Health Is Wealth
Booth’s new Healthcare Initiative uses analytical and humanistic approaches to make a positive impact on the health-care industry.Health Is Wealth
With a successful mRNA coronavirus vaccine, 24 products in the pipeline, and a tenfold increase in its stock price since January 2020, Boston-based Moderna gives new meaning to lightning-speed innovation. Employing just 1,500, the company was able to tap into public-private partnerships to play a major role in what’s nothing less than a vaccine revolution, navigating a complex path and rolling out millions of vaccine doses less than a year after the start of a global pandemic.
David Meline, ’86, joined what was then a development-stage biotech firm as its CFO in June 2020. Previously, the Booth alumnus was the CFO at Amgen, a large biotech, and was the CFO at 3M before that, after spending 20 years with General Motors.
This week, he joined Randall S. Kroszner, deputy dean for Executive Programs and the Norman R. Bobins Professor of Economics, for a virtual chat as part of Chicago Booth’s Road to Economic Recovery series. Read on to learn more about Moderna’s meteoric rise, why the company felt it was essential to make vaccine doses prior to FDA approval, and what Meline has learned as a senior leader in this historic moment.
Watch the full video below, or scroll for edited highlights of their conversation.
Madhav Rajan: Good morning, afternoon or evening, ladies and gentlemen. My name is Madhav Rajan. I'm the Dean and the George Schultz Professor of Accounting at the University of Chicago Booth School of Business. I'm thrilled to welcome you to Chicago Booth Road to Economic Recovery series. Wherever you're logging in from, I hope you're all doing well during this unusual time, and I'm very grateful to you for taking the time to engage with the school in this fashion. We have a very special discussion plan today, titled “Vaccine Revolution. How Did It Happen, and What's Next?” I'd like to thank Chicago Booth alumnus and Moderna CFO David Meline for being here to discuss issues related to the COVID-19 vaccine, and what's going to happen next. My thanks also to Deputy Dean Randall Kroszner for moderating today's chat.
This is the third event in this Road to Economic Recovery series on COVID-19. Each event takes place virtually and includes a discussion with industry leaders, policymakers, and other experts from Booth and beyond to think about the challenges facing all of us as we go forward. Last July, we opened the series for the chat between Randy and Sir Mervyn King, former governor of the Bank of England about rebuilding the global economy amid radical uncertainty. Then in October, Booth alum, Ann Mukherjee, chairman and CEO of Pernod Ricard North America, and Brian Niccol, chairman and CEO of Chipotle, another Booth alum, discussed how consumer behavior has changed during the pandemic in a panel moderated by a Booth professor, J.P. Dubé who oversees the Kilts Center for Marketing at Booth.
We'll continue the Road to Economic Recovery series as the world continues to rebuild, and we will post details about future events on the Booth website, chicagobooth.edu, as plans take shape. I want to also let you know about another great event coming up on April 30th. We will host our annual Management Conference, and this event which is going to be online. We'll open with a keynote conversation between Booth alumni Cliff Asness, David Booth, and Eugene Fama, who’s of course also a faculty member at Booth, and moderated by our faculty member Steven Kaplan. These giants of the investment world are going to discuss their views on the current and future state of asset prices and investing. We're also going to have other panels and session topics on things like big data in the classroom, the COVID vaccine, fake news, the future of the MBA, and lots of other interesting sessions.
So you can learn more about Management Conference as well on the Booth website. With that, I'm thrilled to introduce today's speakers. So as CFO of Moderna, David Meline oversees all of the financial business development and business services functions for the company. Before that he served as CFO and EVP at Amgen from 2014 through 2019. He was responsible for all finance information systems and global business service activities across 100 countries. Before that, he spent six years at 3M, where he also served as CFO and senior vice president, and was responsible for all of their financial activities across 70 countries. Prior to that, he held numerous leadership positions at GM, including vice president and CFO for GM, North America. Thank you very much, David for being here today.
David Meline: Thank you for the invitation.
Madhav Rajan: Sure, and Randy Kroszner, who is our deputy dean for Executive Programs and the Norman Bobbins Professor of Economics at Chicago Booth. Randy served as a governor of the Federal Reserve System from 2006 until 2009. He chaired the committee on supervision and regulation of banking institutions, and the committee on consumer and community affairs. Randy took a leading role in developing the sponsors to the financial crisis and in thinking about new initiatives to improve consumer protection and disclosure. Thank you very much, Randy, and take it away.
Randall Kroszner: All right, great. Thank you so much, Madhav. I'm delighted and thrilled to have David Meline with us and to have the third installment of our Road to Economic Recovery series that builds on our Economic Outlook series that we do around the globe, and so I wanted to start with, David, how in the world did you make the transition from Amgen, which is a very large company $20–30 billion in revenues, market cap of more than a hundred billion to something that's, until relatively recently, no one had ever heard of. Moderna in 2019 had revenues under $100 million and a market cap of less than $10 billion. How in the world did you make that transition?
David Meline: Yeah. No, it's a great question, Randy. It's been a really exciting journey since I joined the company in June of last year. So if you go back to that time, the company, Moderna, was at a phase where it was in early development of this vaccine for the COVID-19 virus, and it looked quite encouraging in terms of the possibility of coming to market, as soon as the end of 2020. The company was a development-stage biotech company until that time, and the first product launch was expected more like four or five years in the future.
So as they were looking at the possibility of becoming a very significant commercial company quite quickly, they reached out to me and I had just finished my six years as a CFO at Amgen, so I knew the industry. I understood how to build global businesses, and they asked me to join them, to help build out the company, which I thought there would be no more interesting and exciting and impactful a challenge that I could think of. So, I decided to join them and it's been a great ride, and as we look at how the vaccines been now distributed globally, it's quite satisfying to see the results thus far.
Randall Kroszner: So let's take through this because you said you've built global businesses before, but nothing like this. I mean, going from a trivial amount of revenues to contracts for $18 billion worth of revenues, tenfold increase in the stock price, but this unprecedented growth is really no model like this. How have you begun to manage this? Also, what I want to note is, please feel free to send your questions. We've got a number of excellent questions that have already come in, and this is actually one of them of. How did you manage this growth from zero to something enormous?
David Meline: Yeah. So if you look at the company, when I joined as I said we were just in the phases of planning for what's called the Phase 3 clinical trial, which was the trial that would be for 30,000 people to allow us to get approval for the vaccine. The company was made up largely of a research and development team. So when I joined and we started building out, A, we built out the manufacturing network, which is largely an externally sourced network where we're partnering with some capable manufacturers including Lonza from Switzerland. We got contracting in place. We aligned up raw materials to the tune of hundreds of millions of dollars of committed supply.
We then were in discussions with governments around the world who, by the summer of last year, were very anxious to start contracting with us, even though the technology was not yet proven out, but obviously we're in the middle of the pandemic already. So there was a huge amount of interest in contracting, which we did through the summer into the fall. We got the results then from the trial in the fall and got approval under an emergency use authorization to launch in December which we did, and as you mentioned, we announced the signed contracts that we have in place for 2021 deliveries right now stand at about $18 billion. So far so good, we've delivered 67 million doses thus far on the way to a hundred million in the US this first quarter and 15 to 25 million international.
Randall Kroszner: Amazing. This is also one of the questions that had come in. So my understanding is that you had basically never created a commercial dose before or delivered them before, and suddenly you're doing hundreds of millions, if not a billion in a shortened period of time. So take us through a particular challenge of something that you had to unlock that, of course the company had never done before, some challenge that you were facing. And then how did you sort of deal with unlocking that challenge to go from zero to a billion?
David Meline: Yeah. Well, I mean, if you think about what we've been doing, normally that development that occurred over a matter of months, we would typically build out over about a decade. So what you end up doing is doing a number of things in parallel, and I think importantly if you look at the investment thesis, we were taking risks in terms of investing in advance of when you normally would. So normally when you develop a product like this, you go through a series of trials, Phase 1 to Phase 2 to Phase 3. You then take incremental investment in scientific risk as you go along. In this case because of the urgency of the pandemic situation, we did these steps in parallel.
In the case on the scientific side, it was with close cooperation with the FDA in the US and the health agencies around the world, because you're monitoring safety as you go because you can't compromise in any way the safety of the product and for those patients who are in the trials. So we were doing that in a number of cases in parallel where you typically do it over a longer sequential period, and then in the same time we were investing. So were investing in lining up commercial supply and actually we're producing product as early as last summer, which meant that if it wasn't ultimately approved and launched, we would have had a loss of those investments. But fortunately the product came through with very high efficacy, 94% efficacy rates, which is amongst the best vaccine efficacy that's been seen in history, and we were able to launch the product successfully, and therefore able to ramp very quickly because we'd taken the risk to invest and be ready for that.
Randall Kroszner: Yeah. I mean, I think many people don't realize that traditionally the FDA would approve the vaccine if it's like 50% to 60% efficacy. I mean, this is extraordinarily high. There is a lot of contracts with government, and so we had a couple of questions come in about this, about dealing with the political economy of government contracts. And in particular, what was the role of Operation Warp Speed? Was that helpful? What did that do for you? How did that help you to do your investments?
David Meline: Yeah. First of all, I would say it's a really great example of a public-private partnership, that's really worked incredibly well. Again, if you look at the number of people in US who have now been vaccinated and the rollout that's occurring, it's very much an outcome of those investments in that risk-taking that was done jointly together. So the US government made a decision to place bets, if you will, on three different technologies, where they invested with and contracted with two producers for each of those technologies because they recognized that it was unknown as to how quickly and how efficacious each of those vaccine candidates would be. In our case, as you said as a company that was a startup biotech company without a history of products, We didn't have the benefit of a global network. We didn't have the infrastructure in place. We didn't have the manufacturing, we didn't have a credit rating, and so the support we got in the partnership with the US government was critical to our ability to then progress quickly with again, the result of a very efficacious vaccine. The original target and the guidance from the FDA was that they would be approving vaccines to the extent they achieved a 50% threshold of effectiveness or higher, and again, obviously we came at the high end of the range, so that was very satisfying. And because of this mRNA technology we're using, we were also able to get to market quickly and the results have been very encouraging.
Randall Kroszner: Yeah. I think it's a very, very interesting innovation to think about how we usually think of governments providing some sort of insurance function and instead what they did is they said, "Okay, if we don't know which technology is going to work, and this is so important publicly that we'll take a chance on a whole bunch of them. Some may work, some may not." It was crucial for you to be able to put the pieces together because you have no preference and you had very few resources. So, I think that's really an amazing transformation. And as you said, I think a very clever use of public funds to try to help the private sector to support the public health problems. You've mentioned that the mRNA technology, so let's take us back to the origin of the vaccine revolution. My understanding is that Moderna was able to figure out what vaccine they wanted to use in two days, but just seems something out of science fiction. Is that true, and how did that happen?
David Meline: Yeah. So if you look at the technology, which has been under development now for about a decade, the thesis is that what you can do is basically, RNA is the messenger instructions that come from DNA to the body to produce proteins. So the insight that was developed then was if you can reprogram RNA, the messenger RNA to give the body instructions to produce a certain type of protein, that's how you can then develop a drug candidate, and so that's what we did in this case. This was the 10th vaccine candidate that has been developed and put into clinical trials by Moderna. But of course, the first one that's now gotten to market in part because of the urgency of this pandemic crisis, but back to your question. So yes, the answer is once the genome of the virus was published on the internet by the Chinese authorities last year, within two days then we were able to design the mRNA sequence and the vaccine. We then went into production and initial production run, and we delivered 42 days later to the NIH, the first vaccine that could be then used in the first trial. So very interesting technology in part because of the speed, and if you look now with the variants that have started developing, we've started some trials a couple of weeks ago including a modified version of the vaccine that's specifically designed to address the .351 variant that originated in South Africa. So we believe this technology will be very effective in terms of its adaptability to accompany the evolution of this virus, which we think will continue, so we're very optimistic that we have a technology that's going to contribute strongly going forward to address diseases of this type.
Randall Kroszner: Then the speed is just amazing because it was Watson and Crick again in Cambridge, UK, who came up with the understanding of the structure of DNA, and then it was decades before we started being able to sequence the genome, and now it's something that we identify the virus, the genome is published a short time after, and in a couple of days, you figure out what you want.
David Meline: Yeah. I mean, if I could comment, and I think there's something very exciting going on right now, which is the knowledge and understanding of biology continues to improve quite dramatically, as we move through time. The capability of computing and the costs, the decline of computing costs is also contributing, and those are coming together to unleash this type of development, which I think is very exciting frankly, for humanity.
Randall Kroszner: Yeah. I think this is just amazing. So let's pick up on your point on what's next and so, on the mutations and the variants. So what is your view of … we had gotten a question in on this. We have a number of questions about what's going to be happening with the mutations and what will that mean for public health. So how do you see the role of just the vaccine rollout in general affecting whether there will or would be mutations and variants? And then what can Moderna and others do to try to respond to that?
David Meline: Yeah. So I would say, first of all, we do expect that this coronavirus will continue to be present and will not be eradicated in the foreseeable future. If you look at other coronaviruses that have not been as serious, you see them continuing to exist and mutate, so we expect that will continue with this virus as well. The good news is we have been testing against these new mutations, and thus far we've seen that our current vaccine is effective against all of the major mutations that have been identified, so that's encouraging, but we're keeping an eye on this because the open unanswered question is around the durability of the vaccine. So we're monitoring that, and then as I've said, we've started some additional trials in the last couple of weeks where what we're doing is we're looking at the effect of a booster shot of the existing vaccine.
So we give two injections in a course of treatment. We're then giving a third injection as a booster to raise the level of antibodies and observe the effectiveness of that against these new strains. Secondly, we've done a modified version of the mRNA vaccine, which is specifically targeted against the .351 version out coming out of South Africa. So we're testing that, and then there's a third arm of the trial, which has got a combination of the existing plus the .351, and we'll see what the results are from those trials in the relative near term but we do think that there's a reasonable likelihood that you'll see a booster shot recommendations, perhaps as soon as by the end of this year.
Randall Kroszner: What role will the FDA in the US and the other health agencies play in for applying of this [inaudible] for you to try these new things out of this, then actually get it into people's arms.
David Meline: Yeah. That's a good question. So we're working very closely, as you can imagine with the US health authorities, including the FDA, as well as many of the health authorities around the world. The cooperation has been very good, obviously it's a huge priority around the world, and so we're working very collaboratively on, frankly a 24/7 basis with these people world given the urgency of the situation. Obviously, all of these trials that we're now launching have been designed and done together in cooperation with the health authorities, and they're monitoring closely the results so that again, we can quickly move through the decision process, assuming success to get these vaccines to market, and in this case, we're talking about boosters, which we believe there's a reasonable likelihood there'll be necessary.
Randall Kroszner: So we've had a number of questions come in about the potential tension between profit motive and the public health, and so how have you been thinking about that? Because obviously getting the vaccine out quickly to as many people as possible, it's an extremely valuable thing from a public health perspective, but obviously you have to make sure that Moderna is viable, and so how do you think about those kinds of trade-offs given the important role that you play to the public health, you and the others who've created the vaccines, play in public health?
David Meline: Sure. I think it's a great example this situation of a successful public-private partnership, where there's been not only co-, if you will, co-investment as they've underwritten the Phase 3 trial for us and the other manufacturers. But there's also the risk-taking that's taken place as we've been taking risks with our private shareholder investment. And of course, we've contracted with a number of countries who were willing to give us at-risk down payments against their orders to enable them to get an allocation of the product as it's produced.
So we've seen a very close collaboration and risk-taking that there's been a willingness to undertake. I think It's a very unusual situation and we think that it's likely at least in the US as this evolves to a more stable, endemic phase of this virus that you'll see then [inaudible] but it's reasonable to think that you'll have a private market develop that goes along with it as we move to the next phase. So, not determined yet, but I think it's reasonable to expect that, to develop going forward, like you have for other vaccines for other diseases.
Randall Kroszner: This is interesting because it seems the main or perhaps the only purchases, at least in the short run is the governments, and one of the questions came in is, will private markets and private organizations be able to access the vaccine and then other resell it or using their companies to sell the vaccines?
David Meline: Yeah. Until now our customers have been the governments and health authorities around the world who have taken the responsibility to contract and make the product available to their citizens. We have two supply chains that we've set up. One is a US-based production that is until now exclusively for distribution within the US borders, and then we have a supply chain that was set up in collaboration with our manufacturing partner Lonza, which is a Swiss-based company and their primary production location is in Switzerland, and that is the source of products for our international contracts. We have those in place, as I said until now it's been a government business, but we do expect that as we go through phases of this and get past the pandemic phase, at least in some countries, it would be likely that you would see a transition to a private market, which would be... We're preparing for that likelihood in fact.
Randall Kroszner: But do you think that's a ways off?
David Meline: It's a little unclear right now as to the precise timing, but if you look at the speed at which you're seeing supply developing at least in the US, I think it could be sooner than later that we see that transition. In other parts of the world, it's likely it's going to be well into 2022 or beyond when you have initial coverage of vaccine, and I think that will dictate them the timetable in which the market develops.
Randall Kroszner: Very interesting. And as you know some of my colleagues, Eric Budish and Canice Prendergast, have been crucial in working with this international group called COVAX to try to ensure that vaccines are allocated globally, not just to a few of the wealthiest countries in the West, and if we might be able to put into the chat a link to their recent paper in Science on market design to accelerate COVID-19 vaccine supply, it's a very interesting way of trying to use market forces to achieve a social purpose. So have you worked with COVAX and what is your thoughts about COVAX?
David Meline: Sure. We've been working with COVAX since last year. So we made some initial proposals to them later in the summer last year, and we've continued to have a dialogue with them around supply. We're very interested in that mechanism in-part, because again, think about this startup company, no existing commercial infrastructure around the world. Certainly, no presence in let alone the US or Western Europe or Japan, let alone the developing markets around the world. Very interested in how can we provide our product and access to our product to potentially all citizens, we recognize is a responsibility of ours. And therefore what are the means by which that can be accomplished? COVAX is clearly a mechanism by which we can access areas of the world that otherwise would be inaccessible to us. So we've been very interested in working with them. What we've also seen to be honest is, we've seen some of the countries that are COVAX participants come into us directly to contract recently. So we announced, I think within the last few weeks, a contract with the Philippines, a contract with Colombia. So we see various approaches which we try to be responsive to.
Randall Kroszner: It's very, very interesting. But there's so many interesting aspects of this, sort of the role of the government in providing some risk-sharing function to allow you to do what you and others do. Then the issue of public health because obviously, this is a classic externality kind of... Of course, you want to protect yourself from the virus, but we want to give incentives for everyone to be protected against the virus globally, because as you're describing mutations can come from anywhere and could come back to any country given the global interconnections.
David Meline: Sure. That's right. If I may, that's a very important observation, which is this question of access and equity and equitable distribution. The fact is, is that mutations arise from people that are infected, who haven't been vaccinated. So until you have broad dissemination of vaccines, you can expect that you'll continue to see a very active evolution of the virus. So there's some very strong reasons from a public health perspective to seek to broadly get gained vaccinations for the entire world.
Randall Kroszner: So we had a few questions come in around pricing of both how, since you're developing this so quickly, how do you even think about pricing of something like this? Then how do you also take that into account and thinking about the benefits of getting more vaccines out to people?
David Meline: Sure. So what we've sought to achieve as a balance on pricing, which is if you looked at the traditional pharmacoeconomic modeling of the value of this vaccine to the economy, it leads you to some conclusions where you could see prices that are quite a lot higher than we're offering. So what we've done is we've sought to balance our responsibility as a manufacturer to offer a fair price, which will generate a return on investment to our investors, as well as allow us to continue to invest and take risks on additional developments while also acknowledging and recognizing our responsibility to society by setting a price that meets affordability criteria, which we think we've achieved very well. If you compare the price of our vaccine to what it costs to get a test for whether you're infected or not, I think you would find that the vaccine is quite a lot cheaper than just getting a test. So I think that's a validation that we've been able to strike that balance.
Randall Kroszner: The work that Eric Budish and Canice Prendergast and their coauthors have done, their rough estimate is that the global benefit from an additional capacity is the order of $500 to $1,000 per dose. From you and others, it seems to the cost per dose it's on the order of $6 to $40.
David Meline: Yeah. That's exactly right. So I think that demonstrates the value that's being provided here by us and others.
Randall Kroszner: It's a very, very interesting issue of how to try to get this right, and make sure that we try to achieve that incredible social value of $500 to $1,000 per vaccine and make sure to get that out there. We had a few questions come in on dealing with the political pressures because obviously you're dealing with government contracts. So there are issues there, and then you're dealing with governments who have different views and some governments who wish they had contracted earlier than others. So you and the others who are creating this vaccine can face a lot of political pressures. So how did you deal with that in thinking about the initial contracting as well as going forward?
David Meline: That's a good question. I mean, if you look at the developments of the vaccine at Moderna, it was quite straightforward. We'd been cooperating with the NIH. As I said, we'd done nine previous developments of vaccines. So our technology was well-known at least to the US government health authorities. So in that regard we didn't have, if you will, political pressure. We had good cooperation and knowledge of the technology and support because there was recognition that this technology, which had never been brought to the world previously, was likely to be very well matched with the needs of this type of a pandemic situation. So one can say we didn't have political pressure on that side. What is true is that we have lots of governments coming in looking to contract with us.
You had some that were more forward leaning and prepared to contract. Remember that this was a technology that was previously not available in the markets. So depending on the knowledge of the health authorities and the government, I think there was a greater willingness to consider the contract early. Others that chose to depend more heavily on some of the traditional proven technologies, we didn't see them come in until later when they saw that we got to market successfully and the efficacy was very high. So the interests say today, there's a very strong and broad interest in mRNA technology. We and others are working very hard to continue to develop given the proven applicability and high efficacy. So far so good on safety, it looks very good in terms of the product.
Randall Kroszner: It's really quite amazing. I mean, taking these fundamental ideas, Nobel Prize winning ideas from 1950s and then it became so rapid and being able to implement this. I mean, this is exactly what we deal with at the Polsky Center for Innovation and Entrepreneurship by trying to take the ideas that scientists and researchers have, and then actually bring them into practice. This seems like just an amazing example where we bring together traditional science, computation and data analysis, big data putting it all together.
David Meline: No. That's right. I think it's a great example of innovation and the power of innovation. Moderna was named by Fast Company last week as the most innovative company in 2020 in the world. I think that's exactly right. I think it's a really exciting example of the power of innovation and what can be accomplished.
Randall Kroszner: So are there broader lessons? Because we've talked a lot about the specific challenges, the amazing challenges that you have faced and going from zero to 18 billion or a zero to a billion doses. But for others who may not have quite the same rapid growth that you've had, but are trying to deal with innovation and trying to deal with rapid growth. Are there some general lessons we can draw from this?
David Meline: Yeah. That's a good question. I mean, I would say, my observation first is it's an incredible triumph of science. So you see what's being done here, imagine in the absence of this innovation, the situation the world would be facing with this pandemic today, right? So a wonderful example of the power of science. Secondly, I would say more specifically it's been a unique opportunity to bring to market this mRNA technology, which is new to the world and had been under development for a number of years perhaps serendipity that we were at a point of development that coincided with the arrival of this COVID-19 virus, and we were able to respond to it.
So that's very exciting. Thirdly, I would observe and we've talked about this public-private partnership, and when it functions effectively the power of that to address big public health issues, again, we think is very exciting and a good example of cooperation leading to real economic benefit for the world. So look, we're one year almost to the day into this pandemic, and we're optimistic that you can see the sun starting to appear on the horizon. It's very much the result of the efforts of all of these things to address this pandemic.
Randall Kroszner: It's very interesting to think about this because there is a lot of debate on the role of government in innovation. Then, of course, people have talked about ARPA and DARPA in the US. UK has just created something called ARIA based on that sort of model, which is about high risk-taking and the expectation that most projects will not succeed because if you've never missed an airplane, you spend too much time waiting in the airport. You're not taking enough risk. Traditionally, government has not been very good at being able to take risk, and it seems that this may be a breakthrough on a much better model going forward.
That's where we want to think about two sets of questions coming in. First is, how do we make this sustainable? So there've been a lot of innovations with the FDA and health authorities in the world to be able to speed trials. A lot of innovations in sort of government risk sharing to try to solve important public policy problems. Is this something that you think will just disappear when we get this under control? If so, how can we try to make sure that doesn't happen? We sustain these instances on the policy side.
David Meline: I mean, as you can imagine, there is a lot of interest amongst governments right now around the world to exactly address the question you're raising, right? Because the sustainability of efforts tends to dissipate when the crisis passes, right? You move on to the next crisis of the day. So how do you sustain the effort of preparedness, is the key question that governments are wrestling with right now. Would you have some level of optimism here that this type of technology, which is a platform technology, and therefore you can use the same processes.
You can use the same production equipment for different vaccines for these different viruses, if you lower the barrier and the cost of preparedness, if you will. That starts to unlock the possibility of better preparedness going forward. So those are the areas that are being explored right now. Is there a means by which you can ensure that you are as prepared as possible while still being responsible with the type of investment that one needs to sustain? I think there's something there that is very exciting.
Randall Kroszner: Yeah. No, I think it's really gotten us to think much more carefully about risk management because the FDA had operated in an extraordinary risk-averse way, and they're historical reasons for that. They had made some steps forward with HIV/AIDS because people were dying. So the FDA said, "Well, you can take a few more risks in some of these trials because we know this person will not make it in six months, but let's try because they may we may get something out of it." Now we're doing further expediting of these things. So I'm hopeful that we will learn permanent lessons on better risk management because I'm not sure that we had the optimal risk management from before. But this gets us to what's next, and you mentioned that. I have a zillion questions on what's coming for mRNA vaccines? We should mention the platform that enabled to do these. I know that there's been some discussion of potential cancer vaccines, HIV/AIDS, a whole variety of things. So tell us about what's potential in that?
David Meline: Thanks, Randy. If you look at the pipeline that Moderna has under development, it's very exciting. We have 24 candidates in the pipeline. I think 13 of those are already in the clinic, so in trials. They cover a diverse set of diseases where you have high unmet needs. So we've got cancer vaccines that we're working on which we're very excited about the possibility there. We've also got a set of activities around other autoimmune diseases. We've got additional vaccine candidates for the next version of this virus that we might see. We've got an effort in the cardiovascular area. The largest killer of people on the planet is cardiovascular disease, and we have a number of candidates there.
Then finally, we've also got an effort underway against ... there are many rare diseases that occur in small sets of the population that we think that this technology, which can go after basically all of the proteins in the body, instead of only a third of them, which is what traditional biotech can address, opens up the possibility of addressing a number of unmet needs. So if you look at the size of that pipeline, that's comparable to much larger biotech or pharma companies. As you've quoted all the figures, we're getting to be a bit bigger this year. I think we're approaching 1,500 employees now, which is about double what we were a year ago. So it's very exciting what's going on.
Randall Kroszner: Actually, I have some more questions came in on that last piece about managing this. So how did you work with the senior management team on this? You've got an interesting combination of people who are scientists and who really understand the technology, understand the science. You've got data analysts who may not be a PhDs in bio, but we know the data very well. Then you've got yourself with a great background at Amgen, but not being a scientist. So how do you get a team like that with very different strengths to work together in such a short period of time to create all this?
David Meline: And on top of it, all being done over Zoom.
Randall Kroszner: Oh. right.
David Meline: Having never met any of my other fellow employees, we built this global company and are addressing this global pandemic. So we think that's very exciting. We're not the only company who's dealing with this situation, but certainly it's been a real challenge for everybody. But the advantage sometimes of urgency is that it does break down the barriers to effectiveness. So it's not unusual. We will be conducting a meeting of the day on any particular day, and there'll be people on the call who will be contributing actively to the discussion and problem-solving. At the end of the meeting, we'll introduce ourselves because they've just joined the company. So it's been an incredible build-out.
What we've tended to do of course, is seek people with the level of experience and expertise in their particular specialty area to come in and help us to build out the business as we've gone. Again, the results I think, speak for themselves. Obviously, the mission that we're on and the opportunity to contribute has attracted some of the best and brightest in the world in their different areas of specialty. Then it's just about being clear and get the communications right and understand the decisions we're making. My role of course, is to understand the trade-offs and the risk reward trade-offs financially. I depend very heavily on my colleagues to make similar types of trade-off decisions scientifically. You put those together and you can see some success. Then the impact is apparent in terms of what's going on to address this pandemic.
Randall Kroszner: As you mentioned, it's truly amazing. Not only is this sort of unprecedented going from zero to 18 billion, doubling your employees, producing a billion doses, and it's all on Zoom. That's even more astonishing. That's really amazing. As you said, you've got colleagues with science backgrounds. They're making science trade-offs, you're making science trade-offs, how did you make the ultimate trade-offs? What is the way in which you do the decision-making to make the final decisions? There may be differences in the approach you're taking, the scientists are taking and that others in the company are taking. What is the way your leadership work and your leadership approach works to make that make those decisions?
David Meline: That's a good question. So if you look at the company, again, we have the advantage of being small. So you can get the key decision makers around a single table. Everybody has their specific area of expertise that they bring to the table and you need to conduct which Stéphane Bancel does very effectively, our CEO, of allowing everybody to contribute to the debate, to make their points and offer their points of view. Then you seek to come to a consensus. Sometimes I vote yes, sometimes I vote no. But whatever we decide to go with, then we need to all get on board and support through success and check your ego at the door as you enter the room. It's worked very effectively. Again, the urgency helps a lot, right? The clarity of the mission and the situation at hand actually makes in some ways risk-taking, and decision-making is easier than in other cases where the need is not perhaps as well defined.
Randall Kroszner: I think that's a very important point. I mean, you're making amazing number of decisions in an extremely short period of time in areas where we really haven't explored before. But I think the ability to do that really comes from the clarity of the objectives. That's something that we talk about a lot to getting the question right because once you get the question right, once you get that clarity from that, then you can do your risk management around it. If you're not quite sure what you're trying to do, that slows down decision-making. Then there's a lot, of course, office politics kinds of things that come in when it's super clear from the CEO and from other populations …
David Meline: If I may add, Randy, and you take us back to our orientation at the University of Chicago. I'm a big believer in, you do the analysis, you understand the alternatives, you understand the assumptions and inputs. Usually, strategy's pretty easy once you've done that analysis because more often than not the answers clarify themselves as a result of doing that kind of a framework of analytics that I think is important. I'm always a big believer in doing that framework, doing the analytics. In my role as the CFO, I always tell my people, I get the seat at the strategic table because I bring the data, right? I may have an opinion but you got to get it right. That's our role and if you do it well it helps to facilitate making good decisions.
Randall Kroszner: Is that what you see as the main thing that you got from your training, that's been helpful for you to work with these amazing, amazing guys.
David Meline: Yeah. I think that's been very helpful. The training, the analytics, the dependency on preference for data and hard facts is something that I learned at Booth and carrying with me until today.
Randall Kroszner:That's great. Anything else that you wanted to add? I mean, hundreds of questions have come in, but are there any questions that we haven't touched on that you want to touch on? Perhaps, that you wanted to touch on?
David Meline: No, I think you've covered a broad set. Again, very interesting we'll look back, I think at this as a case study and see the again, the triumph of science, the positives of this partnership between the private sector and the public sector and the effective addressing of this pandemic. In this case, by a small company that's been nurtured by the US system that encourages innovation and risk-taking, I think it's a great example. We should all feel very good about.
Randall Kroszner: I think the key, as you said, it's getting the risk-taking right both on the public level and on the private level because you're making trade-offs as a private company. Governments are making trade-offs from a public policy perspective, but also, have many different political constituencies and interests that they are dealing with. I think what I take from this is a great deal of optimism and hope that we can sustain some of the changes that have occurred in the process by which vaccines trials occur and are approved, hope in terms of the new platform that you have that potentially could find to cancer, HIV/AIDS, many other diseases. That could be quite astonishing, and hope that we can get this behind us and get back [inaudible].
Thank you so much, David for the use of your time and your thoughts. I know the world is looking to you and to Moderna for solving these problems, this pandemic issue that we're facing. It's amazing how you've gone from basically a small startup to being one of the most important pharma players in the world. I really appreciate what you're doing, and I hope that we will continue with the conversation. Thank you so much.
David Meline: Okay. Thank you.
Randall Kroszner: Bye-Bye.
Randall S. Kroszner: Prior to the COVID-19 vaccine, Moderna had a promising pipeline using mRNA technology, but its first product was not expected to come to market for another four or five years. How did you personally decide to make the career leap to Moderna after having been at some of the largest and most established firms in the world?
David Meline: When the company reached out to me, I had just finished six years as CFO of Amgen, so I knew the biotech industry. Moderna was planning for the Phase 3 clinical trial for its coronavirus vaccine, a trial that would include 30,000 people and could allow it to get FDA approval. I understood that there would not be a more interesting, exciting, and impactful challenge, so I decided to join. And they understood that I knew how to build global businesses.
Kroszner: What was it like to build out an international manufacturing network for coronavirus vaccine production from the ground up?
Meline: When I joined Moderna, we started to build out a largely external network, partnering with capable manufacturers. We got contracting in place, we lined up raw materials to the tune of hundreds of millions of dollars, and we had committed suppliers. Then we were in discussions with governments around the world that—by last summer—were anxious to start contracting with us, even though the technology was not yet proven at the time. In the middle of the pandemic, there was a huge amount of interest in contracting. Recently, we announced the signed contracts—for a total of $18.4 billion—that we have in place for 2021 deliveries. We’ve delivered 67 million doses and are on the way to 100 million in the first quarter. So far so good.
Kroszner: The US government, through Operation Warp Speed, took a risk in supporting companies, including Moderna, to develop COVID-19 vaccines more quickly. What role did this ultimately play in vaccine development?
Meline: The US government made a decision to place bets on three different technologies, investing in and contracting with two producers for each type of vaccine. In our case, we were a startup biotech company without a history of products. We didn’t have the benefit of a global network, we didn’t have the infrastructure in place, and we didn’t have a credit rating. The support we got in the partnership with the US government was critical to our ability to get to market quickly. We also benefited from the government’s recognition that this mRNA technology, which had never been brought to the world, was likely to be well matched for the challenge.
“We are interested in how we can provide access to our product to potentially all citizens and we recognize our responsibility to do this. COVAX is clearly a mechanism by which we can access areas of the world that otherwise would be inaccessible to us.”
Kroszner: In retrospect, Moderna took on a new approach to investing risks, making the vaccine prior to regulatory approval. What have you learned?
Meline: If you look at the investment thesis, we were taking investing risks in advance of when you traditionally would. Normally when you develop a product like this, you go through a series of trials and take on incremental investment and scientific risks as you go along. In this case, because of the urgency of the pandemic situation, we did these steps in parallel. On the scientific side, it was in close cooperation with the FDA in the US and with health agencies around the world, because you’re monitoring safety and can’t compromise in any way.
At the same time, we were investing in lining up the commercial supply, and started producing product as early as summer 2020. If it was not approved and launched, we would have had a loss on those investments. Fortunately, the product came through with efficacy rates of 94 percent, which is among the best for vaccines that we’ve seen in history. We were able to launch the product successfully and ramp up quickly because we’d taken the risks to invest.
Kroszner: Some of my Booth colleagues published a paper on how to accelerate vaccine availability through market forces for a social purpose and have been involved with COVAX, the global initiative to get vaccines to the world’s more vulnerable populations in emerging markets. What is your take on it?
Meline: The questions of access, equity, and equitable distribution are important. We’ve continued to have a dialogue with COVAX around supply and we’re interested in that mechanism. As a startup company, we do not have existing commercial infrastructure, including in the United States, Western Europe, or Japan, let alone in the developing markets around the world. We are interested in how we can provide access to our product to potentially all citizens and we recognize our responsibility to do this. COVAX is clearly a mechanism by which we can access areas of the world that otherwise would be inaccessible to us.
Recently, we’ve seen some of the countries that are COVAX participants come to us directly. For example, within the past few weeks, we announced contracts with the Philippines and Colombia. Mutations arise from infected people who haven’t been vaccinated, so until you have broad dissemination of vaccines, you’ll continue to see active evolution of the virus. So, there are some strong reasons to broaden access from a public-health perspective.
Kroszner: Will vaccines be open to private market participants as the pandemic enters its next stage?
Meline: Until now, our customers have been governments and health authorities around the world. We have two supply chains that we’ve set up: One is US-based production for distribution within the US borders. The other was set up in collaboration with our Swiss-based manufacturing partner, Lonza, to fill our international contracts. As we get past the pandemic phase to a more stable, endemic phase, you will likely see a transition to a private market, at least in some countries. It’s reasonable to expect that this process will eventually be similar to what you see with vaccines for other diseases.
“Beyond coronavirus, we have 24 programs for other diseases in the pipeline, and 13 of those are already in clinical trials. They cover a diverse set of conditions, including a cancer vaccine that we’re working on and a set of activities around autoimmune diseases.”
Kroszner: Can you share more about the possibility of a COVID-19 booster, and what else is in the works at Moderna?
Meline: We’ve started some additional trials in the past couple of weeks, and there’s a reasonable likelihood that you'll see a booster-shot recommendation, perhaps as soon as by the end of this year. In general, we believe this mRNA technology will be effective in terms of its adaptability to accompany the evolution of this virus, which we think will continue.
Beyond coronavirus, we have 24 programs for other diseases in the pipeline, and 13 of those are already in clinical trials. They cover a diverse set of conditions, including a cancer vaccine that we’re working on and a set of activities around autoimmune diseases. We have another effort in the cardiovascular area. And then finally, we also have an effort underway against rare diseases that occur in small sets of the population that we think we can go after with mRNA technology.
Kroszner: You had to quickly collaborate with diverse teams that included scientists, researchers, and data analysts to bring this to market. What was the work environment like and how were you able to make this work successfully?
Meline: One of the critical aspects is that all of this was being done over Zoom. Indeed, I have never met most of my fellow employees. We’re not the only company that is dealing with this situation, and certainly it’s a real challenge for everybody. Sometimes the urgency of this mission does break down the barriers that would otherwise hold us back. It’s not unusual that we will be conducting a meeting and there will be people on the call who will be contributing actively to the discussion and the problem-solving, and then at the end of the meeting, we will all introduce ourselves because they’ve just joined the company. We’ve tended to seek people out with a high level of experience and expertise in their particular specialty area to come in and help us to build out the business.
Obviously, the mission that we’re on and the opportunity to contribute has attracted some of the best and brightest in the world in their areas of specialty. My role of course is to also understand the risk-reward trade-offs financially. I depend heavily on my colleagues to make similar types of trade-off decisions scientifically. When you put those together, you can see success.
Kroszner: How has your Booth MBA contributed to your accomplishments?
Meline: Having a preference for data and hard facts is something that I learned at Booth and that I have carried with me ever since. Even during orientation as an incoming student, I learned about the need for building a framework of analytics. Once you do the analysis, you can understand the alternatives, assumptions, and inputs. The strategy is pretty easy once you’ve done that analysis—more often than not, the answers clarify themselves. Today, I always tell my people I get a seat at the strategic table because I bring the data—and I may have an opinion.
Booth’s new Healthcare Initiative uses analytical and humanistic approaches to make a positive impact on the health-care industry.Health Is Wealth
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