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Moderna, Inc. (MRNA)

Q2 2019 Earnings Call· Thu, Aug 8, 2019

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Transcript

Operator

Operator

Good morning, and welcome to Moderna Second Quarter 2019 Conference Call. At this time, all participants are in listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that the call is being recorded. At this time, I’d like to turn the call over to Lavina Talukdar, Head, Investor Relations at Moderna. Please proceed.

Lavina Talukdar

Management

Thank you, operator. Good morning, and welcome to Moderna's second quarter 2019 conference call to discuss business updates and financial results. You can access the press release issued this morning as well as the slides that we’ll be reviewing by going to the Investors section of our Web site at www.modernatx.com. Today, on this call, we have Stéphane Bancel, our Chief Executive Officer; Stephen Hoge, our President; Tal Zaks, our Chief Medical Officer; and Lorence Kim, our Chief Financial Officer. Before we begin, I would like to remind everyone that this conference call will include forward-looking statements. 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. We undertake no obligation to update or revise the information provided on this call as a result of new information or future results or developments. I will now turn the call over to Stéphane. Stéphane Bancel: Thank you, Lavina, and good morning, everyone. We believe mRNA has the potential to be a new class of medicines. We believe mRNA medicines have the potential to address large unmet medical needs and to treat diseases that are not addressable by recombinant proteins or small molecules. Due to the platform nature of mRNA, we believe our mRNA medicines provide a higher probability of technical success and faster timelines to clinical trials and to the market relative to traditional medicines. We also believe that the manufacturing capital intensity of mRNA is materially lower than recombinant proteins and that the manufacturing costs at commercial scale will be similar to small molecule injectable. Because of this large potential, we continue to focus on managing the risk across our portfolio, especially technology risk and…

Tal Zaks

Management

Thank you, Stéphane. As you know, we’re advancing our pipeline of medicines in six different modalities. In the next few slides I will highlight the progress we have made this quarter in each of these. So starting with prophylactic vaccines on Slide 13, you will see we have eight programs in this modality and we’ve made significant progress in the last quarter. In total to date, we have safety data from over a 100 healthy volunteers who have participated in our Phase 1 study and we remain pleased with the emerging safety and tolerability profile of our vaccines. I’m happy to report that our CMV program with mRNA-1647 is now fully enrolled in the Phase 1 trial and I’ll go over this opportunity in greater detail in just a moment. The RSV Phase 1 study testing mRNA-1172 dosed its first subjects in this quarter and recall that at the last quarterly update we reported that our partner Merck had just filed the IND. Our Zika program with mRNA-1893 also had the IND filed and open in the second quarter and I’m happy to report that the first subjects in the Zika Phase 1 trial was also dosed. In terms of emerging data, in hMPV and PIV3 or mRNA-1653, we continue to see neutralization titers above baseline at the second interim look seven months after the last vaccination. For context, in January we reported the two-month immunogenicity data. We plan to present the full data from this Phase 1 study at IDWeek in the fall. We’re also pleased with the feedback from FDA regarding the development plans for mRNA-1653 where we discussed the potential fast forward to evaluate protection against both hMPV and PIV3 in a single Phase 3 study. Consistent with these plans, we plan to enroll seropositive toddlers in…

Lorence Kim

Management

Thanks, Tal. In today’s press release, we reported our second quarter 2019 financial results. Please note these results are unaudited. We ended Q2 2019 with cash, cash equivalents and investments of $1.44 billion. This compares to $1.69 billion at the end of 2018. We are reiterating today our expectation for cash, cash equivalents and investments at December 31, 2019 to be in the range of $1.15 billion to $1.20 billion consistent with the guidance given on our call in March. We remain focused on allocation of our shareholder capital towards value-driving investments in our portfolio and platform. Net cash used in operating activity was 256 million for the first six months of 2019 compared to 160 million in 2018. These numbers include 22 million and 25 million of in-licensing payments in the first quarters of 2019 and 2018, respectively, as stated in the footnote. After the first quarter of 2019, we have no further in-licensing payment obligations to Cellscript and its affiliate. Cash used for purchases of property and equipment was 18 million in the first six months of 2019 compared to 66 million in 2018. And then on revenue, recall that on January 1, 2019, we adopted the mandated revenue recognition standard ASC 606, using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2019. The decrease in total revenue for Q2 and the first six months of 2019 as compared to 2018 was mainly attributable to this adoption of the new revenue standard. Revenue or Q2 2019 was $13 million as compared to $29 million for Q2 2018 and for the first six months of 2019 revenue was $29 million compared to $58 million in 2018. Total revenue under the previous revenue recognition standard would have been 17 million for…

Operator

Operator

[Operator Instructions]. Our first question comes from Salveen Richter of Goldman Sachs. Your line is open.

Andrea Tan

Analyst

Great. Thanks for taking our questions. This is Andrea on for Salveen. My first one is, how are you thinking about positioning for your KRAS vaccine in the context of growing competition in disease? And then I have a follow up.

Tal Zaks

Management

Hi. This is Tal. Thanks for the question. First of all, I’m really happy that we finally have therapies that are emerging as effective against KRAS mutations. I think that progress for the field is tremendous. I think it’s still early days, so let me make two points. First, the exact nature of the activity and against which mutations and in our case which mutations and which HLA still needs to be defined. So I don’t see them even on – if you look at the patient distribution necessarily as competing. Second and I think more importantly on the fundamentals, I think what our vaccine is trying to do and what the emerging inhibitors are trying to do are very different things in terms of patient benefit. I think the history of small molecule targeted therapy has been terrific in the sense that it’s translated into real benefit for these patients. But we struggle to turn them into curative-intent treatments. I think on the other hand, the immuno-oncology approaches were successful, have translated into a much more durable effect. And so my expectation is down the road if both of these approaches are successful, you would expect them to have complementary benefits for the patients. And I’m really excited in the coming years to see how that story plays out. Stéphane Bancel: And maybe, it’s Stéphane, just to add one thing, because Tal described in his remarks the mRNA that we designed is actually coding for mutation; G12D, G12V, G13d, and G12C.

Andrea Tan

Analyst

Great. And then just on your MMA program, how many patients right now are enrolling in your clinical study that have been rolled over from the Natural History study?

Tal Zaks

Management

So in the clinical study we have not yet enrolled. We’re actively recruiting. In the Natural History study there have been 71 patients enrolled to-date.

Andrea Tan

Analyst

Sorry. So do you anticipate I guess rolling any patients over from that Natural History study or no?

Tal Zaks

Management

It is a possibility. We’re looking at it.

Andrea Tan

Analyst

Got it. Thank you so much.

Operator

Operator

Our next question comes from Matthew Harrison of Morgan Stanley. Your line is open.

Matthew Harrison

Analyst

Good morning. Thanks for taking the question. Two for me. So the first one is, can you just comment broadly how we should think about safety so far in the chikungunya study given that you’re through almost a third cohort? I don’t know if you can comment on what the stop and gos are from a safety standpoint. And then second question just on OX40 Ligand. Can you talk about what you need to do in this space to probably be able to take that to the FDA? I guess what I’m asking is how should we think about potential regulatory tests forward with that molecule? Thanks.

Tal Zaks

Management

Sure. Let me start with the chikungunya. This study is ongoing so I can’t really comment on the data until we see the totality of the picture there and then we’ll describe it for you. It’s a healthy volunteer study, so stopping rules are what you would expect in these typical studies. In terms of OX40 Ligand, the regulatory path, if you look at where we’re expanding into the Phase 2 cohort, we’re going after ovarian cancer. I think in that setting checkpoint inhibitors are not yet approved and it’s because they really have marginal activity as monotherapy. If we could demonstrate that the combination has a clear benefit to patients, I think the path to approval will be relatively straightforward. So that’s how we’re looking at it. Did that answer your question, Matthew?

Matthew Harrison

Analyst

It did. Thanks, Tal.

Operator

Operator

Our next question comes from Ted Tenthoff of Piper Jaffray. Your line is open.

Edward Tenthoff

Analyst

Great. Thank you very much and thank you for the updates; lots of good progress. So my question is and I apologize if this was asked, but with respect to the Triple my concern here is certainly not activity especially with durvalumab, but are you doing any special immune safety analysis or any special additional safety analysis just because of the potential potency of the Triple therapy? Thanks.

Tal Zaks

Management

Thanks. That’s a really good question and I wish I had a wider answer for you. The reality is that we’re looking at the safety I think in the traditional way that people do in clinical trials maybe colored by a better understanding over the years of what the safety profile of the checkpoint inhibitors alone is. And so we’re looking at whatever autoimmune phenomena, et cetera, and all the other adverse events that one would expect from checkpoint inhibitor monotherapy and assessing very carefully to see whether we exceeded. If there’s any other safety signal that is attributable to the Triplet, then I think we’ve got two ways of finding it. First, recall we’re dosing as monotherapy so that will give us a clear view on the safety profile just of the Triplet. And second, in the combination arm we’re looking carefully at all the clinical characteristics. And unfortunately I think in the field it’s very hard to predict the adverse reactions that one sees and they’re not very frequent. So all we can do at this point is maintain a careful visual for what to expect and make sure you’re not missing anything unexpected. I don’t know if that answers the question. I’m not sure I’ve got a better one.

Edward Tenthoff

Analyst

That’s all right. That makes a lot of sense. I appreciate that. Then just a really quick high-level question. With respect to the CF collaboration, are there any novel delivery modalities that are being incorporated for that disease or is this really not just treating lung but really systemic disease? Thank you.

Stephen Hoge

Analyst

Ted, it’s Stephen Hoge.

Edward Tenthoff

Analyst

Hi, Steve.

Stephen Hoge

Analyst

So first of all, it’s a research collaboration with Vertex and we’re excited to continue it based on the preclinical progress to date. As a part of our general research activities, we do look broadly at a range of different delivery modalities. We have obviously made progress in one direction here but we haven’t yet defined a development candidate at which point we’d probably provide specifics about that. Generally, our approach with Vertex and CF has been to address the unmet need in CF, particularly for those patients who are [indiscernible] for CFTR and focusing intensively on the pulmonary disease. But obviously without commenting specifically in the CF example, pulmonary delivery is a route of administration that could be valid for other systemic diseases or other applications as well.

Edward Tenthoff

Analyst

Thanks a lot. I’m looking forward to the – yes, sorry. Go ahead.

Stephen Hoge

Analyst

No. That’s it.

Edward Tenthoff

Analyst

Great. Awesome. I’m looking forward to the CMV data and see you guys in September. Thanks.

Tal Zaks

Management

Thank you.

Operator

Operator

Our next question comes from Cory Kasimov of JPMorgan. Your line is open.

Cory Kasimov

Analyst

Hi. Good morning, guys. Thanks for taking my questions. I have two as well. So I guess first is can you just walk us through the cadence of what you see is the key validating clinical updates we should expect in the next 12 months or so? Beyond the CMV and chikungunya updates, what else has a change of recurring in that time period and would we see new clinical data at your R&D Day in September? And then I have one follow up. Stéphane Bancel: Hi, Cory. Good morning. It’s Stéphane. So I will not comment on the R&D Day. I hope you come to the R&D Day, but we’ll make sure that we give good updates on everything we know then. On the next 12 months, as you can see on Slide 46 on the presentation, as I discussed in my comments, CMV is really important. As you know, it really is a very large opportunity. We own 100% of the economic of this product. We believe it’s a very large medical need out there. And so the CMV data are going to be very important we believe for company. RSV and Zika, because they’re in Phase 1 in healthy subjects and they are dosing as we speak, should read pretty quickly. And as I shared, the plan is to move the dose to Phase 2 assuming we have good data into the clinic. I remind you that we have already in the past shown in a good translation from primates into humans, into our vaccines that have positive data. And so we look forward to this data in human. PCV, of course, will take a little bit of time because we started a Phase 2. That’s a very important study. We need to recruit for that Phase…

Cory Kasimov

Analyst

Okay, great. And then the follow up is regarding your personalized cancer vaccine, 4157 program. Any near-term plans for exploring indications beyond resected melanoma patient that are at high risk of relapse, or PD1 refractory? What do you see is the potential of this program and indications that may have considerably less neoepitopes?

Tal Zaks

Management

Thanks for that, Cory. It’s Tal. It’s a question that we’ve asked ourselves since the beginning of this program. I think strategically and philosophically, what we want to do with this program is first to go where the likelihood of success is the highest before we look for areas that are more challenging. And so that’s why we’ve focused in the histologies that we have in the Phase 1 and that’s why we went into an adjuvant setting even within melanoma for a definitive study into Phase 2. I think once we have a clear proof of concept, clearly we will begin to explore some of those additional indications. But there’s not any current plans to do that. Stéphane Bancel: And Cory, it’s Stéphane, to add to Tal’s remark. If you think about it, going back to Lorence’s comments, we are very disciplined in our capital allocation. So, of course, there could be a lot of different things one could think of trying with personalized cancer vaccine as you think about all of our patients that aren’t treated today. But unfortunately we cannot know – before we have an important derisking, we cannot expand too much because we have so many opportunities of products across the portfolio, we could be increasing the [indiscernible] that will not be unreasonable. And so we want to be very disciplined. That’s just one example. There’s a lot of things, trust me, that the clinical team – as you know Tal is oncologist by training who love to be trying in the clinic to help those patients. But we just have to be very disciplined in capital allocation and how much we spend and where we spend it, and when we spend it based on the risking.

Cory Kasimov

Analyst

Okay, makes a lot of sense. Thanks for taking the questions. Stéphane Bancel: Thank you.

Operator

Operator

Our next question comes from Alan Carr of Needham. Your line is open.

Jennifer Shen

Analyst

Hi. This is Jennifer speaking for Alan. I have a couple of questions. First question is, I was wondering if the team can give us some color on the commercial strategy and possibly specific patient groups that you may be planning to target for the CMV assets. Thank you. Stéphane Bancel: So thank you, Jennifer, for the question. I think it would be great if you can join us at the R&D Day because we will spend quite some time on CMV commercial opportunity. As we discussed in the past, there are many populations from women in the age of bearing a child, adolescent women who might want to protect. There was also discussion about partners of those pregnant women. There’s also discussion because humans are very [indiscernible] CMV, do you put down an age to try to eradicate CMV. So there’s a lot of different segments that we’ll discuss quite at length on the R&D Day. But this is why I think we believe CMV, if you take a 10, 20-year timeframe and if you look at all the old vaccines, like the HPV vaccine and the [indiscernible] vaccine, those very important vaccines, the lifecycle management of those products can be very important and we have our eyes very much on how do we go about this. Again, we cannot do all the indications at the same time. It’s going back to very simply on capital allocation and investments. But we are very much in mind of how do we maximize with them this opportunity to get the largest label that we can for CMV, so it can be given to the largest population we can around the world and not only in the U.S.

Jennifer Shen

Analyst

Thank you so much. The other question is for the hMPV/PIV3 vaccine, could you possibly give us some comments or color, any new understanding of the titer level needed to progress this effort? Thank you.

Tal Zaks

Management

This is Tal. I think that our understanding of the titers there is going to be based mostly on the preclinical modeling and what we’ve seen to date that is protective. Unfortunately, there is no vaccine on the market, so we don’t really have a correlative protection like we have from influenza. But it is a respiratory virus, so one draws similar parallels from the experience with flu and you get a sense from the totality of our understanding in the science on the respiratory viruses what are the titers like. I think what we’ve seen in the Phase 1 is supportive of our ability to immunize. Recall though that the target population here is in seronegative infants, right. So ultimately we’re going to have to define our ability to reach significant titers and boost to the maximum the immune response capability to respond in that population down the road. So I think it may not be a very black and white answer, because I think it will take inference from multiple lines of reasoning, from science and from clinical studies and from other vaccines I think to come to that. Does that help you?

Jennifer Shen

Analyst

Yes. Thank you so much for taking my questions.

Tal Zaks

Management

Thanks, Jennifer.

Operator

Operator

Our next question comes from Hartaj Singh of Oppenheimer & Company. Your line is open.

Hartaj Singh

Analyst

Great. Thank you for the questions. I just have two. One is; I know that you mentioned that the chik antibody is very important. Can you just talk maybe a little bit about that if you see the proof of concept manufacturing the antibody using an mRNA and then see efficacy on the vaccine side, antibodies are over 100 billion in sales per year. What other areas could you go into? Would you see yourself being in vaccines? Are there other types of antibodies, other types of diseases that would be amenable to your approach in that regards, or is that just looking too far into the future? And then I got a quick follow up. Stéphane Bancel: Good morning. It’s Stéphane. So as you know we have disclosed all 21 development candidates and we don’t comment on future plans in research. Obviously, as I said in my remarks, we think it’s a very important milestone. It’s the first time using a modern technology and antibody is being produced in a human. And so that’s an important technology that as you commented has a lot of different applications. What we try to do always as the portfolio of the assets that we develop with our shareholders’ capital is to be thoughtful about managing biology risk, technology risk and to create important innovative products for patients. That’s always a big driver for us. If you look back to one of my closing slides, if you look at the portfolio today, for most of the products in the pipeline, there is no product on the market with big enough medical need and there’s no solution on the market. And so we are always thoughtful about all those things. But it would of course become a very important tool in our Moderna toolbox. As you know, partnering is certainly an important part of our strategy. If you look back over time, we’ve done four partnerships with Merck, a few with AZ. We’re very, of course, happy with the decision by Vertex to expand the collaboration. And so that’s why technology can be made available to a partner. So this is an important piece of the Moderna toolbox.

Hartaj Singh

Analyst

Great. That helps a lot. And then I just had a question on your manufacturing strategy. I visited the Norwood facility; really, really kind of cool stuff going on there. It is clinical grade sort of material and research material. Can you just talk a little bit about how you’re thinking about your commercial-grade material? You’re getting to the point now where you might have one or two other rare diseases where you might be able to get to the clinic fairly rapidly and the regulators want to see a sort of clinical to commercial sort of strategy. Can you just talk a little bit about that? And then which of your modality actually requires more intensity from a commercial manufacturing perspective than others? Thank you. Stéphane Bancel: Those are great questions. So, on the commercial front, as we’ve shared in the past, Norwood is able to do commercial, but it’s not ready today. We have to do much work around validation and the quality systems and so on. But the infrastructure of the plant itself has been built so that the site can be brought to commercial readiness and be able to do pivotal studies, registration studies out of Norwood. What we also shared and it’s again going back to our focus on managing the risk, we will not have to be the commercial facility before we have our first commercial product approved. That’s a very important part of Moderna’s strategy to derisk the company. So we can launch products out of Norwood. We can do Phase 3 out of Norwood. We will get the site ready on time so that we can do that. We also always have a contract manufacturer strategy. We never want to be single sourced for the company. That would be way too risky.…

Hartaj Singh

Analyst

Great. Thank you, Stéphane. That’s great.

Operator

Operator

Our next question comes from Alec Stranahan from Bank of America Merrill Lynch. Your line is open.

Alec Stranahan

Analyst

Hi, guys. Thanks for taking my questions and congrats on the progress. I just had a couple. So maybe first on the hMPV/PIV3 combination vaccine, do you have a sense of the sort of data we’ll likely see in October? And will we see data outside of antibody titer comparisons? And is the Phase 1b toddler study necessary as per your conversations with the FDA before you begin a Phase 3? And then I have one more.

Tal Zaks

Management

Thanks, Alex. It’s Tal. So in October, we’ll present the totality of the data as we have it, so you’ll see the antibody titers, you’ll see the safety, you’ll see what you typically see when we describe the totality of the study. And I believe that’s been accepted to IDWeek. In terms of the seropositive toddlers, yes, I think that is consistent with the development that one would expect and that the agency concurs in terms of the next step in the development path here. So ultimately remember that the target population here is infants, so there’s a pretty structured and rigorous way by which you work your way down into that population.

Alec Stranahan

Analyst

Okay, great.

Tal Zaks

Management

Now given the sensitivity to the pediatric population, we wanted to make sure that we’ve got clarity from the agency in terms of designing that study and that’s why we put it in the press release and we discussed that interaction.

Alec Stranahan

Analyst

Right, I understand that’s a sensitive patient population. And then shifting gears to your KRAS vaccine, 5671, we’ve seen data from Amgen and others that are pretty encouraging on G12C, although it seems maybe there’s a subgroup that requires additional combination therapies. So I was just curious on the KRAS vaccine what your thoughts are for it as monotherapy and also in terms of combination with checkpoint inhibitors? Thanks.

Tal Zaks

Management

Yes, so I’ll give you two versions of the answer, one on the science and one as a drug developer. On the science, unquestionably, one would want to combine these as early as possible because we think there’s orthogonal benefit, as I described previously, and one would expect they’d get combined with checkpoint inhibitors in addition. As a drug developer, you want to get confidence first that each individual has merit on its own before you go into the combination. I think for us it’s critical to demonstrate that the cancer vaccine is such in combination with the PD1 inhibitor can actually mediate responses. I think once we get to that stage, we will obviously have a keen interest in pursuing the right combinations with the inhibitors depending on where they are at that point in time. Alec, did that answer your question?

Alec Stranahan

Analyst

Yes, that’s great. Thank you.

Operator

Operator

There are no further questions. I’d like to turn the call back over to Stéphane Bancel for any closing remarks. Stéphane Bancel: Thank you for joining us today and for your questions. We look forward to seeing you during our upcoming third annual R&D Day in New York City. This meeting will be held during the morning of September 12. Have a wonderful day. Thank you.

Operator

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day.