OT: MRNA

Moderna’s stock (MRNA) has tanked today upon announcement that the partnership of Sanofi and GlaxoSmithKline has finally produced good results in late stage testing for their Covid vaccine and they will be submitting it for approval in the US and Europe. These pharmaceutical heavyweights had run into multiple delays, but overcame them and the vaccine is showing very good efficacy, up there with the mRNA based Pfizer and Moderna vaccines.

Moderna reports earnings tomorrow before market open, and their expected profit has been climbing steadily up to $9.90 now from $8.62 60 days ago. There is still an immense global market for Covid vaccines from developing countries who still have not vaccinated their population to ongoing booster shots in developed countries.

Trailing twelve months diluted earnings are $16.28 giving a trailing PE of 8.4 based on recent price of $136.50/share. If they hit expectations of $9.9 tomorrow that would increase trailing earnings all the way up to $26.87 and drop trailing PE to 5.08. Current expectations for next year’s earnings are $28.32 per Yahoo. If that holds up the company will have earned 40% of its current per share stock price this year and next.

I’ve looked a little more into their pipeline. They have two new vaccines in stage 3 trials: for Respiratory Syncytial Virus (RSV), a common respiratory virus that can be serious for the very young and old, and for cytomegalovirus (CMV), a common virus that is in the same family as herpes and which remains latent in carriers long term. It can cause serious problems for infants and the immune compromised.

Other vaccines and drugs in development/testing are a refrigerator stable Covid vaccine, multiple variant specific Covid vaccines, a quadrivalent flu vaccine, a Covid/flu vaccine, a pediatric combo vaccine for RSV and Human metapneumovirus (hMPV), Epstein–Barr virus vaccine, and therapeutics targeting advanced melanoma, acidemia, and cystic fibrosis. https://www.modernatx.com/pipeline

I bought some more today for my and my family’s accounts at ~137-138. Seems like a really good bet to me. In news that is dismaying at a human level, but good for MRNA’s prospects, an omicron subvariant BA.2, is widespread worldwide, including the US, and has displaced Omicron in South Africa and Denmark. It appears to be ~30% more contagious than Omicron and better at evading the immune system. https://www.npr.org/sections/health-shots/2022/02/21/1081810…

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I am watching the stock. They have $40 cash and going to earn lot more cash. So they are really cheap. Everyone is expecting the revenues will fall after next year. Now, the real question is, what are they going to do with the cash? Will they just keep the cash, continue to focus on their pipeline, opportunistically to some buybacks, and some tuck-in acquisition or blow it in some sort of transformational M&A?

The empire building has destroyed many companies. What they are going to do with their cash is the key. If they are going to be patient and continue to focus on their pipeline, stay disciplined with any acquisition, it is a good price.

Otherwise…

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Earnings released this morning were great. $11.29/share vs. $9.90 expected gives trailing twelve month net diluted income of $28.29 and a trailing PE of 5.3 at recent price of $149.3/share. They raised revenue forecasts for 2022 and predict the Covid vaccine will stay a great money maker for years to come as they expect Covid to become an endemic disease with recommended annual shots like the flu. Once they judge the disease has transitioned from pandemic to endemic, they will be raising the price on their vaccine.

Shares are up 10% this morning, still look like an incredible value, IMO, at $150/share.

The empire building has destroyed many companies. What they are going to do with their cash is the key.

Yeah, there are plenty of ways things could go sour. I like that they announced up to $3 billion in stock buybacks this morning, given I find the price so attractive.

They now have 44 drug/vaccine programs in development including a bivalent Omicron/Covid vaccine. Phase 1 of their flu vaccine went well and Phase 2 is fully enrolled. They announced a new program for a Herpes Simplex therapeutic vaccine, which would be huge if successful, and also a new program for a cancer vaccine that seeks to address specific checkpoints that cancers exploit in their growth. They are working on two different HIV vaccines, an Epstein-Barr virus vaccine and therapeutic vaccine (mononucleosis and increased risk of multiple sclerosis). Numerous other important programs in development include cancer inhibition and heart disease therapeutics.

Revenue last year was $18.5 billion and they already have $19 billion in advanced purchase agreements in place for 2022 with another $3 billion in options and ongoing active discussions for further orders. Expenses will be going up as their tax rate, administrative expenses and R&D all increase, but initial rough estimates indicate they should net as much or more next year as this year. They already have firm orders for 2023 Covid vaccines from 4 countries. They are building a global commercial network to support sales without partnering with a major pharmaceutical.

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Revenue last year was $18.5 billion and they already have $19 billion in advanced purchase agreements (APAs) in place for 2022 with another $3 billion in options and ongoing active discussions for further orders.

I just finished listening to the earnings conference call Q&A, and a couple of interesting bits of info came out: The $19 billion in APAs and $3 billion in options include $0 from the US, and Moderna expects that to change with a high likelihood of another round of boosters recommended this fall. They also said that they don’t believe there needs to be another widespread variant wave for a lot of the $3 billion in options to go forward to purchases. Some of that is just governments waiting for funding, for instance.

They also are working on innovative 10 year strategic supply agreements with countries, which would include the ability to customize a pan-respiratory vaccine specific to what that country’s health agency thinks is most needed for the coming year. Moderna’s mRNA technology allows for more rapid R&D&C of strain-specific vaccines, so we might see them delivering different targeted flu vaccines to Europe than delivered to Canada. They already have agreements in principal for these long term agreements with Canada and Australia.

The stock market is pricing MRNA as if the past years’ earnings are a flash in the pan which will shrivel up with only modest prospects to maintain or grow them, but the business seems more robust to me.

In negative news about the company today, Moderna is being sued by Arbutus Biopharma Corp and Genevant Sciences Inc. over alleged infringement on their patents related to a lipid envelope which allows the mRNA payload to move into cells where it can be used to build the desired proteins.

https://finance.yahoo.com/news/1-arbutus-files-patent-infrin…

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The lawsuit comes after a federal appeals court in December rejected Moderna’s challenge to patents belonging to Arbutus Biopharma that were licensed to Genevant Sciences Inc.

The court let stand an administrative panel’s findings that Arbutus’ patents - which may cover technology used in the vaccines - were valid, as the science involved was not previously known…

“We seek fair compensation for Moderna’s use of our patented technology that was developed with great effort and at great expense, without which Moderna’s COVID-19 vaccine would not have been successful.”
"

I don’t know what their chances are of success, or how much Moderna might have to pay if they are found to be infringing on the patents.

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Moderna is popping today (up ~18% at the moment) on news that they’ve begun human trials for their new HIV vaccine. That vax could be huge if successful, but it will be quite a while before we know.

I think the stock is also benefitting from more and more people realizing that the pandemic isn’t over and more boosters will be necessary. Omicron subvariant BA.2 is apparently causing a significant rise in cases in the UK right now, right on the heels of the Omicron tsunami subsiding. BA.2 is also implicated in the outbreaks in China that have them shutting down major cities and regions, and it is widespread in the US.

Phizer’s CEO said over the weekend that a second booster shot is necessary to maintain protection, and there’s a huge population of people in the US who never got the first booster, not to mention ~35% of the population is not even ‘fully vaccinated’ with two shots.

Current expectations are for earnings to decline in the current fiscal year to ~$26.3/share from $28.26 diluted earnings reported for the trailing twelve months. I know their expenses will be going up this year, but I also think analysts are under-estimating their forward revenue and I expect they will match or exceed last years earnings. That’s just my opinion though!

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Moderna announced an additional advance purchase agreement (APA) with Japan for 70 million more doses of vaccine for the second half of the year.

https://finance.yahoo.com/news/moderna-japanese-government-r…

I expect numerous more countries to step up and buy a lot more vaccine in the second half, including the US, which currently has no advance purchase agreement with Moderna, who already had $19 billion worth of APAs for 2022 with options for $3 billion more in place. I’ve not tried to figure out or find an average price per dose, but I’m sure the 70 million doses is a significant number and expect Moderna will sell all they can make and grow revenue quite significantly over last years number of $18.5 billion. If so I expect they’ll beat last years earnings number, while current published estimates are for a drop in earnings from last years $30.21/share ($28.26 diluted) to $26.35.

With trailing PE of 5.2, I see an enormous amount of upside to this stock as it surpasses current estimates in the coming year. Certainly the pandemic shows no sign of abating, global numbers are turning back up from a very high level, the BA.2 variant is causing problems all over the world and is growing rapidly in the US.

https://www.worldometers.info/coronavirus/

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It seems to me that the market is basing Moderna’s price on its estimate on how many COVID shots it’s going to sell in the long term.

Doing a bit of back of the envelope math:

  • 807M doses sold for $17.7B = average selling price of $21.9/shot. Moderna said on the call that it expects to be able to raise its prices once we come out of the pandemic. Flu shots in the US by comparison are somewhere between $30-$50. Let’s use the low-end ASP of $30/shot.
  • Global production of flu vaccines (potential comparable long-term demand) in 2019 was roughly $1.48B shots
  • Valueline expects revenues of $7.5B in 2025-2027
  • Working backwards, we get demand of 250M shots/year in an endemic state

So market is probably expecting the need for annual COVID shots (potentially big assumption) capturing around 17% (250M/1.48B) of global demand (assuming similar demand as the flu), which seems reasonable (maybe a bit low) given the number of COVID vaccines available.

So if we project earnings out (roughly):

  • 2022 - $26 (next year’s estimate)
  • 2023 - $19
  • 2024 - $13
  • 2025 and beyond - $7 (Valueline estimate for 2025)

We get $26 + $19 + $13 + $7 * P/E (15-20), roughly a price of $163-$198, which is around today’s price.

There are some big error bars though:

  • Will we need annual boosters for COVID?
  • Will there be more demand for COVID vaccines than we expect (e.g. new variants)?
  • How much will Moderna’s other vaccines in the pipeline contribute to revenue?

Seems like the first question is the biggest downside. Although based on my limited knowledge, I think it’s likely that we’ll need it to some degree (e.g. elderly, immunocompromised etc.), which is not too different from the flu. The latter two questions seem like big potential upside.

I really like the idea of MRNA vaccines and how quickly they can be developed. Still waiting on the sidelines for now hoping for a better price for more safety (like last week at $126).

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2025 and beyond - $7 (Valueline estimate for 2025)

Yeah, the utter uncertainty about size of future earnings is why the stock is so cheap on a current earnings basis. The $7 Valueline estimate for 2025 is just a guess.

I’d personally guesstimate ~$30 earnings for 2022 instead of analysts’ $26, given what I know. With some room for upside surprise. The pandemic is still going to be wreaking havoc well into 2022, that much is certain. 2023? Who knows. If Covid keeps mutating and stays roughly similar virulence, or not too much less, then 2023 could be just as big. Or if it mutates into the common cold, Covid vaccine sales would crater to practically nothing.

I do like their pipeline of drugs and vaccines. There are some potential blockbusters in there and I’ve been very impressed with their execution on the Covid vaccine, so I expect some future success, but when the next hit comes through is highly uncertain so any modeling of future income is little more than guess-work.

In the short term I see a high likelihood of upside surprise over current estimates, so I expect the stock to do well since it looks like such a value on current earnings and does have prospects for growth in the future.

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Ben,

A belated thanks to you for bringing this to the board’s attention. I was able to snatch a starter position at 125.14. Will be adding as time goes by, if sensible.

Thanks again

JK

I was able to snatch a starter position at 125.14. Will be adding as time goes by, if sensible.

Wow, great entry price. That’s better than any I managed. Best I got for me and my family was 128.30, with most in the mid 130s and a couple lots in the low 150s.

Glad to share my thoughts on it. I’ve read an awful lot of useful analysis here, so thought I’d share my highest conviction idea. Hope it continues to work out well for both of us. :slight_smile:

Moderna announced approval of its Covid vaccine in Canada for 6-11 year olds, it’s already been cleared for use in that age group in Australia and Europe. They still await approval for 12-17 age category in the US, while Pfizer already has approval for ages 5+.

https://finance.yahoo.com/news/1-modernas-covid-shot-gets-15…

The stock has enjoyed a nice climb from its lows (which touched $122.01 intraday on March 8th) up to a current price of $168.26. However the value proposition still looks strong at this price with trailing PE of 6 and the pandemic seemingly gearing back up for another global wave from already high levels.

Upthread, bjlkeng estimated a ~$22/shot price tag for Moderna’s Covid vax, and I’ve done a little reading on the subject since which indicates that’s reasonable, but that prices vary widely. The US has gotten a nice deal at $15/shot, presumably because we helped Moderna develop the vaccine. Last August it was reported that Europe was paying $25.50/dose, up from the $22.60 they paid in the first agreement, but down from a previously negotiated $28.50 for the second deal because they are buying a higher volume.

The recent announcement of an advanced purchase agreement (APA) with Japan for 70 million doses is less than 1/2 the size of their second 2021 deal with Europe, so I’ll pencil in the higher $28.50/dose for ~$2 billion estimated revenue from this new deal, bringing their announced plus new estimated APA total up to $21 billion for the year, and there’s another $3 billion in options, compared to 2021 revenue of ~$18.5 billion. Those APAs and options include $0 from the US at this point.

Looks to me like $25 billion in revenue for 2022 is a reasonable guesstimate, a 35% increase … doesn’t quite meet the Saul board minimum criteria of 40% growth, though hitting that figure by making $26 billion in sales is certainly possible. With ~$14 billion in cash and long term investments (compared to market cap ~$60 billion) and PE 6, it looks good at current prices. I don’t feel the fire to buy more at the moment with a healthy position in place, but if it tanks back down without accompany negative company specific news, I will see what I can do to free up more money for it.

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Thanks for the update BenSolar! How are you thinking about the long term for Moderna’s COVID vaccine demand?

The next couple of years looks pretty solid but it really depends on how COVID evolves and what steady state looks like. Once pretty much everyone has been vaccinated or had had COVID, it will be a much smaller public health risk and demand will go down (maybe closer to the flu as a guess?).

Or are you looking for something more of a shorter term trade as there’s a high chance for another variant/wave next (like in China) that could drive demand and the stock price?

How are you thinking about the long term for Moderna’s COVID vaccine demand?

The next couple of years looks pretty solid but it really depends on how COVID evolves and what steady state looks like. Once pretty much everyone has been vaccinated or had had COVID, it will be a much smaller public health risk and demand will go down (maybe closer to the flu as a guess?).

Or are you looking for something more of a shorter term trade as there’s a high chance for another variant/wave next (like in China) that could drive demand and the stock price?

Yeah, it’s a bit of a guessing game long term, but Covid settling into an endemic phase similar to the flu, but more vicious, seems like a reasonable bet, which could drive a reasonable amount of demand for who knows how long, but maybe indefinitely, which could give a long tail of earnings for MRNA. There is distinct possibility that another variant emerges that escapes much of the immune response and/or increases virulence. So I think long term earnings from their Covid vaccine (and iterations), for boosters for adults, especially elderly, and for kids as they age into eligibility, are probably going to be better than the stock has priced in. But, it’s also possible the Covid bug mutates into something less virulent and it becomes more like a cold than a severe flu.

I say like the flu but more vicious because I’ve known a couple adults who were reasonably careful, were fully vaxed and boosted, and still got sick as hell with Omicron. Not hospitalized, but ‘sick as I’ve ever been’ sick as with a severe flu. If it keeps mutating enough to cause that level of pain even if boosted, then there will be good demand for those boosters. Of course there’s tons of others who didn’t get so sick in the same circumstances.

Really what drove my excitement was just how hated the stock had become even while absolutely raking in cash and with prospects for that flood of cash to continue for the coming year at least, while it seemed to be priced like earnings would fall off a cliff. So I figured would be good for a short-medium trade at least, but I’m hoping to see good progress on other vaccines/therapeutics and watch them grow into a pharma powerhouse while I hold it long term.

They’ve got a real nice looking pipeline already and they executed so well on the Covid vax I like the chances they have multiple product lines before long. In the short term BA.2 will drive booster shots, and much of the world’s population is still unvaccinated, or vaccinated with a sub-par vaccine, so I expect 2022 to be a very good year again just on the existing vaccine.

It’s not all roses, though. Another company has announced a lawsuit claiming patent infringement related to the lipid coating of the vaccine. I don’t know how much these suits could cut into earnings if the plaintiffs win.

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Moderna released their 1st Q 2022 earnings this morning and they blew away estimates. The stock market initially yawned, but this afternoon it’s up ~5% as the market rallied. It’s still not very far above recent lows, as it’s been trading in a range of ~130-170 since January.

Earnings PR:
https://finance.yahoo.com/news/1-moderna-keeps-full-covid-11…

Comparison to Wall St. expectations by Zacks:
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MRNA reported earnings of $8.58 per share for the first quarter of 2022, comfortably beating the Zacks Consensus Estimate of $5.18. The company had reported earnings of $2.84 per share in the year-ago quarter. The significant improvement in the bottom line was driven by strong year-over-year growth in revenues.

Revenues in the quarter were $6.1 billion, significantly beating the Zacks Consensus Estimate of $4.50 billion. In the year-ago quarter, revenues were $1.93 billion. The significant increase in revenues was driven by the strong sales of its COVID-19 vaccine, Spikevax, and its booster doses.
"
https://finance.yahoo.com/news/moderna-mrna-beats-q1-earning…

Trailing twelve months diluted earnings per share have now bulged to $34/share, for trailing PE of 4.5. They bought back $1 billion in shares and have authorized another $3 billion in buybacks.

They did not change forward guidance, still saying they have $21 billion in advance purchase agreements for 2022, which includes $0 from the US. If the US doesn’t allocate money for further purchases by the government, then Moderna will move forward with private sales to drugstores etc … like normal business practice, which they would charge substantially more per shot, but probably wouldn’t sell as many shots as if the US were subsidizing it.

They said they should have results for their bivalent Covid vaccine that specifically targets the Omicron variant by June and hope to have that ready for commercial sales by August.

Omicron subvariant BA.2 is dominant in most of the US now and is fueling a rise in cases in most states. Wastewater analysis shows a much bigger surge than cases.
https://biobot.io/data/

Their earnings will live and die by their Covid vaccine sales for the next year or two, but they do have a promising pipeline.

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Some good news about MRNA today https://finance.yahoo.com/news/fda-act-quickly-modernas-covi…
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May 19 (Reuters) - The U.S. Food and Drug Administration will act as soon as possible on Moderna Inc’s application seeking approval of its COVID-19 vaccine for children under age 5, the agency’s chief told lawmakers on Thursday…

Looks like MRNA had pole position for first covid vaccine approval for kids under five.

One of the reasons I’ve been talking up the stock is I believe there are a number of likely catalysts this year to support the price, this being one.

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Looks like MRNA had pole position for first covid vaccine approval for kids under five.

One of the reasons I’ve been talking up the stock is I believe there are a number of likely catalysts this year to support the price, this being one.

They may get some government contracts out of it, but I think the world has moved on. We have 2 kids, one under 5, one 5 to 12. The 5 to 12 one is vaccinated. A couple months ago my wife, who voted for HC, said knowing what she knows now she wouldn’t have gotten him vaccinated. There is no way she would push it on a 0 to 5 year old. So outside of a vaccine mandate, I feel like the 80% of the country to the right of my wife have moved on and aren’t going to bother.

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We have 2 kids, one under 5, one 5 to 12. The 5 to 12 one is vaccinated. A couple months ago my wife, who voted for HC, said knowing what she knows now she wouldn’t have gotten him vaccinated. There is no way she would push it on a 0 to 5 year old. So outside of a vaccine mandate, I feel like the 80% of the country to the right of my wife have moved on and aren’t going to bother.

The scale of Covid vaccine sales is not going to return to the levels of the past year and a half, and I expect you are right that a majority of parents won’t get their child under 5 vaccinated. Still, almost 10% of the US population is under 5, and if 20% of them get vaccinated, that’s over 6 million new recipients of the two shot initial dose. Not huge business, but a nice incremental gain.

Going forward, there will be a lot of adults, especially older ones, who get a booster this year. Moving on with your life or not, if you are the type to get an annual flu shot, you’ll probably get an annual Covid vax too, perhaps in the same shot, and that’s pretty big business.

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Looks like MRNA had pole position for first covid vaccine approval for kids under five.

Pfizer and Moderna are about even, I would say.

(And BTW is it for kids under five or six? It’s confusing. The Moderna trial is aimed at kids from 6 months to 11 years old (i.e., less than 12 years old), using 25 mcg/dose. Their adult vaccine is 100 mcg/dose for the first 2 doses, and 50 mcg for the booster, but it is only approved in adults 18 and over, at least in the USA (it is approved for children elsewhere, like in Canada, where it is approved for kids as young as 12).

The Pfizer vaccine, 30 mcg/dose, is approved for adults (18+) and for kids 12 years and older, although they use a lower dose (10 mcg/dose) for the adolescents. That lower dose is also approved for kids from 5-11. Pfizer is now testing an even lower dose vaccine (3 mcg/dose) for children younger than 5. No vaccine has been FDA-approved for kids under 5.

Your yahoo.com reference does say that Moderna is seeking approval for children under 5, but it would be more accurate to say that they are seeking approval for kids under 6, making it potentially the first vaccine approved for kids under 5 (since Pfizer already has a vaccine approved for 5 year olds.) Except that Pfizer’s trial in kids under 5 will ALSO be ready when the FDA meets in June, so barring some unforeseen disappointing results in their trial, both vaccines will probably be approved simultaneously.

Dr. Offit: Right. Moderna has a two-dose vaccine with 25 micrograms per dose, given to children between six months and less than six years of age. The dose is given four weeks apart. They’ve submitted to the FDA for approval through emergency use authorization. Pfizer is in the midst of a three-dose trial, not a two-dose trial like Moderna but a three-dose trial where it’s three micrograms per dose. You remember for adults or older adolescents, it was 30 micrograms per dose. For the five to 11-year-old, it was 10 micrograms per dose. For the less than five-year-old, in the case of Pfizer, it’s a three microgram dose. I haven’t seen preliminary data on that trial but I have seen just preliminary data, meaning top line, press release data from the Moderna trial. My suspicion, if I had to make a guess, and it is a guess, is that probably sometime in mid-June, both of these vaccines will be considered but we’ll see.

https://www.ama-assn.org/delivering-care/public-health/covid…

dtb

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Sorry for that confusing editing snafu: revised version here:

I expect you are right that a majority of parents won’t get their child under 5 vaccinated. Still, almost 10% of the US population is under 5, and if 20% of them get vaccinated, that’s over 6 million new recipients of the two shot initial dose.

That’s a bit high: there are actually less than 20 million kids under 5 in the USA, not 33 million, so it’s more like 6%. And I agree that it is going to be a hard sell: the illness is so mild in children, it is probably not in the top 10 viruses to worry about, and as we ramp down our (somewhat exagerated) worries about COVID in older people, I think covid vaccination for kids may fall off the radar for most people.

That said, I personally would get my kids vaccinated, if the studies show that it is as safe in younger kids as it is in older kids. Why not? The risk of side effects is also very low, and you might as well get as few colds as you can. Vaccines don’t have to be just to avoid catastrophic illnesses…

dtb

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That’s a bit high: there are actually less than 20 million kids under 5 in the USA, not 33 million, so it’s more like 6%.

Wow, a real surprise to me. I looked at the population pyramid and it is about 3.5% that are 5 and under. So about 12 million kids are 5 and under. The 0 to 4 and 5 to 9 year old group, each have 3% for boys and 2.9% for girls, for the entire population these are really small groups. For females, you have to go to the 65 to 69 year old group to get 2.9% or less.

Craig