amazing success. It is the U.S. and the U.S. government who took out of the pandemic the world.
Mm-hmm.
We don't have a European vaccine coming and saving us. We don't have, you know, a Chinese vaccine or a Japanese vaccine. That's also quite interesting. I think it's really hard to know, when you see spokesman's, you know, comment, does it represent what the leadership thinks?
Mm-hmm.
I don't know if the head of FDA thinks that or not. In the interactions we're having, we're having a very science-based, data-based discussion. Again, the guidelines coming from the FDA commissioner last week.
Mm-hmm.
I don't think made any insinuation or comment about safety. Actually, if you look at it carefully, which is why for those who care about the field, I will suggest if you have not done it, read it and read it a couple of times. There's some language on MMR.
Mm-hmm.
That's quite interesting. At the bottom of the first page, the comment is that there's been clearly demonstration of safety and efficacy of MMR vaccines.
Mm-hmm.
It's coming from the FDA commissioner. They didn't have to include that. The title of a paper is COVID-19 policy, and they decided to include it, which is, I think, also quite interesting given a lot of previous statements by different players in the administration. I think that's a bit where we are, which is focusing on the data.
Mm-hmm.
Having discussions with the teams, especially at the FDA. As we said on the quarterly call, at every level, we're having regular discussion, normal discussions with the team, and the files are advancing as you would expect.
Fantastic. Thank you very much for that. I'm sure there's going to continue to be lots of conversations because every morning we'll continue to wake up to new news from this administration. Perhaps trying to dive a little bit into your business.
Sure.
Perhaps starting with kind of where we're at right now. It feels like this year is perhaps kind of a foundational year for COVID and RSV, kind of setting what the view of that endemic kind of population might look like going forward. Then we've got upcoming readouts that perhaps begin to send the signals for where the future might go. What is it that you're really focused on this year in terms of stabilizing and achieving that at least $1.5 billion or to the $2.5 billion of revenue that you've guided to?
Sure. I think it goes back to some of the things we started talking about, which is last year, the good news is in the elderly setting, 65+ . In the U.S., the market went down 2% compared to the year before. You start to see a stabilization of people that we call the hardcore vaccinees, which are people, if you look at the claims data.
Mm-hmm.
They are on schedule to all of our vaccines.
Mm-hmm.
Those are elderly that are up to date on Shingrix, on flu, on all their COVID boosters since the first one of the pandemic, that we all got, you know, in Q1 or Q2 2021. On the epidemic call, you know, vaccine, just all the vaccine, they're up to date. That segment is a very important segment for us because there are people that care about being protected.
Mm-hmm.
They don't want to be sick. The other piece, we're working with a pharmacist because, as I said, the pharmacy chains are really the channels we're working with. If you think about the pharmacy, it's quite interesting. They have all the data of the drugs you use. They have quite a sophisticated system, actually, to reach out via text message. I'm sure some of you get those text messages or emails, to make sure that you are aware of the guidelines.
Mm-hmm. Mm-hmm.
and so if you look at, for example, in the spring booster, which, as you know, it is recommended for the elderly to get the COVID spring booster, the volume is actually pretty similar to last year.
Mm-hmm.
Despite having had no CDC promotional campaign this year because those budgets have been cut. Despite the cut of promotion, just even to remind people.
Mm-hmm.
Go get your booster, the pharmacy channel has been pulling a lot of people, reminding themselves, not for a campaign, but sending a text to, you know, 70-year-olds saying, "Hey, you have not come through your COVID booster. You know it is recommended, and you should come get it." Same thing with comorbidity. They have an amazing ability to know that you have asthma because you take an asthma drug, or you have an autoimmune disease, or you have, you know, cardiac risk and so on, just based on the drug you buy from them to be able to reach out to you. I think those are already the market going back to what we talked about, the policy paper from the FDA. It's spot-on strategy.
Mm-hmm.
Our focus in the U.S. is to make sure we stabilize the COVID market, that we get some RSV sales because last year, because of timing of contracting, we were mostly excluded from the contract, but from small kind of independent pharmacy and so on. That is what we're also doing outside the U.S.. We should always remember, like you guys do with stock, the best way to manage risk is to diversify, right?
Mm-hmm.
The good news is we have sales also outside the U.S.. Roughly half the company sales are in the U.S., half the company sales are outside the U.S.. We're very pleased about the contract that we have in Canada, in the U.K., in Australia, where we set up 10-year agreements with governments in, investing in the countries and building a local plant.
Mm-hmm.
Giving them pandemic readiness in national soil. They gave us basically a 10-year contract. Those contracts are going to start kicking off this year because the plants are coming online this year. We will not have a full-year impact, but in 2026, you are going to have a full-year impact and de facto just mechanical growth outside the U.S.. As you know, in Europe, there was this contract between Pfizer and Europe that went without a tender, which is against European law, for which we are getting back into getting some sales in Europe. Same thing, if you look at 2025, 2026, 2027, you are going to see a reacceleration of Moderna sales in Europe. We are still doing some good business in Taiwan, South Korea. We have some tenders also in Latin America and so on.
I think this is what we're trying to do, is to really get in COVID and RSV, as I said, priority company number one.
Mm-hmm.
Is get this business stable and go back into growth. The policy in the U.S. might be a growth driver this year if we get into a focus on people at high risk and clarity that if you're at high risk, you should get those vaccines. The next leg of growth, of course, is coming from the new products.
Mm-hmm. Absolutely. Maybe just to zoom into this year because you've kind of guided to that $1.5 billion-$2.5 billion, and you've spoken a lot about kind of what needs to go right or wrong.
Yeah.
To sit between those ranges. Can you perhaps clarify for the audience kind of where that bottom end of the range, what is expected to happen in the environment or what must happen in the environment to achieve 1.5? And if there's anything in the environment that's happening now that perhaps adds any more risk.
Sure.
Into that scenario.
When we did the forecast, we took a lot of assumption on risk to look at the low end of the guidance. If you look at the low end of the guidance, $1.5 billion, to give you a sense, just to calibrate, if you look at the sales of last year, U.S. $1.7 billion, you take out the basically returns that makes $1.5 billion net. That's the number of last year. You assume either all the business outside the U.S. goes away.
Mm-hmm.
Which, as I described, it doesn't look like it. It's actually almost the reverse. Or in the U.S., you know, you get the business more than halved, which again, I don't think if you look at price and/or market share and/or time, it's really hard to get there.
Mm-hmm.
So as we said on the call a couple of weeks ago for Q1, we still confirmed the guidance.
Mm-hmm.
It still has a broad range.
Mm-hmm.
We are still in the process of contracting in the U.S. with a pharmacy chain. It is a bit too early to tighten the guidance. Because there is so much uncertainty, we thought it was not appropriate to tighten it. We will at the right time.
Mm-hmm.
We just reaffirm that the guidance, we feel that we can deliver the low end of the guidance.
Fantastic. That's helpful to understand.
Mm-hmm.
To kind of get that context and ensure that there is kind of certainty for investors.
Yes.
And thinking about the bottom end of the guidance.
I want to re-remind people that in the guidance, there's no new product baked in.
Mm-hmm.
Because that was one of the lessons of a mistake we made, and I take accountability for it last year where we had put RSV in the guidance.
Mm-hmm.
Of course, we missed it partly because of RSV. What we said last September, based on that lesson, is that in guidance for the year of launch, we put zero.
Mm-hmm.
For example, should we get 1283 approved, which we're.
Mm-hmm.
Working actively toward, those sales basically come on, on top of the guidance
Mm-hmm.
They're not in the guidance.
Fantastic. That's helpful. And jumping into that flu combo, there has been a slight change in the filing strategy. And so you announced
Mm-hmm.
In-announced that in a again in the last couple of weeks. Can you just talk about what that change represents, if there's an impact to timing or potential for probability of success and what that means in terms of kind of how flu is going to play a role in, in your
Sure. So.
Business.
It goes, it boils down to the flu and what the FDA has been saying and how they evolved their position around flu. Flu, historically, you have seen approvals in the U.S. by the FDA of new flu products based on antibody levels. And so based on that precedent, we designed the phase study initially on antibody levels because it's faster and cheaper. As the phase III was ongoing, the FDA started to ask questions, "Hey, we're not sure. Maybe for a new technology, we should." And then we pointed them to new flu technology where they did not want efficacy study. What became clear very recently with the FDA at the working team level.
Mm-hmm.
is that they've kind of made up their mind that they really wanted efficacy data, especially because they are, like you would expect, like us, monitoring the season. We started, last fall, a very large phase III efficacy study, which we will have to do anyway.
Mm-hmm.
Because when you get approval on antibody, then you have to demonstrate efficacy
Mm-hmm.
in the follow-on study. That study is funded by our Blackstone partnership.
Mm-hmm.
100%. Because, as you know, the flu season was pretty hard last year.
Mm-hmm.
and so because of that, a lot of cases accumulated in the study. We announced on the earnings call that we exceeded the number of cases needed for readout, which is why we said we should have a readout this summer. As you can imagine, FDA followed the cases as well. There was discussion at the working team level between our regulatory team and the FDA team.
Mm-hmm.
Reviewing the file, saying, "Hey, you guys are going to get efficacy data anyway.
Mm-hmm.
Given we know we're going to get it, we want that data before we finish our assessment of the flu COVID combo, which was filed last October. What happened is, we had discussion with them, "Do you want us to file an amendment?
Mm-hmm.
Do you want us to withdraw the file? The team, after the internal FDA deliberation, communicated to us last week that they wanted us to withdraw the file, and we filed a complete file with both the COVID data, which we have efficacy for
Mm-hmm.
The flu data, to review the flu COVID combo.
Mm-hmm.
Which is what we said last week we will do this year.
Fantastic. If you give us, how, how does that then translate to a potential launch date for the flu?
It will, of course, depend precisely when do we file.
Mm-hmm.
Based on when do we get the data? We said this summer for flu, and then we need to prepare the BLA and all the filing.
Mm-hmm.
Quality controlling all the subjects because, as you know, in the U.S, you have to send all the raw data, unlike other regulatory agencies. It takes a bit more time to prepare. Based on when we file and do we use a voucher or not.
Mm-hmm.
It will depend, I think, of our internal choice. We still have one voucher.
Mm-hmm.
to decide do we want to use it or not because it's still, you know, $100 million+. So we make those decisions hopefully carefully and thoughtfully.
Mm-hmm.
to see can it help you in terms of the contracting season or not.
Mm-hmm.
I think it's a bit too early to know, is it the 2026 launch, which will not be a full launch? Is it a 2027 full launch? Do you have some sales in 2026? That's a piece that I think is just too early to know. There are just too many variables on timelines.
Got it. That's super helpful. I think one of the big questions when it comes to flu and COVID is, does this add to your potential revenue purely by adding extra price because you're adding extra kind of impact to those patients that were already getting a COVID vaccine, now they're also getting protected from flu? Or does this expand the market.
Mm-hmm.
That you have in any way, shape, or form?
Yeah.
Can you talk about how you think about that internally?
Sure. I think it's actually both, and for the following reason. As we talked about a few minutes ago, the COVID market last year was 40 million doses in the U.S.. The flu market was 150 million doses. To just give you a sense that you have, if I round my numbers, you have around a 3X bigger market for flu.
Mm-hmm.
If you look at the data going back again to people at high risk, which is our focus, excuse me, the people at high risk, what you see is basically 70%+ of those people getting flu COVID the same day. Again, if you look at the claim data, people by person by person in the U.S., of course, we're looking at people's name and ID.
Mm-hmm.
You see that actually 70% of people going to a CVS or Walmart will get both shots the same day. Because nobody really likes needles too much, the fact that those people are willing the same day to get both shots in each arm.
Mm-hmm.
Makes us believe that actually there's a pretty large market, inner target market of people at high risk
Mm-hmm.
Who want a combo product.
Mm-hmm.
This is not a new concept. Combo product exists for the pediatric setting. If you think about it, the pneumonia market, whether you have Pfizer product or Merck, those are multi-strain products.
Mm-hmm.
It just makes sense if you think about it. Even, you know, in our lifetime, many of us have been, you know, getting a flu shot pre-pandemic and saying, you know, because we're sick, the shot didn't work. Actually, you don't know until you do a test because you might have had RSV infection or another, you know, virus infection.
Mm-hmm.
There's even old coronavirus that still circulates in New York every year.
Mm-hmm.
Causing around 10% of hospitalization linked to 100+ year-old coronaviruses, that are still circulating that came from what was called the Russian flu, which was actually a corona pandemic
Mm-hmm.
In 1870. At the time, there was no PCR testing, so nobody knew.
Mm-hmm.
Scientists have been able to go back, through looking at deceased bodies and so on and do testing to realize that. I'm saying all that, which is if you had a magic wand, what you would want is a respiratory virus vaccine.
Mm-hmm.
Where all the respiratory viruses are taken care of by a combo vaccine that has all those components. You could see in the future even the elderly wanting a COVID flu RSV combo.
Mm-hmm.
As you know, we have shown data about such a product. I think this is where the market is going because it's just convenience.
Mm-hmm.
To you, then your question of price for us is not only there's this ability to go into a much larger market, three times the size, but then the high-dose flu shot is around $70. Adding just even if you assume some of a part in terms of pricing.
Mm-hmm.
Adding another $70 for the same cost of good because the thing that is really interesting about mRNA is the cost of filling the prefilled syringe is actually higher than the cost of the mRNA in the prefilled syringe. To just tell you the sense of the manufacturing scale that we have with mRNA because what most people forget with mRNA is one copy of mRNA in your body makes around 1,000 protein copies. You get a free-load amplification by nature as a gift.
Mm-hmm.
Which is why if you visit a Moderna factory, you see 100-liter reactor. If you go see a Sanofi factory, you see 20,000 L reactor. And so, when you look at those things, it's actually quite interesting for us. You get a bigger volume.
Mm-hmm.
You get added the price on your COVID price if you assume no premium despite the convenience.
Mm-hmm.
The cost of good is almost the same by a couple of pennies.
Mm-hmm.
We think it's actually really interesting for us, which is why we are deploying a lot of capital toward a COVID flu combo. If you look at the market, it is quite strange to us that Pfizer has shared no data of their clinical data on the 65+, which is clearly where the medical need is.
Mm-hmm.
They've shared data in the young adults that are healthy.
Mm-hmm.
They have not shared data in the elderly
Mm-hmm.
Which I would assume from their side that the data might not look so good.
Mm-hmm.
because they know that the market is in the elderly and people at high risk, obviously. Then there's, of course, Novavax with a combo, but it's also not clear at this stage what the data will look like.
Mm-hmm.
The good news is we have phase III data showing non-inferiority to FluZone HD.
Mm-hmm.
The gold standard in the elderly for flu. We have shown a much improvement because we use 1283 in the combo.
Mm-hmm.
The next-gen higher efficacy COVID vaccine. Looking at those things together, we are quite excited.
Fantastic. That's really helpful. Perhaps pivoting to kind of something that's upcoming this weekend, we've got ASCO.
Yes.
Kind of one of the biggest oncology conferences. As I think about kind of some of the messaging and kind of work you guys have been doing, there's been a bit more active highlighting of your oncology portfolio over the last few months.
Yeah.
Can you give us a really brief overview?
Sure.
Certainly, kind of on the INT, which I think is obviously nearest and dearest to my heart given my immunology, immuno-oncology background, how de-risked would you describe that phase III melanoma trial as being?
Sure.
Given the data we've seen so far?
Good. Let me maybe step back a minute to understand the role of oncology in our strategy, which is what we're trying to do because we knew with the COVID pandemic that our vaccine work is to develop pretty quickly in over a few years a respiratory portfolio that can become a massive cash cow for Moderna.
Mm-hmm.
Why? Because we pay for phase III only once.
Mm-hmm.
We already built manufacturing.
Mm-hmm.
We use all the same infrastructure for all of our products because we have a platform. If you think about it, if we could build a $4 billion-$8 billion respiratory business with a pretty high gross margin and no R&D and the same sales and marketing team, which is very tiny. In the U.S., we have 150 people in commercial. Why? It's a massively concentrated market. You have CVS as a big one. You have Walgreens as a number two. Then you have a few large food retailers like Walmart, Albertsons, Kroger, and so on. You have a long tail, but you go at them through, you know, purchasing agreements for, like, independent pharmacy network and so on. You could launch RSV and flu and flu COVID combo all with the same sales force.
Mm-hmm.
If you think about it on a couple-year basis at the P&L level, I love that business.
Mm-hmm.
I know right now vaccines are not very popular, but the virus are not leaving the planet.
Mm-hmm.
People are still getting sick. We have more and more older people around the world. We are playing a multi-year game. We're not playing a couple-quarter game. The way we think about this business is that we're going to create a massive cash cow business that allows us to fund the platform and all the products coming out of the platform. The big next chapter of Moderna is oncology. If you think about what we're trying to do in oncology, we're trying to go after a lot of things because with INT, the individualized neoantigen therapy combined with Keytruda, we are trying to increase the efficacy of Keytruda or checkpoints that they demonstrated alone. As we know, those products have changed the life of so many people.
They have generated incredible turnover for those companies and cash flows and market value as a consequence. We think that if you like, we have shown with INT in melanoma, you can have two out of three people that three years after surgery have no distant metastases.
Mm-hmm.
As we know, people die from metastases most of the time or no death compared to Keytruda alone.
Mm-hmm.
That's a pretty significant clinical impact, right? And so, we want to improve the efficacy of checkpoints by adding INT to patients in stage two and stage three of a cancer. We want to go in monotherapy early because the checkpoints, as we all know, are not used in stage one because the side effect is terrible. As you know, when you look at the list of side effects on the label, it's basically who's who of autoimmune disease, which again, as an immunologist, you're not surprised. You push your immune system, so that's what happens when you push your immune system. But it's better to have type 1 diabetes or lupus than being dead, obviously.
Mm-hmm.
Think about INT. It's the same technology as our vaccine. So, the safety profile of this technology is remarkable. As you saw in the clinical study, the safety profile of a combo was the same as Keytruda alone.
Mm-hmm.
When you look at the science, it's like that. It's the same chemistry. It's the same lipid. It's the same manufacturing process that we use for the COVID or the RSV vaccine. We know the safety profile of those products. We think the monotherapy is going to be a very interesting market because it's very large, and you don't have the competition that you have in the stage two and stage three with the checkpoints, where you have a long list of checkpoints and soon, generic checkpoints or biosimilar coming, many of them out of China and so on in the coming years. We feel excited about that.
We also are quite excited about a product we mentioned more recently, but we already highlighted last year at ASCO, which we call the checkpoint product for us, which is basically a vaccine with PD-L1 and IDO coded into it. Again, same technology as COVID vaccine, again, safety profile-wise. We have shared at our earnings call, and we've had data coming last year of a phase Ia at ESMO, the European, smaller, kind of ASCO.
ASCO.
Or sister or brother of ASCO. Some quite interesting early data as we're doing those findings. We've announced that we'll present more data later this year. We've had some quite interesting response in people in metastatic setting. I've seen personally cases of patients. Think about a 72-year-old woman that has melanoma and has, has failed on Keytruda and then failed on Opdivo and then failed on the third one and the fourth one. You give that person with cancer progressing, of course, a couple of years after because if you look at the, you know, number of treatments for all those checkpoints and in between, a couple of years after with a much worse disease, you give them our product and they respond to it.
Mm-hmm.
Of course, it's still a small signal. We have announced we are expanding into a significant phase 2 of that product to be able to get a much stronger signal. It's the first time we're making a foray into a metastatic setting. I said that we are phase II/III, with phase III going for melanoma. We're going to go into monotherapy.
Mm-hmm.
Stage one cancer. We're into metastatic setting with this checkpoint product. We've also, if you look at clinicaltrials.gov and what we announced at ASCO last year when Rose, our Head of R&D, gave a bit of an overview, we're also working on trispecific for multiple myeloma, which were not in liquid tumors before. There is just a lot of things going on in Moderna. I think people should expect up to 10 oncology programs in the next 12 months in the clinic.
Mm-hmm.
Because again, when the platform is going, it's going, as we've been able to show in vaccine, where we're able to do based on the learning on our vaccine in infectious disease and our learning on INT in cancer. We've learned so much over the last few years.
Mm-hmm.
that we're able to design very quickly and pivot very quickly as we showed during COVID where we designed the COVID vaccine over a weekend.
Mm-hmm.
You can, with this technology, because you design everything in silico on the computer, you can invent new drugs very quickly based on what you learn in the clinic. This next wave of product in oncology is, I think, what is super exciting to us. That is going to be funded by this cash cow that we are building with the respiratory vaccine franchise.
Fantastic. We've had a couple of questions come through on that cash cow kind of question.
Yes.
The angle of the questions is kind of two themes. One theme is it sounds like you've got these long-term international agreements.
Mm-hmm.
For vaccines. Is there any reason on the vaccine, respiratory vaccine side of the equation that that couldn't become more like 75% of your overall contribution to, to cash? That's kind of one part of.
Yeah.
Of the question. Is there a margin reason why international is less appealing than the U.S.? The other theme that we've had come through on this is, is there a risk to your cash generation and the spend rate, and therefore, is there any potential that Moderna would need to raise equity over this horizon as we head towards kind of that longer-term future in oncology and other places?
Sure. Great. On the first point, what is quite interesting is the pricing on vaccine between the U.S. and outside the U.S. is very similar. Unlike what you see in therapeutic, where sometimes you see a 2X, a 3X, a 4X pricing difference. In the vaccine, the price is very similar. Actually, there are even countries where price is even a bit higher than the U.S.. If you look at volume, in terms of volume of people vaccinated, just based on population, you have actually a much larger opportunity outside the U.S. than you have in the U.S.. Because the price differential is not what you see in drugs, where in drugs, because of price differential, even with a smaller population, you see the U.S. market being very important.
If you look at vaccine, you realize actually a lot of vaccine actually have more sales outside the U.S. than they have in the U.S.. We think it's quite an interesting opportunity there. In terms of the burn, what I think we have done last year and this year and again earlier this month with the cash cost target for 2027 is to be very clear, which is we will adjust our cost by basically not taking more drugs into phase III.
Mm-hmm.
and being very disciplined about prioritizing the assets to get back to break-even and cash flow positive for the company.
Mm-hmm.
Which is we're not going to raise more equity. We have a lot of levers that we are doing. We are going after the entire P&L. As I said, we were around $9 billion of cost a couple of years ago. We are at around $5 billion now. If you look at the current spend, we are going down to $4 billion at the same time that we are launching products where we're going to have new revenues coming on. As I said, the policy guidance on COVID last week might actually be a plus in terms of the time.
Mm-hmm.
In the U.S., and the U.S. market has been stabilizing. We continue to monitor that very carefully.
Mm-hmm.
We also, because the latent portfolio is basically what is not being funded right now for phase III.
Mm-hmm.
Because our focus is really on oncology, as we just talked about.
Mm-hmm.
We are having quite a number of discussions. We have strategic partners. As you know, historically, we've done several deals with AstraZeneca, several deals with Merck, deals with Vertex. I think this team is willing and able to execute deals.
Mm-hmm.
We've also done deals with project financing.
Mm-hmm.
Like we did with Blackstone last year.
Mm-hmm.
We know the key players in the project financing world. Last time I checked, there's a lot of capital to develop with private equity. They like that it is not correlated to market.
Mm-hmm.
Because it's a multi-year project investment, that they can do either on a project-by-project basis or a portfolio of projects. You know, we have a very exciting EBV vaccine. You remember the clinical data in phase II, an HSV vaccine for herpes. There's no product on the market as well. VZV vaccine that actually showed non-inferiority to Shingrix, even on T cell, a lot better T cell than Shingrix out of a phase two. If you look at what's happening there, I wish we could fund it, but we are being disciplined. We're not funding it. If a partner is willing to go participate in the shingles market.
Mm-hmm.
We think it's a great opportunity because it's already a $5 billion market. There's only GSK right now. If you look at the recent data, there's some interesting epidemiology data linking vaccination against shingles and less level of dementia.
Mm-hmm.
It's purely epidemiology. Now there's a big study being run by GSK with the NHS in the U.K. to try to demonstrate it. Think about what this $5 billion market could become if you had the reduction of risk of dementia, which is not surprising as a scientific hypothesis because those viruses rest in your immune system, as you know.
Mm-hmm.
As you age, of course, there's reactivation of those viruses creating inflammation. A lot of those diseases, cancer, autoimmune disease, degeneration of the brain, have inflammatory mechanism underlying. We think that's quite interesting. Think about the scenario where you say to a private equity partner or a pharma partner, "What if we develop together because it's ready for phase III, a shingles product?" Let's imagine we only take 20% market share. It's $1 billion.
Mm-hmm.
Of the current market, which is growing as aging population with this huge upside on dementia. We take a billion dollars. You do not have to invest a dollar of CapEx.
Mm-hmm.
Because the factory is already here. It's not seasonal. We could make the product in Q1, and use existing sales force to go sell those things in retail. 70% of Shingrix sales are done in the retail channel in the U.S., the CVS of this world, and so on. You can think about the you do not have to be a genius in math to realize quickly that's actually a pretty attractive opportunity. You pay once a phase III study, and you have forever because, again, VZV is not leaving the planet. It's going to be with humans forever. I think there's just an interesting set of assets that we have right now. Again, we have a willingness, and we have a BD team who has been able to do deals in the past. We are actively having many discussions on those things.
Fantastic. Lots of opportunities to ensure that cash continues.
Correct.
To come into the business. One other topic that I think has been elevated, and we touched on it before we jumped on the stage, has come up in conversation. Yesterday, the keynote speaker at lunch was, the topic was all about AI and AI integration.
Yes.
Into businesses. We've just had a question come through as well here in terms of your tech adoption strategy.
Yes.
I know you've connected the dots between kind of HR and technology. This particular question is also asking, do you have any CapEx spend investment, spend estimates, sorry, that you can share with us in terms of kind of how big is this investment you're going after and what can it do for Moderna?
Yeah. In our case, because we do not build data centers, it is not CapEx. It is OpEx working with partners and having access to their tools. It is public, and it has been well documented. We have a very important partnership with OpenAI, where actually the company is helping them in the pharma space develop GPT enterprise for B2B clients. Because, of course, the last thing we wanted is to upload scientific data and help everybody else learn from our own data. What we believe is AI is going to really change work in a very profound way. I think there is a productivity element of the company. It includes development, manufacturing, SG&A.
We have a very large effort, where we're trying to look at key business processes end-to-end across the enterprise and to ask the question, how would you do it in an AI world versus before with IT system and people?
Mm-hmm.
there's already a lot of impact. We have literally thousands of GPTs that have been written at the company from HR GPTs to legal GPTs to finding the clinical dose of a drug using GPTs. There's a huge chapter around innovation in terms of finding new molecules, finding new lipid to allow mRNA to go into a new cell type to open the aperture of all the things the platform can do. This also is something that has been going on for actually a long time at Moderna. In 2016 is when I really got religion on AI personally because our scientific team invented a new molecule, an enzyme that does not exist in nature, that did exactly the job that it was designed to do in the large in the system that we believe was machine learning. It was not large language model.
This day really was a very profound aha moment for me.
Mm-hmm.
Where a system was optimized to for a chemical formula. Most of my scientists at the time pooh-poohed it that this most probably would not work. Somebody was crazy enough to make with their bare hands the protein and test it. He was doing exactly what it was designed for. It came out of a computer.
Mm-hmm.
We started to invest a lot in terms of training our employees. There is a training called Moderna AI Academy, where every employee is required to go to that multi-day training. And then now with GPT, we have accelerated that. I am just trying to reinvent the whole enterprise.
Mm-hmm.
It is going to be important for us as we launch all those products because I think we could launch an enterprise actually with flat headcount, maybe even headcount down. If you look at the last few months, our headcount is actually down, by a couple of hundred people already. If you think about where we are going, where we are going to launch 10 products, the challenge I have for our team is how do we launch those 10 products without adding headcount?
Mm-hmm. Mm-hmm. That's really exciting.
It's going to be quite a fascinating journey. Yeah. We're quite lucky with the timing.
Absolutely. There's lots of opportunities and things to look forward to in the future. There's a few bumps potentially along the way as we think about the policy and political.
Mm-hmm.
Political environment you're in at the moment and kind of skepticism around mRNA and vaccines. It certainly looks like there's lots of bright lights or sparks in the future.
Yeah. We have a great portfolio, $8.5 billion of cash, a very dedicated team. We're putting our head down. We're doing the work. Science is science, and the virus are still hurting people, and cancer is still killing people.
Absolutely. Thank you so much for that.
Thank you.
It's my pleasure.