Moderna Third Quarter 2026 Conference Call - MODERNA INC

Financial Performance:

• Q3 2026 revenue reached $1.3 billion, a 29% year-over-year increase, bringing year-to-date revenue to $1.8 billion.
• Net income for the quarter was $162 million, a significant turnaround from a $198 million loss in the prior year, translating to $0.38 diluted EPS versus a $0.51 loss previously.
• Gross margin improvement is on track for 2026, excluding a $900 million non-cash litigation charge; Q3 cost of sales was $318 million (24% of revenue).
• R&D expenses decreased 27% year-over-year to $583 million due to wind-down of infectious disease studies and operational efficiencies.
• SG&A expenses rose 5% to $282 million, maintaining cost discipline while investing in growth.
• Ending cash and investments stood at $8 billion, driven by $2.6 billion in net proceeds from convertible debt financing, offset by a $950 million litigation settlement.
• Operational cash costs were reduced by 10% year-over-year.

Guidance and Future Outlook:

• Full-year 2026 revenue growth guidance increased to 15–25% (previously up to 10%), driven by strong uptake of MNEXT Spike and international expansion in the UK, Canada, and Australia.
• International revenue is projected to be $900 million year-to-date, $200 million ahead of the full-year 2025 run rate.
• 2026 R&D expense framework lowered by $200 million to $2.7 billion; SG&A expected to remain flat at approximately $1 billion.
• Adjusted cash cost target reduced by $200 million to $3.8 billion for 2026.
• Capital expenditure estimate lowered to $200 million for the year.
• Projected year-end cash and investments for 2026 range between $8.1 and $8.3 billion; excluding financing proceeds, cash projection improves to $5.5–$5.7 billion.
• Management expects an even split between U.S. and international revenue for the full year.

Business Segments and Product Lines:

• Respiratory: Received FDA approval for mFluciva (mRNA flu vaccine) for adults 50+, with accelerated approval for 65+; secured Canadian approvals for mFluciva and mCoflu (mCombriax). MNEXT Spike received updates for the 2026-2027 season in the U.S., Canada, Japan, and Taiwan.
• Oncology: Positive Phase 3 data for Intismoran autogene (IMO) + pembrolizumab in resected melanoma, showing a 42% reduction in recurrence/death risk (ITT) and 49% in Modified Intent-to-Treat (MITT); BLA submission targeting completion in 2026.
• Rare Diseases: Program for mRNA-1469 (Ebola) advanced to Phase II-III; registrational trial for propionic acidemia (PA) on track for data later in the year; methylmalonic acidemia (MMA) pivotal trial decision deferred pending PA results.
• New Therapeutics: Progress in mRNA-2808 (T-cell engager) for multiple myeloma with data to be presented at ASH; Phase I studies ongoing for pancreatic and gastric cancers.
• Manufacturing: Expansion of supply via a five-year agreement with a local manufacturer in Mexico for COVID-19 vaccines; reintegration of Juan Andres to the Executive Committee to oversee global manufacturing scale-out.

Market and Competitive Landscape:

• Global respiratory vaccination demand remains strong; U.S. flu, COVID-19, and RSV administrations increased 3% year-over-year through late October.
• mFluciva becomes Moderna's first mRNA-based influenza vaccine and first non-COVID product approval, expanding the portfolio to five approved infectious disease vaccines.
• Intismoran represents the first individualized cancer vaccine and first combination immunotherapy to show benefit over anti-PD-1 monotherapy in adjuvant melanoma.
• Management highlighted the "multi-year revenue growth strategy" anchored in geographic expansion and portfolio diversification into oncology and rare diseases.
• Norovirus vaccine (mRNA-1403) program adjusted following failure to meet early success statistical criteria; no additional cohort enrollment planned for the upcoming winter.

Risks and Challenges:

• Litigation: $900 million litigation charge remains embedded in 2026 cost of sales framework; $950 million settlement payment impacted Q3 cash position.
• Pipeline Dependency: Norovirus program uncertainty; reliance on successful BLA submission for Intismoran in 2026 and subsequent approvals in 2027.
• Regulatory Timelines: Delays in FDA discussions regarding the combination COVID/flu vaccine filing in the U.S. and potential hurdles for rare disease approvals.
• Manufacturing Complexity: Execution risks associated with scaling individualized cancer therapy manufacturing (IMO).
• Competitive Dynamics: Potential competitor catch-up on neoantigen algorithms; ongoing debate regarding LNP immunogenicity contributions.

Management Commentary and Tone:

• Tone was highly confident and optimistic, characterized as "great" and "landmark," emphasizing the successful delivery of both commercial performance and clinical milestones.
• Management expressed strong conviction in the clinical data for Intismoran, citing consistency between Phase 2 and Phase 3 results and the robustness of the hazard ratios.
• Emphasis placed on "financial discipline" and "scientific revolution," with confidence that the proprietary neoantigen algorithm and real-world data provide a sustainable competitive moat.
• Leadership transition highlighted with the return of Juan Andres to bolster manufacturing capabilities for the oncology business.

Analyst Questions and Answers:

• Renal Cell Carcinoma (RCC) Confidence: David Berman cited RCC as an anti-PD-1 sensitive disease with overlapping low-TMB characteristics to melanoma Phase 2 data, expressing confidence in a positive Phase 2 readout by year-end or early next.
• Pricing Strategy: Stephen Hogue stated it is premature to discuss pricing for Intismoran; the team will work with Merck to price based on healthcare value once submitted.
• LNP Immunogenicity: Management clarified that evidence for LNP driving immunogenicity is conflicting and insufficient to explain the Phase 3 results; the benefit is attributed to the vaccine itself.
• Neoantigen Optimization: The team acknowledges having 34 neoantigens is effective but is actively analyzing Phase 3 data to determine if a higher or different selection is optimal.
• Algorithm Moat: David Berman noted that the proprietary algorithm and the 5,000+ neoantigen dataset generated from clinical trials constitute a significant "goldmine" and difficult barrier for competitors.
• Norovirus Path Forward: Confirmed the decision to pause further enrollment and engage regulators to define next steps given the interim data.

Other Key Points:

• Analyst Day scheduled for November 12 at the Intismoran manufacturing site in Marlboro, Massachusetts.
• Intismoran Plus Pembrolizumab showed a favorable safety profile with adverse events consistent with known profiles of individual therapies.
• Enrollment completed for adjuvant Phase 3 non-small cell lung cancer (NSCLC) study (INTRAPATH-002).
• mRNA-1469 (Ebola) selected for Phase II-III advancement by WHO Technical Advisory Group.
• U.S. FDA approval for mFluciva includes recommendations by the American Academy of Family Physicians for adults 65+.