Business context and reporting period
Moderna, Inc. is a clinical-stage biotechnology company developing mRNA medicines and vaccines. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2020; comparative 2019 figures are restated for lease-accounting adoption. Moderna had no approved products and reported no product-sales revenue. Its pipeline comprised 23 development candidates across 22 programs.
The company’s principal near-term focus was mRNA-1273, its investigational COVID-19 vaccine, developed with NIH/NIAID. Management said the program was consuming significant resources and could slow other programs. The Phase 3 U.S. trial began enrollment July 27, after quarter-end.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Total revenue | $66.4M | $13.1M | $74.7M | $29.1M |
| Research and development | $151.9M | $128.3M | $267.0M | $258.7M |
| General and administrative | $36.6M | $28.5M | $60.7M | $55.7M |
| Operating loss | $(122.1)M | $(143.7)M | $(253.0)M | $(285.4)M |
| Net loss | $(116.7)M | $(134.9)M | $(240.9)M | $(267.5)M |
| Net loss per share | $(0.31) | $(0.41) | $(0.66) | $(0.81) |
| Operating cash flow | Not presented quarterly | $(130.1)M | $(252.9)M |
Revenue growth was driven mainly by BARDA grant revenue for mRNA-1273 and increased AstraZeneca collaboration revenue, including drug-material deliveries. Six-month collaboration revenue was $32.9M and grant revenue was $41.8M. Revenue remains dependent on grants, collaborations, and potentially future product approvals and sales.
At June 30, cash and cash equivalents were $1.762B and investments were $1.310B, totaling approximately $3.072B in cash, cash equivalents, and investments. Current assets were $2.797B and current liabilities $161.6M. Total liabilities were $539.1M, including $68.1M of non-current finance-lease liabilities and $103.8M of operating-lease liabilities (including current amounts). The filing does not identify material conventional borrowings. Accumulated deficit was $1.737B. Management stated available cash, cash equivalents, and investments should fund projected operations for at least 12 months from issuance of the financial statements.
Six-month cash used in investing activities was $303.5M, principally reflecting purchases of marketable securities and $24.9M of property and equipment. Financing activities provided $1.959B, primarily from $1.853B net public-offering proceeds and $106.6M from equity plans. No operating margin or product gross margin was reported; the company remained loss-making and had no product sales.
Material changes versus prior comparable periods
- Q2 revenue increased 407% year over year, while six-month revenue increased 157%; grant revenue rose sharply with BARDA funding for mRNA-1273.
- Q2 operating expenses increased 20%, led by higher R&D spending, headcount, outside services, and COVID-19 vaccine development. Six-month operating expenses rose 4%.
- Net losses narrowed year over year in both the quarter and six-month period, though the company continued to incur substantial operating losses.
- Cash, cash equivalents, and investments rose from $1.263B at year-end 2019 to $3.072B, principally reflecting equity issuance. Shares outstanding increased from 336.5M at December 31, 2019 to 393.3M at June 30, 2020.
Outlook, management commentary, risks, and unusual items
- COVID-19 vaccine: BARDA initially awarded up to $483.3M, with all options exercised; after quarter-end, a July 26 amendment added up to $471.6M, raising the maximum to $954.9M. Phase 3 was designed for approximately 30,000 participants at a 100-microgram dose. Phase 1 interim results were encouraging but preliminary; the filing cautions that early findings may not predict later-stage efficacy, safety, or durability.
- Supply, pricing, and commitments: Moderna reported Q2 deposits of $75M for prospective mRNA-1273 supply, recorded as deferred revenue. After quarter-end, it reported $383M in total upfront deposits under supply agreements, including the Q2 amount, and $299M in additional binding manufacturing purchase commitments expected to be paid through 2021. Q2 preliminary government agreements were priced at $32–$37 per dose; management expected possible lower prices for larger-volume agreements and described different pricing assumptions for a future endemic market.
- Investment and execution: A 10-year Lonza manufacturing collaboration, Catalent fill-finish arrangements, and a subsequent ROVI collaboration supported planned scale-up. Moderna warned that it had not previously launched a product commercially and might face manufacturing scale, yield, quality, raw-material, cold-chain, regulatory, and distribution challenges. It reported $201.2M in non-cancelable supply/manufacturing commitments at June 30, including Lonza-related obligations.
- Pipeline and pandemic effects: COVID-19 disruptions paused or delayed enrollment in certain rare-disease and pediatric trials. The filing also describes mRNA-1273 resource diversion as a potential source of delay to other programs. Management expected R&D and other expenses to rise as trials and manufacturing scale-up advanced; it provided no broad company revenue or earnings guidance.
- Other risks and contingencies: Moderna cited clinical and regulatory uncertainty, competition, reliance on collaborators and single-source suppliers, intellectual-property disputes, and the possibility of further financing needs. It had no material legal proceedings and no off-balance-sheet arrangements. It reported no material claims or reserves for indemnification obligations.
- Unusual items: Moderna completed public offerings in February and May 2020; the May offering generated $1.30B net proceeds. Q2 2019 comparatives were restated for ASC 842. Management reported effective disclosure controls as of June 30, 2020.
Important facts for investors to verify
- Progress, safety, efficacy, durability, and regulatory pathway for mRNA-1273, including subsequent Phase 3 results and any approval decision.
- Whether manufacturing partners can deliver planned capacity and product quality, and how actual production costs and commitments compare with expectations.
- Conversion of vaccine deposits and BARDA funding into recognized revenue, including any delivery, refund, or reimbursement conditions.
- Cash burn and liquidity relative to management’s stated 12-month runway, and the potential need for additional capital or further shareholder dilution.
- Effects of COVID-19 resource allocation and trial disruptions on the timing, costs, and prospects of Moderna’s broader pipeline.