Everyone, I am Ellie Merle. Thank you so much for joining us at day two of the UBS Biopharma Conference here in sunny Miami. Very happy to have Moderna here with us this morning. Joining us from Moderna is Jamey 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 why we give some three years of 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 number one 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, you know, we wanted to be transparent about, "Hey, we're gonna continue to invest. We're gonna be cash conscious. We're gonna 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 gonna invest through that. We're gonna invest in 2024.
We're gonna, it's gonna grow a little, and then we're gonna invest in 2025, but by 2026, we're gonna break even because we are cash conscious, and, but at this point, we think it's the right thing to do to invest in the portfolio.
Mm-hmm. Absolutely. And so within that break even by 2026, what's needed from COVID and RSV? I mean, like, the biggest pushback I get from investors is: Oh, okay, break even in 2026, that sounds great, but what happens if, if COVID volumes go down further? What happens if RSV proves more competitive? How should we think about kind of the leverage there?
Yeah. I mean, we are committed to breaking even, so we don't think it'll go down. We think 2024 is the floor. So we said approximately $4 billion, and COVID is $3 billion-$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 break out, bring flu to market. We'll bring our combination vaccine to 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, 'cause we said by 2028, so hopefully some will trickle in 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, you know, in the world that COVID actually goes down and it's not what we anticipate it 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.
Mm-hmm. Yeah, maybe starting with the top line, let's talk about COVID and, and volumes. And, you know, you mentioned kind of perhaps this is a, a low point, and maybe we can return to growth from here. How do we think about that?
Yeah. So we do think 2024 will be the low point. You know, obviously, this year we're at $6 billion, and next year we'll be at $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, you know, let's just talk about the first category is around our advance purchase agreements, where we have long-term contracts in place with many countries, and they are right-sized for the amount of COVID, the volume that we anticipate. Places like the UK, places like Canada, places like Australia, so we feel very confident in the $1 billion because it's pretty much set.
The $2 billion, and, you know, the U.S., that's a similar assumption year over year, that we're gonna be on the low end of our range. So for 2023, we said, look, at the low end is 50 million doses, or patients get vaccinated, and that's similar to what we saw in 2022. So that'll be two years in a row that we think that kind of sets the floor.
Mm-hmm.
We see that 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'll help top up some of the COVID revenue. And long term, I mean, I don't think COVID's going away. We think that it'll continue to mutate. It's here for the long term. It's got three times the health burden of flu, so why wouldn't it actually have a similar vaccination rate as flu? So it's gonna 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.
Mm-hmm. And what are you expecting for volumes in, in the fourth quarter? And I guess, what's baked into the guidance, and how are you thinking about the mix between retail and, you know, in-office prescriptions of the, of the vaccine?
Yeah. So let's break down the $6 billion. So there's $4 billion of APAs, and that is pretty much set.
Mm-hmm.
So through the third quarter, we had already recognized $3 billion of that, and 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 de-risked. So it really only leaves the US, which is what you're-
Mm-hmm
... 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 work 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, the non-retail market will grow as a percent. So if you look at last year through October, it might have been, you know, the non-retail might have made up 10%-15%. It's similar this year. But by the end of last year's vaccination season, the non-retail 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%-80% range, but nonetheless, the non-retail component will grow faster over the coming few weeks here.
Mm-hmm. How accurate are scripts? We, we tried to track it.
Yeah.
But-
Not too bad. I mean, we looked at what we've shipped, what we think, and we correlate it. There's, you know, 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.
Yeah, sure.
I would say that it's directionally correct.
Okay. That's helpful.
Yeah.
Directionally.
Yeah, directionally correct. I mean, we don't know exactly either, to be honest.
Yeah.
So...
Yeah, that's fair.
But it's in the ballpark.
Okay. That's helpful. RSV.
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?
Yeah. We're super excited about our RSV product profile, and really in three ways. First is the efficacy of the product; it looks terrific. Second is the safety of the product; it looks terrific, and to date, we haven't seen any Guillain-Barré Syndrome events, and so we think our safety differentiates ourselves right now. And then third, the ease of the use of the products, and maybe more, most importantly. So we have a prefilled syringe. Our competitors do not. So ours is one step; our competitors are five 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, you know, all the workers are overworked, the pharmacists are staffed, you know, maybe not enough. Store managers are helping out.
And you would 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 talked to, you know, the retail companies, both the buyers and the CEOs of those companies, and they are really excited about bringing our product to market and that product profile. So, you know, we're encouraged that it'll 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.
Mm-hmm. We got it. Very exciting.
Yeah.
Maybe on the other side of the equation, with expenses-
Yep.
This is another question I get a lot from investors, given the, you know, potential variability in COVID volumes. What degree, maybe starting with R&D, do you have to flex on spend? You know, $4.5 billion in spend this year from R&D. How should we think about in a, you know, 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% 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, you know, 80+% of our overall spend. We said we'll always invest in research and the platform, and I mentioned at R&D Day, that makes up 10%-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, you know, 5%-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 can—Stéphane 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.
Mm-hmm. Tell us a little bit more about potential partnerships. What would this look like? And, you know, just strategically, in terms of the framework-
Yeah.
What are the programs that might make more sense versus others?
Sure. So we think of ourselves, and we talked, we have four 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.
Mm-hmm.
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 partnerships 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 in the latent disease. And what would we be looking for in a partner? I mean, I think it's mostly financial right now. You know, what would we, what are the financial terms? And then what are the terms in terms of control, you know, 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.
Mm-hmm.
But, and that will grow over time. So we laid out at R&D Day that, you know, we said we'd spend roughly $5 billion, or $25 billion over 5 years.
Mm-hmm.
And 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%-20% of that. So the latent is gonna grow in the 2025 and 2026 time periods, because it actually overtakes respiratory by that time period to be the number one driver in spend. And so that's probably the way it will look.
Mm-hmm. 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, you know, kind of as a whole, like its own business, COVID and the margins there long term? You mentioned, you know, $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.
Yeah.
Is this something that, you know, 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-$8 billion to kind of-
Mm-hmm
complete the respiratory business-
Mm-hmm
from an R&D standpoint. 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 the new strain, and we have to do a little bit of work, but it's not nearly the same-
Mm-hmm
cost as an initial efficacy study that goes on. So, and we're basically through most of RSV. We've got obviously, we've got some more to do in 2024, and then we'll get into PD, so there's a little bit more on RSV. Flu, we still have some work to do. 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%.
Mm-hmm.
At Vaccines Day, we said we'd be $8 billion-$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 know, you've got an $8 billion-$15 billion top line franchise. So that kind of sizes R&D. SG&A 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, you know, built for the most part, so I don't anticipate a ton of growth there. I think we laid out 10-ish% or something like that. I forget exactly.
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, at Pep, 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%, let's just take the low end, 25% cost of sales, 10% R&D, and 10%-15%-
Mm-hmm.
You know, SG&A, you're talking about a 50% profitability business.
Mm-hmm.
At $8 billion, that should generate $4 billion in overall income for the company.
Mm-hmm. Absolutely. That's, that's very helpful.
Yeah.
My question is, in thinking about these percentages, particularly R&D, being, say, around 10% of the top line, how much does that have flex if the top line is lower? Should we think about that in terms of an absolute number or in terms of a percentage?
Yeah.
You know, if we're, if we're running various COVID scenarios where, or respiratory, you know, disease scenarios, it—can that in, in a lower sales scenario, is that 10% still 10%? And what proportion are the, the fixed operating costs of, you know, renewing the strains every year?
Yeah. Yeah, and you're talking in the outer years.
Yeah.
The outer years, I think, it should be, you know, maybe it can go to 5%-10% or something like that, in a low-case scenario, but the strain cost is really not that much.
Mm-hmm.
What we put into that maintenance cost of 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, you know, 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 three years in the respiratory business, you know, we said it's $6 billion-$8 billion, you know, starting, we said that at Vaccines Day, so that's, you know, kind of $2.5 billion a year. So you look at 2024, and that's $2.5 billion of our $4.5 billion dollars is going into the respiratory business.
You know, we're pretty far down the path on all these programs. We're not gonna flex, you know, too much.
Mm-hmm.
But, 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 program, complete the programs, is because we have to return to growth, and we have to grow 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.
Mm-hmm. Absolutely. And, maybe just with COG 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.
Yeah. So yeah, we, I mean, the high level-
Mm-hmm.
We were built for a pandemic. You know, we, we had to build for a pandemic, I should say, over the course of 2020 and 2021 and 2022, and the company generated, you know, $40 billion in revenue, as a result of that. And so obviously, the volume moving forward is very different. We delivered, you know, over 1 billion doses then, and we're gonna deliver much less than that, a fraction of that, you know, now. And so what did we have to do? We had 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 CapEx footprint that we have, mostly with our network partners.
And we went out and renegotiated with all of our partners, which we highly 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, you know, it's a result of transitioning to an endemic from a pandemic. But that really cleans up.
I mean, 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 a year and a half ago. And so you don't even have that much to write off moving forward. It's just, it's impossible.
Mm-hmm.
and then you look at our purchase commitments on our balance sheet. We were, you know, over $5 billion. It'll be $2 billion by the end of this year. So we've really got 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'll be 20%-25%, and we've, you know, acted on it recently.
Mm-hmm.
There's still more work to do, but that's a lion's share of what we have to do.
Mm-hmm, absolutely. 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 in APAs next year. Just how should we think about that going forward?
Yeah, good question. So, I would think, so we said it would be $0-$1 billion. Well, actually, let me back up. In the overall $4 billion framework next year-
Mm-hmm.
-$2 billion for the U.S.
Mm-hmm.
$1 billion of advance 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 UK, 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-
Mm-hmm.
and we think that's a good proxy moving forward. Then we have to compete in certain areas, and certain areas we're slightly disadvantaged. In the EU, for the next 3 or 4 years, we have a competitor that has a fair amount of volume in there. But 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, you know, 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 gone up and down in terms of market share, but moving forward, we will still compete heavily in Japan and believe that that can still be a pretty sizable market for us. And then there's other areas. So we said $1-$2 billion overall for 2024, and hopefully. The same, the same dynamics, though, moving forward, are the same across the entire globe. The healthcare burden of COVID, you know, an aging population, you know, population growth as well. So we think it'll go over time, but the $1-$2 billion is what we guided for in our framework for 2024 internationally.
Mm-hmm. That's, that's interesting. I'm thinking about it almost as a floor because it's committed contracts.
Correct. Right.
Did you say till 2029? I mean, I know there's a lot of different contracts in there.
Right. Yeah.
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, you know, opinions around COVID.
Yeah.
Like, I mean, how do you think about it going forward, and why do you think the COVID vaccination rate is so much lower than the flu?
Tough one to guide,
Mm-hmm.
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 advance 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 advance purchase agreements was the only thing we said at the outset, and that's obviously changed to $4 billion. So, so a lot of learnings through that process. And then on the US, you know, 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 two 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. You know, they're over the age of 65, or they're immunocompromised. And, you know, if 40%-50% of those people actually go get a vaccine, COVID vaccination shot, then that's, you know, 35-40 million by itself. And then there's plenty of people that still will recognize the need for it. So that. I'd get comfortable with a floor around 50, maybe 45. Who knows? We'll see what it settles out.
Mm-hmm.
And I think over two years of seeing that data point, it should set the floor. But due 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 three times worse than flu. There are three times more deaths and 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 2025 and 2026, and, you know-
Mm-hmm.
We'll move forward with that.
Mm-hmm.
A lot of learning, though, about our overall forecasting over the last year. Hard one to predict.
It, I mean, yeah, I was like, I don't know how you, how you do that.
Yeah.
We don't envy you.
Thanks.
You've been on the upward trajectory in terms of market share with COVID. Does it keep going up from here? What are the takes and takes?
Yeah, good question. Thank you. Yeah, 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 forget the exact timing, I lost track, but I mean, really didn't kind of crystallize till kind of the July, August timeframe. But, I mean, we've been talking to our customers since January, you know? And we got the 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, has actually played out here, knock on wood.
And then second, you know, I think now it's post-pandemic, people can talk about efficacy more and the efficacy of the vaccine, and we believe we have a stronger vaccine. And there's obviously some buyers out there that appreciate that. And then I think second is, 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'll be a tough competition, so, but going from 36% last year to 45%, and we hope 50%, we've even evidenced in the recent weeks, 50%. You know, it'll bounce around, I'm quite sure. I'm quite sure moving forward it'll bounce around, but I don't think it'll go back to the old market share, and sometimes maybe it's a little higher.
So in that 40%-60% range, some years I'm sure we'll win more, and some years I'm sure we'll win less, but we hope to win more than less.
Who doesn't?
Yeah.
Maybe turning to RSV, I mean, this is obviously a big swing factor in terms of your top line in the next couple years. You know, 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?
Yeah, 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, you know?
Yeah, absolutely.
So, both, 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, which would be great, and which hopefully 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, you know, we came out with, I think, almost 84% efficacy with two or more symptoms, or equal two or more symptoms. I've got to go back to the ease of the product of use. So prefilled syringe makes a difference with not only retail, really everybody.
Mm-hmm.
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, you know, make sure you're careful about all that, you can just pull out a prefilled syringe and give somebody a shot, it makes a big difference for any healthcare 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. You know, that's the beauty is, you know, it's the same customer base that our team's already, particularly in, you know, all across the globe, but particularly in the US.
That same conversation we just had about how we're taking share, that applies to RSV as well, from a agility and nimbleness perspective, but also from a product profile. I think it might even benchmark a little bit better.
Mm-hmm.
So, we're optimistic.
Yeah, that's exciting. Maybe in terms of RSV and, like, the frequency of vaccination, I mean, we have, like, with flu, and now it seems like COVID is probably gonna be an annual, at least for some people, vaccine.
Yeah.
How do we think about RSV and, you know, how that plays into the ultimate long-term, you know, annual market opportunity?
Yeah, I think, I think the story is still unwritten.
Mm-hmm.
To date, though, it's every other year vaccination.
Mm-hmm.
I think over time, I mean, it's a first vaccine on first vaccines out there.
Mm-hmm.
And so ACIP made the decision, probably looking at a lot of factors. I think the efficacy of the product's good. The safety, I think is, you know, 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, you know, 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 two years, then maybe it is two years, you know-
Mm-hmm
how that everybody gets vaccinated. If it's one year, then, you know, I think they will be in the confident with the safety, and they look at the data, they might say: Okay, well, let's move it to one year. So for now, it's two years, which is still a sizable market. I think, you know, maybe 5%-10% of the 80 million patients that we are looking at right now will get vaccinated, and then we will join, and they'll still be substantial in 2024 as well.
Mm-hmm. That, that's helpful. And how does that play into how you think about combination development and thinking about the frequency?
Yeah. So we have a lot of shots on goal there.
Mm-hmm.
So, we have COVID, RSV and flu, we have COVID and flu. We've looked in, in a handful of others as well. But right now, you know, COVID and flu seem to make absolutely the most sense, that it is an annual seasonal vaccine, and that is a convenient 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 combination is a big picture for our story. Combination, we have so much flexibility. You know, we have so much ability to add antigens, which specific antigens, in particular in the case of flu.
and so, you know, 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, you know-
Mm-hmm
... they want a different vaccine. I think the mRNA platform really helps that. We talked about speed and probability of success and how it's been, you know, really incredible. And I mean, go back to the story on COVID. We developed a vaccine in one day. You know, we'll see what happens in terms of combinations, but I think there's a long road ahead for it.
Mm-hmm.
And many different, you know, types of combinations that could come to market over a long time.
Mm-hmm. Yeah, 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, where it's really where you have a huge advantage. How do we think about this from a financial perspective, you know, in the coming years?
Yeah. 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 three or four candidates already, and we've already iterated on it. And so with that, of course, that will compete, both fine and well in the flu market. But to your point, I think combinations 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 a real game changer financially.
Of course, a standalone flu product can also compete, and, you know, it's a $6 billion marketplace that's highly entrenched. It's been around for a long time. You know, maybe you could get a fair share of $1 billion-$2 billion, is what we think, and, and that's still financially wonderful. But I think the real game changer is what it might do from a, you know, a combination vaccine perspective. And if, if we really have a, you know, high efficacy, great flu product combined with a high efficacy, great COVID product in one shot, I think that competes very well.
Mm-hmm. And, certainly beneficial from a margins perspective.
Certainly. Yeah, yeah, yeah.
I see that makes you happy.
Yeah, for sure. Yeah, I mean, you know, maybe I could just take a second to talk about our cost of sales, and maybe I'll use the 35%. So we have 5% loyalty.
Mm-hmm.
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, that's gonna 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, you know, it's all the- it's the filling of a vial or a prefilled syringe. And that cost probably makes up two-thirds 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, 'cause the actual mRNA is actually much smaller.
So that bodes well from a 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-
Mm-hmm.
which will be great.
Mm-hmm. Yeah, absolutely. Well, that'll be interesting to watch-
Yeah.
-at launch. All right, let's talk about the pipeline.
Pipeline.
CMV in phase 3, how do we think about the potential commercial opportunity if this trial is successful?
Yeah. This is one of your favorites, I know.
Yeah.
Which has been with us and has been for a long time. So CMV, first, it's, you know, there's no vaccine out there. It's an incredible market opportunity. And, you know, congenital CMV leads to 1 in 200 babies having... That being the leading cause of birth defects and they're material birth defects. They, 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 to, so I said, 1 in 200 babies, and there's, you know, 4 million babies born per year in the United States and, 40 million across the globe. So, you know, 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 market, and we've always talked about it as kind of a $2 billion-$5 billion marketplace. When you compare other latent diseases that are out there on the market and kind of benchmarking and look at the value of what we're bringing, that's what we think financially it could be worth.
Mm-hmm. What are the underlying assumptions behind the $2 billion-$5 billion?
Yeah, I mean, it's really the same thing I just talked about, which is, you know, what are the patient population? How many births are there?
Mm-hmm.
What? How many people? What percentage? So that's what I would go model is. 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 US? What are comparable products that are out there in the latent infectious disease world, and what do you think the right value is from a price perspective?
Mm-hmm. Absolutely. And so if this phase 3 is successful, from a financial perspective, how do you think about then the framework for how much you should invest in other latent virus vaccines?
Yeah. Well, yeah, I mean, in that, I mean, maybe the simplest way to talk about that is in that $5 billion per year, if I said-
Mm-hmm.
50% is respiratory, and by 2028, it's gonna be 10%.
Mm-hmm.
Rare is relatively small. We have a big partner on 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, VZV, HSV, et cetera, and there's probably four or five other candidates we have in the pipeline right now, and that could be a quite material business, you know? So if you say 5 candidates at $2 billion-$5 billion each, we've actually mentioned this before, that's a, you know, $10 billion-$25 billion top-line business, so we want to invest in that. I mean, not just for the reason and the, for, you know, for why it's so important for patients, but you know, it also diversifies our franchise.
Mm-hmm.
I think that's important to us. I mean, we don't wanna be just a respiratory business. We wanna grow a latent infectious disease business. We wanna grow an oncology and INT business. We wanna grow rare disease. I think that diversification bodes well for any company, but in particular, that's what we look at a lot as well.
Mm-hmm. 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?
Yeah, 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's done a great job 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, and Stephen actually said on the call, that you'd probably get the next update at Vaccines Day-
Mm-hmm.
-which is traditionally in the March, April timeframe of 2024 of every year, but in 2024. So I think that's probably when you'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? Are you..." You know, so, so maybe on the calls we might be able to say some of that, but I would be looking forward to Vaccines Day-
Mm-hmm
For the next big piece of data, or hopefully we'll, we'll see where the status is at that point.
Mm-hmm. Great. INT, we're expecting an update by the end of the year, which I guess there's seven weeks left in the year or something like that.
Yeah, 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?
Yeah. So INT for adjuvant melanoma, we gave two-year data at in December of last year, and the cutoff was in November of last year. So we've been looking and waiting for patient, you know, events to accrue as well, and perhaps it's a good thing that they haven't. So we said we're gonna cut it off again at the three-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, you know. But 44% reduction in recurrence-free survival is outstanding versus KEYTRUDA.
And so our hope is, you know, 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 it with them all the time. I mean, our hope is that the phase 2 data that we're coming out with in the next few weeks is a 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 3 trial going as well, which we have, and it's enrolling quickly. And then get our manufacturing process ready-
Mm-hmm.
which the team is very hard at work to make sure that we can, you know, serve as many patients as we need to when this thing launches someday from an approval standpoint. So we've invested in a 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 so we'll see in the coming quarters, year, what happens here?
Quarters, year.
Year.
Okay, cool.
Yeah. Well, quarter, at least a quarter. We'll give the data, and then we'll have a conversation, and then we're working on the-
Yeah
the manufacturing side, and we're still going with the phase 3, but I'm sure we'll, we'll give a lot of updates along the way.
How should we think about? You, you could just skip this question if you want.
Okay.
Like, timing for when we might get an update around the regulatory strategy, if this is a possibility with accelerated approval?
Yeah, probably a better question for Stephen on that one.
Okay.
I'll leave that to him to, to give the,
Uh
-the status.
Maybe let's talk about just how to think about the size of that opportunity.
Yeah. Yeah, it's a great question. So, 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 would, how we model it and how, and without giving the specifics is, then I would look at, okay, what stage are they in? You know, is it resectable? How much share do you think KEYTRUDA has? What price point do you think you have? And you come to an overall revenue number, and, and I would say, you know, if there's over 100,000, we're talking, you know, 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 would do that across the globe. So places like Australia, very high prevalence for melanoma.
That's how we think that's a very material opportunity for us. 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. 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.
Mm-hmm.
We'll see when that time is.
Mm-hmm. Absolutely. Rare disease franchise. You've shown some encouraging data, and, you know, you continue to progress with a few programs. It's smaller indications, so I think they get talked about a lot less. How do we think about the opportunities there?
Yeah. So we've said traditionally, rare disease programs are in the $500 million-$1 billion range, and I think that's still a fair assumption. You know, 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 all have the same fight and have a lot of support for each other. So, and we've got four that we said could be launched by 2028, MMA, PA, GSD1a, and then PKU. So, you know, we've accrued, or we've been looking at the data. We've had shown a lot of great support in terms of what we call MDEs, and the fact that it, 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, you know, patient populations that we've been serving. So, you know, I don't know if it's the full $500 million or $1 billion or something on the way to that by 2028, but it's only hope to watch.
Mm-hmm. 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, you know, given there's been so much focus on COVID, is there something in particular around the Moderna story that you think investors are missing?
Yeah. I think the, you know, the pipeline, we like everything.
Of course.
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, you know, we're talking about four franchises that could be very material for our company and for any company, really. And you talk about the platform nature, and we've shown the probability of success 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 on not only COVID, but even flu.
You look at the flu and, you know, what we announced in April of this year versus what we announced, I don't know, a month or so, a month or two ago, whatever it was, you know, 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's the limit here. So, I think the platform nature of our company is, I think, what's most underappreciated.
Mm-hmm. Great. Well, Jamey, thank you so much for making the time.
Thank you.
Thank you everyone in the room and webcast for joining us.
Thank you.