Collaboration Agreement

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Sanofi Collaboration and License Agreement

3. Collaboration Agreement

Sanofi Collaboration and License Agreement

In 2018, the Company entered into a collaboration and license agreement with Sanofi (the “Original Sanofi Agreement”) to develop mRNA vaccines for up to five infectious disease pathogens (the “Licensed Fields”). On March 26, 2020, the Company and Sanofi amended the Original Sanofi Agreement (the “First Sanofi Amendment”) to include vaccines against SARS-CoV-2 as an additional Licensed Field, increasing the number of infectious disease pathogens to up to six. On June 22, 2020, the Company and Sanofi further amended the Original Sanofi Agreement to expand the scope of the collaboration and licenses granted to Sanofi (the “Second Sanofi Amendment”). The Original Sanofi Agreement, as amended by the First Sanofi Amendment and the Second Sanofi Amendment, is referred to as the “Amended Sanofi Agreement.”

Pursuant to the Amended Sanofi Agreement, the Company and Sanofi are jointly conducting research and development activities to advance mRNA vaccines targeting up to seven infectious disease pathogens. The term of the research collaboration (the “Collaboration Term”) expires in June 2022 with an option for Sanofi to extend the Collaboration Term for one additional year, followed by a technology transfer to Sanofi. If Sanofi elects to extend the Collaboration Term, the collaboration may be further expanded to jointly conduct research and development activities to advance mRNA vaccines for up to an additional three infectious disease pathogens, bringing the total to up to ten pathogens.

Under the terms of the Amended Sanofi Agreement, the Company has granted to Sanofi exclusive, worldwide licenses under applicable patents, patent applications, know-how and materials, including those arising under the collaboration, to develop, commercialize and manufacture mRNA vaccines to prevent, treat or cure diseases, disorders or conditions in humans caused by any infectious disease pathogen, with certain specified exceptions.

Pursuant to the Original Sanofi Agreement, Sanofi paid the Company an upfront payment of $45.0 million in 2018. Pursuant to the Second Sanofi Amendment, Sanofi paid the Company an additional upfront payment of $300.0 million in August 2020. If Sanofi chooses to exercise its option to extend the Collaboration Term for an additional year, Sanofi has agreed to pay the Company an additional payment of $75.0 million. The Amended Sanofi Agreement provides that the Company is eligible to receive aggregate potential payments of up to $1.9 billion upon the achievement of additional specified development, regulatory, manufacturing and commercialization milestones, inclusive of the fee to exercise the option to extend the Collaboration Term. In particular, the Company is entitled to receive development, regulatory and sales milestone payments of up to $148.0 million for each Licensed Field, other than the SARS-CoV-2 Licensed Field, development, regulatory and sales milestone payments of up to $250.0 million in the SARS-CoV-2 Licensed Field, and one-time manufacturing milestone payments of up to $200.0 million. In addition, the Company is entitled to receive a $10.0 million milestone payment from Sanofi following completion of the technology and process transfer. In March 2021, Sanofi paid the Company a milestone payment of $25.0 million upon the initiation of the Phase 1/2 clinical trial of MRT5500 and in June 2021, Sanofi paid the Company a milestone payment of $50.0 million upon the successful manufacture, release and delivery of clinical drug product to supply the Phase 1 clinical trial of MRT5400 and MRT5401. Additionally, in June 2021, the Company achieved a milestone of $4.0 million upon the start of the Phase 1 clinical trial of MRT5400 and MRT5401, which is included in collaboration receivables on the condensed consolidated balance sheet as of June 30, 2021.

Accounting for the Sanofi Collaboration

The Company recognizes revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customer (“ASC 606”). During the six months ended June 30, 2021, the Company increased the overall transaction price by $108.7 million. The transaction price as of June 30, 2021 includes the upfront, non-refundable payments of $345.0 million for the transfer of the combined license, supply and development obligations under the Original Sanofi Agreement and Second Sanofi Amendment, the premium paid in consideration for common stock of $51.2 million under a securities purchase agreement entered into with an affiliate of Sanofi, an estimated $76.3 million in reimbursable employee costs, an estimated $167.8 million in reimbursable development costs including manufacturing costs and out-of-pocket costs paid to third parties and an estimated $212.0 million in milestone payments. Under ASC 606, at the end of each reporting period, the Company re-evaluates the variable consideration determined using either the expected value or most likely outcome approach and re-evaluates the probability that the consideration associated with each milestone or reimbursement will not be subject to a significant reversal in the cumulative amount of revenue recognized, and, if necessary, adjusts the estimate of the overall transaction price. The estimated collaboration budget is consistently re-evaluated and changes to the budget, if any, require approval by the Joint Steering Committee. If an approved change occurs, the Company will re-evaluate the transaction price which could potentially affect the cumulative amount of revenue recognized. Changes as a result of a contract modification or in the planned services under the Amended Sanofi Agreement may have an impact on the transaction price and on the Company’s measure of progress toward complete satisfaction of the performance obligation. The impact of changes during the six months ended June 30, 2021 resulted in a cumulative revenue catch-up adjustment of $20.5 million.

The following table summarizes the Company’s collaboration revenue (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Collaboration revenue	$	72,649	$	16,319	$	107,249	$	20,974

The following table presents the balance of the Company’s contract liabilities (in thousands):

	June 30,		December 31,
	2021		2020
Contract liabilities
Deferred revenue	$	293,069	$	296,222

Deferred revenue is classified as short-term or long-term in the condensed consolidated balance sheets based on the Company’s estimate of revenue that will be recognized within the next twelve months which is determined by the cost-to-cost input method which measures the extent of progress towards satisfying the performance obligation. As of June 30, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligation is estimated to be approximately $597.0 million, which is expected to be recognized as revenue through 2024. Revenue recognized from contract liabilities at the beginning of the period was $29.8 million and $6.4 million during the six months ended June 30, 2021 and 2020, respectively.