UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _ to _

Commission File Number: 001-38753

Moderna, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		81-3467528
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)
200 Technology Square
Cambridge,	Massachusetts	02139
(Address of Principal Executive Offices)		(Zip Code)

(617) 714-6500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	MRNA	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer o	Non-accelerated filer o	Smaller reporting company	☐
				Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

As of October 20, 2020, there were 395,710,105 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”), including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q include, but are not limited to, statements about:

•the initiation, timing, progress, results, safety and efficacy, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available, and our research and development programs;

•the ultimate impact of the current coronavirus pandemic, or the COVID-19 pandemic, or any other health epidemic, on our business, manufacturing, clinical trials, research programs, supply chain, regulatory review, healthcare systems or the global economy as a whole;

•risks related to the direct or indirect impact of the COVID-19 pandemic or any future large-scale adverse health event, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, material delays in diagnoses, initiation or continuation of treatment for diseases that may be addressed by our development candidates and investigational medicines, or in patient enrollment in clinical trials, potential clinical trials, regulatory review or supply chain disruptions, and other potential impacts to our business, the effectiveness or timeliness of steps taken by us to mitigate the impact of the pandemic, and our ability to execute business continuity plans to address disruptions caused by the COVID-19 pandemic or future large-scale adverse health event;

•our activities with respect to mRNA-1273, our investigational vaccine against SARS-CoV-2, the novel strain of coronavirus that causes COVID-19, including our plans and expectations regarding clinical development, manufacturing, pricing, commercialization, if approved, regulatory matters and third-party and governmental arrangements and potential arrangements;

•our anticipated next steps for our development candidates and investigational medicines that may be slowed down due to the impact of the COVID-19 pandemic, including our resources being significantly diverted towards mRNA-1273, including if the federal government seeks to require us to divert such resources;

•our ability to identify research priorities and apply a risk-mitigated strategy to efficiently discover and develop development candidates and investigational medicines, including by applying learnings from one program to our other programs and from one modality to our other modalities;

•our ability and the potential to successfully manufacture our drug substances, delivery vehicles, development candidates, and investigational medicines for preclinical use, for clinical trials and on a larger scale for commercial use, if approved;

•the ability and willingness of our third-party strategic collaborators to continue research, development and manufacturing activities relating to our development candidates and investigational medicines;

•our ability to obtain funding for our operations necessary to complete further development, manufacturing and commercialization of our investigational medicines;

•our ability to obtain and maintain regulatory approval of our investigational medicines;

•our ability to commercialize our products, if approved;

•our ability to meet our obligations under supply agreements for our products, if approved;

•the pricing and reimbursement of our investigational medicines, if approved;

•the implementation of our business model, and strategic plans for our business, investigational medicines, and technology;

•the scope of protection we are able to establish and maintain for intellectual property rights covering our investigational medicines and technology;

•estimates of our future expenses, revenues, capital requirements, and our needs for additional financing;

•the potential benefits of strategic collaboration agreements, our ability to enter into strategic collaborations or arrangements, and our ability to attract collaborators with development, regulatory, manufacturing and commercialization expertise;

•future agreements with third parties in connection with the manufacturing and commercialization of our investigational medicines, if approved;

•the size and growth potential of the markets for our investigational medicines, and our ability to serve those markets;

•our financial performance;

•the rate and degree of market acceptance of our investigational medicines;

•regulatory developments in the United States and foreign countries;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•our ability to produce our products or investigational medicines with advantages in turnaround times or manufacturing cost;

•the success of competing therapies that are or may become available;

•our ability to attract and retain key scientific or management personnel;

•the impact of laws and regulations;

•developments relating to our competitors and our industry; and

•other risks and uncertainties, including those discussed in Part II, Item 1A - Risk Factors in this Form 10-Q. 

In some cases, forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “could,” “expects,” “intends,” “plans,” “aims,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.

The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.

This Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.

NOTE REGARDING COMPANY REFERENCES

Unless the context otherwise requires, the terms “Moderna,” “the Company,” “we,” “us,” and “our” in this Form 10-Q refer to Moderna, Inc. and its consolidated subsidiaries.

ADDITIONAL INFORMATION

Our website, www.modernatx.com including the Investor Relations section, www.investors.modernatx.com; and corporate blog www.modernatx.com/moderna-blog; as well as our social media channels: Facebook, www.facebook.com/modernatx; Twitter, www.twitter.com/modernatx; and LinkedIn, www.linkedin.com/company/modernatx; contain a significant amount of information about us, including financial and other information for investors. We encourage investors to visit these websites and social media channels as information is frequently updated and new information is shared.

Table of Contents

PART I.		Page
Item 1.	Financial Statements (Unaudited)	6
	Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	6
	Condensed Consolidated Statements of Operations for the three months and nine months ended September 30, 2020 and 2019	7
	Condensed Consolidated Statements of Comprehensive Loss for the three months and nine months ended September 30, 2020 and 2019	8
	Condensed Consolidated Statements of Stockholders' Equity for the three months and nine months ended September 30, 2020 and 2019	9
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	11
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	63
PART II.
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	121
Item 5.	Other Information	121
Item 6.	Exhibits	121
SIGNATURES		123

Item 1. Financial Statements

MODERNA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share and per share data)

	September 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	1,505,581	$	235,876
Investments	1,770,721		867,124
Accounts receivable	190,501		5,369
Prepaid expenses and other current assets	109,376		19,403
Restricted cash	1,032		1,032
Total current assets	3,577,211		1,128,804
Investments, non-current	691,969		159,987
Property and equipment, net	276,909		201,495
Right-of-use assets, operating leases	91,684		86,414
Restricted cash, non-current	11,053		10,791
Other non-current assets	2,047		1,931
Total assets	$	4,650,873	$	1,589,422
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	20,521	$	7,090
Accrued liabilities	208,832		67,652
Deferred revenue	1,234,506		63,310
Other current liabilities	9,702		5,063
Total current liabilities	1,473,561		143,115
Deferred revenue, non-current	207,768		138,995
Operating lease liabilities, non-current	98,954		93,675
Financing lease liabilities, non-current	108,609		38,689
Other non-current liabilities	2,183		138
Total liabilities	1,891,075		414,612
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, par value $0.0001; 162,000,000 shares authorized as of September 30, 2020      and December 31, 2019; no shares issued or outstanding at September 30, 2020 and      December 31, 2019	—		—
Common stock, par value $0.0001; 1,600,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 395,390,672 and 336,536,985 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	40		34
Additional paid-in capital	4,726,007		2,669,426
Accumulated other comprehensive income	4,784		1,804
Accumulated deficit	(1,971,033)		(1,496,454)
Total stockholders’ equity	2,759,798		1,174,810
Total liabilities and stockholders’ equity	$	4,650,873	$	1,589,422

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019 (1)		2020		2019 (1)
Revenue:
Grant revenue	$	145,694	$	3,708	$	187,535	$	8,671
Collaboration revenue	12,216		13,338		45,115		37,483
Total revenue	157,910		17,046		232,650		46,154
Operating expenses:
Research and development	344,486		119,637		611,479		378,355
General and administrative	48,541		28,173		109,277		83,913
Total operating expenses	393,027		147,810		720,756		462,268
Loss from operations	(235,117)		(130,764)		(488,106)		(416,114)
Interest income	5,571		9,252		20,515		30,546
Other expense, net	(3,226)		(1,881)		(5,910)		(5,689)
Loss before income taxes	(232,772)		(123,393)		(473,501)		(391,257)
Provision for (benefit from) income taxes	864		(178)		1,078		(526)
Net loss	$	(233,636)	$	(123,215)	$	(474,579)	$	(390,731)
Net loss per share, basic and diluted	$	(0.59)	$	(0.37)	$	(1.26)	$	(1.19)
Weighted average common shares used in net loss per share, basic and diluted	394,682,744		330,769,341		376,174,283		329,592,322

________

(1) Restated to conform to ASC 842. See accompanying Note 2.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019 (1)		2020		2019 (1)
Net loss	$	(233,636)	$	(123,215)	$	(474,579)	$	(390,731)
Other comprehensive income:
Unrealized (loss) gain on available-for-sale debt securities, net of tax of $0 and $25, for the three months ended September 30, 2020 and 2019, respectively, and net of tax of $0 and $1,173 for the nine months ended September 30, 2020 and 2019, respectively	(3,683)		168		1,878		4,243
Less: amounts recognized for net realized loss (gain) included in net loss	211		(79)		1,102		(93)
Total other comprehensive (loss) income	(3,472)		89		2,980		4,150
Comprehensive loss	$	(237,108)	$	(123,126)	$	(471,599)	$	(386,581)

______

(1) Restated to conform to ASC 842. See accompanying Note 2.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(Unaudited, in thousands except share data)

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2020	393,277,267	$	39	$	4,675,987	$	8,256	$	(1,737,397)	$	2,946,885
Vesting of restricted common stock units	43,374	—		—		—		—		—
Exercise of options to purchase common stock, net	2,070,031	1		26,814		—		—		26,815
Stock-based compensation	—	—		23,206		—		—		23,206
Unrealized loss on marketable securities	—	—		—		(3,472)		—		(3,472)
Net loss	—	—		—		—		(233,636)		(233,636)
Balance at September 30, 2020	395,390,672	$	40	$	4,726,007	$	4,784	$	(1,971,033)	$	2,759,798

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit (1)		Total Stockholders’ Equity (1)
	Shares	Amount
Balance at June 30, 2019	329,958,172	$	33	$	2,582,134	$	2,741	$	(1,249,948)	$	1,334,960
Vesting of restricted common stock	33,678	—		—		—		—		—
Exercise of options to purchase common stock, net	2,502,927	—		15,554		—		—		15,554
Stock-based compensation	—	—		20,804		—		—		20,804
Unrealized gain on marketable securities	—	—		—		89		—		89
Net loss	—	—		—		—		(123,215)		(123,215)
Balance at September 30, 2019	332,494,777	$	33	$	2,618,492	$	2,830	$	(1,373,163)	$	1,248,192

_______

(1) Restated to conform to ASC 842. See accompanying Note 2.

9

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2019	336,536,985	$	34	$	2,669,426	$	1,804	$	(1,496,454)	$	1,174,810
Proceeds from public offering of common stock, net of issuance costs of $2,086	47,863,158	4		1,852,755		—		—		1,852,759
Vesting of restricted common stock units	203,488			—		—		—		—
Exercise of options to purchase common stock, net	10,613,303	2		133,367		—		—		133,369
Purchase of common stock under employee stock purchase plan	173,738	—		2,917		—		—		2,917
Stock-based compensation	—	—		67,542		—		—		67,542
Unrealized loss on marketable securities	—	—		—		2,980		—		2,980
Net loss	—	—		—		—		(474,579)		(474,579)
Balance at September 30, 2020	395,390,672	$	40	$	4,726,007	$	4,784	$	(1,971,033)	$	2,759,798

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit (1)		Total Stockholders’ Equity (1)
	Shares	Amount
Balance at December 31, 2018	328,798,904	$	33	$	2,538,155	$	(1,320)	$	(1,006,627)	$	1,530,241
Vesting of restricted common stock	141,153	—		—		—		—		—
Exercise of options to purchase common stock, net	3,554,720	—		19,541		—		—		19,541
Transition adjustment from adoption of ASC 606	—	—		—		—		27,984		27,984
Transition adjustment from adoption of ASC 842	—	—		—		—		(3,789)		(3,789)
Stock-based compensation	—	—		60,796		—		—		60,796
Unrealized gain on marketable securities	—	—		—		4,150		—		4,150
Net loss	—	—		—		—		(390,731)		(390,731)
Balance at September 30, 2019	332,494,777	$	33	$	2,618,492	$	2,830	$	(1,373,163)	$	1,248,192

__________

(1) Restated to conform to ASC 842. See accompanying Note 2.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

10

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended September 30,
	2020		2019 (1)
Operating activities
Net loss	$	(474,579)	$	(390,731)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	67,542		60,796
Depreciation and amortization	23,545		22,046
Amortization/accretion of investments	5,053		(3,428)
Loss on disposal of property and equipment	287		70
Changes in assets and liabilities:
Accounts receivable	(185,132)		4,369
Prepaid expenses and other assets	(67,994)		1,813
Right-of-use assets, operating leases	(13,117)		(7,970)
Accounts payable	13,633		(19,185)
Accrued liabilities	132,374		(8,253)
Deferred revenue	1,239,969		(32,795)
Operating lease liabilities	14,417		13,475
Other liabilities	6,684		(153)
Net cash provided by (used in) operating activities	762,682		(359,946)
Investing activities
Purchases of marketable securities	(2,326,141)		(949,277)
Proceeds from maturities of marketable securities	748,152		747,846
Proceeds from sales of marketable securities	140,337		81,030
Purchases of property and equipment	(44,147)		(24,892)
Net cash used in investing activities	(1,481,799)		(145,293)
Financing activities
Proceeds from public offerings of common stock, net of issuance costs	1,852,759		—
Proceeds from issuance of common stock through equity plans, net	133,369		19,541
Proceeds from purchase of common stock under employee stock purchase plan	2,917		—
Charges to financing lease liabilities	39		741
Net cash provided by financing activities	1,989,084		20,282
Net increase (decrease) in cash, cash equivalents and restricted cash	1,269,967		(484,957)
Cash, cash equivalents and restricted cash, beginning of year	247,699		670,491
Cash, cash equivalents and restricted cash, end of period	$	1,517,666	$	185,534
Non-cash investing and financing activities
Purchases of property and equipment included in accounts payable and accrued liabilities	$	13,280	$	1,863
Leasehold improvements included in prepaid and other current assets	$	—	$	6,310

______

(1) Restated to conform to ASC 842. See accompanying Note 2.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

11

MODERNA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of the Business

Moderna, Inc. (collectively, with its consolidated subsidiaries, any of Moderna, we, us, or the Company) was incorporated in Delaware on July 22, 2016. We are the successor in interest to Moderna LLC, a limited liability company formed under the laws of the State of Delaware in 2013. Our principal executive office is located at 200 Technology Square, Cambridge, MA.

We are a biotechnology company creating a new generation of transformative medicines based on messenger RNA (mRNA), to improve the lives of patients. mRNA medicines are designed to direct the body’s cells to produce intracellular, membrane, or secreted proteins that have a therapeutic or preventive benefit with the potential to address a broad spectrum of diseases. Our platform builds on continuous advances in basic and applied mRNA science, delivery technology, and manufacturing, providing us the capability to pursue in parallel a robust pipeline of new development candidates. We are developing therapeutics and vaccines for infectious diseases, immuno-oncology, rare diseases, autoimmune and cardiovascular diseases, independently and with our strategic collaborators.

Since inception, we have incurred significant net losses. As of September 30, 2020, we had an accumulated deficit of $1.97 billion. We may continue to incur significant expenses and operating losses for the foreseeable future. In addition, we anticipate that our expenses will increase significantly in connection with our ongoing activities to support our platform research, drug discovery and clinical development, infrastructure and Research Engine and Early Development Engine, digital infrastructure, creation of a portfolio of intellectual property, pre-launch inventory buildup, expansion into global markets, and administrative support.

We do not expect to recognize significant revenue from sales of potential mRNA medicines unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our investigational medicines. If we seek to obtain regulatory approval for any of our investigational medicines, we expect to incur significant commercialization expenses. Our investigational vaccine against the novel coronavirus (mRNA-1273), which is currently in clinical trials, has been developed rapidly to respond to the global COVID-19 pandemic. We are expending significant efforts to further the rapid development of this potential vaccine and expect to continue to do so over the next 12 months. These efforts have required and will continue to require the expenditure of significant funds and the establishment of significant worldwide infrastructure and partnerships.

As a result, we expect we will need substantial additional funding to support our continued operations and pursue our growth strategy. Until we can generate significant revenue from potential mRNA medicines, if ever, we expect to finance our operations through a combination of public or private equity offerings, structured financings and debt financings, government funding arrangements, strategic alliances and marketing, manufacturing, distribution and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our programs. We believe that our cash, cash equivalents, and investments as of September 30, 2020 will be sufficient to enable us to fund our projected operations through at least the next 12 months from the issuance of our financial statements.

Because of the numerous risks and uncertainties associated with pharmaceutical development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenues from the sale of our investigational medicines, including mRNA-1273, if approved, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

2. Summary of Basis of Presentation and Recent Accounting Standards

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements that accompany these notes have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K). Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as found in the Accounting Standard

12

Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). This report should be read in conjunction with the consolidated financial statements in our 2019 Form 10-K.

The consolidated financial statements include the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including critical accounting policies or estimates related to revenue recognition, research and development expenses, income tax provisions, stock-based compensation, leases, and useful lives of long-lived assets. We base our estimates on historical experience and on various relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results that we experience may differ materially from our estimates. Significant estimates relied upon in preparing these financial statements include, among others, those related to fair value of equity awards, revenue recognition, research and development expenses, leases, fair value instruments, useful lives of property and equipment, income taxes, and our valuation allowance on our deferred tax assets.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2020 are consistent with those described in our 2019 Form 10-K, except for “Pre-Launch Inventory” and as noted within the “Recently Adopted Accounting Standards” section below.

Effective on December 31, 2019, we lost our emerging growth company (EGC) status which accelerated the requirement of ASC 842 (Lease Accounting) adoption. As a result, we adjusted our previously reported consolidated financial statements effective January 1, 2019 in our 2019 Form 10-K, and amendments to previously filed Forms 10-Q were not required. Accordingly, our prior period condensed consolidated financial statements and information, as presented herein, have been restated to conform to the new standard.

The following tables summarize the effects of adopting ASC 842 on our condensed consolidated financial statements for the three and nine months ended September 30, 2019 (in thousands, except per share data):

	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
			ASC 842						ASC 842
	Previously reported		Adjustments		As adjusted		Previously reported		Adjustments		As adjusted
Operating expenses:
Research and development	$	119,715	$	(78)	$	119,637	$	378,786	$	(431)	$	378,355
General and administrative	28,188		(15)		28,173		83,994		(81)		83,913
Total operating expenses	147,903		(93)		147,810		462,780		(512)		462,268
Loss from operations	(130,857)		93		(130,764)		(416,626)		512		(416,114)
Other expense, net	(1,767)		(114)		(1,881)		(5,351)		(338)		(5,689)
Loss before benefit from income taxes	(123,372)		(21)		(123,393)		(391,431)		174		(391,257)
Net loss	(123,194)		(21)		(123,215)		(390,905)		174		(390,731)
Net loss per share attributable to common stockholders, basic and diluted	(0.37)		—		(0.37)		(1.19)		—		(1.19)

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	Nine Months Ended September 30, 2019
	Previously reported		ASC 842 Adjustment during the period		As adjusted
Operating activities
Net loss	$	(390,905)	$	174	$	(390,731)
Depreciation and amortization	22,082		(36)		22,046
Prepaid expenses and other assets	(1,407)		3,220		1,813
Right-of-use assets, operating leases	—		(7,970)		(7,970)
Deferred lease obligation	3,844		(3,844)		—
Operating lease liabilities	—		13,475		13,475
Other liabilities	1,617		(1,770)		(153)
Net cash used in operating activities	(363,195)		3,249		(359,946)
Financing activities
Reimbursement of assets under lease financing obligation	3,678		(3,678)		—
Charges to financing lease obligation	—		741		741
Payments on financing lease obligation	312		(312)		—
Net cash provided by financing activities	23,531		(3,249)		20,282

Comprehensive Loss

Comprehensive loss includes net loss and other comprehensive (loss) income for the period. Other comprehensive (loss) income consists of unrealized gains and losses on our investments. Total comprehensive loss for all periods presented has been disclosed in the condensed consolidated statements of comprehensive loss.

The components of accumulated other comprehensive (loss) income for the three and nine months ended September 30, 2020 are as follows (in thousands): 

	Unrealized (Loss) Gain on Available-for-Sale Debt Securities
Accumulated other comprehensive income, balance at December 31, 2019	$	1,804
Other comprehensive loss	(7,931)
Accumulated other comprehensive loss, balance at March 31, 2020	(6,127)
Other comprehensive income	14,383
Accumulated other comprehensive income, balance at June 30, 2020	8,256
Other comprehensive loss	(3,472)
Accumulated other comprehensive income, balance at September 30, 2020	$	4,784

Restricted Cash

We include our restricted cash balance in the cash, cash equivalents and restricted cash reconciliation of operating, investing and financing activities in the condensed consolidated statements of cash flows. 

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The following table provides a reconciliation of cash, cash equivalents and restricted cash in the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):

	September 30,
	2020		2019
Cash and cash equivalents	$	1,505,581	$	173,711
Restricted cash	1,032		1,032
Restricted cash, non-current	11,053		10,791
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	1,517,666	$	185,534

Pre-Launch Inventory

Prior to an initial regulatory approval for our investigational medicines, we expense costs relating to production of inventory as research and development expense in our condensed consolidated statements of operations, in the period incurred. When we believe regulatory approval and subsequent commercialization of our investigational medicines is probable, and we also expect future economic benefit from the sales of the investigational medicines to be realized, we will then capitalize the costs of production as inventory.

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard changes how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. The amendments in this standard should be applied on a modified retrospective basis to all periods presented. We adopted this standard in the first quarter of 2020. Based on the composition of our investment portfolio and investment policy, the adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard requires capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). We adopted this standard in the first quarter of 2020 using the prospective method. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. We early adopted this standard in the second quarter of 2020. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements and disclosures.

3. Grant Revenue

In September 2020, we entered into an agreement with the Defense Advanced Research Projects Agency (DARPA) for an award of up to $56.4 million to fund development of a mobile manufacturing prototype leveraging our existing manufacturing technology that is capable of rapidly producing vaccines and therapeutics. As of September 30, 2020, the committed funding was $5.0 million, with an additional $51.4 million available if DARPA exercises additional contract options.

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In April 2020, we entered into an agreement with the Biomedical Advanced Research and Development Authority (BARDA), a division of the Office of the Assistant Secretary for Preparedness and Response (ASPR) within the U.S. Department of Health and Human Services (HHS), for an award of up to $483.3 million to accelerate development of mRNA-1273, our vaccine candidate against the novel coronavirus. In July 2020, we amended our agreement with BARDA to provide for an additional commitment of up to $471.6 million to support late-stage clinical development of mRNA-1273, including the execution of a 30,000 participant Phase 3 study in the U.S. The amendment increased the maximum award from BARDA from $483.3 million to $954.9 million. Under the terms of the agreement, BARDA will fund the advancement of mRNA-1273 to FDA licensure. All contract options have been exercised. As of September 30, 2020, the remaining available funding net of revenue earned was $781.7 million.

In September 2016, we received an award of up to $125.8 million from BARDA, to help fund our Zika vaccine program. Three of the four contract options have been exercised. As of September 30, 2020, the remaining available funding net of revenue earned was $71.9 million, with an additional $8.4 million available if the final contract option is exercised.

In January 2016, we entered a global health project framework agreement with the Gates Foundation to advance mRNA-based development projects for various infectious diseases, including human immunodeficiency virus (HIV). As of September 30, 2020, the available funding net of revenue earned was $12.6 million, with up to an additional $80.0 million available if additional follow-on projects are approved.

The following tables summarize grant revenue and deferred grant revenue as of and for the periods presented (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
BARDA	$	143,318	$	1,135	$	183,134	$	4,500
Other grant revenue	2,376		2,573		4,401		4,171
Total grant revenue	$	145,694	$	3,708	$	187,535	$	8,671

	September 30,		December 31,
	2020		2019
Deferred grant revenue	$	5,670	$	1,496

4. Collaboration Revenue

The following table summarizes our total consolidated net revenue from our strategic collaborators for the periods presented (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
Collaboration Revenue by Strategic Collaborator:	2020		2019		2020		2019
AstraZeneca	$	48	$	3,724	$	17,202	$	4,726
Merck	6,718		9,110		18,060		28,456
Vertex	5,450		504		9,698		4,301
Other	—		—		155		—
Total collaboration revenue	$	12,216	$	13,338	$	45,115	$	37,483

The following table presents changes in the balances of our receivables and contract liabilities related to our strategic collaboration agreements during the nine months ended September 30, 2020 (in thousands):

	December 31, 2019		Additions		Deductions		September 30, 2020
Contract Assets:
Accounts receivable	$	1,972	$	115,037	$	(85,354)	$	31,655
Contract Liabilities:
Deferred revenue	$	199,528	$	117,002	$	(50,320)	$	266,210

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During the three and nine months ended September 30, 2020, we recognized the following revenue as a result of the change in the contract liability balances related to our collaboration agreements (in thousands):

Revenue recognized in the period from:	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Amounts included in contract liabilities at the beginning of the period (1)	$	13,263	$	50,320
Performance obligations satisfied (or partially satisfied) in previous reporting periods (2)	—		1,262

______

(1) We first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional consideration is received on those contracts in subsequent periods, we assume all revenue recognized in the reporting period is first applied to the beginning contract liability.

(2) Related to changes in estimated costs for our future performance obligations and estimated variable considerations.

As of September 30, 2020, the aggregated amount of the transaction price allocated to performance obligations under our collaboration agreements that are unsatisfied or partially unsatisfied was $366.7 million.

AstraZeneca – Strategic Alliances in Cardiovascular and Oncology

2013 Option Agreement and Services and Collaboration Agreement

In March 2013, we entered into an Option Agreement, the AZ Option Agreement, and a related Services and Collaboration Agreement, the AZ Services Agreement, with AstraZeneca plc (AstraZeneca) to develop and commercialize potential therapeutic mRNA medicines directed at certain targets for the treatment of cardiovascular and cardiometabolic diseases and cancer, which were amended and restated in June 2018. We refer to these agreements in the forms that existed prior to the 2018 amendment and restatement as the 2013 AZ Agreements.

2016 Strategic Alliance with AstraZeneca – IL-12

In January 2016, we entered into a new Strategic Drug Development Collaboration and License Agreement, which we refer to as the 2016 AZ Agreement, with AstraZeneca to discover, develop and commercialize potential mRNA medicines for the treatment of a range of cancers.

2017 Strategic Alliance with AstraZeneca – Relaxin

In October 2017, we entered a new Collaboration and License Agreement, which we refer to as the 2017 AZ Agreement, under which AstraZeneca may clinically develop and commercialize a development candidate, now known as AZD7970, which is comprised of an mRNA construct for the relaxin protein designed by us and encapsulated in one of our proprietary lipid nanoparticles (LNP). We discovered and performed preclinical development activities for AZD7970 prior to the initiation of the strategic alliance with AstraZeneca under the 2017 AZ Agreement.

2013 Agreements with AstraZeneca, amended and restated in 2018

In June 2018, we entered into an Amended and Restated Option Agreement and a related Amended and Restated Services and Collaboration Agreement with AstraZeneca (2018 A&R Agreements), which amended and restated the 2013 AZ Agreements. Under the 2018 A&R Agreements, we granted AstraZeneca certain exclusive rights and licenses to research, develop and commercialize potential therapeutic mRNA medicines directed at certain targets for the treatment of cardiovascular and cardiometabolic diseases and cancer, and agreed to provide related services to AstraZeneca. The activities to be performed by the parties under the 2018 A&R Agreements are limited to defined biological targets in the cardiovascular and cardiometabolic fields and one defined target in the cancer field.

Please refer to our 2019 Form 10-K under the heading “Third-Party Strategic Alliances” for further description of each of the AstraZeneca collaboration agreements.

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Accounting Treatment

We applied the provisions of ASC 606 (Revenue from Contracts with Customers) in accounting for these arrangements, except for the 2017 AZ Agreement which was accounted for under ASC 808 (Collaborative Arrangements). In August 2016, AstraZeneca exercised a product option available pursuant to the 2013 AZ Agreements to obtain exclusive rights to clinically develop and commercialize the VEGF-A product (AZD8601). This option exercise is referred to as the 2016 VEGF Exercise. Pursuant to ASC 606, we determined that the 2016 VEGF Exercise and the 2017 AZ Agreement should be accounted for as separate transactions as the agreements are not interrelated or interdependent. Conversely, the 2013 Agreements, as amended by the 2018 A&R Agreements, and the 2016 AZ Agreement, were combined for accounting purposes and treated as a single agreement, as these agreements were negotiated in contemplation of each other. We refer to this combined transaction as the Combined 2018 AZ Agreements. We determined that all aspects of Combined 2018 AZ Agreements and the 2016 VEGF Exercise represent a transaction with a customer and therefore is accounted for in accordance with ASC 606.

Combined 2018 AZ Agreements

We identified the following performance obligations in the Combined 2018 AZ Agreements: (i) a combined performance obligation that includes a research license, research and development pool services, and manufacturing obligations related to the 2013 AZ Agreements, as amended by the 2018 A&R Agreements, collectively referred to as the Combined 2018 AZ Agreement Performance Obligation, (ii) preclinical development services for IL-12, (iii) preclinical development services for an oncology development target, (iv) a combined performance obligation for a development and commercialization license and manufacturing obligations for IL-12, and (v) a material right to receive development and commercialization rights and manufacturing services for an oncology development target.

We concluded that the research license is not distinct from the research and development pool services or the manufacturing obligations related to the 2018 A&R Agreements, as AstraZeneca cannot fully exploit the value of the research license without receipt of such services and supply. Our services and supply involve specialized expertise, particularly as it relates to mRNA technology that is not available in the marketplace. Any supply requested by AstraZeneca in excess of the minimum quantities specified in the agreement are considered customer options and treated as separate contracts for accounting purposes. Further, we concluded that AstraZeneca cannot exploit the value of the development and commercialization license for IL-12 without receipt of supply as the development and commercialization license does not convey to AstraZeneca the right to manufacture and therefore combined the development and commercialization license and the manufacturing obligations for IL-12 into one performance obligation.

The following table summarizes the composition of the total transaction price for the periods presented (in thousands):

	Transaction Price
	September 30,		December 31,
Combined 2018 AZ Agreements:	2020		2019
Upfront payments	$	240,000	$	240,000
Sublicense reimbursement	1,000		1,000
Toxicity milestone payment	60,000		60,000
Competition milestone payment	60,000		60,000
Estimated reimbursement for IL-12 manufacturing obligations	38,089		40,782
Total	$	399,089	$	401,782

We utilize the most likely amount method to determine the amount of reimbursement for IL-12 manufacturing obligations to be received. We determined that any sales-based royalties related to IL-12 will be recognized when the related sales occur as they were determined to relate predominately to the license granted and therefore have been excluded from the transaction price. In addition, we are eligible to receive future milestones and royalties on future commercial sales for optioned product candidates under the 2018 A&R Agreements and future royalties under the 2016 Agreement; however, these amounts are not considered variable consideration under the Combined 2018 Agreements as we are only eligible to receive such amounts if AstraZeneca exercises its options (including certain options that are deemed to be material rights). We have concluded that the exercise of an optioned product candidate represents a separate transaction under ASC 606. We re-evaluate the transaction price at the end of each reporting period. There was a $2.7 million decrease to the transaction price during the nine months ended September 30, 2020, resulting from a change in estimate of variable consideration.

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The transaction price was allocated to the performance obligations based on the relative estimated standalone selling prices of each performance obligation. We developed the estimated standalone selling price for the licenses included in the Combined 2018 AZ Agreement Performance Obligation and the combined performance obligation for a development and commercialization license and manufacturing obligations for IL-12 primarily based on the probability-weighted present value of expected future cash flows associated with each license related to each specific program. In developing such estimate, we also considered applicable market conditions and relevant entity-specific factors, including those factors contemplated in negotiating the agreement, probability of success and the time needed to commercialize a product candidate pursuant to the associated license. We developed the estimated standalone selling price for the services and/or manufacturing and supply included in each of the performance obligation, as applicable, primarily based on the nature of the services to be performed and/or goods to be manufactured and estimates of the associated costs, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts. The estimated standalone selling price of the material right to receive development and commercialization rights and manufacturing services for an oncology development target was developed by estimating the amount of discount that AstraZeneca would receive when exercising the option and adjusting such amount by the likelihood that the option will be exercised.

The following table summarizes the allocation of the total transaction price to the identified performance obligations under the arrangement, and the amount of the transaction price unsatisfied as of September 30, 2020 (in thousands):

	Transaction Price
Combined 2018 AZ Agreements:	September 30, 2020
Combined 2018 AZ Agreement performance obligation	$	293,223
Preclinical development service - IL-12	8,133
Preclinical development service - oncology development target	8,133
Development and commercialization license and manufacturing obligation	88,009
Material right to receive development and commercialization rights	1,591
Total	$	399,089
Remaining unsatisfied performance obligation	$