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Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway and I'm Joe.
Why isn't thal Joe?
Do you know much about MODERNA?
Well, I had.
Heard the name for maybe a few years, and then they became household name some point in twenty twenty when they were ahead of the race to develop a COVID vaccine. Then it became massive, and then I don't know much beyond that.
Yeah, for me, this is a company that kind of came out of nowhere during the pandemic, and as you're right, it kind of shot into household name territory. Here's my other question. Do you know what a CFO does?
What?
That is a great question, actually, because I mean, I guess I would say yes in this sense that I think they're the ones who are sort of watching the financing, helping to make capital allocation decisions, although I imagine that the CEO also has that. I think the CFO is the one primarily involved in putting together the earnings and you know, communicating the finance side, specifically the analyst. But I guess I only partly know what a CFO does to me.
The thing I always think when I hear CFO I always think they're the hard ones. Sorry, They're the ones that answer the hard questions on the on the earnings calls. That's what they do.
I love that. I think that, yes, that's right.
The CEO is like, oh, we get to these great products and blah blah. And then like someone asked a really technical question about like well if your borrow will get this above so far and margins and they're like, I'm going to bring the CFO in the answer this.
Then yeah, exactly. Well, I'm pleased to say today we do, in fact have the perfect guest to answer the question of what is modern and also what does a CFO actually do. We are going to be speaking to the CFO of MODERNA, Jamie Mack. Jamie, thank you so much for coming on on thoughts.
Hi, Tracy and Joe, thank you for having me. It's a pleasure to be here with you.
So maybe just to begin, can you give us the sort of elevator pitch summary of what it is that MODERNA does and full disclosure, I was in Hong Kong for a few years of the pandemic, so I missed a lot of the vaccine conversation here in the US. There was a very different vaccine conversation that was happening in Hong Kong and in mainland China at the time. But what is it that you actually do and how is it that you have become a household name in a relatively few short years.
Well sure, so, first I found your introduction quite entertaining. The CFO actually in our business because we are very much a science business, which I'll get into.
It's actually our president and CEO.
That get the really tough questions. But I get to my own share as well, which we can get into.
But the CEO has to answer the tough biology questions.
Well, he's quite good at it. He's he was part you employee number one and.
Has been here and built this business for thirteen years so and he's got a science background, so he's quite good at it. And then our president, Stephen Hoague is a doctor by trade, so obviously they answered most of the scientific questions.
But so Maderna is obviously known.
Due to how we help the global community with COVID, but it's really much more than that. It is a platform company revolving around MR and a which really makes the proteins in a body, and those proteins can help either fight infectious diseases and prevent against any kind of infectious disease, or be a therapy, and we can get into the segments that we're in, but it can be
in oncology, it can be a rare disease. And we actually believed, and that was the principal belief in the company is if this platform can work, it's going to be able. Since it's part of your natural body, it's going to be able to help solve many different therapeutic areas in the body.
And so that's a little bit about Maderna.
In over the last thirteen years, we've built a pipeline of forty five drug candidates. Obviously we're known for covid, but also in other respiratory diseases. We hope to launch our second drug this year, RSV, which became pretty well known last year as it had a pretty significant spike, but also in flu and other respiratory diseases. And then in oncology we've got an exciting cancer therapy that we are excited about rare diseases and other latent diseases. So
that's a little bit about Maderna. We've been around since twenty eleven. We've got almost six thousand employees. We're based out of Cambridge, Massachusetts, but have.
Some facilities all across the globe, and we've got quite an exciting pipeline ahead of us. That was excellent.
All right, Now, what does the CFO or you specifically? What is your job within the company?
So my CFO role is really not that different than many other CFOs. It's just you know, in a different space. And I think there's principally four different areas. One is the foundation, which is controllership, so that's accurate books and records. That's safeguarding our assets, and that's got to be foundational and.
An absolute given.
The second is allocating capital, and we can talk about that some more, but what is the envelope where we going to spend it? How much goes into our investment in our R and D pipeline, how much goes into capital.
Expenditure and S G and A.
The third is to support decision making across the company and train our teams to understand how to measure return on investment and how to think through decisions that are made every single day, thousands of decisions across the company every single day. And then the last is stakeholder management and with whether it's investors, employees, the board of directors, customers, partners, suppliers.
You know.
That's how I think about it, which really isn't too different from my prior role. Is it's a CFO of a different company or in my opinion, and many of the CFOs that are out there, how they operate every day.
So you mentioned that the CFO role is kind of uniform across companies, but I have to imagine there are some aspects of the pharma industry that make it a little bit different, and one of them has to be I guess the lead times in developing new treatments and new medicines, and perhaps the risk as well. So you might spend ten years developing this one thing and then you find out at the very end that it has an awful side effect or that the regulators aren't going
to approve it. How does that aspect of the business, that uniqueness, feed into the CFO role.
Yeah, you're absolutely right, And maybe just to talk about that process we call it, you know, we take a drug from pure research to kind of pre clinical which doesn't go into a human body, and you're kind of testing how it works in the animals, and then it gets into an IMD process or a new drug candidate, and there are phase one, phase two, phase three, and you're right, I mean, the probability is success from basic research all the way through not only getting it launched
with the FDA in the United States as an example, but there's healthcare regulators all across the globe, and.
Then commercial success as well.
So there's a ton of risk that goes into it, and that's what we spend our time doing. And we as a platform company believe that. You know, we've been studying the science of mr anda in different verticals. A vertical might be respiratory vaccines, as I mentioned, and if we know that our mr and a platform can work with COVID, then we have a high conviction that it can work with RSP and a high conviction that it can work with through another.
Respiratory and so we derisk that throughout the process.
We do it in basic research, we do it in pre clinical, we do it in phase one trials, phase two trials, and all those trials are just more patients. So you might start with literally ten to fifteen patients in phase one and then.
A respiratory trial.
Our RSP trial for phase three was thirty seven thousand patients. And you just continue to assess what is the risk and what is the capabilities, And so that's what we spend a ton of time doing when we think about allocating capital to our pipeline and our next drug candidates.
Talk to us a little bit more about that. I think you said you had forty or forty something various candidates in the pipeline. Obviously it'd be nice to have unlimited money and work on all of them. You know, when you are thinking about capital allocation, R and D allocation, et cetera, Like, what are the factors that go into making these decisions?
Sure, yeah, there's a lot, but I'll kind of summarize it into a few, which is getting back to that sense of risk and comparing it to our capabilities. So I mentioned we have higher conviction and respiratory vaccines, so therefore it's much easier to place bets and further dollars behind respiratory vaccines. We are currently hoping to de risk
our latent vaccine therapeutic area. We've recently de risked our oncology area, which we call individualized antigen therapy, which is a mouthful, but in essence it helps stimulate key.
Sales to attack cancer.
And so when we look through it, we say, okay, what is the mRNA capabilities? Have we derisked this area? And therefore, you know, every step of the way, allocate more dollars.
So that's number one. Number two is we look at the size of the opportunity.
So this really isn't any different than any business case for any company in any industry.
You know, respiratory vaccines is a very large market.
We think it's a thirty billion dollar market between flue, covid, rsv SO, and there's only a few players, and there's a very high barrier to entry because you have to test so many patients and those trials are quite expensive. Third is what's the competition and what's our commercial capabilities? Will we be successful? Will we have something that differentiates
our product versus another product? And then the fourth is timing, particularly when you're we're still a relatively young biotech company.
Thirteen years old is not that old in the grand scheme of.
Things, and so therefore we have to understand Okay, what's our cash balance? You know, how much revenue and profit are we going to be generating in the next few years. And therefore we want to turn over the portfolio to not just be a COVID company, but to be a multi drug company in various different areas. And so therefore we look at, well, is this going to start generating revenue in twenty twenty five, twenty twenty six, or some
of these won't be till twenty thirty five. So we have to kind of balance all those things to make sure that we have a sustainable company and bring the most drugs to market with the highest probability of success.
So one thing that always interests me in these types of conversations is the decision on allocating resources. And we're talking about okay, thirteen years old, still relatively small in the grand scheme of large pharma companies. But you have a lot of people, you have a decent amount of money, it seems, how do you decide where to put that money to work? And I guess how granular do those
decisions actually get. Is there like a line item for R and D expenses every year and it's just like a big bundle and then there are people who are specifically dedicated to dividing that up or would you, as CFO, be like, I'm going to give X amount to this project and why amount to this other developmental treatment.
Yeah, So at the high level, we work with the executive team and the board to understand what is the envelope of capital will give to R and D in that example, because we also have to give capital to SGNA, We have to give capital to capital expenditures, and historically over the last couple of years, we had bought back shares, although we've stopped buying backshares at this point because we primarily want to.
Invest in this pipeline.
So after that, so once you size the envelope in terms of, Okay, here's how much I'm willing to spend. As an example, in twenty twenty four, we think we'll spend approximately four and a half billion dollars. So then the next step is, Okay, you have forty five drug candidates, which ones why? Which is what I just kind of talked through in terms of capabilities and the size of opportunities. But just to maybe give a little bit more flavor, a drug is not so simple, even COVID as an example,
you know, there's different patient populations. So there's the immunal compromised, there's age sixty plus, there's age fifty to fifty nine, there's age eighteen to forty nine, there's you know, I think six to eighteen. And then there's pediatrics as well, which all take a different level of testing and regulatory oversight because there are different types of patients and the bodies react in different ways, and the regulators want you
to study different things. So a lot of the actual details is under Okay, yes, we've said we're going to go with an RSV vaccine, where are we going to start and how much will that cost?
And right now we've said age is sixty and over.
But then we might look at pediatrics because RSPA is often hitting quite materially or significantly younger population. And so that's kind of the next level of allocation, which is you size the envelope, You then pick a program the You then say which patient populations or indications are you
going to go after. Another example is oncology. So I talked about this product that we have and we are starting with adjuvant melanoma, and because adjuvant melanoma really in immunooncology really seems to work quite well, and we are kind of bundled with immunooncology and stimulating it even more.
And so we started there and it's you know, right now.
The data that we've released is quite positive over three years and improves the life of a patient's success in terms of recurrence or death by fifty percent, which is outstanding in terms of cancer. And then you've got to figure out, well, there's you know, loads of different cancer types, where will this product work best? And that's what we try to determine every single day as we get more and more specific underneath that envelope the capital.
What is the process by which I mean I have to imagine that with e within each internal candidate, the various scientists, the various teams, like they probably want more for their the specific thing that they're working on. What is this sort of internal process? Is it a sort
of is it an internal lobbying process? That's sort of what I imagine my head where they come to you and they're like, look, we believe that we can do this, and if we could increase the R and D on this thing, then we believe that we can maybe get it to market or get to the next stage of trials faster than X. Like, what is sort of your internal process for working with the various champions of different potential products where they make the case that they could use money in a productive way.
Yeah.
So, first and I tell every industry, we could certainly spend a lot more than four and a half billion dollars, and that is a wonderful thing, because the minute we run out of ideas and pipelines, we're in trouble and we'll stop growing.
So it is definitely a hot debate, I would say, in terms of where we're going to allocate our capital. But let me just give you maybe I'd say three processes that we run. Great.
So, first off, we have twice a year a look at our entire portfolio and we call it a strategy review to understand, Okay, let's make these decisions, given the envelope, the capital we have, let's prioritize these things and we pull together.
It's extremely cross functional. It is even within R and D.
There are many different functions within R and D, and we bring in all of those people that are product specialists or epidemiologists or development specialists, et cetera. We bring in the finance team to obviously run the financials and understand the reward, the commercial team to understand the size of the opportunity, and we debate and say, okay, strategically, as a company, if we want to be this year,
we think we'll be four billion in sales. If we want to get to I'll just make it up a number, say ten billion dollars in sales by twenty twenty seven. And if that's a priority, that's not the only priority, but that is a priority to say, okay, let's have that lens on it.
Number one. Number two, here's another lens.
We want to diversify our revenue streams, so we don't want to be solely a respiratory business. So we've got to make sure we are investing in other latent areas, latent disease areas or oncology that we also want to bring to market, and we have those strategic and that kind of sets the foundation.
Then. So that's process one that happens twice.
A year, and we figure out which products we want to fund in theory, and that's what we start co operating too. But then there's underlying research and clinical trials that are going on every single day, and there's report outs and you might get different data, different answers that actually changes that and that is a very well governed
process that we call a stage gay process. And as an example, you know, I myself have to approve whether we go to a phase three trial because those are very expensive, as I mentioned earlier, so you know, but there are gates into even before it gets into the clinical there's gates in the research area, in pre clinical area, and then there's gates before you go to phase one, phase two, phase three, and those you know, we have a theory based on the strategy of what we wanted
to invest in, but new data.
Comes out and you have to adjust to it.
So I'd say that's kind of the second process that is highly governed. So you have this top level strategy, then you have actual data that's coming through that is well governed. And then the last thing is particularly on how much we're going to spend and whether we go
and spend more on these phase three trials. We actually take it to a subcommittee of the board, so the Board of Directors, which we have some scientists and doctors that are on our board and oversee it and have a lot of experience also govern Yeah, we think it's worse. We get it, we get the strategy. If it's into our strategy, we understand the risks, and we think you should move forward. So those are kind of three different processes in terms of how we govern our product strategies.
Where does the money actually come from? And I realized like maybe maybe there's some obvious answers here. You are a publicly traded company, but this is a really capital intensive business. And I was looking on the Bloomberg terminal earlier. It doesn't seem like you have any bonds, which is kind of unusual nowadays. Where does that like funding mix actually come from.
Yeah, so I'll chase the answer that question in the industry, but also the specific to us because we're a little bit different. Sure, so specific to us, we actually, because of COVID and how successful our vaccine was to help support the global population, we're actually sitting on thirteen billion dollars in cash. That is very unique to a biotech company. So we are quite fortunate. And as an example, we said this year we're going to actually burn through four
billion dollars in cash. So we believe in this platform so much that we need to advance the next set of pipeline of drug candidates.
And we have a plan all the way for the next three.
To five years that we're actually going to go from thirteen billion to nine billion in the year twenty twenty four because we think it's the right thing to do. And then we said we're going to do it a little bit again, that we're going to burn another two to three billion in twenty twenty five before breaking even
in twenty twenty six as we'd launch new drugs. So that's a bit unique in the biotech world, I would say broadly though for the sector, there are various avenues that obviously public investors, capital markets, like you said, there are some government projects with Barta Covid as an example, the US government helped fund some of the COVID research and development of our product, and so there are different government agencies across the globe that you can tap into.
There are other companies.
So before we were you know, before Covid, we had no we had no products that had ever been approved, and so we started in twenty eleven and in twenty sixteen we actually went to a different company, company called Merk. I'm sure you've heard of them, and they actually helped fund our oncology product because it is in conjunction with
their product k Trudea. So that's another outlet for capital that you can part with a collaboration where you know, a company like Mark gave us I think two hundred and fifty million dollars back in twenty sixteen to launch this product and advance the science that is now so
fruitful come twenty twenty four. And then the last one is just foundations, and we tap into foundations as well, not as much now that we have a fair amount of funding ourselves, but Bell and Melinda Gates as an example, we were working with them on certain infectious disease vaccines. So those are kind of the areas. So it's capital markets, it's the government, it's other companies and collaborations that might fund it, and then there's foundations as well.
Let's talk about the role of the government. One of the extraordinary things, and you know, Operation Warp Speed was sort of this incredible endeavor that involved upfront money and also advanced purchasing agreement so that once you got the vaccine to market that you had guaranteed sales talk to us just about the math of Operation Warp Speed, what it meant for Maderi NA, and then specifically the power of the advanced purchase agreements and whether that is a
model that you see being replicated going forwards, like a sort of a way of de risking the entire process.
Sure.
Yeah, as you and I spoke beforehand, Joe, I wasn't here during COVID. I joined the company at the end of twenty twenty two, in September of twenty two, so I've been here for eighteen months, so I obviously am aware of what went on, but I don't know all the intimate details. So I'll give you my general opinion and impression, and you know it works. Me. I forget the exact money, but I think it might be in the range of a billion dollars. Don't quote me on that.
It's in our disclosures. You can actually pull it up and get the exact numbers. But it was not insignificant. And I think this is an example of a terrific public private partnership that actually did great for the world. And to put that into perspective, and it wasn't just the funding. By the way, we can get into it. There was so much help throughout the entire process in
twenty twenty in many different areas, shippings, et cetera. A lot of red tape to cut through, but it actually proves that in one year we went from COVID that came out, we identified the vaccine in two days, and.
We got it approved from market in eleven months.
That is unparalleled in the pharmaceutical biotech industry. And so it shows you the art of the possible. There is good reason why things are regulated because there's safety concerns and we have to do that, but it also shows you that you can accelerate this timeline if you cut through some red tape for something that has been very powerful, very safe and effective and really has changed the world in a very rapid way. So I'm a huge believer in the success of that. In terms of the APA SEAH,
I mean to think about our situation. We had zero revenue and we were asked to go invest literally hundreds and billions of dollars to get this over the hump. It was a make or break decision for us. I mean, we were sitting there going we were public company. You could run out of cash and a heartbeat, and so we you know, we needed a partner to help take that risk, and ultimately it worked out and worked very well.
So the APAs to your second part of your question there were.
Very important because we had to know that if we're going to go invest all this money and in our infrastructure, forget about the research and development, we have to bring on six different manufacturing partners across the globe. We had to go make purchase commitments for inventory in the billions of dollars with part you know, to say, hey, we need we need to make a lot of COVID doses over a billion on that time period that we made a billion doses as this and we had that was a.
Lot of risk.
We needed to know that we were going to get some return otherwise, you know, we were going to turn upside down.
So APAs were important.
I believe that a partnership can work quite well, and in this example, I think it works extremely well. I get that there needs to be regulation for many different reasons, but I think that shows you the art of the possible, both in public private partnerships as well as what can happen when you really try to expectegulatory process here's.
One thing I always wonder when it comes to CFOs and their sort of daily life. But Joe has a line that I think it actually came from Neil Data and you co opted it. But the stock market is not the economy. But it's not not the economy. And when share prices go up, that means there's more availability of funding for companies in general. So first of all, how closely do you watch the moderna stock price? Is that like the first thing you look at when you come into the office every morning.
I mean I certainly monitor it quite a bit. Yes, I do. It's important. I mean it's one of the key stakeholders.
And one that I know most importantly own, which is our investors.
So I have to make sure I'm watching that. And so yes, I actually watch it in a fair amount.
And then okay, what do you think when it starts going down? Is there like a thought process in your head that says, oh, we need to think about specific things that we could be doing to boost shares or do you start thinking, well, you know, there are other things going on in the economy, interest rates are going up. That sort of thing. I just wonder, you know, put us inside your mind for a second. As a CFO, when you look at a share price, what is happening in your head?
Yeah? I try.
I try to assess for really rapid movement, what is going on? You know, day to day, stock's going to jump all that, you know, a little bit up, a little bit down, a little bit.
That happens all the time.
So I try to assess, Okay, Number one, is it a specific event for us? A news item, whether it's a regulatory update on a clinical trial, or whether we give you know, guidance on financials or whatever it might be.
Is it a specific event? Did we do it well? You know, we take that quite.
Seriously, and did we communicate it well where we clear do people get it to investors get it? And even if they get it, you know, if it's bad news, the stock may go down, but they understand it and there's a natural you know, implication to that. Or if the stock goes up, they are clearly understanding the message of what we're trying to say.
So I try to understand Number one, is there a specific event for us?
The everyday events in terms of just the global economy and interest rates worry me less. We're fortunate as I mentioned to have thirteen billion dollars in cash.
We don't take it lightly. We try to understand what that.
Means for us over the coming years in terms of, Okay, what's going to happen from a demand perspective, or you know, the cash in the bank will return interest, And so we obviously are cognizant on the of the implications on our company, but overall, we're I think we spend the most time focusing on our investors understanding the long term opportunity for our company.
And I think that's what's critical for many companies. And it is hard to.
Have investors really look at the long term, and you know, different portfolio managers, investors have a different view on what is long term, whether that's twenty four months, five years, ten years, And we try to make sure that people.
Understand what is the opportunity ahead and.
Actually if they are saying it back to us, then at least they understand it and they might make a different decision, might wait for it, you know, and we try to understand what does that mean in terms of their buying behavior.
But that's what we.
Spend the most time doing, is to under just make sure our investors understand our long term strategy and do they believe in where we're going.
It does seem like for companies in some areas that when a stock is moving lower or maybe higher, but when this dog is moving lower, that there is an
impulse to course correct in some way. And so you saw this, for example, I think within big tech, where we saw this pretty big sell off in twenty twenty two and a bunch of companies seem to get the message like, oh, you know what, we really need to slow our hiring, or maybe we shouldn't bet the entire company on virtual reality goggles, and we need to cut
our research in this area. That there is this message about something, and then you see the layoffs and they're like, look, we've done much better about reducing our cash burned, et cetera. Do you take a signal I mean, I get there are certain things that are out of your control that you have a long term message that you want to
tell the shareholders. But do you take a signal from larger moves in the market that say, look, the investors want to see X, and we need to course correct in some way or another in order to align our goals.
That's a great question.
So I think, if there's a big move, and we should be doing this all the time, but there's something to listen to, and so I'll just take myself out of Maderna. I mean, if you're a CFO and your stock goes down twenty percent, that is a substantial amount of investors saying it is less valuable. Something's going on, And I think what you have to listen for is do we already know that or is it something that
we really have We got to think differently about. So is our revenue line not going to be what we think it's going to be? And the investors are ahead of us because they see something in the marketplace that is changing. And if that's the case, then sometimes I mean I take our conversations with investors as a two way learning.
I learned from them.
They give me their thoughts on what they think that where the market's going, where we're positioned, how we're positioned, how successful they think we're going to be, just as much as I try to tell them our view. And so it is a two way learning. And especially when there's a huge market move or significant market move, they're.
Telling you something.
The question of what you have to sift through is did we already know that and therefore just stay the course on strategy, or is it something that, hey, we might need to think differently about and perhaps we're wrong on one of our assumptions. So that's how I deal with, you know, particularly significant moves in the share price.
So in the course of prepping for this interview, I was doing, you know, some casual research into MODERNA and pharma in general, and I stumbled on this article from Science I think it was from March twenty twenty, so right in the heart of the pandemic, and it opens with a discussion of the gartment hype cycle and this idea that you know, people get really excited about a
new technology. You see share prices of these tech companies go through the roof, and then there's some adjustment process or reality kind of sets in the shar's fall, and then slowly there's a recovery as people kind of enter realistic productivity and use of these new technologies. And looking at the MODERNA share price since March of twenty twenty,
it really does look like a gartment hype cycle. Like if you're going to choose a textbook example, it's kind of this, So I guess my question is, like, how do you balance people getting really enthusiastic about new technological breakthroughs and all these new treatments we have in the pipeline. I mean, I don't think you're working on this specifically, but GLP one weight loss drugs are obviously something that's
kind of burst in to the public consciousness recently. How do you balance that excitement and the hype versus like the reality of putting these in production and again, going back to the timelines that you were discussing the idea of long term investment, like, don't get too excited. It's going to take a while for these to enter the market, and then it's going to potentially take even longer for them to filter through in an efficient way.
I think in those cases, I don't know every single case, but I'm a little closer to the Maderna case. Let's say, I think it shows the art of the possible, and I think people understand what could be from Maderna. And to your point, maybe there's a little over exuberance at a particular period and time, and I think that's where I go to what we should be doing, which is to not tell people that that's still not a real
possibility someday. Well, let's go through the timeline, let's go through the risks and opportunities, and let's walk it through our you know, as best to our ability in a public way.
Here's what we believe and what.
Could happen when and after that, investors have to model their own cashlowds. That's what a stock price is is ultimately what they think the company's worth from.
A cashloaw perspective. So I think it's a delicate.
Balance of we still believe what MODERNA can be and it should be someday in terms of being able to solve so many therapeutic areas as a platform company that can run the same technology through a manufacturing plant, and so therefore the marginal cost of arguing with drugs should go down substantially.
But there's a timeline for that.
There are regulators, and there's a timeline, and there's only so much in development as expensive, and so we try to be as transparent as possible with that, And I don't know, I guess that's my belief is we sh just to always make sure people understand what could happen someday, but also give them the best assumptions possible.
To the best of your ability over the relative near term.
Maderna is a according to the Bloomberg right now, I'm looking at a thirty seven billion dollar company. But obviously this sort of accelerated development of the COVID vaccine, allowing life to get back to normal in a maybe a period of time that was much shorter than people expected. You know, obviously orders of magnitude more valuable to the global economy than perhaps what Maderna specifically accrued. And I guess that's why you know, we had Operation warp Speed.
It certainly seems like in theory you could say the same thing about other vaccines, other pharma products that are in the works. You know, I don't know how much money is lost to the flu every year, but it would be probably very great for the economy if no one got the flu anymore, or colds or any other
sort of sicknesses that disrupted our life. Do you think like I've been a little surprised, you know that after the Operation Warp Speed experience, we haven't seen more announcements like hey, let's do an operation warp speed for X or Y, or maybe they have been and I just missed the stories like have you seen any follow up on like, Hey, this model did something powerful, Let's do it again, let's derisk it, Let's have the government step
in with this investment and guaranteed purchase agreements. Like have people taken lessons from Operation Warp Speed and applied it potentially to other areas?
I think you see some minor examples of that. But I also just think that COVID was such a significant event that affected the entire global population that it warranted both you know, resources from a time perspective as well as money perspective. And that's not to say that these other ones don't, but it just it was a crisis. And so you know, there are areas in oncology that I think there's additional funding going behind.
I think people learning. Okay, rare disease, I hear a lot of talk.
Again, I am not a scientist, I am not a regulator, So take it with a grain of salt. But rare disease as an example, it's rare by nature, so it's difficult to say it's difficult to actually get enough patients in data to progress fast because of the regulatory processes, and I think the regulators acknowledge that and say, hey, if I only have I'm going to make it up
one hundred patients in the United States. This might take ten years, but I can already tell in two years in a phase one trial it's making a significant impact on fifteen patients. And these are life threatening diseases. It's worth taking the risk.
So it might not be at.
The same speed and emphasism as operation warp speed, but I have seen a couple areas in oncology and rare disease, and maybe that's quite honestly, that's where I am personally spending time, so I see those things, and maybe it's happening in other areas, but I'm just not as knowledgeable as all other therapeutic areas.
But I do see it a little bit more in oncology and rare disease. Again, not the same as operation warp speed, but I have seen it change people's minds and perspectives a little bit.
I wanted to ask an operational question, which is how important is distribution to the pharma business. And one of the reasons I ask is because we recorded an episode with the Celsius CEO and energy drinks are clearly a very different business to pharma, but one thing maybe they have in common is that a lot of your success depends on actually getting into stores. And obviously, with medicines,
we are not talking about getting into stores. We're talking about getting into hospitals and pharmacies and doctors' offices, and there, I imagine you have to face some pretty stiff competition from competitors like Pfizer or a Glaxo Smith Klein. So how important is that and how do you how does that process actually work? What are the discussions like when it comes to distribution.
Yeah, I would say I think distribution is very important.
I think there are other important factors in terms of making sure that medication reaches a patient, but distribution, I mean, when I think about it, number one, it's got to be there at the right time. So take walking into CBS and wanting a flu shot. If CBS does not have the flu shot available, there's a chance that you might not go back for it. And so the importance of being having the supply in the market when a patient wants and needs it is extremely important, and distribution plays.
A role in that.
There's also many different things that you have to work through in terms of storage. So some products are required to be refrigerator stable, some are required to be frozen at a certain temperature, some are required to be frozen at a very cold temperature, and making sure that the
distribution network has that as well. So the conversation largely revolves around that, what can they do to make sure that we have the right amount of products in the right channels and buy channels for our industry that means pharmacies and or doctor's offices, and there's other places to put it as well, you.
Know, but that's largely what that conversation does. And I would.
Say there is some differentiation in the marketplace from a competitive standpoint, but I wouldn't say different Distribution specifically is the number one variable for a differentiation between competition.
Tracy mentioned earlier. But the hot thing, it seems inform right now that people are really excited about is gop one drugs and weight loss, and if a company has something in that category that investors get really excited and bid up the stock. You know, imagine things go in and out of style at various times, and people are
really excited about one particular category. Do you feel that pressure that is like, Okay, this is the hot thing right now weight loss, and we've you know, suppressed people's appetite with an injection. Do you feel that pressure and does that come from investors? Like are you playing in the space? Do one of your forty products? Is it going to be potentially related to this category? And I'm curious, like, you know, you mentioned that sort of two way conversation.
You're telling investors about your pipeline, they're telling you what they expect. Does this sort of flavor of the month or flavor of the year when it comes to what's hot in drugs play into those conversations?
Not really, not for us, not from what I've heard from investors.
I have seen it in other industries for sure, where and maybe it's just because there's a hot new product that is really core and central, that could be core and central to somebody's strategy, but they're missing it GLP versus what we've laid out is not core and central to our strategy. And so therefore investors understand that and quite frankly, rarely.
Ask about it. Okay, we're in the same yeah, so just not as applicable to our company.
You worked at GE for a long time before going on to Motejarna. I think there was another company in between. But one thing I'm really curious about is are there overlaps between pharma and something like the aircraft business. I have to imagine that both of those industries have really long lead times that you have to manage, and as part of that, you also have to manage investor expectations.
They are so similar.
So let me paint the aviation business that I worked in for GE, which was I was in the commercial engines division, Commercial Engines and Services. So think of you know the seven three seven maps, a partnership with a company out of France and GE called CFM. Is the is the engine on that aircraft? And so when I was a CFO there, you're making bets on product families that will be on aircraft for literally forty years. And
these are substantial investments. We're talking two three billion dollars for a company to invest.
In, and you have to make the right bet. Are you on the right.
Aircraft because you know, you can put an engine on a bad aircraft and your engine might be great, but if nobody buys aircraft, it's irrelevant. So not only do you need to make the best engine, you need to put it on the right aircraft, people need to buy it, and then you need to obviously do everything else well. From an execution standpoint.
That is no different here.
I mean, we are making you know, I mentioned our RSV product as an example, thirty seven dollars in patients. It's in the hundreds of millions of dollars from an investment perspective.
But once it's ready, and if it's there.
You know that rspeed vac scene probably won't be tweaked too much. Maybe a little bit of tweaking over time, but.
We've just cleared a high barrier of entry. Where as of right now there's only two competitors, and in the aviation.
Space there's there's largely three competitors. So they're very similar and so the funding. So let's just give an example, maybe give you a specific example. When I was at Aviation, you think through that three billion dollar program, and we had what we called risk and revenue share partners, which was somebody to say, hey, we can't invest in six
product families times three billion dollars each. We're going to have to have some partners that they'll make part of the engine and they'll help invest in the technology and they can share in the commercial rewards. That can be very similar in pharmabiotech. So I mentioned Mark in our partnership. They funded two hundred and fifty million dollars back in twenty sixteen and additional moneys since thereafter, and.
They owned fifty percent of that program. So when you're.
Thinking about pulling together this entire pipeline across many different therapeutic areas and they all cost a lot of money to develop, you need partnerships, and then you know that that partnership can provide more than just money.
In the case of Merk, they are great from a commercial perspective.
They sell the leading oncology drug and the planet, and the same in the aviation plant world. You've got to have people that might make the best part of the engine that you're talking about to improve fuel consumption. So they're very similar models one that I think about quite a bit. And on top of that, maybe the last
thing I'd say is they're both highly regulated. I already mentioned the biotech space, but aviation, as you know, the FAA and other agencies across the globe highly regulate the aviation space to make sure that it is very safe to fly aircraft across the globe.
I just have one last question, and I get you know, for a sort of young company, growth company, you know, macro may not affect you as it may affect a more mature company. But I'm just curious, like, when the FED raises rates dramatically, what does that mean for company like ours?
Well, for us, again, we're a bit unique because we have thirteen billion dollars solid into it our way and maybe how I think about it for other companies ways, but that might not have be fortunate to thirteen billion. Thirteen billion we have I forget the exact number invested in bonds, but primarily invested in bonds, and so we look at duration, We look.
At you know, what does that investment portfolio want to look like. We're not there to make money on that asset.
We are there to preserve capital to invest in what is core to us, which is our R and D and everything that we've spoken about today. But we look at, okay, what's that mean? And you know, what's the duration we should be taking out? Which is a happy problem to have for us. I would say, I would say, you know, for a company that is sitting on you know, one and a half years of cash burn, and you're just sitting there saying, Okay, you know, I'm about chech. I'm
not revenue yet, I'm not revenue generating yet. I've got one and a half years of cash burn, you know, in terms of cash on my balance sheet? What does this mean? And what do I need to do? You know, am I going to make it? You know how interest rates affect me? Should I reposition myself?
Do I What do I need from a death perspective?
You know, it's just such a different animal in terms of surviving that time period in a different way.
All Right, Jamie Mock, CFO of Moderna, thank you so much for coming on all thoughts. That was a really interesting conversation. I feel like I understand MODERNA now and also the role of CFO a little bit better.
Well, thank you, Tracy angel I really enjoyed it and it was a pleasure. Amazing you both.
So, Joe, that was really interesting and kind of surprisingly thematic in a lot of ways. It seemed to touch on a bunch of recent things we've been talking about, like aviation.
Mike, Yeah, I wasn't expecting that.
Yeah, Like distribution, although I take his point that that isn't I guess, a main source of competitive differentiation. But I'm glad I've finally got the chance to ask a CFO what he thinks when he sees the share price going down. I always wanted to ask that.
Yeah, No, I mean I think it's really interesting. I mean, at the end of the day, like, right, any company can talk about their vision or their roadmap, et cetera, But when investors are selling your stock. I think I appreciated his fourth rightness that like you have to take that seriously on some level, like it seems like there's only so far any company can go in terms of staying on one path if investors don't like the path.
Yeah, And just on that note, I also thought it was really interesting his discussion of I guess encouraging investors to think over the long term, and also the idea that everyone has a different definition of what the long term actually is. And I suspect those definitions have been
getting shorter in recent years. But you know, it can range for twenty four months to like ten years, And how do you actually convince people to stay with the company, be excited about the product offering and the pipeline, but not get too excited and expect that immediacy for things that take a particularly long time to develop.
Totally, you know, the I was not expecting him to like draw those analogies between pharma development and commercial engines, but it makes so much sense because obviously you have this, you know, this huge runway, no pun intended, and then you're locked in for a long time and the product isn't going to change after that until you're really taking this sort of like extremely long uncertain bet. I also really like to description of the processes that they have
in place for internal capital allocation. You know, you have like forty different processes and that like competition element between the different subject areas.
Yeah, absolutely, shall we leave it there.
Let's leave it there, all right.
This has been another episode of the Audlots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.
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