Good morning, and welcome to the Moderna First Quarter 2019 Conference Call. [Operator Instructions]. Please be advised that the call is being recorded. At this time, I would like to turn the call over to Lavina Talukdar, Head, Investor Relations at Moderna. Please proceed.

Thank you, Operator. Good morning, and welcome to Moderna's First Quarter 2019 Conference Call to discuss financial results and business update. You can access the press release issued this morning as well as the slides that we will be reviewing by going to the Investors section of our website at www.modernatx.com. Today, on this call, we have Stéphane Bancel, our Chief Executive Officer; Stephen Hoge, our President; Tal Zaks, our Chief Medical Officer; and Lorence Kim, our Chief Financial Officer. Before we begin, I would like to remind everyone that this conference call will include forward-looking statements. Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to update or revise the information provided on this call as a result of new information or future results or developments. I will now pass the call over to Stéphane. Stéphane Bancel: Thank you, Lavina. Good morning or good afternoon. As you know, we believe that mRNA has the potential to become a new class of medicines. And since Moderna's inception, we have worked hard to be the company that could become the leader in this field. We believe our mRNA medicines have a potential to address large unmet medical needs and to treat diseases that are not addressable by recombinant proteins or small molecules. Due to the platform nature of mRNA, we believe our mRNA medicines provide a higher probability of technical success and faster timelines to clinical trials and to the market relative to traditional medicines. We also believe that the manufacturing capital intensity of mRNA is materially lower than recombinant proteins. We have, of course, the manufacturing at commercial scale.…

Thank you, Stéphane. Let me begin with reviewing our progress by modality and I'm going to start with the prophylactic vaccines. We're capping in our mRNA vaccine for respiratory syncytial virus or RSV, one of the most common causes of respiratory disease in both the very young and the elderly. In collaboration with Merck, we designed our vaccine to encode a membrane-anchored version of stabilized pre-fusion F protein, which elicits a neutralizing antibody response. In the inset, we show the intended design of the mRNA formulated in an LNP. We worked with Merck to identify and advance improvements to the RSV vaccine, which has led us to the identification of mRNA-1172. This second vaccine has an improved RSV antigen resulting in an enhanced potency in preclinical models as well as a proprietary formulation developed by Merck. On the right, we have outlined data from a preclinical study in African green monkeys comparing serum neutralization titers of mRNA-1172 to mRNA-1777. In this study, mRNA-1172 was shown to be significantly more potent than mRNA-1777. As Stéphane mentioned, the IND for this new vaccine was filed earlier this month and mRNA-1777 will not move forward into the planned Phase IIa study at this time. Let me now turn to the rest of the prophylactic vaccines. Overall to date, approximately 1,000 healthy volunteers have been enrolled across 7 Phase I trials at doses of up to 400 micrograms. The emerging safety and tolerability profile remains consistent with that of marketed adjuvant vaccines. We've shown promising data from 5 Phase I programs within the prophylactic vaccines modality and we continue to make progress. For CMV, the first 3 dose levels are now fully enrolled, and healthy volunteers have started to being dosed at 300 micrograms for the fourth dose level in that study. And VZV,…

Thanks, Tal. So glycogen storage disease type 1a or GSD1a is a rare inherited metabolic disorder resulting from a deficiency in an enzyme called glucose 6-phosphatase, or G6Pase for short. The G6Pase enzymes involved in the metabolic pathways to allow the liver and, to a lesser extent the kidney, to maintain the level of glucose in the blood during fasting. After a couple of hours in a normal healthy person, most of the glucose from your last meal have been consumed by tissues. So as glucose levels start to fall, most of the tissues in our bodies will convert to using -- should convert from using glucose for energy to other sources such as lipids or triglycerides. But cells in our brains are unable to make that switch and are dependent upon glucose to survive. So our livers take over the responsibility for making and releasing glucose into the bloodstream to keep the brain alive. This process involves two different metabolic processes: first, glycogenolysis or the breakdown of liver-stored glucose for release; and gluconeogenesis or the conversion of other substrates into glucose. Glucose 6-phosphatase catalyzes the last step in both of those processes in the ER and liver. Now the good news for most of us is that process happens automatically, every day and particularly as we fast overnight, our liver takes over the responsibility for keeping our brain alive. But people suffering from GSD1a are unable to maintain that blood glucose during a fast. As a result, they suffer from threatening hypoglycemia or low blood glucose that can also result in debilitating neurologic effects, even death. Over time, the lack of the enzyme can also lead to a wide range of severe metabolic derangements such as hyperlipidemia from the buildup of lipids, lactic acidemia and enlargement disease in livers.…

Thank you, Stephen. In today's press release, we reported our first quarter 2019 financial results. Please note these results are unaudited. We ended Q1 2019 with cash, cash equivalents and investments of $1.55 billion, and this compares to $1.69 billion at the end of 2018. Let me highlight two cash flow metrics, which provide a direct view on cash use. These are better given the quantity of deferred revenue stock-based compensation and depreciation that's embedded in our operating income. Net cash used in operations was approximately $144 million for the first quarter of 2019, that compares to $111 million for the first quarter of 2018. Please note that Q1 of 2019 and 2018 include $22 million and $25 million, respectively of in-licensing payments. Secondly, cash used for purchases of the property and equipment was $8 million for Q1 2019 compared to $32 million for Q1 '18. Revenue for Q1 2019 was $16 million as compared to $29 million for Q1 '18. Note that on January 1, 2019, we adopted the new revenue recognition standard ASC606, using the modified retrospective transition method applied to those contracts, which were not completed as of January 1. The decrease in total revenue was mainly attributable to the decrease in collaboration revenue across all of our strategic alliances, particularly AstraZeneca and Merck, driven by the adoption of the new revenue standard. Total revenue under the previous revenue recognition standard would have been $38 million for Q1 2019. R&D expenses for Q1 2019 were approximately $131 million compared to $90 million for Q1 '18, the increase was primarily due to an increase in personnel-related costs, including stock-based comp, mainly driven by an increase in number of employees supporting research and development programs, an increase in clinical trial and manufacturing costs, an increase in lab supplies and…

[Operator Instructions]. Our first question comes from Matthew Harrison of Morgan Stanley.

I guess, two from me. So on RSV, can you maybe just clarify a little bit what specifically is Merck hoping to achieve with the new formulation and the neoantigen selection relative to what you've achieved so far? And then, I guess, just remind us when you started a similar point with 1777, how long did it take you to progress to being Phase II ready? And then I have a follow-up. Stéphane Bancel: Sure, Stephen?

Sure. Obviously, we're pretty excited about that one, the 1172 and we're really pleased that Merck's filed the IND already, and it's moving quickly. You saw the summary of the data in primates. It's been hard to argue with the substantial improvement that we demonstrated there. 1777, just referencing that slide, shows superior titers to a natural RSV infection, which was there in gray. But 1172 was qualitatively and quantitatively several-fold higher. And so in the face of those improvements, we felt compelled and that it makes a ton of sense to move forward. Now what are those improvements just quickly, I think, you hit on them, Matt, but the first is antigen design. This is still a pre-fusion F protein, but it's been further stabilized to improve potency and immunogenicity, so that's a desirable feature. And then the second scientific improvement went into the program, obviously, is the switch from a legacy lipid nanoparticle to a Merck proprietary formulation, that has some improved features. Those improved features, I'll let Merck talk about at a future date, but we think they are a part of what's happening in terms of the improvement here. And ultimately, the combination of antigen and formulation leads to the qualitative improvement you see there. It does, at this point, mean a pause to 1777 moving to Phase IIa as described, but as far -- our goal is the best RSV vaccine possible, with the highest probability of success and as much as we wanted to see the 1777 data, it's clearly the right answer to look for 1172 first, given the multifold improvement that's been demonstrated in African green monkeys. In general, our experience has translated and you know that well. Things that we've been able to see in terms of preclinical species like primates for vaccines has translated into humans. So if this translates in Phase I relatively quickly for 1172, which we hope and expect it will, this is the vaccine that we should advance further in development to Phase II and Phase III.

And Matthew, this is Tal. In terms of time lines, if you look historically, it typically takes you 12 to 18 months for a Phase I vaccine trial. It's done in healthy volunteers, so it's a fairly straightforward simple design. I can't give you a forward-looking guidance here, but I would note that Merck has recently filed its IND and they will be leading the execution of this trial. Obviously, the team there knows what they're doing in terms of vaccine trials.

Okay. Great. That's helpful. And then the second question is on chikungunya. I know you've entered the second cohort. Do you have any view on how many cohorts you need to get through before you feel like you have enough data to talk about with that modality?

This is Tal. The trial that's currently designed has 4 dose levels, that was predicted based on our expectation that translates the data from the nonhuman primate that you've seen. I think, we're on track with that design. We've been enrolling fairly consistently, and as we said, we're at the second dose level.

And our next question comes from Salveen Richter of Goldman Sachs.

It's Ross on for Salveen. Just in terms of mRNA-1172 and RSV and the decision to move forward the more optimized program, is this something that we should kind of think that may occur in other programs going forward as you continue to test new formulations of your current compounds in clinical candidates?

So we continue -- with any program we advance, we're always looking at whether there are improvements. And yes, there are always -- there sometimes can be small improvements you can make. I think the question gets more complicated where you start to see 5-fold improvements kind of like we're talking here with 1172 where qualitatively that improvement is so strong and in the background of what's been happening in RSV vaccines more generally, it makes sense to bring the best vaccine forward first and quickly, particularly when you are this close after the lead, in this case 1777. That isn't something that we can predict happening broadly across many programs or efforts. And in general, as you can see with other vaccines in our pipeline, we haven't been doing this. And so just pointing at the history here, it's more of by exception a situation where this has been happening and that's probably what we would expect about the future.

This is Tal. I mean, just to add a couple of points. I think it's one of the fascinating things of beauty of our platform that we have relatively rapid improvements and that the coding-like nature of mRNA lends itself to those improvements. So if you look at our history, for example, in the personalized cancer vaccine, we've been able to take it to the next level by increasing the number of neoantigens from 20 to 34. And as the team worked through what that means both in terms of mRNA length and sequence optimization, we found a way within the clinic to actually introduce that within the current clinical paradigm. Now, of course, the PCV is a unique type of drug in that regard and I give the FDA a lot of credit for working with us to enable that. So where we can, we always try to optimize for the best medicine that we can and it depends on the specifics of the product as to what's the best way to do it.

Great. And then I just have one follow-up on the chikungunya antibody. How can we think about the clinical bar here as we approach the data readout, like what are the level -- the antibody levels that we should expect to see to confer this passive immunity in humans?

So as you will see in the preclinical data that as we said that's recently been accepted for publication, so it should come out soon, the target expression for this antibody is about 1 microgram per mL in terms of what we think is going to be a therapeutic concentration or a concentration that will -- should prevent from infection based on the totality of the preclinical data. And that was easily achieved within the dose levels that we've cleared for in the toxicology studies and the preclinical studies. So from a target product profile for this application what we're shooting for is 1 microgram per mL. If you look at where most therapeutic antibodies live in terms of concentrations, if you pull the FDA label for REMICADE, the trough levels are between 0.5 per microgram per mL and about 6 microgram per mL. So it's within the range of what monoclonal antibodies have achieved for therapeutic levels from many indications.

And our next question comes from Cory Kasimov from JPMorgan.

I have two of them for you as well. So first one is I'm curious how this RSV decision changes how you're thinking about your CMV program, if at all? And maybe what the latest in terms of time lines for when we should expect data from that fourth dosing cohort from CMV? And then I have one follow-up.

Yes, so this is Tal. It does not actually change, in my view, one iota how we think of CMV or what we're doing about CMV. I think if you look at the totality of our data, to date, we've shown a pretty consistent safety and tolerability profile across the 1,000 or so healthy volunteers that have been dosed across the various programs. And so now, it's about figuring out the best vaccine and the best dose for any given application. In that regard, CMV -- the dose for CMV and the activity for CMV needs to be defined in the context of a CMV clinical trial. I can't give you a forward guidance. Obviously, clinical trials are at the mercy of a lot of external factors, but if you look at our past performance and if you see where this trial is, you can sort of connect the dots. And we're at the fourth dose level here. The goal with this vaccine is really to -- since it's a Phase I and you're dose escalating, we want to make sure, we're getting a good sense of what would be a tolerable profile to take forward. And so as we continue to dose escalate, at some point, we will say, okay, we think we've reached the bar for what should be tolerable. That's how you defined it in the Phase I; at which point, we'll wait and make sure that we understand the immunogenicity and then we'll show the data.

Okay. And then, the follow-up question is on MMA and curious when we should expect the first patient to be dosed in that program? And can you just kind of give maybe a little overview on what that dose escalation strategy might be there?

Yes. So as we said, we're -- the IND has been open for a couple of months now. It takes you time to talk to sites, initiate the sites. The first cohort here following discussions with regulators is going to be adolescents, aged 12 to 18. So obviously, we're in active discussion with the sites to get them initiated, get the study ongoing. And at the same time, talking to the investigators and even the patient advocacy groups here to try and identify the patients. In terms of the dosing regimen that you asked, this is sort of a traditional dose exploration. We're going in from the very first dose in this disease at a dose that can be effective. It's one of the requirements to do a pediatric development. And so even at the initial starting dose, which is 0.2 milligrams per kilogram, we think we -- there's an opportunity to have benefit and we'll dose escalate from there based on the totality of tolerability and what we see in terms of biomarker effect.

And our next question comes from Ted Tenthoff of Piper Jaffray.

Thanks for hosting us yesterday up in Cambridge, that was really interesting. I want to pick up on Cory's first question just with respect to CMV development path, and maybe you can kind of outline sort of where you would expect to take the Phase I data sets and what next studies would be? And then I just have one quick follow-up please.

So I think the Phase I -- the goal is to demonstrate obviously tolerability, safety and immunogenicity. In our case, the critical pieces to be able to demonstrate the immunogenicity against both components of this vaccine. As you would recall, we both have a complex pentameric protein here, which I think is a unique feature you can do with mRNA and against gB, so we need to figure that out. Now in terms of a full development path, I think there is work ahead of us to talk to FDA and other regulators to understand this is obviously a very high unmet need, but it is an unmet need within a context that's obviously challenging to develop, which is trying to prevent maternal transmission to babies in utero is what we're trying to achieve here at the end of the day. Getting there is not simple. Over the years, there have been various discussions of other companies with the FDA, so there is a good body of precedent for what full development looks like. We're just starting down the path of those conversations. I will say that the effort on our side is led by Wellington Sun as you may recall, he was the prior Division Director for Vaccines for FDA for the past decade before joining our team. So he is very busy these days actually putting this together, discussing with other experts in the field and planning on that next set of conversations to understand what that full development path would look like.

Great. That's super helpful. And then one more for you Tal, if I may. Just with respect to the triplet program for IL, for cancer, so I was pleased to see that you guys are expanding to the second dose. I think this thing is going to really carry a big hammer and safety is going to be the one of the primary focus areas. Was there anything you saw to date that gives you any pause there? Or how is that looking from an early standpoint from a safety side?

So look, it's hard for me to comment on a trial that's in progress. The data continues to come in, and we're obviously evaluating it on an ongoing basis. I can tell you that we're at the second dose level. As a reminder, for OX40 ligand alone, for the membrane protein, we got up to 8-milligram, which was the intended dose and that seemed to be tolerated well. So in terms of the contribution of OX40 ligand itself and the lipids nanoparticle delivery technology, I'm pretty comfortable with their tolerability profile. I think your question is correct with locally secreted cytokines, do you get to a level that is worrisome? I don't know yet. I would point that the preclinical data in totality was pretty supportive of going to much higher doses. I think that's the unique ability of mRNA to set up this local paracrine effect within the tumor with minimal spillover into the blood. These are obviously things we'll measure, so we will be looking at the expression of these proteins, both in the tumors and systemically to see if they're detectable. We will be looking at the typical safety parameters [indiscernible] labs, et cetera. It's frankly, too early to say.

And our next question comes from Alan Carr of Needham & Company.

I wish you could -- I'm hoping you can tell us a little bit more about some of these rare disease programs that -- or preclinical programs that you presented just recently. It looks like a bit of a shotgun strategy in terms of the number that you have running in parallel, how do you decide which ones to bring forward? And maybe give us a sense of expectation in terms of when these might move forward in the clinic? And then the second one, I'm wondering if you can elaborate a bit more about this proprietary formulation developed by Merck for 1172? To what extent do you, I guess, work with Merck on developing new delivery formulations for in both those specific programs? And how do they -- with Merck and then they translate to other programs that are not licensed during collaboration with Merck?

Sure. So the two questions. So first on the ASGCT abstracts, 5 of which were presented to a wide range of academic collaborators and institutions, as you saw. We do have a very active research collaborations with academia across a very wide range of rare diseases. What you saw was a sampling of that activity, but it was ready for presentation by many of the academic labs. By participating with those folks, we absolutely commit to them being able to present that data at the appropriate fora as well as publish it. And so you will see a steady flow of those sorts of things, that doesn't necessarily translate into our portfolio strategy or programs that we're taking forward into development. I'll point to our own publication record there, even in the last couple of years, there was a number of programs that we published in high-impact journals that are not currently in our development pipeline. What we choose to take into development goes through a different series of filters in terms of prioritization as well as our view on unmet need and developability. So I can't comment on whether or not you should expect those things to be translating forward, and in fact, I would only say that you should expect to continue to see a large amount of that activity both in publication and presentation collaborations with academia. Onto the 1172 delivery vehicle, so we -- obviously, we've had a multiyear collaboration with Merck where we do talk a lot about things we're learning to enable the best development of the programs we're partnering with on them, including the vaccines like RSV. We -- I can't comment specifically on the improvements that went into the 1172 formulations that Merck was developing, but -- or is developing, but obviously we published last year in a paper on our website, Tasset et al, some of the deficiencies with the legacy lipid nanoparticle formulations in terms of local tolerability in the vaccine context. That underpinned a lot of our efforts to -- several years ago to develop our own proprietary lipid nanoparticle delivery technologies that are actually already in programs like CMV and hMPV PIV. RSV had started before that as an effort and so as we shared that data with Merck long before we published it, they made their own determinations about what that might mean for that development program. And as I said, I'll let them, at the appropriate time, talk about any improvements in specifics, but obviously, they are aware of all of work together. Now we do share information back and forth. I think part of your question was do we collaborate on these things, and obviously, we do. We were sharing that information with Merck long before the publication, and as they make improvements and step-forwards in formulation then that becomes a two way street, and so we're excited about it.

And our next question comes from Geoff Meacham of Barclays.

For the new GSP program, the disease ideology is pretty complicated with multiple organs involved. I guess, the question is, just help us with how you're thinking about the regulatory path down the road post proof of concept? I imagine there's been some discussion of endpoints already. And I have a follow-up.

Geoff, this is Tal. It's a great question. This disease is a different one, as you rightly point out. The unmet need here is -- it's not just the multiple organs that are affected, if you think about the patient experience and the quality of life, it's the frequent feeding at night, but if you actually meet one of these patients, which I had the opportunity to sit down, when I sit for a meeting for 2 hours, I typically take a cup of coffee. A GSD1a patient who sits for a 2-hour meeting needs to have a cup of cornstarch that they're drinking. And if you think about that day in, day out your entire life, there's obviously a high unmet need there that's manifest in many dimensions. Now to your point about regulatory path and endpoints, I think it's still early days. This is just the declaration of our intent in the development candidate, there's work ahead of us. We have to go talk to the agency. We have to go figure out the strategy for the Phase I first and then we have to understand what is going to be the development path to bring and demonstrate that we can actually impact not just the basic biology of these diseases, as you've shown quite remarkably, I think in the mouse model, but actually, how do we demonstrate that we're able to address all those manifold manifestations of this disease spanning from the biochemistry all through the quality of life, preventing relatively rare but very severe events, but at the same time actually changing their day-to-day quality of life in a much more consistent fashion. That's a lot of work that's still ahead of us.

Got you. Okay. That's helpful. And then, on the cancer vaccine and the IO programs, I know you're in an enrollment ramp at this point, but maybe can you speak to whether we'll see any clinical updates at the upcoming ASCO meeting?

So the -- you know it's a medical meeting. You like to show the data that you have, I'll point to you that the -- to the abstracts once they will be live I think in a couple of weeks, so they will describe the contents of the data that we will be sharing there.

[Operator Instructions]. Our next question comes from Ying Huang of Bank of America.

I want to ask about the GSD1a program. First of all, I guess, now we have 5 rare disease programs in the pipeline. Does that suggest an increasing focus on this modality compared to others? Secondly, there is a competitor, which is conducting a trial in gene therapy for this disease specifically. Can you talk about maybe pros and cons versus the mRNA approach? And given the data we obtained recently from [indiscernible], what do you think you can improve on? Stéphane Bancel: This is Stéphane, I am going to take your first question and Stephen will be talk about gene therapy. So as we indicated since early 2018, rare disease is an important point of focus for the company, obviously because of the unmet medical need, because of a quick path to approval, and also because what we believe is a lower biology risk against some of the things we're trying to do. So as you know, as we beat the pipeline of the company, as I said in my introduction remarks, we focus very much on managing risk. And so the way we think about our pipeline now in development is, we have some very interesting vaccine in infectious disease that got a big unmet medical need that I think we have a [indiscernible] to be able to help a lot of people. With five other programs now we think we have a nice portfolio of IO and what we were looking for is great execution in the clinic to see what we can do for patients with those programs. And given the more "straightforward" biology of rare disease where clearly missing instruction for the DNA, and as you have seen in a lot of publication work that we have done, there's very exciting preclinical model data. We really want to focus on rare diseases and this is consistent with the strategy we are outlining now and 1.5 years ago. And also what you saw at the ASGCT a few weeks ago, there's a lot of work going on there. This is a very important area for the company.

Yes. And on GSD1a, and gene therapy specifically -- or generally, we -- starting with mRNA, our focus is on dose-dependent pharmacology. I think the defining feature of our platform is our ability to have predictable dose-dependent pharmacology. You give a dose today, you get a response. You give it next week, you get the same response. If you need a more response tomorrow, I give twice the dose, you should expect to get twice the response and that's what we mean by sort of dose-dependent pharmacology functions like a traditional drug. We focus a lot of our rare disease efforts in metabolic diseases where you would expect the needs of the patient based on metabolism will change over time. Sometimes in a week, sometimes over years as they age. And in particular, as they're growing and young can be highly dynamic. And so we focus on looking at the disease like GSD1a, mRNA is another example of this, where we are expecting to need to titrate to the dose response that's desirable to manage that disease. Now there are, as you mentioned, a gene therapy approach going after GSD1a as we speak and we really don't view those as necessarily competitive. In fact, we think these are different tools that physicians will use hopefully in combination for different purposes to help patients manage this disease. We can easily imagine a world where sort of analogous to insulin is sort of basal long-acting forms, but you're still managing the disease day in, day out with -- by testing blood glucose for week in, week out by controlling for it. That would give, frankly, the physician we hope that -- personally, I would hope that they're successful and we're successful because more tools for clinicians as they are treating patients will be a great thing. So we don't necessarily view it as competitive. We view it as adjunctive and we're focusing on different areas of pharmacology.

And I'm not showing any further questions at this time. I would now like to turn the call back over to Stéphane Bancel for any further remarks. Stéphane Bancel: Well, thank you very much for joining us today and for your questions. We look forward to talking and to seeing many of you in the coming weeks, including at the ASCO around the PCV posters. Have a great day.

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