Moderna, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Moderna is a clinical-stage biotechnology company developing messenger RNA medicines. It had no product-sale revenue during the period; reported revenue came from government grants and strategic collaborations. mRNA-1273, its investigational COVID-19 vaccine, was the dominant source of increased development spending and grant revenue.
Financial performance
Amounts below are in millions of dollars, except per-share data.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $157.9 | $17.0 | $232.7 | $46.2 |
| Grant revenue | $145.7 | $3.7 | $187.5 | $8.7 |
| Collaboration revenue | $12.2 | $13.3 | $45.1 | $37.5 |
| Research and development expense | $344.5 | $119.6 | $611.5 | $378.4 |
| General and administrative expense | $48.5 | $28.2 | $109.3 | $83.9 |
| Operating loss | $235.1 | $130.8 | $488.1 | $416.1 |
| Net loss | $233.6 | $123.2 | $474.6 | $390.7 |
| Net loss per share | $0.59 | $0.37 | $1.26 | $1.19 |
Q3 revenue rose 826%, principally because BARDA funding for mRNA-1273 increased; nine-month revenue rose 404%. Losses nevertheless widened: Q3 net loss increased 90%, and nine-month net loss increased 21%. R&D expense rose 188% in Q3 and 62% year to date, driven mainly by clinical trials, manufacturing and raw materials, headcount, and pre-launch inventory. Product gross margin is not meaningful because no product sales were recognized.
Cash, liquidity and financing
- At September 30, cash and cash equivalents were $1.51 billion; current and non-current investments were $1.77 billion and $692.0 million. Cash, cash equivalents and investments totaled approximately $3.97 billion, versus $1.26 billion at December 31, 2019.
- Current assets were $3.58 billion and current liabilities $1.47 billion. Deferred revenue totaled $1.44 billion, including approximately $1.17 billion of deposits under COVID-19 vaccine supply agreements. These deposits are not recognized as revenue until contractual revenue-recognition conditions are met.
- Nine-month operating cash flow was positive $762.7 million, compared with negative $359.9 million in 2019. The 2020 result was substantially supported by a $1.24 billion increase in deferred revenue, rather than operating profitability.
- Investing cash outflow was $1.48 billion, largely reflecting purchases of marketable securities; financing cash inflow was $1.99 billion, principally from $1.85 billion of net public-offering proceeds. The February and May offerings increased shares outstanding and diluted existing holders.
- Non-current finance-lease liabilities were $108.6 million; operating lease liabilities were $103.7 million in total. The filing reports no off-balance-sheet arrangements. Management said available cash and investments should fund projected operations for at least 12 months from issuance of the statements.
Business developments, outlook and risks
- The U.S. supply agreement covers 100 million mRNA-1273 doses for a fixed transaction price of $1.225 billion, with a $601.4 million advance recorded as deferred revenue. Up to $300 million of incentive payments depends on timely EUA or BLA receipt and delivery; the U.S. government also has options for up to 400 million additional doses. International agencies had provided $569 million in deposits by quarter-end. No supply-agreement revenue was recognized through September 30.
- Management forecast approximately 20 million doses produced by year-end 2020 and total 2021 production of 500 million to 1 billion doses. These are targets, not assured outcomes. The Phase 3 study was fully enrolled with 30,000 participants on October 22, after quarter-end; efficacy, safety, regulatory review and manufacturing execution remained uncertain.
- Management described pandemic-period U.S. pricing of $12.25 per dose for the initial order, potentially $24.80 per dose including BARDA funding and incentives if earned. Certain international agreements were priced at $32–$37 per dose; future prices may differ. The filing says pricing after a transition to an endemic market would depend on market conditions and competition.
- BARDA’s maximum mRNA-1273 award was increased to $954.9 million, with all options exercised; $781.7 million remained available net of revenue earned at quarter-end. A separate DARPA award was up to $56.4 million, of which $5.0 million was committed and further options remained conditional.
- Moderna entered new Vertex and Chiesi collaborations, with upfront payments of $75 million and $25 million, respectively. The RSV collaboration with Merck was terminated by mutual agreement on October 7, 2020, after quarter-end, without an impact on the reported period’s financial statements.
- Key risks include clinical or regulatory failure, unexpected safety findings, manufacturing scale-up and supply-chain constraints, dependence on third parties, COVID-related trial disruption, potential refunds if supply commitments are not met, competition, intellectual-property disputes, and continued operating losses. The company had $613.9 million of non-cancelable supply and manufacturing commitments expected to be paid through 2021, in addition to other commitments.
Most important facts for investors to verify
- Whether mRNA-1273 demonstrated adequate efficacy and safety in Phase 3 and obtained regulatory authorization; interim Phase 1 findings do not establish clinical benefit.
- Whether the company achieved its production targets and could deliver doses on schedule, including through Lonza, Catalent and ROVI.
- How much of the recorded deposits and BARDA funding converted into recognized revenue and cash, and whether any supply-agreement refund or delivery obligations arose.
- Whether spending, cash burn and manufacturing commitments remained within available liquidity; reported operating cash flow benefited materially from advance deposits.
- The impact of additional equity issuance, stock-based compensation and the expanding share count on per-share value.