The operator introduces the Moderna Third Quarter 2023 Earnings Call and turns it over to Lavina Talukdar, Head of Investor Relations. She introduces the speakers, including CEO Stéphane Bancel, who will discuss the company's financial results and business updates. The call will include forward-looking statements and important risk factors. Bancel will be followed by Arpa Garay, who will discuss commercial progress, Jamey Mock, who will present financial results and explain one-time charges, and Stephen Hoge, who will review clinical programs. Bancel will end by sharing the company's key priorities for 2024 and 2025.

Moderna reported $1.8 billion in sales for their COVID vaccine in the third quarter, and they expect their sales for 2023 to be at least $6 billion. They have achieved a 45% market share in the U.S. for the current season and are preparing for the launch of RSV in 2024 and a flu-COVID combo in 2025. They have resized their manufacturing in order to achieve gross margin levels of 75-80%. The company also reported $1.6 billion in charges for this resizing. Arpa Garay provided an update on the company's third quarter performance, U.S. commercial launch progress, and preparation for the RSV launch. The company expects an additional $1.1 billion in sales for the fourth quarter and a total of $3.9 billion for the first three quarters of the year.

The sales of Moderna's COVID-19 vaccine are based on government contracts and are not returnable. More than half of these sales have already been shipped in the fourth quarter and the company expects at least $1 billion in sales in the U.S. in the fourth quarter. This brings their updated sales outlook for 2023 to at least $6 billion. In the U.S., Moderna's market share for the current season is 45%, higher than last year's 36%. The company's ability to compete effectively in the commercial market is demonstrated by this progress. The cumulative vaccinations in the U.S. retail pharmacy channel are analyzed on a launch-adjusted basis, showing the comparison of vaccine uptake in 2023 and 2022.

The paragraph discusses the channel mix and vaccination trends in the market for the 2023 flu season. It mentions that the retail channel is typically the largest segment and that the market is tracking ahead of last year's levels. The non-retail segment is expected to grow and make up a larger percentage of the market, with the company's market share remaining consistent across channels. The company is committed to increasing vaccination rates through public health efforts.

The United States is taking a multi-faceted approach to increase vaccination rates for COVID-19. This includes providing education resources to medical professionals, pharmacies, and advocacy groups, launching a direct-to-consumer campaign, and focusing on at-risk populations and holiday travel. Moderna expects to see $6 billion in sales this year from at least 50 million doses, with a consistent market share and higher demand in 2022. The retail channel is seeing strong early consumer demand, and the non-retail channel is expected to increase in the coming months. Moderna will continue to market and support their customers' efforts in the upcoming months. The company will also be launching a new product for RSV in 2024.

The company believes that their RSV vaccine has a strong product profile and is well-positioned for launch in 2024. They have a well-established safety profile and will be the only company with ready-to-use pre-filled syringes, which will save time and reduce administration errors. The commercial team is prepared to bring the vaccine to market. The financial update will be provided by Jamey.

In the third quarter, the company's net product sales were $1.8 billion, a 44% decrease from the previous year due to lower sales volume. The company also reported an increase in cost of sales, research and development expenses, and selling, general, and administrative expenses. An income tax provision of $1.7 billion was reported, which included a reserve for deferred tax assets. The company also provided an update on their financial outlook for 2023 and shared their early thoughts on 2024.

The company's income projections do not include future income from products not yet approved by regulators, and a valuation allowance was recorded for deferred tax assets. The net loss for the period was $3.6 billion, and the company ended the quarter with $12.8 billion in cash and investments. The cost of sales for the full year is expected to be $5 billion, with $1.5 billion in unit-driven expenses and $3.5 billion in inventory write-downs and charges. The company undertook a strategic initiative to restructure its manufacturing footprint and is recording charges of $1.6 billion, mostly in Q3, for inventory write-downs and CMO wind-down costs and cancellation fees.

The Q4 charge is related to the wind-down of CMO operations, but we believe it will ultimately improve our manufacturing efficiency and lead to higher margins. This charge, along with other restructuring costs, will result in a net cash benefit of $1 billion through 2029. Our cost of sales for 2023 is now projected to be $5 billion, and we expect it to be at the low end of our previous guidance for the full year. We have made significant progress in reducing our COVID-related costs and expect our cost of sales to be more predictable in the future. Going forward, we anticipate write-offs and charges to be less than 10% of sales on an annual basis, and our capacity is better positioned to scale with volume. At a sales level of $4 billion, we expect our cost of sales to be approximately 35%, decreasing to 30% at $6 billion of sales, and ultimately reaching our target of 20% to 25% at even higher sales levels.

The company has resized its manufacturing footprint and expects significant volume leverage moving forward. They provide a view of their financial results in Q3 with and without resizing and tax valuation allowance charges. They have updated their 2023 financial framework, with expected product sales of at least $6 billion and expenses for cost of sales, R&D, SG&A, tax, and capital expenditures. The company's principles for the next three years include a focus on making their COVID franchise profitable in 2024 and beyond.

The company is confident in the profitability of their Spikevax product and their future pipeline. They have recently made efforts to resize their COVID franchise and believe it will continue to generate income and cash. They plan to be disciplined in their investment approach and expect a loss over the next two years but will break even in 2026. They have sufficient funds to support their plans and do not plan to repurchase shares in the near future. Sales are expected to hit a low point in 2024 at $4 billion, with most of the sales coming from existing contracts. They expect a return to growth in 2025.

In 2024, the company expects to see a decrease in R&D and SG&A expenses, resulting in a projected income of $1 billion for Spikevax. The following year, sales are expected to grow, leading to improved cost of sales and flat to decreased expenses in R&D and SG&A. The company also plans to launch five new products in order to break even in 2026. The remainder of the paragraph discusses the company's clinical programs and the Phase 3 trial designs for their combination flu and COVID vaccine and INT in non-small cell lung cancer.

The company has made significant progress in advancing its late-stage pipeline and plans to have up to 15 product launches in the next five years. These include vaccines for RSV, flu, next-generation COVID, and a combination flu and COVID vaccine. The company also has a diverse pipeline of other vaccines, cancer therapies, and rare metabolic disease medicines. They recently shared positive data for their combination flu and COVID vaccine and have started a Phase 3 study for it. They also have a Phase 3 study for their CMV vaccine fully enrolled.

The study is currently enrolling cases and eagerly awaiting vaccine efficacy data. Other clinical programs against various diseases are also progressing. The company is proud of their pipeline progress, particularly in cancer and rare diseases. A Phase 3 study for adjuvant non-small cell lung cancer has been initiated, with a design that includes a combination of INT and KEYTRUDA. The study will enroll approximately 900 patients and the primary endpoint is disease-free survival. Secondary endpoints include overall survival and patient-reported outcomes.

The study marks an important step in the collaboration between Moderna and Merck, showing their commitment to bringing INT to patients quickly. Moderna's focus is on returning to sales growth and profitability, with priorities including commercial execution, disciplined investments, and cost reduction. They plan to launch the RSV vaccine in 2024 and a COVID plus flu combo vaccine in 2025, which they believe will lead to sales growth. The company will also be disciplined in their investments and consider partnerships to reduce costs.

The company is currently going through their 2024 budget and aims to have a lower spend in SG&A in 2024 compared to 2023. They plan to keep SG&A flat in 2025 and expect to break even in 2026. They have an exciting late-stage pipeline with six Phase 3 assets and are investing in building a factory for commercial launch. They have the largest late-stage pipeline of any mRNA company and are focused on delivering impact for patients. The first question from an analyst is about the company's goal to break even in 2026.

The speaker is discussing the projected costs and sales for the years 2024 and 2025, with a potential range of $8 billion to $9 billion in costs. They mention the launch of RSV, flu, and a combination of flu and COVID as potential sources of growth. They also mention a target of $25 billion in overall investment and the possibility of adjusting expenditures if sales do not meet expectations.

The speaker is confident in the company's pipeline and is prepared to adjust investments if necessary. They missed part of the question and asked for it to be repeated. The speaker then discusses the capacity for manufacturing and states that they are built for volume leverage. They mention the completion of facilities in the UK, Canada, and Australia, and state that they need no more than $10 billion in sales for the respiratory framework. They also mention building for commercial purposes for INT. The next question asks about guidance for COVID and RSV in 2024 and the speaker declines to break down the $1 billion attributed to each. The second question asks about the flexibility of R&D and SG&A in the company's financial framework for 2025 and the speaker declines to provide specific parameters but mentions the ability to prioritize programs and development.

The speaker discusses the company's PDUFA date and filing in various countries. They express confidence in their product and note a positive market uptake. They mention flexibility in spending for 2025, particularly in R&D and SG&A, and the possibility of partnering to adjust investments based on sales.

The company is expecting $1 billion in RSV international sales in 2024, with no contribution from flu. They are also working on CMV cases and expect to provide an update in the spring. The total RSV market is estimated to be around £5 billion, and the company is confident in their market share despite competition from larger companies.

The company's projections for RSV are similar to those of GSK and Pfizer, but they have not yet provided any forward-looking projections on market share. They are confident in their product profile and plan to leverage the success of their COVID launch for RSV. The CEO emphasizes the team's ability to compete in the market, as shown by their increasing market share for COVID. He also mentions the potential challenges faced by pharmacists with the workload of administering multiple products during the season.

The speaker discusses the company's pre-filled syringe product and its strong efficacy and safety profile. They believe it will have a positive impact on sales and differentiate them from competitors. They also mention their late-stage pipeline, including RSV, flu, and COVID products, which will contribute to their breakeven in 2026. They are confident in their product profiles and plan to launch 15 products by 2028.

The company is committed to breaking even in 2023 and has a flexible approach to growth and investment. Retail channels are expected to make up the majority of vaccinations in 2023, with a potential shift towards non-retail channels. OpEx plus CapEx is not expected to significantly change despite declining COVID numbers, as the company believes this is the right strategic decision. The launch of the RSV product by GSK and Pfizer has been successful and the company's product has unique differentiations.

The speaker is discussing the need for an RSV vaccine and whether it will need to be administered annually or less frequently. They mention that the decision will ultimately be made by public health officials based on various factors, including data provided by manufacturers. They are also confident in the potential for growth and impact on patients in the market.

The company plans to launch 15 new products by 2028 or 2025 in order to grow and take advantage of opportunities. They are committed to their registrational trials in 2024 but have flexibility in 2025. They believe in investing in high-priority projects to create value and return on capital for shareholders. They have a successful track record with their late-stage pipeline and plan to continue investing in growth and profitability.

The operator introduces Michael Yee from Jefferies who asks about the company's assumptions for Q4 COVID vaccinations and their expectations for 2024 and 2025. The company expects a similar split between November and December for vaccinations as last year and anticipates reaching 50 million doses this year. They also assume that those who received boosters in 2023 will continue to do so in 2024 and beyond, with the potential for an increase in the overall COVID market over time. The next question comes from Hartaj Singh with Oppenheimer.

The speaker was asked about the potential impact of combination vaccines in the market for COVID-19 and flu. They responded by saying that they anticipate a strong uptake of combination vaccines, as seen in the pediatric market, due to consumer preference for one shot and healthcare authorities' belief that combinations can boost vaccination rates. They also mentioned that combinations may help with workload issues and increase compliance in adult vaccinations.

The company has been discussing the topic of vaccination combination with healthcare ministers during COVID, especially outside the U.S. where there is a high interest in combinations due to the integrated healthcare system. The company has partnerships with countries like the UK, Canada, and Australia where the concept of combination has been critical in their decision-making. This is because as the population ages, there is a concern about increasing hospitalizations and shortages of healthcare workers. In integrated healthcare systems, the drive for combination vaccines is expected to be even faster than in commercial markets like the U.S. Additionally, the company's cost of sales will see a substantial margin expansion opportunity due to the smaller portion of drug substance and the cost savings from using a single presentation for multiple vaccines.

Evan Wang asks about the long-term contribution of COVID and RSV to the company's plans for 2024 and beyond. Arpa Garay discusses expectations for a strong launch of RSV in the second half of the year and ongoing efforts to secure international agreements for the COVID vaccine. Stephen Hoge mentions discussions with regulators about the pathway for licensure of their flu vaccine following positive Phase 3 data.

The speaker does not have any updates about ongoing conversations regarding licensure pathways, but they will provide an update once there is clarity across all markets. The operator then concludes the Q&A portion of the conference call.

This summary was generated with AI and may contain some inaccuracies.