Moderna, Inc. (NASDAQ:MRNA) NASDAQ 43rd Virtual Investor Conference Call December 4, 2020 12:00 PM ET
Stéphane Bancel – Chief Executive Officer
Conference Call Participants
Matthew Harrison – Morgan Stanley
Okay. I think we are live. So great. So thanks everybody for joining us for the next presentation. Very pleased to have Stéphane Bancel, who is the CEO of Moderna. I just need to read a quick disclaimer statement. So for important disclosures, please see Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures and if you have any questions, please reach out to your Morgan Stanley sales representative. Additionally, there is a chat box on the webpage and you can submit questions, which I can ask on your behalf if you would like.
Q – Matthew Harrison
So Stéphane, thanks for joining. Nice to see you again. I thought we’d start with COVID, which is a big surprise to everybody. Look, we’ve got data on three vaccines now including yours. Maybe you could put your data into context, how you see your data versus the field and we can go from there?
Yes. Well thanks, Matthew. Good to see you. So I would say, as everybody knows, the mRNA vaccine don’t look so bad. And so the piece about ours that I think is going to be the differentiation is first with severe cases. As you know, Matthew, we have quite a high number of severe cases in the Phase III study, which I think confirms that the study was set up with people at very high risk. It’s almost 3x I think what we saw on the Pfizer study that they reported so far and we have 30 in the placebo group and zero in the active group.
And so I think what the vaccine looks like, it has very high efficacy at 94%. And if you get disease, you will get mild disease. We have data, we have no severe disease. And of course, as you can understand, massive impact in the risk of hospitalization, the risk of getting to the ICU and the risk of dying. So that’s why I’ve said, I think this vaccine is going to be a game changer. The other piece is supply chain. We store the vaccine at minus 20, not minus 70 as has been sometimes incorrectly reported in the media. Minus 20 [indiscernible] vaccine for six months. And then what we’ve done and that was communicated recently, we have 30 days at 2 to 8 Celsius at regular fridge like insulin. And then you have 12 hours at room temperature at the site of inoculation.
And so if you think about it, we designed the whole technology and this comes from a lot of investments we’ve made over the years in term of technical development and science to be able to get to that type of performance where we design it at minus 20 between [indiscernible] factory and the big distribution centers. And then with the Global Last Mile to a CVS store, to a hospital, to even a GMP office, you can do in a regular fridge where there are plenty and those are easy to set up and certainly if you don’t have a fridge, but all the pharmacies have because of insulin for example, regular fridge. So we think that’s a differentiation of a product.
Okay. And do you think governments as you’re starting to talk to more people after the data, do they appreciate either the difference on supply chain or the difference on the data and how do you think that plays out in pricing?
Yes. So the answer is, yes. We do appreciate it. We’ve got quite a number of calls in the last few weeks once data got out, but still I would say – I think the U.S. has done the best job that I have seen, and I’ve not talked to every country in the world. But we have talked to a lot. I think has done the best job that I have seen in terms of getting ready for the vaccination, the execution of vaccination, the supply chain and so on. I think a lot of countries just realized in the last three months or two that one vaccine is at minus 20 and the other one is at minus 70, it is not the same.
We’ve announced I think this morning, Israel buying more products. There is quite a number of countries that have come back say, hey, actually I want more because I realized that now that all my teams are in full actions to get ready and so on. I think most countries were anticipating vaccine data more in 2021, not at the end of 2020. The U.S. because of [indiscernible] speed that has funded, a lot of that work has been very close to all those clinical development. And so I think that’s where the differentiation comes, which is why we think we can maintain at premium price.
As you know, we have been selling product initially at $32 for small volume, which I call millions of doses type of deals, then $37 because we have much more data, much less risk to a product. And in the big volume, like U.S. government around $25 per dose, including the BARDA grant. So I think, we believe we have a premium product and we are going to keep premium positioning, which I think is well adapted for people at high risk. If people want to use our vaccine for 25-year old, where that’s fine with us, it’s a big planet out there.
Okay. Helpful. So I guess that leads to the other question, which is you’ve set a bar in terms of supply 500 million to 1 billion doses for next year. And I think you’ve commented a handful of times before that the delta there depends on raw materials and being able to produce things. I would think – it sounds like from your commentary that the demand side has gone up since data. So where are you in terms of pushing yourself to the higher end of that range? Or would you even consider going above that range?
So those are good questions. So the way I framed it, and you’ve heard it, it’s not for people on the call. The 500 million dose, I am very comfortable, we’re going to get there. The 1 billion dose today, and we are still in early December requires as you said raw materials to work well, and also yield and so on to work well. So that’s why it’s a bit too early and we don’t want to disappoint. I don’t want to take all those that I cannot deliver.
The relationship with government is going to be very important in the long run for Moderna, given the portfolio we have of 20 products. And so I would rather surprise on the upside and surprise on the downside in 2021 to the customers and those sorts of market, of course. And so the way I think about it is we’re working really hard to get to 1 billion.
As you know, Juan Andres who is running and manufacturing for us. He used to be where the manufacturing of Novartis worldwide, including Alcon and including also Sandoz. So he runs more than a 100 plants. He has 30 years of manufacturing GMP experience. He was my colleague at Lilly 20 years ago. We had the same boss. And so I’ll not bet against Juan to get very close to 1 billion. But today our base plan is 500 million. And as we get more comfortable in the year and we’ll learn more about the yield and yield consistency.
We will kind of refine the window both up and down to give people more and more color. But I think today, saying, we see 1 billion for sure, would be way too aggressive. I would rather say, it’s 500 million for sure, but we’re looking for 1 billion. In term of doing more, that’s something that we’ll continue to consider with the Board. We just got the data two weeks ago as you remember. So it’s new.
I also want to understand a bit more what the competitive landscape look like because it’s of course a very different world. If you have six vaccines, like the six sponsored by the U.S. government getting to a finish line or not. I think other vaccines are going to have a much harder time. Sometime the media people say there is 50 vaccine being developed.
A lot of those companies were never going to be able to fund it. We will not have been able to fund $1 billion to run the 30,000 people for Phase III study if the U.S. government had not helped us. And of course, Pfizer or AZ can. But all the companies that are small and don’t have the balance sheet to support it, I think is going to have a very hard time because I don’t see governments. Now we have already two products that are most probably going to get approved very soon. Pfizer already got approved in the UK this week. I don’t think there’s going to be 50 vaccines out there.
Okay. Helpful. So let’s talk about the process because people care about what happens and what happens next. So maybe you could talk about the process in the U.S. and then what you expect for the process outside the U.S.?
Sure. So let me start at the starting point, which is – on Monday, we filed the same data to all the key regulatory agencies around the world, so U.S., Canada, UK, Europe, Switzerland, Singapore, Israel, and WHO. What we had done in the last month or two is to get the non-U.S. agencies catching up with the FDA. Why do I say that? You know, given we’ve done all the studies in the U.S. FDA has seen preclinical models, challenge models, Phase I, Phase II data. We are very familiar with the protocol that we approved for Phase III.
And so what we are trying to do is to catch up everybody else, so that’s when the Phase III data come, that could be the last data package we give to everybody. And the other piece that we have been doing is on manufacturing front is filing all the manufacturing components of an EUA as we got the data, so FDA could start reviewing them. So we will save time on the back end. So it will only be basically about the safety and efficacy of a Phase III, not about CMC anymore.
So in the U.S., process wise as it’s – has been highly reported. The FDA has informed us that all VRBPAC meeting is December 17, assuming it’s positive, which is what I believe today given the data. We expect within a few days, maybe 24 to 72 hours an EUA approval. We’ve been around a lot. I think next week we will have Pfizer at VRBPAC. That’s one of the benefit of not to be the first one is some of this is going proof of training before you, so we’re going to be, of course, learning a lot there.
Outside the U.S., we are having a very close discussion with all the countries I mentioned. I will not be surprised if some go before U.S. and some, of course, will come I think a few weeks after U.S. in Europe. We’ve got the notification on Tuesday that was made public by the EMA in Europe. That scientific meeting will be January 12 at the latest. So let’s see if that’s the date that we are able to compress the timeline a little bit.
In terms of product, we will be ready to ship product as soon as we have approval. So if we have approval in a couple of days after the VRBPAC meeting, we will have already millions of those to be delivered. We have 20 million dose forecast for the end of this year. Next year, as you said, 500 million to 1 billion. And yesterday when we are at The New England Journal of Medicine update on durability of antibody, we also gave an update for the first time on our estimate for Q1. And we believe that in Q1, we should bring to the market between 100 and 125 million doses is still a ramp as you can see to a $500 million number, I said.
But as we’ve said all along, we’re going to get to peak capacity around the May timeframe. We’ve all the line coming online between Lonza and our own plant in Massachusetts. So I expect around May timeframe to be going at full speed.
Okay. When you think about capacity, if you were to make a decision to push north of 1 billion, I mean, is there – what kind of lead time would you need to bring more lines on to be able to hit that? Is there a window that you need to say, we need to make that decision by a certain date?
Yes. I’d say six more for lead time from decision to vials coming out of a line because you need to buy equipment, you need to hire people, you need to install the equipment, validate it, qualify everything, train their employees, get more raw material, of course, some are longer lead times. So I think the six-month timeframe is a good order of magnitude for increments. There are a few things you can do to shorten some service, but six-month is a good number.
Okay. Helpful. And then I guess in terms of the Adcom, I mean, anything you are expecting at the Adcom or anything, I mean, I assume we’ll get detailed safety data, which we haven’t seen already, but any other information that investors should expect to be able to see at the Adcom?
Yes. So I would assume detail by – at mix groups, age group, co-morbidity group. As you know, we had a lot of people with diabetes, lung disease, heart disease in the study by design. We had a lot of minority communities, 10% African-American, 20% Latino or Latinx. And so age groups, we have a lot of age groups. So I think people are going to see a lot of data cut at the VRBPAC meeting, the safety for all of those groups as well. So that I think what people should be expecting.
Okay. Helpful. And then I guess last thing before we maybe talk about outside after the pandemic period, how this plays out. But pediatrics, lower age groups, I think yesterday – I think you posted maybe wasn’t yesterday, but you posted on clin trials 12 to 17, just walk through people how pediatrics play out and what timeline you think should be for them?
Sure. So indeed we posted our Wednesday clinical trial of – 12 to 17 age group at 100 microgram dose, the same dose as a Phase III. It’s a Phase II free. So our goal is to try to get the data in the spring/late spring. What I would really hope we can get to is, let’s say, end of June, July, label extension to go down to 12 years of age from 18, which we expect in the EUA. So that in the summer, kids going to middle school and high school can get vaccinated because I believe their teacher and the school staff will be vaccinated in Q2 or Q1.
You’ve got high risk, but most probably Q2 for most of them that by the time we go back to September 2021, the kids can go back to school with a normal school year, which is so important to know in terms of equality and then kids’ development and education and mental health and so on so. That’s our plan for adolescent.
For pediatric, we’re going to start a tiny bit after, I mean, not the most, but a tiny bit after. As you know, my feel for pediatric, we have to go down in age very slowly. That’s what always happened in vaccines because you give vaccine to healthy people and as of course healthy children and young children. So we have to go down in age slowly, and you’re going to start at a lower dose, but actually much lower dose, we are finalizing the dose selection and titrate up, which also takes time.
So I would anticipate maybe towards more of the end of the year, a full data in the younger children. Again, we believe as much less of an urgency because of what we have observed in terms of disease and transmission, but we think it’s important to add, so that’s kind of a plan to be able to have a vaccine to go from pediatric down to 18, 19 years of age.
Okay, good. So let’s just talk for COVID, one of the big debates out there is post-pandemic, what this market looks like. Maybe you could just give us sort of your thoughts on that, but specifically, I think, the question is who’s going to need to be boosted if anyone, and when are we going to figure that out?
Yes. So I think this is the big question for everybody. I mean, we’re all focused on making as much vaccine as we can for 2021. The question of boost, I think, we have a data that we published yesterday in the New England on 90 days after the boosts of a Phase I. You can see that the curves are going down slowly, which is a good sign. I think it’s tough to know at this stage, are you going to need to boost every three to five years a young healthy person every year or two years an older person.
I think what is clear from the data we showed yesterday, at least for all vaccines. I do not know about the other vaccines. The worry that was in the scientific and medical community, if you recall back in the spring, the vaccine are only going to last three months, they might never work and it will work only for last three months. I think this worst case scenario is out of a window, in my opinion.
I think we’re going to be in the world where people are going to have [indiscernible] to get boosts. But in the multiyear timeframe, and we’ll have to figure this out, we’re going to of course need to have Phase III participants that enrolled for several years, and to get that data to look at how is efficacy moving down on that because nobody knows the current protection yet for this new virus. So I think there’s a lot of things we’re going to learn in 2021 clinically that will inform us and the governments and the payers what to do in terms of boosting.
Job number one now is just to vaccinate as many people as we can in 2021 to stop this awful pandemic. And then by the time we have to consider boosting, we will have that data. I will not be surprised that somebody who is at high risk i.e. older age and co-morbidity factor might be interested in getting a boost before winter 2021, 2022. So this will see how things play out in terms of the market size because of course, eBay has no indication for boosting. We cannot promote the product. It’s very more of a discussion of people and their doctors. But if you have that data, which I hope we will have and we can promote it to a medical community.
And then I guess one last thing maybe before we move on because you obviously have other things in the pipeline beyond COVID, but sterilizing immunity, asymptomatic transmission, when do you think we’ll have some idea of how effective the vaccine is in that regard?
Yes. I think we have a sense around Q1, I would say. We need a bit more data as university has been designed to answer that question. So we will not answer to that. It’s very important for us and for, of course, public health experts in term of strategy. We believe that we have a high chance to get protection – sorry, yes, transmission, sorry, transmission or protection. It’s impossible to know the rate of protection.
I’m just referring to the non-human primate date published in New England earlier this year, where we show that if we inject 10 to a six copy of a virus in the nose of a monkey that has been vaccinated. If you got the viral load in the nose at day two, it’s massively down that there is no more viral load in the nose, which gives you a good sense because 10 to six is extremely higher when the natural infection will get you. So it’s a good sign that if you get some copies of a virus through the transmission from somebody else in your nose and/or your mouth, your antibody should be able to do the trick. So again, we have to confirm that. So today is just too early to have a judgment, but I think in Q1, we should know.
Okay. Great. So let’s turn, I guess, to the rest of the business and also just sort of think through a couple of topics. So I guess the first one is you’ve seen a dramatic rise in your valuation throughout this as you’ve achieved success with COVID. And I think one of the kinds of questions that I get pretty often is, how do you think about the business growing from here? What are you focused on as you think about being a much larger company?
Yes. So first, I think we should go back to first principle. Since we started the company, we’ve always said, this will be ever a failure and there would be no drug coming out of this company, or there going to be several thousands because mRNA is an information molecule. And so the first big thing for me, and we talked about it back in our JPMorgan earlier this year at the conference, which is now that we have the good sign of a Phase II data last year of CMV. We want to do many more vaccine, but trust me now that you see the data that we have looked at. We want to do even more.
So as we’ve said strategically now for a year, a vaccine is going to end up being a cornerstone of this company. High-value vaccine, as we’ve said, the CMV, we believe could be a $2 billion to $5 billion on your big sales opportunity. There is no CMV vaccine on the market.
And so I think vaccine is going to be important for us. But as you say, we have [indiscernible] in the heart. We have in a rare genetic disease. We announced earlier this year, it’s going to be in the clinic soon, auto immune disease, of course, cancer product. So we have 20 products in our pipeline. I think we’re going to be playing to strength of a platform, which is where we know it works clinically. We’re going to do much more because now we have $4 billion of cash on the balance sheet, but I think people have not always appreciated. Now is that we generated $1 billion of cash flow from operation in Q3 to a $4 billion balance sheet to know that.
And so if you think about this platform that we built, what has limited us in the past was capital. And so we have capital now. We can accelerate programs. We can take more calculated business risk. There’s been a lot of learning from COVID and how COVID was developed. Can I think when you can develop the next vaccine, like flu on the same time line? No, because my team will not allow me to make them work 24/7, seven days a week for almost a year now.
And the FDA has done extraordinary things to help us in terms of feedback, response time and so on, including 2 o’clock in the morning email from the FDA, but there’s a lot of learning still of what we can do different. And in terms of business risk, we as a company are going to be willing to take because we know our mRNA technology works in the clinic.
And so I think when you put all that together, it’s going to be more infectious disease vaccine. We’re going to be pretty aggressive there. And for things that we know [indiscernible] repeat dosing of an IV systemic chikungunya antibody as we showed at our R&D day in September. I think more disease, like in a rare disease space in autoimmune disease. As you know, we’re working harder with Vertex to finish and fine tune the delivery into a lung, even that’s one move to the clinic. The partnership with Vertex is only around CF, so we can do more things.
And another piece that I don’t think everybody has always appreciated is in the new partnership we announced with Vertex in September. We are entering gene-editing using mRNA and using our delivery system. And so that’s another kind of big horizon where you can do a lot of different things for Moderna.
So I think if you think about the company now with a balance sheet we have, but even more think about the balance sheet we’re going to have at the end of 2021. That’s another piece that if you figure a bit ahead and you look at how much cash we could generate. If you take $500 million to $1 billion and you pick it in a capital ranges of average selling price, given this product is not partnered.
The big difference with Pfizer-BioNTech products, where they are sharing the profits, we have no partner. And so the profits are going to be for our shareholders and they’re going to be reinvested in the business. And so you could see us sitting on a very substantial balance sheet at the end of 2021, which I think will be incredible stepping stone for us to scale Moderna.
And so what I believe is 2021 is going to be the most important inflection point in the company history. We’re going to scale at the pace that I think is going to surprise a lot of people. You know us well, Matthew, you have been following the company since pre-IPO. But I don’t think people realize the capability we have at our plant, where we could make up to 100 different mRNA per year for clinical trial for different products. And once something works like the vaccine of the IV systemic, you can take much more risk with your capital allocation on those applications because we have worked in the clinic.
Can you talk about maybe just aspiration for vaccines, right? I mean, we can look at other successful vaccine business, Merck as an example, right, has a very large vaccine business. Do you think you can aspire to look like them on the vaccine irrespective of the other things that you’re investing in?
I think so. I think we have a sales chance now to build one of the biggest vaccine business in the world. If you think about the opportunity, since 1918, they are more than 80 viruses that were discovered by scientists and clinicians around the world that hurt humans. There is actually vaccine against two and soon I hope there is going to be vaccine against third, which is of course SARS-CoV-2. But just to give you a sense of the incredible opportunity that exists in a vaccine, and also with mRNA you can combine vaccine. I mean, we announced in September, we’re going after our flu business.
Again, as a premium product because like we’ve shown with SARS-CoV-2 vaccine, we are able to do a very high neutralizing antibody in all the adults in the study. As you know, flu vaccine efficacy is pretty bad plus you have a strain mismatch issue sometime. These technology speed is unmatchable by recombinant or by X technology or anything else. We’ve shown this year 42 days from sequence of a SARS-CoV-2 virus to shipping GMP product out the door, including a two-week sterility test, as of course, everyone has to do. I think we can do better than that. This was our first time trying to go really fast.
And so as we invest in manufacturing, we invest in IT. Can we shrink that to 30 days? I think it’s possible. So when you combine all those pieces, strong antibody in the elderly, the ability to do quickly even if there’s a strain change, you can chase that mutation very quickly even in the same winter. And at least we vaccinate people that are at higher risk like the elderly.
So I think – and then you can combine it with COVID. We talk about the boost business. How would you differentiate or separate compared to adeno or compared to the protein plus adjuvant? Well, you could have a new Moderna flu vaccine and in the same vial of COVID boost, one shot, that would be extremely differentiating product. We could get premium price by providing protection against two virus versus one. So there is a lot of things like these that we can do with technology. And we’ve shown we can do that. CMV has six mRNA in each vial. We know we can technically do it. And the FDA has let us go to a clinic right away with six mRNA from Phase I.
All right. Good. We’re close to time here, but maybe just one final question. Maybe just highlight over the course of the next year. You’ve got a handful of cancer vaccine as well as potential rare disease inflection. So maybe just highlight for people those things that you’re looking out for?
Yes. So next year I’m excited about – in addition to, of course, the COVID sales, I’m excited about CMV starting Phase III. We’re going to have several readouts in vaccine. We’re going to get into the clinic. Several new vaccines that are going to readout pretty quickly, I mean, look at what we did in the spring. It took us about three months without the Phase I of the COVID vaccine and two months to enroll in the six months timeframe.
So you have something that you start in March in the clinic, you can have data by the end of the year. As you see, we have five drugs in the clinic for cancer. We just announced at SITC based on the encouraging, but early data in head and neck HPV-negative that’s what expanding the clots.
And then you have – VEGF is in Phase II with AZ. It could be ready in 2021. I’m very excited about this product because I think it has a high chance of working, and then the rare disease and the autoimmune disease. So I think there is going to be a lot of readouts in addition to progress on our sales in 2021.
Great. Stéphane, thanks for being here. Appreciate it.
Thank you, Matthew. Thanks, everybody. Stay safe.