Moderna, Inc. (MRNA) Q2 2022 Earnings Report, Transcript and Summary

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.

Thank you, Kevin. Good morning, everyone. And thank you for joining us on today’s call to discuss Moderna’s second quarter 2022 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. On today’s call are Stephane Bancel, our Chief Executive Officer; David Meline, our Chief Financial Officer; Stephen Hoge, our President; Paul Burton, our Chief Medical Officer; and Arpa Garay, our Chief Commercial 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 two 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.

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.

Thank you, Stephane, and good day, everyone. As the COVID-19 pandemic continues and the SARS-CoV-2 virus keeps undergoing significant evolutionary change, the subject top of mind for many people is boosting, when to get boosted and what to get boosted with. In the next few slides, I want to show you how the Moderna mRNA-1273 vaccine is performing clinically in the booster setting and how antibody levels are performing in the real world setting in individuals primed and boosted with mRNA vaccines. Here in this next slide, you see the rates of COVID-19 infection in over 3 million individuals in the Spanish National Registry. The first point these data make is boosting is highly effective, reducing the risk of infection. The second point, the authors make is that mRNA-1273 the Moderna vaccine is more effective than BNT162b2 and that the effect size increases over time. In the second example, I am showing you data from the U.S. VA system in over 450,000 individuals boosted with either mRNA-1273 shown here in green or BNT162b2 shown in red. Again, in terms of infection or hospitalization prevention, the authors conclude that mRNA-1273 is more effective than the alternate mRNA vaccine. Finally, here a data from over 3 million individuals in the NHS England database. Again, showing a clinically meaningful and statistically significant reduction in COVID-19 infection and hospitalization with mRNA-1273 boosting, compared to BNT162b2 during the Omicron periods of infection. I want to turn now to data from an innovative, decentralized, pragmatic real world study. We have recently conducted within the Moderna community collaborative platform with invitation of over 100,000 participants here in the United States. This study is called disCOVEries and it enrolled approximately 850 of these people into a real world assessment of antibody levels following primary vaccination and boosting with either Moderna-Moderna-Moderna that’s the MMM group or Pfizer-Pfizer-Pfizer, that’s the PPP group. Importantly, the study population has an average age of 44, approximately 60% of the participants of female and it’s ethnically very diverse. Participants were enrolled into the study, consented and received a home self-administered micro needle blood collection kit from your buyer. As you can see here, across an array of SARS-CoV-2 variants of concern higher and more durable antibody levels shown here on a logarithmic Y-axis scale were observed in those individuals primed and boosted with the Moderna vaccine in red, relative to the Pfizer vaccine in blue from eight weeks to 32 weeks following their first booster. Many of the comparisons were highly statistically significantly different. It’s true even for antibody levels against the Omicron BA.1 variant of concern, where an approximately 12-week duration advantage is seen in Moderna primed and boosted individuals compared to those receiving the Pfizer vaccine. So taken together, these data demonstrate the strong performance of the Moderna vaccine in a real world clinical boosting setting, which could be explained by higher enduring antibody levels against a wide variety of variance of concern. I will now turn the call over to Dr. Stephen Hoge to provide comments regarding the composition of the full COVID-19 booster vaccines, as well as other pipeline updates. Stephen?

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.

Thank you, Stephen. Good morning and good afternoon to everyone. As the newest member of Moderna Executive Committee, I am excited to see the impact that we have had in COVID, as well as the commercial opportunities ahead for us in COVID, as well as future vaccines and therapeutics in the long run, leveraging our mRNA technology. Turning now to slide 20, where you will see the regional sales mix in second quarter and in the first half of 2022. In the quarter, North American sales were $1.6 billion. These sales were driven by 1273 booster deliveries to the United States as we continue to fulfill our first U.S. Government order with the vast majority now delivered through the end of second quarter this year. In the quarter, we also delivered primary series of the -- for the pediatric group five years and younger as the authorization for this group came through in this quarter. Sales to EMEA were $1.5 billion and sales to Asia-Pacific were $1.1 billion. As you can see across the first two quarters of the year, North American sales were $2.7 billion, sales to EMEA were $3.9 billion and sales to Asia-Pacific region were $3 billion. Of note, for both the three months and six month periods, we saw geographic diversification of sales across these key regions. This diversification is a reflection of how quickly we built out and executed within our global commercial organization. Now turning to slide 21, we are also happy to see that as we continue to scale globally around the world that Spikevax’s market share and the booster market defined as a third or fourth booster continues to show substantial market share. As Stephane has already mentioned, we see on slide 22, our new U.S. Government contracts for the fall of 2022. Specifically, the agreement initially was for 66 million doses of our bivalent COVID booster to be delivered in 2022. Earlier this week, the U.S. Government informed us that they exercised an option for 4 million doses for the pediatric age group. This brings the total contract value to approximately $1.8 billion. Our U.S. Government order includes options to purchase an additional 230 million doses, bringing the total to 300 million doses if all options are exercised. As you heard from Stephane earlier, after FDA guidance, the U.S. fall booster product will be the mRNA-1273.222, which consists of 1273 and the Omicron BA.4/5 subvariant. I want to spend some time on the evolution of the pandemic and the resulting impact on the commercial outlook. Early in the pandemic, we anticipated several factors including the virus evolution, population immunity at any given time and seasonal trends would result in a shift to the endemic setting and we have shared this illustrative graph before. These same factors have and will continue to emphasize the commercial outlook. With the emergence and then dominance of multiple variance at different time points, we have been able to develop booster to address these variants, which includes our bivalent boosters against the Omicron variant. We are currently advancing two bivalent booster candidates for the fall of 2022 based on different market needs. The two bivalent booster candidates we are advancing are the mRNA-1273.214 and mRNA-1273.222. Both contain 25 micrograms of the currently authorized booster 1273 and 25 micrograms of an Omicron subvariant either BA.1 or BA.4/5. Deliveries for these boosters will start in September of this year and will be more heavily weighted to the fourth quarter, as we ramp manufacturing and obtain regulatory authorizations around the world. And to close, as we look to 2023, we are prepared for a shift to the commercial market in the U.S. for COVID boosters, where the market will be more fragmented than it was during the pandemic where the U.S. Government with a sole purchaser of vaccines. The commercial organization has already engaged with commercial payers and the channel, both channel distributors, as well as key pharmacies in anticipation of the shift. Internationally, we expect public health authorities to remain key purchasers of vaccines, but we are also identifying markets where there may be a private commercial market as well. All in all, we are well positioned for the transition as we have invested in building our commercial infrastructure both in the U.S. and globally. With that, I will turn it over to David.

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.

Thank you, David, Arpa, Stephen and Paul for those updates. In 2022, we set out to execute on five key priorities. First to execute on delivering vaccine against $21 billion of Advanced Purchase Agreements, with half of the year behind us and the sign deals for the fall of 2022 and a strong manufacturing team we are on target. We have continued the momentum in our late stage clinical trials with our Phase 3 trial is now approved RSV and CMV and I thank our team for delivering on such aggressive timelines. We are on track to share data from proof-of-concept studies from two therapeutic application of our technology with data from our PA and PCV trial in second half. We have continued to make progress with new development candidates in vaccines and therapeutics, some already been announced and now will come in the second half of the year. And finally, the recent announcement of our inhaled IND with our partner Vertex, we have expanded our mRNA platform to target primary disease. As we grow, we are committed to doing the right things in the right way for patients and our stakeholders. As a company, led by a solid team, we are thinking in five-year, 10-year, 20-year increments. To that end, this year we published our very first ESG report, which highlights the key pillars of our corporate versatility framework, medicine for patients, our employees, the environments, our community, and of course, governance. I am proud of what we are doing initially in pillar and so proud of the ambitious goals we set for ourselves. I’d be the first steps to achieving those ambitious goal is to set them to create and foster our purpose-driven culture and go on this framework to meet those goals. As an example, our goal of a net zero carbon emissions globally by 2030 we put on that amongst the global leaders in promoting long-term sustainable growth for our planet and our organization. We will share more detail on the ESG governance at our ESG Day on November 10th. But first, we look forward to asking you at our Annual R&D Day in September 8th. Moderna mission to deliver on the promise of mRNA science to create a new generation of transformative medicines for patients has always been our Northstar. Despite the challenges facing the financial market with consumer inflation and ensuing increase in interest rates and the cost of capital, Moderna is in a very fortunate position. We have a unique amount of platform enabling the generation and personnel speed of innovative medicines. We have a strong team of 3,400 mission-driven employees. We have $18 billion of cash on the balance sheet and with the strong commercial momentum. We have no intention of slowing down our growth. We are putting our head down and doing the work. I have been as excited about the future of Moderna, now is not the time to slowdown, patients are waiting for innovative medicines. Thank you for listening and now we would be happy to take questions. Operator?

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

Great. Good morning. Thanks for taking the question. Stephane, I was hoping you could just maybe address in a little bit more specificity how you are thinking about opportunities for either acquisitions or collaborations. I think at the topic that comes up a lot among investors, and I think, there is a different scope that a lot of people think about including the things that are quite large versus things which might be more complementary on a technology side to the platform. So if you could just address how you are thinking about that in your priorities that would be great? Thank you.

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.

One moment for next question. Our next question comes from Elizabeth Webster with Goldman Sachs. Your line is open.

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.

Thank you for the question. I will take the first one. And I assume Arpa for the second. So first on the 222 is a bivalent vaccine that is based on the BA.4, BA.5 variant. This is most -- I think the question is directed mostly to the FDA guidance and the focus particularly in United States on authorization of vaccine. We continue to work hard to pull together both preclinical and manufacturing data, and all of our underlying bivalent platform data, which includes two different Phase 2/3 studies and I referenced mRNA-1273.211 and mRNA-1273.214, both of which demonstrated superiority of the bivalent platform and the performance against Omicron variant concern. So the totality of that data was Phase 2/3 study was frequently data manufacturing data will form the submission, which is consistent with the published FDA guidance. FDA has also asked us as you referenced to run an additional study really to support future deployment, because we do want to understand the performance of the 222 vaccine if there is further variant evolution for instance in December or January has unfortunately happened every year in this pandemic and we want to have samples that allows us to inform that those sorts of decisions about deployment of vaccine. We expect to enroll that study really in August. But this data wouldn’t be available for a few months, because you would follow till approximately a month to get the boosted samples, collect them and test them in the relevant asset. We do not at this point expect nor the FDA suggested that that data would be required prior to authorization. In fact, we will be authorizing based on the prior clinical data for 211 and 214 the preclinical data manufacturing data. But we will have that -- those samples in hand. Now as to the specific timing of when we would be able to share 222 data, other than later in the fall, I don’t think we have any other specific item today, except to emphasize again that it’s really not required for the authorization based on recent FDA guidance, it really is to support future deployment decisions that are in the later part of the winter.

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.

Understood. Thanks so much.

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

Hey. Good morning. Thanks for the questions and thanks for the updates. A quick question in relates to the comment around getting the BA.4/5, 222 authorized. Stephen you had mentioned the pathway there, but actually want to think a little bit forward, do you envision that future variant and development vaccines would be able to be authorized quickly via just preclinical data, such as like flu or do you think that that’s where the path is going and that the FDA seems to be going along that route? That’s the first question. And then second question, just ironically you had made comments around monkeypox vaccine and now WHO has made comments on global health emergency, I didn’t see any update there and wondering if that actually had made any progress? Thank you.

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.

Got it. Thank you, guys.

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

Hi. This is Sheldon on for Gena. Thanks for taking our question and congrats on the good quarter. We have two questions. One is on the current APA for 2022. Could you comment on how many doses for the COVAX contracts are still unallocated and how they were accounted for in the current $21 billion guidance and could you also remind us on the current APA for 2023 and how should we think about the demand next year? And a quick follow-up, another question on mRNA-1010 flu vaccine, the Phase 3 immunogenicity trial, how do you think about the expected data timeline or do you need to enroll also in the Northern Hemisphere? Yeah. Thanks.

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

I will…

I will take obvious for sure.

Let me -- so just to reiterate, the $21 billion in Advanced Purchase Agreements does not include any additional COVAX doses to be allocated. So that already reflects a lower demand that we are seeing from the COVAX countries and we anticipate that for the remainder of the year we will see very few additional orders and demands from these countries. In terms of 2023 orders, we have already signed deals with five countries that we have previously announced; the United Kingdom, Canada, Australia, Kuwait and Taiwan. We have also signed options with Canada, Switzerland, Taiwan as well. And we are actively having dialog with countries around the world for additional orders in 2023. We will be able to provide additional guidance on what these advanced purchase orders look like later this year or early next year.

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.

A quick follow-up, the Southern Hemisphere immunogenicity data, so likely data will be available later in 2022?

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.

Thank you so much.

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

Hi. Good morning and this is Tara on for Tyler. So I was hoping you could provide some comment on the 11% share gain that Pfizer was referring to since January 1st and where that might be coming from, like most of it coming from the adeno vaccines, given the share that they have lost, and of course, I’d be interested to know where the Spikevax share changes are coming from as well?

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.

Yeah. Thanks.

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

Hey, guys. Thanks for the question. And on slide 23 you guys gave sort of the illustrative example of kind of the longer term opportunity for COVID. But I wanted to just get, as you invest in 2023 and beyond, not asking for guidance, but how do you think about what would be the tail of the endemic phase in terms of either volume or patients, et cetera? And then a related question, in terms of capital allocation, how do you guys think about investing in businesses. I know, Stephane, the goal here is to further expand the reach of Moderna’s technology in one of your slides, but how do you think about adding capabilities that are outside of that that maybe peripheral, but I wasn’t sure how far you are willing to sort of steer a little bit away from the core mRNA? Thank you.

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.

So the only comment I would add to that is, we will continue to work closely with Nipah, as well as governments around the world to see how their recommendations evolve for their populations in terms of the populations that are being covered and how often they are recommending booster. So we will continue to work with them and over time see how the demand shape up.

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.

Okay. Great. Thanks guys.

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

Hey, guys. Thanks so much for taking the question. Just as you think about the pipeline and capital allocation from here. Can you help us think about just with the buybacks, as well as further business development, how you are thinking about prioritization? And then just a second question on monkeypox, just I know that since you have announced that you have been looking at preclinically and given the kind of public health emergency and broader vaccine needs. Can you comment a bit on your plans from here and any further plans for development? Thanks.

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.

Thanks, Stephane.

Stephen, you want to say on the monkeypox?

Yeah. Yeah. So, I think, conceptually, we were obviously very aware with monkeypox concern, and obviously, very sensitive to recent announcements. And so what we are looking to do is understand if we were to develop that program, how would we move it? The purpose of moving it would be to move very quickly, and Stephane, just covered, our platform is pretty well established and our ability to rapidly scale has been demonstrated. And if we were to go after a monkeypox clinical development program, it would be to very quickly progress towards an approvable standard endpoints in a clinical study. And in that sense, we need to engage with regulators and other consultations to determine what that path would be. It’s not a primary or principal discussion to just advance a program and demonstrate in Phase 1 clinical generally. We would really be doing it to try and help generate a public health counter-measure. And to those conversations, we will start to more engage with them. We obviously also recognize, there are other even larger public health threats right now. COVID remains the larger public health threat and many regulators are totally focused on addressing the updated this to work for this fall and so we are respectful of that. But we will engage in those conversations and once we have clarity on whether or not we will go forward given what we think those endpoints will be we will obviously provide it, but at this point, it’s premature to say more, because we have not clarified those endpoints and therefore have not made our own decision about whether we will move the preclinical program into clinical development at this stage.

Thanks for the color.

Great. Thank you so much everybody for joining the call today and for your questions. We look forward to speaking to many of you and look forward to welcoming you at the R&D Day early September. Have a great day. Thank you.

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