MODERNA Earningcall Transcript Of Q2 of 2024

Mock, our chief financial officer; and Stephen Hoge, our president.

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.

Stphane Bancel -- Chief Executive Officer

Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us today. I will

start with a review of our business.

Jamey  will  present  our  financial  results  for  the  quarter  and  thank  you  for  our  based  financial

framework. There will then review our clinical progress. I will then close by sharing our commercial

progress  and  our  outlook  for  major  upcoming  milestones.  In  the  second  quarter  of  2024,  our

respiratory franchise has shown remarkable progress and is poised to positively impact millions of

lives globally each year.

This is why we started Moderna to impact patients, and that is why the Moderna team is so focused

on  execution  because  of  that  profound  impact  on  so  many  lives.  mRNA-1273  vaccine,  Spikevax,

continues  to  play  a  critical  role  in  combating  COVID.  Based  on  CDC  data  provision  just  ending

October  '23  to  June  '24,  COVID  continues  to  result  in  higher  hospitalization  than  other  respiratory

viruses. We are pleased that the RSV vaccine whose brand name is mRESVIA as more of second

respiratory product has launched in the U.S.

and has now shipped to U.S. customers. It is poised to impact public health in the U.S. this year and

soon in many other countries for many years to come.

Our  flu  vaccine  candidates,  mRNA-1010,  has  demonstrated  positive  Phase  III  results,  meeting  all

immunogenicity  endpoints  in  adults,  18  and  older.  Our  Flu  plus  COVID  combo  vaccine  candidate

mRNA-1083  has  also  shown  positive  results  in  Phase  III,  underscoring  our  ability  to  innovate  and

tackle  multiple  respiratory  illnesses  effectively.  These  achievements  highlight  the  strength  of  our

mRNA  platform  and  our  commitment  to  public  health.  We  are  now  five  out  of  five  vaccines  with

positive Phase III data, COVID, RSV, flu, next-gen COVID, mRNA-1283, and our two post COVID

combo.

We are very excited about these achievements and are very thankful for our teams. We believe our

technology has a potential to significantly reduce the product of these respiratory innate globally and

saved millions of hospitalizations around the world and thus impacting millions of families. Moving to

business highlights for Q2. We manufactured the '24/'25 season COVID vaccine targeting both the

KP2 and JN.1 strength of a virus.

We are ready to meet the demand of a '24/'25 respiratory season. In addition to our approval in the

U.S.,  we  are  pleased  that  mRESVIA  received  a  positive  opinion  from  Europe  regulatory  agency

EMA with CHMP. We are waiting for regulatory approvals in additional countries around the world.

For pandemic flu, we recently announced a partnership in the U.S.

with  BARDA  to  address  five  influenza  virus  and  future  public  health  spreads.  The  agreement

awarded Moderna, $176 million in funding to accelerate the development of mRNA-based pandemic

through vaccines. Lastly, our Japanese partnership with Mitsubishi Tanabe Pharma Corporation is

an  important  collaboration.  With  this  joint  agreement,  we  will  co-promote  Moderna  respiratory

vaccines in Japan, expanding our reach and impact in the Japanese market.

In Q2, our revenues were up $241 million, which continue to reflect the highly seasonal nature of our

respiratory vaccine business. The net loss was $1.3 billion. We ended the quarter with $10.8 billion,

mainly  the  strong  cash  and  investment  position.  This  robust  financial  foundation  allows  us  to

continue investing in our key programs and initiatives.

Additionally,  we  continue  to  make  considerable  progress  in  reducing  our  operating  expenses.

Compared to Q2 2023, we have decreased our operating expenses by more than $600 million in Q2

2024.  This  reduction  highlights  our  commitment  to  operational  efficiency  and  financial  discipline.

Before I hand over to Jamey, I want to touch on an announcement we made last week.

We are very pleased and proud to welcome David Rubenstein, the co-founder and co-chairman of

the Carlyle Group to Moderna board starting next week. David has decades of experience investing

and growing businesses across a number of industries. He is also one of the most respected voices

globally on matters related to international affairs and public policy. We are very excited to have join

us to help us build Moderna to reach to the next level.

With David joining the board, Stephen Berenson is stepping down from the board and I would like to

personally  thank  him  for  his  many  contributions  during  his  tenure,  including  to  academic.  We  also

announced that Bob Langer has informed the board of the intention to retire from the board. As one

of our co-founder, Bob has made incredible contributions to Moderna and will not be the company

we are today without his vision and insights. I am personally very grateful to Bob or coaching and

mentoring,  especially  during  the  early  years  of  Moderna,  where  as  experience  was  so  valuable  to

me.

With that, let me turn to Jamey.

Jamey Mock -- Chief Financial Officer

Thanks, Stephane, and hello, everyone. Today, I will walk you through our financial performance for

the second quarter and also update you on our financial outlook for the remainder of 2024. Let me

start with our commercial performance on Slide 9. Net product sales for Q2 were $184 million, down

37%  year  over  year,  mainly  driven  by  lower  sales  volumes  of  our  COVID-19  vaccine  in  regions

outside of the United States compared to the second quarter of 2023 when we fulfilled orders from

prior year contracts.

Q2  sales  were  above  our  guidance  of  approximately  $100  million,  primarily  due 

to

stronger-than-expected  sales  in  the  United  States.  We  recognized  sales  from  a  number  of  other

countries, including a small portion of the Brazil contract we announced last quarter. Year-to-date,

sales  were  $351  million,  down  83%  year  over  year.  largely  driven  by  the  same  Q2  year-over-year

trends I just mentioned a moment ago.

Moving to Slide 10. As I just explained, that product sales were $184 million, in Q2, we recognized

$35  million  of  licensing  revenue,  which  is  included  in  the  other  revenue  line  of  $57  million.  This

revenue  comes  from  a  nonexclusive  intellectual  property  out-licensing  agreement  with  a  leading

pharmaceutical company in Japan announced in our Q1 earnings call. The deal includes an upfront

payment and low double-digit royalties on net sales of their COVID-19 product in Japan.

For  the  second  quarter  of  2024,  our  cost  of  sales  was  $115  million,  which  included  $10  million  of

third-party  royalties,  $55  million  related  to  unutilized  manufacturing  capacity  and  wind-down  costs

and  $14  million  of  inventory  write-offs.  This  resulted  in  our  cost  of  sales  representing  62%  of  net

product sales. As a result of our initiative to resize our manufacturing cost structure, Cost of sales

was down 84% from Q2 last year when cost of sales was 249%. R&D expenses were $1.2 billion in

Q2, reflecting a slight increase of $73 million or 6% year over year.

We  purchased  a  priority  review  voucher  during  the  second  quarter,  which  is  included  in  our  Q2

results.  With  first  half  R&D  spending  at  $2.3  billion,  we  are  tracking  toward  the  full  year  expected

spend  of  approximately  $4.5  billion.  SG&A  expenses  for  Q2  were  $268  million,  reflecting  a  19%

decrease year over year. This reduction is a result of our continued strong focus on cost discipline

and  strategic  investments  driving  productivity  on  which  I  will  provide  additional  detail  in  the

upcoming slides.

We reported zero income tax expense for the second quarter of 2024 compared to an income tax

benefit  of  $369  million  in  the  same  period  last  year.  The  shift  is  primarily  due  to  the  continued

application  of  a  valuation  allowance  on  the  majority  of  our  deferred  tax  assets,  which  we  first

established in the third quarter of 2023. Our net loss for the period was $1.3 billion, an improvement

from the net loss of $1.4 billion recorded last year. Loss per share was $3.33 compared to a loss of

$3.62 in the second quarter of 2023.

We ended Q2 with cash and investments totaling $10.8 billion down from $12.2 billion at the end of

Q1, primarily due to ongoing research and development expenses and operating activities. Moving

to Slide 11 and similar to Q1, I want to provide additional detail on the cost reductions we are driving

across the company. You can see in our Q2 results that we had a 19% year-over-year reduction in

SG&A  spend  due  to  efficiency  gains.  One  of  the  main  drivers  for  the  year-over-year  reduction  in

SG&A is from our commercial and medical affairs group.

Over  the  past  year,  we  have  built  our  internal  capabilities,  which  has  allowed  us  to  drive  cost

efficiencies  by  reducing  our  use  of  external  consultants  and  other  purchase  services.  We've  also

been more focused and targeted on how we invest in this area to drive the strongest possible return

on investment. And as the endemic market has been more seasonal, we have shifted more of our

commercial  spend  into  the  second  half  of  the  year.  Additionally,  our  procurement  team  has

successfully driven companywide cost reductions in the first half of 2024.

Their  primary  focus  has  been  on  reducing  third-party  supplier  rates  and  we  have  seen  strong

progress in contract rates for raw materials, components, clinical, travel and consulting services. We

continue  to  see  strong  adoption  in  artificial  intelligence  by  our  employees.  which  will  allow  us  to

scale  the  business  in  an  efficient  manner  with  a  digital-first  mindset.  For  example,  in  the  second

quarter, our HR team launched benefits and equity GPs.

These AI-driven assistants are designed to handle frequently asked questions previously directed to

the  HR  operations  team  and  allow  us  to  scale  efficiently.  Overall,  we  have  built  a  solid  foundation

and made purposeful investments in people, processes and technology. We highlighted some of the

significant  drivers  of  the  2Q  SG&A  savings  but  we  are  also  seeing  additional  efficiency  savings  in

R&D and manufacturing. I'm very pleased with the cost savings results in the first half of the year

and want to thank our Moderna teams.

Now,  let's  turn  to  our  2024  financial  framework  on  Slide  12.  We  are  revising  our  expectations  for

2024 net product sales to a range of $3.0 billion to $3.5 billion. There are three primary drivers for

the  updated  outlook.  First,  we  are  now  expecting  very  low  sales  in  2024  from  EU  member  states

based on recent feedback and discussions with country health officials.

Second,  in  the  U.S.,  we  are  seeing  increased  competitive  pressures  for  our  respiratory  vaccines.

While  this  has  led  to  a  slower  RSD  ramp  than  previously  anticipated,  we  continue  to  believe  in

RESI's long-term potential. Third, in the rest of the world, we have provided for the potential risk of

revenue deferrals from 2024 into 2025. We remain committed in our attempt to mitigate these risks,

but believe it's appropriate to adjust our guidance at this time.

Finally, this revenue framework assumes a U.S. COVID vaccination rate similar to last season. Our

second half sales mix will be dependent on timing of regulatory approvals across the world and the

number of days available in the third quarter to ship. We currently expect a remaining sales split of

40% to 50% in Q3 with the balance in Q4.

We expect cost of sales as a percentage of product sales for the full year to be in the range of 40%

to 50% based upon our updated sales range. For R&D, we continue to expect full year expenses to

be approximately $4.5 billion, down from $4.8 billion in 2023. For SG&A, we continue to expect full

year expenses to be approximately $1.3 billion, down from $1.5 billion in 2023. Note that we expect

SG&A  to  be  higher  in  the  second  half  versus  the  first  half,  primarily  due  to  increased  commercial

activity, but still expect the second half to be down on a year-over-year basis.

We continue to expect taxes to be negligible in 2024 and capital expenditures to be approximately

$0.9  billion.  Finally,  we  continue  to  expect  that  we  will  end  2024  with  approximately  $9  billion  in

cash.  We  have  made  strong  progress  in  improving  our  working  capital  management,  which  is

offsetting  the  change  in  our  product  sales  outlook.  With  that,  I  will  now  hand  the  call  over  to

Stephen.

Stephen Hoge -- President

Thank  you,  Jamey.  Today,  I'll  review  updates  from  our  clinical  programs  in  three  of  the  four

development areas in our portfolio. In the second quarter, we had important updates in respiratory

vaccines, oncology and rare diseases. Starting with respiratory vaccines.

We are very pleased by the approval and ACIP recommendation for our RSV vaccine, mRESVIA. In

the U.S. for all unvaccinated adult 75 years and older and in unvaccinated adults 60 to 74 years of

age  for  an  increased  risk  from  RSV.  This  recommendation  was  the  same  as  for  the  other  two

previously approved RSV vaccines.

We  also  recently  received  a  positive  CHMP  opinion  from  the  European  Medicines  Agency  for

mRESVIA.  And  as  Stephane  mentioned  earlier,  we  are  working  toward  approvals  in  additional

countries. Turning to flu, we are in discussions with multiple regulatory authorities and intend to file

in 2024. We -- for our next-generation COVID vaccine, mRNA-1283, we announced positive Phase

III efficacy results demonstrating non-inferior efficacy against COVID-19 compared to Spikevax in all

trial participants full years of age and older.

FSC  was  higher  than  Spikevax  in  adults  18  years  and  older.  We  are  excited  by  the  data  and  are

sharing  the  results  with  regulators  and  intend  to  file  for  approval  beginning  in  2024.  Rounding  out

the news and respiratory vaccines development. In the quarter, we shared positive results from our

Phase III trial with our combination flu and COVID vaccine.

The  trial  met  its  primary  immunogenicity  endpoints  with  the  combination  vaccine  eliciting  higher

immune responses against flu and Sars-CoV-2 than the licensed flu and licensed co-vaccine, given

separately in adults 50 years of age and older in the trial. In the subset of participants 65 years of

age and older, our combination of vaccine also elicit higher immune responses than an enhanced flu

vaccine that is recommended in the 65 and older age group in many countries, including the United

States. These results are exciting, and we have begun sharing them with regulators and planning for

the next steps. Turning now to oncology.

In the quarter, we shared an update on our MRNA-4157 program, also known as INT, which elicits

antitumor T cell responses by targeting a patient's unique tumor mutations or neoantigens. IMT is in

multiple  large  randomized  trials,  including  two  Phase  III  trials,  one  in  adjuvant  melanoma  and  the

other adjuvant non-small cell lung cancer one Phase II/III trial in adjuvant cutaneous squamous cell

carcinoma  and  two  randomized  Phase  II  studies,  one  in  adjuvant  kidney  cancer  and  the  other  in

bladder  cancer.  We  and  our  partner,  Merck,  expect  to  start  additional  studies  in  new  tumor  types.

The  development  program  has  launched  on  the  back  --  was  launched  on  the  back  of  impressive

randomized Phase II trial results in adjuvant melanoma.

We recently shared the three-year follow-up data from that trial at ASCO this past June. And on the

next  few  slides,  I  will  quickly  summarize  the  highlights  from  that  presentation.  The  primary  clinical

endpoint for the Phase II adjuvant melanoma study is recurrence-free survival or RFS. As presented

at  ASCO,  there  is  a  sustained  improvement  in  RFS  with  the  combination  of  INT  plus  KEYTRUDA

versus KEYTRUDA alone through three years of follow-up.

74.8%  of  patients  receiving  the  combination  treatment  of  IT  plus  KEYTRUDA  world  live  and

tumor-free at three years, which was 19 percentage points higher than KEYTRUDA. and resulted in

an  impressive  hazard  ratio  of  plus  0.51.  The  combination  of  INT  plus  KEYTRUDA  also  showed

sustained  improvement  in  distant  metastasis-free  survival  at  three  years.  89.3%  of  patients  in

combination  INT  plus  KEYTRUDA  treatment  group  were  alive  and  without  metastases  or  distance

spread  of  their  tumor  at  three  years  of  follow-up  versus  68.7%  of  patients  in  the  KEYTRUDA

monotherapy group.

This is an equally impressive and remarkable hazard ratio of 0.38. We were lastly pleased to share

data showing that an early favorable trend in overall survival at three years of follow-up. Now, finally,

on the safety side, IMT continues to demonstrate a remarkable profile for our novel cancer therapy.

Immune-related adverse events were not tire in the combination IMTs KEYTRUDA ARM despite the

benefits than in the KEYTRUDA monotherapy arm.

This highlights the impressive emerging benefit risk profile for our I&T program. Moving now to rare

diseases. I'm happy to share that our MMA candidate mRNA-3705 was selected for the FDA STAR

program. M&A is a rare disease in which patients cannot properly break down proteins from the food

and digest.

As  a  result,  toxins  build  up  in  the  bloodstream  and  cause  recurrent  episodes  of  life-threatening

metabolic  decompensation.  The  FDA  STAR  program  is  a  program  designed  to  accelerate

development of new and promising therapies in rare diseases, where there is a high unmet need.

Our  MMA  candidate,  mRNA-3705  is  being  evaluated  in  patients  in  a  Phase  I/II  study  with

encouraging  early  results  that  we've  previously  shared.  And  we  look  forward  to  working  with  the

FDA to accelerate the development of this promising potential medicine.

With that, I'll now turn it back to Stephane.

Stphane Bancel -- Chief Executive Officer

Thank you, Stephen and Jamey. Let's start with COVID. With the start of the COVID season only a

few weeks away, contracting for the season is almost completed as we speak. In the U.S., we have

seen increased competitive pressure during the contracting season compared to last year, and we

have not finalized most of the contracts.

We  are  working  closely  with  public  officials,  healthcare  providers,  pharmacies  to  drag  vaccination

rates.  Our  collaborative  efforts  with  these  stakeholders  are  critical  in  driving  what  spread  taxation

adoption.  In  the  EU,  we're  in  advanced  discussions  on  the  tender  framework  to  provide  market

access. However, based on recent feedback from several large governments, we are now expecting

variable sales to EU and member states in 2024.

Some large countries will not buy back for '24, 25 season. In the rest of the world, we have multiple

signed contracts in place, some of which could be deferred into 2025. Contracting discussions are

ongoing with some additional countries, but we do not expect this to have a significant impact on an

updated sales framework. Moving now to the launch preparation for the '24/'25 season.

Our organization is fully prepared for the upcoming season, thanks to a substantial effort made by

the  Moderna  teams  to  ensure  the  global  availability  of  COVID  vaccine.  In  North  America,  we  are

ready  to  supply  start  back  targeting  Capital  strength  as  of  by  the  year  demonstrating  our  ability  to

quickly develop and manufacture buybacks for selected strengths. In the rest of the world, we are

supplying  vaccine  targeting  the  JN.1  strength  as  requested  by  hepatitis  in  those  regions.  Let  me

now take you through details on the U.S.

COVID market. We'll be ready to supply millions of doses to all segments of the U.S. market upon

regulatory  approval.  Our  goal  is  to  ensure  that  Spikevax  is  available  to  all  customers,  larger

pharmacies, independent pharmacies, healthcare professionals, and hospital network, public health

entities at the same time, facilitating early and was spread vaccination.

Securing  the  water  system  to  be  ready  to  vaccinate  is  a  key  priority  for  us  this  season.  We  have

implemented a real-time order tracking system which is available to all of our customers and provide

detailed information on every order, including real timing, package size and temperature status. Our

supply chain are using AI tools to help estimate the optimal order of distribution to locations within

the U.S. market.

These  preparations  highlight  our  commitment  to  ensuring  the  broad  availability  of  buybacks  and

meeting  market  demand.  Let  me  now  turn  to  our  marketing  efforts.  We  believe  education  and

awareness campaigns will be important drivers to increase vaccination rates. We have started these

efforts early.

For end of the season, we have launched a back-to-basics campaign. This initiative is designed to

raise awareness about how the SARS-CoV-2 virus works and why it is critical to get a new roster

each year like for flu. The various tests over time, and we need to have a new tool to vital immune

system,  the  new  mutations  to  reduce  infection,  reduce  utilization  and  reduce  deaths.  Additionally,

we  are  working  with  public  care  authorities  to  educate  the  public  on  the  impact  of  long  COVID,

highlighting how vaccine can help reduce risk for young and middle-aged adults.

Soon,  we  will  start  our  in-season  outage  to  Harris  groups.  By  collaborating  with  major  retail

pharmacies,  we  aim  to  effectively  market  our  products  during  the  season.  This  targeted  approach

ensures that our efforts are focused, and those who are the most venerable maximizing the benefits

of vaccination for those groups. By leveraging major channels, we aim to reach a broader audience

and emphasize the critical need for vaccination to mitigate severe outcomes.

Let  me  now  turn  to  our  RSV  launch.  We  are  very  excited  about  the  launch  of  our  second  product

mRESVIA.  Following  the  approval,  the  ACIP  vaccine  recommendation  on  par  with  competitor

vaccines. Specifically, ACIP recommended a single dose of RSV vaccine for all unvaccinated adults,

age 75 and the board.

ACIP recommended a single dose for unpainted adults between the age of 60 and 74, we are at an

increased  risk.  Based  on  this  recommendation,  approximately  40  million  people  in  the  U.S.  are

eligible  for  vaccination.  The  RSV  market  size  beyond  the  '24-'25  season  will  depend  on  the

revaccination recommendation, which are anticipated to be discussed by ECP in future meetings.

In  RSV,  our  focus  into  direct  our  efforts  to  the  segments  we  have  the  vast  majority  of  our  initial

occur. In the U.S., we are targeting the pharmacy segment, which includes both large retail chains,

as  well  as  independent  pharmacies.  Together,  total  pharmacy  segment  accounted  last  year  for

around 95% of our vaccine administrator. We began shipping products in pharmacy in July.

And  as  Jamey  mentioned  earlier,  we  are  seeing  a  highly  competitive  environment.  Additionally,

larger competitor contracts were negotiated prior to our approval and launch, resulting in lower 2024

share  than  we  would  have  liked.  Long  term,  we  continue  to  believe  our  PFS  presentation  will

resonate  with  well  with  customers,  offering  them  the  ability  to  use  the  time,  much  more  efficiently

during the busy fall back nation season and to reduce potential medical errors. We look forward to

some major upcoming milestones in the near term.

In respiratory vaccine, we expect a covert approval, and we'll be ready to ship in the U.S. and rest of

the  world  in  the  August,  September  time  frame.  In  RSV,  we  expect  to  release  Phase  III  data  for

high-risk  individuals,  18  years  of  age  and  above.  We  are  in  discussion  with  regulators  on  our  two

program and intent to file in 024.

We also expect to present immunogenicity data in other adults for flu vaccine versus Fluzone HD.

For next-gen COVID vaccine, mRNA-1283, we're engaging with regulators and intent to file in 2024.

And with the combination of flu COVID vaccine, mRNA-1283, we're engaging regulators and also be

able to give an update soon. In latent vaccine with CMV fully enrolled and accruing cases, we look

forward to potentially Phase III vaccine efficacy readout in 2024.

And  as  Stephen  just  talked  about,  we  are  very  excited  about  our  INT  program.  We  are  looking

forward to the completion of the element of a Phase III in adjuvant melanoma, which is, of course, a

major milestone. We are keen to discuss regulators the possibility of accelerated approval based on

the Phase II study data. As we shared before, there are three things with you as necessary before

we could consider pursuing access of approval for INT.

Thus,  durability  of  data,  which  we  believe  that,  as  Stephen  presented,  we  are  there.  Second,  a

substantially enrolled Phase III adjuvant melanoma study; and third, manufacturing readiness at our

Marlboro site. Lastly, our reads portfolio, we look forward to initiating pivotal study for PNM. We're

eager  to  achieve  these  milestones  and  to  continue  to  progress  toward  our  mission  to  deliver  the

greatest possible impact to people for mRNA medicine.

We  expect  these  new  some  events,  combined  with  further  advancement  in  our  pipeline  with

confirmed power of our platform and its potential to serve patients for years to go. An important favor

date for your calendar, our annual R&D Day will be held the morning of September 12 in New York

City. Of course, webcast will also be available. Thank you for listening to the call.

And we would like now with the team to take your questions. Operator?

Operator

Questions & Answers: