MODERNA, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited financial information and related notes included in this Form 10-Q and our consolidated financial statements and related notes and other financial information in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , which was filed with theSEC onFebruary 27, 2020 (the "2019 Form 10-K"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in Part II, Item 1A - Risk Factors in this Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. 43
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Table of Contents
Overview
We are a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines to create a new generation of transformative medicines 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 diseases and cardiovascular diseases, independently and with our strategic collaborators. Within our platform, we develop technologies that enable the development of mRNA medicines for diverse applications. When we identify technologies that we believe could enable a new group of potential mRNA medicines with shared product features, we call that group a "modality." While the programs within a modality may target diverse diseases, they share similar mRNA technologies, delivery technologies, and manufacturing processes to achieve shared product features. The programs within a modality will also generally share similar pharmacology profiles, including the desired dose response, the expected dosing regimen, the target tissue for protein expression, safety and tolerability goals, and pharmaceutical properties. Programs within a modality often have correlated technology risk, but because they pursue diverse diseases they often have uncorrelated biology risk. We have created six modalities to date: •prophylactic vaccines; •cancer vaccines; •intratumoral immuno-oncology; •localized regenerative therapeutics; •systemic secreted and cell surface therapeutics; and •systemic intracellular therapeutics. In 2019, we designated our prophylactic vaccines and systemic secreted and cell surface therapeutics modalities as our "core modalities" based on positive Phase 1 data from our infectious disease vaccine portfolio, including our cytomegalovirus, or CMV, vaccine and chikungunya antibody program. In these core modalities, our strategy is to invest in additional development candidates using our accumulated innovations in technology, our process insights and our preclinical and clinical experience. As such, we have brought five new development candidates forward in early 2020: a SARS-CoV-2 vaccine, interleukin-2, or IL-2, programmed death-ligand 1, or PD-L1, a pediatric Respiratory Syncytial Virus, or RSV vaccine, and an Epstein-Barr Virus, or EBV vaccine, as part of our mission to use our technology to advance global public health. Our exploratory modalities continue to be a critical part of advancing our strategy to maximize the application of our potential mRNA medicines. In response to the global coronavirus pandemic, we are pursuing the rapid development and manufacture of our vaccine candidate, mRNA-1273, for the treatment of SARS-CoV-2, the novel strain of coronavirus that causes COVID-19, in collaboration with theVaccine Research Center andDivision of Microbiology and Infectious Diseases of theNational Institute of Allergy and Infectious Diseases ("NIAID"), part of theNational Institutes of Health ("NIH"). The progress of mRNA-1273 during 2020 has resulted in the need for us to devote significant resources toward the development and manufacture of this product. Significant capital investment is necessary to prepare for the clinical development, manufacturing and distribution of a vaccine at a scale necessary to meet demand in a global pandemic environment. BARDA has committed to fund up to$954.9 million to accelerate the clinical development and manufacturing process scale-up of mRNA-1273. Under the terms of the agreement, BARDA will fund the advancement of mRNA-1273 to FDA licensure and the scale-up of manufacturing processes. The agreement does not contemplate any product stockpiling. InMay 2020 , we completed a public offering of 17,600,000 shares of common stock resulting in net proceeds of from the offering were$1.30 billion , net of underwriting discount, commission and offering expenses. This additional funding has enabled us to substantially expand our manufacturing network, purchase the required capital equipment, hire appropriate global staff and secure the raw materials and other consumables to manufacture substantial doses of mRNA-1273. mRNA-1273 is currently being tested in several clinical trials in collaboration with NIAID. We are in discussions withthe United States government and many other governmental agencies outsidethe United States related to the potential sale of doses of mRNA-1273 should the product be approved by the relevant regulatory requirements in each such country. As part of those discussions and in certain cases, we may receive upfront deposits for our future mRNA-1273 vaccine supply, initially recorded as deferred revenue. During the three months endedJune 30, 2020 , we recognized approximately$75.0 million in deferred revenue in connection with such deposits. We will recognize revenue when revenue recognition criteria have been met. As such, in the event that 44 -------------------------------------------------------------------------------- Table of Contents mRNA-1273 is approved for distribution, we may expect to capitalize inventory costs and record revenue related to product sales during 2020. Pre-launch inventory costs are expensed in the period incurred and included in research and development expense. Our initial product gross margin may be higher as our pre-launch inventory costs will not be included in cost of goods sold. COVID-19 has resulted in a significant burden of disease for the worldwide population, especially those with pre-existing diseases and other comorbid conditions such as cardiovascular disease, diabetes, chronic kidney disease, chronic lung disease and obesity. In determining the pricing for a potentially approved vaccine, we considered a health economic assessment framework that uses standard metrics like the incremental cost effectiveness ratio (ICER) and the standard willingness to pay thresholds as judged by quality adjusted life years (QALY) gained from a therapy. This analysis does not reflect the costs of factors like social disruption and economic loss. This assessment has resulted in a potential assigned value to an effective COVID-19 vaccine on an ICER basis with a QALY of$50,000 that ranges from$300 per 2-dose course to$725 per 2-dose course, with the value dependent on the age category and the epidemiology of the disease, depending on whether the spread continues on the current trajectory or there is increased transmission of COVID-19. With these values in mind, our approach during the pandemic period has resulted in our working to develop a safe and effective vaccine and to price that vaccine well below its value during the pandemic period. To date, we have entered into smaller volume agreements, primarily with governments, executed at$32-$37 per dose or$64-$74 per 2-dose course. It is expected that future larger volume agreements, if any, may result in a lower price per dose. As and if the pandemic recedes and the world enters an endemic period where a vaccine against COVID-19 is still required, we expect that our vaccine will be priced in-line with other innovative vaccines and will be dependent on market forces, including vaccine efficacy and number of competitors. During the endemic period, we expect to use traditional approaches to vaccine pricing, sale and distribution. We have a diverse development pipeline, and the broad potential applications of mRNA medicines have led us to raise significant capital and adopt a long-term approach to capital allocation that balances near-term risks and long-term value creation. As ofJune 30, 2020 , we had cash, cash equivalents, and investments of approximately$3.07 billion . We use this capital to fund operations and investing activities for technology creation, drug discovery and clinical development programs, infrastructure and capabilities to enable our research engine and early development engine (which includes ourModerna Technology Center ), our digital infrastructure, creation of our portfolio of intellectual property and administrative support. Since our inception, we have incurred significant operating losses. Our net loss was$514.0 million and$384.7 million for the years endedDecember 31, 2019 and 2018, respectively. Our net loss was$116.7 million and$240.9 million for the three and six months endedJune 30, 2020 , respectively. As ofJune 30, 2020 , our accumulated deficit was$1.74 billion . For the foreseeable future, we may continue to incur significant expenses and operating losses in connection with our ongoing activities, including as we: •continue our platform research and drug discovery and development efforts; •build up our commercial operations and organization; •conduct clinical trials for our investigational medicines; •manufacture clinical trial materials and develop large-scale manufacturing capabilities; •seek regulatory approval for our investigational medicines; •maintain, expand, and protect our intellectual property; •hire additional personnel to support our program development effort to obtain regulatory approval and secure additional facilities for operations; and •continue to operate as a public company. We do not expect to recognize revenue from the sale 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 and commercialize any of our investigational medicines, we expect to incur significant commercialization expenses, which include establishing a sales, marketing, manufacturing, and distribution infrastructure globally. As a result, we expect we will need substantial additional funding to support our continued operations and pursue our growth strategy in addition to commercial revenue that we may receive upon any sale of any of our products. Until we can generate significant revenue from sales of our 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. Because of the numerous risks and 45 -------------------------------------------------------------------------------- Table of Contents uncertainties associated with pharmaceutical development, we are unable to predict the timing or amount of 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 medicines, 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. In response to the global outbreak of coronavirus, we are pursuing the rapid clinical testing and manufacture of our vaccine candidate, mRNA-1273. In May andJuly 2020 , we announced positive interim data from theNIH -led Phase 1 study. of mRNA-1273. The Phase 2 placebo-controlled, dose-confirmation study of mRNA-1273 completed enrollment in earlyJuly 2020 , and enrollment in the Phase 3 study of mRNA-1273 began onJuly 27, 2020 . We continue to commit financial resources and personnel to the development of mRNA-1273, which may cause delays in or otherwise negatively impact our other development programs. The ultimate impacts of COVID-19 on our business are currently unknown. InMarch 2020 , we announced that, based on the special concerns for the safety and health of pediatric patients and their caregivers, and the risks of disruption to the integrity of trials from COVID-19, we decided to pause new enrollment of our Phase 1 rare disease clinical trials (mRNA-3704 for MMA, mRNA-3927 for PA) and our age de-escalation trial for our pediatric respiratory vaccine (mRNA-1653 for hMPV/PIV3). These decisions will be re-evaluated on an ongoing basis as the COVID-19 situation evolves. We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, suppliers and stockholders. We cannot predict the effects that such actions, or the impact of COVID-19 on global business operations and economic conditions, may have on our business or strategy, including the effects on our ongoing and planned clinical development activities and prospects, or on our financial and operating results. Our Pipeline This section describes the pipeline that has emerged thus far from the combination of our strategy, our platform, our infrastructure, and the resources we have amassed. Since we nominated our first program in late 2014, we and our strategic collaborators have advanced in parallel a diverse development pipeline which currently consists of 23 development candidates across our 22 programs. SinceDecember 2015 we have dosed approximately 2,000 subjects in our clinical trials and in our Phase 3 trial of mRNA-1273 started in late July we expect to dose 30,000 people with our vaccine or placebo. Our diverse pipeline comprises programs across six modalities and a broad range of therapeutic areas. A modality is a group of potential mRNA medicines with shared product features, and the associated combination of mRNA technologies, delivery technologies, and manufacturing processes. Aspects of our pipeline have been supported through strategic alliances, including with AstraZeneca plc, orAstraZeneca, Merck & Co, Inc. , or Merck, and Vertex Pharmaceuticals Inc., or Vertex, and government-sponsored organizations and private foundations focused on global health initiatives, theU.S. Biomedical Advanced Research and Development Authority , or BARDA, theDefense Advanced Research Projects Agency , orDARPA , theNIH , CEPI and theBill & Melinda Gates Foundation , or theGates Foundation . The following chart shows our current pipeline of 23 development candidates across our 22 programs, grouped into modalities-first the two core modalities where we believe we have reduced the technology risk, followed by the four exploratory modalities in which we are continuing to investigate the clinical use of mRNA medicines. 46
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[[Image Removed: mrna-20200630_g2.jpg]]
Abbreviations: IL-12, interleukin 12; IL-23, interleukin 23; IL-36?, interleukin
36 gamma; VEGF-A, vascular endothelial growth factor A.
The breadth of biology addressable using mRNA technology is reflected in our
current development pipeline of 22 programs. These span 26 different proteins or
protein complexes: 11 different antigens (including virus-like particles) for
infectious disease vaccines; two different cancer vaccines, one personalized
cancer vaccine addressing neoantigens and one for a shared cancer antigen; four
different immuno-modulator targets (including membrane and systemically secreted
proteins) for immuno-oncology programs; one secreted, local regenerative factor
for a heart failure program; four secreted or cell surface proteins of diverse
biology (an antibody, an engineered protein hormone, a secreted cytokine and a
cell surface receptor); and four intracellular enzymes for rare disease
programs.
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Table of Contents The diversity of proteins made from mRNA within our development pipeline is shown in the figure below. [[Image Removed: mrna-20200630_g3.jpg]] We have developed six modalities, which are summarized as follows:
•Prophylactic vaccines: Our prophylactic vaccines modality currently includes eight programs, six of which have entered into clinical trials. Of these programs, we have demonstrated desired pharmacology, in the form of immunogenicity, in the positive Phase 1 clinical trials for the following eight programs: H10N8 vaccine (mRNA-1440), H7N9 vaccine (mRNA-1851), RSV vaccine (mRNA-1777), Chikungunya vaccine (mRNA-1388), human metapneumovirus (hMPV)/ parainfluenza virus type 3 (PIV3) vaccine (mRNA-1653), Zika vaccine (mRNA-1893), CMV vaccine (mRNA-1647) and SARC-CoV-2 (mRNA-1273). We have an ongoing Phase 1 trial for the next generation Zika vaccine (mRNA-1893) and Merck is conducting a Phase 1 trial for an additional RSV vaccine (mRNA-1172). Our SARS-CoV-2 vaccine (mRNA-1273) is described in detail below. In addition to the eight programs being developed, the H10N8 vaccine (mRNA-1440) and Chikungunya vaccine (mRNA-1388) are two public health programs that are not being further developed without government or other funding. •Systemic secreted therapeutics: We have four systemic secreted and cell surface therapeutics development candidates in our pipeline. Our secreted programs include our antibody against Chikungunya virus (mRNA-1944), Relaxin (AZD7970) for the treatment of heart failure, and IL-2 (mRNA-6231) for autoimmune disorders. Our antibody against Chikungunya virus (mRNA-1944) has had positive Phase 1 readouts to date and is currently being evaluated in an ongoing Phase 1 dose escalation study in healthy adults that is randomized and placebo-controlled. The Phase 1 study evaluating escalating doses of mRNA-1944 administered via intravenous infusion in healthy adults has restarted after COVID-19 disruptions. Both cohorts, one cohort at the 0.6 mg/kg dose with steroid premedication and one cohort with two doses of 0.3 mg/kg (without steroid premedication) given one week apart, are fully enrolled and all participants have been dosed. The remaining programs for Relaxin (AZD7970) and IL-2 (mRNA-6231) are currently in preclinical development. We have a cell surface therapeutic program in this modality, PDL-1 (mRNA-6981) for autoimmune hepatitis, which is currently in preclinical development. •Cancer vaccines: We are currently developing two programs within our cancer vaccines modality. Our personalized cancer vaccine program mRNA-4157 is being developed in collaboration with Merck and is in a multiple-arm Phase 1 trial and a randomized Phase 2 trial. A second personalized cancer vaccine, NCI-4650 was being developed in collaboration with theNational Cancer Institute , or NCI, and was in an investigator-initiated single-arm Phase 1 trial which has been completed. The two vaccines mRNA-4157 and NCI-4650 differ in the neoantigen selection protocols used, but are otherwise 48 -------------------------------------------------------------------------------- Table of Contents substantially the same. Our second program within this modality, mRNA-5671, is a KRAS vaccine. Our strategic collaborator Merck has a Phase 1 clinical trial ongoing for mRNA-5671. •Intratumoral immuno-oncology: We have three programs in this modality. The first program in this modality, OX40L (mRNA-2416), was designed to overcome technological challenges in advancing this modality, including engineering the mRNA sequence to minimize off-target effects, utilizing our proprietary lipid nanoparticles (LNPs) to enhance safety and tolerability, and to demonstrate expression of a membrane protein in patients. OX40L (mRNA-2416) is currently being evaluated in an ongoing Phase 1/2 trial inthe United States , and protein expression has been demonstrated in a number of patients. Data from the monotherapy arm of this ongoing study of mRNA-2416 showed that mRNA-2416 was well-tolerated at all dose levels studied with the majority of adverse events reported as grade 1 and 2 and no grade 3 adverse events reported. This data supports the evaluation of intratumoral mRNA-2416 with the anti-PD-L1 inhibitor durvalumab in solid tumors, which is ongoing in Part B of this study with a focus on advanced ovarian carcinoma. Our second program, OX40L/IL-23/IL-36? (Triplet) (mRNA-2752), has dosed patients in a Phase 1 study for the treatment of advanced or metastatic solid tumor malignancies or lymphoma. Our third program, IL-12 (MEDI1191), is being developed in collaboration with AstraZeneca. •Localized regenerative therapeutics: Our localized VEGF-A program, AZD8601, which is being developed by AstraZeneca, has completed a Phase 1a/b trial to describe its safety, tolerability, protein production, and activity in diabetic patients. The study has met its primary objectives of describing safety and tolerability and secondary objectives of demonstrating protein production and changes in blood flow post AZD8601 administration. In this trial, AZD8601 was administered by intradermal injection in the forearm skin of patients for single ascending doses. These data are consistent with studies previously conducted in preclinical models. We believe these data provide clinical proof of mechanism for our mRNA technology outside of the vaccine setting. AstraZeneca has initiated a Phase 2a study of AZD8601 for VEGF-A for ischemic heart disease in patients undergoing coronary artery bypass grafting (CABG) surgery with moderately impaired systolic function, and the trial is ongoing. •Systemic intracellular therapeutics: We have four systemic intracellular therapeutics development candidates in our pipeline. Our intracellular programs address methylmalonic acidemia, or MMA (mRNA-3704), propionic acidemia, or PA (mRNA-3927), phenylketonuria, or PKU (mRNA-3283), and glycogen storage disorder type 1a, or GSD1a (mRNA-3745). We have an open IND for mRNA-3704 for a planned Phase 1/2 trial, and the FDA has also designated the investigation of mRNA-3704 for the treatment of isolated MMA due to MUT deficiency as a Fast Track development program. We have an open IND for mRNA-3927 for a planned Phase 1/2 trial and this program has also been designated as a Fast Track development program. PKU (mRNA-3283) is currently in preclinical development.
Our Vaccine Candidate Against SARS-CoV-2 (mRNA-1273)
In response to the global coronavirus pandemic, we are pursuing the rapid development and manufacture of our vaccine candidate, mRNA-1273, for the treatment of SARS-CoV-2, the novel strain of coronavirus that causes COVID-19, in collaboration with NIAID.
Preclinical Studies
OnJuly 29, 2020 , we announced the publication inThe New England Journal of Medicine of data from a preclinical study of mRNA-1273 in non-human primates. In the study, immunogenicity and protective efficacy were assessed after a two-dose vaccination schedule of 10 or 100 µg doses of mRNA-1273 or control given four weeks apart (n=24; 8 per group). Four weeks after the second vaccination, animals were challenged with high doses of SARS-CoV-2 through intranasal and intratracheal routes. After two vaccinations, the immune response observed in this non-human primate study was consistent with the Phase 1 human study of mRNA-1273, also published inThe New England Journal of Medicine . At the 10 µg dose, the geometric mean titer (GMT, ID50) measured in a pseudovirus (PsV) neutralization assay was 103, similar to the GMT for a panel of convalescent sera reported previously (109), and below the GMT achieved by mRNA-1273 in the Phase 1 human study at the 100 µg dose (231) in the same PsV assay. At the higher dose in the non-human primates (100 µg), neutralizing antibody titers increased further, with PsV GMT reaching 1,862. Vaccination also led to a significant increase in T cell responses, primarily Th1 CD4 T cells. Two doses of mRNA-1273 provided protection against lung inflammation following viral challenge with SARS-CoV-2 in non-human primates at both the 10 µg and 100 µg dose levels. In addition, both the 10 µg and 100 µg dose groups demonstrated protection against viral replication in the lungs, with the 100 µg dose also protecting against viral replication in the nose of the animals. Of note, none of the eight animals in the 100 µg group showed detectable viral replication in the nose compared to six out of eight in the placebo group on day 2. 49 -------------------------------------------------------------------------------- Table of Contents Preclinical results from a viral challenge study in mice conducted in collaboration with NIAID and its academic partners are also available. In this study, vaccination with mRNA-1273 prevented viral replication in the lungs of mice challenged with SARS-CoV-2. Neutralizing titers in Phase 1 clinical trial participants at the 25 µg and 100 µg dose levels (described below) were consistent with neutralizing titers that were protective in the mouse and NHP challenge models. Phase 1 Study A Phase 1 open-label study of mRNA-1273 is being conducted by theNational Institutes of Health (NIH). This study, which began onMarch 16, 2020 , originally enrolled 45 healthy adult volunteers ages 18 to 55 years and is evaluating three dose cohorts (25 µg, 100 µg and 250 µg). An additional seven cohorts in the Phase 1 study have since completed enrollment: a 50 µg cohort in adults 18-55 (n=15), three cohorts of older adults (n=30, ages 56-70, 25 µg, 50 µg, and 100 µg) and three cohorts of elderly adults (n=30, ages 71 and above, 25 µg, 50 µg, and 100 µg).
On
This interim analysis demonstrated that mRNA-1273 induced binding antibodies to the full-length SARS-CoV-2 Spike protein (S) in all participants after the first vaccination, with all participants seroconverting by Day 15. Dose dependent increases in binding titers were seen across the three dose levels, and between prime and boost vaccinations within the dose cohorts. After two vaccinations, at Day 57, geometric mean titers exceeded those seen in convalescent sera obtained from 38 individuals with confirmed COVID-19 diagnosis. Of the 38 individuals in the convalescent sera group, 15% were classified as having severe symptoms (hospitalization requiring intensive care and/or ventilation), 22% had moderate symptoms and 63% had mild symptoms. Convalescent sera samples were tested using the same assays as the study samples. Neutralizing activity was assessed in two different assays, a live SARS-CoV-2 plaque-reduction neutralization test (PRNT) and a pseudovirus neutralization assay (pseudotyped lentivirus reporter single-round-of-infection neutralization assay, PsVNA). No participants had detectable live SARS-CoV-2 virus neutralization or PsVNA responses prior to vaccination. After two vaccinations, mRNA-1273 elicited robust neutralizing antibody titers. At Day 43, neutralizing activity against SARS-CoV-2 (PRNT80) was seen in all evaluated participants. At the Phase 3 selected dose of 100 µg, the geometric mean titer levels were 4.1-fold above those seen in reference convalescent sera (n=3). After the second vaccination, PsVNA neutralizing antibody titers were detected in all participants in all dose cohorts. The Day 57 geometric mean titers at the 100 µg dose were 2.1-fold higher than those seen in convalescent sera (n=38)3. Strong correlations were observed between the binding and neutralization assays, and between the live virus and pseudovirus neutralization assays. A clear dose response was seen in geometric mean titers between the 25 µg and 100 µg dose levels, with minimal additional increases at the 250 µg dose. T-cell responses were also evaluated at the 25 µg and 100 µg dose levels. Following second vaccination, mRNA-1273 elicited Th1-biased CD4 T-cell responses without significant elevation of Th2-biased CD4 T-cell responses. mRNA-1273 was generally safe and well-tolerated, with no serious adverse events reported through Day 57. Adverse events were generally transient and mild to moderate in severity. The most notable adverse events were seen at the 250 µg dose level, with three of those 14 participants (21%) reporting one or more severe events. Solicited systemic adverse events were more common after the second vaccination and occurred in seven of 13 (54%) participants in the 25 µg group, all 15 participants in the 100 µg group and all 14 participants in the 250 µg group. The most commonly reported systemic adverse events following second vaccination at the 100 µg dose were fatigue (80%), chills (80%), headache (60%) and myalgia (53%), all of which were transient and mild or moderate in severity. The most common solicited local adverse event at the 100 µg dose was pain at the injection site (100%), which was also transient and mild or moderate in severity. Evaluation of clinical safety laboratory values grade 2 or higher and unsolicited adverse events revealed no patterns of concern. Evaluation of the durability of immune responses is ongoing, and participants will be followed for one year after the second vaccination, with scheduled blood collections throughout that period.
Phase 2 Study
We are conducting a Phase 2 placebo-controlled, dose-confirmation study evaluating the safety, reactogenicity and immunogenicity of two vaccinations of mRNA-1273 given 28 days apart. Each cohort -- healthy adults ages 18-55 years (n=300) and older adults ages 55 years and above (n=300) -- is receiving placebo, a 50 ?g or a 100 ?g dose at both vaccinations. OnJuly 8, 2020 , we announced that the Phase 2 study was fully enrolled. Participants will be followed for one year after the second vaccination.
Phase 3 Study
We are conducting a Phase 3 randomized, 1:1 placebo-controlled study of mRNA-1273, named the COVE study, which began enrollment onJuly 27, 2020 . The study protocol, which has been reviewed by theU.S. Food and Drug Administration (FDA) and is 50 -------------------------------------------------------------------------------- Table of Contents aligned to recent FDA guidance on clinical trial design for COVID-19 vaccine studies, provides for approximately 30,000 participants inthe United States at the 100 µg dose level. The primary endpoint will be the prevention of symptomatic COVID-19 disease. Key secondary endpoints include prevention of severe COVID-19 disease (as defined by the need for hospitalization) and prevention of infection by SARS-CoV-2. The primary efficacy analysis will be an event-driven analysis based on the number of participants with symptomatic COVID-19 disease. The target vaccine efficacy (VE) against COVID-19 for powering assumptions is 60% (95% confidence interval to exclude a lower bound >30%). Data will be reviewed by an independent Data Safety Monitoring Board organized byNIH . The trial is expected to have two interim analyses (at approximately 53 and 106 events), prior to a final event-driven analysis at approximately 151 events.
Regulatory
OnMay 11, 2020 , the FDA granted Fast Track designation for mRNA-1273. Fast Track is designed to facilitate the development and expedite the review of therapies and vaccines for serious conditions and fill an unmet medical need. Programs with Fast Track designation may benefit from early and frequent communication with the FDA, in addition to a rolling submission of the marketing application. Manufacturing
We are continuing to manufacture mRNA-1273 at the
InMay 2020 , we announced a 10-year strategic collaboration agreement withLonza Ltd. to enable larger scale manufacture of mRNA-1273 and additionalModerna products in the future. The companies are establishing manufacturing suites at Lonza's facilities inthe United States andSwitzerland for the manufacture of mRNA-1273 at both sites, and the first batches of mRNA-1273 at Lonza'sU.S. facility were manufactured in July. InJune 2020 , we announced a collaboration with Catalent, Inc. for large-scale, commercial fill-finish manufacturing of mRNA-1273 at Catalent's biologics facility inIndiana . As part of the agreement, Catalent will provide vial filling and packaging capacity, as well as additional staffing required for 24x7 manufacturing operations at the site to support production of an initial 100 million doses of the vaccine candidate intended to supply the U.S. market starting in the third quarter of 2020. Catalent will also provide clinical supply services from its facilities inPhiladelphia, Pennsylvania , including packaging and labeling, as well as storage and distribution to support our Phase 3 clinical study.
In addition, in
Key Updates for our Other Development Candidates
•CMV vaccine (mRNA-1647): We completed the third planned interim analysis of data from the Phase 1 clinical trial of mRNA-1647, which has completed enrollment and is evaluating the safety and immunogenicity of mRNA-1647 in 181 healthy adult volunteers. The clinical trial population includes those who are naïve to CMV infection (CMV-seronegative) and those who had previously been infected by CMV (CMV-seropositive). Participants were randomized to receive either placebo, or 30, 90, 180 or 300 µg of mRNA-1647 on a dosing schedule of 0, 2 and 6 months. This third planned interim analysis assessed immunogenicity of the first three dose levels (30, 90, and 180 µg) at twelve months (six months after the third vaccination). Neutralizing antibody titers (levels of circulating antibodies that block infection) were assessed in two assays utilizing epithelial cells and fibroblasts, which measure immune response to the pentamer and gB vaccine antigens, respectively. gB antigen-specific T cell responses after the second and third vaccinations were measured in a subset of CMV-seronegative participants in the 30, 90 and 180 µg dose levels utilizing an ELISpot assay. Pentamer-specific T cell assays remain in development. Vaccine-induced neutralizing antibody responses in the CMV-seronegative group were compared to the baseline neutralizing antibody titers in the CMV-seropositive group, noting that prior maternal CMV infection is associated with an approximately 30-fold lower risk of congenital CMV infection compared to the risk in the setting of maternal primary CMV infection.
In CMV-seronegative participants at twelve months (six months after the third vaccination) in the 30, 90 and 180 µg dose levels:
•A dose-related increase in neutralizing antibody titers was observed in
epithelial cell assays.
•Neutralizing antibody titers against epithelial cell infection were 3.6-fold
and 3.9-fold higher in the 90 and 180 µg dose levels than CMV-seropositive
baseline titers at the 90 and 180 µg dose levels.
•Neutralizing antibody titers against fibroblast infection were 0.7 and 0.9
times the CMV-seropositive baseline titers at the 90 and 180 µg dose levels.
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In CMV-seropositive participants at twelve months (six months after the third vaccination) in the 30, 90 and 180 µg dose levels:
•A dose-related increase in neutralizing antibody titers was observed in both epithelial cell and fibroblast assays. •Neutralizing antibody titers against epithelial cell infection ranged between 14-fold to 31-fold over baseline titers in all dose levels. •Neutralizing antibody titers against fibroblast infection ranged from 6-fold to 8-fold over baseline titers in all dose levels. The interim data analysis also included an assessment of safety for the highest dose level (300 µg). Safety and tolerability data at the 300 µg dose level were generally similar to that observed at the 180 µg dose level, indicating that the vaccine was generally well-tolerated. There were no vaccine-related serious adverse events. The most common solicited local adverse reaction at the 300 µg dose level was injection site pain. The most common solicited systemic adverse reactions at the 300 µg dose level were headache, fatigue, myalgia and chills and for seropositive participants, fever and arthralgia.
•hMPV/PIV3 vaccine (mRNA-1653): The first 10 subjects in the Phase 1b age de-escalation clinical trial of mRNA-1653 have been enrolled and dosed. Further screening and enrollment in this trial is paused due to the COVID-19 pandemic.
•Zika virus vaccine (mRNA-1893): All four cohorts (10 µg, 30 µg, 100 µg, 250 µg) of the Phase 1 study of mRNA-1893 have been dosed. In April, we announced positive data from an interim analysis of the 10 µg and 30 µg cohorts. The clinical trial population includes those who had not been infected by the Zika virus (flavivirus seronegative) and those who had previously been infected by the Zika virus (flavivirus seropositive). Participants were randomized to receive either placebo, 10, 30, 100 or 250 µg of mRNA-1893 on a dosing schedule of day 1 and day 29. This second planned interim analysis assessed safety and immunogenicity of the higher dose levels (100 and 250 µg) at day 57, 28 days after the second vaccination. Neutralizing antibody titers (levels of circulating antibodies that block infection) were assessed using Plaque Reduction Neutralizing Test (PRNT50) and microneutralization assays (MN), which provide equivalent guidance for interpreting the neutralizing immune response.
In the flavivirus-seronegative group:
•Seroconversion rates after the second vaccination reached 100% in the 100 µg dose level and 98.7% in the 250 µg dose level, based on the PRNT50. MN data were consistent with PRNT50 data. •A single vaccination at both the 100 and 250 µg dose levels was sufficient to seroconvert baseline flavivirus seronegative participants. However, there was a clear benefit of a two-dose series given 28 days apart. •Each of the 100 and 250 µg dose levels induced a strong neutralizing Zika virus-specific antibody response. •When compared with the 100 µg dose level, the 250 µg dose level did not show a higher neutralizing antibody response at either Day 29 (after one dose) or Day 57 (after the second dose).
In the flavivirus-seropositive group:
•The percentage of participants achieving a 4-fold boost in pre-existing PRNT50 titers after the second vaccination reached 100% in the 100 µg dose level and 75% in the 250 µg dose level, based on the PRNT50. MN data were generally consistent with PRNT50 data. A safety analysis indicated that the 100 and 250 µg dose levels were both generally well tolerated. There were no vaccine-related serious adverse events. The most common solicited local adverse reaction was local pain at the injection site. The most common solicited systemic adverse reactions were headache, fatigue, myalgia, fever and chills.There was a trend towards more observations of local erythema and swelling/induration at the injection site with higher dose levels, in particular after the second vaccine administration, as well as a trend of more solicited systemic adverse events with the 250 µg dose after the second administration.
For each of the dose cohorts in the Phase 1 study of mRNA-1893, further analysis of safety and immunogenicity at month 7 and month 13 is pending.
•OX40L (mRNA-2416): Based on available data, earlier this year we decided to
focus the development of mRNA-2416 for the treatment of patients with ovarian
cancer in combination with durvalumab (IMFINZI), a PD-L1 inhibitor. The safety
cohort of the combination arm (mRNA-2416 and durvalumab) of this Phase 1/2
clinical trial continues to enroll, and the Phase 2 dose expansion cohort in
patients with ovarian cancer is actively recruiting participants.
•Antibody against Chikungunya virus (mRNA-1944): We are conducting a Phase 1
dose-escalation study in healthy adults that is randomized and
placebo-controlled. The objective is to evaluate the safety and tolerability of
escalating doses (0.1, 0.3, 0.6, mg/kg dose levels, without dexamethasone
included in the premedication regimen, a dose level cohort at 0.6 mg/kg dose
level, with dexamethasone included in the premedication regimen, with 8 subjects
per cohort) of mRNA-1944 administered
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via intravenous infusion. In addition, there is a dose level cohort in which
subjects were administered two IV infusions of 0.3 mg/kg, one infusion on Day 1
and another subsequent infusion on Day 8, without dexamethasone in the
premedication regimen. No further dose escalation beyond 0.6 mg/kg is planned.
Following a pause due to COVID-19 disruption, enrollment and dosing in this
study resumed, and dosing of all dose level cohorts has been completed.
•Methylmalonic Acidemia (MMA) (mRNA-3704): Enrollment continues to be paused for
this study due to difficulties caused by the pandemic. As a result of the study
pause, the single patient previously enrolled was unable to be dosed in
accordance with study criteria, resulting in de-enrollment of the patient.
Financial Operations Overview
Revenue
To date, we have not recognized any revenue from the sale of potential mRNA
medicines. Our revenue has been primarily derived from strategic alliances with
Merck, Vertex and AstraZeneca, and from government-sponsored and private
organizations including BARDA,
Total revenue for the three and six months endedJune 30, 2020 was$66.4 million and$74.7 million , respectively. Total revenue for the three and six months endedJune 30, 2019 was$13.1 million and$29.1 million , respectively. In each period total revenue was comprised of collaboration revenue and grant revenue. Collaborative revenue from our strategic alliances as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Collaboration revenue: AstraZeneca$ 15,884 $ 188 $ 17,154 $ 1,002 Merck 10,365 8,659 11,341 19,346 Vertex 2,193 1,183 4,249 3,797 Other - - 155 -
Total collaboration revenue
Cash received from strategic alliances was$8.1 million and$10.5 million for the six months endedJune 30, 2020 and 2019, respectively. The timing of revenue recognition is not directly correlated to the timing of cash receipts. Total deferred revenue related to our strategic alliances as ofJune 30, 2020 andDecember 31, 2019 was$173.0 million and$199.5 million , respectively. Grant revenue was comprised as follows for the periods presented (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Grant revenue: BARDA$ 37,048 $ 1,876 $ 39,816 $ 3,365 Other 861 1,177 2,025 1,598 Total grant revenue$ 37,909 $ 3,053 $ 41,841 $ 4,963 Our ability to recognize revenue from sales of mRNA medicines and become profitable depends upon our ability to successfully develop and commercialize mRNA medicines. The rapid acceleration of our work on mRNA-1273 may result in revenue to us, either based on sales of the product directly or through collaborators. In addition, we expect to continue to receive funding from our contract with BARDA, which may result in significant additional amounts of revenue toModerna during 2020. To the extent that existing or potential future strategic alliances generate revenue, our revenue may vary due to many uncertainties in the development of our mRNA medicines under these strategic alliances and other factors. We may continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our research and development efforts. We expect our programs to mature and advance 53 -------------------------------------------------------------------------------- Table of Contents to later stage clinical development, and we expect expenses to increase as we seek regulatory approvals for our investigational medicines and begin to commercialize any approved mRNA medicines.
Research and development expenses
The nature of our business and primary focus of our activities generate a significant amount of research and development costs. Research and development expenses represent costs incurred by us for the following: •cost to develop our platform; •discovery efforts leading to development candidates; •preclinical, nonclinical, and clinical development costs for our programs; •costs related to pre-launch inventory; •cost to develop our manufacturing technology and infrastructure; and •digital infrastructure costs. The costs above comprise the following categories: •personnel-related expenses, including salaries, benefits, and stock-based compensation expense; •expenses incurred under agreements with third parties, such as consultants, investigative sites, contract research organizations, or CROs, that conduct our preclinical studies and clinical trials, and in-licensing arrangements; •expenses associated with developing manufacturing capabilities and acquiring materials for preclinical studies, clinical trials and pre-launch inventory, including both internal manufacturing and third-party contract manufacturing organizations, or CMOs; •expenses incurred for the procurement of materials, laboratory supplies, and non-capital equipment used in the research and development process; and •facilities, depreciation, and amortization, and other direct and allocated expenses incurred as a result of research and development activities. We use our employee and infrastructure resources for the advancement of our platform, and for discovering and developing programs. Due to the number of ongoing programs and our ability to use resources across several projects, indirect or shared operating costs incurred for our research and development programs are generally not recorded or maintained on a program- or modality-specific basis. The following table reflects our research and development expenses, including direct program-specific expenses summarized by modality and indirect or shared operating costs summarized under other research and development expenses during the three and six months endedJune 30, 2020 and 2019 (in thousands): 54
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Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Program expenses by modality:
Prophylactic vaccines $ 35,657 $ 12,398 $ 44,397 $ 32,660
Cancer vaccines 11,652 13,375 16,119 23,461
Intratumoral immuno-oncology 1,443 2,775 3,476 7,193
Localized regenerative therapeutics - 8 - 16
Systemic secreted and cell surface therapeutics 578 4,484 1,270 9,117
Systemic intracellular therapeutics 5,235 9,829 12,430 16,572
Total program-specific expenses by modality (1) 54,565 42,869 77,692 89,019
Other research and development expenses:
Discovery programs 10,229 15,635 20,727 28,550
Platform research 18,659 24,256 40,245 48,753
Technical development and unallocated
manufacturing expenses 29,284 18,258 58,422 39,443
Shared discovery and development expenses 24,416 14,355 43,168 29,238
Stock-based compensation 14,703 12,932 26,739 23,715
Total research and development expenses $ 151,856 $
128,305
__________
(1)Include a total of 23 and 21 development candidates atJune 30, 2020 and 2019, respectively. Program-specific expenses include external costs and allocated manufacturing costs of pre-launch inventory, mRNA supply and consumables, and are reflected as of the beginning of the period in which the program was internally advanced to development or removed if development was ceased. A "modality" refers to a group of programs with common product features and the associated combination of enabling mRNA technologies, delivery technologies, and manufacturing processes. The program-specific expenses by modality summarized in the table above include expenses we directly attribute to our programs, which consist primarily of external costs, such as fees paid to outside consultants, central laboratories, investigative sites, and CROs in connection with our preclinical studies and clinical trials, CMOs, and allocated manufacturing costs of pre-launch inventory, mRNA supply and consumables. Costs to acquire and manufacture pre-launch inventory, mRNA supply for preclinical studies and clinical trials are recognized and included in unallocated manufacturing expenses when incurred, and subsequently allocated to program-specific manufacturing costs after completion of the program-specific production. The timing of allocating manufacturing costs to the specific program varies depending on the program development and production schedule. We generally do not allocate personnel-related costs, including stock-based compensation, costs associated with our general platform research, technical development, and other shared costs on a program-specific basis. These costs were therefore excluded from the summary of program-specific expenses by modality. Discovery program expenses are costs associated with research activities for our programs in the preclinical discovery stage, and primarily consist of external costs for CROs and lab services, and allocated manufacturing cost of preclinical mRNA supply and consumables. Platform research expenses are mainly costs to develop technical advances in mRNA science, delivery science, and manufacturing process design. These costs include personnel-related costs, computer equipment, facilities, preclinical mRNA supply and consumables, and other administrative costs to support our platform research. Technology development and unallocated manufacturing expenses are primarily related to non-program-specific manufacturing process development and manufacturing costs.
Shared discovery and development expenses are research and development costs such as personnel-related costs and other costs, which are not otherwise included in development programs, discovery programs, platform research, technical development and unallocated manufacturing expenses, stock-based compensation, and other expenses.
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The largest component of our total operating expenses has historically been our
investment in research and development activities, including development of our
platform, mRNA technologies, and manufacturing technologies. We expense research
and development costs as incurred and cannot reasonably estimate the nature,
timing, and estimated costs required to complete the development of the
development candidates and investigational medicines we are currently developing
or may develop in the future. There are numerous risks and uncertainties
associated with the research and development of such development candidates and
investigational medicines, including, but not limited to:
•scope, progress, and expense of developing ongoing and future development
candidates and investigational medicines;
•entry in and completion of related preclinical studies;
•enrollment in and completion of subsequent clinical trials;
•safety and efficacy of investigational medicines resulting from these clinical
trials;
•changes in laws or regulations relevant to the investigational medicines in
development;
•receipt of the required regulatory approvals; and
•commercialization, including establishing manufacturing and marketing
capabilities.
A change in expectations or outcomes of any of the known or unknown risks and
uncertainties may materially impact our expected research and development
expenditures. Continued research and development is central to the ongoing
activities of our business. Investigational medicines in later stages of
clinical development, including mRNA-1273 and mRNA-1647, generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect our research and development costs to continue to increase in the
foreseeable future as our investigational medicines progress through the
development phases, as we continue to advance the development of mRNA-1273 and
mRNA-1647 and identify and develop additional programs. There are numerous
factors associated with the successful commercialization of any of our
investigational medicines, including future trial design and various regulatory
requirements, many of which cannot be determined with accuracy at this time due
to the early stage of development of our investigational medicines. Moreover,
future commercial and regulatory factors beyond our control will impact our
clinical development programs and plans.
As we continue to progress mRNA-1273 through the development process in order to
be useful during the current pandemic, we expect to incur significant additional
expenses, including those related to clinical trials, expanding our
manufacturing capabilities, costs of pre-launch inventory, regulatory filings
and the related costs, expansion of our operations into foreign jurisdictions
and commercialization and distribution efforts. At this time, the magnitude of
these potential expenditures and whether or not they will be funded by third
party contributions in whole or in part is not known. In connection with the new
BARDA agreement to accelerate development of mRNA-1273, our revenue and expenses
are expected to increase significantly. BARDA's funding is expected to offset
those increased expenses that are covered under the BARDA agreement, subject to
our obtaining reimbursement from BARDA.
General and administrative expenses
General and administrative expenses consist primarily of personnel-related costs, including stock-based compensation, for executives, finance, legal, human resources, business development and other administrative and operational functions, professional fees, accounting and legal services, information technology and facility-related costs, and expenses associated with obtaining and maintaining intellectual property, or IP. These costs relate to the operation of the business, unrelated to the research and development function, or any individual program. We anticipate general and administrative expenses will increase as we continue to expand the number of programs in development and prepare for the potential earlier establishment of commercial activities both within and outsidethe United States . In addition, if we obtain regulatory approval for any of our investigational medicines, including the potential accelerated approval for mRNA-1273, and do not enter into one or more third-party commercialization collaboration and manufacturing arrangements, we will incur significant expenses related to building a regulatory, manufacturing, sales and marketing team to support medicine sales, marketing, and distribution activities. We have a broad IP portfolio covering our development and commercialization of mRNA vaccine and therapeutic programs, including those related to mRNA design, formulation, and manufacturing platform technologies. We regularly file patent applications to protect innovations arising from our research and development. We also hold trademarks and trademark applications inthe United States and foreign jurisdictions. Costs to secure and defend our IP are expensed as incurred and are classified as general and administrative expenses. 56 -------------------------------------------------------------------------------- Table of Contents General and administrative expenses, including IP-related expenses, were$36.6 million and$60.7 million for the three and six months endedJune 30, 2020 , respectively. General and administrative expenses, including IP-related expenses, were$28.5 million and$55.7 million for the three and six months endedJune 30, 2019 , respectively. IP-related expenses, including our internal personnel-related costs, were$3.2 million and$5.6 million for the three and six months endedJune 30, 2020 , respectively. IP-related expenses, including our internal personnel-related costs, were$4.4 million and$7.2 million for the three and six months endedJune 30, 2019 , respectively. We did not incur litigation expenses related to our IP during the three months or six months endedJune 30, 2020 and 2019.
Interest income
Interest income consists of interest generated from our investments in cash and cash equivalents, money market funds, and high-quality fixed income securities.
Other expense, net
Other expense, net consists of interest expense, gains (losses) from the sale of investments in marketable securities, and other income and expense unrelated to our core operations. Interest expense is primarily derived from our finance lease related to ourModerna Technology Center manufacturing facility, or MTC South.
Critical accounting policies and significant judgments and estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of these condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors 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. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, are reflected in the condensed consolidated financial statements prospectively from the date of change in estimates. There have been no material changes in our critical accounting policies and estimates in the preparation of our condensed consolidated financial statements during the three months endedJune 30, 2020 compared to those disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , or 2019 Form 10-K.
Recently issued accounting pronouncements
We have reviewed all recently issued standards and have determined that, other
than as disclosed in Note 2 to our condensed consolidated financial statements,
such standards will not have a material impact on our financial statements or do
not otherwise apply to our operations.
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Results of operations
The following tables summarize our condensed consolidated statements of operations for each period presented (in thousands):
Three Months Ended June 30, Change 2020 vs. 2019
2020 2019 $ %
Revenue:
Collaboration revenue $ 28,442 $ 10,030 $ 18,412 184%
Grant revenue 37,909 3,053 34,856 1142%
Total revenue 66,351 13,083 53,268 407%
Operating Expenses:
Research and development 151,856 128,305 23,551 18%
General and administrative 36,622 28,487 8,135 29%
Total operating expenses 188,478 156,792 31,686 20%
Loss from operations (122,127) (143,709) 21,582 (15)%
Interest income 7,092 10,322 (3,230) (31)%
Other expense, net (1,530) (1,877) 347 (18)%
Loss before income taxes (116,565) (135,264) 18,699 (14)%
Provision for (benefit from) income taxes 148 (324) 472 (146)%
Net loss $ (116,713) $ (134,940) $ 18,227 (14)%
Six Months Ended June 30, Change 2020 vs. 2019
2020 2019 $ %
Revenue:
Collaboration revenue $ 32,899 $ 24,145 $ 8,754 36%
Grant revenue 41,841 4,963 36,878 743%
Total revenue 74,740 29,108 45,632 157%
Operating Expenses:
Research and development 266,993 258,718 8,275 3%
General and administrative 60,736 55,740 4,996 9%
Total operating expenses 327,729 314,458 13,271 4%
Loss from operations (252,989) (285,350) 32,361 (11)%
Interest income 14,944 21,294 (6,350) (30)%
Other expense, net (2,684) (3,808) 1,124 (30)%
Loss before income taxes (240,729) (267,864) 27,135 (10)%
Provision for (benefit from) income taxes 214 (348) 562 (161)%
Net loss $ (240,943) $ (267,516) $ 26,573 (10)%
Revenue
Total revenue increased by $53.3 million , or 407%, for the three months ended
June 30, 2020 compared to the same period in 2019, due to increases in both
collaboration revenue and grant revenue. Collaboration revenue increased by
$18.4 million for the three months ended June 30, 2020 compared to the same
period in 2019, primarily driven by an increase in revenue due to delivery of
drug materials under the collaboration agreements with AstraZeneca. Grant
revenue increased by $34.9 million for the three months ended June 30, 2020
compared to the same period in 2019, mainly due to an increase in revenue from
BARDA related to our mRNA-1273 vaccine candidate development.
Total revenue increased by $45.6 million , or 157%, for the six months ended June
30, 2020 compared to the same period in 2019, due to increases in both
collaboration revenue and grant revenue. Collaboration revenue increased by $8.8
million for the six months ended June 30, 2020 compared to the same period in
2019, mainly attributable to an increase in revenue in the second quarter of
2020, particularly from AstraZeneca, partially offset by cumulative catch-up
adjustments in revenue in the first quarter of 2020 due to changes in estimated
costs for our future performance obligations under the collaboration agreements
with AstraZeneca and Merck.
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Grant revenue increased by $36.9 million for the six months ended June 30, 2020
compared to the same period in 2019, mainly driven by an increase in revenue in
the second quarter of 2020 from BARDA related to our mRNA-1273 vaccine candidate
development.
Operating expenses
Research and development expenses
Research and development expenses increased by$23.6 million , or 18%, for the three months endedJune 30, 2020 compared to the same period in 2019. The increase was primarily attributable to an increase in personnel-related costs of$12.4 million and an increase in consulting and outside services of$12.2 million , mainly driven by increased headcount and mRNA-1273 clinical development. The increases were partially offset by a decrease in raw materials and manufacturing costs of$4.2 million , mainly due to change in timing of raw material inventory management and manufacturing lead time. Research and development expenses increased by$8.3 million , or 3%, for the six months endedJune 30, 2020 compared to the same period in 2019. The increase was primarily attributable to an increase in personnel related costs of$15.5 million , an increase in consulting and outside services of$11.2 million , and an increase in stock-based compensation of$3.1 million , largely attributable to increased headcount and mRNA-1273 clinical development. The increases were partially offset by a decrease in raw materials and manufacturing costs of$19.4 million and a decrease in lab supplies of$2.8 million , mainly due to change in timing of raw material inventory management and manufacturing lead time.
General and administrative expenses
General and administrative expenses increased by
General and administrative expenses increased by$5.0 million , or 9%, for the six months endedJune 30, 2020 compared to the same period in 2019. The increase was mainly due to an increase in personnel-related costs of$3.8 million , an increase in legal-related costs of$2.0 million , and an increase in stock-based compensation of$1.3 million . The increases were partially offset by a decrease in consulting and outside services of$2.3 million .
These increases for both the three and six month periods in 2020 were primarily attributable to increased headcount and mRNA-1273 vaccine candidate development-related activities.
Interest income
Interest income decreased by$3.2 million , or 31%, for the three months endedJune 30, 2020 compared to the same period in 2019. Interest income decreased by$6.4 million , or 30%, for the six months endedJune 30, 2020 compared to the same period in 2019. The decreases in interest income from our investments in marketable securities for the three and six month periods in 2020 were mainly attributable to an overall lower interest rate.
Other expense, net
The following table summarizes other expense, net for each period presented (in
thousands):
Three Months Ended June 30, Change 2020 vs. 2019
2020 2019 $ %
Gain on investments $ 570 $ 17 $ 553 3253%
Interest expense (1,878) (1,765) (113) 6%
Other expense, net (222) (129) (93) 72%
Total other expense, net $ (1,530) $ (1,877) $ 347 (18)%
Six Months Ended June 30, Change 2020 vs. 2019
2020 2019 $ %
Gain on investments $ 891 $ 14 877 6264%
Interest expense (3,544) (3,298) (246) 7%
Other expense, net (31) (524) 493 (94)%
Total other expense, net $ (2,684) $ (3,808) $ 1,124 (30)%
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Total other expense, net remained relatively flat for the three and six months
ended
Liquidity and capital resources
We have historically funded our operations primarily from the sale of equity instruments and from proceeds from certain strategic alliance arrangements and grant agreements. As ofJune 30, 2020 , we had cash, cash equivalents and investments of$3.07 billion . Cash, cash equivalents and investments are invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Investments, consisting primarily of government and corporate debt securities, are stated at fair value. As ofJune 30, 2020 , we had current and non-current investments of approximately$955.4 million and$354.9 million , respectively. We began construction of our manufacturing facility inMassachusetts , MTC South, in the second half of 2016 and completed construction during 2019. In the second quarter of 2019, we entered into an additional lease for office and laboratory space nearby, or MTC North. We started construction of MTC North in the fourth quarter of 2019. Our capital expenditures related to our MTC facilities were$20.0 million and$3.7 million for the six months endedJune 30, 2020 and 2019, respectively. Cash disbursements related to our MTC facilities were$15.3 million and$10.9 million for the six months endedJune 30, 2020 and 2019. In the second quarter of 2020, we received deposits of$75.0 million for our future mRNA-1273 vaccine supply based on preliminary agreements with certain of our potential customers. Cash flow
The following table summarizes the primary sources and uses of cash for each period presented (in thousands):
Six
Months Ended
2020 2019
Net cash provided by (used in):
Operating activities $ (130,066) $ (252,853)
Investing activities (303,539) (258,660)
Financing activities 1,959,358 4,470
Net increase (decrease) in cash, cash equivalents and restricted
cash $ 1,525,753 $ (507,043) Operating activities
We derive cash flows from operations primarily from cash collected from certain strategic alliances. Our cash flows from operating activities are significantly influenced by our use of cash for operating expenses and working capital to support the business. We have historically experienced and will continue to expect negative cash flows from operating activities due to our investments in mRNA technologies, digital infrastructure, manufacturing technology and infrastructure, and advancing our program development efforts and pipeline. Net cash used in operating activities for the six months endedJune 30, 2020 was$130.1 million and consisted of net loss of$240.9 million and non-cash adjustments of$61.6 million , plus a net change in assets and liabilities of$49.3 million . Non-cash items primarily included stock-based compensation of$44.3 million , and depreciation and amortization of$15.0 million . The net change in assets and liabilities was due to an increase in deferred revenue of$51.4 million , an increase in accrued liabilities of$20.2 million , an increase in operating lease liabilities of$14.0 million , an increase in accounts payable of$11.5 million and an increase in other liabilities of$4.4 million , partially offset by an increase in accounts receivable of$28.0 million , an increase in right-of-use assets related to operating leases of$12.4 million , an increase in prepaid expenses and an increase in other assets of$11.8 million . Net cash used in operating activities for the six months endedJune 30, 2019 was$252.9 million and consisted of net loss of$267.5 million and non-cash adjustments of$52.4 million , minus a net change in assets and liabilities of$37.8 million . Non-cash items primarily included stock-based compensation of$40.0 million , depreciation and amortization of$14.8 million and amortization of investment premium and discount of$2.4 million . The net change in assets and liabilities was primarily due to a decrease in accrued liabilities of$27.8 million , a decrease in deferred revenue of$23.1 million and an increase in right-of-use assets relating to operating leases of$3.4 million , partially offset by a decrease in accounts receivable of$8.1 million , a decrease in prepaid expense and other assets of$6.0 million , and an increase of right-of-use assets relating to operating leases of$3.6 million . 60 -------------------------------------------------------------------------------- Table of Contents Investing activities Our primary investing activities consist of purchases, sales, and maturities of our investments and capital expenditures for manufacturing, laboratory, computer equipment and software. Net cash used in investing activities for the six months endedJune 30, 2020 was$303.5 million , which included purchases of marketable securities of$903.6 million and purchases of property and equipment of$24.9 million , partially offset by proceeds from maturities of marketable securities of$516.9 million and proceeds from sales of marketable securities of$108.0 million . Net cash used in investing activities for the six months endedJune 30, 2019 was$258.7 million , which included purchases of marketable securities of$843.3 million and purchases of property and equipment of$18.2 million , partially offset by proceeds from maturities of marketable securities of$563.6 million and proceeds from sales of marketable securities of$39.2 million .
Financing activities
We generated cash from financing activities of$1.96 billion for the six months endedJune 30, 2020 , primarily from net proceeds from equity offerings of$1.85 billion and net proceeds from the issuance of common stock through our equity plans of$106.6 million .
We had insignificant financing activities for the six months ended
Operation and funding requirements
Since our inception, we have incurred significant losses and negative cash flows from operations due to our significant research and development expenses. We have an accumulated deficit of$1.74 billion as ofJune 30, 2020 . We may continue to incur significant losses in the foreseeable future and expect our expenses to increase, as we continue research and development of our development candidates and clinical activities for our investigational medicines. We also expect our expenses to increase associated with manufacturing costs, pre-launch inventory expenses, the establishment of late stage clinical and commercial capabilities, including our arrangements with our international supply and manufacturing partners. Our ongoing work on mRNA-1273 will require significant additional investment during 2020, some of which may not be reimbursed or otherwise paid for by our partners or collaborators. In addition, we expect to continue to incur additional costs associated with operating as a public company driven, in part, by the increased compliance requirements of being a publicly traded company that no longer qualifies as an emerging growth company as ofDecember 31, 2019 . We are subject to all the risks related to the development and commercialization of novel medicines, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors including the expenses related to the ongoing coronavirus pandemic, which may adversely affect our business. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We believe that our cash, cash equivalents, and investments as ofJune 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. Until we can generate a sufficient amount of revenue from our programs, we expect to finance future cash needs through a combination of public or private equity offerings, structured financings and debt financings, government funding arrangements, potential future strategic alliances from which we receive upfront fees, milestone payments, and other forms of consideration, and marketing, manufacturing, distribution and licensing arrangements. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of one or more of our investigational medicines, or slow down or cease work on one or more of our programs. If we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders or increased fixed payment obligations, and any such securities may have rights senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise funds through strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or investigational medicines or grant licenses on terms that may not be favorable to us. Any of these events could significantly harm our business, financial condition, and prospects. 61
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Contractual Obligations
As ofJune 30, 2020 , other than disclosed at Note 7 and Note 8 to our condensed consolidated financial statements, there have been no material changes to our contractual obligations and commitments from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2019 Form 10-K.
Off balance sheet arrangements
As of
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