Moderna, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated results; amounts below are in millions of dollars except per-share data. Moderna is an mRNA biotechnology company. Its only commercial product authorized at quarter-end was its COVID-19 vaccine, Spikevax.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $167 | $1,862 |
| Net product sales | $167 | $1,828 |
| Operating expenses | $1,433 | $2,228 |
| Loss from operations | $(1,266) | $(366) |
| Net income (loss) | $(1,175) | $79 |
| Diluted earnings (loss) per share | $(3.07) | $0.19 |
| Net cash used in operating activities | $(989) | $(1,225) |
| Capital expenditures | $196 | $113 |
- Net product sales fell 91%, primarily reflecting lower sales volumes outside the U.S., the shift to a seasonal COVID-19 vaccine market, and prior-year delivery of doses deferred from 2022. Higher average selling prices, particularly in the U.S., partly offset the decline.
- Cost of sales was $96, or 58% of net product sales, versus $792, or 43%, a year earlier. Q1 2024 included $30 of inventory write-downs and $27 of unutilized manufacturing capacity and winddown costs. Gross margin, calculated as product sales less cost of sales, was approximately 42%, versus 57%.
- Research and development expense was $1,063, down 6%; selling, general and administrative expense was $274, down 10%. Interest income was $120; the income tax provision was $10, compared with a $384 tax benefit in Q1 2023.
- Cash, cash equivalents and investments totaled $12,161 at March 31, 2024, down from $13,281 at year-end 2023. Working capital was $7,220. Cash and cash equivalents were $2,051.
- Operating cash use was $989; investing activities provided $118 and financing activities provided $14. Cash, cash equivalents and restricted cash decreased by $857 during the quarter.
- Total liabilities were $3,912. Lease liabilities totaled $1,237, including $575 of finance lease liabilities and $662 of operating lease liabilities; the filing does not report conventional borrowings as a separate debt balance.
Material changes and business developments
- U.S. net product sales were $100, compared with $1 a year earlier; rest-of-world sales were $67, compared with $1,251. Europe sales were zero, versus $576.
- Q1 2024 gross product sales of $222 were reduced by $55 in chargebacks, discounts, returns and other provisions. Deferred revenue related to COVID-19 customer deposits was $580 at quarter-end; $522 was expected to be realized within one year.
- Inventory write-downs declined to $30 from $148; the prior-year quarter also included $66 of losses on firm purchase commitments. Q1 2024 royalty expense was $8, down from $86.
- In March, Moderna entered a development and commercialization funding arrangement with Blackstone Life Sciences for up to $750 to support its investigational influenza vaccine. Funding reduces related R&D expense as costs are incurred. If qualifying U.S. approval depends on funded activities, Blackstone may receive low-single-digit royalties and up to $750 in sales milestone payments.
- After quarter-end, Moderna announced a Japan COVID-19 IP licensing agreement with a $50 upfront payment, including a $20 prepayment creditable against future royalties, plus low-double-digit royalties on net sales. Moderna also terminated its involvement in its Metagenomi collaboration in April, while retaining its shareholder position.
Outlook, commentary and risks
- Management expects COVID-19 vaccine demand to be seasonal, with higher sales in fall and winter. It expects 2024 COVID-19 vaccine sales to decline further relative to 2023.
- For 2024, management expects cost of sales as a percentage of net product sales to be below 2023's 70%, based on anticipated manufacturing-efficiency improvements and fewer inventory write-downs; it expects the percentage to be higher in the first half than the second half. R&D expense is expected to decline modestly and SG&A expense to be slightly lower than in 2023.
- Management believes available cash, cash equivalents and investments, together with expected product-sale cash flows, will fund projected operations and capital expenditures for at least 12 months from issuance of the statements. It cautions that continued investment may produce negative operating cash flows and that actual funding needs could exceed forecasts.
- Pipeline highlights include positive Phase 3 interim results for next-generation COVID-19 vaccine mRNA-1283; pending regulatory decisions and an anticipated U.S. ACIP recommendation in 2024 for RSV candidate mRNA-1345; and ongoing Phase 3 studies of the Merck-partnered individualized neoantigen therapy. Moderna reported 40 candidates across 47 programs, 43 of which were in clinical studies.
- Risks include uncertain seasonal vaccine demand, competition and commercialization, clinical and regulatory outcomes, manufacturing and supply execution, inventory shelf-life and commitments, and substantial ongoing R&D and facility obligations. Non-cancelable commitments included $1.8 billion for raw materials and manufacturing through 2029 and $223 million for clinical services and other goods and services through 2039. The filing also reports $2.6 billion of cancelable open purchase orders, subject to contractual terms and possible cancellation costs.
- Moderna reported ongoing ordinary-course claims, including intellectual property litigation described in its 2023 Form 10-K, but no legal proceeding for which a material loss was both probable and reasonably estimable at quarter-end. It reported no material changes to previously disclosed risk factors and stated disclosure controls were effective at a reasonable-assurance level.
Important facts for investors to verify
- Whether seasonal COVID-19 vaccine demand, deliveries and customer-deposit recognition support management's 2024 sales expectations.
- Whether manufacturing efficiency and lower write-downs reduce full-year cost of sales as a percentage of sales, given the 58% Q1 ratio and low sales base.
- Cash burn, capital spending, investment balances and the assumptions underlying management's at-least-12-month liquidity assessment.
- Progress, regulatory decisions and commercialization prospects for mRNA-1283, RSV candidate mRNA-1345, influenza and combination vaccines, and the INT program.
- Potential effects of the Blackstone funding terms, the Japan license, purchase commitments, lease obligations, and ongoing intellectual property proceedings.