Moderna, Inc. (NASDAQ:MRNA) Q3 2024 Earnings Call Transcript

Moderna, Inc. (NASDAQ:MRNA) Q3 2024 Earnings Call Transcript November 7, 2024

Moderna, Inc. beats earnings expectations. Reported EPS is $0.03258, expectations were $-1.9.

Operator: 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 speakers’ presentation, there will be a question and answer session. To ask a question during this session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-one-one again. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Lavina Talukdar. Please go ahead.

Lavina Talukdar: 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 update. You can access the press release issued this morning, as well as the slides that we will be reviewing, by going to the Investors section of our website. On today’s call are Stéphane Bancel, our Chief Executive Officer, Stephen Hoge, our President, and Jamey Mock, our Chief Financial Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. I will now turn the call over to Stéphane.

Stéphane Bancel: 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, Jamey will present our financial results and outlook, and 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 third quarter of 2024 compared to the third quarter of 2023, we reduced operating expenses by $500 million across cost of sales, R&D, and SG&A. This figure excludes $1.4 billion of [indiscernible] charge in the third quarter of 2023.

I would like to thank our teams, who have been working hard to achieve these cost savings and will 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. Spikevax was available across all segments of the U.S. healthcare system. Our manufacturing and logistics teams were able to double 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 IQVIA, which includes retail pharmacies and long term care. As you can see in the graph on the left, the earlier approval of a vaccine this year has helped to push total market vaccine growth 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. While we will not know the shape of this curve until the end of the season, we are encouraged that the COVID market is something to prove to be a sizeable and durable long term market. Moderna has 40% share of retail shots in arms season to date. Turning to Slide 7, we think it is helpful 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.: the retail pharmacies, integrated delivery networks or IDNs, which basically serve hospitals and doctors who are part of these networks, and a third group, government programs and other.

As you can see, the retail channel comprised 73% of total U.S. market for COVID vaccine doses last year in 2023. COVID vaccines have been [indiscernible] mainly given to pharmacy settings [indiscernible] smaller distribution in [indiscernible] channel. If we now look at flu, in the flu market, however, the distribution by channel is different with [indiscernible] on IDNs and government. Since [indiscernible] than flu in the [indiscernible] space [indiscernible] 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 segment, therefore as we [indiscernible] our COVID strategy, we see the opportunity to drive the COVID vaccination rate closer to flu over time, especially in the under-penetrated channels.

[Indiscernible] COVID vaccination rate over time is a combination COVID/flu vaccine which Stephen will discuss shortly. Let’s now turn to what Moderna is doing to grow our vaccination rates. The first objective of our effort is to educate healthcare providers on the importance of COVID as a public health threat, its negative impact is a much greater cause of [indiscernible] and 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 [indiscernible] of COVID than flu. Secondly, we are going direct to consumers to emphasize the benefits of getting vaccinated, and our most recent campaign highlights the danger of long COVID and the importance of vaccinations to minimize the risks of it.

Additionally, public health authorities, including the CDC recognize the importance of vaccination, which is reflected by the most recent [indiscernible] recommendation for additional COVID doses for immunocompromised people and those 65 and older in the spring of 2025. Moving onto RSV, Moderna’s third quarter mRESVIA sales were $10 million. This was below expectations going into 2024. Unfortunately, the timing of approval and recommendation by the CDC on mRESVIA resulted in us missing most of contracting season. Additionally, the substantial build-up of inventory in the channel by competitors prior to our launch has had a negative impact on our sales. Looking to 2025, we believe that we’ll be able to participate from the beginning of the contracting season in the U.S. We’re also vying for approval of a broader mRESVIA label that will allow us to address the 18- to 59-year-old high risk population.

Additionally, we see the potential for market expansion if regulators recommend revaccination. 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 the Moderna board of directors. Abbas has strong commercial background with vaccines and is a great addition to our board. He has more than 25 years of commercial experience, more recently as CFO of Vifor and before that as [indiscernible] GSK. Abbas is an ideal board 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 Abbas in the years ahead. Finally, I am very pleased to announce the expansion of Moderna’s executive committee, expanding the responsibilities of two current members of the team and adding three new members to the team to help us make sure we execute our strategy and deliver on our mission to patients.

First, Stephen will expand his role to include oversight of the full commercial organization, which was previously divided into [indiscernible]. As Moderna President, Stephen is responsible for strategy across the [indiscernible] of the company: research and development, and medical and commercial. Joining Moderna’s executive committee are Rose Loughlin and Jacqueline Miller. Rose is being promoted to Executive Vice President, Research. Jacqueline has been promoted to Chief Medical Officer, Medical Development organization. The promotion of Jacquie 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 this reflects our commitment to grow and develop our internal talent at Moderna.

Tracey Franklin, our Chief Human Resources Officer, will also expand her role, becoming the Chief People and Digital Technology Officer. The expansion of her role emphasizes the vital integration of people, culture and digital innovation across the business. As Tracey and the team work 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, be it [indiscernible] software, AI solutions including our own machine learning algorithm or GPT enterprise, and/or robotic solutions. I would like to thank Stephen and Tracey for their new expanded roles and for their partnership over many years and many years looking forward, and to congratulate Rose and Jacquie for becoming part of the company executive committee.

With this, let me turn to Jamey.

Jamey Mock: Thanks Stéphane 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 3Q24 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 provision release of approximately $140 million primarily driven by lower product returns from the 2023 – 2024 season compared to our previous estimate. Additionally, we commenced RSV vaccine sales in Q3. While initial RSV sales were limited at $10 million, we believe there is potential for long term growth as we work to capture a larger market share of 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 billion to $3.5 billion, which implies a 4Q product sales range of $0.8 billion to $1.3 billion.

We expect our U.S. 4Q product sales to be between $200 million and $500 million. The range is driven by the following three key variables: our Spikevax 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 million 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 3Q24 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 3Q23. As a reminder, last year we undertook a strategic initiative to restructure our manufacturing footprint and recorded $1.4 billion of charges in 3Q23 from inventory write-downs, [indiscernible] 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 3Q24, 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 strong year-over-year spending declines for research, development, and clinical manufacturing as we continue to drive cost efficiencies across all areas of the organization. SG&A expenses for 3Q24 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 recognized 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 3Q23. 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 3Q23. Earnings per share for the quarter was $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 SG&A expenses by 36% year-over-year. We had year-over-year reductions across all areas of our SG&A categories: commercial, medical, and G&A functional spending. Major drivers were from reductions in purchased services and external consultants as we better leveraged 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 RSV 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 billion to $3.5 billion, and 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 estimate to $4.6 billion 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 SG&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 outlay 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.

Stephen Hoge: Thank you Jamey, 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 aged 65 and older in that study. As previously shared, we intend to file mRNA 1283 for approval in 2024 and will 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 high risk from RSV.

We are also using a priority review voucher for this program, which we intend to submit this year. We also shared positive Phase III data from our combination flu/COVID vaccine, mRNA 1083, and intend to file for approval in 2024 subject to ongoing discussions with FDA. We have 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 PDUFA 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 III vaccine efficacy study. As a reminder, this Phase III study is funded within our project financing agreement with Blackstone Life Sciences.

Slide 20 shows the study design for that Phase III standalone flu vaccine. This is a randomized observer-blind active control study for mRNA 1010 against the standard as 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-respiratory 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 III 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 un-blinding 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 neo-adjuvant 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 neo-adjuvant 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 III study for our norovirus vaccine candidate. As a reminder, norovirus is a gastrointestinal disease with high unmet need and no approved vaccines on the market. The Phase III study is designed to test the efficacy, safety and immunogenicity of our vaccine in 25,000 adults aged 18 and older. It is randomized one-to-one, observer blind, and placebo controlled. Turning now to the trial design for our second Phase III study in non-small cell lung cancer for INT in collaboration with Merck, which complements the Phase III INTerpath-002 trial, this Phase III study called INTerpath-009 will enroll more than 1,200 patients with stage 2 to 3b non-small cell lung cancer without any GFR mutation, and who are able to undergo surgery.

These patients will receive neo-adjuvant 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 end point for the study is disease-free survival, and the secondary end points include distant metastasis-free survival and overall survival. With that, I will now turn the call back over to Stéphane.

Stéphane Bancel: Thank you Stephen and Jamey. During our R&D day in September, we shared the company priorities: Priority 1, to drive sales of approved products, Spikevax and mRESVIA; Priority 2, focus on our [indiscernible] plan where we believe we can have up to 10 product approvals over the next three years, which will be drivers of sales growth; Priority 3, to deliver cost efficiency across the business and slow the pace of R&D investments, reducing annual R&D expenses by $1.1 billion [indiscernible]. Our first priority is to drive sales of Spikevax and mRESVIA, which we believe are the foundation of our respiratory vaccine portfolio. We will continue to work with all market [indiscernible] to maximize Spikevax availability.

We are focusing our 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 U.K., in Canada and in Australia in 2025 and will start to fulfill multi-year contracts in those countries. With a full season of RSV contracting in the U.S. and other countries in 2025, we expect to increase mRESVIA sales and market share. We are focused on delivering up to 10 product approvals over the next three years, which we believe will drive sales growth and fund the next wave of our investments. For many of these programs, we have near term milestones. For CMV, we expect to trigger the interim analysis for our Phase III vaccine efficacy study by the end of this year.

We are looking forward to those results. For PA and MMA, we plan to initiate pivotal studies. Our norovirus and flu Phase III vaccine efficacy studies are now underway. Finally, we intend to file three products in 2024: our next-gen COVID vaccine, our RSV vaccine for high risk 18 to 59-year-olds, and our combination COVID-flu vaccine, which is subject to ongoing discussions with the U.S. FDA. We will continue to focus on improving efficiency by keeping our R&D and SG&A expenses flat to down in 2025. As demonstrated in the quarter, we are making progress on our cost saving initiatives already. By 2027, we expect to decrease annual R&D expenses by $1.1 billion. On the cost of sales, we continue to drive efficiency and we expect to achieve operating leverage [indiscernible].

We have two products approved that help protect people every day. We have a large [indiscernible] pipeline [indiscernible] and we will continue to focus on delivering the greatest possible impact to people [indiscernible]. While there is work to be done to meet our execution targets, 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 have taken to help people are becoming a reality. With this, Operator, we’ll be happy to take questions.

Q&A Session

Operator: Thank you. [Operator instructions] Our first question comes from Salveen Richter with Goldman Sachs.

Salveen Richter: Thank you, good morning. Two questions from 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 that these contracts, that should you expect them to recur in 2025? Then separately on CMV, you talked about the DSMB–you’ll share the results if the DSMB recommends un-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.

Stephen Hoge: Sure, thanks for the question, Salveen. 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 and Australia. We announced an order in Brazil, and so that’s been–the balance will be shipped either in the third quarter or the fourth quarter. 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 as we mentioned at R&D day, 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 upon the contracts that we have in certain countries, so that’s a little bit on the rest of world split.

Jamey Mock: On the CMV question, if the DSMB recommends un-blinding to the sponsor at 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 receive them. There is a change that the DSMB will not recommend un-blinding, 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 DSMB recommended un-blinding, share those results.

Operator: Thank you. Our next question comes from Eli Merle with UBS. Your line is open.

Eli Merle: Thanks for taking the question. Just another one on how to think about the ex-U.S. 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 ex-U.S., and I guess, what’s essentially guaranteed from a revenue perspective here in terms of some of these ex-U.S. contracts, if you have a sense of maybe, like, what the minimum sales ex-U.S. could be in certain years going forward based on that. 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 rate of accruals, I guess what’s your latest expectation in terms of the time frame 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.

Thanks.

Stephen Hoge: Yes, so I’ll take the first part, Eli. 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. 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.

Jamey Mock: 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.

Eli Merle: Great, thanks.

Operator: Our next question comes from Gena Wang with Barclays. Your line is open.

Gena Wang: Thank you. I have two questions. One is regarding the commercial questions. If we calculate US $1.2 billion revenue and accumulate 19 million U.S. doses, is the calculation $63 per dose as a net price a right way to think about it? 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? Quickly, regarding the flu combo, flu-COVID combo, not using priority voucher, maybe give us a little bit more rationale for this, and then will all three that you submit this year, how many of these will make it for 2025 winter season?

Jamey Mock: Yes Gena, maybe I’ll take the first question 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.

Stephen Hoge: On the pipeline question, Gena, 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 that 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 two–the other two submissions to go forward with priority 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 revenue from either the 18 to 59 RSV SBLA or 1283 in our 2025 guidance or expectations, and if we were able to deliver those with those priority reviews and approvals, we still wouldn’t include any revenue and that would be an upside.

Gena Wang: Reserve return?

Stephen Hoge: Sorry, could you repeat the question, Gena? I missed the sales return part.

Gena Wang: Yes, sure – reserve return, could you provide the final reserve return from last winter season, because I know you initially booked over $500 million, and you need to adjust it to see the final numbers, so if you could provide the final numbers, and what is your reserve return assumption so far for this winter season?

Jamey Mock: Yes, so as I mentioned in my prepared remarks that we released in the quarter about $140 million primarily driven from return reserve being lower than prior estimate. That $500 million-plus went down to, let’s say, $400 million for the prior season. 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.

Gena Wang: Thank you.

Operator: Our next question comes from Michael Yee with Jefferies. Your line is open.

Michael Yee: 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 state that has to be run? I think it’s a little unclear to us on the combo. Then on RSV, I think the market anticipated this was going to be a big market; however, obviously there are 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.

Stephen Hoge: Thank you for both questions. First on the–I’ll take the combo and I think Stéphane will take the question on RSV. First, we are in discussions with the FDA. The data for 1083, as you will remember, came sort of middle of this year, and so we’ve only more recently had the opportunities to be sharing that and engaged 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 to the benefit of ourselves and the agency.

Stéphane Bancel: On the RSV, Mike, I think there’s a few things. As you know, the market has been much slower than last year and much slower than anticipated. Obviously the new CDC guidelines that came out in the June timeframe impacted that. The other piece we are hearing from customers is they’re very focused on making sure people get covered 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 RSV 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 no contracting happened before the CDC guideline, there’s quite a lot of volume in the channel, 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 hands, both wholesalers and retail pharmacies, as you can imagine, it’s taking quite some time to go through that inventory, and so we think it’s an interesting question about the market dynamic in terms of timing.

Again, with Q1 being more important timing for RSV moving forward, it’s a question to be seen. Of course, we expect as more data accumulates, CDC will cause it to review and look at what is the right guideline, so that’s for public health to decide, and being able to totally contract COVID and RSV at the same time for flu season, we believe it’s going to have an impact in the U.S. The other piece, as I mentioned in my remarks, is outside the U.S., which as you know we had no sales 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.

Michael Yee: Thank you.

Operator: Our next question comes from Tyler Van Buren with TD Cowen. Your line is open.

Tyler Van Buren: Hey guys, good morning. Thanks very much for taking the questions. I wanted to ask about U.S. COVID vaccine sales – 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. Is there a significant shift occurring this year due to vaccine 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., so any additional color would be appreciated.

Stéphane Bancel: Thank you. If you think about the U.S. market, I think what is important for us is to look at the different channels, because they are very different. As we shared, the data that we have is the actual data for retailer and long term care facilities. As you see earlier starts, see that today a little bit ahead, but if you look at the weekly scripts, they are coming down the peak. We hear from retailers that they are working really hard in terms of vaccination campaigns ahead of Thanksgiving and there is a plan ahead of Christmas, between Thanksgiving and Christmas, so that is to be seen what happens, what is the shape of that curve. Then there is the IDN networks. As I said in my remarks, we have been working with IDN networks to increase the COVID to flu vaccination rate since last year.

We don’t have a lot of visibility because those campaigns started later, most of them early October, [indiscernible] the retailers starting in August [indiscernible] strong in August and early September, and then the government data, for which we have no visibility, we only get orders when their orders come in, so it’s still early in the season, the shape is very different from last year in retail. We are hoping that our work with retailers and our work in [indiscernible] different shape than last year, and then IDNs and government, so we’ll have to see and we continue to learn about this market. But we believe it still remains sizeable [indiscernible] people who want the COVID vaccination.

Stephen Hoge: Yes, and maybe I would just add that, remember, when we sell product, that is not tied to vaccination, so when you look the decline from the third quarter to the fourth quarter, we had an early approval, to Stéphane’s point, so therefore 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.

Operator: Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open.

Terence Flynn: 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 III in 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.

Stéphane Bancel: Good morning Terence. Yes, so the team continues to do a great job in the plant with all progress totally on schedule, and so given what we shared at R&D day in terms of timing with FDA, the plant will no longer be a critical path to approval, but we’re keeping the team working really hard and they are making great progress, so we’re very pleased with that.

Stephen Hoge: Yes, 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 of the programs will include–or many of the programs may include, I should say, that data, so the bridging will be done in stream.

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

Evan Wang: Hey guys, thanks. Two from me. First on 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 [indiscernible] vaccine in the U.S.? What steps are you doing to reassure confidence there and protect against potential increase in legal liabilities? One on RSV – some competitors are describing how data are now sufficient for expansion in international revenues. Do you agree there, and what gives you confidence in competitiveness ex-U.S. specifically? Thanks.

Stéphane Bancel: Good morning. Thank you for the questions. On your first question, as you know, our mission as a company is to bring innovative medicine to help people and prevent disease. Since the company’s founding, we have 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 worked very collaboratively with President Trump during his first term and so we’re going to continue to do that. Our mission is to make sure we help people and increase people’s health, which is [indiscernible] what the administration is going to work on. On RSV outside the U.S., as you know, the market has approved the product at very different times outside the U.S. We have a very similar process that you have in the U.S. – once you get approval, you need to get recommendation with the CDC [indiscernible] which in some markets happens at different times.

Then you have pricing negotiations, which as you know are quite different outside the U.S. and in the U.S. Sometimes you might miss a whole season because of the timing of those different elements. As you know in the U.S., there is a pricing negotiation where you can lose some time, months or quarters, so I think the [indiscernible] ramp outside the U.S. reflecting both the recommendations that sometimes tend to be for older populations, like 70 and above or in some countries 75 and above, and just the timing of all the mechanics to come together, and then you again you could miss the season by a few weeks and you just miss the season, so those are the dynamics happening outside the U.S. We continue to believe that RSV cause hospitalization and hurts people, and RSV vaccines are going to be important to prevent people getting hospitalized, especially if you think in terms of the tailwind that 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 of the U.S. will be an important market.

But there’s a lot of education to do, both at the consumer level – there are consumers that didn’t even know what RSV was until recently, still 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 [indiscernible]. Everybody knows, especially governments that are single payors, that vaccines are most probably the best ally that you get in terms of [indiscernible] and the best way to not have hospitals with too many people is to get prevention.

Operator: Thank you. Our next question comes from Edward Tenthoff with Piper Sandler. Your line is open.

Edward Tenthoff: Great, thank you very much. Appreciate all the time and all the detail. Just looking at the orphan disease pipeline, with respect to pivotal trial starts for MMA in the first half and I think also maybe generating some registrational data this year, what do you see as the path forward here in terms of 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.

Stephen Hoge: Thanks Ted. In both cases, we’ll be moving forward, as we said, either presently or very quickly in 2025 in the case of MMA, into the pivotal study design. 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 results, as you can imagine, can be achieved somewhat more quickly. In the case of PA, what we’d be looking–because there is not as clear a biomarker, we’ll be looking at event rates, which can take some more time. 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 there’s a significant benefit, either with the biomarker or with the event rates from PA.

As we’ve previously described at R&D day, we do expect that can happen within the next couple of years, and our goal is to be launching that product in that sort of third window, 2026-plus – 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 in enrollment in those studies.

Edward Tenthoff: Great, thanks Steve.

Operator: Our next question comes from Luca Issi with RBC Capital. Your line is open.

Luca Issi: Oh great, thanks so much for taking my question. Maybe on RSV, 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 you can get a third of the market share, given prefilled syringes and [indiscernible], or do you think that that would be optimistic? Then maybe second on COVID in the U.S., how should we think again about market share here? It looks to me that last year, you were gaining some share versus Pfizer, versus this year it looks like you may be losing some share versus them, so wondering if you can offer any additional color on that. Thanks so much.

Stéphane Bancel: Sure, so on RSV, across products we don’t guide around share, so we’re not going to start guiding around share. As I said, we believe very much 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 share. 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’ll get a good sense about the share holistically at the end of the season, so that’s where we are at this stage.

Operator: Thank you. Our next question comes from Courtney Breen with Bernstein. Your line is open.

Courtney Breen: Fantastic, thanks so much for the time today. 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 non-small 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 being–the current paradigm is falling in the direction of chemo combination, there’s a scientific belief that the INT works well in the post-chemo space, or all 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, what’s primarily gating that? Is that the scientific signal or is that manufacturing capacity for the Phase III development plan?

Stephen Hoge: Thank you for both questions. First in the non-small cell lung cancer context, there has been a move–it’s really an evolving standard of care, so there obviously has been a move from just adjuvant towards neo-adjuvant use of checkpoints, and Keytruda specifically, and there are a number of patients that have a pathologic complete response, clearance of their tumor, they have evidence of that as a result of that neo-adjuvant chemo plus Keytruda. Recognizing that there’s a move towards that standard of care, we also want to confirm the potential for INT to benefit those patients. Obviously you wouldn’t be expecting a substantial benefit on those that have had a pathologic complete response because, fortunately, they do have very good clearance of their tumor, and so the structure of the study is to obviously enrol 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 INT can add on top of adjuvant at that point Keytruda treatment, with further Keytruda.

Really, I think the driver there is a view of where we see potential standard of care moving in the lung cancer space towards neo-adjuvant use of Keytruda. There may be other applications, thinking more broadly, where neo-adjuvant treatments start to emerge and we choose to go study the benefit of INT in the neo-adjuvant 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 INT 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 II and Phase III program, and we just want to be disciplined about not adding too many at the same time. We will continue, we do continue to discuss with our partner, Merck additional Phase III 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 simply the ability to execute and the overall scale of that program.

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

Manos Mastorakis: Thank you, two questions – Manos Mastorakis from Deutsche Bank on behalf of Emmanuel. If approved, how quickly do you expect the flu market transition to combination flu-COVID, and would that be expected to happen in 2025 already or more of a midterm thing? Secondly, what’s the latest update and perspectives you have on the COVID litigation, in particular GSK’s recent lawsuit? Thank you.

Stephen Hoge: I’ll take the first question on timing. On flu-COVID, obviously it depends upon approval and it’s also dependent upon public health recommendation. From a purely launch timing perspective and contracting perspective, we do not believe that 2025 is a timeline that will happen- that’s because a majority in the–in the United States, a 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 get improved compliance with COVID vaccines as well as deliver a highly effective flu vaccine, but again the timing of that will be contingent upon the regulatory review process and then ultimate 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.

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

Operator: Thank you. Ladies and gentlemen, this does conclude the Q&A portion of today’s conference. I’d like to turn the call back over to Stéphane for any closing remarks.

Stéphane Bancel: Thank you everybody for joining us today. We look forward to talking to many of you in the next days and weeks. Have a great day.

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