Moderna, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unaudited consolidated results; amounts in U.S. dollars. Moderna is an mRNA medicines company, and its COVID-19 vaccine was its only commercial product authorized for use at quarter-end.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $1.937 billion | $8 million |
| COVID-19 vaccine product sales | $1.733 billion | None |
| Grant revenue | $194 million | $4 million |
| Operating expenses | $671 million | $139 million |
| Operating income (loss) | $1.266 billion | $(131) million |
| Net income (loss) | $1.221 billion | $(124) million |
| Diluted EPS | $2.84 | $(0.35) |
| Cash from operating activities | $2.971 billion | $(106) million |
| Cash, cash equivalents and investments | $8.203 billion at March 31 | $5.247 billion at December 31, 2020 |
Product sales were $1.358 billion in the United States and $375 million elsewhere. Cost of sales was $193 million, or 11% of product sales, including $84 million of royalties. This cost ratio benefited from inventory costs expensed before commercialization; the filing estimates cost of sales would have been $377 million, or 22% of sales, if the quarter’s sold inventory had been valued at cost. Moderna said it had substantially used its zero-cost inventory and expected the cost-of-sales percentage to rise.
Research and development expense increased 249% to $401 million, largely reflecting COVID-19 clinical development, clinical-trial costs and increased headcount. Selling, general and administrative expense rose 221% to $77 million, mainly from commercialization-related activity and higher staffing and outside services. The $39 million tax provision followed a release of most of the valuation allowance on deferred tax assets; a $49 million discrete tax benefit related to assets expected to be used in future years.
Operating cash flow included a $3.666 billion increase in deferred revenue, partly offset by increases in receivables ($1.819 billion) and inventory ($448 million). Thus, cash generation reflected customer deposits and working-capital movements as well as reported earnings. Capital expenditures were $35 million. The balance sheet reported $8.441 billion of current liabilities, including $7.531 billion of current deferred revenue. No conventional borrowings are shown; total lease liabilities were $286 million, including financing leases.
Material changes and business developments
- Moderna moved from an $8 million-revenue, loss-making prior-year quarter to substantial vaccine sales and $1.221 billion of net income, following COVID-19 vaccine authorization and commercialization.
- R&D and SG&A spending increased sharply as the company expanded vaccine development, manufacturing and commercialization. Inventory rose to $494 million from $47 million at year-end.
- Deferred revenue related to product sales increased to $7.470 billion from $3.799 billion at December 31, 2020, reflecting deposits and billings for future vaccine supply. Revenue recognition depends on delivery, manufacturing and applicable authorization or acceptance conditions.
- Cash and investments increased by about $2.956 billion from year-end. The quarter’s operating cash inflow was partly driven by deferred customer deposits, while accounts receivable also rose substantially.
Outlook, commentary and risks
- Management expected product sales to increase significantly in 2021. At March 31, signed COVID-19 vaccine supply agreements were approximately $17.3 billion, with $7.5 billion of related deferred revenue. The company reported post-quarter agreements for up to 47 million additional doses.
- On April 29, Moderna raised its projected 2021 vaccine supply to 800 million–1 billion doses and estimated global 2022 capacity of up to 3 billion doses, depending on dose mix and regulatory outcomes. These plans depend in part on manufacturing partners’ ability to expand capacity and deliver.
- The company said it remained on track to deliver the second 100 million doses to the U.S. government by the end of May 2021 and a further 100 million by the end of July.
- Moderna planned to begin rolling submission of COVID-19 vaccine data for a U.S. Biologics License Application in May 2021. Adolescent and pediatric studies and variant-booster development were ongoing. COVE efficacy updates cited in the filing were preliminary; studies and safety follow-up continued.
- Management expected significant ongoing R&D, manufacturing and commercialization spending. It stated cash, cash equivalents and investments should fund projected operations for at least 12 months from issuance of the statements, while cautioning that forecasts may prove inaccurate and continuing profitability is not assured.
- BARDA had up to approximately $1.0 billion committed at quarter-end, with $317 million remaining available net of revenue earned. An April 18 amendment added up to $236 million in potential reimbursements, bringing reported total support to approximately $1.3 billion.
- Quarter-end commitments included $1.0 billion of non-cancelable raw-material and manufacturing purchases expected through 2022, plus $30 million of other non-cancelable commitments. The filing also disclosed $993 million of cancelable open purchase orders, which are not equivalent to non-cancelable obligations.
- Key risks include vaccine demand and delivery timing, regulatory decisions, clinical efficacy and safety, manufacturing scale-up and third-party performance, supply-chain constraints, future cost and profitability, and foreign-exchange exposure. Moderna reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether contracted vaccine doses are delivered on schedule and deferred revenue converts to recognized sales under the applicable contract terms.
- How margins evolve as previously expensed, zero-cost inventory is replaced by inventory bearing full manufacturing costs, royalties and other production expenses.
- Whether production targets and stated 2021–2022 capacity are achieved by Moderna and its manufacturing partners.
- Regulatory progress and updated clinical data for the COVID-19 vaccine, boosters, adolescent and pediatric studies, and the broader pipeline.
- The sustainability of profitability and operating cash flow after accounting for working-capital changes, investment needs, purchase commitments and ongoing development costs.
- The durability of the tax benefits from the valuation-allowance release and the assumptions supporting realization of deferred tax assets.