Moderna Inc (MRNA) — Q2 2021 Earnings Call Transcript

Thank you, operator. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's second 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; Paul Burton, our Chief Medical Officer; Corinne Le Goff, our Chief Commercial Officer; and Jackie Miller, our Senior Vice President, Therapeutic Head of Infectious Diseases. 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 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our performance and results to differ materially from those expressed or implied in these forward-looking statements. On Slide 3, please see the important indication and information for our COVID-19 vaccine, which has been authorized for emergency use in the United States and in many countries around the world. I will now turn the call over to Stéphane.

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q2 2021 conference call. Today, I will start with a quick business review of our quarter before Corinne walks you through the commercial update. David will present the key financials. Stephen and Jackie will provide the clinical update, highlighting new human data about the final analysis for COVID-19 vaccine Phase 3 COVE study and human data for COVID-19 booster candidate Phase 2. I will then come back to close to share some thoughts about where we are heading. Let me start with Moderna COVID-19 vaccine or Spikevax. We are pleased to announce today that our final analysis vaccine efficacy or VE in our Phase 3 COVE study is holding very nicely at 93%. We are starting to get authorizations for adolescent indication 12 to 17 years of age, receiving authorization in Japan this week and the positive recommendation from the European Medicines Agency in July. An important step toward our vision of an annual respiratory combination booster is the start of a Phase 1/2 for mRNA-1010, which is equivalent to a seasonal flu vaccine. Our teams are already preparing the Phase 2/3 for this program. We were delighted to get fast track designation from the U.S. FDA for our RSV vaccine candidate, mRNA-1345 in adults over 60 years of age. There is no approved RSV vaccine. The burden for RSV infection is very high. In adults over 65 years of age, according to the CDC, 177,000 hospitalizations and around 14,000 deaths occur annually in the U.S. due to RSV. Our teams are also preparing a Phase 2/3 for this program. Our Zika vaccine has now moved to Phase 2. mRNA-3927 for propionic acidemia or PA, a rare genetic disease has also started building patients in our Phase 1/2. And we are pleased to announce recently that we started dosing healthy volunteers in our first autoimmune disease program, mRNA-6231, coding for IL-2. So Moderna is now in the clinic in five large therapeutic areas: infectious diseases, cancer, cardiology, autoimmune disease, and rare genetic diseases. We have strong pipeline momentum and the research teams are working hard to bring the next wave of development candidates to the clinic. Moving to Slide 6. We have also a strong commercial momentum. Let me start by giving you an update about Advanced Purchase Agreements or APAs for our COVID-19 vaccine Spikevax. For fiscal year 2021, we have now signed APAs for $20 billion versus $19.2 billion announced in our Q1 call. We are now capacity constrained for 2021 and we are not taking any more orders for 2021 delivery. For fiscal year 2022, we have already signed APAs for $12 billion. We have also signed an additional $8 billion in auctions. We are having numerous discussions ongoing, as we speak, with countries around the world to enter into new APAs for 2022. We'll continue to give you updates on a regular basis. What is very interesting to see is that forward-thinking countries like Israel and Switzerland have already signed APAs for 2023 to ensure supply for the endemic market. On the financial front, we delivered $4.4 billion of revenue and $2.8 billion of net income. The cash generation in the quarter was strong at around $4 billion, bringing our cash balance to over $12 billion at the end of June. We're also announcing today our first share buyback plan. Our Board of Directors has authorized share repurchase for up to $1 billion. David and I will give you more color in a few minutes. For 2021, we continue to forecast supply between 800 million and 1 billion doses. For 2022, we forecast supply between 2 to 3 billion doses, depending on the final dose approved by the regulators for our booster at 50 micrograms, up to 3 billion doses; at 10 micrograms, up to 2 billion doses. As we continue focusing on scaling the company, I am delighted to have three new executive committee members who joined recently by start date of the company: Shannon Klinger as our Chief Legal Officer and Corporate Secretary. She joined us from Novartis, where she was the Chief Legal Officer. Mr. Paul Burton, our Chief Medical Officer, he joined us from Johnson Pharmaceuticals, a Johnson & Johnson company, where he was Chief Global Medical Affairs Officer. And most recently, Kate Cronin as our newly created role of Chief Brand Officer. Kate was, until recently, the CEO of Ogilvy Health. I look forward to working closely with Shannon, Paul, and Kate, as we scale Moderna to the next level. On Slide 9, you will find our usual summary slide, a few important things to note. We are now preparing Phase 2/3 for the quadrivalent seasonal flu and our RSV program. Our team continues to grow as we increase manufacturing capacity for the COVID-19 vaccine as we move programs from early-stage clinical study to late-stage clinical studies, and as we increase investment in research for the next wave of development candidates. Let me now turn to Corinne to give you a commercial update. Corinne?

Thank you, Stéphane, and good morning or good afternoon, everyone. I am pleased to report on the productive quarter our commercial organization has experienced in the second quarter, which is ongoing as we enhance our efforts to supply the Moderna COVID-19 vaccine, Spikevax, to countries worldwide. I will begin by summarizing the advanced purchase agreements we have signed for delivery in 2021. Since our last quarterly call, I am excited to highlight that we have entered into agreements with COVAX for 34 million doses this year, an additional 110 million doses with the U.S. government, bringing the total to approximately 400 million doses for the United States, and 10 million doses to Australia for delivery in 2021. We anticipate generating up to $20 billion in sales from these agreements as we fulfill them throughout the remainder of the year. We take pride in distributing our vaccine directly or through our partner network across all continents, and most importantly, ensuring access to our vaccines in all countries, regardless of their income level, especially through the COVAX facility framework. I also want to note that we are doing everything possible to support the U.S. government in executing donations of Moderna vaccine doses. The next slide outlines the signed agreements for deliveries in 2022 and 2023. The structure of these agreements includes both confirmed orders as well as options that can be activated later. To date, we have contracted for 22 product sales amounting to $12 billion and an additional $8 billion in options. Some of these agreements are for primary series vaccines while others are for potential boosters. Considering the likelihood of needing booster vaccines to enhance immune responses against waning immunity and the rise of concerning variants, Moderna has already initiated our COVID booster strategy, which Stephen will elaborate on shortly. Meanwhile, the commercial team is actively engaged in various discussions that are becoming increasingly urgent as we observe the Delta variant surging among unvaccinated individuals. We are particularly in conversations with multiple countries in South America, Asia, and the Middle East, all of which are eager to secure primary series vaccines or booster doses for their populations next year. In the U.S., Moderna has begun the rolling submission process for beta approval and anticipates completing this submission in August. This approval will be a significant milestone in achieving herd immunity as it may help address vaccine hesitancy. Additionally, it will enable the commercial organization to prepare for the private U.S. market. Moving to the next slide, which reviews the sales for the second quarter of 2021. Total product sales for the quarter reached $4.2 billion, representing 199 million doses delivered. Sales in the U.S. amounted to $2.1 billion, reflecting 126 million doses delivered to the U.S. government, while sales to other countries were also $2.1 billion, representing 73 million doses delivered in the quarter. Now, I will hand it over to David to discuss the financial details.

Okay. Thank you, Corinne. We're providing today the analysis of actual 2021 second quarter results along with an updated view of key drivers of financial performance going forward. As in previous quarters, we are presenting our results primarily on a U.S. GAAP basis. In some cases, we also provide additional detail to provide greater clarity on underlying trends. Turn now please to Slide 15. The transformation of Moderna from an R&D-focused biotech to a commercial company is very apparent when reviewing our financial results. The comparison of the second quarter of 2021 to the prior year is not as meaningful due to our dynamic growth, which is why we'll primarily focus on the quarter-over-quarter comparison relative to Q1 on this slide. Total revenue was $4.4 billion in the second quarter of 2021 compared to $1.9 billion in Q1. The increase in total revenue is primarily the result of the sale of the company's COVID-19 vaccine. Product sales in Q2 were $4.2 billion compared to $1.7 billion in the first quarter, an increase of 142%. Cost of sales were $750 million or 18% of the company's product sales in the second quarter compared to $193 million in the first quarter. Research and development expenses were $421 million in Q2 2021 compared to $401 million in Q1 and $152 million in the same period in 2020. The higher spend versus prior quarter and prior year was driven by increased COVID-19 vaccine clinical development activities including our announced efforts around booster, variant-specific, and multivalent vaccine candidates. Selling, general and administrative expenses were $121 million for Q2 compared to $77 million for the prior quarter. The growth in spending was driven by commercialization of our COVID-19 vaccine globally with the biggest increases being in personnel and outside services. Provision for income taxes was $283 million in Q2 after $39 million in Q1 and an insignificant amount in the prior year. Our effective tax rate for Q2 was 9%. Let me remind you of the following. The significant investments to develop the mRNA platform over the last decade resulted in a net operating loss carryforward with a balance of $2.3 billion at the end of 2020. As of December 31, we maintained a full valuation allowance against our deferred tax assets related to these loss carryforwards. As discussed in our last call, we started to release the valuation allowance this year. The majority of the allowance will flow through the P&L over the course of this year through our effective tax rate pro-rated based on the cadence of our expected pre-tax quarterly earnings. Over the course of 2021, the resulting non-recurring benefit due to the release of the valuation allowance is about five percentage points on our effective tax rate. Our Q2 effective tax rate was lower than the U.S. statutory rate, primarily due to the benefit related to the release of the valuation allowance, the foreign-derived intangible income deduction, as well as a discrete item for excess tax deductions related to stock-based compensation. We recorded net income of $2.8 billion in Q2 after $1.2 billion in Q1, an increase of 128%. Diluted earnings per share for Q2 were $6.46. Turning now to year-to-date financial results compared to the prior year on Slide 16. Total revenue was $6.3 billion for the six months ended June 30, compared to $75 million for the same period in 2020. The significant growth was driven by the sales of 302 million doses of the company's COVID-19 vaccine. Cost of sales was $943 million or 16% of the company's product sales for the six months ended June 30, including third-party royalties of $232 million. Reported cost of sales was reduced by three percentage points due to the consumption of previously expensed inventory of approximately $200 million. Research and development expenses were $822 million for the six months ended June 30, compared to $267 million for the same period in 2020. The growth in spending in 2021 was largely driven by increased mRNA-1273 clinical development and headcount. Selling, general and administrative expenses were $198 million for the six months ended June 30, compared to $61 million for the same period in 2020. The growth in spending in 2021 was mainly attributable to the company's COVID-19 vaccine commercialization activities. For the six months ended June 30, we recorded a provision for income taxes of $322 million compared to an insignificant amount for the period in 2020. Our effective tax rate for the six months ended June 30 was 7%. It was lower than the U.S. statutory rate, primarily due to the non-recurring benefit related to the release of the valuation allowance, the ongoing benefit of the foreign-derived intangible income deduction, as well as a discrete item for excess tax deductions related to stock-based compensation. Net income was $4 billion for the six months ended June 30, compared to a net loss of $241 million for the same period in 2020. Diluted earnings per share were $9.30 for the six months ended June 30, 2021. Turning to cash and selected cash flow information on Slide 17. We ended Q2 with cash and investments of $12.2 billion compared to $8.2 billion at the end of Q1. The increase is driven by our commercial sales and additional customer deposits received in the second quarter for future purchases of our COVID-19 vaccine. Net cash provided by operating activities was $4.1 billion in Q2 after $3 billion in Q1, totaling then $7 billion year-to-date. This compares to net cash used in operating activities of $130 million in the prior year. Cash used for the purchase of property and equipment was $65 million for the six months ended June 30, compared to $25 million for the same period in 2020. Similar to last quarter, before providing an updated financial framework for the remainder of 2021, let me point out a few areas that are important to keep in mind when modeling expected 2021 financial performance, starting with the cost of sales on Slide 18. The cost of sales includes the cost of goods manufactured, third-party royalties as well as logistics and warehousing costs. As you may recall, we began capitalizing our COVID-19 vaccine inventory cost in December 2020 following emergency use authorization. Prior to the authorization, inventory costs were recorded as research and development expenses in the period incurred. In Q1, a zero-cost inventory balance of $184 million was sold and benefited our cost of sales. If inventory sold during the first quarter was valued at actual cost, our cost of sales would have been $377 million or 22% of product sales. In Q2, the cost of sales of $750 million or 18% of product sales were no longer materially impacted by the zero-cost inventory, hence, the relevant comparison is the adjusted ratio in Q1. The reduction of cost of sales as a percent of product sales when comparing to the adjusted cost of sales in Q1 is primarily driven by a customer mix-driven increase in our average selling price during the second quarter. Now turning to our cash and investment position on Slide 19. The cash and investment balance reported as of June 30 was $12.2 billion, up from $8.2 billion as of March 31. The increase is driven by our commercial activities, including a net increase in customer deposits for future product supply of the COVID-19 vaccine. The net cash balance of customer deposits increased from $5.6 billion at the end of Q1 to $6.8 billion as of June 30. Turning to Slide 20. I wanted to share our capital allocation priorities. We seek to optimize our capital deployment and maximize long-term shareholder returns. Our top investment priority will continue to be reinvesting in the base business across multiple areas. For R&D, we have more than tripled spending in the first half of 2021 relative to the prior year, and we will continue to significantly increase spending in this area to advance and accelerate our pipeline. For manufacturing, we previously disclosed our 2021 capital expenditure plans, which will allow us to increase our production capacity. Additionally, we are investing heavily in digital, automation, and AI, as well as scaling up our global commercial operations which will allow us to maximize the impact of our mRNA platform. Our second investment priority is to seek attractive external investment and collaboration opportunities to further expand the reach of Moderna's technology and capabilities. We are considering attractive strategic opportunities that enable and complement our platform and take a disciplined approach in evaluating potential outside investments. After evaluating internal and external investment opportunities, we then assess additional uses of cash. As part of today's press release, we announced that the board has authorized a $1 billion share repurchase program. This program is authorized for a two-year period based on the strength of our financial results for the first half of the year and our confidence in our business outlook; we believe it is an appropriate time to initiate this program. Turning now to the 2021 updated financial framework on Slide 21. Signed advanced purchase agreements for expected delivery in 2021 reflect the current full year total of approximately $20 billion in anticipated product sales including the $5.9 billion of product sales already generated in the first half of this year. For the full year, we continue to expect a minimum supply of 800 million doses at the 100-microgram dose level. Our manufacturing team and our partners continue to work to supply up to 1 billion doses for 2021. We have signed advanced purchase agreements for expected delivery in 2022 for total product sales of approximately $12 billion and options for an additional $8 billion. Numerous additional negotiations are still ongoing for 2022 APAs. We have also started to sign APAs for 2023. As we previously announced, we continue to make investments to increase our supply of vaccines including by working with contract manufacturing organizations. We currently anticipate that our supply could be as high as 3 billion doses for 2022, if our sales are primarily at a 50-microgram dose level. If sales are primarily at the 100-microgram dose level, we anticipate that supply will be approximately up to 2 billion doses. The ultimate approach on dosage levels for 2022 and where we might end up in that range is subject to ongoing internal review as well as discussions with regulators and customers and will also be impacted by the mix of primary and booster series. Our total cost of sales includes the cost of goods manufactured, third-party royalties as well as logistics and warehousing costs. For 2021 we now expect the average total cost of sales as a percentage of product sales to be between 18% to 20% compared to our previous outlook of approximately 20% of product sales. This reflects the successful ramp-up of this global manufacturing network. With regard to planned R&D and SG&A expenses, Q2 expenses of approximately $542 million reflect a quarter-over-quarter increase of 13% in line with the outlook we gave in Q1. We continue to plan for an increase on a quarter-over-quarter basis for the remainder of this year and expect this growth rate to accelerate as the business rapidly expands. Based on further increased visibility of the utilization of our accumulated net operating loss carryforward, expected global sales mix and the mentioned discrete benefits in the first half of this year, we now expect our all-in 2021 tax rate to be approximately 10%. This compares to our previous forecast in the low-teen range. This forecast is based on current U.S. tax policy and does not include any future potential discrete benefits related to stock-based compensation. Finally, regarding capital investments, we maintained our forecast for a range of $450 million to $550 million including the planned capacity expansion investments as announced on April 29 of this year. This concludes my remarks and I turn the call over to Jackie Miller.

Yes. Good morning, good afternoon everyone. My name is Jackie Miller and I lead the therapeutic area for infectious diseases. It is my pleasure today to give you an update on the ongoing accumulation of data in our Phase III clinical study and also to talk about some of the publications of real-world evidence that have occurred outside of Moderna with the use of our COVID-19 vaccine. So on Slide 24, you'll see the top-line updates to our COVE efficacy trial. These efficacy data have now been followed through four to six months after subjects received their second vaccination of either mRNA-1273 or placebo. Recall that at the time of our EUA submission, our primary efficacy analysis demonstrated efficacy to COVID-19 of 94.1%. Now four to six months after the second dose, we see a maintenance of that efficacy of 93.2% with a lower limit of the 95% confidence interval of 91%. We continue to maintain efficacy against severe COVID-19 disease with updated vaccine efficacy of 98.2% and currently have 100% efficacy against deaths caused by COVID-19. So unfortunately, there were three deaths in the placebo group and up to now none in the mRNA-1273 group. We continue to see consistency in our subgroup analyses including analyses by gender, by race, and by preexisting medical conditions. Our safety profile continues to be consistent with the Phase 3 data over the longer period of safety follow-up and also continues to be consistent across population subgroups. Next slide, please. On Slide 25, you'll see the efficacy data broken out by time interval. So what you see at the top of the table is the overall efficacy we just discussed. According to the primary endpoint, we start measuring vaccine efficacy at 14 days after dose two. And again, that's 93.1%. If you look between 14 days post dose two, to less than two months after dose two, we observed vaccine efficacy of 91.8% and 94% if you look two months after dose two to less than four months after dose two. Finally, greater than four months after dose two, we observed 92.4% efficacy. The conclusion we take from these data is that our efficacy has remained consistently high and durable throughout the period of follow-up. We intend to continue to follow these data now that the trial is in its open-label phase. The reports will be different moving forward given that subjects in the placebo group have recently been vaccinated, but we think it's important that we continue to follow as subjects remain further out from their initial vaccination. So if you go to Slide 26, you'll see that these data have been consistent also in studies outside of the Moderna clinical trial. So, we begin to see real-world effectiveness data demonstrate that Moderna maintains effectiveness consistent with what was seen in the COVE study. There are reports from Canada, from the United Kingdom, and from Qatar and importantly, these trials confirm that there is vaccine effectiveness against the Wuhan strain as well as emerging variants of concern, including the alpha, beta, gamma, and delta variants, and this is even after partial vaccination or vaccination with a single dose. So if you move to Slide 27, I'm now going to hand over the presentation to Stephen Hoge, who will review our COVID-19 booster strategy and clinical data as well as a review of our pipeline.

Thank you, Jackie. So moving on to Slide 28. I want to start with an update of our perspective on COVID-19 and how it's impacting our strategy for boosters. Firstly, our emerging perspective. We believe today that the increased force of infection resulting from the delta variant, fatigue with non-pharmaceutical interventions, and the seasonal effects of moving indoors will eventually lead to an increase in breakthrough infections in vaccinated individuals. In fact, there have been reports of that already. While we see durable Phase 3 efficacy through six months, which Jackie just described, we do expect that neutralizing antibodies will continue to wane and eventually that will impact vaccine efficacy. So given this intersection between a rising force of infection and waning immunity, we believe a third dose booster will likely be necessary to keep us as safe as possible through the winter season in the Northern Hemisphere. So how has that informed our booster strategy? Since early this year, our primary approach has been to advance our portfolio of booster candidates against all potential emerging variants of concern, and so we have a large number of ongoing clinical studies, and I'll provide some update on some today. Those boosters are being evaluated often at two different dose levels, 50 micrograms and 100 micrograms. They fall broadly into three categories. First is our prototype vaccine mRNA-1273, for which Jackie just described the primary efficacy data out of our Phase 3 study. Second, we are looking at various specific booster candidates, beta and now a new delta variant-specific candidate. Third, we are looking at a multivalent platform, combining different variants into a single vaccine, first with our mRNA-211 program and now a new mRNA-213 program, which includes the delta antigen. The goal of the multivalent platform is to continue to try and stay ahead of where the virus is going by combining different antigens against emerging variants of concern. So, I'd like to provide a brief update today on the three pre-existing programs, mRNA-1273, our variant-specific booster candidate against the beta strain 351, and our first multivalent vaccine 211. Moving to Slide 29, I have the comparison of those three candidates from our Phase 201 study. Starting on the left-hand side, we can look at the wild-type virus neutralization of the three different booster approaches. As you can see, at the baseline, day one, six to eight months after they participated in one of our clinical studies, we offered them a chance for this booster. All three boosters significantly increased the neutralization against the wild-type virus. As you can see for 1273, a 16.7-fold increase; approximately 11-fold at both day 15 and day 29 for the beta variant candidate; and 38 to 46-fold with the 211 multivalent platform. So, we view our multivalent platform as an important part of our scientific strategy. If that came with the increased transmissibility force of infection that delta can achieve, that might be a significant threat. So, we think multivalent boosters are part of the scientific strategy moving forward. I would also say, don't rule out that the virus has surprises in its future. We expect it will likely continue to have rounds of infection and for variants to continue to emerge.

Thank you, Corinne, David, Jackie, and Stephen. Before taking your questions, let me share a few thoughts. On this slide, we articulate how we have been speaking for many years now about using our mRNA platform to maximize our impact on patients. On the left, we now have two core modalities. For vaccines in blue we have achieved authorized products; and for systemic secreted and cell-surface therapeutics in pink, we have achieved human proof-of-concept with our chikungunya antibodies demonstrating we could get therapeutic levels of antibodies and we could repeat those successfully. In the middle, we have four exploratory modalities, which are in the clinic with six programs to understand if we achieve human proof-of-concept. Four medicines in immuno-oncology, one in cardiology, one in rare genetic disease. More coming in the coming quarters. On the right, you see two modalities which are not yet in the clinic but for which we believe we have achieved an important derisking in non-human primates. Delivery of mRNA to the lung and delivery of mRNA into hematopoietic stem progenitor cells. In vaccines, we are focusing on bringing to market what we believe could be a game-changing respiratory vaccine that could combine COVID-19, seasonal flu boosters, and RSV boosters in one single annual shot. Our RSV clinical data have shown a high level of neutralizing antibodies which has led the FDA to grant Fast Track Designation. The flu market is $5 billion to $6 billion per year. Despite flu vaccine efficacy being progressive in several key mRNA, we believe we can do better with our mRNA platform, given what we have demonstrated with COVID-19. The Moderna flu vaccine candidate could launch as early as 2023. I'm excited about our vaccine pipeline and how these vaccines could prevent death, hospitalization, and disease in billions of people over the years. Thank you for coming in today, and we look forward to talking to you at the latest for R&D Day on September 9.

Good morning. Thank you for taking my questions. Could you walk us through the dynamics for 2022 and beyond in terms of APAs for Spikevax essentially demand in the context supply of 2 to 3 billion doses for 2022, and then how we should think about the years beyond 2022 and pricing? And then secondly, with regard to external business development, how are you thinking about integrating areas like gene editing and gene therapy with your platform?

Maybe I'll start on the answer on 2022-2023. So, as we said, we are seeing very strong demand continuing in the context of the pandemic well into 2022. And hence, we've given you the range of 2 to 3 billion doses depending very much on whether our customers are still purchasing for primary series or if they're looking at boosters and then depending on the eventual dosage for booster. So I think it's really going to evolve as to exactly what that looks like in terms of dosage. Going beyond 2022, as we said, we are starting to see now the forward-planning countries that are looking beyond the very near-term. We're starting to have contract discussions and, in fact, have agreed some contracts into 2023. But I think it's early to really know how this is going to evolve in terms of the transition from pandemic to the endemic phase. In terms of pricing, I think it's helpful to start with where we are in 2021 to have a context for understanding pricing going forward. The contracts that we've signed now for 2022, the pricing constructs are very consistent with the framework that we've had in 2021. If you look at the average price, that will depend on the mix across these categories. And, of course, we're expecting to see significant sales to the middle and low-income countries and that increasing in 2022. So it shouldn't be surprising if the average price you see some declines. As we move into a post-pandemic period, we would expect market forces to impact our price negotiations. So hopefully, that answers your question.

And, Salveen, I’ll maybe just pipe in at the end with your first question on gene editing. We have been, as you all know, the innovator in mRNA and lipid nanoparticle delivery in therapeutics for a while. We’ve watched the space quite interestingly or significantly in terms of ways that we could help with delivering gene editing cargoes across a range of different tissues where our lipid nanoparticle systems have been shown to go even in humans. We think it's the right time for us to start to expand in that direction. If there's a general convergence in the gene editing space is that messenger RNA and lipid nanoparticles are perhaps the way to go. That’s something we strongly agree with, having spent the last decade working in the technology. So you’ll be looking for us to bring new payloads, new capabilities, new enzymes into our existing technological capabilities, which we think are best-in-class.

Great. Good morning. Thanks for taking the questions. A couple of related questions on boosters, if I may. I guess, first question is, maybe you could just put in context some of the information we're hearing from the FDA or the CDC, especially ACIP on their position on boosters and how you would expect that to evolve over the coming months. Second, could you comment on the potential for a multivalent booster? And how you might be thinking about that in the context of the data you presented today, especially just on using a third dose of the existing shot? And then, third, could you maybe just comment on your views of long-term virus evolution? Obviously, typically, viruses tend to evolve towards more infectious, but lower virulence. And so I'm wondering what your thoughts are on the long-term booster market obviously versus the sort of near-term booster market when infections may still be quite high? Thanks.

Sure. Thank you, Matthew. I think we are going to always defer to what's happening with the public health officials in terms of when they think the appropriate time to recommend a booster vaccine is necessary. Where we see the data ourselves, I can't speak to the challenges they face. But the good news is we see the potential for waning immunity. In fact, there are a couple of publications that have emerged supporting that point. We continue to want to be vigilant because that trend and those predictions we think will come to four. For all those reasons, we think that it’s appropriate to be cautious. Our approach is to defer public health and when boosters are going to be necessary but to bring forward the best option as we see them based on the science that we see in the emerging epidemiology. We are hopeful that it will wait, but we really do believe the virus is here to stay for the long term. Therefore, there’s going to be a need to regularly boost particularly high-risk older populations into the future.

Great. Thank you very much, and thank you for all the thorough information just on Spikevax, but also on the pipeline. I guess my first question has to do with capacity and really trying to understand a little bit more fully what goes into continuing to grow capacity, especially overseas. And I guess the second question would be with respect to the worsens disease pipeline which is, I think you guys normalize events just in terms of application for mRNA. How can we be moving faster there? Again appreciating that you guys have a pandemic you're trying to address. But it seems to me like everything is set to go there. And just curious what we can be doing to maybe accelerate some of those important programs. Thank you so much for taking the question.

Yes. Maybe I’ll take the capacity and then Stephen will talk about rare disease. We’ve announced significant manufacturing capacity increase in the U.S. and overseas. As I said in my remarks, we are still tracking for 800 million to 1 billion doses this year. But we’re trying to maximize the penetration of Spikevax around the world. On rare diseases, we have had a long-standing commitment to these populations and that's as strong today as ever. And especially in rare diseases, we want to move from Phase 1 studies into pivotal studies. So, particularly in rare diseases, we expect there will be a solid timeline now because all of that through our early positive clinical data.

Hi. Good morning. Thanks for the questions. One on boosting. Do you guys have a good sense of what you think the regulatory view or hurdle is to support boosting? You show that great data on Slide 30 showing the waning of the antibodies. What do you think that specific data is or what the tighter level would be to support boosting for the fall or the winter? And then question two, a little bit similar. On flu, is it your view that significantly higher levels of antibodies will be to significantly higher efficacy and that would be just a larger loss to be supportive of a launch I think you said in 2023? Thank you.

Sure. So, on your first question, we do not currently have a correlative protection in the world unfortunately for any vaccines. And so, it's very hard to say objectively what tighter, what level is this sort of the minimum level. But as it stands today, we think the 50-microgram data presented today look encouraging. The good news is it looks like the data show that the vaccine is holding up. As for your second question about flu, it is certainly our hope and view that because it's a well-understood market, with things like the HAI titers, we might be able to leverage some of that thinking in terms of immunogenicity and safety. But the regulatory path will be subject to ongoing discussions.

Thank you. I have three quick questions. The first one is, if boosters turned out to be 50 micrograms, should we still expect a similar price range among the three buckets during the pandemic phase? And then number two, could you walk through the clinical trial development path for a single-shot vaccine against COVID flu and RSV? The third question is regarding external investment opportunities. You mentioned that expanding to two new modalities, lung and hematopoietic stem cells, with gene editing with liponanoparticle delivery, currently focusing on the liver. Does that mean you are willing to expand to liver diseases?

So, on the boost, the price is not linked to the mass. We anticipate the price of boosting to be set and not related to those. On the second question, I believe Jackie will clarify that for you.

I'm happy to take that question, Stéphane. It’s around the clinical development plan for a booster combination vaccine. We do have experience with combination vaccines in the past, and typically what we do is license the initial components first. We are working on our BLA for COVID and preparing Phase 2/3 for flu and for RSV. We would then look to license the combination vaccine through immunobridging.

Thank you, Jackie. On the gene editing question, we do have that focus on liver diseases. But as presented, we believe both technologies allow for great opportunities to reach a broader patient population and we would explore those technologies more deeply.

This is 25 minutes past the hour. So I would hand it over back to Stéphane Bancel to make closing remarks.

Thank you, everyone, for coming in today. We look forward to your continued engagement with us, and we are excited for the future of Moderna as we continue to focus on maximizing our impact on patients. Thank you and have a great day.