Moderna, Inc. Q3 FY2025 earnings call

Key Points

• Quarter Review: Revenue $1 billion, net loss $200 million, ended the quarter with $6.6 billion in cash. Cost reduction efforts led to a 34% combined reduction in cost of sales, R&D, and SG&A compared to Q3 2024.
• Strategic Priorities:
  • Commercial Product Use: Spikevax approved in 40 countries for seasonal update; mNEXSPIKE approved in US and Canada; mRESVIA approved in 40 countries. Strategic partnerships in Canada, UK, Australia with manufacturing and offtake agreements.
  • Pipeline Advancement: Positive Phase III flu efficacy data for mRNA-1010 and mRNA-1083; CMV vaccine mRNA-1647 discontinued in congenital CMV but continued in bone marrow transplant trial.
  • Financial Discipline: Updated 2025 expense guidance with GAAP operating expense reduced by $700 million to $5.3 billion, cash cost to $4.6 billion, and year-end cash projected to $6.5 billion to $7 billion.

In the third quarter, Moderna's revenue was $1 billion. Net product sales were $973 million, and other revenue was $43 million from grants, collaborations, etc. U.S. revenue in Q3 was $800 million, with international revenue at $200 million. Year-to-date total revenue was approximately $1.3 billion. Cost of sales for Q3 was $207 million, a 60% year-over-year decrease. R&D expenses were $801 million, a 30% decrease year-over-year. SG&A expenses were $268 million, a 5% decrease year-over-year. Revenue contribution: U.S. was the largest market, making up 69% of year-to-date revenue ($900 million), while international was 31% ($400 million).

Revenue Guidance

• Narrowed 2025 revenue range to $1.6 billion to $2 billion from prior $1.5 billion to $2.2 billion. U.S. revenue guidance revised to $1.0 billion to $1.3 billion (previously $1.0 billion to $1.5 billion), international to $600 million to $700 million (previously $500 million to $700 million).

Cost Guidance

• Lowered 2025 GAAP operating expense to $5.3 billion, with cost of sales to $0.8 billion to $0.9 billion and R&D to $3.3 billion to $3.4 billion. Projected year-end cash increased to $6.5 billion to $7 billion.

• COVID Demand: Lower COVID vaccine demand impacted revenue. - CMV Program: mRNA-1647 failed Phase III in congenital CMV, leading to discontinuation. - Tariffs: New tariffs not expected to materially impact business but monitored.

Q: As we look to the expense management on the forward here, can you help us understand what's being deprioritized or changed to allow for these changes? And then secondly, in accordance with kind of Roivant and the IP dynamics that are playing out here, can you just frame your strategy here on the forward as we look to 2026?

A: Sure. Salveen, thanks for the question. So I'll take the first one. So it depends on your reference point in terms of what you talk about from a cost-out perspective. Over the last few years, as I mentioned, we're down 50% from a cash cost basis. But if I'm more recent in our recent $500 million to $700 million reduction, that's split evenly across R&D and cost of sales. So cost of sales is purely driving efficiencies. Everything that the teams are hard at work and have been hard at work doing, they're just accelerating and getting it done faster. So that's unutilized manufacturing capacity, that is all the waste that we saw in materials, they're doing a great job reducing that, driving productivity within the labor force. So that's not really a deprioritized investment. On R&D, it's a bit of both. The execution of our clinical trials has been much more efficient. We've talked in the past about the fact that we were operating for speed and this time, we are operating for cost as well and efficiency. So a lot of this is just the execution of our trials. But we are making decisions here and there to not continue to advance to Phase II or Phase IIIs or even out of Phase I here and there. Broadly, we're taking down our -- just big picture story from the last couple of years. Our large Phase III vaccine trials are really running down and winding down, including CMV recently and flu combination vaccine. And after that, we are moving into oncology, which is a different amount of patients that are under those trials. So there is some prioritization in there, as we've always said, but a lot of it is also execution, but we still have prioritized our pipeline. So we are excited about the 9 or 10 late-stage programs that we have that Stephen highlighted in his prepared remarks, and we look forward to continuing to take out additional costs, and we do see that coming down over the coming years, and we'll update you more at Analyst Day. On Arbutus, the trial in the U.S. is scheduled for March 9, 2026. We remain confident in the groundbreaking technology we pioneered, including our lipid nanoparticle delivery system. We are vigorously defending the case and responding to new filings outside the U.S. We believe that our technology does not infringe any valid patents asserted by Arbutus.

Q: Maybe 2 very quick questions. First one is regarding the U.S. COVID revenue, $781 million. I assume majority of this basically is the inventory buildup or delivery to the pharmacists. So maybe how often do you track pharmacies to maintain their inventory? And what additional color you can share regarding your estimate of the revenue for the remaining of this year? And then second question is regarding the CMS -- sorry, CMV vaccine. So what is the learning there? Why immunogenicity data did not translate to clinical benefit?

A: Okay. So thanks, Gena. Good to hear from you. I'll take the U.S. sales. Yes. So ultimately, the end measure is vaccinations in the U.S. that is shots in arms. And so in the third quarter, yes, we ship a lot of our product into wholesalers and then they take it down to our end pharmacists, whether that's a retail pharmacy or an IDN network, a doctor or a physician's office. And so we track that almost daily. And really, what we put -- what Stephen shared with you on the screen is that's why we show shots in arms. We believe that's the ultimate measure. And if you look at season to date through October 24, shots in arms are down in the U.S., 30%. There's a lot of reasons for that, some of which we anticipated. And if I take this back to our guidance, when we originally guided at the beginning of the year, we said $1.5 billion in the U.S. sales, $1 billion to $1.5 billion. The $1.5 billion was essentially flat year-over-year for all aspects, whether it's market share, competitive dynamics, vaccination rates, et cetera, excluding a onetime item from the prior year. And the $1 billion, as I said, is down 33%. So we obviously anticipated that the vaccination rate, which is the largest variable here, could go down. And so now we've seen that go down, and we've reduced our range. So we said we believe vaccination rates will now be down 20% to 40%. And we are in the heart of the vaccination season, we're probably half to 2/3 of the way through. So we have good visibility to this. We are measuring shots in arms. We talked about our share as well. And we also look at every single day and every single week, is there more pull down? Is there more pull down to the physicians? Is there more pull down to retail? Are there more shipments even in the fourth quarter? So -- and we feel very comfortable with our range now of $1 billion to $1.3 billion, but we do not see vaccination rates in the U.S. getting back to flat, which is the change from the high end from going from $1.5 billion to $1.3 billion. And Gena, I'll take the CMV question. So first, we really only have, at this point, the top line data from that trial. And over the coming weeks and months, we will get a tremendous amount of more information, including detailed information on a bunch of other on immunogenicity and potentially even correlative protection and have the ability to generate hypotheses on what maybe didn't work. What I can say at this point is, as you know, going into the trial, we and the field had high hopes that a pentamer neutralizing antibody response, which had not been a part -- a strong pentamer neutralizing antibody response, which had not been a part of previous intismeran vaccine was going to be the missing piece for being able to prevent infection with a CMV vaccine. Prevention of infection with the herpes virus or in CMV was an incredibly high bar. It was a difficult bar to go after. But ultimately, the only one we thought that we could test that had a chance at meeting our target product profile for prevention of congenital CMV. So I guess what we can say at this point until we get that additional data is it looks like pentamer neutralizing antibodies weren't the missing piece and that it wasn't sufficient by itself to drive a dramatic improvement in the prevention of infection with CMV. Now we'll dig into the data as we get it over the coming months. Obviously, look forward to publishing it, sharing it at medical conferences and hopefully, the entire field can learn where vaccine development in CMV might need to go next. But ultimately, pentamer wasn't enough.