Moderna, Inc. (MRNA) Earnings Call Transcript & Summary

Everyone, I'm Ellie Merle. Thank you so much for joining us at day 2 of the UBS Biopharma Conference here in sunny Miami. Very happy to have Moderna with us this morning. Joining us from Moderna is James Mock, Chief Financial Officer.

And with that, maybe just starting high level, walk us through the recent update with the 2023 guidance and how you think about COVID numbers from here?

Okay. Well, first off, thanks for having us, Ellie. It's a pleasure to be here. And maybe let me just step back and talk about what we wanted to frame of it, why we get some 3 years of the financial framework here. So we've always operated under the same principles. Those principles were that we could always have the ability to flex spending. We've showed that in the past. We're always concerned with financing risk. We've shown that in the past. We're fortunate to have a lot of capital right now, but we're still very cash conscious. Over the last few years, we've been making COVID profitable. But the #1 thing that we've always talked about is investing in our unparalleled opportunity for organic growth. And for us, that means in the next few years, we said we'd come out with 15 new products by 2028, 4 new products by 2025. So -- but I think what's changed is that the volume outlook has changed dramatically. And so that's getting to the point of what you're talking about. And so we wanted to be transparent about, hey, we're going to continue to invest. We're going to be cash conscious. We're going to look at the next few years. It's not the revenue level that we had anticipated even a year ago. So we came out with the $4 billion for 2025, and we said we're going to invest through that. We're going to invest in 2024. We're going to -- it's going to grow a little, and then we're going to invest in 2025. But by 2026, we're going to break even because we are cash conscious, and we -- at this point, we think it's the right thing to do to invest in the portfolio.

Absolutely. And so within that breakeven by 2026, what's needed in COVID and RSV? I mean like the biggest pushback I get from investors is, oh, okay, breakeven in 2026. That sounds great. But what happens if COVID volumes go down further, what happens if RSV proves more competitive? How should we think about kind of the leverage there?

Yes. I mean we are committed to breaking even. So we don't think it will go down. We think 2024 is the floor. So we said approximately $4 billion and COVID is $3 billion to $4 billion for that, and RSV is the first year of our launch and that makes up the balance. And then in 2025, we will bring flu to market. We'll bring our combination vaccine market. So we expect growth in that year. And then we expect further growth in 2026. And by 2028, we have other new products coming in. So there might be new products in 2026 because we said by 2028. So hopefully, some will trickle in 2026. So we anticipate growth, and we anticipate that 2024 is our low. Now that all said, we said we would adjust. So if it -- in this world that COVID actually goes down and it's not what we anticipated to be or RSV launch isn't as good or our flu launch isn't as good, which we don't anticipate, we're very confident in the pipeline, we'll adjust our spend. And we can talk about the flexibility there, but we do have a fair amount of flexibility to do so.

Yes, maybe starting with the top line. Let's talk about COVID and volumes. And you mentioned kind of perhaps this is a low point and maybe we can return to growth from here. How do we think about that?

Yes. So we do think 2024 will be the low point. Obviously, this year, we're at $6 billion and next year will be up $4 billion. And the big difference there is some of the deferrals in the first half from 2022 that hit 2023. So if we break down the pieces, I mean, let's just talk about the first categories around our advanced purchase agreements where we have long-term contracts in place with many countries and they are rightsized for the amount of COVID volume that we anticipate, places like the U.K., places like Canada, places like Australia. So we feel very confident in the $1 billion because it's pretty much set. The $2 billion in the U.S., that's a similar assumption year-over-year that we're going to be on the low end of our range. So for 2023, we said, look, if the low end is 50 million doses of patients get vaccinated, and that's similar to what we saw in 2022. So that will be 2 years in a row that we think that kind of sets the floor. We see that's trending through October. We'll see where November and December plays out, it could be a little lower, it could be a little bit higher. But we think that the $2 billion U.S. number is pretty sound. And then there's other markets that we'll compete in. We'll compete in the EU, albeit at a smaller volume, Japan, Latin America, other countries that will help top up some of the COVID revenue. And long term, I mean, I don't think COVID's going away. We think it will continue to mutate, it's here for the long term. It's got 3x the health burden of flu. So why wouldn't it actually have a similar vaccination rate as flu. There's going to be population growth. The elderly percent of the population is growing faster, and this is really targeted to high-risk individuals like elderly patients and immunocompromised. So we think that COVID will hit that floor and then over time, will grow. And then when combinations come in, that has another ability -- another lever to actually bring up the COVID market in terms of vaccination rates.

And what are you expecting for volumes in the fourth quarter? And I guess, what's baked into the guidance? And how are you thinking about the mix between retail and in office prescriptions of the vaccine?

Yes. So let's break down the $6 billion. So there's $4 billion of APAs, and that is pretty much set. So through the third quarter, we had already recognized $3 billion of that, these are not returnable at all. And we mentioned on the call that over 50% of the 4Q volume, which is $1 billion has already been shipped in October. So that is pretty much derisked. So really that only leads into the U.S., which is what you're asking about, and that 50 million vaccination rate. And if you look through October, October was intentionally more through the retail outlet because that's where there's a greater demand at the early outset. So the wholesalers and us worked to actually give it to the retailers first. So 85% of our volume in -- through September actually got shipped to retailers, and actually through October. And then what we expect is similar to last year, the retail market -- the nonretail market will grow as a percent. So if you look at last year through October, it might have been -- the nonretail might have made up 10% to 15%. It's similar this year. But by the end of last year's vaccination season, the nonretail component of the overall 53 million vaccinations was 33%. Now we anticipate that retail is actually growing a little bit. So maybe it's in the 70% to 80% range. But nonetheless, the nonretail component will grow faster over the coming few weeks here.

How accurate are scripts? We tried to track it, but...

Yes, not much in that. I mean, we look at what we've shipped, what we think, and we correlate it. There's -- we look at Symphony, we look at IQVIA, we look at Veeva, we look at what we've shipped. We look at what the wholesalers have shipped to their end customers. And then we have reporting back from our end customers like the retail pharmacies to actually report on their inventory levels. So we look at it a lot of different ways. And I would say that it's directionally correct.

Okay. That's helpful, directionally.

Yes. So that's really correct. I mean we don't know exactly either, to be honest.

Yes, that's fair.

But it's in the ballpark, yes.

Okay, helpful. RSV, there's a little bit baked into the guidance for next year. How do we think about that both in 2024 and longer term?

Yes. We're super excited about our RSV product profile. And really in 3 ways. First is the efficacy of the product looks terrific. Second is the safety of the product looks terrific. And to date, we haven't seen any Guillain-Barre syndrome events. So we think our safety differentiates ourselves right now. And then third, the ease of the use of the products, maybe most importantly. So we have a prefilled syringe. Our competitors do not. So ours is one step. Our competitors are 5 to 10 steps depending upon the competitor. And if you think about what's going on and you read the news around what's going on at the retail outlets, retail pharmacies, where all the workers are overworked, the pharmacists are staffed, maybe not enough. Store managers are helping out. And if you think about, all right, well, now we're going to take out a lot of minutes on every single shop because it's just one step. And we think -- and we actually talk to the retail companies, both the buyers and the CEOs of those companies, and they are really excited about bringing our product to market and our product profile. So we're encouraged that it will launch next year. We have a 2Q PDUFA date, and we will be ready for the second half and already starting to build supply around it. So it's in that $1 billion, and we'll see how well we compete next year.

Got it. Very exciting. Maybe on the other side of the equation with expenses. This is another question I get a lot from investors given the potential variability in COVID volumes. What degree -- maybe starting with R&D, do you have the flex on spend? $4.5 billion in spend this year from R&D, how should we think about a more negative outlook scenario for COVID or RSV, how much you could flex that spend down?

Sure. So we have a lot of opportunity to adjust spend in 2025. In 2024, I would say it's less so, maybe, let's say, 10-ish percent or something like that. And why is that? The bulk of our spend is for the development of our late-stage pipeline. I mean that is 80-plus percent of our overall spend. We said we'll always invest in research in the platform, and I mentioned at R&D Day, that makes up 10% to 20%. So we'll continue to spend there. And then it's really the development side. So -- and if you look at the development side, we said the majority of that is already committed for 2024. So there's not a lot of flex. There's some around the edges, so I'd say 5% to 10% that we can maybe adjust in 2024. But then come 2025, that development side is only half committed. So we have a lot of time between now and then, and we'll look at it and look at what's happening at the end of 2023. We'll look at what's happening in 2024, try to not overcommit ourselves and be able to flex in 2025 and certainly by 2026 as well. I'd say the other big lever is partnerships. So we -- Stephane talked about it on the call, we will look at partnerships to see if we want to help fund some of these programs, and we can talk about that a little bit more. So plenty of flexibility in 2025 and 2026, a little less so in 2024.

Tell us a little bit more about potential partnerships. What would this look like? And just strategically in terms of the framework, what are the programs that might make more sense versus others?

Sure. So we think of ourselves and we talk -- we have 4 franchises we're building right now. So we have a respiratory franchise, we have a latent infectious disease franchise, we have an oncology franchise through INT and we have a rare disease franchise. So I'll actually work backwards. Rare disease is really small from an R&D perspective. It just probably would not make sense to actually go through a partnership there. It's a small percentage of our overall R&D. oncology with INT, we already have a terrific partner with Merck. So we're probably not going to look for additional partnership on that side. So it really leaves you with latent infectious disease as probably the primary opportunity here, as well as respiratory, but we're pretty far down the path on respiratory. So my guess is it's more on the latent disease. And what would we be looking for in a partner? I mean I think it's mostly financial right now. What are the financial terms? And then what are the terms in terms of control? And there's different institutions out there. You can go with a strategic partner; you can go with a financial partner. Financial partner might give you more control to really operate and control your own destiny, which I think we like. But we'll consider all options out there. And I think there's plenty of flexibility. And our latent portfolio is pretty substantial, and I'm sure we'll talk about it today, but -- and that will grow over time. So we laid out on R&D day that we said we'd spend roughly $5 billion -- $25 billion over 5 year. That's what we said. So that's $5 billion a year. And we said that respiratory makes up for the next couple of years, about 50% of that. And I already mentioned that research and our platform makes up 10% to 20% of that. So the latent is going to grow in the '25 and '26 time periods because it actually overtakes respiratory by that time period to be the #1 driver of spend. And so that's how we will really work.

And I mean, I'm sure we'll talk about it, but I think that's a very exciting part of your pipeline. But sticking to the cost question, how do we think about long term just kind of as a -- like its own business, COVID and the margins there long term? You mentioned $2.5 billion in R&D for respiratory. How do you think about that long term? I mean I assume there's some for combinations in there. Is this something that longer term can be much lower? And how do you think about the long-term margins of that business?

Sure. Thank you. Much lower in the future. So we talked about at Vaccines Day that we have $6 billion to $8 billion to kind of complete the respiratory business from an R&D standpoint. And once you launch those, just like COVID, there's not a lot of -- I mean, you have maintenance spend in R&D every year. So obviously, we are researching a new strain, and we have to do a little bit of work, but it's not nearly the same cost as an initial efficacy study that goes on. So -- and we're basically through most of RSV. We've got some more to do in 2024. And then we'll get into peak where there's a little bit more on RSV. Flu, we still have some work to do with combinations. We have some work to do. So let's talk about the COVID margins. But once those are through, we said that R&D as a percent of revenue is about 10%. And in the Vaccines Day, we said we'd be $8 billion to $15 billion in revenue, which we can talk about. And so that says 10% is $800 million on the low end and $1.5 billion on the high end, but you've got to be at the $15 billion top line franchise. So that kind of sizes R&D. SG&A spend has been mostly built, particularly for the respiratory business. And then in oncology, we actually have a partner so -- but the commercial team has been built for the most part, so I don't anticipate a ton of growth there. I think we laid out 10-ish percent or something like that, I forget exactly. And then it comes to cost of sales, which we said, look, this we've done, as you know, in the last quarter, a ton of work to resize our footprint and we said then it's really built for volume leverage. So at the $4 billion level, it's a 35% cost of sales, which is what we talked about for 2024 framework. And then when you want to get to $8 billion, it would be 25% cost of sales. So if you take 25%, and let's just take the low end, 25% cost of sales, 10% R&D and 10% to 15% SG&A, you're talking about a 50% profitability business. So at $8 billion, that should generate $4 billion in overall income for the company.

Absolutely. That's very helpful. My question is in thinking about these percentages, particularly R&D being, say, around 10% of the top line. How much does that have flexed as the top line is lower. Should we think about that in terms of an absolute number or in terms of the percentage? If we're running various COVID scenarios where -- or respiratory disease scenarios, can that -- in a lower sales scenario, is that 10% still 10%? And what proportion are the fixed operating costs of renewing the strains every year?

Yes. Yes. And you're talking in the outer years. Yes, I think it should be -- maybe you can go to 5% to 10% or something like that in a low case scenario. But the strain cost is really not that much. What we put into that maintenance cost at 10% is actually a little bit for each program, but maybe there's another study, maybe there's a new patient population that you want to put into it -- into one of the products each year. So the real flexibility there is a new kind of patient population or the strain study and the maintenance is actually quite small. If you talk about the next 3 years in the respiratory business, we said it's $6 billion to $8 billion started into the vaccine phase. that's kind of $2.5 billion a year. So if you look at 2024, and that's $2.5 billion, about $4.5 billion is going into the respiratory business. And we're pretty far down the path on all these programs. We're not going to flex too much. I mean there are some choices we can make in terms of patient population in the coming years, particularly in 2025, but we have to complete the programs. And the reason why we have to complete the programs is because we have to return to growth, and we have to go through that. That growth generates the ability to invest more in our company. And that's how we all think about it, is we've got to get products out there that are generating revenue and income so that we can invest in the platform, ultimately break even by 2026. But we have a long future ahead of us from an organic growth perspective.

Absolutely. And maybe just with COGS, delving into that. You did a little bit of restructuring in order to best prepare for long-term cost of goods. Walk us through that and what you announced at the quarter.

Yes. So yes, we -- I mean, the high level, we were built for a pandemic. We had to build for a pandemic, I should say, over the course of 2020 and 2021 and 2022 and the company generated $40 billion in revenue as a result of that. And so obviously, the volume moving forward is very different. We did deliver over 1 billion doses then, and we're going to deliver much less than that, a fraction of that now. And so, what do we have to do, we have to go out there and look at our inventory. We had to go out there and look at our commitments that we've made in terms of purchasing future inventory. We had to look at our footprint that we have, mostly with our network partners. And we went out and renegotiated with all of our partners, which we add value, and they were all great about discussing it and understanding that our volume situation has changed. And after restructuring those contracts, we had a charge. So our charge was -- will be $1.6 billion for the year. And in the quarter, we recorded $1.4 billion. But I think the real message is that charge reflected all the, I'll call it, waste cleanup. And what is waste cleanup? I mean, this year, we will have, I think of it as $3.5 billion of our $5 billion in COGS as waste. And it's a result of transitioning to an endemic from a pandemic, but that really cleans up the -- by the end of the year, if you look at our inventory and our purchase commitments on our balance sheet, they will be down materially. We're talking like 80% down on inventory versus 1.5 years ago. And so, you don't even have that much to write off moving forward. It's impossible. And then you look at our purchase commitments on our balance sheet, we were over $5 billion. It will be $2 billion by the end of this year. So we've really -- that's about a 60% change. We've totally changed what the go-forward outlook is, which is why we're confident in what is our cost of goods sold moving forward. And yes, it's at 35% right now. We believe long term it will be 20% to 25%, and we've acted on it recently. And there's still more work to do, but that's the lion's share of what we have to do.

Absolutely. And for our COVID forecast, it seems like maybe the back half of this year is perhaps like a good go forward for the U.S. But how should we think about ex U.S.? I mean, I know there's a little bit of APAs next year? Just how should we think about that going forward?

Yes. Good question. So I would think so we said it would be $0 billion to $1 billion Well, actually let me back up. In the overall $4 billion framework next year, $2 billion for the U.S. and $1 billion of advanced purchase agreements that are locked. And we have long-term contracts with many of these countries. We're talking over 5, almost 10 years, countries like the U.K., Australia, Canada, and that locks in some amount of base floor for us in terms of COVID revenue. And we said that's $1 billion in 2024, and we think that's a good proxy moving forward. Then we have to compete in certain areas. In certain areas, we're slightly disadvantaged to the EU for the next 3 or 4 years. We have a competitor that has a fair amount of volume in there. And that -- we're still working with the EU and many of the countries still want a choice. It won't be a choice of vaccination. And they also want -- they recognize the efficacy; they recognize our product profile. And it won't be at the same magnitude that our competitor has in there, but there's still volume to be had there and to compete, and we think we will. Same thing in Japan. So Japan, we've had -- we've gone up and down in terms of market share. But moving forward, we will still compete heavily in Japan, and we believe that, that can still be a pretty sizable market for us. And then there's other areas. So we said $1 billion to $2 billion overall for 2024. And hopefully, the same dynamics though, moving forward are the same across the entire globe, the health care burden of COVID, an aging population, population growth as well. So we think it will go over time, but the $1 billion to $2 billion is what we guided in our framework for 2024 internationally.

That's interesting. I'm thinking about it almost as a floor because it's committed contracts.

Correct, but...

Did you say until 2029? I mean I know there's a lot of different progress on there but that's interesting. Philosophically, how do you guide COVID? I mean it's just been so variable and subject to maybe a lot of personality and opinions around COVID. How do you think about it going forward, and why you think the COVA vaccination rate is so much lower than the flu?

Tough one to guide, which is why over time, we've tried to be as transparent as possible. And if you date back to perhaps even 2021, but certainly 2022, we just talked about our advanced purchase agreements. We just -- that was the only thing that we could tell people is these are commitments. And obviously, those commitments change, and we didn't know how they would change, but they changed and then we came into this year and said I think $5 billion for advanced purchase agreements is the only thing we said at the outset, and that's obviously changed to $4 billion. So a lot of learnings through that process. And then on the U.S. Our view is that COVID should be higher than 50 million vaccinations. And someday, hopefully, that will happen. So how do we guide? I think at this point, the confidence that we have, and it really won't be crystallized till the end of this season, is if you have 2 years in a row of, let's say, 50-ish million vaccinations, then that really should set the floor. And why does that make sense that it's a floor or at least a floor? You've got 80 million people in the United States that are at risk. They're over the age of 65 or they're immunocompromised. And if 40% to 50% of those people actually go get a COVID vaccination shot, then that's 35 million to 40 million by itself. And then there's plenty of people that still will recognize the need for it. So that -- I get comfortable with the floor around 50 million, maybe at 45 million, who knows, we'll see what it settles out. And I think over 2 years of seeing that data point, it should set the floor. But to your point, it's a highly political topic, unfortunately. But I think that -- I hope that dissipates over time. And I hope that people recognize that the burden for COVID is 3x worse than flu. There are 3x more deaths in hospitalizations. And that if you're getting a flu shot, why wouldn't you get a COVID shot? Obviously, that's a hotly debated item and it's difficult to plan for. So all we are doing is planning for the lower end of that right now, which is what we put in our guidance for 2024, which is kind of in our assumptions and for '25 and '26 and we'll move forward with that. But a lot of learnings about our overall forecasting over the last year, a hard one to predict.

It really has. I don't know how you do that. We don't envy you. You've been on the upward trajectory in terms of market share with COVID. Does it keep going up from here? What are the puts and takes?

Yes. Good question. Thank you. Yes, really proud of the team and how they have competed. And we really have been talking about it all year with them. I mean, the contracting process really didn't -- I think I forget the exact timing, I've lost track, but I mean really didn't kind of crystallize until kind of the July, August time frame. But I mean, we've been talking to our customers since January. And we got this feeling that they liked how we were talking to them, they liked how we operate with them. So I think this sense of kind of a smaller company that's more agile, listening to their needs is -- it's actually played out here, knock on wood. And then second, I think now it's post pandemic, people can talk about efficacy more and the efficacy of the vaccine, and we believe we've got a stronger vaccine. And there's obviously some buyers out there that appreciate that. And then I think second or third is the fact that we have prefilled syringe. So I think all those dynamics helped in our ability to increase share in 2023. And hopefully, those are the same dynamics. I mean it will be a tough competition. So -- but it's going from 36% last year to 45%, and we hope 50%, we gave an evidence in the recent weeks, 50%. It will bounce around. I'm quite sure. I'm quite sure moving forward it will bounce around, but I don't think it will go back to the old market share and sometimes maybe it's a little higher. So in that 40% to 60% range, some years, I'm sure we'll win more and some years, I'm sure we'll win less. But we hope we win more than less.

The returning to RSV. I mean, this is obviously a big swing factor in comes to your top line in the next couple of years. A question I get from investors is, okay, you're behind GSK and Pfizer. You have one other vaccine on the market relative to some of your competitors that might have more. How should we think about your ability to compete in this market?

Yes. I mean I'll go back to a few of the things I mentioned. But first off, I think we're really encouraged by the uptake. I think that's great. So both companies have done a nice job kicking it off. And obviously, there is a demand out there, which we obviously thought so, too. Maybe it's a $2 billion market size this year, which would be great. And hopefully, it continues to grow over time, and we will earn our fair share. And so how will we earn our fair share is a little bit of what I mentioned earlier, which is we love the product profile in terms of the efficacy of the product. And we came out with, I think, almost 84% efficacy with 2 or more symptoms or equal 2 or more symptoms. I'll then go back to the ease of the product of use. So prefilled syringe makes a difference with not only retail, really everybody. I mean it's -- if you don't have to go through as many steps to shake it and get it into the right area and make sure you're careful about all that, you can just put -- pull out a prefilled syringe and give somebody a shot, it makes a big difference for any health care provider. And we think that, that bodes well for our ability to take our fair share. And then the safety profile as well, the safety profile of our product looks good. So we are already in discussions with all the same customers. That's the beauty is it's the same customer base that our teams already, particularly in all across the globe, but particularly in the U.S., that same conversation we just had about how are we taking share, that applies to RSV as well from an agility and nimbleness perspective but also from a product profile, I think it might even benchmark a little bit better. So we're optimistic.

Yes. That's exciting. Maybe in terms of RSV and like the frequency of acclimation, I mean we have like with flu and now it seems like COVID is probably going to be annual at least for some people, vaccine. How do we think about RSV and how that plays into the ultimate long-term annual market opportunity?

Yes. I think the story is still unwritten. So to date though, it's every other year vaccination. But I think over time, I mean, it's the first vaccines out there. And so ACIP made the decision, probably looking at a lot of factors. I think the efficacy of the product is good. The safety, I think, is some concern out there because we saw some events. They saw some events. But I think -- and they'll also have to look at, all right, well, what is the efficacy over time? What is the durability of the immunogenicity of the product. And so I think every single year, they'll relook at that and they'll get hopefully more comfortable with the safety, and we'll see what happens. I mean if it really lasts and it's durable for 2 years and maybe it is 2 years that everybody gets vaccinated. If it's 1 year, then I think they will be and they're confident with the safety and they look at the data, they might say, okay, let's move it to 1 year. So for now, it's 2 years, which is still a sizable market. I think maybe 5% to 10% of the 80 million patients that we are looking at right now will get vaccinated and then we will join and that will still be substantial in 2024 as well.

That's helpful. And how does that play into how you think about combination development and thinking about the frequency?

Yes. So we have a lot of shots on goal there. So we have COVID, RSV and flu. We have COVID and flu, we've looked at a handful of others as well. But right now, COVID and flu seem to make absolutely the most sense that it is an annual seasonal vaccine. And that is the leading candidate for us that we announced recent data on and that we are moving into a Phase III trial or have moved in, and that we will try to get this ready for the market by 2025. So RSV, where it shakes out and whether it's seasonal or every other season, we'll play a role in that. And I think combinations' a big picture for our story. Combination, we have so much flexibility. We have so much ability to add antigens, which specific antigens, and particularly in the case of flu. And so we can move and have different products to market and actually on a global basis as well. So perhaps someday, there are strains that are more specific to certain geographies that are -- they want a different vaccine. I think the mRNA platform really helps for that. When we talk about speed and probability of success and how it's been really incredible. And I mean go back to the story on COVID, we developed a vaccine in one day. So we'll see what happens in terms of combinations, but I think there's a long road ahead for us and many different types of combinations that could come to market over a long time.

Yes, let's talk about flu. How should we think about from a financial perspective when we could begin to see this impact? You said first combination launch in 2025. But I mean as you mentioned, there's kind of a road with perhaps being able to change some of the strain selection or where it's really where you have a huge advantage. How do we think about this from a financial perspective in the coming years?

Yes. Great question. So to your point, I mean, our strategy on flu is that we can get better and better from an efficacy perspective, which is why we have 3 or 4 candidates already, and we've already iterated on it. And so -- but that -- and of course, that will compete both fine and well in the flu market. But to your point, I think combination is the real success here. So when we have a great product profile for flu, which we hope is 2025, and you combine that in a combination vaccine and make it easier for people to actually get vaccinated with one shot, that's a real game changer financially. You asked about financially. I think that's the real game changer financially. Of course, a stand-alone flu product can also compete and it's a $6 billion marketplace but it's highly entrenched, it's been around for a long time. Maybe you could get a fair share of $1 billion to $2 billion is what we think. And that's still financially wonderful. But I think the real game changer is what it might do from a combination vaccine perspective. And if we really have a high efficacy, great flu product combined with a high efficacy, great COVID product in one shot, I think that competes very well.

And certainly beneficial from a margin perspective.

Certainly, yes.

I see that makes you happy.

Yes, for sure. Yes. I mean, maybe I can just take a second and talk about our cost of sales and maybe I'll use the 35%. So we have 5% royalty. That's not changing. I mentioned 10% waste moving forward at a prior call. So we can always get better at that and it's been much more substantial over the last few years. But that's going to be there. There's always -- every company in the world has some amount of waste and our job is to make it as small as possible and get that down. Then you have 20% left. And that 20% left is mostly drug product, what we call drug product, and it's all the -- it's the filling of a bio or a prefilled syringe. And that cost probably makes up 2/3 to 75% of the remaining cost there. And so if you only have to do that once versus twice, it's quite substantial overall in terms of volume leverage because the actual mRNA is actually much smaller. So that bodes well from the cost of goods sold. And then from an overall combination vaccine perspective, then you've got compliance advantages, you've got ease-of-use advantages for somebody in terms of just being able to get one shot and then you've got a cost advantage as well, which would be great.

Yes. Absolutely. Well, that will be interesting to watch that launch. All right. Let's talk about the pipeline. CMV in Phase III, how do we think about the potential commercial opportunity if this trial is successful?

Yes. This is one of your favorites, I know, which is the same with us and it has been for a long time. So CMV first, it's -- there's no vaccine out there. It's an incredible market opportunity. And congenital CMV leads to 1 in 200 babies having -- being the leading cause of birth defects and they're material birth defects that -- hearing loss, seizures, sight loss, jaundice, you name it, a lot of implications. So with no vaccine out there, we are hard at work to try to bring one to the market. And we talked then so I said 1 in 200 babies, and there's 4 million babies born per year in the United States and 40 million across the globe. So you have an ability to try to bring this to market, and it could be very important. There's also the transplant area. So that's where CMV is also transmitted is during transplant. So I think the pediatrics and maternal first is what we're trying to bring this to market. And we've always talked about it as kind of a $2 billion to $5 billion marketplace when we compare other latent diseases that are out there on the market and kind of benchmark, and you look at the value of what we're bringing. That's what we think financially it could be worth.

What are the underlying assumptions behind the $2 billion to $5 billion?

Yes. I mean it's really the same thing I just talked about, which is what are the patient population, how many births are there, with how many people, what percentage. So that's what I would go model this. All right, well, how many people do you think you'll get a vaccine based on the prevalence out there and how many births are out there and what's the value in the U.S.? What are comparable products that are out there in the latent infectious disease world and where do you think the right value is from a price perspective.

Absolutely. And so if this Phase III is successful from a financial perspective, how do you think about then the framework for how much you should invest in other latent virus segment?

Well, that, yes, I mean maybe the simplest way to talk about that is in that $5 billion per year, is I said 50% is respiratory. And by 2028, it's going to be 10%, and rare is relatively small. We have a big partner with Merck on INT. I mean, latent can be quite substantial. And so that presents a lot of opportunity. But to your point, that if CMV is successful, it de-risks EBV, shingles, VCV, HSV, et cetera, and there's probably 4 or 5 other candidates we have in the pipeline right now. And that could be a quite material business. So if you say 5 candidates at $2 billion to $5 billion each, we've actually mentioned this before, that's $10 billion to $25 billion top line business. So we want to invest in that. I mean not just for the reason and why it's so important for patients. But it also diversifies our franchise. I think that's important to us. I mean, we don't want to be just a respiratory business. We want to grow a latent infectious disease business. We want to grow in oncology and INT business. We want to grow rare disease. And I think that diversification bodes well for any company, but in particular, that's what we look at a lot as well.

Absolutely. And data timing. I know it's event driven, but how should we think about when we could potentially see data? And maybe more near term, how should we think about the types of updates that we'll be getting from you guys in terms of case accrual?

Yes. Great question. So now it's fully enrolled through COVID, as you could imagine, it took a little time because not everybody could go. And so now it's fully enrolled, which is terrific. The team has done a great job of getting that done. We said the first interim analysis is at 81 events and that right now, we are a quarter of the way through there. So hard to predict the exact timing but we said -- Stephane actually said on the call that you probably get the next update at Vaccines Day, which is traditionally in the March, April time frame of 2024. It was every year, but in 2024. So I think that's probably when we'll get the next update. But we might be able to say at earnings calls, okay, you said you were 25% there from an event standpoint. Are you 50% there? Or are you -- so maybe on the calls we might be able to say some of that, but I would be looking forward to Vaccines Day for the next big piece of data, or I hope so. We'll see where the status is at that point.

Great. INT, we're expecting an update by the end of the year, which, I guess, 7 weeks left in this year or something like that. What should we be looking for in that data? And I guess, more importantly, how should we think about -- is there still some area where you could get accelerated approval? And just what are the puts and takes there?

Yes. So INT for adjuvant melanoma, we gave 2-year data in December of last year, and the cutoff was in November of last year. So we've been looking and waiting for patient events to accrual as well and perhaps it's a good thing that they haven't. So we said we're going to cut it off again at the 3-year mark in 2023. So that's coming up in like a week or something. And then we'll cut the data, refresh it, et cetera, and then come out with our results in the not-too-distant future. So what are we looking for? I mean we're looking for, hopefully, at least as good as last time, but 44% reduction in recurrence and survival is outstanding versus KEYTRUDA. And so our hope is it's at least as good as that, if not better, but we'll see what the data says in the coming weeks. In terms of accelerated approval, I mean, as you know, we have breakthrough designation status with the FDA, and we talk about -- with them all the time. I mean, our hope is that the Phase II data that we're coming out with in the next couple of weeks. Is it good enough sample size to actually say maybe there's grounds for accelerated approval, but we'll see. I mean that's not our call but we're working with the FDA to do that. All we can do is cut the data, get the Phase III trial going as well, which we have, and it's enrolling quickly, and then get our manufacturing process ready, which the team is very hard at work to make sure that we can serve as many patients as we need to when this thing launches someday from an approval standpoint. So we've invested in the facility, we've invested in the equipment in the facility, we've got a ton of automation, we've got partnerships on the sequencing side. We're getting that all ready. And then -- and so we'll see in the coming quarters, year, what happens there?

Quarters, year. Okay. Cool.

Well, at least this quarter, we'll give the data, and then we'll have a conversation and then we're working on the manufacturing side, and we're still going with the Phase III and I'm sure we'll give a lot of updates along the way.

How should we think about -- we could just skip this question if you like timing for when we might get an update around the regulatory strategy if this is a possibility of accelerated approval?

Yes. Probably a better question for Stephane on that one. I'll leave that to him to give the status.

Maybe let's talk about just how to think about the size of that opportunity.

Yes. Yes. It's great question. So maybe I'll take the United States, there's over 100,000 patients in the United States with melanoma. And so I'll just give the variables on how I wouldn't -- how we model it and without giving the specifics is, then I would look at, okay, what stage are they in? Is it resectable, how much share do you think KEYTRUDA has, what price points do you think you have, and you come to an overall revenue number. And I would say if there's over 100,000. We're talking tens of thousands here. We're not talking like 1,000 patients that we think we will serve. And so that hopefully gives you some framework, and I will do that across the globe. So places like Australia, very high prevalence for melanoma. And so that's how we think about it's a very material opportunity for us. And I think maybe even more importantly is we've seen really quick uptake. And a lot of patients that really want it and need it. And so that's why we're so focused on the manufacturing side that we are expecting a very quick uptake and we need to be ready with a lot of automation and all our processes in place so that we can serve them. And we'll see when that time is.

Absolutely. Rare disease franchise. You've shown some encouraging data and you continue to progress with a few programs, smaller indications. So I think they talked about a lot less. How do we think about the opportunities there?

Yes. So we've said traditionally rare disease programs are in the $0.5 billion to $1 billion range. And I think that's still a fair assumption. There's obviously a little ramp, but it's a small community that should ramp relatively quickly because you're talking about very rare populations that talk to each other and understand and I will have the same site and have a lot of support for each other. So -- and we've got 4 that we said could be launched by 2028: MMA, PA, GSD1a and then PKU. So we've accrued -- we've been looking at the data. We've -- had shown a lot of great support in terms of what we call NPEs and affected that it's really been postponed having these events and patients' lives are definitely changed. So we will look to go to pivotal trials as soon as possible here. And we've got a lot of patient years under these patient populations that we've been serving. And so I don't know if it's the full $0.5 billion or $1 billion or something on the way to that by 2028, but it's what we hope to launch.

Great. That's helpful. Maybe just to close things out, is there something in the pipeline or portfolio that you're particularly excited about? And given there's been so much focus on COVID, is there something in particular around the Moderna story that you think investors are missing?

Yes. I think the pipeline, we like everything, of course. So -- but I think that what people are missing is the platform nature of our company. And I don't think there's enough credit given to the success we've had and the probability of success that we have shown and will continue to show. So we're talking about 4 franchises that could be very material for our company, for any company really. And you talk about the platform nature, and we've shown the probability of success versus our -- versus industry benchmarks. We have the manufacturing footprint that can serve all those franchises mostly built. And so the volume leverage will be there and the scalability is substantial. The speed to market of our product is incredible, and we evidence that not only COVID, but even flu. You look at the flu, what we announced in April of this year versus what we announced, I don't know, a month or a month or 2 ago, whatever it was. And we totally changed the game on that. Just imagine that speed on every single product across many different franchises. I mean I think the sky is the limit here. So I think the platform nature of our company is, I think, what's most underappreciated.

Great. Well, Jamey, thank you so much for making the time and thank you, everyone, in the room and webcast for joining us.

Thank you.