Moderna Inc (MRNA) — Q3 2019 Earnings Call Transcript

Thank you, operator. Good morning and welcome to Moderna's third quarter 2019 conference call to discuss business updates and financial results. 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. Today on this call we have Stéphane Bancel, our Chief Executive Officer; Tal Zaks, our Chief Medical Officer; Stephen Hoge, our President; and Lorence Kim, our Chief Financial Officer. Before we begin, I would like to remind everyone that this conference call will include forward-looking statements. Please see slide two 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. We undertake no obligation to update or revise the information provided on this call as a result of new information or future developments or updates. I will now turn the call over to Stéphane.

Thank you, Lavina, and good morning, everyone. We are committed to building mRNA as a new class of medicines, with Moderna positioned to remain the leader in the field. As you know, we believe our mRNA medicines have the potential to help patients by addressing large unmet medical needs and treating diseases that are not addressable by recombinant proteins or small molecules. Due to the platform nature of mRNA, we believe mRNA medicines provide a higher probability of technical success and faster timelines to clinical trials compared to traditional medicines. We also believe that the manufacturing capital intensity of mRNA is materially lower than that of recombinant protein and that the cost of manufacturing at commercial scale will be similar to small molecule injectables. We continue to focus on managing risk across the portfolio, especially technology and biology risk. In the quarter, we were proud to share positive Phase I data for two important milestones: the CMV vaccine and our antibody against the chikungunya virus delivered IV. We showed that we successfully immunized seronegative subjects with CMV and boosted seropositives. We plan to start a Phase 2 study very soon. The GMP material has already been made, and the study protocol has been submitted to the FDA. As a frame of interim results of our Phase 2 trial, we should be able to make the decision for Phase 3 dose. The team is already spending a lot of energy to plan for our Phase 3 study. We believe our CMV vaccine could, if approved, change the future for thousands of children around the world by preventing birth defects. Moderna owns the global commercial rights to the CMV vaccine. We also presented data from the first-ever mRNA-encoded antibody in a human study. We are very proud of this major scientific achievement, and we are eager to move forward with the MMA and PA clinical studies soon. Both of these rare disease programs use the same delivery technology as the one in the antibody program. If we step back and look at the body of clinical data from the last three-and-a-half years, we have come a long way. We started 16 Phase 1 trials. We dosed and maintained 1,400 subjects and patients. We repeat dosed up to eight doses of mRNA up to three weeks apart in our OX40 Ligand and PCV trials. Additionally, across the five modalities for which we have human data, we have consistently shown that our mRNA medicines are well tolerated, resulting in consistent protein expression in humans, encoding for proteins that are functional in humans and translating from pre-clinical models into humans. These findings are very important. They assure that our technology investments are paying off. We believe we are at an important inflection point in the company's history. Five out of the first five modalities have found success in the clinic. That was not easy. It's not obvious that this would be the case. Two critical factors explain it for me: one, the quality of our science; two, the quality of our CMC including manufacturing, technical development, and quality. One of my mentors at Eli Lilly, the late Dr. Gus Watanabe, who was President of Lilly Research Labs once told me, Stéphane, it takes great science to make important medicines. With okay science, well, good luck. We are very humbled to be named for the fifth year in a row among the best employers around the world by Science. To be a Science 2019 top employer speaks loudly of the culture we have established in our scientific teams, for the mRNA platform of drug discovery and also for process development and manufacturing. We are more than ever committed to being the best mRNA company in the world. It requires the right culture. And being named to this list five years in a row by our Moderna colleagues seems to signal we are on the right path. mRNA science is not easy. It requires great collaboration from many disciplines with the right capabilities around the table. We think that with more than 300 scientific colleagues we have scale. We believe it is very hard to be a great mRNA science company with a much smaller team. We, of course, also recognize that great science is being done outside of our walls. As such, a key part of our strategy is to collaborate on research with leading academic and medical centers around the world. We have, over the years, established over 15 collaborations. Our more recent research collaboration with Harvard is centered around developing new medicines for immunological diseases. On slide nine, you see our current European pipeline. Three important milestones in Q3 are notable: the PCV Phase 1 randomized trial has begun. We reported positive CMV Phase 1 data, and we reported positive results from our antibody program. The first subject has been dosed in the age de-escalation cohort of a Phase 1b of the hMPV/PIV3 vaccine. Zika received fast track designation by the FDA; PA has an open IND by the FDA and recently got fast track designation as well. Let me now turn to Tal to review our clinical progress.

Thank you, Stéphane. We're advancing our pipeline of medicines in six different modalities. So let me start with the prophylactic vaccines where we've treated over 1,000 healthy volunteers across seven programs to date. We're pleased with the emerging consistent safety and tolerability profile, and of course with the repeated demonstration of peptide immunogenicity, which we had expected based both on the fundamentals of expressing a viral antigen using our body's own cells and the wealth of preclinical data that continues to translate well in the clinic. The CMV Phase 1 success is the latest addition here. These data have exceeded our expectations. But before I review them, let me first briefly update you on other progress. Both the RSV and Zika programs continued to dose patients in their respective Phase 1 studies. For Zika, we also presented preclinical data at the International Society for Vaccines conference in late October, where vaccination with mRNA-1893 was shown to be fully protective at the lowest dose tested. On the hMPV/PIV3 program, I'm pleased to report that the age de-escalation study, as Stéphane noted, has started with the first subject dosed. We also presented 7-month immunogenicity data at Infectious Disease Week in October. Finally, with our chikungunya vaccine program, we continued to see good durability with 78.6% of the subjects seropositive to chikungunya virus at 12 months post vaccination. So let's get back to CMV. CMV is a common pathogen that is a member of the herpes family of viruses. And like other herpes viruses, it's a lifelong virus, meaning once infected, it's for life. The disease burden associated with CMV is birth defects and disease in babies born to mothers who are infected during pregnancy. The burden of disease is significant, with approximately 25,000 newborns infected each year and infected each year in the U.S. Currently, there aren't any vaccines against CMV on the market despite repeated attempts over the last 50 years. Now we believe that a reason for prior failures has been the inadequate immunization against the pentameric complex which the virus uses to infect epithelial cells, either the cells that line body surfaces and are the first port of entry for the virus. This pentamer is made of five distinct proteins that have to assemble inside the cell before they are transported to the membrane. So trying to make this structure one protein at a time using traditional recombinant technologies is obviously challenging. However, this challenge can be overcome with our mRNA-based vaccine because our technology enables a simultaneous translation of five components. As shown on the bottom half of this slide, mRNA-1647 actually contains six mRNA sequences, five of which encode for this pentamer and one that encodes for gB. Now, gB is a relatively simple single-protein receptor. The important thing is that prior studies with the recombinant vaccine that only included gB already showed prevention of half the cases of CMV infection, which provides us with a very good starting point for demonstrating efficacy. So let me frame the next two data slides. Every one of us has either been infected with CMV in the past or not. If we have, we’re lifelong carriers and our immune system is constantly fighting this chronic infection. So we have antibodies in the serum of our blood, and that is called seropositive. If we've never been infected, we're seronegative. Now, both seropositive and seronegative subjects were enrolled in our Phase I study. So we'll be looking at the levels of neutralizing antibody titers for each. mRNA-1647 encodes for the two antigens, the pentamer and the gB that, in general, mediate the ability of the virus to infect two different cell types, the epithelial cells and fibroblasts. So we will look at titers in the blood of subjects that can neutralize the virus' ability to infect either type of cell. That is important because we're talking about a functional readout. So all in all, we are looking at four data sets from this trial. Let's start with the seronegative subjects on slide 13. The top half of the table shows neutralizing antibody titers against epithelial cell infection. I'm going to draw your attention to two rows in the top half of the table. The fourth row down labeled GMT post-second vaccination, where you will see the titer levels for placebo in each dose tested, which were basically zero for the placebo group and roughly 3,000, 15,000, and 31,000 for the 30-, 90-, and 180-microgram dose levels. The second row to focus on is the sixth row that shows the CMV seropositive titer level of 5588. This is the level of neutralizing titers seen in people who have been previously infected by CMV, the seropositives. The row right above shows the ratio between the neutralizing antibody levels achieved with our vaccine relative to that level seen from seropositive subjects in the trial. At the 90- and 180-microgram doses, mRNA-1647 elicited an immune response against epithelial cell infection that is 2.7 and 5.5 fold higher than what is seen in seropositive subjects with natural infection. The reason why this is an important point is that because of the CMV seropositive pregnant women have been observed to have a lower rate of CMV transmission to their unborn children. So these results are striking in that previous vaccines have not exceeded seropositive levels, and it demonstrates the strong immunological potency of our mRNA vaccine platform. The bottom half of the table shows a similar comparison for neutralizing antibody titers against fibroblasts. Here, we see our vaccine-induced neutralizing antibody titer levels similar to levels in seropositive subjects. So we've achieved the goal here as well. Taken together, these interim data show that mRNA-1647 effectively immunizes seronegative subjects to levels at/or well above seropositive individuals. Slide 14 shows the same representation of the data, only this time for the seropositive subjects in the trial. Here, placebo subjects started off with neutralizing antibody titers. The average level, as I described, was 5588. After both the first and second vaccinations, we see marked increases in neutralizing antibody titers. So, both vaccinations boost the neutralizing antibody levels well above the baseline. And this is true for epithelial cells as well as fibroblasts. With epithelial cells, we see a 10 to 19 fold increase above the CMV-seropositive benchmark, and with fibroblasts, we see a 2 to 4 fold increase. It's worth noting that this boosting of seropositive individuals has not been observed with prior vaccines. In terms of safety and tolerability, the vaccine was generally safe and well tolerated with no serious adverse events. Local adverse events included pain, redness, and swelling at the injection site. The most common systemic adverse events were flu-like symptoms of fatigue, fever, chills, and myalgia. The adverse events seem to be more common and tend to be more severe in seropositive subjects after more than one vaccination. In other words, they tend to correlate with the potency of this vaccine to elicit a specific immune response. That said, the adverse events are of a type that one expects to see in a healthy volunteer vaccine trial and are consistent with the safety and tolerability profile that we've seen in our other vaccine trials. As a reminder, the data I've described thus far are interim data analyzed one month after the second dose. Our regimen is a three-dose regimen at zero, two, and six months. On this slide, you can see preliminary results from a small cohort of seronegative subjects for which we have data out to a year following the three-dose regimen. The solid gray line is the level of seropositive neutralizing titers against epithelial cell infection. You can see that everyone starts at zero, gets to the level I previously described by month three and is further boosted at month six, so that they remain at/or above the level of seropositives at least out to a year, with a relatively shallow decline over time. My expectation is that this durability is a function of eliciting strong T-cell help, which we know is an inherent feature of our mRNA vaccine platform. So in summary, we're very pleased with these CMV data. We've shown seronegative subjects who were successfully immunized to generate neutralizing titers, while seropositive subjects were boosted to levels above their baseline, something that I don't believe the vaccine community has seen before. mRNA-1647 was generally safe and well tolerated, and we have early evidence of durability out to a year. We're excited by these results and are quickly moving to start a Phase 2 dose confirmation study. Phase 3 preparations are well underway, and importantly, FDA feedback suggests a regulatory path to approval using the prevention of primary infection in a population that would include women of childbearing age as a basis for licensure, as opposed to a licensure that would be based only on demonstrating the prevention of infection in newborns. We believe a Phase 3 trial with this endpoint is achievable with less than 8,000 subjects. Prevention of CMV in women of childbearing age is a very significant unmet need, which we expect will translate into a large commercial opportunity. Currently, there aren't any vaccines on the market for CMV. We're targeting a highly motivated population with clear opportunities down the road for label expansion. The sales effort should be focused on calling on OB/GYNs and pediatricians, and assuming pricing similar to other innovative vaccines, one can quickly get to a multi-billion dollar annual sales potential. Moving to the cancer vaccines modality. Recall that both we and NCI demonstrated at ASCO the ability of our personalized cancer vaccine to induce T-cells against the new antigens that we encode. The NCI has now completed enrollment of five subjects in their trial. They used our personalized cancer vaccine as a single agent in an attempt to further boost the expansion of tumor-infiltrating lymphocytes that they had given to a heavily pretreated patient population. They have not seen any responses to the vaccine as a single agent in these five patients. In contrast, our PCV program is designed primarily towards testing the ability of a personalized cancer vaccine to work in synergy with a PD-1 inhibitor and in earlier stages of disease. To that end, we're actively enrolling patients with melanoma in the randomized Phase 2 trial where we will compare our personalized cancer vaccine in combination with KEYTRUDA versus KEYTRUDA alone for the treatment of patients in the adjuvant setting. The Phase 1 PCV trial also continues to enroll. Finally, KRAS as a target is getting a lot of attention these days, and our approach is to use the four most prevalent KRAS mutations as a cancer vaccine. The trial for our KRAS vaccine in combination with KEYTRUDA is being run by our partner Merck. The Phase 1 targeting pancreatic, colorectal, and lung cancer is ongoing. Moving to the intratumoral modality, we have three programs in this sphere with OX40 ligand, the Triplet, and interleukin 12. Starting with mRNA-2416, which encodes OX40 ligand, a potent co-stimulator of immune activation. The Phase 1 is completing the monotherapy arm and currently dosing patients with a combination of OX40 ligand and durvalumab. We're no longer moving forward with just monotherapy of OX40 ligand, but we'll focus our efforts on the combination with durvalumab, which we intend to move into a Phase 2 cohort in patients with advanced ovarian cancer, once the dose escalation and confirmation cohort is complete. The Phase 1 trial for mRNA-2752, which encodes for OX40 ligand and two pro-inflammatory cytokines IL-23 and IL-36, is ongoing. We intend to test the combination of this triplet with durvalumab in several tumor-specific cohorts. Finally, our IL-12 program partnered with AstraZeneca based on a similar rationale is also ongoing. In our localized regenerative modality, the Phase 2 VEGF trial is ongoing. Recall that our partner AstraZeneca has opened additional sites in Europe with the goal of increasing enrollment here. So let me spend the last few minutes on our systemic therapeutics starting with recent data we shared at the R&D Day. As a reminder, mRNA-1944 encodes for an antibody against chikungunya virus. Antibodies are complex proteins consisting both of a heavy and a light chain that come together. So mRNA-1944 includes two mRNAs, one that encodes for the heavy chain and one that encodes for the light chain. Once formed, we would expect the antibody to be secreted in the bloodstream, where we can measure it. So, here are the Phase 1 data. We saw a translation of CHKV-24, the antibody in a dose-dependent manner, meaning the more mRNA-1944 you gave, the more CHKV-24 antibody was made. Administering mRNA-1944 at the middle and high doses shows protein production well in excess of the one microgram per ml level that we had pre-specified as the level predicted to be protective against the chikungunya virus. The half-life behavior of the protein is exactly as predicted, such that the amount of antibody is expected to stay above the one microgram level for at least four months at the 0.3 mg per kg dose. As you can see in the inset, protein production starts within hours. This is relevant as we think of using this delivery technology to direct the synthesis of intracellular enzymes in liver cells of children born with rare genetic diseases, as is the case in methylmalonic acidemia and propionic acidemia. The final point to make on this slide is the remarkably low inter-subject variability, as measured by the coefficient of variance in the range of 20% to 40%. This is similar to what is seen with recombinant proteins. In other words, our delivery technology can direct protein expression without apparent increase in the variability between subjects, which is important as it relates to our ability to define a dose response relationship not just within a given subject, but within the population as a whole. We also show that the antibody made using mRNA-1944 is active as expected. Here the antibody is collected from the serum of subjects and tested against the virus in an assay. It is shown here as the proportion of patients in whom you can dilute the blood at least a hundredfold and still be able to neutralize the virus. Let me review the safety information. Based on the preclinical toxicology, we were able to test mRNA-1944 without steroid premedications, though of course the investigator had the option of using steroids if needed. For the low and middle doses, we could not distinguish a difference between the drug arm and placebo as it relates to safety. Recall that, at the middle dose, we reached potentially therapeutic levels of protein. At the high dose, we started to see infusion-related reactions that are typically associated with lipid nanoparticles and, in fact, with recombinant proteins at large. These were anticipated in the protocol. They occurred within hours of the infusion, were clinically resolved by the time the subject went to sleep or got up in the morning, and did not require medical intervention. We did not see any serious adverse events and we did not see changes in liver or kidney function tests. To understand the performance of our technology, I'd ask our clinical pharmacology team to model the exposure that we would expect in humans based on the preclinical animal model experience. Here in the shaded areas, you can see the 90% confidence intervals for where we would expect human protein levels to fall at each dose level. The solid dots are the individual clinical data landing exactly where expected. Our delivery technology, in other words, translates from preclinical species to human with no loss of potency. This is important because it increases our confidence in the predicted activity of the 0.2 mg per kg dose level for MMA, our first rare disease program because it is using the same delivery lipid nanoparticle. Given that we explicitly did not include steroid premedication in the first part of the study, the question is whether we can add steroids to the 0.6 mg per kg dose and further reduce or completely eliminate the infusion-related reactions that we've seen. So we're continuing to explore the pharmacology of mRNA-1944 at the 0.6 mg per kg dose level and intend to do so with both the inclusion of steroid premedication as well as by splitting the dose and giving two doses of 0.3 mg per kg one week apart without steroids. I look forward to continuing to show the data as it emerges from this trial. In summary, we're really happy with the results of our Chikungunya antibody program mRNA-1944. We saw a dose-dependent increase in levels of antibodies against the chikungunya virus. The antibodies were functional with a predicted translation profile from species to species and no loss of potency when we bring it into humans. mRNA-1944 was also well tolerated in a healthy volunteer population at a dose where we saw therapeutic levels of antibodies being produced. Importantly, these results bode well for our rare disease programs like MMA that use the same LNP delivery technology as mRNA-1944. This brings me to the intracellular therapeutics. In this modality, let me provide you a quick update on MMA and PA. These are similar diseases caused by inborn error of protein metabolism and are caused by MUT enzyme deficiency or PCC deficiency, both of which act intracellularly. Our MMA and PA programs aim to replace these proteins and bring protein metabolism and the associated acidemia levels closer to normal. From a regulatory standpoint, mRNA-3704 and mRNA-3927 have similar designations. Both compounds have FDA orphan drug designation, EMA orphan disease status, FDA fast-track status, and FDA rare pediatric disease designation which upon approval will qualify the two programs for rare pediatric disease vouchers. The Phase I study for MMA is currently active recruiting patients, and the PA program recently had its IND opened. We're preparing to start a Phase 1/2 trial there shortly. Regarding MMA, the initial cohort was limited by the FDA to adolescents between the ages of 12 and 18. During the summer, we went back to the agency, and they allowed for the expansion of this age bracket to include patients older than 8. While we're continuing the dialogue with FDA regarding further modification to the enrollment criteria in the past few weeks, this amended protocol has been approved by the IRBs of the first few institutions. I look forward to updating you on our progress soon. PA has a similar design and similar initial age restrictions, and following the opening of the IND and subsequent fast track designations, we have begun start-up activities at the leading academic centers. Let me close with slide 32 which lists the anticipated next steps and upcoming clinical catalysts. I'll focus you on the CMV Phase 2 start as well as the eventual readout and on the MMA and PA Phase 1/2 trials. With that, let me turn the call over to Lorence.

Thank you, Tal. In today's press release, we reported our third quarter 2019 financial results. Please note these results are unaudited. We ended Q3 2019 with cash, cash equivalents, and investments of $1.34 billion. This compares to $1.69 billion at the end of 2018. Net cash used in operating activities was $363 million for the first nine months of 2019 compared with $240 million in 2018. Cash used for repurchases of property and equipment was $25 million for the first nine months of 2019 compared to $92 million in 2018, which was the first year that we put our Norwood manufacturing facility into service. Recall that on January 1, 2019, we adopted the mandated revenue recognition standard ASC 606 using the modified retrospective transition method applied to those contracts, which were not completed as of January 1, 2019. The decreases in total revenue for Q3 and for the first nine months of 2019, compared to 2018 were mainly attributable to the adoption of this new revenue standard. Revenue for Q3 2019 was $17 million as compared to $42 million for Q3 of 2018. For the first nine months of 2019, revenue was $46 million compared to $100 million in 2018. Total revenue under the previous revenue recognition standard would have been $25 million for Q3 2019 and $80 million for the first nine months of 2019. R&D expenses for Q3 2019 were $120 million compared to $109 million for Q3 2018. For the first nine months of 2019, R&D expenses were $379 million compared to $304 million in 2018. The increase in Q3 and for the first nine months of 2019 compared to the prior year was mainly driven by an increase in personnel-related costs, including stock-based compensation, with additional increases for the first nine months of 2019 being driven by higher clinical trial and manufacturing costs, an increase in lab supplies and materials, and an increase in consulting and outside services. G&A expenses for Q3 2019 were approximately $28 million compared to $19 million in Q3 2018. For the first nine months of 2019, G&A expenses were $84 million compared to $56 million in 2018. The increases in Q3 and the first nine months of 2019 compared to the prior year were mainly due to the additional costs of operating as a publicly traded company, including an increase in personnel-related costs, stock-based compensation, consulting and outside services, legal, and insurance costs. Let me now drill down on our balance sheet strength. We ended Q3, as I mentioned, with cash, cash equivalents, and investments of $1.34 billion. That balance sheet is augmented by our access to a number of grants. We are fortunate to have established strategic alliances with government-sponsored and private organizations including DARPA, BARDA, and the Bill & Melinda Gates Foundation. As of September 30, 2019, we've recognized $59 million in revenue to date, while we have a total additional available funding of $187 million, comprising $99 million of committed funding and another $88 million of non-committed funding that we can tap into. I'll turn now to where we expect to end 2019. We ended 2018 with $1.69 billion in cash, cash equivalents, and investments. Early this year, we guided to a year-end 2019 cash balance of $1.15 billion to $1.20 billion. We've reiterated that guidance on subsequent quarterly calls. Today, we are guiding the year-end cash at the high end of that range. We expect to have approximately $1.2 billion at the end of 2019. This works out to a change in cash of less than $500 million for 2019. I also want to highlight two specific cash flow line items: our cash used in operating activities and purchases of property and equipment by quarter. In Q1, we used $152 million of cash in these two items. That number included $22 million of in-licensing payments, but we have no further in-licensing payment obligations to these entities going forward. You can see the decline in our quarter-over-quarter cash used for these items and a year-to-date number of $388 million. When we look ahead to the full year on these cash flow metrics, we can expect 2019 net cash used in operating activities and purchases of property and equipment to total approximately $500 million. As we've said in the past, this reflects our ongoing focus on the allocation of our shareholders' capital toward value-driving investments in our portfolio and platform. Lastly, as we look at 2020, we are issuing guidance now for next year around these same cash flow metrics. I'll start by noting that we actually expect the trend to be relatively flat year-over-year. This trend is really due to a combination of factors. First, we had non-recurring costs such as the $22 million of in-licensing payments in 2019. Also at this time with Norwood operating well, our need for significant new facilities and associated capital expenditures is limited. Our pipeline, while it's advancing well, is actually not burdened with very large trials in 2020. For instance, while we are planning for a substantial Phase III CMV vaccine study, that program only requires pre-investment in 2020. Lastly, our partners fund significant development costs for programs such as RSV, Zika, KRAS, IL-12, VEGF, and Chikungunya antibody. For these reasons, we do not expect growth in our cash needs for next year, while being able to fund significant pipeline advancement and ongoing platform development. As a result, our guidance is that we expect net cash used in operating activities and for purchases of property and equipment to total $490 million to $510 million for 2020, very similar to where we will end 2019. As I hand it back to Stéphane, I'll close again with our pipeline which reiterates my last point on the number of programs that we've highlighted that our partner-funded. Stéphane?

Thank you, Lorence. To close, I would like to spend a couple of minutes on the development products and why we are so excited about them and what they can do for patients. Let's start with our innovative vaccines. We now have in clinical studies four important innovative vaccines: the CMV vaccine, RSV vaccine, a combo hMPV and PIV3 vaccine, and the Zika vaccine. There are no approved vaccines to protect humans from these five viruses. The morbidity and mortality costs around the world from these five viruses is devastating. We believe CMV, RSV, and our hMPV/PIV3 combo are each multibillion-dollar annual fixed sales opportunities and Zika is a several hundred million-dollar annual fixed sales opportunity. We know that our vaccine translates well from preclinical models to Phase I data. It is well documented in the pharmaceutical industry that vaccines once they show a positive Phase I have the highest probability of launching across any therapeutic area. We have five immuno-oncology programs in the clinic; that is a remarkable pipeline. For all of our five oncology programs, our aim is the same: can we add an innovative mRNA medicine to a commercial PD-1 or PD-L1 to improve the response rate of these patients? Checkpoints are wonderful medicines, but unfortunately, most patients do not respond to checkpoint inhibitors. We believe there is a large commercial opportunity to improve the complete response rate of checkpoint inhibitors, and we have five opportunities to try to do that. Finally, in rare diseases, we have two — we have five important medicines in development. Three of these are designed to treat devastating diseases for which there are no improved medicines on the market: MAPA, GSD1a; and two of them are designed to improve the standard of care for patients for PKU and Fabry. Our priorities for 2019/2020. Priority number one is to execute on our pipeline. I am pleased with the progress across the board in 2019, especially with clinical data for the CMV vaccine and our antibody against chikungunya virus programs, as well as our PCV program now in Phase II. Priority two was to name a new development candidate in our existing modalities. We then have a new DC for GSD1a earlier this year. Priority number three is to create a new development candidate in new modalities. We are continuing to make good progress in several new modalities and we look forward to sharing some updates in 2020. In summary, we are pleased with the pace of execution. The key highlights of our third quarter are the positive Phase I data for CMV and the antibody drug chikungunya. We have up to $1.5 billion to invest in the business with enough cash balance to support our endeavors. We invested approximately $500 million in our company in 2019 and also approximately $500 million in 2020. We intend to continue to pursue new partnerships with biopharma companies and to apply for new grants. We know that we have a special opportunity, and we are committed to delivering on the promise of our science and bring forward a new class of medicines for patients. I would like to end our remarks by thanking the many people who participated in our clinical studies, including patients, healthy volunteers, and physicians. I would also like to thank the great team at Moderna working hard every day to make this vision a reality. With that, we are now happy to take any questions. Operator?

Great. Good morning. Thanks for taking the question and thanks for the detail on the update here. I guess two parts for me. So first, could you just talk about the progress in being able to enroll patients in MMA? I think you've had sites opened for a bit of time here, and now you've been able to expand the age group, but it doesn't sound like you've enrolled a patient yet. So maybe you can just talk about what's going on there? And then second on chikungunya, maybe just talk about when we should expect to see some information about dosing profile and if you're able to drive doses higher with premedication or split dosing?

Thank you, Matthew. This is Tal. Let me address both of your questions. You're right on MMA. We have not yet dosed our first subject. As noted initially, the FDA had requested that we limit the first three subjects to ages 12 and above, and before we can proceed to children that are as young as one year old, where the highest unmet need is. I think we found in opening the sites and trying to enroll that there are several factors that come into play. By the time somebody gets to be an adolescent, if their disease has been severe, they've often had a liver transplant. In fact, liver transplants in the U.S. are recommended between the age of one year in preschool. When a kid with MMA shows up for liver transplant, they move to the top of the queue, so there's not much waiting. Those who don't get a liver transplant often suffer from kidney deterioration and do a Phase I trial with really abnormal kidney function. So we have gone back to the summer, as noted, to discuss with the FDA lowering the age criteria. They had agreed to take it down to ages eight and above. While we're still in dialogue with them about that, the amendment to enable us to do that has just recently opened at some of the leading institutions. I look forward to enrolling the first subject soon. It has been a challenge due to all those factors that I alluded to. I think between lowering the age and now being open at some of the select institutions, we should see progress soon. Now, you asked me about the chikungunya and when do you expect to see data? This is a healthy volunteer trial. We had gone back to the safety monitoring committee, aligned with them on the next steps, and we're actively working with the site to get the next cohorts enrolled. As soon as data will become available and we understand what it is, we will share it with you. Being a healthy volunteer trial, it should move relatively quickly.

Great. Thanks for the update and all of the great progress. I want to ask about the CMV vaccine, really just get a little bit better clarity on what you see as the path forward here, appreciating a Phase II dose confirmation start next year. Can you give us a sense of the size of that study and maybe how long it would take? And then looking kind of forward, how soon do you think you could actually initiate pivotal studies in women of childbearing age?

Thank you, Ted. This is Tal. I'll take that question. A couple of points. First, in terms of size and timing, the Phase II is about 250 subjects or so. The design is really meant to confirm the dose and give us more color on both immunogenicity and safety and tolerability, so that we can pick the right dose for Phase III. That being said, the time should be relatively quick because we'll make the decision based on a three-month endpoint once everybody has been dosed, similar to what the interim data that we've shown in Phase I. By then we will have the further follow-up post the third dose in Phase I, so we'll have overall more data to share and substantiate that decision. Now, the path to Phase III, I think the big change here for me has been the fact that FDA has provided guidance that speaks of the potential for licensure based on the prevention of primary infection. That's very significant because that means it is imminently doable with the trial of the size that we've discussed. In terms of launching that, I would say the two gating factors that I think are going to be the launching study are going to be the Phase II data and some regulatory discussions. This was just very preliminary initial guidance, of course, before one launches a Phase III trial here. We need to have those deeper discussions with the FDA and other agencies to ensure we're launching the right study. Once we get their agreement, I think the design is fairly straightforward. One would expect an incident rate of about 1.5% a year. So hopefully with a couple of years of follow-up once everybody is enrolled, you could see the effect you're looking for and wrap it up. That gives you a rough sense of the overall timeline here.

Great. That's super helpful. And then if I may just ask a second question. Appreciating that it's with Merck, when could we get data from the enhanced RSV vaccine? Thanks so much.

Yes. That's a great question. I ask it as well. The truth is that they are pretty efficient in running these trials. They've got a long track record of running a healthy volunteer vaccine trials and analyzing data quickly. So as soon as they have something material to share with us, we'll of course share it with you.

Good morning. Thanks for taking my questions. Maybe a first question here on how your chikungunya vaccine clinical development plan reflects the guidance that was provided by the FDA. And then a second question on the chikungunya antibody program here. Could you just walk us through your plans for evaluating repeat dosing, recognizing that you do have this cohort study coming up with two doses about a week apart?

Thank you, Salveen. This is Tal. I'll take that. The plan to develop a chikungunya vaccine is a great question. It's true that the FDA is giving a potential path. In fact, there's a big discussion in a couple of days down at FDA where our team is presenting alongside others to flesh out what that could look like. To date, it hasn't been clear how one could develop it and do it in a commercially viable setting. The degree to which the discussions with the agency in the near term will actually paint a path where it would be worth our capital and time to go there. We'll obviously be looking at it carefully. I don't have a clear answer because I think this is a work in progress. To date, we've not seen a commercial path. I'm happy with the recent agency guidance, and we'll see how the conversations go. Your question on repeat dosing for the monoclonal antibody program. The goal really here is to substantiate our ability to stack pharmacology. In other words, to show that the antibody level, the protein level production of two doses given a week apart behave as expected in the clinic. We have seen that in the preclinical toxicology in nonhuman primates. I think being able to show that and leveraging the fact that the adverse event profile seems to be a very quick infusion-related reaction that comes on quickly and comes off quickly, we would expect that there would not be any stacking in terms of safety, while there would be stacking in terms of pharmacology. That's the rationale for doing two doses one week apart at a dose where we have not seen any significant adverse events. Did that answer the question?

Yes. That was helpful. Thanks.

Hey, good morning, guys. Thanks for taking my questions. So two as well. So first is just following up on CMV. And as you get the Phase 2 sites up and running and plan for your Phase 3, are there any additional processes or challenges we should be thinking about given the new modality you're introducing? Or is this something that you think you can go pretty quickly from a patient accrual point of view? And then my second question is just regarding your natural history studies for MMA and PA. What's the age range you have there for the natural history? Do you think that provides any read-through to how enrollment might go once you have a broader age range introduced for your clinical trials? 87 subjects at this stage, it seems like a pretty decent number for rare diseases? Thanks.

Thank you, Cory. It's Tal. Let me take those two in sequence. I don't foresee any additional challenges for enrolling the CMV out of the Phase 2 or the Phase 3 that are platform-dependent. I'll give you the two reasons for that. First, the totality of safety and tolerability data that we've seen across the portfolio are consistent with what one would expect. We haven't seen anything surprising. There's no scientific reason to expect anything untoward, and we haven't seen anything untoward in preclinical. I think this is going to be a vaccine platform that will behave as such. In fact, the CMV data suggest that the more potent the vaccine is, the more adverse events one gets, such as flu-like symptoms. The type of adverse events, as I've noted, is what you'd expect. The other reference point is the fact that this platform is no longer considered an adjuvanted vaccine by the agency. I think that is also reassuring in that respect. So I don't see any hurdles that are a function of the platform to enrolling CMV or getting it to market frankly. Your question about the natural history study is a good one. I was pleased by the rate of enrollment and the numbers that we've gotten there to date. The age distribution is pediatric. We are seeing, I think, a median age of around five to eight, roughly speaking, looking at the totality of the data so far. It is providing us, I think, good information as it relates to variability, biomarkers, clinical endpoints, all the things we've expected to see. I think it is substantiating our sense that the older the children are, at least those that are found at any given time points in terms of prevalence, certainly in the U.S., tend to have either undergone transplant or have deteriorating kidney function. It all is coherent, I would say overall, with what we're seeing in starting up sites now and trying to enroll the first subjects into the MMA trial.

Okay. That’s helpful. Thanks, Tal.

Hey, guys. Thanks for taking my question. So on the ongoing follow-up from the Phase 1 trial of the personalized cancer vaccine. I appreciate that the objective of the Phase 1 is primarily to assess safety and immunogenicity. But do you intend to present any outcomes-type data from the study beyond immunogenicity, say with this next six months? Or will we need to wait on the Phase 2 study for this sort of analysis? And then on the KRAS vaccine, is this something that Merck will report since they are the ones leading the study?

Hi, Alec. It's Tal. Yes to both questions. The Phase 1 PCV data, we will share that data once we've got a cogent totality of it. Every Phase 1 or every clinical trial that we do, as a matter of policy and ethics in the company, we will publish, and this is no different. So at the next opportune moment when we have a body of evidence there, we will share it, including the totality of the clinical data. In fact, I think it is the clinical data that is important to me and I think the rest of the world to assess activity here. In that regard, recall that one of the cohorts there is testing patients previously refractory to PD-1 inhibitors, and so I think that will be meaningful data once we have it. KRAS, you are correct. Merck is running it, and so Merck will be, I think, the party reporting out the data, and I look forward to that as well.

Okay, great. Thanks. I had one more question if I may. I noticed that the follow-on Phase 1b for the hMPV/PIV3 vaccine was posted at ct.gov last week. It looks like you've dosed the first patient in the study. A few questions. What kind of safety metrics are required for gating between the adult and pediatric cohort? What dose levels of the vaccine will be included in the study? How quickly do you foresee the study completing? From your conversations with the FDA, do you have a sense of potential registrational path following the study? Thanks.

Those are great questions. Let me answer them in turn. The safety metrics are your typical vaccine safety metrics, so you look for safety and tolerability. We have an independent safety monitoring committee that reviews that, and we've actually had our recent inaugural meeting with them. It won't be just us making that. We've got some of the world's experts actually looking over our shoulders and helping make those decisions. The dose level, honestly, on the top of my mind, I don't remember. It's the honest truth. I'm happy to get back to you. If it's not on the trial, let's double-check that. The path to approval, that's a great question. As we had disclosed in the past, we had an initial interaction with the agency and had a Type C meeting in response. We had a line of sight to the possibility to have a pivotal trial that would test both viruses together. Roughly speaking, the path there is to demonstrate safety in the seropositive toddlers and then go on to a larger Phase 3 study to demonstrate efficacy in seronegative toddlers. We are trying to establish immunogenicity from before anybody has been exposed. I can't give you a clear time to completion, and as with CMV, before one goes into a Phase 3 trial, we're going to have to have more in-depth discussion with the regulatory authorities before we do that.

Great. Thanks for the color.

Great. Thank you for the questions. I just want to ask one question about an asset that you got the furthest along, AZD8601. I know that's in partnership with AstraZeneca, the CABG study. I mean that's when you're treating patients for almost about a year and a half now. Just any thoughts there? Could the readout of this Phase 2 study move that along faster or into a pivotal clinical trial? So any thoughts there? And then I just have a couple of quick follow-ups.

All right, Hartaj. It's Tal. Two points on that trial. I mean to give AZ credit, they've designed a very informative pharmacology trial because they're using state-of-the-art, as you may recall, oxygen-labeled CAD imaging to map the heart and the areas at risk very finely. The challenge for them has been that the half-life of that isotope is extremely short and so you have to find a hospital that basically has a cyclotron next door. They have gone and found additional sites where they can launch that trial. They are now open not just in Finland as they were but actually in Germany and the Netherlands and are actively looking for patients. The good thing about that trial is that the endpoint, once they enroll the subject, should be relatively quick because it is a six-month endpoint, and the trial overall is not very large. I think that's as much insight as I have in terms of enrollment. Could they move faster? There are other ways that one could think of how you would develop an intracardially injected molecule. They've got a ton more expertise in this space than I do, and they're actively working along those fronts. Frankly, I'd have to defer to them to give you more color on what that could look like. But I think you had a few follow-ups.

Yeah, a quick one. I'll just mention them quickly. I know you had mentioned that the seropositive patients—data seen in those in the CMV trial—that had not been seen previously in other trials. For your Phase 2 and your Phase 3, will you stratify by seropositives? Could those be a group that you could get approval just on their own? Just any thoughts there?

Yes. So a couple of thoughts. The fact that one sees this effect on seropositives is really scientifically interesting, and I've got a deep curiosity to see if it could translate to benefits. That being said, in terms of enrolling on the Phase 3 and the eventual label, I'd make two points: one, I think the Phase 3 will be focused on seronegatives because that's where you can see the obvious effect of preventing infection. It's hard if not impossible to demonstrate a clinical benefit in the seropositives, although of course, I remain intensely curious about that. The second point to note is that the FDA in their response told us that they understand that one is not expected to demonstrate the benefit in seropositives. In order for this vaccine to be viable in terms of access to patients and having an impact on the population, you would need a label that would encompass both populations. So the expectation is that we would demonstrate immunogenicity—I'm sorry, prevention of primary infection in the seronegatives, but we would demonstrate safety and tolerability in the entire population that is all-inclusive of seropositives, and that could lead then to a label irrespective of sero status. Does that answer your…

That's great, Tal. Yeah, great. Thank you.

Hi, Tal, thank you for taking our questions. Questions are all around PA. Congrats on recently receiving fast track designation. So the first one is for you. Can you tell me when you're thinking about the dosing strategy for PA, how it will differ from your strategies in 3704? When we think about sort of key PD biomarkers, what key biomarker in your view proves established proof-of-concept? And then part three of the question is, what do we know from the literature in regards to what level of expression of PCC one needs to achieve to provide therapeutic benefits?

Thank you, Yasmeen. Great questions. Let me take them one at a time. The dosing strategy is roughly similar to what we expect to see in MMA. It is based on our translation of the preclinical data. We've done long-term models in animals and have used that to extrapolate. So far, the technology has extrapolated nicely from all the preclinical species in the various modalities. I would expect the dosing strategy to be once every two or three weeks. So, I think we're going to have to define that and see the effect we have in Phase I. There is a whole slew of biomarkers here that one looks at, and I think it's premature to specify which one is going to be the one. It is true. I think what you're indirectly alluding to is that the biomarkers on PA are not maybe as clear-cut as they are in MMA. I think that remains to be proven. The information we hope to achieve from the natural history study in terms of biomarker levels, where we're collecting it, should also be informative. We will continue to update that as we learn more. Our understanding of the literature and our natural history level here is evolving. In terms of the level of expression needed, I think it's hard to quantify. What we've seen from our preclinical models suggest that it is a similar level that we need of MMA in order to have the effect in the mice be effective as profound in the PA models as it is in the MMA models. We expect a similar dosing level to be required for both. It may be a little bit higher given that in PA, we are encoding for two proteins, not one, right? On a model basis, we would expect similarity on a milligram per kilogram. It may be a tad higher, but it's clearly within the same ballpark.

Thank you. And then if I may have a quick follow-up in regards to the antibody against chikungunya. We're excited to see the data from the two doses of 0.3 mg per kg. How far out are you going to assess safety? What are you planning to do? And what has regulators asked you to do?

Just to clarify the question. You are asking how far we are looking at safety?

Yes. Yes. Just monitoring the safety, since you're giving for the first time two doses. How far out will you actually monitor these patients, and therefore will provide for us the safety results?

Several weeks, I would say. I don't think it's going to be much longer than that. The reality is you've seen the adverse event profile to date. It really is a function of the LNP as I understand it more than the protein that we make. We'll be continuing to follow these patients—I'm sorry, these subjects for weeks, but I've not seen anything that leads me to expect that there's a long-term challenge here. I think the safety profile within a week will describe what it is.

Hi. Thanks for taking my questions. Can you give us an update on where the other rare disease programs stand? Might those be a little bit easier to enroll? Also, do you have any update on AZ's program with Relaxin?

Yes, so this is Tal. Let me take them. They're in their preclinical phases. Once we file the IND and we get rolling, we'll update you accordingly. I think we don't typically comment on where exactly in the early research space they are. I think the same holds true for Relaxin which is partnered with AstraZeneca.

Yes. So, thank you. This is Stéphane. If you look at the company history, as you know, we have done a lot of partnerships. Over the last 12 months, you might have observed we have been quiet because we were very busy. We're preparing for the IPO and then spending a lot of time on the road as a newly public company. If you look at what the team has achieved and what we believe a platform can provide in terms of new medicines for patients, we have a primal abundance, which is a wonderful point to have in this industry. We think that we cannot take all the drugs that are coming from Stephen's team on the platform into the clinic by ourselves. We'll continue to have dialogues with biopharmaceutical companies. If you look at the company history, we work around the clock there with our capital since the inception of the company through partnerships. We think this is a wonderful way to tap capabilities that we don't have, tap capital that we don't have, and just increase the opportunities of getting Moderna's mRNA medicines to patients and to a finish line. We anticipate to continue to set up new partnerships in the quarters to come.

And what's the profile of programs that you might partner versus keeping in-house when you're looking at this?

Speaking to what we have done before is looking at where we have expertise and keep us looking at biology risk. This is what we're selling for.

Thank you.

Yes. Thank you very much for joining us today and for your questions. We look forward to seeing many of you in the coming weeks and at the JPM conference in January. We also wanted to share with you that we are planning to start an Annual Day focused on manufacturing and digital. This new Investor Day will complement our Science Day, which usually happens in the spring, and the R&D Day usually in September. The 2020 manufacturing and digital events will be held at our Norwood plant on the afternoon of March 4 on the back end of a Cowen conference in Boston. Juan Andres, who leads our Technical Development, Manufacturing, and Quality; as well as Marcello Damiani, our Chief Digital Officer, will host the event. They will share with you what progress their team has made in 2019 and the new initiatives they will do in 2020. We hope to see many of you on the afternoon of March 4 in Norwood. Have a nice day.