Moderna Inc (MRNA) — Q4 2021 Earnings Call Transcript

Thank you, Kevin. Good morning, everyone. And thank you for joining us on today’s call to discuss Moderna’s fourth quarter and full-year 2021 financial results and business update. You can access the press release we 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; and Paul Burton, our Chief Medical 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 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. With that, I will turn the call over to Stéphane.

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q4 2021 conference call. Today, I will start with a quick business review of fiscal year ‘21 before Paul walks you through some real-world evidence data. Stephen will then review our clinical programs before David presents our financial results. I will then come back to close to share some thoughts about where we are heading. We are pleased to report today $18.5 billion in revenues for fiscal year 2021 and a GAAP net income of $12.2 billion, translating to a GAAP diluted earnings per share of $28.29 with a cash balance at the end of the year of $17.6 billion. We announced this morning that we have completed our August 2021 $1 billion share buyback plan, which reduced our average share count during the fourth quarter for the first time in the Company's history. I am very proud of our team’s ability to advance, as well as expand, our development pipeline with new programs. In respiratory vaccines for COVID, as you know, we received full BLA approval from the U.S. FDA for Spikevax, with authorization for children ages 12 to 17 in key markets globally. We are conducting a 50-microgram dose study in the U.S. for adolescents following discussions with the FDA. We are pleased to report that we have also started to receive authorization for children aged 6 to 11, beginning in Australia last week, with more countries expected in the coming days and weeks. We also dosed the first participants in our Omicron-specific vaccine trial, mRNA-1273.529. Today, we’re announcing that we plan to bring mRNA-1273.214, a bivalent vaccine combining the wild-type vaccine mRNA-1273 and the Omicron vaccine mRNA-1273.529 into one single-dose booster into the clinic. We are very excited that now RSV is in Phase 3. This is our third vaccine starting Phase 3. And for flu, we are awaiting Phase 2 data for mRNA-1010. As soon as we have them, we will select a dose and initiate our Phase 3 for the flu and start our Phase 1 for the COVID plus flu program, mRNA-1273. For latent viruses, CMV is enrolling in Phase 3, EBV and HIV are now in Phase 1, and we are very excited to announce that we’re adding two new latent virus programs to our development pipeline, one vaccine against HSV and one vaccine against VZV. More latent virus vaccines are in the works in our labs. In therapeutics, PA and MMA are in the clinic, dosing and recruiting more patients. We announced a new checkpoint cancer vaccine, mRNA-4359, and Merck has informed us that they are restoring the rights to the KRAS vaccine while evaluating future steps for this program. The Company continues to expand at a rapid pace. We now have one approved medicine, two in Phase 3: RSV and CMV; and five in Phase 2, for a total of 44 programs. We are deploying capital to accelerate and expand the pipeline. The Company now has 3,000 team members across the world, with a great culture, and 11 commercial subsidiaries across the Americas, Europe, and the Asia Pacific, while a $17 billion cash balance at the end of the year is enabling us to scale across research, development, manufacturing, commercial, and G&A. With this, let me now turn to Paul.

Thank you, Stéphane, and hello, everyone. It is almost exactly three months ago that we first heard about the challenges related to Omicron variants. Today, we look back on three months that have seen millions of new cases of COVID-19 infection worldwide due to Omicron, and a death toll that turned out to be almost 20% higher than that during the Delta wave. It is clear that SARS-CoV-2 is a virus capable of making very large evolutionary leaps in its structure and function. While we are hopeful that we are about to enter a period of relative stability in the northern hemisphere, we believe firmly that a vaccine booster dose will be required for the fall of 2022 to provide ongoing protection against this virus. We have seen measures taken by the United Kingdom recently to offer an additional booster dose to those at higher risk, and we believe such measures will become more widespread with governments looking to protect their populations from disease later this year and support their healthcare systems. As always, a huge note of appreciation to the frontline workers, the healthcare workers who have continued to immunize and protect us during this pandemic. Their tireless work has saved millions of lives worldwide. I’m going to review some data today that underpins why we believe an additional booster shot will be required certainly by the fall of 2022. First, let me share with you some data from a study of almost 440,000 individuals in the United States Veterans Administration database, looking at the effectiveness of mRNA-1273, Spikevax in the primary series vaccination setting. As we know, the mRNA vaccines are extremely safe and effective. The data here shows the exceptional effectiveness of mRNA-1273. In this well-powered and prospectively designed comparative effectiveness study, mRNA-1273 significantly reduced the risk of COVID-19 infection and hospitalization compared to BNT162b2. These data are reassuring and continue to underpin the strong global confidence that governments, healthcare systems, and individuals have in mRNA COVID-19 vaccines and mRNA-1273. Indeed, an example of that is the very recent announcement by the CDC at British Columbia for the preferential use of the Moderna vaccine in anyone over 12 years of age living with immunocompromised conditions. A similar pattern of results is seen from real-world effectiveness studies in the United Kingdom. The graphs I’m going to show you here come from the United Kingdom Health Security Agency, looking at the effect of either the Pfizer-BioNTech or Moderna vaccines and their effectiveness against hospitalization. First, let me show you the results in people who received the Pfizer-BioNTech vaccine for their primary vaccination and were then boosted with either the Pfizer-BioNTech vaccine or the Moderna vaccine. We see retained protection against the Delta variant of concern in the field squares, but we see waning of effect in the circles against Omicron. The same is true on the next graph. Here, you see individuals who received the AstraZeneca vaccine for their primary immunization. Again, in this very large real-world assessment, we can see that mRNA-1273 provides protection against hospitalization due to both Delta and, to a lesser extent, Omicron infection. Notably, we see waning of protection over time against hospitalization due to Omicron infection. This fits with the profound immune evasion we know to be the case with Omicron. This is also a driver of our belief that both a booster vaccination will be required later in 2022, but additional protection will also be necessary against both the Delta and Omicron variants of concern, as Stéphane announced earlier. This is because Delta, as we know, has strong pathogenicity, and Omicron, as we have seen, due to its transmissibility and infectivity, is also associated with substantial morbidity and strain on healthcare systems due to the sheer number of cases. Protection against both Delta and Omicron may be necessary in the next booster vaccination. On slide 10, we see data explaining the clinical phenomena I just outlined. These data come from one of our previously conducted clinical studies. Sera from individuals immunized and boosted with mRNA-1273 significantly neutralize the ancestral SARS-CoV-2 virus, but to a lesser extent than Omicron. This underscores the belief that an additional booster dose will be needed later in 2022, providing protection against both the Delta and Omicron variants of concern. You can see this point made clearly again in slide 11, where we estimate the duration of protection against both the ancestral D614G and Omicron. Because protection against Omicron wanes and drops to levels that begin to allow breakthrough infections to occur around nine months post boosting, we will continue to monitor the situation carefully alongside other emerging variants and continue to do everything we can to provide people with a safe and highly effective vaccine booster for 2022 and beyond. We announced in January that we were able to go from the identification of Omicron to testing a new vaccine in humans in just two months, a remarkable testament to the Moderna mRNA platform and its utility. The next slide illustrates the different phases of the pandemic to endemic continuum and its effect as measured by morbidity or disease burden over time. The shape of the graph was adapted from our historical knowledge of previous pandemics and what we expected from the current pandemic, considering the immune response developed via infection or vaccination. The very first wave of the pandemic, when the global population was naïve to this virus, resulted in high levels of morbidity and mortality. With each subsequent variant, the morbidity observed tended to be less severe, relative to the first wave, as the immune systems gained familiarity with fighting off SARS-CoV-2. We’ll continue monitoring the situation in the southern hemisphere as winter approaches. We expect respiratory viruses, such as SARS-CoV-2, to follow a seasonal pattern of disease burden. Vaccinating vulnerable populations will be pivotal as we move forward, and protecting against combinations of viruses like SARS-CoV-2, flu, and RSV with a single yearly shot will be foundational for our strategy. In summary, the available real-world data continue to show the remarkable effectiveness of mRNA-1273. These data show that a 50-microgram booster dose significantly protects against hospitalization caused by Omicron, although we note the waning of antibody titers by six months post-boosting. As leaders in mRNA vaccines, it's crucial to develop booster vaccines that can help us protect against Omicron and future variants as we work together to end this pandemic. I will now hand it over to Dr. Stephen Hoge to provide further updates on this topic and the Moderna pipeline.

Thank you, Paul. Good morning and good afternoon, everyone. On slide 16, I’d like to briefly summarize our COVID-19 booster development strategy for the endemic phase. As Paul covered, the strategic rationale for a seasonal booster has three parts. Firstly, we believe neutralizing titers will wane similar to endemic human coronaviruses as Paul just described. This decline in neutralizing titers will increase the risk of breakthrough hospitalization in those at higher risk, specifically older adults and the immunocompromised. Secondly, the emergence of new variants of concern will also increase the risk of waning, expanding the risk of breakthrough infections to other populations. The desired features for our Northern Hemisphere fall and winter 2022 booster are outlined here. We’d like to improve the longevity of protection for neutralizing antibodies against Omicron and its mutations to at least six months, which will ensure full protection through the Northern Hemisphere fall-winter infection season. Furthermore, we’d like to retain the high and durable protection we have seen from our prototype vaccine against Delta and ancestral strains. Lastly, we’d like to enhance cross-protective immunity as broadly as possible to increase the chance of defending against any newly emergent variants of concern which might arise mid-year from the Southern Hemisphere. Moving on to slide 17, I’ll quickly summarize our strategy for developing an updated booster for fall 2022. We are currently evaluating three different booster strategies in adults aged 18 plus. First, as noted by both Paul and Stéphane, is a bivalent booster vaccine composed of the prototype mRNA-1273 and an Omicron-specific mRNA-1273.529. We are also evaluating, as announced previously, an Omicron-specific booster, mRNA-1273.529. Of course, we will also continue evaluating our prototype booster, mRNA-1273, for which there exists a substantial body of real-world evidence, as Paul just described. We are assessing these three different approaches across two studies in the United States and the United Kingdom: a Phase 2 study in the U.S. with about 750 participants and a 3,000-participant study in the UK. Both studies are examining bivalent and Omicron-specific boosters and both will consider third and fourth doses of those boosters. The UK study will explore heterologous boosting, including with other mRNA and non-mRNA vaccines. On slide 18, I want to delve into the scientific rationale supporting why we believe the bivalent vaccine booster for the fall of 2022 presents a potential advantage. This data indicates that there may be an opportunity to improve protection longevity against variants of concern while maintaining efficacy against ancestral variants, based on one of our earlier bivalent vaccines, mRNA-1273.211, which was based on the 1273 vaccine and the Beta variant of concern that emerged approximately a year ago. When we compare both booster strategies, the prototype booster on the left, and the bivalent booster on the right, against the different variants, we observe an encouraging emergence of potential improvement in durability. On slide 19, we plotted that same data over time for better visualization. On the left-side graph, we observe the mRNA-1273 booster performance compared to the bivalent Beta booster over time. While post-booster results indicate that the two boosters provide significant increases in neutralizing titers to about 1,000 for both, six months later shows a difference in durability. The bivalent vaccine, with its Beta variant, exhibits enduring protection, suggesting a potentially longer-lasting effect compared to the prototype vaccine, which declines back toward baseline levels. Moving to slide 20, to summarize our COVID-19 booster development for fall 2022, we anticipate that a seasonal booster will be essential to prevent breakthrough cases, including hospitalizations among vulnerable individuals. Therefore, we believe that the fall 2022 booster should reflect the diversity of circulating mutations, aiming for over six months of neutralizing titer longevity to maximize protection throughout the entire fall COVID season, roughly September through February. Moderna is developing an Omicron-containing bivalent booster, informed by previous bivalent research suggesting that incorporating mutations from variants of concern may improve durative efficacy against such variants. On slide 21, we can catch up on other developments in our COVID-19 vaccine. We have made progress both in the primary and booster series administered to adolescents and pediatric populations. In adolescents, we have achieved regulatory approvals for Spikevax in Europe, the United Kingdom, Australia, Canada, and many other regions. In the US, we are preparing to submit an EUA for 100 micrograms of mRNA-1273 in adolescents who are immune compromised or at heightened risk of severe outcomes. We are also exploring a potential lower dose of 50 micrograms as a primary series. Moreover, we plan to submit data for 50 micrograms as a booster dose for both adolescents and adults, which will include findings on heterologous boosting. For the 6- to 11-year-old pediatric age group, we have received provisional approval for Spikevax in Australia and have submitted to several other international regulatory entities, expecting authorizations shortly. The U.S. submission remains pending alignment with FDA regarding the adolescent application, and we are evaluating lower doses, including a 25-microgram primary series dose. In the youngest demographic of 6 months to 5 years, we anticipate data on our 25-microgram two-dose primary series in the first quarter. Pending favorable data, we will prepare submissions to regulatory bodies while continuing to evaluate lower doses and potential third doses in that age cohort. Transitioning to our broader respiratory vaccine portfolio on slide 22, we continue to progress with all our respiratory vaccines. As Stéphane mentioned, our flu vaccine is fully enrolled for Phase 2. Assuming successful results, we are poised to advance into Phase 3, likely this 2022. We are also preparing to initiate a combination flu and COVID vaccine currently at the preclinical stage, which we expect to begin in Phase 1 this year. Our older adult RSV program has entered its Phase 3 study segment and is currently enrolling participants. Additionally, we have commenced a pediatric RSV study which will move into Phase 1. We have established further respiratory combination vaccines: one targeting human metapneumovirus to parainfluenza virus 3 vaccine now in Phase 1b (fully enrolled), and an RSV plus hMPV vaccine in preclinical development we anticipate commencing soon. Moving on to latent and public health vaccines on slide 23, our CMV vaccine continues to enroll in the Phase 3 CMVictory study. We have also advanced two new latent virus vaccine programs into clinical testing: our EBV vaccine aimed at preventing infectious mononucleosis is in Phase 1, and our first HIV vaccine, mRNA-1644, is also in Phase 1. We've introduced two new development candidates, a vaccine against HSV and another against VZV. Our public health vaccines targeting Zika and Nipah also continue to progress. On slide 24, I’d like to feature one of our new candidates: mRNA-1608, our vaccine against Herpes simplex virus 2. HSV-2 primarily affects the genital area and creates lifelong latent infections within sensory neurons. Its prevalence is significant in developed markets, approximately affecting 18 million people who are HSV-2 positive in the United States—about 5% of the population. Our mRNA-1608 vaccineencodes antigens from the HSV virus and has demonstrated potent immune responses, as illustrated in the accompanying figure. Neutralizing titers in mice administered with the mRNA-1608 vaccine are significantly elevated beyond levels seen in seropositive human sera, suggesting we can potentially provide substantial benefits within this population. The second candidate I want to highlight is on slide 25: mRNA-1468, aimed at herpes zoster or shingles. Herpes zoster arises from the reactivation of latent varicella-zoster virus (VZV) and is primarily observed due to declining immunity in older adults, often leading to painful and severe lesions. One in three adults will experience herpes zoster during their lifetime, and the incidence is growing as populations age, particularly beyond 50 years. On the right, you’ll find previously published data from the Journal of Vaccine, comparing our VZV vaccine, mRNA-1468, in nonhuman primates against current approved shingles vaccines. As depicted, our mRNA vaccine against gE prompted significant neutralizing titers after two doses, signaling a strong potential for clinical benefit with mRNA-1468. Moving on to our therapeutic pipeline on slide 26, we are advancing multiple programs. Our PCV program is currently in Phase 1, with Phase 2 fully enrolled and data expected in the fourth quarter of 2022. I will also provide updates on the checkpoint vaccine and newly announced candidates shortly. In other therapeutic areas, our VEGF program proceeds through Phase 2 alongside our collaborations with AstraZeneca. In rare diseases, the PA and MMA programs are currently in Phase 1 or dosing stages, with the first cohort in PA fully enrolled and continuations in other cohorts ongoing. We persist with our other preclinical endeavors in rare diseases, including GSD1a, PKU, CN-1, and cystic fibrosis with Vertex. Moving to slide 27, our latest development candidate, a checkpoint vaccine aimed at promoting T-cell responses in cancer, mRNA-4359, focuses on stimulating effector T cells to target and eliminate immune cells suppressing tumors that express high levels of target checkpoint antigen. Previous work has identified that pre-existing IDO and PD-L1 T cells can eliminate immunosuppressive regulatory cells and tumor cells overexpressing these antigens, thus liberating immune responses against tumors. Our vaccine can amplify IDO and PD-L1 T cells in preclinical models, inducing tumor cell death while facilitating the recognition of tumor-associated antigens by additional cytotoxic T cells for broader tumor elimination. Systemic blockade with PD-1 or PD-L1 antibodies may augment this effect further. We will initially develop mRNA-4359 for indications like first-line cutaneous melanoma stage IIIb and first-line non-small cell lung cancer. I’ll now hand over to David for financials.

Okay. Thank you, Stephen. Today, I’m providing an analysis of our actual 2021 fourth quarter and full-year results along with key drivers influencing our financial performance moving forward. 2021 was a transformative year for the Company, marking our shift from an R&D-focused entity to a commercial-stage company. I’m pleased with our performance and want to thank all our employees at Moderna for their dedication and for responding to the many challenges we faced during this unprecedented scale-up period. Starting with an overview of our sales performance on slide 29, total product sales in the fourth quarter of 2021 reached $6.9 billion, which represents 297 million doses delivered to our customers. This compares to sales of $4.8 billion for 208 million doses in Q3 and 199 million doses in Q2. Our dose supply in Q4 increased by 43% compared to Q3, after maintaining a relatively stable supply picture in Q2 and Q3 while successfully addressing bottlenecks in our supply chain. The geographic mix of our COVID vaccine sales has shifted throughout the year in line with our expectations, facilitated by the ramp-up of our international manufacturing capabilities. Sales outside the U.S. accounted for $6.1 billion in Q4, reflecting 252 million doses. In contrast, sales to the U.S. government amounted to $0.7 billion in Q4, corresponding to 45 million doses sold. For the full year, we delivered a total of 807 million doses, resulting in product sales of $17.7 billion. We raised $5.4 billion in sales from the U.S. and $12.3 billion from customers existing in other states. Approximately 25% of the doses delivered went to low-and-middle-income countries either through direct sales or donations facilitated by other customers. Turning to slide 30 to provide further detail on our Q4 results, Moderna’s transformation from an R&D-focused biotech company to a commercial-stage business remains notable when reviewing our financial results. The comparison between the fourth quarter of 2021 and prior years is somewhat misleading due to the significant growth, so I will focus primarily on quarter-over-quarter comparisons. Total revenue for Q4 2021 was $7.2 billion versus $5 billion in Q3 and $0.6 billion in the same period last year. This substantial revenue increase was driven primarily by the sale of our COVID-19 vaccine. In Q4 2021, product sales amounted to $6.9 billion, compared to $4.8 billion in Q3, marking a 44% increase. Cost of sales totaled $952 million, or 14% of that. In the fourth quarter, compared to $722 million or 15% in Q3, percentage improvements were due to favorable manufacturing costs while the average selling price remained stable. Research and development expenses stood at $648 million in Q4 versus $521 million in Q3 and $759 million in Q4 2020. The quarter-over-quarter increase is primarily attributed to higher clinical trial costs from our evolving and maturing development portfolio. The decrease from 2020 is largely due to approximately $200 million of pre-launch inventory costs included in the prior year's figures. Selling, general, and administrative expenses totaled $201 million for Q4 versus $168 million in the previous quarter and $79 million during the same period in the prior year. The upward trend in spending is mainly attributable to global commercialization efforts for our COVID-19 vaccine, reflecting continued personnel investment and external services to support our accelerated company growth. Provision for income tax was $542 million in Q4, up from $219 million in Q3 and non-existent in the prior year. Our effective tax rate for Q4 was 10%, with the quarter-over-quarter rise driven primarily by increased earnings. I would like to remind everyone that we had a net operating loss carryforward of $2.3 billion at the end of 2020. In 2021, we released the valuation allowance against related deferred tax assets. This resulted in a nonrecurring full-year benefit to our effective tax rate of approximately five percentage points. We recorded a net income of $4.9 billion in Q4, compared to $3.3 billion in Q3, an increase of 46%, and a loss of $0.3 billion during Q4 of last year. Diluted earnings per share for Q4 2021 stood at $11.29. Moving onto the full-year financial results on slide 31, total revenue for 2021 was $18.5 billion compared to $0.8 billion in 2020. The significant growth was driven by sales of 807 million doses of our COVID-19 vaccine, resulting in product sales of $17.7 billion. The cost of sales for this period was $2.6 billion, or 15% of product sales for the year, with third-party royalties representing $641 million. A portion of the inventory costs associated with this year’s product sales was expensed as pre-launch inventory in 2020. Valuing the sold inventories for the full year at cost, our cost of sales would have been $2.8 billion, or 16% of product sales. R&D expenses reached $2 billion in 2021 compared to $1.4 billion in 2020, driven by clinical trial expenses for our expanding pipeline and related organizational growth. Selling, general, and administrative expenses stood at $0.6 billion for the full year compared to $0.2 billion in 2020, mainly increasing due to consulting, personnel-related costs, and marketing expenses attributed to our COVID-19 vaccine commercialization activities alongside our broader hiring efforts. The provision for income taxes in 2021 was $1.1 billion, up from a trivial amount in 2020. The effective tax rate in 2021 was 8%, lower than the U.S. statutory rate primarily due to a nonrecurring benefit related to the release of the valuation allowance, ongoing advantages from foreign-derived intangible income deductions, and benefits pertaining to stock-based compensation. Net income for the full year amounted to $12.2 billion compared to a net loss of $0.8 billion in 2020. Diluted earnings per share stood at $28.29 for 2021. Turning to cash and cash deposits on slide 32, we concluded 2021 with $17.6 billion in cash and investments compared to $15.3 billion at the end of Q3. This increase was driven by our commercial endeavors. The cash deposit balance for future product supply was $6 billion at year-end compared to $6.7 billion at the end of Q3. The quarter-over-quarter reduction is attributed to commercial deliveries against prior obligations. Now, moving to slide 33, our capital allocation priorities remain unchanged. Our top investment priority has been and will continue to focus on reinvesting into the base business across multiple areas. For R&D spending, we have significantly expanded our investment to approximately $2 billion in 2021 and expect to increase this further to advance our pipeline, both existing and new programs. We also plan to boost our investments in manufacturing, digital, automation, and AI, alongside expanding our global commercial operations. Our second priority is identifying attractive external investment and partnership opportunities that can extend the reach of Moderna’s technology and capacity. We will pursue opportunities that complement our platform while taking a disciplined approach to evaluate potential external investments. Announced collaborations with Metagenomi and Charisma Therapeutics fall under this category. After assessing internal and external investments, we regularly evaluate additional cash uses. After completing our $1 billion share buyback program from August last year, this morning we announced a new buyback program of $3 billion. Additionally, we have provided an updated financial framework for 2022 found on page 34. We have signed advanced purchase agreements for expected deliveries in 2022 totaling approximately $19 billion, along with signed option agreements of approximately $3 billion on a probabilistically adjusted basis. As we anticipate a shift of the SARS-CoV-2 virus into an endemic phase, the timing of sales is expected to be higher in the second half of 2022 compared to the first half. Our total cost of sales comprises the goods manufactured, third-party royalties, as well as logistics and warehousing costs. For the entire year of 2022, we expect a cost of sales ratio in the low to mid-20s percentile range. This increase compared to the previous year is driven by expected manufacturing cost increments stemming from a shift from pandemic to smaller dose and vial presentations. The predicted decrease in average selling price is attributed to anticipated greater supply deliveries to low-income countries. For R&D and SG&A expenses, we project full-year expenditures to reach around $4 billion, fueled by an expanding development portfolio and the global scaling of operations. Based on current tax regulations, we foresee our 2022 tax rate landing in the mid-teens range due to benefits ensuing from foreign-derived intangible income and deductions associated with stock-based compensation. Finally, regarding capital expenses, we forecast an estimated $0.6 billion to $0.8 billion in capital expenditures needed as we further develop our global manufacturing and general infrastructure. This concludes my remarks about financial performance, and I’ll now pass it to Stéphane.

Thank you, David, Stephen, and Paul. Now, let me share some thoughts about where we’re heading. I am pleased to see how the team is executing on our product strategy. Priority number one is to develop a pan-respiratory annual booster. We are currently in Phase 3 for RSV, and are awaiting flu data to initiate a Phase 3 study for flu and also begin a Phase 1 for a COVID plus flu candidate, mRNA-1273. Our second priority focuses on latent virus vaccines. CMV is in Phases 3 and 5 candidates against VZV for shingles, plus more in development. Our third priority revolves around therapeutics, including a newly announced checkpoint cancer vaccine. Finally, priority number four is to enhance our unique mRNA platform to create new medicines. There has been a significant change in commercial momentum for Moderna between early 2021 and early 2022. During early 2021, there was limited momentum after Phase 3 data, whereas the strong real-world evidence now suggests Spikevax maintains a long duration of efficacy. Last year, we experienced supply constraints. Today, we've made substantial progress and are expanding manufacturing capabilities thanks to investments made last year, and we’ve gained stronger momentum. We have contracts with many governments worldwide. The increase in signed APAs has reached around $19 billion, accompanied by roughly $3 billion in probabilized options. We’re engaged in discussions with governments and NGOs around the globe. Notably, the current U.S. contract stipulates that final shipments will occur before summer 2022. Therefore, of the $19 billion plus $3 billion option, there is currently no APA signed for the U.S. for the latter half of this year. Also mentioned, as we transition to an endemic situation, we expect sales may have a seasonal pattern. We anticipate continued primary vaccination and boosting in the Southern Hemisphere during the first half, transitioning to booster requirements for the Northern Hemisphere in the second half of the year, similar to flu vaccines. Last week, we announced significant expansion of our commercial network: from 11 countries with Moderna teams on the ground, we are adding 10 more, including Poland, Netherlands, Belgium, Sweden, Norway, and Denmark in Europe, and Malaysia, Taiwan, Singapore, and Hong Kong in Asia. Our real-world data demonstrates that having teams on the ground allows for greater market penetration. The same results can be expected in the new markets. With this expanded commercial coverage, we will maximize the impact of Spikevax while also having the necessary teams for launching our pan-respiratory annual boosters and latent virus vaccines. This capability will significantly enhance our ability to benefit patients and create value. Moreover, we have distributors in Central and Eastern Europe, the Asia Pacific region, and have recently announced partnerships in Latin America. We continue to work with COVAX to ensure vaccine access for low-income nations. Strategically, we aim to reshape our business model with governments regarding our pan-respiratory annual booster campaign. To that end, we’ve initiated the process of establishing service-based subscription-like agreements with governments worldwide, including recent memoranda of understanding with Canada and Australia. These are long-term, ten-year agreements adeptly crafted to supply a pan-respiratory annual booster. We are in discussions with several other nations to adopt similar models. Although it requires considerable effort, we believe this method would provide countries the flexibility to adjust to public health needs based on local assessments on what vaccines they need. We believe this unique approach will significantly enhance our platform's value and competitive edge. Before we move to your questions, I’d like to remind you of some key upcoming events for 2022. Mark the calendar for March 24th for our Annual Vaccine Day; May 17th for our Annual Science Day, where we will showcase new platform advances; September 8th for our Annual R&D Day featuring important updates on our development pipeline; and we are proud to announce that we will hold our inaugural ESG Day on November 10th. Lastly, I’d like to express our excitement for our company’s future as we leverage our mRNA technology. We believe everyone deserves protection against respiratory viruses and they should not suffer medical detriments due to latent viruses. Our technology allows us to work towards achieving this goal. Your engagement and interest in our mission motivate us to continue pushing boundaries in healthcare. Operator, we are ready to take your questions.

Good morning. Thanks for taking my question. Outside of the flu data that we’re going to see this year, we’re also going to obtain personalized cancer vaccine data as well as rare disease data. Could you address what success might look like in rare diseases, and what the regulatory pathway could be? Additionally, regarding the personalized cancer vaccine, will we be able to get a sense of proof of concept this year?

Sure. Thanks for the question, Salveen. First of all, in the rare disease space, it's crucial to understand that these are Phase 1/2 studies, focusing primarily on the PA study. Our main goal in these studies is to assess safety, as you would expect from a Phase 1/2. Thus, one of the prime aims is to establish whether we can safely dose very ill patients or children over an extended period—up to six months or more during the open-label extension study. Establishing the safety of the platform while maintaining chronic dosing for 6 to 12 months is an important objective for this phase. When it comes to efficacy, because these are early-stage studies with relatively small patient groups, I must tread carefully when interpreting the results. The significant metrics you're likely to be looking at include the performance of the medicines in preventing clinical outcomes. In the instance of propionic acidemia, our benchmark will be major metabolic decompensation events or hospitalizations that occur with regularity for those impacted by these rare conditions. Additionally, we will be focusing on biomarkers that have shown correlations with preclinical disease, though it’s essential to highlight that there are no validated biomarkers for these rare diseases yet, as there have been no therapeutics approved. Thus, there will be an interplay of early efficacy signals and biomarker assessments across a limited cohort of patients. In terms of advancing toward pivotal studies, our hope is to collate clear indications from the composite data collected and engage in discussions with regulators on what outcomes would matter most. Now, speaking about cancer vaccines, we have completed enrollment in the Phase 2 study of the personalized cancer vaccine, which is a head-to-head comparison of KEYTRUDA alone versus KEYTRUDA plus vaccine. Our focus will be on relapse-free survival data, which we expect to have by the year’s fourth quarter. Being a randomized head-to-head study, this could provide a clear signal around the potential benefit of personalized cancer vaccines compared to KEYTRUDA alone, which represents the primary benchmark.

I have two questions. The first concerns the flu data, specifically the Phase 2 data we expect to see in early 2022. Can you give us some specificity regarding timing and discuss the kind of data you believe would be necessary for filing, without needing a Phase 3 trial focused on efficacy outcomes? My second question regards the 1273, U.S., age 12 to 17. In the press release, you mentioned that the FDA has not concluded on the benefit-risk profile of the 100-microgram primary series. What additional data would you require? Will you need 50-microgram data as well to receive approval?

Great. Thank you for those questions, Gena. To clarify on the flu data, we do not believe that the Phase 2 data alone will be adequate for filing. This conclusion is based on previously published regulatory guidance—not specific to Moderna. Therefore, we think standalone Phase 2 flu data will not suffice; we anticipate needing to conduct a Phase 3 efficacy study that focuses on both safety and immunogenicity, likely involving several thousand participants, for an accelerated approval. Previous precedents do exist for accelerated approvals based on safety and immunogenicity in Phase 3 studies, so it may be possible to conduct an efficacy study post-approval. In summary, we expect to have to conduct a Phase 3 study for flu. The exact structure of that study, however, remains unresolved and will depend on our consults with regulators. Regarding the 1273 adolescent filing in the U.S., the FDA has not finished its assessment of the 100-microgram adolescent primary series. After consultation with them, we are also exploring a lower 50-microgram primary series in adolescents aged 12 to 17. It’s notable that the 100-microgram primary series for this age group has gained authorization globally, and we believe it's been administered efficiently, perhaps to over 1 million adolescents globally. We continue collecting that real-world data alongside analytics from our monitoring studies. When appropriate, we'll submit that to the FDA for further evaluation of the 100-microgram primary series. Currently, we are preparing an EUA filing in the United States for 100 micrograms targeted toward immune-compromised adolescents and those at a high risk of severe outcomes—since we think the compelling efficacy data of mRNA-1273 at 100 micrograms offers distinct benefits in that group. We believe there are significant benefits from the 100-microgram dosage, justifying the application for approval.

I have two clarifications and then a question. First, after your discussions regarding flu data, can we expect that when you present the Phase 2 data, you will either have formulated regulatory discussions or will be clear about the next steps required in terms of the necessary scope of Phase 3 studies? Secondly, regarding the PA study, could you provide insight into how many cohorts you might need to evaluate before you feel confident presenting initial data? Lastly, concerning the timing of COVID revenues this year, I recall at JPM you referenced a first-half weighting; it seems that might have shifted. Could you clarify if the anticipation of boosters for the fall is the primary reason for the recent revenue timing adjustments?

Thank you, Matthew. I'll respond to the first two points. Regarding flu, as regulations are not only in our hands, we wish to expedite consultations with the FDA to receive feedback in a timely manner. However, we may need to share Phase 2 results before we have definitive regulatory insights on next steps. Therefore, the likelihood of feedback aligning with when we release our data may not be feasible, so I wouldn't expect to have agency feedback by that time. Regarding the PA study, we’re considering two aspects to evaluate: the number of dose-level cohorts and length of observation on treatment. We anticipate seeing data over a year, allowing us to gauge the impact of the treatment on preventing major metabolic decompensation events, with two to three dose-level cohorts as a reasonable expectation. A combination of the duration of treatment and these cohorts should help clarify our understanding of whether we've selected the optimal dose level and whether risks are manageable. That composite of early cohort data—along with dose level insights—should guide our regulatory consultations as we update you on developments. On the revenue timing, David will address that.

Yes, regarding first half versus second half, we assessed various aspects as we approached 2022. Observations indicate that emerging market countries face challenges absorbing all the received products distributed via donations and have experienced bottlenecks. Our refined outlook suggests a shift to typically stronger second-half sales. The second half, per Stéphane mentioned, will likely see increased booster sales that justify expectations for performance greater than during the first half.

We had two parts. First, regarding your COVID boost strategy and the three different investigative strategies you outlined, could you elaborate on the decision framework guiding which option you'll progress with, and your confidence level in regard to clearance and distribution by the FDA in preparation for the fall 2022 booster season? Additionally, could you clarify where we currently stand concerning U.S. purchases or approval for 2022 or 2023?

Great, Michael. I’ll take the first part; Stéphane can address the second. The most important point to stress is that the mRNA-1273 booster exists. We’re evaluating additional strategies: the fourth dose and the Omicron variants, which we know require some time to assess durability. While we’re running studies on both bivalent and Omicron-specific vaccines, we expect to see one-month data soon—which allows us to evaluate those booster candidates rapidly and assess safety. Yet, defining six-month data is challenging and could extend beyond Q3, as robust data will take time to ensure accurate projections into the fall scheduling. That results in considerations of how to best proceed with regulatory filings; discussions are ongoing with regulatory bodies to make timely filings given the current considerations. As for the public health decisions concerning governments around what to stockpile for the fall, those may not necessarily require prior regulatory filings in tandem with ongoing evaluations. Moving to you, Stéphane, on the U.S. side.

In essence, Michael, just to clarify: As of today, regarding U.S. figures, our current signed advanced purchase agreements encompass $19 billion without a U.S. government contract. Therefore, at this moment, any U.S. related contracts reflecting future options are zero. The uncertainty lies in how the U.S. government may proceed for fall 2022—whether to utilize a private market approach, a mixed scenario, or simply continue traditional methods by providing free vaccines as it did for previous doses. It's not a straightforward pathway and requires careful evaluation of the unique dimensions concerning our projected engagements.

Firstly, I'd like to clarify your outlook on what the commercial marketplace will look like post-pandemic in 2023 and beyond. Are you expecting agreements with larger nations like the U.S. or Europe for the 2023 market? Alternatively, do you anticipate a shift towards direct sales into private markets, leaving the APA structure aside? Secondly, relating to capital allocation, I acknowledge your priorities for investment remain steady. However, with nearly 20% of year-end cash allocated for buybacks, how should we interpret future priorities, considering this recent buyback's implications?

In regard to the U.S. and broader market outside the pandemic era, most countries administratively will continue to observe direct government purchasing models for COVID products. The dynamics differ; for instance, Europe’s approach involved collective purchasing during the pandemic, and we must now await their decisions on whether to maintain that framework for COVID or revert to national purchasing protocols. However, other countries like Japan, Canada generally operate as single-buyer systems. We have ongoing discussions related to 2023 supply, as noted in our signed contracts for the forthcoming year. Some nations, including the UK, have already secured commitments based on their views surrounding the endemic market potentially requiring annual boosters. Thus, we're looking into establishing long-term contracts in countries where production plants will be built. This customizable focus with local authorities enables us to furnish their health services needs. We aim to warrant that flexibility and address pressing local healthcare issues through our collaborative engagements. Concurrently, David can provide insights on the impacts of our buyback strategies.

When considering today's announcement for the $3 billion buyback, it stems from various considerations. Primarily, we wanted to ensure the company has enough resources to invest internally and externally. We're confident entering 2022 with solid cash generation visibility, hence the decision. I wouldn't want to project beyond that as it’s too early to determine whether this magnitude is a feasible ongoing metric.

To follow up, could you share your latest insights on future U.S. pricing for Spikevax? Do you forecast that subsequent contracts will align with more normalized pricing relative to the expectations seen in ex-U.S. nations? Furthermore, do you regard an emerging variant wave before year-end as essential for unlocking the majority of the $3 billion in APA options?

Regrettably, I can't publicly comment on U.S. pricing as it's contingent on our negotiations with governments. However, our expectation is that once pricing transitions to a typical private market context, we will likely see prices reflecting the vaccine's true value. As for the $3 billion in options, it's not mandatory for a new variant to emerge in order for at least part of that to materialize into signed agreements.

I appreciate everyone participating in the call today, and I look forward to discussing further developments with you soon, especially at our upcoming Vaccine Day in March.