Moderna Inc (MRNA) — Q3 2022 Earnings Call Transcript

Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's third quarter 2022 financial results and business update. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the investors section of our website. On today's call are Stéphane Bancel, our Chief Executive Officer; Stephen Hoge, our President; Arpa Garay, our Chief Commercial Officer; and Jamey Mock, our Chief Financial Officer. After prepared remarks, we will take your questions through 9:15 a.m. this morning. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. With that, I will turn the call over to Stéphane.

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q3 2022 Conference Call. Today I will start with a quick business review of the quarter before Stephen reviews our clinical programs. Arpa will then take you through commercial dynamics and Jamey will present financials. I will then come back to close before we take your questions. In the quarter, we reported $3.4 billion in revenues. We reported net income of $1 billion and cash investments totaling $17 billion. We now expect deliveries under advanced purchase agreements in the range of $18 billion to $19 billion in 2022, due to delayed deliveries from our fill-finish contract manufacturers resulting in $2 billion to $3 billion of revenue deferrals into 2023. In Q3, we had to deal with lots of complexity, launching two products, mRNA-1273.214 and mRNA-1273.215 at the same time, and also moving products from 10-dose vials to 5-dose vials. Q3 was actually our greatest delivery amount in terms of vials produced and was up about 20% from the average of the previous three quarters. Arpa will share more thoughts on 2023 in a moment. In the first quarter, we repurchased over seven million shares. The $3 billion share repurchase program we announced in February 2022 was completed. Since the start of our first share repurchase program in 2021, through the end of the first quarter, we have repurchased more than 23 million shares. Our first share repurchase program announced in August 2022 for an additional $3 billion in repurchase is ongoing. Let me now review the pipeline highlights and advances since our last update. I am very pleased with the important progress the Moderna team has made on advancing the pipeline closer to product launches and at the same time expanding the breadth of the pipeline. We've continued to progress with COVID booster programs and have received authorization around the world for both COVID mRNA-1273.214 program, which targets Omicron BA.1 and mRNA-1273.215 which targets BA.4/BA.5. We have, as you know, two respiratory vaccines in Phase 3 trials as we speak that continue to progress quickly. For our flu vaccine, our IND in September, we announced that the first Phase 3 immunogenicity study was fully enrolled. We expect now to have data in the first quarter of 2023. As a reminder, we plan to pursue an accelerated approval pathway for the seasonal flu vaccine. We also started a Phase 3 efficacy study with our flu vaccine and that trial is enrolling quickly. For Phase 3 RSV vaccine, we are on track for data without this winter season. We were pleased to announce that Merck exercised the option to develop and commercialize our personalized cancer vaccine, mRNA-4157, paying Moderna $250 million in Q4. We and Merck will share costs and profits fifty-fifty for this program moving forward. We continue to expect data from our Phase 2 study for PCV in Q4 this year. In rare diseases, we are pleased to share at our R&D Day that we saw encouraging early signs of clinical benefits above PA and GSD1A and announced a new development candidate for OTC. On Slide 6, you see our usual snapshot of Moderna in November 2022 showing the breadth of the pipeline with now 48 programs in development across vaccines and therapeutics. The company continues to grow, and we have now more than 3,700 Moderna team members. Last week we were very pleased to announce that we were recognized as a top employer by Science for the eighth consecutive year. We now have 15 commercial subsidiaries globally and a strong balance sheet of $17 billion to fund our company growth. With this, I will now turn it over to Stephen to review the pipeline.

Thank you, Stéphane. Good morning or good afternoon, everyone. This morning I'll review our clinical progress. We've launched two vaccine boosters for the current fall-winter season to meet different market demands and have received authorizations or approvals worldwide for these vaccines. We previously shared that mRNA-1273.214, which targets Omicron BA.1, induces significantly higher titers than 1273 against the BA1 and BA4/5 sub-lineages in the clinical trial. mRNA-1273.214 is now authorized in the United Kingdom, Switzerland, Canada, Australia, European Union, Japan, and other countries. For mRNA-1273.222, which targets the Omicron BA.4 BA.5 variants, the Phase 2/3 study is ongoing and we expect data later this quarter. mRNA-1273.222 is authorized in the United States and now also in the United Kingdom, Switzerland, Australia, Canada, the European Union, Japan, and other countries. Now moving to Slide 9, I'll review our respiratory vaccines pipeline. I will cover the Phase 3 studies in detail in the next slide. Here I want to highlight progress in the earlier-stage studies with our respiratory vaccines. mRNA-1020 and mRNA-1030 for seasonal influenza are in a Phase 1/2 study and are now fully enrolled. mRNA-1345, for RSV in the pediatric population, is now fully enrolled in our Phase 1 study. Moving now to our combination respiratory pipeline, we have made meaningful progress. mRNA-1073, our combination vaccine for COVID and flu, is in Phase 1/2 and is fully enrolled. I'm very pleased to announce that our combination COVID, flu and RSV vaccine or mRNA-1230 has also started enrolling in its Phase 1/2 study. We announced a new development candidate, mRNA-1045, targeting a combination of RSV and influenza and that has started its Phase 1/2 study. Lastly, in our combination vaccine pipeline, we also have a pediatric vaccine covering hMPV and PIV3. That study is ongoing in a fully enrolled Phase 1B study. Finally, our endemic human coronavirus vaccine is in preclinical development along with our pediatric RSV hMPV combination vaccine. Now to review our Phase 3 flu and RSV programs on Slide 10. For flu, our Phase 3 immunogenicity study in the southern hemisphere is fully enrolled with 6,000 participants with a data readout expected in the first quarter of 2023. As we've previously noted, regulators have indicated support for an accelerated approval pathway for our seasonal flu vaccine candidate pending the results from this study. We've also started enrolling our Phase 3 efficacy study in the northern hemisphere and have now enrolled more than 10,000 participants. Timing of this confirmatory Phase 3 efficacy readout will be driven by flu case accruals in the study and could come as early as this winter. Looking to RSV, our pivotal Phase 3 efficacy study in older adults has now enrolled more than 35,000 participants. As we previously mentioned, our primary endpoints in this study are safety and vaccine efficacy. Timing of the Phase 3 efficacy readout will be driven by RSV case accruals in that study. As we're now in the midst of a very strong RSV season, we continue to expect that the results will be available this winter season. Moving on to our latent and public health vaccine portfolio, our CMV vaccine is ongoing in a Phase 3 study. Our EBV vaccine to prevent infectious mononucleosis is in a Phase 1 study, while our EBV vaccine to prevent longer-term sequelae, such as cancer and multiple sclerosis, is in preclinical. We have two HIV Phase 1 trials ongoing, and our HSV and VZV vaccines are ongoing in preclinical studies. Finally, our public health vaccine for Zika is ongoing in a Phase 2 trial, and our Nipah vaccine is ongoing in a Phase 1 study.

Thank you, Stephen. And hello everyone. It's a pleasure to be here with you today. After two months at Moderna, I’m even more excited about our company's future and the role we are playing in bringing a new generation of medicines to patients. For those of you whom I haven't had the pleasure of meeting yet, I look forward to working with you in the months and years ahead. Today I will start by providing additional color on our third quarter results and capital allocation priorities and finish with a view on the key drivers on our remaining 2022 financial performance. Turning now to Slide 25, total product sales in the quarter were $3.1 billion, decreased 35% year-over-year. The decrease was driven by lower sales volumes due to the timing of market authorizations for our updated COVID-19 booster vaccines, and the related manufacturing ramp-up with our CMO partners. As a reminder, we received the marketing authorization for the U.S. on August 31st, for the European Union on September 2nd, and Japan on September 12th. We anticipate that product sales will be higher in the fourth quarter of 2022 than in the third quarter as we continue to deliver against our supply contracts for booster vaccines. Cost of sales was 35% of product sales compared to 15% of product sales last year. This includes a charge of $333 million for inventory writedowns related to excess and obsolete COVID-19 products and expenses for unutilized manufacturing capacity of $209 million, and a loss on firm purchase commitments and related cancellation charges of $102 million. These charges are driven by a shift in product demand to our Omicron targeting COVID-19 bivalent boosters and costs associated with surplus production capacity. Research and development expenses were $820 million, an increase of 57% versus the prior year. The increase in R&D spend continues to be driven by our increasing and maturing pipeline including Phase 3 studies for RSV, flu, CMV and COVID boosters. Selling, general and administration expenses of $278 million increased by 65% year-over-year. The growth in spending was driven by continued investments in personnel and outside services in support of the accelerated commercial and overall company build-out. The effective tax rate was 14% compared to 6% last year. As a reminder, 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 in 2021. After-tax net income decreased by 69% to $1 billion, diluted EPS in Q3 2022 decreased by 67% to $2.53. As a result of our share buyback activities, the diluted weighted average share count reduced by 22 million shares to 412 million shares as of the end of Q3 2022, compared to 434 million shares the prior year.

Thank you, Jamey, Arpa, and Stephen for this update. Before opening to Q&A, I just want to review some of the key priorities as we close out this year and look into 2023. For the remainder of the year, we'll continue to focus on delivering our updated Omicron boosters and drive 2022 sales. We are already working on 2023 sales contracts in Europe, Japan, and other areas around the world. Our partner teams are also setting up the U.S. team and scaling it so that we can go private in the U.S. market in 2023. We continue to execute on our pipeline. We look forward to being able to present when we have it the Phase 2 data for PCV we expect before the end of the year. The team is doing a great job to cause it to enroll our Phase 3 study for flu, RSV, and CMV, and I'm excited to see the advancement of our rare disease programs. Looking to next year, Arpa and the team and the entire organization, including manufacturing, is pushing to bring multiple vaccine launches in the year, including the commercial COVID market as well as the potential for therapeutic programs to move very quickly into Phase 3. And finally, we hope that many of you can join us next week for our first ESG Day on November 10th. The virtual event will be available from our webcast. With this, we'll be happy to take your questions.

Good morning, thanks for taking my questions. On pricing here for the COVID vaccine, Pfizer's guiding to price of 110 to 130 in the private market. Is this in line with what your discussions thus far suggested, and when do you think the private market will emerge next year? And then a second question here; you were talking about some of the cost burden for next year with distribution costs and building out the commercial infrastructure around flu, RSV, and trials. Could you just give us some directional color on the OpEx situation as we look to look forward?

So I can take the pricing question. So first, I'm not in a position to comment on competitor pricing, but as we think about our pricing as we evolve from a pandemic setting to an endemic setting, the real focus for us is on ensuring that our vaccines are priced based on the value that they provide to the healthcare system and reflect the cost-effectiveness guidelines that are set by public health authorities around the world. Here in the U.S., that would be ACIP. It is important to note that some of the pricing guidance that has been released in the past is really at a gross level and we do anticipate some discounting across different channels. Additionally, here in the United States, as we evolve into the commercial setting, it's also important to remember that for all ACIP-recommended vaccines, there is a zero out-of-pocket cost for consumers. So from a consumer access perspective, we do expect that the pricing will not be a barrier to uptake.

And Salveen, maybe I'll take the cost part of that. So yes, our costs will change in the endemic mode. Number one, there are presentation preferences moving more to prefilled syringes and single-dose vials that I think will be different year-over-year. We have to continue to invest in bivalent vaccines, and Moderna will now pick up the distribution costs moving forward, particularly in the United States. So yes, our cost profile will change, and we'll come out and update in terms of what that means at a later date.

Great. Good morning. Thanks for taking the question. I was hoping to ask on PCV; just given that this is a Phase 2 study that's proof of concept a p-value greater than 0.05 could be considered a success in this study. So maybe you could just help us think about how you're thinking about success in the study and then just given that it's an open-label study, how much data is available to you internally? Thanks.

Great. Thanks, Matthew, for the question. So as you said, it's a Phase 2 study, but it's actually quite a sizable one. It's 150 patients and they were randomized two-to-one, so 100 patients have received the combination therapy and 50 the standard of care, which in this case is KEYTRUDA. That's actually quite a sizable sample and does allow for us to look at efficacy. Now it is a Phase 2 study, and so we didn't pre-specify a statistical threshold that we'd want to hit, but we are looking at hazard ratios across that, and we will get p-values. I won't comment on a specific p-value or hazard ratio at this time. It's premature to do so, but obviously, we are looking against standard of care and demonstrate a significant benefit over that standard of care. It's just important to note that the study wasn't powered for that at 150 participants. We will be looking at that hazard ratio and the p-value as indicative. Depending upon the strength of that result, if it is in fact, as you said, a p-value less than 0.05, and there's a very strong result, we will then make our subsequent decisions about how to proceed forward with development. Obviously, the stronger the benefit in terms of hazard ratio and the lower the p-value, the more we'll want to move very quickly towards advancing that program.

Great. Thank you very much and congrats on all the progress. Appreciate all the detail on sort of the outlook both for the COVID market and as we move forward. Questions back to my favorite topic, the orphan diseases with this proof of concept I assume from the first programs, is there a desire to be expanding the pipeline similar to what you did with vaccines upon proof of concept with COVID? Thank you very much.

Thanks, Ed, for the question. And so I think the short version is absolutely. In any of our modalities, whether they're cancer vaccines or our infectious disease vaccines or now our orphan diseases where we believe we've achieved a technological proof of concept. Where we've achieved what we wanted to in patients, we look to rapidly expand the number of diseases and implications that we can bring forward with that technology. In the case of orphan rare diseases, as we shared, we are extremely encouraged by the data across two different diseases using two different medicines that now suggest we have obviously acceptable safety and tolerability profile, which is of primary importance. But more importantly, for efficacy, we're starting to see really encouraging results in terms of biomarkers or even from the dynamic readout, a potential benefit for patients. Given the strength of those two prior results, we've actually moved quickly to expand our pipeline. We have a number of other programs that are already publicly disclosed and moving forward in clinical trials. Some including MMA are already in clinical studies. As I mentioned at our R&D day, we're looking to substantially expand that pipeline of programs. We announced the OTC program as one instance of that just a month ago, but you can expect that we'll be adding substantially to that. Our goal will be to more than double that pipeline in the years ahead as we expand our investments in rare diseases on the back of that de-risk clinical data.

Hi, good morning. Thanks for the questions. Maybe a question for Stéphane. In RSV, we've had two players read out results; I think one is 80% plus or minus 166%, depending on the endpoints. So I wanted to ask you how you view the bar in terms of being competitive and where there is some differentiation opportunity for RSV vaccine that could read out soon. So talk a little bit about that? And then just as a follow-up to PCV, again just to clarify, Merck had opted in; can you comment on, I guess the idea of the timing just before the data whether they had sufficient information or just talk a little bit about the implications of that opt in just before the data? Thank you.

Good. Thank you for the question, Michael. So first on RSV, obviously, we’re incredibly encouraged by the results that have been seen by other vaccines. Given our platform has previously demonstrated its potential in COVID specifically in respiratory vaccines, we think it bodes well for us in terms of that study. There's a bar that's been established in terms of severe disease as you referenced in the 80% range. We are looking at three-symptom or 'severe disease.' It's hard to compare between the studies. They're not conducted at the exact same time and they don't always have exactly the same definition, as you know. But we would absolutely hope and expect that the type of efficacy we're going to see against severe disease will be on par with, and I would even hope for better than what has been seen by others. It's certainly been the case with our platform technology compared to others in terms of COVID that we've been able to see those sorts of potential benefits. I'll also note that we looked at titers and we previously shared our titers as well as other companies have from their early clinical Phase 1 and Phase 2 results, and we believe that the boosting of anti-neutralizing RSV titers against both RSV-A and RSV-B that we were achieving was on par. You could always argue perhaps better or worse, but on par with what others had seen. So we're quite encouraged by that and I think we're looking forward to the RSV efficacy results over this coming winter. Our bar for this is to be good or better than others have been. In terms of PCV, Merck has opted in as you said, and I know Matthew asked the question as well. So it is an open-label study as we previously disclosed and so we have been following events through that study. Those that have received the cancer vaccine in combination of KEYTRUDA versus those that have not. As we have now passed the one-year mark for follow-up of the last patient to be randomized in that study, we now have at least a year of follow-up and in many cases, two-plus years of follow-up across those two different cohorts. Those that receive combo and those receive standard care KEYTRUDA. That data was known to us and Merck, but it's important to note that's an ongoing un-cleaned and not primary analysis. The correct thing to do at this point is to begin the closing process, get all of the scans, review all of the data associated with the clinical outcomes, make sure nothing was missed, and in that cleaning process then finalize that database and conduct the primary analysis for the study which is to evaluate the hazard ratio and statistical significance of that hazard ratio between the two arms. That's the process we're undergoing right now. And while Merck made their opt-in decision, which was really more calendar and contract-driven based on obviously having access to that open-label information, the really important analysis – the primary analysis, the one on which we will base our decisions of what to do next as will regulators and others is the one that we're trying to conduct right now and is not yet completed, but we do expect that result in this quarter.

Thank you. Steve, maybe just follow your comment on Merck. I just want to confirm that Merck does see in the open label data for the recurrence-free survival rate? And then also wanted to confirm that the control arm, the PD1 model that will be in line with historical data that's in the low-70s that would be the rate? And also how would you share the data for the PCV Phase 2 data? Another question is regarding Slide 19, the global COVID market opportunity. Since we expect significant increase in price in the U.S. what is your expectation for the ex-U.S. price change across major markets since you're giving like $20 to $40 price range?

Gena, thanks for that question. So again, it was not a continuous data set. It was an open-label study, and per our agreement with Merck, they had the right to know what we know about the program at that point in which they had to make their decision about whether to opt-in or not. And so of course what we did is we provided them the access to the data of the study at that point in time, and as you all noted, they elected to opt-in to that program, and we are encouraged by that decision on their part. They obviously do have a tremendous amount of experience and so in terms of the control arm, you have the Keynote-054 study, which is their prior registrational studies, and they have experience of what to expect in a control arm. You can infer whatever you'd like from their decision to just say that they believe it’s worth opting into that program and proceeding to the primary analysis that we're conducting right now. We will be able to compare the control arm, the 50 patients who just received KEYTRUDA as standard of care against the registrational studies that others have, and actually the many years of patient experience that companies like Merck and others have, just to be confident that in fact if we are seeing a difference between and we are seeing a hazard ratio difference, that it's not a difference in terms of that control arm, which will bode well because again patients were randomized in this study. Now in terms of the data we'll share, at this point all we'd expect to share this quarter once we've completed the analysis. The primary analysis on efficacy and the study is just the top line data in terms of PCV, which as I mentioned previously is looking at the hazard ratio and then a characterization statistically of that. In subsequent and appropriate for including meetings and otherwise, we will look to share the older data set over time.

And then I can take the pricing question. Your question was primarily around ex-U.S. pricing and our expectations. A couple of factors are coming into play here. The first is the timing of where and how quickly ex-U.S. markets are going to be shifting from more of a central procurement pandemic setting to an endemic setting. So we are looking at how different regions and countries are going to be shifting back towards a more endemic or a commercial approach. When we get to that position, we will be again pricing the vaccine according to the value that it provides in different healthcare systems around the world. We will continue to follow established systems around cost-effectiveness guidelines based on the country regulations and the public health authority guidance. The overall global average price we do anticipate will be largely driven by the regional mix. It is hard to predict what that price will end up being, but we'll continue to share more as we see evolving demand as well as evolving pricing.

Hi guys, thanks for taking the questions. So is it fair to say that the 2023 signed APAs of the $4.5 billion to $5.5 billion is the floor? And what minimum revenue do you think could be added from the geographies that you're expecting contracts from? And related to this then to what extent does it include sales in the key markets that were mentioned in the press release, like for example, does it include the option from the latest U.S. agreement?

Thank you for the question. So the $4.5 billion to $5.5 billion is the floor sales that we anticipate in 2023 as we already have signed APAs as well as deferrals from 2022 into 2023. This number does not include options from the U.S. government and we do anticipate additional sales coming from key markets such as the U.S., EU, Japan, Australia as well as regional sales in Latin America, Asia-Pacific, the Middle East, and COVAX. Again to answer your question specifically, this is what we anticipate to be the floor, but still unknown in terms of the total opportunity as we evolve particularly in the U.S. market into a commercial setting.

Hey guys, good morning. Thanks for taking my question. Are the short-term supply constraints mentioned as a reason for delivery delays resolved at this point? How does bivalent booster uptake so far this fall compare to your expectations? And as it relates to China's potential orders of Western mRNA vaccines, what's your level of optimism that that could come to fruition within some reasonable timeline, say the next year or so? Thank you.

Sure. So it’s Stéphane. I'm going to take the first question on supply and then I'll turn to Arpa for the commercial pieces. As I shared in my remarks, we actually had to deal with a very complex third quarter from a manufacturing standpoint, not launching one product, but two, during this time as you are aware. The FDA informed us at the end of June that they wanted these products for the U.S. and that product was available in pharmacy labels that weekend. The shift from 10-dose vials to 5-dose vials basically doubled the number of vials needed for the same number of doses. We've faced quite a number of pain points with fill-finish manufacturers. We are working through a lot of those issues. Many are solved, but many are still being addressed as we speak. There are numerous lessons to be learned and we are working on putting robust fixes in place for the end of the year, so that we are in a much better place for the fall of 2023. Arpa?

Sure. The first question around vaccine uptake, we are seeing some variability around the world in terms of vaccination rates with the best data thus far really coming from the U.S. market. As we look at 2022 vaccination uptake versus 2021 specifically for COVID boosters, we're actually tracking a similar pattern. It’s a little early to see what November, December, and the rest of the fall and winter season will look like, but the early rates in absolute terms are fairly low. They are tracking the trends we expected compared to last year. Around the world, we are seeing some markets with very high uptake of vaccination rates, driven by public health authorities, while in other markets, we are still observing the dynamics that have played out this year with populations that have recently gotten their fourth booster in the summertime and regulatory bodies recommending that they wait a few months before they get their fifth booster. So I think there's more to come as we continue to track around the world, but the early signs of uptake are encouraging. Your last question on China, we continue to look at the opportunities in China. Nothing new to report here as of now, but it is certainly a key market of interest for us commercially.

Good morning, guys. Yes, thanks for the question. Just had a couple. Just one to follow up on your last comment. You mentioned booster adoption has been mixed depending on geographies. Is this something that Moderna expects to further invest in with regard to value of boosters, additional follow-ups, and studies? That's the first question. The second one, maybe more for Stéphane, the balance sheet remains pretty strong. You guys have done some buybacks, but we haven't seen sort of a cluster of acquisitions or any sort of real capital allocation yet. Where would M&A sort of fall in your priority list with uses of cash? Does that change as COVID continues to wind down with regards to the revenue base in 2023 versus 2022 and maybe even more modest going forward? Thank you.

So to the first question on if we are investing in vaccination rates, as I shared earlier today, the medical need continues to be clear for COVID booster vaccination, especially as we compare it to hospitalizations and deaths compared to flu. We believe partnering with governments and public health agencies to share the data we have in terms of the ongoing medical need at a country level, as well as the value of COVID booster vaccination in their populations, is crucial. This partnership with public health authorities is really driving increased urgency and action around vaccinations, and this is our approach since we believe public health authorities are in the best position to encourage vaccination for their populations.

Thanks, Arpa. And on the balance sheet side, our biggest strategy, as Jamey noted in his remarks, has not changed. We are looking and have signed deals in terms of technology licenses and also looking at M&A. As we've said before, we stay focused on nucleic acids. We don't believe it's a good strategic use of our capital to buy small molecule assets or large molecules or cell therapy; we want to stay focused on nucleic acids. The business development team is very active, as Jamey knows, and this team knows they are doing a lot of work. We will remain disciplined in terms of understanding the risk either on the technology side or on the biology side, understanding value. We're here to create value, not just manage press releases. The team is very active, and we are looking at due diligence on a regular basis. But not everything that we look at results in something we believe we can create a lot of value with, but we will continue to look and I would not be surprised if we add partnerships in the months to come.

Hey guys, thanks so much for taking the question. Just another one on RSV. In terms of thinking about mRNA as a vaccine modality in the context of RSV, how are you thinking about the potential for mRNA and potential advantages relative to other more traditional vaccine modalities in the context of RSV? What could we learn from some of the upcoming readouts, both for the opportunity in RSV and also what it could tell us about mRNA potential and vaccines relative to other modalities more broadly? Thanks.

Great. Thank you for the question. First, we have previously demonstrated with our platform in COVID and in fact in some recent publications, we generally see a really broad-based and balanced immune response. We tend to see very high T-cell and cell-mediated immunity. I would argue some of the highest, if not the highest, antibody neutralizing titers. Both of those are really important as you start talking about older adults and respiratory infections, which is probably why we tended to see higher efficacy with the mRNA platform than other approaches in that high-risk population, including in COVID, over the last couple of years. It’s that combination that we think defines our advantage from a platform perspective and why we're so excited about developing a portfolio of respiratory vaccines against all the leading killers in that space for older adults. RSV just fits right into that. As we all know, there is a huge unmet need in that space. We are very pleased to have fully enrolled that Phase 3 study. We were actually quite pleased with the titers and cell-mediated immunity that we saw in early development, some of which we've presented publicly. We are looking forward to that efficacy readout. In terms of other approaches, let’s also just celebrate that recombinant protein, viral vector and adjuvanted approaches have all shown really exciting progress in the last year, year and a half across a range of companies. RSV is a huge unmet need. It will take many different approaches to have an impact there. The success of others gives us optimism that our approach will also be successful, but there will likely be many different solutions for older populations. We believe our platform has an advantage, but given the success of other vaccines and quite encouraging efficacy results, it’s important to note that there are many good successful options out there, and it may not always be possible to differentiate between them, but we hope to be in that first class.

Hi, good morning. Thanks for taking our questions. Just clarification on the deferrals from the 2022 contracts, that $2 billion to $3 billion, are those locked in signed APAs and they are just being deferred to 2023, or is there any optionality built into that? And then the second question is just broader based pipeline. You are expanding the pipeline to 48 programs, 35 clinical trials. But what I was curious about is if you could comment on the relative mix of the pipeline: respiratory vaccines, immuno-oncology, rare disease, where it stands now and how you see that evolving in that relative mix of the pipeline programs over time.

So maybe I'll take the first one quickly. Yes, those are locked in advanced purchase agreements for 2023, and so they are just shifting to the right from 2022.

Great. And on the broader question of the pipeline, as you mentioned, we've got 48 programs now and multiple Phase 3s ongoing with some we hope to have quite imminent readouts. As you look at it now, most of our late-stage pipeline is respiratory vaccines for sure. We have four programs there, and we expect the flu and RSV data to come up quickly. We will then move rapidly in respiratory into combination vaccines. We have three adult combination vaccines in clinical studies and two pediatric respiratory combination vaccines that are moving forward and you should expect to expand into these very quickly. We hope to start registrational studies over the coming period which will allow us to build out what we believe will be the best respiratory portfolio both from a monovalent vaccine perspective but most importantly from combinations against the viruses that matter in the different populations we want to protect, particularly older adults and the very young. So respiratory will be a growth area for us for the near term. We will start to see some diversification. Again, talking about late-stage, we already have a CMV Phase 3 program, which has been up and running and enrolling. You should expect us in our latent virus vaccines to add additional late-stage programs. We are quite passionate about Epstein–Barr virus, as you all know. We expect to move that in. You will start to see some first diversification in terms of our latent virus portfolio, some that's already happened with CMV. The couple of things that will come quickly as well are we hope for the readout from our personalized cancer vaccine program. It has a therapeutic profile since we are preventing cancer from recurring, we are intervening in someone who has that cancer already. This therapeutic readout that we expect to have over the next month or so this quarter will trigger, if successful, moving into pivotal stage studies. Immuno-oncology remains a competitive space where there's still substantial need to improve upon the current IO therapy, and there are many different histologies and types of cancer that will make sense to develop a program if we show a benefit. That expansion could happen quickly and represents a large diversification into oncology and the therapeutic context outside of the vaccine space. The last one is rare diseases, which we've discussed. We have a couple of programs already showing very encouraging results, both from pharmacology and potential clinical readouts. As soon as we finalize doses for instance, the propionic acidemia program, and establish alignment with regulators on the path forward, you should expect us to move into pivotal studies there as well. As I said in answer to your prior question, that won't be a one-off for us; once we really believe we've got a modality, we'll be bringing many programs forward in succession in parallel. So as you look forward on how we think about diversifying the pipeline, it’s a question of time horizon. For now, it's a lot of respiratory and latent, but quickly we expect to expand into therapeutics, particularly cancer and rare metabolic disease. That could happen in quite short order based on upcoming clinical readouts.

Hi, good morning. I have a question about volume expectations. You mentioned excluding 2023 from your volume production due to variability. I'm curious about the COVID volumes for 2023. How much do you expect to come from the APAs? As you transition to the northern endemic model for local vaccines, do you anticipate continuing the APAs in the future? Thank you.

Sure. Thank you for that question. As I outlined in terms of the volume expectations for next year outside of the signed APAs, we are looking at a number of variables that could impact the total volume. In the long term, we do believe we should approach 500 to 600 million volume comparable to the flu volumes that exist today. In 2023, there will be a range depending on viral evolution, ongoing medical need across different regions, and public health authorities' recommendations, as well as broader consumer appetite to vaccinate. The reason for the sensitivity on the volume that I shared earlier is that we still have a number of variables as we continue to transition into an endemic stage. Our short-term outlook does not provide a clear picture, but we do believe from a medical perspective, over time, we should be approaching the same volumes as the flu market.

Well, thank you everybody for joining the call today and for your thoughtful questions. We look forward to speaking with many of you in the days to come. We hope many of you can join us next week for our first ESG Day. Have a great day. Bye.