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

I am thrilled to be here today with Stéphane Bancel from Moderna. My name is Courtney Breen. I am the U.S. biopharma analyst here at Bernstein. Before we dive into the Q&A, I will give Stéphane the opportunity to give us some context to where Moderna is at, and then we'll dive in. I've got a long, long list of questions and I'm sure we won't get through all. As a reminder, and I think if you have already come through, we do have the pigeonhole function. So please do feel free to add questions throughout and we'll integrate them into the conversation. So over to you, Stéphane to give an intro.

Well, thank you, Courtney. Good morning. I would say at the high level, we are trying to build a lot of products coming impacting patients using mRNA technology. We are trying to diversify the company by having a very broad portfolio between infectious disease, cancer, but also rare disease product. And we're working on autoimmune disease as one of the next frontier for Moderna. Our priorities for the year are probably clear, I hope. One is to drive sales with two products that we have approved, COVID and RSV. The second priority is to drive new product launches to diversify the top line and to grow the top line. We have up to 10 launches for the next few years. We have already several BLAs filed and more BLAs coming this year. And the third one is, of course, to resize the company from a cost standpoint because of COVID sales as we move from pandemic to endemic. If I just point a number, we have delivered 20% cost reduction in Q1 2025 versus Q1 2024. And if you look at what we announced on our Q1 earnings call, the 2027 target of around $4 billion of cash cost compared to $9 billion 2 years ago. It gives you a good sense of how we are resizing the business across the entire P&L. We are slowing down the pace of new products getting to the clinic. We have 14 now which is a lot and 5 Phase III readout coming. We are also reducing manufacturing footprint and also on the SG&A side, so I would say every line of the P&L. And because we have a platform, CapEx also is coming down tremendously because we can launch new products using existing infrastructure. Because we have a seasonal business right now, as you can imagine, the teams are very busy in Q2, Q3. But in Q4 and Q1, there's not as much capacity utilization. We use it for clinical trial manufacturing. But you could see us launching rare disease products, nonseasonal products like CMV, norovirus and so on, that you can make off-season and help leverage the infrastructure without adding costs, both CapEx and also OpEx.

Fantastic. Very, very helpful. There's a lot going on in the industry and the sector, and I think we all wake up to a tweet or a news blast every morning. So I'd love to touch on some of those bigger pieces before we dive in. And as I think about it, there are lots of different kind of elements to this. There's tariffs, there's MFN or international reference pricing. There's Medicaid cuts potentially on the horizon. There's PBM reform. There's HHS changes, including kind of strategy but also organizational cuts. Some of those are really relevant for Moderna and some of them are less irrelevant compared to the rest of the industry. Can you talk us a little bit through kind of the relative impact and size of the risk that you see with those various factors?

Sure. So indeed, Moderna has a quite different profile than most of us of industry that I will articulate in the next minutes. So let's start by the easy things, I would say. First, PBMs, this most probably PBM reforms coming. For some companies, it might be good. For some company, it might be a question mark. The good news for Moderna is we do not use PBM because we are selling vaccines today. If you look at the vaccine business across the industry in the U.S., they're directly contracted between the manufacturer and the pharmacy chain. So Moderna has had, for several years, an annual contract with CVS and Walmart and Albertsons and all the different players in pharmacies. There's no PBM in between. So whatever happens there will have no impact on us. The other one is tariffs. We make product drug substance for the U.S. market in the U.S. in our Massachusetts plant. So compared to companies that have most of their products made in Ireland or Singapore, somewhere else, we don't have that thing to worry about, which is great. Medicaid for us is very, very little impact. Even if there's huge reform in Medicaid, because if you look at the government side of the house for us, it's mostly Medicare for the elderly, which as far as we know in the current setup of a new tax reform, is not impacted. Medicare is very, very small impact. I think the biggest impact for us, and I'm sure we'll talk a lot about it is what's happening with the agency, with the FDA and the CDC and the respective roles that seems to be changing a little bit compared to before. But the rest, I think, is actually not really impacting us.

Makes a lot of sense, and I think kind of with all these uncertainties around everyone is trying to find anchors to hold on to and so it's useful to put that in context. As we think about the agency, there's a few pieces that we've learned recently. Kind of in the last week or so, we've seen an update to the COVID expectations in terms of, number one, who is recommended to get COVID vaccines, but also number two, what is the evidentiary requirement for the boosters? And then overnight, we've also heard some more information more broadly in terms of mRNA vaccine perceptions and bird flu. But perhaps we just start with the COVID details. Can you give us a bit of context as to how you see those announcements in the context of your business and in the context of new clinical trials that you have up and running?

Sure. So indeed, last week, we were actually quite pleased to see a written policy by the FDA Commissioner and the Head of CBER in the New England Journal of Medicine because, as you know, there was a lot of speculation, including people saying there won't be COVID vaccine next year in the U.S., so say, fall of '25, which we never thought was a realistic scenario, given the high burden of disease. But of course, you could never put 0 probability to some scenarios. And so I think the framework was very helpful. If you look at what they're trying to do is to really focus on people at high risk, which is they define as the elderly, 65-plus and adult with high risk. If you look at the list of high risk, which is on the second page of that policy article, it's actually quite long. People that are physically inactive are considered high risk. People that have smoked before are considered high risk. You have, of course, all the traditional people with cancer, people with asthma and disease. So the list was actually surprisingly long, which is good. And if you look at the table on the third page, they're actually describing their own assessment that those two populations, the elderly and the adult with high risk are 100 million Americans. If you look at the market of COVID for the '24/'25 season, the season that just finished a few weeks ago, it actually was around 40 million doses, 4-0. So if you think about it, if this administration is going to really try to push vaccination for people at high risk, I'm in because this is potentially a larger market than some of the confusion we have seen in the past and some of the skepticism that we have seen in the past. I think you can see, I think it's positive to see the commissioner saying that people at high risk defined by age or comorbidity factors need COVID protection. And so we are quite pleased that we don't go into a very dark scenario, and actually this scenario has potentially upside for us. Again, it's still early days. It's only a week old so we will have to process it and so on. But I've read it several times personally and I know my team has done the same. And it's actually pretty clear in what they're trying to achieve, which I think is a net positive.

Absolutely. And so as you look at that guidance, there is kind of a suggestion that if you do want to go into these other patient populations, the boosters, there has been a requirement for efficacy studies. Can you talk about kind of does this impact your development plans or perhaps who you include in your studies going forward? Or would you initiate any sort of efficacy studies to try and expand beyond that 100 million patients?

Yes, it's a good question that, again, we are processing as we speak with a team because, again, it's literally a week old. Is if you look at the data of who got vaccinated, let's say, in the last couple of seasons as we are moving from pandemic to endemic, it is mostly the population that they are looking into. Of course, there were some healthy people that got vaccinated because they don't want to get sick. We don't want to have a loved one at home or parents getting sick. They didn't want to get the risk of long COVID because long COVID is still sensically a thing. And so as you start to peel figures apart, what's going to be interesting to really figure out is how big is the market, and that's why the team, given the guidance is very new, we are trying to analyze this as we speak, how big is probably the market right now of healthy adults that do not have risk factors? Because if we have to run a study to access this market that's, let's say, a couple of million doses, the math doesn't work financially. And it's a very bad return on investment to invest in such a study. And so the fact that there's clear guidelines for what we always focused on, and if you look at Moderna's strategy for the last several years, we've said respiratory vaccine strategy is about people at high risk, which are defined by the elderly and adult with comorbidity factor faces, so nothing new for us. And as I said, if you see where they want to push in terms of the use of vaccination in that high risk segment, it could actually be a net benefit compared to what we have seen in the last few years where there was a lot of confusion.

And then perhaps a parallel for that is as we think about RSV and the change to the inclusion criteria and making that more vague has kind of caused some confusion in the environment compared to that being quite an explicit recommendation for the particular groups?

Yes. You build on even further on the RSV analogy. RSV initially was 65-plus. And then you can see that going down in age, there's a discussion at the last ACIP meeting for potential vote at the June ACIP meeting of above the 18- to 49-year-old adults because it was 65. Now it's down 50-plus and there's potentially an 18-plus high risk. So you start to see this convergence, which again, you go back to the medical need, the medical need for those COVID through RSV respiratory vaccine is in those two populations. And so if this administration wants to say, let's stop vaccinating everybody, let's stop recommending everybody but let's really go after those population, again, I will take $100 million TAM any day of the week.

Totally fair. $100 million is quite compelling. So the other thing that you kind of alluded to in one of your initial comments was perhaps the changing relationship within the agency and the changing roles of the different parts of the agency. And I think we saw that now just in the last couple of days with the announcement from RFK Jr., specifically highlighting the pregnant female kind of options when it comes to boosters, and now no longer there's a recommendation there and the same for children. Can you talk a little bit about perhaps your interactions and how you're working to ensure that there's appropriate understanding and appropriate access?

Yes. So again, for those that might not be as familiar because I know we have some generalists in the room, historically in the U.S., the FDA will review the clinical data and approve a product for use by a health care professional. And then the CDC will look at the data of the manufacturers. But also every year, we look at the real-world data to make recommendations. And those recommendations are important not only because here's what a lot of doctors and health care professional use, but so for a lot of those things are important for reimbursement. And so traditionally, this is the respective role of the 2 agencies. What we have seen recently, and it's really hard to have a judgment, is it an exception or is it what's going to be the rule moving forward is do you see FDA having more of a role in recommendation of use of products that they approve or not approve? And again, I think it's just too early. We're talking about what happened literally in the last week and it's N equal one so I think it's hard to make a rule out of something recent and such a small sample set. Or are they going to really go into a direction where the role of CDC is going to reduce tremendously because it's really its key role. There's, of course, a surveillance road. But if you look at the public health level, the recommendation of the CDC was historically really important. So I think it will be interesting for our industry to see, is that something that changes over time or not?

Absolutely, absolutely. And then we've had a question come through, and I've thrown it into my notes this morning because we were worked up to new news this morning as well with kind of the revocation of the BARDA funding for the Phase III for the bird flu influenza study that -- or program that Moderna was engaged in with the administration. And I think specifically in the commentary that we saw from the HHS director was language around kind of the fact that the mRNA technology remains under-tested. And they are done with repeating the mistakes of the past administration, which conceal the legitimate safety concern, which to me sounds like very pointed language is probably a very kind way of describing that language. And so I would love to hear kind of how you are reacting to that information. Does this require more education? Because I mean, mRNA has been tested and used in millions of people around the world. And so I would love to hear kind of how do you go about making sure that the right people in the administration understand this and your reaction to this in an immediate way.

So I think there's a lot of questions here. First is, as you say, what is interesting in the quote that we saw from the spokesman of the agency is the fact that the technology is untested, given that we ran a 30,000-people study, placebo-controlled, which I think is what this administration is trying to aim at, placebo-controlled. And then as you said, the vaccine has been used in several billion people. There's never been, in the history of vaccines, vaccines that in their lifetime have this type of exposure to so many people. And as you know, the way the regulation is set, which is we, as manufacturers, have to report any complaint from any countries to all the regulators. So FDA not only sees what's happening in the U.S. but in real time, companies like ours or Pfizer or Merck or anybody who has a vaccine has to report to the regulators for their product complaints from all the countries in which you provide the product. The other interesting thing about this quote, which I don't know if it was validated by leadership or just a spokesman, it's happened in companies, as you all know too, because it was kind of a real-time thing. We literally got the notice yesterday afternoon and after the market closed, we issued a press release is that it's actually the Trump administration or the Trump 1 who funded for BARDA not only the Moderna vaccine Phase III but also a lot of our product. And as we know, Operation Warp Speed was an amazing success, and it's the U.S. and the U.S. government who took out of the pandemic the world. We don't have a European vaccine coming and saving us. We don't have a Chinese vaccine or a Japanese vaccine. So that's quite interesting. So I think it's really hard to know when you see a spokesman comment, does it represent what the leadership thinks? I don't know if the head of FDA thinks that or not. In the interactions we're having, we're having a very science-based database discussion. Again, the guidelines coming from the FDA commissioner last week, I don't think made any insinuation or comment about safety. Actually, if you look at it carefully, which is why for those who care about the field, I will suggest if you have not done it, read it and read it a couple of times, there's some language on MMR that's quite interesting. At the bottom of the first page, the comment is that there's been clearly a demonstration of safety and efficacy of MMR vaccines. It's coming from the FDA commissioner. We didn't have to include that. The title of the paper is COVID-19 Policy, and they decided to include it, which is, I think, also quite interesting, given a lot of previous statements by different players in the administration. And so I think that's a bit where we are, which is focusing on the data, having discussions with the teams, especially at the FDA. And as we said on our quarterly call, at every level, we're having regular discussion, normal discussions with the team and of us advancing, as you would expect.

Fantastic. Thank you very much for that. And I'm sure there's going to continue to be lots of conversations because every morning we'll continue to wake up to new news from this administration. Perhaps trying to dive a little bit into your business and perhaps starting with kind of where we're at right now. It feels like this year is perhaps kind of a foundational year for COVID and RSV kind of setting what the view of that endemic kind of population might look like going forward. And then we've got upcoming readouts that perhaps begin to send the signal for where the future might go. What is it that you're really focused on this year in terms of stabilizing and achieving that at least $1.5 billion or to the $2.5 billion of revenue that you've guided to?

So I think this is back to some of the things I was talking about, which is last year, the good news is in the elderly setting, 65-plus in the U.S., the market went down 2% compared to the year before. So you start to see a stabilization of people that we call the hardcore vaccinees, which are people, if you look at the claims data, they are on schedule to all of their vaccines. These are elderly that are up to date on Shingrix, on flu, on all their COVID boosters since the first one of the pandemic that we all got in Q1 or Q2 2021, on their pneumococcal vaccine, just all the vaccines up to date. And so that segment is a very important segment for us because there are people that care about being protected. They don't want to be sick. The other piece we're working with a pharmacist because, as I said, the pharmacy chains are only the channels we're working with. And if you think about the pharmacy, it's quite interesting. They have all the data of the drugs you use. And so they have quite a sophisticated system actually to reach out their text message. I'm sure some of you get those text message or e-mails to make sure that you are aware of the guidelines. And so if you look at, for example, in the spring booster, which as you know, it is recommended for the elderly to get a COVID spring booster, the volume is actually pretty similar to last year despite having had no CDC promotional campaign this year because those budgets have been cut. So despite the cut of promotion, just even to remind people, go get your booster. The pharmacy channel has been pulling a lot of people, reminding themselves not for a campaign but sending a text to a 70-year-old saying, "Hey, you have not come through your COVID booster. Do you know it is recommended and you should come get it?" And something with comorbidity. They have an amazing ability to know that you have asthma because you take an asthma drug or you have an autoimmune disease or you have cardiac risk and so on just based on the drug you buy from them to be able to reach out to you. So I think those are really the market going back to what we talked about, the policy paper from the FDA, it's spot-on strategy. And so our focus in the U.S. is to make sure we stabilize the COVID market that will get some RSV sales because last year because of timing of contracting. We have mostly excluded from the contract but from small kind of independent pharmacy and so on. And that is what we're also doing outside the U.S. We should always remember like you guys do with stock, the best way to manage risk is to diversify, right? And so the good news is we have sales also outside the U.S. Roughly half the company sales are in the U.S. Half the company sales are outside the U.S. We are very pleased about the contracts that we have in Canada, in the U.K. and Australia where we set up 10-year agreements with governments in investing in the countries and building a local plant, giving them pandemic readiness in national soil. They gave us basically 10 years contract. And so those contracts are going to start kicking off this year because the plants are coming online this year. We won't have a full year impact. But in '26, you're going to have a full year impact and the factor just mechanical growth outside the U.S. As you know, in Europe, there was this contract between Pfizer and Europe that went without a tender, which is against European law, for which we are getting back into we're getting some sales in Europe. And so same thing, if you look at '25, '26, '27, you're going to see a reacceleration of Moderna sales in Europe. We're still doing some good business in Taiwan, South Korea. We have some tenders also Latin America and so on. So I think this is what we're trying to do is really getting COVID and RSV, as I said, priority company #1 is get this business stable and go back into growth. The policy in the U.S. might be a growth driver this year if we get into focus on people at high risk and clarity that if you had high risk, you should get those vaccines. And then the next leg of growth, of course, is coming from the new products.

Absolutely. And so maybe just to zoom into this year because you've kind of cited that $1.5 billion to $2.5 billion, and you've spoken a lot about kind of what needs to go right or wrong to sit between those ranges. Can you perhaps clarify for the audience kind of where that bottom end of the range, what is expected to happen in the environment or what must happen in the environment to achieve $1.5 billion? And if there's anything in the environment that's happening now that perhaps adds any more risk?

Sure. So when we did the forecast, we took a lot of assumption on risk to look at the low end of the guidance. So if you look at the low end of the guidance, $1.5 billion, to give you a sense, just to calibrate, if you look at the sales of last year, U.S. $1.7 billion, you take out basically returns, that makes $1.5 billion net. That's the number of last year. So you assume either all of the business outside the U.S. goes away, which, as I described, it doesn't look like it. It's actually almost the reverse, or in the U.S., you get the business more than half, which again -- I don't think if you look at price and/or market share and our TAM, it's really hard to get there. So as we've said on the call a couple of weeks ago for Q1, we still confirm the guidance. It still has a broad range. We are still in the process of contracting in the U.S. with a pharmacy chain. So it's a bit too early to tighten the guidelines. And because there's so much uncertainty, we thought it was not appropriate to tighten it. We will, at the right time, but we just reaffirm that the guidance, we feel that we can deliver the low end of the guidance.

Fantastic. That's helpful to understand just to kind of get that context and ensure that there is kind of certainty for investors and thinking about the volume.

And so I want to remind people that in the guidance, there is no new product baked in. Because that was one of the lesson of the mistake we made, and I take accountability for it last year where we had put RSV in the guidance. And of course, we missed it partly because of RSV. And so what we said last September based on that lesson that in guidance for the year of launch, we put 0. So for example, should we get 1283 approved, which we are working actively towards, those sales basically come on top of the guidance and they're not in the guidance.

Fantastic. That's helpful. And jumping into that flu combo, there has been a slight change in the filing strategy and so you announced that again in the last couple of weeks. Can you just talk about what that change represents, if there's an impact to timing or potential for probability of success and what that means in terms of kind of how flu is going to play a role in it?

Sure. So it boils down to flu and what the FDA has been saying and how they evolved their position around flu. Flu, historically, you have seen approvals in the U.S. by the FDA of new flu products based on antibody levels. And so based on that precedent, we designed the Phase III study initially on antibody levels because it's faster and cheaper. As the Phase III was ongoing, the FDA started to ask question, "Hey, we're not sure." Maybe for a new technology, we showed them and we pointed them to new flu technology where they did not want efficacy study. And so what became clear very recently with the FDA at the working team level is that they've kind of made up their mind that they really wanted efficacy data, especially because they are, like you would expect like us, monitoring the season. We started last fall a very large Phase III efficacy study, which we will have to do anywhere because when you get approved antibody, then you have to demonstrate efficacy in the follow-on study. That study is funded by our Blackstone partnership, 100%. And so because, as you know, the flu season was pretty hard last year, and so because of that, a lot of cases accumulated in the study. We announced on the earnings call that we exceeded the number of cases needed for readout, which is why we say we should have a readout this summer. Well, as you can imagine, FDA followed the cases as well. And there was a discussion at the working team level between our regulatory team and the FDA team reviewing the file saying, hey, you guys are going to get efficacy data anyway. So given we know we're going to get it, we want that data before we finish our assessment of the flu-COVID combo, which was filed last October. And so what happened is we had a discussion with them. Do you want us to file an amendment or do you want us to withdraw the file? The team after the internal FDA deliberation communicated to us last week that they wanted us to withdraw the file, and we file a complete file with both the COVID data, which we have efficacy for and the flu data to review the flu-COVID combo, which is what we said last week, we will do this year.

Fantastic. And so if you give us -- how does that then translate to a potential launch date for the flu-COVID vaccine?

So it will, of course, depend precisely when do we file based on when do we get the data. We see this summer for flu and then we need to prepare the BLA and all the filing and quality controlling all the subject because, as you know, in the U.S., you have to set all the raw data unlike other regulatory agencies. So it takes a bit more time to prepare. So based on when we file and do we use a voucher or not, it will depend, I think, of our internal choice. We still have one voucher to decide we want to use it or not because it's still $100-plus million. So we make those decisions hopefully, carefully and thoughtfully. So it can help you in terms of the contracting season or not. So I think it's a bit too early to know, is it a '26 launch, which will not be a full launch. Is it a '27 full launch but you have some sales in '26? So that's a piece that I think it's just too early to know. There's just too many variable on time lines.

Got it. That's super helpful. And then I think one of the big questions when it comes to flu and COVID is, does this add to your potential revenue purely by adding extra price because you're adding extra kind of impact to those patients that were already getting a COVID vaccine, now they're also getting protected from flu? Or does this expand the market that you have in any way, shape or form? And can you talk about how you think about that internally?

Sure. I think it's actually both and for the following reason. As we talked about a few minutes ago, the COVID market last year was $40 million in the U.S. The flu market was $150 million. So just to give you a sense that if I run my numbers, you have around a 3x bigger market for flu. And if you look at the data going back again to people at high risk, which is our focus, the people at high risk, what you see is basically 70-plus percent of those people getting through COVID the same day. Again, if you look at the claim data, people -- person by person in the U.S., of course, we were looking at people's name and ID, you see that actually 70% of people going to a CVS or Walmart will get both shots the same day. And because nobody really like needles too much, the fact that those people are willing the same day to get both shots in each arm makes us believe that actually there's a pretty large market in our target market of people at high risk who want a combo product. And this is not a new concept. Combo product exists for the pediatric setting. If you think about it, the pneumonia market, whether you have a Pfizer product or Merck, those are multi-strain products. And so it just makes sense if you think about it. Even in our lifetime, many of us have been getting a flu shot pre pandemic and saying, because we're sick, the shot didn't work. Well, actually, you don't know until you do a test because you might have an RSV infection or another virus infection. There's even old coronavirus that still circulate in New York every year, causing around 10% of hospitalization linked to 100-plus year old coronaviruses that are still -- that came from what was called the Russian flu, which was actually a corona pandemic in 1817. At the time, there was no PCR testing so nobody knew. But time, we have been able to go back through looking at deceased bodies and so on and testing to realize that. And so I'm saying all that, which is if you had a magic wand, what you will want is a respiratory virus vaccine, where all the respiratory virus are taken care of by a combo vaccine that has all those components. You could see in the future, even the elderly wanting a COVID through RSV combo. As you know, we have shown data about such a product. And so I think this is where the market is going because it's just convenient. So then your question of price for us is not only this ability to go into a much larger market 3x the size, but then the high-dose flu shot is around $70. So adding, just even if you assume some of the part in our pricing, adding another $70 for the same cost of goods because the thing that is really interesting about mRNA is the cost of filling the prefilled syringe is actually higher than the cost of the mRNA in the prefilled syringe. To just tell you the sense of the manufacturing scale that we have with mRNA because what most people forget with mRNA is one copy of mRNA in your body makes around 1,000 protein copies. So you get a free amplification by nature as a gift, which is why if you visit a Moderna factory, you see 100-liter reactor. If you go see a Sanofi factory, you see 20,000-liter reactor. And so when you look at those things, it's actually quite interesting for us, you get a bigger volume. You get added the price on your COVID price if you assume no premium despite the convenience, but the cost of good is almost the same by a couple of pennies. So we think it's actually really interesting for us, which is why we are deploying a lot of capital towards COVID-flu combo. If you look at the market, it is quite strange to us that Pfizer has shared no data of the clinical data on the 65-plus, which is clearly where the medical need is. They've shared data in the young adults that are healthy. They have not shared data in the elderly, which I would assume from the outside that the data might not look so good because they know that the market is, it is in the elderly and people at high risk, obviously. Then there's, of course, Novavax with a combo but it's also not clear at this stage what their data will look like. The good news is we have Phase III data showing noninferiority to Fluzone HD, the gold standard in the elderly for flu. We have shown much improvement because we used 1283 in the combo, the next-gen higher-efficacy COVID vaccine. So looking at those things together, we are quite excited.

Fantastic. That's really helpful. Perhaps pivoting to kind of something that's upcoming this weekend, we've got ASCO. That's one of the biggest oncology conferences. And as I think about kind of some of the messaging and kind of work you guys have been doing, there's been a bit more active highlighting of your oncology portfolio over the last few months. Can you give us a really brief overview? And certainly kind of on the INT, which I think is obviously nearest and dearest to my heart, given my immuno-oncology background, how derisked would you describe that Phase III melanoma trial being, given the data we've seen so far?

Good. So if you step back a minute to understand the role of oncology in our strategy, which is what we're trying to do because we knew the COVID pandemic that our vaccine work is to develop pretty quickly in over a few years, the respiratory portfolio that can become a massive cash cow for Moderna. Why? Because we put a Phase III only once, and we already built manufacturing and use all the same infrastructure for all of our products because we have a platform. So if you think about it, if we could build $4 billion, $5 billion, $6 billion, $7 billion, $8 billion respiratory business with a pretty high gross margin and no R&D and the same sales and marketing team, which is very tiny. In the U.S., we have 150 people in commercial. Why? It's a massively concentrated market. You have CVS as a big one. You have Walgreen as the #2. Then you have a few large food retailer like Walmart, Albertsons, Kroger, and so on. And then you have a long tail but you go at them through purchasing agreement through like independent pharmacy network and so on. So you could have -- you could launch RSV and flu and flu-COVID combo, all the same sales force. So if you think about it on a couple of year basis at the P&L level, I love that business. I know right now, vaccines are not very popular. But the virus are not leaving the planet. People are still getting sick. We have more and more older people around the world. So we are playing a multiyear game. We're not playing a couple of quarter game. And so the way we think about this business is that we're going to create a massive cash cow business that allows us to fund the platform and all the products coming out of the platform. So the big next chapter of Moderna is oncology. And if you think about what's we're trying to do in oncology, we are trying to go after a lot of things because with INT, the individualized new antigen therapy, combined with KEYTRUDA, we are trying to increase the efficacy of KEYTRUDA or checkpoints that they demonstrated alone. And as we know, those products have changed the lives of so many people. They have generated incredible turnover for those companies and cash flows and market value as a consequence. And so we think that if you like we've shown with INT in melanoma, you can have 2 out of 3 people that 3 years after surgery have no distant metastasis, and as you know, people die from metastasis most of the time, or no death compared to KEYTRUDA alone, that's a pretty significant clinical impact, right? And so we want to improve the efficacy of checkpoints by adding INT to patients in Stage 2 and Stage of a cancer. We want to grow in monotherapy early because the checkpoint, as we all know, are not used in Stage 1 because the side effect is terrible. As you know, when you look at the list of side effect on the label, it's basically who's who of autoimmune disease, which again as an immunologist, you're not surprised, you push your immune system. So that's what happens when you push the immune system. But it's better to have type 1 diabetes or lupus than being dead, obviously. But think about INT, it's the same technology as a vaccine. So the safety profile of this technology is remarkable. As you saw in the clinical study, the safety profile of a combo was the same as KEYTRUDA alone. And when you look at the science, it's like that. It's the same chemistry, it's the same lipid, it's the same manufacturing process that we use for the COVID or the RSV vaccine, and we know the safety profile of those products. And so we think the monotherapy is going to be a very interesting market because it's very large. And you don't have a competition that you have in the Stage 2 and Stage 3 with checkpoints where you have a long list of checkpoints and soon, generic checkpoints or biosimilar coming, many of them out of China and so on in the coming years. So we feel excited about that. We also are quite excited about the products we mentioned more recently but we already highlighted last year at ASCO, which we call the checkpoint product for us, which is basically a vaccine with PD-L1 and IDO coded into it. So again, same technology as COVID vaccine, again safety profile-wise. We have shared at our earnings call and we've had data coming last year of a Phase Ia at ESMO, the European smaller kid of ASCO or sister or brother of ASCO, some quite interesting early data as we're doing those findings. We've announced that we'll present more data later this year. But we've had some quite interesting response in people in metastatic setting. And I've seen personally cases of patients so think about the 72-year-old woman that has melanoma and has failed on KEYTRUDA and then failed on OPDIVO and then failed on the third one and the fourth one. And then you give that person with cancer progressing, of course, a couple years after because if you look at the number of treatment for all those checkpoints and in between a couple of years after with a much worse disease, you give them our product and they respond to it. So of course, it's a still small signal so we have announced we are expanding into a significant Phase II that product to be able to get a much stronger signal. But so it's the first time we're making a foray into a metastatic setting. So I said that we are Phase II/III with Phase III going from melanoma. We're going to go into monotherapy Stage I cancer. We're into metastatic setting with this checkpoint product. We've also -- if you look at clinicaltrials.gov and what we announced at ASCO call last year when Rose, our Head of R&D, gave a bit of an overview, we're also working on trispecific for multiple myeloma, which were not in liquid tumors before. So there's just a lot of things going on in Moderna. I think people should expect up to 10 oncology programs in the next 12 months in the clinic because again, when the platform is going, it's going as we've been able to show in vaccine, where we're able to do based on the learning on our vaccine infectious disease and on learning on INT in cancer. We've learned so much over last few years that we're able to design very quickly and pivot very quickly as we showed during COVID, where we designed the COVID vaccine over a weekend. You can with this technology because you design everything in silicon on the computer. You can invent new drugs very quickly based on what you learn in the clinic. And so this next wave of product in oncology is, I think, what is super exciting to us. And that's going to be funded by this cash cow that we're building with respiratory vaccine franchise.

Fantastic. We've had a couple of questions come through on that cash cow kind of question. And the angle of the question, there's kind of two themes. One theme is it sounds like you've got these long-term international agreements for vaccines. Is there any reason on the vaccine, respiratory vaccine side of the equation, that, that couldn't become more like 75% of your overall contribution to cash? That's kind of one part of the question. Or is there a margin reason why international is less appealing than the U.S.? And then the other theme that we've had come through on this is, is there a risk to your cash generation and the spend rate? And therefore, is there any potential that Moderna would need to raise equity over this horizon as we head towards kind of that longer-term future in other places?

Great. So on the first point, what is quite interesting is the pricing on the vaccine between the U.S. and outside the U.S. is very similar. What you see in therapeutic because sometimes you see a 2x or 3x or 4x pricing difference. In vaccine, the price is very similar, and actually, there are even countries where price is even a bit higher than the U.S. But then if you look at volume in terms of volume of people vaccinated just based on the population. You have actually a much larger opportunity outside the U.S. than you have in the U.S. So because the price differential is not what you see in drugs where in drugs because of price differential even with a smaller population, you see the U.S. market being very important. If you look at vaccine, you realize actually, a lot of vaccines actually have more sales outside the U.S. than they have in the U.S. So we think it's quite an interesting opportunity there. In terms of the burn, what I think we have done last year and this year and again earlier this month with the cash cost target for 2027 is, to be very clear, which is we will adjust our cost by basically not taking more drugs into Phase III and being very disciplined about prioritizing the assets to get back to breakeven and cash flow positive for the company, which is we're not going to raise more equity. We have a lot of levers that we are doing. We are going after the entire P&L. As I said, we were around $9 billion of cost a couple of years ago. We are at around $5 billion now. If you look at the current spend, we are going down to $4 billion at the same time that we are launching products where we're going to have new revenues coming on. As I said, the policy guidance on COVID last week might actually be a plus in terms of the time in the U.S., and the U.S. market has been stabilizing. But we'll continue to monitor that very carefully. Because the latent portfolio is basically what is not being funded right now for Phase III because our focus is really on oncology as we just talked about. And so we're having quite a number of discussions. We have our strategic partners. As you know, historically, we have done several deals with AstraZeneca, several deals with Merck, deals with Vertex. And so I think this team is willing and able to execute deals. We've also done deals with project financing like we did with Blackstone last year. We know the key players in the project financing world. Last time I checked, there's a lot of capital to develop in private equity. And they like that it is not correlated to market because of our multiyear project investment that they can do it on a project-by-project basis or a portfolio of projects. We have a very exciting EBV vaccine. You remember the clinical data in Phase II. An HIV vaccine for herpes, there's no problem on market as well. A VZV vaccine that actually showed non-inferiority to Shingrix. Even on T cell, a lot better T cell than Shingrix out of a Phase II. So if you look at what's happening there, I wish we could fund it but we are being disciplined. We're not funding it. But if a partner is willing to go participate in the shingles market, we think it's a great opportunity because it's already a $5 billion market. There's only GSK right now. If you look at the recent data, there's some interesting epidemiology data linking vaccination against shingles and less level of dementia. It's purely epidemiology. Now there's a big study being run by GSK with the NHS in the U.K. to try to demonstrate it. But think about what this $5 billion market could become if you had the reduction of risk of dementia, which is not surprising as a scientific hypothesis because those viruses rest in your immune system as you know. And as you age, of course, there's reactivation of those viruses creating inflammation. And a lot of those disease, cancer, autoimmune disease, degeneration of the brain have inflammatory mechanism underlying. And so we think that's quite interesting. So think about the scenario where you say to a private equity partner or a pharma partner, what if we develop together because it's ready for Phase III, a shingles product? And let's imagine we only take 20% market share. It's $1 billion of the current market, which is growing as aging population with this huge upside on dementia. And we take $1 billion. You don't have to invest a dollar of CapEx because the factory is already here. It's not seasonal. We could make the product in Q1 and use existing sales force to go sell those things in retail. 70% of Shingrix sales are done in retail channel in the U.S., the CVS of this world and so on. So you can think about the -- you don't have to be genius in math to realize quickly, that's actually a pretty attractive opportunity. You pay once a Phase III study, and you have forever because again, VZV is not leaving the planet. It's going to be with humans forever. So I think that's just an interesting set of assets that we have right now. And again, we have a willingness and we have a BD team who has been able to do deals in the past. So we are actively having many discussions on those things.

Fantastic. So lots of opportunities to ensure that cash continues to come into the business. One other topic that I think has been elevated and we touched on it before we jumped on the stage and come up in conversation, and yesterday, the keynote speaker at lunch was about -- all of the topic was all about AI and AI integration to businesses. We just had a question come through as well here in terms of your tech adoption strategy. And I know you've connected the dots between kind of HR and technology. And this particular question is also asking, do you have any CapEx spend investment -- spend estimates, sorry, that you can share with us in terms of kind of how big is this investment you're going after and what can it do for Moderna?

Yes. So in our case because we don't build data center, it's not CapEx, it's OpEx, working with partners and having access to their tools so it's public and has been well documented. We have a very important partnership with OpenAI. We're actually the company helping them in the pharma space develop GPT enterprise for B2B clients because, of course, the last thing we wanted is to upload scientific data and help everybody else learn from our own data. What we believe is AI is going to really change work in a very profound way. So I think there's a productivity element of the company. It includes development, manufacturing, SG&A. And so we have a very large effort where we're trying to look at key business processes end-to-end across the enterprise and to ask the question, how would you do it in an AI world versus before with IT systems and people? And there's already a lot of impact. We have literally thousands of GPTs that have been written at the company from HR GPT to legal GPTs to finding the clinical dose of a drug using GPTs. And then there's a huge chapter around innovation in terms of finding new molecule, finding new lipid to allow mRNA to go into a new cell type, to open the aperture of all the things the platform can do. This also is something that has been going on for actually a long time at Moderna. And 2016 is when I really got fully joined on AI personally because our scientific team invented a new molecule, an enzyme that does not exist in nature, that did exactly the job that it was designed to do in the system that we believe was machine learning, it was not a large language model. But this day really was a very profound a-ha moment for me, where a system was optimized to -- for a chemical formula. Most of my scientists at the time believed that this most probably would not work. Somebody was crazy enough to make with their bare hands a protein and test it. It was doing exactly what it was designed for. It came out of a computer. And so we started to invest a lot in terms of training our employees and there is a training called Moderna AI Academy where every employee is required to go to that multi-day training. And then now with GPT that we have accelerated that and are just trying to reinvent the whole enterprise. And it's going to be important for us as we launch all those products because I think we could launch an enterprise actually with flat headcount, maybe even headcount down. If you look at the last few months, the headcount was actually down by a couple of hundred people already. And if you think about where we're going, where we're launching our products, the challenge for our team is how do we launch those same products without adding headcount? So going to be quite a fascinating journey. We're quite lucky with the timing.

Absolutely. There's lots of opportunities and things to look forward to in the future. There's a few bumps potentially along the way as we think about the policy and political environment you're in at the moment and kind of skepticism around mRNA and vaccines. But it certainly looks like there's lots of bright lights or sparks in the future.

Yes. We have a great portfolio, $8.5 billion of cash, a very dedicated team. We're putting our head down. We're doing the work, and science is science and the virus are still hurting people and cancer is still killing people.

Absolutely. Thank you so much, Stéphane. My pleasure.

Thank you.