Moderna, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Moderna is a clinical-stage biotechnology company developing mRNA medicines; it reported no product-sales revenue. Amounts below are in U.S. dollars unless stated otherwise.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Total revenue | $16.0 million | $29.0 million; down 45% as reported |
| Research and development expense | $130.6 million | $90.1 million; up 45% |
| General and administrative expense | $27.3 million | $16.3 million; up 67% |
| Operating loss | $141.8 million | $77.4 million |
| Net loss | $132.7 million | $72.4 million |
| Basic and diluted loss per share | $0.40 | $1.16 |
| Operating cash flow | $(143.9) million | $(111.4) million |
| Cash, cash equivalents and investments | Approximately $1.55 billion | Approximately $1.69 billion at December 31, 2018 |
At March 31, 2019, current assets were $1.14 billion and current liabilities were $159.2 million. Total liabilities were $360.2 million, including a $33.4 million lease financing obligation; the filing reports no conventional borrowing balance. Accumulated deficit was $1.11 billion. No product gross margin is presented.
Cash and cash equivalents were $502.9 million; current and non-current investments were $606.0 million and $437.7 million, respectively. The quarter’s net decrease in cash, cash equivalents and restricted cash was $155.7 million. Investing cash use was $11.8 million, while financing cash use was minimal.
Changes and comparability
- Revenue decline as reported was primarily attributed to adoption of ASC 606 and lower collaboration revenue. Without ASC 606, Q1 2019 revenue would have been $37.9 million and net loss $110.8 million; those figures are not directly comparable with Q1 2018, which remained under ASC 605.
- ASC 606 adoption on January 1, 2019 reduced opening deferred revenue and increased opening accumulated deficit by $28.0 million. Under the new standard, reported Q1 collaboration revenue was $14.1 million; grants contributed $1.9 million.
- R&D spending rose $40.5 million, reflecting higher personnel and stock-based compensation, clinical and manufacturing costs, laboratory supplies, and outside services. G&A rose $11.0 million, partly due to public-company costs.
- Operating cash use increased by $32.5 million year over year. The 2018 comparison also included $549.5 million of preferred-stock financing; Q1 2019 had no comparable financing proceeds.
Outlook, operations and risks
- Management said available cash, cash equivalents and investments were expected to fund projected operations for at least 12 months from issuance of the financial statements. It expects substantial expenses and operating losses to continue and does not expect significant product-sales revenue unless medicines are developed and approved.
- The pipeline comprised 21 development candidates, 11 in early-stage clinical studies. Management expects expenses to rise as research, clinical development, manufacturing capabilities and public-company operations expand; the filing gives no quantified earnings or revenue guidance.
- RSV candidate mRNA-1777 was not being advanced to Phase 2a at that time; Merck planned a Phase 1 study of the newer mRNA-1172 candidate. Moderna also reported Merck had discontinued preclinical work on the VZV candidate and returned rights. The filing describes a May 2019 Merck amendment focused the collaboration on RSV and permitting Moderna to pursue certain pediatric respiratory-virus work.
- Moderna planned a Phase 1 study of newly designated GSD1a candidate mRNA-3745. Progress remains subject to clinical, regulatory, manufacturing, financing, collaborator and commercialization risks.
- Commitments include up to $243.0 million of budgeted PCV/SAV research, development and manufacturing activities with Merck, and $246.5 million of future minimum operating lease payments. A new approximately 200,000-square-foot Norwood lease was signed in February 2019 and was scheduled to commence in Q2.
- Moderna reported no material legal proceedings, no off-balance-sheet arrangements and no material changes to the risk factors in its 2018 Form 10-K. Disclosure controls were assessed as effective at a reasonable-assurance level.
Important facts for investors to verify
- Assess cash runway against the $143.9 million quarterly operating cash outflow and expected increases in development and infrastructure spending.
- Reconcile revenue and loss comparisons using the ASC 606 adoption disclosures, especially the substantial difference between reported and legacy-accounting Q1 2019 revenue.
- Track clinical results and timing for the pipeline, including the Merck-led RSV mRNA-1172 program and the paused mRNA-1777 program.
- Review collaboration terms, partner election or termination rights, and the timing and conditions of milestones, royalties and remaining performance obligations.
- Monitor lease and collaboration commitments, and whether future financing or partnerships may be needed beyond management’s stated 12-month runway.