01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
Moderna, Inc. filed its 10-K for the fiscal year ended December 31, 2019, reporting a significant transition from an "emerging growth company" to a "large accelerated filer." A key focus of the filing is the adoption of new accounting standards, ASC 606 (Revenue from Contracts with Customers) and ASC 842 (Leases).
The adoption of ASC 606 resulted in a $28.0 milliona cumulative-effect adjustment to accumulated deficit, primarily impacting revenue recognition from strategic collaboration agreements with major partners like AstraZeneca and Merck. The company's financial statements reflect significant investments in research and development, evidenced by substantial collaboration revenue and grant funding. The report details multiple strategic alliances, particularly with AstraZeneca and Merck, for the development of mRNA-based therapeutics for various diseases, including cancer and infectious diseases.
These collaborations involve complex revenue recognition and milestone payments, highlighting the early-stage nature of many of Moderna's pipeline assets. Investors should note the company's continued net loss, reflecting ongoing R&D expenditure, and the substantial cash position, which provides runway for future development.
02—Key points
Key Highlights
- Moderna transitioned from an "emerging growth company" to a "large accelerated filer" as of December 31, 2019.
- Adopted new accounting standards ASC 606 (Revenue from Contracts with Customers) and ASC 842 (Leases), impacting revenue recognition and balance sheet presentation.
- Reported a $28.0 million cumulative-effect adjustment to accumulated deficit due to ASC 606 adoption, primarily affecting collaboration revenue.
- Significant collaboration revenue and grant funding from major partners like AstraZeneca, Merck, and the Bill & Melinda Gates Foundation, underscoring the company's R&D partnerships.
- Detailed multiple strategic alliances for mRNA-based therapeutics, including cancer vaccines and infectious disease treatments, with complex revenue recognition tied to milestones and development progress.
- Maintained a strong cash and cash equivalents position, providing financial flexibility for ongoing research and development activities.
- The company reported a net loss for the year, consistent with its focus on significant R&D investments in its pipeline.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $60.00M$135.07M | −55.6% |
| Cost of Revenue | $0$0 | — |
| Gross Profit | $60.00M$135.07M | −55.6% |
| R&D Expenses | $496.00M$454.08M | +9.2% |
| Operating Expenses | $605.93M$548.33M | +10.5% |
| Operating Income | -$546.00M-$413.27M | −32.1% |
| Net Income | -$514.00M-$384.73M | −33.6% |
| EPS (Basic) | $-1.55$-4.95 | +68.7% |
| EPS (Diluted) | $-1.55— | — |
| Shares Outstanding (Basic) | 330.80M81.11M | +307.8% |
| Shares Outstanding (Diluted) | 331.00M— | — |
05—Questions
Frequently Asked Questions
What are the main accounting changes disclosed in this filing and what is their impact?
The primary accounting changes are the adoption of ASC 606 (Revenue from Contracts with Customers) and ASC 842 (Leases). ASC 606 required a modified retrospective adoption, resulting in a $28.0 million adjustment to the opening balance of accumulated deficit. This primarily affected how revenue from collaboration agreements is recognized, shifting from a more straightforward method to one requiring significant judgment in estimating variable consideration and performance obligations. ASC 842 requires the recognition of right-of-use assets and lease liabilities on the balance sheet for operating and finance leases, impacting asset and liability figures. This adoption also resulted in a $3.8 million adjustment to accumulated deficit.
How does Moderna recognize revenue from its collaboration agreements?
Moderna recognizes revenue from its collaboration agreements based on ASC 606, which involves identifying distinct performance obligations within contracts. Revenue is recognized either over time (e.g., using a proportional performance model based on costs incurred) or at a point in time (e.g., upon transfer of control of supply). For many agreements, significant variable consideration, such as milestone payments and royalties, is included in the transaction price only when it is highly probable that a significant reversal of cumulative revenue recognized will not occur. The application of this standard requires considerable judgment in estimating standalone selling prices, variable consideration, and the pattern of revenue recognition.
What is Moderna's financial position and outlook based on this filing?
As of December 31, 2019, Moderna reported a substantial cash and cash equivalents balance of $235.9 million, supplemented by marketable securities, indicating sufficient liquidity. However, the company reported a net loss of $514.0 million for the year, reflecting ongoing substantial investments in research and development to advance its mRNA platform and pipeline. The company's transition to a large accelerated filer suggests increased scrutiny and reporting requirements going forward. While the partnerships provide significant funding and validation, the continued net loss highlights the early-stage, R&D-intensive nature of its business.
What are the key collaborations mentioned and their financial implications?
The filing details several significant collaborations, notably with AstraZeneca (Cardiovascular, Oncology, Relaxin), Merck (Infectious Diseases, Cancer Vaccines), and Vertex (Cystic Fibrosis). These agreements involve upfront payments, milestone payments contingent on development and regulatory achievements, and potential royalties. For instance, the AstraZeneca agreements generated collaboration revenue of $48.0 million in 2019, while the Merck PCV/SAV agreement contributed $41.4 million. The Vertex agreement generated $6.2 million. These collaborations are crucial for funding Moderna's R&D efforts and validating its mRNA technology, but also introduce complexity in revenue recognition and significant future contingent liabilities/opportunities.
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