Moderna, Inc. — FY2018 Form 10-K
Reporting period: Year ended December 31, 2018. The filing also provides unaudited fourth-quarter results. Moderna is a clinical-stage biotechnology company developing mRNA medicines and vaccines; it had no product-sale revenue.
Financial performance and liquidity
| Metric | FY2018 | FY2017 |
|---|---|---|
| Total revenue | $135.1 million | $205.8 million |
| Research and development expense | $454.1 million | $410.5 million |
| General and administrative expense | $94.3 million | $64.7 million |
| Operating loss | $413.3 million | $269.4 million |
| Net loss | $384.7 million | $255.9 million |
| Net loss per share, basic and diluted | $4.95 | $4.18 |
| Operating cash flow | $(330.9) million | $(331.5) million |
| Capital expenditures | $105.8 million | $58.4 million |
| Cash, cash equivalents and investments at year-end | $1.694 billion | $901.9 million |
| Working capital at year-end | $1.340 billion | $591.8 million |
FY2018 revenue comprised $122.5 million of collaboration revenue and $12.6 million of grants. The operating-loss margin was approximately 306% of revenue, versus 131% in FY2017; the net-loss margin was approximately 285%, versus 124%. These ratios reflect the company’s substantial research and development spending and absence of product sales.
Fourth quarter: Revenue was $35.4 million, operating expenses were $188.5 million, and operating loss was $153.0 million. The quarterly table does not provide a clear Q4 net-loss value.
Year-end total liabilities were $431.9 million, including deferred revenue and lease-related obligations. The filing reports a $33.5 million Norwood lease financing obligation; it does not identify conventional borrowings as a material source of financing. Management said available cash, cash equivalents and investments were expected to fund projected operations for at least 12 months.
Changes versus the prior comparable period
- Revenue fell $70.8 million, or 34%, from FY2017. Collaboration revenue declined $54.5 million, largely because FY2017 included accelerated recognition of approximately $70 million of Alexion deferred revenue after termination of that alliance. Increased AstraZeneca and Merck revenue partly offset the decline.
- Grant revenue decreased $16.3 million, or 56%, mainly due to lower BARDA revenue as the Zika program shifted toward preclinical work on the next-generation candidate.
- R&D expense rose $43.6 million, or 11%, and G&A expense rose $29.5 million, or 46%. Higher staffing, stock compensation, outside services, facilities and manufacturing-related costs contributed.
- Net loss widened by $128.8 million. FY2018 cash and investments increased substantially, supported by financing rather than operating cash generation.
Business context, outlook and risks
- Moderna reported 20 development candidates across six modalities, with 11 in clinical trials, and more than 1,000 clinical-trial participants enrolled. The Norwood manufacturing facility opened in July 2018; it is approximately 200,000 square feet and designed for up to 100 cGMP lots annually.
- The company completed its IPO in December 2018, raising $563.0 million net. Preferred shares converted into common stock at the IPO. FY2018 financing cash flow was $1.227 billion, primarily from preferred-stock issuance and IPO proceeds.
- Management expects continued significant losses and expenses and no product-sale revenue in the foreseeable future. It does not provide forward-looking timing guidance for program milestones and says additional capital will be needed over time to obtain approvals and commercialize products.
- Near-term program developments described include planned Phase 2a work for Merck’s RSV vaccine, a planned randomized Phase 2 study of the personalized cancer vaccine with pembrolizumab, and an open IND for the MMA candidate. These programs remain investigational; early clinical or preclinical observations do not establish efficacy.
- Key risks include the unproven mRNA platform and uncertain regulatory pathway, clinical safety and efficacy failures, LNP-related immune or infusion reactions, manufacturing scale-up and product stability, reliance on single-source suppliers and collaborators, and the need for further financing. Moderna also disclosed one SUSAR in its Chikungunya vaccine trial and injection-related reactions and SUSAR reports in its OX40L oncology trial; the filing describes two ovarian-cancer lesion regressions that did not meet RECIST partial-response criteria.
- Material commitments include $236.2 million in specified contractual cash obligations at year-end, plus a Merck personalized-cancer-vaccine program budget commitment of up to $243.0 million whose timing and amounts were not included in that obligations table. A February 2019 Norwood lease adds approximately $39.3 million in net minimum payments through 2031.
- No material legal proceedings were reported. The independent auditor issued an unqualified opinion on the financial statements; auditor attestation on internal control was not required during the company’s emerging-growth-company transition period.
Important facts for investors to verify
- Reconcile collaboration revenue and deferred revenue by partner, especially the FY2017 Alexion termination-related recognition and FY2018 revenue mix.
- Review cash burn, capital spending, cash and investment balances, lease obligations, and management’s stated 12-month funding outlook against the pace of pipeline investment.
- Check subsequent clinical data, trial enrollment and safety updates for the 11 clinical-stage programs, distinguishing clinical observations from confirmed response or efficacy.
- Assess execution and cost risks at Norwood, including manufacturing scale, product stability, quality controls and the additional 2019 facility lease.
- Review collaborator election and termination rights, government-funding conditions, patent challenges and potential dilution from future financing and equity awards.