Moderna Inc (MRNA) — Q1 2021 Earnings Call Transcript

Thank you, Dee Tamar. Good morning, everyone. Thank you for joining us on today's call to discuss Moderna's first quarter 2021 financial results and business update. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the Investors section of our website. On today's call are Stéphane Bancel, our Chief Executive Officer; David Meline, our Chief Financial Officer; Stephen Hoge, our President; Tal Zaks, our Chief Medical Officer, Corinne Le Goff, our Chief Commercial Officer and Juan Andres, our Chief Technical and Operations Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 results or developments. On slide three, please see the important indication and safety information for our COVID-19 vaccine, which has been authorized for emergency use in the United States and many other countries around the world. I will now turn the call over to Stéphane.

Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for taking the time to join our Q1 2021 conference call. We’ll start with a quick business review of the quarter before Corinne walks you through a commercial update. David will then walk you through the key financials. Stephen will provide the clinical update, especially new human data about two of our COVID-19 booster candidates, mRNA-1273, the currently authorized vaccine, and mRNA-1273.351, the variant-specific booster to B.1.351 first adopted in South Africa. I will then come back to close. The Moderna COVID-19 vaccine is now available and protecting people in 37 countries around the world. With the WHO authorization last Friday night, the number of countries where our vaccine will be available will go up significantly. In the first quarter alone, 102 million doses have been shipped and many tens of millions of people have been fully vaccinated or received their first dose. Twelve months ago in Q1 2020, Moderna had never run a Phase 3 clinical study, never gotten a product authorized by a regulator, and never made 100 million doses in a single quarter, not even 10 million, not even 1 million doses. I am very proud of what the Moderna team has achieved, and most importantly, I am very thankful for their impact on the world and the incredible sacrifices that our team has made to protect fellow human beings around the world. This is very humbling, and I am fortunate to lead Moderna in this moment. I am also thankful for Moderna scientists, engineers, doctors, and team members, who have worked relentlessly over the last 10 years now to be ready for when the virus emerged in late 2019. We invented technology to produce safe, well-tolerated mRNA vaccines, which made it possible for us to chase this opportunity. The company achieved revenues of $1.9 billion in Q1 2021, of which $1.7 billion were COVID-19 vaccine product sales. The net income for the period was $1.2 billion. This marks the company’s first GAAP profitable quarter in its history after many years of operating losses. At the end of 2021, we had cash and cash investments of $8.2 billion. David will give you more details in a few minutes. We increased our 2021 supply forecast once again. We now believe that we should be able to supply 800 million doses in 2021, and we are still aiming for 1 billion doses for the year. The total advance purchase agreements signed for delivery in 2021 have been increased to $19.2 billion. We are happy to report this morning an interim update to our TeenCOVE study. The initial interim analysis of our Phase 2/3 TeenCOVE study of mRNA-1273 showed vaccine efficacy against COVID-19 of 96%, and mRNA-1273 was generally well tolerated with no serious safety concerns identified to date. We’re still on track to start this month the filing of our rolling BLAs with FDA for the COVID-19 vaccine mRNA-1273. Our type of COVID; we added another first as a company, and that is the dosing of our first patient with an mRNA therapeutics candidate against a rare genetic disease, propionic acidemia, for genetic deficiency in the liver we have a candidate mRNA-3927. One of the things that I am most excited about is where we’re going. The Q1 results highlight both the consequence of last year’s work and decisions we made. So, as I look to where Moderna is going, I get very excited by the level of our increased investments across the board. Using our strong balance sheet to invest to scale Moderna. Just two numbers for some context. In Q1 2021, our R&D investments were approximately 4 times higher than the R&D investments in Q1 of last year. Not 4% or 40%, but 4 times higher. For all of you who have known us for many years, Moderna has been built as a digital enterprise since the early days. But we now have the opportunity to do much more and to build new functions like clinical trial operations, pharmacovigilance, commercial, digitally from the beginning. So, looking at the next five to 10 years, we’re investing intensively in digital automation and AI. Our plan for 2021 is to invest 3 times more in digital than in the fiscal year 2020. We announced last week that we have decided to invest to increase our 2020 supply to up to 3 billion doses. Let me share with you why we decided to recommend to our Board to invest at that scale. First, let’s talk about the science of the SARS-CoV-2 virus. New variants of concern continue to emerge around the world, and we believe that over the next six months, during the southern hemisphere's fall and winter, we could see variants of concern emerge. We expect for a while now that we believe booster shots will be needed as we believe that the virus is not going away. We also believe, from a scientific standpoint, that the highest efficacy booster over time will be provided by multi-variant-specific booster. Second, the market has changed quite a lot versus what we knew six months ago. Initially, mRNA vaccines have emerged as best-in-class vaccines, high efficacy, good tolerability profile, having to scale manufacturing and speed to address the variants in the clinic. Many companies are still in the clinic with their first-generation vaccine, while we are in the clinic with variant-specific boosters. More importantly, as we are talking to governors around the world in the West and in the East, in the North and in the South, we’re hearing loud and clear from the market, supply us with more mRNA vaccine for the primary series and supply us with more mRNA vaccine in the future for boosters for 2022 and 2023. There is a big shift versus what the market perceived six or nine or 12 months ago when protein vaccines or adeno vaccines were thought to be the answers to the pandemic. We believe it has become an mRNA market for the COVID-19 vaccine. Third is on our pipeline. We believe we will bring to market several more products in the next two years, which will add to the market demand for COVID-19 boosters for years through vaccines as we discussed at our Vaccine Day, and our goal is for the seasonal flu vaccine combined with the COVID variant booster in a single dose product. We will have strong clinical data for RSV vaccine and CMV vaccine. Plus, we have seven programs in clinical studies in three therapeutic areas and more programs to move from preclinical development to clinical studies in the months to come. So we decided to build capacity to deliver up to 3 billion doses of supply in 2022 to serve both the North and the South. We’re doubling our drug substance supply in Europe and increasing by 50% of drug substance supply in the US. We are, of course, adding filling capacity in the US and Europe at our existing partners, but also adding new ones as we speak, with more to come. Another piece of feedback we’re hearing from the market is that Moderna has the best-in-class mRNA vaccine, with shipment at minus 20 Celsius and storage, not minus 70 Celsius. Small cartons of 100 doses. Storage up to six months in a standard freezer and four weeks in regular refrigerated temperatures. The only authorized mRNA vaccine that does not require on-site dilution. We believe this is an even more important feature today, and will be more significant in the future in 2021, 2022, and 2023 as we move to a booster market and decentralized administration in pharmacies and at doctor’s offices. We believe we have the best mRNA vaccine authorized and we wanted to improve our product, continuing to have the best-in-class products of the mRNA market. We are delighted to announce this morning the start of the dosing of our first patient in our Phase 1/2 study for propionic acidemia disease. The study is called Paramount. This is yet another milestone for Moderna. Not only do we have, I believe, the most innovative infectious disease vaccine in the clinical pipeline, but we also have therapeutics candidates in clinical studies in oncology, cardiology, and now in rare genetic diseases. Let me close my remarks on this familiar slide. We now have 1,500 employees. We’ve recently incorporated Moderna Japan KK, and we continue to build our commercial network. We will push to the Asia-Pacific in 2021. Given our strong balance sheet of $8.2 billion, we’re going to continue to accelerate and invest to allow Moderna to scale and maximize the impact of a broad mRNA platform towards as many people as we can. Let me share our perspective on yesterday afternoon’s announcement by the United States Trade Ambassador, regarding the US government's support of waiving intellectual property protection for COVID-19 vaccines. We believe this will not help supply more mRNA vaccines to the world any faster in 2021 or 2022, which is the most critical time of the pandemic. There is no idle mRNA manufacturing capacity in the world. There is no industry of talented individuals who are skilled in the art of making high-quality and high-purity GMP-grade mRNA vaccines. There are no companies who have developed manufacturing processes, purification processes, and analytical processes that would allow them to quickly run a clinical trial. If approved by regulators around the world, then provide hundreds of millions or billions of supplies of mRNA vaccine. We announced in the Company’s statement issued October 8, 2020, that during the pandemic, Moderna will not enforce COVID-19-related patents. You can find that statement on our website. We believe that the best way to end the pandemic is what we’re currently doing: First, to maximize supply in 2021 to protect as many people as we can; second, to build additional capacity, which we have announced last week to get up to 3 billion doses of authorized mRNA vaccines for 2022, 2023, and beyond; and third, to continue to adapt the vaccine to have the highest efficacy vaccine with variant-specific boosters, for which we announced very encouraging clinical results yesterday. Let me now turn to Corrine to give you the commercial update. Corinne?

Thank you, Stéphane, and good morning or good afternoon, everyone. As all of you already know, Moderna’s COVID-19 vaccine is our first authorized product, and on the back of it, we have turned into a commercial company very quickly. So today, I’m delighted to give you an update on the commercial progress in the first quarter. I will start with our most recently signed supply agreements, those that occurred in the first quarter and at the beginning of the second quarter this year. I am particularly happy to announce our agreement with COVAX, which will provide access to our vaccine to millions of people in low- and middle-income countries, and is in keeping with our global access principles. In total, our COVAX agreement is for 500 million doses for delivery in the 2021 and 2022 period. Specifically, in 2021, Moderna will begin delivery of 34 million doses in the fourth quarter of 2021. COVAX will have an option for an additional 466 million doses in 2022. We are grateful to all the collaborative efforts of CEPI, Gavi, UNICEF, the World Health Organization, and the Moderna commercial teams in making this important supply agreement a reality. Moving now to the additional supply agreements signed for both 2021 and 2022. We have signed additional supply agreements with Israel for 5.3 million doses in 2022, with an additional option of 17.3 million doses for 2022 and 2023; and with Switzerland for 7 million doses in 2022 and options for an additional 7 million in late 2022 and 2023. We have also signed new deals for 2021 delivery with Botswana, Brunei, and in addition, we have also signed an agreement with Zuellig Pharma, our distribution partner in Southeast Asia, Hong Kong, Macau, and Taiwan. In total, we announced advanced purchase agreements totaling 845 million doses to be delivered in 2021 to the countries that are listed here on this slide. We continue to have discussions with countries, both those we have already contracted with and new countries for supply in 2022 and beyond. In our discussions, as Stéphane said, we are hearing consistently from governments that in their view there is no other technology that provides the high efficacy of mRNA vaccines and the speed necessary to adapt to variants while at the same time, allowing reliable scalability of manufacturing. We are grateful for the trust placed in us from the various governments we have signed agreements with, and we look forward to supplying the vaccine to other countries and helping end the pandemic and getting ahead of variants. Let me now turn to product sales. Our product sales for the first quarter of this year were $1.73 billion and were recorded for the delivery of 102 million doses. Product sales in the US were approximately $1.4 billion and sales outside of the US to the EU, Canada, Switzerland, Israel, and Singapore were approximately $400 million for the 14 million doses delivered in the first quarter. In the US, we have successfully completed the delivery of the first 100 million doses to the US government within 100 days of emergency use authorization, and we expect to complete the delivery of the second 100 million doses to the United States government before the end of the second quarter. As you know, the US production started earlier, and it’s roughly one quarter ahead in production ramp. As such, in the second quarter of 2021, we expect the ex-US ramp to be similar to that of the US ramp in the first quarter. To close, I want to reiterate that as we continue to produce and roll out vaccines into the global market, we are humbled and proud to be part of the solution. I will now turn the call over to David Meline.

Okay. Thank you, Corinne. Today, as with our last earnings call, we are presenting our results primarily on a US GAAP basis. In some cases, we also provide additional detail to provide greater clarity on underlying trends. With this background, we are providing an analysis of actual 2021 first quarter results, along with an updated view of key drivers of financial performance going forward. Turning to Slide 18, total revenue was $1.9 billion in the first quarter of 2021, compared to $8 million in Q1 of last year. Following our first-ever product sales of $200 million in December 2020, we recorded product sales of $1.7 billion for our COVID-19 vaccine in the first quarter of 2021. Grant and collaboration revenue increased to $204 million in Q1, primarily due to increases in grant revenue from BARDA to accelerate the development of our COVID-19 vaccine. Cost of sales were $193 million in the first quarter, benefiting substantially from previously expensed pre-commercial inventory costs, which I will discuss in more detail on a later slide. Research and development expenses were $401 million for Q1 2021, compared to $115 million for the same period in 2020. The higher spend was driven by increased COVID-19 vaccine clinical development activities, including our announced efforts around booster, variant-specific, and multi-valent vaccine candidates. Headcount increases, as well as pharmacovigilance activities related to our COVID-19 vaccine also contributed to the year-on-year expense increase. Selling, general and administrative expenses were $77 million for Q1 2021, compared to $24 million for the same period in the prior year. The growth in spending was driven by increases in personnel, outside services, and costs associated with the commercialization of our COVID-19 vaccine globally. Our provision for income taxes was $39 million in Q1 2021, reflecting a benefit from utilization of our net operating loss carry-forward, as well as discrete items. I will provide further context on the following slides. We recorded a net income of $1.2 billion for Q1 of this year, compared to a net loss of $124 million in the same period of last year. Earnings per share on a diluted basis was $2.84. Please note that our share count on a diluted basis now also includes the effect of outstanding options and RSUs as we began to be profitable. Previously, when we were in a net loss position, basic and reported diluted number of shares were the same. Turning to cash and selected cash flow information on Slide 19. We ended Q1 2021 with cash and investments of $8.2 billion, compared to $5.2 billion at the end of Q4 2020. The increase is driven by our commercial sales and additional customer deposits received in the first quarter for future purchases of our COVID-19 vaccine. Net cash provided by operating activities was $2.97 billion in Q1 of this year, compared to net cash used in operating activities of $106 million in Q1 of last year. The reversal from net operating cash outflow to cash inflow was driven by our commercial market entry for the entire quarter. Similar to last quarter, before providing an updated financial framework for the remainder of 2021, let me summarize a few areas from our Q1 results that are important to keep in mind when modeling expected 2021 financial performance. Starting with product sales on Slide 20. We started last year to build two distinct supply chains, one in the US and one outside the US for rest of world markets. Our supply chain scaling up in the US was roughly one quarter in advance of our ex-US supply chain, which is reflected in the geographic sales mix in Q1. As we move forward in Q2, the ex-US supply chain is also ramping up toward full capability. Turning to Slide 21, cost of sales includes the cost of goods manufactured, logistics and warehousing costs, as well as third-party royalty costs. We began capitalizing our COVID-19 vaccine inventory costs in December of 2020, following the COVID-19 vaccine emergency use authorization, based upon our expectation that these inventory costs would be recoverable through commercialization of the vaccine. Prior to the authorization of our COVID-19 vaccine, inventory costs were recorded as research and development expenses in the period incurred. We expensed $242 million of pre-launch inventory costs in 2020 and started 2021 with the remaining balance of $187 million of zero-cost inventory. Almost the entire balance, or $184 million, was sold and benefited our cost of sales in Q1 of this year and hence, will not further impact future quarters in a material way. If inventory sold during the first quarter was valued at actual cost, our cost of sales would have been $377 million, or 22% of our product sales, somewhat favorable to what we expected, driven by favorable yields in our US production facilities. Now, turning to our cash and investment position on Slide 22. The cash and investment balance reported as of March 31 was $8.2 billion, up from $5.2 billion as of December 31, 2020. The increase was primarily driven by the net increase in customer deposits for future product supply of our COVID-19 vaccine. The net balance of cash customer deposits increased from $2.8 billion at the end of December 2020 to $5.6 billion at the end of Q1 2021. Lastly, let me comment on tax-related items on Slide 23. The significant investments in our research, development, and startup activities to develop the mRNA platform over the last decade have resulted in net operating loss carry-forwards with a balance of $2.3 billion at the end of 2020. As of December 31, 2020, we maintained a full valuation allowance against our deferred tax assets related to these loss carry-forwards. We perform a valuation allowance assessment during each reporting period based on the latest available financial information and outlook. After considering the weight of available evidence, both positive and negative, we concluded that as of March 31, it is more likely than not that the company will be able to realize the substantial majority of its net deferred tax assets. This analysis included not only our strong first quarter results, but also our April activity. The majority of the valuation allowance will flow through the P&L over the course of 2021 in our effective tax rate, pro-rated based on the cadence of our expected pretax quarterly earnings. We also recorded two discrete benefits in our tax provision in Q1, which lowered our first quarter tax rate. The first benefit related to the valuation allowance release for the portion of deferred tax assets, which we expect to utilize in future years. The second related to the excess tax benefits associated with stock-based compensation. Turning now to the 2021 updated financial framework on Slide 24. Signed advance purchase agreements for expected delivery in 2021 reflect the current full-year total of $19.2 billion in anticipated product sales, including doses that have been delivered and recognized as revenue in Q1. Based on continuous progress to ramp up available supply capacity in our network, we have raised the lower end of our global manufacturing plan for 2021 from 700 million to 800 million doses at the 100 microgram dose level. Our manufacturing team and our partners are still working to supply up to 1 billion doses for 2021. Further, we continue to expect a range of deliveries in Q2 2021 of 200 million to 250 million doses. Our total cost of sales includes the cost of manufacturing, logistics and warehousing, and third-party royalties. For 2021, we continue to model average total cost of sales as a percent of product sales to be approximately 20% for the full year with some variation quarter by quarter, largely driven by average selling price going forward. Now, let me comment on planned R&D and SG&A expenses. Q1 expenses of approximately $0.5 billion were stable compared to the underlying Q4 2020 expense run rate on a like-for-like basis. In Q1, our actual expenses were lower than the internal forecast, primarily driven by the timing of clinical development and commercial activities and related costs. We now expect a notable expense trend increase starting in Q2 on a quarter-over-quarter basis for the remainder of this year. Based on better visibility of the utilization of our accumulated net operating loss carry-forward, expected global sales mix, and the mentioned discrete benefits in Q1, we now expect our all-in 2021 tax rate to be in the low-teens. This compares to our previous forecast in the mid-teen range. This forecast is based on current US tax policy in effect and does not include any future potential discrete benefits related to stock-based compensation. We will update this view as our business evolves further. Finally, regarding capital investments. We are raising our forecast for capital investment from our previous range of $350 million to $400 million for 2021 to $450 million to $550 million, including the planned capacity expansion investments as announced on April 29. This concludes my remarks concerning financial performance. I will now turn the call over to Stephen.

Thank you, David. I’ll begin with an overview of our COVID-19 strategy against variants of concern and the initial data from our Phase 2 booster vaccine study before ending with a summary of the rest of our pipeline. And before I go into the data, a reminder that our booster strategy is evaluating single-dose booster vaccinations with three different mRNA vaccines: 50 micrograms of mRNA-1273; 50 micrograms of mRNA-1273.351, both of which have data available today, and I will discuss in just a moment; and a multi-valent booster vaccine candidate which combines a 50-50 mix of mRNA-1273 and mRNA-1273.351 in a single vaccine. In addition, we’re also evaluating a lower 20 microgram dose of mRNA-1273.351. Data from the multi-valent booster and the 20 microgram booster of 351 will be shared when available. Now, with that backdrop, let’s move to the data. Starting with safety, local and systemic adverse events within seven days after a booster dose of either 1273 or 1273.351 were generally comparable to those observed after the second dose of 1273 in our previously reported Phase 2 study and our Phase 3 COVE study. The majority of the events were mild or moderate in severity, and Grade 3 events occurred with the frequency of approximately 15% in participants who received 1273 and approximately 10% in participants who received 1273.351. The most commonly reported solicited local events were injection site pain, and the most commonly reported systemic events were fatigue, headache, myalgia, and arthralgia. There were no Grade 4 events reported. On the next slide, our figures from two papers. The figure on the left-hand side was published in the New England Journal of Medicine and shows the difference in neutralization of SARS-CoV-2 pseudoviruses in serum samples one week after vaccination with the primary series of mRNA-1273. Recall, that there was a six-fold decrease in neutralization titers against the B.1.351 variant, and the variant first identified in the Republic of South Africa, and a three-fold drop in titers against P.1, the variant first described in Brazil. As a reminder, these neutralizing titer levels were from serum samples one week after the second dose of the primary vaccine series of mRNA-1273. Essentially, these titers are close to peak levels. On the right-hand side of the slide is a figure from the pre-print manuscript of our initial results from our Phase 2 study posted yesterday to bioRxiv. The figure shows the neutralization titer levels of the participants in our Phase 2 booster study immediately before their booster vaccinations. A reminder that these individuals were previously vaccinated with a primary series of mRNA-1273 in either our Phase 2 or Phase 3 studies roughly six to eight months prior to enrolling in this booster study. At this time point, titers against wild-type SARS-CoV-2 remained high, with almost all participants having detectable titers. But titers against B.1.351 and P.1, the variants of concern were much lower. In fact, approximately half of participants had titers below the assay's limit of quantification at this time point. So, it is clear that waning of titers is apparent both with time, and that lower titers against variants of concern lead to a more rapid loss of neutralizing activity. Turning to the next slide. The data shows that two weeks after booster vaccines of either mRNA-1273 or 1273.351, neutralizing titer levels increased against both the wild-type virus, as well as the B.1.351 and P.1 variants of concern. In fact, following a booster, geometric mean titers against the three variants tested increased to levels similar to or higher than previously reported peak titers against the ancestral strain following primary vaccination. When looking specifically at the GMTs of the different strains, we achieved levels of 1,400 after booster vaccination with mRNA-1273.351 against the 351 variant. This compares against the GMT of 864 when boosting with mRNA-1273. Vaccination with mRNA-1273.351 was more effective at narrowing the gap in neutralizing titers between wild-type and B.1.351 viruses relative to boosting with mRNA-1273. Now, we’re encouraged by this initial data and we’re excited to see additional data over time from these arms, as well as the data from the multi-valent arm and a lower dose arm of mRNA-1273.351. On the next slide, I would like to highlight one last comparison from the manuscript. On the left is a sample of participants from the Phase 1 study and their neutralizing titers against the ancestral strain following a primary vaccination series with mRNA-1273. GMTs achieved in this assay are approximately 1,500. On the right-hand side is a reproduction of the data we just discussed. Looking at neutralizing titers, and I’m specifically highlighting the neutralizing titers against the B.1.351 variant of concern. A booster dose of 50 micrograms of mRNA-1273, the top bar, was able to increase titers to a level of 864 in this study. That compares with a booster dose of 50 micrograms of 1273.351, which was able to get the titers against the variant of concern as high as 1,400 in this study. We’ll continue to closely watch this data, and as I mentioned a moment ago, look forward to subsequent updates and time points. On slide 31, is a snapshot of our vaccine development candidates that are in or entering the clinic; I’ll highlight a few. Our CMV vaccine is on track to start a pivotal Phase 3 study in 2021. Our Zika vaccine is expected to begin a Phase 2 study also in 2021. Our hMPV/PIV3 respiratory combo vaccine is currently enrolling in toddlers. At our Vaccine Day last month, we announced positive interim Phase 1 data from our RSV vaccine, mRNA-1345. This continues in pediatric and older adult cohorts of that Phase 1 study that are still enrolling. Finally, within our flu vaccine program, we expect a Phase 1 study of mRNA-1010 to begin in 2021. Outside of vaccines, we have seven clinical proof-of-concept trials ongoing across four modalities. Our VEGF program partnered with AstraZeneca is enrolling in a Phase 2. Our personalized cancer vaccine program partnered with Merck is also enrolling in the Phase 2 trial. Our KRAS program, our second program partnered with Merck is ongoing in a Phase 1 study. Within intratumoral immuno-oncology, our Phase 2 dose expansion OX40 ligand Phase 1 triplet and Phase 1 IL-2 study, which is partnered with AstraZeneca, are also ongoing. Finally, as Stéphane mentioned, we are pleased to have started dosing in the Paramount study in propionic academia. On slide 33, you can see our full development pipeline. In addition to our large portfolio of infectious disease vaccines, we now have seven therapeutic programs in the clinic. I’ll now turn the call over to Stéphane to take us on.

Thank you, Stephen, Corinne, and David. Our 2021 advanced purchase agreements signed have now been increased to $19.2 billion. As we look into 2022, we’re investing to build 3 billion doses of supply capacity because we believe the market need could be greater in 2022 than in 2021. First, we already have countries signing APAs for 2022 for additional prime series for children, but also for variant-specific boosters, like Israel last week and Switzerland this morning. If you recall, they were some of the first countries who signed APAs in 2020, and again, these countries are ahead of the game for 2022 and 2023. Second, with the COVAX partnership announcement on Monday, we anticipate supplying up to 466 million doses in 2022. Third, we are having active discussions with all the governments that have signed 2021 APAs with Moderna for new APAs for 2022 deliveries, again, prime series but also boosters. Fourth, we are having numerous discussions with governments that do not have 2021 APAs with Moderna; because we cannot supply them in 2021 unfortunately. But many of these governments are already asking us to enter into 2022 APAs because they want high-efficacy mRNA vaccines that are easy to store. This is why we decided to invest for more supply in 2022. We believe from our current deals and current discussions that the market wants more supply from us in 2022 than we can supply in 2021. As we look at the next five to ten years, we have the most innovative vaccine pipeline in the industry, and we’re investing more in research to increase our impact by bringing to the clinic more innovative vaccines against viruses that hurt humans. We are now in the clinic in three therapeutic areas: oncology, cardiology, and rare disease, and soon we should be in the clinic in autoimmune diseases as well. We’re continuing to innovate and invest in science, like for example, for delivering mRNA in the lung with our partner Vertex. As we continue to prepare Moderna to scale that 10 times more impact, we’re investing aggressively. We are accelerating our investment in digital, automation, and AI. From a spend of $27 million in 2019, we invested around $60 million in 2020 in digital. We are planning to almost triple that to $170 million in 2021. We’re investing across the board in R&D to ensure high quality to accelerate the pace of learning and to ensure we can transform clinical operations. We’re investing in digital to ensure high-quality, high scalability for manufacturing. We are building commercial operations so that we can commercialize our pipeline in a highly efficient and effective manner. We want to change the big pharma paradigm of large, inefficient, and expensive sales forces and advertising spend to promote needed drugs. Our pipeline is first-in-class medicine that patients and doctors are waiting for. We want to enable our corporate functions, HR, legal, finance, and so on to scale without creating large corporate organizations. I’m also excited that we are launching an AI academy. Today, we have some exciting pockets of excellence in AI across the company. But AI is not yet part of our DNA. The rhythm is simple; most companies don’t do AI. So, as we grow and hire new talent, they have great skills in their part, but few have been exposed to AI in their previous company. We want AI to be how we run the business in science, in clinical development, in manufacturing, quality, commercial, in HR, and finance, everywhere. It is the same change management and evolution as 20 to 30 years ago when personal computers entered the workforce. We want every team at Moderna to understand and use AI in everything we do. AI would become part of our DNA. As many of you know, we have integrated digital systems connected to each other. As we have more systems, we get more data. As we get more data, we learn faster. We keep building and creating our virtuous cycle. With our strong balance sheet, our mRNA platform, our team, our culture, and our digital infrastructure, I believe we are willing to scale Moderna, which is unique in the biopharmaceutical industry. As part of scaling Moderna, that is software, but there is another way. Many of you are aware of the opening of our Norwood manufacturing site in July 2018 or you came to visit after reopening. Our building is around 200,000 square feet. We called it Moderna Technology Center South, or MTC South. In 2020, we added a building next to it and added around 225,000 square feet, calling it MTC North. We are pleased to announce this week that we now have access to a new building, MTC East, which will start welcoming Moderna employees later this year after some renovations in the building. That is another 240,000 square feet. So, we now have access to around 650,000 square feet at MTC. We now hold the building on this campus, and we can also add more buildings and build them now that we have the entire campus. We are deeply committed to building a company that has a strong sense of responsibility. We want Moderna to be a positive force in the world, not only for medicines, but also by who we are as a Company. We are very committed to belonging, inclusion, and diversity. We recently published our expanded workforce diversity figures for the first time. Last year, we signed the CEO Action for Diversity & Inclusion pledge. We have also reiterated our ongoing commitment to increasing diversity in our clinical trials. We are deeply committed to the environment. We have decided to source our Norwood and Cambridge site with renewable energy and will offset any energy that is not from renewable sources, and we will be working on our target as to when we should be a net-zero carbon company. We’re also encouraging our employees to have a positive impact on the communities in which we live and volunteer, from cleaning the Charles River in Cambridge to feeding the homeless, and through STEM education and much more. You can find many resources online on our website. As I close, I want to convey how thankful we are at Moderna to have a chance to do what we do. Every day we come to work to make innovative medicine using the first information platform of the biopharmaceutical industry. My colleagues and I work and collaborate to create more medicines to help protect or treat people. I am proud of what the team has done over the last 10 years to get us to this stage. Over the last 14 months since we started chasing the SARS-CoV-2 virus, and in Q1, we have continued to execute relentlessly. I believe we have a chance over the next five, 10, or 20 years to transform medicines potentially like no other company has ever changed medicine. This is just the beginning. Before taking your questions, I would like to remind you that we will be hosting our Annual Science Day in a few weeks on May 27. You are going to want to connect with this event as Stephen and his team have some very cool new things to share with you. Later, at the end of the summer, on September 9, our Annual R&D Day will provide a holistic clinical update. Operator, we’ll be happy to take any questions now.

Good morning. Thanks for taking my questions. I have a couple here. So, firstly, with regard to — if the US supports the WTO waiver of COVID-19 vaccine IP, what does that mean for Moderna? I mean, if you could just walk us through that? Secondly, if you could just discuss contract dynamics for the vaccine in 2022 as you look to address variants and kind of you see them move towards an endemic market? And third, it’s nice to see the PA program move forward, it’d be great to kind of understand whether we’ll see data from that program this year? And what else we might see from the ex-COVID pipeline? Thank you.

Salveen, good morning. It’s Stéphane. Let me start with your first question and then I’ll turn the PA question to Stephen. So, on the IP, what does it mean? I believe it doesn’t change anything for Moderna. As I said, we had stated last October that we will not enforce our COVID-19-related patents during the pandemic. As I’ve said in my remarks, there is no mRNA manufacturing capacity in the world. This is a new technology. You cannot go hire people who know how to make mRNA. Those people don’t exist. Even if all those things were available, anyone who wants to produce mRNA vaccines will have to buy the machine, invent the manufacturing process, invest in purification processes, analytical processes, and then they will have to go run a clinical trial, get the data, get the product approved, and scale manufacturing. This doesn’t happen in six or 12 or 18 months. We have been working at this for years. Some smaller mRNA companies are still in the clinic trying to get their products to the finish line. And so, I really believe that this is not the issue. I believe the IP topic is mostly critical but it is not the issue for mRNA. Stephen, do you want to take the PA question?

Sure. Salveen, thanks for the question. So, as you know, the program, the Paramount study for propionic acidemia is going to focus on biomarkers as a part of its dose optimization. Therefore, it’s possible that we’ll see very early indicators of impact there. However, there is no guarantee that the first dose level and the first cohort we’re examining will be the correct one. We’re going to make sure that we can develop a cogent and consistent data set before we bring that forward. It is a dose optimization study, and we will likely be looking at multiple dose levels. So, while it’s possible that we could see data this year, it really depends on many factors that are beyond our control. You also asked a more general question about our broader portfolio, and if you look at the programs more generally, VEGF is a Phase 2 program that has been enrolling for a while. It’s possible we could see data from that. Our PCV and KRAS programs are open label programs, and we’ll continue to track those closely as they enroll. In addition, many intra-tumoral programs that we’ve highlighted are ongoing and producing data. Once we have a complete and cogent data set, we will bring it forward.

Thank you.

Great. Good morning. Thanks for taking the questions. I guess, two from me. One, on the next-generation COVID vaccine, where you think it might be refrigerator stable. Can you just talk about the regulatory path for that vaccine, given that it’s not the full spike? Do you think you might have to run an actual efficacy study, or do you think a neutralization titer study with safety might be enough for that? And then the second question, Stephen, if I can just follow up on PPA. I know in the past, one of the struggles has been enrollment. Obviously, it’s great to see that you’ve gotten a patient into the study. Can you just talk about now that you’ve gotten a patient in, what your view is around enrollment? And if you think you’ve gotten through some of those hurdles?

Sure. Thank you, Matthew, for both questions. So, first, on I believe, you’re referencing our second-generation vaccine candidate that is mRNA-1283. It is a shorter construct that we think could have a much longer refrigerant stability profile. As we announced previously, we’ve started enrolling in the Phase 1 study in that, and it’s probably a little early to comment on what we think the regulatory path will look like for that until we get some of that initial data and have conversations with regulators. However, it is possible that 1283 may not need to go into a full primary series vaccination study; it could help function in the future as a booster. Again, it’s probably too early to say and we will have to wait until we see that data, ultimately dependent upon our conversations with regulators in the future. As it relates to PA enrollment, yes, as you mentioned, we’ve been working very hard on that over the coming — the past years and we’re quite pleased to have enrolled the first participant in that study. The team is working hard to enroll additional patients as quickly as possible. I think time will tell whether we’ve actually broken through here and resolved any of the issues that we previously had in terms of enrollment. Hopefully, we’ll be able to provide subsequent updates on expanding enrollment in the near term demonstrating that we’ve made that progress.

Great. Thank you very much, and thank you for all of the detailed updates, including running through the financial balances, so detailed David. Congrats on all the success. Stephen, I wanted to pick up on the booster data that you’ve shown, and maybe you can kind of take us a step forward. What is the booster strategy going to look like? Do we actually need to maybe re-dose or re-vaccinate sooner than eight to six months because of where the levels were? And maybe you can just tell us what you see as sort of the potential timing? Thank you. When we’ll be getting boosters?

Thank you for the question, Ted. Look, I think we have to start by saying we don’t know. We do not have data on when to expect waning immunity leading to breakthrough infections. But we do know that there is a raging pandemic; re-infections will happen at some point. The best way to ensure that we do not have renewed outbreaks in well-vaccinated countries is to boost and maintain the highest possible levels of neutralizing immunity. We, as Moderna, also believe that that means we want to maintain the broadest neutralizing immunity against the largest number of then circulating variants of concern. If you look at the data that we have posted today, as well as some of our published data and others, it does feel like immunity to a primary vaccination series or a previous infection seems to wane over the six- to 12-month time horizon, at least as measured by neutralizing titers. Again, we don’t know whether that’s a clinical correlate or not, but it certainly indicates a waning immunity. Looking at the data presented earlier, approximately half of the participants in our booster studies no longer have detectable neutralizing immunity against the variants of concern. They have neutralizing immunity against the ancestral strain that they were vaccinated against. The logical thing we think to do is to bolster their immunity against those variants of concern, effectively vaccinating them against those to both increase those titers right now, but also provide them with longer duration of protection, perhaps long enough to guide us through the pandemic. That probably looks like boosting on a nine to 12-month timeline after the primary series as an annual booster for now, at least while we’re continuing to see the evolution of the virus. The last point was about our strategy more generally here, and we do believe that the virus is not going to follow one path of evolution; we are going to see many variants of concern that may diverge. Therefore, the best way to ensure we can protect against the broadest number of variants will be a multi-valent vaccine. We’re still waiting to see our multi-valent vaccine data, which is a combination, as you know, of ancestral and 351 and the strain first identified in South Africa. This is just the beginning, and we think we’re unfortunately going to continue to fight this pandemic through 2022, at least globally. We are committed, as a company, to make as many updates to the vaccine, adding as many variants as we think are necessary to ensure that when people receive a booster, it provides the broadest immune protection against the widest range of variants.

Thank you, Ted.

Hi. Thank you. Good morning. I appreciate the questions. I had two important follow-ups. One was going back to the question about the WTO. Can you just offer some color around the view of loss of raw material supply capacity, etc? In other words, shedding some light on any ability to actually increase global capacity even if there were some form of open patents? So maybe just talk about that because I don’t think that you can just make it as easy as you’d like it to have. Can you maybe just offer some color there? And the second question is also a follow-up on the variant strategy; it sounds like the bivalent strategy might be the best. So, at what point would you just pull the trigger on beginning to manufacture that and ramp that all up for 2022? Thank you.

Thanks, Michael. It’s Stéphane. Let me start on the raw material and the IP. Going back to what I said, if someone was to start from scratch, because again there is no mRNA player with idle capacity out there. One would not start by focusing on large-scale raw material supply. One would have to first figure out how to make mRNA; you cannot find that patent on the Internet, on the US Patent Office website. One would need to figure out what machine is required, how to make mRNA, what purification methods are needed, what analytical methods are necessary, and once you’ve figured out all of these challenges, this will take time. It is not easy, and there are companies that have been in the market with mRNA vaccines for decades. Even with companies that have been working on it for 10 or 20 years are still in the clinic trying to reach the finish line. Therefore, I genuinely believe that this is not the issue. I believe the IP topic is mostly driven by critical priorities. This is not the issue for mRNA. Stephen, do you want to take the variant strategy question?

Yeah. So thank you, again, Michael, for the question. So, on our multi-valent strategy, we have at this point, we are still waiting for the clinical data to confirm that. We expect to have that shortly, as we’ve mentioned we previously dosed people with the mRNA-1273.211 variant. The preclinical data that we have presented and published does suggest that that is going to be the winning approach. As highlighted by the mono-valent clinical data, there is a benefit to adding additional antigens and potential benefit occurring with a multi-valent approach. Importantly, the multi-valent GMP is complex because the mRNA constructs are similar in size. They look mostly alike since you only change a few nucleic acids. This takes time, which is yet another strong advantage of the Moderna platform. As you all know, with our CMV vaccine now on track in Phase 3, we have developed a very complex product with six mRNA sequences in one variant. Reflecting on the achievements we are making with the multi-valent COVID vaccine, it will certainly not be easy. For companies that have not experience in GMP settings with multi-valent manufacturing, they will face difficulties. Therefore, we are proactively building up and maintaining sufficient manufacturing capacity to ensure that we can meet the future demands for both variant boosters and other products.

Got it. Thank you, guys.

Thank you for taking my questions. I also have two, one related to the IP question. I’m just wondering how many contracted global manufacturing sites you have? How long, in general, are the contracts? And the second question also regarding the new booster data. I was surprised the differences between 1273 versus 1273.351 were less than I would initially expect. It seems like 1273 should also be sufficient to protect from variant strains. So, what could be the explanation? And then you did just lay out the plan; do you think a single shot would still be sufficient for protection?

Thanks, Gena. I’ll take that question first and then hand it back to Stéphane on your IP question. A couple of things to note: the first is the level of titers, as you suggested there, is a little less than the two-fold difference between them. However, you’re still seeing substantially higher titers, around 1,400 when you give the variant-specific booster, mRNA-1273.351. All of this occurs at day 15, representing an early time point. While you are seeing performance from both vaccines presented, we believe selecting the vaccine that provides the best immunity over time will enhance long-term protection, especially among high-risk populations. However, we think that mRNA-1273 as a booster could significantly enhance neutralizing titers against variants of concern and we think it’s encouraging to be using both options in future clinical plans. Stéphane?

Sure. Gena, on the contract manufacturers, I would look at raw material, drug substance, and drug products. In all of these, we have multi-year contracts. As soon as we got Board authorization to go to a 3 billion supply for 2022, we right away send a lot of orders and a lot of additional supplies to our suppliers. Don't forget, the drug substance; this is the place where we actually have the biggest capacity of drug substances, even in the 3 billion doses 2022 scenario.

Hi. Good morning, guys. Thanks for the question. I just had two on COVID. The first one is, what does your data tell you with real world effectiveness of 1273 today, as of now, with respect to some of the main variants? I’m just trying to reconcile that the need for annual boosters versus minimal breakthroughs thus far and high efficacy. And then the second question is, when the next-gen vaccines for COVID-19 will have some permutations? What’s the potential to leverage the technology to use different parts of the virus instead of just modifying the spike protein, or do you think this could add regulatory steps that could make it difficult, even if it’s theoretically possible? Thank you.

Thank you, Geoff. Those are both good questions. So, maybe I’ll tackle the first one. The largest amount of evidence we’ve seen from the real world has been published by groups like the CDC, and it continues to reinforce that the efficacy we saw in the clinical trials appears to translate well into real-world use with very high efficacy against COVID-19. However, it’s important to note that this is still happening very acutely. We are only months into these vaccination campaigns, and the primary concern that we and others are facing from a public health perspective isn’t what’s going to happen right after vaccination but what does this look like in nine months? What does it look like in 18 months? The difficult situation everyone is in is that we could say, let’s wait until a year from now. However, if we see a resurgence and resulting deaths, that’s not a risk the public health community is willing to take. Therefore, we believe for the near term, the correct approach is to maintain the highest level of immunity possible in well-vaccinated populations. Focusing on the pivotal role of immunity against re-infections and outbreaks in the future is critical. If you examine the past, we believe SARS-Cov-2 will continue to emerge and that it’s going to be a significant burden. Therefore, the long-term potential here requires us to be in a situation where we are continuously ramping up immunization.

And, Stéphane, just on the second question on the different modalities or Stephen…

Yeah, Geoff. I’m sorry. And in response to your second question regarding the different parts of the virus, if you look across all vaccines, we see very high efficacy generated by the spike protein, which serves as a fundamental antigen imparting protection against COVID-19. While it remains theoretically possible to develop vaccines targeting non-spike antigens, we observe the significant proof provided by multiple large Phase 3 trials emphasizing the value of pursuing vaccines based on spike proteins. Therefore, we believe any company that would like to move in that path must re-demonstrate their efficacy and establish difficult timelines all while maintaining efficacy expectations from existing vaccines in development.

Hey. Good morning, guys. Thanks for taking the questions. I want to go back to the topic of future contracts. I know this has kind of been asked in a couple of different ways. But based on discussions and negotiations that are currently taking place, how much confidence do you have that there is going to be demand to fill up to 3 billion doses in anticipated supply that you think you could have next year, especially if people are getting a single annual booster in the future? And then the second question is, from a modeling perspective, are the price points currently being negotiated on future contracts comparable to what you have on the existing ones for 2021? I just want to see if we should be assuming stable pricing for modeling purposes for 2022. Thank you.

Yeah. Let me take a stab at that question, Cory. If I may, from what we’re hearing from the customer, this is becoming a mRNA market looking forward. There are not many players in the mRNA market. If you consider future needs globally, there remain many unvaccinated adults around the planet. When you add children and prime series boosters into the equation, the need is evident. As a result of such discussions, we are in a position requiring increased supply for 2022. Our current contracts and discussions reflect the shift away from lower efficacy options for the vaccines. Unlike a year ago, countries now want our mRNA vaccine to protect their citizens effectively. Understand, Cory?

Yeah. No. And on the pricing question for modeling purposes?

Yes. Pricing based on market demand and the discussions we are having indicates that pricing mechanisms are critical leading to improved margins for the coming years.

Great. Thank you. Thanks for the question, and all the color. A question I would have is just on the 50 microgram dose going forward, the booster against variants. Would you see that potentially becoming your initial prime boost vaccine possibly in the future? Or do you think you’ll stick with the 100 microgram route, whether it’s with 1283 also? And then just on OpEx, just any kind of color, when we think about 2022 and 2023, David, what cost of goods sold could look like once these quarterly variations kind of flush out? And then what your adjusted operating margins could start looking like also? Thank you for the question.

Thanks, Hartaj. I’ll take the first question, and then hand it to David for the other. On 50 micrograms, obviously, the data we shared today is with a small number of subjects. Previously, we shared and published our Phase 2 data on a slightly larger number of subjects, looking at a 50 microgram primary series that looked quite good. At least as measured by immunogenicity, it seemed to achieve levels that were consistent with the 100 microgram dose. It is certainly something we’re going to evaluate further to see if we could pursue it as such. However, how we achieve this will depend on the data that we receive. There are countless factors involved in assessing different populations. For example, we expect that we wouldn’t need higher doses for younger cohorts and likewise, for older populations. So, we have multiple things to consider in assessing whether or not a primary series should be administered at 50 micrograms but we will review this carefully. For a booster series, that is certainly the target dose we are looking at going forward. I will pass it over to David now.

Yeah. So, cost of goods and operating expense trends as we look into 2022 and beyond, I guess what I’d say is it’s a little early to start giving that kind of guidance for 2022. If you look at our cost of goods and the trends we’ve seen thus far, we’ve been quite pleased with what we’re seeing as we ramped up production here in the US. We’ve seen, as I mentioned, yields have been better than we had expected. We reiterated today that we think the right planning assumption continues to be 20% as we move beyond 2021. You get into a question of vaccines versus therapeutics, where we think cost of goods manufactured will remain competitive for this product and, therefore, margins will depend very much on price levels in 2022. We’ll be updating guidance in due course as things evolve.

Hi. Good morning. Thanks for taking our questions. Just another one on manufacturing capacity here. As you potentially move to next-generation COVID vaccines, I wonder if you could give us a sense, maybe even qualitatively, in terms of the manufacturing ramp. What would it look like for some of these second-gen vaccines in terms of manufacturing capacity in the ramp relative to what we have seen with 1273? Thank you.

Yes. It’s Stéphane. So, the ramp of mRNA-1273 has been constrained by our manufacturing capacity. Looking at your projections this year, the only reason we’re quoting this year at around 100 million doses in Q1 — which is, of course, a massive number — is because we’ve been working to build capacity. We expect ramps for future products to be faster and not to face capacity issues between launching our multi-variant booster, RSV, or CMV launch. We recognize the learning curve in ramping the mRNA vaccines deployment, and we will be better positioned for future needs, launching products once we establish manufacturing capacities based on existing knowledge. Therefore, while we are actively pursuing the scaling of product capacity through external partners, we do anticipate that next-generation variants and new product launches won’t face supply constraints.

Hey, guys. Thanks for taking the question. One quick one, I’m starting on financials. You gave a little clarity on CapEx investments around expanding capacity for production. Should we think of that as level setting CapEx going forward — modest increase going forward? Or should we think of that as primarily a one-time build-out? Secondly, you’ve given clarity, there’s a lot of clarity around COGS for this quarter versus the rest of the year. When you think about absolute COGS per unit, again priced to dose. When you think about other attributes like royalties and differences in product usage between different vaccines, would that suggest that that’s not the right way to think about it?

Yeah. So, CapEx guidance for 2022 and beyond is a bit premature at this point for us to provide precise expectations on continuing CapEx. This year, we have increased our projections based on developments over the past two months. Will this be a steady state going forward? A reasonable assumption would imply ongoing CapEx investments owing to our size and scope of operations. In terms of COGS, I would say that’s the right way to think about it; however, keep in mind variations that can occur based on dosage, which can project alongside overall production efficiencies. While we are seeing solid trends in our yields today, additional progress may occur which can help temper per unit COGS in the future.

Thank you so much for participating in today’s call and for the great questions. We look forward to seeing you at Science Day on May 27. Stay safe, everybody. Have a nice day. Bye.