Moderna, Inc. (MRNA) Q3 2024 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Moderna Third Quarter 2024 Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to the speaker today, Lavina Talukdar. Please go ahead.

Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's Third Quarter 2024 financial results and business updates. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the Investors section of our website. On today's call are Stéphane Bancel, our Chief Executive Officer; Stephen Hoge, our President; and Jamey Mock, our Chief Financial Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements. I will now turn the call over to Stéphane. Stéphane Bancel: Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us. I will start with a review of our business in the third quarter. Jamey will present our financial results and outlook. Stephen will review our clinical programs. I will then come back and share our key priorities before Q&A. We delivered $1.9 billion of revenue in the third quarter. Our net income was $13 million. We ended the quarter with cash and investments of $9.2 billion. As you know, for over a year now, we have been working to improve productivity in the company. In the third quarter of 2024 compared to the first quarter of 2023, we reduced operating expenses by $500 million across cost of sales, RD and SG&A. This figure excludes $1.4 billion of resizing charge in the first quarter of 2023. I would like to thank our teams who have been working hard to achieve these cost savings and we'll continue our journey to improve our cost efficiencies. Stéphane Bancel: This year, the COVID market benefited from U.S. regulatory approval that was 19 days earlier than in 2023. Spikevax was available across all segments of the U.S. health care system. Our manufacturing and logistics teams were able to double the number of doses delivered to customers compared to the first week of last year's COVID vaccine season. Now turning to what we have seen so far this season for vaccinations in the U.S. retail market. The graphs on Slide 6 are shots in arms in the retail channels as measured by IQVIA, which includes retail pharmacies and Long-term Care. As you can see the graph on the left, the earlier approval of a vaccine this year has helped to push total market vaccine dose above where they were last year at this point in the season. The graph on the right shows weekly doses, which, as you can see in the past few weeks have started to decline. While we will not know the shape of this curve until the end of the season, we are encouraged that the COVID market is starting to prove to be a sizable and durable long-term market. Moderna has 40% share of retail shops in arms season to date. . Stéphane Bancel: Turning to Slide 7. We think it is helpful to look at vaccination trends from last year to inform our understanding of where there are additional opportunities to grow the COVID market. There are 3 major delivery channels for respiratory vaccines in the U.S.: There are retail pharmacies, integrated delivery networks or IDNs, which basically serve hospitals and doctors who are part of these networks and the third group, government programs and other. As you can see, the retail channel comprised 73% of total U.S. market for COVID vaccine doses last year in 2023. COVID vaccines have been overwhelmingly given to pharmacy settings with such smaller distribution into other channel. If now we look at Flu. In the flu market, however, the distribution by channel is different with much greater emphasis on IDN and government. Since COVID started to present a much greater health burden than flu in the United States, we remain convinced that increasing the vaccination rate of COVID relative to flu provides a significant opportunity to improve public care, especially in the IDN segment and government and other segments. Therefore, as we execute our COVID strategy, we see the opportunity to drive the COVID vaccination rate closer to flu over time, especially in the underpenetrated channels. One additional approach to increase COVID vaccination rate over time is a combination COVID/flu vaccine, which Stephen will discuss shortly. . Stéphane Bancel: Let's now turn to what Moderna is doing to drive vaccination rates. The first objective of our effort is to educate health care providers on the importance of COVID as a public health trend. Its negative impact has a much greater cause of severe illness than other respiratory viruses and the opportunity to improve public health by following vaccine recommendation. As you know, in the 2023, 2024 season, there were 3x more hospitalization of COVID than flu. Secondly, we're going direct to consumer to emphasize the benefit of getting vaccinated and our most recent campaign highlights the danger of a long COVID and the importance of vaccination to minimize the risk of it. Additionally, public health authorities, including the CDC, recognized the importance of vaccination, which is reflected by the most recent AC proclamation for additional COVID doses for immunocompromised people and dose 65 and above in the sping of 2025. Stéphane Bancel: Moving on to RSV. Moderna third quarter mRESVIA sales were $10 million. This was below expectations going into 2024. Unfortunately, the timing of approval and recommendation by the CDC of mRESVIA resulted in us missing most of contracting season. Additionally, the substantial buildup of inventory in the channel by competitors prior to our launch has had a negative impact on our sales. Looking to 2025, we believe that we'll be able to participate from the beginning of the contracting season in the U.S.. We also filed for approval of a broader mRESVIA label that will allow to address the 18- to 59-year-old high-risk population. Additionally, we see the potential for market expansion if regulators recommend revaccination. And finally, we are now starting to receive approval outside the U.S., and we expect to have sales in those markets in 2025. Stéphane Bancel: I am delighted to welcome Abbas Hussain to the Moderna Board of Directors. Abbas has strong commercial background, which makes him a great addition to our Board. He has more than 25 years of commercial experience, more recently, as CFO of Vifor and before that, as Chief Commercial Officer of GSK. Abbas is an ideal member to guide Moderna forward as we continue to advance our growth portfolio of products towards commercialization in the next few years. We very much look forward to working with Abbas in the years ahead. Stéphane Bancel: Finally, I'm very pleased to announce the expansion of Moderna's Executive Committee, expanding the responsibilities of 2 current members of the team and adding 2 new members to the team to help us ensure we execute our strategy and deliver on our missions to patients. First, Stephen will expand his role to include oversight of a full commercial organization, which was previously divided between he and I. As Moderna President, Stephen is responsible for strategic across the full lifecycle of the company, Research and Development and Medical and Commercial. Joining Moderna's Executive Committee are Rose Loughlin and Jacqueline Miller. Rose is being promoted to Executive Vice President, Research. Jackie is being promote to our Chief Medical Officer, leading our development organization. The promotion of Jackie and Rose to the Executive Committee is a special milestone for the company. This is the first time in our history that we have promoted internal talent onto the Executive Committee. It is a testament to both of these remarkable colleagues who have each spent years building and leading critical areas of the company. And also reflect our commitment to grow and develop our internal talent at Moderna. Tracey Franklin, our Chief Human Resource Officer will also expand her role becoming the Chief People and Digital Technology Officer. The expansion of her role emphasized the vital integration of people, culture and digital innovation across the business. As Tracey and the team works to scale up our business processes, they asked a question of how we should do work? How should we be organized between people and digital technologies, being over-the-shelf-software, AI solutions, including our own machine learning algorithm or GPT Enterprise and/or robotic solution. I would have to thank Stephen and Tracey for their new expanded role and for their partnership over many years and many years looking forward. And to congratulate Rose and Jackey for now being part of the company executive committee. With this, let me turn to James.

Thanks, Stéphane, and hello, everyone. Today, I will provide an overview of our financial results for the third quarter and share our outlook for the remainder of 2024. Let's start by reviewing our commercial performance, which you can follow on Slide 14. For the third quarter of 2024, our net product sales were $1.8 billion, bringing year-to-date product sales to $2.2 billion. We also had approximately $100 million in year-to-date other revenues from grants, collaboration, licensing and royalties, which are not included in the figures on this slide. $1.2 billion of our 3Q 2024 product sales were from the U.S. market, where we experienced an earlier launch to the 2024, 2025 season. While our 3Q results exceeded expectations, this was mainly due to sales timing between the third and fourth quarter, supported by receiving FDA approval of our updated COVID-19 vaccine, 3 weeks earlier than last year. Also included in our U.S. sales of $1.2 billion is a provision release of approximately $140 million, primarily driven by lower product returns from the 2023, 2024 season compared to our previous estimate. Additionally, we commenced RSV vaccine sales in Q3. While initial RSV sales were limited at $10 million, we believe there is potential for long-term growth as we work to capture a larger market share over time. International sales of $0.6 billion were in line with our expectations but lower compared to the same period in 2023, when sales benefited from the fulfillment of orders deferred from 2022. For our full year 2024 outlook, we are reaffirming our product sales estimate of $3 billion to $3.5 billion, which implies the 4Q product sales range of $0.8 billion to $1.3 billion. We expect our U.S. 4Q product sales to be between $200 million and $500 million. The range is driven by the following 3 key variables. Our [ Sydac ] market share, which is currently tracking to approximately 40% in retail. At this time, it's too early to call our share in IDNs and with the government. Next, vaccination rates. Our range assumes a market size, which has COVID vaccinations flat to down 10% versus the prior year. Finally, our performance in and the ultimate size of the RSV market in 2024. To summarize, if our retail market share remains constant at 40% and the U.S. market finishes this season down 10% compared to last year, and there is no uptick in RSV sales, we expect to be on the low end of the sales range. We expect our international 4Q product sales to be between $600 million and $800 million. We have a tighter range on our international sales as most of these sales are for contracted volume and confirmed orders. The final international sales amount will be dependent upon revenue recognition timing and our performance in a few specific markets.

Moving to Slide 15, I will talk about our 3Q financial results in more detail. Net product sales for Q3 were $1.8 billion, as I just discussed on the prior page. Our cost of sales for 3Q 2024 was $514 million, representing 28% of net product sales for the quarter. This was a 77% year-over-year decline in our cost of sales from $2.2 billion in Q3 2023. As a reminder, last year, we undertook a strategic initiative to restructure our manufacturing footprint and recorded $1.4 billion of charges in 3Q 2023 from inventory write-downs, CMO wind-down costs and cancellation fees. Excluding the $1.4 billion charge, cost of sales still declined by 38% year-over-year as we continue to make progress driving additional productivity improvements in our manufacturing operations. R&D expenses were $1.1 billion in Q3 2024, reflecting a 2% year-over-year decline from $1.2 billion last year. We purchased a priority review voucher during the third quarter of 2024, which is included in our Q3 results. Excluding the PRV purchase, we had strong year-over-year spending declines for research, development and clinical manufacturing as we continue to drive cost efficiencies across all areas of the organization. SG&A expenses for Q3 2024 were $281 million, representing a 36% year-over-year reduction. This decline reflects our focus on driving cost efficiency and making targeted investments that continue to strengthen our overall productivity. I will provide further details in the following slides. We recognized an income tax of $8 million for the third quarter, a significant reduction from the $1.7 billion in the same period last year. The decrease was largely attributable to the establishment of a $1.7 billion valuation allowance on deferred tax assets in Q3 2023. The valuation allowance has remained in place since its initial recognition and continues to impact our tax expense. Our net income for the period was $13 million, a notable improvement from the net loss of $3.6 billion recorded in Q3 2023. Earnings per share for the quarter were $0.03, compared to a loss of $9.53 per share in the same period last year. We ended the quarter with cash and investments totaling $9.2 billion, down from $10.8 billion at the end of Q2. primarily due to ongoing research and development expenses and operating activities.

Moving to Slide 16. I want to provide additional detail on the cost reductions we are driving across the company. As discussed on previous calls, as a platform company, we are building a unique operating model. And over the last few years, we have invested purposefully into people, processes and technologies to build foundational capabilities that will allow us to scale efficiently. We continue to see these efficiency gains in our 2024 results. As mentioned on the previous slide, we reduced 3Q SG&A expenses by 36% year-over-year. We had year-over-year reductions across all areas of our SG&A categories, commercial, medical and G&A functional spending. Major drivers were from reductions in purchased services and external consultants as we better leverage digital technology and AI. Year-to-date, our SG&A spending is down 24% year-over-year. While we continue to drive productivity improvements, we are also committed to increasing COVID-19 vaccination rates with investments in HCP education and consumer ad campaigns. As well as increasing our COVID-19 and RSV market share in competitive markets. Therefore, we don't expect as large a year-over-year decline in 4Q SG&A spending versus the prior year. For the full year, we expect SG&A to be down approximately 20% to $1.2 billion, which is reflected in our financial framework update on the next slide.

Turning to that 2024 financial framework on Slide 17. Our net product sales guidance remains at $3 billion to $3.5 billion. As reviewed earlier, there are a handful of factors we are monitoring as the season progresses. For cost of sales, we are narrowing our guidance to 40% to 45% of product sales as a result of the continued manufacturing productivity improvements we are driving in the company. For R&D, we are lowering our full year estimate of $4.6 billion to $4.7 million from our previous guidance of $4.8 billion. The reduction is due to cost savings from productivity improvements, as well as clinical study timing. For SG&A, we continue to expect full year expenses to be approximately $1.2 billion, down from $1.5 billion in 2023, a decrease of approximately 20% year-over-year. We continue to expect taxes to be negligible in 2024, and we are updating our capital expenditures outlook to approximately $1.2 billion which reflects the purchase of our Norwood campus from our landlord for approximately $400 million, partially offset by approximately $100 million of other CapEx reductions. The purchase of this highly strategic asset allows us full control to expand and build out the campus to drive future productivity and innovation. We anticipate this transaction will close in December. We continue to expect ending 2024 with approximately $9 billion of cash and investments. The additional cash outlay for purchasing our Norwood campus will be offset by reductions in our cost of sales, R&D and other capital expenditures. In summary, 2024 was a year of financial discipline, and we are well positioned as we enter 2025. We remain committed to managing costs, optimizing our operations and investing in our future growth. With that, I will now turn the call over to Stephen.

Thank you, Jamey, and good morning or good afternoon, everyone. Slide 18 shows the prioritized programs we highlighted at our R&D Day in September. As Stéphane mentioned earlier, we discussed our focus on 10 product approvals over the next 3 years to drive growth. We've now filed for approval for 3 respiratory vaccines, our next-gen COVID vaccine, mRNA-1283, our RSV vaccine for high-risk adults ages 18 to 59 and our flu COVID combination vaccine for people aged 50 and older. Most of the other 7 prioritized programs are in pivotal studies, and the remainder are expected to begin their pivotal studies in the near future.

Slide 19 highlights the most recent updates from our late-stage portfolio. As a reminder, in September, we presented positive efficacy and immunogenicity data from our next-gen COVID vaccine mRNA-1283. We have since filed for approval in multiple jurisdictions, and have a PDUFA date of May 31 in the United States. Also in September, we shared positive Phase III data for our RSV vaccine in high-risk adults ages 18 to 59. This vaccine has also been filed for approval in multiple countries, with a PDUFA date of June 12 in the United States. For our combination flu COVID vaccine, we previously shared positive Phase III immunogenicity and safety data. And on the basis of that data, we filed for approval at the end of last year in the United States and other countries. We have previously demonstrated efficacy for the COVID component of the vaccine, demonstration of efficacy for the flu component may ultimately be required for approval. To that end, our stand-alone flu vaccine, mRNA-1010, is currently in a Phase III efficacy study that is accruing cases rapidly. Based on the current pace of case accrual, we are optimistic that we will be able to conduct the first analysis of efficacy for our flu vaccine at the end of the currency.

Now turning to our nonrespiratory portfolio. Starting with our latent and other virus vaccines. For our CMV vaccine, we announced last month that the Data and Safety Monitoring Board informed us that the early efficacy criteria was not met, and recommended that the study continue to its final analysis. We remain blinded to the study and continue to expect the results for the final analysis later this year. Our Norovirus vaccine Phase III study is fully enrolled in the Northern Hemisphere, and we are preparing to enroll participants for the upcoming Southern Hemisphere season. The trial is currently on FDA clinical hold in the U.S., following a single case of Guillain-Barré syndrome, which remains under investigation. Given that enrollment had already completed for this season, we do not currently expect any impact on time lines, while we complete the investigation and update trial documents with this information. In oncology, we and our partner, Merck have multiple late-stage studies underway evaluating INT or mRNA-4157 in combination with KEYTRUDA. The first of which, adjuvant melanoma, is part of our 10 prioritized program. The Phase III for this is now fully enrolled. Two additional Phase III studies are underway in non-small cell lung cancer, and there are 2 randomized Phase II trials ongoing in high-risk muscle-invasive bladder cancer and adjuvant renal cell carcinoma. In rare diseases, propionic acidemia, or PA, is in its registrational study, and methylmalonic acidemia, or MMA, we have -- with MMA, we have agreed with FDA on our pivotal study design and expect to start that study in 2025.

Turning now to the trial design for our second Phase III study in non-small cell lung cancer for INT in collaboration with Merck, which complements the Phase III INTerpath-002 trial. This Phase III study called INTerpath-009 will enroll more than 1,200 patients with Stage II to IIIb non-small cell lung cancer without an EGFR mutation and who are able to undergo surgery. These patients will receive neoadjuvant therapy of KEYTRUDA plus chemotherapy followed by surgery. Following surgery, the study will randomize approximately 680 patients, who have not achieved a pathologic complete response into 2 arms, combination of INT plus KEYTRUDA or KEYTRUDA plus placebo. The primary endpoint for the study is disease-free survival and the secondary endpoints include Distant Metastasis-Free Survival and Overall-Survival. . With that, I will now turn the call back over to Stéphane. Stéphane Bancel: Thank you, Stephen and Jamey. For 2025, we have 3 priorities: Priority 1 is to drive sales of approved products. Priority 2, focus on our late-stage pipeline, where we believe we can have up to 10 product approvals over the next 3 years, which will drive sales growth and diversification. Priority 3, to deliver cost efficiency across the business and slower pace of R&D investments, reducing annual R&D expenses by $1.1 billion, starting in 2027. Stéphane Bancel: Our first priority is to drive sales of Spikevax and mRESVIA, which we believe are the foundation of our respiratory vaccine portfolio. We will continue to work with all market channels to maximize Spikevax availability. We are focusing on marketing and medical education to try to drive the COVID vaccination rate closer to that of flu over time. Internationally, we plan to bring manufacturing plants online in the U.K., in Canada and in Australia in 2025 and then start to fulfill multiyear contracts in those countries. And with the full season of RSV contracting in the U.S. and other countries in 2025, we expect to increase mRESVIA set the market share. Stéphane Bancel: Priority 2, we are focused on delivering up to 10 product approvals over the next 3 years, which we believe will drive sales growth, and fund the next wave of R&D investment. For 8 of these programs, we have near-some milestones. For CMV, we expect to trigger the interim analysis for Phase III vaccine efficacy study by the end of this year. We're looking forward to those results. For PA MMA, we plan to initiate pivotal studies, Our Norovirus and flu Phase III vaccine efficacy studies are now underway. Finally, we intend to file 3 products in 2024 for next-gen COVID vaccine, our IV vaccine for high risk 18- to 59- year old and our combination COVID/flu vaccine which is subject to ongoing discussions with the U.S. FDA. Stéphane Bancel: Priority 3, deliver cost efficiencies across the business. We've demonstrated our commitment to cost savings by the $2.6 billion cost reduction we made in 2024. We will continue to focus on improving efficiency by reducing costs across the entire company, across manufacturing, across R, but also D and across SG&A in 2025, but also in 2026. Through efficiency program, we're reducing cash cost to an estimated $5.5 billion in 2025 and $5 billion in 2026. This brings our total cash cost reduction to well over $1 billion over these 2 years from a $6.3 billion in 2024. We will continue to adjust our cost structure to ensure we break even on a cash cost basis no later than 2028. In other words, to be very clear, if needed, we will reduce our cost structure further than the $5 million cash cost level if our sales objectives are not met. For lack of [indiscernible] product, we expect important milestones. We filed 3 BLAs. For CMV, we look forward to having the final results of our Phase III study in 2025. Flu norovirus vaccines are in Phase III studies and the timing of data readout will be subject to case accrual. For the INT adjuvant melanoma, we will also be subject to event accrual. For PA, we are already generating data from our registration study, and we expect to start registration study for MMA this year. We will continue to focus on delivering the greatest possible impact to people through mRNA medicine. Our portfolio of products and pipeline are progressing well, 2 approved products, 3 BLA filed and 6 Phase III or pivotal studies ongoing. Our RNA platform is working.

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

Two questions for me. One is, can you speak to the source of the rest of world revenue generated in the third quarter and expected in fourth quarter with regard to which countries are contributing here and these contracts that should you expect them to recur in 2025 and -- and then separately on CMV, you talked about the DSMB, you'll share the results of the DSMB recommends unblinding. Can you speak more to that as to whether we will actually get interim data provided to us or we're going to have to wait for the full analysis here?

Sure. Thanks for the question, Salveen. I'll take the first one in terms of rest of world revenue. So without getting into too much specifics, I think you know we're establishing a presence in the United Kingdom, in Canada, in Australia, we announced an order in Brazil -- and so that's been -- the balance will be shipped either in the third quarter and the fourth quarter. And when we look at the fourth quarter of the $600 million on the low end, the large majority of that is contracted with those countries and others, but I just wanted to name a few. As we look to 2025, I think we mentioned at R&D Day, that there will be a decline in some of those countries. And then it will then uptick our anticipation is that it will uptick in 2026 based upon the contracts that we have in certain countries. So that's a little bit on the rest of world split.

And on the CMV question. So if the DSMB recommends unblinding to the sponsor at the first term analysis to your question, that would be because we met the criteria for vaccine efficacy. And obviously, we would share those results if we receive them. There is a chance that the DSMB will not recommend unblinding, which would mean perhaps that we did not make statistical significance in that first interim analysis and be going then to the final analysis, which could happen quite quickly. And depending upon the conditions of that communication and the timing of that final analysis, we may or may not be communicating right then about the fact that we're waiting for that final analysis. But we would, in any event, if the DSMB recommended unblinding, share those results.

Our next question comes from Ellie Merle with UBS.

Just another one on how to think about the ex U.S. COVID revenues. In the past, you've talked about some contracts with some countries for guaranteed purchases like some even throughout the end of the decade. Maybe can you just in broad strokes characterize the size of some of these contracts that you have outstanding ex U.S.? And I guess what's essentially guaranteed from a revenue perspective here in terms of some of these ex U.S. contracts sort of if you have a sense of maybe like what the minimum sales ex U.S. could be in certain years going forward based on that? And then just a second follow-up on CMV. I think you alluded to this in the last answer, but maybe just -- in terms of the like rate of accruals, I guess what's your latest expectation in terms of the time frame between when you will accrue the number of events to trigger the interim versus the number of events to trigger the final analysis, just the timing between those 2.

Okay. Yes, sure. So I'll take the first part, Ellie. So in terms of the contract that we have with some of these countries, we're not going to disclose the specifics. But what I will say is that as we add products over time, you can imagine that the amount of the minimum purchase commitment will grow over time. So that's why, as I just mentioned in my prior response, that it will drop in 2025 and then start to grow in 2026. But I don't think we're going to disclose anything more than that.

On the question on CMV and the timing of case accrual, it is coming quite steadily right now. And in fact, we do have a bit of a backlog of case confirmation that we are working through. There's multiple steps that have to go with multiple testing to validate a case. And so we actually -- obviously, we don't control the rate of case accrual, but we do expect that if we are going to that final analysis, that it won't be a very long period of time between and actually could happen quite quickly.

Next question comes from Gena Wang with Barclays.

I have 2 questions. One is regarding the commercial questions. If we calculate USD 1.2 billion revenue and accumulate 19 million U.S. doses, is the calculation like $63 per dose as a net price is the right way to think about it? And then regarding the reserve return, could you provide a final reserve return from last winter season? And what is your reserve return so far for this winter season? And quickly regarding the flu combo -- flu/COVID combo, not using priority voucher, maybe give us a little bit more rationale for this? And then will all 3 that you submit this year? How many of these will make it for 2025 winter season?

Yes, Gena, maybe I'll take the first question. So on the U.S. pricing, the $19 million, I think, is the total market you might be referring to for COVID vaccinations, not specific to Moderna. That said, the pricing that you're talking about, we won't specifically disclose, but it's not that far off.

On the pipeline questions, Gena, thank you for both. So first on the priority review voucher for the Flu/COVID combo. Given where we are in terms of timing of this year and relative timing of the contracting season for flu vaccines, we no longer think it makes sense to use a priority review voucher to try and accelerate that process because ultimately, we believe we would miss the contracting season. For that reason, we'll hold back that PRV and use it for a different product in the future. As far as the submissions, as we confirm today, we are expecting 2 -- the other 2 submissions to go forward with priority review vouchers. And given the time lines, you can understand that we think that means approval next year is possible and can happen prior to the season. However, we do not include any revenue from either the 18 to 59 RSV SBLA or 1,283 in our 2025 guidance or expectations. And so if we were able to deliver those with those priority reviews and approvals, we still wouldn't include any revenue that would be an upside.

Reserve return?

Sorry, could you repeat the question, Gena, I missed the sales return part.

Yes, sure. Reserve return is -- could you provide the final reserve return from last winter season? Because I know you initially booked over $500 million and you need to adjust it to see the final numbers. So if you could provide that final numbers? And what is your reserve return assumption so far for this winter season?

Yes. So as I mentioned in my prepared remarks that we released in the quarter about $140 million, primarily driven from returns reserves being lower than our prior estimate. So that $500 million-plus went down to, let's say, $400 million for the prior season. So we learned from that and continue to forecast what an anticipated product returns reserve is for this season, and we will continue to monitor it as we look at vaccination rates throughout the entire quarter. and what we project into the first quarter of next year.

Our next question comes from Michael Yee with Jefferies.

Two questions, not 10. But on the combo, I know that you say you're in discussions with the FDA. Can you just clarify what are the different factors that are contributing to why you have maybe lack of confidence on filing or I guess not certainty on filing the combo, for example, would there be an infection study that has to be run? I think it's a little unclear to us on the combo. And then on RSV, I think the market had anticipated this was going to be a big market. However, obviously, there is a lot of dynamics going on there. Can you maybe comment on whether you think there will be a change to this market? And what would give you confidence that you're going to actually be a player here? Given you've already given -- given your current position now and where your guidance is for 2025.

Thank you for both questions. So first on the combo and I think Stéphane will take the question on RSV. So first, we are in discussions with the FDA. The data for 1083, as you'll remember, came sort of middle of this year. And so we've only more recently had the opportunities to be sharing that and engage in discussions about what would be in the BLA for accelerated approval of 1083 based on immunogenicity results. I would not comment on those discussions back and forth. We continue to work closely with the agency to understand what they would like to see in that. We continue to believe, as we said today, that we will be submitting for approval this year. although those conversations are ongoing, and we'll update as they proceed forward. The decision not to use the priority review voucher became one about the timing of that approval and ultimately, our view that would -- we would miss the contracting season for influenza, and therefore, it didn't make sense to do that. But by withdrawing the priority review voucher, we also allow for a more fulsome time for review, which is also obviously the benefit of ourselves and the agency. Stéphane Bancel: And on the RSV, Mike, I think there's a few things. As you know, the market has been much lower than last year, and much lower than people anticipated. Obviously, the new CDC guidelines that came out in the June time frame impacted that. The other piece we are hearing from customers is that they're really focused on making sure people get COVID through vaccination right now. So I think it's going to be quite interesting to see what happens in Q1, potentially and thus the shape of the curve of IV looks different than what we saw in the previous season. So that's to be seen. The other piece is because through contracting and because of what happened last year and there's no contracting happened before the CDC guideline. There's quite a lot of volume in the channel, whether both at the retailers themselves and in the wholesalers. And so of course, with a much lower market and a large inventory in the customers and both wholesaler and retail pharmacies as you can imagine is taking quite some time to go through that inventory. And so we think that there's an interesting question about the market dynamic in terms of timing, again, will Q1 be a more important timing for RSV going forward. It's a question to be seen. Of course, we expect as more data accumulate, CDC will continue to review and look at what is the right guideline. So that's for the public leaders to decide and being able to totally contract COVID and RSV at the same time for a full season, we believe it's going to have an impact in the U.S. And the other piece I mentioned also in my remarks, is outside the U.S., which is as you know, we have no sales outside the U.S. We are getting approvals, and they're going to continue to happen in the months to come. So we believe '25 and beyond should also help outside the U.S.

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

So I wanted to ask about U.S. COVID vaccine sales. So they were roughly flat quarter-over-quarter between Q3 and Q4 last year. But the vaccine sales guidance for Q4 this year assumes a decline as much as 60% to 80% quarter-over-quarter if RSV sales remain low and my math is correct. So is there a significant shift occurring this year due to the vaccines being available earlier and patients getting vaccinated earlier that you expect to be the dynamic moving forward? Or could this guidance be conservative? I just asked because it's a pretty dramatic change in the cadence of U.S. sales. So any additional color would be appreciated. Stéphane Bancel: Thank you. So if you think about the U.S. market, I think what is important first is to look at the different channels because they are very different, As we share the data that we have is the IQVIA data for retail and long-term care facilities. As you see, earlier start season to date, a little bit ahead. But if you look at the weekly scripts, they are coming down the peak. We hear from retailers that they are working very hard in terms of vaccination campaign ahead of Thanksgiving and they also have plans ahead of Christmas between Thanksgiving and Christmas. But that is to be seen what happens, what is a shape of that curve. And then there is the IDN networks. As I said in my remarks, we have been working with IDN networks to increase the COVID to flu vaccination rate versus last year. We don't have a lot of visibility because those campaigns started later, most of them early October, we as used the retailer starting in August with some of them starting pretty strong in August and early September. And then the government data for which we have no visibility, we only get orders when the orders coming. So it's still early in the season. The shape is clearly different from last year in retail. We are hoping that we will work on retailers and our work in might tail off with different shape as last year. And then IDNs and government. So we will have to see and we're continuing to learn about this market, but we believe it still remains sizable and clearly durable. We see that millions of people who want the COVID vaccination.

Yes. And maybe I would just add that, remember, when we sell product, that is not tied to vaccination. So when you look at the decline from the third quarter to the fourth quarter, we were -- we had an early approval to Stéphane's point. So therefore -- and we were better ready to ship more within the third quarter. So that's what I think you see on a year-over-year basis, what's happening here.

Our next question comes from Terence Flynn with Morgan Stanley.

I was just wondering on the INT program, obviously, you're continuing to accelerate the clinical program here with the new Phase III in lung. But can you just give us an update on the manufacturing facility in Massachusetts and if that's still on track for completion by year-end? And then if there's going to be any bridging work required by the FDA for approval or validation? Stéphane Bancel: Terence, yes. So the team continues to do a great job in the plant with all the progress are totally on schedule. And so given what we shared at R&D Day in terms of timing with FDA, the plant will no longer be a critical path to approval. But we're keeping the team working really hard, and they're making great progress. So we're very pleased with that.

Yes. And on the question of bridging, once the plant is operational, we'll transition our clinical work to that plant as well. And so effectively, all of the programs will include -- many of the programs may include, I should say, that data. So the bridging will be done in stream.

Our next question comes from Evan Wang with Guggenheim Securities.

Two for me. First, on the election results. Just wondering given the pending change in administration, what barriers are in place from policy or legislative standpoint that would meaningfully limit threats to current use of vaccine in the U.S.? What steps are you doing to reassure confidence there and protect against potential increase in legal liabilities? And one on RSV, some competitors are describing how data are now sufficient for expansion in international revenues. Do you agree there? And what gives you confidence in competitiveness ex U.S. specifically? Stéphane Bancel: Good morning. So thank you for the questions. So on your first question, as you know, our mission of the company is to bring innovative medicines to help people either prevent disease or treat disease. Since the company founding, we've always worked very closely with governments leader and public health leaders around the world, including, of course, the U.S. And as you know, we work very collaboratively with President Trump during his first term. And so we're going to continue to do that. Our mission is to really ensure we help people and we increase people's health, which is totally align with what the administration is going to work on. On RSV, outside the U.S., as you know, the market have approved the product at very different times. Outside the U.S., you have a very similar process than you have in the U.S. because once you get approval, you need to get for recommendation, which is CDC [indiscernible] which in some markets happen at different times. Then you have pricing negotiation, which, as you know, are quite different outside the U.S. and the U.S. Sometimes you might miss a whole season because of the timing of those different elements, As you know in the U.S., there's no pricing negotiation where you can lose sometimes months or quarters. So I think the slower ramp outside the U.S. is reflecting both the recommendations that sometimes tend to be for all the population like 70 and above or in countries 75 and above. And just the timing of all the mechanics to come together and then again, you could miss a season by a few weeks and you just miss the season. So those are the dynamics happening outside the U.S. We continue to believe that RSV causes hospitalization and hurts people and the RSV vaccines are going to be important to prevent people getting hospitalized, especially if you think in terms of the tailwinds, we have an aging population in Europe. We have a aging population in Asia. And so I continue to believe that over time, the RSV market outside the U.S. would be an important market. But there's a lot of education to do, both at the consumer level, where a lot of consumers didn't even know what RSV was until recently. Some don't know as of today, same with some doctors. So there's just a lot of work to do. But the virus is hurting people. So there is a need there, and we collectively need to work with public figures to prevent hospitalization. Everybody knows, especially in governments that are single players that vaccines are most probably the best ROI that you get in our health care dollars. And the best way to not have hospitals with too many is to get prevention.

Our next question comes from Edward Tenthoff with Piper Sandler.

Most my questions have been answered. But I think I saw some news maybe on the Vertex CF program. And I was wondering if you could just kind of give us an update on what's going on there with that rare disease program?

Yes. So thank you for the question, Ed. So we continue with our partner, Vertex, who is conducting that clinical trial. So the sponsor study have the most information on it. But we continue to have the path of -- we've completed the single ascending dose portion of that trial and are now in the multiple ascending dose portion of that trial. That is, patients receiving treatment regularly to ultimately measure whether or not we're having an effect on respiratory measures and hopefully, overall, addressing the burden of CF in those patients that can't take the small molecule correctors. We do expect a readout from that multiple ascending dose trial. I think Vertex previously guided that we expect that this year, and we will look for them to provide further updates on that timing, if they happen.

Our next question comes from Jessica Fye with JPMorgan.

I have a few follow-ups for Stephen, just from prior questions I was hoping to clarify the response on. On norovirus, how confident are you that the trial will not go on some equivalent of clinical hold in the Southern Hemisphere? Have other global regulators confirmed they do not need a pause to review the information? Or is there a chance of stoppage there? For CMV, just following up on Gena's question. I think in the past, you had said the final CMV analysis could come near months after the interim, which we heard about in January. So should we still think of that as the first half of '25? Or can you clarify the prior answer? And then on the 1083 COVID flu filing, I think the press release states that approval may require a vaccine efficacy data from the Phase III flu trial. Why is that a point of uncertainty that the FDA may require? Has it been up and clear with you in your pre-submission meeting? And then lastly for Jamey. Can you recap what variables in the COVID vaccine and RSV markets would land you at the low end or the high end of your '25 guidance, like price vaccination rates, market share or stuff like that?

So a lot there for me, so I'll go first and then kick you to Jamey. So first, on the Northern -- the norovirus study. As we said, we will look to enroll a second season in the Southern Hemisphere. At present, we do not expect any delays in doing that, given that we have enrolled over 20,000 participants in that study already in Northern Hemisphere, if there were any delays, we're not sure that it would have an impact to study time line. But at this point, we're as confident as we can be that there won't be any delays in the Southern Hemisphere. As it relates to CMV, on case accrual. The second half, we have previously said that case accrual was moving relatively quickly. It continues to accrue steadily in the study. Ultimately, it's an event-driven analysis, so we can't necessarily predict the time line, but we previously indicated that we expected it perhaps mid-2025. We're not changing that here. We continue to believe if that's possible. And ultimately, again, it will depend upon the rate of case accruals, which we don't control. As to 1083, and so for the flu COVID product, when we submitted the package as part of our initial exchange with regulators, we are identifying review questions that they have or issues. And as we said in our press release, in some cases, the proximity of the flu efficacy readout really does loom large on the overall review for the combination product. And we will be -- we do expect that, that may be necessary in some cases now that, that flu efficacy readout is expected shortly. As it relates to individual conversations with individual regulators, I'll say, we're working through their review questions in that submission, and I won't otherwise comment on the specific back and forth.

Okay. Thanks. So thanks, Jess. Yes. So as a reminder, on the high end, the $2.5 billion, if you exclude the unusual we saw in 2024, we called that essentially flat. So in my prepared remarks, the U.S. came in at $1.7 billion. It had a $200 million return reversal adjustment from the prior year, which would take that to about a $1.5 billion number. And then outside the United States, we were at $1.4 billion, and we said that there was about $400 million of advanced purchase agreements that the demand level we do not anticipate repeating. So the high end is essentially flat, Jess. So you can anticipate both inside the U.S. and outside the U.S., similar market share, vaccination rates. We do have a little bit of uptick in RSV in the high end, but it's all together rather minimal in general. On the low end, it basically assumes no increase in RSV. In the U.S., you would have to expect it to go down substantially. So you'd have to expect it to go down 5% to 10% from a market share perspective. Vaccination rates would have to go down again 7% to 10%. Both of those things would have to happen to go down, let's say, $0.5 million. And then really the biggest factor outside the United States are the licensure timing of our plants in the U.K., Canada and Australia. So should those be licensed and registered on time, we will be on the upper end, but if they are delayed, we've factored that into the lower end of our guidance.

Our next question comes from Simon Baker with Redburn.

There's also a clarification, Jamey. You mentioned the spend on respiratory trials being 50%. Was that 50% of your total trial spend or 50% of your R&D spend? And then just another question on the flu COVID combo following off from Jessica's question. I'm just interested in what the mechanism is and the timing at which point the regulators could ask for an extra data. Is this something that could come at any time? If it happens sooner rather than later, do you think it would have an an impact on the approval time line? And is there any risk in the U.S. that the initial filing gets a complete response and then you have to refile with that COVID data. Any color on the machinations, that would be very handy.

Yes. Thanks, Simon. On the first one, I was referencing 50% of the trial expense, which is what we break down in our 10-K. There are other line items that hit R&D in terms of the overhead that supports it, people, the sites, et cetera, or manufacturing facilities as well as research, but the 50% that I was referencing is really trial related, but you could imagine many of those other costs are also related, therefore, to the respiratory trials as well.

Yes. Thank you. And so for the clarifying question, again, we have filed in multiple geographies, and I won't comment on individual regulatory exchanges. But generally speaking, we -- as a part of the initial round of questions and feedback that we're receiving, there are instances where we think we will be dependent upon that efficacy data from the 1010 study, which we do expect in the coming months, the current season to be available. The timing of that readout and the impact on the review process for regulators is not something I can predict at this point, but we're in active discussion with regulators about it. Certainly, it is possible that if that is substantially delayed or if it is not a favorable efficacy readout, that it could, for sure, delay or impact the time line of approval for the combination product. If we are able to complete that submission, get that data to regulators and they're able to conduct their review, it's possible that we continue with that review without substantial delays. Ultimately, we don't know at this point because it will depend upon those submissions and discussions with the regulators that we're having right now. But we did want to flag that we do think, based on some of the initial conversations that we may be dependent upon that data ultimately for approval with some -- in some geographies.

Our next question comes from Myles Minter with William Blair.

Just one on potential ACIP recommendation review for RSV vaccines. Do you expect that hearing to be in February or the June meeting? And is there anything built into the top end of that $2.5 billion revenue guidance for mRESVIA that would require a widening of that recommendation that it currently stands?

So I'll take the first question on timing. We are obviously working closely with public health officials on the widening. We filed for approval for the 18 to 59 high-risk population. At this point, we are not yet approved. And so from a broader sort of engagement with ACIP perspective, we'll wait for approval before we do that too broadly. We do expect that the benefit risk is favorable for RSV vaccines, including mRESVIA. And so we do look forward to expansion of the recommendation to cover high-risk populations, both the 50 to 59, which have previously been discussed, but ultimately, hopefully 18-plus high-risk populations.

Yes. Sure. Yes. So Myles, as I mentioned in Jess' question, we have a little bit of growth in RSV. But I also mentioned that we have nothing related to new product approvals in our guidance for 2025. So that doesn't include the next-gen COVID vaccine or what Stephen just talked about, about the expanded indication related to RSV or anything from a combination approval should it happen.

Next question comes from Tim Anderson with Bank of America.

So if I could just go back to that very last point, on your 2022 revenue guidance, you're not including any new products. Makes sense for RSV because that would be tiny. Makes sense for the combo product because of the reasons that you outlined. But why wouldn't the next-gen COVID product be included in guidance at this point, given that the PDUFA date is not very far away, end of May. It's well-characterized paradigm having COVID vaccines out there. I'm just wondering if that lack of inclusion guidance anticipates some uncertainty about approval, given the new administration coming in and this common thread of kind of an anti-COVID stance across lots of people from the Trump administration?

Yes, Tim, thanks for the question. Maybe I'll take the first one. So I don't think there's much to read into here. I think we've learned our lesson coming into 2024 in terms of guiding with a product that is yet to be approved. So moving forward, we have eliminated any products. Of course, there could be upside. But I think we approach our guidance understanding that there is variability and therefore, we will not put the -- any revenue related to the next-gen COVID or any of the other 2 products as well. And again, I don't think there's anything else to read into as a result of that.

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