Will Moderna lose the Arbutus patent trial and be ordered to pay royalties of 5% or higher on LNP-based products?

This is a compound event requiring both a Moderna loss AND royalties at 5%+. P(loss) is elevated at ~45-55% given failed IPR challenge and the pre-trial ruling retaining $8B as royalty base. But P(royalty >= 5% | loss) is not certain -- NIH settlement precedent was 'low single-digit royalties,' suggesting courts and settlements trend toward 3-4%. However, Arbutus has stronger leverage than NIH (6 patents covering core LNP technology, $8B retained base, 30-country international litigation). Settlement at 5%+ also counts as YES, adding meaningful probability since Moderna has incentive to settle given exposure. I estimate P(loss or adverse settlement) ~50%, P(>=5% rate | adverse outcome) ~55%, yielding ~0.28.

The IPR failure is a significant negative signal for Moderna -- courts have already reviewed patent validity and upheld the patents. This pushes P(loss) toward 45-50%. However, the royalty rate analysis cuts the other way. With an $8B retained royalty base, courts applying Georgia-Pacific reasonable royalty factors often apply lower rates to avoid excessive total damages. The NIH precedent ('low single-digit' ongoing royalties) reinforces that even when Moderna loses IP disputes, the rate tends toward 2-4%. The specific 5% threshold is a demanding bar -- it requires the upper portion of the 3-10% range. Moderna's invalidity defense may be weakened but their non-infringement arguments (that their LNP formulation differs materially) remain untested at trial. P(compound) ~0.22.

Settlement dynamics are underweighted by base-rate analysis. Moderna faces $8B in retained royalty exposure plus 30-country international litigation. A trial loss in Delaware would be catastrophic for international cases (signaling effect). Moderna has strong incentive to settle pre-verdict, and Arbutus has leverage to demand 5%+ given the breadth of patent coverage (6 patents covering ALL LNP-based products, not just Spikevax). The question also resolves YES for 'settlement with equivalent terms,' which broadens the YES pathway. International lawsuits across 30 countries filed March 2025 add significant pressure. I estimate settlement probability at ~30%, with settlement at 5%+ at ~40% conditional, plus trial-loss-at-5%+ pathway at ~15%, yielding compound ~0.32.

Failed IPR proceedings are the strongest signal -- Arbutus patents have already survived validity challenge. P(loss) elevated to ~45%. But 5%+ royalty is the harder bar. NIH precedent at low single-digit rates anchors expectations below 5%. The $8B retained base creates inverse pressure on the rate (courts avoid excessive total damages). Arbutus has strong leverage from 6 patents and international litigation, which partially offsets. Settlement at 5%+ is possible but Moderna would likely prefer a lump sum (which resolves NO). P(compound) ~0.25.

Multiple NO-resolution paths reduce YES probability. Trial may not conclude by June 30, 2026 (patent trials can extend with motions, appeals). A lump-sum settlement resolves NO. Moderna winning resolves NO. Royalty below 5% resolves NO. The YES pathway requires: trial concludes by June 30 AND Moderna loses AND rate is 5%+. Each conditional reduces probability. The Black Swan Beacon 30-50% loss estimate doesn't account for the compound nature of this specific question. Timing risk alone (trial scheduled March, but patent trials routinely extend) probably clips 5-10% off. P(compound including timing) ~0.22.

The 30-50% loss probability from Black Swan Beacon is the anchor. Given failed IPR, I lean toward the upper end (~45%). For the 5%+ royalty conditional: the 3-10% range from the committee suggests roughly uniform uncertainty across that range. If we assume a roughly uniform distribution over 3-10%, P(>=5 | in range) is about 5/7 or ~71%. But the NIH precedent at 'low single-digit' shifts the distribution leftward, maybe to ~45% conditional on being in the 3-10% range. So P(loss) ~45% * P(>=5% | loss and royalty assessed) ~45% = ~0.20. But adding settlement-at-5%+ pathway and the possibility of enhanced damages for willful infringement pushes this up to ~0.27.

Compound event: need both loss AND 5%+ rate. Failed IPR elevates loss probability to ~45%. But 5%+ rate is upper half of 3-10% range. NIH precedent at low single-digit argues for lower rates. P(loss) ~45% * P(5%+ | loss) ~45% = ~0.20.

NIH settlement at 'low single-digit royalties' is the strongest precedent for the royalty rate. Most patent royalties in pharma/biotech cluster at 2-5%, with the median below 5%. The 5% threshold is above the typical outcome even in loss scenarios. Combined with ~40% loss probability, the compound probability is ~0.18.

International litigation pressure (30 countries) and $8B retained base give Arbutus significant leverage. Settlement dynamics could push toward 5%+ if Moderna wants to resolve global exposure. The 6 patents covering core LNP technology strengthen Arbutus position. P(compound) ~0.25.