Moderna, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report; the provided filing text does not give a clear set of Q4-only financial results. Amounts below are in U.S. dollars.
Business context
Moderna is a biotechnology company whose mRNA platform supports vaccine and therapeutic programs across infectious disease, oncology, rare disease and other areas. At year-end, it reported 45 development programs, nine in late-stage development. Its only commercial product was its COVID-19 vaccine, Spikevax.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $6.848 billion | $19.263 billion |
| Net product sales | $6.671 billion | $18.435 billion |
| Research and development expense | $4.845 billion | $3.295 billion |
| Selling, general and administrative expense | $1.549 billion | $1.132 billion |
| Cost of sales | $4.693 billion | $5.416 billion |
| Operating income (loss) | $(4.239) billion | $9.420 billion |
| Net income (loss) | $(4.714) billion | $8.362 billion |
| Operating cash flow | $(3.118) billion | $4.981 billion |
- COVID-19 vaccine sales accounted for all 2023 product revenue. Sales fell 64% year over year, reflecting lower volume as the market shifted to endemic, seasonal demand. U.S. commercial sales began in Q3, increasing average selling price but also introducing discounts, chargebacks and return provisions.
- Cost of sales equaled 70% of net product sales in 2023, versus 29% in 2022; this implies product gross margin of approximately 30% before other operating expenses. The comparison was heavily affected by inventory and manufacturing-related charges.
- Cash, cash equivalents and investments totaled $13.281 billion at year-end, down from $18.220 billion. Working capital was $7.310 billion, compared with $8.508 billion.
- Cash used in operations was $3.118 billion. Investing activities provided $4.206 billion, principally reflecting investment maturities and sales; capital expenditures were $707 million. Financing activities used $1.377 billion, including $1.153 billion of share repurchases.
- The filing reports lease liabilities of $1.243 billion, including operating and finance leases. It reports no material off-balance-sheet arrangements. Contractual cash obligations totaled $4.420 billion, including leases and purchase obligations.
Material changes and unusual items
- Revenue declined 64% from 2022, while R&D expense rose 47% and SG&A expense rose 37%.
- Cost of sales included $2.2 billion of inventory write-downs, $981 million of unutilized manufacturing capacity and wind-down costs, and $205 million of losses on firm purchase commitments and cancellation fees. Moderna cited lower expected COVID-19 demand and its manufacturing-footprint reset.
- The manufacturing optimization initiative generated $1.4 billion of charges in Q3 and a further $169 million in Q4. The filing identifies $903 million of raw-material write-downs and $513 million of CMO wind-down costs and cancellation fees in Q3, followed by $16 million and $153 million, respectively, in Q4.
- A $2.224 billion valuation allowance against deferred tax assets was recorded at year-end, following the 2023 loss and projected cumulative losses. The 2023 income-tax provision was $772 million despite the pretax loss.
- Other revenue fell to $177 million from $828 million, primarily due to lower BARDA grant revenue and the prior-year recognition of Merck’s $250 million INT participation payment.
Outlook, management commentary and key risks
- Management expects 2024 COVID-19 vaccine sales to be lower than 2023, with seasonal demand, less predictable orders and commercial-market discounts, returns and distribution costs continuing to affect results. No numerical 2024 revenue guidance is provided in the supplied filing text.
- Management expected a modest reduction in R&D expense and slightly lower SG&A expense in 2024, and anticipated lower cost of sales as a percentage of product sales than in 2023. These are expectations, not guarantees.
- Moderna expected cash, cash equivalents, investments and anticipated product-sale cash flows to fund operations and capital expenditures for at least 12 months from issuance of the financial statements. It also cautioned that continued investment could result in negative operating cash flow.
- Pipeline catalysts include anticipated 2024 regulatory decisions for the adult RSV vaccine; Phase 3 data expected in 2024 for the refrigerator-stable COVID-19 candidate and the flu/COVID combination vaccine; potential 2024 CMV efficacy data; and plans to advance PA and MMA programs into pivotal studies. Timing and outcomes remain uncertain.
- Key risks include further COVID-19 demand declines, competition and reimbursement pressure, execution of the RSV launch and commercial buildout, clinical or regulatory setbacks, manufacturing and supply-chain constraints, single-source suppliers, and mRNA safety or tolerability concerns. The filing also describes significant patent disputes, including cases involving Pfizer/BioNTech, Arbutus/Genevant and Alnylam.
- Management stated that no current legal proceeding had a material loss that was both probable and reasonably estimable. Outcomes of the described IP litigation are uncertain; potential losses were described as possible but not reasonably estimable in the filing’s legal-proceedings discussion.
Most important facts for investors to verify
- Whether COVID-19 vaccine demand, pricing, returns and market share support the company’s lower-revenue 2024 outlook.
- Whether 2023 inventory write-downs, supplier commitments and manufacturing reset costs have materially reduced, and whether cost of sales improves as management expects.
- Regulatory decisions, launch timing, uptake and economics for RSV, and the timing and results of the other 2024 clinical catalysts.
- Cash burn, investment balances, capital expenditure needs and the company’s ability to fund its pipeline and global manufacturing plans.
- Assumptions behind the $2.224 billion deferred-tax-asset valuation allowance and the estimation of commercial product returns, which the auditor identified as critical audit matters.
- Developments and potential financial exposure in the patent disputes, as well as the terms and execution risks of key collaborations.
Audit note: Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements and on internal control over financial reporting as of December 31, 2023.