Operator:

Good day and thank you for standing by. Welcome to the Moderna second quarter 2024 conference call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you’ll 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.

Stéphane Bancel:

Thank you Lavina. Good morning or good afternoon everyone. Thank you for joining us today. I will start with a review our business, Jamey will present our financial results for the quarter and take you through our basic financial framework. Stephen will then review our clinical progress. I will then close by sharing our commercial progress and our outlook for major upcoming milestones. In the second quarter of 2024, our respiratory franchise has shown remarkable progress and is poised to positively impact millions of lives globally each year. This is why we started Moderna, to impact patients, and that is why the Moderna team is so focused on execution because of that profound impact on so many lives. Our mRNA-1273 vaccine, Spikevax, continues to play a critical role in combating COVID. Based on CDC data for the season just ending, October 23 to June 24, COVID continues to result in higher hospitalization than other respiratory viruses. We are pleased that our RSV vaccine, whose brand name is mRESVIA, our second respiratory product, has launched in the U.S. and has now shipped to U.S. customers. It is poised to impact public health in the U.S. this year and soon in many other countries for many years to come. Our flu vaccine candidate, mRNA-1010, has demonstrated positive Phase III results, meeting all immunogenicity end points in adults 18 and older. Our flu + COVID combo vaccine candidate, mRNA-1083, has also shown positive results in Phase III, underscoring our ability to innovate and [indiscernible] respiratory illnesses effectively. These achievements highlight the strength of our mRNA platform and our commitment to public health. We have now five out of five vaccines with positive Phase III data

Stephen Hoge:

Thank you Jamey. Today I’ll review updates from our clinical programs in three of the four development areas in our portfolio. In the second quarter, we had important updates in respiratory vaccines, oncology and rare diseases. Starting with respiratory vaccines, we are very pleased by the approval and ATIP recommendation for our RSV vaccine, mRESVIA, in the U.S. for all unvaccinated adults 75 years and older and in unvaccinated adults 60 to 74 years of age who are at increased risk from RSV. This recommendation was the same as for the other two previously approved RSV vaccines. We also recently received a positive CHMP opinion from the European Medicine Agency for mRESVIA, and as Stéphane mentioned earlier, we are working towards approvals in additional countries. Turning to flu, we are in discussions with multiple regulatory authorities and intend to file in 2024. For our next-generation COVID vaccine, mRNA-1283, we announced positive Phase III efficacy results demonstrating non-inferior efficacy against COVID-19 compared to Spikevax in all trial participants 12 years of age and older. Efficacy was higher than Spikevax in adults 18 years and older. We are excited by the data and are sharing the results with regulators and intend to file for approval beginning in 2024. Rounding out the news in respiratory vaccines development, in the quarter we shared positive results from our Phase III trial with our combination flu and COVID vaccine. The trial met its primary immunogenicity end points with the combination vaccine eliciting higher immune responses against flu and SARS-CoV-2 than the licensed flu and licensed COVID vaccines given separately in adults 50 years of age and older in the trial. In the subset of participants 65 years of age and older, our combination vaccine also elicited higher immune responses than an enhanced flu vaccine that is recommended in the 65 and older age group in many countries, including the United States. These results are exciting, and we have begun sharing them with regulators and planning for the next steps. Turning now to oncology, in the quarter we share an update on our mRNA-4157 program, also known as INT, which elicits anti-tumor T-cell responses by targeting a patient’s unique tumor mutations, or neoantigens. INT is in multiple large randomized trials, including two Phase III trials, one in adjuvant melanoma and the other in adjuvant non-small cell lung cancer; one Phase II/III trial in adjuvant cutaneous squamous cell carcinoma, and two randomized Phase II studies, one in adjuvant kidney cancer and the other in bladder cancer. We and our partner, Merck expect to start additional studies in new tumor types. The development program was launched on the back of impressive randomized Phase II trial results in adjuvant melanoma. We recently shared the three-year follow-up data from that trial at ASCO this past June, and in the next few slides, I will quickly summarize the highlights from that presentation. The primary clinical end point for the Phase II adjuvant melanoma study is recurrence-free survival, or RFS. As presented at ASCO, there is a sustained improvement in RFS with the combination of INT plus Keytruda, versus Keytruda alone through three years of follow-up. 74.8% of patients receiving the combination treatment of INT plus Keytruda were alive and tumor-free at three years, which was 19 percentage points higher than Keytruda alone, and resulted in an impressive hazard ratio of 0.51. The combination of INT plus Keytruda also showed sustained improvement in distant metastasis-free survival at three years. 89.3% of patients in combination INT plus Keytruda treatment group were alive and without metastases or distant spread of their tumor at three years of follow-up versus 68.7% of patients in the Keytruda monotherapy group. This is an equally impressive and remarkable hazard ratio of 0.38. Lastly, we were pleased to share data showing an early favorable trend in overall survival at three years of follow-up. Finally on the safety side, INT continues to demonstrate a remarkable profile for a novel cancer therapy. Immune-related adverse events were not higher in the combination INT plus Keytruda arm despite the benefits than in the Keytruda monotherapy arm. This highlights the impressive emerging benefit-risk profile for our INT program. Moving now to rare diseases, I’m happy to share that our MMA candidate, mRNA-3705, was selected for the FDA START program. MMA is a rare disease in which patients cannot properly break down proteins from the food they digest; as a result, toxins build up in the bloodstream and cause recurrent episodes of life-threatening metabolic decompensation. The FDA START program is a program designed to accelerate development of new and promising therapies in rare diseases where there is a high unmet need. Our MMA candidate, mRNA-3705 is being evaluated in patients in a Phase I/II study with encouraging early results that we’ve previously shared, and we look forward to working with the FDA to accelerate the development of this promising potential medicine. With that, I’ll now turn it back to Stéphane.

Operator:

Thank you. [Operator instructions] Our first question comes from Salveen Richter with Goldman Sachs. Your line is open.

Jamey Mock:

Hi Salveen, I’ll take the first question regarding the year-end cash balance. I would say there’s a few factors in there. Number one, on the deferrals of revenue, some of which we have already collected the cash and ultimately we will collect the remaining balance that might push into 2025, but some of that is already a prepayment. Number two, as I mentioned in my prepared remarks, we have been working on working capital. We’ve got a whole team focused on it, and the teams are doing a great job from accounts payable, inventory balances, receivables and our collections progress. You can see our receivables balance on the balance sheet is relatively small at this point, so the team’s done a great job, which helps offset it. Then third, just coming into the year, we had a little bit of cushion to the $9 billion, so overall we remain confident in the $9 billion and are pleased with that kind of ending balance heading into 2025.

Operator:

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

Jamey Mock:

Yes, thanks Terence. I’ll take the first one related to guidance and what’s the split between COVID and RSV. What I would say is if you look at the three drivers, all of them are, first, similar in size. Then if I break them down, the deferrals are all related to COVID, the EU is all related to COVID, and then that last category of competitiveness in RSV vaccine--or in respiratory vaccines, there’s a split between COVID and RSV, so that should give you some understanding of the general split between COVID and RSV.

Operator:

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

Jamey Mock:

Yes, thanks Mike. We are still--as I mentioned, we’re still expecting $9 billion in cash next year and don’t currently have any different change in our outlook for the $6 billion to $7 billion that we said we’d end 2025 with, and let me break that down. First, this year we went from the start of the year, $13 billion to $9 billion, so a $4 billion loss in cash. That included many prepayments coming into the year that will no longer repeat, so we’re not actually getting the cash from operations and that won’t be a drag year-over-year. Second, we plan to return to growth in 2025 and, as I mentioned earlier, some of that will also be buoyed by the fact that we have some deferrals heading into 2025, but more so we’ll have an entire year and operating experience on RSV, we hope to bring new products to market, and so we’re still expecting to return to growth. But yes, I mean, we continue to look at opex and understand what we want to do there, and we are always laser focused on our cash balance, and at this time we don’t think the $6 billion to $7 billion will change.

Jamey Mock:

Yes, it’s a bit of both. We’re not breaking it down, nor have we given guidance on RSV, but I would say this year is not turning out as we expected, and I answered Terence’s questions in terms of how much is really split between COVID and RSV, so you can kind of get an understanding there. But again, we were third to market this year, some of the contracts were already negotiated, we only are participating in the second half, but I think our hope is that we get access across many of the retail chains, they start to get comfortable with us with the second product so that when we head into 2025, we can get a more fair market share on RSV.

Operator:

Our next question comes from Eliana Merle with UBS. Your line is open.

Stephen Hoge:

Great, thanks for the questions. I’ll take it first. First, we have enough data on case numbers for CMV. We may have an update at R&D day - I’m not sure, but we don’t have any change to our prior guidance, which is we do think that the interim analysis of efficacy could happen this year, and that would account for also median safety follow-up from a timing perspective, and so at this point, no new update, but we continue to stand behind the belief that the interim analysis for efficacy on the CMV program could happen this year.

Operator:

Thank you. Our next question comes from Gena Wang with Barclays. Your line is open.

Stephen Hoge:

Yes, thanks Gena. We define competitiveness both in terms of share and in price, so we’re relatively pleased with our market share, there’s potentially some price pressure in there. But generally speaking, we think that the U.S. will perform pretty well compared to last year, but we are seeing a bit of a competitive--a more competitive market this year after a year where in the U.S., we had nearly or approximately 50% market share, so. We’re seeing the pressure but still confident in the overall performance of the U.S. business.

Operator:

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

Stephen Hoge:

Great, thank you for both questions. Obviously first and foremost, our focus at the ACIP meeting was we were quite pleased with the parity recommendation, and I think we were all pleased with the clear recommendation for those over the age of 75 and those with higher risk from RSV, that they really should get vaccinated. As its only a year old is the market, the most important thing we can do is cover the large number of people who are now recommended, the 40 million-plus who are not vaccinated, and that’s quite a large increase in the number of folks who we hope to cover soon. Now, on the question--the specific question of revaccination, I think it’s also important to say that we are--you know, the ACIP is really just looking at one year of real-world data, and all three of the vaccines, but including mRESVIA, show significant second season protection, although it does decrease, and so there is the decline from season one into season two from a clinical trial perspective, but there’s still protection there in that year two. While you’re only one year into that public experience, public health experience, I think ACIP took a prudent choice and said there’s still a benefit, and maybe the focus should be on increasing vaccination coverage rates for those who are current unprotected because there clearly is some benefit, even still at that second year. I think if you fast forward a year, and this would be my perception, but if you fast forward a year, if you look at the rates of waning for the other two vaccines than ours, there is clearly a decline from year one to two, and from year two to three. The pace of that decline suggests that by year three, there really won’t be much protection for those people who have received vaccines in the first year. I think that’s when you probably need to start asking the question of, do we continue to leave those people unprotected or boost them again? Now, from a scientific perspective, you asked my view, you will be infected with RSV almost 20 times in your life, you will repeatedly get ill. In fact, many people who are at risk of severe complications over the age of 75 or otherwise with medical co-morbidities, they’ve seen RSV before. It’s the waning protection from that infection that ultimately is the reason why you need a vaccine, and because you get infected multiple times by that virus over life, even if you’ve seen it before, you probably will benefit from a booster in future. We continue to believe that as the public health story evolves, that recommending bodies and CDC and ACIP will look at the waning efficacy, the potential to boost people again and hopefully provide additional public benefit, and that eventually there will be recommendations for revaccination for those who are at highest risk of RSV, but it is not our choice. We are providing that data to obviously the regulators but principally to groups like CDC, and then they will determine the right moment, if ever, to recommend that revaccination in the United States. As it relates to bird flu, we continue to follow that very closely. It’s drifted a little bit out of the news more recently - I think that’s a good thing, but the most important news for us has been in the quarter, we executed an agreement with BARDA to advance into Phase III with our pandemic bird flu vaccine, which we’ll provide updates on as we move forward in the months and the year ahead. But we will be sure to be partnering with public health entities across the world, including the United States government specifically. We’re grateful for working with BARDA again in the event that bird flu does emerge as a pandemic or epidemic threatening this country.

Operator:

Our next question comes from Alexandria Hammond with BofA. Your line is open.

Stephen Hoge:

Thanks for the question. We have--as you highlight, there is a large number of pulmonary diseases for which respiratory delivery could be quite impactful. We have not provided any updates on the preclinical programs that we’ve moved into development, and so I would describe those activities right now as still research and discovery phase, and not something for competitive reasons and for scientific reasons that we’ll talk about. They’re in the earlier stages. As it relates to whether we would partner with Vertex on it, we would of course always welcome partnering with Vertex given their expertise, but the partnership we have right now, the deal we have with them is limited to the cystic fibrosis program at this point.

Edward Tenthoff:

Great, thank you. Most of my questions have been answered, but I appreciate all the detail. I wanted to ask a little bit about the orphan disease program, and maybe you can provide a little bit of color on what the regulatory path might look like in MMA and PA. Thank you.

Edward Tenthoff:

Great, thanks. Looking forward to the R&D day.

Jessica Fye:

Hey guys, good morning. Thanks for taking my questions. For RSV, I’m curious your take on Pfizer’s comment that customers want to carry an RSV vaccine that could address both maternal and the older adult population. Then for INT, I saw it on the near term milestone slide, but to clarify, what’s your latest projection on when you expect to complete enrolment of the Phase III adjuvant melanoma trial, and what’s the latest you can share on manufacturing progress for that product? Are there any updates to share on how that’s going? Thank you.

Jessica Fye:

Thank you.

Evan Wang:

Hey guys, thanks for taking the questions. A few from me. Just first, just given the comments on the higher competitive environment, how are you thinking longer term about the outlook for RSV and COVID versus some of the [indiscernible] you made earlier in the year and historically, just given some of the pricing and market share dynamics there? Second, with COVID and the EU tender, what’s your level of confidence in the EU being a meaningful contributor in 2025, and what changes between now and then? You know, does having the combo or potentially having a combo add to competitiveness there? Lastly, I saw that you guys purchased a PRV - is that for use on the combo or the standalone flu, and are you comfortable in getting ahead of the potential June recommendation next year? Thanks.

Operator:

Thank you. Our next question comes from Tyler Van Buren with TD Securities. Your line is open.

Lavina Talukdar:

You broke up a little bit during your question. I think we caught the tail end of your question, which is what is the size of the RSV market relative to what we though previously?

Stéphane Bancel:

Yes, so let me try to take a stab at it. As Stephen stated, in the long term we believe that as real-world evidence data is gathered by public health leaders, that they will most probably be in for boosting. The current recommendation is what it is, but as Stephen said, we believe it will potentially evolve over time. For this year, I think what is interesting is on paper, it seems that it could be a smaller market. The thing that’s going to be interesting to see how it plays out in terms of market size and number of doses in arms is the guidelines are much more clear than last year, and as you know, sometimes in vaccinations, you get a better reaction from the doctors and pharmacists and consumers with clear guidelines versus not as clear guidelines with larger population potential. Because of those two factors, it’s going to be interesting to see how the season plays out.

Stephen Hoge:

Then I would just comment on the current year market size as well. I think we talked about what we believe the patient population is, which is still sizeable, and we believe that the market will still be overall sizeable this year and similar to last year, if not a little bit more. I think there are other factors at play with those comments - you know, there was a lot of inventory that was--or a lot of sales that happened in the prior year, that customers may be sitting on some of that inventory, so from a revenue perspective that might be different, but from a vaccination rate perspective, we believe that it will still be similar, if not a little bit bigger this year.

Adi :

Hi, good morning. This is Adi on for Cory. I have a question on has the recent summer COVID surge caused any concern for fall vaccinations as the infected population is usually recommended not to get vaccinated for six months post infection, and is the base case for the U.S. COVID revenue similar vaccination as last year, which I think per CDC tracking was 22.5 overall population and 14% for 65 and above?

Operator:

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

Operator:

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

Operator:

Good day, and thank you for standing by. Welcome to Moderna's First Quarter 2024 Conference Call. [Operator Instructions] Please be advised, this conference being recorded.

Lavina Talukdar:

Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's First Quarter 2024 financial results and business updates. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the Investors section of our website.

Stéphane Bancel:

Thanks, Lavina. Good morning or good afternoon, everyone. Thank you for joining us today. I will start with a review of our business. Jayme ill then present our financial results. Stephen will review our late-stage clinical programs, and I will close by sharing our 2024 commercial priorities and major upcoming milestones.

James Mock:

Thanks, Stéphane, and hello, everyone. Today, I will walk you through our financial performance for the first quarter and provide commentary on our 2024 financial framework.

Stéphane Bancel:

Thank you, Stephen and Jamey. Slide 18 is an overview of our COVID-19 strategy for 2024, which is focused on the need of each 2 region.

Operator:

[Operator Instructions] Our first question comes from Salveen Richter with Goldman Sachs.

Stephen Hoge:

Yes, sure. So thanks for the question. So on the 3 additional INT indications, I think the short version of it is they are all adjuvant settings. Similar to our melanoma Phase II results have been so encouraging, where KEYTRUDA has a known benefit and where we still believe that there's an opportunity to improve on that by driving a specific T cell response with INT.

Operator:

Our next question comes from Michael Yee with Jefferies.

Terence Flynn:

Great. Maybe two parts for me. Just on the RSV vaccine. Can you provide your latest perspective on what the most likely ACIP recommendation will be? Will you get a parity recommendation to the competitors? Or do you think there's a potential for a differential recommendation here?

Unknown Executive:

Thanks for both questions. So first on RSV, caveat by saying we have to complete the approval process with FDA. And then at the end of the day, the recommendation really falls to ACIP and the committee members, so I defer to them.

Stephen Hoge:

On the question of flu, we are actively engaged right now on the -- with regulators on the process for submission of the flu vaccine. As I mentioned a moment ago, we are also closing in on clinical data from our combination flu COVID vaccine, mRNA-1083. And that obviously has an important role in our engagement with regulators, generally on flu versus flu COVID combination.

Operator:

Our next question comes from Eli Merle with UBS.

Stephen Hoge:

So first, on the question of boosting. So far, what we have -- we obviously don't have the efficacy readout. That's the Phase III study is ongoing. But we do expect to have quite substantial durability data on immunogenicity. And it's quite possible that the efficacy data will give us a signal what the core of production could be.

Hartaj Singh:

Great. I just have a question on -- you're developing a refrigerator stable vaccine and flu vaccine, I believe. And I'd just like to kind of understand how you think about that. When could that get approved? And then will the combo vaccine also be refrigerator stable?

Operator:

[Technical Difficulty] Ladies and gentlemen, please stand by, your conference will resume momentarily. Once again, ladies and gentlemen, please stay on the line.

Unknown Executive:

Yes, I'm here. Can you hear me?

Stephen Hoge:

Right. Sorry for that brief interruption. So Hartaj, thank you for the question. Just to quickly restate what I was saying. The -- all of our respiratory portfolio, RSV, flu, COVID and the flu COVID combo are being developed towards refrigerator stable PFS. And so our mRNA-1083 program, the flu COVID program as well as the flu program are intended to be a refrigerator stable prefilled syringes. As Stéphane mentioned a moment ago, we really view that as the ideal presentation, the helpful presentation for health care providers really around the world to facilitate their delivery of the vaccine to patients.

Huidong Wang:

I have two. One is regarding COVID. So for the EU, you said up to 36 million doses every year in EU. What could be the scenario you can get 36 million doses in EU? And also the price in Brazil and the EU, should we use pandemic price of $25 to $30 per doses at the benchmark?

Stéphane Bancel:

Gena. It's Stéphane. I'll take the COVID question and then Stephen will talk about INT. So the tender is up to 36 million doses, will depend on a number of countries that apply to the tender through the EU. So this, we'll know at the end of the process. And as it's a tender process so there is no dialogue, we're just entering all the files and all the data, and that's really ongoing. The team is obviously very active on it.

Stephen Hoge:

Yes. So we haven't specifically guided to when we expect to complete, obviously, the second and third parts of our 3-part criteria. That being manufacturing readiness, as you can imagine, work is going on around the clock as well as the enrollment we've made great progress, but we have to sustain that progress.

Luca Issi:

Maybe a very quick one on RSV. I think the last press release actually cited May 12 as the PDUFA date. While today, you're simply saying the initial regulatory approvals in the first half of '24. So is there anything to read to it? Can you just confirm that the PDUFA date is still May 12, which is actually the end of next week?

Operator:

Our next question comes from Jessica Fye with JPMorgan.

Stéphane Bancel:

Great. I'll start with the INT question on manufacturing, then Stephen can add around [indiscernible]. So we have not provided some capacity numbers of the factory in Marlborough. But of course, as you can assume, we now the size of melanoma market. And we know our stronger data. We [indiscernible] people benefiting from the Phase II data.

Operator:

Our next question comes from Geoff Meacham with BofA.

Alexandria Hammond:

The zoster, the shingle.

Operator:

Our next question comes from Evan Wang with Guggenheim Securities.

Stéphane Bancel:

Sure. So with internal markets, obviously, very important, the U.S. is very important, the U.S. and Russia also super important. As we shared before, we found in all the major geographies already. Of course, EU, U.K., Canada, Australia, some countries in Asia, some countries in the Middle East.

Simon Baker:

Two quick ones, if I may. Just in terms of the timing on the CMV interim data. You said this quarter, it could be as early as the end of '24. That sounds slightly later than you previously said. I just wondered if that's me over-interpreting the semantics or whether there is a slight delay there?

Stephen Hoge:

So first on the clarification. There's no change to our expectations on when the CMV readout will happen. I think we previously tried to be careful in saying that we expect it to happen this year. And so obviously, by the end of this year, it is meant to say the same thing, but there's no change in our expectations at this point.

Edward Tenthoff:

Congrats on everything. Actually, most of my questions have been answered. But I wanted to ask with respect to the cancer efforts, are you able to break out what the actual R&D cost is for that program and that's still a cause some profit share with Merck? And how many indications do you guys ultimately plan on pursuing?

Edward Tenthoff:

Understood. And then -- with the expansion...

Edward Tenthoff:

Very exciting. Look forward to seeing you in Chicago.

Stéphane Bancel:

Well, thank you, everybody, for joining in today for a great session. We look forward to seeing you at latest ASCO. Have a great day.

Operator:

Good day, and thank you for standing by. Welcome to the Moderna Fourth Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions]. 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.

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us today. I will start with a review of 2023. Jamey will then present our financial results. Stephen will then review our late-stage clinical programs, and I will close by sharing our 2024 priorities. Let me start with our mission, Moderna's commitment to deliver the greatest possible impact to people through mRNA medicine. In 2023, every member of the Moderna team helped to advance our mission, which is a driving force that motivates our team every single day. We impacted more than 100 million people around the world and we advanced our development pipeline across all of our franchises, including infectious disease, oncology, and rare disease. 2023 was a difficult year as we transitioned from a pandemic to a seasonal endemic market. We reported sales of $6.1 billion for 2023, which was at the low end of our financial framework range. These sales exclude the recognition of $600 million of deferred revenue from Gavi. In the U.S., the vaccination rate was down year-over-year. We were pleased that our U.S. commercial team drove an increase in our retail market share from 37% to 48%. Outside of the U.S., we were not able to compete in the EU market in the second half of 2023 due to a competitor contract, and our performance led to a low market share in Japan. We did have a strong performance in Israel, Switzerland and Taiwan. We took several important actions in 2023 that we set our commercial COVID business up for success. We resized our manufacturing footprint, which has been established to support capacity at pandemic levels. We exited contract manufacturing relationships and reduced inventory levels. These initiatives will improve cash flow from our COVID business moving forward. We also flattened the commercial structure. All regions report directly to me now for more targeted sales execution and also a better integration with global teams. We focused on R&D spending and our SG&A expenditures towards near-term growth and higher return on investment projects. While sales were challenging in 2023, our development team had a great year with excellent progress across many of our late-stage pipeline programs. In 2023, we advanced our pipeline and now have nine late-stage programs. Let's start with Respiratory vaccine. For RSV, we filed for approvals around the world. We reported positive data from a flu P303 study, and we are fully enrolled in the Phase 3 studies for our next-gen COVID, mRNA-1283, and flu plus COVID combination vaccine, mRNA-1083. In our latent franchise, we are very excited that our Phase 3 CMV trial is now fully enrolled. In our Individualized Neoantigen Therapy Program or INT, where we partner with Merck, Phase 3 studies in adjuvant melanoma and non-small cell lung cancer are enrolling. We purchased and are currently building out a manufacturing site in Marlborough, Massachusetts to enable commercialization of our INT program. Our rare disease therapeutic programs continue to progress well. We are in dose selection of the restrictional study of our Propionic Acidemia Program. In MMA, we are pleased to see improvement in biomarkers and clinical outcomes. In research, we made six estimated [ph] investments, including one acquisition, which we expect will increase the strategic reach and also the breadth of our mRNA platform. Now turning to our 2023 financial summary, we reported GAAP revenue of $6.8 billion, a net loss of $4.7 billion, primarily driven by mostly non-cash charges of $3.7 billion related to resizing of manufacturing and the tax valuation allowance. We are pleased to end the year with cash and cash investment of $13.3 billion. Let me turn to Jamey for more color on our financials.

Stephen Hoge :

Thank you, Jamey. Good morning or good afternoon, everyone. Today I'll do a quick review of our clinical highlights from our late-stage programs in 2023, and then look ahead to anticipated milestones in 2024. While we have over 40 programs in development, they'll focus on our late-stage pipeline, which consists of nine programs across four franchises, all made significant progress in 2023. Four of these programs are in our respiratory vaccine franchise. We hope to launch all of these potential products by the end of 2025. I'll discuss these further in a moment. The other five late-stage programs are spread across latent vaccines, oncology therapeutics, and rare disease therapeutics. We hope to begin launching these beginning in 2026, and I'll discuss our progress in these areas as well. In infectious disease vaccines, we've achieved many important clinical milestones in 2023. Within our respiratory vaccine franchise, we filed for RSV vaccine approvals in many countries around the world. We recently presented follow-up data from our Phase 3 study at the RSVVW meeting that I'll recap in a moment. In our mRNA-1010 flu program, our Phase 3 P303 study met its primary safety endpoints and hit all eight co-primary immunogenicity endpoints against all strains of influenza. We're also excited that we fully enrolled the Phase 3 immunogenicity and safety study of our Next-Gen COVID vaccine and the Phase 3 immunogenicity safety and safety study of our flu and COVID combination vaccine. In our latent and other vaccines franchise, we're proud of the great progress our team made to complete enrollment in the Phase 3 study of our CMV vaccine in 2023. That study is now accruing cases towards its first interim analysis of efficacy. On slide 17, I want to briefly review the primary analysis for our RSV vaccine, which was first shared in January of 2023. The study met its primary and key secondary endpoints, leading the DSMB to recommend unblinding. Vaccine efficacy was 83.7% against RSV with two or more symptoms of lower respiratory tract disease at a median follow-up of 3.7 months with a wide range of two weeks to 12 months of total follow-up. The primary analysis also showed 82.4% and 68.4% vaccine efficacy against three or more symptoms and acute respiratory distress respectively. These data were recently published in the New England Journal of Medicine in December of last year. We've continued to follow the participants in the trial and announced follow-up data at the RSVVW conference earlier this month. An additional analysis showed sustained vaccine efficacy against RSV with VE of 63.3% against RSV, lower respiratory tract disease with two or more symptoms through a medium follow-up of 8.6 months and a maximum follow-up of 17.7 months. The vaccine efficacy was 74.6% against RSV, lower respiratory tract disease associated with shortness of breath, which has been shown to be a key driver of seeking a higher level of medical care and the associated burdens and costs. Now, slide 19 summarizes the overall timing of enrollment, primary efficacy analysis, and subsequent analysis overlaid against the epidemiology of RSV over the two seasons that have now contributed to the efficacy in the trial. Our trial enrolled steadily over 13 months between November 2021 and December 2022. As a result, the primary efficacy analysis included cases from both the smaller RSV season of 2021 and 2022 and the much more significant RSV season of 2022 and 2023. Due to enrollment throughout the year, the median follow-up of the primary analysis was 3.7 months, but as I noted, the maximum follow-up was 12 months. The primary analysis met its success criteria leading to a study on blinding. We continued a pre-plan additional analysis on April 30, 2023. At that analysis, the medium follow-up was 8.6 months, with a maximum follow-up of 17.7 months. Or put another way, approximately 17,000 participants were between nine and 18 months of study follow-up at the time of the analysis, with many completing their second RSV season on the study. Per protocol, we are continuing to follow cases through one year, but as is evident from the epidemiology, very few cases would be expected in the six months after the April 30th cutoff date from the last analysis. In summary, we are pleased that the data shows sustained efficacy through two seasons, including the large RSV season of 2022, 2023, and we look forward to providing further updates from this ongoing study. We also achieved clinical milestones across our therapeutics franchises in 2023. In oncology, our Individualized Neoantigen Therapy developed in partnership with Merck, began Phase 3 clinical studies in both adjuvant melanoma and non-small cell lung cancer. Both phase three trials are now actively enrolling. Our primary analysis from the Phase 2 study was recently published in The Lancet, giving greater detail on the two-year follow-up data that we had released in 2022. Now in December of 2023, we shared top-line follow-up data from that same Phase 2 study in adjuvant melanoma patients, confirming the durability of the initially reported responses. At a medium follow-up of now three years, the recurrence-free survival and distant metastasis-free survival remained extremely favorable, with a reduction of the risk of recurrence or death by 49% and a reduction of the risk of distant metastasis or death of 62%. Both results were highly statistically significant at three years. And in PA and MMA, our most advanced rare-disease therapeutic programs, we continued to see positive clinical data in our Phase 1/2 studies, including improvements in biomarkers and clinical outcomes, such as metabolic decompensations. Now, turning to slide 21. While we're proud of the progress in 2023, we have much more ahead in 2024. Let me take you through some of the late-stage milestones we anticipate for this year. I'll start with our respiratory franchise, where we are targeting the first approval for our RSV vaccine, beginning in the first half of 2024, with commercial launches shortly thereafter. With our flu vaccine, we're in discussions with regulators about potential submissions for approvals, and we expect to begin filing this year. Phase 3 data from our Next-Gen COVID vaccine is expected in the first half of 2024, which will inform the next steps. And we expect Phase 3 data for our flu and COVID combination vaccine this year. In latent vaccines, we are looking forward to potential efficacy data from our CMV Phase 3 study. In oncology, we expect continued progress enrolling our two Phase 3 studies in INT for adjuvant melanoma and non-small cell lung cancer. We also expect to expand into additional tumor types this year. And finally in rare diseases, we expect to move into registrational studies for both PA and MMA in 2024. It'll be a very busy year, and we look forward to sharing progress with you as the year progresses. With that, I'll turn the call over to Stéphane.

Operator:

Thank you. [Operator Instructions] Our first question comes from Michael Yee with Jeffries. Your line is open.

Stéphane Bancel:

Great. Thank you, Michael. It’s Stéphane. So in terms of contracting, obviously we cannot start contracting now, because the product is not approved. But our medical team has been quite engaged across the board at medical conferences, talking to healthcare professionals and sharing the great data that was published in December, as you know, for a Phase 3 in the New England Journal of Medicine. So we have active discussions. There is quite high excitement about the possibility, again, if a product was to be approved to get a pre-filled syringe product. As we discussed in my remarks, as you know, labor shortages are a big issue in pharmacy. For any of us that has gone to a pharmacy in the fall, you could see it was very busy, sometimes a bit too hectic, and so the leadership of the big retail pharmacies is very engaged to think about COVID versus RSV and how to simplify the workflow, how to reduce medical errors, which is why those medical discussions that we're having so far give me significant hope that our products will be meaningful tools for our customers.

Gena Wang:

Thank you. I have two very quick questions. First one is regarding the RSV vaccine. What portion of 35,000 to 36,000 participants that completed two seasons and regarding February 29 ACIP meeting, what additional data you will be presenting? And very quickly on 2024 guidance, now we have a better understanding of both COVID and RSV market size for 2023 and 2024 season. What could be the upside or downside for your 2024 revenue guidance of $4 billion?

Stéphane Bancel:

Thanks Stephen. And Gena, its Stéphane, on the upside and downside on the sales for this year. I think on the upside obviously, the COVID in Europe, as I just mentioned, we couldn't participate in the market last fall. The new tender is an opportunity for us to participate. Quite a number of doctors, hospitals, public health leaders have actually complained that the Moderna vaccine, given the higher efficacy reported for reduction of hospitalization was not available, especially for the elderly, for immunocompromised people, so that's an interesting upside. Of course, the vaccination rate in the U.S. as we reported, the vaccination rate in the current ending season was lower than last year. As I said in my remarks, we need to do better to protect more people. And our team is actively already working in a cross-functional matter to address the VCR and increase the vaccination rate. And the other upside could be the RSV, both for market growth, as well as our share. How quickly can we get share from the current two solutions available. On the downside, of course, the vaccination rate could be a downside. And the other one is of course timing of RSV launch, given we rely on regulators for the approval of products, and then the public health recommendations like CDC over different NITAGs in the different countries, that could of course delay launches and of course impacting sales. Thank you.

Eli Merle :

Hey guys, thanks so much for taking the question. Just turning to the CMV Phase 3, can you talk a little bit about what you would view as clinically meaningful or commercially relevant on vaccine efficacy? And if successful, also, how are you thinking about use in seronegative versus seropositive patients? Thanks.

Operator:

Thank you. Our next question comes from Hartaj Singh with Oppenheimer. Your line is open.

Stephen Hoge :

Yeah, of course. Thanks Hartaj. So we're currently fully enrolled and we're accruing cases in that study. I think as we've shared before, we've actually made substantial progress in a number of cases. It is a case-driven endpoint and we'll need to see approximately 80 cases before we'll do the first interim analysis for efficacy. That, its 81 cases to be specific. That interim analysis actually will look a lot like our other vaccine efficacy studies. DSMB will evaluate that data and if we meet the statistical threshold, which is for early efficacy, meaning we're doing better than our minimum of 49.5% vaccine efficacy, then they will at that moment tell us to unblind and share the results, and of course, we will share them broadly with the world. If for whatever reason we don't quite have the statistical power in that first interim analysis efficacy, the study is powered to continue on and continue to accrue cases towards a final analysis of efficacy. Now, given the rate of the final analysis at 112 cases, now given the rate of a case accrual that we're currently seeing in the study, we do expect that we will have more than enough cases this year. We are therefore pretty confident that we're going to be seeing a readout from the interim analysis, possibly even a final analysis for efficacy in 2024. But again, since its case and event driven, we just have to bide our time. And ultimately, we will depend upon the DSMB to tell us whether or not we've met that statistical threshold.

Luca Issi :

Oh, great. Thanks so much for taking my question. Maybe Stephen, at INT, maybe can you remind us what's your latest thinking in terms of potential for accelerated approval there for melanoma? And then maybe on the additional tumor types that you guys and Merck are thinking about it, can you just maybe talk about what are the tumor types that you are contemplating and whether those tumor types are going to be in the adjuvant settings or in the metastatic settings? And then maybe on RSV quickly, can you just maybe expand on durability in the context of your competitor? Is there a scenario where ACIP recommends the GSK vaccine for every other year versus your vaccine for every year? Any color there is much appreciated. Thanks so much.

Operator:

Thank you. Our next question comes from Salveen Richter with Goldman Sachs. Your line is open.

Stéphane Bancel :

Hey. So I'll take the question. So on RSV vaccines [ph], we have not started the study yet. We are of course considering taking this into a Phase 3. It is in the clinic with Phase 1/2. We are waiting for the data to be able to move at the right time into the paediatric setting. In terms of CMV, we don't have data yet on durability. Again, like we've done for other programs, when we share the data, we share the data, including durability, because it's very important. As you know, the benefit of young women is they have a very strong immune system. As we've shown in our INT programs, our T-cells work very well in terms of the vaccination technology of Moderna. So we really expect to have good durability over time. But again, we have to wait for the data to make such a determination. Thank you.

Alex Hammond:

Hi, this is Alex Hammond on for Geoff Meacham. Thank you for taking our question. So a great way to equalize vaccine efficacy results is to use a correlative of protection. So for RSV, when do you think we could have a line of sight into those type of metric? And how important could this be for competitive dynamics? Thank you.

Stephen Hoge :

Hi. Sorry about that -- small technical snafu. So I'm back. I believe I caught the end of the question, which is when do we think we'll have a correlative of protection that can inform dynamics, both between products and boosting, if that's correct. We and all the other manufacturers have been sharing publicly our work on a correlative protection. We do believe that we've identified a strong candidate in neutralizing antibodies, not surprisingly, from our clinical study. We've been sharing that data with regulators, and we've been sharing the preliminary analysis with public health officials, including advisory groups and ITAGs like the ACIP. We will be publishing that data and ultimately submitting that to our regulatory submissions as a correlate through the balance of this year. And if we and I think the other competitors are successful in establishing neutralizing antibodies against RSV as a correlative protection in RSV, then it really will probably be the primary way that public health officials make determinations about revaccination and boosting, and ultimately how we maintain durable protection against RSV for high-risk populations like older adults. From a competitive dynamics perspective, once each product has established their correlate, their correlate will relate to them. But we do think there's probably going to be more commonality than not in the correlates of protection, which makes sense, because at the end of the day we're still talking about the same virus and vaccination against it for all three products.

Terence Flynn :

Great. Thanks for taking the question. I was just wondering if you could provide an update on your discussions with the FDA for 1010, your seasonal flu vaccine, and what's gating to filing here. Thank you.

Operator:

Thank you. Our next question comes from Jessica Fye with J.P. Morgan. Your line is open.

Stephen Hoge :

Great questions all. So, I'll take the first part of that. So first of all, metastatic. So we have not formally decided or announced that we're going into a metastatic indication. We do have data from our Phase I study, our initial Phase 1 study in metastatic patients, including non-small-cell lung cancer, but we have not yet made a determination that we're going into the metastatic indication. And I think behind your question is a view that I would agree with, which is to the extent that INT is going to provide a really substantial benefit, we think it is probably in earlier lines of therapy. So not just adjuvant, but perhaps even Stage I disease or a Stage II disease, depending on the indication, because the safety and tolerability profile is we think incredibly favorable, and the benefits we're seeing are pretty remarkable from an immune perspective. That said, there is still a really high unmet need in the metastatic space, and even immunotherapies like the PD-1s, like KEYTRUDA, provide a substantial benefit there. And so at the right time, we may well choose to study the metastatic indication, but as I said or metastatic indications and settings, but as I said, we have not yet formally decided to do that today, and we are really focused on adjuvant and earlier and monotherapy principally. On the manufacturing process and enrollment, we have substantially scaled up our ability to enroll patients in those Phase 3 studies. I can assure you that with our partner, Merck, we wouldn't have opened a second Phase 3 study and be talking about the third if we didn't have confidence in our ability to rapidly meet the demand for the substantial demand from those clinical research sites for INT manufacturing. We haven't specifically put out numbers, but suffice it to say, we are rapidly enrolling in those studies, and we would expect to make substantial progress this year and even perhaps getting close to completing enrollment in at least one of those studies if it continues trajectory. So we're excited about the progress we've made in scaling up the manufacturing for clinical supply. We're excited about the progress we're making right now in enrolling patients and the demand that we're seeing from clinical sites. And we do believe that we've solved a lot of the, for clinical research, for clinical development, the manufacturing requirements. The question then becomes commercial, and as we alluded to a few minutes ago, the Marlboro site would really become the purpose-built commercial site, which needs to not only be able to deliver high-quality products at high volumes, but also do it at a valuable price and cost point and all of that work is ongoing. We've made great progress in building that site. Our goal is to establish that site for at least clinical supply this year, but we haven't provided further guidance on when we will have that fully operational for potential commercial use. And ultimately, it depends upon discussions with regulators as well.

Operator:

Okay. Our last question comes from Evan Wang with Guggenheim Securities. Your line is open.

Stephen Hoge :

Great. I'll quickly take the first part of that and then hand it over to Stéphane for the second. So the additional data on 50-plus, we have obviously immune bridging data and co-administration data. We'll be sharing that at the appropriate time with public health officials and others. It could be as soon as the ACIP. It just depends on when the data comes in, as well as the 18-plus high-risk populations. In your question about getting those in the label, it's important to note that public health officials can recommend use even beyond the label and may choose to do that, but our responsibility would be to get it in the label, and we will need to complete the initial BLA before then we could submit the SBLA to get that data in the label. And so obviously it would follow shortly after our hopefully successful PDUFA outcome in May.

Stéphane Bancel:

Thank you so much for the questions today. Thank you for taking the time to be with us. We look forward to talking and seeing many of you in the coming days and weeks. I hope that you will have on March 27, Annual Vaccine Day in your calendar. We'll start the presentation at 9 a.m. Eastern Time. So have a great day and thank you for joining.

Operator:

Good morning. My name is Kevin. And welcome to Moderna's Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we'll open the call up for your questions. [Operator Instructions] Please be advised, today's call is being recorded. At this time, I'd like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us today. I will start with a quick review of our business for third quarter. Arpa will then give you an update of our commercial progress and plans. Jamey will present our financial results and will explain in detail the one-time charges we announced this morning in our press release. Stephen will then review our clinical programs. And I will share our key priorities for 2024 and 2025 to return Moderna to sales growth and profitability. We delivered $1.8 billion in Spikevax sales of COVID vaccine in the third quarter. Based on trend we are seeing in the U.S. COVID market in recent weeks, we expect our sales for 2023 to be at least $6 billion. We have been preparing for the 2023 fall COVID launch throughout the year, because the U.S. market was pivoting from a pandemic government purchase market to a commercial market. I am very pleased to report that according to IQVIA market data, we have a market share in the U.S. of 45% season to date, compared to 36% for 2022. [And Arpa] (ph) will show you, we even achieved 51% market share last week in the U.S. This commercial performance in the U.S. market shows that Moderna can compete commercially with large established players, [that will prove] (ph) important as we launch RSV 2024 and combo of flu-COVID in 2025. On the cost side of the company, we informed you at R&D Day that it was important for us to resize our manufacturing footprint as the world has moved from a pandemic to an endemic setting. I am pleased that our manufacturing and finance team were able to move fast and resize our manufacturing, so that we can go back to 75% to 80% gross margin levels. This resizing resulted in a charge of $1.6 billion, which Jamey will explain in detail in his section. Now let me turn over to Arpa to walk you through our progress in the U.S. market.

Jamey Mock:

Thanks, Arpa, and hello, everyone. Today, I will review our financial performance for the third quarter and provide an updated framework for our full year 2023 financial outlook. Additionally, given we know it's top of mind for investors, we wanted to provide our early thoughts on 2024 and how we're approaching the next couple years. Starting on Slide 15. Total net product sales for the quarter were $1.8 billion, down 44% year-over-year, driven by lower sales volume, and partially offset by a higher average selling price. Product sales were almost evenly distributed between the U.S. market and the rest of the world. We initiated product shipments to customers in mid-September for the fall booster season, following the authorization of our updated COVID-19 vaccine. Cost of sales for the third quarter of 2023 was $2.2 billion compared to $1.1 billion in the prior year. I will provide detailed commentary on the following slides. Research and development expenses were $1.2 billion, which increased by 41% versus the prior year. This increase was driven by our expanded and maturing development pipeline with six products now in Phase 3 studies or pending approval. Selling, general and administrative expenses were $442 million, reflecting an increase of 59% year-over-year. The growth in spending was primarily driven by the buildout of our commercial activities and, in particular, our launch in the U.S. commercial market. The income tax provision in Q3 was $1.7 billion, as we reported evaluation allowance against deferred tax assets of $1.7 billion. Under GAAP accounting rules, we are required to take a reserve, also referred to as evaluation allowance, for deferred tax assets when the current year and cumulative income projection for the next three years is in a loss position. These losses indicate our deferred tax assets may not be fully realized. It's important to note, future income from products not yet approved by regulators are excluded from these income projections, which restricts us to adjust our COVID vaccine, and it does not include expected future launches. In combination with our updated endemic COVID forecast, we determined it was appropriate to record a valuation allowance for our deferred tax assets. This valuation allowance did not impact cash flows, nor future returns, nor the company's ability to utilize deferred tax assets in future periods. Net loss for the period was $3.6 billion compared to net income of $1 billion last year. Diluted loss per share was $9.53 compared to diluted earnings per share of $2.53 in 2022. Finally, we ended the third quarter with $12.8 billion in cash and investments. The decline versus prior quarter was driven by our operating loss and sales to be collected in Q4. Now, let me come back to cost of sales on Slide 16. We now expect full year cost of sales of $5 billion, driven by $1.5 billion of unit-driven expenses, which also includes royalties, and $3.5 billion of inventory write-downs and charges related to CMO purchase commitments, cancellation fees, and wind-down costs. As Stéphane previously highlighted, in our pursuit to optimize the cost structure of our COVID-19 franchise, we undertook a strategic initiative in the third quarter to restructure our manufacturing footprint, which was built for the pandemic. As part of this initiative, we reduced our capacity and commitments with several third-party vendors, we reevaluated our raw material inventory levels, and cut back on our purchase commitments for raw materials not anticipated to be consumed before expiration. As a result, we are recording charges of $1.6 billion, $1.4 billion of which are in Q3 and an expected $0.2 billion in Q4. The $1.4 billion charge in Q3 consists of inventory write-downs of $0.9 billion and CMO wind-down costs and cancellation fees of $0.5 billion. The Q4 charge is related to CMO wind-down costs. Despite the immediate financial impact, we are confident that this strategic move will improve the efficiency of our manufacturing operations and establish a strong foundation for improved margins going forward. As part of the $1.6 billion in total restructuring charges I just mentioned, only the CMO-related costs and cancellation fees are cash restructuring costs. We project this approximately $0.7 billion charge will have a payback in less than two years and a net cash benefit of approximately $1 billion through 2029. As I mentioned, our full year forecast for cost of sales in 2023 is now $5 billion. Before resizing charges of $1.6 billion, our cost of sales for the full year is expected to be at the low end of our previous guidance of $3.5 billion to $4 billion. So, now coming back to my commentary on Q3. In addition to unit-driven manufacturing costs and the cost from this initiative, we also incurred approximately $0.4 billion of inventory charges for excess and obsolete material, demand-related write-downs of our latest Spikevax product, and unutilized manufacturing capacity charges. Moving to Slide 17. In summary, we made substantial progress to resize our COVID cost structure and accelerated our path towards our longer-term target of 20% to 25% of sales. We expect our cost of sales to not only be at a lower level, but also be more predictable in the future. In recent quarters, our cost of sales were highly impacted by write-offs and charges as we just addressed today and in previous calls. Year-to-date write-offs and charges for inventory CMO and supplier-related commitments are 74% of sales. Starting in 2024, we expect those to be less than 10% of sales on an annualized basis. Our capacity is now better positioned to scale with volume. At a $4 billion sales level, we expect cost of sales of approximately 35%, reducing to approximately 30% at $6 billion of sales, and 20% to 25% at even higher sales levels. In other words, with our resized manufacturing footprint, we now expect to achieve significant volume leverage moving forward. Let's now move to Slide 18. While we intend to continue to focus on GAAP results, we wanted to give you a view of our financial results in Q3 with and without the resizing and tax valuation allowance charges. While our total GAAP net loss in the third quarter was $3.6 billion, our loss excluding these charges would have been $0.5 billion. Now, let's turn to our updated 2023 financial framework on Slide 19. As Arpa mentioned earlier, we now expect product sales for 2023 of at least $6 billion for the full year, which is comprised of $3.9 billion of sales through the third quarter, an additional $1.1 billion of international sales in Q4, and at least $1 billion of Q4 sales from the U.S. As explained earlier, we now expect cost of sales for the full year of approximately $5 billion, which includes resizing charges of $1.6 billion. For R&D and SG&A, we now expect full year expenses to be approximately $6.3 billion, with approximately $4.8 billion in research and development. Our R&D spend is slightly higher than the $4.5 billion previously forecasted, which is mainly driven by business development activities as well as additional investments in our late-stage clinical trials. Our forecast for SG&A expenses remain consistent at approximately $1.5 billion. We now expect a full year tax expense of approximately $0.8 billion to $1 billion, driven by the $1.7 billion increase in the deferred tax allowance I referenced earlier. And finally, we now expect capital expenditures of approximately $0.9 billion, down from our previous guidance of $1 billion. Before I get into the specifics on 2024 and 2025, I wanted to share with you our principles on how we are operating the company today and our plans over the next three years. We are laser-focused on making our COVID franchise profitable in 2024 and beyond. We look at our Spikevax product profitability, excluding research and development costs, for our future pipeline, and we believe our recent resizing efforts will ensure that our COVID franchise is a continuous and increasing source of income and cash generation. At the same time, we also recognize the significant and unique opportunity for organic sales growth ahead of us with our late-stage pipeline. We will be disciplined in our investment approach and adjust R&D and SG&A based upon the sales performance of our product lines, which in 2024 is still mostly COVID, but we expect it to also include RSV. We expect this investment in our late-stage pipeline will result in a loss over the next two years, but help us to breakeven starting in 2026. We believe our current balance sheet is more than sufficient to fund our plans without the need to raise equity. We are also not planning to repurchase shares in the intermediate term. Stepping back, we believe this is an unparalleled opportunity to impact the lives of patients while creating shareholder value at the same time. Moving to Slide 21, let's start with our view on sales over the next couple of years. We're expecting sales to hit a low point in 2024 at approximately $4 billion. The biggest change year-over-year is related to our signed APAs. We currently have $1 billion of COVID-related APAs for delivery in 2024. Recall that our first half sales in 2023 of $2.1 billion were mostly deferrals from our 2022 existing contracts. So, we expect minimal sales in the first half of 2024. For the U.S., we expect 2024 to be at least $2 billion and believe it will grow over time. Lastly, we expect approximately $1 billion from RSV and other international COVID sales. And finally, in 2025, we expect a return to growth. Let me finish by giving you a more fulsome view on 2024 and our thinking on 2025. Starting with 2024, as I just explained, we expect sales to be approximately $4 billion. Cost of sales are expected to be approximately 35% of sales. R&D expenses of approximately $4.5 billion in 2024, would be down 6%. In 2024, the majority of our R&D expenses are for registration trials, which are now mostly committed. I will speak to our view on 2025 R&D expenses in a moment. SG&A expenses of approximately $1.3 billion in 2024 would be down 13%. We expect taxes to be negligible in 2024 and capital expenditures to be similar to 2023 at $0.9 billion. In summary for 2024, Spikevax will generate nearly $1 billion of income. When we combine that with our estimated investments in R&D and capital expenditures, our cash balance is projected to be approximately $9 billion at the end of 2024. Now for our preliminary thoughts on 2025. As mentioned earlier, sales will return to growth. Cost of sales will improve with the increased sales growth. R&D will be flat to down, and we have much greater flexibility for reduction, given that only approximately half of our current R&D spending levels for registrational trials are committed for 2025. SG&A will be flat to down. Taxes will continue to be negligible. And capital expenditures will be materially lower after the completion of our facilities in the UK, Canada and Australia in the first half of 2025. In summary, our COVID operating income will grow and our investments will remain flat or lower, leading us to an estimated ending cash balance of approximately $6 billion to $7 billion in 2025. Finally, during this period, we expect to launch five new products to help us breakeven in 2026. So with that, I'll now turn the call over to Stephen.

Stéphane Bancel:

Thank you, Stephen, Jamey and Arpa. Our focus is to return Moderna to sales growth and profitability. To achieve that, we have three priorities. Priority number one, commercial execution. Our market share in the U.S. demonstrates we can compete. We are focused on launching RSV in 2024. We believe we have best-in-class profile for RSV vaccine, high-efficiency, good safety profile, and the easiest to use in pharmacies or doctor's offices. As you all know, pharmacy chains are having challenges given the workload, especially in the fall season. The two other vaccines on the market today are very complicated to prepare before injection; one is nine steps, and one is four steps. Now we launched pre-filled syringe and, as Arpa said, we are very excited about that. And from the discussions I had with the leadership of pharmacies, I believe that this will be an important differentiation. Our COVID plus flu combo vaccine should launch in 2025. And as you know, flu is a higher volume market than COVID. In the U.S., for example, flu is around 3 times the number of doses compared to the COVID market. With these new product launches in '24 and '25, and the combination of COVID sales in the endemic setting, we believe Moderna will be in sales growth again in 2025. Priority number two, discipline investments. We'll be disciplined in our investments and [cycle] (ph) them based on our sales performance. As you saw, we have taken bold actions to resize our manufacturing footprint in the third quarter. The team is not done and there are many continuous improvement projects to drive a reduction in cost of manufacturing. We'll also look at our R&D costs and will consider partnering some programs, if needed, to allow us to be responsible and disciplined about our costs. For SG&A, as Jamey mentioned, we are currently going through our 2024 budget and our goal is to have a lower spend in SG&A in 2024 than we had in 2023. We still plan to keep SG&A flat in 2025 versus 2024. We're launching respiratory products in 2024 and 2025, and we anticipate the same teams [indiscernible] productivity gains as we improve our commercial operations. As Jamey mentioned, we expect to breakeven in 2026. Priority number three, executing on our late-stage pipeline to drive sales growth. As you all know, we have an exciting late-stage pipeline with six Phase 3 assets. For respiratory program, RSV, flu, next-gen COVID, mRNA-1283, and COVID plus flu combo that Stephen just talked about. One latent program, CMV, which is fully enrolled in Phase 3 and accruing cases. One oncology program, INT in melanoma, and as Stephen mentioned, in lung cancer. We look forward to having and sharing three years of INT data from our melanoma study before the end of this year. If the data are strong, we believe it could be the basis for regulatory discussions for potential accelerated approval. We have been investing in building a factory in Marlborough, Massachusetts, which will enable the commercial launch for INT. Thanks to the mRNA platform we built, we have an exciting pipeline, with up to 15 launches in the next five years. We have the largest late-stage pipeline of any mRNA company in the world and will continue to focus to deliver the greatest possible impact to people for mRNA medicine. I've never been more excited about the potential we have to deliver for patients. The actions we are taking help us to execute on that vision. With this, operator, we'll be happy to take questions now.

Gena Wang:

Thank you for taking my questions. I have two questions regarding the commercial questions. First, you did mention 2026, you're looking to have a breakeven. And when we take a quick look based on your 2024 and 2025 outlook, it seems the total cost could be in the $8 billion to $9 billion, that range. Could you give us a sense what could be the additional sales if we're using 2024 guidance as a base point? And the second very quickly regarding the manufacturing resizing. After resizing, what is the full capacity regarding doses and what percentage of the manufacturing will be internal in 2024 and 2025?

Arpa Garay:

Capacity.

Gena Wang:

Sure. Basically, after manufacturing resizing, what is the full capacity regarding doses, and what percentage will be internal?

Gena Wang:

Thank you.

Salveen Richter:

Good morning. Thanks for taking my questions. Two from me here. One is, you provided guidance of about $4 billion between COVID and RSV on the [forward here] (ph) for 2024. Could you just speak to the contribution from each and how you're thinking about flu monotherapy? And the second question is that your financial framework for 2025 includes the ability to flex R&D and SG&A. Are there any parameters you can share on the range of this flexibility and how you would prioritize R&D programs and development? Thank you.

Stéphane Bancel:

And Salveen, this is Stéphane. Maybe just to add to Jamey's point on the R&D, as I mentioned in my remarks, if we have to, we will be open, of course, to partnership some of those programs, which is an important way we could flex the R&D number based on where the sales are, as Jamey mentioned, which is if the sales are according to our plan, then we're going to be okay. If the sales are below, we will be very open to partnering. As you know, we've done that in the past. The team knows how to do it. But we will be disciplined about our investments in the business based on where the sales line is.

Unidentified Analyst:

Hi, this is Sarah on for Ellie. Thanks so much for taking our question. First, I guess, can you talk about in 2024 again on that $1 billion RSV international sales number? Are you expecting any contribution from flu in '24, and maybe how you're thinking about it into '25? And then, on CMV, can you talk about where you are in cases and how they're tracking versus R&D Day where I think you said a fourth of them were currently tracked? That would be great. Thanks so much.

Stephen Hoge:

And on the CMV question, thanks for that. So yes, we did update that we're about a quarter of the way through the case accrual back in R&D Day. I think the next -- we continue to accrue cases at a steady pace. I do think the next update will provide is likely our Vaccines Day in the spring.

Operator:

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

Arpa Garay:

Thank you for the question. In terms of the total RSV market, as I mentioned earlier, we're excited by the uptake and the consumer awareness of the market overall. And our projections are similar to what both GSK and Pfizer have already guided. In terms of our market share with RSV, we have not yet provided or are ready to provide any forward-looking projections on share, but we are very excited about our strong product profile, both in terms of efficacy, safety, and, as I mentioned, our ready to use pre-filled syringes. So, we will be leveraging the learnings and the success from our COVID commercial launch this year and applying them to RSV next year.

Operator:

Thank you. Our next question comes from Jessica Fye with JPMorgan. Your line is open.

Jamey Mock:

Yeah. Thanks, Jess, for the question. Again, without getting into too much detail on 2026 in terms of how we think about it, I mean, the best way to keep going back to that late-stage pipeline that we've been talking to you about, RSV, flu, our combination, our next-gen COVID product as well, will all be very much there for the year 2026. And we are confident in all those product profiles and how we will compete. As I mentioned, at 6%, our cost of sales -- at $6 billion, sorry, our cost of sales would be 30%. At $8 billion, our cost of sales would be 25%. And of course, we'll try to improve on that. And that will give us the envelope for how much we can continue to invest in the future products, which we said we'll launch 15 by 2028. That'll be all of our latent product portfolio, that'll be our INT portfolio, that'll be our rare disease portfolio. So, I think that's as much as we can say right now. I just want everybody to know that we are very committed to breaking even in that year, and we have a lot of flexibility, both from a growth standpoint and a discipline investment standpoint.

Operator:

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

Stephen Hoge:

Maybe I'll take the first -- the second part of that question and then hand it over to Jamey for the first. So, on RSV and the need for it, obviously, we're continuing to follow the public health situation in terms of the rate of occurrence of the RSV epidemic this year. At this point, I think we don't have data yet on whether or not it will ultimately be an annual or something less than annual, say every two or three year vaccination regime. I think like everybody else, we'll be looking to our data, the other manufacturers' data, as well as the public health, the epidemiologic data to guide that decision. There are plenty of vaccines for which there is an approach, flu as an example, where there's a seasonal vaccination approach, both because of the benefit offered by the vaccine, but also because of the convenience of just making sure that every season, every year, people are reminded to get that vaccine. So, the ultimate decision on whether this is going to be recommended is not ours, the manufacturer, it will fall to public health officials based on a number of factors, which will include the [indiscernible] and the data we provide, but other factors as well. And we'll work to make sure they have the data they need to make that decision.

Stéphane Bancel:

It's Stéphane. Just maybe adding to Jamey, who said it super well. As you know, we have a platform company. And the [indiscernible] success of those programs we feel very good about. If you just look at with COVID and Phase 3 RSV -- sorry, and Phase 3 for RSV and Phase 3 for flu, we have three out of three positive Phase 3. This is not your industry average. So, we think we can create value and create return on capital for shareholders by investing that capital to high-priority projects that are in late-stage pipeline. As I said, we have the largest late-stage pipeline of any mRNA company. We have six programs right now. And as soon as we launch [indiscernible], which is very, very soon, there's going to be seven programs. We believe the best way to create returns for shareholders is to invest that capital to drive sales growth and profitability.

Operator:

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

Arpa Garay:

Thank you for the question. In terms of the fourth quarter '23 jabs, what we saw in 2022 is there was a significant portion, about 45% of the total COVID vaccinations happening in November and December. This year, we're expecting a similar split, likely larger, given that we launched two weeks later into the season in 2023 than we did last year. And what we are hearing from our different non-retail customers as well as our retail pharmacy partners is they are planning vaccination campaigns and marketing efforts to really capture on the November and December months. So, in total, we do anticipate getting to at least 50 million doses this year, and we do believe that November and December will be strong months for us. In terms of 2024, our assumption is everyone who has gotten their booster in 2023 will at least get their booster also in 2024 and beyond. Now, given the higher burden of disease with COVID, as consumers become more understanding of the annual recommendations and as the convenience of getting both flu and COVID becomes more normalized, we do believe over time we'll start to see some increase in the overall COVID market.

Hartaj Singh:

Great. Thank you for my question. I just got a question on the combination programs. And just to give a little bit of -- frame the question, in other therapeutic areas, aside from vaccines for infectious diseases, for example, oncology, monotherapy treatments generally tend to be minority of treatments, 10%, 15%, 20%. Currently, monotherapy vaccines dominate the market in COVID-19 flu. So when you get the combination vaccines going, do you imagine -- does your market research tend to suggest that you would -- again, probably a combination approach might dominate that versus a monotherapy approach, singular vaccines going forward? And then secondly, will the cost of goods sold be any different for the combination versus the monotherapy products? Thank you.

Stéphane Bancel:

Yes, it's Stéphane. Just to add to Arpa's comments, during COVID, we've been discussing to a lot of -- with healthcare ministers, and the topic of vaccination combination has come a lot. And as you think, especially outside the U.S., where you have a lot of [indiscernible] taking care of people from birth to death, basically, we are very, very interested in combinations. Because they know that if a participant of a country got the vaccine, they got protection against several viruses which prevent hospitalization. As you know, we've done partnership with some countries like the UK, Canada, and Australia. And through those negotiations, the concept of combination was critical in their decision-making. Because as they see their population getting older, they worry that the number of hospitalizations will just go up over time and the ability to prevent that when you see shortages of healthcare workers and as you project those shortages in the future is a key determination of a decision. So, I only think in integrated healthcare system, the drive the [good combo] (ph) will move even faster than actually in commercial markets like the U.S. market.

Hartaj Singh:

Thank you all.

Evan Wang:

Hey guys, thanks for taking the question. Appreciate you guys sharing early thoughts on '24 and beyond. For '24 specifically, you talked about some of the contribution from COVID and RSV in terms of split. It sounds like you plan to hit the ground running there in RSV. With international, how are you thinking about the longer-term contribution from COVID as competitor agreements expire? And with flu, with the comments on [marketing] (ph) '25, wondering if you've had any recent conversations with the regulators there in terms of potential approval. Thanks.

Stephen Hoge:

And thank you for the flu question. So, as you referenced, we had really strong data out of our P303 Phase 3 study for flu that we released at R&D Day. We're excited about that. We are engaging right now with multiple regulators about the pathway to licensure. I don't have an update about all those conversations because they're happening as we speak, but we will, once we have clarity across all markets on the pathway licensure, provide an update.

Operator:

Good day and thank you for standing by. Welcome to Moderna Second Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. [Operator Instructions]. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lavina Talukdar, Head of Investor Relations. Please go ahead.

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon. Today, I will start with business review of our second quarter. Stephen will then review our clinical programs before Arpa gives an update on our commercial progress and plans. Jamey will present the financial results and I will come back to share some final thoughts. In Q2, we reported revenues of approximately $300 million, reflecting the seasonal nature of endemic respiratory vaccines. Given our investments in four infectious disease vaccine programs, which are in Phase 3, and our oncology program also in Phase 3, this offseason quarter sales resulted in a GAAP net loss of $1.4 billion, GAAP diluted loss per share of $3.62. We ended the quarter with a cash and investment balance of $14.6 billion. We continue to execute on the capital allocation strategy, prioritizing organic growth of our platform, with investments in our business. If Q2, we invested $1.1 billion in R&D, continuing investments in late stage clinical programs and progressing our pipeline. SG&A costs were approximately $300 million. Capital investments were approximately $200 million. Year-to-date, our external investments were all strategic collaborations, with the exception of OriCiro in Japan, which was an acquisition. OriCiro was renamed Moderna Enzymatics and is being integrated into Moderna manufacturing process development organization. From a capital return perspective, we repurchased 4.4 million shares in Q2 for a total of $628 million. Now turning to commercial and late stage clinical update in the quarter. With the submission of our XBB updated COVID-19 vaccine applications to regulators globally, we are now awaiting approval to start fall of 2023 sales. As you will hear from Arpa shortly, we're updating our COVID-19 sales expectation for 2023 to a range between $6 billion and $8 billion. This range reflects additional contracts in the US commercial market and other countries. This range is wide, given the uncertainty on the US vaccination rate. Our commercial team is also preparing for the 2024 launch of RSV, our next respiratory commercial product. Regulatory applications have been submitted in major markets around the world. We've also started to manufacture mRNA-1345 in preparation for the launch. As a reminder, at launch, these products will be in a prefilled syringe presentation, which combined with the strong efficacy profile will position very well our product to healthcare professionals. In oncology, for mRNA-4157, our individualized neoantigen therapy, or INT, we're continuing to scale up manufacturing to support clinical development and commercial markets. We're very pleased to report our Phase 3 study in adjuvant melanoma has begun enrolling patients in July. We'll plan, on slide 6, our updated company profile. The breadth of our late stage pipeline means we could see multiple launches in 2024, 2025, 2026. Turning now to slide 7. I am proud to share that Moderna has been named one of the world's most innovative companies in 2023 for pioneering AI-driven innovation by the Boston Consulting Group. As many of you know, AI has been part of the foundation of Moderna's research and development programs for several years. We have built our own AI models for protein and mRNA engineering, assay data analysis, regulatory interactions, and many more other use cases, as we continue to be an AI leader in biopharma. One of our key Moderna mindset is that we digitize everything possible as we recognize that this will be central to the impact we have with AI. As of 2023, AI training is required for all Moderna team members, and we facilitate this training at the corporate level through our AI academy. We have challenged everyone across all of our business functions at Moderna to corporate AI into their everyday workflow. I'm happy to share our AI implementation is accelerating throughout Moderna. Our secure large language model is called mChat. As you can see on the graph, our mChat usage has grown rapidly amongst our employees since its introduction on May 18. Around 50% of Moderna employees use it already only 60 days after launch. With that, I will now turn to Stephen for an update on development programs.

Arpa Garay :

Thank you, Stephen. And good day to everyone. I'll start with a review of sales in the quarter and the first half of 2023. In the second quarter of 2023, we reported approximately $300 million of COVID vaccine sales, which was in line with our expectations given the seasonal nature of endemic respiratory vaccine businesses. Sales of $2.1 billion for the first half of 2023 met our expectations. As a reminder, the sales in the first half were predominantly from mRNA-1273.222, which is our COVID vaccine targeting the BA.4-5 variant. As you heard earlier from Stephen, regulators and health authorities around the world have selected the XBB.1.5 variant for the fall of 2023 season. We have submitted applications to regulators globally for our updated vaccines, and we are now awaiting approvals and authorizations. Subject to regulatory approvals, we expect additional sales in the second half of 2023, primarily from mRNA-1273.815. Turning now to the 2023 COVID sales outlook. We are updating our COVID sales expectation for 2023 to be in the range of $6 billion to $8 billion, with the key variable being vaccination rates from the United States. Our 2023 sales mix consists of $2.1 billion in sales already recorded in the first half of this year, another $2 billion in sales from previously signed advanced purchase agreements for the second-half delivery from several countries, including those listed in the middle column on this slide. Recent discussions with customers around the world have resulted in confirmed contracts of $2 billion for delivery in the second half of this year, updated from the originally expected $3 billion. Approximately $1 billion of the original $3 billion are now expected to be deferred to 2024. Also now included in the total expected 2023 COVID sales range of $6 billion to $8 billion is an additional $2 billion to $4 billion in sales expected from signed and anticipated commercial contracts in the US as well as other markets such as Japan and the EU. The US commercial contracts are a sizable portion of additional new sales expected in the second half of this year, so let me provide some color on that market in particular. As you are aware, the COVID vaccine market in the US has shifted to a commercial market with the transition from the pandemic to the endemic phase. In the US, the commercial vaccines market is made up of many different customer segments, including retail pharmacies, wholesalers, group purchasing organizations, integrated delivery networks, health systems, government entities, employers, and other providers. Today, I am happy to report that we have signed contracts in each of these customer segments and continue to work on additional contracts. We are ready with ample supply to be shipped upon regulatory approval. Our signed contracts give us visibility into the expected US launch in the coming weeks and confidence in the additional sales we expect in the second half of 2023 from new orders. Let me now turn to slide 21 to help frame the fall 2023 US COVID market. As I mentioned earlier, a key determinant for the market size in the US will be vaccine uptake or shots in arms during the upcoming September to December time frame. As I've mentioned before, our expected 2023 sales range of $6 billion to $8 billion will be primarily driven by vaccination rates in the US market. Earlier in the year, we provided parameters that informed our US fall volume forecast for 2023, which included the roughly 50 million doses administered in the US in the fall of 2022; 82 million Americans in the high-risk category, so those who are over 50 with a comorbidity or those over the age of 65; and an average of 150 million doses of flu vaccines given in the US every year for the last nine years, which we believe is a reasonable proxy for a seasonal respiratory vaccine, especially given the higher burden of disease with COVID. These parameters supported a volume forecast of 100 million doses for the US market for fall 2023. But the fact of the matter is, in this first transition year to a commercial endemic market, it is difficult to accurately predict market volumes and predict how many Americans will come in this fall for their shots. As such, we look to Southern Hemisphere countries where the COVID season occurs during their fall/winter months to inform potential vaccination uptake in the US as well. Specifically, in Australia, where they are just completing their 2023 COVID season, the vaccination rate was 19% in populations where the booster vaccine was recommended. The Australian data, combined with prior-year comparisons, indicate US market volumes for fall 2023 to be in the range of 50 million to 100 million doses, and this supports our US sales expectations for the second half of the year. Moving to slide 22. I'm excited to share the fall vaccination campaigns for the updated COVID vaccine launch. Moderna's fall vaccine campaigns are two-pronged and are focused on

Stéphane Bancel:

Thank you, Jamie, Arpa, and Stephen. Moderna has a promising commercial outlook, starting with COVID. While there is uncertainty in vaccination rates as we transition from a pandemic to endemic market, our APAs and US commercial contracts underpin our expected 2023 COVID revenue in the range of $6 billion to $8 billion. We believe this first endemic year will provide visibility to recurring revenue stream. I believe we will be selling COVID vaccines for a very long time, and we are working to combine COVID and flu into a single vaccine. Moving to RSV. RSV vaccine has a strong product profile and a differentiated prefilled syringe presentation that should work to our advantage in the anticipated 2024 launch. In oncology, we are scaling our INT manufacturing capacity to be ready for commercialization. The Phase 2 data are very strong, and we are now in Phase 3 with melanoma indication. With our partner, Merck, we are working to prioritize indications beyond those already announced, which are melanoma and non-small cell lung cancer. Stepping back and looking at the broad portfolio, I'm very excited that we are playing with the high-play [ph] scenario of Moderna with positive clinical data in infectious disease vaccine, in oncology, and in rare genetic disease of liver. For the next three years, from 2024, 2025 to 2026, we anticipate multiple product launches across our vaccine and therapeutics portfolio that will position the company for strong sales growth. This is an incredibly exciting time at Moderna as we enter a new era with a diversified revenue stream and a robust pipeline. The platform is working, and the result will be an unprecedented number of mRNA launches in a very short time. We look forward to updating you further at our upcoming R&D Day on September 30. That event will be live in New York City and, of course, also available online. On December 7, we'll be hosting our second annual ESG Day. This event will be online. The mission of our company is to deliver the greatest possible impact to people through mRNA medicines. This mission is especially relevant now as we approach the launch of multiple new medicines that should extend human lives and alleviate patient suffering. All of our stakeholders are poised to benefit as Moderna continues to deliver on its potential. It is a privilege for all of us to be part of this company. We'll now take questions. Operator?

Salveen Richter:

With regard to the expected additional sales for second-half deliveries, can you speak to the spectrum of factors in addition to the US vaccination rates that might impact reaching the higher end of that range? And can you discuss confidence that additional contracts wouldn't be pushed to 2024 as the fall season plays out?

Operator:

Our next question comes from Tyler Van Buren with TD Cowen.

Arpa Garay:

In terms of how we're thinking about 2024, I would look at the first half of 2023, where we have recently reported $2.1 billion of sales, a portion of that volume is volume that we do not anticipate as a recurring sale in the outer years, given most countries are going towards fall vaccination campaigns with annual shots. For the remainder of the $4 billion to $6 billion, we do believe that vaccine demand will remain and, over time, eventually increase as we think about the flu volumes that we believe the COVID vaccination rates will start trending to. So as I mentioned earlier, for example, in the United States, there are about 150 million flu vaccines given every fall. What we've modeled for 2023 is a range of 50 million to 100 million. And we think over time, given the high disease burden and also as we think about future combinations, we will start trending closer to about 150 million.

Gena Wang:

Regarding the COVID US commercial contract this time, were there any definitive initial stocking order? And the second regarding the RSV vaccine, given that Pfizer and the GSK label language and a slow initial launch, any learning you could have for your approval and the launch prep?

Operator:

Our next question comes from Michael Yee of Jefferies.

Stephen Hoge:

First, on the 1010 flu program, as you referenced, we have two ongoing – we have actually three ongoing Phase 3 studies, but two that are continuing to accrue data. We'll be providing updates on the efficacy study, the P302 study you referenced. And as you know, on our Vaccines Day, we talked about an end-of-season update. And we'll also be sharing where we are in the pivotal P303 immunogenicity study. And as I said, we'll be doing that this quarter, and we're excited to continue to update on the progress in influenza. As it relates to INT, now INT, not PCV, that program, we had a great opportunity to provide an update to you all and everyone at ASCO just a month ago. And we're going to be, of course, at our R&D Day reprising that. And also talking to some of the other progress happening in the INT program. We are obviously working hard to get up and running in our non-small cell lung cancer, but we're really – pivotal studies, but we're really excited by the start of the first Phase 3 with melanoma study now, and we'll be providing further updates in a month in New York.

Unidentified Participant:

This is Sarah [ph] on for Ellie. Just a follow-up on Tyler's earlier question. Thinking about COVID volumes going forward, can you give more color on how you're thinking about first half versus second half? Particularly, any color on your expectation for first half of next year? And then on CMV, any expectation on when you'll complete enrollment? And how we should think about when we could get data and maybe anything you're seeing on a blinded basis on the event rate?

Stephen Hoge:

And on the question of CMV enrollment, yes, we're really excited by the recent acceleration toward completion of enrollment there. We're past 80%. We do hope to complete enrollment shortly. We've made good progress in the first half of this year, and so we haven't specifically set a target on that, but we would hope to enroll it for sure this year. Then we will be accruing cases, and I think that's where it gets very interesting in tracking the CMV Phase 3 program. We've already started to accrue cases that we talked about in the Vaccines Day. And as we get to full enrollment, we will have more participants who can contribute cases to our first interim analysis of efficacy, which will be an event-driven analysis, and so not something we can predict the timing of.

Luca Issi:

Maybe one, Jamey, if I can circle back on margins. I think your prior guidance implied 60% to 65% gross margin versus your new guidance today implies 47% gross margin at the midpoint. Can you just maybe expand a little bit more on what's driving that change today? Maybe, Stephen, on flu, I think Sanofi argued that the lower immunogenicity for the B strain could actually be a class effect. So it'd be difficult for any of the mRNA players to actually have strong immunogenicity for B strain. Wondering what are your thoughts there. Thanks so much.

Stephen Hoge:

And I'm aware of the argument that Sanofi made about a class effect. I'm not sure I see it the same way. I think we'll look to the data to answer that question rather than conjecture. We'll look forward to sharing where we are in the P303 Phase 3 study in the next quarter, and I'll leave it at that.

Edward Tenthoff:

My question is kind of a little bit of a longer-term strategic one. As COVID continues to evolve and then as you ultimately seek approval of 1010 and even RSV, what is the plan for combining these from a regulatory standpoint and then also a commercial standpoint? So, how do we get from where we are today with one approved, maybe two, three approved vaccines next year to one combo-approved or multiple combo-approved vaccines?

Edward Tenthoff:

Just to clarify one point, if I may. When you said the pivotal Phase 3s, those would be immuno-bridging studies.

Operator:

Our next question comes from Manos Papadakis with Deutsche Bank.

Jamey Mock:

Yes, it does apply regardless, as I mentioned in my prepared remarks. Most of this cost is fixed at this point. We've already ordered the raw materials. We've already started manufacturing most of our – we've got a lot of supply ready to go as soon as we are able to – as soon as we've got regulatory approval. So that $3.5 billion to $4 billion is not really dependent too much on the sales outcome that will happen either way. And maybe just to talk to longer term, so I think what we're suffering with this year is just an unpredictable market. So back to the prior question of the 35% to 40% or 60% to 65% gross margin, as it becomes more predictable, we will be able to order the right amount of material, have the right amount of volume commitments, that might not happen in 2024 as we work through some of our commitments. But we feel very confident in the overall 75% to 80% gross margin range in the long term.

Alexandria Hammond:

This is Alex on for Geoff. Can you talk about all the other potential indications you may pursue for the INT vaccine? And how will you decide which indications to pursue first? Will this be based on [indiscernible] or an unmet need? Secondly, what commercial hurdles do you expect for flu and RSV, given the entrenched competition and new entrants respectively?

Arpa Garay:

And I can take the question on RSV and flu, we are very excited to be launching RSV next year. So while we will be bringing the third product to market, we're very confident in what we believe is a best-in-class profile with our consistently high effectiveness across high-risk groups, thinking about our well-established safety profile in the only mRNA platform for RSV, and lastly, as I mentioned earlier, being the only product with a ready-to-use prefilled syringe. So we're feeling really good about the RSV launch preparations, and we're ready to execute in 2024. From a flu perspective, we do think one of the advantages of 1010, which would be our first-generation flu vaccine, is our speed to market could give us an opportunity for better strain matching in the future. And as we get enhanced profiles for flu, as Stephen mentioned earlier, from a commercial perspective, we see a tremendous amount of interest in our combination vaccines, both from patients as well as from healthcare systems. So having RSV and flu gives us an incredible opportunity for a combination for the future.

Evan Wang:

I just want to follow up on COVID. And as we're thinking ex-US, any details you can share in terms of size orders and market positioning in some of your markets like Japan? And what could change in 2024? And in flu, just great to see the P303 study fully enrolled, Just want some updated thoughts in terms of confidence on hitting on some of the B strain, given some of the competitor updates.

Stephen Hoge:

The flu question. So, yes, we're fully enrolled in P303, ahead of schedule on that, and we will provide data shortly on the P303 study this quarter, as we said. As far as the B strains goes, we already updated earlier this year that actually in the P302 study, we achieved non-inferiority in the B strain, you'll remember. In the P301, we had missed that. And so, we were learning as we went, and we actually made a series of changes into the P303 study that we were confident and remain very confident will provide a benefit in the B strains that will improve immunogenicity there. So I remain quite optimistic that our understanding of science is really strong, we think, best-in-class and that where we will be and when we look at that P303 data [indiscernible] is in a very strong position as it relates to B strains and continue to be in a very strong position as it relates to the A strains.

Simon Baker:

Just two questions from me. One was, how has your view of the RSV opportunity changed in light of competitor two-year data and the ASIC recommendation? In what regard do you think that you can achieve best-in-class profile? And the second question was just a little bit more about the CMV Phase 3 enrollment and if you think you'll be able to get full enrollment by this quarter.

Stephen Hoge:

The only thing I'd add to that in terms of the development side is we are obviously looking at multiple different versions of RSV combination vaccines, and one of the advantages there will obviously be increased convenience and compliance. And that's where if we can create healthcare system value, I think it will be – it will continue to evolve, the recommendation that people have around that. As it relates to CMV, so we haven't set out a guidance on when we would expect the enrollment to complete. But we're actually confident, given the trajectory that we're already past 80%, that we will complete enrollment this year. I'm not saying this quarter, but this year. And as I said, what really matters is probably not whether we're at 80% or 99% or 100% enrollment. It's the accrual of cases and events will drive the first interim analysis from here forward. Now, obviously, more patients – more participants enrolled will increase the number of – and pace of those events over time. And so, we are focused very much on that operationally, and we do hope to have that completed this year.

Stéphane Bancel:

Well, thank you very much for your questions. We look forward to seeing many of you in the next days and weeks, but especially seeing you at the R&D Day on September 13 to see many of you in person. Have a great day. Thank you.

Operator:

Good day and thank you for standing by. Welcome to Moderna's First Quarter 2023 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. [Operator Instructions] 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.

Stephane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Today, I will start with a business review Stephen will then review our clinical programs before Arpa gives an update on our commercial progress and plans. Jamie will present our financial results, and I will come back to close. So in the first quarter, we recorded revenues of $1.9 billion, GAAP net income of $79 million and GAAP diluted earnings per share of $0.19, cash and cash investments of $16.4 billion at the end of the quarter. We continued in Q1, executing on our capital allocation strategy, prioritizing investments in our business. In the third quarter, we invested $1.1 billion in R&D, continuing investment in last stage clinical programs and progressing our entire pipeline. SG&A costs were approximately $200 million in the quarter, which continued investment in digital and also AI infrastructure and approximately $100 million in capital investments. In 2023, our team has been very active. This includes the acquisition of OriCiro in Japan, collaboration with CytomX, Life Edit and Generation Bio. All of these investment opportunities further expand the reach of Moderna's mRNA technology. We are growing Moderna mRNA operating system. Probably less than $6 million were returned to shareholders with share purchase of 3.6 million shares in the quarter. Let me turn to Commercial in the first quarter. We continue to expect $5 billion in COVID vaccine deliveries in 2023 from already signed advanced purchase agreements. With $1.8 billion of COVID we are well on our way to achieve $5 billion in APS. The commercial team is actively negotiating to sign new contracts with customers in major markets to finalize additional orders that will add to the $5 billion. The U.S. team is negotiating with pharmacy chains, hospital networks and other customers. As a reminder, the $5 billion of signed APAs does not include any fall 2023 U.S. contracts. So these new U.S. commercial contracts are important to the business as the additional. The team is also making progress in Japan, in Europe and other countries in Asia, Middle East and also Latin America. We recently signed a new contract in Australia for 2023. Our commercial organization is also preparing for the launch of RSV in 2024, our next respiratory commercial products. They're educating the medical community on the health burden of RSV. Our medical team is participating in major infectious disease medical congresses and sharing the new data that shows a strong profile of RSV vaccine. To prepare for RSV launch, our manufacturing team has already begun producing drug substance, the mRNA molecule for RSV vaccine. The vaccine will be supplied as a prefilled syringe. We believe that will help drive adoption by pharmacists and doctors versus some of our RSV products. In oncology, for mRNA-4157 now called individualized neoantigen therapy, or INT, we are scaling up manufacturing to support clinical development and commercial markets. Our commercial team is also working to prioritize tumor types to select for adjuvant Phase 3 studies in addition to melanoma and lung. Turning to the pipeline. At Vaccine Day, we discuss detailed data from our RSV vaccine that were presented at research medical meetings. We believe the profile of RSV vaccine is potentially best-in-class. We shared top line data on the flu programs announcing the initiation of Phase 2 or 3, the Phase 3 study that we intend to use for accelerated approval as well as strategy for our next-generation flu programs. We also announced the start of Phase 3 for next-gen COVID vaccine, mRNA-1283, which should be refrigerator-stable. Today, we're also announcing a new program for pandemic readiness for Influenza H5. In latent vaccine, our CMV Phase 3 trial continued progress and is greater than 50% enrolled. I'm also very pleased to announce progress in our early-stage program, EBV and HIV. EBV, as you know, has two programs. The EBV Phase 1 trials to prevent mononucleosis with mRNA-1189 are fully enrolled in adults and also in adolescents. Our EBV trial for the treatment of long-term complication for EBV infection has now started enrolling. And for HIV, we shall interim analysis from our Phase 1 study at vaccine. We also introduced new programs. We are working on vaccines for norovirus in Lyme disease. Lyme is the first bacterial pathogen we are targeting mRNA platform with vaccine. In therapeutics, we participated in AACR meeting where we presented detailed Phase 2 data from our R&D program partnered with Merck. Later on the call, Stephen will take you through the data presented there. Already this pipeline is also making progress. We're excited to announce a new milestone for our PA program. The Phase 1/2 trial in Propionic academia or PA is now in dose expansion phase. And additional data from this study will be presented at the American Society for Gene and Cell Therapy later this month in May. The Company continues to expand at a rapid pace. We have 47 programs underway which now reflect the inclusion of new program also in the quarter and removes programs that are not continuing to develop. The full of disease pipeline can be seen in the appendix of this presentation or obviously on our website. We now have more than 4,000 team members and 17 commercial subsidiaries across Americas, Europe and Asia Pacific. In addition to our commercial subsidiaries, we also announced we're opening a Seattle office as a technology hub, where we're hiring the data scientists and engineers who will help digitize our business and expand our AI capabilities. I'm also happy to announce Modena was officially recognized in March has a great place to work by the Great Place to Work Institute. Our $16.4 billion of cash at the other quarter is enabling us to scale across our research, development, manufacturing, commercial and G&A. With that introduction, let me now turn to Stephen.

Arpa Garay:

Thank you, Stephen, and good day to everyone. I will first start with a review of sales in the quarter. On Slide 22, we summarized the composition of our sales in the first quarter. As you'll see on the chart, our sales to Europe were $0.6 billion and sales to the rest of the world were $1.3 billion. Approximately $1.8 billion of sales from previously announced APAs were delivered in the first quarter of 2023, representing the vast majority of the $2 billion expected in the first half of 2023. As a reminder, U.S. sales for COVID vaccines are expected to begin in the second half of 2023, with updated strain manage. Now as we turn to Slide 23, looking at the 2023 COVID deliveries, today, we are reiterating a minimum of approximately $5 billion in COVID vaccine deliveries from current advanced purchase agreements. And we continue to expect additional orders from key markets. Of the $5 billion in 2023 deliveries from previously announced APAs, $2 billion, as I mentioned earlier, are expected to be delivered in the first half of 2023. We have already delivered $1.8 billion of that $2 billion in the first quarter with substantial fulfillment to Japan and the European Union. We expect to deliver the remaining approximately $3 billion in previously announced APAs in the second half of this year. Additionally, we expect new sales in the U.S., Japan, European Union, Asia and Latin America. I'm happy to announce that the commercial team has signed a contract with the Australian Government for 2023. Our discussion with commercial buyers in the U.S. are positive, and I will elaborate on that shortly. In our discussions with commercial customers in the U.S., it is clear that our customers are aware that COVID is still a substantial health urban. Throughout 2022, COVID continued to be a leading cause of hospitalizations. Data available through September 2022, list COVID as the third leading cost of death in the U.S. only after heart disease and cancer, as shown in the first chart on the left. The chart on the right-hand side of the slide shows the most recent data available for U.S. hospitalizations for COVID, flu and RSV. As you'll see, with current season hospitalizations of over 600,000 per COVID, the hospitalization rate for COVID is almost triple that of flu as well as more than triple that of RSV. There continues to be a clear need to protect against severe COVID infections and our customers recognize that need. For full of 2023, we expect the U.S. market volume to be approximately 100 million doses. As we highlighted earlier in the year, the successful transition of our U.S. COVID business from a government driven to a commercial-driven model is critical. We have made great progress on this front, executing on our action plan to rapidly develop this commercial market. Importantly, the commercial team is in active discussions with customers throughout the U.S. We are contracting with national and regional pharmacies, integrated delivery networks, government health providers, including the VA, the CDC and the Department of Defense, for purchasing, organizations and other providers. In addition, our established national distribution infrastructure and our Moderna Direct e-commerce site is fully operational. Our global supply chain is in place to handle all U.S. customer needs including prefilled syringes and single-dose files at the time of launch. I'm excited to share some of the launch preparation activities for the updated COVID-19 vaccine for fall vaccination campaigns. We believe these activities will drive consumers to get vaccinated. First, we are taking an omnichannel approach via tailored digital messaging to healthcare providers. This multifaceted approach will allow us to drive broad awareness and continue to emphasize the ongoing need for COVID production. Later this year, we will be disseminating customized content to drive physician demand across immunizing physicians, institutional decision-makers, as well as influencers. We are also partnering with our customer base across the different commercial segments to assist with their fall immunization programs. We believe there's an opportunity to continue to provide education, both to staff as well as to patients. And we believe there is an opportunity to harmonize and simplify the vaccination process for patients who are going in to skip their flu vaccine. Consumer promotion will be focused primarily in the fall of this year, driving patients to seek Moderna's COVID vaccine through significant DTC efforts. As I mentioned earlier, we are looking to simplify the experience for our consumers who are already going in together seasonal influenza vaccine this fall. We are energized for this fall season. Moving on to Slide 27, I will update you on our second near-term commercial opportunity, which is RSV. We are excited for the expected 2024 launch of our RSV vaccine and the commercial team is undertaking a number of activities to ensure that we develop what we hope will be a large share of that market as quickly as possible. We are already raising awareness of the health and economic burden of RSV by generating and presenting detailed data from our Phase 3 study at major medical meetings. Our medical team has shared additional data showing that vaccine efficacy is consistently high across all tested age groups as well as in participants with preexisting comorbidities. The figures on the right-hand side of the slide, detail efficacy data in these important subgroups, as we share these data at medical congresses, we are encouraged by and key opinion leader feedback on our data and the application of our mRNA platform to prevent RSV. We're engaging with payers and ITAC to ensure access upon launch. And the commercial team is active in local markets preparing for a commercial launch in 2024. Specifically, we are building our digital capabilities so that we will be able to efficiently educate customers as soon as the vaccine is approved. And as we invest in prelaunch activities, we have already begun manufacturing components of the vaccine and prefilled syringes. We are excited about the profile of the products we will be launching into these large respiratory markets. As we discussed at Vaccines Day, the estimated total addressable markets for our three key respiratory vaccines are substantial. With COVID, RSV and flu offering potential addressable markets of $15 billion, $6 billion to $8 billion and $6 billion to $9 billion, respectively. We believe we can take a sizable share of this roughly $30 billion respiratory market. The commercial team is well underway in preparing for RSV and flu launches in 2024. We believe our opportunity in the respiratory market will continue to expand beyond 2024 with our next-gen vaccines and importantly, with future combination vaccines, positioning us to drive share over time. Now on to Slide 29, I want to share with you how the commercial team is helping identify eligible patient populations in the adjuvant and neoadjuvant settings for various tumor types. Along with our partner, Merck, we have already announced that we will start Phase 3 trials in Adjuvant melanoma and adjuvant non-small cell lung cancer. There is an annual population of over 130,000 new patients in the U.S. and Europe in these two indications. Patient populations for additional potential adjuvant and neoadjuvant tumor types are listed on the right-hand side. Our commercial teams are working closely with our clinical teams to identify the largest unmet need for addressable tumor types for individualized neoantigen therapy. We are excited to be launching into a space where we have one medicine for one patient in areas of great in cancer. Given the individualized approach, we are reimagining our commercial model, along with our partner, along with patient care journey, end-to-end. With that, I will turn it over to Jamie.

Stephane Bancel:

Thank you, Jamie, Arpa and Stephen. Let me share some thoughts before we close into Q&A. Moderna's promising commercial outlook has several development projects come to fruition. In COVID, we are finalizing discussions with customers. And I believe that we'll see significant additional contracts in the U.S., in Japan and around the world for '23. COVID is not going away and governments are getting ready for vaccination campaign in the fall. I'm pleased that we have begun prelaunch market development and as risk manufacturing for RSV, which we expect to launch in '24. And in oncology, the team is making great progress. We expect to deliver key milestones on our development pipeline in the remaining eight months of 2023. We expect regulatory authorities to give us direction on COVID strain with the June VRBPAC meeting, and we expect to launch an updated COVID-19 vaccine for fall of '23. We plan to file for approval for RSV vaccine and of Phase 2/3 to study should be fully enrolled by this summer, and we expect data in Q4. For INT cancer therapy, we expect to make additional Phase 2 update, launch of our Phase 3 study in adjuvant melanoma and expand into additional cancer types. And we'll continue to make progress in our revenues portfolio. We present data for PA on May 18. This is a very exciting time for us at Moderna, and I would like to thank our teams for all their hard work and their commitment to our mission. Our platform is firing on all cylinders. In Infectious Disease vaccine, look at the data and the portfolio of respiratory, latent and now entering a bacterial vaccine. Very excited by where INT is and is going. And rare disease with PA followed closely by MMA and GSD1a. We'll give some key updates this year. On September 13, we have our annual R&D there. We will present new development pipeline data and on December 7, we'll be hosting our second annual ESG day. We believe that the incredible progress we have made across all of our modality, positions our company for long-term financial success. But the mission of our company was motivated for our entire team to come to work every day is to deliver the greatest possible impact to people for mRNA medicine. We believe we have a technology to eliminate or greatly reduced human suffering caused by respiratory viruses, latent viruses, bacteria, cancer, regulating disease and a growing list of diseases. We work to bring a number of our more promising technologies to market in the next several years and have paused to continue to fulfill on our mission. With this, we'll take questions. Operator?

Gena Wang:

I have two quick questions. The first one is regarding the U.S. commercial opportunity in the second half this year. You are in discussion with both, the commercial or government peers, is 110 to 130 still a good benchmark? How is the pricing play out between these two groups? When will you start to see clarity on actual contracts and orders? And then my second quick question is regarding your expectation for ASCO update for your PCV program?

Stephen Hoge:

Gena had a question on ASCO? Okay. Sorry. Gena what date was open at ASCO. So it's Stephen. So, as I said, there's two presentations, two sets of data that will be shared. The first will be focused on the distant metastasis-free survival, DMFS. DMFS, as you know, is another surrogate of overall survival and distant metastasis usually, unfortunately, is visceral, and that's obviously a greater concern. The protocol for the Phase 2 study included in the first analysis, primary analysis, looking both at RFS and distant metastasis-free survival, DMFS was a secondary endpoint, and we'll be presenting for the first time that data at ASCO. The second data that will be shared in poster form will be some data on biomarkers and additional data on the performance of INT across populations. That is data that will get more into the basic science for those who are interested in it, but we'll look into the mechanism of action of the product as well as further stratification of risk that we believe provides even more confidence that the signal we're seeing in terms of potential benefit for INT in the Phase 2 study is resilient and really bodes well for the future.

Salveen Richter:

With regard to the PA data that we're going to see at ASGCT, could you just frame that for us? I think in the past, you've talked about 25% being clinically meaningful as you look at relative risk reduction in major decomposition events here and what the translatability is from that to MMA and GSD1 and OTC your overall rare disease franchise? And then a second question for COGS, how are you thinking about beyond 2023? And in the context of your assumed market share of the respiratory franchise revenue as you look out to 2027 which you noted, how do you think about profitability in the context of this OpEx spend, including kind of your R&D and SG&A outlook?

Jamey Mock:

And Salveen, maybe I'll take the COGS question. So to reiterate, this year is 35% to 40% of sales. And as you mentioned, we'll go to 20% to 25% by 2027. So I'm not sure it's a perfectly straight line, but let me just give you the factors that will improve that over time. First is volume. So increasing volume over time as we add new products, our overall manufacturing footprint should give us better leverage. I think predictability helps that so this is a highly unknown season this year. It will be the first time we're transitioning to an endemic. So that will become more predictable over time. ASP, I think, will continue to go up as well. What might offset that a little bit is a greater single-dose file or PFS presentation over time, and we've got some of that budgeted for 2023. So overall, we feel confident inverting our inventory levels down and overall decreasing our cost as a percent of sales. As it pertains to the 2027 P&L and what does that mean for overall company profitability, we haven't issued any guidance on that. I would say to reiterate for those that heard my prepared remarks, the respiratory vaccine business should generate $4 billion to $9 billion, which we laid out on the page there. And then we'll just have to see, to be honest. We've got an exciting pipeline. We have to understand what's happening with INT. We're quite excited by that, rare diseases, latent diseases as well, and we'll do what's best for all of our stakeholders. So if it makes sense to continue to reinvest some of those profits back into the business, we'll do that. And we're just going to have to wait and see where the pipeline looks like at that time.

Tara Bancroft:

This is Tara on for Tyler. So I know you mentioned a little bit about timing. But specifically, what we're wondering is, once the COVID strain is selected for the fall and winter season next month, how long approximately do you think it will take to finalize the commercial contracts in the U.S. and abroad? And then separately outside of the U.S., does the recent announcement regarding the ongoing negotiation with Pfizer and Europe actually create an opportunity for you guys to perhaps drive a larger contract in Europe than previously anticipated?

Operator:

Thank you one moment for our next question. Next question comes from Michael Yee with Jefferies. Your line is open.

Stephen Hoge:

Thank you, Mike, for the question. I'll take the INT one. So Look, I think it's obviously still early in this discussion about what it will take to bring this notion forward to patients. And even in the Phase 2 study, while the data is really exciting, it's probably premature to say that it's sufficient for -- at this point for proceeding directly to accelerated approval. But there are conditions we think over the next year -- or couple of years that could lead to that being an appropriate thing for us and regulators to consider. In the short term, look, the data is still maturing. We still haven't put out the distant metastasis free-survival data. We're going to be doing that at ASCO. We're obviously excited to share that data, and it starts to just build that more complete picture and DMFS because it looks at visceral lesions does start to look towards perhaps some of those more -- the severity of those relapses that are happening. We have additional biomarker data that's coming through in that ASCO presentation as well. And both of those data sets are dealing with the initial analysis, which was 40 events. But I'll remind you, we have an analysis at 51 events, which we think will be when these curves are substantially more mature. Obviously, we haven't crossed that yet. And when we do trigger that 51 of that analysis, we will update the RFS curves. We'll update the DMFS curves. We'll obviously look at statistics around that. And it will be a point in time for us to understand, let's say, with more than 2.5, maybe 3.5 years of follow-up in total median follow-ups on that study. What do the overall curves look like? What are the hazard ratios? What do the statistics look around that? And then what more have we learned about the MLA from all of the ongoing biomarker work that we've done. So that richer data set I think, is really what we are waiting for to see. There's a second piece of this, too, though, which is that. Any consideration of an accelerated approval, whether it's for INT or just more generically, increasingly, it's going to depend upon whether or not you have initiated the confirmatory studies and that's appropriate. Because we've all seen how initiating substantially enrolling the confirmatory studies actually helps make sure that, that answer comes quickly and that accelerated approval can either be converted to a full approval or be adjusted as a result of those confirmatory results, and we're very attuned to that. And so our primary focus right now, while we're waiting for the data to mature from the Phase 2 is to make sure that we stand up that Phase 3 study and enroll it as fast as possible. I think the conditions under which we might consider in partnership and discussion with regulators pursuing accelerated approval would really be at some point in the future when that Phase 3 study is well on the path towards being enrolled obviously not read out yet, but well on the path there being enrolled and where a lot of the other data I had described had matured and continued to show a really compelling pace for the potential benefit here, perhaps even in patient populations they are at higher risk from a stratification perspective as we were sharing in some of the data today. And that those -- that complement the factors would trigger an opportunity to say it's time to bring this medicine to patients in an accelerated way while waiting for the confirmatory read out. So premature. All of those things still have to happen. So that's why right now our focus is get that Phase 3 started, get it enrolled and continue to follow this really intriguing story in the randomized Phase 2 study.

Operator:

Thank you one moment for our next question. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open.

Stephen Hoge:

Yes. So it's a couple of things. So first, we did look in the Phase 1 at non-small cell lung cancer, there were patients in that. Those were not adjuvant patients, but nonetheless we do have some data, biomarker data and other clinical histories, again, not from a controlled study in the Phase 1. I think the other confidence is the strength of the mechanism of action that we're seeing and the translation across risk strata in the Phase 2 study that we've already run, really, we think sets up well as you look at adjuvant indications more broadly, and that's where an adjuvant non-small cell lung cancer, even neoadjuvant non-small cell lung cancer makes a lot of sense from a translatability perspective. And so, it's a combination of a little bit of data from that Phase 1. The breadth and strength of performance we're seeing in the Phase 2 for melanoma and obviously, what's been learned with PD-1, PD-1/L1 therapy in adjuvant settings more broadly. Operator Thank you one moment for our next question. Our next question comes from Jessica Fye with JPMorgan. Your line is open.

Arpa Garay:

Thank you. In terms of your first question on providing updates for U.S. commercial contracts, we are not currently committing to real-time updates per contract. But at a minimum, we will be providing updates at our quarterly calls in terms of where we are with U.S. commercial contracts. The second question around ex-U.S. pricing, we do not comment on our pricing, but what I can tell you is for the majority of the countries outside the U.S., we are still primarily in a centralized government procurement model. So, we have not set endemic or more traditional commercial pricing yet for most of the markets outside of the U.S. And the last question, I believe, is on RSV contracting. We are targeting a 2020 launch for -- we continue to work through the details of the contracting for the U.S. market in particular. But assuming a 2020 for a launch per our current assumptions, we do believe we will be in time for contracting to launch in 2024 in the U.S. market.

Eliana Merle:

Maybe if you could just elaborate a little bit on your confidence in the updated formulation targeting the B strains in influenza. And if you can comment on the dose level if this is studying a higher absolute dose. And just maybe just in terms of this compound, but also just broader the flu platform as you add additional antigens, just your thoughts on reactogenicity here and then broadly, with the additional balance of these compounds? And then second, just in RSV, just a bit of housekeeping. I guess, do you still plan to file this quarter?

Operator:

One moment for our next question. Our next question comes from Luca Issi with RBC. Your line is open.

Stephen Hoge:

Great. Thank you for this question. So I think we do think that INT can go both earlier and later in terms of its use. And it's a challenging question about which one do we prioritize in the short term. I think there's a huge opportunity we perceive, we believe, in adjuvant. That is where you hear all of our current activities. That's our focus. That's where we're trying to move into pivotal studies, very, very quickly Phase 3 studies. But if you look to adjuvant, we do have adjuvant experience. You pointed to the head and neck data. We also have from our Phase 1 to management melanoma, there's actually some adjuvant -- sorry, the metastatic melanoma, metastatic non-small cell lung cancer. And I think situations where we think the burden of the tumor, the size of that tumor is a little bit of a barrier to the potential active activity of any immune therapy. In fact, generally, immune therapies have struggled in later-stage disease and where the real power of the technology, its safety tolerability profile, potential benefit probably is upstream. So while we are following closely the metastatic space and we did see some intriguing signs in the metastatic head and neck study that you referenced, we are right now waiting for a little more data to decide whether or not we want to go into those metastatic settings in the short term with our partner, Merck, of course. The other area that I referenced is the earlier stage. And so Stage 3, Stage 2 disease, disease where immune therapies are not traditionally used right now, but we're a well-tolerated approach like INT that we believe does provide a boost of specific T cell responses against the cancer may have a unique benefit. And again, that's a place that we're eager to explore the INT approach with our partner mark in the very near term. We don't have at the present as substantial an effort going into those two areas, but we could pivot very quickly. So for now, what we're focusing on is the pivotal studies in adjuvant, we're watching very closely the evolution of our data in metastatic, and we're trying to think about how we could move whether biomarker enabled or otherwise into earlier-stage diseases. I'm sure we will find ways to explore all of those areas if there's a potential for benefit for INT and then it's just now a matter of working down the opportunities as fast as we can.

Stephen Hoge:

I'll comment very quickly, but the combination vaccine -- so the first point is we want to need to get the flu approved. I think in the Vaccines Day, we talked about our expectations, our hope are to have the COVID-flu combo approved and launched in 2025.

Alec Stranahan:

This is Alec on for Geoff Meacham. So given the breadth of your clinical pipeline and the potential opportunities for new vaccines, how does Moderna prioritize assets or indications to go after? Once the data has, let's say, proof of concept for its line disease, what is your clinical strategy in terms of targeting additional bacterial indications? And then just finally, how are you thinking about capital deployment for the INT program?

Operator:

Thank you one moment for our next question. Our next question comes from Simon Baker with Redburn. Your line is open. Simon, your line is open. You can ask your question. Do you want me to remove some from the queue?

Operator:

Thank you. One moment for our next question. Our last question comes from Hartaj Singh with Oppenheimer. Your line is open.

Arpa Garay:

Sure. Thank you. I'll start with the first question around the respiratory opportunity. We are hearing significant enthusiasm from both consumers as well as our customer base combination vaccines. We believe that it will enhance compliance and adherence to address the broad respiratory burden of disease by putting these two, potentially three vaccines into one. So, as we think about the commercial opportunity, we do think combinations will be the majority of the opportunity as we look forward in 2027. And with that, we do anticipate cannibalization of the monotherapy.

Stephen Hoge:

And pediatric RSVV question. So, we've actually been working in pediatric RSV as long as we've been in RSV. And so, we have ongoing clinical trials including monotherapy and combination respiratory vaccines across a couple of different diseases that impact that population. We completely agree. It is a huge unmet need and area. In terms of guiding forward what timing will look like, we're conducting clinical research. We'll provide the updates on the data as we see it. We've already actually shared some of the early data from our pediatric programs. There will be both seropositive so kids who have previously been RSV, there is some benefit there. Those children do get reinfected and that will look more like a boosting set of studies. And then there will be seronegative children. Those are the -- those are the places where there might be the highest unmet need, those who have not yet had their first instance of RSV, so very young children onto the age of one. What you'll probably see us do over time is bifurcate those development programs because it en- up being very different take target populations. And more likely than not, the seropositives will move faster and the seronegatives will move slower as is normally the case with pediatric development.

Stephane Bancel:

Well, thank you, everybody, for joining us today and for your questions. The next month is going to be exciting, PA data May 18 and new INT data at ASCO in early June. Have a great day. Bye.

Operator:

Good morning. My name is Kevin and welcome to Moderna’s Fourth Quarter 2022 Earnings Call. [Operator Instructions] Please be advised this call is being recorded. At this time, I’d like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.

Stephane Bancel:

Thank you, Lavina. Good morning or good afternoon everyone. Welcome to our Q4 2022 conference call. Today, I will start with a quick business review of 2022. Stephen will then review our clinical programs before Arpa gives an update on our commercial progress and plans. Jamey will then present our financial results and I will come back to share some posts on where we are heading. We are pleased to report today revenues of $19.3 billion for fiscal year 2022, GAAP net income of $8.4 billion, and GAAP diluted earnings per share of $20.12, cash and investment balances of $18.2 billion at the end of the year. We continued our disciplined capital allocation policy, reinvesting first in our company. In 2022, we invested $3.3 billion in R&D, our highest level of R&D investments ever. We invested $1.1 billion in SG&A and $400 million in capital investments. We made investments in Metagenomi for access to new gene editing enzymes and Carisma in oncology. We announced an investment in CytomX and the acquisition of OriCiro in Japan to continue to streamline our manufacturing processes. And just yesterday, we announced the collaboration with LifeEdit. $3.3 billion was returned to shareholders through a buyback of 23 million shares. I am proud of the strong results by our team in 2022 as we made history with a number of outstanding accomplishments for patients. In respiratory vaccines, we developed new products with remarkable speed, getting the mRNA-1273.214 against Omicron BA.1, the strain recommended by WHO and mRNA-1273.222 against Omicron BA.5, the strain asked by the U.S. FDA. We developed 1273.222 in less than 2 months. We are able to protect millions of people from potentially severe disease resulting from new COVID strains. Our RSV vaccine went from Phase 1 start to Phase 3 data in 24 months and met its primary efficacy endpoint in the Phase 3 trial. In oncology, our personalized cancer vaccine was the first demonstration of positive results from an mRNA cancer treatment in the randomized clinical trial. In rare diseases, our propionic acidemia program showed early positive clinical results in a repeat dose chronic disease setting in reducing metabolic decompensation events in patients. And we announced what we hope will become the first effective inhaled mRNA therapy in humans as our partner, Vertex, entered a Phase 1 trial using our technology in the therapy for cystic fibrosis patients who lacks the CFTR protein. Finally, we had our first ESG Day and published our first ESG report, providing additional transparency in how we conduct our business. I want to take a moment this morning to touch on transition the Moderna Executive Committee. As we announced in late 2022, Marcello Damiani decided to retire as Chief Digital Officer after more than 7 years with the company. Marcello joined Moderna before our first clinical trial and we are today a digital-first company, as a big testament of his ability to scale digital resources. I am grateful to Marcello for his contribution during the early years of Moderna. I am excited to have worked already with Brad Miller since early January. Brad brings a wealth of enterprise solution and platform organization experience in several of the top technology companies. This will be instrumental as Moderna scales into a fully-integrated biotechnology company. I want to also share with you that Juan Andres, currently President of Strategic Partnership and Enterprise Expansion has informed me of his decision to retire and will be retiring at the end of May. Juan has played a tremendous role since joining Moderna in 2017 from Novartis, where he led all manufacturing for them. Juan served as Moderna’s Chief Technology, Operations and Quality Officer where he led our manufacturing from an early-stage clinical development company to a commercial company. I believe Juan did a historic job with his team in 2020 and 2021 to scale Moderna for global commercial launch during the pandemic. It is literally unbelievable that he led the team from having made across our entire portfolio, less than 100,000 doses in 2019 to more than 800 million doses in 2021, all during the pandemic. We and hundreds of millions of people across the globe who received the Moderna COVID-19 vaccine owe Juan our gratitude. I believe very few manufacturing leaders would have led such an achievement. Most recently, Juan has focused on building out our organization to support Moderna’s growing pipeline, leading our efforts in producing of personalized cancer vaccine. Jerh, who used to work for Juan at Novartis, has joined us since early fall and has been leading manufacturing since then. I am thankful for Juan who has ensured a very smooth transition, helping Jerh every step of the way. Upon his retirement at the end of May, Juan’s responsibility will transition to Stephen Hoge, President of Moderna, to integrate PCV across all functions, with Jerh leading the manufacturing of PCV for multiple Phase 3s, and of course, for getting commercial ready. On behalf of the entire Moderna team, I want to thank Juan for his continued leadership and wish him and his wife, Marina, the best of a well-deserved retirement. I am deeply thankful to have counted him for so many years as a partner at Moderna, and more importantly, for more than 20 years as a friend and a mentor. We will miss him. The company continues to expand at a rapid pace. We now have 3 commercial COVID-19 vaccine products. We have 4 development programs in Phase 3. We have to expand our commercial portfolio very soon. Overall, we have 48 programs underway with a team of 3,900 team members and now present on the ground in 16 commercial subsidiaries across Americas, Europe and Asia-Pacific. Our $18 billion of cash balance at the end of the year is enabling us to scale across research, clinical development, manufacturing, commercial and G&A. With that, let me ask on to Stephen.

Arpa Garay:

Thank you, Stephen and good day to everyone. I will start with a review of sales on Slide 20. In the fourth quarter, total product sales were $4.9 billion. In the U.S., our sales were $1 billion, sales in Europe approximated $2.2 billion, and sales in the rest of the world were $1.6 billion. We ended the full year strong, with total product sales for 2022 of $18.4 billion. Sales in the U.S. for the full year were $4.4 million, sales in Europe were $6.7 million, and in the rest of the world were $7.3 billion. We are reiterating approximately $5 billion in COVID sales for delivery in 2023 from our currently-signed advanced purchase agreements and deferrals. And we do expect additional sales from key markets such as the U.S., EU and Japan. Slide 21 summarizes the current composition of sales for 2023. We have advanced purchase agreements from Canada, Kuwait, Switzerland, Taiwan and the United Kingdom. We expect these sales to be recognized upon delivery of vaccines in the second half of 2023. Additionally, we expect further sales from deferrals from 2022 contracts. These deferrals are from the countries listed on the slide and are expected to be mainly recognized from deliveries in the first half of 2023. Together, these advanced purchase agreements and deferrals totaled approximately $5 billion in sales for 2023. We do expect additional sales from key markets, including the United States, EU and Japan, as well as Australia and other countries in Asia and Latin America. In the U.S., contracting discussions with commercial customers are ongoing and we will provide visibility into expected U.S. sales at a future date after we complete these discussions. In our discussions with commercial customers in the U.S., it is clear to us that our customers recognize that COVID is still a substantial health burden. Throughout 2022, COVID continued to be a leading cause of hospitalizations and deaths. If you look to the chart on the left hand side, what you will see here is data available through September of 2022 COVID was the third leading cause of death in the United States only after heart disease and cancer. And if you look to this right-hand side, [Technical Difficulty] 4 months for the fall and winter season from October 1, 2022, [Technical Difficulty] 2023, hospitalizations from COVID in the U.S. are nearly 450,000, more than double from flu and nearly 3x higher than RSV in that same 4-month period. There continues to be a clear need to protect against severe COVID infections and our customers recognize that. Given this need, we estimate the U.S. fall 2023 COVID market volume to be approximately 100 million doses. We base this assumption after looking at 2022 vaccination rates and including potential recommendation for two-dose booster series for high risk individuals. Taken together, the doses administered represent roughly 30% of the U.S. population. A few factors that can impact this volume include viral evolution, regulatory recommendations as well as vaccine understanding and uptake by consumers. Moderna’s commercial organization is prepared for the transition to a commercial market in the U.S. Let me now take you through how we have been preparing to go to market. First and foremost, we are committed to access, which I will explain in greater detail in just a moment. To ensure coverage of our vaccine, we are engaged in discussions with private customers as well as public entities such as the VA, CDC and the Department of Defense. We are increasing awareness and educating consumers as well as healthcare providers about the benefits of booster vaccinations in alignment with public health agencies such as CDC and ACIP. We are reaching healthcare providers and consumers through innovative digital outreach programs. We have built the infrastructure needed to fulfill customer orders and shipments and our commercial and medical organizations have been scaling to execute on this plan and we are ready for the transition to a commercial market in the United States. Very importantly, as we enter the commercial phase of the endemic COVID market, we want to emphasize our commitment to vaccines access for everyone in the United States regardless of their ability to pay. For all insured individuals in the United States, consistent with preventative health services requirements, current reimbursement rules will be sustained. As an ACIP-recommended vaccine, Moderna’s COVID vaccine will continue to be available for zero out-of-pocket costs for individuals with insurance. And we are proud to say that for uninsured or underinsured people in the United States, Moderna will be launching a patient assistance program that will provide COVID-19 vaccines at no cost. Let me now summarize our COVID vaccine outlook. In 2023, we expect COVID sales of approximately $5 billion. In addition, we are expecting sales from U.S. commercial market orders, EU, Japan and other countries. We will provide visibility into these sales after we complete ongoing discussions with governments and with customers. We can recognize COVID continues to be a burden to healthcare systems and this continues to be an important point as we discuss the value of booster vaccinations with our customers. In the U.S., we expect commercial market volumes to be approximately 100 million doses in 2023 and Moderna’s commercial organization is prepared for the transition to a commercial endemic market. Last but not least, we are committed to patient access in the United States. I now want to turn to another launch in the respiratory vaccine space that the commercial team is preparing for, our RSV vaccine in 2024. As you heard from both Stephane and Stephen earlier, we are very pleased by our Phase 3 RSV vaccine results. Stephen’s organization will be filing for the approval soon and we expect we maybe approved in late 2023 or early 2024. With the potential approval fast approaching, I am very excited for the RSV vaccine launch and I want to provide additional color into the launch plans. The RSV launch will leverage the existing commercial infrastructure that is already in place for COVID and we will continue to invest to support it ensuring strong execution. Both COVID and RSV markets overlap considerably as we look at our target customers as well as potential target patients and audiences and we will leverage this overlap between the two markets. We will ensure awareness of RSV disease and the associated economic burden of RSV in older adults across key stakeholders such as healthcare providers and payers. Upon approval of our RSV vaccine, we will educate consumers on key attributes of our vaccine. These planned activities will be initiated in 2023 and in full force upon approval. We have the added benefit of an in-place commercial infrastructure built for COVID. Many of these resources can be leveraged for flu as well into the future. I look forward to keeping you updated on our progress throughout this year. And with that, I will turn it over to Jamey.

Stephane Bancel:

Thank you, Jamey, Arpa and Stephen. Let me now share some thoughts about where we’re heading. I’m really excited to see our mRNA platform and the investments we have made in science over the last 11 years leading to such a promising pipeline. We anticipate a number of important developments. Let me start with our first franchise, respiratory vaccines. In COVID boosters, we are working for the switch to U.S. commercial market, and we anticipate being able to quickly meet the full 2023 market needs for updated vaccines after VRBPAC and the FDA make this transaction in the spring of 2023. We plan to submit RSV vaccine for regulatory approval in the first half of 2023, and as you heard from Arpa, we will be ready to launch the RSV vaccine in late ‘23 or early ‘24. In flu vaccine, for Northern Hemisphere, mRNA-1010 Phase 3 trial, the Data and Safety Monitoring Board is expected to complete its interim efficacy analysis in the first quarter of 2023 of second franchise latent virus vaccine. It’s progressing very well with a broad spectrum of programs. In our large CMV Phase 3 study, we look to complete the enrollment. For EBV, HIV and VZV programs, our next milestone will be Phase 1 data. Turning to Slide 37, let me review the milestone for mRNA therapeutics programs. For personalized cancer treatment, we expect to start our Phase 3 study in partnership with Merck in adjuvant melanoma, and we expect to rapidly expand to additional tumor types, including non-small cell lung cancer. Full Phase 2 data will be presented at an upcoming oncology meeting and published in a top-quality medical journel. In PA, we plan to select those and begin the expansion arm of our Phase 1/2 study. MMA, we will have Phase 1/2 data. The next milestone for heart failure drug by Relaxin will be Phase 1 data in patients. And in Inhaled therapeutics, our partner Vertex expects to complete its single ascending dose study and initiate a multiple ascending dose study. To continue to build the best version of Moderna, we have established seven priorities for 2023. Priority number one, execute the operational and sales plan for COVID booster for fall of ‘23. Priority number two, build an unrivaled seasonal respiratory vaccine franchise. Priority number three, execute a bold campaign of cancer vaccine studies. Priority number four, advance rare metabolic disease programs. Priority number five, drive rapid advancement and growth of our latent vaccine portfolio. Priority number six, deliver the next-generation pipeline and platform. As we said before, this is just the beginning. And Priority number seven, build a culture of perpetual learning and strengthen our processes and digital system as we want to scale the company to another level. On Slide 39, some key dates for 2023 Moderna Investor Days. April 11 will be our Annual Vaccines Day. September 13 will be Annual R&D Day, where we will present development pipeline key updates. And December 7 will be our second ESG Day. Now that we have delivered on the promise of mRNA science with our first product launch, our mission has evolved. Our mission is to deliver the greatest possible impact to people for mRNA medicine. We are passionate about our ability to have a profound impact on humanity. We believe we have a technology to eliminate or greatly reduce human suffering caused by respiratory viruses, latent viruses, many cancers, regenerative diseases and a growing list of other diseases. We believe we can have an impact on disease treatment, with our therapeutic first and then with our gene editing programs. This is just the beginning. With that, the team and I are free to now take your questions. Operator?

Salveen Richter:

Good morning, thank you for taking my questions. Could you speak to the regulatory strategy for flu, given the miss on the B strains for immunogenicity? And if you are confident into the interim efficacy analysis, given the abominating prevalence of [indiscernible]?

Salveen Richter:

Great. Thank you.

Gena Wang:

Thank you. Just quickly follow Salveen’s question. Do you need to show superiority in order to receive approval regarding the efficacy study? And then quickly on the revenue. Did I hear correctly the existing contract of $5 billion mainly will be in the second half ‘23? If that’s the case, is it fair to say that total COVID revenue in 2023 should be around $7 billion? And then regarding the $2 billion in the first half ‘23, how much will be from the U.S. market, i.e., out of estimated 100 million doses in the U.S., what could be your market share?

Arpa Garay:

Sure. Yes, I can take the second question. In terms of the total sales, we are anticipating about $2 billion of the $5 billion in the first half of the year, and none of that $2 billion is coming from the U.S. market. The remaining advance purchase agreements that we have of $3 billion will be coming in the second half of this year. Now, that $5 million is just the total that we have from advanced purchase agreements as well as deferrals from 2022. We do anticipate additional sales from the U.S., Japan, EU and other markets, and we believe the majority of these sales will be in the second half of 2023.

Arpa Garay:

We continue to believe in the strong, differentiated profile of our products. We do not have any updates on market share projections as we are currently in discussions with customers right now for fall 2023 contracting.

Operator:

[Operator Instructions] Next question comes from Matthew Harrison with Morgan Stanley. Your line is open.

Stephen Hoge:

Great. Thank you, Matt for the question. So we’re obviously really pleased yesterday to announce that we received FDA breakthrough designation therapy for the PCV program. And what that allows us to do is very rapidly accelerate our conversations with the FDA and other regulators on the path forward for filing 4157. As you noted, the Phase 2b study that we’ve run is a randomized study compared against, really, the standard of care with KEYTRUDA alone, and has already shown a quite significant benefit of 44% reduction of the rate of recurrence and – or death. And that study is ongoing, and so we’re continuing to follow over time and conduct additional interim analyses. And it’s possible that those – in fact, we would hope that those data mature and continue to get stronger and stronger. And so it is entirely possible that in our discussions under breakthrough with the FDA and others that we will come up with a path forward for beginning the filing process based on that Phase 2 and potentially proceeding with accelerated approval. Now as you know, in this country, and I think it’s where your question is coming from, as well globally, if there is a path forward there. We haven’t yet engaged with the FDA on because the breakthrough happened yesterday. But if there is a path forward there, it would require us to rapidly enroll a confirmatory Phase 3 study. And in fact, there is more and more attention on perhaps requiring that those Phase 3 studies be enrolled prior to an accelerated approval. And so for that reason, ourselves and Merck are working really quickly now to try and stand up that confirmatory Phase 3 melanoma study and enroll as fast as possible. Now we’re not ready yet to guide on how quickly that will be, but we are fully aware of the fact that in fact, if there is a path forward for accelerated approval, the enrollment of that Phase 3 may be gaining, and therefore, we want to have it enrolled as quickly as possible. So at this point, we’ve just received the breakthrough designation, we’re engaging with regulators, and we’re going to try and develop that path forward. But it is theoretically possible that there is an accelerated approval path and that we would need to enroll that Phase 3 study based on recent regulatory guidance, more generally to the industry. And working hard to make sure that we can do that as fast as possible here, while continuing to conduct the additional interim analyses and see the maturity of this data continue to proceed, and hopefully, the strength of the benefit provided by the combination to be further validated.

Edward Tenthoff:

Great. Thank you very much. And thanks for all the detail on the call today. My question, I had to go back to flu for a minute and just with respect to the follow-on candidates, including I think the one that’s pentavalent hemagglutinin and then fixed hemagglutinin and then also into the neuraminidase, the candidates at that neuraminidase, what should be our expectation both in times of timing for data here? And how do you ultimately see your seasonal flu product offering kind of evolving? Thanks.

Edward Tenthoff:

Great. Thank you very much.

Michael Yee:

Hi. Thanks. Good morning. A couple of follow-up on the flu vaccines and also a PCV question for Stephen. I guess could you clarify – do you have a hypothesis around why these strains were not non-inferior and what the ramifications are for that, either for this flu vaccine, but also for the infection study, and what that would mean for combinations? So first of all, just to clarify what’s going on there with the B strain, the ramifications for flu vaccine? And then my second question is on PCV. Obviously, we are excited about the adjuvant data. There is also a competitor reading out in metastatic melanoma this summer, so I wanted to understand how we should compare and contrast that and if you could walk us through how to think about metastatic and what competitors might show? Thank you.

Operator:

Thank you. [Operator Instructions] Next question comes from Tyler Van Buren with Cowen. Your line is open.

Stephen Hoge:

Sure. I can maybe – I will take the first portion of that question. At this point, there are obviously three companies that have wrote out their Phase 3 pivotal efficacy studies and are proceeding right now to filing. I think – I don’t have a specific view on J&J, maybe Arpa can offer perspectives on that, but it is an adenovector virus [ph] program, and otherwise still unclear about their regulatory path forward. Now on the question of reactogenicity and tolerability profile, as we presented today or as our collaborator presented today at RSVVW, we do see, we think a favorable tolerability profile. Grade 3 adverse reactions, whether local or systemic, were all below 2% for any of the individual symptoms. And actually compared relatively favorably with a placebo in that arm, often maybe 1.5x as frequent as what we are seeing in placebo, which we think is a compelling overall reactogenicity profile. We then think the other parts of the benefit of the product are obviously efficacy. We are incredibly pleased. If you look at the most common definition of cases, or RSV, lower respiratory tract disease involving two symptoms, which has been relatively consistent across the different products. We have seen high efficacy 83%, which I really think is among the best. And as we presented today, that efficacy actually holds up beautifully as you look at older populations, those over the age of 70, as well as those with higher comorbidities. Those would drive the majority of the expense associated with caring for patients, older adults with respiratory disease from RSV. So, overall, it’s very difficult, obviously, to do cross-trial comparisons. And ultimately, it will fall for public health officials to make those decisions, but we are really encouraged by both the efficacy and tolerability profile of 1345, and look forward to filing and ultimately to the commercialization of that product. Arpa, would you like to add anything in terms of your perception of the market going forward?

Operator:

Thank you. [Operator Instructions] Our next question comes from Jessica Fye with JPMorgan. Your line is open.

Stephen Hoge:

Yes. Thanks for those questions. So, let me take the flu stuff first. So again, the full approval of standard is a head-to-head efficacy study. And so if we demonstrate non-inferior efficacy against an approved vaccine in the population which we are studying and which in this case in P302 is 50-plus adults. We do believe that could form the basis of an approval. At the end of the day, immunogenicity results, and in particular, are only surrogates for efficacy, and ultimately, efficacy is the gold standard. That’s what’s required for traditional approval, and that’s why we are running the P302 study. So, it will depend upon how a conversation with regulators around that data package, but it is certainly plausible. And in fact, one might say likely that if we meet efficacy in the efficacy study that that would be sufficient to move forward for a full approval. It doesn’t mean that there may not be questions about demonstrating non-inferior immunogenicity with influenza B strains or other things in subsequent studies, but we do believe there is a possibility there. But at the end of the day, it will be dependent upon data and discussions with regulators, including the FDA. And so we will wait until we have that data and have those conversations, but I think it’s certainly a possibility. Now, as it relates to age for approval, we are currently studying mRNA-1010 only in older adults. And so as I have said, the P301 was in 18-plus, P302 is in 50-plus, and that’s really where we see the broadest recommendations for seasonal influenza vaccine and where we have been most focused initially on building out our respiratory portfolio. We will evaluate our influenza vaccine, in fact, many of our respiratory vaccines in younger populations over time. But we will have to do age de-escalation, dose finding and then bridge down from an immunogenicity perspective, very much like what we did with COVID. And so our initial filings for approval, if they proceed based on data, would be in adults and older adults principally. And then eventually, we would follow-on with pediatric populations. And as I said a moment ago in response to Michael’s question, that may involve using updated B antigens to increase immunogenicity in that population. But again, that’s subsequent studies that we would do in children. Could you remind me of the second question?

Stephen Hoge:

Sure. So, I will let Arpa take the second part of that question. First on frequency, it is not yet clear on how frequently people will need an RSV vaccine. It’s a seasonal virus, a seasonal epidemic of disease that shows up. Most of us have been exposed to RSV all over a dozen times over the course of our life. And what really happens from a biology perspective is as we get older, our ability to maintain high neutralizing titers to protect us goes down, and what we have is breakthrough disease and ultimately, a disease leads to substantial cost and morbidity and even some mortality in older adults. We do not – we have not yet had approved vaccines, and so what we don’t yet know is what’s the frequency of vaccination, is it going to be seasonal every year, or is it going to be less than seasonal every couple or few years. But what’s pretty clear, based – from my perspective, based on the epidemiology of RSV infection, is that we do see RSV fairly regularly as adults, and unfortunately, over time, it breaks through more frequently, and so there probably will need to be repeated boosting to protect against RSV. At the end of the day, the initial recommendations will come from ACIP as well as from regulators around that frequency, and we will have to defer to them on how they want to administer and roll out the RSV vaccines, whether they want to follow a flu model, which would be annual to make sure that we get the broadest amount of protection, or that they want to initially roll out RSV vaccines and then follow over time for the durability of that efficacy. At this point, none of us, none of the three products that have read out in Phase 3 have a clear answer on the durability of that efficacy, although we would expect it to wane as it does against natural RSV infection over time in those results. Arpa, do you want to take the next part of the question?

Operator:

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

Stephen Hoge:

All very good questions and I think the short answer is we are looking into that data right now. And we will provide an update I am not exactly sure when we will have that, but we do have the Vaccines Day Investor Meeting coming up in April of the spring and then obviously, we will be looking to publish that data and share as it comes in and is it available. You have highlighted one of the key challenges in active comparator studies in influenza in particular, which is that you can see high titers, but actually because you are looking at a ratio, say for whatever reason, your active comparator does really well against one of the strains, that can impact your ability to non-inferiority statistically. And at the end of the day, the challenge is even more complicated as you look at older adults where, for instance, the influenza B strains are not a big driver of efficacy or disease. And so we will look at all of that as will regulators. I would note that it is well precedented. In fact, many of the currently approved influenza vaccines have, in the past, missed on non-inferiority for – and influenza B strain end point here or there and still have received full approval or accelerated approvals. And the reason for that is, as we have said sort throughout, that at the end of the day, influenza B is not a primary driver of concern and it is known to be among the different strains of influenza in the virus in the vaccines of lower import for disease in older adults. In fact, one of the four strains, there have been active debate about the B/Yamagata strain as to whether or not it’s gone extinct, and even should be removed from quadrivalent vaccines in many of the recent WHO and other debates. And so influenza B is a well-trodden path for many of these vaccines as well as now for mRNA-1010, where there is differential performance, and ultimately, there is precedent for moving forward where you do not technically need non-inferiority on immunity your sales [ph] conversion endpoints and still moving forward because of the lower concern about that disease in older adults. So, we will look at that data. We will develop our strategy. We will obviously engage with regulators with that data, and ultimately determine a path forward. The most important thing for us, though, in the near terms continuing with the efficacy study trying to establish whether or not we have non-inferior or even superior efficacy for mRNA-1010 in its current form against influenza A, which is really where we think payers and public health officials will have the most attention because it is prevention of that disease, not the immunogenicity endpoint, prevention of influenza-like illness, hospitalizations, that is the primary objective of the vaccine and that’s where we are focusing our attention right now.

Operator:

[Operator Instructions] Our next question comes from Joseph Stringer with Needham. Your line is open.

Stephen Hoge:

Thank you for those questions. So, on 4157, I think I will just reiterate our prior guidance, I don’t want to expand it, to say that we are trying to move into those pivotal studies, they are Phase 3 confirmatory studies for melanoma and non-small cell lung cancer, both adjuvant settings, this year. And we – you can look at the history of Merck and their ability to execute those studies, enroll quite quickly and now working together with us, we hope to be able to at least do that well. And we will look to enroll those at least as quickly as other confirmatory Phase 3 studies and similar populations have been run generally. But I don’t think we are going to provide more specific guidance on enrollment time horizon except to say we want to go as fast as possible. I will also clarify, too that from an accelerated approval perspective, if that pathway were to become available based on the current Phase 2 data, which again is subject to future conversations with regulators, that we would want to have started those confirmatory studies. We wouldn’t have needed to complete enrollment, but definitely, we want to be demonstrating that we are moving forward in those confirmatory studies as quickly as possible. And so we have double impetus. We are moving fast in enrolling them in the near-term. Now, in the rare disease space, programs moving out of pre-clinical and clinical. The first I would say is we do have a clinical program for MMA, which you referenced, but that MMA program is another place where we expect to see additional data following on, hopefully, the continued strong performance of the propionic acidemia PA program. And then in the pre-clinical development space, we have programs against OTC and PKU, so Phenylketonuria and a urea cycle disorder OTC, and those are both programs that we would hope to move into clinical testing in short order. We haven’t specifically guided on the timing of that yet.

Operator:

Ladies and gentlemen, this does conclude the question-and-answer portion of today’s call. I would like to turn the call back over to Stephane for any closing remarks.

Operator:

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

Operator:

Good morning. My name is Kevin. And welcome to Moderna's Third Quarter 2022 Earnings Call. [Operator instructions] Please be advised that this call is being recorded. At this time, I'd like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon everyone. Welcome to our Q3 2022 Conference Call. Today I will start with a quick business review of a quarter before Stephen reviews or clinical programs. Arpa will then take you through commercial dynamic and Jamey will present financials. I will then come back to close before we take your questions. In the quarter we reported $3.4 billion in revenues. We reported net income of $1 billion and cash investments totaling $17 billion. We now expect deliveries under advanced purchase agreements in the range of $18 billion to $19 billion in 2022, due to delay deliveries from our fill-finish contract manufacturers resulting in $2 billion to $3 billion of revenue deferrals into 2023. In Q3, we had to deal with lots of complexity, launching two products, mRNA-1273.214 and mRNA-1273.214 at the same time, and also moving products from 10 dose vials to 5 dose vials. Q3 was actually our greater delivery amount in terms of vial produced and was up about 20% the average of previous three quarters. Arpa will share more thoughts on 2023 in the moment. In the first quarter, we repurchased over seven million shares. The $3 billion share repurchase program we announced in February, 2022 was completed. Since the start of our first share repurchase program in 2021, through the end of the first quarter, we have repurchased more than 23 million shares. Our first share repurchased program announced in August, 2022 for an additional $3 billion in repurchase is ongoing. Let me now review the pipeline highlights and advances since our last update. I am very pleased with the important progress the Moderna team has made on advancing the pipeline closer to product launches and at the same time equating the breadth of a pipeline. We've continue to progress with COVID booster programs and have received for addition around the world for both COVID mRNA-1273.214 program, which targets Omicron BA.1 and 1273.224 which targets BA.4/BA.5. We have, as you know, two respiratory vaccines in Phase 3 trials as we speak that continue to progress quickly. For flu vaccine our IND in September, we announced the first Phase 3 immunogenicity study was fully enrolled. We expect now data in the first quarter of 2023. As a reminder, we plan to pursue an accelerated approval pathway for seasonal flu vaccine. We also started a Phase 3 efficacy study with our flu vaccine and that trial is enrolling quickly. For Phase 3 RSV vaccine we are on track for data without this winter season. We were pleased to announce that Merck exercised the option to develop and commercialize our personalized cancer vaccine, mRNA-4157, paying Moderna $250 million in Q4. We and Merck with share costs and profit fifty-fifty for this program moving forward. We continue to expect data from our Phase 2 study for PCV in Q4 this year. In rare diseases we are pleased to share at our R&D Day that we saw encouraging early sign of clinical benefits above PA and GSD1a and announce a new development candidate for OTC. On Slide 6, you see our usual snapshot of Moderna in November, 2022 showing the breadth of the pipeline with now 48 programs in development across vaccines and therapeutics. The company continues to grow and we have now more than 3,700 Moderna team members. Last week we were very pleased to announce as a top employer by Science for the eighth consecutive year. We have now 15 commercial subsidiaries globally and a strong balance sheet of $17 billion to fund our Company growth. With this, I will now turn it to Stephen to review the pipeline. Stephen?

Arpa Garay:

Thank you, Stephen. And good day to everyone. I will start with a review of sales on Slide 16. Sales to the U.S. were $1 billion in the third quarter and were mainly from deliveries of mRNA-1273.222 our bivalent booster targeting Omicron BA.4 BA.5. Sales to Europe of mRNA-1273.214 were also $1 billion and the rest of the world totaled $1.1 billion. Through the first three quarters of the year, U.S. sales were $3.4 billion; sales to Europe were $4.5 billion and sales to the rest of the world accounted for $5.7 billion. In both the three and nine month periods, we saw geographical diversification of sales across these key regions. We recognized there are questions regarding the 2023 market and long-term COVID booster potential and we wanted to walk you through how we are thinking about it. As we transition into an endemic market, there are important factors we considered in our commercial outlook. These include the ongoing medical need for COVID boosters and the potential size of the annual booster market. We use the seasonal flu market to frame the opportunity and I will take you through our thinking on that in the next couple of slides. I will also detail some of the factors underlying the transition to the commercial market in the U.S. in 2023. I will then wrap up the COVID section with an overview of our currently signed contracts and our outlook for additional expected contracts in 2023. Finally, I'll close with a reminder what's coming in 2023 from our respiratory vaccine franchise, a potential launch timings that we shared recently at our R&D Day in September. So starting with the medical need for COVID boosters, the chart on Slide 18 compares hospitalizations and deaths associated with the seasonal flu and COVID over a relevant time period. For flu, we looked back at the past 10 influenza seasons in the U.S. before COVID-related interventions disrupted the typical flu season. And for COVID, we looked at hospitalizations and deaths from October 2021 to September 2022, which covers the period of widespread immunity against SARS-CoV-2 and its variants either through vaccination or infection. We believe this period is a close proxy to what population immunity to COVID could be in an endemic season. As you can see here on the chart, hospitalizations due to COVID during the past 12 months are three times higher than the 2017, 2018 flu season, which represents a year with the highest medical burden within the 10-year period included in the analysis. And the deaths due to COVID are even higher coming in at a rate of seven times higher than the same severe flu season. This comparison shows the higher medical burden of COVID in a period that we believe more closely approximates an endemic season and underscores the need for boosters in the endemic phase. It also helps frame the potential endemic annual COVID market, which I want to take you through on the next slide. To size the endemic COVID booster market we start with the flu market volumes. Volume in the annual flu market is approximately 500 million to 600 million doses around the world. The size of the market is highly dependent on the number of doses as well as global price as shown in the sensitivity table on the left hand side of the slide. The prices shown here are purely illustrative to demonstrate a range of outcomes on global pricing. Ultimately, global price for COVID boosters will reflect sales mix and differential pricing across markets. Our endemic pricing will be focused on the value that the vaccine brings to healthcare systems around the world. As we move to an endemic market in 2023 key factors that will impact our volume in the year include the medical need, ongoing viral evolution, recommendations from public health authorities and consumer motivation to vaccinate. So while we believe that volumes in the global endemic COVID market should approximate to at least 600 million doses over time, we believe it is too early to reliably predict the variables impacting the volume of doses in 2023. Turning to Slide 20, and specifically addressing the transition to the commercial market in the U.S., we anticipate a more fragmented customer base including private payers, health plans, pharmacy chains, individual pharmacies and physician offices. We also anticipate reduced predictability in orders, seasonality of deliveries similar to flu vaccine deliveries, a shift to full distribution costs assumed by Moderna, as well as other major factors in the U.S. such as shifting to a single dose presentation and continued innovation and product differentiation. Moving on to Slide 21, we summarize the contracts that have been signed so far for 2023. We have advanced purchase agreements for the United Kingdom, Canada, Switzerland, Taiwan and Kuwait totaling $2.5 billion. Additionally, we expect deferrals of $2 billion to $3 billion from 2022. These deferrals are from the countries listed on the slide. Together, these advanced purchase agreements and deferrals total $4.5 billion to $5.5 billion in sales for 2023. Finally, and very importantly we have a number of countries where we expect additional 2023 contracts to be signed. We are working to secure 2023 orders in the U.S., EU, Japan, Australia, Asia, Latin America, and COVAX. And we expect to have visibility into these orders as contracting seasons begins later this quarter and continuing into next year. So to summarize the COVID outlook on Slide 22, with the continued higher medical burden of COVID relative to flu, we expect the endemic COVID vaccine market could be as large or larger than flu market volumes over time. The U.S. market is transitioning to a commercial market and we believe we are well-positioned to serve its evolving needs. And finally, we have established a base of confirmed contracts of 4.5 billion to 5.5 billion in 2023, to which we anticipate adding a number of important orders in the months ahead from key markets including the U.S., EU, Japan, and others. Now, before I close, I'm excited to review the formation of our respiratory vaccine franchise that we highlighted during our R&D Day in September. As early as next year we could be expanding into flu and RSV. And as we look at flu and RSV combined with COVID, they lead to more deaths annually than Alzheimer's, stroke or diabetes in developed markets. As Steven highlighted depending on case accruals and vaccine efficacy, we could see data from our flu and RSV Phase 3 trials this winter. We are actively preparing for the commercial launches for these additional respiratory vaccines and we'll leverage a COVID commercial infrastructure that we are currently building. With that I'd like to turn it over to Jamie.

Stéphane Bancel:

Thank you Jamey, Arpa and Steven for this update. Before opening to Q&A, I just want to review some of the key priorities as we close out this year and look into 2023. For the remainder of a year we'll continue to focus on delivering our updated Omicron boosters and drive 2022 sales. We are already working on 2023 sales contract; in Europe, Japan and Europe from afar around the world. Our partner team are also setting up the U.S. team and scaling it so that we can go private in the U.S. market in 2023. We continue to execute on our pipeline. We look forward to be able to present when we have it the Phase 2 data for PCV we expected before the end of the year. The team is doing a great job to cause it to enroll our Phase 3 study for flu, RSV and TMV and I'm excited to see the advancement of our rare disease programs. Looking to next year Arpa and the team and the entire organization including manufacturing, is to bring for multiple vaccine launches in the year including commercial COVID market as well as potential for therapeutic programs to move very quickly in phase three. And finally, we hope that many of you can join us next week for first ESG Day on November 10th. The virtual event will be available from our webcast. With this we'll be happy to take your question. Operator?

Arpa Garay:

So I can take the pricing question. So first I'm not in a position to comment on competitor pricing, but as we think about our pricing as we evolve from a pandemic setting to an endemic setting, the real focus for us is on ensuring that our vaccines are priced based on the value that they provide to the healthcare system and reflect the cost effectiveness guidelines that are set by public health authorities around the world. So for here in the U.S. that would be ACIP. I think it's important to note that some of the pricing guidance that has been released in the past is really at a growth level and we do anticipate some discounting across different channels. Additionally here in the United States as we evolve into the commercial setting, it's also important to remember that for all ACIP recommended vaccines there is a zero out of pocket cost for consumers. So from a consumer access perspective, we do expect that the pricing will not be a barrier to uptake.

Salveen Richter:

Thank you.

Matthew Harrison:

Great. Good morning. Thanks for taking the question. I was hoping to ask on PCV; just given that this is a Phase 2 study that's proof of concept a p-value grayer than 0.05 could be considered a success in this study. So maybe you could just help us think about how you're thinking about success in the study and then just given that it's an open label study, how much data is available to you internally? Thanks.

Operator:

Thank you. One moment for our next question. Our next question comes from Edward Tenthoff with Piper Sandler. Your line is open.

Stéphane Bancel:

Thanks Ed for the question. And so I think the short version is absolutely. In any of our modalities whether they're cancer vaccines or our infectious disease vaccines or now our orphan disease where we believe we've achieved a technological proof of concept. Where we've achieved what we wanted to in patients, we look to rapidly expand the number of diseases and implications that we can bring forward that technology in. And in the case of orphan rare diseases as we shared, we are extremely encouraged by the data across two different diseases using two different medicines that now suggest we have obviously acceptable safety and tolerability profile, which is of primary importance. But more importantly for efficacy we're starting to see really encouraging results in terms of biomarkers or even from the dynamic readout, a potential of benefit for patients. And so given the strength of those two pre prior results, we've actually moved quickly to expand our pipeline. We have a number of other programs that are already publicly disclosed and moving forward in clinical trials. Some including MMA are already in clinical studies. And as I mentioned at our R&D day we're looking to substantially expand that pipeline of programs. And so we announced the OTC program as one instance of that just a month ago but you can expect that we'll be adding substantially to that. Our goal will be to more than double that pipeline in the years ahead as we expand our investments in rare diseases on the back of that de-risk clinical data.

Operator:

One moment for our next question. Our next question comes from Michael Yee with Jefferies. Your line is open.

Stéphane Bancel:

Good. Thank you for the question, Michael. So first on RSV, obviously we're incredibly encouraged by the results that are been seen by other vaccines. Given our platform has previously demonstrated its potential in COVID specifically in respiratory vaccines, we think it bodes well for us in terms of that study. There's a bar that's been established in terms of severe disease as you referenced in the 80% range. We are looking at three-symptom or "severe disease". It's hard to compare between the studies. They're not conducted the exact same time and they don't always have exactly the same definition as you know. But we would absolutely hope and expect that the type of efficacy we're going to see against severe disease will be on par with, and I would even hope for better than what's been seen by others. It's certainly been the case with our platform technology compared to others in terms of COVID that we've been able to see those sorts of potential benefits. I'll also note that we looked at titers and we previously shared our titers as well as other companies have from their early clinical Phase 1 and Phase 2 results and we believe that the boosting of anti – neutralizing RSV titers against both RSV-A and RSV-B that we were achieving was on par. You could – you should – you could always argue perhaps better or worse but on par with what others had seen. So we're quite encouraged by that. And I think we're looking forward to the RSV efficacy results over this coming winter. Our bar for this is to be good or better than others have been. In terms of PCV our – in terms of PCV, Merck has opted in as you said, and I know Matthew asked the question as well. So it is an open label study as we previously disclosed and so we have been following events through that study. Those that have received the cancer vaccine in combination of KEYTRUDA versus those that have not. And as we've now passed the one-year mark for follow-up of the last patient to be randomized in that study, we now have at least a year of follow-up and then [indiscernible] many cases, two-plus years of follow-up across those two different cohorts. Those that receive combo and those receive standard care KEYTRUDA. That data was known to us and Merck, but it's important to note that's an ongoing un-cleaned and not primary analysis. And so while it is open label the correct thing to do at this point now is begin the closing process, get all of the scans, review all of the data associated with the clinical outcomes, make sure nothing was missed and in that cleaning process then finalize that database and conduct the primary analysis for the study, which is to evaluate the hazard ratio and statistical significance to that hazard ratio between the two arms. That's actually the process we're undergoing right now. And it's important that before we make a decision on whether that data is positive or negative and the strength of that positivity – how quickly we move forward per Matthew's question into whatever the next major development are that we conduct all of the right diligence on those data sets and that's the work that's ongoing right now. So while Merck made their opt-in decision, which was really more calendar and contract driven based on obviously having access to that open label information, the really important analysis – the primary analysis, the one on which we will base our decisions of what to do next as will regulators and others is the one that we're trying to conduct right now and is not yet completed, but we do expect that result in this quarter.

Operator:

One moment for our next question. Our next question comes from Gena Wang with Barclays. Your line is open.

Stéphane Bancel:

Gena, thanks for that question. So again, it was not a continuous data set. It was an open label study and so per our agreement with Merck they had the right to know what we know about the program at that point in which they were had to make their decision about whether to opt-in or not. And so of course what we did is we provided them the access to the data of the study at that point in time and as you all have noted they elected to opt-in to that program and we are encouraged by that decision on their part. They obviously do have a tremendous amount of experience and so in terms of the control arm you obviously have the Keynote-054 study, which is their prior registrational studies, they have experience of what to expect in a control arm. And I think you can infer whatever you'd like from their decision to just say that they believe it's worth opting into that program and proceeding to the primary analysis that we're conducting right now. We will obviously be able to compare the control arm, the 50 patients who just received KEYTRUDA as standard of care against the registrational studies that others have, and actually the many years of patient experience that companies like Merck and others have, just to be confident that in fact if we are seeing a difference between and we are seeing a hazard ratio difference, that it's not a difference in terms of that control arm, which will board well because again patients were randomized in this study. Now in terms of the data we'll haven't share, at this point all we'd expect to share this quarter once we've completed the analysis. The primary analysis on efficacy and the study is just the top line data in terms of PCV, which as I mentioned previously is looking at the hazard ratio and then a characterization statistically of that. In subsequent and appropriate for including meetings and otherwise we will look to then share the older data set over time.

Gena Wang:

Thank you.

Tara Bancroft:

Hi guys, thanks for taking the questions. So is it fair to say that the 2023 signed APAs of the $4.5 billion to $5.5 billion is the floor? And what minimum revenue do you think could be added from the geographies that you're expecting contracts from? And related to this then to what extent does it include sales in the key markets that were mentioned in the press release like for example, does it include the option from the latest U.S. agreement? Thanks.

Operator:

Thank you. One moment for our next question. Our next question comes from Jessica Fye J.P. Morgan. Your line is open.

Stéphane Bancel:

Sure. So it’s Stéphane. I'm going to take the first question on supply and then I'll turn to Arpa for the commercial PCs. As I shared in my remarks, we actually had to deal with very complex third quarter from a manufacturing standpoint, not launching one product, but two doing this kind of in the work hard times as you are aware, we have FDA informed us at the end of June that they wanted [indiscernible] products for the U.S. and that product was available in pharmacy label at weekend. And the shift from 10 dose per vial per provide, which is what we sold with 1273. And for a first time selling five dose per vial, basically doubling the number of vials needed, the same number of doses. And so we've had quite a number of pain points with fill-finish manufacturers. We are working through a lot of those issues. A lot are solved, a lot are still being, as we speak. There are many lessons to be learned that we are working on to put robust fixes for the end of the year, so that we are in a much better place for the fall of 2023. Arpa?

Jessica Fye:

Thank you.

Geoff Meacham:

Good morning guys. Yes, thanks for the question. Just had a couple. Just one to follow- up on your last comment. You mentioned booster adoption has been mixed depending on geographies. Is this something that Moderna expects to further invest in with regard to value of boosters, additional follow-up and studies? That's the first question. The second one, maybe more for Stéphane, the balance sheet remains pretty strong, you guys have done some buybacks, but we haven't seen sort of a cluster of acquisitions or any sort of real capital allocation yet. Where would M&A sort of fall in your priority list with uses of cash? And does that change as COVID continues to sort of wind down with regard to the revenue base 2023 over 2022 and maybe even more modest going forward. Thank you.

Stéphane Bancel:

Thanks, Arpa. And on the balance sheet side, I mean, our biggest strategy as Jamey noted in his remarks, isn't changed. As you know we are looking, and have already signed deals in terms of technology licenses and also looking at M&A. As we've said before, we stay focused on nucleic acid. We don't really think it's a good strategic use of our capital to buy small molecule asset or large molecule or cell therapy, or else we really want to stay nucleic acid. The BT team is very active as Jamey knows, and this team knows they are doing a lot of work where we're doing a lot of things. As I've said in the past, we will remain disciplined in term of understanding the risk either on the technology side, or on the biology side, understanding value. We're here to create value not to manage press release. But the team is very active. We are looking at diligence on a regular basis. But not everything that we look at comes out to be something we think we can create a lot of value with. But we will continue to look and I would not be surprised if we continue to add partnerships in the monsoon quarter to come.

Operator:

One moment for our next question. Our next question comes from Eliana Merle with UBS. Your line as open.

Stéphane Bancel:

Great. Well, thank you for the question. So, first we have previously demonstrated with our platform in COVID and in fact in some recent publications, even in flu that we're we generally see a really broad based and balanced immune response. So we tend to see very high T-cell and cell mediated immunity. And I would argue some of the highest if not the always the highest antibody neutralizing titers. And both of those are really important as you start talking about older adults and respiratory infections, which is probably why we tended to see higher efficacy with the mRNA platform than other approaches in that high risk population, including in COVID, over the last couple of years. And so those features of the platform, the ability to generate really strong cell mediated immunity, boost T cells, which are important for preventing severe disease, but also pair that with achieving very high titers for a seasonal protection where again, you get high neutralizing titers, which provide a barrier to the amount of infection that you're going to get, which is really, really important for older adults because their cell-mediated responses, their innate immune system just isn't as strong, even with a great vaccine. And it’s that combination that we think defines our advantage from a platform perspective and why we're so excited about developing a portfolio of respiratory vaccines across all the leading killers in that space for older adults. And RSV just fits right into that. As we all know right now, there is a huge unmet need in that space. We are very pleased to have enrolled, fully enrolled that Phase 3 study. And we were actually quite pleased with the titers and cell-mediated immunity that we saw in early development, some of which we've presented publicly. So we're looking forward to that FC readout. In terms of other approaches, let's also just celebrate that recombinant protein, and viral vector and adjuvanted approaches, have all shown really exciting progress in the last year, year and a half across a range of companies. RSV is a huge unmet need. It will take many different approaches to have an impact there. And if anything, I think, the success of others gives us optimism that our approach is going to also be successful, but there are likely going to be many different solutions to this for older populations. We do believe that our platform had an advantage. But given the success of the other vaccines and really, I think, quite encouraging efficacy results, it's important to note that there are many good successful options out there. And it may not always be possible to differentiate between them, but we hope to be in that first class.

Operator:

One moment for our next question. Our next question comes from Joseph Stringer with Needham, your line is open.

Stéphane Bancel:

So maybe I'll take the first one quickly. So yes, those are locked in advanced purchase agreements for 2023, and so they are just shifting to the right from 2022.

Joseph Stringer:

Great. Thanks for taking our questions.

Unidentified Analyst :

Hi, and good morning, this is [indiscernible] for Mani Foroohar. I just have a question related to volume to be expected. So I know that your volume production, you had mentioned that you would exclude 2023 based on because of the variability there, but I was wondering for 2023, how much of COVID volumes or I would say probably [indiscernible] do you anticipate to be driven by the APAs? And also as you move to our northern endemic model for locally vaccine, do you continue to anticipate APAs in the future? Thank you.

Unidentified Analyst :

Thank you.

Stéphane Bancel:

Well, thank you everybody for joining the call today and for your thoughtful questions. We look forward to speaking to many hours to come, days to come. And also we’re welcoming you next week or our first ESG Day. Have a great day. Bye.

Operator:

Good morning. My name is Kevin, and I will be your operator. Welcome to Moderna’s Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for questions. [Operator Instructions] Please be advised that this call is being recorded. At this time, I’d like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.

Stephane Bancel:

Thank you, Lavina. Good morning, or good afternoon, everyone. Welcome to our Q2 2022 to conference call. Today, I will start with a quick business review, before Paul walks you for some new real world evidence data on Spikevax and then, Stephen, will review our clinical programs. Arpa will take you through commercial dynamics and David will present financials and we will come back to growth, just some thoughts, about where we are heading. In the quarter, we continued strong financial performance. We reported revenue of $4.7 billion and net income of $2.2 billion. We are pleased with the Q2 sales. The decreasing net income is driven by higher cost of sales in the quarter, mostly driven by our COVAX contract, David will cover that in the financials, a strong increase in R&D investment to fund our future, including the four Phase 3 programs and the higher tax rate in Q2 2021. For our share repurchase program, we reduced our share count by $9 million shares in Q2. Since the start of our first share repurchase program in 2021 through yesterday, we have repurchased around $18 million shares. We continue to have signed event purchase agreements for expected delivery in 2022 in the amount of approximately $21 billion. Based on our commercial momentum and our balance sheet, today we also announced that our Board of Directors has approved the new share buyback program for an additional $3 billion. Let me now review the business and pipeline update since our last review. I am pleased with the important progress that Moderna team has made on advancing the pipeline across the product launches and increasing the breadth of the pipeline. On the commercial side, we recently signed a new agreement with the U.S. Government for an initial 66 million doses for bivalent booster vaccine against Omicron. The agreement also include options to purchase an additional 234 million doses, bringing the total sales potentially up 400 million doses. The U.S. Government has already exercised option for an additional 4 million doses since the contract was signed and announced. So the current total is actually 70 million doses contracted for the fall of 2022 with the U.S. Government. In addition, both Canada and the U.K. had exercised options for their current agreements for additional deliveries in 2022. On the regulatory front, I am very happy to talk about authorized for pediatric and recent population in the U.S. We further see the thought with regulatory clinical teams at Moderna and the U.S. FDA now allows the protection of the youngest in the U.S. population as they head back to school. As Canada and Australia both authorized the use of our vaccine for children’s six months to five years old. Our research and clinical team continue the momentum in our pipeline. We are look for running Phase 3 development with COVID bivalent booster, flu, RSV and CMV trials ongoing. Importantly, our Phase 1 study with mRNA-1030, our flu vaccine targeting the traditional flu antigen, as well as been novel NA antigen is now fully enrolled. And our combination flu plus COVID vaccine is also fully enrolled for Phase 1/2. We look forward to these readouts on safety and immunogenicity for approvals. In properties, we now have an open IND with the checkpoint vaccine in oncology and we dose our first patients with our GSD1a rare disease program. Finally, we are very pleased to be on track and look forward to sharing data for our proof-of-concept studies this year for two of our therapeutic programs. The Phase 1/2 rare disease program propionic acidemia or PA and our Phase 2 data with our personalized cancer vaccine in combination to KEYTRUDA versus KEYTRUDA monotherapy. Slide six is our usual snapshot of Moderna in August 2022, showing the breadth of the pipeline with 46 programs in development across vaccine with four therapeutics. The company has strong foundation, we have 3,400 teams and growing, 11 commercial subsidiaries and the strong balance sheet with around $18 billion of cash to fuel our growth. I will now hand it over to Paul.

Stephen Hoge:

Thank you, Paul. Good morning, or good afternoon, everyone. I will quickly review some of the recent updates around our Omicron containing COVID booster for the upcoming fall season and then review the rest of our pipeline before handing it to Arpa. We are advancing to bivalent candidates for the fall winter season of 2022 to meet different market demands, mRNA-1273.214 is our Omicron BA.1 containing bivalent vaccine. Clinical data previously presented from our Phase 2/3 study showed that 214 significantly increased neutralizing titers against BA.4, BA.5 compared to the currently authorized booster. Following regulatory discussions, we have submitted application for authorization for 214 in the EU, Australia, U.K., Canada, and Switzerland. We have also started a rolling submission in Japan. mRNA-1273.222 is our bivalent vaccine candidate that combines an Omicron containing vaccine based on the BA.4, BA.5 subvariant and our original mRNA-1273. The FDA has asked us to submit for authorization for 222, based on the demonstrated strength of our bivalent platform against variance of concern including data from our Phase 2/3 studies with 214 and 211 bivalent boosters. FDA has also advised manufacturers to initiate clinical trials with 222 as these data will serve useful as the pandemic continues to evolve. We expect to start these trials in August. Now to review our respiratory vaccine pipeline on slide 16, I just want overall -- Omicron containing COVID boosters. We were happy to announce that our flu vaccine mRNA-1010 launched an immunogenicity study in the Southern Hemisphere in June and we are also preparing to launch an efficacy study for mRNA-1010 this upcoming fall, which will either serve as a post-approval efficacy study or if we are not eligible for study approval we will support our application. Our next-generation flu vaccines, which had eight mRNA’s across HA and NA antigens, mRNA-1020 and mRNA-1030, also completed enrollment in their Phase 1.2 study. Our RSV program is ongoing including a Phase 3 in older adults and a Phase 1 in pediatrics. Importantly, we also started and concluded enrollment for the Phase 1-2 study of our COVID plus flu vaccine this quarter. We look forward to sharing that data when we have it. Our combination COVID flu RSV vaccine also expects to enter the clinic this year. Our endemic, human Coronavirus vaccine is in preclinical along with our pediatric RSV plus hMPV combination vaccine and the pediatric hMPV plus PIV3 vaccine Phase 1b is now fully enrolled. Moving onto our latest public health vaccine portfolio, our CMV vaccine is ongoing in a Phase 3. Our EBV vaccine to prevent infectious mononucleosis is in a Phase 1 study and our EBV vaccine to prevent long-term sequelae from the virus is in preclinical. We have two HIV Phase 1 trials and a Phase 2 Zika vaccine trial that are all ongoing. Our Phase -- our HSV and VVV vaccines are in preclinical. And finally we dosed the first participants in our Phase 1 study of our Nipah vaccine, which is being conducted in partnership with the NIH. And to close on our therapeutics pipeline on slide 18, Stephane already mentioned that we expect data from our proof-of-concept studies in our PCV NPA programs later this year. A few other important updates to highlight on this slide, first, we were happy to dose our first patient in our GSD1a trial and open an IND for our checkpoint cancer vaccine. Second, AstraZeneca notified us that after a portfolio review they are returning the VEGF program and we are currently evaluating the next steps for that asset. Finally, based on a review of early clinical data from our IL-2 program for autoimmune disease and the evolving competitive landscape, we have decided to discontinue further development of our program and we were moving from our pipeline. With that, I will hand it over to Arpa.

David Meline:

Okay. Thank you, Arpa. Today we are providing the analysis of actual 2022 second quarter results along with a view of key drivers of financial performance going forward. Overall, we continue to progress well and I am very pleased with our operational and commercial performance. Turning now to slide 25, starting with an overview of our financial performance in the second quarter. Total product sales for the second quarter of 2022 of $4.5 billion, increased by $334 million or 8% compared to the prior period. The total product sales growth in 2022 was primarily driven by higher average sale price of our COVID-19 vaccine due to changing customer mix. Total revenue was $4.7 billion for the second quarter of 2022, an increase of $395 million compared to Q2 of last year, driven by the increase of sales of our COVID-19 vaccine. Cost of sales was $1.4 billion or 30% of product sales in the second quarter of 2022, compared to 18% of product sales for the same period in 2021. This includes a charge of $499 million for inventory write downs related to excess and obsolete COVID-19 products, a loss on firm purchase commitments of $184 million and an expense for unutilized external manufacturing capacity of $131 million. These charges are driven by substantial reduction of our expected deliveries to COVAX as indicated as a potential variable impacting our Advanced Purchase Agreements in our last call and to a lesser extent by deferral of deliveries to other customers, particularly to the European Union in light of the expected upcoming launch of our updated bivalent vaccines. Research and development expenses were $710 million for the second quarter of 2022 and increased by $289 million or 69% compared to the year ago period. The increase in R&D spend continues to be driven by clinical trial expenses, particularly with our COVID-19 and RSV programs, as well as personnel related costs for expanding and maturing development portfolio. Selling, general and administrative expenses were $211 million for the second quarter of 2022, increased by $90 million or 74% compared to the year ago period. The growth in spending was driven by the commercialization of our COVID-19 vaccine globally with continued investments in personnel and outside services in support of the accelerated company build-out. The effective tax rate for the second quarter of 2022 was 11%, compared to 9% for the same period in 2021. Let me remind you of the fact that we had a net operating loss carry-forward of $2.3 billion at the end of 2020, which resulted in a non-recurring benefit to the reported tax rate last year. After-tax net income in Q2 2022 decreased by $583 million or 21% to $2.2 billion compared to the same period in 2021. The decrease was primarily due to higher cost of sales and other operating expenses in the current period. Diluted EPS in Q2 2022 decreased by $1.22 or 19%, the $5.24 a share, which is compared to the same period in 2021. Turning now to year-to-date financial results compared to the prior year on slide 26. Total product sales for the first six months of 2022 were $10.5 billion, increased by $4.5 billion or 76% compared to the prior year period. The total sales growth in 2022 was mainly attributable to our manufacturing capacity ramp up and to a smaller extent to favorable customer mix resulting in increased average selling price. Total revenue was $10.8 billion for the first six months of 2022, compared to $6.3 billion in the same period in 2021. The increase in total revenue was primarily driven by the increase of sales of our COVID-19 vaccine outside of the U.S. Cost of sales was $2.4 billion or 23% of product sales for the first six months of 2022. This compares to 16% of product sales in the prior year period on a reported basis or 19% adjusted for pre-launch inventory costs, which were expensed in 2020. The increase in cost of sales as a percent of product sales was mainly due to higher write-downs for excess and obsolete inventory, and expenses related to future purchase commitments and unutilized external manufacturing capacity, and to a lesser extent the lack of pre-launch inventory benefit that was realized in the first quarter of 2021. Research and development expenses were $1.3 billion for the first six months of 2022, an increase of $442 million or 54% compared to the prior year. The increase in R&D spend continues to be driven by clinical trial expenses, personnel related costs and outside services for expanding and maturing development portfolio, including the development of COVID-19 bivalent boosters. Selling, general and administrative expenses of $479 million for the first six months of 2022 increased by $281 million or 142% compared to the year ago period. The growth in spending was driven by the commercialization of our COVID-19 vaccine globally and support of the accelerated company build-out, including substantial investments in digital. Additionally, in Q1 2022, there was an initial upfront endowment of $50 million for the newly established Moderna foundation. The effective tax rate for the first six months was 13%, compared to 7% for the same period in 2021. The increase was primarily due to the benefit recorded in 2021 related to the release of the valuation allowance on the majority of our deferred tax assets. After-tax net income increased by $1.9 billion or 46%, the $5.9 billion for the first six months of 2022 compared to the same period in 2021. The increase in net income was driven by the growth of our product sales. Diluted EPS for the first six months from 2022 increased by $4.55 or 49% to $13.85 compared to the same period in 2021. Turning now to cash and cash deposits on slide 27, we ended Q2 2022 with cash and investments of $18.1 billion, compared to $19.3 billion at the end of Q1 of this year. The decrease reflects the share repurchase activities in Q2 of $1.3 billion. The ending balance of cash deposits for future product supply was $4.1 billion, compared to $5.3 billion at the end of the previous quarter. The reduction quarter-over-quarter is driven by product deliveries against customer deposits. Now turning to slide 28, our capital allocation priorities remain unchanged. Our top investment priority has been and will continue to be reinvesting in the base business across multiple areas. As previously stated, R&D spending was $1.3 billion in the first half of 2022, a 54% increase on a year-over-year basis. We remain on track with our full year R&D forecast of $2.5 to $3 billion. Our second investment priority is to seek attractive external investment and collaboration opportunities to further expand the reach of Moderna’s technology and capabilities. We are considering attractive opportunities that enable and complement our platform and take a disciplined approach in evaluating potential outside investments. We are in multiple active discussions regarding additional external collaboration opportunities. After evaluating internal and external investment opportunities, we then assess additional uses of cash. In the second quarter of 2022, we repurchased 9 million shares for $1.3 billion. Since inception of our repurchase activities last year and up until August 2nd, we have purchased 18 million shares or approximately 4% of our outstanding diluted shares for $3 billion of total. As a reminder, we announced a share repurchase program for $3 billion in February of this year and currently have approximately $1 billion of remaining capacity from that authorization. As part of today’s press release, we announced that the Board has authorized an additional share buyback program, the $3 billion with no expiry. Now let’s turn to our 2022 updated financial framework on page 29. We continue to have signed Advanced Purchase Agreements for expected delivery in 2022 in the amount of approximately $21 billion. This includes expected sales from the recently announced new agreement with the U.S Government and an adjustment for doses that remain unallocated by COVAX due to lack of demand we indicated this was a possibility on our last call. Furthermore, this total includes expected negative foreign exchange impacts compared to the contract value at signing, which we estimate to be approximately 1.5% of sales for the full year 2022 assuming current rates remain through year end. We anticipate that for sales in the second half of 2022, sales will be greater in the fourth quarter than the third quarter, driven by the timing of anticipated approval of our updated COVID-19 vaccines and the related manufacturing ramp-up of the new products. Our total cost of sales, includes the cost of goods manufactured, third-party royalties, as well as logistics and warehousing costs. We now expect our full year 2022 reported cost of sales to be in the mid-20% range driven by the previously mentioned cost related to a reduction of doses to COVAX and deferral of doses to other customers. Cost of sales could increase to the high 20% range in the event of further charges due to product updates. For R&D and SG&A, we continue to expect full year expenses to be approximately $4 billion, driven by a maturing development portfolio and the global scale up of the company. Based on current tax laws, we now expect our 2022 effective tax rate to be in the low- to mid-teen range as a result of the benefits from the foreign derived intangible income driven by our international business mix, as well as stock-based compensation deductions. Finally regarding capital expenditures, we continue to plan for capital expenditures in the range of $0.6 billion to $0.8 billion as we further build out our manufacturing in general company infrastructure globally. This concludes my remarks concerning the financial performance and I turn the call back over to Stephane.

Operator:

[Operator Instructions] Our first question comes from Matthew Harrison with Morgan Stanley. Your line is open.

Stephane Bancel:

Sure. Thanks for the question, Matthew. So, as you know, we run it now for over a year our capital allocation strategy, that’s in a cash flow positive situation. Of course, number one; invest in the business; two, stick to our investment to build the company; and three, share buyback. As you have seen through what we have done over the last quarters, we have been I think totally aligned with this strategy in terms of the investment in internal R&D, as David said, 69% increase in R&D investments Q2 this year versus Q2 last year. As you have seen we have announced last year our third share buyback plan today also being very aggressive there. As you see, we have done a few deals in the last year in terms of external collaborations. We have not acquired any company at this stage. We see this, to your point as, how do we expand the potential of the company to deliver on its mission to make innovative medicine. And on the external front, I think, there’s two filters that are important for us is, finding interesting assets and finding them at a price that we think we can create value for. As we have said, and David confirmed today, our BD teams are extremely busy looking at a lot of things. But as you know, it’s a bit the same as investors looking for companies to invest in. We look at a lot of things before we decide to go for something. We won’t be shy if we find great assets. There’s a lot of asset that are very early. There’s a lot of asset that don’t really see the company’s strategy, but we will keep looking. I think doing the large acquisition -- probably like a large acquisition is not our strategy. What we want to do is to be the best if nucleic acid company in the world. As we have said, would be very happy to go outside them on as long as we see to the nucleic acid space. We will be happy to do acquisition if we find good assets, we will happy to new partnerships and acquisition is not regarding itself. So that’s a bit how we think about outside the investment actually. Thank you.

Elizabeth Webster:

Hey, guys. This is Elizabeth on for Salveen. Congrats on the quarter and thank you for taking our question. Could you walk us through the path to authorization for 1273.222 and just clarify exactly what the path is here and then when could we see data from the trials, you mentioned, that are starting this month? And then our second question is, if you had to think of levers for potential upsides to the $21 billion in APAs, where might those come from and could additional new orders come online? Thank you.

Arpa Garay:

And I can take the second question on the $21 billion guidance. From an Advanced Purchase Agreement perspective, we do believe the majority of the market demand is captured in this $21 billion. That being said, we continue to work with countries around the world on potential additional orders for our bivalent vaccines as many countries are continuing to assess their public health needs, as well as their booster population recommendations and considering potential expansions to those populations. So we are feeling pretty good about the $21 billion, but we do continue to work with countries to see if and when there is additional demand for either 214 or the 222 bivalent vaccine.

Operator:

One moment for our next question. Our next question comes from Michael Yee with Jefferies. Your line is open

Stephen Hoge:

Sure. Thank you for the questions, Michael. I will try to take both. So, first on the approach, I think, you are right, we do believe that the flu model for authorization of strain supplements, strain updates every year will make sense in the future for COVID vaccines and boosters. And in that sense the authorization of 222 if the FDA -- that does have with the FDA and other markets follow really becomes the first instance of that. We are still going to have to file for supplemental BLA instantiating that pulling together that framework. But we are actively working with regulators, not just in the U.S., but globally to try and establish that pathway, because at the end of day, in order for us to take full advantage of the platform and respond every year, it makes sense that we don’t conduct clinical studies before authorization in the future. We also think that the flu model and the performance of the platform globally now in billions of people really does start to demonstrate the potential for us to mature to more of an endemic approach that doesn’t require a clinical study every time. So that is our expectation and hope will obviously engage with regulators over the fall and winter as we complete those filings and trying prepare for in 2023, it might look just like that. And there’s, again, I think, that 222 experienced this fall really might just be that first instance what becomes the new norm. Now on monkeypox, we did initiate a research program. We are tracking that very closely. And obviously, given the recent public health announcements and increasing concern about availability of vaccine supply, we have -- we are -- been beginning to look at what it would take for us to use our platform to provide a monkeypox vaccine, both intervene in the current epidemic, but also to try and address long-term issues of supply in this public health threat. We do not have any update on those discussions and we will firm them up, those will include if appropriate some regulatory consultations. And once we have clarity on whether we are moving to clinical development and what that path would be, we will, of course, provide an update on it. But at this stage, it remains a preclinical program, but one that we are tracking very closely given the recent developments.

Operator:

One moment for our next question. Our next question comes from Gena Wang with Barclays. Your line is open.

Stephen Hoge:

Maybe I will take the last question first and -- or do you want to take.

Stephen Hoge:

I will take obvious for sure.

Stephen Hoge:

Great. And then on the question of the flu Phase 3 study that’s ongoing. So that is a Southern Hemisphere immunogenicity and safety study. As we said, we are moving -- that study is ongoing, we can characterize where we are. The -- we do not expect at this point that we would need to rotate that study into the Northern Hemisphere. So we will be concluding that safety immunogenicity study enrolling in the Southern Hemisphere. We do expect to run a Phase 3 efficacy study in the Northern Hemisphere in the later part of this year. And so we will be studying Northern Hemisphere comparators this year, but not the current ongoing Phase 3 that is the safety immunogenicity study that we believe could support accelerated approval.

Stephen Hoge:

So we haven’t specifically guided on when the data will be available. But generally, as you know, the safety immunogenicity studies after they are enrolled follow a non-inferiority or superiority endpoints at day 29, so one month after this. And so the data will follow shortly once we have completed enrollment. But ultimately we will also want to follow up with the safety data and consult with regulators about their expectations of what sort of follow-up and data they would like to see and so until we have had all of those consultations we will specifically guide on time.

Operator:

One moment for our next question. Our next question comes from Tyler Van Buren with Cowen. Your line is open.

Arpa Garay:

Sure. I can take that question. In terms of the share, the shares that we reported today are looking at the cumulative share for Spikevax across just the third and fourth boosters, which is a difference compared to some of the data that Pfizer had shared and also looked at the major markets, OECD markets that we plan. So as we think about the majority of where our source of business is coming from. We are seeing substantial market share holds and in some cases even some market share gains year-to-date. Again, focusing just on the booster population, which is where the vast majority of our current and future growth is coming from.

Operator:

One moment for our next question. Our next question comes from Geoff Meacham with Bank of America. Your line is open.

Stephen Hoge:

Okay. So I think maybe Arpa, you and I will tag team on the first question then comes to Stephane on the M&A one. So first, maybe on the morbidity of disease and that picture, we do believe that endemic human Coronavirus is point of picture here would suggest there’s going to be seasonal disease, there will unfortunately be breakthrough infection, some hospitalization, even some death and that will happen indefinitely, particularly in those that are higher risk. The question, how we define that higher risk is 55 plus, 50 plus or is it 18 plus with high risk factors or is it broadly, will really depend upon the evolution of the virus. It’s hard to anticipate. But we do believe over time this will become a seasonal market, where boosting and elevating neutralizing protection to prevent breakthrough infections will happen annually in a large population and they will benefit from just like they do for flu or they would for endemic human Coronaviruses. Arpa if you want to comment on how that market evolves.

Stephane Bancel:

Thanks guys. And on the capital allocation, as we have shared in the past, we are very interested by applying with information molecules, so in nucleic acid. And so we are not only looking at mRNA to express a human protein. As you know we are also losing mRNA through gene as you think, as you know, we are already done some partnership there and we look forward to giving us some update in the near future. But then also in the gene therapy that we talked about RNA also being put actually the space of interest. So I think when you applying nucleic acid, I think, as we said in the past, going to small molecule or large molecule is not something that we think will be in the best action on Moderna, again taking at three-year, five-year, 10-year view of things. I think there is a lot of things we can do in terms of nucleic acid and we like the ability to plug and play on to the platform across research, across development, across CMC. So this is very true benefits and synergies that is just getting a product for the sake of getting a product and driving more complexity into the company and definitely the technologies that we see have little income with nucleic acid.

Operator:

One moment for our next question. Our last question comes from Ellie Merle with UBS. Your line is open.

Stephane Bancel:

So let me start on capital allocation. This is Stephane. As David illustrative on one of our slide that we have been using for few quarters now. Our priority number one has been investing in the business. We are really excited about the platform that we have. As you know in vaccine, given the vaccine modality has been derisked, w are willing to invest pretty aggressively. It’s kind of remarkable, let’s call, we have four vaccine in place for you right now. And as we said on the last call, we have shown now three times the ability to grow from starting a clinical study in vaccines to starting a Phase 3 on 12 months timeframe, which I think really speak about the platform of CMC capabilities, and of course, how we really -- we have a very strong development team. So I see that’s going to be interesting, of course, is the human proof-of-concept that we talked about coming later this year in cancer and in rare disease, because if one of those two or both of those two were to work in terms of getting interesting clinical signal, you will most probably see us do what we did with vaccines which expand very quickly. As you know, one of the really good thing about mission RNA and how we built the company with a lot of robotics out of the digitalization is giving to scale very quickly. We always felt a new application like rare disease or cancer before we know even technology is working, we can’t have time to stop piano [ph] with only a few programs. But if let’s say, we have positive results in PA, will you see us developing many more programs, I mean, what we have now in rate disease very quickly? The answer is yes. And we see something in oncology. So investing in the business is priority the number one, priority number two is really expanding the platform through partnership, licensing, M&A and then the excess cash we will return to shareholder. And I think the announcement of share buyback plan today we were and we should begin the production by the Board is a confirmation of the ability to return the capital if we cannot find with using the company.

Stephane Bancel:

Stephen, you want to say on the monkeypox?

Ellie Merle:

Thanks for the color.

Operator:

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

Operator:

Good morning. My name is Kevin, and welcome to Moderna’s First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only-mode. Following the formal remarks, we will open the call up for questions. Please be advised that this call is being recorded. At this time, I’d like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.

Stephane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q1 2022 conference call. Today, I will start by a quick business review of the quarter before Paul walks you through an update on Spikevax real world evidence, and then Stephen reviews our clinical programs. David will then present the key financials. And I will then come back to conclude before we take your questions. I’m happy to share that the team delivered strong financial results this quarter. Revenues of $6.1 billion, GAAP net income of $3.7 billion and GAAP diluted EPS of $8.58. We ended Q1 with a cash balance of $19.3 billion. For our share buyback program, we continued to retire shares in Q1 like we already did in Q4. David will share some numbers on share count in a few minutes. For 2022, we are reiterating $21 billion in signed advanced purchase agreements. We have previously shared market share increases seen in the OECD countries with Spikevax when supply was no longer limited and when real-world publications highlighted differentiating data amongst the market vaccine. I’m happy to share that our market share has increased or still consistent across OECD countries. While a subset of our team is focused on delivering on the $21 billion signed APAs for fiscal year 2022, another subset of our team is focused on preparing the next wave of product launches. With our flu vaccine candidate, mRNA-1010, plan to start a Phase 3 study in Q2 in the Southern Hemisphere, Moderna will have very soon four vaccine candidates in Phase 3

Stephen Hoge:

Thanks, Paul. Good morning and good afternoon, everyone. So, Paul just shared with you the effectiveness of our booster MRNA-1273 against Omicron in the real-world setting. But on slide 15, I’d like to pivot to our strategic rationale for why we think a seasonal booster will be necessary. So, first, we think neutralizing titers will wane similar to the endemic human coronaviruses. And that decline in neutralizing titers will increase their risk of breakthrough, infection and hospitalization for those at higher risk, particularly as Paul just described, older adults or those with medical immunocompromised. The emergence of new variants of concern like the BA.4, .5 subvariants could accelerate the impact of that waning and broaden the risk of breakthrough across the population. So, with that, we do believe a booster will be needed in the fall, and we’re working hard to make improvements to our available boosters. The desired features for a Northern Hemisphere fall-winter booster, we think will be that it improves the durability of protective neutralizing antibodies against Omicron and its subvariants beyond six months, i.e., the full Northern Hemisphere fall or winter infection season. We’d like to retain high and durable protection against Delta and ancestral strains. And we’d like to broaden cross-protective immunity to increase the potential for protection against new emergent variants or subvariants that might happen over the coming months. So, on slide 16, I’d like to summarize our work in developing that improved booster. Our primary focus, as you know, has been on developing a bivalent vaccine, and we have taken three bivalents into clinical trials. The first, mRNA-1273.211 includes 9 of the common mutations and was based on a combination of our prototype wild-type vaccine and Beta. The mRNA-1273.213 bivalent included 11 mutations based on what had emerged from Beta and Delta. And our mRNA-1273.214 booster includes 32 mutations, also now based on the wild-type, prototype vaccine and the combination with the Omicron original variant of concern. Our latest bivalent, mRNA-1273.214, that includes those 32 mutations that have emerged, remains our lead candidate for the fall Northern Hemisphere campaign. The objective of that booster will be to demonstrate superior immunogenicity against variants of concern when it compares to our approved current prototype booster or MRNA-1273 at 50 micrograms. And of course, we want to maintain non-inferiority against ancestral strains in case they reemerge. Now, on slide 17, I’ll summarize the ongoing clinical development work across that portfolio of bivalent boosters. I’ll remind you that mRNA-1273 has been authorized or approved in many markets as a third and even a fourth booster. The data for the first bivalent mRNA-.211 has already demonstrated superiority against all variants of concerns tested, including Omicron and Delta, and I’ll cover that data in just a moment. But, our lead candidate remains, as I said a moment ago, our mRNA-1273.214, which is being evaluated in two separate studies, a Phase 2/3 in the United States and a Phase 3 P305 study in United Kingdom. Again, both of those are being conducted at a booster dose of 50 micrograms. Now, on slide 18, just quickly to update you on the data we have from the .211 first bivalent. Not surprisingly, the safety and reactogenicity profile of the bivalent boosters is consistent with what we saw with mRNA-1273. As you’ll see on the chart, both solicited adverse local reactions and systemic reactions are broadly consistent in both frequency and severity. And the frequency and types of unsolicited adverse events were also comparable between the groups with no serious adverse events in the bivalent vaccine group up to 28 days after the booster dose. Moving to slide 19. We have some of the neutralizing antibody data from that study, evaluating again our mRNA-1273.211 bivalent and comparing that with an approved or authorized mRNA-1273 booster. Looking at neutralizing titers and GMTs, both immediately pre-booster at 1 month or day 29 and at 6 months, on day 181 across the 3 variants of concern which we tested, higher neutralizing titers were seen for day 29 and day 181 across all the variants of concern with the bivalent booster. On slide 20, we represent that as a ratio when comparing the performance of the bivalent booster to mRNA-1273 at 1 month and 6 months, and superiority was met for the ancestral and all variants of concern at different time points, as you’ll note here. The clinical endpoint for superiority was defined as a geometric mean titer ratio, or GMR, where the lower bound excluded -- the lower bound of the 95% confidence interval excluded 1. And as you’ll note, at day 29, a GMR for the ancestral SARS-CoV-2 virus was 1.28, Beta was 1.3, Delta was 1.75, and importantly, Omicron was as high as 2.2. And the 95% confidence interval for Omicron, the lower bound was 1.74, again, demonstrating strong trend towards superiority in this data. Excitingly, at day 181 or 6 months, that superiority was also met for the ancestral virus, Beta and the Omicron variant, which is important because the primary goal we have here is to improve the durability of protection by increasing those titers. So, on slide 21, in conclusion, the safety and reactogenicity profile of the 50-microgram bivalent 211 booster was comparable to the 50-microgram of the authorizer approved 1273 booster. And we believe that the superiority already demonstrated by the bivalent platform in .211 bodes well for our overall strategy. We continue to believe that bivalent boosters will ensure the broadest immunity across the evolutionary uncertainty of SARS-CoV-2 and maintain current protection while expanding the breadth and durability of neutralizing antibodies, including, as I just demonstrated a moment ago with .211, out to 6 months. We anticipate the one-month or day 29 data from our Omicron containing bivalent, mRNA-1273.214 in June of 2022. Now, turning to the rest of our respiratory vaccine pipeline on slide 23. We announced positive Phase 2 data from our flu vaccine, mRNA-1010 at our Vaccines Day event. mRNA-1010 is our -- is part of our speed-to-market approach. We plan to start a Phase 3 immunogenicity study in the second quarter of this year and a Phase 3 efficacy trial later this year with mRNA-1010. As part of our flu vaccine strategy, we are also advancing in parallel vaccine candidates that contain both HA antigens and NA antigens. We started a Phase 1/2 trial of mRNA-1020 and mRNA-1030 last month. Our RSV vaccine, mRNA-1345, a Phase 3 trial in older adults is ongoing, and we are enrolling participants worldwide. We also have an ongoing pediatric RSV trial enrolling as well. In combination, we plan to start a Phase 1 trial for both, our COVID plus flu and our COVID flu RSV vaccines this year. Our Phase 1 trial for the hMPV/PIV3 combination vaccine is also now fully enrolled. And our RSV and hMPV combo and our endemic human coronavirus vaccine combo are in preclinical. Before moving from respiratory vaccines, I want to take a step back and reflect on the incredible progress over the past two years. We have or will have progressed 3 candidates into pivotal Phase 3 studies within one year of an IND being opened. This speed is made possible by our mRNA platform. And we believe our COVID vaccine success has derisked our vaccine pipeline, and we can now move quickly into our RSV and flu pivotal studies. Importantly, in RSV and flu, we are looking at seasonal endpoints or immunogenicity endpoints, which we believe can be -- can allow us to progress faster through Phase 3 towards its readouts and ultimately to commercialization. Now, turning to the rest of our pipeline. We have an ongoing Phase 3 study for our CMV vaccine, mRNA-1647, which is enrolling well and is now enrolling participants globally. Our EBV vaccine to prevent infectious mononucleosis is in Phase 1, and our EBV vaccine to prevent long-term sequelae such as multiple sclerosis is in preclinical studies. Our HIV vaccines are in Phase 1 clinical trials with our partners. And the recently announced HSV and VZV vaccines are in preclinical studies. Within public health vaccines, our Zika vaccine continues to enroll in Phase 2. And we are pleased to update that our Nipah virus vaccine IND was opened, and we look forward to starting that trial soon with our partner. Now, moving to our therapeutic pipeline on slide 26. Within oncology, our personalized cancer vaccine is ongoing in a Phase 1 study and a Phase 2 study. And we expect the first look at the data from our Phase 2 study, which is evaluating personalized cancer vaccine plus KEYTRUDA versus KEYTRUDA alone, in the fourth quarter of this year. We have four other candidates in Phase 1 or preclinical stages across oncology. In cardiovascular and autoimmune, we have two candidates in each area in clinical trials or in the preclinical stage. And within rare diseases, our propionic acidemia program, or PA program for short, which I will give more detail on the next slide, is ongoing in a Phase 1/2 study. Our MMA program is also ongoing in the Phase 1/2 study. And our GSD1a program has an open IND and we look forward to enrolling the first patient or participants in that study. We have three other candidates in preclinical and rare disease as well. Now, before I hand it off to David, on slide 27, I wanted to provide a bit more color on our Phase 1/2 study in propionic acidemia. As a reminder, PA is a rare metabolic disorder that is characterized by a deficiency of propionyl-CoA carboxylase, an enzyme that’s involved in the breakdown of several of the building blocks of proteins called amino acids. As a result of deficiency in that enzyme, harmful intermediate compounds can build up to toxic levels in the body. This can lead to serious health problems, including recurrent episodes of life-threatening metabolic decompensation events. Our therapy for PA encodes for two of those proteins that form the deficient enzyme, PCCA and PCCB, and has 1 mRNA for each in the drug. The Phase 1/2 study is an adaptive trial design, enrolling participants greater than one years of age in the United States, United Kingdom and Canada. Participants received one dose of mRNA-3927 every 2 or every 3 weeks for up to 10 doses in that study. The first cohort is fully enrolled, and we are now enrolling patients in the additional cohorts. Five patients have now completed the initial 10-dose course of the study and became eligible for continuing dosing in the open-label extension. And all five of those patients have elected to participate in the OLE. A total of 75 doses have now been administered across Phase 1/2 and the OLE study. Now, the study is focused on evaluating safety and PK/PD. It is also looking at clinical events, those that are most important, including the metabolic decompensation events I mentioned previously. And of course, we are also evaluating potential biomarkers in the study. We look forward to enrolling more patients and sharing the data this year. And with that, I’d like to turn this over to our financial review. And David?

Stephane Bancel:

Thank you, David, for that review of the quarter and those kind of words. More importantly, I would like to thank you for agreeing to come out of retirement in the spring of 2020 to help us scale Moderna at an unprecedented speed from an early-stage development U.S.-centric company to a commercial, global company. I am very grateful for you agreeing to come out of retirement to help us. Your work to get us to this point was crucial. You built a strong team and robust business processes. Thank you for also agreeing to stand as a consultant as we transition to your successor. And so, I want to wish you and your wife well in the next phase of your life. As many of you know, we announced that Jorge Gomez will join us as Chief Financial Officer, effective next Monday, May 9th. Jorge brings with him experience in the capacity of CFO for global health care organizations, which are Dentsply and Cardinal Health. Jorge has the same kind of high-quality finance training as David as a General Motor finance alumni. He has a broad set of international experiences in addition to having been CFO of publicly-traded companies. I would also like to welcome Arpa Garay who is joining us from Merck at the end of this month as our Chief Commercial Officer. She was a member of Merck Executive Committee where she most recently served as Head of Marketing. Arpa also has a very international background and multiple experiences in both sales and marketing. I look forward to partnering with these two leaders to continue to scale rapidly Moderna. Before moving to Q&A, I would like to review with you our 2022 priorities. Priority number one, to execute on the $21 billion of signed APAs and to prepare for a successful fall 2022 booster season. Priority number two, to execute on our four Phase 3 vaccine programs, an Omicron-containing COVID bivalent booster, flu booster, RSV booster and CMV primary series vaccine, which could lead to three respiratory commercial launches over the next two to three years. Priority number third, to expand beyond infectious disease vaccine into therapeutics and share proof-of-concept readouts for PA, MMA and PCV programs. Priority number four, to bring forward more mRNA candidates into clinical development. And last but not least, priority number five, to continue to expand our mRNA platform, so the possibility of mRNA impact to patients continues to increase over time. I also wanted to remind people of our upcoming events this year, including our Science Day in just two weeks on May 17th. We’ll also host our typical annual R&D Day in September, and first ESG Day in November. While we have had a profound impact on humanity over the last two years, we believe that what is ahead of us to help protect and treat hundreds of millions of people is even more exciting. We’ll continue to execute on our mission, and we thank you for your support. This is just the beginning. Operator, we’ll be happy to take questions now.

Salveen Richter:

Good morning. Thanks for taking my questions. And David, it’s been a pleasure working with you. Two questions for me. One is for COVID, based on what’s known right now, what regimen as you think about dosing in candidate do you have the most confidence on for annual boosting as you look to 2023 and beyond? And then secondly, just given your balance sheet and the -- as you look to kind of entering an endemic phase here, how are you thinking about later stage BD and M&A to bolster the revenue line?

Stephane Bancel:

Thanks, Stephen. Good morning, Salveen. It’s Stephane. So, as you know, in term of capital allocation, our priority number one is to invest in the business. We believe we have this really unique platform that is very different from typical pharma companies or biotech companies where we have an ability to scale very quickly. As we discussed today, we are actively preparing the pivotal studies and the launch of four programs in Phase 3, as we discussed. As you know, there’s a lot of programs in Phase 2. And I think there’s around 30 vaccines in development today. And Stephen has showed you today that we believe we have built for our platform and all our investment in digital and a great team, we have the ability in around 12 months to go from opening an IND in vaccine to starting the Phase 3. So, seeing where the pipeline is and where it’s going to be 12 months, 24 months from now, that is really exciting. And then, there’s therapeutics. We always get a question around COVID-19 for obvious reasons. But as we’ve said in our remarks, this year will be very exciting around therapeutics. We have two rare genetic disease programs that are well recruiting, as Stephen described, for which we are eager when we have it to share data with you. And assuming this is positive, we will do more in rare genetic disease. As you’ll recall, because you’ve been following the Company for a long time, we started with a few infectious vaccines and as we got more confirmation that the technology was working in human, and more recently, more capital, we had a very unprecedented acceleration of our infectious disease vaccine. Well, we plan to do the same in rare genetic diseases if we get positive clinical data and personalized cancer vaccines. And as you know, we have, as Stephen said, more cancer programs, autoimmune programs and also quite exciting to work with our partner, Vertex, toward getting following application, the CF mRNA candidate into the clinic. In terms of M&A, I can tell you, our teams have never been as busy. They are looking at a lot of opportunities literally across the world, across therapeutic area, but also technologies. And so, we will not be shy to invest to expand the platform, have approved technology or approved product, and that’s really where we are in terms of M&A. So, more to come when things get finalized and signed. And as you know, the third bucket of our priorities in terms of balance sheet is returning shareholders to capital via share buyback. And so this, as David said, we’ll continue to buy back share at attractive prices. And we’ll continue to have a dialogue with the Board as to what should we do after the current plan, if needed. But now, we’re focused on executing the current plan. Thank you.

Matthew Harrison:

I guess, two for me. So first, David, could you just comment a little bit more on the upside and downside levers to COVID revenues this year? And in particular, what would be the features that would not allow COVAX to accept the deliveries, or what should we be looking out for to understand that? And then, secondly, just on flu, could you maybe give some updated comments on where you are in terms of regulatory discussions? It sounds like it’s not clear yet whether or not you’re going to need a full efficacy study for approval. And so, I’m just wondering where those discussions are and when you think you’ll be ready to give people a clearer picture on what the outlook is for the flu program. Thanks.

Stephen Hoge:

Thanks. This is Stephen, Matthew. So, on the question of flu and where we are, we have been consulting with regulatory agencies globally, as you might imagine, around the path forward for our mRNA-1010 program. As there are issued guidance around accelerated approval that are still open, at the end of the day, we still believe that there’s a potential path towards an accelerated approval, at least in some markets with our mRNA-1010 program using a safety and immunogenicity endpoint as has been previously discussed. At the end of the day, that will be a review, Matt, and we’ll have to generate that data and have conversations on the back of that data with regulators as a path forward. But even if we do move forward with accelerated approval, which is the study that we’re starting the Q2 Phase 3 study that we’re talking about starting this quarter -- even if we do move forward on the back of that, we will have an obligation even under accelerated approval to demonstrate efficacy at some point in a follow-on study to move from accelerated to full approval. And so, because we’re certain of that need at some point, we are also planning to start a Phase 3 efficacy study, which will then be conducted perhaps in the Northern Hemisphere winter, this coming fall. And we also announced the plans for that. And what that would do is, we would hope, we find a path forward for both, the accelerated approval but also rapidly being able to move that to a full approval on the back of that efficacy result. Now for some reason, the accelerated approval is not available in some markets or all markets, we would instead go directly to full approval with a very short latency, given the timing of those two studies.

Gena Wang:

Thank you for taking my questions. Congrats on the strong quarter, and David, we will miss you. I have a few questions regarding the revenues. David, you mentioned that second half this year will be higher than the first half. Since first quarter, we already delivered $5.9 billion revenues. Should we expect less than $4.5 billion for the second quarter this year? And then, my second question is regarding the ex-U.S. $5 billion revenue. What is the breakdown between EU and the rest of the world? And the third question is regarding the prices for U.S., EU and the rest of the world. And where do you see these prices change for the remaining of 2022 and also 2023?

Gena Wang:

Third point -- thank you very much. That’s very helpful. The third question is ex-U.S. $5 billion revenue, what is the breakdown between Europe and the rest of the world?

Stephane Bancel:

Yes. And maybe just to add, Gena it’s Stephane, on the pricing. As David said, as we move into endemic, as we’ve been saying, we’ll have to discuss with payers as part of kind of health economics and value of products as it’s done for every pharmaceutical product, especially in the U.S. And as you might be aware, CMS has already communicated that for fiscal year 2023, which starts in October 2022, the reimbursement for COVID-19 vaccine is going to be $60.

Michael Yee:

I have to ask the last question to David before he gets to go back and then a question for Stephen on the pipeline. I’m going back to the question around the guidance. Can you maybe help us quantify the exposure to COVAX? There was an article I guess talking about some of that recently in the press. And I think that’s part of what your APA commentary out today is. I’m not sure, are you saying that that’s partly in the $21 billion, but then offset by potential USA orders that could come later this year. So, maybe you could just talk about that dynamic a bit? And then a question for Stephen is, again, definitely excited about propionic acidemia. Can you just rightsize your expectations because it’s five patients but at the lowest dose. So, is that a therapeutic dose, you would expect to see biomarker changes? Maybe just talk a little bit about that. Thank you.

Stephen Hoge:

Thank you, Michael. So, look, you point to the most important thing I’ll say, which is this remains a small number of patients. It’s a rare disease. And as you said, we’re looking now in Cohort 1 and Cohort 2 at our lowest dose levels, and we’re continuing to enroll. And I would expect, as is appropriate for a Phase 1 study where we are doing dose finding Phase 1/2, that we will continue to enroll and explore a range of doses, including potentially higher doses in a Cohort 3. Now, that said, we will have a body of data building. As we said, we’ve got 5 participants who’ve moved into the open-label extension. One has already -- at least one has already been approaching approximately a year on drug, a total of 75 doses. And so, as you look -- as you look at that body of data, it will start to provide potentially an early signal. And I think in that sense, the things that I will personally be looking at, I think we’ll be focused on. First and foremost, it’s clinical endpoints. It is the clinical endpoints that matter most to these patients, obviously. We are developing the medicine to try and prevent the sequelae disease. And so obviously, that includes things like metabolic decompensation events, hospitalization, other interventions, other progressions, signs of rare disease. And importantly, that’s something you really only measure over time as opposed to a biomarker, which I’ll get to in a second. You really need to see about what that looks like over time. Now, the benefit of where we will be this year is that we will have a reasonably large amount of time for these small number of patients on drug. And so, that’s something that we’ll be focused intensely on. But again, it’s small and that we’ll be looking at. When it comes to biomarkers, we’re looking at a range of biomarkers. It’s important to note there are no validated biomarkers in this disease. It’s not even guaranteed that we discover a validated biomarker in this disease. But obviously, it will be helpful as an evidence of pharmacology and the potential for benefit in clinical endpoints that we do try and measure those. And so, we’re looking at a range of biomarkers. We’ve described many of the ones that are associated with the disease. And that will be other data that we will have. As we pull together these first couple of cohorts and we have a cogent story to tell around them. And the balance of the clinical endpoints and the biomarker data together will help us decide whether we’ve found the correct dose to move forward or whether more work is needed to find more optimal dose for this patient population. I think the encouraging thing is, as we stand today, is that we do know there are patients that have been on drug for quite a long period of time. And that longitudinal experience allows us to look at clinical endpoints and also gives us some good indication, hopefully, where we’re going to be on safety, which is obviously essential for us to move forward.

Tyler Van Buren:

So, the Ontario study provides some interesting initial evidence that the fourth dose is beneficial. And you mentioned the populations that should get the fourth dose. So, how big in aggregate is this population in total? What percent of the U.S. and global population do these patient groups comprise? And the second question was just a follow-up on prior questions to make sure that I’m clear. Did you say that the average selling price per Spikevax dose in 2022 will be lower than ‘21 due to COVAX orders? And does this not account for a potential increased price from future U.S. orders? And could these offset that decline in ASP, especially if you sell a sizable portion of doses at year-end at that $60 per dose price I believe you just mentioned per the CMS announcement?

David Meline:

Yes. Go ahead.

David Meline:

Yes, sure. Yes. So, if I track that, in terms of pricing, that’s correct. We have had and we continue to have based on the customer mix this year versus last year, we had indicated that we’ll have a year-over-year decline in the average price of product being sold when we look at the $21 billion of APAs compared to last year’s actual. And the key contributor to that decline for the year is, in fact, the inclusion of COVAX volume in the confirmed APAs that we previously were discussing. So, that contributes to an average sale price decline. Will that sale price on average in 2022 change from that outlook? Yes, it can to the extent there were change in volume for COVAX, including if it were some of the volume were to defer beyond ‘22 into ‘23, for example, that would improve your average price calculation. And then, likewise, to the extent which we’ve indicated, we have an expectation of additional sales of product in 2022 for the fall season, including potentially for private market, should that develop. That would then presumably have a favorable impact on the average price. So, hopefully that is clear.

Tyler Van Buren:

Okay. Congratulations again, David, on your second retirement.

Unidentified Analyst:

This is Tiffany on for Cory. So, as the U.S. government hasn’t procured a budget for boosters this fall and if they continue to not place orders, can you walk us through some of the implications of what that privatization potentially means and how the Company is thinking about it? You mentioned potentially higher prices, but anything from market research that might suggest demand change or how you’re thinking about discounts, et cetera?

Unidentified Analyst:

Okay, great. And then, just a second one. So, how should we think about operating expenses moving forward and potentially steering away from COVID as a big driver there? Will it be pipeline dependent or something else? Thank you.

Operator:

Our next question comes from Geoff Meacham with Bank of America.

Stephane Bancel:

Yes. So, this is Stephane. Partnership versus M&A, I think it’s really a question of risk and then willingness of sellers to sell because it needs be two to tango. And so, as we’ve done from the effort we met at Metagenomi, what we do a partnership in terms of licensing for Metagenomi is because we are very excited about the science and the team that we discovered over time and with diligence. We thought at this stage of the gene editing technology of that company, it was not the best thing for us to do from a risk-adjusted basis to acquire the company. And in terms of M&A, we would be very happy to buy the right company that we really believe will drive value to Moderna on commercial basis. In terms of deal size, we’re looking at a lot of different things. But again, we are staying very-disciplined. We are here to create value, not to do things just for the sake of doing things. As you know, a lot of us own a significant share in the Company, and we are already focused on creating value. So, the BD team, as I said, is most busy they have been in a long time. We’re looking at a lot of things, literally, around the world because the best science is not always in this country. There’s a lot of amazing science in this country, but there’s a lot of other smart people around the planet. And we think with Moderna’s infrastructure and capital actually has a lot of technology that we could potentially scale up where there’s commercial teams that have cool science, but not necessarily the right balance sheet and infrastructure to scale and to maximize patient impact. Stephen, do you want to take RSV?

Lavina Talukdar:

Kevin, we have time for one more question.

Joseph Stringer:

I had one on the rare disease programs. And just curious, you have the PA in MMA and clinical development here, an initial readout in PA. How much is the PA readout? Would that be sort of derisking in terms of bringing additional rare disease programs into the clinic? Has it been more of a some of the hurdles and challenges to expanding that area of the pipeline? Is it then more on an indication-specific basis, or have you been sort of waiting for these initial proof-of-concept readouts to bring more programs into the fold, or has it been more of influenced by sort of the focus on COVID and potentially headwinds related to the COVID pandemic? Any additional color on that would be helpful. Thank you.

Stephane Bancel:

Well, thank you very much for joining us today. We look forward to meeting a lot of you in person in Boston when we do the R&D Day two weeks from now. Have a great day. Thanks.

Operator:

Good morning. My name is Kevin and I’ll be your operator today. Welcome to Moderna’s Fourth Quarter and Full-Year 2021 Earnings Call. At this time, all participants are in a listen-only-mode. Following the formal remarks, we will open the call up for questions. Please be advised that this call is being recorded. At this time, I’d like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q4 2021 conference call. Today, I will start by a quick business review of fiscal year ‘21 before Paul walks you through some real-world evidence data. Stephen will then review our clinical programs before David presents our financial results. I will then come back to close to share some thoughts about where we are heading. We are pleased to report today $18.5 billion of revenues for fiscal year 2021 and the GAAP net income of $12.2 billion, translating to a GAAP diluted earnings per share of $28.29 billion, (sic) [$28.29] with a cash balance at the end of the year of $17.6 billion. We announced this morning that we have completed our August 2021 $1 billion share buyback plan, which reduced our average share count during the fourth quarter for the first time in the Company history. I am very proud of our team’s ability to advance as well as expand with new programs our development pipeline. In respiratory vaccines, for COVID, as you know, we received full BLA approval from the U.S. FDA for Spikevax. With authorization for 12 to 17 years old in key markets globally, we are running a 50-microgram dose study in the U.S. for adolescents following discussions with the FDA. We are pleased to report that we have also started to receive authorization for children aged 6 to 11 years of age, beginning in Australia last week, with more countries expected in the days and weeks to come. We also dosed the first participants in our Omicron-specific vaccine trial, mRNA-1273.529. And today, we’re announcing that we plan to bring mRNA-1273.214, bivalent vaccine, combining the wild-type vaccine mRNA-1273 and the Omicron vaccine mRNA-1273.529 into one single dose booster into the clinic with a total mass of microgram. We are very excited that now RSV is in Phase 3. This is our third vaccine starting the Phase 3. And for flu, we are waiting the Phase 2 data for mRNA-1010. As soon as we have them, we will pick a dose and will initiate our Phase 3 for flu, and we will start our Phase 1 for COVID plus flu program, mRNA-1273. For latent viruses, CMV is enrolling in Phase 3, EBV and HIV are now in Phase 1, and we were very excited to announce last week that we’re adding two new latent virus programs to our development pipeline, one vaccine against HSV and one vaccine against VZV. More latent viruses’ vaccines are in the works in our labs. In therapeutics, PA and MMA are in the clinic dosing and recruiting more patients. We announced a new checkpoint cancer vaccine, mRNA-4359, and Merck has informed us that they are restoring the rights to the KRAS vaccine, while evaluating future steps for this program. The Company continues to expand at a rapid pace. We now have one approved medicine; two in Phase 3, RSV and CMV; and five in Phase 2, for a total of 44 programs. We are deploying capital to accelerate and expand the pipeline. The Company now has 3,000 team members across the world, with a great culture, and 11 commercial subsidiaries across Americas, Europe and Asia Pacific, while $17 billion cash balance at the end of the year is enabling us to scale across research, development, manufacturing, commercial and G&A. With this, let me now turn to Paul.

Stephen Hoge:

Thank you, Paul. Good morning and good afternoon, everyone. On slide 16, I’d like to briefly summarize our COVID-19 booster development strategy for the endemic phase. So, as Paul covered, the strategic rationale for a seasonal booster has three parts. First, we think neutralizing titers will wane, similar to the endemic human coronaviruses, as Paul just described. That decline in neutralizing titers will increase the risk of breakthrough hospitalization in those at higher risk, specifically including older adults and the immune compromised. We think the emergence of new variants of concern will also have the risk of accelerating waning and broadening the risk of breakthroughs to other populations. So, the desired features for our Northern Hemisphere fall and winter 2022 booster are described here. First, we’d like to improve the durability of protection for neutralizing antibodies against Omicron and Omicron mutations to at least six months that will provide full protection through the Northern Hemisphere fall-winter infection season. We’d like to retain the high and durable protection we’ve been seeing with a prototype vaccine against Delta and the ancestral strains. And third, we’d like to broaden cross-protective immunity to the extent possible to increase the potential for protection against a new emergent variant of concern, which could emerge perhaps from the Southern Hemisphere this midyear. So on slide 17, I’ll quickly summarize our strategy for developing an updated booster for fall 2022. We are currently evaluating three different booster strategies in adults age 18 plus. The first, as both Paul and Stéphane have mentioned, is a bivalent booster vaccine, made up of the prototype mRNA-1273 and an Omicron-specific mRNA-1273.529. This bivalent has been called 214. We are also evaluating, as we previously announced, an Omicron-specific booster, mRNA-1273.529. And of course, we will continue to evaluate our prototype booster, mRNA-1273, for which there is a large body of real-world evidence, as Paul just described. We’re evaluating these three different approaches across two studies in the United States and the United Kingdom, the Phase 2 study in the United States of approximately 750 participants and a 3,000-participant study in the United Kingdom. Both are looking at both bivalent and Omicron-specific boosters. And both will be looking at both, third and fourth dose of those boosters. In the UK study, we will also be looking at heterologous boosting, including on the background of other mRNA vaccines and non-mRNA vaccines. Now, I’d like to take a moment on slide 18 to provide some scientific insight to why we believe the bivalent vaccine booster for the fall of 2022 offers a potential advantage. Slide 18 includes data on some of our prior bivalent boosters. And this data -- this emerging data suggests to us that there may be an opportunity to improve durability against variants of concern while preserving activity against the ancestral variants. This data is based on one of our prior bivalence, mRNA-1273.211, or 211 for short. And 211, as you may recall, was based on the 1273 vaccine and the Beta variant of concern, which emerged approximately a year ago. When we compare over time how the two different booster strategies, our prototype booster on the left-hand column here, and our bivalent booster on the right-hand column here, do against the two different virus variants that were in the vaccine, you see an emergence of potential improvement in durability. So, first, to orient you to the slide. mRNA-1273 was given at 50 micrograms as a booster to those who had previously received two doses of the mRNA-1273 vaccine. And on the top left panel, you’ll see how the neutralizing titers or pseudovirus neutralizing titers against the ancestral strain of the virus, the D614G virus, in our validated clinical assays. Underneath there, you’ll see how those -- the pseudovirus neutralization titers against the Beta variant of concern in blue. And in the middle column, you’ll contrast that with a bivalent 211 booster, which, in this case, included the Beta variant of concern, again, at the same dose level, 50 micrograms. Top right panel is the ancestral variant of concern, ancestral virus, D614G, and lower right is the Beta variant of concern or the B1.351. Now, as you’ll note, comparing the performance against the ancestral D614G virus, both mRNA-1273 and the bivalent Beta containing booster do a good job boosting neutralizing titers by day 29 after the booster. So, one month post booster, neutralizing titers are approximately 1,800 for 1273 and 2,200 for the bivalent. And importantly, as we test the serum six months after booster, noted as day 181 here, you’ll see that neutralizing titers remain high, approximately 1,000 in both boosters. Now, the situation against the variant of concern, in this case, Beta, is slightly different. Again, both boosters, increased neutralizing titers by day 29 one month after booster to quite reasonable levels, approximately 1,000 in both cases. However, when you follow out six months, there is a difference in the neutralizing titers that emerges. And not surprisingly, the bivalent booster, which includes the Beta variant of concern, starts to see more durable neutralizing titers, 402, as noted here, as opposed to 154 for mRNA-1273. So, in summary, six months after a 211 bivalent booster, the neutralizing titers against the Beta variant of concern appear to be more durable than with just a prototype booster. And the durability or the rate of decline for the Beta neutralizing titers more closely matches that seen for the ancestral virus following the bivalent 211 booster. Including the Beta variant of concern, therefore, appears to be improving the durability of neutralizing titers against that variant of concern. Now on the next slide, slide 19, we have that same data, but now plotted as a function of time to help you visualize it a little more clearly. On the left-hand side, we’re contrasting the mRNA-1273 booster as a black line against a bivalent Beta containing booster in the red line. On the left-hand side, you’re again looking at the ancestral D614G neutralizing titers. And as you can see, following a booster approximately six months after booster dose two, neutralizing titers for both of the boosters, both bivalent and the prototype vaccine, increased significantly. And the data we have out to six months, if you project that forward as we do with the dotted lines, suggest that we will maintain quite high neutralizing titers, perhaps as long as one year. Now, the situation on the right-hand side highlights we think the potential for improving durability with a bivalent vaccine. Again, here, the black line is mRNA-1273 and the red line is the bivalent Beta containing booster at the same dose level. Now, while both boosters increase neutralizing titers to approximately 1,000 within one month of boosting, what starts to emerge six months later is a different degree of durability in those neutralizing titers, with the bivalent vaccine containing the Beta antigen doing slightly better, as you can see with the red line. And if you project that forward, it suggests that the bivalent vaccine neutralizing titers against the Beta variant concern will remain quite high, perhaps as long as a year, whereas with a prototype vaccine, those neutralizing titers appear to be decaying more quickly, back towards baseline levels or pre-booster levels by approximately 8 to 9 months. On slide 20, just to quickly summarize therefore where we are in COVID-19 booster development for fall 2022. We believe that a seasonal booster will be necessary to prevent breakthrough diseases, including hospitalization in vulnerable populations. And we believe that the continued evolution of the virus is going to continue to put pressure on pre-existing immunity, whether that’s naturally derived or vaccine provided. We think the fall 2022 booster should reflect the diversity of circulating mutations that are out there in order -- and seek to achieve greater than six months of neutralizing titer durability to increase the potential for protection throughout the entire fall season, in this case, we think September through February. So, Moderna is developing an Omicron-containing bivalent booster, based on data that we have from prior bivalent candidates that suggests that incorporating the variant of concern of those mutations from that variant of concern has the potential to improve the durability against such variant of concern. Now, moving to slide 21, just quickly catching up on other developments in our COVID-19 vaccine. We have made progress in primary series and booster in adolescent and pediatric populations. So, in adolescents first, we’ve received regulatory approvals for Spikevax in Europe, United Kingdom, Australia, Canada and many other countries. In U.S., we plan to submit an EUA for 100 micrograms of mRNA-1273 in adolescents that are immune compromised or an elevated risk of severe outcomes. And we’re also evaluating the potential of a lower dose, 50 micrograms, as a primary series. And lastly, as has been noted previously, we’re preparing to submit data for 50 micrograms as a booster dose in adolescents and 50 micrograms as the booster dose in adults as well. And that will include data on heterologous boosting. In pediatrics, or the 6- to 11-year old, we received provisional approval for Spikevax in Australia and submitted to multiple other international regulatory agencies and expect authorization shortly. The U.S. submission is pending alignment with the United States FDA on the adolescent application. And we will also continue to evaluate lower doses, including a 25-microgram primary series dose. Finally, in the youngest, 6 months to 5-years old pediatric population, we expect data on our 25-microgram two-dose primary series in the first quarter. And pending that data, we’ll plan to submit to regulators. We are also continuing to evaluate lower doses and the potential of a third dose in that population. Pivoting to the broader respiratory vaccine portfolio on slide 22. Beyond COVID-19, we continue to make progress across all of our respiratory vaccines. As Stéphane mentioned, our flu vaccine is fully enrolled with Phase 2. And pending that data, we will prepare to move forward, which we still anticipate doing in 2022 into a Phase 3 study. We’re also preparing to start a combination flu and COVID vaccine, which is currently in preclinical, but we expect to start the Phase 1 study this year. Our older adult RSV program has started its Phase 3 study portion, and that pivotal study is ongoing enrolling. We have a pediatric RSV study, which we will move forward in Phase 1. We have also two different respiratory combination vaccines. First, the human metapneumovirus parainfluenza virus 3 vaccine, which is in Phase 1b and has now fully enrolled, and an RSV plus hMPV vaccine, which remains in preclinical development, and we hope to start shortly. Moving now to latent and public health vaccines on slide 23. As discussed, CMV continues to enroll in the Phase 3 CMVictory study. We have also moved forward two new latent virus vaccines in the clinical testing, our EBV vaccine to prevent infectious mononucleosis is in Phase 1, and our HIV -- our first HIV vaccine, mRNA-1644, is also in Phase 1. We announced two new development candidates, which I’ll cover briefly in the next couple of slides, against HSV and VZV. And our public health vaccines against Zika and Nipah continue to progress. Briefly on slide 24, I’d like to introduce our -- the first of our two new development candidates in this space. mRNA-1608 is our vaccine against Herpes simplex virus 2. HSV-2 primarily infects the genitals and establishes lifelong latent infections within the sensory neurons. There is a significant burden of disease in developed markets, including approximately 18 million people who are HSV positive, HSV-2 positive in the United States. Globally, that represents about 5% of the population. Primary burden of disease is a reduction in quality of life from recurrent lesions. Our mRNA-1608 vaccine encodes antigens on the surface of the HSV virus and has been able to induce very strong immune responses, as illustrated in the figure to the right. Neutralizing titers in mice following an HSV-2 vaccine with mRNA-1608 are significantly above the levels seen in human sero from those who are seropositive. This gives us reason to believe that we will be able to provide a significant benefit with this vaccine in this population. The second development candidate is on the following slide, slide 25. This is our mRNA-1468 program against herpes zoster or shingles. Herpes zoster is caused by the reactivation of latent varicella-zoster virus, or VZV for short. It’s principally a disease that’s seen as a result of declining immunity in older adults, where protection against VZV decline, leading to reactivation of the virus and painful and very itchy lesions. Herpes zoster occurs in about one out of three adults in their lifetime. And the incidence is increasing as populations age, and particularly increases over the age of 50. On the right-hand side is previously published data in the Journal of Vaccine on our VZV vaccine, in this case, mRNA-1468. Our vaccine in nonhuman primates was compared against the protein and protein plus adjuvant, as they stand in, a proxy for the shingles vaccine, which is already approved for this indication. As you note on the right, in nonhuman primates, the mRNA vaccine against gE resulted in significant and elevated neutralizing titers after two doses, and we believe will provide the basis for a strong potential clinical benefit with mRNA-1468. Moving now to our therapeutic pipeline. We continue to make progress across a range of different programs. On slide 26, I’ll note a few very quickly. First, our PCV program in Phase 1 is ongoing and the Phase 2 is fully enrolled. We expect data in the fourth quarter of 2022. We are also going to provide a bit of an update on the checkpoint vaccine and newly announced development candidate in just a minute. Highlighting in other therapeutic areas, our VEGF program continues to move forward in Phase 2 with AstraZeneca. And in rare diseases, our PA and MMA programs continue to enroll in their Phase 1, with a Phase 1 -- first dose level cohort fully enrolled in PA and continued enrolling of additional cohorts. We also continue to make progress across all of our other preclinical programs in rare diseases, including GSD1a, PKU, CN-1 and the cystic fibrosis program with Vertex. On slide 27, I’d like to briefly cover our latest development candidate, a checkpoint vaccine to promote anti-checkpoint T-cell responses in cancer, otherwise known as mRNA-4359. So briefly, the objective of this program is to stimulate effector T cells that target and kill suppressive immune in cancer cells that express high levels of target checkpoint antigen. We previously identified that there are pre-existing IDO and PD-L1 specific T cells that have been identified in cancer patients and tumors. IDO and PD-L1 specific T cells can kill and remove the immunosuppressive regulatory immune cells and cancer cells that overexpress these antigens. It’s an important counterbalance that helps liberate the immune response against the tumor. Our vaccine can expand IDO and PD-L1 specific T cells in preclinical models. And the vaccine induced direct tumor cell killing can facilitate recognition of tumor-associated antigens by other cytotoxic T cells, leading to more broad tumor killing. Systemic blockade with PD-1 or PD-L1 antibodies may further amplify this effect. We will initially be developing mRNA-4359 against indications, including first-line cutaneous melanoma stage IIIb and first-line non-small cell lung cancer. With that, I’d like to turn it over to David to walk you through the financials.

Stéphane Bancel:

Thank you, David, Stephen and Paul. Let me now share some thoughts about where we’re heading. I am pleased to see how the team is executing on our product strategy. Priority number 1, pan-respiratory annual booster. RSV is already in Phase 3. We’re waiting for flu data to start the Phase 3 on flu and start the Phase 1 on a COVID plus flud candidate, mRNA-1073. Priority number two, latent viruses vaccines. CMV in Phase 3, now we have 5 candidates, including VZV against shingles, and more coming. Priority number three, therapeutics, will be new checkpoint cancer vaccine, and priority number 4, expanding our unique mRNA platform to create new medicine. As I shared in January at the JPMorgan Healthcare Conference, there was a big change in commercial momentum from Moderna between early 2021 and early 2022. In early 2021, vaccine [ph] looked the same after Phase 3 data, and now we see strong real world evidence that Spikevax has long duration or efficacy. In early 2021, we were supply constrained. And now, we’re getting to a place, we continue to scale manufacturing, thanks to investments made last year and are less supply constrained. We have contracts with many governments around the world. But in early 2021, we had few team members on the ground in most countries. On slide 37, you can see that Spikevax booster market share has increased across key markets. You see that shift in market share data from around the world where we have teams on the ground. Even in Germany, where there is a national mRNA champion, we have moved our share of the booster market from 4% in October 2021 to almost 40% in January 2022. And it is also clear that OECD countries or high-income countries have become de facto in mRNA market. We have continued to increase our signed APAs to now around $19 billion. We also have approximately $3 billion in probabilized options. We continue to have numerous discussions with governments and NGOs around the world. For example, the current U.S. contract has its last shipments coming before the summer of 2022. This means that in the $19 billion plus $2 billion option, there is currently no APAs for the U.S. for the second half for 2022. As David mentioned, when we shifted to endemic, we expect to seasonality in sales. This year, we expect to see continued primary vaccination and boosting the Southern Hemisphere in the first half, and a shift to boosters as a fourth dose booster in the Northern Hemisphere in the second half of the year, similar to flu vaccines. We were pleased to announce last week a big expansion of our commercial network. From our current 11 countries where we have Moderna commercial teams on the ground, we announced an additional 10 countries, in Europe, Poland, Netherlands, Belgium, Sweden, Norway and Denmark; and in Asia, Malaysia, Taiwan, Singapore, Hong Kong. You have seen the impact of our strong real-world evidence data, coupled with teams on the ground, drive greater Moderna market penetration. I believe the same phenomena will happen in those 10 new markets. We have a direct commercial presence in these 21 important markets. We will maximize the impact of Spikevax and also have the teams to launch our pan-respiratory annual booster or latent virus vaccines in the rest of the portfolio. That commercial coverage and capabilities will prove critical in our ability to maximize our impact on patients and the resulting value creation. We now have distributors in Central and Eastern Europe. We have distributors in Asia Pacific, and with this week announcement, in Latin America. We, of course, continue to work with COVAX to provide access to a vaccine to low-income countries. Strategically, we want to create a new business model with governments around our pan-respiratory annual booster. We have started to create a subscription or service model with governments around the world. We have announced memoranda of understanding with the governments of Canada and Australia. We are currently in discussions with several other countries. These are 10-year agreements for the supply of a pan-respiratory annual booster. We have also governments which have signed APAs for 2023, as you can see on the slide. Numerous discussions are ongoing as we speak about securing supply for 2023 for the endemic setting to protect people at risk, 50 years and above, people with comorbidity factors, people who stuck with them at risk and adults who simply do not want to get severe disease. As we shared in the past, this is our strategy for capital allocation. As David said, the priority number one is and remains to invest in the Company. We have this unique mRNA platform. And we have $17 billion to invest to grow our pipeline to launch new medicine and to expand the capabilities of our platform. Priority number two is to expand the platform by in-licensing or M&A as we see new interesting nucleic acid technologies that can complement and strengthen the Moderna platform. Priority number 3 is to return capital to shareholders. After completing August 2021 $1 billion share buyback plan and reducing our share count for the first time, we announced this morning a new $3 billion share buyback. As we grow Moderna, we care deeply about building the right company, which is a responsible company to its community. In 2021, 25% of doses we shipped were to low and middle income countries. We’re investing in Moderna Science Center in Cambridge and launching an AI Academy. We plan to achieve net zero carbon emissions globally by 2030. We’ve announced Moderna Charitable Foundation and the global fellowship program. And we announced plans to invest up to $500 million in manufacturing facility in Africa. We hope to be able to announce some positive developments soon about these exciting projects. We will continue to push the boundary of corporate social responsibilities and share this with you. Before taking your questions, we’d like to remind you of 2022 events. March 24th will be our Annual Vaccine Day; May 17th will be our Annual Science Day, where we’ll present new platform advances; September 8th will be our Annual R&D Day where we’ll present development pipeline key updates. And today, we’re announcing that we’ll be hosting our first ESG Day on November 10th. I would like to close by sharing how excited we are about the future of our company. Because mRNA is an information molecule, we always knew this will be a company with a fewer [ph] drug approach. Well, now we know which future it will be. We are passionate about our ability to have a profound impact on humanity. We believe nobody should be hospitalized because of a respiratory virus. We have a technology to do that. We believe nobody should have medical consequences short term or long term because of a latent virus. We have a technology to do that. We believe we can have a profound impact on disease treatments with our therapeutics first and then our gene-editing programs. This is just the beginning. Operator, we’ll be happy to take your questions.

Salveen Richter:

Good morning. Thanks for taking my question. Outside of the flu data that we’re going to see this year, we’re going to get personalized cancer vaccine data as well as rare disease data. Could you just speak to, in rare disease, what success would look like and what the regulatory path there could be? And then, for the personalized cancer vaccine, whether we would be able to get a sense of proof of concept this year?

Operator:

Our next question comes from Gena Wang with Barclays.

Stephen Hoge:

Great. Thank you, Gena, for both those questions. So first, a clarification on the flu data. We do not believe that the Phase 2 data alone would be fileable. And that’s based on previously published regulatory guidance, not specific guidance to Moderna. But ultimately, we don’t think Phase 2 on flu alone, which is an immunogenicity -- safety immunogenicity study of approximately several hundred, is sufficient for filing. The question is, from a filing perspective, what sorts of Phase 3 studies are necessary and whether or not an accelerated approval is possible based on just safety and immunogenicity or whether we will need to demonstrate efficacy in an independent efficacy study, a Phase 3 efficacy study prior to filing. And those are consultations that have not yet happened with regulators, but will on the back of that Phase 2 data that we expect shortly. It’s important to note that there are precedents for accelerated approvals based just on safety and immunogenicity in a Phase 3 study, which would be a few thousand people. But you always have to then follow up with an efficacy study perhaps post approval. And so, in summary, we expect to have to do an efficacy study in flu at some point. The question is whether or not it would be before or after accelerated approval with a Phase 3 immunogenicity and safety study. That Phase 3 study would follow on the current Phase 2 study, and we don’t think that the Phase 2 study alone is viable. We do intend, as I said previously and as we said before, to try and start those Phase 3 studies, whether they’re efficacy safety immunogenicity study this year. On the question of the 1273 adolescent filing in the U.S., and so the FDA has not provided -- has not completed its review of the 100-microgram adolescent primary series. And we have decided on consultation with them to evaluate a lower dose, a 50-microgram primary series dose in -- of adolescents 12 to 17. It’s important to note that the 12 to 17 adolescent 100-microgram primary series has been approved globally in many other markets, and we believe has been administered quite broadly, perhaps up to over 1 million adolescents globally. And so we’ll continue to collect that real-world data as well as the observational data from our monitoring studies. And as and when appropriate, submit that to the FDA for their continued evaluation of the 100-microgram primary series. We are in the interim -- given the strong real-world efficacy data that we’ve seen for Spikevax on 1273, particularly in immune-compromised population. We are in the interim preparing an EUA filing in the United States for 100 micrograms for immune compromised adolescents or those at high risk of severe outcomes from disease because we think the strong efficacy profile of mRNA-1273 at 100 micrograms provides a clear benefit risk in that population. We do believe that 100 micrograms provides a benefit more broadly, which is why it’s been authorized globally. But we’ll continue to work with the FDA and the U.S. to evaluate other potential dose-sparing strategies and submit that data as we develop it.

Matthew Harrison:

I have two clarifications and then a question. So, first one, on flu. Should we expect that when you present to us the Phase 2 data, whether or not you’ll have had those regulatory discussions or be able to talk about potential next steps in terms of what scope of Phase 3 studies you would need? And then, second, on PA, can you give us a sense of how many cohorts you think you need to see before you may be able to provide that initial data? And then, third, just on the timing of COVID revenues this year, I believe at JPM, you had talked more about first half weighting and second half weighting. And it seems like that’s switched. And I’ve gotten just a couple of questions that I thought would be helpful to clarify. Is that mainly because you’re now targeting boosters for the fall, or is there something else happening here in terms of the weighting of the revenues? Thanks.

David Meline:

Yes. So, in terms of the first half, second half timing, as we’ve looked now at -- as we move into ‘22, what do we see? We see that the emerging market countries of COVAX have indicated that they’re having a lot of challenge to absorb all the product that they’re receiving through donations. And therefore, as we looked at, in particular, the second quarter timing versus the third quarter, we refined that outlook to be, as I described, first half, second half. And then secondly, the second half is certainly, as Stéphane mentioned, we think there’s going to be quite strong booster sales that will cause the second half to be a bit higher than the first half.

Michael Yee:

We had a two-part question. One was thinking about your COVID boost strategy and the three different strategies you laid out, including the bivalent, which I think is great. Can you just talk about at what point you decide to pick which strategy that would be, and you’re confident that whatever that would be that that would be ready and able to be approved by the FDA to distribute presumably for the fall 2022 booster season, and if that is actually the product that would be in the guidance for 2022? And the second question relates to USA. I know previously you had talked about USA boosting options and purchases. But I can’t actually remember what or where we are for USA for 2022 or for 2023. And maybe just speak to the color about that market. Thank you.

Stéphane Bancel:

Thank you, Stephen. Good morning, Michael. So, let me maybe talk about it in two angles. The first one is, as we said this morning, in these increased APAs, we’ve announced at $19 billion, there is no signed APA for -- between Moderna and the U.S. government. So, the number in there from the U.S. is zero. And because there’s no option either that the government has from a previous contract -- the U.S. government has no option currently. So there is $0 in the $3 billion of options probabilized. What is not clear today is what would the U.S. government decide to do for the fall of 2022. We’ve seen what they’ve done in ‘20 and ‘21, buy vaccines from the manufacturers and give them away for free, for the first, second and third dose. Will it be a private market or will be a mix of both the private and free vaccine available because you could see where we are, if we can sell to private markets, there’s private networks and even companies that might want to procure the vaccines. And that’s a bit that is not clear. So it’s why in a very conservative manner, because what we have communicated so far are signed APAs or options, and because the U.S. government has zero, we did not include any of those numbers.

Operator:

Okay. Our next question comes from Cory Kasimov with JP Morgan.

Stéphane Bancel:

So, let me take the first question, Cory, and I’ll turn to David for the buyback question. So, if you look at the countries outside the U.S., they are in, let’s say, non-pandemic markets, they are mostly direct contract with governments anywhere. So, what is it going to look like in terms of shape and form is not very clear. For example, Europe has purchased together the vaccines for the pandemic, which is not the case, let’s say, for seasonal flu, for example. So, will they continue that model for COVID and move to that model for other vaccines or will they go back to a national system is to be seen. But all countries like Japan, Canada and so on are basically a single buyer market. Some countries as you know small product markets, but it’s mostly kind of government orders. And so, we are in discussions with governments about ‘23. As you saw, we’ve already signed contracts for ‘23 because some countries like the UK and others wanted to secure supply because they believe very deeply that the endemic market will require annual boosters. And so, we just want to get ahead of it. And as you saw what we are doing with Canada and Australia, which I think is a very interesting new model of kind of service-based subscription-like partnership, is we basically are trying to secure, as we said, 10-year agreements. And we’re in discussion with several more countries about setting the similar model in the countries where we build the plant. They reserve a given volume for a year, let’s say, 20 million, 50 million-dose, 100 million-dose, depending on the market size. And then, what we commit to them is to be able to customize the respiratory vaccines with what they believe they want. So, as you saw from Paul’s presentation, there’s a lot of respiratory virus that most people are not aware of, even their names. Look at PIE and there people knew that there were coronaviruses circulating and creating so much hospitalization and they are stable. Well, our vision is to bring all of those components together and discuss with local public health experts on an annual basis, what do they want in their vaccine for Canada or vaccine for Australia. As we discussed on the flu call in the fall, sometimes, the WHO picks a flu strain like H3 or -- and then it’s a different flu strain that winter that is between, let’s say, North America, Europe and/or Asia, like Japan and so on. And so, this ability to also customize and work with local public health authorities, to customize a vaccine they want, we think it’s a really unique feature of this platform because of the speed, because every combined components. And so, that’s what we’re already trying to do here, is to really establish very long-term agreements. I’m not aware of other companies having done this type of thing in pharma. And I think this is something we can do. And the teams are working very actively also. We’ll have to wait a few more months to see more coming, but there are quite a lot of discussions. We just have to wait there, because we cannot do in 10 countries at the same time in discussion because they are very-customized and very-complex partnerships. But that’s exactly where we’re trying to head. David, do you want to talk about buybacks?

Operator:

Our last question comes from Tyler Van Buren with Cowen.

Stéphane Bancel:

So, let me start. So, I will not comment on the U.S. pricing for obvious reasons because of our discussions with the governments. I think as we said before, once this goes into a normal private market, we do expect the pricing to be higher. We think the vaccine does not reflect -- sorry, the price doesn’t reflect the value of a vaccine from a pharmacoeconomic standpoint. And I mean, the options, the $3 billion, so there are just different stage -- some are just waiting funding from governments to move into fully signed APAs. Some are things with COVAX that has a place or as for future needs. So, I don’t think they need to be a new variant for some of it to happen, and plus, the U.S. on top of that. But again, we have never managed through a pandemic and through a transition from pandemic to endemic. So, we want to be cautious and prudent. But I think it doesn’t need a new variant for a material chunk, over $3 billion, to move into signed APAs.

Stéphane Bancel:

Well, thank you very much everybody for joining. I look forward to talking to you in the coming days and weeks, and especially to welcome you at our Vaccine Day, which will be exciting, in March. Thank you.

Operator:

Good morning and welcome to Moderna's Third Quarter Earnings Call. At this time, all participants are in a listen-only-mode. Following the formal remarks, we will open the call up for your questions. Please be advised that the call is being recorded. At this time, I would like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please go ahead, ma'am.

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q3 2021 conference call. Today, I will start by quick business review of the quarter before David presents the key financials. Paul will then walk you through some real world evidence update. And Stephen will provide the clinical development update. I will then come back to close to share some thoughts about where we are heading. Let's start on slide 5 with a holistic pipeline update. First, respiratory vaccines. We are pleased to have filed the BLA for COVID-19 vaccines with FDA and have now received a priority review designation. We received our first full approval for Spikevax backs in Canada. We received EUA from the FDA for the 50 microgram booster and mix and match has been authorized. We also received authorization for boosters from our major geographies, EMA, UK and so on. We were informed recently that FDA may take until January 2022 to review the EUA request for 12 to 17 years of age. Turning now to flu. mRNA-1010 is fully enrolled for Phase 1 and we expect human data soon now. For RSV, mRNA-1345, after a very positive data in the Phase 1, with high neutralizing antibody levels after one dose, our teams are finalizing the preparation of a Phase II/III in older adults. This study should start soon. We also announced our development candidate for COVID booster plus flu booster in a single dose, mRNA 1073, which we anticipate will be in a clinic soon. Let me now turn to vaccines against latent viruses. As many of you know, latent viruses are a major cause of health problems. Latent viruses are mainly made of DNA viruses. And once a human is infected by a latent virus, that virus will stay in the body. You are familiar with some latent viruses like HIV and HPV. There are many other that helps humans. As a company, we are committed to developing a portfolio of first-in-class vaccines and therapeutics against these latent viruses. Our first programs are CMV vaccine, EBV vaccine, and EBV therapeutic vaccine. We have also partnered to work on two HIV vaccines. Last week marked a big milestone for Moderna. We started dosing in the clinic the first participant of our Phase III pivotal registration study for CMV vaccines mRNA-1647. This marks the second Phase III study that the company has started and brings us one step closer to getting another important vaccine to millions of people around the world. For EBV vaccine, mRNA-1189 should start dosing for its Phase I very soon. And our new development candidate on the EBV therapeutic vaccine, mRNA-1195 is moving toward the clinic. Let me now turn to therapeutics. Our personalized cancer vaccine is in Phase II [indiscernible] with KEYTRUDA monotherapy is fully enrolled. And we expect data in the back end of 2022. Our rare genetic programs continue to progress well in the clinic. PA has its Phase I dose core fully enrolled. MMA is dosing patients in its Phase I. GSD1a has an open IND and has received orphan drug designation by the FDA. So, as you can see, we have three rare genetic disease programs in the clinic or soon to be in the clinic. So, we look forward to showing clinical data in the coming months. We are very proud to have found a way to get Crigler-Najjar Type 1 or CN-1 to patients through a donation of our IP and the assets to the Institute for Life Changing Medicines. CN-1 disease is an ultra-rare disease with very few patients afflicted around the world. For ultra-rare disease, just the cost of clinical developments will result in a very high price for a few patients around the world that could benefit. This model is not one that we support. So instead of developing a drug and charging a very high price, we decided to give the drug away and innovate for a creative partnership. We provide the drug to the institutes, we pay for clinical trial material, the institute pays for the clinical trial cost. If the drug is approved, we'll provide the medicines to the kids and their families for free. And we will not charge any royalty or milestone to the institutes. We believe this is the right thing to do to continue to contribute to society for ultra-rare disease where our mRNA platform can help. One of the important news items announced today is the introduction of a new modality through our existing six modalities. We're very pleased to announce that Vertex and Moderna are now in GLP tox studies for the cystic fibrosis program, VXc-522. This marks our first inhaled preliminary therapeutics program. I would like to congratulate and thank our scientific team as well as the Vertex team for having been able to develop a novel lipid formulation to allow inhaled pulmonary delivery. This is really exciting for patients. As we communicated previously, in addition to doing therapeutics using mRNA coding for human proteins, like the ones I just described, we want to use our mRNA plus lipid technologies to develop therapeutics using mRNA coding for gene editing enzymes. We are pleased to announce our first partnership in the field. We announced earlier this week that we entered into a licensing collaboration with Metagenomi based in California to use their next generation gene editing enzymes. We believe that that technology, coupled with our mRNA plus lipid technologies, and our manufacturing infrastructure will produce some exciting new medicines to take into the clinic. I am very pleased with the progress of the company. We are increasing depth in vaccines, and at the same time increasing breadth of application [indiscernible] and gene editing. On slide 5, you will find financial highlights. For Q3, we reported revenue of around $5 billion enabled by delivering 208 million doses of our COVID-19 vaccine. Net income of $3.3 billion. Our cash and cash equivalents position was $15 billion at the end of September. Since the end of the quarter, we have been working to get better visibility into those variables that will impact our full year results. And we have much better visibility today than we did a month ago. For fiscal year 2021, we're updating the range of doses we plan to deliver to 700 million to 800 million doses. The key variable of this update volume range are first, longer lead time for exports to countries outside the US and for international shipments in general. In Q3, we shipped more deliveries to new international markets and expect Q4 to also have more international deliveries. As we deliver to these countries for the first time, we expect the process to become more routine and delivery time to shorten. However, some Q4 deliveries may still move to early 2022 as a result. Second, in Q3, we have expanded our fill finish capacity with our manufacturing partners, which had the temporary impact on our shipments. That work is complete now. And we should see a positive impact from this expansion very soon. Third, the bottleneck of production has moved down the manufacturing line to product release. We added additional resources, skilled personnel to the release and of the manufacturing line. And we expect to increase the weekly number of doses raised. We believe resolution of these factors put us in a good position heading into Q4 and 2022. Now if I turn to revenue for 2021. The updated revenue range for 2021 is $15 billion to $18 billion. This range reflects our updated delivery schedule with fewer doses delivered in 2021 as some doses are pushed into 2022. And also, the pricing impact of prioritization delivery to COVAX and African Union that have a lower tier pricing. On slide 7, let me start by summarizing the scale-up operational challenges that the team had to work through as we scaled from making less than 100,000 doses in 2019 to hundreds of millions of doses in 2021. Q1 scale up challenges were around drug substance, making mRNA in lipids. Q2 scale up challenges were on drug products and ensuring we could fill enough vials. In the first half of the year, we made great progress in these challenges, as you can see from the numbers on the right. We now have 901 million doses of drug substance that have been formulated [indiscernible] of mRNA products. And we have 770 million doses of drug products already in vials. Q3 scale-up challenges were on product release as the supply chain became more complex with increased deliveries to many countries around the world. At the beginning of the year, we supplied just a few large countries. As mentioned before, we are working through these challenges. And as November 1, we achieved 566 million doses around the world. With the progress year-to-date, we expect to be able to deliver 700 million to 800 million doses for full year 2021. We were pleased to be named last week for the seventh year in a row as one of the top 20 biotech and pharmaceutical company in the world by Science. We continue to invest in science and the culture of our team. We aim at building the best mRNA science in the world, in the culture of boldness, collaboration, curiosity and relentlessness. On slide 9, you will find our usual summary slide, which describes some of the key high-level attributes of the company as of today. Now let me turn it over to David.

Paul Burton:

Thank you, David. And good morning, good afternoon, everyone. With more than 150 million people worldwide now having received two doses of our vaccine, we are humbled to be able to see the positive impact it is having on people's lives around the world. We are reminded of the fact that almost 250 million people have been infected with COVID-19 globally and 5 million people have lost their lives. Our profound thanks, as always, go out to those on the front lines, working tirelessly to keep us safe in this ongoing fight. Through numerous independent studies, time and time again, we see consistent findings showing that mRNA-1273 is highly effective in saving lives, reducing hospitalizations and reducing the risk of COVID-19 infection. I will highlight a few of these independently conducted studies this morning. In slide 18, I will begin with some of the data from the United States government. These data come from the CDC and show through September of this year the difference in COVID-19 cases between fully vaccinated and unvaccinated populations. An unvaccinated person has an 11-fold greater risk of dying from COVID-19, underscoring the importance of getting vaccinated plays in our protection and ending this pandemic. The data show that vaccination with mRNA-1273 provides the greatest protection, not only against COVID-19 infection, but also death due to COVID-19. In fact, even during the surge of the Delta virus variant during the summer months this year, Moderna's vaccine had the lowest reported deaths associated with breakthrough infection as the CDC data demonstrate. Approximately 160 million doses of the Moderna vaccine have been administered in the United States. And in the next slide, I want to show you some further government-generated data in a country where the Moderna vaccine has also had extensive use, and that country is Switzerland. You can see here exposure data on the left. Approximately 3.6 million people have been fully vaccinated with the Moderna vaccine and 1.9 million people have been fully vaccinated with the Pfizer/BionTech vaccine. These government-generated data from the Federal Office of Public Health in Switzerland, again, are clear and show that vaccination with the Moderna vaccine is highly effective at reducing infections, hospitalizations and deaths due to COVID-19 infection. For every 1 million people vaccinated, use of mRNA-1273 would be expected to result in 643 fewer COVID-19 breakthrough infections, 78 hospitalizations and 38 fewer deaths. Next, in slide 20, our data from two other recent independent studies that build on the results I just showed you from Switzerland. The first study on the left side of this slide followed 38 million vaccinated people in the United States, Iceland and South Korea. And again, found that those people vaccinated with mRNA-1273 were at 53% reduced risk of a COVID-19 infection and 33% reduced risk of a COVID-19 hospitalization compared to those vaccinated with the alternate mRNA vaccine. The data on the right hand of the slide are from a recent publication by Nordstrom and colleagues in Sweden and Norway, showing that mRNA-1273 delivered 87% vaccine effectiveness during a time of high Delta variant circulation in those countries. The data I've shared so far are all from the general population. Let me turn now to the effectiveness of the Moderna vaccine, in particularly vulnerable populations, the immunocompromised. These data were published just two days ago, again, by the United States CDC VISION network and examine vaccine effectiveness at preventing COVID-19 hospitalization, which is so critically important in individuals with a variety of immunocompromised medical conditions between January and September of this year. As the authors of this study note, with the exception of those individuals with rheumatic disorders, vaccine effectiveness point estimates were generally higher for the Moderna vaccine than for the Pfizer/BioNTech vaccine. And the difference in effectiveness in these hard-to-immunize populations is shown in the column on the right. I want to turn now to the topic of myocarditis and to put it in the context of the clinical benefits of vaccination that I've just described with mRNA-1273. It is important to recognize that the cases of myocarditis reported to occur following mRNA vaccination are rare, generally mild, typically respond to conservative treatment and self-limiting. Health authorities have reviewed many data sets and the US CDC and WHO have concluded that there is a risk of myocarditis and pericarditis after receiving any mRNA vaccine. The WHO's Advisory Committee on vaccine safety notes that myocarditis can occur following SARS-CoV-2 infection or COVID-19 disease and that mRNA vaccines have a clear benefit in preventing hospitalization and death from COVID-19. Analyses from our global safety database show that the events of myocarditis are very rare. Overall, we observe 9.5 cases of myocarditis per million vaccinated individuals compared to an expected rate of 21 cases per million individuals. Now, in common with other reports of mRNA vaccines in individuals aged 18 to 24, we see an increased rate of myocarditis of 40 cases versus 17 expected cases per million individuals. These data from our own safety database are consistent with the findings from safety databases evaluated by the CDC and other global health authorities. And the link to the CDC analysis is provided on the slide below. MRNA-1273 has been authorized for use in adolescents aged 12 to 18 in multiple countries around the world. Moderna's global safety database has information on an estimated 1.5 million of them, providing us an opportunity to look at the rate of myocarditis in those individuals, and those data are shown in this table. We see the small, absolute, well-described risk of increased myocarditis rates in males aged 18 to 24 that I just described to you. But we do not see an increased risk in adolescents, neither in boys nor in girls. These data are reassuring and important as we continue to offer mRNA-1273 to adults, adolescents and as we file for authorization in children. So, in summary, the data I've shared with you today from independent government reports in the United States and in Switzerland, countries with high vaccination rates of Moderna's vaccine, show that mRNA-1273 is associated with lowest breakthrough infections, hospitalizations and deaths due to COVID-19. Other independent studies in millions of individuals continue to show that mRNA-1273 is highly effective in reducing the risk of breakthrough COVID-19 as well as hospitalizations and death. And importantly, this is also true in those vulnerable and hard-to-vaccinate immunocompromised patient populations. Moderna's global safety database of 151 million vaccinated individuals shows a rate of myocarditis in males aged 18 to 24 that is consistent with analyses by CDC and others. Moderna's global safety database does not show an increased risk of myocarditis in 1.5 million individuals below the age of 18 and vaccinated with Spikevax. So, this concludes my quick overview of some recent analyses of mRNA-1273 effectiveness data and review of data from our global safety database. And I will now turn the call over to Stephen.

Stéphane Bancel:

Thank you, Stephen. Slide 39 is from our September 9 R&D Day and summarizes the product franchise we focus on at Moderna. Priority number 1 is our pan-respiratory annual booster franchise. Priority number 2 is our first in-class vaccines for latent viruses. Priority number 3 is our therapeutics based on mRNA-encoded proteins. And priority number 4 is the therapeutic space on mRNA-encoded gene editing enzymes. As we have said for several quarters now, SARS-CoV-2 is here to stay and will evolve from a pandemic to endemic setting. We believe that 2022 will see pandemic in low-income countries throughout the year, but at high income countries, the year would be of two halves, pandemic priming for children and boosting for others with an endemic boosting campaign in the fall of 2022. On slide 42, you can see the revenue drivers that we anticipate will play out in 2022. We believe there are three components that will drive our COVID-19 vaccine revenues for next year. First, signed APAs. We have already signed around $17 billion of advanced purchase agreements, or APAs, for delivery in 2022. Second, APA options. There are up to $3 billion of APAs that are in options. Some options have been converted in Q3 from options to firm order. Third, the fall of 2022 commercial market. We also believe that the fall of 2022, assuming that BLA is granted for boosters, will drive the commercial booster market of up to $2 billion. So, in total, at this point, we believe that 2022 revenues could be between $17 billion and $22 billion. We, of course, continue to have discussions [indiscernible] APAs with governments and international organizations, including COVAX, the Pan American Health Organization or PAHO, and the African Union. For this pan-respiratory franchise, our goal is to evolve the COVID-19 vaccine primary series into fall of 2021 boosters, which is happening as we speak, and then fall of 2022 boosters and then add to a COVID booster a flu booster in a single dose, and then added to COVID and flu an allergy booster in a single dose. Our flu vaccine human data should be out soon. And the team is already preparing the Phase II/III for flu. And RSV is moving fast to Phase II/III. If we you look at the health damage of latent viruses, it is profound. EBV is a major cause of infectious mononucleosis. EBV has been reported to increase risk of multiple sclerosis. EBV is associated with certain cancers and autoimmune diseases and EBV is associated with a higher risk of long COVID. CMV associated will be the leading cause of birth defects. CMV is a major driver of immune dysfunctions with aging. CMV is associated with cardiovascular diseases. CMV is associated with cancer and cognitive impairments. For now, our focus is CMV, EBV and HIV, but we are developing in the labs vaccine against other latent viruses [indiscernible] human health. Our goal is to eliminate these viruses. As we discussed earlier, several cancer and rare genetic programs are in the clinic and will provide clinical results soon. On November 15, AZ will present Phase II data in patients from the VEGF program at the American Health Association. And we are pleased to announce the new modality with inhaled pulmonary therapeutics. Moderna [Technical Difficulty] is our effort to expand the use of our platform to create more innovative drugs to help patients. Our strategy to invest internally under the leadership of Dr. Eric Huang with a dedicated team and to set up licenses agreements with next-generation in gene editing companies. The Metagenomi partnership is a first step in that direction. The strategic path of the company is very clear and exciting. We want to stop people getting hospitalized from respiratory infection. We won't stop until this goal is achieved. We want to stop our fellow human beings from suffering from these latent viruses. We want to bring to market mRNA encoded protein therapeutics in oncology, cardiology, rare genetic disease, autoimmune. We want to bring therapeutics using gene-editing enzymes. We believe Moderna could become the most impactful drug company in the world. As we scale, we realize that we needed to go further in setting the right framework for our team to understand what has made Moderna. So, we worked through Q2 and Q3 to articulate our mindset, how we behave, and make decisions at Moderna. There is more information on our website and we'll be happy to spend time with those of you who want to learn more about them. Let me just summarize them at a high level. At Moderna, we act with urgency. Action today compounds the life saved tomorrow. We pursue options in parallel to make the best choice later. We accept risk as the only path to impact. We're obsessed over learning. We don't have to be the smartest. We have to run the fastest. We pivot fearlessly in the pace of new data. We question convention because proven models don't always fuel the future. We push past possible. We behave like owners. The solutions we are building go beyond any job description. We act with dynamic range, driving strategy and execution at the same time and at every step of the way. We remove viscosity to encourage collective action. We prioritize our platform over any single product. We digitalize everything possible using the power of digital information to maximize our impact on patients. We want to be the most impactful drug company in the world. We care deeply about doing it the right way. It means being a great company to work for, as exemplified by our seventh consecutive year ranked as the best company to work for by Science. But it also means building a company that is responsible in minimizing our impact on the planet. We are proud to have announced earlier this week that we will work to achieve net zero carbon emission for our operations globally by 2030. I want to thank the Moderna team for their commitment to our mission, and their relentless work to build the best version of Moderna over the next 20 years. Before we jump into Q&A, we wanted to share the dates of our annual investor event for 2022; Vaccine Day on March 24; Science Day on May 17; and R&D Day on September 8. Operator, we'll now be happy to take any questions.

Salveen Richter:

For 2022, can you walk through the supply aspects. Are you still guiding to up to 3 billion doses here? And can you also speak to demand dynamics? Is there upside to the guidance that you've commented on today for future signed APAs. And then secondly, how confident are you that you can fix these supply issues and over what time frame?

Operator:

Your next question is from Matthew Harrison with Morgan Stanley.

Stephen Hoge:

This is Stephen. I'll try and take those questions. So, first, look, I think it's most important to say that what we communicated and desired to be maximally transparent last week was that the FDA, unlike other regulators, has asked for some more time to review emerging recent data. And that might take until January. I think your question is how is that different vis-à-vis what happened with the Pfizer vaccine. I think the most important thing to recognize is that the Pfizer adolescent vaccine was authorized prior to any substantial discussion about myocarditis as a benefit or as a risk. In fact, the signal emerged a few weeks later just before we made our filing. And I think a prudent approach there was to – there was a VRBPAC conducted, there was ongoing discussions. But what we've continued to see over the last four or five months is that for both mRNA vaccines, there's a question of whether there's an increased rate of myocarditis above background in 18 to 24-year-old males, a relatively small population, but an important one. And I think it's in the face of those continuing emerging questions that the FDA has been diligent and appropriately conservative in their approach and making sure they have the time to review those. And they have continued to come out over time. And so, I think, principally, what we're seeing here as the difference is a function of timing, which is that the other vaccine had been authorized prior to this concern and there has been continued emerging data around that. We are very grateful to the FDA for that diligence. I would note that the same information are available to other regulators. And as I have said before, we are authorized for that population internationally. And fortunately, as Paul characterized, we have not seen an increased rate of myocarditis in 12 to 17-year-olds. And we think, over time, the substantial benefits of our vaccine will ultimately win out here. And so, we look forward to continuing to work with the FDA. So, that's my best version of what I think we heard from them last week. The question about how we see that evolving over time. Obviously, internationally, we are participating in the market. In the United States, adolescent vaccinations have substantially tailed off, as we all would note. And so, the extent that there is an ongoing need in the United States for vaccination, it is a diminishing market for sure. And again, this is a primary series vaccine. And so, we do hope that most people in the world will seroconvert and not need a primary series moving forward. The question then of what is that endemic market going forward that is of greatest import. And I've tried to summarize that in our view of the evolution of this virus and what that need will be. It is, we believe, in the future, a booster market. And the booster market, targeted at those populations that are at higher risk of respiratory disease. Those populations tend to be older adults and immunecompromised. Places where we think mRNA-1273 is demonstrating really remarkable efficacy, differentiated perhaps. But publicly reported data is really encouraging on that dimension. And I would note that is not a population that's associated to date with any of the vaccines that have an increased rate of myocarditis. And so, the benefit risk there, we think, even swings more favorably to 1273, but we'll allow data to continue to develop and ultimately drive this behavior. So we are quite encouraged by the performance of the vaccine in a population that we think is going to be most important in the years ahead. The last question was on flu, which is what do we think about that data. Obviously, as you pointed to, there are correlates of protection that have been used previously with HAI titers in influenza vaccine. We will be looking at that, as I'm sure everybody will, as well as other responses in the immune system as we continue to try and identify the optimal dose. I'm not going to put out there a view of what I think our view of success will look like. I would just say that we have very high expectations for our platform. Now we do believe that our performance in older adults, including with the COVID vaccine, but also more recently with the RSV booster study in Phase I demonstrates that our platform does incredibly well in those at highest risk of these respiratory viral diseases. And so, we're optimistic that we will continue to show strong performance, hopefully strongest performance in those populations. But I won't give you a specific titer number today.

Operator:

Next question is from Ted Tenthoff with Piper Sandler.

Stephen Hoge:

I'll take that too. So, first, I think we're very excited about the programs that are already in the clinical space, either already dosing patients or about to start. And so, I think the most important thing is looking forward to next year, the demonstration, we would hope, of proof of concept in that rare disease modality. As you know, we are dosing quite a large number of folks in propionic acidemia and we've been dosing in methylmalonic acidemia. With the opening of the GSD1a IND, we'd hope to be following a short order there. So, all three of those are potentials for us to demonstrate the real proof that this technology can be used to correct inborne errors of metabolism in these populations. I'll also note that there's a quite a wide range of disease going down to as young as two years of age in some of the organic acidemias and also the older adults in some of the GSD1a program. So, we're going to be demonstrating quite a lot there. Crigler Najjar presents another opportunity for that proof-of-concept as well as the PKU program when that moves forward, but those are still in preclinical, as I said. So the question is what do we do on the back of that proof-of-concept from any one or all of those programs. What you've seen us do in respiratory vaccines and in vaccines generally is probably the best predictor of how we will respond, which is, as you know, there are a very, very large number of metabolic diseases that could be addressed to deliver through mRNA therapy. We could list off large groups, the urea cycle of disorders, other organic acidemias, so many beyond that. And even in moving into more broadly present metabolic diseases. So, what we would do is we would define that systemic intracellular therapeutic modality as a core modality, just like we did with vaccines a couple of years ago. And that would cause us to dramatically expand that pipeline. Now I can assure you we're looking at those programs in research right now, but we have held back on moving them into preclinical development and putting them on our pipeline until we've seen the modalities perform. So that is probably the most important thing for me, looking at the rare and orphan disease space over the course of the coming year, is when do we cross that threshold and then, ultimately, when do we expand dramatically that pipeline of programs.

Operator:

We have a question from Michael Yee from Jefferies.

Stéphane Bancel:

I'll take the first one and give it through to Stephen. So, I think you already highlighted some of the other drivers. So on 2021, so there's two things I think that is driving. First is, of course, the lower volume. And the second one is price. As you know, we are working very hard with several governments to send products that they have bought for high-income countries like the US to low-income countries this side of Christmas. And so, when you think about just the US, the US we see that publicly. When we announced our African Union partnership, the US decided to delay to Q2 the delivery of the December quarter. That volume is going to African Union at a low tier price. So, you have an impact on the turnover just by doing the math of a lower price on the same volume right there. And some orders that are moving from December to January on the supply volume side of things. So, when you're on to 2022 where you have the increase of volume moved from December to January, that is one. We've signed new APAs since the last numbers. And as I said, some options have been exercised. One of them was a COVAX option that was exercised at the end of Q3. That is now counted as a full APA because of the firm commitment and some prepayments and so on. And so, those are the dynamics that are happening. The team also is starting to spend a lot of time, the commercial team, on focusing on the fall of 2022 because we think that's going to be an important moment. The mix and match, we think, is critical. That is now allowed in most places. In some countries, they've been just mix and match for a long time. But the US market, of course, is important, is allowing mix and match. And as Paul just shared, we believe that as time will go, the data will show that what we believe is that we have a longer duration efficacy vaccine on the market. And today, if you look at data and market research, very few consumer in the US know that. People that are listening to this call know that because you read papers on a daily basis, a few people in the US. We believe there is an opportunity for us between now and, let's say, next summer to make sure that people understand the facts, understand the real-world evidence, so that they can make an informed decision and that includes the healthcare workers, the pharmacies, the doctors, the nurses, that include the consumers directly. And so, this is why, as we're starting to sharpen our pencils, everybody is spending a lot of time working toward the fall of 2022, we believe that's another piece that was not – if you go back to our previous numbers, we only disclosed APAs and options of APAs, the commercial opportunities for fall of 2022, we think, is going to be an important vector to the 2022 sales. Stephen, on flu?

Operator:

Next question is from Gena Wang from Barclays. Your line is open.

Stephen Hoge:

I can try and take the first question, although invite Paul as well. So, I think in terms of -- you referenced some of the more recent communications that happened from public health officials, for instance, in the Nordics and elsewhere. I would note that those same communications, literally often the same documents, include reference to the fact that there's very strong efficacy for the Moderna COVID-19 vaccine. And in fact, some of those Nordic country communications include reference to the fact that it looks to be potentially greater in terms of protection as emphasis for why the vaccine not only is still recommended in many of those jurisdictions, but ultimately provide very favorable benefit risk. And so, we continue to believe that whole picture looking at the benefit and quantifying that benefit, which we think is substantial and larger than any risks contemplated here is really important. And we, again, look to those communications that clearly state that. Paul, anything you would add to that?

Stephen Hoge:

Just as a closing comment, I would just reference, we have entered in some of these markets into a very interesting phase of the pandemic, which is that we are in the lower risk population and we are providing vaccination to them as appropriate. So, as we do that, we're looking at benefit/risk in increasingly cautious ways, and that's appropriate. But as we look forward to next year and we start thinking about boosting, and particularly, the seasonal market of protecting those that are highest risk, I think that calculus obviously changes pretty dramatically. And so, I think we are in a period of time where we are, again, looking at the lowest risk populations. And I think that is transient period time ultimately because it is high risk populations that are of greatest concern looking forward from 2022.

Operator:

Next question is from Cory Kasimov with J.P. Morgan.

Stéphane Bancel:

Thank you, Cory. So let me take this apart. The APAs do not have options. When we say $17 billion of APAs, those are firm orders, signed orders and all our APAs have upfront payments. David did a nice job walking you through the cash upfront we are receiving for those contracts. It's one of the way that we are conducting our business. We want people to be very committed and to have a material upfront of the total value of a deal when they sign. The options components that we characterize as up to $3 billion as of today, those are true options, meaning people are reserving capacity. And sometimes it's for financing rhythm because, again, as I said, we do not do APAs without upfront. And one of the best example that's today public is COVAX. We had to do a quarterly option with COVAX. As I said, it just exercised that Q2 option at the end of Q3. But Q3 2022 and Q4 2022 COVAX are still options and it's mostly because of a funding issue. They don't have the cash. They get cash from their different funders, which are mostly government and foundation, on the kind of a month-to-month basis. And so, we did that to help COVAX and to do the right thing to help the planet. As you know, we don't have to do options. We say, if you want the vaccine when you sign a contract and you pay an upfront, but with COVAX we have to do so. We thought it was the right thing to do. And so, we expect, if they want their Q3 volume, that in Q1, they will exercise the options – sorry, end of Q4, they exercise the options [indiscernible]. On the endemic and [indiscernible] of the sales over the year, I think it will be dangerous to assume at this stage one way or another in terms of first half and second half because of volume and also pricing. As you get the sense, the COVAX, the African Union and [indiscernible] deals we have lower prices and David mentioned that, tiered pricing. And so, there might be a large volume, but the price might be way lower than what the commercial market could drive, which we believe is going to be above what has been the pandemic price again because of volume. And so, we have people stocking ahead of when they need to inject in pharmacies. I would be cautioned that assuming Q1 can be lower than Q2 is a bit too early.

Geoff Meacham:

I just had one more on the flu program, maybe for Stephen. It's highly likely that you'll see an increase in antibody titers. I was just thinking for the combo study, though, with 1273, what other factors do you need to address to de-risk that study? And just, I guess, I'm trying to determine how to optimize the regimen by things like dose titration or even selecting the population by more urgent need for the COVID booster side of things.

Operator:

We have a question from Joseph Stringer from Needham.

Stéphane Bancel:

On the fall of 2022, so the commercial team has spent quite a lot of time modeling different assumptions in terms of volume of people who want the booster, market share, and, of course, pricing. I cannot comment further for competitive reason right now, especially on the pricing piece, but we will do that in due time. But indeed, it's typical commercial analysis that the team that has done many times before in other companies have run through the last few months.

Operator:

Next question is from Emmanuel Papadakis from Deutsche Bank.

Operator:

And next is from Mani Foroohar with SVB Leerink.

Stéphane Bancel:

I'll take a few and, David, if you can take the financials, that would be great. So, on Q4, we already actually picked COVAX product. And the African Union will be in December, as we communicated in the press release. And it's going to be a big ramp into next year, obviously. In terms of European share, which was one of your questions. So if you look at it, there's a few things. First, in Europe, if you remember, we had a late and slow launch in Europe because we had no manufacturing capacity in Europe. If you recall, when we had the pandemic, we had Norwood that we converted and we were not allowed to export outside the US market. So Lonza came online a bit later than Norwood because we had nothing in Lonza until they started sometime in the summer to just get machines and get the facility ready. And so indeed, in Europe, we have a lesser share than we have in the US, except, for example, for Switzerland like you saw earlier. And so, as the country gets more and more of an understanding first that mRNA vaccines are superior, the other vaccines other than mRNA are not really used anymore. That's my understanding. They're mostly given through COVAX. I think we have an interesting opportunity because as I shared, as you take – you talk to healthcare leaders, health minister, as you get more and more data that Paul shared, we have a better and better understanding that the two mRNA vaccines are not the same. And so, again, as we look into 2022, we already have a contract with Europe for 2022. And we are discussing also with country by country on the data and using the benefit of the Moderna vaccine versus the other one. And then the other question that's going to stay in Europe, which is today, contracts are done at the European level because this was organized and agreed by Europe because of the pandemic. The big question that's going to be out there is when do countries start to be buying by themselves because they have to make guesses of supply when they set up 2021 and 2022 agreements that might not meet the needs that they have, as we understand better the different profiles of the vaccine. And so, I think it's going to be quite interesting to see the share opportunity that we have in Europe. Also as we build our teams, you remember, we had no infrastructure in Europe, zero, not one Moderna employee in commercial. We have now teams in several countries in Europe, in the UK, in Spain, in France, in Germany, building the Italian team as we speak. So I think that will also help because we get feet on the ground to be able to get the message that – of a real world evidence data. David, do you want to take the capital financial questions?

Mani Foroohar:

On potential China JV, I know you guys have mentioned it in the last call, I don't know if there's been any progress?

Operator:

There are no further questions at this time. I would now like to turn the conference back to Mr. Stéphane Bancel.

Operator:

This concludes today's conference call. Thank you for joining. You may now disconnect.

Operator:

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

Stéphane Bancel:

Thank you, Lavina. Good morning or good afternoon, everyone. Welcome to our Q2 2021 conference call. Today, I will start by a quick business review of our quarter before Corinne walks you through the commercial update. David will present the key financials. Stephen and Jackie will provide the clinical update, highlighting new human data about the final analysis for COVID-19 vaccine Phase 3 COVE study and human data for COVID-19 booster candidate Phase 2. I will then come back to close to share some thoughts about where we are heading. Let me start with Moderna COVID-19 vaccine or Spikevax. We are pleased to announce today that our final analysis vaccine efficacy or VE in our Phase 3 COVE study is holding very nicely at 93%. We are starting to get authorizations for adolescent indication 12 to 17 years of age, receiving authorization in Japan this week and the positive recommendation from the European Medicines Agency in July. An important step toward our vision of an annual respiratory combination booster is the start of a Phase 1/2 for mRNA-1010, which is equivalent for seasonal flu vaccine. Our teams are already preparing the Phase 2/3 for this program. We were delighted to get fast track designation from the U.S. FDA for our RSV vaccine candidate, mRNA-1345 in adults over 60 years of age. There is no approved RSV vaccine. The burden for RSV infection is very high. In adults, over 65 years of age, according to the CDC, 177,000 of hospitalizations and around 14,000 deaths occur annually in the U.S. due to RSV. Our teams are also preparing a Phase 2/3 for this program. Our Zika vaccine has now moved to Phase 2. mRNA-3927 for propionic acidemia or PA, a rare genetic disease has also started building patients in our Phase 1/2. And we are pleased to announce recently that we started dosing healthy volunteers in our first autoimmune disease program, mRNA-6231, coding for IL-2. So Moderna is now in the clinic in five large therapeutic areas

David Meline:

Okay. Thank you, Corinne. We're providing today the analysis of actual 2021 second quarter results along with an updated view of key drivers of financial performance going forward. As in previous quarters, we are presenting our results primarily on a U.S. GAAP basis. In some cases, we also provide additional detail to provide greater clarity on underlying trends. Turn now please to Slide 15. The transformation of Moderna from an R&D-focused biotech to a commercial company is very apparent when reviewing our financial results. The comparison of the second quarter of 2021 to prior year is not as meaningful due to our dynamic growth, which is why we'll primarily focus on the quarter-over-quarter comparison relative to Q1 on this slide. Total revenue was $4.4 billion in the second quarter of 2021 compared to $1.9 billion in Q1. The increase of total revenue is primarily resulting from the sale of the company's COVID-19 vaccine. Product sales in Q2 were $4.2 billion compared to $1.7 billion in the first quarter, an increase of 142%. Cost of sales were $750 million or 18% of the company's product sales in the second quarter compared to $193 million in the first quarter. Research and development expenses were $421 million in Q2 2021 compared to $401 million in Q1 and $152 million in the same period in 2020. The higher spend versus prior quarter and prior year was driven by increased COVID-19 vaccine clinical development activities including our announced efforts around booster, variant-specific and multivalent vaccine candidates. Selling, general and administrative expenses were $121 million for Q2 compared to $77 million for the prior quarter. The growth in spending was driven by commercialization of our COVID-19 vaccine globally with the biggest increases being in personnel and outside services. Provision for income taxes was $283 million in Q2 after $39 million in Q1 and an insignificant amount in the prior year. Our effective tax rate for Q2 was 9%. Let me remind you of the following. The significant investments to develop the mRNA platform over the last decade resulted in a net operating loss carryforward with a balance of $2.3 billion at the end of 2020. As of December 31, we maintained a full valuation allowance against our deferred tax assets related to these loss carryforwards. As discussed in our last call, we started to release the valuation allowance this year. The majority of the allowance will flow through the P&L over the course of this year through our effective tax rate pro rated based on the cadence of our expected pre-tax quarterly earnings. Over the course of 2021, the resulting non-recurring benefit due to the release of the valuation allowance is about five percentage points on our effective tax rate. Our Q2 effective tax rate was lower than the U.S. statutory rate, primarily due to the benefit related to the release of the valuation allowance, the foreign-derived intangible income deduction, as well as a discrete item for excess tax deductions related to stock-based compensation. We recorded net income of $2.8 billion in Q2, after $1.2 billion in Q1, an increase of 128%. Diluted earnings per share for Q2 were $6.46. Turning now to year-to-date financial results compared to prior year on Slide 16. Total revenue was $6.3 billion for the six months ended June 30, compared to $75 million for the same period in 2020. The significant growth was driven by the sales of 302 million doses of the company's COVID-19 vaccine. Cost of sales was $943 million, or 16% of the company's product sales for the six months ended June 30, including third-party royalties of $232 million. Reported cost of sales was reduced by three percentage points, due to the consumption of previously expensed inventory of approximately $200 million. Research and development expenses were $822 million for the six months ended June 30, compared to $267 million for the same period in 2020. The growth in spending in 2021 was largely driven by increased mRNA-1273 clinical development and headcount. Selling, general and administrative expenses were $198 million for the six months ended June 30, compared to $61 million for the same period in 2020. The growth in spending in 2021 was mainly attributable to the company's COVID-19 vaccine commercialization activities. For the six months ended June 30, we recorded provision for income taxes of $322 million compared to an insignificant amount for the period in 2020. Our effective tax rate for the six months ended June 30 was 7%. It was lower than the U.S. statutory rate, primarily due to the non-recurring benefit related to the release of the valuation allowance the ongoing benefit of the foreign-derived intangible income deduction, as well as a discrete item for excess tax deductions related to stock-based compensation. Net income was $4 billion for the six months ended June 30, compared to a net loss of $241 million for the same period in 2020. Diluted earnings per share were $9.30 for the six months ended June 30, 2021. Turning to cash and selected cash flow information on Slide 17. We ended Q2 with cash and investments of $12.2 billion compared to $8.2 billion at the end of Q1. The increase is driven by our commercial sales and additional customer deposits received in the second quarter for future purchases of our COVID-19 vaccine. Net cash provided by operating activities was $4.1 billion in Q2 after $3 billion in Q1, totaling then $7 billion year-to-date. This compares to net cash used in operating activities of $130 million in the prior year. Cash used for purchase of property and equipment was $65 million for the six months ended June 30, compared to $25 million for the same period in 2020. Similar to last quarter, before providing an updated financial framework for the remainder of 2021, let me point out a few areas that are important to keep in mind when modeling expected 2021 financial performance, starting with cost of sales on Slide 18. Cost of sales includes the cost of goods manufactured, third-party royalties as well as logistics and warehousing costs. As you may recall, we began capitalizing our COVID-19 vaccine inventory cost in December 2020 following emergency use authorization. Prior to the authorization, inventory costs were recorded as research and development expenses in the period incurred. In Q1, a zero cost inventory balance of 140 -- $184 million was sold and benefited our cost of sales. If inventory sold during the first quarter was valued at actual cost, our cost of sales would have been 377 million or 22% of product sales. In Q2, cost of sales of 750 million or 18% of product sales were no longer materially impacted by the zero cost inventory, hence, the relevant comparison is the adjusted ratio in Q1. The reduction of cost of sales as a percent of product sales when comparing to the adjusted cost of sales in Q1 is primarily driven by a customer mix-driven increase in our average selling price during the second quarter. Now turning to our cash and investment position on Slide 19. The cash and investment balance reported as of June 30 was 12.2 billion, up from 8.2 billion as of March 31. The increase is driven by our commercial activities, including net increase in customer deposits for future product supply of COVID-19 vaccine. The net cash balance of customer deposits increased from 5.6 billion at the end of Q1 to 6.8 billion as of June 30. Turning to Slide 20. I wanted to share our capital allocation priorities. We seek to optimize our capital deployment and maximize long-term shareholder returns. Our top investment priority will continue to be reinvesting in the base business across multiple areas. For R&D, we have more than tripled spending in the first half of 2021 relative to the prior year, and we will continue to significantly increase spending in this area to advance and accelerate our pipeline. For manufacturing, we previously disclosed our 2021 capital expenditure plans, which will allow us to increase our production capacity. Additionally, we are investing heavily in digital, automation, and AI, as well as scaling up our global commercial operations which will allow us to maximize the impact of our mRNA platform. Our second investment priority is to seek attractive external investment and collaboration opportunities to further expand the reach of Moderna's technology and capabilities. We are considering attractive strategic opportunities that enable and complement our platform and take a disciplined approach in evaluating potential outside investments. After evaluating internal and external investment opportunities, we then assess additional uses of cash. As part of today's press release, we announced that the board has authorized a $1 billion share repurchase program. This program is authorized for a two year period based on the strength of our financial results for the first half of the year and our confidence in our business outlook we believe it is an appropriate time to initiate this program. Turning now to the 2021 updated financial framework on Slide 21. Signed advanced purchase agreements for expected delivery in 2021 reflect the current full year total of approximately 20 billion in anticipated product sales included the 5.9 billion of product sales already generated in the first half of this year. For the full year, we continue to expect a minimum supply of 800 million doses at the 100-microgram dose level. Our manufacturing team and our partners continue working to supply up to 1 billion doses for 2021. We have signed advanced purchase agreements for expected delivery in 2022 for total product sales of approximately $12 billion and options for an additional $8 billion. Numerous additional negotiations are still ongoing for 2022 APAs. We have also started to sign APAs for 2023. As we previously announced we continue to make investments to increase our supply of vaccine including by working with contract manufacturing organizations. We currently anticipate that our supply could be as high as 3 billion doses for 2022, if our sales are primarily at a 50-microgram dose level. If sales are primarily at the 100-microgram dose level we anticipate that supply will be approximately up to 2 billion doses. The ultimate approach on dosage levels for 2022 and where we might end up in that range is subject to ongoing internal review as well as discussions with regulators and customers and will also be impacted by the mix of primary and booster series. Our total cost of sales includes the cost of goods manufactured, third-party royalties as well as logistics and warehousing costs. For 2021 we now expect the average cost total of sales as a percent of product sales to be between 18% to 20% compared to our previous outlook of approximately 20% of product sales. This reflects the successful ramp-up of this global manufacturing network. With regard to planned R&D and SG&A expenses Q2 expenses of approximately $542 million reflect a quarter-over-quarter increase of 13% in line with the outlook we gave in Q1. We continue to plan for an increase on a quarter-over-quarter basis for the remainder of this year and expect this growth rate to accelerate as the business rapidly expands. Based on further increased visibility of the utilization of our accumulated net operating loss carryforward expected global sales mix and the mentioned discrete benefits in the first half of this year, we now expect our all-in 2021 tax rate to be approximately 10%. This compares to our previous forecast in the low-teen range. This forecast is based on current U.S. tax policy and does not include any future potential discrete benefits related to stock-based compensation. Finally regarding capital investments, we maintained our forecast for a range of $450 million to $550 million including the planned capacity expansion investments as announced on April 29 of this year. This concludes my remarks and I turn the call over to Jackie Miller.