Moderna Inc (MRNA) — Q2 2020 Earnings Call Transcript

Thank you, operator. Good morning, everyone, and welcome to Moderna’s second quarter 2020 conference call to discuss financial results and business update. You should 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 Stéphane Bancel, our Chief Executive Officer; Tal Zaks, our Chief Medical Officer; Stephen Hoge, our President; and David Meline, our Chief Financial Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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. We undertake no obligation to update or revise the information provided on this call as a result of new information or future results or developments. I will now turn the call over to Stéphane.

Thank you, Lavina. Good morning or good afternoon, everyone. I hope all of you are in good health and remain safe. Thank you for joining our Q2 business update. We are committed to building mRNA as a new class of medicines. We model our position to remain the leader in this field. As you know, we believe our mRNA medicines have the potential to address the large and unmet medical needs and to treat diseases that are not addressable by recombinant protein or small molecules. Due to the platform nature of mRNA, we believe our mRNA medicines provide a higher probability of technical success to commercial launch and faster timelines to clinical trials and to the market relative to traditional medicines. We also believe that the manufacturing capital intensity of mRNA is materially lower than recombinant protein and the cost of manufacturing at commercial scale will be similar to small molecule injectables. Let me start by summarizing the key achievements of the Company in Q2 on slide 4. mRNA-1273, our COVID-19 vaccine candidate, saw the start of its Phase 2. And the team focused on the Phase 3 design and preparation for a July start. We signed a strategic long-term partnership with Lonza to significantly increase our manufacturing capacity to make mRNA and formulate it at large industrial scale to complement our Massachusetts manufacturing site capacity in the context of the pandemic. We started the technology transfer to Lonza in Q2. We raised $1.3 billion on May 18th. This capital was raised to enable us to scale up at risk our manufacturing capacity in anticipation of a potential approval for mRNA-1273. We started investing the proceeds for additional capital equipment at our Massachusetts plant, as well as the Lonza plants in New Hampshire and in Switzerland, ordering raw materials at large scale and hiring additional personnel to make mRNA-1273. In April, we finalized and announced an award from BARDA for up to $483 million for clinical development costs for mRNA-1273. An additional award was also announced last week for up to $472 million, given the increased size of the Phase 3 to 30,000 participants. The total award is now up to $955 million. In a very difficult environment during the spring, given the many lockdowns across the U.S. due to the COVID-19 outbreak, our clinical team was able to continue to operate most of our clinical trials on schedule. And we remain on track to provide in Q3 the Phase 2 interim data for our CMV vaccine candidate, mRNA-1647. The team continues to work relentlessly to start the Phase 3 study for CMV in 2021. We continue to believe that our CMV vaccine candidate annual peak sales could be $2 billion to $5 billion, and like mRNA-1273, our COVID vaccine candidate, we own the global commercial rights of mRNA-1647, our CMV vaccine candidate. Q2 marked a new growth phase for the Company as we started to build and hire our commercial team. This is a historic moment for those of us who have worked at the Company for many years, since it was a breakthrough research enterprise, working with small animal models. And now, we’re building commercial operations. In Q2, the team initiated discussions with several countries around the world about potential supply agreements for mRNA-1273. We saw our first deferred revenues booked in Q2 on the balance sheet for $75 million of cash receipts from deposits for the first potential supply of mRNA-1273. As of July 27th, we have received approximately $400 million of cash deposits. For today’s call, we will cover three main topics. First, Tal will review and update you on our clinical programs and share some new clinical data on our CMV and Zika vaccine candidates. Then, Stephen and I will discuss our value framework for the COVID-19 candidate and our approach for delivering value during the pandemic. Finally, David will take you through the second quarter financials. Let me now turn the call to Tal.

Thank you, Stéphane, and good morning, everyone. Let me start with our prophylactic vaccines portfolio; a quick overview of the programs is on slide 7. mRNA-1273, our vaccine against COVID-19, has made very significant progress. The interim results of the Phase 1 trial have now been published in The New England Journal of Medicine. The Phase 2 trial was fully enrolled. Importantly, we recently started the Phase 3 trial with 30,000 volunteers in the U.S. Our CMV Phase 2 dose confirmation study remains on track for interim data in the third quarter of this year, and the Phase 3 trial is expected to begin next year. The Phase 1 trial for Zika is fully enrolled, and I’ll share some data from the 100 and 250-microgram dose cohorts shortly, while we’re preparing for Phase 2. Our Phase 1b age de-escalation study with our combination hMPV/PIV3 vaccine remains on pause with enrollment suspended due to COVID-19 disruptions. Finally, the Phase 1 study with mRNA-1172 against RSV led by our partner Merck is ongoing. So, new is additional data from our CMV and Zika Phase 1 programs. For CMV, these include 12 months of immunogenicity data from dose cohorts, 30, 90, and 180-microgram, along with safety data from the 300-microgram dose cohort. For Zika, we disclosed data from the 10 and 30-microgram cohorts. Today, I will show you the safety and immunogenicity data for the 100 and 250-microgram dose groups. Starting with CMV. On slide 9, you will see a table of the solicited adverse events after the third and final vaccination in the highest dose we tested, 300-microgram. The safety and reactogenicity data from this dose is shown side by side with the other lower dose cohorts from the trial. At the 300-microgram dose levels, solicited adverse event reactions showed a trend towards increases with the higher dose and who were higher in seropositives. This is consistent with what we’ve seen in the other doses as we moved from 30 to 90 and 180 micrograms. The most commonly reported adverse events were pain at the injection site, headache, fatigue, myalgia, and chills for seronegative participants, with fever and arthralgia as more common adverse events in seropositives. Importantly, at the 300-microgram dose, there continue to be no related serious adverse events reported and no unexplained safety findings. Moving to the 12-month immunogenicity data for the full 30, 90, and 180-microgram dose cohorts in the Phase 1 CMV trial; we have durable neutralizing antibody responses out to the 12 months timeframe. Slide 10 shows the data in the same format we reported previously. At the top part of the table, you see the geometric mean neutralizing antibody titers against epithelial cell infections or the pentamer at the 12-month mark, as well as the fold increases above the seropositive benchmark of 5,917. At the 90 and 180-microgram doses, the fold increase in geometric mean titers above that seropositive benchmark were 3.6 and 3.9-fold higher respectively. The bottom half of the table figures for the geometric mean antibody titers against fibroblast infection or the gB antigen for the same doses can be seen, and the geometric mean titers against fibroblast cells in the 90 and 180-microgram were 0.7 and 0.9-fold seropositive benchmark level of 1,449. On slide 11, you can see the graphical representation of the geometric mean antibody titers against epithelial cell infection relative to the seropositive benchmark, geometric mean titers. The solid line represents the seronegative participants and the increase in neutralizing antibody titers for each of the doses after each vaccination. The 90 and 180-microgram doses are shown in solid blue and orange, and they’re well above the benchmark seropositive level of the 12-month mark. This is six months after the last vaccination. The persistence of neutralizing antibodies is encouraging. Seropositives are represented by the dashed lines. These participants entered the trial with neutralizing antibodies, as you can see from the start, and they also saw their neutralizing antibody levels further increase with each vaccination, remaining above the geometric mean titer for neutralizing antibody levels up to the 12 months mark. CMV is an important unmet need, and we’re encouraged and excited by this 12-month data. We are currently running the Phase 2 dose confirmation study where we’re testing a narrow range of doses at the 50, 100, and 150-microgram; 252 seronegative and seropositive results have been enrolled, and we remain on track for an interim readout in the third quarter of this year. We continue to plan for the Phase 3 trial in 2021, pending further regulatory interactions and feedback. The primary endpoint, as we have previously reported, is anticipated to be prevention of primary infection in seronegative women of childbearing age. We expect to include less than 8,000 participants in the U.S. and Europe. Let me now move to mRNA-1893, our vaccine against the Zika virus, where we’ve seen additional data at the 100 and 250-microgram dose levels. Both of these dose levels were generally well-tolerated, with a trend towards more observations of local erythema and swelling at the injection site with the higher dose levels and after the second vaccination. Consistent with what we’ve seen across our vaccine platform, there’s a trend of more solicited systemic adverse events noted with 250-microgram dose levels, particularly after the second dose. There were no related serious adverse events. You can see some of the 30-microgram data have been updated from our Vaccine Day Presentation back in April. In terms of the immunogenicity response, both the 100 and 250-microgram dose levels induced a strong neutralizing antibody response in both seropositive and seronegative participants. The table on the left-hand side focuses on the seronegative participants and the data for the 10 and 30-microgram cohorts that we previously shared. All seronegative participants in the 100-microgram dose cohort seroconverted after the second vaccination, similar to that seen with a lower 30-microgram dose cohort, but now with higher geometric mean titers, as depicted graphically on the bottom. We did not see any further increase at the 250-microgram relative to the 100-microgram dose. On this page, you can see the data for participants with preexisting flavivirus immunity or the seropositives, where mRNA-1893 was still able to mount a Zika-specific neutralizing antibody response. Here, the first vaccination is comparable to a booster response, and the response was similar between all dose levels, although these are very small numbers. We are reviewing the data and will make a dose selection decision in preparation for the Phase 2 study. This program continues to be supported by BARDA. Quickly, to review at a high level the data generated to-date with mRNA-1273, our COVID-19 vaccine; the Phase 1 clinical data we published in The New England Journal show that 100% of the participants vaccinated generated neutralizing antibodies, and the geometric mean titer level at day 43 were 4.1-fold higher than those seen in convalescent sera from three representative COVID-19 patients. As published recently in The New England Journal of Medicine, in the nonhuman primate, vaccination with the two-dose regimen of mRNA-1273 led to rapid protection against infection in both the lungs and in the upper respiratory tracts of the animals. A preprint from a mouse challenge model has showed consistent protection in the lungs and noses of those animals as well. This morning, we’re happy to hear that Nature published this data, and it is available online today. We’ve been able to show protection against viral replication in every species we’ve tested so far, and the levels of neutralizing antibodies that correlate with this protection are roughly similar to those we achieved in humans in Phase 1. We look forward to the data readouts expected in the coming months, which will include the older and elderly cohorts in Phase 1, the safety and immunogenicity data from the Phase 2, and the potential for ensuring safety and efficacy analysis from the Phase 3 COVE trial. Let me now quickly review our other clinical programs in the Systemic Secreted & Cell Surface Therapeutics. I’m happy to report that the additional two cohorts of the Phase 1 trial for mRNA-1944 have recently completed enrollment. In this program, the mRNA-1944 encodes for IgG antibody against the chikungunya virus. The additional cohorts are testing an IV infusion of mRNA-1944 at the high dose of 0.6 mg/kg with steroid premedication, as well as two doses of 0.3 mg/kg without steroid premedication, given a weaker part. The randomized Phase 2 trial of our personalized cancer vaccine in combination with KEYTRUDA versus KEYTRUDA alone, which is partnered with Merck, is ongoing. We’ve also made progress with the intratumoral immuno-oncology programs. Our OX40 ligand program has expanded into the Phase 2 dose expansion study in combination with durvalumab in patients with ovarian cancer and is actively recruiting patients. The Phase 1 program with our triplet of OX40 ligand IL-23 and IL-36 gamma is ongoing and data were recently presented at ASCO. You can find a link for the data at the bottom of the slide. Within our systemic intracellular therapeutics modality, both MMA and PA studies remain on pause due to COVID-19 disruptions. Finally, our partner-led programs, including the mutant KRAS vaccine with Merck and IL-12, and VEGF with AstraZeneca continue. Slide 18 is a snapshot of our development pipeline with mRNA-1273 in Phase 3 and CMV in preparation for Phase 3 start in 2021. We have four trials now in Phase 2 and two preparing for Phase 2 and ten development candidates in Phase 1 with a further nine in preclinical studies. With such a broad development pipeline, we anticipate many readouts and next steps in the near term, and they’re listed on slide 19. These include, as I mentioned, the Phase 1 results from the older and elderly age cohorts, Phase 2 and interim analysis for Phase 3 for mRNA-1273, the Phase 3 results from CMV in the third quarter, and the complete Phase 1 data from the additional cohorts from our antibody against the Chikungunya virus. With that, let me turn the call over to Stephen.

Thank you, Tal. I’d like to begin our discussion on mRNA-1273 by referencing slide 21, which highlights the significant loss we’ve all experienced. It’s tragic that this pandemic has affected millions, and we extend our condolences to those who’ve lost loved ones or faced illness. It’s hard to fathom that just seven months ago, we didn’t even know about SARS-CoV-2 or COVID-19. Worldwide, over 18 million people have confirmed infections, with nearly 700,000 fatalities. In the U.S., that translates to 4.7 million confirmed cases and 150,000 deaths. Projections indicate that by the end of the year, the U.S. alone could witness up to 400,000 deaths. What we’re discovering about the virus is that it may lead to various long-term effects beyond the immediate consequences. In addition to pulmonary issues, pneumonia, acute respiratory distress syndrome, and pulmonary embolism, there have been growing reports of other blood clotting disorders, heart injuries, long-term consequences, as well as concerning potential long-term neurological complications and inflammatory conditions in children. Clearly, we are continuously learning about the severe impact of this virus. It’s absolutely crucial that we continue to advance the vaccine to mitigate this pandemic and address these long-term effects. On slide 22, when evaluating a vaccine's value during a pandemic, there are several methodologies. One well-established method is using incremental cost-effectiveness ratios, which typically assess merely healthcare costs, focusing on the direct medical expenses of treating the disease. Through the ICER analysis, we measure the incremental cost changes against the incremental health outcome improvements. The value of that improvement is generally gauged by willingness to pay thresholds, which usually range from $50,000 to $150,000 per quality-adjusted life year. On slide 22, I am sharing a recently completed analysis by Quadrant Health Economics examining an ICER at a $50,000 quality threshold. This analysis focused purely on the short-term benefits of vaccination during a pandemic, specifically the value generated in the first year following a widespread vaccine rollout. The scenarios vary depending on the populations considered and the epidemiology of the virus. However, looking at the current infection trajectory and vaccinating all adults aged 18 and older, the ICER value for the vaccine at the $50,000 threshold would be approximately $300 per course. If vaccination is initially targeted at high-risk populations, like individuals over 65, that value significantly increases, reflecting the higher disease burden in that demographic. Naturally, as transmission rises, the potential value of the vaccine amplifies. On slide 23, it’s essential to recognize the limitations of these ICER analyses. While vaccines provide substantial value by directly influencing healthcare costs, such analyses do not account for the long-term effects or disability potential related to COVID-19. They also fail to capture the social disruption and extensive economic losses affecting our lives globally. With that, I’d like to hand the call over to Stéphane to discuss our approach further.

Thank you, Stephen, for this value framing. I think, it is most appropriate for me to start with Moderna’s mission. We set out nearly 10 years ago now with a mission to deliver on the mRNA science to create a new generation of medicines for patients. Our mission has been our compass for almost a decade, and we continue for the long term. On slide 25, I want to share our approach to delivering value during the COVID-19 pandemic. During this pandemic and from the development process of mRNA-1273, our promise to deliver for patients has never been clearer. We have a responsibility to do everything we can to develop a safe and effective vaccine. We have invested in manufacturing at risk, ahead of approval to ensure supply if our COVID-19 vaccine candidate is approved. We are working with governments around the world and others to ensure the vaccine is accessible regardless of ability to pay. We will be responsible on price, well below value during the pandemic. Let me now turn to slide 26 and give you some more specifics. First, as we thought about responsible pricing, we concluded it is important to consider different time horizons. We are currently under a pandemic as defined by the WHO. At Moderna, like many public health experts, we believe that the SARS-CoV-2 virus is not going away, and that there will be a need to vaccinate people or give them a boost for many years to come. So, we think about two time horizons: the pandemic period as defined by WHO, and the endemic period. During the pandemic period, we are priced well below value with pre-approval supply agreements mostly to governments. To date, smaller volume agreements have been executed between $32 and $37 per dose. Larger volume agreements that are under discussion will be at a lower price for higher volumes. In the endemic period, pricing considerations will follow traditional dynamics and market forces including vaccine efficacy and the competitive landscape. We will look to price in line with other innovative commercial vaccines. We expect traditional approaches to vaccine purchases and distribution in the endemic phase. With this, let me now turn to David for a review of our financials. David?

Sure. Thank you, Stéphane. Turning to slide number 28, in today’s press release, we reported our second quarter unaudited 2020 financial results. We ended Q2 2020 with cash and investments of $3.1 billion compared to $1.7 billion at the end of Q1. The increase is driven by the capital raise in May of this year. Net cash used in operating activities was $130 million for the first half of 2020 compared to $253 million in 2019. The decrease in 2020 is mainly due to deposits of $75 million received as of June 30th, for potential future supply of mRNA-1273. Net cash used in operating activities for the first half of 2019 also included $22 million of in-licensing payments to Cellscript to sublicense certain patent rights. Cash used for purchases of property and equipment was $25 million for the first half of 2020 compared to $18 million in 2019. Total revenue was $66 million for Q2 2020 compared to $13 million for the same period in 2019. Total revenue was $75 million in the first half of 2020 compared to $29 million for the same period in 2019. Total revenue increased for both the three and six-month periods in 2020 due to increases in collaboration and grant revenue. The collaboration revenue increases were mainly attributable to an increase in revenue in the second quarter, particularly from AstraZeneca. The increases in grant revenue were primarily due to our BARDA agreement related to the development of our vaccine candidate mRNA-1273. Research and development expenses were $152 million for the second quarter of 2020 compared to $128 million for the same period in 2019. Research and development expenses were $267 million in the first half of 2020 compared to $258 million for the same period in 2019. The increases for both the three and six-month periods in 2020 were mainly due to increased headcount and mRNA-1273 clinical development activities. Overall, in both periods, we saw a significant increase in expenses for prophylactic vaccines modality as a result of our focus on mRNA-1273, while expenses related to the rest of the portfolio were stable. General and administrative expenses were $36 million for Q2 2020 compared to $29 million for the same period in 2019. Expenses were $61 million for the first half of 2020 compared to $56 million for the same period in 2019. The increases for both periods were mainly driven by increases in personnel and legal expenses. Turning to cash flow from net operating activity and purchase of property and equipment on slide 29. Cash used in operating activity and for purchases of property and equipment was $118 million, excluding the $75 million for deposits received as of June 30th for potential supply of mRNA-1273, in line with previous trends. On a reported basis, including the mentioned $75 million deposits, cash used in operating activities and purchases of property and equipment were $43 million for the quarter. Turning now to updated guidance for 2020. Our guidance today maintains a metric of net cash used in operating activities and for purchases of property and equipment. We will adopt additional guidance metrics in the future as the business progresses towards commercialization. As always, we’ll be interested in any advice you may have on how we can be clear, concise, and comprehensible. Overall, the net cash used in operating activities and purchases of property and equipment in 2020 will increase to $0.65 billion to $0.85 billion from the prior guidance of approximately $0.5 billion for the year. Updated guidance for 2020 reflects ongoing investments in Moderna’s broad mRNA clinical and preclinical pipeline, as well as the significant activities associated with our efforts to advance our mRNA-1273 COVID vaccine toward approval and launch. With regard to the ongoing investment in our base business, we remain on track with prior plans where we continue to expect net cash used in operating activities and purchases of property and equipment to be approximately $0.5 billion in 2020. Turning now to the financial impacts of a rapidly advancing mRNA-1273 COVID vaccine. First, expenses that fall under the scope of our BARDA agreement. These are primarily research and development activities to drive the COVID vaccine to licensure and scale-up activities on the technical development and manufacturing side. We expect a relatively close matching of expenses and reimbursement, and therefore, we do not expect these activities to materially impact our cash flow, and hence, these are not shown separately on slide 29. Next, looking at the COVID vaccine related non-reimbursable investments, primarily for manufacturing of product to be commercialized in the U.S. and internationally. We expect the net cash impact of COVID-related investments to be between $0.55 billion to $0.75 billion in 2020. This includes approximately $0.2 billion in capital investments with the balance of the expenses related to raw materials and production activity in our network. Additionally, this investment includes the initial commercial infrastructure build-up. The sum total of net cash used in operating activities for all of Moderna’s business is expected to total $1.05 billion to $1.25 billion before consideration of customer deposits. Also included in today’s guidance are the deposits we have received to-date for potential future supply of our COVID vaccine. Deposits as of July 31 total $0.4 billion, including $75 million received during the second quarter. We remain in active discussions with a number of potential customers, and we’ll update the status as the market evolves. In summary, on a net total company basis, we update our 2020 guidance for net cash used in operating activities to $0.65 billion to $0.85 billion for 2020. We expect this number to reduce as we receive further deposits. As we progress towards approval and commercialization of mRNA-1273, there’s heightened interest in several areas of accounting that will increasingly impact our reported results as we move forward. Slide 31 highlights several of these items. Costs associated with prelaunch inventory are expensed to R&D in the period incurred. We will capitalize our inventory when regulatory approval and subsequent commercialization is determined to be probable and we expect future economic benefits from sales to be realizable. Customer deposits for potential supply of mRNA-1273 are recorded as deferred revenue and will be recognized as revenue when revenue recognition criteria are met at a future date. Accounting for the BARDA grant follows a reimbursement model, where we will recognize revenue as we perform services and closely match expenses as they are incurred. For purchase and supply agreements, we disclose the aggregated amount of the purchase obligation that is fixed and determinable as per GAAP accounting requirements. This is regardless of whether these obligations have been recorded as actual costs in our financial statements in the current period. With that, I turn the call back to Stéphane for closing remarks.

Thank you, David. In closing, let me share with you a snapshot of Moderna today. The Company continues to progress its clinical pipeline and got closer in Q2 to becoming a commercial company. We have a first Phase 3 program with our COVID-19 vaccine, but we’re also preparing the Phase 3 for CMV vaccine. We have three programs in Phase 2, CMV; personalized cancer vaccine, PCV; and VEGF. We’re also preparing Phase 2 for the Zika vaccine and OX40 ligand development candidates in immuno-oncology. We have eight programs in Phase 1. We have 12 positive Phase 1 readouts across five different technology modalities. The products in development include seven vaccines for unmet medical needs, which if approved, could be first-in-class vaccines. This includes our vaccines against COVID-19, CMV, hMPV/PIV3 combo, RSV in older adults, and RSV pediatric population, Zika, and EBV. We have five immuno-oncology programs in clinical studies. We have four rare disease programs in both MMA, PA with open INDs. We have two autoimmune disease candidates, IL-2 and PD-L1 in preclinical studies. The foundation of Moderna has never been stronger. With over 2,000 healthy volunteers and participants enrolled in our study, as of the end of July, this number will grow considerably over the coming weeks as we continue to enroll 30,000 participants in the Phase 3 COVE study for our COVID-19 vaccine candidate. We have over 1,000 employees. We have a fully integrated GMP site in Massachusetts and a strong, experienced manufacturing partner in Lonza. Our biopharmaceutical partners are leaders in their respective fields, including Merck, AZ, and Vertex. Lastly, we had a strong balance sheet at the end of June. We have the ability to invest $3.1 billion to create value. We have entered a new growth phase for the Company. mRNA-1273 is now in Phase 3, and we have received approximately $400 million in cash for customer deposits for potential supply of mRNA-1273 as of July 31. We continue to discuss with many governments around the world who are interested in accessing mRNA-1273. The last six months have been extraordinary by many measures for our Company. The next six months could see us filing our first product for BLA approval. We know that we have a special opportunity, and we’re committed to delivering on the promise of science to bring forward a new class of medicines for patients. That is why we started this company, that is why we work hard every day. mRNA-1273 is ahead of its peers. We have a large pipeline with more than 20 development candidates. Since our founding, we have believed that it makes no sense for Moderna to be a one-medicine company. It will be zero if we fail to make mRNA science work or it will be many medicines if the first one gets to market, thanks to an FDA approval. That is because mRNA is an information molecule, which makes Moderna a unique biotech platform company. I would like to end our remarks by thanking those who participate in our clinical studies, including patients, healthy volunteers, physicians, and nurses. I would like to thank our partners at the NIH and BARDA and our biopharmaceutical partners. A special thank you to the Moderna team for their remarkable job in Q2 during a very complex time, scaling Moderna quickly while managing lockdowns and many personal disruptions. I’m very proud of the team’s achievement in the past seven months of 2020. With that, we are happy to take any questions. Operator?

Great. Good morning. Thanks for taking my question. I guess, two for me this morning. First, on manufacturing for 1273, can you give us an update on how much inventory you’ve built so far? And where you are in terms of scaling to that 500 million dose per year run rate that you previously highlighted? And then, second, I was hoping you could comment on some media reports we’ve seen over the last day or two about the FDA potentially convening a panel for vaccines in October. And I guess, also comments that there’s going to be real-time review of vaccines, and what exactly that means, given the timelines potentially for your Phase 3 study?

Matthew, this is Tal. Let me maybe take the second question first, and then I’ll defer to Stéphane to take the first one. Look, I can’t comment on media reports. I think that we have been working very closely with the agency, as I’m sure my colleagues have from other companies to ensure that we’re locked up and give them the best visibility we can to our data as it emerges. We continue that dialogue as our Phase 3 is now enrolling. The Phase 3 trial has pretty clear, if you will, interim analyses, and a robust statistical plan that we have described in the past. With the level of unmet need and more and more data emerging to substantiate a potential for benefit as we accumulate safety data on the Phase 3, I’m very happy to see that the FDA is continuing to take a proactive stance in evaluating the totality of the clinical data as it emerges. As soon as I have any more insights than that, I’ll be happy to share it.

Thank you, Tal. And Matthew, on the first question around manufacturing, we will not share inventory numbers at this time. What I can tell you is that as we speak, our teams are making commercial products, receiving the potential approval of mRNA-1273. We are literally making products and stockpiling at risk. In terms of the capacity, I’ll confirm what we have said before, which is for 2021, the 500 million doses per year continues to be our base plan, meaning the team has a good sense of how to execute over that plan. The team continues to work hard across many different approaches, from new processes, equipment to debottleneck, to find a path to 1 billion, which we still consider at this date as an upside. So, the base of 500 is your base case, and the team is still working hard to figure out how we can get closer to a 1 billion capacity for ‘21 output.

A question with regard to the assumed infection rate for the Phase 3. This is going to be somewhat dependent on where you’re enrolling and things like that. What can you tell us about the general assumed infection rate and how many infections you may need to see to be able to power the Phase 3 study of that size?

It’s a great question. The challenge is that I don’t know how to build those assumptions, given the huge wide variability we see in actual infection rates. The number of infections you need to see correlates to the number of cases required to pass the interim. As we’ve disclosed, it’s roughly a little over 50— a little over 100 and 150 for first and second interim and then the final. That’s sort of the number of cases. The advantage of running a 30,000-subject trial with 15,000 of them getting the active vaccine and the rest receiving the placebo is that the larger that cohort, the more likely you are to see those cases early. It’s of course a direct function of infection rates. If you step back philosophically, we designed with our partners at NIH such a large trial with the initial goal, not knowing at the time what the infection rates were. You take a cross-country average, figure you’re going to be able to enrich it somewhat, and you make it broad enough so that it’s representative of the diverse population. What we’ve seen is an anticipated acceleration of the timeline to cases, not just from us but from many researchers recognizing that infection rates currently in the U.S. are higher, particularly in areas where we’re conducting this trial, than we expected three or four months ago. The initial projections from experts suggested that we would see cases come in towards the end of the year or by the end of the year. Given the current infection rates, there may be an acceleration of this, but it’s extremely difficult to predict. Like everyone else, we follow these on a daily and weekly moving average.

Regarding the volume agreements executed at a higher price point for smaller versus larger volume orders, how are you delineating between the smaller versus larger internal volumes? And secondly, if two different companies developing vaccines for SARS-CoV-2 both use the PRNT50 assays, are those assays identical? Could you actually look at these programs head-to-head?

Good morning, Salveen. I will take the first question and then defer to Tal or Stephen for the second one. On the volume agreements, we’re not disclosing very precise cutoffs, because there are many components that go into getting those agreements across the finish line with potential customers. I think small is more in the 1 million range and large, as you can imagine, for bigger countries, will be very different ballparks. Stephen or Tal, do you want to discuss the PRNT50 assays?

Yes. This is Tal. It’s a great question. All of us are trying to look at and understand the assays. There are significant differences because those assays are not standardized. We’ve seen a range of PRNT50s, against live virus, pseudo virus neutralization. What’s clear is that all these correlate with each other fairly well. However, there are differences. I think if you look across, that’s why everybody is trying to report it out as a ratio to the convalescent plasma. The challenge is, again, there is no standard panel for what the convalescent plasma is. So, everybody’s using different panels. The ballpark estimates probably lie roughly between half a log and a log of each other, for sure, maybe even tighter than that. It’s hard to drill down and have confidence that you’re comparing apples to apples. I don’t think they’re identical. People attempt to set them up in identical ways, but there will be minor variances. There’s also variability in the preclinical models reported. For example, in nonhuman primates, there are different inoculum levels and severity of infections and differences in models. I think, ultimately, we’ll get smarter when we see the Phase 3 results.

Two quick ones for me. First, you’re seeing the market is seeing a lot of contracts both in the UK this morning and also another U.S. contract with J&J. Could you just put into some context for us how we should think about Moderna’s position here and presumption of a diversified stockpile and why or why not there hasn’t been anything to announce yet? And the second question, I guess, is since you’ve reported data, there has been a lot of other platforms with data that have come out, both adeno and protein. Can you just comment on how to put that into perspective and the market’s enthusiasm about those data sets?

Let me talk a bit about contracts, and then I will hand it over to Tal. As you know, Michael, to reach a contract, you need two parties to agree on terms. We have a longstanding relationship with the U.S. government with different agencies like BARDA, DARPA, and the NIH. The contracts that have been signed so far are contracts that, as you can imagine, are happening around the world in all key regions. As we get to the right place, we will, of course, make the right announcement. Our understanding is that different governments have different strategies. Some want to build a portfolio to manage risk because nobody knows which vaccine will get approved. They want to cover a range of potential products. We are cautiously optimistic about the good clinical data so far for our vaccine, and we are committed to helping as many people as we can across various governments. Tal, can I turn it over to you for the second part of the question?

It’s a great question on the platforms stacking up against each other. I believe our data continues to be as good or better than anything reported by anyone, both in terms of our neutralizing antibodies and in terms of the vaccine challenge data in the non-human primates. It’s been nice to see Pfizer validating our data with the BioNTech construct. We’re still very curious to see what they’re taking into Phase 2 and 3, as they report taking a different construct than the one for which they previously showed data. The adeno vectors have been an interesting story. I don’t know if they are as effective. AstraZeneca's data looks encouraging as they appear to boost to levels of convalescent plasma, but again, it is early in reporting. I've seen that when they dosed over 1,000 subjects, they showed data for only 10 who received both doses. I’m encouraged by the data and hope that they are enough as time goes on. We are similarly encouraged by Novavax data last night, and due to the arching emerge from the field of vaccines, we anticipate similar approaches will be showcased. Ultimately, we’ll need Phase 3 results to understand the efficacy point estimates and safety profiles across various platforms.

I have two questions. The first one is regarding the Phase 3 primary endpoint. Just wondering how you count infection? According to clinical trials.gov, it’s basically the number of participants with the first occurrence of COVID-19 starting 14 days after the second dose. Is there a time cutoff, so every patient will have the same time exposure, or will you report events per 1,000 patient years? The second question is regarding the Phase 1 and Phase 2 data update. Will we see a more meaningful number of convalescent sera from severe patients using PRNT50 or PRNT80?

Let me take those. I’m not sure we’re going to see significantly additional data regarding convalescent plasma. We’ll assess that when we report the Phase 2 results. Concerning your Phase 3 question: the primary analysis is based on the number of cases. In that regard, it’s slightly different statistically but yields the same outcome. The precise counting of cases occurs 14 days after the booster shot; that’s the definition of the primary endpoint. However, there is a secondary endpoint that captures the totality of cases that emerge once people start the trial. That could serve as further supportive evidence. The case definition for us is symptomatic disease. There may be minor variation in the definitions across different sponsors, but we've been very transparent with the exact definition of our endpoints so that people can draw their own conclusions.

Hey. Good morning, guys. Thank you for taking my questions. Two for me as well. First one is on pricing. I appreciate all the thought and detail that went into your prepared comments this morning. But I’m wondering, if we see other companies currently agreeing to contracts with various governments with price points that appear to range from the low single digits to nearly $20 per dose, doesn’t that inherently make it more difficult for you to charge something materially higher than that? And the second question is probably for Tal. I’m wondering how difficult it is to maintain the integrity of a Phase 3 blinded trial when you suspect a large proportion of mRNA-1273 treated patients will experience common vaccination adverse events like fever and other systemic responses that presumably would not happen with placebo. Does that matter much in your view?

Good morning, Cory. I’ll take the first one on pricing. It’s true that many factors go into arriving at an agreement. First, the data available at the time of discussion, preclinical and clinical, is critical because I do not think all products are equal. As Tal mentioned, we will all learn much more from Phase 3 data in the fall. Volume also matters. Additionally, the time of payment and how risk is distributed between companies are considerations. We’ve signed several agreements for potential supply in the $32 to $34 range. As volumes will increase, we’ll adjust this into our analysis. Tal, do you want to address the Phase 3 question?

Cory, it’s a keen observation. We have thought long and hard about the integrity of the blinded trial. You’re right; particularly after the second dose, people may intuit whether they received the active vaccine or placebo. The important piece is that the endpoints are hard endpoints, and I don’t think you’re less likely to report significant symptoms whether you’ve received the placebo or not. The measurement of a PCR test is a PCR test. We’ve established measures to prevent any quirks in unblinding. For example, we’ll test everyone by PCR both during the study and after the second dose to ensure that any mild flu-like symptoms reported can be attributed accurately to the vaccine or an infection, letting us avoid bias by measuring more frequently in those receiving the vaccine. Beyond the first couple of days, I don't expect significant symptoms. Thus, I believe we’ll have comprehensive data for both groups. Regarding asymptomatic cases, we'll look retrospectively and assess with serology, with testing done equally across both arms. Our goal is to ensure all objective measures are conducted on both arms at the same time points to maintain our data integrity.

Hey, guys. Good morning, and thanks for the question. I just had a few. We’ve learned that T cell responses are important as our antibody titers. When you look at the new data today for Zika or for CMV or really anything going forward, do you think you’ll place more emphasis on optimizing T cell responses just with respect to the platform? As a follow-up on 1273 pricing, when you look at the Phase 3 data, is there a single element that you would say justifies differential pricing, be it T cell or B cell or safety profile and things like that?

Thanks, Geoff. To confirm, a lot of attention has been devoted to T cell responses. Look, T cells are near and dear to my heart, as a medical oncologist. They’re required to cure cancer. However, I don’t think they’re as crucial for curing COVID-19, frankly. I think T cells reflect the quality of the response. The best evaluation of the immune response is by assessing the ability to boost following a prime. That correlates well with the immune system’s ability to trigger again after an infection. If you have mild infection, you’re more likely to have reduced antibody levels that are prone to waning. It’s also important to note that measuring antibodies over time isn’t the only indicator of memory in an immune response. We’ve found that initial levels of neutralizing antibodies help reassure us regarding the quality and magnitude of responses. We continue to monitor this in the context of a pandemic with a level of enthusiasm. I believe our platform is optimized to induce T cell responses inherently because of the way mRNA translates antigens directly. Stéphane, do you want to discuss Phase 3 pricing?

Regarding Phase 3 pricing, safety is critical, of course, but I would argue that it’s vital for us, as sponsors, and for the regulators. As with any product evaluation, efficacy is a key parameter. Efficacy has various dimensions and is essential for achieving immunity at the population level. Moreover, it can also be assessed from the perspective of those receiving the vaccine. A 50% efficacy versus a 90% efficacy will lead to different experiences statistically in terms of protection rates. We also need to consider subpopulations, particularly the elderly, who may be more vulnerable to the virus. Understanding responses in this demographic is critical, and we’re paying special attention to it in our study as well. Diversity matters, as some ethnic groups are affected differently by the virus. Evaluating these factors is essential in understanding the variances across our vaccine’s efficacy. Lastly, duration of protection is an important consideration moving forward. We speak to the fact that the virus isn’t going away and continued monitoring will give insights into these factors to determine optimal pricing post-pandemic.

Just a couple quick questions off the topic of the COVID-19 vaccine. Can you go over quickly the CMV Phase 3 program, the initiation, the development, and when you’d expect that to readout and potential approval for that product? Secondly, there seems to be a lot of excitement around mRNA therapy for treating cystic fibrosis patients. Can you talk a little about that and where you exactly are with your Vertex collaboration?

Let me start with the Phase 3; Stéphane can address the Vertex collaboration. The Phase 3, as we articulated before, has no significant changes. The trial should follow participants for at least a couple of years. It’ll probably take around 18 months to enroll and then finish up the data gathering. We are on track to start next year. We’ve had feedback from the FDA regarding our primary endpoints which reassured us the feasibility because we’re looking to prevent primary infection in seronegative women of childbearing age, not directly looking at outcomes in babies as part of the Phase 3 program. However, this will require more detailed discussions with them regarding the Phase 3 design and dose alignment before we can begin. As for the Vertex collaboration, I’m very excited about the potential of mRNA to treat multiple mutations.

I’ll let Stephen talk about that. He and his team are doing all the work.

As a scientist, I’m super excited by the potential for mRNA to not be limited by specific mutations due to its fundamental science. However, I’ll let Stéphane discuss the status of the collaboration.

Vertex expanded their collaboration with Moderna on CF. The joint teams have done an excellent job in recent years in terms of delivery. Developing CFTR mRNA involves numerous challenges given the fields we’re working in. We look forward to sharing data soon. As a partnership, we need to align with Vertex on the right timing. Both of our teams are very excited about the progress being made and the potential impact for patients.

Just following on the theme of programs other than COVID-19. You mentioned before that enrollment in a few of these programs is still paused due to COVID-19. I’m curious if you can still prioritize and move ahead with some of the other programs, such as the rare disease programs, and whether you feel you can still keep your focus on the rest of the non-COVID pipeline at Moderna?

This is Tal, and yes, absolutely, we’ve maintained focus on all fronts. The expansion of our development team to tackle COVID-19 has enabled us to push everything else. We continue to enroll in oncology, and while it’s slowed down, this is based on the condition of each individual center. We’ve used the time to engage deeply with both investigators and patients on our rare disease efforts. The experience allows us to optimize those programs further. We are monitoring closely and hope to resume more robust activities as the pandemic subsides.

Additionally, we spent considerable time at the onset of the pandemic assessing how we could structure the Company, investing resources in both areas, recognizing the continued focus needed on both aspects. The team has done remarkable work to push 1273 quickly while still managing other areas outside of COVID-19. We’ve had challenges presented, especially involving studies with children due to their heightened risk. However, we have not strayed from focusing on our pipeline.

I’m quite struck by the fact that neutralizing antibody titers don’t seem to emerge until after the second dose, while antibodies in general seem to be elicited after the first injection. How do you think about this? Seems to be somewhat general across vaccines. Importantly, how would such patients be treated in the Phase 3, should they contract COVID-19 after their first injection due to not having a sufficient titer going into the second injection?

Yes, it is interesting. This likely speaks to basic immunology, suggesting that if the immune system thinks it can clear an infection easily, it responds less vigorously. If the infection persists, it reacts stronger with affinity maturation leading to improved antibody quality and absolute titers. After just the prime, while neutralizing antibodies may not be present, the immune system responds differently once it recognizes the antigen, leading to a quicker and more vigorous response upon boost. An infection after the first dose may not prevent infection but hopefully results in less severe outcomes due to the immune response being engaged. It will be interesting to review Phase 3 for COVID-19 next month. Regarding permanence, we lack durability statistics; mild infections often lead to lower antibodies and quicker waning. Levels of antibodies don’t equate to the full scope of memory in an immune response. During our CMV study, positive data revealed six-month antibody persistence, which is reassuring. I think it’s great news for our anticipated 12-month durability in protecting against COVID-19. Anticipating a year's worth of protection will allow us to protect the population as we get to 2022, assessing the longer-term outlook as we move forward.

Could you lay out the economics on what you guys receive on a commercialized vaccine? How should we think about percentages paid out to academic partners and the NIH’s commercial economic interest, etc.? I’m trying to understand what the unit margin might be. Additionally, as we look at pricing, you’ve commented on various pricing seen in contracts with major upper and lower ranges. How might we reasonably expect to realize pricing in an environment focused on lower pricing for larger volumes? How do you expect us to increase our realized price in a setting with heightened competition and lower demand?

This is Stéphane. Regarding unit economics, we’re not disclosing specific margins per product. In terms of the endemic market, we mentioned the competitive dynamics will factor significantly. We believe that efficacy and the totality of the data will be critical. We’ve already signed several agreements in a range of $32-$34. The final pricing will depend on numerous factors, including future data from trials.

This is Tal. You were correct that our CD8 T cell response and T cell biology was centered primarily on our cancer portfolio as opposed to this particular vaccine. Thus far, there hasn’t been any measurable data to reflect a significant CD8 T cell response specific to our mRNA-1273.

Thank you very much, everybody, for joining today. Stay safe, and we’ll speak soon.