Moderna, Inc.

Good day, and thank you for standing by. Welcome to the Moderna Third Quarter 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I want to extend the conference over to speaker today. Lavina Tulukdar, please go ahead.

Thank you, Kevin. Good morning, everyone. And thank you for joining us on today's call to discuss Moderna's third quarter 2024 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 Stephane Bensal, our chief executive officer, Stephen Hove, our president, and Jamie Mock, our chief financial officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the state 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.

Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us. I will start with a review of our business in the third quarter. Jamie will present our financial results and outlook. Stephen will review our clinical programs. I will then come back and share our key priorities before Q&A. We delivered $1.9 billion of revenue in the third quarter. Our net income was $13 million. We ended the quarter with cash and investments of $9.2 billion. As you know, for over a year now, we have been working to improve productivity in the company. In the first quarter of 2014, compared to the first quarter of 2013, we reduced operating expenses by $500 million across cost of sales, R&D, and SG&F. This figure excludes $1.4 billion of resizing charge in the first quarter of 2023. I would like to thank our teams who have been working hard to achieve this cost savings, and we continue our journey to improve our cost efficiencies. This year, the COVID market benefited from U.S. regulatory approval that was 19 days earlier than in 2023. SPAC RACS was available across all segments of the U.S. healthcare system. Our manufacturing and logistics teams were able to download the number of doses delivered to customers compared to the first week of last year's COVID vaccine season.

Now turning to what we have seen so far this season for vaccinations in the U.S.

retail market. The graphs on slide 6 are shots in arms in the retail channels as measured by IQVR, which includes retail pharmacies and long-term care. As you can see the graph on the left, the earlier approval of a vaccine this year has helped to push total market vaccine dose above where they were last year at this point in the season. The graph on the right shows weekly doses, which as you can see in the past few weeks have started to decline. One will not know the shape of this curve until the end of the season. We are encouraged that the COVID market is starting to prove to be a sizable and durable long-term market. Moderna has 40% share of retail shops in arms season today. We've been busy to look at vaccination trends from last year to inform our understanding of where there are additional opportunities to grow the COVID market. There are three major delivery channels for respiratory vaccines in the U.S. There are retail pharmacies, integrated delivery networks, or IDNs. which basically serve hospitals and doctors who are part of these networks, and the third group, government programs and others. As you can see, the retail channel compromised 73% of the total U.S. market for COVID vaccine doses last year in 2023. COVID vaccines have been overwhelmingly given to pharmacy settings with such smaller distribution in the global channel. If now we look at flu, in the flu market, however, The distribution by channel is different, with much greater emphasis on IDN and government. Since COVID-19 presents a much greater health burden than flu in the United States, we remain convinced that increasing the vaccination rate of COVID relative to flu provides a significant opportunity to improve public health, especially in the IDN segment and government and other segments. Therefore, As we execute our COVID strategy, we see the opportunity to drive the COVID vaccination rate closer to flu over time, especially in the under-patient enchants. One additional force we use COVID vaccination rate over time is our combination COVID flu vaccine, which Stephen will discuss shortly. Let's now turn to what Moderna is doing to drive vaccination rates. The first objective of our effort is to educate healthcare providers on the importance of COVID as a public health trend. negative impact as a much greater cause of severe illness than other respiratory viruses, and the opportunity to improve public health by following vaccine recommendations. As you know, in the 2023-2024 season, there were three times more projections of COVID than before. Secondly, we are going direct to consumers to emphasize the benefits of getting vaccinated, and our most recent campaign highlights the dangers of COVID. Additionally, public health authorities, including the CDC, recognize the importance of vaccination, which is reflected by the most recent ACP recommendation for additional COVID doses for immunocompromised people and those $60,000 in the spring of 2025. Moving on to R&B. More than a third quarter, MRSDR sent about $10 million. This was below expectations going into 2024. Unfortunately, the timing of approval and recommendation by the CDC on M-ResDR resulted in us missing most of the contracting season. Additionally, the substantial buildup of inventory in the channel by competitors prior to our launch has had a negative impact on ourselves. Looking to 2025, we believe that we will be able to participate from the beginning of the contracting season in the U.S. We are also filing for approval of a broader MYSDR label that will allow to address the 18- to 59-year-old high-risk population. Additionally, we see the potential for market expansion if regulators recommend re-vaccination. And finally, we are now starting to receive approval outside the U.S., and we expect to have sales in those markets in 2025. I am delighted to welcome Abbas Hussain to the Moderna Board of Directors. Habas has strong commercial backgrounds, which makes him a great addition to our board. He has more than 25 years of commercial experience, more recently as CFO of Vi4, and before that, as Chief Commercial Officer of GSK. Habas is an ideal group member to guide Moderna forward as we continue to advance our broad portfolio of products towards commercialization in the next few years. We very much look forward to working with Habas in the years ahead. Finally, I am very pleased to announce the expansion of Modana Executive Committee, expanding the responsibilities of two current members of the team and adding two new members to the team to help us ensure we execute our strategy and deliver on our missions to patients. First, Steven will expand his role to include oversight of a full commercial organization, which was previously divided into the EMI. As Modana Procedure, Stephen is responsible for strategy across the full cycle of the company, research and development, and medical and commercial. Joining Monada's executive committee are Rose Loughlin and Jacqueline Miller. Rose is being promoted to executive vice president, research. Jacqueline is being promoted to chief medical officer, leading the development organization. The promotion of Jackie and Rose to the Executive Committee is a special milestone for the company. This is the first time in our history that we have promoted internal talent onto the Executive Committee. It is a testament to both of these remarkable colleagues who have each spent years building and leading critical areas of the company, and also reflects our commitment to grow and develop our internal talent at Moderna. Tracy Franklin, our Chief Human Resource Officer, The expectations of our role emphasize a vital integration of people, culture, and digital innovation across the business. As recent teamwork to scale up our business processes, they ask the question of how we should do work, how should we be organized between people and digital technologies, being overshared software, AI solutions including our own machine learning algorithm, or GPT enterprise, and or robotic solutions. I would like to thank Stephen and Tracy for their new expanded role and for their partnership over many years and many years looking forward, and to go back to Rose and Jackie for not being part of the company executive committee. With this, let me turn to Jamie.

Thanks, Stephane, and hello, everyone. Today, I will provide an overview of our financial results for the third quarter and share our outlook for the remainder of 2024. Let's start by reviewing our commercial performance, which you can follow on slide 14. For the third quarter of 2024, our net product sales were $1.8 billion, bringing year-to-date product sales to $2.2 billion. We also had approximately $100 million in year-to-date other revenues from grants, collaboration, licensing, and royalties, which are not included in the figures on this slide.

$1.2 billion of our 3Q 2024 product sales were from the U.S. market.

where we experienced an earlier launch to the 2024-2025 season. While our 3Q results exceeded expectations, this was mainly due to sales timing between the third and fourth quarter, supported by receiving FDA approval of our updated COVID-19 vaccine three weeks earlier than last year. Also included in our U.S. sales of $1.2 billion is a provisioned release of approximately $140 million primarily driven by lower product returns from the 2023-2024 season compared to our previous estimate. Additionally, we commenced RFC vaccine sales in Q3. While initial RFC sales were limited at $10 million, we believe there is potential for long-term growth as we work to capture a larger market share over time. International sales of $0.6 billion were in line with our expectations, but lower compared to the same period in 2023, when sales benefited from the fulfillment of orders deferred from 2022. For our full year 2024 outlook, we are reaffirming our product sales estimate of $3 to $3.5 billion, which implies a 4Q product sales range of $0.8 to $1.3 billion. We expect our U.S. 4Q product sales to be between $200 and $500 million. The range is given by the following three key variables. Our Spikes Act market share, which is currently tracking to approximately 40% in retail. At this time, it's too early to call our share in IDNs and with the government. Next, vaccination rates. Our range assumes a market size which has COVID vaccinations flat to down 10% versus the prior year. Finally, our performance in and the ultimate size of the RSV market in 2024. To summarize, if our retail market share remains constant at 40% and the U.S. market finishes this season down 10% compared to last year, and there is no uptick in RSV sales, we expect to be on the low end of this sales range. We expect our international 4Q product sales to be between $600 and $800 million. We have a tighter range on our international sales as most of these sales are for contracted volume and confirmed orders. The final international sales amount will be dependent upon revenue recognition timing and our performance in a few specific markets. Moving to slide 15, I will talk about our 3Q financial results in more detail. Net product sales for Q3 were $1.8 billion, as I just discussed on the prior page. Our cost of sales for 3Q 2024 was $514 million, representing 28% of net product sales for the quarter. This was a 77% year-over-year decline in our cost of sales from $2.2 billion in Q3 2023. As a reminder, last year we undertook a strategic initiative to restructure our manufacturing footprint and recorded $1.4 billion of charges in 3Q 2023. From inventory write-downs, CMO wind-down costs, and cancellation fees. Excluding the $1.4 billion charge, cost of sales still declined by 38% year-over-year, as we continue to make progress driving additional productivity improvements in our manufacturing operations. R&D expenses were $1.1 billion in Q3 2024, reflecting a 2% year-over-year decline from $1.2 billion last year. We purchased a priority review voucher during the third quarter of 2024, which is included in our Q3 results. Excluding the PRV purchase, we had a strong year-over-year spending decline for research, development, and clinical manufacturing as we continue to drive cost efficiencies across all areas of the organization. FCMA expenses for Q3 2024 were $281 million, representing a 36% year-over-year reduction. This decline reflects our focus on driving cost efficiency and making targeted investments that continue to strengthen our overall productivity. I will provide further details in the following slides. We recognize an income tax of $8 million for the third quarter, a significant reduction from the $1.7 billion in the same period last year. The decrease was largely attributable to the establishment of a $1.7 billion valuation allowance, on deferred tax assets in Q3 2023. The valuation allowance has remained in place since its initial recognition and continues to impact our tax expense. Our net income for the period was $13 million, a notable improvement from the net loss of $3.6 billion recorded in Q3 2023. Earnings per share for the quarter were $0.03, compared to a loss of $9.53 per share in the same period last year. We ended the quarter with cash and investments totaling $9.2 billion, down from $10.8 billion at the end of Q2, primarily due to ongoing research and development expenses and operating activities. Moving to slide 16, I want to provide additional detail on the cost reductions we are driving across the company. As discussed on previous calls, as a platform company, we are building a unique operating model. And over the last few years, we have invested purposefully into people, processes, and technologies to build foundational capabilities that will allow us to scale efficiently. We continue to see these efficiency gains in our 2024 results. As mentioned on the previous slide, we reduced 3Q SCNA expenses by 36% year-over-year. We had year-over-year reductions across all areas of our SGNA categories, commercial, medical, and GNA functional spending. Major drivers were from reductions in purchase services and external consultants, as we better leverage digital technology and AI. Year-to-date, our SG&A spending is down 24% year-over-year. While we continue to drive productivity improvements, we are also committed to increasing COVID-19 vaccination rates with investments in HCP education and consumer ad campaigns, as well as increasing our COVID-19 and RFC market share in competitive markets. Therefore, we don't expect as large a year-over-year decline in 4Q SG&A spending versus the prior year. For the full year, we expect SG&A to be down approximately 20% to $1.2 billion, which is reflected in our financial framework update on the next slide. Turning to that 2024 financial framework on slide 17, our net product sales guidance remains at $3 to $3.5 billion, As reviewed earlier, there are a handful of factors we are monitoring as the season progresses. For cost of sales, we are narrowing our guidance to 40% to 45% of product sales as a result of the continued manufacturing productivity improvements we are driving in the company. For R&D, we are lowering our full-year estimates at $4.6 to $4.7 billion from our previous guidance of $4.8 billion. The reduction is due to cost savings from productivity improvements, as well as clinical study timing. For SC&A, we continue to expect full year expenses to be approximately $1.2 billion, down from $1.5 billion in 2023, a decrease of approximately 20% year-over-year. We continue to expect taxes to be negligible in 2024, and we are updating our capital expenditures outlook to approximately $1.2 billion, which reflects the purchase of our Norwood campus from our landlord for approximately $400 million, partially offset by approximately $100 million of other CapEx reductions. The purchase of this highly strategic asset allows us full control to expand and build out the campus to drive future productivity and innovation. We anticipate this transaction will close in December. We continue to expect ending 2024 with approximately $9 billion of cash and investments. The additional cash outweighed for purchasing our Norwood campus will be offset by reductions in our cost of sales, R&D, and other capital expenditures. Based on our 3Q actual product sales of $1.8 billion, we have strong visibility into our expected cash collection timing from our customers in 4Q. With that, I will now hand the call over to Stephen. Thank you, Jamie.

And good morning or good afternoon, everyone. Today, I'll do a quick review of our pipeline. At our R&D event in September, We discussed our focus on 10 product approvals over the next three years. Today, I'll briefly summarize the status of those programs, starting with our respiratory vaccines portfolio. For our next generation COVID vaccine, mRNA-1283, we are pleased with the positive Phase III safety, immunogenicity, and vaccine efficacy data we presented at R&D Day, including a 13.5% higher vaccine efficacy compared to Spikevax in participants age 65 and older in that study. As previously shared, we intend to file mRNA-1283 for approval in 2024, and we'll use a priority review voucher. For our RSV vaccine, mRNA-1345, we also shared positive safety and immunogenicity data from our Phase III trial in participants 18 to 59 years old who are at high risk from RSV. We are also using a priority review voucher for this program, which we intend to submit this year. We also share positive phase three data from our combination flu COVID vaccine, mRNA-1083, and intend to file for approval in 2024, subject to ongoing discussions with FDA. We've decided not to use a priority review voucher for this program, given the timing of submission and the potential launch relative to the respiratory virus season in 2025. We will announce PDUPA dates for these programs, if and when they are confirmed by the FDA. Moving now to our standalone flu program, mRNA 1010, we have initiated and substantially enrolled the first season of our phase three vaccine efficacy study. As a reminder, this phase three study is funded within our project financing agreement with Blackstone Life Sciences. Slide 20 shows the study design for that phase three standalone flu vaccine. This is a randomized, observer-blind, active control study for mRNA 1010 against the standard dose comparator. It is designed to be enrolled over two seasons, but the study has the possibility to declare early success after a single season. Now turning to our non-rescuitory portfolio, starting with our latent and other virus vaccines. For our CMV vaccine, we continue to expect that we will accrue the 81 cases required for the interim analysis in our phase three study by the end of this year. Following the accrual of these cases, the Data Safety and Monitoring Board will conduct a statistical analysis. Should they recommend unblinding at the interim analysis, we will share those results. For norovirus, I'm happy to announce that we are rapidly enrolling our Phase III trial. In a moment, I will take you through the design of that norovirus Phase III study. In oncology, we and our partner, Merck, have initiated a Phase III trial evaluating adjuvant INT, or mRNA-4157, in combination with Keytruda after neoadjuvant Keytruda and chemotherapy in patients with certain types of resected non-small cell lung cancer. This is the second Phase III trial for INT in non-small cell lung cancer and is targeting patients who may not respond to neoadjuvant therapy alone. I will also review this study design in the upcoming slides. For our rare disease therapeutics, we intend to begin to generate pivotal trial data for our PA program in 2024. And for MMA, we have an agreement with FDA on our pivotal trial design. We now expect to start that study in the first half of 2025. On slide 22 is the design of our phase three study for our norovirus vaccine candidates. As a reminder, norovirus is a gastrointestinal disease with high unmet need and no approved vaccines on the market. The Phase 3 study is designed to test the efficacy, safety, and immunogenicity of our vaccine in 25,000 adults age 18 and older. It is randomized one-to-one, observer-blind, and placebo-controlled. Turning now to the trial design for our second phase 3 study in non-small cell lung cancer for IMT in collaboration with Merck, which complements the phase 3 InterPath 002 trial. This phase 3 study called InterPath 009 will enroll more than 1,200 patients with stage 2 to 3B non-small cell lung cancer without an EGFR mutation and who are able to undergo surgery. These patients will receive neoadjuvant therapy of Keytruda plus chemotherapy followed by surgery. Following surgery, the study will randomize approximately 680 patients who have not achieved a pathologic complete response into two arms, combination of INT plus Keytruda or Keytruda plus placebo. The primary endpoint for the study is disease-free survival And the secondary endpoints include distant metastasis-free survival and overall survival. With that, I will now turn the call back over to Stéphane.

Thank you, Stephen and Jamie. During R&D Day in September, we shared the company priorities. Priority one, to drive sales of approved products, Spivax and Memoresia. Priority two, focus on our latest SPAC plan, where we believe we can have up to 10 product approvals over the next three years, and we will be drivers of sales growth. Priority three, to deliver cost efficiency across the business and slower pace of our investments, reducing annual expenses by $1.1 billion, starting in 2027. Our first priority is to draft steps on SPAC-Vax and Emresia, which we believe are the foundation of our respiratory vaccine portfolio. We will continue to work with all market channels to maximize back-to-back availability. We are focusing on marketing and medical education to try to drive the COVID vaccination rate closer to that of flu over time. Internationally, we plan to bring manufacturing plants online in the UK, in Canada, and in Australia in 2025, and then start to fulfill multi-year contracts in those countries. And we have full season of R&D contracting in the U.S., and other countries in 2025, we expect to increase emirates' sales and market share. We are focused on delivering up to 10 product approvals over the next four years, which we believe will drive sales growth, and fund the next wave of our investment. For any of these programs, we have near-term milestones. For CMV, we expect to trigger the interim analysis for phase 3 vaccine efficacy study by the end of this to initiate pivotal studies. Our norovirus and through-phase pre-vaccine efficacy studies are now underway. Finally, we intend to find free products in 2024 for next-gen COVID vaccines, for R&D vaccines for high-risk 18- to 29-year-olds, and our combination COVID-free vaccine, which is subject to ongoing discussions with the US FDA. We will continue to focus on improving efficiency by keeping our R&D and SDN expenses flat to down in 2025. And as demonstrated in the quarter, we are making progress on our cost-saving initiatives already. By 2027, we expect to decrease annual R&D expenditures by $1.1 billion. On the cost of sales, we will continue to grow efficiency, and we expect to achieve a proactive leverage that we were applying in a framework we shared previously. We have two products approved that help protect people every day. We have the largest Netflix pipeline, for any mRNA company and we will continue to focus on delivering the greatest possible impact to people for mRNA medicine. Whether it's work to be done to meet our execution target, I'm confident our team will be able to achieve our goals. I continue to be excited about the potential we have to deliver for patients. The actions we are taking to help people is becoming reality.

With this, operators will be happy to take questions.

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Salveen Richter with Goldman Sachs. Your line is open.

Thank you. Good morning. Two questions for me. One is can you speak to the source of the rest of world revenue generated in the third quarter and expected in fourth quarter with regard to which countries are contributing here and these contracts that, you know, should you expect them to recur in 2025? And then separately on CMV, you talked about the DSMB you'll share the results of the DSM-B recommends on blinding. Can you speak more to that as to whether we will actually get interim data provided to us or we're going to have to wait for the full analysis here? Thank you.

Sure. Thanks for the question, Salvi, and I'll take the first one in terms of rest of world revenue. Without getting into too much specifics, I think you know we're establishing a presence in the United Kingdom, in Canada, in Australia. We announced an order in Brazil. And so that's been – the balance will be shipped either in the third quarter or in the fourth quarter. And when we look at the fourth quarter of the $600 million on the low end, the large majority of that is contracted with those countries and others, but I just wanted to name a few. As we look to 2025, I think we mentioned at R&D Day that there will be a decline in some of those countries. And then it will then uptick our anticipation is that it will uptick in 2026 based on the contracts that we have in certain countries. So that's a little bit on the rest of world split.

And on the CMV question, so if the DSMV recommends unblinding to sponsor the first interim analysis to your question, that would be because we met the criteria for vaccine efficacy. And obviously, we would share those results if we received them. There is a chance that the DSMV will not recommend unblinding, which would mean perhaps that we did not make statistical significance in that first interim analysis and be going then to the final analysis. which could happen quite quickly. And depending upon the conditions of that communication and the timing of that final analysis, we may or may not be communicating right then about the fact that we're waiting for that final analysis. But we would, in any event, if the DSM be recommended, unblind and share those results.

Thank you. Our next question comes from Ellie Merle with UBS. Your line is open.

Hey, guys. Thanks for taking the question. Just another one on how to think about the XUS COVID revenues. In the past, you've talked about some contracts with some countries for guaranteed purchases, like some even throughout the end of the decade. Maybe can you just in broad strokes characterize the size of some of these contracts that you have outstanding XUS and I guess what's essentially guaranteed from a revenue perspective here in terms of some of these XUS contract sort of if you have a sense of maybe like what the minimum sales XUS could be in certain years going forward based on that. And then just a second follow up on CMV. I think you alluded to this in the last answer, but maybe just in terms of the like rate of accruals, I guess what's your latest expectation in terms of the timeframe between when you will accrue the number of events to trigger the interim versus the number of events to trigger the final analysis, just the timing between those two things.

Yeah, sure. So, I'll take the first part, Ellie. So, in terms of the contract that we have with some of these countries, we're not going to disclose the specifics. But what I will say is that as we add products over time, you can imagine that the amount of the minimum purchase commitment will grow over time. So that's why, as I just mentioned in my prior response, that it will drop in 2025 and then start to grow in 2026. But I don't think we're going to disclose anything more than that.

On the question on CMV and the timing of case accrual, it is coming quite steadily right now. And in fact, we do have a bit of a backlog of case confirmation that we are working through. There's multiple steps that have to go and multiple testing to validate a case. And so we actually, obviously we don't control the rate of case accrual, but we do expect that if we are going to that final analysis, that it won't be a very long period of time between and actually could happen quite quickly.

Great, thanks.

Our next question comes from Gina Wang with Barclays. Your line is open.

Thank you. I have two questions. One is regarding the commercial questions. If we calculate 1.2 billion U.S. revenue and accumulate 19 million U.S. doses, is the calculation like $63 per dose as a net price is the right way to think about it? And then regarding the reserve return, could you provide a final reserve return from last winter season? And what is your reserve return so far for this winter season? And quickly regarding the flu combo, a flu COVID combo, not using priority voucher, maybe give us a little bit more rationale for this. And then we'll all three that you submit this year, how many of these will make it for 2025 winter season?

Yeah, Gina, maybe I'll take the first question. So, on the U.S. pricing, the $19 million, I think, is the total market you might be referring to for COVID vaccinations, not specific to Moderna. That said, the pricing that you're talking about, we won't specifically disclose, but it's not that far off.

But pipeline questions, you know, thank you for both. So first on the priority review voucher for the flu COVID combo, given where we are in terms of timing of this year and relative timing of the contracting season for flu vaccines, We no longer think it makes sense to use a priority review voucher to try and accelerate that process because ultimately we believe we would miss the contracting season. For that reason, we'll hold back that PRV and use it for a different product in the future. As far as the submissions, as we confirmed today, we are expecting the other two submissions to go forward with prior review vouchers. And given the timelines, you can understand that we think that means approval next year is possible and can happen prior to the season. However, we do not include any revenues. from either the 18 to 59 RSV, SBLA, or 1283 in our 2025 guidance or expectations. And so if we were able to deliver those with those priority view jobs and approvals, we still wouldn't include any revenue that would be an upside.

Reserve return.

Sorry, could you repeat the question, Gina? I missed the sales return part.

But yeah sure reserve return is that you know, could you provide a final reserve return from last winter season, because I know you initially booked the five over 500 million they need to adjust it to see the final numbers. So if you could provide that final numbers and what is your reserve return assumption so far for this winter season.

Yeah, so, um, so, as I mentioned in my prepared remarks that we released in the quarter about 140Million primarily driven from, uh, returns reserves being lower than a prior estimate. So that 500 plus went down to, let's say, 400Million, uh, for the prior season. So we learned from that and continue to forecast what an anticipated product returns reserve is for this season. And we will continue to monitor it as we look at vaccination rates throughout the entire quarter and what we project into the first quarter of next year.

Thank you. Our next question comes from Michael Yee with Jefferies. Your line is open.

Thank you. Two questions, not 10. But on the combo, I know that you say you're in discussions with the FDA. Can you just clarify what are the different factors that are contributing to why you have maybe lack of confidence on filing, or I guess not certainty on filing the combo? For example, would there be an infection study that has to be run? I think it's a little unclear to us on the combo. And then on RSV, I think the market had anticipated this was going to be a big market. However, obviously, there is a lot of dynamics going on there. Can you maybe comment on whether you think there will be a change to this market and what would give you confidence that you're going to actually be a player here, given you've already given your current position now and where your guidance is for 2025? Thank you.

Thank you for both questions. So first on the, I'll take the combo, and I think Stefan will take the question on RSV. So first, we are in discussions with the FDA. The data for 1083, as you'll remember, came sort of middle of this year, and so we've only more recently had the opportunities to be sharing that and engage in discussions about what would be in the BLA for accelerated approval of 1083 based on the immunogenicity results. I would not comment on those discussions back and forth. We continue to work closely with the agency to understand what they would like to see in that. We continue to believe, as we said today, that we will be submitting for approval this year, although those conversations are ongoing and we'll update as they proceed forward. The decision not to use the priority review voucher became one about the timing of that approval, and ultimately our view that we would miss the contracting season for influenza, and therefore it didn't make sense to do that. But by withdrawing the priority review voucher, we also allow for a more fulsome time for review, which is also obviously the benefit of ourselves and the agencies.

And on the RSV, Mike, I think there's a few things. As you know, the market has been much lower than last year and much lower than people anticipated. Obviously, the new CDC guidelines that came out in the June timeframe impacted that. The other piece we're hearing from customers is that they're really focused on making sure people get COVID through vaccination right now. So I think it will be quite interesting to see what happens in Q1 potentially, and does the shape of the curve of RZ looks different than what we saw in the previous season. So that's to be seen. The other piece is because through contracting and because of what happened last year, and as new contracting happened before the CDC guideline, there's quite a lot of volume in the channel, whether both at the retailers themselves and in the wholesalers. And so, of course, with a much slower market, and a large inventory in the customer's hand, both wholesaler and retail pharmacies. As you can imagine, it's taking quite some time to go through that inventory. And so we think that it's interesting Again, will Q1 be a more important timing for RISD moving forward? It's a question to be seen. Of course, we expect that as more data accumulates, CDC will continue to review and look at what is the right guidelines. So that's for the public health leaders to decide. And being able to totally contract COVID and RISD at the same time for a full season, we believe it's going to have an impact in the U.S. And the other piece that I mentioned also in my remark is outside the U.S. We are getting approvals, and they're going to continue to happen in the months to come. So, we believe 25 and beyond should also help outside the U.S. Thank you.

Our next question comes from Tyler Van Buren with TD Cowan. Your line is open.

Hey, guys. Good morning. Thanks very much for taking the question. I wanted to ask about US COVID vaccine sales. So they were roughly flat quarter over quarter between Q3 and Q4 last year. But the vaccine sales guidance for Q4 this year assumes a decline as much as 60% to 80% quarter over quarter if RSV sales remain low, and my math is correct. So is there a significant shift occurring this year due to the vaccines being available earlier and patients getting vaccinated earlier that you expect to be the dynamic moving forward? Or could this guidance be conservative? I just ask because it's a pretty dramatic change in the cadence of U.S. sales, so any additional color would be appreciated.

Thank you. So if we look at the U.S. market, I think what is important first is to look at the different channels because they are very different. As we share the data that we have is the actual data for retail and long-term care facilities. As you see, earlier start, season to date, a little bit ahead, but if you look at the weekly script, They are coming down the peak. We hear from retailers that they are working really hard in terms of vaccination campaign ahead of Thanksgiving, and there's a plan ahead of Christmas between Thanksgiving and Christmas. But that is to be seen what happens, what is the shape of that curve. And then there is the IDN networks. As I said in my remarks, we have been working with IDN networks to increase the COVID-2 flu vaccination rate, as you see last year, we don't have a lot of visibility because those campaigns started later. Most of them early October. We assume the retailers starting in August, with some of them starting pretty strong in August and early September. And then the government's data, for which we have no visibility, we only get orders when there are orders coming. So it's still early in the season. The shape is clearly different from last year in retail. We are hoping that we will work with retailers and our work, you know, in my tale of with different shape than last year. And then at the end, the government. So we have to see and we're going to continue to learn about this market. But we believe it still remains sizable and carry through. We see that, you know, many millions of people who want the COVID vaccination.

Yeah, maybe I would just add that, remember, when we sell product, that is not tied to vaccinations. So when you look at the decline from the third quarter to the fourth quarter, we had an early approval to Stefan's point. So therefore, then we were better ready to ship more within the third quarter. So that's what I think you see on a year-over-year basis, what's happening here.

Thank you.

Our next question comes from Terrence Flynn with Morgan Stanley. Your line is open.

Hi, thanks for taking the question. I was just wondering on the INT program, obviously you're continuing to accelerate the clinical program here with the new phase three and lung, but can you just give us an update on the manufacturing facility in Massachusetts and if that's still on track for completion by year end, and then if there's going to be any bridging work required by the FDA for approval or validation? Thank you.

Good morning, Terrence. Yes, so the team continues to do a great job in the plant. With all the progress, they're totally on schedule. And so given what we showed at R&D Day in terms of timing, the plant will no longer be a critical path to approval. But we're keeping the team working really hard, and they're making great progress. We're very pleased with that.

And on the question of bridging, once the plant is operational, we'll transition our clinical work to that plant as well. And so effectively, all the programs will include, many of the programs may include, I should say, that data. So the bridging will be done in stream.

Thank you. Our next question comes from Evan Wang with Guggenheim Securities. Your line is open.

Hey, guys. Thanks. Two from me. First on, you know, the election results. Just wondering, given the pending change in administration, what barriers are in place from a policy or legislative standpoint that would meaningfully limit threats to current use of vaccines in the U.S.? What steps are you doing to reassure confidence there and protect against, you know, potential increase in legal liabilities? And one on RSV, some competitors are describing how data are now sufficient for expansion and international revenues. Do you agree there?

And what gives you confidence in competitiveness, X2S specifically? Thanks. Good morning.

So thank you for all of the questions. So on your first question, as you know, our mission as a company is to bring innovative medicine to help people either prevent disease or treat disease. Since the company's founding, we've always worked very closely with government leaders and public health leaders around the world, including, of course, the U.S. And as you know, we work very collaboratively with President Trump during his first term. And so we're going to continue to do that. Our mission is to really ensure we help people and we increase people's health, which is totally what the administration is going to work on. On RSV outside the U.S., as you know, the markets have approved the product at very different times. Outside the U.S., you have a very similar process that you have in the U.S. Once you get the approval, you need to get for recommendation, which is CDC ACP equivalency, which in some markets happen at different times. Then you have pricing negotiation, which, as you know, are quite different outside the U.S. and the U.S. Sometimes it might be There's no pricing negotiation where you can lose sometimes months or quarters. So I think the slower ramp outside the U.S. is reflecting both the recommendations that sometimes tend to be for older population, like 70 and above, or even 75 and above, and just the timing of all the mechanics to come together. And then, again, you could miss a season by a few weeks, and you just miss a season. So those are the dynamics happening outside the U.S. We continue to believe that RSV causes hospitalization and hurts people, and the RSV vaccines are going to be important to prevent people getting hospitalized, especially if you think in terms of a tailwind. We have an aging population in Europe. We have an aging population in Asia. And so I continue to believe that over time, the RSV market outside the U.S. would be an important market. There's also a lot of educations to do, both at the consumer level. A lot of consumers didn't even know what RSV was. until recently. Some don't know as of today. Same with some doctors. So there's just a lot of work to do. But the virus is hurting people, so there is a need there. And we collectively need to work with public health leaders to prevent hospitalization. Everybody knows, especially in governments that are single payers, that vaccines are most probably the best ROI that you get in our healthcare dollars. And the best way to

too many people is to get prevention thank you our next question comes from edward tenoff with piper sandler your line is open great thank you very much appreciate all the time and all the detail just looking at the orphan disease pipeline um with respect to kind of uh pivotal trial starts for mma in first half and i think also maybe generating some registrational data this year. What do you see as sort of the path forward here in terms of, you know, trial design, patient numbers, follow-up? When do you think we could actually see these two data that could lead to the filing here? Thank you.

Thanks, Ted. So, you know, in both cases, we'll be moving forward, as we said, either presently or very quickly in 2025 in the case of MMA into those pivotal study designs. The answer is a little bit different for both. In the case of MMA, as we've discussed previously, we do believe there is a biomarker that can serve as the basis for approval. That's the subject of our discussions with the FDA. And that biomarker result, as you can imagine, can be achieved somewhat more quickly. Then in the case of PA, will we be looking, because there's not as clear a biomarker, we'll be looking at event rates, which can take some more time. And in any event, it will depend upon the rate of enrollment in those studies and then how quickly we can get to the, you know, ultimately we hope is a significant benefit either with the biomarker or with the event rates for PA. As we previously described, it's R&D day. You know, we do expect that can happen within, you know, the next couple of years. And our goal is to be launching that product, you know, in that sort of third window, 2026 plus, but both of those products, I should say, in the 2026 plus time horizon. If we approve patients more quickly into those studies, it could be sooner. If it takes longer, it could be a little bit longer. We'll obviously update as we go forward in how we're doing enrollment in those studies.

Great. Thank you. Our next question comes from Luca Issi with RBC Capital. Your line is open.

Oh, great. Thanks so much for taking my question. Maybe on RSC, you know, obviously this year has been a little challenging given the late approval versus the timing of the contracting season. But how should we think about next year? Do you think it is fair for us to assume that you can get a third of the market share in given pre-filled syringes and obviously no GBS, or do you think that that would be optimistic? And then maybe second on COVID in the U.S., how should we think, again, about market share here? It looks to me the last year you were gaining some shares versus Pfizer versus this year it looks like you're maybe losing some shares versus them. So wondering if you can offer any additional color on that. Thanks so much.

Sure. So on RSV, I mean, Across products, we don't guide our own share, so we're not going to start guiding our own share. As I said, we believe very much so that being able to contract in full season will be quite different from last year. So we'll play this out in the 2025 season. In terms of COVID, you are correct in terms of the retail market. We have lost some market shares we indicated earlier in the year. This has been quite an intense competitive environment in the U.S. What we don't know yet is the share in retail, sorry, in IDN and government. We get a good sense about the share holistically at the end of the season.

So that's a bit where we are at this stage. Thank you. Thanks a lot.

Our next question comes from Courtney Breen with Bernstein. Your line is open.

Fantastic. Thanks so much for the time today. I appreciate getting a question in. The first one that I wanted to ask was just around the INT. Obviously, you have just initiated this new 009 trial in multiple cell lung cancer that has the chemo combo preceding the INT. there's a few different reasons as to why you might be doing it, running the trial that way. It could be that you're seeing kind of the current paradigm is falling in the direction of chemo combination. There's a scientific belief that INT works well in the post-chemo space or kind of just about practical timing for INT preparation. Can you give some context to that particular trial design? And then as we think about expansion of this program more broadly to other tumor areas kind of what's primarily gating that is that the scientific signals or is that manufacturing capacity for the phase three development plan all right thank you for both questions so first in the non-small cell lung cancer context there has been a move it's really

Evolving standard of care. So there obviously has been a move from just adjuvant towards neoadjuvant use of checkpoints and Keytruda specifically. And there are a number of patients that have a pathologic complete response, a clearance of their tumor and evidence of that as a result of that neoadjuvant. And so, recognizing that there's a move towards that sort of care. We also want to confirm the potential for to benefit those patients. Obviously, you wouldn't be. Expecting a substantial benefit on those that have had a pathological response, because fortunately, they do have very good clearance to their tumor. And so the structure of the study is to obviously enroll patients, allow them to get that treatment, and approximately half, you can see about 680, we would expect to not have had that pathologic complete response. And that's the group that we then randomize and go see whether IMT can add, on top of adjuvant at that point, Keytruda, treatment with further Keytruda. And I really think the driver there is a view of where we see potential standard of care moving in the lung cancer space towards neoadjuvant use of Keytruda. There may be other applications, you know, thinking more broadly, where neoadjuvant treatments start to emerge, and we choose to go study the benefit of INT in the neoadjuvant setting, not just in the adjuvant setting. As far as other indications, the short version is we continue with our partner Merck to systematically look at all the places that we think that I&T can offer a benefit. We aren't done yet. There are more studies coming. We are pacing ourselves as we stand up those investments, but manufacturing capacity is only one of the considerations. It's not the primary consideration. To some extent, this is about also just pacing the start of these studies. As you can see, we're starting to build quite a large phase two and phase three program, and we just want to be disciplined about not having too many at the same time. So, we will continue, we do continue to discuss with our partner Merck additional phase three programs. We will start new ones in the coming year that we haven't yet announced, but we will pace ourselves both for manufacturing and just scale of that program.

Thank you. Our last question comes from Manos Mastariakis with Deutsche Bank. Your line is open.

Thank you. Good question. Manos Mastariakis from Deutsche Bank on behalf of Emmanuel. So if approved, how quickly do you expect the flu market to transition to combination flu COVID-19? And would that be expected to happen in 2025 already or more of a midterm thing? And secondly, what's the latest update and perspectives you have on the COVID litigation, in particular GSK's recent lawsuit? Thank you.

I'll take the first question on timing. So, on COVID, you know, obviously it depends upon approval and it's also dependent upon public health, you know, sort of recommendation from a purely launch timing perspective and contracting perspective. We do not believe that 2025 is a time where that will happen. That's because a majority in the United States, the majority of the flu contracting is happening really early in the year, in the first quarter or the first half. And for that reason, given the timing of our current submission and approval, we wouldn't expect that to be a 2025 event. We would hope that it would happen in 2026, and ultimately we are working towards that because we see a huge potential public health benefit in terms of prevention of hundreds of thousands of hospitalizations in the United States, if we can improve compliance with COVID vaccines as well as deliver a highly effective flu vaccine. But again, the timing of that will be contingent upon a regulatory review process and then alternate recommendation processes in different markets. Over the long term, We are believers that a combination flu COVID product is the right way for us to be protecting those at high risk of respiratory viruses seasonally in all the markets in which we play. And so from a very long-term view, we are quite bullish on the opportunity of the combo product.

We will not comment on the merit of a GSK case. We would note that such lawsuits are not uncommon during market formation around new technology, and we are prepared to defend ourselves from these claims. We look forward to presenting our case at trial once scheduled.

Thank you, ladies and gentlemen. That's concluded the Q&A portion of today's conference. I'd like to turn the call back over to Stéphane for any closing remarks.

Well, thank you, Robin, for joining us today. We look forward to talking to many of you in the next days and weeks. Have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.