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spk11: Good morning. My name is Kevin, and welcome to Moderna's first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded. At this time, I'd like to turn the call over to Labina Talukdar, Head of Innovations at Moderna. Please proceed.
spk04: Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's first quarter 2022 financial results and business updates. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the Investor section of our website. On today's call are Stephon Boncel, our Chief Executive Officer, David Moline, our Chief Financial Officer, Stephen Hogue, our President, and Paul Burton, our Chief Medical Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please see slide 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. I will now turn the call over to Stephane.
spk07: Thank you, Lavinia. Good morning or good afternoon, everyone. Welcome to our Q1 2021-82 conference call. Today, I will start by a quick business review of a quarter before Paul walks you through an update on SPACBAC's real-world evidence, and then Stephen reviews our clinical programs. David will then present the key financials, and I will then come back to conclude before we take your questions. I am happy to share that the team delivered strong financial results this quarter, and revenues of $6.1 billion, GAAP net income of $3.7 billion, and GAAP diluted EPS of $8.58. We ended Q1 with a cash balance of $19.3 billion. For our share buyback program, we continue to retire shares in Q1 like we already did in Q4. David will share some numbers on share count in a few minutes. For 2022, we are reiterating $21 billion in signed advanced purchase agreements. We have previously shared market share increases seen in the OECD countries with Spivax, when supply was no longer limited, and when real-world publications highlighted differentiating data amongst the marketed vaccine. I'm happy to share that our market share has increased or stayed consistent across OECD countries. While a subset of our team is focused on delivering on the 21 billion signed APAs for the fiscal year 2022, another subset of our team is focused on preparing the next wave of product launches. We have a flu vaccine candidate, MRD-1010, planned to start a phase 3 study in Q2 in the southern hemisphere. Moderna will have very soon four vaccine candidates in phase 3. An Omicron-containing virulent COVID booster, a flu booster, an RSV booster, and a CMV-impromptu-series vaccine. Starting with our Omicron-containing viral COVID booster, mRNA-1273.214, we could see up to three respiratory vaccine launches from the fall of 2022 over the next two to three years. We believe each of these four vaccine candidates in Phase 3 could have multi-billion-dollar annual peak sales. And because they all use the exact same mRNA technology as our approved vaccine SPAC-VAX, we believe these four vaccine candidates in late-stage clinical trials have a high probability of success. In addition to our four late-stage vaccines, we continue to expand the applications of mRNA technology beyond vaccines. We should have important proof-of-concept data in patients in two of our therapeutic modalities later this year. Propionic acidemia, and methylmalonic acidemia in our rare genetic disease portfolio, and the personalized cancer vaccine. Slide 7 shows the continued growth of Moderna. We now have 46 development programs in the pipeline. The organization has continued to grow to 3,200 team members. With that, let me hand it over to Paul to review real-world evidence studies of our COVID booster. Paul?
spk12: Thank you, Stéphane, and hello, everyone. While there continues to be many studies posted and published on our mRNA vaccine, I would like to highlight some data today on vaccine boosting. But first, it's important to understand why booster vaccines are so critical as we transition through the COVID-19 pandemic and the understanding that we need to have about the evolution of the SARS-CoV-2 virus. On slide nine, we can see the change in COVID-19 cases over time, with the massive rise we observed due to Omicron in the last weeks of 2021 and the early part of 2022. The Omicron wave was caused by BA.1, and while that was certainly the dominant version of SARS-CoV-2 at that time, remarkably, BA.1 is now almost extinct here in the United States and around the world, having been replaced by new subvariants. This continues to demonstrate the remarkable evolutionary capacity of this virus. BA.2 is now the dominant strain in the United States, with another subvariant of that, BA.2.12.1, increasing rapidly, showing enhanced transmissibility. While BA.2 is dominant today, that increased transmissibility and infectivity of BA.2.12.1 is likely going to ensure it will be the dominant circulating strain very soon, as we are seeing in New York and in the northeast of the United States. Other new subvariants, BA.4, BA.5, seen in South Africa have also been detected in the United States. and we will need to carefully monitor their growth trajectories and pathogenicity. The slowing of booster uptake now means there will be individuals who are under-vaccinated and under-protected as we move into late spring and summer when we thought we would have declining case counts, a balance which could now be impacted by BA.2.12.1, BA.4, or BA.5. The speed and breadth of evolution of this virus that we see so clearly again today underpins our prediction for the global need for a variant-adapted booster campaign this coming fall. The good news is that a booster vaccine protects against both BA.1 and BA.2. This is seen clearly when we look at data from the United Kingdom Health Security Agency. This graph looks at vaccine effectiveness against symptomatic disease for people who received the Moderna, Pfizer, or AstraZeneca vaccine for their primary vaccination on the left. You can see that against both BA1, Omicron, and BA2, vaccine effectiveness wanes over time. But a booster dose of either the Pfizer or Moderna mRNA vaccines increases vaccine effectiveness and protection, as you can see on the right. These two vaccines are combined together in this analysis, but again, even in this setting, there is gradual waning of vaccine effectiveness over time following boosting. This waning of vaccine effectiveness begs the question, will a second booster dose provide clinical utility and help to restore vaccine effectiveness and provide protection against COVID-19? While there are several examples of studies showing the high clinical effectiveness of additional boosting with the Moderna vaccine. In slide 11, I want to highlight the results of a recent study from Ontario that looked at exactly this question and measured the effectiveness between a first and second booster vaccine dose in a high-risk population, those people living in long-term care facilities. A key finding from this study, which was conducted in over 55,000 individuals is that indeed a second booster vaccination showed increased vaccine effectiveness against Omicron infections, symptomatic disease, and importantly, against severe outcomes in this high-risk setting. In fact, an increase in vaccine effectiveness was seen at seven days from the second booster vaccination and continued to increase in effectiveness over time. Turning now to slide 12, I would like to provide a perspective on who might gain particular benefit from annual vaccine boosting. There are many health, age-related, and environmental occupational risk factors that lead to populations being at higher risk for COVID-19. First, age greater than 50 years. We know that hospitalization and mortality rate begin to increase steeply for those with COVID-19 who are over the age of 50. And then turning to people over the age of 18-year-old that have other health risk factors, such as people with kidney disease, cancer, autoimmune disease, and HIV patients. Other health factors that either result in immunocompromise or place people at higher physiological risk for severe disease if indeed they are infected with SARS-CoV-2. Finally, environmental or occupational risk factors such as health care workers, first responders, those in high density housing or living conditions such as college students, military personnel, or the incarcerated. We believe it is people in these broad categories who could benefit most from annual boosting for COVID-19. And so in summary, we've seen, as we continue to anticipate, SARS-CoV-2 to keep evolving rapidly with multiple new variants and recombinant variants circulating globally. Real-world evidence demonstrates the effectiveness of a booster shot, a third dose of mRNA-1273 against evolving variants of concern. And an additional booster, a fourth dose of mRNA-1273 shows incremental vaccine effectiveness when compared to a third dose against infection, symptomatic infection, and severe disease in a high-risk population. We believe people are at high risk due to health, age, and environmental or occupational risk factors, And we believe that when taken together with the viral epidemiology and waning of protection, there is an important need for a variant adapted booster vaccine and for boosting of populations this coming fall. With that, I'll now turn it over to Stephen to take you through the progress in our clinical development pipeline. Stephen. Thanks, Paul.
spk14: Good morning and good afternoon, everyone. So Paul just shared with you the effectiveness of our booster mRNA-1273 against Omicron in the real-world setting. But on slide 15, I'd like to pivot to our strategic rationale for why we think a seasonal booster will be necessary. So first, we think neutralizing titers will wane, similar to the endemic human coronaviruses. And that decline in neutralizing titers will increase the risk of breakthrough, infection, and hospitalization for those at higher risk, particularly, as Paul just described, older adults or those with medical immune compromise. The emergence of new variants of concern, like the VA.4 and .5 subvariants, could accelerate the impact of that waning and broaden the risk of breakthrough across the population. So with that, we do believe a booster will be needed in the fall, and we're working hard to make improvements to our available boosters. The desired features for a northern hemisphere fall winter booster we think will be that it improves the durability of protective neutralizing antibodies against Omicron and its subvariants beyond six months, i.e. the full northern hemisphere fall or winter infection season. We'd like to retain high and durable protection against Delta and ancestral strains, and we'd like to broaden cross-protective immunity to increase the potential for protection against new emergent variants or subvariants that might happen over the coming months. On slide 16, I'd like to summarize our work in developing that improved booster. Our primary focus, as you know, has been on developing a bivalent vaccine, and we have taken three bivalents into clinical trials. The first, mRNA-1273.211, includes nine of the common mutations and was based on a combination of our prototype wild-type vaccine and beta. The mRNA-1273.213 bivalent included 11 mutations based on what had emerged from beta and delta, And our mRNA-1273.214 booster includes 32 mutations, also now based on the wild-type prototype vaccine and in combination with the Omicron original variant of concern. Our latest bivalent, mRNA-1273.214, that includes those 32 mutations that have emerged, remains our lead candidate for the fall Northern Hemisphere campaign. The objective of that booster will be to demonstrate superior immunogenicity against variants of concern when compared to our approved current prototype booster or mRNA-1273 at 50 microns. And, of course, we want to maintain noninferiority against ancestral strains in case they reemerge. Now, on slide 17, I'll summarize the ongoing clinical development work across that portfolio of bioavailable boosters. I'll remind you that mRNA-1273 has been authorized or approved in many markets as a third and even a fourth booster. The data for the first bivalent, mRNA-211, has already demonstrated superiority against all variants of concerns tested, including Omicron and Delta, and I'll cover that data in just a moment. But our lead candidate remains, as I said a moment ago, our mRNA-1273.214 candidate, which is being evaluated in two separate studies, a Phase 2-3 in the United States and a Phase 3P305 study in the United Kingdom. Again, both of those are being conducted at a booster dose of 50 micrograms. Now, on slide 18, just quickly to update you on the data we have from the 2-1-1 first bivalent, not surprisingly, the safety and reactogenicity profile of the bivalent boosters is consistent with what we saw with mRNA-1273. As you'll see on the chart, both solicited adverse local reactions and systemic reactions are broadly consistent in both frequency and severity. And the frequency and types of unsolicited adverse events were also comparable between the groups, with no serious adverse events in the bivalent vaccine group up to 28 days after the booster dose. Moving to slide 19. we have some of the neutralizing antibody data from that study, evaluating, again, our mRNA-1273-211 bivalent and comparing that with the approved or authorized mRNA-1273 booster. Looking at neutralizing titers and GMTs, both immediately pre-booster at one month or day 29 and at six months on day 181. Across the three variants of concern which we tested, higher neutralizing titers were seen for day 29 and day 181, across all the variants of concern with the bivalent booster. On slide 20, we represent that as a ratio in comparing the performance of the bivalent booster to mRNA-1273 at one month and six months. And superiority was met for the ancestral and all variants of concern at different time points, as you'll note here. The clinical endpoint for superiority was defined as a geometric mean-titer ratio, or GMR, where the lower bound of the 95% confidence interval excluded one. And as you'll note, at day 29, a GMR for the ancestral SARS-CoV-2 virus was 1.28, beta was 1.3, delta was 1.75, and importantly, Omicron was as high as 2.2. And the 95% confidence interval for Omicron, the lower bound, was 1.74, again demonstrating strong trend towards superiority in this data. Excitingly, at day 181, or six months, that superiority was also met for the ancestral virus, beta, and the Omicron variant, which is important because the primary goal we have here is to improve the durability of protection by increasing those titers. So on slide 21, In conclusion, the safety and reactogenicity profile of the 50-microgram bivalent 2-on-1 booster was comparable to the 50-microgram of the authorized or approved 1273 booster. And we believe that the superiority already demonstrated by the bivalent platform in 2-on-1 bodes well for our overall strategy. We continue to believe that bivalent boosters will ensure the broadest immunity across the evolutionary uncertainty of SARS-CoV-2, and maintain current protection while expanding the breadth and durability of neutralizing antibodies, including, as I just demonstrated a moment ago, a 2-on-1 out to six months. We anticipate the one-month or day 29 data from our Omicron-containing bivalent, mRNA-1270B.214, in June of 2022. Now, turning to the rest of our respiratory vaccine pipeline on slide 23. We announced positive phase two data from our flu vaccine, mRNA 1010, at our Vaccines Day event. mRNA 1010 is part of our speed-to-market approach. We plan to start a phase three immunogenicity study in the second quarter of this year and a phase three efficacy trial later this year with mRNA 1010. As part of our flu vaccine strategy, we are also advancing in parallel vaccine candidates that contain both HA antigens and NA antigens. We started a phase one, two trial of mRNA 1020 and mRNA 1030 last month. Our RSV vaccine, mRNA 1345, phase three trial in older adults is ongoing and we are enrolling participants worldwide. We also have an ongoing pediatric RSV trial enrolling as well. In combinations, We plan to start a phase one trial for both our COVID plus flu and our COVID flu RSV vaccines this year. Our phase one trial for the HMPV-PIV3 combination vaccine is also now fully enrolled. And our RSV and HMPV combo and our endemic human coronavirus vaccine combo are in pre-clinic. Before moving from respiratory vaccines, I want to take a step back and reflect on the incredible progress over the past two years. We have or will have progressed three candidates into pivotal Phase III studies within one year of an IND being opened. This speed is made possible by our mRNA platform, and we believe our COVID vaccine success has de-risked our vaccine pipeline, and we can now move quickly into our RSV and flu pivotal studies. Importantly, in RSV and flu, we are looking at seasonal endpoints or immunogenicity endpoints. which we believe can allow us to progress faster through Phase 3 towards its readouts and ultimately to commercialization. Now, turning to the rest of our pipeline, we have an ongoing Phase 3 study for our CMV vaccine, mRNA-1647, which is enrolling well and is now enrolling participants globally. Our EBV vaccine to prevent infectious mononucleosis is in Phase 1, And our EBV vaccine to prevent long-term sequelae, such as multiple sclerosis, is in preclinical studies. Our HIV vaccines are in Phase I clinical trials with our partners. And the recently announced HSV and VZV vaccines are in preclinical studies. Within public health vaccines, our Zika vaccine continues to enroll in Phase II, and we are pleased to update that our Nipah virus vaccine, IND, was opened, and we look forward to starting that trial soon with our partners. Now moving to our therapeutic pipeline on slide 26, within oncology, our personalized cancer vaccine is ongoing in a phase one study and a phase two study, and we expect the first look at the data from our phase two study, which is evaluating personalized cancer vaccine plus Keytruda versus Keytruda alone. In the fourth quarter of this year, we have four other candidates in phase one or preclinical stages across oncology. In cardiovascular and autoimmune, we have two candidates. in each area, in clinical trials or in the preclinical stage. And within rare diseases, our propionic acidemia program, or PA program for short, which I will give more detail on in the next slide, is ongoing in a Phase I-II study. Our MMA program is also ongoing in a Phase I-II study. And our GSD-1A program has an open I&D, and we look forward to enrolling the first participants in that study. We have three other candidates in preclinical and rare diseases as well. Now, before I hand it off to David, on slide 27, I wanted to provide a bit more color on our Phase I-II study in propionic acidemia. As a reminder, PA is a rare metabolic disorder that is characterized by a deficiency of propionyl-CoA carboxylase, an enzyme that's involved in the breakdown of several of the building blocks of proteins called amino acids. As a result of deficiency in that enzyme, harmful intermediate compounds can build up to toxic levels in the body, This can lead to serious health problems, including recurrent episodes of life-threatening metabolic decompensation events. Our therapy for PA encodes for two of those proteins that form the deficient enzyme, PCCA and PCCB, and has one mRNA for each in the drug. The Phase I-II study is an adaptive trial design enrolling participants greater than one years of age in the United States, the United Kingdom, and Canada. Participants received one dose of mRNA-3927 every two or every three weeks for up to 10 doses in that study. The first cohort is fully enrolled, and we are now enrolling patients in the additional cohorts. Five patients have now completed the initial 10-dose course in the study and became eligible for continuing dosing in the open-label extension, and all five of those patients have elected to participate in the OLE. A total of 75 doses have now been administered across Phase 1-2 and the OLE study. Now, the study is focused on evaluating safety and PKPD. It is also looking at clinical events, those that are most important, including the metabolic decompensation events I mentioned previously. And, of course, we are also evaluating potential biomarkers in the study. We look forward to enrolling more patients and sharing the data this year. Now, with that, I'd like to turn this over to our financial review.
spk10: And David. Okay. Thank you, Stephen. We're providing today the analysis of actual 2022 first quarter results, along with a view of key drivers of financial performance going forward. Overall, we had a good start to 2022, and I'm very pleased with our operational and commercial performance. Turning now to slide 29, starting with an overview of our sales performance. Total product sales in the first quarter of 2022 were 5.9 billion. This compares to product sales of 1.7 billion in the first quarter of 2021. The total sales growth is driven by the fact that we were in an earlier stage of our manufacturing ramp-up in Q1 of last year, with our U.S.-based manufacturing lines roughly three months ahead of our international manufacturing capabilities. This also explains the different geographic sales mix. In the first quarter of 2022, sales outside the US were $5 billion and sales to the US government were 0.9 billion. The majority of sales in Q1 of last year were to the US government. Turning to slide 30 to go into more detail of our Q1 results. Total revenue was $6.1 billion in the first quarter of 2022, compared to $1.9 billion in Q1 of last year. The increase of total revenue was driven by the sale of our COVID-19 vaccine. Cost of sales was $1 billion, or 17% of the company's product sales in the first quarter. Cost of sales in percent of sales in Q1 of last year was 11% on a reported basis and 22% adjusted for pre-launch inventory costs, which were expensed in 2020. Compared to the prior year adjusted 22%, we are benefiting this quarter from an increased average selling price driven by customer mix, favorable impacts from the scale-up of our manufacturing processes partially offset by higher write-downs for excess and obsolescent inventory and a current period expense related to future purchase commitments. Research and development expenses were $554 million in the first quarter of 2022 compared to $401 million in the same period in 2021. The increasing R&D spend continues to be driven by clinical trial expenses for expanding and maturing development portfolio. Selling general and administrative expenses were $268 million for Q1 2022, compared to $77 million for the same period in 2021. The growth in spending was driven by the commercialization of our COVID-19 vaccine globally with continued investments in personnel and outside services in support of the accelerated company build-up. Our Q1 2022 results also include the initial upfront endowment of $50 million for the newly established Moderna Foundation. Provision for income taxes was $572 million in the first quarter of 2022 compared to $39 million in the prior year period. Our effective tax rate for the first quarter was 14%. Let me remind you of the fact that we had a net operating loss 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. We recorded after-tax net income of $3.7 billion in Q1 compared to $1.2 billion in the prior year. Diluted earnings per share in Q1 2022 were $8.58. As a final point on the quarter and beyond, We currently do not have any commercial activities or R&D activities in the Ukraine or Russia. Turning to cash and cash deposits on slide 31. We ended Q1 2022 with cash and investments of $19.3 billion compared to $17.6 billion at the end of 2021. The increase is driven by our commercial activities. The balance of cash deposits for future product supply was $5.3 billion compared to $6 billion at the end of 2021. The reduction quarter over quarter is driven by product deliveries against customer deposits. Now turning to slide 32. Our capital allocation priorities remain unchanged. Our top investment priority has been and will continue to be reinvesting in the base business across multiple areas. For R&D, we continue to forecast a spend in the range of $2.5 to $3 billion in order to advance and accelerate our pipeline, both for existing and new programs. Our second investment priority is to seek attractive external investment and collaboration opportunities to further expand the reach of modernist technology and capabilities. We're considering attractive opportunities that enable and complement our platform and take a disciplined approach in evaluating potential outside investments. We're in multiple active discussions regarding additional external collaboration opportunities. After evaluating internal and external investment opportunities, we then assess additional uses of cash. We completed our initial $1 billion share buyback program in January and announced a new share buyback program of $3 billion in February. Across these two authorizations, we repurchased a total of 3.8 million shares for $0.6 billion during the first quarter. The next slide shows a progression of our share count since we initiated our share repurchase program. As a reminder, we received board approval for our initial 1 billion share repurchase program in August 2021 and began repurchasing shares in the fourth quarter of 2021. Our quarter end basic shares outstanding declined from $405 million at the end of September 2021 to $400 million at the end of March 2022. We repurchased 7 million shares, more than offsetting 2 million shares of common stock issued in connection with equity compensation over this period. Our diluted weighted average shares outstanding also declined from 434 million in the third quarter of 2021 to 426 million in the first quarter of 2022, primarily as a result of the share repurchase activity. Now, let's turn to 2022 financial framework on page 34. We have signed advanced purchase agreements for expected delivery in 2022 in the amount of approximately 21 billion. There is a potential downside to this number from timing of COVAX deliveries if COVAX is unable to confirm demand aligned to their contracted volume in the 2022 calendar year. There's also an upside to this number from potential additional contracts for the fall booster dose, including for the US market. In 2022, we believe that the SARS-CoV-2 virus will evolve into an endemic phase with a more seasonal sales pattern. As a result, we continue to expect timing of sales to be larger in the second half of 2022 than in the first half our total cost of sales includes the cost of goods manufactured third-party royalties as well as logistics and warehousing costs we continue to expect cost of sales as a percent of product sales to increase compared to prior year driven by both a decrease in our average selling price and a forecast increase in manufacturing costs. The year-on-year decrease in average selling price is due to the higher share of COVAX APAs for delivery this year compared to last year. As the COVID-19 pandemic evolves into an endemic phase, we forecast our manufacturing unit costs to increase. This is driven by a move to smaller dose presentations, and the cost for adjusting our production and supply chain infrastructure, including future purchase commitments. We continue to expect our full year 2022 reported cost of sales in the low to mid 20% range, which incorporates all the expected adjustments that we've identified for the 2022 calendar year. The cost of sales for Spikevax beyond 2022 will be further impacted by geographic customer mix, the pricing effects of the private market as it develops, as well as our initiatives to optimize and improve efficiency. For R&D and SG&A, we continue to expect full-year expenses to be approximately $4 billion, driven by our maturing development portfolio and the global scale-up of the company. Based on current tax laws, we continue to expect our 2022 tax rate to be in the mid-teens as a result of the benefits from the foreign derived intangible income driven by our international business mix and stock-based compensation deduction. Finally, regarding capital expenditures, we continue to plan for capital expenditures in the range of $0.6 to $0.8 billion as we further build out our manufacturing and general company infrastructure globally. As this is the last earnings call for me as CFO of Moderna, I would like to take the opportunity to welcome Jorge Gomez, who is well qualified to lead Moderna in the next stage of its development. I would also like to recognize my own team and my colleagues for success in ramping up a global commercial company in contributing to taming the pandemic. I have great confidence in the company's ability to fully realize the vast potential of its mRNA technology platform against the many remaining unmet medical needs. This concludes my remarks concerning the financial performance, and I would like to turn the call back over to Stefan.
spk07: Thank you, David, for that review of a quarter and those kind of words. More importantly, I would like to thank you for agreeing to come out of retirement in the spring of 2020 to help us scale Moderna at an unprecedented speed from an early-stage development, U.S.-centric company to a commercial global company. I am very grateful for you agreeing to come out of retirement to help us. Your work to get us to this point was crucial. You built a strong team and robust business processes. Thank you for also agreeing to stay on as a consultant as we transition to your successor. I also want to wish you and your wife well in the next phase of your life. As many of you know, we announced that Jorge Gomez will join us as Chief Financial Officer effective next Monday, May 9. Jorge brings with him experience in the capacity of CFO for global healthcare organizations such as Densifly and Cardinal Health. Jorge has the same kind of high-quality finance training as David, as a general motor finance alumni. He has a broad set of international experiences, in addition to having been CFO of publicly traded companies. I would also like to welcome Arpa Garay, who is joining us from Merck at the end of this month as our Chief Commercial Officer. She was a member of Merck Executive Committee, where she most recently served as Head of Marketing. APA also has a very intellectual background and multiple experiences in both sales and marketing. I look forward to partnering with these two leaders to continue to scale rapidly Moderna. Before moving to Q&A, I would like to review with you our 2022 priorities. Priority number one, to execute on the $21 billion of signed APAs and to prepare for a successful fall 2022 booster season. Priority number two, to execute on our four phase three vaccine programs, an Omicron-containing COVID-prevalent booster, flu booster, analyzer booster, and saving prime series vaccine, which could lead to free respiratory commercial launches over the next two to three years. Priority number three, to expand beyond infectious disease vaccine into therapeutics. and share proof-of-concept readouts for PA, MMA, and PCV programs. Priority number four, to bring forward more mRNA candidates into clinical development. And last but not least, priority number five, to continue to expand our mRNA platform so the possibility of mRNA impact to patients continues to increase over time. I also wanted to remind people of our upcoming events this year, including our Science Day in just two weeks on May 17. We will also host our typical annual R&D Day in September and our first ESG Day in November. While we have had a profound impact on humanity over the last two years, we believe that what is ahead of us to help protect and treat hundreds of millions of people is even more exciting. We will continue to execute on our mission, and we thank you for your support. This is just the beginning. Operator, we'll be happy to take questions now.
spk11: Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchtone telephone. If your question has been answered and you wish to move yourself from the queue, please press the pound key. Our first question comes from Salveen Richter with Goldman Sachs.
spk05: Good morning. Thanks for taking my questions. And, David, it's been a pleasure working with you. Two questions for me. One is for COVID, based on what's known right now, what regimen, as you think about dosing and candidate, do you have the most confidence on for annual boosting as you look to 2023 and beyond? And then secondly, just given your balance sheet and, you know, as you look to kind of entering an endemic phase here, how are you thinking about later stage BD and M&A to bolster the revenue lines?
spk14: Thank you, Salvin. Stephen, so first on the COVID booster and what we perceive as of today, you know, subject to data and obviously collaborating with regulators. We are, as I said, most excited about our bivalent vaccine platform and including Omicron as the now dominant variant and family of subvariants that are infecting people today. Our Our objective, just like with our bivalent 2-in-1 booster data that I presented today, is to provide at least six months of protection from that. And because we think this will be a seasonal vaccine, that'll be very similar to what people are used to from a flu perspective, meaning in the northern hemisphere, you'd get boosted in the October time horizon that would cover you well through the early part of spring when transmission will subside. And so provided that we are able to provide that duration of protection as we've demonstrated already with the 2-1-1, we actually think then that means a seasonal annual booster in the fall that would cover people for the year. And as I said, we think it would be the bivalent Omicron-containing booster for this year. For 2023+, we would expect to continue to update the bivalent platform to reflect the then-dominant or then-at-risk circulating strains of the variant. So it may be Omicron this year, it may be Omicron again next year, or it may be something new.
spk07: Thanks, Stephen. Good morning, Stephen. So as you know, in terms of capital allocation, our priority number one is to invest in the business. We believe we have this really unique platform that that is very different from typical pharma companies or biotech companies where we have an ability to scale very quickly. As we discussed today, we are actively preparing the pivotal studies and the launch of four programs in Phase 3, as we discussed. As you know, there's a lot of programs in Phase 2, and I think there's around 30 vaccines in development today. And Stephen has showed you today that we believe we have built for our platform and all our investment in digital and a great team we have the ability in around 12 months to go from opening an IND vaccine to starting a phase three. So if you think about what the pipeline is and where it's going to be, you know, 12 months, 24 months from now, that is really exciting. And then there's therapeutics. You know, we always get questions around COVID-19 for obvious reasons, but as we've said, you know, in our remarks, this year is going to be very exciting around therapeutics. We have two rare genetic disease programs that are well-recruiting, as Stephen described, for which we are eager, when we have it, to share data with you. And assuming this is positive, you know, we will do more in rare genetic disease. As you recall, because you've been following the company for a long time, you know, we started with a few infectious disease vaccines, and as we got, you know, more confirmation that the technology was working in humans, and more recently, more capital, we had a very, you know, unprecedented acceleration of infectious disease vaccine. Well, we plan to do the same in rare genetic disease if we get, you know, positive clinical data in this personalized cancer vaccine. And as you know, there are, as Stephen said, more cancer programs, autoimmune programs, and also quite exciting to work with our partner, Vertex, toward getting, for long application, you know, the CF mRNA candidate into the clinic. In terms of M&A, I can tell you our teams have never been as busy. They are looking at a lot of opportunities literally across the world, across therapeutic care, we have also technologies. And so we will not be shy to invest. We expand the platform either through technology or through products. And that's really where we are in terms of M&A. So more to come when things get finalized and signed. And as you know, the first bucket of our priorities in terms of balance sheet is returning shareholders' capital via share buyback. And so this, as David said, will continue to buy back share at attractive prices, and we'll continue to have a dialogue with the board as to what should we do after the current plan if needed. But now we're focusing on executing the current plan.
spk11: Our next question comes from Matthew Harrison with Morgan Stanley.
spk01: Great. Good morning. Thanks for taking the questions. I guess two for me. So first, David, could you just comment a little bit more on the upside and downside levers to COVID revenues this year, and in particular, what would be the features that would not allow COVAX to accept the deliveries, or what should we be looking out for to understand that? And then Secondly, just on flu, could you maybe give some updated comments on where you are in terms of regulatory discussions? It sounds like it's not clear yet whether or not you're going to need a full efficacy study for approval, and so I'm just wondering where those discussions are and when you think you'll be ready to give people a clearer picture on what the outlook is for the flu program. Thanks.
spk10: Sure. So on the first one, in terms of the outlook for sales in 2022, I think the most important point is COVAX had an option for additional doses in 2022, which they chose not to exercise. So that's impacted the outlook. We formally were reporting options that could be taken up. that's been taken off the table as they didn't exercise. And what we see is in our plans in the 21 billion, there continue to be some volume for COVAX. They are actually the consolidator of demand from the countries. So what they need to do is get the confirmed requirements from each country and then that becomes a confirmed order to the company, and notwithstanding having contracts, there's still that process they have to go through. So that's why we wanted to flag there's some level of uncertainty associated with the timing of that demand that we're reflecting in the APAs. And then, of course, we have, as we've said before, a number of negotiations and discussions going on with other countries around the world as we look forward to the fall season and look forward to the variant booster offerings that are making their way through the approval process. So, likewise, that presents some potential for additional sales that are not presently in the APA count for this year.
spk14: Thanks. And this is Steve Matthews. So on the question of flu and where we are, we have been consulting with regulatory agencies globally, as you might imagine, around the path forward for our mRNA 1010 program. As there are issued guidance around accelerated approval that are still open, At the end of the day, we still believe that there's a potential path towards an accelerated approval, at least in some markets, with our mRNA 1010 program using a safety and immunogenicity endpoint, as has been previously discussed. At the end of the day, that will be a review matter, and we'll have to generate that data and have conversations on the back of that data with regulators as a path forward. But even if we do move forward with accelerated approval, which is the study that we're starting, the Q2 P3 Phase 3 study that we're talking about starting this quarter, even if we do move forward on the back of that, we will have an obligation even under accelerated approval to demonstrate efficacy at some point in a follow-on study to move from accelerated to full approved. And so because we're certain of that need at some point, we're also planning to start a phase three efficacy study, which will then be conducted perhaps in the northern hemisphere winter this coming fall. And we also announce data plans for that. And what that would do is we would hope we'd find a path forward for both the accelerated approval, but also rapidly being able to move that to full approval on the back of that efficacy result. Now, for some reason, the accelerated approval is not available in some markets or all markets, we would instead go directly to full approval with a very short latency given the timing of those two studies.
spk11: Great. Thanks very much. Our next question comes from Gina Wang with Barclays.
spk02: Thank you for taking my questions. Congrats on a strong quarter, and David, we will miss you. I have a few questions regarding the revenues. David, you mentioned that second half this year will be higher than the first half. Since first quarter, we already delivered 5.9 billion revenues. Should we expect less than 4.5 billion for the second quarter this year? And my second question is regarding the ex-U.S. 5 billion revenue. What is the breakdown between you and the rest of the world? And the third question is regarding the prices for U.S., EU, and the rest of the world. And where do you see these prices change for the remaining of 2022 and also 2023?
spk10: Okay, good. So I'll try to cover them all. And if I miss one, come back to it. So in terms of, first of all, maybe I'll start at the end on pricing. We previously disclosed the ranges of pricing that we had in the contracts last year. And what you see is that pricing has continued as we contracted for 2021. So really no change on the price across the various customers. It's really net prices being impacted, as I mentioned, by the mix of customers where we have our COVAX sales at the very lowest price offer, whereas the other countries, the developed countries, we have varying higher prices. So those continue. We haven't commented on pricing for beyond 2022, but certainly I think it's fair to assume that to the extent that the market moves to a private market, Typically, you see higher prices in driving markets based on the needs of the market as opposed to when you're addressing the government acquired product for, you know, in this pandemic context. So that's one. Secondly, in terms of the 2022 outlook, I think you got it right. So Basically, first of all, I think it would be a mistake for us to move into quarter-by-quarter accounting of where we see the demand given the variability of this pandemic. But what we see with the $21 billion of signed APAs, we mentioned last quarter and it's the same this quarter, that $21 billion we think will be somewhat higher Second half sales in first half, and as you correctly pointed out, the math would then point to the second quarter being likely the lowest that we'll see throughout this year. So I think your thinking on that is right. And sorry, the third point was?
spk02: Third point, thank you very much. That's very helpful. The third question is X U.S. 5 billion revenue. What is the breakdown between Europe and and the rest of the world?
spk10: Yeah, so we had, it was a pretty broad spread. I don't have top of mind the specific quantities by country or region, but it was a pretty broad spread of demand if you look across the world in the first quarter.
spk07: Yeah, and maybe just to add, Gina and Stéphane, on the pricing, as David said, you know, as we move into endemic, as we've been saying, you know, we will have to discuss with payers as part of a kind of health economics and value of products as it's done for every pharmaceutical product, especially in the U.S. And as you might be aware, CMS has already communicated that for fiscal year 2023, which starts in October 2022, the reimbursement for COVID-19 vaccine is going to be $60.
spk02: Thank you very much.
spk11: Thank you. Our next question comes from Michael Yee with Jefferies.
spk13: Hi, good morning. You have to, I guess, ask the last question to David before he gets to go back, and then a question for Stephen on the pipeline. I'm going back to the question around the guidance. Can you maybe help us quantify the exposure to COVAX? There was an article, I guess, talking about some of that recently in the press. And I think that's part of what your APA commentary out today is. I'm sorry, are you saying that that's partly in the 21 billion, but then offset by potential USA orders that could come later this year? So maybe you could just talk about that dynamic a bit. And then a question for Stephen is, again, definitely excited about propionic acidemia. Can you just write size or expectations because it's five patients but at the lowest dose? So is that a therapeutic dose? You would expect to see biomarker changes. Maybe just talk a little bit about that. Thank you.
spk10: Sure. So, yeah, so I'm not sure I have too much to add in terms of the color as to the outlook for the balance of the year. Certainly, again, the $21 billion, we don't right now have included any contracts as a result of additional U.S. business, which we think is quite significant. Likely, we certainly believe there's a recognition of the need for boosters in the U.S., and the dialogue is quite active. That's also true around the world with our customers in other countries and regions. And then, you know, we wanted to be clear that in the case of COVAX, which is, you know, as we've said before, the lowest-priced business in the portfolio, but we have confirmed contracts there in place, and we wanted to flag that they are, as I said, a consolidator of underlying demand, and they'll continue to work through in those developing markets what is exactly that demand picture and what is the timing of it and the ability of those countries to absorb the product that they're receiving. So we wanted to flag that. Quite frankly, if you ask me, should this be an issue of big concern in terms of the total outlook, I would tell you I would put it as quite modest. But we're trying to give some senses to the range of outcomes in terms of this information. Perfect. Thanks. Stephen?
spk13: Sure.
spk14: Thank you, Michael. So, look, you point to the most important things I'll say, which is this remains a small number of patients. It's a rare disease. And as you said, we're looking now in cohort one and cohort two at our lowest dose levels. And we're continuing to enroll. And I would expect, as is appropriate for a phase one study where we are doing dose finding, phase one, two, that we will continue to enroll and explore a range of doses, including potentially higher doses in a cohort three. Now, that said, we will have a body of data building. As we said, we've got five participants who've moved into the open label extension. At least one has already been approaching approximately a year on drug, a total of 75 doses. And so as you look at that body of data, it will start to provide potentially an early signal. I think in that sense, the things that I will personally be looking at, I think, will be focused on First and foremost, it's clinical endpoints. It is the clinical endpoints that matter most for these patients, obviously. We are developing the medicine to try and prevent the sequela of disease. Obviously, that includes things like metabolic decompensation events, hospitalization, other interventions, other progression signs of their disease. And importantly, that's something you really only measure over time, as opposed to a biomarker, which I'll get to in a second. You really need to see about what that looks like over time. Now, the benefit of where we will be this year is that we will have a reasonably large amount of time for these small number of patients on drug. And so that's something that we'll be focused intensely on. But again, it's small N that we'll be looking at. When it comes to biomarkers, we're looking at a range of biomarkers. It's important to note there are no validated biomarkers in this disease. It's not even guaranteed that we discover a validated biomarker in this disease. But obviously, it will be helpful as an evidence of pharmacology and the potential for benefit in clinical endpoints that we do try and measure those. And so we are looking at a range of biomarkers. We've described many of the ones that are associated with the disease. and that will be other data that we will have as we pull together these first couple of cohorts, and we have a cogent story to tell around them. And the balance of the clinical endpoints and the biomarker data together will help us decide whether we've found the correct dose to move forward or whether more work is needed to find a more optimal dose for this patient population. I think the encouraging thing is, as we stand today, is that we do know there are patients that have been on drugs for quite a long period of time, and that longitudinal experience allows us to look at clinical endpoints and also gives us some good indication, hopefully, of where we're going to be on safety, which is obviously essential for this medicine to move forward.
spk00: Perfect. Thank you.
spk11: Our next question comes from Tyler Van Buren with Catwin.
spk08: Hey guys, good morning. Thanks for taking the questions. So the Ontario study provides some interesting initial evidence that a fourth dose is beneficial and you mentioned the populations that should get the fourth dose. So how big an aggregate is this population in total? What percent of the US and global population do these patient groups comprise? And the second question was just to follow up on prior questions and make sure that I'm clear. Did you say that the average selling price per Spikevax dose in 2022 will be lower than 21 due to COVAX orders? And does this not account for a potential increased price from future U.S. orders? And couldn't these offset that decline in ASP, especially if you sell a sizable portion of doses at year end at that $60 per dose price I believe you just mentioned per the CMS announcement?
spk12: Very good.
spk08: Yeah.
spk12: Go ahead. Yeah. Sorry, go ahead, David. You take the first one, and then I'll comment on the... Yeah, sure.
spk10: Yeah, so if I track that, in terms of pricing, that's correct. We have had, and we continue to have, based on the customer mix this year versus last year, we had indicated that we'll have a year-over-year decline in the average price of product being sold when we look at the 21 billion of APAs compared to last year's actual. And the key contributor to that decline for the year is in fact the inclusion of COVAX volume in the confirmed APAs that we've previously were discussing. So that contributes to an average sale price decline. Will that sale price on average in 2022 change from that outlook? Yes, it can. To the extent there were change in volume for Kovacs, including if it were some of the volume were to defer beyond 22 into 23, for example, that would improve your average price calculation. And then likewise, to the extent which we've indicated we have an expectation of additional sales of product in 2022 for the fall season, including potentially for private markets should that develop. That would then presumably have a favorable impact on the average price. So hopefully that is clear. Yep.
spk12: And just to comment on the number of individuals who we think are at high risk, clearly it can change as we see the vaccine. We've seen with the epidemiology of the virus, as Stephen commented earlier. But just going back to our vaccines day earlier, we think that that high-risk population is somewhere in the range of about 1.7 billion people worldwide.
spk08: Okay. Thanks very much. And congratulations again, David, on your second retirement.
spk11: Our next question comes from Corey Kazimov with JP Morgan.
spk06: Hi, guys. Thanks for the question. This is Tiffany. I'm for Corey. So as the U.S. government hasn't procured a budget for boosters this fall and if they continue to not place orders, can you walk us through some of the implications of what that privatization potentially means and how the company is thinking about it? You mentioned potentially higher prices, but anything from market research that might suggest demand change or how you're thinking about discounts, et cetera?
spk07: Sure, Stefanie, this is Stefan. So, indeed, while we're having discussion with the U.S. government, as you would assume is appropriate, we're also working toward assuming that there is no government order. A lot of Americans are on vaccines. I want to make sure we can protect as many Americans as we want on vaccines. And so, with our commercial U.S. team, we're working very diligently to And David and I have spent quite some time in the last, you know, weeks and months to make sure that we have all the wholesaler contracts and all the pieces you need to be able to be commercial in this traditional sense of the world in vaccine. And we have, you know, quite a number of executives that are vaccine sales experts in the U.S. on our team. And so while we hope that the U.S. government Like other countries in the world, we decide to place an order, like we've done in the past, to allow the maximum number of people, including people uninsured, to get vaccinated. We are getting fully ready, assuming that there is zero order from the U.S. government, just in case if that happens, that it's 100% private market in the fall, and the company will be ready for that.
spk06: Okay, great. And then just a second one. So how should we think about operating expenses moving forward and potentially steering away from COVID as a big driver there? Will it be pipeline dependent or something else? Thank you.
spk10: Yeah, it's a good question. We've, you know, tried to give you the indication of the trends for expenses across the business. What I would expect to continue is a very significant investment in R&D as that pipeline progresses and expands. I would say it shouldn't be surprising if you move past 2022 that you'll see a continued increase in the investments in that area, presuming success, which we're feeling very good about. And then in terms of the other considerations, in terms of cost, in terms of SG&A, and if you look at the business now, we've substantially built out the company as we've talked about as a global commercial enterprise. So I think we're, you know, while perhaps not precisely there yet, We're largely there in terms of if you look at the structure of the business globally. So, you know, that I think you might consider to be more of a steady state. So that would be my initial comments on the thinking on that.
spk06: Thank you.
spk11: Our next question comes from Jeff Meacham with Bank of America.
spk03: Hi, guys. Thank you for taking our questions. This is Alex Hammond on for Jeff Meacham. So on BD, how do you think about partnerships versus acquisitions? And how large of a deal would you be willing to consider? And then, if I may, can you provide your thoughts on the RSV competitive landscape and any color on timelines for the readout? Thank you so much.
spk07: Yeah. So this is Stefan. Partnership versus M&A. I think it's really a question of of risk and then willingness of a seller to sell. It doesn't need to be two to tango. And so as we've done, for example, with metagenomics, why did we do a partnership in terms of licensing for metagenomics? Because we were very excited about the science and the team that we discovered over time and we diligent. We thought at this stage of the gene editing technology of that company, it was not the best thing for us to do from a risk-adjusted basis to acquire the company. And, you know, in terms of M&A, we would be very happy to buy the right company that we really believe will drive value to what are now risk-adjusted basis. In terms of data size, you know, we are looking at a lot of different things. But again, we are staying very disciplined. We are here to create value, not to do things just for the sake of doing things. As you know, a lot of us own a significant checking company, and we are really focused on creating value. So the BD team, as I said, is the most busy they have been in a long time. We're looking at a lot of things literally around the world because the best times is not always, you know, in this country. There's a lot of amazing science in this country, but there's a lot of other smart people around the planet. And we think we modernize infrastructure and capital. Actually, there's a lot of technology that we could potentially scale up where there's potential teams that have cool science, but not necessarily the right balance sheet and our infrastructure to scale and to maximize patient impact. Stephen, you want to take the R&D? Sure.
spk14: Sure. So on RSV, so first where we are on the data of our program, 1345, you know, we think the titers, the neutralized antibody titers, the GMTs, we've seen look really strong relative to competitors. And, you know, we also feel quite optimistic and positive about our history of generating strong T cell responses against respiratory viruses. And the mRNA platform in particular has demonstrated that. We think through the COVID pandemic, pretty remarkable performance relative to more traditional approaches. And so the combination has us optimistic. We ultimately don't need to go demonstrate in a clinical trial that potential benefit. And that's the phase three study that we're now in and going full speed at. That phase three study, like our other respiratory virus efficacy studies, is a case-driven design. And so at the end of the day, we have to enroll people, vaccinate them, and then make sure that we accrue enough cases to conduct the interim and final analyses. That is something that we're trying to make sure we're enrolling in geographies where we expect and anticipate RSV surges. There have been recent reports from a competitive landscape perspective of others modifying their studies to increase the number of enrolled subjects in their pivotal studies because perhaps they haven't yet hit that rate of case accrual. In some ways, we think that provides an opportunity to close even more ground because now we're all rapidly working to try and demonstrate the potential of RSV vaccines to help this same older adult population. So it's beyond our control to know when exactly we will have those cases accrued, but obviously we will be working hard to make sure that we're as enriched as possible. Now, from an overall competitive perspective, other than the vaccine, the freestanding RSV vaccine in older adults, which as I said, we're quite optimistic about the GMTs and T cell response to the platform. We are also studying combos because at the end of the day, these are not the only virus, it's not the only virus infecting these populations. And so I'll remind you that we have a RSV flu COVID combo, which we are going to start a clinical study on, we believe this year, which would be a combination of all of the three most common respiratory pathogens that are impacting older adults and And as I said a moment ago, we fully enrolled our RSV and human metapneumovirus combination, which I'll remind you that's in the pediatric population, another important population for RSV, where both of those viruses can lead to morbidity in young children. And so we are continuing down our strategy of making sure that we're not just addressing one pathogen, but that we're providing the best potential health intervention. So that includes that combination strategy. And over time, we think as we demonstrate the potential of our platform against any individual virus, the part of the real value we will deliver to healthcare systems and patients is the ability to do those combinations quickly to reflect the epidemiology of the underlying patient populations different in younger kids than it is in older adults.
spk04: Kevin, we have time for one more question.
spk11: Okay, our last question comes from Joseph Springer with Needham & Company.
spk09: Hi, good morning. Thanks for taking our questions. I had one on the rare disease programs. And just curious, you have the PA and MMA and clinical development here and initial readout in PA. How much is the PA readout? Would that be sort of de-risking in terms of bringing additional rare disease programs into the clinic? Has it been more of a, you know, some of the hurdles and challenges to expanding that area of the pipeline? Has it been more on an indication-specific basis, or have you been sort of waiting for these initial proof-of-concept readouts to bring more programs into the fold, or has it been more of an influence by sort of the focus on COVID and potentially headwinds related to the COVID pandemic? Any additional color on that would be helpful. Thank you.
spk14: Great. Thank you for the question. And, you know, it is going to be a mix of all of the factors you listed. So first, let me talk about PA and what that readout means for us as a platform. So it is our most advanced rare disease platform with an mRNA LNP targeted for those metabolic diseases. And in that sense, MMA and PA both will provide validation that the technology risks associated with that are, you know, are addressed. And that would cause us, you number of diseases we go into quite quickly there that could use that same technology. We have been waiting for that readout. We haven't sat on our hands, though. I'll note that we have a third program, GSD1A, with an open IID that, as we've said before, is in a slightly, is in a different lipid nanoparticle system. So we've continued to look at whether other improvements could help. And we will continue to look at those. But obviously, if we have a very strong signal out of PA, we will be ungating other programs that can benefit from the technology that would then be de-risked from the PA program. When it comes to just the challenges of conducting these studies, I'll remind you that these are unfortunately very ill children often in these studies and relatively rare diseases. And so, yes, it has been difficult throughout the pandemic. in an experimental context to bring people in. And there have been several times during the last two years that we have actually taken an active decision with investigators and families not to be enrolling people because obviously bringing sick children into hospitals was exposing them to risks around SARS-CoV-2. There are obviously also even more recently in the Omicron surge, lots of disruption that these institutions have faced as staff and others have become ill and therefore we can't conduct the studies. We hope that a lot of that is behind us now as we move to an endemic phase for SARS-CoV-2 and that we will really see a pickup in our ability to continue to execute the studies. So we're proud of the progress we made in the last year.
spk07: Well, thank you very much for joining us today. We look forward to meeting a lot of you in person in Boston. when we do the R&D day two weeks from now. Have a great day. Thanks.
spk11: Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.
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