Moderna, Inc. (MRNA) Bernstein’s 40th Annual Strategic Decisions Conference (Transcript)

Moderna, Inc. (NASDAQ:MRNA) Bernstein’s 40th Annual Strategic Decisions Conference May 31, 2024 10:00 PM ET

Company Participants

Stephane Bancel – CEO

Conference Call Participants

Courtney Breen – Bernstein

Courtney Breen

Hi, there, everyone. It’s great to see you all on Friday of the conference. I’m Courtney Breen, I’m the U.S. biopharma analyst here at Bernstein. I am privileged today to be sharing the stage with Stephane Bancel, the CEO of Moderna. Stephane has been at the helm of Moderna for the last 13 years. It’s been a period of great change and growth for Moderna, and we are thrilled to have him join us for this fireside.

We will first kick-off with a bit of a talk from Stephane some slides that he’s prepared, and then we’ll dive into Q&A. To make sure that this Q&A is as relevant to this audience as possible, please feel free to post additional questions through the pigeon hole, I’ll be making sure to check that so that we can make sure that we’re answering as many of your questions as possible.

With that, I’ll hand over to you, Stephane, and look forward to the conversation.

Stephane Bancel

Thank you so much. Good morning, everybody, and thank you so much for being here on the Friday. We really appreciate it. We, of course, will be making forward-looking statements, and you can find those on our website or SEC website. As all of you know by now, because of what happened during COVID, we started building Moderna 15 years ago, it is like yesterday, on this very interesting premise that we could potentially move medicine into digital medicine because mRNA is an information molecule.

I think it’s the most profound and important thing about the whole presentation. So if you think about small molecule and large molecule, which I had a chance to learn when I worked at Lilly, those mRNA medicine. You have to relearn in a clinic everything, every time, you to have to know make the molecule and to build factories for the molecule. With mRNA, if we could make mRNA work, mRNA is a software of life. You send mRNA to the cells, like many of you got a COVID shots and your own cells make a protein in that case the spike protein, and then your body does the rest of the job. And that’s the notion that was so profoundly new that let me decide to join Moderna.

And if you think about what this could do, and that’s a bit — we thought about it and what I was asked earlier this morning, so why did you decide to resign from the CEO of bioMerieux to go and join Moderna with $2 million in the bank and one scientist in the flagship office of VC (ph). It’s because actually of this slide, which is actually the most useful slide I have seen and used for the last 13 years, is we thought if the molecule work, we will be able to do a lot of drugs that are not doable using recombinant or small molecule. We could do secreted protein, like what biotech and pharma does, we could do transmembrane protein, proteins that are stuck at the surface of a cell is where they need to be to do the biological effect you want.

We could do protein inside the cells, which we’ve done so far. We have in the clinic drugs working with clinical outcome, where we change the protein inside mitochondria of patients. So that’s why I was really exciting. What we could do for patients because two-third of the proteins coded in your DNA are protein that are not secreted, meaning they’re undruggable using biotechnology. The second piece that was very exciting to me was a notion that we should have a much higher probability of technical success of our drugs versus the industry.

Why? First, we code protein that exist in nature, either in your DNA or in viruses. If you think about most small molecule, they do not exist in nature, which is why most molecule, you put in a human and you have tox issues. And in our case, the chemistry, the chemicals we put in your body for every product for the mRNA molecule will be 100% the same. When we did the RSV Phase III, not one day as CEO, I worried about the safety of RSV vaccine. Why? It’s exactly the same chemistry as a COVID vaccine that has been given to billions of people.

So that’s another piece about the mRNA technology that made me think a lot, geez, we could have a technology with very different profile of the safety of the drugs. The third piece that excited me is what we could do for patients and creating value for investors by going faster. I think for COVID, I don’t have to make the point anymore. But because it’s a platform, because it’s always the same manufacturing process, you don’t have to reinvent it every time, and you can scale very quickly because you just change one raw material, although the overall materials are the same between drug 1, drug 2 and drug 50. That’s really the power of this technology.

And the icing on the cake, massive capital efficiency because it’s all synthetic manufacturing processes, no live cells, so because of that and because mRNA’s information, we say we have to be the platform company that has never really been built before us in biotech. Why? Because we say it will be zero drug because we’ll go out of cash before the first drug can generate cash and we go bankrupt. All these companies that will have a lot of drugs. The notion this will be a one drug company and zero scientific sense. So we built from day one for scale, hardly do tens and tens and tens of medicine. So with massive investment in science to really be the best mRNA company in the world, massive manufacturing investment, IT, robotics and now a lot of investment in AI.

We just spoke about probability of technical success. I got to go very fast. You see in blue on the left graph, the industry average of a probability of a drug to be successful in Phase I, Phase II and Phase III. And you see in red, the probability of the Moderna portfolio so far. And we’ve counted all the drugs, including the drugs we designed to never move to the next stage. For example, we did a Zika vaccine with H7 Avian flu vaccine years ago. We never wanted to take it to Phase II. So it comes as a failure in Phase I in this graph. (ph) Because we wanted to be consistent with method use in the blues because you only get positive if you move to the next stage of the study.

We’re investing a lot in R&D. And we’re now at the scale of our investment that looks like an Amgen type of investments. We have a very strong pipeline, 28 vaccines, 16 programs in therapeutics, oncology, rare disease. If you look at the vaccines, they address a very large TAM, respiratory vaccine through COVID, RSV and others, it’s around $27 billion, $30 billion of TAM and the latent virus, those virus like HPV, like, VZV, shingles, like HIV that are in your body and once in your body are in your body forever.

Of course, a massive long-term health issue, EBV and MS, EBV and mononucleosis, EBV and cancer, recently more data CMV and cancer. And those virus are very complicated, cannot be done using protein, and we think mRNA is a very important answer for that. In terms of the therapeutics, if you think about the TAM and we talk about cancer, I’m sure, especially ASCO starting this weekend in Chicago. We think we have a technology that is quite unique to be able to individualize the treatment to every person to amplify the response of a checkpoints like KEYTRUDA. And rare disease, we think the TAM is north of $10 billion with what we’re doing in the liver today.

So as I said, because we always thought about building a platform company that can enable those drugs and maximize impact on patients, maximizing value as a consequence, we built a platform company. We invested a lot in the beginnings in IT. So the company has been cloud-enabled since day one. We’ve never had a server in the company’s history. We have invested a lot in our quality of our data, which became very handy when machine learning, pre-COVID started deeply in the company in science, we’re doing machine learning since 2016. I mean, of course, now with GPT, we are doing machine learning everywhere.

And also in robotics, we are doing a lot in robotics, and we are doing a lot around 3D printing to be able to accelerate our development. So you see this being applied across the business, we have a lot of examples. I’m happy to talk about them if you’re interested. If you look at the pipeline in the last couple of slides, we have up to 15 drugs to launch in the next five years. That is an incredible opportunity to impact patients and to create value. And you see that kind of two waves of products in front of you across the board. So now we’re really known as the vaccine company. I believe we’re going to become the biggest vaccine company in the world in that time frame just because of the number of products we have.

If you look at the number of products we have in late stage development in vaccine, it is more than the rest of the industry combined and those are amazing investments. We invest well in the Phase III study for vaccines. And then you have an annuity of say for decades to come. So I think it’s a really amazing opportunity. There’s a lot of milestones. I won’t go through even the whole slide. We should have RSV approved this month, and I know we’re at the end of the month, so I waiting for [indiscernible] from FDA.

We’re waiting for the flu plus COVID Phase III data. And we said this should come this quarter. And if it’s positive, which I believe it should be because of what we showed in the Phase II. And now we have COVID, flu, RSV and the next-gen COVID also positive Phase III. We should be able to potentially have a product available in the market flu plus COVID single dose as early as fall of ’25 because you could file late summer, early fall through a voucher, get this through the June 2025 ACIP meeting and get this for the Fall season.

The CMV Phase III data, our first latent product with six mRNA in each vial, which is vial pharma has all failed to do a CMV vaccine. They all failed in Phase II, six mRNA in each vial, we’ll have Phase III data in second half of the year. The cancer cannot grow on the — how excited we are about the data. We think we should be able to file for accelerated approval next year and the rare disease in the liver. Those are the financials you can read yourself, and I propose to move into questions.

Question-and-Answer Session

Q – Courtney Breen

Fantastic. Thank you. Thank you so much, Stephane. You mentioned a little bit about the premise of where Moderna began and that is built on mRNA and kind of the potential. You then had the catalyst of COVID that really shot you to a revenue generating company. And now you’re at the point of launching a number of respiratory vaccines and this ambition to bring another 15 over the next few years. As you look 10 more years into the future, what does this going to like to you then?

Stephane Bancel

Well, 10 years is a long time. So I mean look we just started 14 years ago and we have nothing. So I think, if you look 10 years out, as I said, we will be the largest vaccine company in the world because there are more than 200 viruses that hurt human, 200. They have vaccine against 20 of those. So there’s a great opportunity to do more vaccines and then to combine them because of course, we don’t want to have 200 shots. But if you think about vaccines preventing cancer, numbers are all over the place. We believe that Moderna that up to 50% of cancers are caused by viruses.

And the latent virus I talked about are the cause of it. Why, because having a virus in your cells for a long time, it’s not good. We get inflammation, and we know what the inflammation does over time. And so we think that between going after the respiratory franchise and the latent franchise of vaccines, you could have a largest vaccine company in the world. I think in cancer, we’re going to end up being larger than KEYTRUDA in terms of sales because we’re going to be able to improve KEYTRUDA everywhere were KEYTRUDA works.

The safety profile is the same as KEYTRUDA alone. So if you have a better efficacy for the same tox profile, as you can imagine, the doctors and the patients will be very, very interested. We are seeing our Phase III study is enrolling super-fast. We spoke to some of our doctors and they are telling us and putting everybody on the study because its high efficacy, one in two people respond to the drug and seems to have cured from the cancer. The safety profile is the same that what they’re going to give them anyway, which is KEYTRUDA and it’s a clinical trial. It’s free. So it’s like, it’s not a very hard decision to make in terms of which I’ll trade-off.

But I believe we’re going to be able to go earlier in disease. As we know, checkpoints are not given in Stage 1 or Stage 2 because of the tox profile that they have. When those drug works, very amazing. But they come with a very heavy tox profile as we know because of the mechanism of the drug. But think about the world in which you could go after Stage-I or II cancer with just INT. It’s the same chemistry as your COVID shot. So think about the world where you could have potentially a liquid biopsy, which is, I think a piece of technology that is not Moderna related, but it’s happening as we speak, and it’s improving as we speak. Think about a world where you could have an annual checkup with a liquid biopsy cancer cause early because you don’t have it last year.

We make an INT for you and because we don’t need KEYTRUDA, I can send to the pharmacy because it’s just an intramuscular. And you need maybe four, five shots. Now it’s nine shots, but we have clinical data showing that four shots by being enough, so of course, when we’re going to launch we were nine shots of a protocol, but we’re going to go in the real world, try to reduce that literally. So think about the world where you do an annual blood work and then you get INT, maybe three, four, five doses at our local pharmacy, where QR code and show, and you have exactly the product for you, send to the pharmacy and next to your home. This is untouchable by checkpoints.

We showed a society the cancer to which this should become a disease as we improve the technology, understanding of cancer, it should become a disease that most people don’t die from.

Courtney Breen

That’s very exciting to hear. And I’m going to build on just one of the points that you made and asked the question because scaling is really important and scaling is tough when you have an individualized asset like an INT. So tell me a little bit about kind of how this future that you just laid out in terms of early stage treatment in cancer might be possible given your platform?

Stephane Bancel

Sure. So I spoke in my intro that because we have a platform, all the products are made in the same reactors with the same material, all but INT. So as these made by the same people in the same room, in same reactor with same material as COVID and some will be flu and some will be over a disease and so on. The only exception is INT because it’s individualized. So if you think about it, I don’t need big reactors, I need microliter. And so it’s all about shrinking.

The good news because our manufacturing process is that free, as I told it’s all synthetic, it’s all enzymatic. The more you shrink things, the faster the reaction goes because things are just closer to each other. And so if you think about it, the manufacturing process we used for the Phase II study, the one — I’m going to give an update at ASCO on Monday, it was basically a five day cycle time on the machine that looks like a big American fridge for the mRNA just to make the amount, then you could lipid and you put [indiscernible]. The mRNA was five days.

In the new plant we are building in Marlborough, which is a Gen 2 of that technology, it’s one day. And it’s a much smaller footprint. So what we’re going to do for the scale up of this opportunity to individualized product is to shrink the footprint because in a given room, I can put many more machines. If you can shrink the footprint and I can shrink the time I need for 1% of that machine, I can increase the throughput tremendously.

If you think about it in the Phase II, we are working five days a week, and we make so one patient a week. Now it’s seven days a week and night. And I need only one there, one working day. So I can — basically, I report in [indiscernible] simplification, just by those two things. Then we have plenty more examples of things like that, that we’re doing. So what I love about it is, there’s no silver bullet and it’s purely an engineering manufacturing product.

So the risk is very, very low. Not everything might be working. I think the current [indiscernible], as I call it internally is around 20 days of needle biopsy to needle first dose. The Phase II was 90 days, we’re currently at 60 days. I have a very strong line of sight to around 30 days. But I think it will happen by the time we launch, which, as I said, could be next year if we get accelerated approval by the FDA.

I think the brick wall (ph) right now is around 20 days based on known technology, but we are working internally and with our partners, all our suppliers to invent the future, which is can you go even lower than 20. But today, I have no line of sight to less than 20 day, but we’re going to keep trying.

Courtney Breen

Fantastic. So we’ve touched on some science already, some manufacturing of engineering. And I think there’s also a really big other decision you’ve made in the last kind of 18 months or so. where, in many ways, Moderna is at a point where it’s about a commercial show me story. And so you have taken this decision to not only play the CEO role, but also play the Chief Commercial Officer role in delivering on that show me of delivering a revenue generation in a competitive commercial market. Tell me a little bit about that decision? Why you took it, and how on earth you are doing both of those very simultaneously?

Stephane Bancel

Good. So I took it because we were building commercial and it was being built the pharma way. I know that pharma does not thinks right, is just that they are not running platforms. The use of technology was also a bit old school at pharma, it was not Moderna. And as I reflected on it, it became very clear that we’ve done, mostly team has done an amazing job, build a platform from an idea of a drug to animal data to Phase II data to a poor, we need to still show the world and with RSV and flu, and few approvals coming. I think the skeptics will see in the couple of years that will have a lot of products approved.

So I think we’ve done a really good job. We’re still improving. It’s not finished, and we’re always going to keep raising the bar by building an amazing machine for what I call generating assets. I think Moderna has an amazing — and if you get over the [indiscernible] and you can visit [indiscernible] said, there’s always open invitation, she is the host, may be not, but I think once you get into our factory and you see how we do research, how we do manufacturing, how we scale, how do 3D printing to go faster to develop processes, you get a sense about the platform we’re building.

And our AI, and we’re very lucky again, I say, we were lucky with the cloud because when we build the company, the cloud was just starting, and we build the whole company on the cloud and scale with the cloud. And now we’re scaling the company in a big way and GPT’s coming, we’ve just been lucky on the timing. With more than 1,000 GPTs already within the company and going up by the day. But the observation I had is we need to build a commercial machine, that need to be a commercial platform, and it was not being built with a platform mindsets. And we tried and we tried and tried to coach and tried to coach and it was not going fast enough.

And so I came to the conclusion just before Christmas that the best use of my time in the next number of years was to lead personally the build of the commercial platform because as Stephen Hoge was the President of the company and has been my partner since early days reflected on that, every time we are to build the rest of the company because we started as a research company. We’re a research company for four years. He and I, were running research. And then we build manufacturing, and I was very involved because of my background at Lilly and I’m engineering by training, and I worked at factories at Lilly Eli. And then we build together the clinical development team, which we really led and I helped him.

We realized that he and I sleeves up here to build all those things and to rebuild them and rebuild them. And every time we give a piece to somebody coming from industry to build a replica of what they’ve seen and experienced. And I think it’s interesting that Stephen came from McKinsey and I give him research after trying to two Chief Strategic Officers coming from industry. That will give me a pharma type science and he has done amazing with the science, they need the same in development.

And so — and Stephen, it’s really — because now manufacturing is really strong understanding with an amazing head of manufacturing, that I’m still coaching and raising the bar, can see him running R&D. And so that’s part of the asset generation platform and machine that we have. I’m keeping an eye on raising the bar that was amazingly build and it has been mostly built. So we’re talking about last 10% of the sales to build there. But on commercial, most of the heavy lifting is ahead of us, and we just need to do it Moderna way, and I’m going to have to sweat out.

And so to your second part of your question, how am I doing both of the jobs? Well, I have a great team. I didn’t go to the JPMorgan conference. It’s the first time in 20-plus years. I think Jamie, our CFO, he did a presentation with Lavina, we have a great team. I told him, guys, I need to go and be with the U.S. commercial team, and I didn’t get on the plane for JPMorgan. Stephen, as I said, is really running the asset generation machine; Jay, our Head of Manufacturing, he’s amazing at raising the bar in manufacturing and he building the INT. We build – we actually had — more than a leader who run the COVID scaleup during the pandemic.

We send him on the one month sabbatical, when we got the Phase II data of INT, I told him you the next climbing of the Everest, is called cancer and you are going to have 18 months to be the cancer platform scratch and he’s doing an amazing job. So we have a lot of great people, so I just rearranged my job, as you know, because we have an amazing head of HR as well. So having the team and not doing things like silly example we give you a sense. There was an industry meeting in Greece for all the CEOs of industry. In April, and I was invited like every year, and I told I’m not going. So you guys deal with industry matter, thank you very much. I want to stay behind and I’m going to be the commercial organization.

So I’ve just reprioritized my time very differently because I already believe the most important thing I can do over the next few years, it would be an amazing Moderna light commercial engine because I need to catch all the drugs that Stephen is throwing at me.

Courtney Breen

Absolutely, and hopefully that’s still coming. As you think about that commercial machine and kind of this first test, which we will be RSV. What are some of the components that will be critical to deliver on? And particularly when you think about the RSV opportunity, how are you using the asset that you have in hand to run against kind of the opportunity ahead.

Stephane Bancel

Sure. So if you think about it, another innovation that we’re bringing in RSV is the prefilled syringe. As you know, the Pfizer product has nine step of a lyophilization (ph) process to prepare the GSK product for RSV as four steps. You clean your arm, We just do a needle, we infect it to put a band aid and that’s the innovation that’s important in a world where there is a lack of labor in pharmacies. You see CVS, there’s a couple of pharmacies unionized recently, last year during the peak fall season, which is very busy in pharmacy because you have flu and COVID and now RSV vaccine on top of the GLP 1 and Lipid 1 everything else.

And unlike Walmart store, unlike an Amazon warehouse in the busy fall season, you cannot hire people because we need qualification, it’s a regulated business. And lot pharmacies coming easily. And so I think that innovation is going to help a lot. We are hearing it from pharmacies, we’re hearing it from independent pharmacists, we’re hearing it from hospital network, CEOs and CMOs, so I think that’s really an important feature and then the ability to bundle. And then in ’25, I would see, potentially the combo. So we’re going to start to be a player that has also the ability to bundle product. We don’t have the ability when you have one product like COVID and the other guys can bundle their products in the retail channel.

But I’m going to start with a little bit in ’24, a lot in ’25, so I think those are the type of things that’s going to help us, and how do we build customer intimacy? We are right now spending a lot of time with the big retailers to think about, okay, how do we help reduce your waste management, because in a vaccine seasonal business, it’s industry practice. I didn’t have a season, you return your waste to the manufactures that’s how a true business works, because the products obviously obsolete, you use different products next season.

But I don’t know if you like to spend time returning your Amazon purchases. I don’t, it’s the same thing for pharmacists because to be reimbursable product, they e have to make sure there is no vial broken, that the box is not damaged and then they have to put the bar code and the package and send it back, nobody likes to do it. But we’re building EDI networks between us and pharmacy chains so that they can tell us every store based on usage by store, what type of product they want, and we’re going to manage that for them, so we’re putting those in place.

We are looking at the size of the box. Why? Because when you go and spend time and sweet the details in pharmacy, you realize that which space is really important. And when you have and RSD box like this, which is a Pfizer box size and Moderna box is much smaller, that’s another advantage that you have. I’m actually now working with the team, okay, how do we have four, maybe the tail end of the season or smaller doctor’s office or independent pharmacies a smaller box. So we are — when they work for COVID and RSV and then flu [indiscernible] syringe box. And so there’s a lot of things like that, that we’re just sweating with the customers, with hospital network is how do we help them, educate the doctors. So we’re renting a lot of medical content, working directly with CMOs of all the big hospital network.

So we’re just trying to create that intimacy with the customers to sweat every detail that there is no detail more enough, if he matters to them, he matters to us. We change even how our 3D bar code and the type of information is contained because by spending time in the pharmacy, we realized during the season that after scanning the bar code more than a product, they have three inputs of information by hand. That’s insane. So let’s get rid of that because I want the pharmacist when they reorder in the stores. They want to pick them on our products because we’re an easier to give the consumer that walks into the pharmacy than any other product.

Courtney Breen

Makes a lot of sense. And you did make reference an upfront that we’re at the 31st of May, and there’s obviously a decision coming from the FDA and they’re doing work at the moment. Can you speak a little bit about kind of the efficacy, the duration response and kind of any signals you can give on kind of when we might hear from FDA?

Stephane Bancel

So the FDA is already in their hands, I don’t know because I’m not online, Lavina is online and its last day of May. So all — I mean we’ve stopped asking questions from FDA a while ago, which is a good sign at the end of the process, every time I’ve done this thing. When you still have questions back and forth, which is not a good sign that you are converging and closing. So I think we’re just running all the processes of approval and so on. If you look at the products, I think it’s really hard at this stage because there’s no head to head study. To be clear, how are the different products performing in humans at scale.

What we believe is important and there’s an important ACIP CDC meeting at the end of June, which is why having the approval before the ACIP meeting is key for us to make this season, obviously. CDC cares about having a product that is in your arm. And so, if you look at it, it’s very rare that CDC recommends a product, it has happened some time. But when they have a large set of data showing that the product drastically drives difference in hospitalization. If you look even at COVID, it’s interesting between our product and Pfizer, there’s no recommendation.

If you look at the data, even published by the U.S. government like VA ran a massive study in a real world, showing very different hospitalization rate between the Moderna vaccine and the Pfizer vaccine in millions of people, much less of patients with Moderna, which is not surprising because Moderna dose is 2x of Pfizer dose. So you make twice as much antibody, it’s going to last longer. It’s just simple biology. We still have not made recommendation because they don’t want to drive worry by the public or the medical professionals. And so what we need from ACIP in June is pretty simple is, we need to be recommended for vaccination [indiscernible]. I think it will take a year or two before there’s enough real-world evidence to get a good sense for safety, efficacy and durability on the different vaccines.

As you know, flu vaccines were done in different seasons. Pfizer and GSK got a little bit lucky because as we are doing the study, then Omicron happened and everybody went back home, no mask. And if you look at the number of ISVs, it just drops, of course, on drug or placebo, there was no cases, so your efficacy looks amazing when there’s no cases. And so I think we’re just going to have to wait. I think on the safety, we might end up having a massive advantage on the Guillain-Barré syndrome. As you know, in our Phase III study, there is no reported case of Guillain-Barré. It was twice the size of the GSK or Pfizer studies. But more importantly, if you look at COVID going back to the platform, if you look at COVID, there IS no Guillain-Barré syndrome. If you look at the Pfizer cases reported by the CDC at the February ACIP meeting, they were 3x higher than GSK.

So I don’t know about your parents, but for my parents, I would rather be on the GSK vaccine and on the Pfizer vaccine because, again, we don’t really know for efficacy at this stage. But we know for safety 3x case of guiding, even though it’s a rare event. As you know, Guillain-Barre is a very, very bad side effect to get. And we believe we might have a case where with Moderna, you might not get Guillain-Barré syndrome on the Moderna platform, so that would be a massive differentiator. Again, it will take a year or two for the CDC to report at the national level, all the safety data. But in year, or two might have a nice upside that — in that case, we might get to recommendation because of safety actually. So those things is just too early to tell but I kind of lack our chances.

Courtney Breen

Fantastic. That’s really helpful to understand. I do want to make sure we get to oncology because of ASCO, but I’m going to take one pivot before we get there. And I know there have been some questions that have come through a pigeon hole on this, and it’s a highly topical event at the moment. We’re seeing your stock price moving a bunch recently in response to the bird flu kind of scenarios that might play out. And yesterday, there were reports on a potential collaboration with the U.S. government in advancing a vaccine candidate. I’ll ask you to share what you can on that. I would be silly not to, but I also want to ask you to share, perhaps, what you learned from COVID that might be guiding the way you’re thinking about this opportunity differently? And also, as you think about the mRNA platform, may that change over the long term the approach to stockpiling when it comes to these kinds of things because of the rapid nature of an mRNA platform.

Stephane Bancel

All right. Those are all great questions. So let me talk about the virus for a minute. As you know, the medical and public health leaders have been worried for the — 28 years have been in infectious disease about Avian flu. When COVID started, I was made aware of the first cases in China between Christmas and New Year 2019. I assume it was an Avian flu, because just how my brain was brain washed for 28 years. And so we, at Moderna started to be worried, the first half of 2023, because we had to see in so many countries, in so many mammals, species, including wild animals, farm animals, DH5 [indiscernible] everywhere.

And as we know, again for all of those that spend whole carriers in infectious disease that people are that are close to animals get infected. And I’m not worried in terms of Avian flu people are directly working close to animals, getting infected like what is being reported like in the eye or whatever. I’m not worried about that. What I’m worried a lot about right now, and I have no data is do somebody working close to animals who is immunocompromised because they have HIV, because they have cancer, because they have some type of diseases, has been brewing the virus in their body, with the body having a chance — the virus having a chance to mutate.

It’s unknowable. It might be zero cases of people working like this around the world. It might be balanced. I have no ID, I have no data. And the day I’m going to start to worry is either cases of somebody not working on the farm reporting flu like symptom i.e. coughing and of fever because it will have come from a human-to-human transmission. And because you will probably a bit like, if you look at COVID, it seems like we have cases of COVID as early as October 2019, circulating in China.

And that’s what I would start to really worry about. So because of the animal situation that I described, last year, in the first half, we decided with the team that it was wise to get an H5 vaccine into the clinic. We started a large Phase I/II study that has been since then on clinicaltrial.gov, nobody looked at it, we didn’t even advertise it because there was no need to worry anybody for it. We were in a large Phase I/II study where we are looking at dose, because humans will be naïve to a virus, so it is not surprising, you need a higher dose than a seasonal flu booster, which as we know, we have Phase III data on, much higher dose.

And so we need to figure out what is that dose with our mRNA platform, which is the goal of a Phase I. And with the Phase II inside the Phase I by giving a big enough and to participants for every dose, so that’s why we have enough safety database moves straight into a Phase III, which we have done many times now with our platform. And the idea was let’s get the data so that if something bad happens, we know the dose and to grow it in COVID time lines to your last question, that will put us in the June 2020 time frame when the issue starts. So think if we had known the dose of COVID on our platform in January 2020, that will have moved the launch six months, right plus because it’s flu, the FDA believes that there is a surrogate end point for approval, which is the level of antibodies. That’s what they use every year. So the Phase II will be much shorter, basically 29 days post dosing. The study will be smaller.

So could I see a three more Phase III studies start to finish, I do? So they’ve been reported an HSS, I made some comments that they’re in discussions with us to potentially work together for a Phase III study of H5. That study, as I said, could be completed as short as three months. So if we were to start it soon, when we get the dose from Phase I/II, you could see the study completed late summer, early fall. And the other piece of the learning from COVID is the manufacturing capacity, which is when COVID happened, we have made 100,000 doses in 2019 and I walked into the office of my head of manufacturing at the time, so how do we make 1 billion doses next year. And you look at funny. He’s like you realize it’s 10,000 times more, like you’re wasting time. How do we make a billion doses next. And they made 850 million doses. So pretty good or crazy target that I literally picked out of [indiscernible].

And so but now it’s very different. We have massive scale. We have a plant in Canada that I visited two months ago that is almost ready. We have a plant in the U.K. that is being built. We have plant in Australia. So we have big difference. It is not only [indiscernible] HIV vaccine approved by FDA, maybe a few months from start of problems versus a year, which was already amazing. And unlike for COVID where we only shipped 20 million doses, the sadist day for me in 2020 is the day we ship the product. It was a day after it got approved on the Friday night by FDA, Saturday morning we shipped to CDC, we shipped only 20 million doses because we worked one year to make 20 million doses.

So now we could literally make 20 million doses in the month. So if you think about a few months, as you do your Phase III and partly you could start making at risk if the government want to start stockpiling. You could have two dose for every American by the time you launch your product, but you start with the first cases of trouble. The thing about the world looks so different talking about an April launch of a vaccine. If I go back to the 2020 time line that we are all too familiar with, we have doses for everybody. We look quite different. So that’s why we’re doing all the things we are doing. It’s impossible to put a probability on it. It was going to be zero or 100. And I don’t know which one. So I’m preparing for 100.

Courtney Breen

Makes a lot of sense. And I think if you’ve got utility across your platform would be able to scale with [indiscernible] having to invest.

Stephane Bancel

I don’t need to spend a dollar of CapEx from our shareholders to get the doses done for the government.

Courtney Breen

Makes a lot of sense when you put it that way. Pivoting a little bit to oncology because I mentioned that I did want to get there. You’ve seen kind of — you’ve outlined three key areas that you want to be confident on when it comes to thinking accelerated approval when it comes to melanoma and you spoke to kind of the durability and you feel like you checked that box, you’re expecting a milestone this year on the study enrollment for the Phase III and you need this Marlborough manufacturing facility in a ready enough state. You gave us some — alluded a little bit to where you are on that process. But can you qualify a little bit further about how far you’re on, on that journey with [indiscernible] and kind of what you might kind of be able to share in terms of the journey to INT becoming a commercial product?

Stephane Bancel

Sure. So we bought the Marlborough plant, which was an empty finished box in March 2023. And if you look at what we’ve done during COVID, 18 months to 24 months doesn’t seem like a crazy time line. Compared to industry standard, it is a crazy time line, but given what the team has done is it’s not a crazy time line. I go to the plant at least once a month the team goes once a week, they literally have a room — the size of this room with day-by-day positive scheduling of building the plant and all the equipment and when they’re going to be dropped in every room and when they’re going to be validated because as you said, to file an accelerated approval, I need in this file, I sent to FDA and I need the manufacturing dossier. And I need to have run all the testing on the machine in that dossier.

And so I believe the plant is going to be the critical path item to filing. Because as I said, the Phase III study in melanoma is enrolling extremely nicely. I think the plant is a critical path item. And so we’re working as hard as we can. We know our lives is on the line because when you have only two people with melanoma being disease free it’s pretty cool. And we want to make that available to as many people as we can. And so as I said, ’25 filing and ’25 launch assuming a six-month, actually, probably what I believe will happen.

Courtney Breen

All right. That’s exciting to hear. And I do see that we’ve got a specific question on the cancer vaccines opportunity in terms of indication selection. And the audience member is asking kind of are you thinking about where others are going in terms of beyond tech and Roche in terms of chasing down other indications. Is that coming into the frame as you’re making decisions about which indications to go after next beyond melanoma and ultimately to lung cancer, etc.

Stephane Bancel

So we are looking where other people are going, but we always look at things as a data point, not as a strategy. We always go back to science. It’s very boring how we run the business, but we are on the science business. I don’t know how to do it, but looking at science, I think we get the best scientists and doctors. And in that case, you have [indiscernible] team to be aware, we have outside advisers, of course, to figure out based on understanding of how our drug works, which is using your immune system. It’s an important point maybe because you mentioned BioNTech. The two technologies are very different in cancer. I think a lot of people missed that. We are an intramuscular. They are an IV. We use a lipid. They use a lipoplex technology.

So I have no idea where the mRNA goes. I have no idea how they designed it. I have no idea of the algorithm. The only thing I know is, is it 20 mutation, we have 34 in our product. But it is the only thing I know for a fact as a differentiation between the product and the IM and the lipid proof of pattern (ph). That’s the only thing I know. What I know for a fact is our mRNA when you inject in the muscle in humans, it goes to into your lymph nodes. We know that for a fact, which is why the immune system is for those who don’t know the immune system, which is why you wanted to [indiscernible]. I have no idea where theirs is going. And so we look at the data as a fact. But we go back to the basic science, which is where can we improve on KEYTRUDA monotherapy based on what is understood of immunology that has been looked and understood from a lot of trials that have been run in immunology.

And in terms of the latest understanding of the immune system because again, a bit like the CNS, the immune system still stays a world that we know some things and as a global center community, we have hypothesis on other things that we don’t know for sure. And so you don’t want to be very thoughtful and critical as you debate IDs about what people believe this is what we know. And we try to take this to build a portfolio of indication to manage risk. Like you guys build portfolios of stock because if I tell you the stock going 100% for sure in the next 10 years, you’ll buy only one stock, right, but you don’t know you build portfolio. So we do the same thing. And as you see over time, we started in places that are the most obvious — but as you see over time, we’re going to go more and more in places where we have strong hypothesis that we could do something different. Like we might go in places who want KEYTRUDA. We talked about liquid biopsy recently. And Merck cannot block us. It’s another important piece to know about this partnership. It has been set up by contract where no party can block the other one.

So if I decide to go in Stage 2 cancer, in melanoma, or Stage 1 as a monotherapy, they might say this is crazy. We don’t pay for it, you are right? We will pay 100% of the R&D cost. If the data is positive, they’re going to reimburse us half of it plus cost of capital, and it’s symmetric, which is they want to go in Stage 4 pancreas and we say it’s crazy. They say we want to go because BioNTech is going there, and we say it’s crazy. They can go along. They’ll pay 100% of the R&D cost. If they are right, which would be great for patients and the business. So I wish they are right. We’ll pay them back half of the cost plus the same cost of capital. So both parties can be very creative and have a different beliefs. So initially, you see us doing all things together because we’re going to have to the lowest hanging fruit in terms of the risk. But as time is going to go by because, we only have five programs that are currently known to the public, but they are working on the next wave and the next wave and the next wave.

You see how Merck was aggressive with KEYTRUDA. This is one of the thing we liked about Merck. When we are talking to a few companies about who do we partner with – on INT back in 2016. And we like that aggressivity because it’s very Moderna like

Courtney Breen

There’s a lot of trial.

Stephane Bancel

Yes. And so expect to see a lot of trial of INT in coming in the next year.

Courtney Breen

Fantastic, that’s exciting to hear for the patients around the world. I want to pivot you, you flashed up on the screen very briefly the guidance. The ’24, for ’25 and also this guidance is longer-term guidance for 2026 breakeven. Speak to me about kind of the trade-offs that you think might be important to make when it comes to achieving that breakeven in 2026. And are there any decisions you might choose to take that prevent you from getting to that breakeven, but you think they’re the right decision for the business.

Stephane Bancel

Yeah. Sure. So an important thing to know about us is, we’ve always been obsessed about creating returns. The thing we have with Moderna team, because Noubar, our Chairman has been here since day one. Stephen has been here since almost day one, [indiscernible] our President. And we’re always obsessed about cash on cash returns. We’re not obsessed about how do we manage for $0.01 of EPS next quarter. This is not who we are. Because we — I think how do we get 10x return on your cash. That’s how we think every day and it’s always a question, 10x, 10x, 10x. So because of COVID, we’ve got very fortunate so not only doing great things for humanity. We got a very big balance sheet, thanks to COVID. And this came at a very nice moment where the platform was clearly working. Because if you think about the parallel universe without COVID, we might have had the platform working with the same time, but not the cash to fund it, and have been a really painful problem.

And so, you see us investing very aggressively to learn things. That’s why we’re doing a lot of Phase I/II in vaccine. And internet, we are very clear, if the result is negative, we are done. And so if you look at the VCV shingles, it’s a head to head to Shingrix. It’s 800 people, Phase I/II, which is really on the supersized of Phase I/II vaccine versus people doing 20s and 30s. But the question was very clear, I want to know is it non-inferior to Shingrix or not? Because if it is not, we are done. If it is, we’re going to a Phase III because I think even if we get only 20% or 40% market share gain, Shingrix is going to be a $6 billion to $10 billion franchise. I don’t need to invest $1 of CapEx at a 95% incremental gross margin of a product I can make off season, but it’s not seasonal product. I make in Q1, when I don’t do COVID and flu so on, with not a dollar of CapEx, 95% gross margin on $2 billion, you can do the math easily. For $400 million phase free cost. I don’t think the finance team to do for me and I can do it with myself. It’s a very good ROI.

And so that’s the type of investment we’re doing a lot right now. The good news about those Phase III is we only do them once. So thinking about the respiratory portfolio, COVID is behind us, RSV is mostly behind us because we have to do safety monitoring but it is mostly behind us. Flu and COVID and flu plus COVID are going to go down. So I think over the next few years, the cost of R&D for respiratory is going to go almost to zero. It is kind of in that time frame. Cancer is expensive, but it’s actually less expensive than respiratory. And Merck is paying half the tab, and so we are trying to really manage the R&D cost at that scale — I mean, if you look at it, we have $4.5 billion, that’s pretty nice scale. So as you saw in ’24, we’re going to be roughly in the same range as ’23, ’25 going to be in the same range, and we can flex down because a lot of ’25 and ’26 costs are not committed yet. So we can manage the R&D line.

Manufacturing as you know, we have done massive restructuring post COVID, we stopped Lonza and did a lot of things. And so as we launch products and grow sales, the cost of goods is going to go only one way, which is down, which is great. And as you saw in Q1 already, SG&A was flat, well, actually down compared to last year because we are trying to get the economies of scales and a lot of tech return on our tech investment. And so we’re going to manage very careful. We also have a Blackstone deal. I think it was a good example of an off P&L partnership that we’ve done to allow us to create the returns for our investors by getting those Phase III done, but we’re sharing small royalty to manage your P&L. We know for other investors as being breakeven is important. So we’re going to get there. But we’re obsessed about creating returns.

Courtney Breen

Fantastic. I think that’s a wonderful moment to finish on. Thank you so much, Stephane. My pleasure.

Stephane Bancel

Thank you so much.

Courtney Breen

Thank you.