Moderna Inc (MRNA) — Q2 2022 Earnings Call Transcript

Thank you, Kevin. Good morning, everyone. And thank you for joining us on today’s call to discuss Moderna’s second quarter 2022 financial results and business update. You can access the press release issued this morning, as well as the slides that we will 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; Paul Burton, our Chief Medical Officer; and Arpa Garay, our Chief Commercial Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Please see slide two of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. With that, I will turn the call over to Stephane.

Thank you, Lavina. Good morning, or good afternoon, everyone. Welcome to our Q2 2022 conference call. Today, I will start with a quick business review, before Paul walks you through some new real world evidence data on Spikevax, and then Stephen will review our clinical programs. Arpa will take you through commercial dynamics, and David will present financials, and we will come back to growth with just some thoughts about where we are heading. In the quarter, we continued strong financial performance. We reported revenue of $4.7 billion and net income of $2.2 billion. We are pleased with the Q2 sales. The decreasing net income is driven by higher cost of sales in the quarter, mostly due to our COVAX contract, David will cover that in the financials, along with a strong increase in R&D investment to fund our future, including the four Phase 3 programs and the higher tax rate in Q2 2021. For our share repurchase program, we reduced our share count by 9 million shares in Q2. Since the start of our first share repurchase program in 2021 through yesterday, we have repurchased around 18 million shares. We continue to have signed event purchase agreements for expected delivery in 2022 in the amount of approximately $21 billion. Based on our commercial momentum and our balance sheet, today we also announced that our Board of Directors has approved a new share buyback program for an additional $3 billion. Let me now review the business and pipeline update since our last review. I am pleased with the important progress that the Moderna team has made on advancing the pipeline across the product launches and increasing the breadth of the pipeline. On the commercial side, we recently signed a new agreement with the U.S. Government for an initial 66 million doses for the bivalent booster vaccine against Omicron. The agreement also includes options to purchase an additional 234 million doses, bringing the total sales potentially up to 400 million doses. The U.S. Government has already exercised the option for an additional 4 million doses since the contract was signed and announced. So the current total is actually 70 million doses contracted for the fall of 2022 with the U.S. Government. In addition, both Canada and the U.K. have exercised options for their current agreements for additional deliveries in 2022. On the regulatory front, I am very happy to talk about authorization for pediatric and recent populations in the U.S. We further see the thought with regulatory clinical teams at Moderna and the U.S. FDA now allows the protection of the youngest in the U.S. population as they head back to school. As Canada and Australia both authorized the use of our vaccine for children aged six months to five years old. Our research and clinical team continue the momentum in our pipeline. We are looking for running Phase 3 development with COVID bivalent booster, flu, RSV, and CMV trials ongoing. Importantly, our Phase 1 study with mRNA-1030, our flu vaccine targeting traditional flu antigens, as well as novel NA antigens, is now fully enrolled. And our combination flu plus COVID vaccine is also fully enrolled for Phase 1/2. We look forward to these readouts on safety and immunogenicity for approvals. In properties, we now have an open IND with the checkpoint vaccine in oncology, and we have dosed our first patients with our GSD1a rare disease program. Finally, we are very pleased to be on track and look forward to sharing data for our proof-of-concept studies this year for two of our therapeutic programs: the Phase 1/2 rare disease program propionic acidemia or PA, and our Phase 2 data with our personalized cancer vaccine in combination with KEYTRUDA versus KEYTRUDA monotherapy. Slide six is our usual snapshot of Moderna in August 2022, showing the breadth of the pipeline with 46 programs in development across vaccines with four therapeutics. The company has a strong foundation; we have 3,400 teams and growing, 11 commercial subsidiaries, and a strong balance sheet with around $18 billion of cash to fuel our growth. I will now hand it over to Paul.

Thank you, Stephane, and good day, everyone. As the COVID-19 pandemic continues and the SARS-CoV-2 virus keeps undergoing significant evolutionary change, the subject top of mind for many people is boosting: when to get boosted and what to get boosted with. In the next few slides, I want to show you how the Moderna mRNA-1273 vaccine is performing clinically in the booster setting and how antibody levels are performing in the real world setting in individuals primed and boosted with mRNA vaccines. Here in this next slide, you see the rates of COVID-19 infection in over 3 million individuals in the Spanish National Registry. The first point these data make is that boosting is highly effective, reducing the risk of infection. The second point, the authors make is that mRNA-1273, the Moderna vaccine, is more effective than BNT162b2, and that the effect size increases over time. In the second example, I am showing you data from the U.S. VA system in over 450,000 individuals boosted with either mRNA-1273 shown here in green or BNT162b2 shown in red. Again, in terms of infection or hospitalization prevention, the authors conclude that mRNA-1273 is more effective than the alternate mRNA vaccine. Finally, here are data from over 3 million individuals in the NHS England database, again showing a clinically meaningful and statistically significant reduction in COVID-19 infection and hospitalization with mRNA-1273 boosting compared to BNT162b2 during the Omicron periods of infection. I want to turn now to data from an innovative, decentralized, pragmatic real-world study we have recently conducted within the Moderna community collaborative platform with input from over 100,000 participants here in the United States. This study is called disCOVEries, and it enrolled approximately 850 of these people into a real-world assessment of antibody levels following primary vaccination and boosting with either Moderna-Moderna-Moderna, that’s the MMM group, or Pfizer-Pfizer-Pfizer, that’s the PPP group. Importantly, the study population has an average age of 44, approximately 60% of the participants are female, and it’s ethnically very diverse. Participants were enrolled in the study, consented, and received a home self-administered micro-needle blood collection kit from their buyer. As you can see here, across an array of SARS-CoV-2 variants of concern, higher and more durable antibody levels shown here on a logarithmic Y-axis scale were observed in those individuals primed and boosted with the Moderna vaccine in red, relative to the Pfizer vaccine in blue from eight weeks to 32 weeks following their first booster. Many of the comparisons were highly statistically significantly different. This is true even for antibody levels against the Omicron BA.1 variant of concern, where an approximately 12-week duration advantage is seen in Moderna-primed and boosted individuals compared to those receiving the Pfizer vaccine. So taken together, these data demonstrate the strong performance of the Moderna vaccine in a real-world clinical boosting setting, which could be explained by higher and more enduring antibody levels against a wide variety of variants of concern. I will now turn the call over to Dr. Stephen Hoge to provide comments regarding the composition of the full COVID-19 booster vaccines, as well as other pipeline updates. Stephen?

Thank you, Paul. Good morning or good afternoon, everyone. I will briefly discuss recent updates on our Omicron-containing COVID booster for the upcoming fall season and then cover the rest of our pipeline before passing it to Arpa. We are progressing with bivalent candidates for the fall-winter season of 2022 to address various market needs. mRNA-1273.214 is our bivalent vaccine that targets the Omicron BA.1 variant. Previous clinical data from our Phase 2/3 study indicated that 214 significantly boosted neutralizing titers against BA.4 and BA.5 compared to the currently authorized booster. After discussions with regulators, we have submitted applications for authorization of 214 in the EU, Australia, the U.K., Canada, and Switzerland. We have also begun a rolling submission in Japan. mRNA-1273.222 is our bivalent vaccine candidate that combines the Omicron-containing vaccine targeting the BA.4 and BA.5 subvariants with our original mRNA-1273. The FDA has requested us to submit for authorization of 222 based on the proven effectiveness of our bivalent platform against variants of concern, including data from our Phase 2/3 studies with 214 and 211 bivalent boosters. The FDA has also recommended manufacturers to initiate clinical trials with 222 as this information will be valuable as the pandemic evolves. We anticipate starting these trials in August. Now to review our respiratory vaccine pipeline, I want to highlight our Omicron-containing COVID boosters. We are pleased to announce that our flu vaccine mRNA-1010 began an immunogenicity study in the Southern Hemisphere in June, and we are preparing to launch an efficacy study for mRNA-1010 this fall, which will support our application. Our next-generation flu vaccines, mRNA-1020 and mRNA-1030, which target eight mRNAs across HA and NA antigens, have also completed enrollment in their Phase 1/2 study. Our RSV program is active, including a Phase 3 trial in older adults and a Phase 1 trial in pediatrics. We have also started and completed enrollment for the Phase 1-2 study of our COVID plus flu vaccine this quarter, and we look forward to sharing that data when it becomes available. Our combination COVID flu RSV vaccine is expected to enter the clinic this year. Our endemic human Coronavirus vaccine is in preclinical development, along with our pediatric RSV plus hMPV combination vaccine, and the pediatric hMPV plus PIV3 vaccine Phase 1b is now fully enrolled. Moving on to our latest public health vaccine portfolio, our CMV vaccine is in Phase 3. Our EBV vaccine to prevent infectious mononucleosis is in Phase 1, and our EBV vaccine aimed at preventing long-term complications from the virus is in preclinical. We have two ongoing HIV Phase 1 trials and a Phase 2 Zika vaccine trial. Our HSV and VVV vaccines are in preclinical development. Lastly, we have dosed the first participants in our Phase 1 study of our Nipah vaccine, conducted in partnership with the NIH. To wrap up our therapeutics pipeline, we expect data from our proof-of-concept studies in our PCV NPA programs later this year. A few other updates to mention: we have dosed our first patient in our GSD1a trial and opened an IND for our checkpoint cancer vaccine. Additionally, AstraZeneca has informed us that they are returning the VEGF program after a portfolio review, and we are currently assessing the next steps for that asset. Finally, after reviewing early clinical data from our IL-2 program for autoimmune disease and considering the competitive landscape, we have decided to discontinue further development of this program and will be removing it from our pipeline. I will now hand it over to Arpa.

Thank you, Stephen. Good morning and good afternoon to everyone. As the newest member of Moderna’s Executive Committee, I am excited to see the impact that we have had in COVID, as well as the commercial opportunities ahead for us in COVID, as well as future vaccines and therapeutics in the long run, leveraging our mRNA technology. Turning now to slide 20, where you will see the regional sales mix in the second quarter and in the first half of 2022. In the quarter, North American sales were $1.6 billion. These sales were driven by 1273 booster deliveries to the United States as we continue to fulfill our first U.S. Government order with the vast majority now delivered through the end of the second quarter this year. In the quarter, we also delivered primary series for the pediatric group five years and younger as the authorization for this group came through in this quarter. Sales to EMEA were $1.5 billion, and sales to the Asia-Pacific were $1.1 billion. As you can see across the first two quarters of the year, North American sales were $2.7 billion, sales to EMEA were $3.9 billion, and sales to the Asia-Pacific region were $3 billion. Of note, for both the three-month and six-month periods, we saw geographic diversification of sales across these key regions. This diversification is a reflection of how quickly we built out and executed within our global commercial organization. Now turning to slide 21, we are also happy to see that as we continue to scale globally around the world that Spikevax’s market share in the booster market, defined as a third or fourth booster, continues to show substantial market share. As Stephane has already mentioned, we see on slide 22 our new U.S. Government contracts for the fall of 2022. Specifically, the agreement initially was for 66 million doses of our bivalent COVID booster to be delivered in 2022. Earlier this week, the U.S. Government informed us that they exercised an option for 4 million doses for the pediatric age group. This brings the total contract value to approximately $1.8 billion. Our U.S. Government order includes options to purchase an additional 230 million doses, bringing the total to 300 million doses if all options are exercised. As you heard from Stephane earlier, after FDA guidance, the U.S. fall booster product will be the mRNA-1273.222, which consists of 1273 and the Omicron BA.4/5 subvariant. I want to spend some time on the evolution of the pandemic and the resulting impact on the commercial outlook. Early in the pandemic, we anticipated several factors, including the virus evolution, population immunity at any given time, and seasonal trends would result in a shift to the endemic setting, and we have shared this illustrative graph before. These same factors have and will continue to emphasize the commercial outlook. With the emergence and then dominance of multiple variants at different time points, we have been able to develop boosters to address these variants, which include our bivalent boosters against the Omicron variant. We are currently advancing two bivalent booster candidates for the fall of 2022 based on different market needs. The two bivalent booster candidates we are advancing are the mRNA-1273.214 and mRNA-1273.222. Both contain 25 micrograms of the currently authorized booster 1273 and 25 micrograms of an Omicron subvariant, either BA.1 or BA.4/5. Deliveries for these boosters will start in September of this year and will be more heavily weighted to the fourth quarter as we ramp manufacturing and obtain regulatory authorizations around the world. And to close, as we look to 2023, we are prepared for a shift to the commercial market in the U.S. for COVID boosters, where the market will be more fragmented than it was during the pandemic when the U.S. Government was the sole purchaser of vaccines. The commercial organization has already engaged with commercial payers and the channel, both channel distributors, as well as key pharmacies in anticipation of the shift. Internationally, we expect public health authorities to remain key purchasers of vaccines, but we are also identifying markets where there may be a private commercial market as well. All in all, we are well positioned for the transition as we have invested in building our commercial infrastructure both in the U.S. and globally. With that, I will turn it over to David.

Okay. Thank you, Arpa. Today we are providing the analysis of actual 2022 second quarter results along with a view of key drivers of financial performance going forward. Overall, we continue to progress well, and I am very pleased with our operational and commercial performance. Turning now to slide 25, starting with an overview of our financial performance in the second quarter. Total product sales for the second quarter of 2022 were $4.5 billion, increased by $334 million or 8% compared to the prior period. The total product sales growth in 2022 was primarily driven by higher average sale price of our COVID-19 vaccine due to changing customer mix. Total revenue was $4.7 billion for the second quarter of 2022, an increase of $395 million compared to Q2 of last year, driven by the increase of sales of our COVID-19 vaccine. Cost of sales was $1.4 billion or 30% of product sales in the second quarter of 2022, compared to 18% of product sales for the same period in 2021. This includes a charge of $499 million for inventory write-downs related to excess and obsolete COVID-19 products, a loss on firm purchase commitments of $184 million, and an expense for unutilized external manufacturing capacity of $131 million. These charges are driven by substantial reduction of our expected deliveries to COVAX, as indicated as a potential variable impacting our Advanced Purchase Agreements in our last call, and to a lesser extent by deferral of deliveries to other customers, particularly to the European Union, in light of the expected upcoming launch of our updated bivalent vaccines. Research and development expenses were $710 million for the second quarter of 2022 and increased by $289 million or 69% compared to the year-ago period. The increase in R&D spend continues to be driven by clinical trial expenses, particularly with our COVID-19 and RSV programs, as well as personnel-related costs for expanding and maturing development portfolio. Selling, general, and administrative expenses were $211 million for the second quarter of 2022, increased by $90 million or 74% compared to the year-ago period. 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. The effective tax rate for the second quarter of 2022 was 11%, compared to 9% for the same period in 2021. Let me remind you of the fact that we had a net operating loss carry-forward of $2.3 billion at the end of 2020, which resulted in a non-recurring benefit to the reported tax rate last year. After-tax net income in Q2 2022 decreased by $583 million or 21% to $2.2 billion compared to the same period in 2021. The decrease was primarily due to higher cost of sales and other operating expenses in the current period. Diluted EPS in Q2 2022 decreased by $1.22 or 19%, to $5.24 a share, which is compared to the same period in 2021. Turning now to year-to-date financial results compared to the prior year on slide 26. Total product sales for the first six months of 2022 were $10.5 billion, increased by $4.5 billion or 76% compared to the prior year period. The total sales growth in 2022 was mainly attributable to our manufacturing capacity ramp-up and to a smaller extent to favorable customer mix resulting in increased average selling price. Total revenue was $10.8 billion for the first six months of 2022, compared to $6.3 billion in the same period in 2021. The increase in total revenue was primarily driven by the increase of sales of our COVID-19 vaccine outside of the U.S. Cost of sales was $2.4 billion or 23% of product sales for the first six months of 2022. This compares to 16% of product sales in the prior year period on a reported basis or 19% adjusted for pre-launch inventory costs, which were expensed in 2020. The increase in cost of sales as a percent of product sales was mainly due to higher write-downs for excess and obsolete inventory, and expenses related to future purchase commitments and unutilized external manufacturing capacity, and to a lesser extent the lack of pre-launch inventory benefit that was realized in the first quarter of 2021. Research and development expenses were $1.3 billion for the first six months of 2022, an increase of $442 million or 54% compared to the prior year. The increase in R&D spend continues to be driven by clinical trial expenses, personnel-related costs, and outside services for expanding and maturing development portfolio, including the development of COVID-19 bivalent boosters. Selling, general, and administrative expenses of $479 million for the first six months of 2022 increased by $281 million or 142% compared to the year-ago period. The growth in spending was driven by the commercialization of our COVID-19 vaccine globally and support of the accelerated company build-out, including substantial investments in digital. Additionally, in Q1 2022, there was an initial upfront endowment of $50 million for the newly established Moderna Foundation. The effective tax rate for the first six months was 13%, compared to 7% for the same period in 2021. The increase was primarily due to the benefit recorded in 2021 related to the release of the valuation allowance on the majority of our deferred tax assets. After-tax net income increased by $1.9 billion or 46%, to $5.9 billion for the first six months of 2022 compared to the same period in 2021. The increase in net income was driven by the growth of our product sales. Diluted EPS for the first six months from 2022 increased by $4.55 or 49% to $13.85 compared to the same period in 2021. Turning now to cash and cash deposits on slide 27, we ended Q2 2022 with cash and investments of $18.1 billion, compared to $19.3 billion at the end of Q1 of this year. The decrease reflects the share repurchase activities in Q2 of $1.3 billion. The ending balance of cash deposits for future product supply was $4.1 billion, compared to $5.3 billion at the end of the previous quarter. The reduction quarter-over-quarter is driven by product deliveries against customer deposits. Now turning to slide 28, our capital allocation priorities remain unchanged. Our top investment priority has been and will continue to be reinvesting in the base business across multiple areas. As previously stated, R&D spending was $1.3 billion in the first half of 2022, a 54% increase on a year-over-year basis. We remain on track with our full-year R&D forecast of $2.5 to $3 billion. 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 take a disciplined approach in evaluating potential outside investments. We are in multiple active discussions regarding additional external collaboration opportunities. After evaluating internal and external investment opportunities, we then assess additional uses of cash. In the second quarter of 2022, we repurchased 9 million shares for $1.3 billion. Since inception of our repurchase activities last year and up until August 2nd, we have purchased 18 million shares or approximately 4% of our outstanding diluted shares for $3 billion total. As a reminder, we announced a share repurchase program for $3 billion in February of this year and currently have approximately $1 billion of remaining capacity from that authorization. As part of today’s press release, we announced that the Board has authorized an additional share buyback program of $3 billion with no expiry. Now let’s turn to our 2022 updated financial framework on page 29. We continue to have signed Advanced Purchase Agreements for expected delivery in 2022 in the amount of approximately $21 billion. This includes expected sales from the recently announced new agreement with the U.S. Government and an adjustment for doses that remain unallocated by COVAX due to lack of demand we indicated this was a possibility on our last call. Furthermore, this total includes expected negative foreign exchange impacts compared to the contract value at signing, which we estimate to be approximately 1.5% of sales for the full year 2022, assuming current rates remain through year end. We anticipate that for sales in the second half of 2022, sales will be greater in the fourth quarter than in the third quarter, driven by the timing of anticipated approval of our updated COVID-19 vaccines and the related manufacturing ramp-up of the new products. Our total cost of sales includes the cost of goods manufactured, third-party royalties, as well as logistics and warehousing costs. We now expect our full year 2022 reported cost of sales to be in the mid-20% range driven by the previously mentioned cost related to a reduction of doses to COVAX and deferral of doses to other customers. Cost of sales could increase to the high 20% range in the event of further charges due to product updates. For R&D and SG&A, we continue to expect full-year expenses to be approximately $4 billion, driven by a maturing development portfolio and the global scale-up of the company. Based on current tax laws, we now expect our 2022 effective tax rate to be in the low- to mid-teen range as a result of the benefits from the foreign-derived intangible income driven by our international business mix, as well as stock-based compensation deductions. 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. This concludes my remarks concerning the financial performance, and I turn the call back over to Stephane.

Thank you, David, Arpa, Stephen, and Paul for those updates. In 2022, we set out to execute on five key priorities. First, to execute on delivering vaccines against $21 billion of Advanced Purchase Agreements, with half of the year behind us and the signed deals for the fall of 2022 and a strong manufacturing team, we are on target. We have continued the momentum in our late-stage clinical trials, with our Phase 3 trials now approved for RSV and CMV, and I thank our team for delivering on such aggressive timelines. We are on track to share data from proof-of-concept studies from two therapeutic applications of our technology with data from our PA and PCV trial in the second half. We have continued to make progress with new development candidates in vaccines and therapeutics, some already been announced and now will come in the second half of the year. And finally, the recent announcement of our inhaled IND with our partner Vertex, we have expanded our mRNA platform to target primary disease. As we grow, we are committed to doing the right things in the right way for patients and our stakeholders. As a company led by a solid team, we are thinking in five-year, 10-year, and 20-year increments. To that end, this year we published our very first ESG report, which highlights the key pillars of our corporate versatility framework: medicine for patients, our employees, the environment, our community, and of course, governance. I am proud of what we are doing in each pillar and so proud of the ambitious goals we set for ourselves. I think the first step to achieving those ambitious goals is to set them and create and foster our purpose-driven culture and go on this framework to meet those goals. As an example, our goal of net zero carbon emissions globally by 2030 we put on that amongst the global leaders in promoting long-term sustainable growth for our planet and our organization. We will share more detail on the ESG governance at our ESG Day on November 10th. But first, we look forward to seeing you at our Annual R&D Day on September 8th. Moderna's mission to deliver on the promise of mRNA science to create a new generation of transformative medicines for patients has always been our North Star. Despite the challenges facing the financial market with consumer inflation and ensuing increases in interest rates and the cost of capital, Moderna is in a very fortunate position. We have a unique platform enabling the generation and personnel speed of innovative medicines. We have a strong team of 3,400 mission-driven employees. We have $18 billion of cash on the balance sheet, and with the strong commercial momentum, we have no intention of slowing down our growth. We are putting our head down and doing the work. I have been as excited about the future of Moderna as ever; now is not the time to slow down, patients are waiting for innovative medicines. Thank you for listening, and now we would be happy to take questions. Operator?

Great. Good morning. Thanks for taking the question. Stephane, I was hoping you could just maybe address in a little bit more specificity how you are thinking about opportunities for either acquisitions or collaborations. I think that topic comes up a lot among investors, and I think there is a different scope that a lot of people think about, including things that are quite large versus things which might be more complementary on a technology side to the platform. So if you could just address how you are thinking about that in your priorities, that would be great. Thank you.

Thank you for the question, Matthew. We have been implementing our capital allocation strategy for over a year now, and it has been cash flow positive. Our primary focuses are investing in the business, continuing to build the company, and executing share buybacks. As demonstrated in recent quarters, we have been consistent with this strategy, particularly in our internal R&D investments, which saw a 69% increase in Q2 this year compared to Q2 last year. Last year, we also announced our third share buyback plan, and we are still proactive in this area. In the past year, we've engaged in several external collaborations, although we have not made any acquisitions yet. We view our growth potential through the lens of delivering innovative medicine. In pursuing external opportunities, we prioritize finding valuable assets at prices that allow us to create value. Our business development teams are actively exploring various options, similar to how investors assess potential investments. We thoroughly evaluate many opportunities before making decisions. We will capitalize on great assets when we find them. While there are many early-stage assets, some may not align with our strategy, but we will continue our search. A large acquisition isn't our goal; instead, we aim to be the leading nucleic acid company in the world. We are open to external ventures within the nucleic acid space and are willing to pursue acquisitions and partnerships if we find suitable assets. This encapsulates our approach to external investments. Thank you.

Hey, guys. This is Elizabeth on for Salveen. Congrats on the quarter and thank you for taking our question. Could you walk us through the path to authorization for 1273.222 and just clarify exactly what the path is here? And then our second question is, if you had to think of levers for potential upsides to the $21 billion in APAs, where might those come from, and could additional new orders come online? Thank you.

Thank you for the question. I will address the first part, and I believe Arpa will handle the second. Regarding 222, it is a bivalent vaccine based on the BA.4 and BA.5 variants. The question mainly revolves around FDA guidance and the focus on authorizing the vaccine in the United States. We are diligently compiling both preclinical and manufacturing data, alongside our foundational bivalent platform information, which consists of two separate Phase 2/3 studies—mRNA-1273.211 and mRNA-1273.214—both of which showed superiority of the bivalent platform against Omicron variants of concern. The comprehensive data from these Phase 2/3 studies and manufacturing will constitute our submission, in line with the published FDA guidance. The FDA has also requested an additional study to support future deployment, as we need to comprehend how the 222 vaccine performs if further variants emerge, similar to patterns observed each year during this pandemic. We aim to begin enrollment for this study in August, but the data will not be available for several months, as it takes about a month to gather and test boosted samples in the relevant assay. At this time, we do not expect, nor does the FDA indicate, that this data will be necessary before authorization. In fact, we will move forward with authorization based on the prior clinical data for 211 and 214, as well as the preclinical and manufacturing data. We will have those samples available. As for the specific timing of when we can share 222 data, aside from later in the fall, we currently have no additional timelines to provide, except to reiterate that it is not needed for authorization based on recent FDA guidance; it is intended to support future deployment decisions later in the winter.

And I can take the second question on the $21 billion guidance. From an Advanced Purchase Agreement perspective, we do believe the majority of the market demand is captured in this $21 billion. That being said, we continue to work with countries around the world on potential additional orders for our bivalent vaccines, as many countries are continuing to assess their public health needs, as well as their booster population recommendations, and considering potential expansions to those populations. So we are feeling pretty good about the $21 billion, but we do continue to work with countries to see if and when there is additional demand for either 214 or the 222 bivalent vaccine.

Hey. Good morning. Thanks for the questions and thanks for the updates. A quick question related to the comment around getting the BA.4/5, 222 authorized. Stephen, you had mentioned the pathway there, but I actually want to think a little bit forward — do you envision that future variant and development vaccines would be able to be authorized quickly via just preclinical data, such as like flu, or do you think that that’s where the path is going and that the FDA seems to be going along that route? That’s the first question. And then second question, just ironically you had made comments around monkeypox vaccine and now WHO has made comments on global health emergency. I didn’t see any update there and wondering if that actually had made any progress? Thank you.

Sure. Thank you for the questions, Michael. I will try to take both. So, first on the approach, I think you are right. We do believe that the flu model for authorization of strain supplements every year will make sense in the future for COVID vaccines and boosters. And in that sense, the authorization of 222, if the FDA and other markets follow, really becomes the first instance of that. We are still going to have to file for supplemental BLA instantiating that pulling together that framework. But we are actively working with regulators, not just in the U.S., but globally to try and establish that pathway because at the end of the day, in order for us to take full advantage of the platform and respond every year, it makes sense that we don’t conduct clinical studies before authorization in the future. We also think that the flu model and the performance of the platform globally now in billions of people really does start to demonstrate the potential for us to mature to more of an endemic approach that doesn’t require a clinical study every time. So that is our expectation and hope that will obviously engage with regulators over the fall and winter as we complete those filings and start preparing for what 2023 might look like. Again, I think that 222 experience this fall really might just be the first instance that becomes the new norm. Now, on monkeypox, we did initiate a research program. We are tracking that very closely. And obviously, given the recent public health announcements and increasing concern about availability of vaccine supply, we are beginning to look at what it would take for us to use our platform to provide a monkeypox vaccine, both to intervene in the current epidemic, but also to try and address long-term issues of supply in this public health threat. We do not have any updates on those discussions, and we will firm them up. Those will include, if appropriate, some regulatory consultations. Once we have clarity on whether we are moving to clinical development and what that path would be, we will, of course, provide an update on it. But at this stage, it remains a preclinical program, but one that we are tracking very closely given the recent developments.

Hi. This is Sheldon on for Gena. Thanks for taking our question and congrats on the good quarter. We have two questions. One is on the current APA for 2022. Could you comment on how many doses for the COVAX contracts are still unallocated and how they were accounted for in the current $21 billion guidance? And could you also remind us on the current APA for 2023 and how should we think about the demand next year? And a quick follow-up, another question on mRNA-1010 flu vaccine: the Phase 3 immunogenicity trial, how do you think about the expected data timeline, or do you need to enroll also in the Northern Hemisphere? Thanks.

Maybe I will take the last question first or do you want to take...

I will…

I will take it for sure.

So just to reiterate, the $21 billion in Advanced Purchase Agreements does not include any additional COVAX doses to be allocated. So that already reflects a lower demand that we are seeing from the COVAX countries, and we anticipate that for the remainder of the year, we will see very few additional orders and demands from these countries. In terms of 2023 orders, we have already signed deals with five countries that we have previously announced: the United Kingdom, Canada, Australia, Kuwait, and Taiwan. We have also signed options with Canada, Switzerland, and Taiwan as well. And we are actively having dialogues with countries around the world for additional orders in 2023. We will be able to provide additional guidance on what these advanced purchase orders look like later this year or early next year.

Great. And then on the question of the flu Phase 3 study that’s ongoing. So that is a Southern Hemisphere immunogenicity and safety study. As we said, we are moving — that study is ongoing. We can characterize where we are. We do not expect at this point that we would need to rotate that study into the Northern Hemisphere. So we will be concluding that safety immunogenicity study enrolling in the Southern Hemisphere. We do expect to run a Phase 3 efficacy study in the Northern Hemisphere in the later part of this year. And so we will be studying Northern Hemisphere comparators this year, but not the current ongoing Phase 3 that is the safety immunogenicity study that we believe could support accelerated approval.

A quick follow-up, the Southern Hemisphere immunogenicity data — so likely data will be available later in 2022?

So we haven’t specifically guided on when the data will be available. But generally, as you know, the safety immunogenicity studies after they are enrolled follow a non-inferiority or superiority endpoint at day 29, a month after the study begins. So the data will follow shortly once we have completed enrollment. But ultimately, we will also want to follow up with the safety data and consult with regulators about their expectations of what sort of follow-up and data they would like to see. Until we have had all of those consultations, we will specifically guide on time.

Hi. Good morning and this is Tara on for Tyler. So I was hoping you could provide some comment on the 11% share gain that Pfizer was referring to since January 1st and where that might be coming from, like is most of it coming from the adeno vaccines, given the share that they have lost? Of course, I’d be interested to know where the Spikevax share changes are coming from as well.

Sure. I can take that question. In terms of the share, the shares that we reported today are looking at the cumulative share for Spikevax across just the third and fourth boosters, which is a difference compared to some of the data that Pfizer had shared and also looked at the major markets, OECD markets that we plan. So as we think about the majority of where our source of business is coming from. We are seeing substantial market share holds and in some cases even some market share gains year-to-date. Again, focusing just on the booster population, which is where the vast majority of our current and future growth is coming from.

Hey, guys. Thanks for the question. And on slide 23, you guys gave sort of the illustrative example of kind of the longer-term opportunity for COVID. But I wanted to just get, as you invest in 2023 and beyond, not asking for guidance, but how do you think about what would be the tail of the endemic phase in terms of either volume or patients, etc? And then a related question, in terms of capital allocation, how do you guys think about investing in businesses? I know, Stephane, the goal here is to further expand the reach of Moderna’s technology in one of your slides, but how do you think about adding capabilities that are outside of that, that may be peripheral? I wasn’t sure how far you are willing to sort of steer a little bit away from the core mRNA? Thank you.

Okay. So I think maybe Arpa, you and I will tag team on the first question then comes to Stephane on the M&A one. So first, maybe on the morbidity of disease and that picture, we do believe that endemic human coronaviruses point of picture here would suggest there’s going to be seasonal disease. There will unfortunately be breakthrough infection, some hospitalization, even some death, and that will happen indefinitely, particularly in those that are higher risk. The question of how we define that higher risk is 55 plus, 50 plus, or is it 18 plus with high risk factors, or is it broadly will really depend upon the evolution of the virus. It’s hard to anticipate. But we do believe over time this will become a seasonal market, where boosting and elevating neutralizing protection to prevent breakthrough infections will happen annually in a large population, and they will benefit from just like they do for flu or they would for endemic human coronaviruses. Arpa if you want to comment on how that market evolves.

So the only comment I would add to that is, we will continue to work closely with NIPs, as well as governments around the world to see how their recommendations evolve for their populations in terms of the populations that are being covered and how often they are recommending protection. So we will continue to work with them and over time see how demand shapes up.

Thanks, guys. And on the capital allocation, as we have shared in the past, we are very interested in applying information molecules, so in nucleic acid. And so we are not only looking at mRNA to express a human protein. As you know, we are also exploring mRNA through gene therapy. We’ve also done some partnership there and we look forward to giving some updates in the near future. But then also in the gene therapy that we talked about, RNA, is also a space of interest. So I think when you consider nucleic acid, we view going into small or large molecules as not something that would be in the best interest of Moderna. We are taking a three-year, five-year, and a 10-year view on things. I think there is a lot we can do in terms of nucleic acid, and we like the ability to plug and play onto the platform across research, across development, and across CMC. So these are very true benefits and synergies rather than just adding a product for the sake of it, and contributing more complexity into the company, which we wish to avoid. And definitely the technologies that we see have little correlation with nucleic acid.

Hey, guys. Thanks so much for taking the question. Just as you think about the pipeline and capital allocation from here. Can you help us think about just with the buybacks, as well as further business development, how you are thinking about prioritization? And then just a second question on monkeypox: I know that since you have announced that you have been looking at preclinically, and given the public health emergency and broader vaccine needs. Can you comment a bit on your plans from here and any further plans for development? Thanks.

Let me begin with our capital allocation strategy. This is Stephane. As David highlighted in one of our slides that we have presented over the past few quarters, our top priority has been investing in the business. We are genuinely excited about the platform we've developed. In the vaccine sector, since the vaccine modality has been derisked, we are prepared to invest quite aggressively. Remarkably, we currently have four vaccines in development. As mentioned in our last call, we have demonstrated our capability to progress from initiating a clinical study in vaccines to starting a Phase 3 trial within a 12-month period, which underscores our robust CMC capabilities and the strength of our development team. A key point of interest will be the human proof-of-concept data in cancer and rare diseases that we discussed, expected later this year. If either of these areas, or both, shows promising clinical signals, we will likely expand quickly, similar to our approach with vaccines. One of the benefits of mRNA technology and our company's emphasis on robotics and digitalization is our ability to scale rapidly. We believe that entering new applications like rare diseases or cancer doesn’t require us to pause with only a few programs running. If we achieve positive results in one area, we will definitely accelerate the development of additional programs in rare diseases. The same goes for oncology. Therefore, our first priority is investing in the business, followed by expanding our platform through partnerships, licensing, and M&A. Any excess cash will be returned to shareholders. Today’s announcement of a share buyback plan, as well as the initiatives we plan to implement, confirms our commitment to returning capital when we cannot find suitable reinvestment opportunities within the company.

Yeah. So I think, conceptually, we are obviously very aware of monkeypox concern, and obviously, very sensitive to recent announcements. And so what we are looking to do is understand if we were to develop that program, how would we move it? The purpose of moving it would be to move very quickly, and Stephane just covered: our platform is pretty well established and our ability to rapidly scale has been demonstrated. If we were to go after a monkeypox clinical development program, it would be to very quickly progress towards an approvable standard endpoint in a clinical study. And in that sense, we need to engage with regulators in other consultations to determine what that path would be. It’s not a primary or principal discussion to just advance a program and demonstrate in Phase 1 clinical generally. We would really just be doing it to aid in generating a public health countermeasure. In those conversations, we will start to engage more fully. We obviously also recognize there are other significant public health threats right now. COVID remains a larger public health threat, and many regulators are entirely focused on addressing the update of vaccines for this fall, and so we are respectful of that. But we will engage in those conversations, and once we have clarity on whether or not we will go forward, given what we think the right endpoints will be, we will obviously provide it. But at this point, it’s premature to say more, because we have not clarified those endpoints and therefore have not made our own decision about whether we will move the preclinical program into clinical development at this stage.

Great. Thank you so much, everybody, for joining the call today and for your questions. We look forward to speaking to many of you and welcoming you at the R&D Day early September. Have a great day. Thank you.