Moderna, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Moderna is an mRNA biotechnology company; its only commercial product was its COVID-19 vaccine, authorized for emergency use in multiple markets. Financial amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q3 2021 | Nine months 2021 | Comparable 2020 |
|---|---|---|---|
| Total revenue | $4.969 billion | $11.260 billion | $157 million and $232 million, respectively |
| COVID-19 vaccine product sales | $4.810 billion | $10.740 billion | None |
| Operating income (loss) | $3.558 billion | $7.886 billion | $(235) million and $(488) million |
| Net income (loss) | $3.333 billion | $7.334 billion | $(233) million and $(474) million |
| Diluted EPS | $7.70 | $17.00 | $(0.59) and $(1.26) |
| Operating cash flow | Not separately presented | $10.310 billion | $763 million |
Product sales were $1.197 billion in the U.S. and $3.613 billion elsewhere in Q3; for the nine-month period, they were $4.648 billion and $6.092 billion, respectively. Cost of sales was $722 million in Q3 (15% of product sales) and $1.665 billion for nine months (16%). The resulting operating margin was approximately 71.6% in Q3 and 70.0% for nine months; net margin was approximately 67.1% and 65.1%, respectively. Nine-month cost of sales included some inventory costs expensed previously; management said cost of sales would remain at a similar share of product sales for the rest of 2021.
Research and development expense was $521 million in Q3 and $1.343 billion for nine months, up 51% and 120% year over year. Selling, general and administrative expense was $168 million and $366 million, up 250% and 236%, primarily reflecting vaccine commercialization and increased headcount. The effective tax rate was 6% in Q3 and 7% year to date; the company attributed the comparatively low rate principally to release of valuation allowances and other tax benefits.
At September 30, cash and cash equivalents were $5.550 billion and investments were $9.798 billion at fair value, totaling approximately $15.3 billion, versus $5.2 billion at December 31, 2020. Current assets were $13.425 billion and current liabilities $9.957 billion (current ratio approximately 1.35). Total assets were $20.923 billion, total liabilities $10.799 billion, and stockholders’ equity $10.124 billion. Deferred revenue was $8.475 billion, including $8.251 billion in product-sales customer deposits; $7.9 billion of vaccine-related deferred revenue was expected to be recognized within one year, subject to delivery and revenue-recognition criteria.
Nine-month investing cash outflow was $7.385 billion, mainly reflecting purchases of marketable securities; financing cash flow was approximately zero. The filing reports no material conventional borrowings. Lease liabilities totaled $583 million ($456 million finance leases and $127 million operating leases). The company also disclosed $2.3 billion of non-cancelable raw-material and manufacturing purchase commitments, plus a $1.1 billion non-cancellable rent commitment for the new Moderna Science Center lease.
Changes versus the prior period
- Revenue and earnings shifted from losses in 2020 to substantial profitability, primarily because COVID-19 vaccine sales began in December 2020. Q3 2021 revenue rose by $4.812 billion versus Q3 2020; nine-month revenue rose by $11.028 billion year over year.
- Nine-month operating cash flow increased to $10.310 billion from $763 million, supported by earnings and a $4.431 billion increase in deferred revenue, partly offset by higher receivables and inventory.
- Cash and investments increased to approximately $15.3 billion from $5.2 billion at year-end 2020; inventory rose to $965 million from $47 million, and property and equipment to $845 million from $297 million.
- R&D and commercial-support spending increased materially. Moderna refined its pipeline-counting method during Q3; it reported 37 development programs, 22 of which had entered clinical trials.
Outlook, commentary, and risks
- Management expected to supply 700–800 million COVID-19 vaccine doses in 2021 at the 100 μg dose. It cited international shipping lead times, temporary fill/finish capacity impacts, and product-release ramp-up as factors that could shift deliveries into early 2022. 2022 demand and volume remained uncertain.
- As of September 30, signed vaccine supply agreements were approximately $25.1 billion through 2023. Management also reported subsequent commitments and supply agreements for up to 58 million additional doses, subject to modifications.
- The FDA said its review of the adolescent EUA request could extend to January 2022 while it evaluated myocarditis analyses. Moderna expected to delay its U.S. pediatric EUA request for ages 6–11 pending that review. The filing describes myocarditis as a rare risk associated with mRNA vaccines, particularly in young men and after the second dose.
- Management expected continued increases in R&D, manufacturing, and commercialization spending, while stating available cash, cash equivalents, investments, and expected operating cash flows should fund projected operations, capital expenditures, and stock repurchases for at least 12 months after issuance of the statements. This assessment is forward-looking and depends on assumptions, including continued profitability.
- Execution depends on regulatory decisions, vaccine demand, manufacturing scale-up and third-party suppliers. The company noted that partner performance, qualified staffing, supply-chain disruptions, and regulatory or clinical outcomes could affect supply and results. It reported no material legal proceedings and no material changes to the risk factors in its 2020 Form 10-K.
- The board authorized a share repurchase program of up to $1.0 billion through August 2023; no repurchases had occurred by September 30, 2021. The company began a Science Center project and disclosed its associated long-term rent commitment.
Important facts for investors to verify
- Whether vaccine deliveries, approvals, customer acceptance, and deferred-revenue conversion support the contracted revenue outlook—and how much delivery timing shifts into 2022.
- Actual 2021 dose supply versus the 700–800 million target, including manufacturing-partner capacity, product-release timing, and cost of sales.
- Regulatory outcomes and timing for adolescent and pediatric use, booster authorizations, and the COVID-19 vaccine BLA; monitor myocarditis safety review developments.
- Whether demand, pricing, and booster or variant-vaccine uptake sustain profitability as the pandemic evolves, alongside rising R&D and commercialization costs.
- Cash-flow quality and working-capital trends, particularly deferred revenue, receivables, inventory, lease obligations, purchase commitments, and the new Science Center commitment.