Moderna Inc (MRNA) — Q1 2022 Earnings Call Transcript

Thank you, Kevin. Good morning, everyone, and thank you for joining us on today’s call to discuss Moderna’s first quarter 2022 financial results and business updates. 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 Stephane 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. I will now turn the call over to Stephane.

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q1 2022 conference call. Today, I will start with a quick business review of the quarter before Paul walks you through an update on Spikevax real-world evidence, and then Stephen reviews our clinical programs. David will then present the key financials. I’m happy to share that the team delivered strong financial results this quarter. Revenues of $6.1 billion, GAAP net income of $3.7 billion, and GAAP diluted EPS of $8.58. We ended Q1 with a cash balance of $19.3 billion. For our share buyback program, we continued to retire shares in Q1, as we already did in Q4. David will share some numbers on share count in a few minutes. For 2022, we are reiterating $21 billion in signed advanced purchase agreements. We have previously shared market share increases seen in the OECD countries with Spikevax when supply was no longer limited and when real-world publications highlighted differentiating data among the market vaccines. I’m happy to share that our market share has increased and remains consistent across OECD countries. While a subset of our team is focused on delivering on the $21 billion signed APAs for fiscal year 2022, another subset of our team is focused on preparing the next wave of product launches. With our flu vaccine candidate, mRNA-1010, planning to start a Phase 3 study in Q2 in the Southern Hemisphere, Moderna will soon have four vaccine candidates in Phase 3: an Omicron-containing bivalent COVID booster, a flu booster, an RSV booster, and the CMV primary series vaccine. Starting with our Omicron-containing bivalent COVID booster, mRNA-1273.214, we could see up to three respiratory vaccine launches from fall 2022 over the next two to three years. We believe each of these four vaccine candidates in Phase 3 could have multibillion-dollar annual peak sales. Because they all use the exact same mRNA technology as our approved vaccine, Spikevax, we believe these four vaccine candidates in late-stage clinical trials have a high probability of success. In addition to our four late-stage vaccines, we continue to expand the applications of mRNA technology beyond vaccines. We should have important proof-of-concept data in patients in two of our therapeutic modalities later this year: propionic acidemia and methylmalonic acidemia in our rare genetic disease portfolio, and the personalized cancer vaccine. Slide 7 shows the continued growth of Moderna. We now have 46 development programs in the pipeline. The organization has continued to grow to 3,200 team members. With that, let me hand it over to Paul to review real-world evidence studies of our COVID booster.

Thank you, Stephane, and hello, everyone. While there continue to be many studies posted and published on our mRNA vaccine, I would like to highlight some data today on vaccine boosting. But first, it’s important to understand why booster vaccines are so critical as we transition through the COVID-19 pandemic and the understanding that we need to have about the evolution of the SARS-CoV-2 virus. On slide 9, we can see the change in COVID-19 cases over time with the massive rise we observed due to Omicron in the last weeks of 2021 and the early part of 2022. The Omicron wave was caused by BA.1. While that was certainly the dominant version of SARS-CoV-2 at that time, remarkably BA.1 is now almost extinct here in the United States and around the world, having been replaced by new subvariants. This continues to demonstrate the remarkable evolutionary capacity of this virus. BA.2 is now the dominant strain in the United States with another subvariant, BA.2.12.1, increasing rapidly, showing enhanced transmissibility. While BA.2 is dominant today, that increased transmissibility and infectivity of BA.2.12.1 is likely going to ensure it will be the dominant circulating strain very soon, as we are seeing in New York and in the northeast of the United States. Other new subvariants, BA.4, BA.5, seen in South Africa, have also been detected in the United States. We will need to carefully monitor their growth trajectories and pathogenicity. The slowing of booster uptake now means there will be individuals who are under-vaccinated and under-protected as we move into late spring and summer when we thought we would have declining case counts, a balance, which could now be impacted by BA.2.12.1, BA.4, or BA.5. The speed and breadth of evolution of this virus that we see so clearly again today underpins our prediction for the global need for a variant-adapted booster campaign this coming fall. The good news is that a booster vaccine protects against both BA.1 and BA.2. This is seen clearly when we look at data from the United Kingdom Health Security Agency. This graph looks at vaccine effectiveness against symptomatic disease for people who received the Moderna, Pfizer, or AstraZeneca vaccine for their primary vaccination on the left. You can see that against both BA.1 Omicron and BA.2, vaccine effectiveness wanes over time. But a booster dose of either the Pfizer or Moderna mRNA vaccines increases vaccine effectiveness and protection, as you can see on the right. These two vaccines are combined together in this analysis. But again, even in this setting, there’s gradual waning of vaccine effectiveness over time following boosting. This waning of vaccine effectiveness begs a question: will a second booster dose provide clinical utility and help to restore vaccine effectiveness and provide protection against COVID-19? While there are several examples of studies showing the high clinical effectiveness of additional boosting with the Moderna vaccine, on slide 11, I want to highlight the results of a recent study from Ontario that looked at exactly this question and measured the effectiveness between a first and second booster vaccine dose in a high-risk population, those people living in long-term care facilities. A key finding from this study, which was conducted in over 55,000 individuals, was that indeed a second booster vaccination showed increased vaccine effectiveness against Omicron infections, symptomatic disease, and importantly, against severe outcomes in this high-risk setting. In fact, an increase in vaccine effectiveness was seen at 7 days from the second booster vaccination and continued to increase in effectiveness over time. Turning now to slide 12. I would like to provide a perspective on who might gain particular benefit from annual vaccine boosting. There are many health, age-related, and environmental or occupational risk factors that lead to populations being at higher risk for COVID-19. First, age greater than 50 years. We know that hospitalization and mortality rates begin to increase steeply for those with COVID-19 who are over the age of 50. Then, turning to people over the age of 18 years who have other health risk factors, such as people with kidney disease, cancer, autoimmune disease, and HIV patients, other health factors that either result in immunocompromise or place people at higher physiological risk for severe disease if infected with SARS-CoV-2. Finally, environmental or occupational risk factors, such as health care workers, first responders, those in high-density housing or living conditions, such as college students, military personnel, or the incarcerated. We believe these broad categories of people could benefit most from annual boosting for COVID-19. In summary, we’ve seen, as we continue to anticipate, the rapid evolution of SARS-CoV-2 with multiple new variants and recombinant variants circulating globally. Real-world evidence demonstrates the effectiveness of a booster shot, a third dose of mRNA-1273 against evolving variants of concern. An additional booster, a fourth dose of mRNA-1273, shows incremental vaccine effectiveness when compared to a third dose against infection, symptomatic infection, and severe disease in a high-risk population. We believe people at high risk due to health, age, and environmental or occupational risk factors are the ones who will benefit the most. When combined with the epidemiology of the virus and waning of protection, there is a significant need for a variant-adapted booster vaccine and for boosting of populations this coming fall. With that, I’ll now turn it over to Stephen to take you through the progress in our clinical development pipeline.

Thanks, Paul. Good morning and good afternoon, everyone. Paul just shared with you the effectiveness of our booster mRNA-1273 against Omicron in the real-world setting. On slide 15, I’d like to pivot to our strategic rationale for why we think a seasonal booster will be necessary. First, we think neutralizing titers will wane similar to the endemic human coronaviruses. That decline in neutralizing titers will increase their risk of breakthrough infections and hospitalization for those at higher risk, particularly as Paul just described, older adults and those with immunocompromised conditions. The emergence of new variants of concern like the BA.4 and BA.5 subvariants could accelerate the impact of that waning and broaden the risk of breakthrough across the population. So, with that, we do believe a booster will be needed in the fall, and we’re working hard to make improvements to our available boosters. The desired features for a Northern Hemisphere fall-winter booster will be to improve the durability of protective neutralizing antibodies against Omicron and its subvariants beyond six months, namely throughout the full Northern Hemisphere fall or winter infection season. We’d like to retain high and durable protection against Delta and ancestral strains. Additionally, we’d like to broaden cross-protective immunity to increase the potential for protection against new emergent variants or subvariants that may arise over the coming months. On slide 16, I’d like to summarize our work in developing that improved booster. Our primary focus, as you know, has been on developing a bivalent vaccine, and we have taken three bivalents into clinical trials. The first, mRNA-1273.211, includes 9 of the common mutations and was based on a combination of our prototype wild-type vaccine and Beta. The mRNA-1273.213 bivalent included 11 mutations based on what emerged from Beta and Delta. Our mRNA-1273.214 booster includes 32 mutations, based on the wild-type, prototype vaccine, and the combination with the Omicron original variant of concern. Our latest bivalent, mRNA-1273.214, that includes those 32 mutations, remains our lead candidate for the fall Northern Hemisphere campaign. The objective of that booster is to demonstrate superior immunogenicity against variants of concern compared to our approved current prototype booster, mRNA-1273 at 50 micrograms. We want to maintain non-inferiority against ancestral strains in case they reemerge. Now, on slide 17, I’ll summarize the ongoing clinical development work across that portfolio of bivalent boosters. I’ll remind you that mRNA-1273 has been authorized or approved in many markets as a third and even fourth booster. The data for the first bivalent, mRNA-1273.211, has already demonstrated superiority against all variants of concern tested, including Omicron and Delta. Our lead candidate remains, as I said a moment ago, our mRNA-1273.214, which is being evaluated in two separate studies: a Phase 2/3 in the United States and a Phase 3 P305 study in the United Kingdom. Again, both of those are being conducted at a booster dose of 50 micrograms. Now, on slide 18, just quickly to update you on the data we have from the .211 first bivalent. Not surprisingly, the safety and reactogenicity profile of the bivalent boosters is consistent with what we saw with mRNA-1273. As you’ll see on the chart, both solicited adverse local reactions and systemic reactions are broadly consistent in both frequency and severity. The frequency and types of unsolicited adverse events were also comparable between the groups, with no serious adverse events in the bivalent vaccine group up to 28 days after the booster dose. Moving to slide 19. We have some of the neutralizing antibody data from that study, evaluating again our mRNA-1273.211 bivalent and comparing that with an approved or authorized mRNA-1273 booster. Looking at neutralizing titers and GMTs, both immediately pre-booster at 1 month or day 29 and at 6 months, on day 181 across the three variants of concern tested, higher neutralizing titers were seen for day 29 and day 181 across all the variants of concern with the bivalent booster. On slide 20, we represent that as a ratio when comparing the performance of the bivalent booster to mRNA-1273 at 1 month and 6 months, and superiority was met for the ancestral and all variants of concern at different time points, as you’ll note here. The clinical endpoint for superiority was defined as a geometric mean titer ratio, or GMR, where the lower bound excluded the lower bound of the 95% confidence interval excluded 1. At day 29, a GMR for the ancestral SARS-CoV-2 virus was 1.28, for Beta was 1.30, for Delta was 1.75, and importantly, for Omicron, it was as high as 2.2. The 95% confidence interval for Omicron, the lower bound was 1.74, again, demonstrating a strong trend towards superiority in this data. Excitingly, at day 181 or 6 months, that superiority was also met for the ancestral virus, Beta, and the Omicron variant, which is important because the primary goal we have here is to improve the durability of protection by increasing those titers. On slide 21, in conclusion, the safety and reactogenicity profile of the 50-microgram bivalent 211 booster was comparable to the approved 50-microgram of the authorized 1273 booster. We believe that the superiority already demonstrated by the bivalent platform in .211 bodes well for our overall strategy. We continue to believe that bivalent boosters will ensure the broadest immunity across the evolutionary uncertainty of SARS-CoV-2 and maintain current protection while expanding the breadth and durability of neutralizing antibodies, including, as I just demonstrated a moment ago with .211, out to 6 months. We anticipate the one-month or day 29 data from our Omicron-containing bivalent, mRNA-1273.214, in June 2022. Now, turning to the rest of our respiratory vaccine pipeline on slide 23. We announced positive Phase 2 data from our flu vaccine, mRNA-1010, at our Vaccines Day event. mRNA-1010 is part of our speed-to-market approach. We plan to start a Phase 3 immunogenicity study in the second quarter of this year and a Phase 3 efficacy trial later this year with mRNA-1010. As part of our flu vaccine strategy, we are also advancing in parallel vaccine candidates that contain both HA antigens and NA antigens. We started a Phase 1/2 trial of mRNA-1020 and mRNA-1030 last month. Our RSV vaccine, mRNA-1345, a Phase 3 trial in older adults is ongoing, and we are enrolling participants worldwide. We also have an ongoing pediatric RSV trial enrolling as well. In combination, we plan to start a Phase 1 trial for both our COVID plus flu and our COVID flu RSV vaccines this year. Our Phase 1 trial for the hMPV/PIV3 combination vaccine is also now fully enrolled. Our RSV and hMPV combo and our endemic human coronavirus vaccine combo are in preclinical. Before moving from respiratory vaccines, I want to take a step back and reflect on the incredible progress over the past two years. We have or will have progressed three candidates into pivotal Phase 3 studies within one year of an IND being opened. This speed is made possible by our mRNA platform. We believe our COVID vaccine success has derisked our vaccine pipeline, and we can now move quickly into our RSV and flu pivotal studies. Importantly, in RSV and flu, we are looking at seasonal endpoints or immunogenicity endpoints, which we believe will allow us to progress faster through Phase 3 towards its readouts and ultimately to commercialization. Now, turning to the rest of our pipeline. We have an ongoing Phase 3 study for our CMV vaccine, mRNA-1647, which is enrolling well and is now enrolling participants globally. Our EBV vaccine to prevent infectious mononucleosis is in Phase 1, and our EBV vaccine to prevent long-term sequelae such as multiple sclerosis is in preclinical studies. Our HIV vaccines are in Phase 1 clinical trials with our partners. The recently announced HSV and VZV vaccines are in preclinical studies. Within public health vaccines, our Zika vaccine continues to enroll in Phase 2. We are pleased to update that our Nipah virus vaccine IND was opened, and we look forward to starting that trial soon with our partner. Now, moving to our therapeutic pipeline on slide 26. Within oncology, our personalized cancer vaccine is ongoing in a Phase 1 study and a Phase 2 study. We expect the first look at the data from our Phase 2 study, which is evaluating the personalized cancer vaccine plus KEYTRUDA versus KEYTRUDA alone, in the fourth quarter of this year. We have four other candidates in Phase 1 or preclinical stages across oncology. In cardiovascular and autoimmune, we have two candidates in each area in clinical trials or in the preclinical stage. For rare diseases, our propionic acidemia program, or PA program for short, is ongoing in a Phase 1/2 study. Our MMA program is also ongoing in the Phase 1/2 study. Our GSD1a program has an open IND, and we look forward to enrolling the first patient or participants in that study. We have three other candidates in preclinical and rare disease as well. Now, before I hand it off to David, on slide 27, I wanted to provide a bit more color on our Phase 1/2 study in propionic acidemia. As a reminder, PA is a rare metabolic disorder characterized by a deficiency of propionyl-CoA carboxylase, an enzyme involved in the breakdown of several building blocks of proteins called amino acids. The deficiency causes harmful intermediate compounds to build up to toxic levels in the body, leading to serious health problems, including recurrent episodes of life-threatening metabolic decompensation events. Our therapy for PA encodes for two proteins that form the deficient enzyme, PCCA and PCCB, and has one mRNA for each in the drug. The Phase 1/2 study is an adaptive trial design enrolling participants greater than one year of age in the United States, United Kingdom, and Canada. Participants receive one dose of mRNA-3927 every 2 or every 3 weeks for up to 10 doses in that study. The first cohort is fully enrolled, and we are now enrolling patients in the additional cohorts. Five patients have now completed the initial 10-dose course of the study and became eligible for continuing dosing in the open-label extension. All five patients have elected to participate in the OLE. A total of 75 doses have now been administered across Phase 1/2 and the OLE study. The study is focusing on evaluating safety and PK/PD. It is also looking at clinical events, including the metabolic decompensation events I mentioned previously. Of course, we are also evaluating potential biomarkers in the study. We look forward to enrolling more patients and sharing the data this year. With that, I’d like to turn this over to our financial review. David?

Okay. Thank you, Stephen. We’re providing today the analysis of actual 2022 first quarter results, along with a view of key drivers of financial performance going forward. Overall, we had a good start to 2022, and I’m very pleased with our operational and commercial performance. Turning to slide 29, starting with an overview of our sales performance. Total product sales in the first quarter of 2022 were $5.9 billion. This compares to product sales of $1.7 billion in the first quarter of 2021. The total sales growth is driven by the fact that we were in an earlier stage of our manufacturing ramp-up in Q1 of last year with our U.S.-based manufacturing lines roughly three months ahead of our international manufacturing capabilities. This also explains the different geographic sales mix. In the first quarter of 2022, sales outside the U.S. were $5 billion, while sales to the U.S. government were $0.9 billion. The majority of sales in Q1 of last year were to the U.S. government. Turning to slide 30 for more detail on our Q1 results. Total revenue was $6.1 billion in the first quarter of 2022, compared to $1.9 billion in Q1 of last year. The increase in total revenue was driven by the sale of our COVID-19 vaccine. The cost of sales was $1 billion, or 17% of the Company’s product sales in the first quarter. The cost of sales as a percentage of sales in Q1 of last year was 11% on a reported basis and 22% adjusted for prelaunch inventory costs, which were expensed in 2020. Compared to the prior year adjusted 22%, we are benefiting this quarter from an increased average selling price, driven by customer mix and favorable impacts from the scale-up of our manufacturing processes, partially offset by higher write-downs for excess and obsolescent inventory and a current period expense related to future purchase commitments. Research and development expenses were $554 million in the first quarter of 2022, compared to $401 million in the same period in 2021. The increasing R&D spend continues to be driven by clinical trial expenses for our expanding and maturing development portfolio. Selling, general, and administrative expenses were $268 million for Q1 2022, compared to $77 million for the same period in 2021. The growth in spending was driven by the commercialization of our COVID-19 vaccine globally, with continued investments in personnel and outside services in support of the accelerated company build-out. Our Q1 2022 results also include the initial upfront endowment of $50 million for the newly established Moderna Foundation. Provision for income taxes was $572 million in the first quarter of 2022, compared to $39 million in the prior year period. Our effective tax rate for the first quarter was 14%. Let me remind you of the fact that we had a net operating loss carryforward of $2.3 billion at the end of 2020, which resulted in a nonrecurring benefit to the reported tax rate last year. We recorded after-tax net income of $3.7 billion in Q1 compared to $1.2 billion in the prior year. Diluted earnings per share in Q1 2022 were $8.58. As a final point on the quarter and beyond, we currently do not have any commercial activities or R&D activities in Ukraine or Russia. Turning to cash and cash deposits on slide 31. We ended Q1 2022 with cash and investments of $19.3 billion compared to $17.6 billion at the end of 2021. The increase is driven by our commercial activities. The balance of cash deposits for future product supply was $5.3 billion compared to $6 billion at the end of 2021. The reduction quarter-over-quarter is driven by product deliveries against customer deposits. Now, turning to slide 32. Our capital allocation priorities remain unchanged. Our top investment priority has been and will continue to be reinvesting in our base business across multiple areas. For R&D, we continue to forecast spending in the range of $2.5 billion to $3 billion to advance and accelerate our pipeline for both existing and new programs. 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 opportunities that enable and complement our platform and are taking a disciplined approach in evaluating potential outside investments. We’re in multiple active discussions regarding additional external collaboration opportunities. After evaluating internal and external investment opportunities, we then assess additional uses of cash. We completed our initial $1 billion share buyback program in January and announced a new share buyback program of $3 billion in February. Across these two authorizations, we repurchased a total of 3.8 million shares for $0.6 billion during the first quarter. The next slide shows a progression of our share count since we initiated our share repurchase program. As a reminder, we received Board approval for our initial $1 billion share repurchase program in August 2021 and began repurchasing shares in the fourth quarter of 2021. Our quarter-end basic shares outstanding declined from 405 million at the end of September 2021 to 400 million at the end of March 2022. We repurchased 7 million shares, more than offsetting 2 million shares of common stock issued in connection with equity compensation over this period. Our diluted weighted average shares outstanding also declined from 434 million in the third quarter of 2021 to 426 million in the first quarter of 2022, primarily due to the share repurchase activity. Now, let’s turn to the 2022 financial framework on page 34. We have signed advanced purchase agreements for expected delivery in 2022 in the amount of approximately $21 billion. There’s a potential downside to this number from timing of COVAX deliveries if COVAX is unable to confirm demand aligned to their contracted volume in the 2022 calendar year. There is also an upside to this number from potential additional contracts for the fall booster dose, including for the U.S. market. In 2022, we believe that the SARS-CoV-2 virus will evolve into an endemic phase with a more seasonal sales pattern. As a result, we continue to expect the timing of sales to be larger in the second half of 2022 than in the first half. Our total cost of sales includes the cost of goods manufactured, third-party royalties as well as logistics and warehousing costs. We expect cost of sales as a percent of product sales to increase compared to the prior year, driven by both a decrease in our average selling price and a forecast increase in manufacturing costs. The year-on-year decrease in average selling price is due to the higher share of COVAX APAs for delivery this year compared to last year. As the COVID-19 pandemic evolves into an endemic phase, we forecast our manufacturing unit costs to increase, driven by a move to smaller dose presentations and the cost for adjusting our production and supply chain infrastructure, including future purchase commitments. We continue to expect our full-year 2022 reported cost of sales in the low to mid-20% range, which incorporates all the expected adjustments that we’ve identified for the 2022 calendar year. The cost of sales for Spikevax beyond 2022 will be further impacted by geographic customer mix, pricing effects of the private market as it develops, as well as our initiatives to optimize and improve efficiency. For R&D and SG&A, we continue to expect full-year expenses to be approximately $4 billion, driven by our maturing development portfolio and the global scale-up of the company. Based on current tax laws, we continue to expect our 2022 tax rate to be in the mid-teens as a result of the benefits from foreign-derived intangible income, driven by our international business mix and stock-based compensation deduction. Finally, regarding capital expenditures, we continue to plan for capital expenditures in the range of $0.6 billion to $0.8 billion as we further build out our manufacturing and general company infrastructure globally. As this is the last earnings call for me as CFO of Moderna, I would like to take the opportunity to welcome Jorge Gomez, who’s well qualified to lead Moderna in the next stage of its development. I would also like to recognize my own team and my colleagues for their success in ramping up a global commercial company and contributing to taming the pandemic. I have great confidence in the Company’s ability to fully realize the vast potential of its mRNA technology platform against the many remaining unmet medical needs.

Thank you, David, for that review of the quarter and those kind words. More importantly, I would like to thank you for agreeing to come out of retirement in the spring of 2020 to help us scale Moderna at an unprecedented speed from an early-stage development U.S.-centric company to a commercial, global company. I am very grateful for you agreeing to come out of retirement to help us. Your work to get us to this point was crucial. You built a strong team and robust business processes. Thank you for also agreeing to stand as a consultant as we transition to your successor. I want to wish you and your wife well in the next phase of your life. As many of you know, we announced that Jorge Gomez will join us as Chief Financial Officer, effective next Monday, May 9th. Jorge brings with him experience in the capacity of CFO for global health care organizations, including Dentsply and Cardinal Health. Jorge has the same high-quality finance training as David as a General Motors finance alumnus. He has a broad set of international experiences in addition to having been CFO of publicly traded companies. I also want to welcome Arpa Garay, who is joining us from Merck at the end of this month as our Chief Commercial Officer. She was a member of the Merck Executive Committee, where she most recently served as Head of Marketing. Arpa also has a very international background and multiple experiences in both sales and marketing. I look forward to partnering with these two leaders to continue to scale Moderna rapidly. Before moving to Q&A, I would like to review our 2022 priorities. Priority number one is to execute on the $21 billion of signed APAs and prepare for a successful fall 2022 booster season. Priority number two is to execute on our four Phase 3 vaccine programs: an Omicron-containing COVID bivalent booster, flu booster, RSV booster, and CMV primary series vaccine, which could lead to three respiratory commercial launches over the next two to three years. Priority number three is to expand beyond infectious disease vaccines into therapeutics and share proof-of-concept readouts for PA, MMA, and PCV programs. Priority number four is to bring more mRNA candidates into clinical development. Last but not least, priority number five is to continue to expand our mRNA platform so the possibility of mRNA impact to patients continues to increase over time. I also wanted to remind everyone of our upcoming events this year, including our Science Day in just two weeks on May 17th. We’ll also host our typical annual R&D Day in September and our first ESG Day in November. While we have had a profound impact on humanity over the last two years, we believe that what is ahead of us to help protect and treat hundreds of millions of people is even more exciting. We’ll continue to execute on our mission, and we thank you for your support. This is just the beginning. Operator, we’ll be happy to take questions now.

Good morning. Thanks for taking my questions. And David, it’s been a pleasure working with you. Two questions for me. One is for COVID, based on what’s known right now, what regimen, as you think about dosing in candidates, do you have the most confidence on for annual boosting as you look to 2023 and beyond? And then secondly, just given your balance sheet and as you look to entering an endemic phase here, how are you thinking about later-stage BD and M&A to bolster the revenue line?

Thank you, Salveen. It’s Stephen. So first, on the COVID booster and what we perceive as of today, subject to data and obviously collaborating with regulators. We are, as I said, most excited about our bivalent vaccine platform, including Omicron as the now dominant variant and family of subvariants that are infecting people today. Our objective, just like with our bivalent .211 booster data that I presented today, is to provide at least six months of protection from that. Because we think this will be a seasonal vaccine, that will be very similar to what people are used to from a flu perspective. Meaning in the Northern Hemisphere, you get boosted in the October time horizon that will cover you well through the early part of spring when transmission will subside. Provided that we can provide that duration of protection as we’ve demonstrated already with the .211, we actually think that means a seasonal annual booster in the fall that would cover people for the year. As I said, we think it will be the bivalent Omicron-containing booster for this year. For 2023 and beyond, we would expect to continue to update the bivalent platform to reflect the then-dominant or at-risk circulating strains of the variant of concern. So, it may be Omicron this year, it may be Omicron again next year, or it may be something new.

Thanks, Stephen. Good morning, Salveen. It’s Stephane. So, as you know, in terms of capital allocation, our priority number one is to invest in the business. We believe we have this really unique platform that is very different from typical pharma companies or biotech companies, where we have the ability to scale very quickly. As we discussed today, we are actively preparing the pivotal studies and the launch of four programs in Phase 3, as we discussed. As you know, there are a lot of programs in Phase 2. I think there are around 30 vaccines in development today. As Stephen has shown you today, we believe we have built our platform, and with all our investment in digital and a great team, we have the ability to go from opening an IND in vaccine to starting Phase 3 in around 12 months. So, seeing where the pipeline is and where it’s going to be in 12 months and 24 months from now is really exciting. And then, there are therapeutics. We always receive questions around COVID-19 for obvious reasons. But as we’ve said in our remarks, this year will be very exciting around therapeutics. We have two rare genetic disease programs that are recruiting well, as Stephen described, and are eager to share positive data with you. Assuming this data is positive, we will do more in rare genetic diseases. As you’ll recall, because you’ve been following the Company for a long time, we started with a few infectious vaccines, and as we got more confirmation that the technology was working in humans, and more capital, we had an unprecedented acceleration of our infectious disease vaccine portfolio. Well, we plan to do the same in rare genetic diseases if we get positive clinical data and in personalized cancer vaccines. We also have more cancer programs and autoimmune programs and exciting collaborations with our partner, Vertex, toward getting the cystic fibrosis mRNA candidate into the clinic. Regarding M&A, I can tell you our teams have never been as busy. They are looking at many opportunities across the world, across therapeutic areas, and also technologies. We will not be shy to invest to expand the platform, have approved technology or approved product, and that’s where we are in terms of M&A. So, more to come when things get finalized and signed. As you know, the third bucket of our priorities in terms of balance sheet is returning capital to shareholders via share buybacks. As David said, we’ll continue to buy back shares at attractive prices. We’ll continue to have a dialogue with the Board about what we should do after the current plan, as needed. But now, we’re focused on executing the current plan. Thank you.

I guess, two for me. So first, David, could you just comment a little bit more on the upside and downside levers to COVID revenues this year? In particular, what would be the features that would not allow COVAX to accept the deliveries, or what should we be looking out for to understand that? And then, secondly, just on flu, could you maybe give some updated comments on where you are in terms of regulatory discussions? It sounds like it’s not clear yet whether you’re going to need a full efficacy study for approval. I’m just wondering where those discussions are and when you think you’ll be ready to give people a clearer picture on what the outlook is for the flu program. Thanks.

Sure. So, on the first one, in terms of the outlook for sales in 2022, I think the most important point is COVAX had an option for additional doses in 2022, which they chose not to exercise. So that’s impacted the outlook. We were formally reporting options that could be taken up. That’s been taken off the table, as they didn’t exercise. What we see is in our plans in the $21 billion, there continues to be some volume for COVAX. They are the consolidator of demand from the countries. They need to get the confirmed requirements from each country, and then that becomes a confirmed order to the Company. And notwithstanding having contracts, there’s still that process they have to go through. We want to flag that there’s some level of uncertainty associated with the timing of that demand that we’re reflecting in the APAs. Of course, we have, as we’ve said before, a number of negotiations and discussions with other countries worldwide as we look forward to the fall season and to the variant booster offerings that are making their way through the approval process. So, that presents some potential for additional sales that are not presently included in the APA count for this year.

Thanks. This is Stephen, Matthew. So, on the question of flu and where we are, we have been consulting with regulatory agencies globally, as you might imagine, around the path forward for our mRNA-1010 program. As there is issued guidance around accelerated approval that are still open, at the end of the day, we believe that there’s a potential path toward accelerated approval in some markets with our mRNA-1010 program using a safety and immunogenicity endpoint as has been previously discussed. That said, we’ll have to generate that data and have conversations on the back of that data with regulators as a path forward. But even if we do move forward with accelerated approval, which is the study that we’re starting in the Q2 Phase 3 study, we will still have an obligation to demonstrate efficacy at some point in a follow-up study to move from accelerated to full approval. Because we’re certain of that need at some point, we are also planning to start a Phase 3 efficacy study, which will be conducted in the Northern Hemisphere winter this coming fall. We’ve also announced plans for that. What that would do is, we would hope to find a path forward for both the accelerated approval and rapidly to move that to full approval based on that efficacy result. If for some reason, the accelerated approval is not available in some markets or all markets, we would instead go directly to full approval with a very short latency, given the timing of those two studies.

Thank you for taking my questions. Congrats on the strong quarter, and David, we will miss you. I have a few questions regarding the revenues. David, you mentioned that the second half this year will be higher than the first half. Since the first quarter, we already delivered $5.9 billion in revenues. Should we expect less than $4.5 billion for the second quarter this year? And then, my second question is regarding the ex-U.S. $5 billion revenue. What is the breakdown between the EU and the rest of the world? The third question is regarding the prices for the U.S., EU, and the rest of the world. Where do you see these prices changing for the remainder of 2022 and also into 2023?

Sure, I’ll cover everything. If I miss something, feel free to ask again. To start with pricing, we shared the price ranges from last year’s contracts. Pricing has remained consistent as we contracted for 2021, with no changes across our various customers. The net prices are influenced by our customer mix, with COVAX sales at the lowest price and varying higher prices for developed countries. We haven't provided any pricing updates beyond 2022, but it's reasonable to expect that as the market shifts to a private system, prices usually increase due to market demand, rather than government procurement for the pandemic. Regarding our outlook for 2022, it's not advisable to delve into quarterly estimates given the unpredictability of this pandemic. We mentioned $21 billion in signed APAs last quarter, and we anticipate second-half sales will be higher than the first half. You’re right in thinking that the second quarter will likely be the lowest of the year. What was the third point you wanted to address?

Thank you very much. That’s very helpful. The third question is about the $5 billion revenue outside the U.S. What is the breakdown between Europe and the rest of the world?

Yes. It was a pretty broad spread. I don’t have the specific quantities by country or region at the top of my head. But it was a pretty broad spread of demand across the world in the first quarter.

Yes. And I’d like to add, Gena, it’s Stephane. On pricing, as David said, as we move into endemic, we will need to discuss with payers as part of health economics and value of products as it’s akin for every pharmaceutical product, especially in the U.S. CMS has already communicated that for fiscal year 2023, which starts in October 2022, reimbursement for the COVID-19 vaccine will be $60.

I have to ask the last question to David before he gets to go back, and then a question for Stephen on the pipeline. I’m going back to the question around the guidance. Can you maybe help us quantify the exposure to COVAX? There was an article I guess talking about some of that recently in the press. I think that’s part of what your APA commentary out today is. I’m not sure, are you saying that that’s partly in the $21 billion, but then offset by potential USA orders that could come later this year. So, maybe you could just talk about that dynamic a bit? A question for Stephen is, again, definitely excited about propionic acidemia. Can you just rightsize your expectations because it’s five patients, but at the lowest dose? Is that a therapeutic dose you would expect to see biomarker changes? Maybe just talk a little bit about that. Thank you.

Sure. Yes, so I’m not sure I have too much to add in terms of the color on the outlook for the balance of the year. The $21 billion does not currently account for any contracts resulting from additional U.S. business, which we think is quite likely. We certainly believe there’s a recognition of the need for boosters in the U.S., and the dialogue is active, as is true for many customers in other countries and regions. We wanted to signal that regarding COVAX, which is as we’ve indicated before, the lowest-priced business in the portfolio, we have confirmed contracts there in place. We wanted to flag that they are a consolidator of underlying demand. They continue to work through in those developing markets what the demand picture looks like and what timing can ensure those countries can absorb the product they’re receiving. We’d like to flag that if you ask me if this should be a concern regarding the outlook, I would generally categorize it as a modest concern. But we are trying to clarify the range of outcomes associated with this information.

Thank you, Michael. The most important point I want to highlight is that this remains a small group of patients since it's a rare disease. As you mentioned, we are examining our lowest dose levels in Cohort 1 and Cohort 2, and we are actively enrolling participants. In line with a Phase 1 study focused on dose finding, we plan to continue enrolling and exploring various doses, possibly including higher doses in Cohort 3. We expect to accumulate data, with five participants transitioning to the open-label extension, and at least one has been part of the trial for around a year. A total of 75 doses have been administered across both Phase 1 and the OLE study. As we analyze this data, it may start to provide early insights. Our primary attention should be on the clinical endpoints that are most relevant to these patients, as we aim to develop the medicine to prevent complications associated with the disease, such as metabolic decompensation events, hospitalizations, and other necessary interventions due to severe disease progression. It’s crucial to measure this over time, unlike biomarkers, which I will touch upon later. We need to evaluate these clinical endpoints over time. The encouraging aspect is that we have patients on the medication for an extended period, and this long-term experience allows us to assess clinical endpoints, which also serve as indicators of safety that are essential for further advancement.

So, the Ontario study provides some interesting initial evidence that the fourth dose is beneficial. You mentioned the populations that should get the fourth dose. How big in aggregate is this population in total? What percent of the U.S. and global population do these patient groups comprise? The second question was just a follow-up on prior questions to make sure that I’m clear. Did you say that the average selling price per Spikevax dose in 2022 will be lower than in ‘21 due to COVAX orders? And does this not account for a potential increased price from future U.S. orders? Could these offset that decline in ASP, especially if you sell a sizable portion of doses at year-end at that $60 per dose price I believe you just mentioned per the CMS announcement?

Good point. Regarding the estimated number of individuals at high risk, as we observe the progression of the epidemic and the viral epidemiology, that population is believed to be around 1.7 billion people worldwide.

Yes. So, in terms of pricing, that’s correct. We have had and continue to have, based on the customer mix this year versus last year, indicated that we’ll have a year-over-year decline in the average price of product sold when we look at the $21 billion of APAs compared to last year’s actuals. The key contributor to that decline for the year is the inclusion of COVAX volume among confirmed APAs that we previously discussed. Will that sale price on average in 2022 change from that outlook? Yes, it can, to the extent of changes in volume for COVAX, including if some of the volume were to defer beyond ‘22 into ‘23, for example, that would improve your average price calculation. To the extent which we’ve indicated we have expectations of additional sales of product in 2022 for the fall season, including potentially for the private market, should that develop, that would then presumably have a favorable impact on the average price. So, hopefully that clarifies things.

This is Tiffany on for Cory. As the U.S. government hasn’t procured a budget for boosters this fall and if they continue to not place orders, can you walk us through some of the implications of what that privatization potentially means and how the Company is thinking about it? You mentioned potentially higher prices, but anything from market research that might suggest demand change or how you’re thinking about discounts, et cetera?

Sure. This is Stephane. We are in discussions with the U.S. government, and the right conversations are ongoing. We are also preparing for a situation where there may not be a government order for vaccines. Our goal is to protect as many Americans as possible. Our commercial U.S. team is working hard, and David and I have been dedicating a lot of time recently to ensure we have all the wholesaler contracts and everything else needed to operate commercially in the traditional vaccine market. We have several experienced executives on our team. While we hope the U.S. government will make an order like other countries, we are fully ready to manage things as a private market this fall if necessary.

Okay, great. The second question is how should we think about operating expenses moving forward and potentially steering away from COVID as a big driver there? Will it be pipeline dependent, or something else? Thank you.

Yes, that’s a good question. We’ve tried to indicate the trends for expenses across the business. I expect to see continued significant investment in R&D as that pipeline progresses. It shouldn’t be surprising to see increased investments in that area if we are successful, which we feel very good about. In terms of SG&A and the business structure, we’ve built out the Company significantly as a global commercial enterprise. We’re not perfectly there yet, but we’re largely at a steady state in terms of the global structure of the business.

This is Alec Stranahan on for Geoff Meacham. Regarding BD, how do you think about partnerships versus acquisitions? What size deal would you be willing to consider? Additionally, can you provide your thoughts on the RSV competitive landscape and any timeline for readouts? Thank you.

Yes. This is Stephane. Partnership versus M&A really depends on risk and the willingness of sellers to sell since it takes two to tango. As we worked with Metagenomi, we decided to partner on their licensing agreement because we are really excited about the science and the team. We believed it was not the best decision from a risk-adjusted basis to acquire the company at that phase. Regarding M&A, we would happily buy the right company that we truly believe will drive value for Moderna. In terms of deal size, we’re looking at a variety of opportunities, always in a disciplined manner. We’re focused on creating value, not just pursuing deals for the sake of activity. Our BD team is currently busier than ever, looking at various prospects both domestically and internationally, recognizing that great science exists worldwide. Moderna’s infrastructure and capital could scale many promising technologies that lack a strong balance sheet or infrastructure for maximizing patient impact.

Sure. Regarding RSV, I think the neutralizing antibody titers and GMTs we’ve seen look really strong relative to competitors. We’re optimistic about our history in generating robust T-cell responses against respiratory viruses. We believe the mRNA platform presents an opportunity to address various viruses effectively. The Phase 3 study, like our other respiratory virus efficacy studies, is a case-driven design requiring us to enroll subjects, vaccinate them, and ensure we accrue enough cases for interim and final analyses. We’ll work to enrich our enrollment in areas where RSV surges are expected, and we’re aware of reports from competitors looking to bolster their own trials due to slower case accrual. We view this as a chance to close the gaps with our data since we’re all working to demonstrate the potential benefits of RSV vaccines for older adults. Furthermore, we’re not limited to a singular virus focus. We’ve engaged in studies on vaccines that address multiple viruses, including combinations. We’re excited to start clinical studies for our combined COVID and flu vaccine along with our COVID, flu, and RSV vaccines this year, which covers more common respiratory pathogens for older adults.

Kevin, we have time for one more question.

I had one on the rare disease programs. Just curious, you have PA in MMA and clinical development here, and initial readout in PA. How much is the PA readout? Would that be derisking in terms of bringing additional rare disease programs into the clinic? Have there been hurdles and challenges to expanding that area of the pipeline? Is it more on an indication-specific basis, or have you been waiting for these initial proof-of-concept readouts to bring more programs into the fold? Has it been influenced by the focus on COVID and potentially headwinds related to the COVID pandemic? Any additional color on that would be helpful. Thank you.

Great. Thank you for the question. It will be a mix of all the factors you listed. First, let me talk about PA and what that readout means for us as a platform. It is our most advanced rare disease platform with an mRNA LNP targeting those metabolic diseases. In that sense, both MMA and PA will provide validation that the technology risk we have associated with that is addressed. That could prompt us, from a derisk perspective and strategic outlook, to expand the number of diseases we explore rapidly, using that same technology. We’ve been waiting for that readout. We haven’t sat idle though; we have a third program, GSD1a, with an open IND that is in a slightly different lipid nanoparticle system. We continue to look at whether other improvements could help. We’ll explore other opportunities in addition to what’s happening in COVID. We hope to receive a strong signal out of PA, allowing us to start advancing into other potential programs that are fittable with technology. However, challenges persist in conducting studies about these unfortunate diseases, particularly in children. COVID has certainly disrupted introductions for many trials, impacting enrollment for rare diseases consistently over the past two years. We have also made decisions occasionally with investigators and families not to enroll participants as they were too vulnerable in trials amidst pandemic circumstances. We remain optimistic about the future now that we are moving to endemicity phase for COVID-19.

Well, thank you very much for joining us today. We look forward to meeting many of you in person in Boston for our R&D Day in two weeks. Have a great day. Thanks.