Moderna Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

There are 14 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Moderna Third Quarter 20 24 Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised, today's conference is being recorded.

Operator

I would now like to hand the conference over to your speaker today, Lavina Talukdar. Please go ahead.

Speaker 1

Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's Q3 2024 financial results and business updates. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the Investors section of our website. On today's call are Stephane Bancel, our Chief Executive Officer Stephen Ho, our President and Jamie Mach, our Chief Financial Officer. Before we begin, please note that this conference call will include forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker 1

Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward looking statements. I will now turn the call over to Stephane.

Speaker 2

Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us. I will start with a review of our business in the Q3. Jamie will present our financial results and outlook.

Speaker 2

Stephen will review our clinical programs. I will then come back and share our key priorities before Q and A. We delivered $1,900,000,000 of revenue in the Q3. Our net income was $13,000,000 We ended the quarter with cash and investments of $9,200,000,000 As you know, for over a year now, we have been working to improve productivity in the company. In the Q3 of 2024 compared to the Q1 of 2020, we reduced operating expenses by $500,000,000 across cost of sales, R and D and SG and A.

Speaker 2

This figure excludes $1,400,000,000 of resizing charge in the Q1 of 2023. I would like to thank our teams who have been working hard to achieve this cost savings and we continue our journey to improve our cost efficiencies. This year, the COVID market benefited from U. S. Regulatory approval that was 19 days earlier than in 2023.

Speaker 2

SPACPAX was available across all segments of the U. S. Healthcare system. Our manufacturing and logistics teams were able to double the number of doses delivered to customers compared to the 1st week of last year's COVID vaccine season. Now turning to adversity so far this season for vaccinations in the U.

Speaker 2

S. Retail market. The graphs on-site ticks are short in arms in the retail channels as measured by IQVIA, which includes retail pharmacies and long term care. As you can see the graph on the left, the earlier approval of a vaccine this year has helped to push total market back indoors above where they were last year at this point in the season. The graph on the right shows weekly doses, which as you can see in the past few weeks have started to decline.

Speaker 2

While we will not be able to shape of this curve until the end of the season, we are encouraged that the COVID market is starting to prove to be a sizable and durable long term market. Moderna has 40% share of retail shops in arms season to date. Turning to Slide 7. We've been very helpful to look at vaccination trends from last year to inform our understanding of where there are additional opportunities to grow the COVID market. There are 3 major delivery channels for respiratory vaccines in the U.

Speaker 2

S. There are retail pharmacies, integrated delivery networks or IDNs, which basically serve hospitals and doctors who are part of these networks and the 3rd group, government programs and other. As you can see, the retail channel compromised 73% of total U. S. Market for COVID vaccine doses last year in 2023.

Speaker 2

COVID vaccines have been overall mainly given to pharmacy settings with such smaller distribution in the turnover channel. If now we look at flu, in the flu market, however, the distribution by channel is different with much greater emphasis on IBM and government. Since COVID-nineteen continues to present a much greater health burden than flu in the United States, we remain convinced that increasing the vaccination rate of COVID relative to flu provides a significant opportunity to improve public health, especially in the IT segment and government and other segments. Therefore, as we execute our COVID strategy, we see the opportunity to drive the COVID vaccination rate closer to flu over time, especially in the underpaid COVID channels. One additional approach with COVID vaccination rate over time is a combination COVID-nineteen vaccine, which Stephen will discuss shortly.

Speaker 2

Let's now turn to what Moderna is doing to grow vaccination rates. The first objective of our effort is to educate healthcare providers on the importance of COVID as a public health trend. Its negative impact has a much greater cause of severe illness and other respiratory viruses and the opportunity to improve public health by following vaccine recommendation. As you know, in the 2023, 2024 season, there were 3 times more expectation of COVID than flu. Secondly, we are going direct to consumer to emphasize the benefits of getting vaccinated and our most recent campaign highlights the danger of a long COVID and the importance of vaccination to minimize the risk of it.

Speaker 2

Additionally, public health authorities including the CDC recognize the importance of vaccination, which is reflected by the most recent AC proclamation for additional COVID doses for immunocompromised people and those $60,000,000 in the spring of 2025. Moving on to RLP. Moderna's Q3 MOSD assets were $10,000,000 This was below expectations going into 2024. Unfortunately, the timing of approval and recommendation by the CDC or AMREZBIA will help us missing most of contracting season. Additionally, the substantial buildup of inventory in the channel by competitors prior to our launch has had a negative impact on our sales.

Speaker 2

Looking to 2025, we believe that we'll be able to participate from the beginning of the contracting season in the U. S. We're also filing for approval of a broader MISGI label that will allow to address the 18 to 59 year old high risk population. Additionally, we see the potential for market expansion if regulators recommend re vaccination. And finally, we are now starting to receive approval outside the U.

Speaker 2

S. And we expect to have sales in those markets in 2025. I am delighted to welcome Havas Usain to the Mona Board of Directors. Abbas has strong commercial background, which makes him a great addition to our Board. He has more than 25 years of commercial experience, more recently as CFO of Raifor and before that as Chief Commercial Officer of GST.

Speaker 2

Abbas is an ideal Board Member to guide Moderna forward as we continue to advance our growth portfolio of products toward commercialization in the next few years. We very much look forward to working with Abbas in the years ahead. Finally, I'm very pleased to announce the expansion of Moderna Executive Committee, expanding the responsibilities of 2 current members of the team and adding 2 new members to the team to help us ensure we execute our strategy and deliver on our mission to patients. 1st, Stephen will expand his role to include oversight of a full commercial organization, which was previously divided between he and I. As Moderna's President, Stephen is responsible for strategic across the full lifecycle of the company, research and development and medical and commercial.

Speaker 2

Joining Moderna's Executive Committee are Rose Laufim and Jacqueline Millen. Rose is being promoted to Executive Vice President, Research. Jacqueline is being promoted to our Chief Medical Officer, Legal Development Organization. The promotion of Jacqueline and Rose to the executive committee is a special milestone for the company. This is the first time in our history that we have promoted internal talent onto the Executive Committee.

Speaker 2

It is a testament to both of these remarkable colleagues who have each spent years building and leading critical areas of the company and also reflects our commitment to grow and develop our internal talent at Moderna. Tracy Franklin, our Chief Human Resource Officer, will also expand our role becoming the Chief People and Digital Technology Officer. The expansion of our role emphasize a vital integration on people, culture and digital innovation across the business. As Tracey's team works to scale up our business processes, they ask the question of how we should do work, how should we be organized between people and digital technologies, being over shelf software, AI solutions, including our own machine learning algorithm for Jupyter Enterprise and our robotic solution. I would like to thank Steven and Tracy for their new expanded growth and for their partnership over many years and many years looking forward and to congratulate Rose and Jackie for now being part of the company's executive committee.

Speaker 2

With this, let me turn to Jamie.

Speaker 3

Thanks, Stefan, and hello, everyone. Today, I will provide an overview of our financial results for the Q3 and share our outlook for the remainder of 2024. Let's start by reviewing our commercial performance, which you can follow on Slide 14. For the Q3 of 2024, our net product sales were $1,800,000,000 bringing year to date product sales to $2,200,000,000 We also had approximately $100,000,000 in year to date other revenues from grants, collaboration, licensing and royalties, which are not included in the figures on this slide. Dollars 1,200,000,000 of our 3Q 2024 product sales were from the U.

Speaker 3

S. Market, where we experienced an earlier launch to the 2024 2025 season. While our 3Q results exceeded expectations, this was mainly due to sales timing between the 3rd Q4, supported by receiving FDA approval of our updated COVID-nineteen vaccine 3 weeks earlier than last year. Also included in our U. S.

Speaker 3

Sales of $1,200,000,000 is a provision release of approximately $140,000,000 primarily driven by lower product returns from the 2023 2024 season compared to our previous estimate. Additionally, we commenced RSV vaccine sales in Q3. While initial RSV sales were limited at $10,000,000 we believe there is potential for long term growth as we work to capture a larger market share over time. International sales of $600,000,000 were in line with our expectations, but lower compared to the same period in 2023, when sales benefited from the fulfillment of orders deferred from 2022. For our full year 2024 outlook, we are reaffirming our product sales estimate of $3,000,000,000 to $3,500,000,000 which implies a 4Q product sales range of $800,000,000 to $1,300,000,000 We expect our U.

Speaker 3

S. 4Q product sales to be between $200,000,000 $500,000,000 The range is driven by the following 3 key variables. Our SpikeZach market share, which is currently tracking to approximately 40% in retail. At this time, it's too early to call our share in IDNs and with the government. Next, vaccination rates.

Speaker 3

Our range assumes a market size, which has COVID vaccinations flat to down 10% versus the prior year. Finally, our performance in and the ultimate size of the RSV market in 2024. To summarize, if our retail market share remains constant at 40% and the U. S. Market finishes this season down 10% compared to last year and there is no uptick in RSV sales, we expect to be on the low end of the sales range.

Speaker 3

We expect our international 4Q product sales to be between $600,000,000 $800,000,000 We have a tighter range on our international sales as most of these sales are for contracted volume and confirmed orders. The final international sales amount will be dependent upon revenue recognition timing and our performance in a few specific markets. Moving to Slide 15, I will talk about our 3Q financial results in more detail. Net product sales for Q3 were $1,800,000,000

Speaker 2

as I just discussed on

Speaker 3

the prior page. Our cost of sales for 3Q 2024 was $514,000,000 representing 28% of net product sales for the quarter. This was a 77% year over year decline in our cost of sales from $2,200,000,000 in Q3 2023. As a reminder, last year we undertook a strategic initiative to restructure our manufacturing footprint and recorded $1,400,000,000 of charges in 3Q 2023 from inventory write downs, CMO wind down costs and cancellation fees. Excluding the $1,400,000,000 charge, cost of sales still declined by 38% year over year as we continue to make progress driving additional productivity improvements in our manufacturing operations.

Speaker 3

R and D expenses were $1,100,000,000 in Q3 2024, reflecting a 2% year over year decline from $1,200,000,000 last year. We purchased a priority review voucher during the Q3 of 2024, which is included in our Q3 results. Excluding the PRB purchase, we had a strong year over year spending declines for research, development and clinical manufacturing as we continue to drive cost efficiencies across all areas of the organization. SG and A expenses for Q3 2024 were $281,000,000 representing a 36% year over year reduction. This decline reflects our focus on driving cost efficiency and making targeted investments that continue to strengthen our overall productivity.

Speaker 3

I will provide further details in the following slides. We recognized an income tax of $8,000,000 for the 3rd quarter, a significant reduction from the $1,700,000,000 in the same period last year. The decrease was largely attributable to the establishment of a $1,700,000,000 valuation allowance on deferred tax assets in Q3 2023. The valuation allowance has remained in place since its initial recognition and continues to impact our tax expense. Our net income for the period was $13,000,000 a notable improvement from the net loss of 3 point $6,000,000,000 recorded in Q3 2023.

Speaker 3

Earnings per share for the quarter were $0.03 compared to a loss of $9.53 per share in the same period last year. We ended the quarter with cash and investments totaling $9,200,000,000 down from $10,800,000,000 at the end of Q2, primarily due to ongoing research and development expenses and operating activities. Moving to Slide 16, I want to provide additional detail on the cost reductions we are driving across the company. As discussed on previous calls, as a platform company, we are building a unique operating model. And over the last few years, we have invested purposefully into people, processes and technologies to build foundational capabilities that will allow us to scale efficiently.

Speaker 3

We continue to see these efficiency gains in our 2024 results. As mentioned on the previous slide, we reduced 3Q SG and A expenses by 36% year over year. We had year over year reductions across all areas of our SG and A categories, commercial, medical and G and A functional spending. Major drivers were from reductions in purchase services and external consultants as we better leverage digital technology and AI. Year to date, our SG and A spending is down 24% year over year.

Speaker 3

While we continue to drive productivity improvements, we are also committed to increasing COVID-nineteen vaccination rates with investments in HCP education and consumer ad campaigns, as well as increasing our COVID-nineteen and RFE market share in competitive markets. Therefore, we don't expect as large a year over year decline in 4Q SG and A spending versus the prior year. For the full year, we expect SG and A to be down approximately 20 percent to $1,200,000,000 which is reflected in our financial framework update on the next slide. Turning to that 2024 financial framework on Slide 17. Our net product sales guidance remains at $3,000,000,000 to $3,500,000,000 As reviewed earlier, there are a handful of factors we are monitoring as the season progresses.

Speaker 3

For cost of sales, we are narrowing our guidance to 40% to 45% of product sales as a result of the continued manufacturing productivity improvements we are driving in the company. For R and D, we are lowering our full year estimates of $4,600,000,000 to $4,700,000,000 from our previous guidance of $4,800,000,000 The reduction is due to cost savings from productivity improvements as well as clinical study timing. For SG and A, we continue to expect full year expenses to be approximately $1,200,000,000 down from $1,500,000,000 in 2023, a decrease of approximately 20% year over year. We continue to expect taxes to be negligible in 2024 and we are updating our capital expenditures outlook to approximately $1,200,000,000 which reflects the purchase of our Northwood campus from our landlord for approximately $400,000,000 partially offset by approximately $100,000,000 of other CapEx reductions. The purchase of this highly strategic asset allows us full control to expand and build out the campus to drive future productivity and innovation.

Speaker 3

We anticipate this transaction will close in December. We continue to expect ending 2024 with approximately $9,000,000,000 of cash and investments. The additional cash outlay for purchasing our Norwood campus will be offset by reductions in our cost of sales, R and D and other capital expenditures. Based on our 3Q actual product sales of $1,800,000,000 we have strong visibility into our expected cash collection timing from our customers in 4Q. With that, I will now hand the call over to Stephen.

Speaker 2

Thank you, Jamie,

Speaker 4

and good morning or good afternoon, everyone. Today, I'll do a quick review of our pipeline. At our R and D event in September, we discussed our focus on 10 product approvals over the next 3 years. Today I'll briefly summarize the status of those programs. Starting with our respiratory vaccines portfolio.

Speaker 4

For our next generation COVID vaccine mRNA-twelve eighty three, we are pleased with the positive Phase 3 safety immunogenicity and vaccine efficacy data we presented at R and D Day, including a 13.5% higher vaccine efficacy compared to Spikevax in participants aged 65 and older in that study. As previously shared, we intend to file mRNA-twelve eighty three for approval in 2024 and we'll use a priority review voucher. For our RSV vaccine mRNA-thirteen forty five, we also shared positive safety and immunogenicity data from our Phase 3 trial in participants 18 to 59 years old who are at high risk from RSV. We are also using a priority review voucher for this program, which we intend to submit this year. We also share positive Phase 3 data from our combination flu COVID vaccine mRNA-ten eighty three and intend to file for approval in 2024 subject to ongoing discussions with FDA.

Speaker 4

We've decided not to use a priority review voucher for this program given the timing of submission and the potential launch relative to the respiratory virus season in 2025. We will announce PDUFA dates for these programs if and when they are confirmed by the FDA. Moving now to our standalone flu program, mRNA-ten ten, we have initiated and substantially enrolled the 1st season of our Phase 3 vaccine efficacy study. As a reminder, this Phase 3 study is funded within our project financing agreement with Blackstone Life Sciences. Slide 20 shows the study design for that Phase 3 standalone flu vaccine.

Speaker 4

This is a randomized, observer blind, active controlled study for mRNA-ten ten against the standard dose comparator. It is designed to be enrolled over 2 seasons, but the study has the possibility to declare early success after a single season. Now turning to our non respiratory portfolio, starting with our latent and other virus vaccines. For our CMV vaccine, we continue to expect that we will approve the 81 cases required for the interim analysis in our Phase 3 study by the end of this year. Following the accrual of these cases, the Data Safety and Monitoring Board will conduct a statistical analysis.

Speaker 4

Should they recommend unblinding at the interim analysis, we will share those results. For norovirus, I'm happy to announce that we are rapidly enrolling our Phase 3 trial. In a moment, I will take you through the design of that norovirus Phase 3 study. In oncology, we and our partner Mark have initiated a Phase 3 trial evaluating adjuvant INT gram RNA-four thousand one hundred and fifty seven in combination with KEYTRUDA after neoadjuvant KEYTRUDA and chemotherapy in patients with certain types of resected non small cell lung cancer. This is the 2nd Phase 3 trial for INT in non small cell lung cancer and is targeting patients who may not respond to neoadjuvant therapy alone.

Speaker 4

I will also review this study design in the upcoming slides. For our rare disease therapeutics, we intend to begin to generate pivotal trial data for our PA program in 2024. And for MMA, we have an agreement with FDA on our pivotal trial design. We now expect to start that study in the first half of twenty twenty five. On Slide 22 is the design of our Phase 3 study for our norovirus vaccine candidate.

Speaker 4

As a reminder, norovirus is a gastrointestinal disease with high unmet need and no approved vaccines on the market. The Phase 3 study is designed to test the efficacy, safety and immunogenicity of our vaccine in 25,000 adults aged 18 and older. It is randomized 1 to 1, observer blind and placebo controlled. Turning now to the trial design for our second Phase 3 study in non small cell lung cancer for INT in collaboration with Merck, which complements the Phase 3 INTERPAT002 trial. This Phase 3 study called INTERPAT009 will enroll more than 1200 patients with Stage II to IIIb non small cell lung cancer without an EGFR mutation and who are able to undergo surgery.

Speaker 4

These patients will receive neoadjuvant therapy of KEYTRUDA plus chemotherapy followed by surgery. Following surgery, the study will randomize approximately 6 80 patients who have not achieved a pathologic complete response into 2 arms, combination of INT plus KEYTRUDA or KEYTRUDA plus placebo. The primary endpoint for the study is disease free survival and the secondary endpoints include distant metastasis free survival and overall survival. With that, I will now turn the call back over to Stephane.

Speaker 2

Thank you, Stephen and Jamie. During R and D Day in September, we shared the company priorities. Priority 1, to drive sales of approved products, SPYVAX and Nemerizia. Priority 2, focus on our late stage pipeline where we believe we can have up to 10 product approvals over the next 3 years and which will be drivers of sales growth. Priority 3, to deliver cost efficiency across the business and slower pace of RD investments, reducing annualized expenses by $1,100,000,000 starting in 20 27.

Speaker 2

Our first priority is to drive sales of Spikevax and Emralesia, which we believe are the foundation of our respiratory vaccine portfolio. We will continue to work with all market channels to maximize SPACVAS availability. We are focusing on marketing and medical education to try to drive the COVID vaccination rate closer to that of flu over time. Internationally, we plan to bring manufacturing plants online in the UK, in Canada and in Australia in 2025 and then start to fulfill multi year contract in those countries. And with full seasonality contracting in the U.

Speaker 2

S. And those countries in 2025, we expect to increase EMEA sales and market share. We are focused on delivering up to 10 product approvals over the next 3 years, which we believe will drive sales growth and find the next wave of our investment. For 8 of these programs, we have near term milestones. For CMV, we expect to trigger the interim analysis for Phase 3 vaccine efficacy study by the end of this year.

Speaker 2

We are looking forward to those results. For PLMMA, we plan to initiate pivotal studies. Our Novavirus and 2 Phase 3 vaccine efficacy studies are now underway. Finally, we intend to file 3 products in 20 24 on XL COVID vaccine for ILV vaccine for high risk 18 to 59 years and the combination COVID-two vaccine, which is subject to ongoing discussions with the U. S.

Speaker 2

FDA. We will continue to focus on improving efficiency by keeping our R and D and SG and A expenses flat to down in 2025. And as demonstrated in the quarter, we're making progress on our cost saving initiatives already. By 2027, we expect to decrease annual R and D expenses by $1,100,000,000 On the cost of sales, we will continue to grow efficiency and we expect to achieve operating leverage that we outlined in a framework we shared previously. We have 2 products approved that help protect people every day.

Speaker 2

We have the largest Netflix pipeline for any mRNA company and we'll continue to focus on delivering the greatest possible impact to people for mRNA medicine. While there is work to be done to meet our execution targets, I'm confident that our team will be able to achieve our goals. I continue to be excited about the potential we have to deliver for patients. The actions we are taking to help people is becoming reality. With this, operator will be happy to take questions.

Operator

Thank you. Our first question comes from Salveen Richter with Goldman Sachs. Your line is open.

Speaker 5

Thank you. Good morning. Two questions for me. One is, can you speak to the source of the rest of world revenue generated in the Q3 and expected in Q4 with regard to which countries are contributing here and these contracts that should you expect them to recur in 2025? And then separately on CMV, you talked about the DSMB, you'll share the results of the DSMB recommend unblinding.

Speaker 5

Can you speak more to that as to whether we will actually get interim data provided to us or we're going to have to wait for the full analysis here? Thank you.

Speaker 3

Sure. Thanks for the question, Salveen. I'll take the first one in terms of rest of world revenue. So without getting into too much specifics, I think you know we're establishing a presence in the United Kingdom, in Canada, in Australia. We announced an order in Brazil.

Speaker 3

And so that's been the balance will be shipped either in the Q3 and Q4. And when we look at the Q4 of the $600,000,000 on the low end, the large majority of that is contracted with those countries and others, but I just wanted to name a few. As we look to 2025, I think we mentioned at R and D Day that there will be a decline in some of those countries. And then it will then uptick. Our anticipation is that it will uptick in 2026 based upon the contracts that we have in certain countries.

Speaker 3

So that's a little bit on the rest of world split.

Speaker 4

And on the CMV question, so if the DSMB recommends on blinding to sponsor at the first interim analysis to your question, That would be because we met the criteria for vaccine efficacy. And obviously, we would share those results if we receive them. There is a chance that the DSMB will not recommend unwinding, which would mean perhaps that we did not make statistical significance in that first interim analysis and be going then to the final analysis, which could happen quite quickly. And depending upon the conditions of that communication and the timing of that final analysis, we may or may not be communicating right then about the fact that we're waiting for that final analysis. But we would in any event, if the DSMB recommended unblinding share those results.

Operator

Thank you. Our next question comes from Ellie Merle with UBS. Your line is open.

Speaker 6

Hey guys. Thanks for taking

Speaker 7

the question. Just another one on how

Speaker 6

to think about the Akceos COVID revenues. In the past, you've talked about some contracts with some countries for guaranteed purchases, like some even throughout the end of the decade. Maybe can you just in broad strokes characterize the size of some of these contracts that you have outstanding ex U. S? And I guess what's essentially guaranteed from a revenue perspective here in terms of some of these ex U.

Speaker 6

S. Contracts sort of if you have a sense of maybe like what the minimum sales ex U. S. Could be in certain years going forward based on that? And then just a second follow-up on CMV.

Speaker 6

I think you alluded to this in the last answer, but maybe just in terms of the like rate of accruals, I guess, what's your latest expectation in terms of the timeframe between when you will accrue the number of events to trigger the interim versus the number of events to trigger the final analysis, just the timing between those 2? Thanks.

Speaker 3

Yes, sure. So I'll take the first part, Ely. So in terms of the contract that we have with some of these countries, we're not going to disclose the specifics. But what I will say is that as we add products over time, you can imagine that the amount of the minimum purchase commitment will grow over time. So that's why as I just mentioned in my prior response that it will drop in 2025 and then start to grow in 2026.

Speaker 3

But I don't think we're going

Speaker 2

to disclose anything more than that.

Speaker 4

On the question on CMV and the timing of case accrual, it is coming quite steadily right now. And in fact, we do have a bit of a backlog of case confirmation that we are working through. There's multiple steps that have to go and multiple testing to validate a case. And so we actually obviously, we don't control the rate of case accrual, but we do expect that if we are going to that final analysis, then it won't be a very long period of time between and actually could happen quite quickly.

Speaker 6

Great. Thanks.

Operator

Our next question comes from Gena Wang with Barclays. Your line is open.

Speaker 8

Thank you. I have two questions. One is regarding the commercial questions. If we calculate US1.2 billion dollars revenue and accumulate US19 million dollars doses, Is the calculation like $63 per dose as a net price is the right way to think about it? And then regarding the reserve return, could you provide a final reserve return from last winter season?

Speaker 8

And what is your reserve return so far for this winter season? And quickly regarding the flu combo flu COVID combo, not using priority voucher, maybe give us a little bit more rationale for this and then we'll all 3 that you submit this year, how many of these will make it for 2025 winter season?

Speaker 2

Yes, Gina, maybe I'll take

Speaker 3

the first question. So on the U. S. Pricing, the $19,000,000 I think is the total market you might be referring to for COVID vaccinations, not specific to Moderna. That said, the pricing that you're talking about, we won't specifically disclose, but it's not that far off.

Speaker 4

On the pipeline questions, thank you for both. So first on the priority review voucher for the flu COVID combo. Given where we are in terms of timing of this year and relative timing of the contracting season for flu vaccines, We no longer think it makes sense to use a priority review voucher to try and accelerate that process, but ultimately we believe we would miss the contracting season. For that reason, we'll hold back that PRV and use it for a different product in the future. As far as the submissions, as we confirmed today, we are expecting 2 the other 2 submissions to go forward with prior review vouchers.

Speaker 4

And given the timelines, you can understand that we think that means approval next year is possible and can happen prior to the season. However, we do not include any revenue from either the 18 to 59 RSV, SBLA or 1283 in our 2025 guidance or expectations. And so if we were able to deliver those with those priority of Bujavs and approvals, we still wouldn't include any revenue that would be an upside.

Speaker 8

Reserve return?

Speaker 3

Sorry, could you repeat the question, Gina? I missed the sales return part.

Speaker 8

Yes, sure. Reserve return is that could you provide the final reserve return from last winter season? Because I know you initially booked over $500,000,000 and you need to adjust it to see the final numbers. So if you could provide that final numbers and what is your reserve return assumption so far for this winter season?

Speaker 3

Yes. So as I mentioned in my prepared remarks that we released in the quarter about $140,000,000 primarily driven from returns reserves being lower than our prior estimate. So that $500,000,000 plus went down to let's say $400,000,000 for the prior season. So we learned from that and continue to forecast what an anticipated product returns reserve is for this season and we will continue to monitor it as we look at vaccination rates throughout the entire quarter and what we project into

Speaker 4

the Q1 of next year.

Speaker 8

Thank

Operator

you. Our next question comes from Michael Yee with Jefferies. Your line is open.

Speaker 9

Thank you. Two questions, not 10. But on the combo, I know that you say you're in discussions with the FDA. Can you just clarify what are the different factors that are contributing to why you have maybe lack of confidence on filing or I guess not certainty on filing the combo? For example, would there be an infection today that has to be run?

Speaker 9

I think it's a little unclear to us on the combo. And then on RSV, I think the market had anticipated this was going to be a big market. However, obviously, there is a lot of dynamics going on there. Can you maybe comment on whether you think there will be a change to this market and what would give you confidence that you're going to actually be a player here, given you've already given your current position now and where your guidance is for 2025? Thank you.

Speaker 4

Thank you for both questions. So first on the I'll take the combo and I think Stefan will take the question on RC. So first, we are in discussions with the AVEVA data for 1083, as you'll remember, came sort of middle of this year. And so we've only more recently had the opportunities to be sharing that and engage in discussions about what would be in the BLA for accelerated approval of 10 V3 based on the immunogenicity results. I would not comment on those discussions back and forth.

Speaker 4

We continue to work closely with the agency to understand what they would like to see in that. We continue to believe, as we said today, that we will be submitting for approval this year, although those conversations are ongoing and we'll update as they proceed forward. The decision not to use the priority review voucher became one about the timing of that approval and ultimately our view that we would miss the contracting season for influenza and therefore it didn't make sense to do that. But by withdrawing the priority review voucher, we also allow for a more fulsome time for review, which is also obviously the benefit of ourselves and the agency.

Speaker 2

And on the OSV, Mike, I think there's a few things. As you know, the market has been much lower than last year, and much lower than people anticipated. Obviously, the new CDC guidelines that came out in the June timeframe impacted that. The other piece we are hearing from customers is that they are really focused on making sure people get COVID through vaccination right now. So I think it will be quite interesting to see what happens in Q1 potentially and also the shape of the curve of R and D looks different than what we saw in the previous season.

Speaker 2

So that's to be seen. The other piece is because through contracting and because of what happened last year and as the contracting happened before the CDC guideline, there's quite a lot of volume in the channel, whether both are the retailers themselves and in the world sellers. And so of course, with a much lower market and a large inventory in the customers and both world seller and retail pharmacies, a scale machine is taking quite some time to go through that inventory. And so we think that there's an interesting question about the market dynamic in terms of timing. Again, will Q1 be more important timing for ISB going forward?

Speaker 2

It's a question to be seen. Of course, we expect as more data accumulate, CDT will cause you to review and look at what is the right guidelines. So that's probably the biggest leaders to decide. And being able to totally contract COVID and RSV at the same time for full season, we believe it's going to have an impact in the U. S.

Speaker 2

And the other piece I mentioned also in my remarks is outside the U. S, which is as you know, we have no sales outside the U. S. We are getting approvals and they're going to continue to happen in the months to come. So we believe 25 and beyond should also help outside the U.

Speaker 2

S.

Speaker 9

Thank you.

Operator

Our next question comes from Tyler Van Buren with TD Cowen. Your line is open.

Speaker 10

Hey guys, good morning. Thanks very much for taking the question. So, I wanted to ask about U. S. COVID vaccine sales.

Speaker 10

So they were roughly flat quarter over quarter between Q3 and Q4 last year, but the vaccine sales guidance for Q4 this year assumes a decline as much as 60% to 80% quarter over quarter if RSV sales remain low and my math is correct. So is there a significant shift occurring this year due to the vaccines being available earlier, patients getting vaccinated earlier that you expect to be the dynamic moving forward or could this guidance be conservative? I just ask because it's a pretty dramatic change in the cadence of U. S. Sales.

Speaker 10

So any additional color would be appreciated.

Speaker 2

Thank you. So if we look at the U. S. Market, I think what is important first is to look at the different channels because they are very different. As we share the data that we have is the accurate data for retail and long term care facilities.

Speaker 2

As you see earlier start, CEDAR today a little bit ahead. But if you look at the weekly scripts, they are coming down the peak. We hear from retailers that they are working really hard in terms of vaccination campaign ahead of Thanksgiving and there's a plan ahead of Christmas between Thanksgiving and Christmas. But that is to be seen what happens, what is the shape of that curve. And then there is the IDN networks.

Speaker 2

As I said in my remarks, we have been working with our IDN networks to increase the COVID-two flu vaccination rate as used last year. We don't have a lot of visibility because those campaigns started later, most of them early October. We have used the retailer starting in August, with some of them starting pretty strong in August early September. And at the government's data, for which we have no visibility, we only get orders when there are orders coming. So it's still early in the season.

Speaker 2

The shape is clearly different from last year in retail. We are hoping that we will work with our retailers and our work in my tail off with different shape than last year. And then IBM and government, so we'll have to see and we're going to continue to learn about this market. But we believe it still remains sizable and clearly to record we see that many millions of people who want the COVID vaccination.

Speaker 3

Yes. And maybe I would just add that, remember, when we sell product that is not tied to vaccinations. So when you look at the decline from the Q3 to the Q4, we had an early approval to Stephane's point. So therefore and we were better ready to ship more within the Q3. So that's what I think you see on a year over year basis what's happening here.

Operator

Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open.

Speaker 11

Hi, thanks for taking the question. I was just wondering on the INT program, obviously, you're continuing to accelerate the clinical program here with the new Phase 3 in lung. But can you just give us an update on the manufacturing facility in Massachusetts and if that's still on track for completion by year end? And then if there's going to be any bridging work required by the FDA for approval or validation? Thank you.

Speaker 2

Good morning, Cerence. Yes, so the team continues to do a great job in the plant. We've all progressed totally on schedule. And so given what we shall allow any day in terms of timing we will be, the plant will no longer be critical path to approval. But we're keeping the team working really hard and they're making great progress.

Speaker 2

We're very pleased with that.

Speaker 4

Yes. And on the question of bridging, once the plant is operational, we'll transition our clinical work to that plant as well. And so effectively all of the programs will include many of the programs may include, I should say, that data. So the bridging will be done in stream.

Operator

Thank you. Our next question comes from Evan Wang with Guggenheim Securities. Your line is open.

Speaker 11

Hey, guys. Thanks. 2 for me. First on the election results, just wondering, given a pending change in administration, what barriers are in place from policy or legislative standpoint that would meaningfully limit threats to current use of vaccine

Speaker 2

in the U. S? What steps are

Speaker 11

you doing to reassure confidence there and protect against potential increase in legal liabilities? And 1 on RSV, some competitors are describing how data are now sufficient for expansion in international revenues. Do you agree there? And what gives you confidence in competitiveness ex U. S.

Speaker 11

Specifically? Thanks.

Speaker 2

Good morning. So thank you for the questions. So on your first question, as you know, our mission of the company is to bring innovative medicine to help people prevent disease or treat disease. Since the company is founding, we've always worked very closely with government leaders and public health leaders around the world, including, of course, the U. S.

Speaker 2

And as you know, we work very collaboratively with President Trump during this 1st term. And so we're going to continue to do that. Our mission is to really ensure we help people and we increase people's health, which is to Daniela like what the administration is going to work on. On RSV outside the U. S, as you know, the markets have approved the product at very different times.

Speaker 2

Outside the U. S, you have very similar process than you have in the U. S. So once you get approval, you get for recommendation, which is CDC, active equivalency, which in some markets happen at different times. Then you

Speaker 4

have pricing negotiation, which as

Speaker 2

you know are quite different outside the U. S. And the U. S. Sometimes you might miss a whole season because of the timing of those different elements.

Speaker 2

As you know, in the U. S, there's no pricing negotiation where you can lose some time months or quarters. So I think the slower ramp outside the U. S. Is reflecting both the recommendations that sometimes tend to be for older population of 70 and above or probably 75 and above.

Speaker 2

And just the timing of all the mechanics to come together. And then you can you could miss the season by a few weeks and you just miss the season. So those are the dynamics acting up anyway. So we continue to believe that RSV causes hospitalization and hurts people and the RSV vaccines are going to be important to prevent people getting hospitalized, especially if you think in some of the tailwind, we have an aging population in Europe, we have an aging population in Asia. And so I continue to believe that over time, the R and D market outside the U.

Speaker 2

S. Would be an important market. There's a lot of educations to do move at the consumer level, but consumer doesn't even know what RZ was until recently, so don't know as of today, same with some doctors. So there's just a lot of work to do, but the virus is helping people. So there is a need there and we collectively need to work with public health leaders to prevent hospitalization.

Speaker 2

Everybody knows especially in governments that are single payers that vaccines are most probably the best ROI that you get in terms of healthcare dollars and the best way to not have hospitals with too many people is to get promotion.

Operator

Thank you. Our next question comes from Edward Tanal with Piper Sandler. Your line is open.

Speaker 12

Great. Thank you very much. Appreciate all the time and all the detail. Just looking at the orphan disease pipeline, with respect to kind of pivotal trial starts for MMA in the first half and I think also maybe generating some registrational data this year. What do you see as sort of the path forward here in terms of trial design, patient numbers, follow-up?

Speaker 12

When do you think we could actually see these two data that could lead to the filing here? Thank you.

Speaker 2

Thanks, Ted. So

Speaker 4

in both cases, we'll be moving forward, as we said, either presently or very quickly in 2025 in the case of MMA into this pivotal study designs. The answer is a little bit different for both. In the case of MMA, as we've discussed previously, we do believe there is a biomarker that can serve as the basis for approval. That's the subject of our discussions with the FDA. And that biomarker result, as you can imagine, can be achieved somewhat more quickly.

Speaker 4

Then in the case of PA, what we'd be looking because there is not as clear biomarker, we'll be looking at event rates, which can take some more time. And in any event, it will depend upon the rate of enrollment in those studies and then how quickly we can get to the ultimately we hope is a significant benefit either with the biomarker or with the event rates for PA. As we previously described at R and D Day, we do expect that can happen within the next couple of years. And our goal is to be launching that product in that sort of 3rd window of 2026 plus, or both of those products, I should say, in the 2026 plus time horizon. If we accrue patients more quickly into those studies, it could be sooner.

Speaker 4

If it takes longer, it could be a little bit longer. We'll obviously update as we go forward in how we're doing enrollment in those studies.

Speaker 12

Great. Thanks, Tim.

Operator

Our next question comes from Luca Iffy with RBC Capital. Your line is open.

Speaker 13

Great. Thanks so much for taking my question. Maybe on RBC, obviously this year has been a little challenging given the late approval versus the timing of its contracting season. But how should we think about next year? Do you think it is fair for us to assume that you can get a third of the market share given peripheral syringes and obviously no GBS or do you think that will be optimistic?

Speaker 13

And then maybe second on COVID in the U. S, how should we think about again about market share here? It looks to me the last year you were gaining some shares versus Pfizer versus this year, it looks like you're maybe losing some shares versus them. So wondering if you can offer any additional color on that. Thanks so much.

Speaker 2

Sure. So on RSV, I mean, across products, we don't guide our own share. So we're not going to start guiding our own share. As I said, we believe very much so that being able to contract in full season will be quite different from last year. So we play this out in the 2025 season.

Speaker 2

In terms of COVID, you are correct. In terms of the retail market, we have lost some market shares we've indicated earlier in the year. This has been quite a intense competitive environment in the U. S. What we don't know yet is the share in retail sorry in the IDN and government.

Speaker 2

So we'll get a good sense about the share holistically at the end of the season. So that's a bit where we are at this stage.

Operator

Thank you.

Speaker 2

Thanks so much.

Operator

Our next question comes from Courtney Breen with Bernstein. Your line is open.

Speaker 7

Fantastic. Thanks so much for the time today. I appreciate getting a question in. The first one that I want to ask was just around the INT. Obviously, you have just initiated this new 9 trial in multiple cell lung cancer that has the chemo combo proceeding the INT.

Speaker 7

There's a few different reasons as to why you might be doing it, running the trial that way. It could be that you're seeing kind of the current paradigm is falling in the direction of chemo combination. There's a scientific belief that INT works well in the post chemo space or kind of just about practical timing for INT preparation. Can you give some context to that particular trial design? And then as we think about expansion of this program more broadly to other tumor areas, kind of what's primarily gating that?

Speaker 7

Is that the scientific signals or is that manufacturing capacity for the Phase 3 development plan?

Speaker 4

Great. Thank you for both questions. So first in the non small cell lung cancer context, there has been a move, it's really evolving standard of care. So there obviously has been a move from just adjuvant towards neoadjuvant use of checkpoints in KEYTRUDA specifically. And there are a number of patients that have a pathological complete response, clearance of their tumor and evidence of that as a result of that neoadjuvant chemo plus KEYTRUDA.

Speaker 4

And so recognizing that there's a move towards that standard of care, we also want to confirm the potential for INT to benefit those patients. Obviously, you wouldn't be expecting a substantial benefit on those that have had a pathological complete response because fortunately they do have very good clearance to their tumor. And so the structure of the study is to obviously enroll patients, allow them to get that treatment and approximately half, you can see about 680, we would expect to not have had that pathological complete response. And that's the group that then we then randomized and go see whether INT can add on top of adjuvant at that point KEYTRUDA treatment with further KEYTRUDA. And I really think the driver there is a view of where we see potential standard of care moving in the lung cancer space towards neoadjuvant use of KEYTRUDA.

Speaker 4

We there may be other applications thinking more broadly where neoadjuvant treatments start to emerge and we choose to go study the benefit of INT in the neoadjuvant setting, not just in the adjuvant setting. As far as other indications, the short version is we continue with our partner Merck to systematically look at all the places that we think that INT can offer a benefit. We aren't done yet. There are more studies coming. We are pacing ourselves as we stand up those investments.

Speaker 4

But manufacturing capacity is only one of the considerations. It's not the primary consideration to some extent. This is about also just pacing the start of these studies. As you can see, we're starting to build quite a large Phase 2 and Phase 3 program and we just want to be disappointed about not adding too many at the same time. So we will continue, we do continue to discuss with our partner Merck additional Phase 3 programs.

Speaker 4

We will start new ones in the coming year that we haven't yet announced. But we will pace ourselves both for manufacturing and just simply the ability to execute in the overall scale of that program.

Operator

Thank you. Our last question comes from Manuos Mestorius from Deutsche Bank. Your line is open.

Speaker 9

Thank you. Good question. Manuos Mestorius from Deutsche Bank on behalf of Emmanuel. So if approved, how quickly do you expect the flu market transition to combination flu COVID? And would that be expected to happen in 2025 already or more of a midterm thing?

Speaker 9

And secondly, what's the latest update and perspectives you have on the COVID mitigation, in particular, GSK's recent lawsuit? Thank you.

Speaker 4

I'll take the first question on timing. So on flu COVID, obviously it depends upon approval and it's also dependent upon public health sort of recommendation. From a purely launch timing perspective and contracting perspective, we do not believe that 2025 is a time when that will happen. That's because a majority in the United States, the majority of the food contracting is happening really early in the year in the Q1 or the first half. And for that reason, given the timing of our current submission and approval, we wouldn't expect that to be a 2025 event.

Speaker 4

We would hope that it would happen in 2026 and ultimately we are working towards that because we see a huge potential public health benefit in terms of prevention of upwards of hundreds of thousands of hospitalizations in the United States, if we can improve compliance with COVID vaccines as well as deliver highly effective flu vaccine. But again, the timing of that will be contingent upon the regulatory review process and then ultimate recommendation processes in different markets. Over the long term, we are believers that a combination flu COVID product is the right way for us to be protecting those at high risk of respiratory viruses seasonally in all of the markets in which we play in. And so from a very long term view, we are quite bullish on the opportunity of the combo product.

Speaker 2

We will not comment on the merit of a GSK case. We would note that such lawsuits are not uncommon during market formation around new technology, and we are prepared to defend ourselves from these claims. We look forward to presenting our case at trial once scheduled.

Operator

Thank you. Ladies and gentlemen, this does conclude the Q and A portion of today's conference. I'd like to turn the call back over to Stephane for any closing remarks.

Speaker 2

Well, thank you everybody for joining us today. We look forward to talking to many of you in the next days weeks. Have a great day.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

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Moderna Q3 2024
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