Moderna, Inc. (NASDAQ:MRNA) Q1 2023 Earnings Call Transcript

Moderna, Inc. (NASDAQ:MRNA) Q1 2023 Earnings Call Transcript May 4, 2023

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. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Lavina Talukdar. Please go ahead.

Lavina Talukdar: Thank you, Kevin. Good morning, everyone, and thank you for joining us on today’s call to discuss Moderna’s first quarter 2023 financial results and business update. 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. On today’s call are Stephane Bancel, our Chief Executive Officer; Stephen Hoge, our President; Arpa Garay, our Chief Commercial Officer; and Jamey Mock, our Chief Financial Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements.

With that, I will turn the call over to Stephane.

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.

Stephen Hoge: Thank you, Stephane. Good morning or good afternoon, everyone. Today, I’ll review the clinical progress in R&D at Moderna in the first quarter and highlight select data from the past few months has been presented. The core of our respiratory portfolio is made up of vaccines against COVID-19, flu and RSV, which are either commercial or in Phase 3. We’re advancing second-generation vaccines, this includes our second-generation refrigerator stable COVID-19 vaccine candidate, mRNA-1283, which is rapidly enrolling in its Phase 3 study and two next-generation influenza vaccines that are in Phase 2. We believe combination vaccines will be the future of our respiratory franchise. And we’re pleased that we now have five different combination vaccine candidates in early clinical trials, including two specifically designed for pediatric populations.

With 11 programs in clinical trials, including four in Phase 3 and covering five different respiratory viruses, we believe this represents the broadest and most advanced portfolio of respiratory virus vaccine candidates. Now turning specifically to COVID. The FDA recently provided updates on several fronts. Our Omicron-targeting bivalent COVID-19 vaccine targeting the original MBA 45 strains is now our only authorized formulation in the United States with a simplified and streamlined regimen for both children and adults. Individuals, 65 years of age and those with certain kinds of immunocompromise are now also eligible to receive additional doses as needed or recommended by their physicians. As we look to the fall, the strain selection for an updated composition for fall 2023 boosters is now expected to come at the June 15 VRBPAC meeting.

Moving to RSV, we’re pleased by the profile of our vaccine in older adults with high and consistent efficacy against RSV lower respiratory tract disease across populations in our large Phase 3 study. At two recent medical meetings, we’ve shared data showing our vaccine’s efficacy was consistently high across all age groups, including in the oldest adult and in participants with preexisting comorbidities that put them at higher risk. mRNA-1345 has also shown a favorable tolerability profile with AEs mostly grade 1 or grade 2, mild to moderate. As we shared during Vaccines Day, today, we have not seen any cases of Guillain-Barré syndrome or other severe demyelinating events in the trial. Moving to flu. Our Phase 3 efficacy study in the Northern Hemisphere, P302 is ongoing.

And last month, we announced that the study did not accrue sufficient cases to declare early success at the interim analysis and that the DSMB recommended that we continue the study. That trial is still accruing cases through the end of this flu season with an update expected this summer. The preliminary immunogenicity data from that P302 study showed that HAI neutralizing titers were consistent with superiority for both A strains and non-inferior immunogenicity for the B strains when compared to the licensed flu vaccine. Now I’m pleased to announce that we’ve initiated our Phase 3 P303 flu study with an updated formulation of mRNA-1010. P303 is testing an update that is designed to increase the HAI neutralizing titers against the B antigens.

This is an immunogenicity study and is expected to enroll approximately 2,400 adults this spring. We believe this study will support our initial flu filing and the potential for a 2024 launch if approved by regulators. Now turning to our latent vaccines. Our CMV vaccine Phase 3 study in women and childbearing age is ongoing and has enrolled more than 50% of participants. We also have an ongoing Phase 1/2 adolescent dose-ranging study with this vaccine that will expand potential eligible populations. As Stefan mentioned earlier, we continue to make significant progress against all of our latent vaccines in earlier-stage clinical trials, including candidates against EBV, HIV and VZV. As Stephane mentioned, our EBV vaccine includes two vaccine candidates, our EBV program includes two vaccine candidates, mRNA-1189 and mRNA-1195 and are in clinical trials for prevention of infectious mononucleosis and for the prevention of longer-term sequela of EBV infection respectively.

Not Vaccines Day, we are pleased to share interim results of our HIV vaccine, mRNA-1644, which continues to advance. Our pipeline in therapeutics targets unmet needs across immuno-oncology, rare disease, cardiovascular disease and autoimmune diseases. All the trials in these therapeutic areas are ongoing. And today, I’ll highlight a few of the recent updates. On Slide 16, are the data shared at AACR from our Phase 2 study in adjuvant melanoma with a combination of our individualized neoantigen therapy plus KEYTRUDA versus KEYTRUDA alone. The Kaplan-Meier curve for relapse-free survival solution here, overall, there was a 44% reduction in the rate of relapse or death with a combination of INT and KEYTRUDA compared to KEYTRUDA alone. We are encouraged by the continued separation of the two curves with a follow-up at 18 months.

Note that there are very few participants beyond the 140 week cutoff at the right of this slide, less than 10 participants in total. Thus, as the data continues to mature, with additional follow-up time, we remain cautiously optimistic that this picture will get even better. Now on Slide 17, I want to briefly highlight some of the additional data that was shared at AACR. The subgroup analysis confirmed the strength of the treatment effect across two important markers that are known to predict responses to KEYTRUDA. Again, on this slide, we’re looking at the relapse-free survival. On the left side, the results are stratified by high tumor mutational burden in red and low tumor mutational burden in blue. In each case, the solid lines are for the INT combination and the dash line is for KEYTRUDA monotherapy control.

If you start by looking and comparing the control arms for KEYTRUDA, you will note that the TMB high participants, the red dash line, have a higher relapse-free survival than the TMB low participants in the blue dash line. This is expected because of what we know about KEYTRUDA, and shows that the controls are performing as we expect. Now moving to the INT combination arms, the solid lines and comparing them against the dotted lines of the same color, you can clearly see that the INT combination led to higher relapse-free survival for both TMB high and TMB low patients. This highlights the robustness of the response for INT. It’s also quite exciting to note that the improved response rate seen in the blue TMB low population, which historically does not respond well — as well to KEYTRUDA.

On the right, you’ll see the result as stratified by PD-L1 status. Now as with the TMB analysis, PD-L1 is known to predict response rates to immunotherapy. As you can see by the dashed lines for KEYTRUDA monotherapy control groups, the relapse-free survival curves look better for PD-L1 positive tumors, these are the red dash lines, and worse for patients unfortunate enough have PD-L1 negative tumors, the blue dashed lines. This isn’t surprising as KEYTRUDA monotherapy acts by blocking the PD-1, PD-L1 access. As with TMB on the left, the solid lines on the RFS curves for the combination show the combination of INT, red denotes PD-L1 positive and blue denotes PD-L1 negative. In both cases, there is an increase in the rate of relapse-free survival with the combination treatment.

It is encouraging to note again that the response rates are significantly improved for the PD-L1 negative patients. Indeed, the hazard ratio in this subgroup analysis is 0.162. Now pulling back, these data highlights that the observed improvement in relapse-free survival seen in the initial analysis of our Phase 2 study, looks broad-based across subgroups with an indication of a potentially important benefit even in patients who have higher risk of progression, whether due to PD-L1 status or tumor mutational burden compared to KEYTRUDA monotherapy alone. Now these positive data are just the beginning for this ongoing study. We’ll be sharing additional data from the Phase 2 study at ASCO, including distant metastasis-free survival which was a secondary endpoint in the primary analysis just conducted and the same data cuts that I just shared.

We’ll also be sharing important additional biomarker data. In addition, this protocol calls for subsequent analysis at 51 events, which is when we will also be updating the Kaplan-Meier curves for recurrence-free survival with longer follow-up time across the full population, and we eagerly await those updates. INT has received breakthrough therapy in the United States and PRIME designation in Europe, which will facilitate frequent dialogue with regulators as we work to quickly advance this treatment for patients. As Stephane mentioned earlier, we plan to initiate our Phase 3 study in adjuvant melanoma in 2023 and rapidly expand to additional tumor types, including non-small cell lung cancer. We’re working closely with our partner, Merck, to explore additional opportunities within KEYTRUDA approved indications and beyond that label.

And finally, a quick update on our propionic acidemia program. Our Phase 1/2 study is ongoing and currently enrolling patients in the 0.9 milligrams per kilogram cohort. We have identified a dose for expansion and have moved into that expansion arm in the study. I’m pleased to announce just yesterday that a clinical update through the earlier — time point earlier this year, including an update on safety and the rate of major metabolic compensations from the higher dose cohorts and including longer-term follow-up from the lower dose cohorts will now be presented at the American Society of Gene and Cell Therapy Meeting on May 18. The abstract for that presentation is now available and can be found in the link on this slide. We look forward to sharing a lot more about the progress of this medicine and our other rare disease programs in the months ahead.

With that, I’ll turn the call over to Arpa.

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.

Jamey Mock: Thanks, Arpa, and hello, everyone. This morning, I will cover our Q1 financial performance, review the framework for our 2023 financial outlook and provide a quick recap from our recent Vaccines Day presentation. Moving to our first quarter results, starting on Slide 31. Total product sales decreased 69% year-over-year to $1.8 billion, the decrease in 2023 is consistent with our expectations and mainly driven by lower sales volume compared to the prior year. Cost of sales for the first quarter of 2023 was $792 million, in addition to our unit-driven manufacturing costs. This includes royalties of $86 million and the following charges: $148 million for inventory write-downs related to excess and obsolete COVID-19 products, unutilized manufacturing capacity of $135 million; and losses on firm purchase commitments and related cancellation fees of $95 million.

These charges, other than royalties, were driven by costs associated with surplus production capacity and an overall lower demand forecast primarily from lower-income countries. Cost of sales as a percent of product sales was 43% compared to 17% in Q1 2022. The increase was driven by the aforementioned charges over lower product sales compared to the prior year and higher manufacturing costs as we switch to smaller dose vials as well as lower product sales to absorb fixed manufacturing costs. Research and development expenses were $1.1 billion, which increased by 104% versus the prior year. The increase in R&D spend continues to be driven by clinical trial-related expenses particularly with our Phase 3 studies for RSV, seasonal flu and CMV.

The increase in R&D was also attributable to increases in personnel-related costs due to increased headcount and our recently announced collaboration agreements with Life Edit and Generation Bio. SG&A expenses were $305 million, reflecting an increase of 14% year-over-year. The growth in spending was primarily driven by continued investments in personnel and outside services in support of our marketed products and related commercialization activities as well as our company expansion. Income tax provision was a net benefit of $384 million for the first quarter, driven by our full year outlook, which includes international provisions, R&D credits and nonrecurring items. Net income was $79 million compared to a net income of $3.7 billion last year.

Diluted earnings per share was $0.19 compared to a diluted earnings per share of $8.58 in Q1 2022. We ended Q1 with cash and investments of $16.4 billion compared to $18.2 billion at the end of the fourth quarter of 2022. The decrease was driven by a reduction of cash deposits as we delivered products against prepayments and our share buyback activity. Cash deposits for future product supply declined from $2.6 billion at the end of 2022 to $1.8 billion by the end of Q1 2023, in line with our expectations. Now turning to Slide 33. I want to give an update on the progress we have made on our capital allocation priorities. Our top investment priority has been and will continue to be reinvesting in the base business across multiple areas. As mentioned earlier, R&D spending in the first quarter increased 104% year-over-year, and we continue to project R&D investments of approximately $4.5 billion for the full year of 2023.

As discussed at our Vaccine Day presentation, the majority of this investment is for our respiratory vaccine franchise, which we expect to generate significant returns in the relatively near term. We are also investing in our digital capabilities, the commercial build-out of the organization as well as expanding our manufacturing footprint. We plan to significantly accelerate our capital expenditures in 2023 as we expand both our international and U.S. manufacturing footprint. Our second investment priority is to seek attractive external investments and collaboration opportunities that will enable and complement our platform. As previously announced, we successfully closed our acquisition of OriCiro in the first quarter and the integration of the operations are well underway.

Additionally, we entered into two collaboration agreements during the quarter with Life Edit and Generation Bio. We are in multiple active discussions regarding additional external collaboration opportunities, and we’ll continue to be disciplined in our approach. After evaluating internal and external investment opportunities, we then assess additional uses of cash. In the first quarter of 2023, we repurchased 3.6 million shares for $526 million. We had 2.3 billion of share repurchase authorization remaining as of March 31, 2023. Now let’s turn to our updated 2023 financial framework on Slide 34. We continue to have advanced purchase agreements for COVID vaccine sales of approximately $5 billion for delivery in 2023. And we are in active negotiations for commercial market and government contracts in the U.S. and additional contracts for Japan, the EU and other key markets.

We continue to expect first half sales to be approximately $2 billion. Due to the seasonal nature of our respiratory business, we expect sales in Q2 of $0.2 billion to $0.3 billion. We continue to expect fiscal year 2023 reported cost of sales to be 35% to 40% of sales which includes 5% royalties. For Q2, we expect cost of sales between $0.5 billion and $0.6 billion. Due to the seasonal nature of our business, we expect our cost of sales in the first half of the year to be above the range of 35% to 40% and then reduce our average through the second half of the year. For R&D and SG&A, we continue to expect full year expenses to be approximately $6 billion, with approximately $4.5 billion in research and development. We now anticipate a full year tax benefit of $0.3 billion to $0.5 billion, driven by R&D credits, international provisions and nonrecurring items.

And finally, we continue to expect capital expenditures of approximately $1 billion. Before I turn the call back to Stephan, for those who weren’t able to attend or haven’t seen the webcast from our Vaccines Day presentation, I wanted to quickly recap the financial takeaways. Given the current significant investment in our respiratory franchise, we wanted to lay out the potential return we envision by the year 2027 for this franchise. Picking up where Arpa ended her earlier remarks, we believe the market size for COVID, RSV and flu will be over $30 billion by 2027, and we expect to capture $8 billion to $15 billion of this marketplace. While our cost of goods sold percentage will remain elevated in the short term as we transition from a pandemic to an endemic environment, we believe this should normalize to a 20% to 25% range by 2027.

We also laid out a $6 billion to $8 billion cumulative R&D investment required over the next three years, which will then normalize to a routine maintenance amount of 10% respiratory vaccines revenue by 2027. Finally, we like the characteristics of the respiratory vaccine franchise, given the highly flexible cost base, low capital intensity, durable future revenue and high potential return, which could lead to $4 billion to $9 billion of free cash flow annually with further room for growth. This concludes my remarks, and I will now turn the call back over to Stephane.

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?

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Q&A Session

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

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?

Arpa Garay: Great. So, I will start with the first two questions on commercial and then hand it over to Stephen to discuss ASCO. In terms of pricing across the U.S. market, we do anticipate our list price when we have our updated vaccine to be in the range of 110 to 130. As you’re aware, in the commercial market, we will be providing differentiated discounts across different payer types, from government agencies through to commercial players as well. In terms of the timing of the orders, we are actively in negotiations with U.S. customers. We are very encouraged on two fronts. First and foremost, our customers do appreciate and understand the significant health burden that continued success with COVID and they do want to partner with us to make sure that as many of their patients can get fascinated to protect themselves from potential hospitalizations and severe diseases.

The other thing we continue to be very encouraged by in our conversations with different customers, if they are appreciating and recognizing the full real-world evidence behind buyback and the effectiveness and profile of our vaccine. So, we anticipate over the next four to six weeks, we will begin to see some more clarity around contracting, which will continue through the end of Q2 and early into Q3.

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.

Operator: Thank you one moment for our next question. Our next question comes from Salveen Richter with Goldman Sachs. Your line is open.

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?