UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
x☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20182020
OR
o☐ 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)
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| Delaware | | 81-3467528 |
| (State or Other Jurisdiction of Incorporation or Organization) | | (IRS Employer Identification No.) |
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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:
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| 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 |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o☑No x☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o☐No x☑
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 x☑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 x ☑No o☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
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.
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Large accelerated filer o ☑ | | Accelerated filer o☐ | | Non-accelerated filer x☐ | | Smaller reporting company o ☐ |
| | | | | | Emerging growth company x ☐ |
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☑
TheIndicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. . Yes ☑ No ☐
As of June 30, 2020, the aggregate market value of thevoting and non-voting common stockequity held by non-affiliates of the registrant was approximately $25.25 billion based on the closing sale price on that date of a share$64.21. Shares of common stock on December 7, 2018 as reportedheld by the Nasdaq Global Select Market on such date was approximately $4.3 billion. The registrant has electedeach executive officer and director and by each other person who may be deemed to use December 7, 2018, which was the initial trading date on the Nasdaq Global Select Market, as the calculation date because on June 30, 2018 (the last business daybe an affiliate of the registrant’s most recently completed second fiscal quarter) the registrant wasRegistrant have been excluded from this computation. The determination of affiliate status for this purpose is not necessarily a privately held company. This calculation does not reflect aconclusive determination that certain persons are affiliates of the registrant for any other purpose.purposes.
As of March 6, 2019,February 16, 2021, there were 329,000,469399,769,582 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement relating to its 20192021 Annual Meeting of Stockholders to be filed hereafter are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.
Table of Contents
Table of Contents
PART I.
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PART I. | | Page |
| Item 1. | Business | |
| Item 1A. | Risk Factors | |
| Item 1B. | Unresolved Staff Comments | |
| Item 2. | Properties | |
| Item 3. | Legal Proceedings | |
| Item 4. | Mine Safety Disclosures | |
PART II. | | |
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |
| Item 6. | Selected Consolidated Financial DataReserved | |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | |
| Item 8. | Financial Statements and Supplementary Data | |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | |
| Item 9A. | Controls and Procedures | |
| Item 9B. | Other Information | |
PART III. | | |
| Item 10. | Directors, Executive Officers and Corporate Governance | |
| Item 11. | Executive Compensation | |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | |
| Item 14. | Principal Accountant Fees and Services | |
PART IV. | | |
| Item 15. | Exhibits, Financial Statement Schedules | |
| Item 16. | Form 10-K Summary | |
| Signatures | | |
SUMMARY OF THE MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS
Our business is subject to numerous risks and uncertainties that you should be aware of before making an investment decision, including those highlighted in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:
•While we have received Emergency Use Authorization, or EUA, from the U.S. Food and Drug Administration and other provisional, interim or conditional authorizations from regulatory authorities outside the United States for our COVID-19 vaccine, we may encounter difficulties manufacturing. producing shipping or successfully commercializing the vaccine consistent with our existing or potential contractual obligations, including due to delays or difficulties experienced by our commercial partners;
•We are devoting significant resources to the scale-up, manufacturing, development and commercialization of our COVID-19 vaccine, including for use by the U.S. government and other global governmental and commercial partners, and the distribution of our vaccine requires us to comply with additional regulatory requirements, including pharmacovigilance regimes that require us to monitor safety data and to identify, evaluate and potentially respond to adverse reactions to our COVID-19 vaccine;
•The positive interim data from the ongoing clinical studies of our COVID-19 vaccine and the EUA granted by the FDA may not be predictive of the final results of the clinical trials, which is one of a number of factors that may delay or prevent us from receiving full regulatory approval of our vaccine;
•Our current COVID-19 vaccine (mRNA-1273) may prove ineffective at providing protection against infection by variant strains of the SARS-CoV-2 virus, and we may be unsuccessful in adapting our COVID-19 vaccine to effectively protect against variant strains of the SARS-CoV-2 virus;
•Our mRNA products, development candidates and investigational medicines are based on novel technologies and any development candidates and investigational medicines we develop may be complex and difficult to manufacture. We may encounter difficulties in manufacturing, product release, shelf life, testing, storage, supply chain management, or shipping for any of our medicines, including our COVID-19 vaccine. If we or any of our third-party manufacturers encounter such difficulties, our ability to supply commercial product or material for clinical trials could be delayed or stopped;
•Other companies or organizations may challenge our patent rights or may assert patent rights that prevent us from developing and commercializing our products—including our COVID-19 vaccine—or these rights may be subject to government action, including “march in rights” by the U.S. or foreign governments, which could harm our ability to commercialize our products or fully realize the financial benefits of those products;
•Our business may continue to be adversely affected by the ongoing coronavirus pandemic;
•mRNA drugs have only been authorized for emergency use, or other provisional, interim or conditional use, for COVID-19, and there is no guarantee that any other mRNA drug will be granted an EUA or will be granted full approval in the future as a result of efforts by others or us. mRNA drug development has substantial clinical development and regulatory risks due to the novel nature of this new class of medicines;
•We have incurred significant losses since our inception and we may incur significant losses again in the future;
•Preclinical development is lengthy and uncertain, especially for a new class of medicines such as mRNA, and therefore our preclinical programs or development candidates may be delayed, terminated, or may never advance to the clinic, any of which may have a material adverse impact on our platform or our business;
•Clinical development is lengthy and uncertain, especially with a new class of medicines such as mRNA medicines. Clinical trials of our investigational medicines may be delayed, including as a result of the COVID-19 pandemic or other pandemics in the future, and certain programs may never advance in the clinic or may be more costly to conduct than we anticipate, any of which could have a material adverse impact on our platform or our business;
•mRNA medicines are a novel approach, and negative perception of the efficacy, safety, or tolerability of any investigational medicines that we develop could adversely affect our ability to conduct our business, advance our investigational medicines, or obtain regulatory approvals;
•If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, or if other regulatory requirements are introduced, we will not be able to commercialize, or will be delayed in commercializing, investigational medicines we may develop, and our ability to generate revenue will be materially impaired;
•We have in the past entered into, and in the future may enter into, strategic alliances with third parties for the development and commercialization of our products, development candidates and investigational medicines. If these strategic alliances are not successful, our business could be adversely affected;
•We have limited sales, distribution, and marketing experience, and have only recently invested significant financial and management resources to establish these capabilities as a result of our rapid development and commercialization of our COVID-19 vaccine. If we are unable to effectively establish such capabilities or enter into agreements with third parties to market and sell our future products, if approved, our ability to generate revenues may be adversely affected;
•Certain of our customers for our COVID-19 vaccine prepay us for a portion of the product payment for the vaccine doses that they expect to receive from us, and under the terms of certain of our supply agreements, we may be required to refund some or all of those prepayments if a customer reduces its purchase commitment or if we fail to deliver the purchased volume;
•We will need to develop and expand our company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations;
•Our internal computer systems and physical premises, or those of our strategic collaborators, other contractors, consultants or regulatory agencies with which we share sensitive data or information, may fail or suffer security breaches, which could result in a material disruption of our product development programs and our manufacturing operations;
•The price of our common stock has been volatile and fluctuates substantially, which could result in substantial losses for stockholders; and
•Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition, or results of operations.
You should consider carefully the risks and uncertainties described below, in the section entitled “Risk Factors” and the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, before you decide whether to purchase our common stock. The risks described above are not the only risks that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements thatwithin the
meaning of the federal securities laws, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. All statements other than statements of historical facts contained in this Annual Report are forward-looking statements. These forward-looking statements 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 Annual Report on Form 10-K include, but are not limited to, statements about:
•our activities with respect to our COVID-19 vaccine, and our plans and expectations regarding future generations of our COVID-19 vaccine that we may develop in response to variants of the SARS-CoV-2 virus, ongoing clinical development, manufacturing and supply, pricing, commercialization, if approved, regulatory matters and third-party and governmental arrangements and potential arrangements;
•the initiation, timing, progress, results, 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 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 our COVID-19 vaccine efforts, particularly 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 and development activities relating to our development candidates and investigational medicines;
•our ability to obtain funding for our operations necessary to complete further development 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;
•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, and commercialization expertise;
•future agreements with third parties in connection with the 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 listed under the caption “Risk Factors.”
In some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology. The risks set forth above are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all risk factors, nor can we assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. 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 Annual Report on Form 10-K. 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 guarantee of future performance.
The forward-looking statements in this Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. 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 Annual Report on Form 10-K.
This Annual Report on Form 10-K 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 Annual Report on Form 10-K refer to Moderna, Inc. and its consolidated subsidiaries.
PART I
Item 1. Business
THE mRNA OPPORTUNITY
mRNA, the software of life
Messenger RNA, or mRNA, transfers the information stored in our genes to the cellular machinery that makes all the proteins required for life. Our genes are stored as sequences of DNA which contain the instructions to make specific proteins. DNA serves as a hard drive, safely storing these instructions in the nucleus until they are needed by the cell.
When a cell needs to produce a protein, the instructions to make that protein are copied from the DNA to mRNA, which serves as the template for protein production. Each mRNA molecule contains the instructions to produce a specific protein with a distinct function in the body. mRNA transmits those instructions to cellular machinery, called ribosomes, that make copies of the required protein.
We see mRNA functioning as the “software of life.” Every cell uses mRNA to provide real time instructions to make the proteins necessary to drive all aspects of biology, including in human health and disease. This was codified as the central dogma of molecular biology over 50 years ago, and is exemplified in the schematic below.
mRNA is used to make every type of protein, including secreted, membrane, and intracellular proteins, in varying quantities over time, in different locations, and in various combinations. This is shown in the figure below.
Given its essential role,Since our founding in 2010, we believehave been inspired by the belief that mRNA could be used to create a new class of medicines, with significant potential to improve the lives of patients. OverIn 2020, mRNA technology emerged as a new class of medicine, with the lastpotential to help treat the ongoing global pandemic. In the span of just over 11 months, we designed a vaccine against COVID-19 (mRNA-1273) using mRNA-based technology, conducted Phase 1, Phase 2 and Phase 3 clinical trials, which demonstrated that the vaccine was highly effective at preventing COVID-19, and obtained an Emergency Use Authorization (EUA) for the vaccine from the U.S. Food and Drug Administration on December 18, 2020, followed a few days later by an Interim Order from Health Canada authorizing the distribution of the vaccine in Canada. By December 31, 2020, we had delivered nearly 17 million doses of the Moderna COVID-19 Vaccine to the U.S. government, and several hundred thousand doses to the Canadian government to help fight the pandemic. As of December 31, 2020, we had committed orders for approximately 520 million doses of the vaccine to be delivered in 2021 to governments around the world.
The success we experienced in 2020 builds on over 40 years of progress in the biotechnology industry has createdindustry. Our approach fundamentally differs from traditional approaches to medicine. Rather than introduce a new category of drugs based on recombinant protein technology. These drugs rely on secreted proteins, including antibodies and protein replacements,or chemical to treat a wide range of diseases. This category of drugs accounts for over $200 billion in annual worldwide sales. However, intracellular and membrane proteins represent as much as two-thirds of the proteins in humans, and are largely beyond the reach of recombinant protein technology. Basedbody, we send tailored mRNA into cells to instruct them to produce specific proteins. We built Moderna on the abilityguiding premise that if mRNA can be used as a medicine for one disease, it could work for many diseases. Instead of starting from scratch for each new vaccine or therapy, our mRNA to produce these proteins directly in cells,approach leverages the technology and fundamental components that we have been researching and developing since our founding. By building off our prior research and learning, we believe we can improve how we discover, develop, and manufacture medicines.
Our success in developing the Moderna COVID-19 Vaccine further underpins our belief that mRNA-based medicines have the potential to help patients in ways that could equal or exceed the impact of recombinant protein-based drugs.traditional approaches to medicine.
Our strategic priorities
Our first priority for 2021 is to maximize the impact of our COVID-19 vaccine, both in terms of access and value creation of this product between now and the end of 2021. We are closely monitoring emerging variants of the SARS-CoV-2 virus as it continues to evolve and testing the performance of our vaccine against them. We are also studying potential booster shots, either of the existing vaccine or of a version that has been adjusted to address significant variants, as well as conducting further clinical trials in younger populations, with the hope of being able to provide the vaccine to adolescents aged 12 to 18 by fall 2021. Executing on this first priority will allow us to pursue our second priority, to accelerate vaccine development to advance our pipeline and bring new vaccines to market. In turn, this will make way for our third priority, to generate human proof-of-concept data in autoimmune diseases, cardiovascular diseases, oncology and rare diseases. And this will allow for our fourth priority, to continue to expand the use of mRNA technology to maximize the potential impact we can have on patients. We continue to believe that over time we will have a number of commercial products within our different modalities, which are described in more detail below.
In January 2021, we announced the expansion of our pipeline of prophylactic vaccines with three new development programs: mRNA vaccine candidates against seasonal flu, human immunodeficiency virus (HIV) and the Nipah virus. We also announced our intent to expand our respiratory syncytial virus (RSV) vaccine program into older adults. We currently have 24 mRNA development programs in our portfolio, with 13 having entered the clinic.
As of February 15, 2021, we had received additional regulatory authorizations for use of our COVID-19 vaccine in Europe, the United Kingdom, Israel, Switzerland, Singapore and Qatar. We continue forging ahead with the rolling reviews of our COVID-19 vaccine that have already been initiated with several regulatory agencies across the globe and the WHO, which is important for obtaining regulatory authorization to distribute the vaccine in many middle- and low-income countries.
The early investment we made in our manufacturing and digital capabilities prepared us to rapidly scale our production. At present, we believe we will be able to produce between 700 million and 1 billion doses of our COVID-19 vaccine in 2021. We are continuing to invest and add staff to make this production possible. We are also working on increasing our potential supply to up to 1.4 billion doses for 2022. Much of the production for the supply of the U.S. market will be completed at our Moderna Technology Center facility, or MTC South, in Norwood, Massachusetts, with additional production by Lonza Ltd. for the U.S. market. We have also partnered with Lonza to complete all production in Switzerland of our COVID-19 vaccine (generally referred to as COVID-19 Vaccine Moderna outside the U.S.) for markets other than the U.S. Fill-finish services for our COVID-19 vaccine are provided by Catalent Inc. in the U.S., and by ROVI and Recipharm outside the U.S. We have also partnered with other contract manufacturing organizations for the production of and fill-finish services for our COVID-19 vaccine, and expect that we will enter into additional collaborations as we scale production.
The structure of mRNA
Messenger RNA is a linear polymer comprising four monomers called nucleotides: adenosine (A), guanosine (G), cytosine (C), and uridine (U). Within the region of the molecule that codes for a protein, or the coding region, the sequence of these four nucleotides forms a language made up of three-letter words called codons. The first codon, or start codon (AUG), signals where the ribosome
should start protein synthesis. To know what protein to make, the ribosome then progresses along the mRNA one codon at a time, appending the appropriate amino acid to the growing protein. To end protein synthesis, three different codons (UAA, UAG, and UGA) serve as stop signals, telling the ribosome where to terminate protein synthesis. In total, there are 64 potential codons, but only 20 amino acids that are used to build proteins; therefore multiple codons can encode for the same amino acid.
The process of protein production is called translation because the ribosome is reading in one language (a sequence of codons) and outputting in another language (a sequence of amino acids). As shown in the figure below, the coding region is analogous to a sentence in English. Much like a start codon, a capitalized word can indicate the start of a sentence. Codons within the coding region resemble groups of letters representing words. The end of the sentence is signaled by a period in English, or a stop codon for mRNA.
The intrinsic advantages of using mRNA as a medicine
We believe mRNA possesses inherent characteristics that could servewe believe provide it with a strong foundation as the foundation for a new class of medicines. These characteristics include:
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1. | mRNA is used by every cell to produce all proteins: Cells in the human body use mRNA to make all types of proteins, including secreted, membrane, and intracellular proteins. mRNA is used by cells to vary the quantities of protein produced over time, in different locations, and in various combinations. Given the universal role of mRNA in protein production, we believe that mRNA medicines could have broad applicability across human disease.
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2. | Making proteins inside one’s own cells mimics human biology: Using a person’s own cells to produce protein therapeutics or vaccine antigens could create advantages over existing technologies such as recombinant proteins, which are manufactured using processes that are foreign to the human body. These advantages include the ability to:
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1.mRNA is used by every cell to produce all proteins: Cells in the human body use mRNA to make all types of proteins, including secreted, membrane,and intracellular proteins. mRNA is used by cells to vary the quantities of protein produced over time, in different locations, and in various combinations. Given the universal role of mRNA in protein production, we believe that mRNA medicines could have broad applicability across human disease.
2.Making proteins inside one’s own cells mimics human biology: Using a person’s own cells to produce protein therapeutics or vaccine antigens provides certain advantages over existing technologies such as recombinant proteins, which are manufactured using processes that are foreign to the human body. These advantages include the ability to:
•use multiple mRNAs to produce multiple proteins;
•reduce or eliminate immunogenicity;
•create multi-protein complexes;
•produce therapeutic or vaccine proteins locally;
•harness native protein folding and glycosylation; and
•make proteins that are unstable outside the body.
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3. | mRNA has a simple and flexible chemical structure: Each mRNA molecule comprises four chemically similar nucleotides to encode proteins made from up to 20 chemically different amino acids. To make the full diversity of possible proteins, only simple sequence changes are required in mRNA. A vast number of potential mRNA medicines can be developed, therefore, with only minor changes to the underlying chemical structure of the molecule or manufacturing processes, a significant advantage over small molecule or protein therapeutics.
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4. | mRNA has the potential for classic pharmacologic features: The intrinsic properties of mRNA translate into attractive pharmacologic features, including:
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3.mRNA has a simple and flexible chemical structure: Each mRNA molecule comprises four chemically similar nucleotides to encode proteins madefrom up to 20 chemically different amino acids. To make the full diversity of possible proteins, only simple sequence changes are required in mRNA. A vast number of potential mRNA medicines can be developed, therefore, with only minor changes to the underlying chemical structure of the molecule or manufacturing processes, a significant advantage over small molecule or protein therapeutics.
4.mRNA has classic pharmacologic features:The intrinsic properties of mRNA translate into attractive pharmacologic features,including:
•each mRNA encodes for a specific protein and no other protein;
•each mRNA molecule can produce many copies of a protein in the cell before being degraded;
•increasing mRNA levels in a cell generally leads to increasing protein levels; and
•the effects of mRNA in a cell can be transient and limits risk of irreversible changes to the cell’s DNA.
As a result, mRNA could havepossesses many of the attractive pharmacologic features of most modern medicines, including reproducible activity, predictable potency, and well-behaved dose dependency; and the ability to adjust dosing based on an individual patient’s needs, including stopping or lowering the dose, to seek to ensure safety and tolerability.
mRNA as a new class of medicines
Based on these and other features, we have developed four core beliefs about the value drivers of mRNA as a new class of medicines:
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1. | mRNA has the potential to create an unprecedented abundance and diversity of medicines. mRNA medicines could be used to provide patients or healthy individuals with any therapeutic protein or vaccine, including those targeting intracellular and membrane proteins. This breadth of applicability has the potential to create an extraordinary number of new mRNA-based medicines that are currently beyond the reach of recombinant protein technology.
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1.mRNA has the potential to create an unprecedented abundance and diversity of medicines. Although only two infectious disease vaccines using mRNA technology have been authorized to date for emergency use, or other provisional, interim or conditional use in response to the COVID-19 pandemic, we believe this success further demonstrates the potential formRNA medicines to provide patients orhealthy individuals with any therapeutic protein or vaccine, including those targeting intracellular and membrane proteins. This breadth of applicability has the potential to create an extraordinary number of new mRNA-based medicines that are currently beyond the reach of recombinant protein technology.
2.Advances in the development of our mRNA medicines can reduce risks across our portfolio. mRNA medicines share fundamental features that can reduce risks across our portfolio. mRNA medicines share fundamental features that canbe used to learn quickly across a portfolio. We believe that once safety and proof of protein production has been established in one program, the technology and biology risks of related programs that use similar mRNA technologies, delivery technologies, and manufacturing processes will decrease significantly. |
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3. | mRNA technology can accelerate discovery and development. The software-like features of mRNA enable rapid in silico design and the use of automated high-throughput synthesis processes that permit discovery to proceed in parallel rather than sequentially. We believe these mRNA features can also accelerate drug development by allowing the use of shared manufacturing processes and infrastructure.
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4. | The ability to leverage shared processes and infrastructure can drive significant capital efficiency over time. We believe the manufacturing processes will decrease significantly. We believe that the progress of our COVID-19 vaccine has helped mitigate risk associated with our prophylactic vaccine modality.
3.mRNA technology can accelerate discovery and development. The software-like features of mRNA enable rapidin silicodesign and the use ofautomated high-throughput synthesis processes that permit discovery to proceed in parallel rather than sequentially. We believe these mRNA features can also accelerate drug development by allowing the use of shared manufacturing processes and infrastructure.
4.The ability to leverage shared processes and infrastructure can drive significant capital efficiency over time. We believe the manufacturingrequirements of different mRNA medicines are dramatically more similar than traditional recombinant protein-based drugs across a similarly diverse pipeline. When manufacturing at commercial scale, we believe mRNA medicines will benefit from shared capital expenditures, resulting in lower program-specific capital needs and an advantageous variable cost profile. |
Recombinant protein-based drugs significantly advanced patient careacross a similarly diverse pipeline. When manufacturing at commercial scale, we believe a portfolio of mRNA medicines will benefit from shared capital expenditures, resulting in lower program-specific capital needs and transformed the biopharmaceutical industry. an advantageous variable cost profile.
We believe that the development of mRNA as a new class of medicines, could represent anotheras evidenced by the development of mRNA-based vaccines during 2020, represents a significant breakthrough for patients and our industry.
OUR STRATEGIC PRINCIPLES AND APPROACH TO MANAGING RISK
Our strategy is designed to deliver on the full scope of the mRNA opportunity over the long-term. Reaching patients with mRNA medicines requires us to make complex choices, including: how much capital we devote to technology creation, drug discovery, drug development, commercial and global marketing and infrastructure; which programs we advance and how; whether we advance programs alone or with strategic collaborators; and which capabilities we build internally versus outsource.
To navigate these choices, we established five strategic principles that guide our approach to creating long-term value for patients and investors. No single strategic principle dominates our choices. Embedded in every decision we make is also our assessment of the most important risks inherent in our business. We believe these risks fall into four categories: technology, biology, execution, and financing.
To increase our chances of success, we often find it necessary to balance our near-to-mid-term risks against the strategic principles that guide our approach to long-term value creation.
Our strategic principles
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1. | We seek to discover and develop a large pipeline in parallel. Our goal is to address or prevent as many human diseases as our technology, talent, capital, and other resources permit. We do so as rapidly as we can, understanding both the urgency for patients and the need to be disciplined in our approach. We have a diverse pipeline of 20 development candidates, 11 of which are currently in clinical trials, and many of which have the potential to be first-in-class or best-in-class medicines.1.We seek to discover and develop a large pipeline in parallel. Our goal is to address or prevent as many human diseases as our technology, talent,capital, and other resources permit. We do so as rapidly as we can, understanding both the urgency for patients and the need to be disciplined in our approach. We have a diverse pipeline of 24 development programs, with 13 of them having entered the clinic, many of which have the potential to be
first-in-class or best-in-class medicines. We have one commercial product, our COVID-19 vaccine, that is being distributed globally.
2.We undertake sustained, long-term investment in technology creation. We aim to improve the performance of mRNA medicines in our currentmodalities, and to unlock new modalities, through investments within basic and applied science. We are committed to remaining at the forefront of mRNA science.
3.We focus on the pace and scale of our learning. We believe that time is a critical resource. We seek to accelerate our progress by solving numeroustechnical problems in parallel rather than in sequence. Our scientists pursue experiments based on how much we can learn from the results, not just the probability of a positive outcome. We believe negative information is valuable and we can learn from our setbacks. We make significant investments in digital assets and research infrastructure to accelerate the pace and scale of our learning.
4.We integrate across the most critical parts of our value chain. mRNA is a complex multicomponent system and we believe it demands integration.We believe that we must be directly engaged in research, drug discovery, drug development, process and analytical development, and manufacturing to accelerate our learning, reduce our risk, and protect our critical know-how. Where appropriate, we seek out strategic collaborators that can augment our capabilities or expand our capacity in specific therapeutic areas, while being careful to resist the fragmentation of our core technology.
5.We forward invest in core enabling capabilities and infrastructure. To execute across a broad pipeline, we need to invest at risk before we have allthe answers. Our forward investments focus on areas where lead times are long and where early investments can reduce execution risk and accelerate future progress. We proactively invested in a dedicated manufacturing facility, Moderna Technology Center (MTC), in Norwood, MA, to support the anticipated growth of our pipeline, and this early investment greatly facilitated our ability to respond to the COVID-19 pandemic by allowing us to begin production of our vaccine even before we received regulatory authorization for its distribution.
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2. | We undertake sustained, long-term investment in technology creation. We aim to improve the performance of mRNA medicines in our current modalities, and to unlock new modalities, through investments within basic and applied science. We are committed to remaining at the forefront of mRNA science, which we believe will take many more years to fully mature.
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3. | We focus on the pace and scale of our learning. We believe that time is a critical resource. We seek to accelerate our progress by solving numerous technical problems in parallel rather than in sequence. Our scientists pursue experiments based on how much we can learn from the results, not just the probability of a positive outcome. We believe negative information is valuable and we can learn from our setbacks. We make significant investments in digital assets and research infrastructure to accelerate the pace and scale of our learning.
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4. | We integrate across the most critical parts of our value chain. mRNA is a complex multicomponent system and we believe it demands integration. We believe that we must be directly engaged in research, drug discovery, drug development, process and analytical development, and manufacturing to accelerate our learning, reduce our risk, and protect our critical know-how. Where appropriate, we seek out strategic collaborators that can augment our capabilities or expand our capacity in specific therapeutic areas, while being careful to resist the fragmentation of our core technology.
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5. | We forward invest in core enabling capabilities and infrastructure. To execute across a broad pipeline, we need to invest at risk before we have all the answers. Our forward investments focus on areas where lead times are long and where early investments can reduce execution risk and accelerate future progress. We proactively decided to invest in a dedicated manufacturing facility in Norwood, MA, to support the anticipated growth of our pipeline.
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Our approach to managing risk
In conjunction with the strategic principles that guide our approach to long-term value creation, we actively manage the risks inherent in our business. At present, these categories of risk include: technology, biology, execution, and financing. We summarize our approach to managing these risks below:
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1. | Technology risk encompasses the challenges of developing the product features of mRNA medicines, including delivery, controlling interactions with
1.Technology risk encompasses the challenges of developing the product features of mRNA medicines, including delivery, controlling interactions withthe immune system, optimizing therapeutic index, and manufacturing. We believe the best way to mitigate technology risk is to sustain long-term investments in our platform. In addition, we diversify our technology risk by compartmentalizing our pipeline into groups of programs with shared product features, which we call modalities. Lastly, we stage program development within a modality, leveraging the first program, whether successful or not, to generate insights that accelerate and reduce the risk of subsequent programs within the modality. |
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2. | Biology risk entails the risk unique to each program based on its mechanism of action and of clinical development in the target patient population. We believe the best way to mitigate technology risk is to sustain long-term investments in our platform. In addition, we diversify our technology risk by compartmentalizing our pipeline into groups of programs with shared product features, which we call modalities. Lastly, we stage program development within a modality, leveraging the first program, whether successful or not, to generate insights that accelerate and reduce the risk of subsequent programs within the modality.
2.Biology risk entails the risk unique to each program based on its mechanism of action and of clinical development in the target patient population. Webelieve the best way to manage biology risk is to diversify it by pursuing multiple programs in parallel. In addition, within a modality we seek to initially pursue programs with well-understood biology. Lastly, we may seek strategic collaborators to share risk and upside in disease areas with high inherent biology risk, such as cancer and heart disease.
3.Execution risk refers to the challenge of executing against the scale of our mission. We solve for this risk by seeking to hire the right people, the besttalent in the industry. We seek to foster a culture of execution with a focus on quick review cycles and high inherent biology risk, such as cancer and heart disease. |
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3. | Execution risk refers to the challenge of executing against the scale of our mission. We solve for this risk by seeking to hire the right people, the best talent in the industry. We seek to foster a culture of execution with a focus on quick review cycles and high
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velocity decision-making. We make forward investments in infrastructure, including manufacturing. Lastly, we have created a digital backbone to track all aspects of our programs and anticipate challenges before they arise.
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4. | Financing risk refers to our ability to access the capital required to fund the current breadth of our endeavor, as well as new opportunities. We manage this risk by attempting to maintain a strong balance sheet with several years of cash runway. As of December 31, 2018, we had cash, cash equivalents, and investments of $1.7 billion. Cash used in operations and for purchases of property and equipment was $330.9 million and $105.8 million in 2018, respectively. Lastly, we may continue to pursue strategic alliances, which provide resources and another source of funding.
4.Financing risk refers to our ability to access the capital required to fund the current breadth of our endeavor, as well as new opportunities. We managethis risk by attempting to maintain a strong balance sheet with several years of cash runway. As of December 31, 2020, we had cash, cash equivalents, and investments of $5.25 billion. This balance represents a significant increase in our liquidity over the prior year, driven primarily by customer deposits for the sale of our COVID-19 vaccine, as well as two equity offerings during the first half of the year (in February and May).
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There is no single strategic principle nor single category of risk that dominates our decision-making, and universal rules do not exist across our portfolio. Our trade-offs generally involve balancing near-term risks and long-term value creation. Because development cycles are long, our choices are complex. We expect the weighting and types of risk we face will evolve as our business matures. We
believe that disciplined capital allocation across near- and long-term choices must be a core competency if we are to maximize the opportunity for patient impact and shareholder value creation.
Our progress
Our success in developing a highly effective vaccine against COVID-19, going from sequence selection, conducting clinical trials and to receipt of regulatory authorization for emergency use, all in less than a year, provides a visible example of the promise of mRNA-based medicine. Our COVID-19 vaccine is currently authorized or conditionally approved in over 30 countries, and has already been used to vaccinate millions of patients to help combat the pandemic. We are encouraged bybelieve our results to date. Across thesuccess in developing this vaccine has positive implications beyond infectious disease vaccines and across our six modalities that wemodalities. We currently have established, we have 2024 programs in development, and manufactured dozensour pipeline spans five therapeutic areas: infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases and autoimmune diseases. We remain on track to produce between 700 million and 1 billion doses of drug substance lots for useour COVID-19 vaccine in IND-enabling Good Laboratory Practice, or GLP, toxicology studies. “IND-enabling” refers to studies required for Investigational New Drug Application, or IND, or equivalent non-U.S. regulatory filings, such as a Clinical Trial Application, or CTA. We and our strategic collaborators have completed IND-enabling GLP toxicology programs to support our 15 open INDs and/or CTAs for our development candidates, manufactured dozens of current good manufacturing practice, or cGMP, batches of clinical trial materials, and have 11 programs in clinical trials and another 3 with open INDs. Over 1,000 subjects have been enrolled in our clinical trials. To fund these activities, we have raised over $3.2 billion as of December 31, 2018, including $2.4 billion from equity issuances and $0.8 billion in upfront payments, milestone payments, and option exercise fees from strategic collaborators.2021.
OUR PLATFORM
Overview of our platform
Our “platform” refers to our accumulated knowledge and capabilities in basic and applied sciences across mRNA, the delivery of mRNA to target tissues, and the manufacturing processes for making potential mRNA medicines. We invest in basic science to discover foundational mechanistic insights, and we invest in applied sciences to invent technology that harnesses those insights. We use our platform to identify and develop new mRNA medicines. When we identify a combination of platform technologies or programs across mRNA technologies, delivery technologies, and manufacturing processes that can enable shared product features across multiple potential mRNA medicines, we group those programs as a modality. The primary goal of our platform is to identify new modalities and to expand the utility of our existing modalities. We are committed to advancing the technological frontier of mRNA medicines over the long term.
We define success in our platform as achieving the following pharmacologic properties:
•predictable dose response;
•reproducible pharmacology, including upon repeat dosing;
•therapeutic potency, through achieving the intended pharmacologic activity in the target tissue;
•safety and tolerability; and
•scalability for development.
Achieving any of these pharmacologic properties requires many, often interdependent, technological solutions. We organize our efforts into three core scientific areas: mRNA, delivery, and manufacturing process as shown in the figure below.below:
We pursue mRNA science both to minimize undesirable activation of the immune system by mRNA, and to maximize the mRNA potency of mRNA once inside target cells.cells, and to extend pharmacology of our therapeutics. We pursue delivery science to protect mRNA from extracellular enzymes that would degrade it, to avoid counterproductive interactions of our delivery vehicles with the immune system, deliver mRNA to desired tissues, and facilitate mRNA transport across cell membranes to the translational machinery within cells. Finally, we have learned that the methods for producing mRNA and lipid nanoparticle, or LNP, delivery systems can have profound positive and negative effects on pharmacology. We pursue process science to optimize these features for our future medicines and to develop technical capabilities to scale our potential mRNA medicines for clinical development.
We have incurred over $500 million ofsignificant expense to advance our platform technology and our intellectual property. This investment has underpinned the creation of all six of our existing modalities and helped us to establish fundamental intellectual property. We intend to sustain our investment in our platform in the future because we believe we can establish new modalities and continue to make meaningful improvements in the performance of our current modalities.
The
Our COVID-19 vaccine demonstrates the success of our current platform and theplatform. Our current pipeline, which consists of 2024 programs, that it underpins depends on hundreds of small advances and 10 years of research and investment in our three core scientific areas. Examples of many
critical advances that we have made are described below. These advances demonstrate our significant progress to date, and exemplify our approach to tackling hundreds of smaller scientific problems and organizing them into technological solutions.
Our platform: mRNA science
An overview of mRNA biology
Messenger RNA is a linear polymer comprised of four monomers called nucleotides: adenosine (A), guanosine (G), cytosine (C), and uridine (U). Within the region of the mRNA molecule that serves as instructions for protein synthesis, the coding region, the exact sequence of these four nucleotides forms a language made up of three-letter words called codons. One codon, the start codon (AUG), serves to signal where the ribosome should start protein synthesis. To know what protein to make, the ribosome then progresses along the mRNA one codon at a time, appending the appropriate amino acid to the growing protein chain. Because the ribosome is reading in one language (a sequence of codons) and outputting in another language (a sequence of amino acids), this process is called translation. Finally, three different codons (UAA, UAG, and UGA) can serve as stop signals, telling the ribosome where to terminate
protein synthesis. The production of proteins from mRNA sequences is called translation and is used to make all human proteins. The production of mRNA from DNA is called transcription.
As shown in the figure below, the coding region in an mRNA molecule is analogous to a sentence in English. The start codon indicates the start of the protein, much like a capitalized word can indicate the start of a sentence. Codons within the coding region resemble groups of letters representing words. The end of the sentence is signaled by a period in English, or a stop codon for mRNA.
In every cell, hundreds of thousands of mRNAs make hundreds of millions of proteins every day. A typical protein contains 200-600 amino acids; therefore a typical mRNA coding region ranges from 600-1,800 nucleotides.
In addition to the coding region, mRNAs contain four other key features: (1) the 5’ untranslated region or 5’-UTR; (2) the 3’ untranslated region or 3’-UTR; (3) the 5’ cap; and (4) a 3’ polyadenosine, or poly-A, tail. The sequence of nucleotides in the 5’-UTR influences how efficiently the ribosome initiates protein synthesis, whereas the sequence of nucleotides in the 3’-UTR contains information about which cell types should translate that mRNA and how long the mRNA should last. The 5’ cap and 3’ poly-A tail enhance ribosome engagement and protect the mRNA from attack by intracellular enzymes that digest mRNA from its ends.
As a result of this biology, mRNA has several key features. First, mRNA is exquisitely specific. There is a one-to-one correspondence between an mRNA molecule and the protein dictated by the coding sequence. Second, the biological effects of mRNA are amplified. Because each mRNA copy can be translated thousands of times, we believe that in some cases, a small number of mRNA copies per cell may be sufficient to induce a pharmacologic effect. Finally, mRNA is impermanent. mRNAs produce proteins for a defined and biologically-regulated period of time without risk of changing genes or cell DNA. If dosing of mRNA stops, protein production will stop and the biological effects generally can be reversed.
Decades of academic investigation have uncovered the basic mechanisms of mRNA translation. Parallel efforts have uncovered how the innate immune system determines self-mRNA versus foreign RNA from RNA-based viruses.
We are grateful for the deep scientific foundation established by these pioneers. Yet as we seekcontinue to develop mRNA into medicines we often find ourselves at the frontiers of current understanding. Therefore, we invest in both applied and basic research, seeking to advance both the state of our technology and the state of the scientific community’s understanding of mRNA. Examples of advances in mRNA science that combine nucleotide chemistry, sequence engineering, and targeting elements are described below.
mRNA chemistry: Modified nucleotides to mitigate immune system activation
The innate immune system has evolved to protect cells from foreign RNA, such as viral RNA, by inducing inflammation and suppressing mRNA translation once detected. Many cells surveil their environment through sensors called toll-like-receptors, or TLRs. These include types that are activated by the presence of double-stranded RNA (TLR3) or uridine containing RNA fragments (TLR7, TLR8). Additionally, all cells have cytosolic double-stranded RNA, or dsRNA, sensors, including retinoic acid inducible gene-I, or RIG-I that are sensitive to foreign RNA inside the cell.
The immune and cellular response to mRNA is complex, context specific, and often linked to the sensing of uridine. To minimize undesired immune responses to our potential mRNA medicines, our platform employs chemically-modified uridine nucleotides to minimize recognition by both immune cell sensors such as TLR3/7/8, and broadly-distributed cytosolic receptors such as RIG-I. mRNA produced using our synthesis technologies and containing unmodified uridine results in significant upregulation of secreted
cytokines such as IP-10, as shown in the figure below.which is indicative of local immune cell activation. Administration of monocyte-derived macrophages, or MDMs, with unmodified mRNA formulated in LNPs results in an increased ratio of IP-10 transcripts relative to a housekeeping gene, HPRT.gene. By substituting unmodified uridine with a modified uridine, we can substantially reduce immune cell activation in this assay. The control contains only transfection agent and no mRNA. In multiple preclinical experiments we have demonstrated reduced immune cell activation, including of B cells, lower immunoglobulin secretion, and lower cytokine expression when administering mRNA made with modified uridine versus unmodified uridine. To date, when deploying these technologies, we have yet to observe dose-limiting toxicity attributable to the mRNA encoding proteins from our drug substance even at the exaggerated doses in IND-enabling GLP toxicology programs. Importantly, in preclinical testing, our chemically-modified uridine has not significantly affected the ribosome’s ability to read and translate the mRNA sequence.
Nucleotide chemistry of mRNA reduces immune activationin vitro (in MDMs)monocyte-derived macrophages)
mRNA sequence engineering: Maximizing protein expression
mRNA exists transiently in the cytoplasm, during which time it can be translated into thousands of proteins before eventually being degraded. Our platform applies bioinformatic, biochemical, and biological screening capabilities, most of which have been invented internally that aim to optimize the amount of protein produced per mRNA. We have identified proprietary sequences for the 5’-UTR that have been observed to increase the likelihood that a ribosome bound to the 5’-end of the mRNA transcript will find the desired start codon and reliably initiate translation of the coding region.
We additionally design the nucleotide sequence of the coding region to maximize its successful translation into protein. As previously described, there are often multiple codons that encode for a specific amino acid. The amount of protein produced by an mRNA sequence is known to be partly determined by the codons it uses, with certain codons being more or less common in endogenous mRNAs. We have found that the amount of protein produced is also determined by the secondary structure of mRNA, or the propensity of mRNA to fold on itself, with more structured mRNAs producing more protein. We designed a set of sequences which independently varied codon usage and structure of the mRNA. As shown in the figure below, protein expression in the Alpha mouse liver 12, or AML12, cell line is highest for sequences containing more commonly occurring codons and also more structured mRNA. Both codon usage and structure have an independent and additive effect on protein expression, shown as mean expression (solid line), as measured by fluorescence of the expressed protein, with 95% confidence interval in gray. The total expression area under the curve, or AUC, and standard error of the mean for AUC are shown for each quadrant, in relative fluorescence units per hour, or RFU/h.hour. By optimizing translation initiation and efficiency, we have further increased the average number of full-length desired proteins expressed per molecule mRNA. This permits us to reduce the mRNA doses required to achieve the same therapeutic benefit.
Sequences with more structure and more common codons in mRNA maximize protein expressionin vitro
Targeting elements: Enabling tissue-targeted translation
All nucleated cells in the body are capable of translating mRNA, resulting in pharmacologic activity in any cell in which mRNA is delivered and translated. To minimize or prevent potential off-target effects, our platform employs technologies that regulate mRNA translation in select cell types. Cells often contain short RNA sequences, called microRNAs or miRNAs, that bind to mRNA to regulate protein translation at the mRNA level. Different cell types have different concentrations of specific microRNAs, in effect giving cells a microRNA signature. microRNA binding directly to mRNA effectively silences or reduces mRNA translation and promotes mRNA degradation. We design microRNA binding sites into the 3’-UTR of our potential mRNA medicines so that if our mRNA is delivered to cells with such microRNAs, it will be minimally translated and rapidly degraded.
As an example, we have demonstrated by intratumoral administration in an animal model that an mRNA encoding a cytotoxic protein and containing a microRNA binding site can be used to selectively kill cancer cells, while protecting systemic tissues such as liver cells. In a mouse model of cancer (Hep3b subcutaneous xenograft mouse), liver enzyme levels and immunohistochemistry, or IHC, of cleaved caspase-3, or CC3, indicate production of an apoptosis-inducing protein encoded by mRNA in tumor cells but not healthy liver cells when the mRNA has multiple miR-122 target sites. This is denoted as 3x122ts in the figure below; miR-122 is more prevalent in non-cancerous liver cells, but absent in the cancerous liver cells. We published this work inNucleic AcidTherapeuticsin 2018.
Tissue-targeted translation of mRNA encoding a pro-apoptotic protein
and microRNA binding sites in mouse study
Our platform: Delivery science
We focus on the delivery of our mRNA molecules to specific tissues. Our mRNA can, in specific instances, such as our VEGF therapeutic, be delivered by direct injection to a tissue in a simple saline formulation without lipid nanoparticles, or LNPs, to locally produce small amounts of pharmacologically active protein. However, the blood and interstitial fluids in humans contain significant RNA degrading enzymes that rapidly degrade any extracellular mRNA and prevent broader distribution without LNPs. Additionally, cell membranes tend to act as a significant barrier to entry of large, negatively-charged molecules such as mRNA. We have therefore
invested heavily in delivery science and have developed LNP technologies, as well as alternative nanoparticle approaches to enable delivery of larger quantities of mRNA to target tissues.
LNPs are generally composed of four components: an amino lipid, a phospholipid, cholesterol, and a pegylated-lipid, or PEG-lipid. Each component, as well as the overall composition, or mix of components, contributes to the properties of each LNP system. LNPs containing mRNA injected into the body rapidly bind proteins that can drive uptake of LNPs into cells. Once internalized in endosomes within cells, the LNPs are designed to escape the endosome and release their mRNA cargo into the cell cytoplasm, where the mRNA can be translated to make a protein and have the desired therapeutic effect. Any mRNA and LNP components that do not escape the endosome are typically delivered to lysosomes where they are degraded by the natural process of cellular digestion.
Examples of tools we developed by using our platform include proprietary LNP formulations that address the steps of mRNA delivery, including cell uptake, endosomal escape, and subsequent lipid metabolism, and for avoidance of counterproductive interactions with the immune system. Examples of delivery tools we have developed are described below.
Chemistry: Novel lipid chemistry to potentially improve safety and tolerability
We initially used LNP formulations that were based on known lipid systems, which we refer to as “legacy LNPs.” A recognized limitation of these legacy LNPs is the potential for inflammatory reactions upon single and repeat administration that can impact tolerability and therapeutic index. Our later-developed, proprietary LNP systems are therefore designed to be highly tolerated and minimize any LNP vehicle-related toxicities with repeat administrationin vivo. The changes we made have included engineering amino lipids to avoid the immune system and to be rapidly biodegradable relative to prior lipids as shown in the figure below.lipids. Administered intravenously in non-human primates, at 0.2 mg/kg, our proprietary LNPs demonstrate rapid clearance of the lipid from panel A (plasma)plasma and B (various organs 12 hours post administration).such as peripheral lymphoid organs and the liver.
Rapid clearance of lipid components of LNPs from plasma in non-human primate study
(y-axis in log-scale)
Panel (A)
Rapid clearance of LNP lipid from tissue 12 hours post administration in non-human primate study
Panel (B)
Even in the case of vaccines, where one might hypothesize that LNP-induced immune stimulation could potentially increase the effectiveness of the vaccine, we have demonstrated in preclinical studies that we can maintain the desired immune response to the vaccine while reducing undesired local immune reaction, or reactogenicity, to the LNP as shown in the figure below. Representative histology sections in the muscle stained with hematoxalin and eosin two days after a single intramuscular administration in rats demonstrated less inflammation and muscle cell necrosis with our proprietary LNPs vs. legacy LNPs containing 0.1 mgLNP. The tolerability of our mRNA. As exemplified in the box with the legacy LNP in panel A, necrosisvaccine formulation has been demonstrated clinically and, degenerationto date, millions of muscle cells and inflammation were observed (dotted box). Withindividuals worldwide have received our proprietary LNPs, inflammation (dotted box) and muscle cell necrosis were less extensive. Serum cytokine levels shown in panel B, are lower with our proprietary LNPs vs. legacy LNPs.vaccine against COVID-19.
Vaccines with our proprietary LNPs demonstrate less inflammation and muscle cell necrosis compared to legacy LNPs in rat study
Panel (A)
Lower serum cytokines with our proprietary LNP in rat study
Panel (B)
Composition: Proprietary LNPs enhance delivery efficiency
Our platform includes extensive in-house expertise in medicinal chemistry, which we have applied to design large libraries of novel lipids. Using these libraries in combination with our discovery biology capabilities, we have conducted high throughput screens for desired LNP properties and believe that we have made fundamental discoveries in preclinical studies about the relationships between structural motifs of lipids and LNP performance for protein expression. By screening for components and compositions that enhance the amount of mRNA delivered per cell and protein expression, we have demonstrated with intravenous administration up to a six-fold improvement in protein production over the prior state of the art for LNPs as shown in the figure below (n=3 rats, 95% CI shown).
Enhanced protein production with our proprietary LNP in rat study
Surface properties: Novel LNP design to avoid immune recognition
We have designed our proprietary LNP systems for sustained pharmacology upon repeat dosing by eliminating or altering features that activate the immune system. These are based on insights into the surface properties of LNPs. Upon repeated dosing, surface features on traditional LNPs such as amino lipids, phospholipids, and PEG-lipids, can be recognized by the immune system, leading to rapid clearance from the bloodstream, a decrease in potency upon repeat dosing, and an increase in inflammation.
Based on our insights into these mechanisms, we have engineered our LNP systems to reduce or eliminate undesirable surface features. In preclinical studies in non-human primates for our systemic therapeutic development candidates that use our novel LNP systems, we have been able to repeat dose with negligible or undetectable loss in potency, liver damage, and immune system activation.
Our platform: Manufacturing process science
We invest significantly in manufacturing process science to impart more potent features to our mRNA and LNPs, and to invent the technological capabilities necessary to manufacture our potential mRNA medicines at scales ranging from micrograms to kilograms, as well as achieve pharmaceutical properties such as solubility and shelf life. We view developing these goals of manufacturing and pharmaceutical properties as stage appropriate for each program. In some cases, this includes inventing novel analytical technologies that make it possible to connect analytical characterization of mRNA and LNPs to biological performance.
mRNA manufacturing process: Improving pharmacology
Our platform creates mRNA using a cell-free approach calledin vitro transcription in which an RNA polymerase enzyme binds to and transcribes a DNA template, adding the nucleotides encoded by the DNA to the growing RNA strand. Following transcription, we employ proprietary purification techniques to ensure that our mRNA is free from undesired synthesis components and impurities that could activate the immune system in an indiscriminate manner. Applying our understanding of the basic science underlying each step in the manufacturing process, we have designed proprietary manufacturing processes to impart desirable pharmacologic features, for example increasing potency in a vaccine. Using a model antigen injected intramuscularly in mice at a 3 µgmicrogram (µg) mRNA dose, the figure below shows the significant improvement in CD8 T cell response we have achieved through mRNA manufacturing process science and engineering as evidenced by Process B.
Manufacturing process changes to tune immune response in mouse study
LNP manufacturing process: Improving pharmacology
Our platform technology includes synthetic processes to produce LNPs. Traditionally LNPs are assembled by dissolving the four molecular components, amino lipid, phospholipid, cholesterol, and PEG-lipid, in ethanol and then mixing this with mRNA in an aqueous buffer. The resulting mixture is then purified to isolate LNPs from impurities. Such impurities include molecular components that have not been incorporated into particles, un-encapsulated mRNA that could activate the immune system, and particles outside of the desired size range.
Going beyond optimization of traditional manufacturing processes, we have invested in understanding and measuring the various biochemical and physical interactions during LNP assembly and purification. We have additionally developed state-of-the-art analytical techniques necessary to characterize our LNPs and biological systems to analyze theirin vitro andin vivo performance. With these insights, we have identified manufacturing process parameters that drive LNP performance, for example, the potency in a secreted therapeutic setting. These insights have allowed us to make significant improvements in the efficiency of our processing and the potency of our LNPs, as exemplified in the figure below. For example, expression of a secreted protein in our Relaxin program (AZD7970) demonstrates an approximate eight-fold increase in area under the curve, or AUC and approximate six-fold increase in maximum concentration for manufacturing process Y versus manufacturing process X in rats dosed intravenously with 0.5 mg/kg mRNA.
Manufacturing process changes to enhance relaxin protein production by mRNA in rat study
Our platform progress to date
Over the last eight years,
Since our inception, we have solved numerous interdependent problems related to the pharmacologic features of our potential mRNA medicines. These features are detailed and exemplified below. Please also see the section of this Annual Report on Form 10-K titled “Business—Program Descriptions” for recent clinical results for our investigational medicines, hMPV+including our COVID-19 vaccine (mRNA-1273), CMV vaccine (mRNA-1647), hMPV/PIV3 vaccine (mRNA-1653), antibody against Chikungunya virus (mRNA-1944), and PCV (mRNA-4157 and NCI-4650)(mRNA-4157) utilizing Moderna proprietary technology.
Dose-dependent protein expression at clinically relevant levelsin the clinic
We have demonstrated in preclinical studiesthe clinic the ability to generate consistent dose-dependentdose dependent levels of protein which is particularly important for therapeutics. A recent example is(antibody) as well as the ability to safely repeat dose. Interim data from our IND-enabling non-human primatePhase 1 study for ourevaluating escalating doses of mRNA-1944 in the 0.6 mg/kg dose with steroid premedication cohort and two doses of 0.3 mg/kg (without steroid premedication) given one week apart demonstrated dose-dependent increases in levels of antibody against Chikungunya virus program (mRNA-1944). We demonstrated linear dose-dependence, meaning three-chikungunya. Safety and ten-fold increasesincreased CHKV-IgG production in the dose of mRNA led to three- and ten-fold increases in antibody as shown intwo-dose regimen shows the figure below. At the top dose, antibody levels reached 16.2 ± 4.6 µg/mL (SD) following first dose (0 hours), and effectively doubled to 28.8 ± 10.0 µg/mL upon second dose (168 hours).platform’s ability for repeat dosing.
This dose regimen also maintained antibody trough levels above 2 µg/mL for 100 days in non-human primates, a level consistent with clinically efficacious levels of many approved antibodies. All doses (0.3, 1, and 3 mg/kg) tested in non-human primates showed no dose-limiting toxicities related to mRNA-1944, and all other observations were generally reversible.
Expression of antibody against Chikungunya virus with repeat dosingin the Phase 1 study of mRNA-1944 in non-human primate study
Reproducible pharmacology, including upon repeated dosing
By combining advances in mRNA, delivery, and manufacturing process science, we have demonstrated in preclinical studies sustained and reproducible pharmacology. The figure below shows a recent example in a mouse model that recapitulates metabolic defects in propionic acidemia, or PA. In this rare disease, a defect in one or both of two different subunits (PCCA and PCCB) of the mitochondrial enzyme propionyl-CoA carboxylase results in accumulation of toxic metabolites such as 2-methylcitrate, or 2MC. In2MC.In mice hypomorphic for the PCCA subunit, monthly intravenous, or IV, administration of mRNAs encoding PCCA and PCCB formulated in our proprietary LNP (mRNA-3927) resulted in a significant and sustained lowering of 2MC throughout the duration of the 6-month study compared to control (luciferase) mRNA (1 mg/kg, n=6/group). We are currently recruiting PA patients for our Phase 1 trial of mRNA-3927. As noted above, we have also seen success in repeat dosing of our antibody against Chikungunya virus.
Plasma 2-methylcitrate levels with repeat dosing of PCCA+PCCB mRNA in PA mouse study
Decreased immune activation upon repeat dosing in non-human primates
We have observed decreased immune activation withwhich enables repeat dosing in non-human primates, as shown in the figure below. Panel AThe data below indicates serum concentration of human erythropoietin, or hEPO, with repeat dosing of mRNA encoding hEPO in our proprietary LNPs with weekly IV administration at 0.2 mg/kg in non-human primates. Panels B and C demonstrate comparable serum concentrations of MCP-1 (promoting immune cell recruitment to sites of inflammation) and C5b9 (indicative of innate immune activation via the complement system) with our proprietary LNP at 0.2 mg/kg weekly IV infusion in non-human primates vs. legacy LNP.
Repeat dosing with mRNA encoding for hEPO in our proprietary LNP in non-human primate study
Panel (A)
Decreased immune activation with mRNA encoding for hEPO in proprietary LNP in non-human primate study
In addition to this example we have completed multiple IND-enabling toxicology studies under GLP for our two systemic therapeutics modalities. For many such programs the no adverse event level was the top dose tested, generally 2 mg/kg or higher. We believe that by combining proprietary mRNA technologies, delivery technologies, and manufacturing process technologies we have significantly advanced the potential therapeutic index of our potential mRNA-based therapeutics.
Pharmacologic activity in the target tissue and cell
While some of our modalities, such as systemic secreted therapeutics, can leverage many different cell types to make therapeutic proteins, others such as systemic intracellular therapeutics, may require delivery of our mRNA into specific tissues and cell types, for instance hepatocytes in certain liver metabolic diseases. Combining our proprietary mRNA, delivery, and manufacturing process technologies we have observed on-target pharmacologic activity in hepatocytes in non-human primates. The on-target potency of this approach
contrasts with traditional delivery technologies. In the figure below, one of our proprietary LNP and processLNPs with increased hepatocyte transfecting properties result in mRNA delivery to and protein expression in liver hepatocytes in non-human primates as demonstrated with a reporter mRNA detected by in situ hybridization and a reporter protein detected by immunohistochemistry at 126 hours after IV infusion at 0.52 mg/kg.
mRNA delivery to and protein
Protein expression in hepatocytes with oura proprietary LNPsLNP in non-human primate study
Additionally, this LNP results in extended expression of a secreted reporter protein in non-human primates as compared to one of our other proprietary LNPs after IV delivery at 0.1mg/kg.
Our platform’s future: Improving and expanding our modalities
We are committed to sustaining investment in our platform, both in basic science to elucidate new mechanistic insights, and in applied science to discover new technologies that harness these insights. Our platform investments have enabled six modalities to date, most of which have already led to multiple development candidates and investigational medicines in our pipeline. We believe that sustaining our investment in platform research and development will enable further improvements in the current modalities and will lead to the creation of new modalities, both of which will benefit our clinical pipeline in the years ahead.
CREATING MODALITIES WITH SHARED PRODUCT FEATURES
Our approach to developing modalities
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, as well as 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.
When entering into a new modality, our approach is consistent with our strategic principles and perspectives on risk management discussed previously. The tenets of our approach are summarized below.
•We identify a first program (or programs) through which we seek to discover and develop solutions for any modality-specific technological challenges. We then leverage the learnings from this first program to the benefit of all subsequent programs in the modality.
•We seek to diversify biology risks within the modality by advancing multiple programs in parallel, against multiple diseases, following the first program.
•When we believe a strategic collaborator could significantly de-risk our early efforts in a new modality, we often seek a strategic collaborator to share the risks and benefits on a specific set of early programs.
•After experience with the first program (or programs) in a modality, we seek to rapidly expand our pipeline within that modality to take full advantage of the opportunity.
Illustrating our approach: From our first modality to today
We started with prophylactic vaccines as our first modality because we believed this modality faced lower technical hurdles, relative to other areas. Our early formulations of mRNA tended to stimulate the immune system, which would present a challenge to therapeutics but was a desired feature for vaccines. In addition, many potential prophylactic vaccine antigens are well-characterized, allowing us to reduce biology risk. Lastly, the dosing regimens for vaccines require as few as one or two administrations, and generally involve relatively low doses.
For our first programs in this modality we chose our H10N8 and H7N9 pandemic influenza vaccines, each requiring expression of a single membrane protein.
We chose to pursue two programs in two separate, but parallel, clinical trials to establish the flexibility of our platform.
When both programs met our goals for safety, tolerability, and pharmacology, we accelerated and expanded our vaccine pipeline to include multiple commercially meaningful and increasingly complex vaccines. These included a combination vaccine, designed to protect against two unrelated respiratory viruses, human metapneumovirus, or hMPV, and human parainfluenza 3, or PIV3, and a vaccine that combines six different mRNAs, our cytomegalovirus, or CMV, vaccine, to express a complex pentameric antigen. We also sought strategic alliances with the Defense Advanced Research Projects or DARPA,Agency (DARPA), the Biomedical Advanced Research Development Authority or BARDA,(BARDA) and Merck & Co. (Merck), or Merck, to allow us to rapidly expand our pipeline and complement our capabilities with their expertise. This early work in the prophylactic vaccines modality led to the ability to introduce our COVID-19 vaccine during 2020 in response to the ongoing pandemic.
Over time, we have taken on more challenging applications and technological hurdles with each successive modality, but we have also tried to build upon our prior experiences to manage risk. For example, in our cancer vaccines modality, we are now applying our technology to elicit T cell responses to potentially recognize and eradicate cancer as a logical extension of our prophylactic vaccines
modality. Having demonstrated local expression of protein in our vaccines, we expanded into local therapeutic applications. For example, in our intra-tumoral immuno-oncology modality, we are seeking to use local expression to drive anti-cancer T cell responses by transforming tumor microenvironments. We can also use local expression to drive regenerative processes as in our Vascular Endothelial Growth Factor A, or VEGF-A program. Most recently, we have expanded into two new modalities that use systemic delivery of mRNA to encode secreted and cell surface or intracellular proteins. We have moved multiple programs in these areas into development for the treatment of diseases as varied as rare genetic disorders, preventing viral infections, or treating heart failure.
Expanding within our designated core modalities
In 2020 we designated the prophylactic vaccines and systemic secreted and cell surface therapeutics modalities as “core modalities” following positive Phase 1 data from our CMV vaccine and chikungunya antibody program, respectively. We believed that this data reduced the risk of these modalities, and our strategy is to invest in additional development candidates within these modalities.
Since January 2020, we have nominated six new development candidates within our prophylactic vaccines modality, including our COVID-19 vaccine (which is now authorized for emergency use or conditionally approved in over 30 countries), as well as vaccine
candidates for seasonal flu, HIV, Nipah virus, and EBV. We also regained rights to develop an RSV vaccine for adults, following the conclusion of our collaboration with Merck in October 2020, which consolidated our global commercial rights to all development candidates within our prophylactic vaccines modality.
Within our systemic secreted and cell surface therapeutics modality, we announced two new development candidates in 2020: Interleukin-2, or IL-2, and programmed death-ligand-1, or PD-L1. In 2021, we also announced that we have regained the rights to our Relaxin program from AstraZeneca, and we are currently evaluating how to proceed with the program. Our exploratory modalities continue to be a critical part of advancing our strategy to maximize the application of our potential mRNA medicines.
How modalities continue to build our pipeline
We believe our portfolio of modalities—each with distinct technological and biological risk profiles—allows us to maximize long-term value for patients and investors. We see our six current modalities as six distinct multi-product pipelines that represent different risk profiles and benefit from common infrastructure and a shared platform technology. We believe the high technology correlation within a modality allows us to rapidly accelerate the expansion of the pipeline in that modality based on learnings from the initial programs. We believe the lower technology correlation between modalities allows us to compartmentalize the technology risks.
We believe our ongoing investments in our platform will lead to the identification of additional new modalities in the future, and will expand the diversity of our pipeline.
EXECUTING ON OUR BROAD PIPELINE
In order to capitalize on the breadth of the mRNA opportunity, we built a set of capabilities across the drug development value chain to enable us to efficiently execute on many pipeline programs in parallel.
mRNAs encode proteins across diverse biology using the same chemical building blocks arranged into different sequences. This lends itself to common rules when designing a new mRNA medicine and common processes for manufacturing. We have invested in scalable infrastructure, built on a digital backbone and enabled by automation to advance a large pipeline of mRNA programs in parallel.
Our capabilities and infrastructure are grouped into three basic units, or engines, that are applied at different stages of the drug development value chain, as shown in the following figure:
Our current pipeline programs utilize our Research Engine and Early Development Engine. We are starting to build the Late Stage Development and Commercial Engine to handle the further advancement of our programs. Each of these engines integrates critical internal capabilities with outsourced, flexible capacity.
Our Research Engine enables us to advance new product ideas into development candidates via our drug discovery efforts, and includes infrastructure to enable rapid supply of thousands of preclinical mRNAs for research involving in vitro and in vivo experiments in order to accelerate programs from idea to development candidate designation.
Our Early Development Engine enables progression of preclinical development candidates to investigational medicines upon IND filing or its equivalent, through early clinical trials that seek to demonstrate human proof of concept, or hPOC. This includes internal and outsourced infrastructure for IND-enabling GLP toxicology studies, the scale up and cGMP manufacture of the investigational medicine, initial regulatory submissions, and the execution of clinical trials.
Our Late Stage Development and Commercial Engine is envisioned to enable progress of our investigational medicines from hPOC through late-stage development to approval and eventual commercialization. This is expected to include internal and outsourced infrastructure for cGMP manufacture for late stage development and commercial supply of products, regulatory submissions, and capabilities to execute later stage clinical trials.
All of these engines are supported and enabled by our integrated digital investments, our focus on highly talented and motivated team members, and our deep capital base.
Our digital infrastructure facilitates efficient integration and control of virtually every aspect of what we do. We design and implement digital operations to control or support complex workflows, accelerate learnings across our enterprise real-time, and provide deeper insights through analytical tools, artificial intelligence, and custom automation.
Our talented employees drive our mission across this value chain for patients and investors. Our culture also plays an invaluable role in our execution at all levels in our organization. An example of our commitment to the development of our employees is our investment in Moderna University, our extensive program of internal and external course offerings curated to meet the learning and development needs of our people.
Our capital from our investors and strategic collaborators enables the scale required to execute on our pipeline. We sought, and continue to seek, diverse funding sources. Of approximately $3.2 billion in cash we have received through December 31, 2018, $0.8 billion has been in the form of upfront payments, milestone payments, and option exercise payments from strategic collaborators, such
as AstraZeneca and Merck, and $2.4 billion has been from equity issuances in both private and public markets to a diverse set of global investors. As of December 31, 2018, we had cash, cash equivalents, and investments of $1.7 billion.
Examples of our proprietary infrastructure
Our Drug Design Studio enables rapid design of multiple mRNAs
As our scientists create new mRNA concepts, they can design mRNAs for research and testing, within days, using our proprietary systems. We utilize the software-like property of mRNA in our proprietary, web-based Drug Design Studio. Our scientists request mRNAs for a specific protein, and the protein target is automatically converted to an initial optimized mRNA sequence. Using our Sequence Designer module, they can tailor entire mRNAs from the 5’-UTR to the coding region to the 3’-UTR based on our ever-improving proprietary learnings. The mRNA sequence is then further optimized using our proprietary bioinformatics algorithms. Our digital ordering then ensures rapid and accurate transmission of sequences to our modular synthesis robotics.
Our high throughput systems facilitate rapid synthesis of research grade mRNA
Once our scientists design mRNAs, we make them at a small scale to test them in cells or in animal models to see if our ideas will work. We integrated the Drug Design Studio mRNA sequence into a modular synthesis system comprised of custom high-throughput automation for making up to 1,000 orders of unique mRNA sequences and formulations per month with a turnaround time of a few weeks at 1-10 mg per lot, the amounts required for testing in cells or animal models. This has accelerated our learnings by allowing us to test many different mRNAs in parallel.
Our Norwood manufacturing site provides modular and automated capacity that can scale with our pipeline
Manufacturing is strategically important to us, and we believe we need to control a significant portion of our manufacturing supply chain. We initially used an outsourced global supply chain to make our multi-component mRNA products. However, we believe that managing quality, supply, and timing in such a supply chain for cGMP material could increase our overall business risk. Accordingly, we elected in 2016 to build our own manufacturing facility. We opened our newly constructed 200,000 square foot Norwood manufacturing facility in July 2018, and brought multiple cGMP suites online, thereby providing integration of our supply chain from raw materials to filled vials at a single site. We can make mRNA, lipids, and LNPs at this site to control quality and supply, while also potentially creating new manufacturing intellectual property. We can readily flex the capacity at our Norwood facility via its modular systems to produce up to 100 cGMP lots per year. This capacity will support our current pipeline, will enable significant future pipeline expansion, and, under certain scenarios, could serve some commercial supply needs.
OVERVIEW OF OUR MODALITIES
At Moderna, we define a modality as a group of potential mRNA medicines that share similar mRNA technologies, delivery technologies, and manufacturing processes to achieve shared product features. Typically, programs within a modality will also share similar pharmacology profiles, including the desired dose response, the expected dosing regimen, the target tissue for protein expression, safety and tolerability goals, and their pharmaceutical properties. We have created six modalities to date:
Prophylactic vaccines;
Cancer vaccines;
Intratumoral immuno-oncology;
Localized regenerative therapeutics;
Systemic secreted therapeutics; and
Systemic intracellular therapeutics.
We believe our portfolio of modalities, each with distinct technological and biological risk profiles, allows us to maximize long-term value for patients and investors. We see our six current modalities as six distinct multi-product pipelines that represent different risk profiles and benefit from common infrastructure and a shared technology platform. We believe the risk correlation within a modality allows us to rapidly accelerate the expansion of the pipeline in that modality based on learnings from the initial programs. We believe the lower risk correlation between modalities allows us to mitigate the risks of expanding into new areas. The cell map illustration of our pipeline in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline” depicts the diversity of the biology of our pipeline across our six modalities.
I. PROPHYLACTIC VACCINES MODALITY OVERVIEW
We designed our prophylactic vaccines modality to prevent or control infectious diseases. This modality currently includes eight programs, all of which are vaccines against viruses. The goal of any vaccine is to safely pre-expose the immune system to a small quantity of a protein from a pathogen, called an antigen, so that the immune system is prepared to fight the pathogen if exposed in the future, and prevent infection or disease.
Within this modality, our portfolio includes programs for both commercial and global health uses. We have strategic alliances with Merck on select commercial vaccines, and BARDA and DARPA on global health vaccine programs.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Prophylactic vaccines: Opportunity
Vaccines to prevent infectious diseases are one of the great innovations of modern medicine. In the United States alone, the Centers for Disease Control and Prevention estimates that childhood vaccinations given in the past two decades will in total prevent 322 million Americans from falling ill, 21 million hospitalizations, 732,000 deaths, $295 billion of direct costs, and $1.3 trillion in social costs. The commercial opportunity for vaccines is significant, with more than $35 billion in annual worldwide sales of vaccines, and with 16 different vaccine franchises each generating more than $500 million in annual worldwide sales in 2017. More innovative vaccines have been able to achieve pricing per regimen generally ranging from 5 to 20 times that of seasonal flu vaccines.
Prophylactic vaccines: Product features
We believe mRNA-based vaccines offer several advantages, including:
Ability to mimic many aspects of natural viral infections. mRNA enters cells and is used to produce viral antigen proteins from within the cell that include natural, post-translational modifications. This mimics the process by which natural viral infections occur, where information from viral genomes is used to produce viral proteins from within a cell. This can potentially enhance the immune response, including improved B and T cell responses.
Multiplexing of mRNA for more compelling product profiles. Multiple mRNAs encoding for multiple viral proteins can be included in a single vaccine, permitting production of complex multimeric antigens that are much more difficult to achieve with traditional technologies. As an example, our CMV vaccine (mRNA-1647) contains six mRNAs, five of which encode five different proteins that combine to form a pentameric protein complex that is a potentially critical antigen for immune protection against CMV.
Rapid discovery and advancement of mRNA programs into the clinic. Many viral antigens are known. However, with traditional vaccines, the target pathogens or antigens have to be produced in dedicated cell-cultures and/or fermentation-based manufacturing production processes in order to initiate testing of potential vaccine constructs. Our ability to design our antigens in silico allows us to rapidly produce and test antigens in preclinical models, which can dramatically accelerate our vaccine selection.
Capital efficiency and speed from shared manufacturing processes and infrastructure. Traditional vaccines require product-dedicated production processes, facilities, and operators. Our mRNA vaccines are produced in a manufacturing process that is sufficiently consistent across our pipeline to allow us to use a single facility to produce all of our mRNA vaccines.
Prophylactic vaccines: Status and next steps
Our prophylactic vaccines modality currently includes eight programs, six of which have entered into clinical trials. Of those six, five of our programs, based on the data observed, have demonstrated desired pharmacology, in the form of immunogenicity, in their Phase 1 clinical trials: H10N8 vaccine (mRNA-1440), H7N9 vaccine (mRNA-1851), RSV vaccine (mRNA-1777), Chikungunya vaccine (mRNA-1388), and hMPV+PIV3 vaccine (mRNA-1653). For the Zika vaccine (mRNA-1325), although the Phase 1 safety and tolerability data generated would permit additional dose escalation of mRNA-1325, our current development efforts are focused on our next-generation vaccine, mRNA-1893, which has been shown to be 20 times more potent in non-human primate Zika challenge studies. We will not further develop mRNA-1325. The remaining clinical stage program, CMV vaccine (mRNA-1647), is in an ongoing Phase 1 trial. The next program in this modality, a VZV vaccine (mRNA-1278), is in preclinical development with an IND-enabling GLP toxicology study in progress. On the basis of the Phase 1 results for the RSV vaccine (mRNA-1777), Merck has initiated planning for a Phase 2a clinical trial. We are working with Merck to identify and advance improvements to the RSV vaccine.
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Prophylactic Vaccines Clinical Data Summary |
Safety information | | Immunogenicity information |
Approximately 950 subjects dosed in Phase 1 trials at levels up to 300 µg. | | Interim Phase 1 data for our hMPV+PIV3 vaccine (mRNA-1653) showed boosted serum neutralization titers against hMPV and PIV3 at all dose levels tested; Merck has initiated plans for a Phase 2a clinical trial of our RSV vaccine (mRNA-1777); 100% seroresponse was observed for subjects at the 100 µg dose level for our Chikungunya vaccine (mRNA-1388); 96% of subjects at 25 µg achieved hemagglutination inhibition, or HAI, titer > 1:40 for our H7 influenza vaccine (mRNA-1851); and 100% of subjects at 100 µg achieved HAI titer > 1:40 for our H10 influenza vaccine (mRNA-1440).
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For our commercial vaccine programs, we expect the next series of milestones will involve the reporting of Phase 1 safety and immunogenicity data from our CMV vaccine (mRNA-1647). Based on the data for the hMPV+PIV3 vaccine (mRNA-1653), we are planning a Phase 1b trial in pediatric subjects as we look to develop this vaccine to address hMPV and PIV3 childhood infections. For the programs being conducted by our strategic collaborator Merck, the next milestones will be the potential start of the Phase 2a trial for the RSV vaccine (mRNA-1777) and the continued development of the VZV vaccine (mRNA-1278), including completion of an IND-enabling GLP toxicology program. For our global health programs, we do not intend to advance our H10N8 vaccine (mRNA-1440), our H7N9 vaccine (mRNA-1851), or our Chikungunya vaccine (mRNA-1388) through further clinical development without government or other third-party funding. We are preparing an IND for submission to the FDA for our Zika vaccine (mRNA-1893).
Each of these programs is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
II. CANCER VACCINES MODALITY OVERVIEW
We designed our cancer vaccines modality to treat or cure cancer by enhancing immune responses to tumor neoantigens, defined below. This modality has two programs currently for neoantigen vaccines, a personalized cancer vaccine, or PCV, program and a vaccine against neoantigens related to a common oncogene called KRAS, both conducted in collaboration with Merck. The goal of a cancer vaccine is to safely expose the patient’s immune system to tumor related antigens, known as neoantigens, to enable the immune system to elicit a more effective antitumor response. Our cancer vaccines modality is focused on the use of mRNA to express neoantigens found in a particular tumor in order to elicit an immune response via T cells that recognize those neoantigens, and therefore the tumor. These neoantigens can either be unique to a patient, as in the case of our personalized cancer vaccine program, or can be related to a driver oncogene found across subsets of patients, as in the case of our KRAS vaccine program.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Cancer vaccines: Opportunity
More than 1.6 million new cancer cases and approximately 600,000 deaths due to cancer were predicted in the United States for 2017. Despite the recent success of checkpoint inhibitors, the majority of patients with the most common types of epithelial cancer still do not benefit from checkpoint inhibitors, as many patients still have incomplete or no response to currently available therapies. In addition, treatment resistance is thought to arise from a number of mechanisms, principally the local immunosuppressive effects of cancer cells, which prevent either access to or recognition by T cells.
Recent breakthroughs in cancer immunotherapy, such as checkpoint inhibitors and chimeric antigen receptor T cell therapies, have demonstrated that powerful antitumor responses can be achieved by activating antigen specific T cells. We believe one approach to improve the efficacy of checkpoint inhibitors is to develop vaccines that increase both the number and antitumor activity of a patient’s T cells that recognize tumor neoantigens.
Cancer vaccines: Product features
We believe that mRNA technology is an attractive approach for cancer vaccines for many reasons, including:
mRNA vaccines can deliver multiple neoantigens concatenated in a single mRNA molecule. We currently encode up to 34 neoantigens in one of our personalized cancer vaccines (mRNA-4157), and four KRAS mutations in our KRAS vaccine (mRNA-5671). Given that a T cell response against a single antigen has the potential to eradicate cancer cells, we believe that delivering multiple neoantigens could increase the probability of a successful treatment outcome for a patient.
mRNA encoding for neoantigens is translated and processed by patients’ endogenous cellular mechanisms for presentation to the immune system. Neoantigen peptides are then potentially processed in multiple ways to give rise to different size peptides for presentation by the immune system. We believe this endogenous antigen production and presentation has the potential to drive a more effective immune response.
mRNA vaccines can be efficiently personalized. The shared features of mRNA, combined with our investments in automated manufacturing technology, enable us to manufacture individual cGMP batches of personalized cancer vaccines rapidly, in parallel.
mRNA vaccines can be delivered simultaneously with customized immuno-stimulators. In our KRAS vaccine mRNA-5671, mRNA encoding for KRAS neoantigens can be delivered in conjunction with mRNA encoding for an activated innate immuno-stimulator. The use of such innate immune stimulants has been shown to improve the T cell response against antigens of interest.
Cancer vaccines: Status and next steps
We are currently developing two programs within our cancer vaccines modality. Our personalized cancer vaccine program includes two vaccines, mRNA-4157 and NCI-4650. mRNA-4157 is being developed in collaboration with Merck and is in a multiple-arm Phase 1 trial. NCI-4650 is being developed in collaboration with the National Cancer Institute, or NCI, and is in an investigator-initiated single-arm Phase 1 trial. The two vaccines differ in the neoantigen selection protocols used, but are otherwise substantially the same.
Our second program within this modality, mRNA-5671, is a KRAS vaccine. Following successful preclinical development, the Investigational New Drug Application, or IND, for this program was transferred to Merck, who will sponsor the Phase 1 trial.
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PCV (mRNA-4157) Clinical Data Summary |
Safety information | | Activity information |
As of February 15, 2019, 33 patients have been dosed with mRNA-4157, including up to the 1 mg dose level. There have been no dose-limiting toxicities or significant related toxicities observed in these patients to date. | | We have detected antigen-specific T cell responses for one patient at the 0.13 mg dose level in Part A of the Phase 1 clinical trial for PCV (mRNA-4157).
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We expect the next steps for the PCV programs (mRNA-4157 and NCI-4650) to involve the continuing reporting of immunogenicity data from the Phase 1 clinical trials in cancer patients and the commencement of a randomized Phase 2 trial to assess whether post-operative adjuvant therapy with mRNA-4157, in combination with pembrolizumab, improves relapse-free survival compared to pembrolizumab alone. The next steps for the KRAS vaccine (mRNA-5671) include the completion of cGMP manufacturing and initiating a Phase 1 trial in patients with certain KRAS mutations. Merck may choose to measure T cell responses in this Phase 1 trial for KRAS vaccine (mRNA-5671).
Each of these programs is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
III. INTRATUMORAL IMMUNO-ONCOLOGY MODALITY OVERVIEW
We designed our intratumoral immuno-oncology modality to treat or cure cancer by transforming the tumor microenvironment to drive anti-cancer T cell responses against tumors. This modality currently has three programs. Our mRNA technology within this modality allows for the combination of multiple therapeutics that can be directly injected into a tumor with the goal of activating the tumor microenvironment to kill cancer cells in the injected tumor as well as in distal tumors, known as the abscopal effect. Intratumoral administration allows for localized effect of these therapeutics that could be toxic if administered systemically.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Intratumoral immuno-oncology: Opportunity
More than 1.6 million new cancer cases and approximately 600,000 deaths due to cancer were predicted in the United States for 2017. There have been several advances in the treatment of cancer through immune-mediated therapies in recent years. However, the outlook for many patients with advanced cancer remains poor, especially in tumors that have little immune system engagement and are sometimes termed immunologically “cold.” We aim to activate the tumor microenvironment with our mRNA therapeutics, in conjunction with a checkpoint inhibitor, to activate the immune system against these otherwise immunologically cold tumors.
Intratumoral immuno-oncology: Product features
We believe our approach to immuno-oncology using our mRNA medicines could complement checkpoint inhibitors and has several advantages over recombinant protein-based drugs, including:
mRNA focuses and limits exposure of immune stimulatory proteins. One of the intrinsic properties of mRNA is its transient nature. This allows for short exposure of the proteins encoded by the mRNA in the target tissue thereby enhancing tolerability.
mRNA can produce membrane associated immune stimulatory proteins. In contrast to recombinant proteins, mRNA administered to a tumor site can lead to the production of either secreted or membrane proteins, depending on the mRNA sequence.
Multiplexing of mRNA allows access to multiple immune stimulatory pathways. The ability to combine multiple mRNAs to express multiple proteins allows for activation of several immune pathways simultaneously. For example, OX40L+ IL23+IL36γ (Triplet) (mRNA-2752) encodes for two secreted cytokines (IL23 and IL36γ) and one membrane protein (OX40L).
mRNA sequences can be engineered to reduce off-target effects. Our mRNA can be designed to minimize translation in off-target tissues. For immune-stimulatory proteins this can potentially prevent toxicities.
Local administration of mRNA can create a concentration gradient for encoded proteins. mRNA administered intratumorally allows for the local production of encoded immune-stimulatory proteins, such as cytokines. The mRNA and encoded protein are expected to form a concentration gradient that decreases as a function of the distance from the tumor, thereby potentially lowering undesirable systemic effects and increasing immune-stimulatory effects close to the tumor.
Intratumoral immuno-oncology: Status and next steps
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 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 in the United States, and protein expression has been demonstrated in a number of patients. Our second program, OX40L+IL23+IL36γ (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, IL12 (MEDI1191), is being developed in collaboration with AstraZeneca.
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Intratumoral Immuno-oncology Clinical Data Summary |
Safety information | | Activity information |
For OX40L, no safety findings observed that met study pause criteria; rapid onset of multiple grade 2 and one grade 3 transient reversible injection-related reactions were observed, all of which were resolved with standard interventions; three suspected unexpected serious adverse reactions, or SUSARs, were reported.
| | As of February 28, 2019, three patients in this Phase 1 study have been dosed and cleared with the first dose level of 0.25 mg of Triplet (mRNA-2752), and we are enrolling patients for the second 0.5 mg dose level.
As of February 15, 2019, we have dosed a total of 33 patients with mRNA-2416, and we have not seen any dose limiting toxicities. The Phase 1/2 study is currently in its dose-confirmation phase at doses up to 8mg. As of October 22, 2018, two patients with ovarian cancer have demonstrated clinical observations of regression in certain injected lesions and in an adjacent uninjected lesion. These clinical observations from these two ovarian cancer patients do not meet partial response criteria as per the response evaluation criteria in solid tumors, or RECIST, guidelines version 1.1.
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Based on the OX40L (mRNA-2416) clinical observations, we have opted to expand the trial to a Phase 2 expansion cohort in patients with advanced ovarian carcinoma. We plan to continue to collect Phase 1 clinical trial data, including biopsy data, and commence dosing of the Phase 2 cohort for OX40L (mRNA-2416) in patients with advanced ovarian carcinoma. We plan to collect Phase 1 clinical trial data including potential clinical responses for OX40L+IL23+IL36γ (Triplet) (mRNA-2752). We expect AstraZeneca to initiate an open-label, international multicenter Phase 1 clinical trial of intratumoral injections of IL12 (MEDI1191) alone or in combination with a checkpoint inhibitor, and the IND for IL12 (MEDI1191) is open.
Each of these programs is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
IV. LOCALIZED REGENERATIVE THERAPEUTICS MODALITY OVERVIEW
We designed our localized regenerative therapeutics modality to develop mRNA medicines to address injured or diseased tissues. Our mRNA technology in this modality allows for the local production of proteins that provide a therapeutic benefit in the targeted tissue. The development of our program in this modality, AZD8601, for the local production of VEGF-A, is being led by our strategic collaborator AstraZeneca. This program recently completed a Phase 1a/b clinical trial in which we observed both a dose-dependent protein production and a pharmacologic effect, as measured by changes in local blood flow in patients. We believe this data provides clinical proof of mechanism for our mRNA technology outside of the vaccine setting.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Localized regenerative therapeutics: Opportunity
There are multiple applications for tissue regeneration. With AstraZeneca, we have focused on ischemic heart failure for the first program. Coronary artery disease, the primary cause of ischemic heart failure, affects the arteries providing blood supply to the cardiac muscle. In 2015, coronary artery disease resulted in 366,000 deaths in the United States, and 8.9 million deaths globally.
Localized regenerative therapeutics: Product features
We believe our approach to localized regenerative therapeutics using mRNA has several advantages over alternative approaches, including:
mRNA can be administered locally to produce the desired protein for an extended, but still limited, duration. Local exposure to the therapeutic protein encoded by our mRNA is sustained by the ongoing translation of the mRNA into protein, often from hours to days. This pharmacokinetic profile closely mimics the optimal tissue exposure profile for regenerative applications and cannot be achieved by injections of recombinant proteins that rapidly diffuse out of the tissue after injection.
Local administration of mRNA allows for focused activity. mRNA administered to a specific tissue or organ should allow for local production of the encoded protein, which could lead to lower levels of encoded protein in distant or systemic locations. This could help to prevent potential toxicity from production of the encoded protein outside of the targeted tissue.
mRNA allows for transient production of the encoded protein. mRNA therapies should also allow for dose titration and repeat dosing. This provides several advantages over gene therapy. Gene therapy typically results in a permanent change to cellular DNA that may result in uncontrolled or constant production of the desired protein in local tissue or in distant sites, which could cause local or systemic side effects. Further, some gene therapy delivery vehicles are associated with immune responses that limit the ability to repeat dose, preventing dose titration.
Localized regenerative therapeutics: status and next steps
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.
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Localized Regenerative Therapeutics Clinical Data Summary |
Safety information | | Activity information |
Demonstrated sufficient tolerability in the Phase 1a/b trial at all dose levels (33 patients received AZD8601 for the Phase 1 trial) to warrant advancement to a Phase 2a study. | | Increase in VEGF-A and bioactivity of VEGF-A protein was observed by increase in blood flow at injection sites up to seven days following a single dose of AZD8601.
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AstraZeneca has initiated a Phase 2a trial for AZD8601 in ischemic heart disease. The Phase 2a study is designed to provide initial safety and tolerability data in approximately 24 coronary artery bypass patients.
This program is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
V. SYSTEMIC SECRETED THERAPEUTICS MODALITY OVERVIEW
We designed our systemic secreted therapeutics modality to increase levels of desired secreted proteins in circulation or in contact with the extracellular environment, in order to achieve a therapeutic effect in one or more tissues or cell types. The goal of this modality is to provide secreted proteins, such as antibodies or enzyme replacement therapies across a wide range of diseases, such as heart failure, infectious diseases, and rare genetic diseases. This modality has benefitted from our strategic alliances with AstraZeneca, DARPA, and the Bill & Melinda Gates Foundation. This modality currently has three programs.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Systemic secreted therapeutics: Opportunity
The ability to systemically deliver mRNA for a therapeutic effect would allow us to address a number of diseases of high unmet medical need. Systemically delivered, secreted therapeutics address conditions often treated with recombinant proteins that are typically administered to the blood stream. These current therapies include, for example:
Enzyme replacement therapies, or ERTs, for rare diseases;
Antibodies for membrane and extracellular soluble targets; and
Circulating modulation factors for common and rare diseases such as growth factors and insulin.
Systemic secreted therapeutics: Product features
Systemically delivered, secreted therapeutics, we believe, would allow us to target areas of biology that cannot be addressed using recombinant proteins. Our potential advantages in these areas include:
mRNA can produce hard-to-make or complex secreted proteins. Some proteins, due to their folding requirements or complexity, are challenging to make using recombinant technologies, but can potentially be produced by human cells using administered mRNA.
Native post-translational modifications are possible through intracellular protein production using mRNA. mRNA administered to a human cell uses natural secretory pathways inside the cell to make and process the encoded protein. The resulting post-translational modifications, such as glycosylation, are human. With recombinant proteins, these post-translational modifications are native to the non-human cells used for manufacture. These non-human post-translational modifications in recombinant proteins may lead to sub-optimal therapeutic outcomes, side effects, and increased immunogenicity.
mRNA can sustain production of proteins, which can increase exposure to proteins with short half-lives. mRNA can lead to protein production by cells that can last from hours to days depending on design. This feature could increase the levels of short half-life proteins for therapeutic benefit.
mRNA allows for desirable pharmacology in rare genetic diseases currently addressed by enzyme replacement therapies. Our mRNA technology potentially permits several differentiated pharmacologic features for treating rare genetic diseases currently addressed by enzyme replacement therapies, including the ability to repeat dose as needed, lower immunogenicity of the replacement protein, the ability to adjust dose levels in real-time based on individual patient needs, and the ability to stop dosing. Gene therapies may also prove to be useful for treating rare genetic diseases; however, mRNA is not limited by pre-existing immunity that may exist for certain gene therapies using viral vectors, and does not localize to the nucleus or require persistent changes to cellular DNA to have the desired effect.
Systemic secreted therapeutics: Status and next steps
We have three systemic secreted 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 Fabry disease (mRNA-3630). Our antibody against Chikungunya virus (mRNA-1944) is currently being evaluated in an ongoing Phase 1 single ascending dose study in healthy adults that is randomized and placebo-controlled. Our second and third programs for Relaxin (AZD7970) and Fabry disease (mRNA-3630) are currently in preclinical development.
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Systemic Secreted Therapeutics Clinical Data Summary |
Safety information | | Activity information |
To date, we have not observed any dose-limiting toxicities in the Phase 1 trial of mRNA-1944. | | As of February 20, 2019, dosing of the first dose level cohort has been completed (0.1 mg/kg, 8 subjects) in the Phase 1 trial of mRNA-1944. |
We expect the next steps for the antibody against Chikungunya virus (mRNA-1944) program will be Phase 1 clinical trial safety and serum antibody level data. We plan to file INDs and take our programs for Relaxin (AZD7970) and Fabry disease (mRNA-3630) into the clinic for Phase 1 testing.
Each of these programs is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
VI. SYSTEMIC INTRACELLULAR THERAPEUTICS MODALITY OVERVIEW
We designed our systemic intracellular therapeutics modality to increase levels of intracellular proteins, using cells in the human body to produce proteins located in the cytosol or specific organelles of the cell to achieve a therapeutic effect in one or more tissues or cell types. The goal of this modality is to provide intracellular proteins, such as intracellular enzymes and organelle-specific proteins, as safe, tolerable, and efficacious therapies. Our initial focus within this modality is on rare genetic diseases. This modality currently has three programs.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Systemic intracellular therapeutics: Opportunity
Systemically delivered, intracellular therapeutics focus on areas currently not addressable with recombinant proteins, which are typically administered systemically and cannot reach the inside of the cell. Objectives for potential new therapies in this area include, for example, increasing the levels of:
intracellular pathway proteins;
soluble organelle-specific proteins; and
organelle-specific membrane proteins.
Systemic intracellular therapeutics: Product features
Systemically delivered, intracellular therapeutics, we believe, would allow us to target areas of biology that cannot be addressed using recombinant proteins. Our potential advantages in these areas include:
Using mRNA to encode for intracellular and organelle-specific proteins. Our modality permits the expression of intracellular proteins, including those that must be directly translated and moved into organelles such as mitochondria. The ability of mRNA to produce protein inside of the cell enables production of these protein types that we believe are beyond the reach of recombinant proteins.
mRNA can produce hard-to-make or complex proteins. For example, some proteins, due to their folding requirements or complexity, are challenging to make using recombinant technologies, but can potentially be produced by human cells using administered mRNA.
Native post-translational modifications are possible through intracellular protein production using mRNA. mRNA administered to a human cell uses natural secretory pathways inside the cell to make and process the encoded protein. The resulting post-translational modifications, such as glycosylation, are human as opposed to recombinant proteins where these post-translational modifications are native to the non-human cells used for manufacture. These non-human post-translational modifications in recombinant proteins may lead to sub-optimal therapeutic outcomes, side effects and increased immunogenicity.
mRNA can sustain production of proteins, which can increase exposure to proteins with short half-lives. mRNA can lead to protein production by cells that can last from hours to days depending on design. This feature could increase the levels of short half-life proteins for therapeutic benefit.
mRNA allows for desirable pharmacology in complex metabolic diseases. Our mRNA technology potentially permits several differentiated pharmacologic features for treating complex metabolic diseases, including the ability to repeat dose as needed, a rapid onset of action, the ability to adjust dose levels real-time based on individual patient needs, and the ability to stop dosing. Gene therapies may also prove to be useful for treating rare genetic diseases; however, mRNA is not limited by pre-existing immunity that may exist for certain gene therapies using viral vectors, and does not localize to the nucleus or require persistent changes to cellular DNA to have the desired effect.
Systemic intracellular therapeutics: Status and next steps
We have three systemic intracellular therapeutics development candidates in our pipeline. Our intracellular programs address methylmalonic acidemia, or MMA (mRNA-3704), propionic acidemia, or PA (mRNA-3927), and phenylketonuria, or PKU (mRNA-3283).
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Systemic Intracellular Therapeutics Data Summary |
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Preclinical | | Successfully completed GLP toxicology program for MMA (mRNA-3704) that was included in the open IND to support advancement into the clinic; IND-enabling GLP toxicology programs for PKU (mRNA-3283) and PA (mRNA-3927) are ongoing. | | Activity measured in animal models for MMA (mRNA-3704), PA (mRNA-3927), and PKU (mRNA-3283); data published for MMA (mRNA-3704). |
Clinical | | — | | — |
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 expect the next steps for mRNA-3704 will be Phase 1/2 clinical trial safety, proof of concept, and biomarker data. As of February 27, 2019, 20 MMA patients and 12 PA patients had enrolled in our MMA and PA global natural history study.
PA (mRNA-3927) and PKU (mRNA-3283) are currently in preclinical development. We plan to file INDs and take our programs for PA (mRNA-3927) and PKU (mRNA-3283) into the clinic for Phase 1 testing.
Each of these programs is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
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. Complete descriptions of our programs are found in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
In late 2014,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 27 development candidates across our 24 programs, with 13 having entered the clinic and an additional development candidate and today have 20 development candidates in our pipeline, with 11 currently in clinical trials on three different continents. Over 1,000 subjects have been enrolled in our clinical trials since December 2015. 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.subject to an open investigational new drug application (IND). Aspects of our pipeline have been supported through strategic alliances, including with AstraZeneca, Merck, and Vertex Pharmaceuticals, or Vertex, and government-sponsored organizations and private foundations focused on global health initiatives, including BARDA, DARPA, the National Institute of Allergy and Infectious Diseases (NIAID), the National Institutes of Health (NIH), the Coalition for Epidemic Preparedness Innovations (CEPI), and the Bill & Melinda Gates Foundation.
Our selection process for advancing new development candidates reflects both program-specific considerations as well as portfolio-wide considerations. Program-specific criteria include, among other relevant factors, the severity of the unmet medical need, the biology risk of our chosen target or disease, the feasibility of clinical development, the costs of development, and the commercial opportunity. Portfolio-wide considerations include the ability to demonstrate technical success for our platform components within a modality, thereby increasing the probability of success and learnings for subsequent programs in the modality and in some cases in other modalities.
Our
The breadth of biology addressable using mRNA technology is reflected in our current development pipeline of 24 programs. The diversity of proteins made from mRNA within our development pipeline is shown below in the figure below.
The following chart shows our current pipeline of 24 development programs, grouped into modalities—first our two formats, with a cell map illustratingcore modalities where we believe we have reduced the diversity of biology addressedtechnology risk, followed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs. We believe the 20 programsfour exploratory modalities in our pipeline represent only an initial wave of potential development candidates, and that our platform over time may yield both multiple new programs within our existing modalities and the potential for multiple programs in new modalities.
Portfolio-wide evidence in support of our platform and approach
We have generated significant learnings across our portfolio that we believe provide compelling support for our approach and pipeline across a broad array of human diseases.
We and our strategic collaborators AstraZeneca and Merck have completed IND-enabling GLP toxicology programs to support 15 opened INDs
With any new class of medicine, safety and tolerability is an important consideration for patients and healthy individuals, and helps to define the scope of application. As part of establishing our modalities and initial development pipeline, we conducted a large number of in vivo toxicology studies across a wide range of projects. We have sponsored dozens of third-party or internally-conducted in vivo toxicology studies since our inception. This includes more than 40 IND-enabling GLP toxicology studies required for regulatory filings.
We currently have 20 development candidates in our pipeline. Fifteen IND-enabling GLP toxicology programs have been completed and supported the opening of INDs by regulators for 15 development candidates to date.
Describing safety and tolerability — early stage clinical data from hundreds of subjects
The translation of preclinical safety and tolerability into the clinic is a key step for each of our programs and in totality supports the creation of a new class of medicines. We continue to generate safety and tolerability data across 11 investigational medicines. Over 1,000 subjects have been enrolled in our clinical trials.
Diverse production of many types of proteins
Our scientists, in conjunction with scientists from Merck and AstraZeneca and other strategic collaborators, have tested over 12,000 unique mRNA sequences in in vitro and in vivo preclinical studies. This includes over 500 invivo preclinical studies that were designed to show evidence of pharmacologic effect or the production of the desired protein. These studies included the following types of proteins:
Extracellular soluble ligands (e.g., VEGF, IL12, Relaxin, and erythropoietin);
Antibodies (e.g., immunoglobulins, which are composed of two light chain and two heavy chain proteins);
Extracellular protein complexes (e.g., Chikungunya virus-like particles);
Membrane proteins, in some cases as multimers (e.g., F protein, glycoprotein B, CMV pentamer, and OX40L);
Intracellular soluble protein complexes (e.g., methylmalonic-CoA mutase homodimer and propionyl-CoA carboxylase heterododecamer);
Intracellular membrane proteins with activating mutations (e.g., STING); and
Neoantigens presented to the immune system as short peptides.
Direct and indirect clinical demonstration of protein production in humans across multiple modalities
Over our eight year history we have had 12 investigational medicines in clinical trials, including our Zika vaccine (mRNA-1325), which we will not further develop. After generating early stage safety and tolerability data, we aimare continuing to demonstrate thatinvestigate the mRNA administered makes the desired protein and creates the desired pharmacological effect. We have observed protein production or a resulting pharmacological effect across a number of programs, which is more fully described in the section of this Annual Report on Form 10-K titled “Business—Program Descriptions.”
Pharmacologic effect—immunological responses
In clinical data, we have observed an ability to elicit neutralizing antibodies to viral antigens from our five most advanced prophylactic vaccine programs. For our two influenza vaccines, the RSV vaccine being developed in collaboration with Merck, the Chikungunya vaccine being developed in collaboration with DARPA, and our hMPV+PIV3 vaccine, both the preclinical models and immune responses in humans showed increased antibody levels to pathogenic viral antigens. For PCV (mRNA-4157), which is the most advanced program in clinical development within the cancer vaccines modality, we have observed antigen specific T cell responses in some patients. In the ongoing clinical trial for OX40L (mRNA-2416) in the intratumoral immuno-oncology modality, we have observed early indications of the ability to impact the tumor microenvironment from tumor regression in injected lesions and an adjacent uninjected lesion.
We have demonstrated the ability of our intratumoral immuno-oncology programs to transform immunologically cold tumor microenvironments in preclinical studies for our OX40L, OX40L+IL23+IL36γ, and IL12 programs. These responses include long-term T cell responses that eliminate tumors in animal models and makes them able to combat a second tumor challenge, indicating immunological memory. We also have preclinical evidence of immunological responses for programs in our cancer vaccines modality, including personalized cancer vaccines and KRAS vaccine.
Pharmacologic effect—enzyme-driven changes in metabolic phenotypes
We have tested our ability to impact metabolic phenotypes via the expression of over 24 different types of proteins. We have also progressed four development candidates, methylmalonic acidemia, or MMA, propionic acidemia, or PA, and phenylketonuria, or PKU, and Fabry disease, through early preclinical development efforts. We have demonstrated the ability of our mRNA development candidates to drive metabolic change in animal models for MMA, PA, PKU, and Fabry disease.
Pharmacologic effect—via binding activity and/or signaling activity
We have demonstrated the ability of cells preclinically to make and secrete antibodies and soluble modulating factors that exert their pharmacologic activity by binding to targets and in some cases, having a signaling effect. For example, for our antibody against Chikungunya virus, we have demonstrated an ability to make an antibody against Chikungunya virus and its ability to drive passive immunity in animal models. For our Relaxin program, we have demonstrated an ability to make relaxin as a secreted and engineered protein, which can impact heart failure in preclinical models.
Pharmacologic effect from proteins encoded by mRNA—next wave of potential clinical data
We have several programs currently in or taking steps to enter Phase 1 clinical trials where we will measure the pharmacology of our expressed proteins, as well as direct or indirect evidence of protein production. These programs include:
CMV vaccine (mRNA-1647) in the prophylactic vaccines modality to show the ability to make complex proteins;
KRAS vaccine (mRNA-5671) in the cancer vaccines modality to show KRAS neoantigen specific T cells;
OX40L+IL23+IL36γ (mRNA-2752) and IL12 (MEDI1191) in the intratumoral immuno-oncology modality to show protein levels, although systemic levels may be limited due to the intratumoral nature of the injection;
Antibody against Chikungunya virus (mRNA-1944), Relaxin (AZD7970), and Fabry disease (mRNA-3630) in the systemic secreted protein modality to show serum protein levels; and
MMA (mRNA-3704), PA (mRNA-3927), and PKU (mRNA-3283) in the systemic intracellular protein modality to show serum changes in metabolites resulting from active protein in these metabolic pathways.
Twelve first-in-human trials since December 2015 and clinical material supply
We invest in capabilities and infrastructure that enable us to execute at scale. We first dosed a subject in a clinical trial occurred in December 2015. We or our strategic collaborators have achieved first-in-human for 12 different mRNA investigational medicines. Eleven of those programs were run and sponsored by us.
Each first-in-human, or FIH, trial involved successful completion of one or more IND-enabling GLP toxicology studies, successful technical development, scale-up and cGMP manufacture of adequate quantitiesuse of mRNA drug product, IND or CTA regulatory filings and interactions with health authorities, and successful clinical operations start-up activities. We or our strategic collaborators have run clinical trials in the United States, Europe, and Australia.medicines.
Conclusion
We believe that this body
Table of preclinical and clinical data is indicative of our significant progress, and provides a strong foundation for our ongoing mission to create a new class of medicines for patients.Contents
PROGRAM DESCRIPTIONS
Using our platform, we have found solutions to many scientific and technical challenges in order to develop the desirable features of our potential mRNA medicines for different applications. A “modality” refers to a group of potential mRNA medicines with shared product features, and the associated combination of enabling mRNA technologies, delivery technologies, and manufacturing processes.
Each of our modalities is designed to overcome the challenges of delivering the right amount of mRNA to the right tissue at the right times across a variety of applications. In advancing our platform technologies and identifying new product features for novel mRNA medicines, we may designate additional modalities.
We started with prophylactic vaccines as our first modality as we believed there would be lower technical hurdles for vaccines compared to therapeutics. Early formulations of mRNA tended to stimulate the immune system, which is a desired feature for a vaccine, but not therapeutics. In addition, antigens for many viruses tend to be well-characterized and of lower biology risk. Also, dosing regimens for vaccines can require as few as one or two administrations.
I. PROGRAM DESCRIPTIONS IN OUR PROPHYLACTIC VACCINES MODALITY
We designed our prophylactic vaccines modality to prevent or control infectious diseases. Since we nominatedThis modality includes our COVID-19 vaccine, which was first programauthorized by the U.S. FDA for emergency use in late 2014, thisDecember 2020 for vaccination of adults age 18 and older against SARS-CoV-2. Our prophylactic vaccines modality has growncurrently includes ten development candidates in addition to currently include eight programs,our commercial COVID-19 vaccine, all of which are vaccines against viruses. The goal of any vaccine is to safely pre-expose the immune system to a small quantity of a protein from a pathogen, called an antigen, so that the immune system is prepared to fight the pathogen if exposed in the future, and prevent infection or disease.
Within this modality, our portfolio includes programs for both commercial and global health uses. We have strategic alliances with Merck on select commercial vaccines, and with the Biomedical Advanced Research and Development Authority, or BARDA, and the Defense Advanced Research Projects Agency, or DARPA, on global health vaccine programs.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Prophylactic vaccines: Opportunity
Vaccines to prevent infectious diseases are one of the great innovations of modern medicine. In the United States alone, the Centers for Disease Control and Prevention (CDC) estimates that childhood vaccinations given in the past two decades will in total prevent 322 million Americans from falling ill, 21 million hospitalizations, 732,000 deaths, $295 billion of direct costs, and $1.3 trillion in social costs. The commercial opportunity for vaccines is significant, with more thansignificant; the worldwide vaccine market in 2019 was $35 billion in annual worldwide sales, including 16 different vaccine products each generating more than $500 million in annual worldwide sales in 2017.billion. More innovative vaccines have been able to achieve pricing per regimen generally ranging from 5 to 20 times that of seasonal flu vaccines.
Our approach
Our vaccine research approach startsProphylactic vaccines: Product features
We believe mRNA-based vaccines offer several advantages, including:
•Ability to mimic many aspects of natural viral infections. mRNA enters cells and is used to produce viral antigen proteins from within thecell that include natural, post-translational modifications. This mimics the process by identifyingwhich natural viral infections occur, where information from viral genomes is used to produce viral proteins from within a cell. This can potentially enhance the antigens most likely to induce a protective immune response, against a specific infectious disease. We test one orincluding improved B and T cell responses.
•Multiplexing of mRNA for more antigens in vivo incompelling product profiles. Multiple mRNAs encoding for multiple animal species. The immune responseviral proteins can be measuredincluded in asingle vaccine, either permitting production of complex multimeric antigens that are much more difficult to achieve with traditional technologies, or producing antigens from multiple ways including:
Generationviruses at once. As an example, our CMV vaccine (mRNA-1647) contains six mRNAs, five of binding antibodies, where the antibodies generated by the vaccine bindwhich encode five different proteins that combine to the pathogen antigens being targeted;
Generation of neutralizing antibodies, where the antibodies generated by the vaccine are able to prevent the pathogen from infecting cells;
Ability of the vaccine to protect vaccinated animals againstform a pathogen, as measured by reductions in detectable pathogen or by the survival of the challenged animal if the pathogenpentameric protein complex that is lethal; and
Generation of ana potentially critical antigen specific T cell response.
Clinical correlates of protection are levels offor immune response that when achieved in response to vaccination are associated with protection against infectionCMV.
•Rapid discovery and advancement of mRNA programs into the clinic. Many viral antigens are known. However, with traditional vaccines,the target pathogens or disease. Influenza, for instance, has an established correlate of protection based on the serum hemagglutination inhibition, or HAI, assay. HAI titers of 40 or above are associated with 50% to 70% protection against influenza. However, such correlates are generally only available for approved vaccines. As a result, new vaccines generally, but not always,antigens have to demonstrate efficacy against clinical disease before being approved.be produced in dedicated cell-cultures and/or fermentation-based manufacturing production processes in order to initiate testing of potential vaccine constructs. Our first two programs ability to design our antigens in this modalitysilico allows us to rapidly produce and test antigens in preclinical models, which can dramatically accelerate our vaccine selection.
•Capital efficiency and speed from shared manufacturing processes and infrastructure. Traditional vaccines require product-dedicated production processes, facilities, and operators. Our mRNA vaccines are H10N8 and H7N9 vaccines for an established antigen with HAI clinical correlates.
Typically, subjects require onlyproduced in a limited numbermanufacturing process that is sufficiently consistent across our pipeline to allow any one of administrations of a vaccineour facilities the flexibility to confer long-lasting protection. Manyproduce any of our mRNA vaccines are developedvaccines.
Prophylactic vaccines: Vaccines against respiratory viruses
COVID-19 vaccine (mRNA-1273)
Moderna’s COVID-19 vaccine has already been administered in millions of patients and is authorized for use in more than 30 countries
Our COVID-19 vaccine (mRNA-1273) was designed, subject to Phase 1, Phase 2 and Phase 3 clinical trials, delivered clinical trial results, and received emergency use and other conditional authorizations in less than a year, and has been and continues to be administereda key tool in twofighting the global SARS-CoV-2 pandemic. The vaccine is referred to as the Moderna COVID-19 Vaccine in the U.S. and Canadian markets, and is generally referred to as the COVID-19 Vaccine Moderna in other markets. Forward-looking references to our COVID-19 vaccine in this Annual Report on Form 10-K may include future modifications to mRNA-1273 or other development candidates that are designed to provide protection against variants of the SARS-CoV-2 virus.
We worked throughout 2020 to expand our manufacturing capacity and partnered with other companies to supplement that production, and currently anticipate that we will be able to produce between 700 million and 1 billion doses oneof our COVID-19 vaccine in 2021. Our COVID-19 vaccine is a two-dose course, meaning this production will be sufficient to primevaccinate between 350 million and 500 million people against COVID-19 at the immune responsecurrent 100 microgram (µg) dose. As of December 31, 2020, we had committed orders for approximately 520 million doses of the COVID-19 vaccine to be delivered in 2021, for total contract consideration of $11.7 billion. We are conducting a Phase 2/3 study of mRNA-1273 in adolescents 12 to 17 years of age. Additional studies are planned to evaluate our COVID-19 vaccine in children younger than 12 years and immunocompromised populations. We are also conducting a field effectiveness trial in the United States to gather additional data in other populations, including older adults and individuals with co-morbidities that place them at increased risk for the complications of COVID-19.
On February 25, 2021, we announced that the Company is developing a next-generation vaccine against COVID-19, mRNA-1283.This vaccine candidate encodes for the portions of the SARS-CoV-2 spike protein that are critical for neutralization, specifically the Receptor Binding Domain (RBD) and N-terminal Domain (NTD). The encoded mRNA-1283 antigen is shorter than mRNA-1273, and is being developed as a potential refrigerator stable mRNA vaccine that we anticipate will facilitate easier distribution and administration by healthcare providers. mRNA-1283 is intended to be evaluated for use as a booster dose for previously vaccinated or infected individuals as well as in a primary series for seronegative individuals.
COVID-19: Disease overview
SARS-CoV-2 is the virus that causes COVID-19 disease, which has led to over 2.4 million global deaths
Coronaviruses are a large family of viruses that can cause illness in animals or humans. In humans there are several known coronaviruses that cause respiratory infections. These coronaviruses range from the common cold to more severe diseases such as severe acute respiratory syndrome (SARS), Middle East respiratory syndrome (MERS), and COVID-19. SARS-CoV-2 is the novel coronavirus first identified in humans in December 2019 and is the cause of COVID-19.
COVID-19 is the most severe global pandemic since the influenza pandemic of 1918. As of February 18, 2021, there have been over 110 million confirmed cases and over 2.4 million global deaths from COVID-19. The risk of mortality increases with age (estimated to be ~0.1% for individuals aged 0-19, ~6% for individuals over age 60). Risk of severe disease and mortality increase for persons with pre-existing diseases or comorbid conditions (e.g. cardiovascular disease, diabetes, chronic lung disease, obesity).
As the pandemic has continued variants of the original SARS-CoV-2 virus first detected in Wuhan, China, have continued to evolve. Certain of these variant strains of SARS-CoV-2 have already proven to lead to increased rates of transmission of the virus, and as the virus continues to evolve, future strains or those already in circulation could cause more severe forms of disease. Some variant strains have also demonstrated resistance to existing vaccines and therapeutics for COVID-19. Data from the primary efficacy analysis announced November 30, 2020 suggested that mRNA-1273—which was designed based upon the genetic sequence of the virus first detected in Wuhan, China—is 94.1% efficacious against symptomatic COVID-19 disease with a clinically-acceptable safety profile. However, while the neutralization titers are comparable for most variant strains tested, including the B.1.1.7 strain first identified in the United Kingdom, there are data to suggest a 6.4-fold reduction in neutralization titers against the B.1.351 strain which was first identified in South Africa. While the titers against B.1.351 remain higher than those found to be protective against viral challenge in animal models, we have nonetheless announced a proactive strategy to address variants of the virus. We are continuing to collaborate with the NIH to study the evolution of the SARS-CoV-2 virus and the secondeffectiveness of mRNA-1273 against new strains. As one part of this strategy, we are testing additional boosters of mRNA-1273 to boost it. In cases where
populations have been exposedfurther increase protection against emerging strains. Additionally, we are advancing an emerging strain booster, referred to as mRNA-1273.351 (named for the B.1.351 strain) to assess protection against that strain. On February 24, 2021, doses of mRNA-1273.351 were shipped to the virus previously, such as with many respiratory viruses, a subject might be administered a single dose of an mRNA vaccine.
We believe that our potential mRNA vaccines will have a more standardized manufacturing process compared to traditional vaccines that would provide considerable advantages. Current approaches include attenuation and replication of live viruses and cell-culture methods to produce recombinant antigens. These approaches require considerable customization compared to the standardized process of producing mRNA vaccines.
We believe the inherent characteristics of mRNA, coupled with our strategy to execute at scale, will allow us to bring potential mRNA vaccines to the clinic in a relatively short period of time. We have chosen to be methodicalNIH for our early programs to understand the technology risks within the modality. If needed, as in the case of a pandemic, we could potentially exploit the scalability of mRNA medicines and our infrastructure to rapidly advance a potential mRNA vaccine to the clinic.
PROPHYLACTIC VACCINES MODALITY: COMMERCIAL PROGRAMS
RSV vaccine (mRNA-1777): Summary
Our RSV vaccine program completed dosing in a Phase 1 clinical trial that will be led and funded by NIAID.
COVID-19 vaccine (mRNA-1273): Product concept
Our vaccine is an mRNA vaccine against COVID-19 encoding for a prefusion stabilized form of the Spike (S) protein, which was co-developed by Moderna and investigators from NIAID’s Vaccine Research Center.
The Spike protein complex is necessary for membrane fusion and host cell infection and has been the target for the majority of vaccines against COVID-19. Our COVID-19 vaccine encodes a stabilized version of the SARS-CoV-2 full-length spike glycoprotein trimer, S-2P, which has been modified to include two proline substitutions at the top of the central helix in the S2 subunit (S-2P).
COVID-19 vaccine (mRNA-1273): Preclinical data
mRNA-1273 led to protection against SARS-CoV-2 infection in the lungs and nose of non-human primates
On July 29, 2020, we announced the publication in The New England Journal of Medicine of data from a preclinical study of mRNA-1273, demonstrating that 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.
COVID-19 vaccine (mRNA-1273): Clinical data
Phase 1 trial. A Phase 1 open-label study of mRNA-1273 is being conducted by the NIH. This study, which began on March 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 were subsequently added in the Phase 1 study: 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 July 14, 2020, we announced the publication in The New England Journal of Medicine of an interim analysis of data from the original cohorts obtained through Day 57 in the Phase 1 study. 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. mRNA-1273 was generally well-tolerated, with no serious adverse events reported through Day 57. Adverse events were generally transient and mild to moderate in severity.
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. On December 2, 2020, a letter to the editor was published in TheNew England Journal of Medicine reporting that participants in the Phase 1 study of mRNA-1273 retained high levels of neutralizing antibodies through 119 days following first vaccination (90 days following second vaccination). The study was led by NIAID.
Phase 1 older adult cohort. On September 29, 2020, we announced the publication in The New England Journal of Medicine of the second interim analysis of data from 40 healthy adult participants across two dose levels (25 µg and 100 µg) in two age cohorts (ages 56-70 and ages 71+), and reports results through Day 57 (1 month after the second dose). Both the 25 µg and 100 µg dose levels of mRNA-1273 were generally well-tolerated, with no serious adverse events reported through Day 57.
At both the 25 µg and 100 µg dose levels, after two vaccinations, mRNA-1273 induced dose-dependent binding antibody responses reaching the upper quartile of the distribution of convalescent sera. At Day 57 (1 month post-dose 2), geometric mean titers (GMT) exceeded the median of those seen in convalescent sera from 41 individuals with confirmed COVID-19 diagnosis.
Phase 3 trial. The Phase 3 COVE trial for mRNA-1273 is a randomized, 1:1 placebo-controlled study testing the vaccine at the 100 µg dose level in 30,000 participants in the U.S., ages 18 and older. The primary endpoint of the COVE study, which is ongoing, is the prevention of symptomatic COVID-19 disease. Key secondary endpoints include prevention of severe COVID-19 disease and prevention of infection by SARS-CoV-2. The Phase 3 COVE study was designed in collaboration with the FDA and NIH to evaluate vaccine efficacy in Americans at risk of severe COVID-19 disease and completed enrollment of more than 30,000 participants ages 18 and older in the U.S. on October 22, 2020, including those at high risk of severe complications of COVID-19 disease. In early September 2020, we announced that we were slowing enrollment in the trial to ensure representation of communities of color in the COVE study. Final enrollment in the study included more than 11,000 participants from communities of color, representing 37% of the study population.
On December 30, 2020, interim safety and primary efficacy results from the Phase 3 trial of mRNA-1273 were published in The New England Journal of Medicine. The primary endpoint of the Phase 3 COVE study was based on the interimanalysis of COVID-19 cases confirmed and adjudicated starting two weeks following the second dose of vaccine. This final analysis was based on 196 cases, of which 185 cases of COVID-19 were observed in the placebo group versus 11 cases observed in the Moderna COVID-19 Vaccine group, corresponding to a 94% vaccine efficacy (95% CI 89.3-96.8%; p<0.0001). This efficacy is highlighted in the chart below. The most common solicited adverse reactions (ARs) after the two-dose series was injection site pain (86.0%). Solicited systemic adverse events occurred more often in the Moderna COVID-19 vaccine group (54.9% and 79.4%) than in the placebo (42.2% and 36.5%) group after both the first dose and the second dose respectively and were most commonly headache, fatigue and myalgia. While the majority of these ARs were mild (grade 1) or moderate (grade 2), there was a higher occurrence of severe (grade 3) reactions in the Moderna COVID-19 Vaccine group after the first (2.9%) and second (15.8%) injections. The majority of local solicited ARs occurred within the first one to two days after injection and generally persisted for a median of one to two days. Safety data continues to accrue, and the study continues to be monitored by an independent Data Safety Monitoring Board (DSMB) appointed by the NIH. All participants in the COVE study will be monitored for two years after their second dose to assess long-term protection and safety. Additional data to be collected will include longer term safety follow-up, duration of protection against COVID-19, and efficacy against asymptomatic SARS-CoV-2 infection. All placebo recipients in the Phase 2 and Phase 3 trials have been offered our COVID-19 vaccine. As of February 15, 2020, over 80% of placebo recipients have received at least one dose of our COVID-19 vaccine.
We are also conducting a Phase 2/3 study of mRNA-1273 in adolescents 12 to less than 18 years of age and a Phase 2/3 pediatric study in children less than 12 years old is expected to begin in April 2021. Finally, to assess the ability of a third vaccination with mRNA-1273 to further boost antibody titers, participants in the active arms (100 and 50ug) of our Phase 2 adult study will be offered a 50ug booster dose. Additional studies are planned to evaluate mRNA-1273 in special risk groups, such as the immunocompromised.
COVID-19 vaccine (mRNA-1273): Regulatory updates
On December 18, 2020, the U.S. Food and Drug Administration authorized the emergency use of mRNA-1273, Moderna’s vaccine against COVID-19, in individuals 18 years of age or older. Our COVID-19 vaccine has also been authorized for emergency or conditional use by regulatory authorities in Canada, Israel, the United Kingdom, the European Union, Switzerland, Singapore and Qatar. Additional authorizations are currently under review in additional markets and by the World Health Organization (WHO).We expect to submit a biologics license application, or BLA, to the FDA for approval of mRNA-1273, and to submit applications with other regulatory authorities for similar approvals, which will allow for the commercial sale and distribution of the vaccine after the pandemic subsides and conditions are no longer met for emergency or conditional use authorizations.
COVID-19 vaccine (mRNA-1273): Commercial, manufacturing and supply updates
As of December 31, 2020, we have signed supply agreements to deliver approximately 520 million doses of mRNA-1273 in 2021, for total contract consideration of $11.7 billion. We have confirmed the following supply agreements as of that date: United States: 200 million doses, with option for an additional 300 million doses; European Union: 160 million doses; Japan: 50 million doses; Canada: 40 million doses, with option for an additional 16 million doses; South Korea: 40 million doses; United Kingdom: 17 million doses; Switzerland: 7.5 million doses; Israel: 6 million doses. We also signed agreements with Qatar, Singapore, and other considerations,countries for which order amounts were not disclosed.
During 2021, and through the date of this Annual Report on Form 10-K, we have agreed to additional supply agreements, or received option exercises, for additional doses as follows: United States: 100 million doses, with an option remaining for 200 million doses; European Union: 150 million doses, with an option remaining for 150 million doses in 2022 (subject to final execution of the Purchase Agreement following the expiration of the opt out period for EU Member States); Canada: 4 million doses; Colombia: 10 million doses; and Taiwan: 5 million doses.
Our base case global production estimate is 700 million to 1 billion doses for 2021. We are continuing to invest and add staff as we meet production at the high end of this range. We are also working on increasing our strategic collaborator Merckpotential supply to up to 1.4 billion doses for 2022 based upon the current 100 µg dose. Much of the production for the supply of the U.S. market will be completed at our MTC facility in Norwood, Massachusetts, with additional production by Lonza Ltd. for the U.S. market. We have also partnered with Lonza to complete all production of mRNA-1273 for markets other than the U.S. in Switzerland. Fill-finish services for mRNA-1273 are provided by Catalent Inc. in the U.S., and by ROVI and Recipharm outside the U.S.
We believe that the conditions under which mRNA-1273 can be shipped and stored are a key feature of our vaccine as such conditions provide for greater flexibility in distributing the vaccine to markets where special handling may be a barrier to distribution. mRNA-1273 does not require dilution prior to use and remains stable at 2° to 8°C (36° to 46°F), the temperature of a standard home or medical refrigerator, for 30 days. mRNA-1273 remains stable at -20° C (-4°F) for up to six months, at refrigerated conditions for up to 30 days and at room temperature for up to 12 hours.
hMPV/PIV3 vaccine (mRNA-1653)
We are developing a combination vaccine to address two viruses that are leading causes of respiratory infection
Human metapneumovirus, or hMPV, and human parainfluenza virus 3, or PIV3, are significant causes of respiratory tract infections in children. Despite the substantial impact hMPV and PIV3 have on human health, attention and research on these viruses have lagged relative to other respiratory infections, like respiratory syncytial virus (RSV). To date, no vaccine to prevent hMPV or PIV3 infections has initiatedbeen approved. Our platform allows us to combine mRNAs encoding antigens for the two pathogens in one combination vaccine, enabling a single vaccine that could protect against both respiratory infections. In our approach, we utilize mRNA sequences encoding for the membrane fusion (F) glycoproteins, or F proteins, for each of the viruses. We have generated safety, tolerability, and immunogenicity data from the Phase 2a planning1 trial for mRNA-1653 in the United States, which has been completed. Based on these data, we have a Phase 1b trial for mRNA-1653 ongoing in the United States in healthy adults and children aged 12-59 months.
hMPV/PIV3 vaccine (mRNA-1653): Disease overview
hMPV and PIV3 have a substantial impact on human health yet have lagged in research and attention relative to RSV
There is no approved vaccine for hMPV although this RNA virus has been determined to be one of the more frequent causes of upper and lower respiratory tract infections. hMPV has been detected in 4% to 15% of patients with acute respiratory infections. hMPV causes disease primarily in young children but can also infect adults, the elderly, and immunocompromised individuals. Clinical signs of infection range from a mild upper respiratory tract infection to life-threatening severe bronchiolitis and pneumonia. hMPV was discovered in 2001 and identified as a leading cause of respiratory infection.
There is no approved vaccine for PIV3 although this RNA virus is recognized as an important cause of respiratory tract infections in children. Infections from parainfluenza virus, or PIV, account for up to 7% of acute respiratory infections among children younger than 5 years. Of the four PIV types identified, PIV3 most frequently results in infections and leads to the more serious lower respiratory tract infections compared to the other three PIV types. Though PIV3 related infections were identified in the past, awareness of their burden to patients and hospitals has risen over the past several years.
Awareness of hospitalizations due to hMPV or PIV3 infections have risen, and we believe that a single, combined vaccine intended for active immunization of infants against both hMPV and PIV3 would be valuable. Previous attempts at developing a vaccine have focused on only hMPV or PIV alone with no known attempts at a combination vaccine.
hMPV/PIV3 vaccine (mRNA-1653): Our product concept
Our approach is to develop a combination vaccine for all infants
mRNA-1653 is a single investigational vaccine consisting of two distinct mRNA sequences that encode the membrane F proteins of hMPV and PIV3, co-formulated in our proprietary LNP.
hMPV/PIV3 vaccine (mRNA-1653): Preclinical information
Our mRNA vaccine is immunogenic and protective in preclinical multiple species
We have evaluated multiple combinations for hMPV/PIV3 mRNA vaccines encoding full-length F proteins for hMPV and PIV3 viruses in mice, Sprague Dawley rats, cotton rats, and African green monkeys, each following intramuscular injection. These studies demonstrate that mRNA encoding for F proteins from these viruses induce robust hMPV and PIV3 neutralizing antibody titers in all species tested. Further, we have demonstrated that our hMPV and PIV3 mRNA combination vaccine does not lead to vaccine-enhanced respiratory disease (evaluated in cotton rats) and is protective against hMPV or PIV3 viral challenge (evaluated in cotton rats and African green monkeys).
hMPV/PIV3 vaccine (mRNA-1653): Clinical data
We have generated safety, tolerability, and immunogenicity data from a Phase 1 trial in the U.S., which has been completed; based on the data, we have a Phase 1b trial in healthy adults and children aged 12-59 months ongoing in the U.S.
A first-in-human dose-ranging study, mRNA-1653-P101, in healthy adults (N = 124) was completed in January 2020. This study evaluated the safety, reactogenicity, and immunogenicity of a range of dose levels (25, 75, 150 or 300 µg) administered on a 1-dose or 2-dose vaccination schedule (approximately 28 days apart) compared with a placebo control in healthy adult subjects (18 through 49 years of age) with a 13 month follow-up period. The mRNA-1653 vaccine was generally well-tolerated at all dose levels. There were no deaths or adverse events of special interest reported during the study. No subject was withdrawn from the study due to an unsolicited adverse event. Injection site pain was the most commonly reported solicited adverse event and the most common grade 3 adverse event. Neutralizing antibodies against hMPV and PIV3 were present at baseline in all subjects, consistent with prior exposure
to both viruses. A single dose of mRNA-1653 boosted serum neutralization titers against hMPV and PIV3, and the magnitude of the boost was similar at all dose levels. The Month 1 to baseline geometric mean ratio (GMR) for the pooled mRNA-1653 treatment groups was approximately 6 for hMPV and 3 for PIV3. A second vaccination did not impact the magnitude of hMPV or PIV3 neutralization titers measured at Month 2. The hMPV neutralizing antibody titers remained above baseline at all dose levels through Month 13, and the PIV3 neutralizing antibody titers remained above baseline at all dose levels through Month 7.
We are conducting a Phase 1b trial to evaluate mRNA-1653 in healthy adults and children aged 12-59 months. The Phase 1b trial is a randomized, observer-blinded, placebo-controlled, dose-ranging trial to evaluate the safety and immunogenicity of two dose levels of mRNA-1653 in healthy adults (18-49 years of age) and three dose levels in children (12-59 months of age) with serologic evidence of prior hMPV and PIV3 exposure. The adult cohort includes 24 adults randomized in the ratio 1:1:1 to receive two doses of 30 μg of mRNA-1653, 150 μg of mRNA-1653, or placebo two months apart. As of January 2021, the adult cohort has been completed and the pediatric portion is ongoing.
RSV vaccine (mRNA-1345)
We are developing an RSV vaccine for children and older adults. We intend to explore a combination vaccine with mRNA-1653, our hMPV/PIV3 vaccine, and/or other respiratory viruses to address a wide array of viral respiratory illness in these populations.
Respiratory syncytial virus, or RSV, is one of the most common causes of respiratory disease in infantschildren under the age of five and the elderly. More than 86,000 children and about 177,000also in older adults are hospitalized due toadults. The RSV associated respiratory infections each year in the United States. To date, no effectivevaccine (mRNA-1345) is our first RSV vaccine to prevententer the clinic with the same proprietary LNP as our COVID-19 vaccine. We previously had two different RSV has been approved, and the only approved prophylaxis treatment is limited to the monoclonal antibody palivizumab, marketed as Synagiscandidates in the United States for pediatric patients at high risk for RSV infection. In collaborationpartnership with Merck we designed mRNA-1777 to encode a membrane-anchored version of stabilized prefusion F protein,(mRNA-1777 and mRNA-1172) enter the main target of potently neutralizing and protective antibodies. This vaccine is administeredclinic. mRNA-1345 was initially nominated as a single dose with no boost. The Phase 1 trial is currently ongoing in Australia,pediatric vaccine for whichRSV. In October 2020, we areannounced that we regained the sponsor.rights to adult RSV vaccines from Merck has initiated plans for a Phase 2a trial, for which Merckand will be moving mRNA-1345 into the sponsor. In addition, we are working with Merck to identify and advance improvements to the RSV vaccine.adult population.
RSV vaccine (mRNA-1777)(mRNA-1345): Disease overview
RSV impactsis the leading cause of unaddressed severe lower respiratory tract disease and hospitalization in infants and young children worldwide and causes a substantial burden of illness in older adults and no approved vaccine exists today
RSV causes upper and lower respiratory tract illness worldwide and is transmitted primarily via aerosolized droplets from an infected person, or via contamination of environmental surfaces with infectious secretions. Following introduction of RSV into the nose or upper respiratory tract, the virus replicates primarily in the ciliated cells of the respiratory epithelium. Upper respiratory symptoms typically begin within several days of exposure. In healthy adults, the infection may remain confined to the upper respiratory tract. However, in those with compromised immune systems, such as premature infants, the elderly, or individuals with underlying respiratory disease, lower respiratory tract infections commonly occur and may manifest as wheezing, bronchiolitis, pneumonia, hospitalization or even death. Infections with RSV follow a seasonal pattern, occurring primarily in the Northern hemisphere between the months of November and April, and in the Southern hemisphere primarily between March and October.
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RSV is a common cause of respiratory tract illness in children, with most infected at least once by two years of age. In the United States, it is estimated that over two million children younger than five years of age receive medical attention and more than 86,000 children are hospitalized due to RSV infection eachannually. Globally, it is estimated that RSV is responsible for over approximately 33 million episodes of acute lower-respiratory tract infection, 3.2 million hospitalizations and as many as 118,000 deaths per year in children younger than five years of age. RSV also causes a substantial burden of respiratory illness in older adults. RSV infection causes an estimated 177,00 hospitalizations and 14,000 deaths per year in adults aged >65 years in the United States. About 177,000 older adults are hospitalized each yearTo date, no effective vaccine to prevent RSV has been approved, and the only approved prophylactic treatment is the monoclonal antibody (mAb) palivizumab, marketed as SYNAGIS in the United States due to RSV-associatedfor the prevention of serious lower respiratory infections, with approximately 14,000 deaths as a result.disease caused by RSV infection is common in adults over the age of 60 years, occurring in an average of 5.5% of older adults every season and resulting in physician’s visitspediatric patients at high risk for 17% of infected older adults. The cost of RSV disease to society can be considerable.infection
RSV vaccine (mRNA-1777)(mRNA-1345): Our productProduct concept
Prevent RSV infectionsdisease in young children and older adults with an improved RSV antigen using a single vaccine doseand our proprietary LNP formulation
Our RSV investigational medicine, mRNA-1777, includes an mRNA encoding
mRNA-1345 encodes an engineered form of the RSV fusion (F) glycoproteinF proteins stabilized in the prefusion conformation and is formulated in anour proprietary LNP. The F protein is present as a homotrimer on the surface of RSV. The prefusion conformation of the F protein interacts with a host cell membrane, and the conformational change from prefusion to postfusion drives virus fusion with a host cell. The majority of RSV-specific neutralizing antibodies in convalescent people are directed to epitopes present only on the prefusion conformation of the F protein. The prefusion state of the F protein elicits a superior neutralizing antibody response compared to the postfusion state in animal studies conducted by others. A schematic of the prefusion F protein on the surface of a host cell, with sites recognized by neutralizing antibodies, is depicted in the figure below; the inset on the left of the figure shows the intended design of the mRNA formulated in LNP, and the inset on the right shows the intended prefusion F protein on the surface of the cell. We believe that neutralizing antibodies elicited by mRNA-1777mRNA-1345 may lead to an efficacious RSV vaccine.
RSV vaccine (mRNA-1777)(mRNA-1345): Preclinical information
mRNA vaccines encoding different versions of
We have demonstrated that the prefusion F protein have been evaluated in mice, cotton rats, and African green monkeys, or AGM. These studies demonstrate that mRNA vaccines encoding the prefusion F protein induceRSV vaccine mRNA-1345 induces robust RSV neutralizing antibody titers in preclinical species tested, do not lead to vaccine-enhanced respiratory disease (evaluated in cotton rats), and are protective against RSV challenge (evaluated in cotton rats and AGM). The data formice. For example, the left panel below shows the results of a study in AGM are shown in the figure below. In thiswhich mice were immunized with different dose levels of mRNA-1345 intramuscularly on study one group of AGM (4 per group) was vaccinated intramuscularly with vaccine, a second group was infected with 5.5 log 10 plaque forming units, or pfu, ofdays 1 and 21 and RSV strain A2 intranasally as a positive control, and a third group received no vaccine as a negative control, each on weeks 0, 4, and 8. Serum neutralizing antibody titers or SN titers, were measured on the indicated weeks and are shown in panel A. All animals were challenged intranasally and intratracheally on study week 10. On multiple time points after the challenge, virus present in bronchoalveolar lavage, or BAL, fluid was quantified by plaque assay as shown in panel B. In this study, we observed an increase in serum neutralizing titers with each vaccine dose. The animals that received mRNA-1777 showed complete protection (no virus detected) in lungs, similarcollected on day 33. When compared to the control group immunizedresults of a similar mouse study conducted with RSV A2. These results are shownmRNA from mRNA-1777 formulated in the figures below.same proprietary LNP as mRNA-1345, mRNA-1345 was shown to be significantly more immunogenic. We have leveraged our body of non-clinical, clinical and CMC experience from our vaccine portfolio to expedite preclinical development of our RSV mRNA-1345 vaccine.
Serum neutralizing titers in mice for mRNA-1345 and for mRNA-1777 mRNA formulated in non-human primate studyour same proprietary LNP
Panel (A)
Lung viremia detected post challenge
Clinical trials of a formalin-inactivated RSV vaccine conducted in non-human primate studythe 1960s resulted in higher rates of severe RSV disease in vaccinated infants than in control infants, a finding referred to as vaccine enhanced respiratory disease (ERD). It is thought that nucleic acid-based vaccines, including mRNA, present a lower risk of ERD because of their biologic similarities with live virus. Given that the RSV vaccine mRNA-1345 is designed to enable intracellular production of prefusion F protein by a person’s own cells, we believe that it likely recapitulates the antigenic presentation and immune cell stimulation as seen with natural infection. Further, the mRNA-1777 RSV vaccine did not predispose for ERD in a cotton rat RSV model (Espeseth et al, npj Vaccines (2020)5:16). To provide further confirmation that the pediatric RSV vaccine mRNA-1345 does not present a risk for ERD, additional preclinical studies will be conducted prior to clinical development of mRNA-1345 in RSV seronegative children or infants.
Panel (B)
RSV vaccine (mRNA-1777)(mRNA-1345): Clinical dataplan
We are conducting a Phase 1 trial for mRNA-1345 in healthy younger adults, healthy older adults and RSV-seropositive children. The Phase 1 trial in Australia has generated safety and tolerability data and demonstrated immunogenicity through day 90; based on the interim data and other such considerations, Merck has initiated planning for a Phase 2a trial
The Phase 1 trial for RSV vaccine has met its objectives of assessing the safety and tolerability profile of mRNA-1777 versus placebo including capturing solicited and unsolicited local and systemic adverse events. The Phase 1 trial for RSV vaccine has also demonstrated immunogenicity and we have observed a humoral immune response as measured by neutralizing antibody titers against RSV A for dose levels one, two, and three of mRNA-1777. Based on the interim data and other considerations, Merck has initiated planning for a Phase 2a trial.
The mRNA-1777 Phase 1 study is a randomized, partially double-blind,observer-blind, placebo-controlled, dose-escalation first-in-humandose escalation study to describeevaluate the safety, tolerability,reactogenicity and immunogenicity in healthy adult subjects in Australia. We are the sponsor for this trial. The study evaluatedof three dose levels of mRNA-1345 in healthy younger adults aged 18 to 49 years and 4healthy older adults aged 65-79 years and two dose levels in healthy older adults. All subjects were given a single intramuscular injection. The key objectivesRSV-seropositive children aged 12-59 months. As of January 2021, 3 of the study included:
assess the safety and tolerability of mRNA-1777 versus placebo; and
determine the immunogenicity of mRNA-1777 by measuring serum neutralizing antibody titers against RSV.
The key endpoints for the study included safety and tolerability of mRNA-1777.
The study is being conducted in two parts. Part A evaluates healthy4 younger subjects (ages > 18 and < 49 years) and Part B evaluates healthy older subjects (ages > 60 and < 79 years). Thereadult cohorts are four dose levels, where the highest dose, or dose four, is twelve times the lowest dose, or dose one, and dose three, the second highest dose, is eight times the lowest dose. In Part A, dose levels one, two, and three are being evaluated. The safety data from the sentinel safety group for each dose level was reviewed before permitting enrollment of the expansion group within that dose level cohort. The safety data of each expansion group was reviewed before
permitting dose escalation/enrollment of the sentinel safety group at the next dose level. In Part B, all four dose levels are being evaluated. The first sentinel dose cohort was triggered after review of the first sentinel dose level cohort in Part A. The safety data from the sentinel safety group for each dose level cohort was reviewed before permitting enrollment of the expansion group within that dose level cohort. The safety data of each expansion group was reviewed before permitting dose escalation/enrollment of the sentinel safety group at the next dose level. Part B includes the highest dose level, dose four, which was enrolled after review of the available safety and immunogenicity data of the preceding Part B dose level cohorts. Expansion groups in Part A and B were both randomized 3:1 mRNA-1777: placebo.
This 200-subject study is fully enrolled, and we began enrollment for the older adult cohort in February 2021.
Seasonal influenza vaccine (mRNA-1010, mRNA-1020 and mRNA-1030)
Three development candidates will be assessed in a phase 1 study planned to start in 2021. Mouse immunization studies have shown strong immune responses against the vaccine antigens.
Seasonal influenza viruses are estimated by the WHO to cause 3 to 5 million cases of severe illness and up to 650,000 deaths each year resulting in a severe challenge to public health. Currently licensed seasonal influenza virus vaccines rarely exceed 60% overall effectiveness and are poorly effective during years when the circulating viruses do not match the strains selected for the vaccine antigens. Particularly in older adults, the population most affected by severe influenza outcomes, vaccine effectiveness remains low. mRNA influenza vaccines could provide several benefits compared to current vaccines, including the ability to more quickly respond to strain changes, avoidance of mutations that may be acquired during vaccine production in eggs or cell culture and stronger immune responses and improved protection in older adults. We are planning to test three development candidates (mRNA-1010, mRNA-1020 and mRNA-1030) in a Phase 1 study starting in 2021, which will allow us to identify a candidate to take forward into pivotal efficacy studies. The vaccine will be administered as a single dose and will aim to elicit protection from all subjects have been dosed. Asseasonal influenza viruses. In the future we also plan to evaluate the combination of April 9, 2018, we havea seasonal influenza vaccine with vaccines against other respiratory viruses with similar epidemiology.
Seasonal influenza vaccine (mRNA-1010, mRNA-1020 and mRNA-1030): Disease overview
Influenza most substantially impacts young children and older adults, and current vaccines show low effectiveness
Influenza epidemics occur each year and manifest in mild to severe forms. Common symptoms of influenza infection include fever, runny nose, sore throat, muscle pain and coughing. The symptoms onset generally occurs within two days after infection and in uncomplicated cases the majority of datadisease is self-limiting and resolves within a week. However, influenza virus infection can lead to severe disease, especially in high risk groups (including older adults and individuals with comorbidities), and even death (290,000-650,000 respiratory deaths worldwide annually).
Influenza viruses follow a seasonal circulation pattern with increased cases during the winter months in the Northern and Southern hemispheres, respectively. Since influenza viruses continuously change through three months (90 days) post-vaccination for younger subjects in dose levels one and two, and for older subjects in doses one, two, and three.a process termed antigenic drift, the circulating viruses are actively monitored by a worldwide monitoring network coordinated by the WHO. Based on the interim data as of April 2018, dose levelsobserved circulation patterns and antigenic changes, an expert panel recommends influenza virus strains to be used for vaccine manufacturing twice a year (once for the Northern and once for the Southern hemisphere). Influenza A and influenza B viruses are the most relevant influenza viruses for human infection. Therefore, current recommendations include one influenza A H1N1 strain, one influenza A H3N2 strain and two influenza B strains (covering the B/Victoria and three of mRNA-1777 were observedB/Yamagata lineages).
Seasonal influenza vaccine (mRNA-1010, mRNA-1020 and mRNA-1030): Product concept
Prevent influenza virus infections by annual vaccination against circulating seasonal influenza viruses
Our investigational products will aim to elicit a humoral immune response as measured by neutralizing antibody titersprotective antibodies against RSV A, neutralizing antibody titers against RSV B (dose level three only, dose levelscirculating seasonal influenza viruses. Three products will be tested in the clinic in 2021 with the goal of selecting one and two have yetproduct to move forward into pivotal studies. The final product is expected to be assayed), absolute serum antibody titersupdated twice a year (for the Northern and Southern hemispheres, respectively) based on the recommendations by WHO and will include antigens of the four strains recommended for seasonal vaccines. An mRNA-based influenza vaccine has a number of potential advantages over vaccines produced using traditional manufacturing processes, such as avoiding mutations to RSV prefusion F protein and RSV postfusion F protein, and competing antibody titers to RSV prefusion F proteinproteins acquired by passage during egg- or cell-propagation of viruses, presentation of antigens in a dose-dependent manner up to dose level two in both younger and older subjects. The immune response measured by neutralizing antibody titers against RSV Atheir natural conformation, better immunogenicity in older adults and more rapid manufacturing timelines.
Seasonal influenza vaccine (mRNA-1010, mRNA-1020 and mRNA-1030): Preclinical information
Preclinical studies show that received dose level three of mRNA-1777 was not higher than thatstrong serum antibody responses against all antigens are elicited after a single administration of the subjects that receivedmRNA vaccines in mice, even at low mRNA dose level two. We have observed an increase in neutralizing antibody titers relative to placebo in younger adult subjects in panel Alevels.
Prophylactic vaccines: Vaccines requiring complex antigens and older adult subjects in panel B who received our RSV vaccine, as shown in the figure below. In the figure, geometric mean titer and 95% confidence interval are depicted by time for neutralizing antibody titers against RSV A for older and younger subjects. At day ninety, between 10 and 19 healthy younger subjects and between 11 and 27 healthy older subjects were tested at each dose level. Based on the interim data and other considerations, Merck has initiated planning for a Phase 2a trial.highly prevalent infections
Neutralizing antibody titers in healthy younger subjects
[Ages>18 and< 49 years] in Phase 1 trial for mRNA-1777 per protocol set
Panel (A)
Neutralizing antibody titers in healthy older subjects
[Ages>60 and< 79 years] in Phase 1 trial for mRNA-1777 per protocol set
Panel (B)
In addition, based on interim data as of April 2018, we observed an increase in T cell response relative to baseline at day 15 and day 60 in both healthy younger and healthy older adult subjects vaccinated with doses two and three of mRNA-1777.
Based on interim safety data as of April 9, 2018, mRNA-1777 was well tolerated with no dose limiting toxicities at dose levels one, two, and three in both the younger and older adults. As of September 2018, the highest dose level, which was evaluated in older subjects only, dose level four, was not as well tolerated as the lower dose levels. However, across all treatment arms, there were no treatment-related serious adverse events, or SAEs, treatment emergent adverse events, or TEAEs, leading to withdrawals, adverse events, or AEs of special interest, or new onset of chronic illnesses or autoimmune disorders in either of the age cohorts. There were no patterns in clinically significant laboratory abnormalities.
As of September 19, 2018, we have observed 15 SAEs in nine subjects, all of which were deemed unrelated to study product. These SAEs occurred approximately one to ten months from receipt of study product and included aortic aneurysm repair, paralytic ileus, spinal decompression, death from pre-existing cardiomyopathy, hernia, transient ischemic attack, peripheral vascular disorder, vasovagal syncope, diagnosis of non-small cell lung cancer, anterior cruciate ligament tear, left knee tendon tear, right knee tendon tear, left patella dislocation, right patella dislocation, and bilateral patella tendon repair.
The trial is ongoing and, consistent with the study protocol, we remain blinded to treatment at the individual subject level and continue to collect safety, tolerability, and immunogenicity data through day 365 of the study. Based on the interim safety, tolerability, and immunogenicity data, Merck has initiated plans for a Phase 2a trial for mRNA-1777.
CMV vaccine (mRNA-1647): Summary
Our CMV program targets congenital CMV infections to reduce or prevent birth defects
Congenital cytomegalovirus, or CMV, infection is the leading cause of birth defects in the United States. Despite several attempts, to date there is no vaccine approved to prevent congenital transmission of CMV. We believe that in addition to the glycoprotein B, or gB, protein antigen, a successful CMV vaccine would need to include the Pentamer, a 5-protein membrane-bound antigen complex required for epithelial, endothelial, and myeloid cell infection by the virus. A CMV vaccine containing the Pentamer as a recombinant protein or a replication defective virus is complex to make and scale. We used our platform to generate an mRNA vaccine designed to make the Pentamer in its natural membrane-bound conformation. This investigational medicine is designed to prevent or control CMV infection and includes five mRNAs encoding for the Pentamer, as well as one mRNA encoding for CMV gB that has previously demonstrated partial clinical efficacy. Our program is currently being tested in aThe Phase 1 clinicaland 2 trials for mRNA-1647 has generated safety and tolerability data, and demonstrated immunogenicity. Based on recent data from the 3-month interim analysis data from the Phase 2 trial, we have selected a dose and initiated planning for Phase 3 trials for mRNA-1647 in the United States.States, Canada, Europe, Australia, and Israel.
CMV (mRNA-1647): Disease overview
CMV is a major cause of birth defects with no approved vaccine
Human CMV is a common human pathogen and member of the herpes virus family. Seropositivity, demonstrating prior exposure to virus, increases with age and is approximately 40-60% in women of child-bearing potential in the United States. However, general awareness of CMV is not high. Less than 10-20% of adults are aware of CMV and most healthy adults after initial (primary) CMV infection do not have symptoms. However, approximately 0.6-0.7% of newborns are congenitally infected by CMV annually in industrialized countries. Congenital CMV results from infected mothers transmitting the virus to their unborn child and it is the leading cause of birth defects, with approximately 25,000 newborns per year in the United States infected. Birth defects occur in approximately 20% of infected babies and include permanent neurodevelopmental disabilities, which can include hearing loss (often permanent), vision impairment, varying degrees of learning disability, decreased muscle strength and coordination, and even death. Some studies report approximately one-third of infants with severe congenital disease will die within the first year of life, and the survivors, their caregivers, and health systems bear significant long-term burdens.
There is currently no available vaccine for CMV, and many previous attempts at developing a vaccine to reduce or prevent congenital transmission have been missing a key antigen, the Pentamer. We believe the Pentamer is critical for the infection of epithelial, endothelial, and myeloid cells by the virus. We believe the Pentamer was not included in certain prior recombinant protein vaccine attempts due to the complexity of producing it as a multi-unit antigen complex. Prior vaccine studies demonstrated insufficient efficacy against CMV infection and limited durability of immune response. A vaccine that leads to durable immunity in women of child-bearing age would address a critical unmet need in the prevention of congenital CMV infection.
CMV vaccine (mRNA-1647): Our product concept
We are developing a single vaccine with complex antigens to prevent or control infection
Our ability to generate a multi-antigen vaccine enables us to combine a traditional target antigen (gB) with the Pentamer in order to specifically focus the immune system on these important antigens. We believe this gives us greater potential to produce neutralizing antibodies that can block CMV transmission from the mother to the fetus. Our approach to block transmission could either be:
•direct, by vaccinating adolescents or adults of child-bearing potential (female and male); or
•indirect, by vaccinating toddlers who could spread CMV to each other, their mothers, and their childcare workers.
Unlike a protein-based or live-attenuated vaccine, our mRNA instructs cells to specifically make predetermined antigens with a structure that mimics the one presented to the immune system by the virus, thus focusing the immune system on these important antigens.
mRNA-1647 comprises six mRNAs that encode for these known hard-to-make CMV antigens in a proprietary LNP:
•In CMV seropositive individuals, the majority of neutralizing antibodies target the Pentamer. The CMV Pentamer is made by five CMV glycoproteins that form a membrane-bound complex. The Pentamer is required for CMV entry into epithelial, endothelial, and myeloid cells. The mRNA-expressed Pentamer is displayed on the surface of the cell and stimulates the production of neutralizing antibodies that prevent the virus from entering the cells.
•gB is a trimeric CMV membrane glycoprotein that abundantly resides on the surface of the viral particles. Fusion between virus and host cells, and hence infection, requires gB. Antibodies to gB can prevent CMV infection. gB has been utilized in some earlier attempts at a CMV vaccine as the sole antigen which had resulted in partial efficacy but not at levels sufficient for approval.
An illustration of our proposed approach for CMV is shown in the figure below.
CMV vaccine (mRNA-1647): Preclinical information
We have published preclinical data for our CMV vaccine
We have demonstrated that the Pentamer and gB mRNAs can elicit potent and durable antibody titers against the antigens in mice and non-human primates, and have published these results in the journal Vaccine in 2018. In one study, mice were immunized with the Pentamer and gB mRNAs encapsulated in our proprietary LNP. Serum samples were taken from the mice at specific timepoints post vaccination.post-vaccination. Post-vaccination neutralizing titers were measured by admixing serial dilutions of each sample with CMV virus, incubating the mixture in a human primary epithelial cell culture, and counting the number of infected cells. We used CytoGam, an approved product for prevention of CMV in transplant patients, as a control in our experiment. CytoGam is cytomegalovirus immune globulin from pooled plasma of CMV seropositive donors. The table below shows the neutralization antibody titers in epithelial cells for escalating vaccine doses in mice, demonstrating our ability to generate neutralizing antibodies. We also observed that at the highest dose, our mRNA vaccine generated a response more than 75-fold higher than CytoGam at estimated clinical levels. In addition, we have also observed that the Pentamer and gB mRNAs can elicit strong T cell responses.
Neutralizing titers in human primary epithelial cells for escalating CMV mRNA vaccine doses in mouse study
|
| | |
Dose for vaccine including the Pentamer and gB in our proprietary LNP | | At 41 days |
| Neutralization titers in
epithelial cell |
1.2 µg | | 58,336 |
3.5 µg | | 682,989 |
10.5 µg | | 457,913 |
CytoGam comparator (used at maximum concentration of 2 mg/ml observed in human serum) | | 5,905 |
CMV vaccine (mRNA-1647): Clinical plandata
We are currently conductinghave demonstrated tolerability and generated immunogenicity data in our Phase 1 and 2 trials. Based on interim Phase 2 data, we have initiated planning a Phase 13 trial in the United Statesof mRNA-1647 vaccine efficacy.
This
Phase 1 12-Month Interim Analysis
We announced positive data from the 12-month interim analysis of the Phase 1 clinical trial of mRNA-1647, which has completed the final study visit of its last participant and is a randomized, observer-blinded, placebo-controlled, dose-ranging study to evaluateevaluating the safety and immunogenicity of mRNA-1647 in 181 healthy adults in the United States. adult volunteers.
The study is designedclinical trial population includes those who are naïve to administer the vaccine asCMV 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 3-dose vaccinationdosing schedule (0,of 0, 2 and 6 months) atmonths. This 12-month planned interim analysis assessed immunogenicity of the first three dose levels (30, 90, and 180 µg) at 12 months (six months after the third vaccination), and the highest dose level (300 µg) at seven months (one month after the third vaccination). The analysis also assessed safety of the highest dose level at seven months. 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 seven months (one month 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.
•After the third vaccination, neutralizing antibody titers against epithelial cell infection were greater than 10 times higher in the 90 and 180 µg dose levels than CMV-seropositive baseline titers at the 90 and 180 µg dose levels.
•After the third vaccination, neutralizing antibody titers against fibroblast infection were 1.3 to 1.4 times higher than CMV-seropositive baseline titers at the 90 and 180 µg dose levels.
In CMV-seronegative participants at twelve months (six months after the third vaccination) in the 30, 90, and 180 µg dose levels:
•Neutralizing antibody titers remained at least 3.5-fold higher than the natural infection benchmark in epithelial cell assays.
•Titers in fibroblast assays approximated that of the natural infection benchmark in the in the 90 μg and 180 μg treatment groups
In CMV-seropositive participants at seven months (one month 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.
•The third vaccination boosted neutralizing antibody titers against epithelial cell infection to levels of 22-fold to 40-fold over baseline titers in all dose levels.
•The third vaccination boosted neutralizing antibody titers against fibroblast infection to levels of approximately 4-fold to 6-fold over baseline titers in all dose levels.
In CMV-seropositive participants at twelve months (six months after the third vaccination) in the 30, 90, and 180 µg dose levels:
•Neutralizing antibody titers were 14-fold to 31-fold over baseline titers in epithelial cell assays.
•Titers in fibroblast assays were 6-fold to 8-fold over baseline titers.
Participants receiving 300 µg of mRNA-1647 followed through seven months (one month after the third vaccination) continued to show consistent dose-dependent increases in neutralizing antibodies against epithelial cell infection and a dose level to be determined, depending on safety review of arm 1against fibroblast infection in both CMV-seronegative and CMV-seropositive subjects. Key objectives ofgroups. In CMV-seronegative participants at seven months, the study include the evaluation of:
safety and reactogenicity of different dose levels of mRNA-1647; and
neutralizing anti-CMV antibody responses againsttiters in epithelial cell assays increased further to 17-fold higher than the natural infection benchmark, and neutralizing antibody titers in fibroblast assays increased further to 5-fold higher than natural infection benchmark. In CMV-seropositive participants at seven months, the neutralizing antibody titers in epithelial cell assays was 13.4-fold over baseline titers and against fibroblast infection following vaccination.
Key endpoints for the study include safety, tolerability, and reactogenicity.
Subsequent to the initiationwas 7.1-fold over baseline titer. In a subset of our Phase 1 study for mRNA-1647, we developed a modified manufacturing process that demonstrated improved pharmaceutical propertiesCMV-seronegative participants in preclinical testing. We elected to introduce this modified process into mRNA-1647 under the same IND. Consequently, prior to our receipt of any immunogenicity data, we modified our trial design to test the original and modified manufacturing process for mRNA-1647.
The trial schematic is shown in the figure below. Our Phase 1 trial comprises dose-escalation phase A, dose-escalation and dose-selection phases B, and sentinel-expansion phase C. Only CMV-seronegative subjects are enrolled into dose-escalation phases A and B and the sentinel cohorts of Phase C, and both CMV-seronegative and -seropositive subjects are enrolled at a 1:1 ratio into dose-selection phases A and B and the expansion cohorts of phase C. Dose-escalation phase A evaluated mRNA-1647 manufactured with the process originally filed in the IND, and phases B and C are evaluating mRNA-1647 manufactured with a modified process. For dose-escalation phases A and B, there is sequential enrollment of subjects into the 30, 90 orand 180 µg dose levels, of study vaccine or placebo, startinggB antigen-specific T cell activation was observed at the 30 µgall dose level. Internal safety review of all subjects at each dose level permit enrollment of subjects into the next dose level. For dose-escalation phases A and B, the safety monitoring committee, or SMC, will review the safety data from all subjectslevels after the second and third vaccinations.
A safety analysis indicated that the vaccine was generally well-tolerated. There were no vaccine-related serious adverse events. Across all mRNA-1647 treatment groups, the most common solicited local adverse reaction, or AR, was injection site pain and the most common solicited systemic ARs were headache, fatigue, myalgia, arthralgia, and chills. Fever was reported in 0-55% of CMV-seronegative treatment groups and in 8-75% of CMV-seropositive treatment groups. In general, solicited systemic ARs occurred less frequently after the third vaccination compared to permit enrollment into the corresponding dose-selection phase. Since dose-escalation phase A included the mRNA-1647 manufactured using the process originally filedsecond, and were more common in the IND,CMV-seropositive treatment groups compared to the CMV-seronegative treatment groups. Grade 3 solicited ARs were more common in CMV-seropositive participants, and we preferwere fatigue (0-27% of a given dose cohort), chills (0-38% of a given dose cohort) and fever (0-33% of a given dose cohort). As reported in the modified manufacturing process includedprevious interim analysis, there was a single Grade 4 AR of an isolated lab finding of elevated partial thromboplastin time, which was elevated at baseline (Grade 1) and self-resolved on the next lab test with no associated clinical findings. Safety and tolerability in phases B and C, the drug product manufactured using the original manufacturing process is not being progressed to dose-selection. Phase C is split into arm 1 and arm 2, with arm 1 enrolling subjects into theparticipants receiving 300 µg dose level, and arm 2 enrolling subjects into a dose levelof mRNA-1647 was comparable to be determined, depending on safety review of arm 1.
Dose-escalation phases A and B have completed all vaccinations. Based on unblinded SMC reviews of safety data after the second vaccinationthat observed at the 180 µg dose level in phases ACMV-seropositive participants and B,generally higher in 300 µg dose level in CMV-seronegative participants.
Although the SMC approved continuationsmall sample size limits the conclusions that can be drawn from the data, the findings from this interim analysis build on an earlier interim analysis of safety and immunogenicity data through one month after the trial. As of March 6, 2019, 103 subjects have received the firstthird vaccination in the dose-selection phase B30, 90 and 180 µg dose levels and one month after the second vaccination in the 300 µg dose level.
Phase 2 Part 1 3-Month Interim Analysis
In Part 1 of the Phase 2 study, participants were randomized to receive either placebo, or 50, 100, or 150 µg of mRNA-1647 on a dosing schedule of 0, 2, and 336 months. The planned 3-month interim analysis of those subjects have receivedsafety and immunogenicity through 3 months (1 month after the second vaccination. Givenvaccination) in September 2020 informed the blindedselection of the 100 µg dose level for the Phase 3 pivotal efficacy study. In addition, we have initiated enrollment in Part 2 of the Phase 2 study, which is evaluating safety and tolerability profileimmunogenicity of the 100 µg dose level to expand the safety dataset in the target population planned for the Phase 3 study.
In CMV-seronegative participants at three months (one month after the second vaccination) in the 50, 100 and 150 µg dose levels:
•Neutralizing antibody titers against epithelial cell infection increased to at least 12-fold over the CMV-seropositive baseline titers after the second vaccination and were generally numerically similar in the 50, 100, and 150 μg treatment groups.
•Neutralizing antibody titers against fibroblast infection increased to titers equivalent to the CMV-seropositive baseline titers after the second vaccination and were generally numerically similar in the 50, 100, and 150 μg treatment groups.
In CMV-seropositive participants at three months (one month after the second vaccination) in the 50, 100 and 150 µg dose levels:
•Neutralizing antibody titers against epithelial cell infection increased 12 to 51-fold over the CMV-seropositive baseline titers after the second vaccination.
•Neutralizing antibody titers against fibroblast infection increased to levels at least 2-fold over CMV-seropositive baseline titers after the first and second vaccination.
Phase 2 Continuation and Phase 3 Planning
Our randomized, observer-blind, placebo-controlled, dose-confirmation Phase 2 study is investigating the safety and immunogenicity of mRNA-1647 in approximately 252 healthy CMV-seronegative and CMV-seropositive adult volunteers in Part 1 of the study, and an additional approximately 250 healthy CMV-seronegative and CMV-seropositive female volunteers in Part 2 of the study in the U.S.
We are actively preparing for a global, randomized, observer-blind, placebo-controlled Phase 3 pivotal study to evaluate the efficacy of mRNA-1647 against primary CMV infection in females 16-40 years of age. We solicited and received Type C meeting feedback from the FDA on the preliminary design of the pivotal trial, requested an end-of-phase 2 (EoP2) meeting with FDA for mid-March 2021, and submitted our Phase 3 development plans to FDA in a briefing document. We believe this can be achieved with a trial with no more than 8,000 participants and study site selection and/or site feasibility has already begun across North America, Europe, Australia, and Israel. The pivotal Phase 3 trial design will be finalized after discussion with the FDA and other global health authorities. Additional adolescent bridging and concomitant vaccination trials are being planned.
Epstein-Barr Virus vaccine (mRNA-1189)
Our EBV vaccine seeks to prevent the development of infectious mononucleosis and potentially prevent EBV infection.
Epstein-Barr virus, or EBV, a member of the herpesvirus family that includes CMV, infects approximately 90% of people by adulthood, with primary infection typically occurring during childhood and late adolescence (approximately 50% and 89% seropositivity, respectively) in the U.S. EBV is the major cause of infectious mononucleosis in the U.S., accounting for over 90% of the approximately 1-2 million cases of infectious mononucleosis in the U.S. each year. Infectious mononucleosis can debilitate patients for weeks to months and, in some cases, can lead to hospitalization and splenic rupture. EBV infection is associated with the development and progression of certain lymphoproliferative disorders, cancers, and autoimmune diseases. In particular, EBV infection and infectious mononucleosis are associated with increased risk of developing multiple sclerosis, an autoimmune disease of the central nervous system. There is no approved vaccine or effective treatment for EBV. Similar to CMV, EBV has lytic and latent stages in its lifecycle and contains on its surface (envelope) multiple glycoproteins and glycoprotein complexes (gp350, gH/gL, gH/gL/gp42 and gB) that mediate virus entry and infection in different cell types. EBV gp350 mediates attachment to B cells through binding to the complement receptor 2 (CR2), followed by binding of the viral gH/gL/gp42 complex to human leukocyte antigen (HLA) class II. Infection of epithelial cells instead requires binding of gH/gL to a different set of receptors. For both B cell and epithelial cell entry, binding of an EBV gH/gL complex to a cell-specific receptor leads to activation of gB, which in turn facilitates virus-cell-membrane fusion and infection. gH/gL and gB comprise the core viral-fusion machinery conserved across all herpesviruses.
Similar to our CMV vaccine (mRNA-1647) product concept, we used our platform to generate an mRNA vaccine containing five mRNAs encoding for gp350, gB, gH, gL, and gp42, which are expressed in their native membrane-bound conformation for recognition by the immune system. We have observed we planpreclinical immunogenicity in the form of high and durable levels of antigen-specific antibodies against both B cell and epithelial cell infection in mice and in non-human primates (NHPs). We intend to test two higher dose levels in sentinel-expansion phase C. Results from thisconduct a Phase 1 trial will informto test the dose levelssafety and immunogenicity of mRNA-1647the vaccine to understand its potential to prevent primary infection, and prevent infectious mononucleosis following EBV infection, in seronegative adults.
Epstein-Barr Virus: Disease overview
EBV is the major cause (approximately 90%) of infectious mononucleosis and has been associated with the development of a range of malignancies and autoimmune disorders.
EBV is a common herpesvirus that we planis spread through bodily fluids, most commonly saliva, and is contracted primarily by young children and adolescents. Adolescents and young adults seroconvert at high rates, particularly in college-aged populations (approximately 10-25% per year) resulting a seroprevalence of approximately 90% by the age of 20. After primary infection, the virus establishes latency and persists in that state for life in most infected individuals. The virus can reactivate intermittently over time even in immunocompetent hosts. The virus usually infects resting B cells in the oropharynx or epithelial cells, which line the mucosal surfaces of the body and in turn infect B cells. B cells disseminate systemically and act as a reservoir for latent virus. Primary infection can cause infectious mononucleosis in 35% to test75% of instances, depending on age, and is characterized by symptoms requiring physician visits, including sore throat, lymph node swelling, fever, body aches and fatigue, often resulting in months of missed work and school for patients and caregivers.
There is currently no approved vaccine against EBV, but the potential of gp350 alone to reduce the rate of infectious mononucleosis has already been clinically demonstrated. An experimental vaccine, developed by others, consisting of adjuvanted recombinant gp350 protein led to a reduction in the incidence of infectious mononucleosis in 78% of the participants in a Phase 2 trial.study of 181 healthy volunteers between the ages of 16-25. However, there was no significant difference between groups in protection against asymptomatic EBV infection. We believe that the addition of gH/gL and gB has the potential to provide protection against epithelial cell infection. We believe the immune response against gp350, gH/gL or gB has the potential to provide B cell protection, which may be further enhanced by the inclusion of gp42. By preventing infection in epithelial cells and B cells, this mRNA vaccine has the potential not only to significantly reduce the rate of infectious mononucleosis, but also to prevent EBV infection.
EBV infection is associated with increased risk of developing certain cancers and multiple sclerosis. In Western industrialized countries, EBV is implicated in the development of post-transplant lymphoproliferative disorder conditions as well as multiple cancers, including Hodgkin’s lymphoma. Additionally, in those seropositive for EBV, development of infectious mononucleosis is associated with a greater than 2-fold increased relative lifetime risk of developing multiple sclerosis. In East Asia, EBV is associated with 80-99% of nasopharyngeal carcinomas that arise. In Africa, EBV is implicated in the development of approximately 95% of cases of endemic Burkitt’s lymphoma. Together, approximately 1.5% of worldwide cancer deaths are attributable to EBV-associated malignancies.
hMPV+PIV3
EBV vaccine (mRNA-1653)(mRNA-1189): SummaryOur product concept
We are developing a vaccine with multiple antigens designed to address two virusesprevent development of infectious mononucleosis and EBV infections.
Similar to our CMV vaccine (mRNA-1647) product concept, we believe that an effective EBV vaccine must generate an immune response to antigens that are leading causesrequired for viral entry in most of respiratorythe susceptible cell types. We have thus designed our EBV vaccine, mRNA-1189, to elicit an immune response to EBV envelope glycoproteins gp350 as well as gB, gp42, and the gH/gL complex, which are required for infection
Human metapneumovirus, or hMPV, of both epithelial and human parainfluenza virus 3, or PIV3, are important causesB cells. mRNA-1189 contains five mRNAs encoding the viral proteins gp350, gB, gp42, gH, and gL encapsulated in our proprietary LNPs. Proteins translated from our mRNA will be displayed on the cell surface in their native conformation, stimulating the production of respiratory tract infections in children. Despiteneutralizing antibodies. By training the substantial impact hMPVimmune system to recognize and PIV3 have on human health, attentionneutralize the machinery used to infect B and research on these viruses have lagged relative to RSV. To date, noepithelial cells, we believe that our vaccine has the potential to prevent hMPV or PIV3 infections has been approved.EBV primary infection and therefore the development of infectious mononucleosis. Further, in the long-run, should our EBV vaccine be approved, we may pursue post-marketing and population studies to potentially evaluate its impact on other EBV-associated diseases. Our EBV vaccine utilizes the same proprietary platform allows ustechnology as our CMV vaccine (mRNA-1647), which was generally well-tolerated and demonstrated durable neutralizing antibody titers higher than those measured in CMV-seropositive patients following up to combine mRNAs encoding antigens for the two pathogensthree doses of mRNA-1647 in one combinationour Phase 1 trial.
EBV vaccine enabling a single vaccine that could protect against both respiratory infections. In our approach, we utilize mRNA sequences encoding for the membrane F proteins for each of the viruses. (mRNA-1189): Preclinical information
We have developed experience withdemonstrated the related F protein from our RSV program with Merck. mRNA-1653 is currently being testedability to induce antibodies against EBV antigens required for viral entry into B cells and epithelial cells.
Naïve Balb/c mice were given two doses of a vaccine against EBV antigens in combination approximately four weeks apart. Antibody titers against viral proteins involved in epithelial cell entry (gH/gL and gB) or B cell entry (gp350, gH/gL and gB) were measured in peripheral blood at day 57. Results shown here represent five animals per group and demonstrate high levels of antigen-specific immunoglobulin G (IgG) as compared to negative controls.
EBV vaccine (mRNA-1189): Clinical plan
We are planning a Phase 1 clinical trial to test the safety and immunogenicity of mRNA-1189 in seronegative adults.
We intend to conduct a Phase 1 trial in the United States.
hMPV+PIV3 vaccine (mRNA-1653): Disease overview
hMPV and PIV3 have a substantial impact on human health yet have lagged in research and attention relative to RSV
There is no approved vaccine for hMPV although this RNA virus has been determined to be one of the more frequent causes of upper and lower respiratory tract infections. hMPV has been detected in 4% to 15% of patients with acute respiratory infections. hMPV causes disease primarily in young children but can also infect adults, the elderly, and immunocompromised individuals. Clinical signs of infection range from a mild upper respiratory tract infection to life-threatening severe bronchiolitis and pneumonia. hMPV was discovered in 2001 and identified as a leading cause of respiratory infection.
There is no approved vaccine for PIV3 although this RNA virus is recognized as an important cause of respiratory tract infections in children. Infections from parainfluenza virus, or PIV, account for up to 7% of acute respiratory infections among children younger than 5 years. Of the four PIV types identified, PIV3 most frequently results in infections and leads to the more serious lower respiratory tract infections compared to the other three PIV types. Though PIV3 related infections were identified in the past, awareness of their burden to patients and hospitals has risen over the past several years.
The majority of hMPV or PIV3-associated hospitalizations in children occur under the age of 2 years. Despite the substantial impact hMPV and PIV3 have on human health, attention and research on these viruses have lagged relative to RSV. Awareness of hospitalizations due to hMPV or PIV3 infections have risen, and we believe that a single vaccine intended for active immunization of infants and toddler against both hMPV and PIV3 would be valuable. Previous attempts at developing a vaccine have focused on only hMPV or PIV alone with no known attempts at a combination vaccine.
hMPV+PIV3 vaccine (mRNA-1653): Our product concept
Our approach is to develop a combination vaccine for all infants and toddlers
mRNA-1653 is a single investigational vaccine consisting of two distinct mRNA sequences that encode the membrane F proteins of hMPV and PIV3, co-formulated in our proprietary LNP as shown in the figure below.
hMPV+PIV3 vaccine (mRNA-1653): Preclinical information
Our mRNA vaccine is immunogenic in multiple species
We have evaluated multiple combinations for hMPV+PIV3 mRNA vaccines encoding full-length F proteins for hMPV and PIV3 viruses in mice, Sprague Dawley rats, cotton rats, and African green monkeys, or AGM, each following intramuscular, or IM, injection. These studies demonstrate that mRNA encoding for F proteins from these viruses induce robust neutralizing antibody titers in all species tested. For example, neutralizing antibody titers for mRNA encoding for F proteins of hMPV and PIV3 encapsulated in LNP in mice are shown in the figure below. C57Bl/6 mice were immunized with 0.33, 2, or 12 µg of formulated material intramuscularly on study days 1 and 29. Neutralizing antibody titers were measured in serum collected on day 43. Results are represented as geometric mean titers, or GMT, of seven mice per group. In the figure below, neutralizing antibody titers in mice after immunization with mRNA for hMPV and PIV3 in our proprietary LNP by hMPV (left panel) and PIV3 (right panel) are depicted along with the lower limit of quantification, or LLOQ, of the assay.
Neutralizing antibodies are thought to be important for protection against hMPV and PIV3. The titer of neutralizing antibodies induced by natural infection from hMPV or PIV3 can be used to benchmark the titers induced by our hMPV+PIV3 vaccine in preclinical models and in our clinical trial. We determined the geometric mean neutralizing antibody titer for 15 seropositive adult donors to be 3,807 (range 499 to 20,751) for hMPV, and 263 (range 47 to > 1024) for PIV3. Our hMPV+PIV3 mRNA vaccine induces a similar neutralizing antibody titer in mice after 2 vaccinations of the dose levels evaluated as shown in the figure above, and we believe it has the potential to confer protection in humans.
We have demonstrated that our hMPV and PIV3 mRNA combination vaccine does not lead to vaccine-enhanced respiratory disease (evaluated in cotton rats) and is protective against hMPV or PIV3 viral challenge (evaluated in cotton rats and AGM).
hMPV+PIV3 vaccine (mRNA-1653): Clinical plan
We are currently conducting a Phase 1 trial in the United States
The mRNA-1653 Phase 1 study is a blinded, randomized, observer-blind, placebo-controlled, dose ranging first-in-human study to evaluatetest the safety and tolerability, reactogenicity, and immunogenicity of mRNA-1653the vaccine to understand its potential to prevent primary infection, and prevent infectious mononucleosis following EBV infection, in healthy adult subjects in the United States. The study evaluates four dose levelsseronegative adults.
Table of mRNA-1653 (25, 75, 150, and 300 µg) administered intramuscularly at day one and month one, with the one-month immunization randomized to be mRNA-1653 or placebo in the dose selection phase of the study.Contents
The key objectives of the study include evaluating:
safety and reactogenicity of mRNA-1653 through 28 days after the last vaccination;
humoral immunogenicity of mRNA-1653 through 28 days after the last vaccination;
optimal dose and vaccination schedule of mRNA-1653 for further clinical development; and
safety of mRNA-1653 through 12 months after the second vaccination.
The key endpoints for the study include safety and tolerability of mRNA-1653.
The schematic of the trial is shown in the figure below. In the dose-escalation phase, there is sequential enrollment into one of the four dose levels of mRNA-1653 or placebo. Advancement to the next dose level is permitted after an internal safety review. In the dose-escalation phase, five subjects will be randomly assigned in a 4:1 ratio to receive mRNA-1653 or placebo. The safety monitoring committee, or SMC, reviews safety data after dose-escalation enrollment is completed to permit enrollment into the dose-selection phase at the three highest dose levels with acceptable safety profiles. In addition, the SMC periodically reviews safety data during the dose-selection phase.
The study is fully enrolled with 124 subjects and subjects have received both doses. Based on an unblinded evaluation of safety data from the dose-escalation phase by the SMC, the three highest dose levels (75, 150, and 300 µg) are being evaluated in the dose-selection phase. The study is currently in the follow-up phase.
Interim data from the Phase 1 trial showed that a single vaccination with mRNA-1653 boosted serum neutralization titers against hMPV and PIV3, and that the magnitude of the boost was similar at all dose levels tested. Consistent with prior exposure to hMPV and PIV3, all study participants had neutralizing antibodies against both viruses at baseline. One month after a single mRNA-1653 vaccination, the hMPV neutralization titers were approximately six-fold greater than baseline and PIV3 neutralization titers were approximately three-fold greater than baseline (based on geometric mean ratios). A second mRNA-1653 vaccination one month after
the first vaccination did not further boost antibody titers. mRNA-1653 was found to be generally well tolerated. No SAEs, adverse events of special interest, or adverse events leading to withdrawal were reported. Injection site pain was the most commonly reported AE and the most common grade 3 AE. We plan to further evaluate mRNA-1653 in the clinic, including in a Phase 1b trial in pediatric subjects.
VZV vaccine (mRNA-1278): Summary
In collaboration with Merck, we aim to develop a varicella zoster virus vaccine with efficacy comparable to Shingrix
Shingles is caused by reactivation of the virus that causes Chicken Pox, varicella zoster virus, or VZV. This painful infection causes a rash and can cause postherpetic neuralgia, a debilitating ongoing nerve pain. In addition, it is highly contagious. The most effective vaccine on the market is Shingrix by GlaxoSmithKline, for which two dose-series of the adjuvanted subunit vaccine is more than 90% effective at preventing shingles in adults 50 years and older. In collaboration with Merck, our goal is to develop a VZV vaccine with efficacy comparable to Shingrix.
VZV vaccine (mRNA-1278): Our product concept
We are developing an mRNA vaccine formulated in lipid nanoparticle
mRNA-1278 is an mRNA vaccine encoding a VZV antigen formulated in a proprietary LNP.
VZV vaccine (mRNA-1278): Preclinical information
In collaboration with Merck, we have observed an antibody response comparable to Shingrix and a T cell response
mRNA-1278 has been evaluated in mice and non-human primates, or NHPs, following intramuscular injection and induces robust antigen-specific antibody and T cell responses. An IND-enabling GLP toxicology program for mRNA-1278 is ongoing.
VZV vaccine (mRNA-1278): Clinical plan
Merck may sponsor and conduct a Phase 1 trial.
PROPHYLACTIC VACCINES: GLOBAL HEALTH PROGRAMS
Our global health portfolio for prophylactic vaccines seeks to leverage our mRNA technology to address epidemic and pandemic diseases. We are currently working with strategic collaborators such as BARDA, DARPA, NIH, the Bill and DARPAMelinda Gates Foundation and the International AIDS Vaccine Initiative (IAVI) to fund and support our programs within this area. The first programs in this portfolio, H10N8 vaccine and H7N9 vaccine, helped identify and overcome the technical challenges with mRNA vaccines and could eventually address pandemics for these viruses. We have also gone from mRNA sequence to a first-in-human trial for Zika vaccine in twelve months. We have leveraged our learnings to rapidly advance a potential mRNA vaccine for a Zika pandemic. As we continue to build infrastructure and capabilities in the Research Engine and Early Development Engine, we believe we can help address future pandemics rapidly.
H10N8 vaccine (mRNA-1440) and H7N9 vaccine (mRNA-1851): Summary
Our H10N8 and H7N9 investigational vaccines demonstrate the potential of our platform to respond to an influenza pandemic
Influenza is one of the most variable and deadly infectious diseases, ranging from 12,000-56,000 deaths per year in the United States alone. The antigens in circulating seasonal influenza strains change slightly, which is called antigenic drift, from one year to the next, necessitating a change in the vaccine to match the new strains. Potential pandemic influenza strains can arise very quickly from substantial changes in antigens, which is called antigenic shift, and because pre-existing immunity is nonexistent in some populations, they can be pathogenic. Addressing a potential pandemic requires the ability to produce an effective vaccine rapidly. We believe that our platform enables the rapid development of safe and effective vaccines. As a proof of concept, we developed vaccines for H10N8 and H7N9 avian influenza strains, where there is a quantitative correlate for protection in humans (hemagglutinin inhibition, or HAI, titer of > 1:40). We have observed tolerability and immunogenicity in Phase 1 clinical trials for both mRNA vaccines for H10N8 and H7N9 and have published the interim data for H10N8 in Molecular Therapy in 2017. We do not intend to progress these programs through clinical development on our own. We may advance these programs with government or other grant funding.
H10N8 vaccine (mRNA-1440) and H7N9 vaccine (mRNA-1851): Disease overview
Traditional vaccines cannot respond easily to a new influenza pandemic
Influenza A is an RNA virus, with a genome packed into eight individual gene segments that code for at least eleven functional proteins needed for infection, replication, and evasion of host antiviral responses. The two major glycoproteins expressed on the surface of the virion are hemagglutinin, or HA, and neuraminidase, or NA, both of which are crucial for infection. HA mediates viral entry into host cells by binding to sialic acid containing receptors on the host cell surface and causing fusion of viral and host endosomal membranes. NA mediates enzymatic cleavage of the viral receptor at late stages of infection, allowing for the release of progeny virions.
Influenza A viruses infect a variety of species, including birds, pigs, sea mammals, and humans. Wild aquatic birds serve as the reservoir of influenza A viruses infecting avian and mammalian species. Although many of these viruses are non-pathogenic in birds and most do not infect humans, in recent decades, some avian influenza viruses such as H10N8 and H7N9 have crossed the species barrier to cause human disease.
There have been five epidemics of human infection due to H7N9, totaling over 1,500 cases, with mortality rates of 34-47%. To date, there have been three reported cases of H10N8, of which two have been fatal. For both H10N8 and H7N9, severe or fatal infections are characterized by rapid progression to respiratory failure within days of initial symptoms.
There are efforts ongoing to develop a H7N9 vaccine and a universal flu vaccine that covers H10N8. However, we believe the use of traditional methods to produce these vaccines can lead to several shortcomings in the vaccine. These include:
production of vaccines in eggs requires selection of vaccine-virus strains that can be grown in eggs and this strain may not always match the pandemic strain; and
growth of the virus in eggs has also been shown to induce structurally relevant mutations that can negatively impact vaccine potency.
H10N8 vaccine (mRNA-1440) and H7N9 vaccine (mRNA-1851): Our product concept
Our platform can bring mRNA encoding for influenza HA antigen to clinical testing rapidly
Our H10N8 and H7N9 influenza vaccine programs are each based on the mRNA sequence for the cell viral HA membrane protein in a legacy LNP. mRNA-1440 encodes for the HA protein of the H10N8 strain and mRNA-1851 encodes for the HA protein of the H7N9 strain.
We believe that mRNA technology offers several advantages to traditional approaches of producing these vaccines, including:
short time period between strain selection and when the vaccine can be made available; this is enabled by intrinsic features of mRNA and the infrastructure we have built, allowing for shorter research and development and time to manufacture;
potential improved vaccine efficacy by avoidance of egg-based manufacture; this prevents the antigenic mismatch due to egg-adapted strains;
potential for improved efficacy by way of improved antigen presentation; an mRNA vaccine, upon administration to a cell, produces the antigen in its natural conformation; and
combination of multiple antigens into a single vaccine, allowing one to target multiple strains if needed; one of the intrinsic features of mRNA is the ability to utilize multiple mRNA sequences so that the cell produces multiple antigens at the same time.
H10N8 vaccine (mRNA-1440) and H7N9 vaccine (mRNA-1851): Preclinical information
We have observed immunogenicity of our mRNA H10N8 vaccine in multiple species
The level of a vaccine’s protection against influenza infection is traditionally measured using the HAI assay. The European Medicines Agency, or EMA, and U.S. Food and Drug Administration, or FDA, have endorsed HAI titers of > 1:40 to indicate an antibody level considered to be 50% protective against infection. This benchmark was based on data from inactivated vaccines and varies with age group and setting.
Proof-of-concept for the use of mRNA vaccines encoding the HA protein from H10N8 has been demonstrated in murine studies. After a single dose of H10N8 vaccine, mice exhibited antibody production sufficient to achieve HAI titers of > 1:40, which is regarded as a quantitative correlate for protection from influenza. Supporting immunogenicity data in ferrets and cynomolgus monkeys for the H10N8 vaccine have also been published by us in Molecular Therapy in 2017.
We have also observed immunogenicity of our mRNA H7N9 vaccine in multiple species
Proof-of-concept for the use of mRNA vaccines encoding the HA protein from H7N9 influenza A virus has been demonstrated in murine studies. After vaccination with mRNA vaccines, mice exhibited antibody production sufficient to achieve HA inhibition titers of > 1:40. Additionally, a single dose of H7N9 vaccine protected 100% of mice from a lethal challenge with H7N9 virus even 84 days after completion of immunization. In a ferret study where H7N9 vaccine was administered intradermally, a reduction in lung viral titers was observed when ferrets were challenged 7 days post immunization. Supporting immunogenicity data in cynomolgus monkeys have also been reported by us in Molecular Therapy in 2017.
H10N8 vaccine (mRNA-1440) and H7N9 vaccine (mRNA-1851): Clinical data
The Phase 1 clinical trial for H10N8 in Germany has ended and we have generated safety and tolerability data and demonstrated immunogenicity
The Phase 1 trial for H10N8 vaccine has met its objectives of describing the safety and tolerability profile of mRNA-1440 vs. placebo including capturing solicited and unsolicited local and systemic adverse events. The Phase 1 trial for H10N8 vaccine has also demonstrated immunogenicity and we have observed 100% of the subjects demonstrating hemagglutinin inhibition, or HAI, titer > 1:40 at day 43 for the 100 µg dose where HAI > 1:40 is regarded as a quantitative correlate for protection from influenza. We believe the data provides support to advance the program in clinical development if we choose to with additional government or other funding. In this randomized, double-blind, placebo-controlled, dose-ranging study, we evaluated safety and immunogenicity of IM dose levels of 25, 50, 75, 100, and 400 µg on a two-dose vaccination schedule on Day 1 and Day 21. We also evaluated intradermal, or ID, dose levels of 25 and 50 µg on a two-dose vaccination schedule on Day 1 and Day 21. The study objectives were safety, tolerability, and immunogenicity by HAI, and microneutralization, or MN, assays. 201 subjects were enrolled in this study, of which 145 received IM vaccination and 56 received ID vaccination. Of the 145 subjects in the IM vaccination group, there were 30, 30, 24, 23, and 3 subjects in the 25, 50, 75, 100, and 400 µg dose level groups, respectively. 35 subjects received the placebo. The Phase 1 trial was conducted with the name of the intervention listed as VAL-506440, in accordance with our legacy naming convention. We have since changed our naming convention and have adopted mRNA-1440 in place of VAL-506440.
Doses up to 100 µg administered IM demonstrated immunogenicity in the Phase 1 trial. The 75 µg cohort was started later and we chose not to proceed with its completion because the safety, tolerability, and immunogenicity data generated supported further development of the 100 µg dose. Intradermal vaccination was associated with high rates of solicited adverse events, or AEs (mainly injection site reactions), and we elected to discontinue enrollment of the ID cohorts.
Geometric mean titers, or GMTs, in the participants who received a two-dose IM series of the H10N8 vaccine at doses of 25, 50, and 100 µg at day 43 are shown in panel A of the figure below. Also, for those doses, 34.5%, 55.2%, and 100% of the participants, respectively, reached HAI titers > 1:40 at day 43 as shown in panel B of the figure below.
HAI GMT for H10N8 vaccine (mRNA-1440) in Phase 1 clinical trial
Panel (A)
Percent of subjects with HAI >1:40 at day 43 with H10N8 vaccine (mRNA-1440) in Phase 1 clinical trial
Panel (B)
The 100 µg dose showed 100% seroconversion. For this dose, we observed persistence in HAI titer six months after the second dose, with a HAI geometric mean titer of 13.9 and 95.6% of participants remaining seropositive (HAI titer > 1:10) as shown in the figure below.
HAI antibody persistence at 100 µg dose for H10N8 vaccine (mRNA-1440) in Phase 1 clinical trial
Overall, up to the 100 µg IM dose, mRNA-1440 was well tolerated. A detailed list of the solicited adverse events, or solicited AEs, is provided in the table below. In the 400 µg IM dose group, two out of the three participants developed severe solicited adverse reactions (erythema, headache) within 24 hours of the first vaccination. These events met pre-specified study pause rules, and after safety committee review, further vaccinations at this dose level were stopped. These events resolved spontaneously without the need for medical intervention or medications.
Three severe unsolicited AEs (separately back pain, tonsillitis, and ruptured ovarian cyst) and 2 serious AEs, or SAEs, (separately cholecystitis and ruptured ovarian cyst) were reported and deemed unrelated to mRNA-1440. 124 unsolicited AEs were reported in the IM groups. The most common unsolicited AEs were upper respiratory tract infection, back pain, pharyngitis, and oropharyngeal pain. No adverse event of special interest, or AESIs, or cases of new onset of chronic illness were reported.
Solicited adverse events for H10N8 vaccine at all dose levels within 7 days after each IM vaccination on days 1 and 22*
|
| | | | | | | |
| | 25 µg | | 50 µg | | 100 µg | | Placebo |
| Dose 1 | n=30 | | n=30 | | n=23 | | n=35 |
| Injection site pain | 23, 76.7 (0) | | 25, 83.3 (0) | | 19, 82.6 (0) | | 2, 5.7 (0) |
| Erythema | 1, 3.3 (0) | | 0 | | 3, 13.0 (0) | | 0 |
| Injection site swelling | 2, 6.7 (0) | | 5, 16.7 (0) | | 3, 13.0 (0) | | 0 |
| Headache | 5, 16.7 (0) | | 12, 40.0 (0) | | 7, 30.4 (0) | | 5, 14.3 (0) |
| Fatigue | 8, 26.7 (0) | | 13, 43.3 (0) | | 8, 34.8 (0) | | 7, 20.0 (0) |
| Myalgia | 16, 53.3 (0) | | 17, 56.7 (0) | | 12, 52.2 (0) | | 1, 2.9 (0) |
| Arthralgia | 0 | | 2, 6.7 (0) | | 2, 8.7 (0) | | 1, 2.9 (0) |
| Nausea | 0 | | 1, 3.3 (0) | | 1, 4.3 (0) | | 0 |
| Fever | 1, 3.3 (0) | | 1, 3.3 (0) | | 2, 8.7 (0) | | 0 |
| Dose 2 | n=28 | | n=29 | | n=23 | | n=27 |
| Injection site pain | 22, 78.6 (0) | | 27 93.1 (0) | | 20, 87.0 (0) | | 3, 11.1 (0) |
| Erythema | 0 | | 0 | | 4, 17.4 (8.7) | | 0 |
| Injection site swelling | 2, 7.1 (0) | | 4, 13.8 (0) | | 3, 13.0 (4.3) | | 0 |
| Headache | 4, 14.3 (0) | | 14, 48.3 (0) | | 16, 69.6 (0) | | 6, 22.2 (3.7) |
| Fatigue | 8, 28.6 (0) | | 13, 44.8 (0) | | 11, 47.8 (0) | | 4, 14.8 (0) |
| Myalgia | 14, 50.0 (0) | | 17, 58.6 (0) | | 11, 47.8 (0) | | 1, 3.7 (0) |
| Arthralgia | 0 | | 2, 6.9 (0) | | 7, 30.4 (0) | | 1, 3.7 (0) |
| Nausea | 1, 3.6 (0) | | 1, 3.4 (0) | | 3, 13.0 (0) | | 0 |
| Fever | 1, 3.6 (0) | | 2, 6.9 (0) | | 4, 17.4 (0) | | 1, 3.7 (0) |
| |
*
| Data represent n, % with solicited AEs (% with severe solicited AEs) in the safety population; 75 µg dose group not shown (2 participants had severe solicited AEs of fatigue and injection site swelling following first vaccination, and no participants received dose 2); 400 µg dose group not shown. |
The Phase 1 clinical trial for H7N9 vaccine in the United States is ongoing
The Phase 1 trial for H7N9 vaccine has met its objectives of assessing the safety and tolerability profile of mRNA-1851 vs. placebo including capturing solicited and unsolicited local and systemic adverse events. The Phase 1 trial for H7N9 vaccine has also demonstrated immunogenicity and we have observed 96% of the subjects demonstrating HAI titer > 1:40 at day 43 for the 25 µg dose where HAI > 1:40 is regarded as a quantitative measure for protection from influenza. We believe the data provides support to advance the program in clinical development if we choose to with additional government or other funding. This randomized, double-blind, placebo-controlled, dose-ranging study evaluated intramuscular, or IM, dose levels of 10, 25, and 50 µg using two vaccination schedules (Day 1, Day 22 and Day 1, Month 6). The objectives were safety, tolerability, and immunogenicity by HAI and MN assays. 156 subjects were enrolled in this study. 30 subjects per dose cohort received two doses of 10 µg, 25 µg, and 50 µg at days 1 and 22. 10 subjects per dose cohort received one dose of 10, 25, and 50 µg at day one and a total of 9 of those subjects received a second dose at 6 months (data not shown). 36 subjects received placebo. A total of 10 subjects withdrew from the study. The Phase 1 trial was conducted with the name of the intervention listed as VAL-339851, in accordance with our legacy naming convention. We have since changed our naming convention and have adopted mRNA-1851 in place of VAL-339851.
Doses up to 50 µg administered IM to patients who received vaccinations on Day 1 and Day 22 in this Phase 1 clinical trial demonstrated immunogenicity.
Geometric mean titers in the participants who received a two-dose IM vaccination series on Day 1 and Day 22 at doses of 10, 25, and 50 µg are shown in panel A of the figure below. Also, for those doses, 36.0%, 96.3%, and 89.7% of the participants respectively reached HAI titers > 1:40 at day 43 as shown in panel B of the figure below.
HAI GMT for H7N9 vaccine (mRNA-1851) in Phase 1 clinical trial
Panel (A)
Percent of subjects with HAI>1:40 at day 43 with H7N9 vaccine (mRNA-1851) in Phase 1 clinical trial
Panel (B)
The 25 µg dose achieved 96% seroconversion. For this dose, we observed persistence in HAI titers six months after the second dose. HAI GMT decreased but remained above HAI titer level of 10 as shown in the figure below. In addition, 52% of participants remained seropositive (HAI titer > 1:10) at six months.
HAI antibody persistence at 25 µg dose for H7N9 vaccine (mRNA-1851) in Phase 1 clinical trial
Overall, up to the 50 µg IM dose of mRNA-1851 was well tolerated. A detailed list of the solicited AEs is provided in the table below. The majority of possibly- and probably-related unsolicited AEs were > grade 2 laboratory abnormalities and occurred at similar rates in vaccine and placebo groups. Four severe unsolicited AEs were deemed possibly related to vaccination: two cases of increased alanine aminotransferase (one 50 µg, one placebo), one case of increased aspartate aminotransferase (50 µg), and one case of thrombocytopenia (placebo). All cases were asymptomatic and resolved without intervention.
Solicited adverse events for H7N9 at all dose levels within 7 days after each IM vaccination on days 1 and 22*
|
| | | | | | | |
| | 10 µg | | 25 µg | | 50 µg | | Placebo |
| Dose 1 | n=30 | | n=30 | | n=30 | | n=36 |
| Injection site pain | 22, 73.3 (0) | | 17, 56.7 (0) | | 24, 80.0 (6.7) | | 5, 13.9 (0) |
| Erythema | 0 | | 0 | | 0 | | 0 |
| Injection site swelling | 5, 16.7 (0) | | 5, 16.7 (0) | | 9, 30.0 (0) | | 2, 5.6 (0) |
| Headache | 5, 16.7 (0) | | 5, 16.7 (0) | | 7, 23.3 (6.7) | | 6, 16.7 (0) |
| Fatigue | 1, 3.3 (0) | | 4, 13.3 (0) | | 3, 10.0 (0) | | 2, 5.6 (0) |
| Myalgia | 3, 10.0 (0) | | 6, 20.0 (0) | | 8, 26.7 (0) | | 6, 16.7 (0) |
| Arthralgia | 2, 6.7 (0) | | 3, 10.0 (0) | | 3, 10.0 (0) | | 4, 11.1 (0) |
| Nausea | 1, 3.3 (0) | | 1, 3.3 (0) | | 1, 3.3 (0) | | 1, 2.8 (0) |
| Fever | 0 | | 1, 3.3 (0) | | 0 | | 0 |
| Dose 2 | n=30 | | n=30 | | n=30 | | n=36 |
| Injection site pain | 14, 46.7 (0) | | 13, 43.3 (0) | | 22, 73.3 (10.0) | | 2, 5.6 (0) |
| Erythema | 0 | | 0 | | 0 | | 0 |
| Injection site swelling | 3, 10.0 (0) | | 6, 20.0 (0) | | 6, 20.0 (0) | | 1, 2.8 (0) |
| Headache | 3, 10.0 (0) | | 2, 6.7 (3.3) | | 8, 26.7 (6.7) | | 1, 2.8 (0) |
| Fatigue | 1, 3.3 (0) | | 3, 10.0 (0) | | 4, 13.3 (0) | | 0 |
| Myalgia | 3, 10.0 (0) | | 4, 13.3 (0) | | 8, 26.7 (3.3) | | 0 |
| Arthralgia | 2, 6.7 (0) | | 1, 3.3 (0) | | 6, 20.0 (3.3) | | 0 |
| Nausea | 0 | | 0 | | 1, 3.3 (0) | | 0 |
| Fever | 0 | | 0 | | 6, 20.0 (6.7) | | 0 |
*Data represent n, % with solicited AEs (% with severe solicited AEs)
Zika vaccine (mRNA-1893): Summary
In collaboration with BARDA, we broughthave advanced a second generation Zika vaccine from mRNA sequence designcandidate to the clinic in twelve monthsa Phase 1 clinical trial
Zika is an infectious disease caused by the Zika virus, in whichvirus; infection during pregnancy has been linked to severe brain damage in infants with congenital infection and Guillain-Barré Syndrome in adults. To date, no vaccine to prevent Zika infection has been approved. In September 2016, we were awarded a contract with BARDA to be reimbursed up to approximately $125$125.0 million for the development of a Zika mRNA vaccine. In order to rapidly respond toPreclinical and clinical studies were carried out on an initial candidate, mRNA-1325. When a potential epidemic, we developed asecond-generation Zika vaccine, mRNA-1893, demonstrated better protection than mRNA-1325 which went from mRNA sequence design to first-in-human clinical testing in twelve months. In addition, we also developed a second Zika vaccine, mRNA-1893. mRNA-1893,non-human primates at 1/20 of the dose, demonstrated better protection in non-human primates, as comparedwe decided to mRNA-1325. We are preparing an IND for submission to the FDA formove forward with mRNA-1893 and we will not further developdiscontinue development of mRNA-1325. mRNA-1893 is currently under evaluation in a Phase 1 trial in the United States. Enrollment and dosing are complete, and the interim analysis is available.
Zika vaccine (mRNA-1893): Disease overview
We faced a Zika epidemic in 2015 for which there were no vaccines or treatments
The Zika virus is a single stranded RNA virus of the flaviviridae family. It was first isolated in a rhesus macaque in the Zika Forest, Uganda in 1947 and the first human case was documented in 1952. Seroepidemiology data suggest that it is endemic to regions of Africa and Asia where the Aedes mosquito vectors are found. Zika virus is predominantly spread by mosquitos from the Aedes genus, but it can also be transmitted congenitally, sexually, and through blood donation.
In 2007, a Zika infection outbreak progressed across the Pacific islands. It arrived in Brazil in 2015 and the epidemic spread across the Americas. This led to the World Health Organization, or WHO, declaring it a public health emergency of international concern in 2016. During the period, there were tens of thousands of cases of microcephaly and congenital Zika syndrome reported in infants and of resulting neurological sequelae such as Guillain-Barré syndrome reported in adults.
Zika infection is usually asymptomatic or mild in adults, leading to fever, rash, and conjunctivitis. However, infection of women during pregnancy can result in devastating microcephaly in newborns. Microcephaly is a birth defect characterized by an abnormally small head and brain, associated with lifelong neurodevelopmental delay, seizures, intellectual disability, balance problems, and dwarfism / short stature, resulting in significant disability and requiring lifelong support. To date, over
In 2007, a millionZika infection outbreak progressed across the Pacific islands. An outbreak observed in Brazil in 2015 soon spread across the Americas. This led to the WHO declaring it a public health emergency of international concern in 2016. During the period, there were tens of thousands of cases of microcephaly and congenital Zika have been officiallysyndrome reported in Latin America. Since mostinfants and of the cases are asymptomatic, we believe the actual number of cases may be far higher. International travel means that Zika infection has the potential to take on global significance. resulting neurological sequelae such as Guillain-Barré syndrome reported in adults.
While the number of cases has declined in the past couple of years, there is currently no treatment or vaccine available for the Zika virus to prevent and respond to potential future epidemics.
Currently, there is no approved vaccine for Zika. Designing and synthesizing conformationally correct protein antigen vaccines, attenuated or vectored live viral vaccines, or inactivated vaccines is time consuming and challenging. These traditional vaccine approaches have therefore found it difficult to respond fast enough to the emerging Zika epidemic.
Zika vaccine (mRNA-1893): Our product concept
We
A more immunogenic second-generation vaccine was rapidly advanced to a complex antigen to the clinic in twelve months and followed up with a next generation vaccinePhase 1 clinical trial
We believe our platform allows for rapid development of mRNA vaccines with complex, immunogenic antigens faster than traditional vaccines. In order to rapidly deploy an mRNA vaccine for Zika, we leveraged available sequences and legacy LNPs to develop mRNA-1325. mRNA-1325 contains a sequence encoding for structural proteins in the Zika virus. The intended design is for translation of a polyprotein and processing inside the cell to make a secreted virus-like particle, or VLP. This process mimics the response of the cell after natural infection as shown in the figure below.
In addition, we continued to develop alternative Zika mRNA vaccine candidates. To this end, we identified mRNA-1706, which contains the same mRNA sequence as mRNA-1325 and now formulated in our proprietary LNP. Continued efforts at identifying different mRNA sequences with improved immunogenicity led to mRNA-1893, a sequence distinct from the first Zika vaccine candidate, mRNA-1325, that increases production of Zika VLPsviral-like particles (VLPs) and generates enhanced immunogenicity and protection in preclinical animal models compared to mRNA-1325. mRNA-1893 is also formulated in our proprietary LNP. mRNA-1706 was discontinued in favor of mRNA-1893, which has been shown to have more activity, and we will not further develop mRNA-1325.
Zika vaccine (mRNA-1893): Preclinical information
We have observed and published our immunogenicity data for our Zika vaccine
The mRNA sequences forwith mRNA-1325, and mRNA-1893 have been tested in mice and non-human primates, or NHPs. We have published a subset of these dataas depicted in the journal Cell in 2017. The mRNA sequence for mRNA-1893 produces equivalent immunogenicity and better protection compared to the sequence used in mRNA-1325 at 1/20 of the dose in NHPs, as shown in the figureimage below. In this study, mRNA vaccine or placebo was administered intramuscularly in a two-dose vaccination schedule (28 days apart), with five animals included in each group. NHPs were challenged with Zika virus 28 days post-boost, and viral titers were measured post challenge via quantitative PCR. Measurements were quantified in terms of focus forming units. Each line on the chart represents an individual animal.
Sequence for mRNA-1893 provided comparable protection to that of mRNA-1325 in non-human primate challenge study
Zika vaccine (mRNA-1893): Clinical data
We are preparing an IND for submission to the FDAconducting a Phase 1 trial for mRNA-1893 in the United States. The results of the Phase 1 study support continued clinical development of mRNA-1893 and we will not further develop mRNA-1325a Phase 2 study is planned for initiation in 2021
We
Dosing has been completed in a Phase 1 randomized, blinded,observer-blind, placebo-controlled, dose-ranging study to evaluate the safety, tolerability, and immunogenicity of mRNA-1325mRNA-1893 in healthy adults (18 to 49 years of age, inclusive) in aendemic and non-endemic Zika region. mRNA-1325 was administered intramuscularly in a two-dose vaccination schedule (28 days apart) at 3 dose levels (10 µg, 25 µg, and 100 µg).regions. Key objectives of the study include:
assess
•Assessing the safety, tolerability, and reactogenicity of a 2-dose2‑dose vaccination schedule of mRNA-1325mRNA-1893 Zika vaccine, given 28 days apart, across a range of dose levels in flavivirus seronegativeflavivirus-seronegative and flavivirus seropositive subjectsflavivirus-seropositive participants compared with placebo; and
assess•Assessing the immunogenicity of a range of doses of mRNA-1325mRNA-1893 Zika vaccine.
Subjects were randomly assigned in a blinded fashion in an approximate 4:1 ratio to receive mRNA-1325mRNA-1893 or placebo at one of threefour dose levels (10 µg, 2530 µg, or 100 µg, and 250 µg), with each subject receiving two vaccinations separated by 28 days. Approximately two-thirdsTwenty-five of the enrolled subjectsparticipants at each dose level were flavivirus seronegative and approximately one-thirdfive were flavivirus seropositive.
Part A of this 2-part study includes dose-finding, safety,
mRNA-1893 was well tolerated at all dose levels, and immune testing through 28 days following the second vaccination. Once subjects completed the final visit in Part A, they were entered into Part B. Part B was a blinded follow-up period with assessment of safety through 12 months.
For each dose cohort, a sentinel safety group enrolled 3 flavivirus seronegative subjects randomized to mRNA-1325 and followed for 7 days after first vaccination. An internal safety team, or IST, reviewed blinded safety data during Part A through 7 days following first vaccination of the sentinel safety lead-in for each dose cohort and approved randomization of the remainder of that dose cohort. The safety monitoring committee, or SMC, approved the escalation to the next higher dose cohort after review of blinded safety data of the currently dosed cohort through seven days following the second vaccination and cumulative safety data of all cohorts. The trial design is shown in the figure below.
The mRNA-1325 trial has completed enrollment (72 received mRNA-1325, 18 received placebo). mRNA-1325 did not show sufficient immunogenicity at doses up to 100 µg. Although the Phase 1 safety and tolerability data generated would permit additional dose escalation of mRNA-1325, our current development efforts are focused on our next-generation vaccine, mRNA-1893, which has been showndid not appear to be 20 times more potentinfluenced by the serostatus of the participants at baseline. ZIKV-specific neutralizing antibodies were measured by Plaque Reduction Neutralization Test (PRNT50) and Microneutralization (MN). All dose levels of mRNA-1893 induced a strong neutralizing ZIKV-specific antibody response in NHPbaseline flavivirus seronegative participants. GMTs post-dose two were comparable to those in a small panel of Zika challenge studies. convalescent sera collected during the epidemic. In participants with pre-existing flavivirus antibodies, neutralizing antibody titers were boosted with a single dose of the vaccine as shown by the GMTs and the seroconversion rates. The participants will continue to be followed through 12 months to measure antibody persistence with time and to monitor safety.
HIV vaccine program (mRNA-1644 & mRNA-1574)
We are preparing an INDadvancing two development candidates against HIV – Phase 1 innovation is needed to accelerate human validation of novel strategies.
mRNA-1644, a collaboration with the IAVI and the Bill and Melinda Gates Foundation, is a novel strategy and approach to vaccination against human immunodeficiency virus (HIV) in humans designed to elicit broadly Neutralizing HIV-1 Antibodies (bNAbs). A Phase 1 study for submissionmRNA-1644 will be the first trial in a series of human studies to the FDA for mRNA-1893,iteratively test and we will not further develop mRNA-1325.improve HIV vaccine antigens that elicit bNAbs using a germline-targeting and immuno-focusing. A second trial, mRNA-1574, is being evaluated in collaboration with NIH and includes multiple native-like trimer antigens.
Chikungunya vaccine (mRNA-1388): Summary
Our Chikungunya vaccine has generated safety and tolerability data and demonstrated immunogenicity for theWe expect to begin Phase 1 clinical studytrials for both mRNA-1644 and mRNA-1574 in 2021. These programs have the potential to inform the future of the HIV vaccine field, and provide an opportunity for our mRNA technology to play a key role in accelerating the discovery of a protective HIV vaccine.
HIV vaccine program (mRNA-1644 & mRNA-1574): Disease overview
HIV is the virus responsible for acquired immunodeficiency syndrome (AIDS), a lifelong, progressive illness with no effective cure. Approximately 38 million people worldwide are currently living with HIV, with 1.2 million in the U.S. Approximately 2 million new infections of HIV are acquired worldwide every year and approximately 690,000 people die annually due to complications from HIV/AIDS. The primary routes of transmission are sexual intercourse and IV drug use, putting young adults at the highest risk of infection. From 2000 to 2015, a total of $562.6 billion globally was spent on care, treatment and prevention of HIV, representing a significant economic burden. There are no approved HIV vaccines and no effective cure.
Nipah vaccine (mRNA-1215)
We are collaborating with the NIH-VRC for pandemic preparedness
mRNA-1215, our vaccine candidate against the Nipah virus (NiV), was co-developed along with the NIH-VRC. The Phase 1 clinical testing will be focused on pandemic preparedness.
Nipah vaccine (mRNA-1215): Disease overview
NiV is a zoonotic virus transmitted to humans from animals, contaminated food, or through approximately six months post dosing; we aimdirect human-to-human transmission and causes a range of illnesses including fatal encephalitis. Severe respiratory and neurologic complications from NiV have no treatment other than intensive supportive care. The case fatality rate among those infected is estimated at 40-75%. NiV outbreaks cause significant economic burden to address a public health need with this vaccine
Chikungunya virus represents a serious public health problem in tropicalimpacted regions due to loss of human life and sub-tropical regions with over 3 million cases globally. While it is rarely fatal, it can cause long-lasting and debilitating pain in multiple joints from polyarthralgia as well as serious neurological conditions. To date, no vaccineinterventions to prevent Chikungunya infectionfurther spread, such as the slaughter of infected animals. NiV has been approved. Effective mosquito control has proven challenging, evenidentified as the cause of isolated outbreaks in higher income countries. We believeIndia, Bangladesh, Malaysia, and Singapore since 2000 and is included on the WHO R&D Blueprint list of epidemic threats needing urgent R&D action.
H7N9 influenza vaccine (mRNA-1851)
H7N9 investigational vaccine demonstrates the potential of our platform to respond to an influenza pandemic
As a proof of concept and as part of our earlier efforts to develop a vaccine against influenza, we developed vaccines for H10N8 and H7N9 avian influenza strains, where there is well-suited to address this disease, as we can produce and deliver mRNA encodinga quantitative correlate for protection in humans (hemagglutinin inhibition, or HAI, titer of > 1:40). The results of the entire Chikungunya virus structural polyprotein (capsid and envelope proteins) to cells, which in turn produce and secrete Chikungunya virus-like particles, or Chikungunya VLPs, known to be robust inducers of protective neutralizing antibody responses. This program is supported by DARPA for a Phase 1 trial which is being conducted in the United States. The Phase 1 trial for ChikungunyaH7N9 vaccine were reported by us in the United States is fully enrolled andVaccine in 2019. The trial has met its objectives of describingassessing the safety and tolerability profile of mRNA-1388mRNA-1851 versus placebo, through approximately six months post dosing including capturing solicited and unsolicited local and systemic adverse events. The Phase 1 trial for ChikungunyaH7N9 vaccine has also demonstrated immunogenicity for the first part of the trial and we have observed 100% seroresponse96% of the subjects demonstrating HAI titers > 1:40 at day 43 (21 days post-second vaccination) for subjects at the 10025 µg dose level 28 days post the second dose. We have also observedwhere HAI > 1:40 is regarded as a durable responsequantitative measure for the 100 µg dose, with 13 of 14 subjects at day 196 with neutralizing antibody titers above the seroresponse threshold. The second part of the trial to measure persistence of response at one year post dosing is ongoing.protection from influenza. We believe the data provides support to advance the program in clinical development if we choose to with additional government or other funding. However, we do not intend to progress the H7N9 vaccine through clinical development on our own.
SYSTEMIC SECRETED AND CELL SURFACE THERAPEUTICS MODALITY
We designed our systemic secreted therapeutics modality to increase levels of desired secreted proteins in circulation or in contact with the extracellular environment, in order to achieve a therapeutic effect in one or more tissues or cell types. The goal of this modality is to provide secreted proteins, such as antibodies or enzyme replacement therapies across a wide range of diseases, such as heart failure, infectious diseases, and rare genetic diseases. This modality has benefited from our strategic alliances with AstraZeneca, DARPA, and the Bill and Melinda Gates Foundation. We have accumulated several innovations in technology, have gained process insights, and have built a set of preclinical and clinical experiences in our systemic secreted and cell surface therapeutics modality. Based on these, we believe this modality is core to our portfolio and we have expanded this portfolio with two new development candidates in a new autoimmune therapeutic area in 2020. Our systemic secreted and cell surface therapeutics modality has four development candidates.
Systemic secreted and cell surface therapeutics: Opportunity
The ability to systemically deliver mRNA for a therapeutic effect would allow us to address a number of diseases of high unmet medical need. Systemically delivered, secreted and cell surface therapeutics address conditions often treated with recombinant proteins that are typically administered to the blood stream. These current therapies include, for example:
•Enzyme replacement therapies, or ERTs, for rare diseases;
•Antibodies for membrane and extracellular soluble targets; and
•Circulating modulation factors for common and rare diseases such as growth factors and insulin.
Systemic secreted and cell surface therapeutics: Product features
Systemically delivered, secreted and cell surface therapeutics, we believe, would allow us to target areas of biology that cannot be addressed using recombinant proteins. Our potential advantages in these areas include:
•mRNA can produce hard-to-make or complex secreted proteins. Some proteins, due to their folding requirements or complexity, arechallenging to make using recombinant technologies, but can potentially be produced by human cells using administered mRNA.
•mRNA can produce membrane associated proteins. In contrast to recombinant proteins, mRNA can lead to the production of membraneassociated proteins on the cell surface, allowing the expression of native forms of signaling receptors or other cell surface complexes.
•Native post-translational modifications are possible through intracellular protein production using mRNA. mRNA administered to a humancell uses natural secretory pathways inside the cell to make and process the encoded protein. The resulting post-translational modifications, such as glycosylation, are human. With recombinant proteins, these post-translational modifications are native to the non-human cells used for manufacture. These non-human post-translational modifications in recombinant proteins may lead to sub-optimal therapeutic outcomes, side effects, and increased immunogenicity.
•mRNA can sustain production of proteins, which can increase exposure to proteins with short half-lives. mRNA can lead to proteinproduction by cells that can last from hours to days depending on design. This feature could increase the levels of short half-life proteins for therapeutic benefit.
•mRNA allows for desirable pharmacology in rare genetic diseases currently addressed by enzyme replacement therapies. Our mRNAtechnology potentially permits several differentiated pharmacologic features for treating rare genetic diseases currently addressed by enzyme replacement therapies, including the ability to repeat dose as needed, lower immunogenicity of the replacement protein, the ability to adjust dose levels in real-time based on individual patient needs, and the ability to stop dosing. Gene therapies may also prove to be useful for treating rare genetic diseases; however, mRNA is not limited by pre-existing immunity that may exist for certain gene therapies using viral vectors, and does not localize to the nucleus or require persistent changes to cellular DNA to have the desired effect.
Our approach
Our systemic secreted and cell surface therapeutics modality comprises programs where mRNAs instruct various cells of the human body to secrete proteins for therapeutic effect. For systemic therapeutic programs that utilize cells in the liver, the liver is a highly productive tissue for secreted protein production. The human liver can make tens of grams of proteins per day, well above the amounts necessary for the pharmacologic effect for virtually all protein therapeutics. We have demonstrated that mRNA can make and secrete monoclonal antibodies and soluble modulating factors in non-human primates. These proteins made in non-human primates can exert their pharmacological activity by binding to targets with biological effect. Recombinant protein therapeutics, which focus on secreted proteins, generate over $200 billion in annual worldwide sales.
Antibody against Chikungunya virus (mRNA-1944)
Systemic mRNA administration to instruct cells to secrete antibodies, in this case for passive immunization to prevent Chikungunya infection
We are using this program to help understand how mRNA can be used to make complex secreted proteins in the human body and to address the potential health threat of Chikungunya virus, particularly for the military and others exposed to this virus. This program highlights a potentially important advancement of our platform and expansion of our modalities.
Chikungunya is a serious health problem and is estimated to have caused at least 3 million cases during the 2005-2015 epidemic. There are no available vaccines or prophylactic treatments for this disease. This virus can cause severe and chronic arthritic-like conditions in up to 50% of infected people. This program offers a passive immunization approach using antibodies to prevent infection, to complement our vaccine (mRNA-1388)approach. In this program, we utilize two mRNAs encoding for light chain and heavy chain of an antibody against the envelope glycoprotein E. We administered these mRNAs encapsulated in our proprietary LNPs intravenously to people to prevent infection by the Chikungunya virus. We are being financially supported for specific activities by DARPA.
Antibody against Chikungunya virus (mRNA-1944): Disease overview
We aim to address
Addressing a significant publicglobal health need
Chikungunya virus is a mosquito-borne RNA alphavirus posing a significant public health problem in tropical and subtropical regions. While Chikungunya has been present in Africa for centuries, recent outbreaks and epidemics in new regions have arisen due to the expanding distribution of theAedes mosquito. mosquito in which it resides. A Chikungunya epidemic beganbeginning in 2004 in Kenya spread to India and was exported to nearly all regions of the world and brought Chikungunya to the attention of the western world. As of April 2016, Chikungunya cases had been reported in over 100103 countries and territories around the world, including more than 4546 countries and territories throughout the Americas.Chikungunya virus infection causes disease,is characterized by an acute onset of fever, rash, myalgia, and sometimes debilitating polyarthralgia, giving the virus its name, which means “that which bends up” when translated from Makonde. It is rarely fatal, butWhile generally non-fatal, neurological sequelae such as Guillain-Barre syndrome and chronic arthralgiaarthritis have been associated with infection.recognized.
Chikungunya virus is an alphavirus of the Togaviridae family with a positive-strand RNA genome. The viral structural proteins are naturally expressed as a single polyprotein followed by subsequent cleavage by viral and cellular proteases into capsid (C) and envelope (E) glycoproteins E3, E2, 6k, and E1. The E proteins are major targets of protective neutralizing antibody responses.responses that can be assessed in assays. In animal models, passive immunotherapy with convalescent sera from Chikungunya infected patients and human Chikungunya virus-specific neutralizing monoclonal antibodies that mainly recognize E2, have been shown to prevent CHKV infection, providing an approach for therapy.
There are currently no effective therapies or approved vaccines to treat or prevent Chikungunya infection or disease, and effective mosquito control has proven challenging, even in higher income countries. Currently, infected individuals are treated with non-steroidal anti-inflammatory drugs to relieve some symptoms. Therefore, in addition to an effective prophylactic vaccine, we believe there is a need for a safesystemic secreted antibody with the potential to provide passive immunity both prophylactically in susceptible populations and effective prophylactic vaccine.for treatment of active Chikungunya virus infections.
Antibody against Chikungunya vaccine (mRNA-1388)virus (mRNA-1944): Our product concept
We are developing a complex polyprotein encoding
A systemically delivered mRNA encapsulated in a lipid nanoparticleinstructing cells to secrete an antibody to glycoprotein E to neutralize Chikungunya
The mRNA-1388 vaccine consistsmRNA-1944 development candidate contains two mRNAs that encode the heavy and light chains of the Chikungunya antibody and utilizes our proprietary LNPs. The mRNA-1944 development candidate encodes a fully human IgG antibody isolated from B cells of a singlepatient with a prior history of Chikungunya infection that targets the E2 protein. The systemic antibody against Chikungunya virus titers can be evaluated in clinical trials by enzyme-linked immunosorbent assay, or ELISA, to quantify the amount of expressed IgG. A neutralization assay can be used to ensure that the mRNA encoding the full native structural polyprotein (C-E3-E2-6k-E1) that is naturally processed into Cexpressed antibody was properly folded and E proteins, which assemble into VLPs and are released from cells.functional.
The E proteins on these VLPs are the major target of neutralizing and protective antibodies, that, in the context of natural infection, can provide essentially life-long immunity to reinfection. The C protein provides structure to the VLP and contains T cell epitopes that could contribute to protective immune responses. The mRNA is encapsulated in a legacy LNP. An illustration of our approach is shown in the figure below.
Antibody against Chikungunya vaccine (mRNA-1388)virus (mRNA-1944): Preclinical information
We have conducted
Systemic mRNA administration results in antibody production and protection from Chikungunya infection in animals
In preclinical studies, mRNA-1944 administered by infusion, elicited high levels of neutralizing antibodies in a dose-dependent manner that were protective against arthritis, musculoskeletal tissue infection and lethal challenge in mouse models. After treatment with 0.5 mg/kg of mRNA-1944, complete survival of mice was observed when challenged 24 hours post-prophylaxis with Chikungunya virus. In cynomolgus macaques following infusion of a single-dose of mRNA-1944 at 0.5 mg/kg, mean maximum concentrations of human Chikungunya antibodies (10.1-35.9 µg/ml) were reached at 24 hours that exceeded the levels needed for protection in mice and non-human primateswith a half-life of 23 day.
Preclinical immunogenicity studies have been performed
In addition, mRNA-1944 was tested in micerats and non-human primates and suggest that our Chikungunya vaccine induces a robust neutralizing antibody response in a dose-repeat-dose study via IV infusion at up to 5 and regimen-dependent manner. Further, a one- or two-dose vaccination series protected AG129 mice from a lethal3 mg/kg, respectively. No dose-limiting toxicities related to mRNA-1944 were observed and all other observations were generally reversible.
Antibody against Chikungunya virus challenge(mRNA-1944): Clinical data
Two-dose regimen of Chikungunya antibody demonstrates the platform’s ability for safe repeat doing
We are conducting a Phase 1, randomized, placebo-controlled dose-escalation study of mRNA-1944 in healthy adults. The objective of this first-in-human study is to evaluate the safety and tolerability of escalating single doses of mRNA-1944 at 0.1 and 0.3 mg/kg, and 0.6 mg/kg with and without dexamethasone included in the premedication regimen with 8 subjects per cohort, and 2 weekly doses of 0.3 mg/kg administered 56 daysvia intravenous infusion. No further dose escalation beyond 0.6 mg/kg is planned. Other objectives are to determine the pharmacokinetics of all dose levels of mRNA-1944, to determine if the antibodies produced are sufficiently active to neutralize viral infection in assays and 112 days later, demonstrating durable immunity,to determine the pharmacodynamics of anti-Chikungunya virus IgG levels. The safety monitoring committee, or SMC, reviews the safety data for the dose level and recommends escalation to the next dose level.
In September 2019 we announced that single doses of mRNA-1944 at 0.1, 0.3 and 0.6 mg/kg resulted in levels of antibody that exceeded those expected to be protective against chikungunya infection (>1 μg/mL), and the 0.3 mg/kg and 0.6 mg/kg doses were projected to maintain antibody levels above protective levels for at least 16 weeks as shown in the figurepanel below. The average serum antibody level was quantified at various time points to demonstrate a half-life of 62 days. No significant adverse events were observed at the low and middle doses; infusion-related adverse events were observed at the high dose, which resolved spontaneously without treatment.
In thisSeptember 2020, we announced positive interim data from the Phase 1 study AG129 mice were immunizedevaluating escalating doses of mRNA-1944 at 0.1, 0.3 and 0.6 mg/kg dose with 0.4, 2, or 10 µgand without steroid premedication and two doses of the mRNA Chikungunya vaccine0.3 mg/kg given one week apart. Administration of mRNA-1944 at all doses resulted in a legacy LNP administered intramuscularly on day 0 (D0) or days 0 and 28 (D0 and D28). Serum neutralizingdose-dependent increases in levels of antibody titers were measured in five mice per group on day 56 by 50% plaque reduction neutralization test (PRNT50), followed immediately by a lethalagainst Chikungunya virus challenge (panels Awith a mean half-life of ~69 days. Post-single doses of 0.3 and C).0.6 mg/kg therapeutically-relevant concentrations of antibody (>1 µg/mL) were observed for 16 weeks. Neutralizing antibodies were observed at all dose levels, indicating functional antibody titersproduction by mRNA-1944. Across doses of mRNA-1944, adverse effects were measuredmild-to-moderate in another five mice per group on day 112, followed byseverity and transient, and none were serious. The most common adverse events were headache, nausea, myalgia, dizziness and chills. Following a lethal challenge (panels Bsecond dose of mRNA-1944 at the 0.3 mg/kg level, a 1.8-fold increase in the concentration of chikungunya virus was observed, with no worsening or exacerbation of side effects, and D).no significant accumulation of mRNA, LNP components or acute phase reactants.
Day 56 neutralizing antibody titer for Chikungunya mRNA vaccine in mouse study
Panel (A)Table of Contents
Day 112 neutralizing antibody titer for Chikungunya mRNA vaccine in mouse study
Panel (B)
Survival post Chikungunya viral challenge on day 56 in mouse study
Panel (C)
Survival post Chikungunya viral challenge on day 112 in mouse study
Panel (D)
Chikungunya vaccine (mRNA-1388): Clinical data
The Phase 1 trial is ongoing in follow-up period during 2021.
Phase 1 interim analysis with two-dose regimen
Relaxin (mRNA-0184): Summary
We have regained rights to develop relaxin from AstraZeneca and are evaluating the program
Until December 2020, we collaborated with AstraZeneca on mRNA encoding for mRNA-1388a relaxin protein designed for a long duration of action. Relaxin is a well-studied natural protein hormone that is known to have cardiovascular protective effects. Earlier attempts at developing relaxin as a protein therapeutic have not been successful. We believe that engineering the relaxin protein for a longer duration, utilizing repeat dosing, and pursuing an alternate indication might overcome the shortcomings of earlier attempts. We use mRNA encoding for an engineered relaxin protein designed for a longer duration of action. It is also designed to be produced by the body with human post-translational modifications.
In December 2020, we regained the rights to the relaxin program from AstraZeneca (previously AZD7970). We are currently evaluating our options for advancing the program.
Autoimmune Therapeutic Area (mRNA-6981 and mRNA-6231) Introduction
Our company strategy continues to be to invest in our platform technology and scalable infrastructure to pursue a pipeline of potential medicines that reflect the breadth of the mRNA opportunity. In January 2020, we announced the entry into a fifth therapeutic area, autoimmune diseases, building on the clinical validation of the systemic delivery of mRNA provided by the Phase 1 clinical proof of concept of the chikungunya antibody program. Autoimmune diseases are characterized by immune activation in response to antigens normally present in the United Statesbody, reflecting a loss of tolerance. Within this therapeutic area, we are developing two potential medicines, mRNA-6981 and mRNA-6231, designed to engage peripheral tolerance pathways to dampen autoimmune activation and help restore immune homeostasis, thereby reducing autoimmune pathology. In this modality, mRNA is fully enrolled, has generated safetydelivered systemically to create proteins that are either secreted or expressed on the cell surface.
Our approach to the treatment of autoimmune diseases is to leverage mechanisms of peripheral tolerance to modulate the immune system’s reaction to self-antigens.
Scientific and tolerability data,technical advances enable our expansion into new therapeutic areas, the latest of which is autoimmune disease. Autoimmune diseases are defined by pathology resulting from an adaptive immune response against an antigen or antigens normally present within the body. Pathology is present in a variety of organs across autoimmune diseases such as rheumatoid arthritis, systemic lupus erythematosus, inflammatory bowel disease, psoriasis, type 1 diabetes, multiple sclerosis, autoimmune hepatitis and demonstrated immunogenicity through approximately six months post dosing.related disorders such as graft vs host disease. Autoimmune diseases affect millions of patients worldwide, many of whose disease is not well-controlled by existing treatment options, and represent billions of dollars in healthcare costs.
In healthy people, autoimmune reactions are prevented or controlled by mechanisms of tolerance. Lymphocytes (e.g., T and B cells) that are reactive against self-antigens are deleted during development, thus establishing central tolerance. Central tolerance is not completely protective, and so other mechanisms, collectively known as peripheral tolerance, act on any self-reactive lymphocytes that escape central tolerance to control potential autoimmune pathology. These mechanisms of peripheral tolerance include induction of a reversible state of cellular non-responsiveness in self-reactive cells called anergy, and expression of inhibitory receptors or cytokines by other cells, such as dendritic cells, macrophages, and regulatory T cells (Tregs). The immune system works constantly to maintain balance between a state of immune activation and immune tolerance, sometimes called homeostasis. We are developing two potential medicines we believe have the potential to engage peripheral tolerance mechanisms to dampen autoimmune activation and help restore immune homeostasis. PD-L1 (mRNA-6981) aims to induce the expression of this inhibitory receptor on myeloid cells, and IL-2 (mRNA-6231) aims to preferentially increase the number of Tregs.
PD-L1 (mRNA-6981)
PD-L1 is a co-inhibitory receptor that can induce anergy in programmed cell death protein 1 (PD-1)-expressing T cells.
Antigen presenting cells, such as dendritic cells, form stable cell-cell junctions with T and B cells, called immune synapses, to communicate in three ways: Signal 1 (antigen presentation and recognition), Signal 2 (co-stimulatory signals to activate the cell) and Signal 3 (cytokines, chemokines, and certain metabolites to activate, repress, or modulate the immune response). When immune synapses occur in the context of high levels of co-inhibition, such as high levels of PD-L1 expressed on antigen presenting cells, this may result in the induction of peripheral regulatory T cells, induction of a reversible non-responsive state called anergy, or death of autoreactive lymphocytes due to removal of critical survival signals. Given their role in adaptive immune responses and their involvement in autoimmune disorders, dendritic cells and other myeloid populations have become a target of recent immunotherapies.
The PhasePD-L1/PD-1 pathway has a critical function in immune regulation and promotes development and function of Tregs. PD-L1 is a transmembrane protein expressed on antigen presenting cells, such as dendritic cells and macrophages, activated T cells, B cells, and monocytes as well as peripheral tissues. Its cognate receptor, PD-1, is a co-inhibitory transmembrane protein expressed on T cells, B cells, natural killer cells and thymocytes. Engagement of PD-1 to PD-L1 results in decreased IL-2 production and glucose metabolism, with continued engagement leading to induction of T cell anergy or conversion of naïve cells into peripheral regulatory T cells. Engagement of PD-L1 with PD-1 also inhibits T cell proliferation, cytotoxic activity and cytokine production, and suppresses the reactivation of previously activated T effector cells.
Preclinical mouse models deficient in PD-1 spontaneously develop a variety of autoimmune diseases such as arthritis, myocarditis, lupus-like glomerulonephritis and type 1 trial for Chikungunya vaccinediabetes, demonstrating the critical role of the PD-L1/PD-1 interaction in maintaining tolerance to self-antigens. Additionally, treatment of cancer patients with PD-1 or PD-L1 inhibitors sometimes results in immune-related adverse events, including the development of hepatitis, dermatitis and colitis, demonstrating the role of PD-1/PD-L1 in human autoimmune reactions.
We believe our PD-L1 therapy may augment PD-L1 expression on cell types similar to those that endogenously express it, and by reducing immune activation, potentially reduce the clinical manifestations of a variety of autoimmune diseases.
PD-L1 (mRNA-6981): Our product concept
We intend to induce expression of PD-L1 on myeloid cells to send a tolerizing signal to immune cells in their environment in order to treat autoimmune diseases.
Our intent is to use our platform to influence myeloid cells, including dendritic cells, to provide additional co-inhibitory signals by augmenting endogenous expression of PD-L1. We believe that this tolerizing signal to lymphocytes may limit autoreactivity in the United States is fully enrolledcontext of ongoing autoimmune pathology without severe and met its objectives of describing the safety and tolerability profile of mRNA-1388 versus placebo through approximately six months post dosing including capturing solicited and unsolicited local and systemic adverse events. The Phase 1 trial for Chikungunya vaccine has also demonstrated immunogenicity for the first partglobal suppression of the trial and weimmune system. Given that our platform allows us to modify myeloid cells in situ, our approach to the creation of a tolerogenic environment may provide unique benefits in treating autoimmune diseases by seeking to restore immune homeostasis. We believe the platform technologies used have observed 100% seroresponsealready been substantially validated in humans; mRNA-6981 employs the same delivery technology used in clinical trials for subjects at the 100 µg dose level 28 days post the second dose. our chikungunya antibody therapeutic, mRNA-1944. Results with mRNA-1944 demonstrate predictable dose-dependent pharmacology that translated effectively from preclinical species into humans.
PD-L1 (mRNA-6981): Preclinical information
We have observed disease modification in a durable responserange of preclinical models.
We have investigated the effect of mRNA-6981 in multiple disease models. In one example, we evaluated mRNA-6981 in a rat model of arthritis. Animals were given a single injection of chicken collagen type II in incomplete Freund’s adjuvant in order to induce chronic arthritis-like symptoms. mRNA-6981 was dosed subcutaneously at four times per week and compared to a negative PBS control and a positive control of daily high dose dexamethasone (Dex). Arthritis-like symptoms included paw swelling and joint rigidity, which were scored as a proxy for disease severity. Compared to animals treated with PBS, animals treated with PD-L1 mRNA presented with consistently less severe disease similar to animals treated daily with dexamethasone for at least three weeks.
Collagen-Induced Arthritis model
We have investigated mRNA-6981 in a range of other preclinical models of autoimmune and related diseases, including type 1 diabetes, colitis and graft-versus-host disease, and observed disease-modifying activity.
PD-L1 (mRNA-6981): Clinical plan
We are planning a Phase 1 clinical trial for patients with type 1 autoimmune hepatitis (AIH).
AIH is an autoimmune condition involving inflammation in the 100 µg dose,liver, which over time can lead to cirrhosis and liver failure. Type 1 AIH is characterized by a specific autoantibody profile and afflicts more than 75,000 patients in the U.S. Type 1 AIH is typically treated with 13steroids and azathioprine but some patients either do not respond to these treatments or are unable to tolerate them and are therefore in need of 14 subjects at day 196alternatives. A specific role for PD-L1 therapy in treating type 1 AIH is supported by clinical observations in cancer patients receiving PD-1/PD-L1 checkpoint inhibitor treatment: a noted adverse event is the development of AIH, which responds to discontinuation of checkpoint inhibitor therapy and treatment with neutralizing antibody titers above the seroresponse threshold. The second part of the trialcorticosteroids. Checkpoint inhibitor-induced AIH has an identical histological and clinical manifestation compared to measure persistence of response at one year post dosing is ongoing.non-drug induced type 1 AIH. We believe the data provides supportthat mRNA-6981 may provide benefit to advance the programtype 1 AIH patients by increasing PD-L1 expression and plan to pursue proof-of-concept in type 1 AIH as a first step to addressing a range of autoimmune indications. We are planning a clinical development if we choose to with additional government or other funding.
The mRNA-1388 Phase 1 study is a randomized, placebo-controlled, dose-ranging studytrial to evaluate the safety, immunogenicitytolerability, pharmacology, and tolerabilityduration of mRNA-1388the effect of mRNA-6981 in healthy adults (18type 1 AIH patients refractory or intolerant to 49 yearsthe standard of age, inclusive)care.
IL-2 Mutein (mRNA-6231)
IL-2 is a critical cytokine for Treg activation and expansion.
Cytokines are potent modulators of the immune system, directing function and homeostasis. IL-2 is critically important to T cell survival and function. IL-2 acts through a receptor complex that can be dimeric, IL-2Rß (CD122) plus the common γ chain (CD132), or trimeric, which is formed through the addition of IL-2Rα (CD25) to the dimeric form. The trimeric form has 10-fold to 100-fold greater affinity for IL-2. Under low or homeostatic IL-2 conditions, those cells which preferentially express the trimeric receptor, or IL-2R, such as Tregs and very recently activated effector T cells, are activated. Conversely, those cells that express the dimeric form, such as naïve or antigen-experienced cytotoxic T cells and natural killer cells (NK cells), are only activated by much higher concentrations of IL-2. Tregs play an obligate role in maintaining peripheral tolerance through the control of effector T cell responses, and several strategies are being developed to exploit IL-2 to treat autoimmune disease by selectively enhancing Treg function. These include recombinant protein forms of IL-2/mAb complexes, IL-2 Muteins and low-dose IL-2.
IL-2 Mutein (mRNA-6231): Our product concept
We intend to utilize subcutaneous mRNA administration to produce a non-endemic regionversion of IL-2 that is potentially longer acting and more selective for the trimeric IL-2 receptor (IL-2R) in order to treat autoimmune diseases.
IL-2-based therapeutics are being clinically evaluated for a wide range of immune-mediated disorders, including rheumatoid arthritis, systemic lupus erythematosus, graft versus host disease, inflammatory bowel diseases, and autoimmune hepatitis. We believe that our platform can be exploited to produce a modified IL-2 for the treatment of autoimmune conditions. Our modified IL-2 is engineered with mutations that selectively decrease binding to the dimeric IL-2 receptor present on CD4+ and CD8+ T effector cells and NK cells, and increase reliance upon CD25 of the trimeric IL-2 receptor complex to trigger the signaling cascade in regulatory T cells. Our modified IL-2 is also expressed as a fusion protein to extend its half-life in the United States.serum. This will be the first demonstration of subcutaneous administration of the delivery technology that is also used in clinical trials for our chikungunya antibody therapeutic, mRNA-1944.
IL-2 Mutein (mRNA-6231): Preclinical information
We have observed preferential expansion of Tregs in non-human primates.
Preclinical studies have been conducted using mouse homologs as well as cynomolgus monkeys. In one example, monkeys were dosed subcutaneously with a single dose of mRNA-6231 and T cells in the peripheral blood were monitored on days 1, 3, 5, 8, and 14. The study includes three dose level cohorts (25, 50, and 100 µg), each containing 20 subjects randomized 3:1 (active: placebo)percentage of Tregs (CD4+ T cells that were also FoxP3+) increased about 12-fold (average across N=4 animals) at their maximum (day 8 post-dosing). All subjectsConversely, the percentage of activated CD8+ conventional T cells (that co-express CD25) did not significantly increase over baseline at any time during the monitoring period, illustrating the preferential expansion of Tregs by the IL-2 Mutein.
IL-2 Mutein (mRNA-6231): Clinical plan
We are givenplanning a two-dose intramuscular injection series, spaced four weeks apart (day 0 and 28). The Phase 1 clinical trial was conducted with the investigational medicine named VAL-181388, in accordance with our legacy naming convention. normal healthy volunteers to assess safety, tolerability, pharmacokinetics and pharmacodynamics.
We have since changed our naming convention and have adopted mRNA-1388plan to conduct a Phase 1 dose escalation study of mRNA-6231 in place of VAL-181388.adult healthy volunteers. The key objectives of thethis study include:
describeare to evaluate the safety and tolerability of mRNA-1388 relativemRNA-6231, to placebo;
determineassess the immunogenicitypharmacodynamic response through Treg selective expansion, activation and duration, and to characterize the pharmacokinetic profile of three dose levels of mRNA-1388 to inform the choice of dose for further development of this vaccine; and
assess immunogenicity changes from baseline using serum neutralizing antibody titers to Chikungunya virus and binding antibody titers to Chikungunya-specific proteins.
The schematic of the trial is shownmRNA-6231 in expressing IL-2 in the figure below. Each dose cohort starts with a sentinel safety group and based on reviewserum following subcutaneous administration.
Table of the internal safety team, or IST, advances to an expansion of that dose cohort. Advancement to the next dose level is permitted after safety monitoring committee, or SMC, review.
100% seroresponse has been pre-defined as when subjects have post-vaccination titer > lower limit of quantification, or LLOQ where their baseline titer is < LLOQ or when subjects have post-vaccination titer > 4-fold the baseline titer where their baseline titer is > LLOQ.
As of October 24, 2018, based on the data for all three dose cohorts through approximately 6 months post dosing, we have observed neutralizing antibodies 28 days post dose 2 and persistence through day 196. Panel A below indicates geometric mean titer, or GMT, by time for neutralizing antibody, or NAb, against Chikungunya virus as measured by 50% plaque reduction neutralization test, or PRNT50. A dose-dependent increase in GMT of neutralizing antibodies against Chikungunya virus was observed across the 25, 50 and 100 µg dose groups. PRNT50 titers were low or undetected after the first vaccination at all dose levels, but increased substantially in the 50 and 100 µg dose groups after the second vaccination. Panel B below depicts the percentage of subjects by time for seroresponse of neutralizing antibody to Chikungunya virus as measured by PRNT50. A dose-dependent increase in PRNT50 seroresponse was observed across the 25, 50 and 100 µg dose groups, reaching 100% after the second vaccination of 100 µg at day 56. The PRNT50 GMT after the second vaccination (day 28) was elevated at day 56 and day 196 for the two higher dose groups compared to day 0 or 28.
Neutralizing antibody PRNT50 GMT in Chikungunya vaccine (mRNA-1388)
Phase 1 clinical trial for per-protocol subset
Panel (A)
Neutralizing antibody PRNT50 seroresponse in Chikungunya vaccine (mRNA-1388)
Phase 1 clinical trial for per-protocol subset
Panel (B)
|
| | | | | | | | |
| Number of subjects per-protocol subset for clinical data at cut-off date | | | | | | | |
| Cohort | | Day 0 | | Day 28 | | Day 56 | | Day 196 |
| 25 µg | | 15 | | 15 | | 13 | | 13 |
| 50 µg | | 15 | | 14 | | 14 | | 13 |
| 100 µg | | 14 | | 14 | | 14 | | 14 |
| Placebo | | 14 | | 14 | | 13 | | 13 |
Based on the interim data as of October 24, 2018, there were two grade 3 solicited adverse events, or AEs, which were in the 100 µg cohort. A potential trend towards increased local and systemic solicited reactogenicity including pain, erythema, induration, headache, fatigue, myalgia, arthralgia and nausea post dose 2 was observed in the 50 µg and 100 µg dose groups. Arthralgia was reported in the 100 µg dose group only (21.4 % of subjects); all events were < Grade 2 and all subjects reported full resolution by Day 4 post vaccination, and thereby distinct from the persistent type observed in post Chikungunya virus infection arthralgias. The solicited AEs are provided in the table below.
Solicited AEs after each study vaccination for the safety set in the Phase 1 trial for Chikungunya vaccine (mRNA-1388)
|
| | | | | | | |
| | 25 µg | | 50 µg | | 100 µg | | Placebo |
| | % (No. with severe AE) |
| Dose 1 | N=15 | | N=15 | | N=15 | | N=15 |
| Pain | 60.0 (0) | | 57.1 (0) | | 73.3 (0) | | 33.3 (0) |
| Tenderness | 66.7 (0) | | 78.6 (0) | | 80.0 (0) | | 40.0 (0) |
| Erythema | 0 | | 0 | | 0 | | 0 |
| Induration | 0 | | 0 | | 0 | | 0 |
| Headache | 13.3 (0) | | 21.4 (0) | | 20.0 (0) | | 0 |
| Fatigue | 0 | | 7.1 (0) | | 6.7 (0) | | 6.7 (0) |
| Myalgia | 13.3 (0) | | 14.3 (0) | | 20.0 (0) | | 0 |
| Arthralgia | 0 | | 0 | | 0 | | 6.7 (0) |
| Nausea | 0 | | 14.3 (0) | | 6.7 (0) | | 0 |
| Fever | 0 | | 0 | | 0 | | 0 |
| Dose 2 | N=15 | | N=14 | | N=14 | | N=15 |
| Pain | 46.7 (0) | | 61.5 (0) | | 85.7 (0) | | 6.7 (0) |
| Tenderness | 53.3 (0) | | 76.9 (0) | | 78.6 (1) | | 6.7 (0) |
| Erythema | 0 | | 7.7 (0) | | 7.1 (1) | | 0 |
| Induration | 0 | | 7.7 (0) | | 0 | | 0 |
| Headache | 20.0 (0) | | 7.7 (0) | | 28.6 (0) | | 13.3 (0) |
| Fatigue | 6.7 (0) | | 15.4 (0) | | 28.6 (0) | | 13.3 (0) |
| Myalgia | 0 | | 7.7 (0) | | 28.6 (0) | | 0 |
| Arthralgia | 0 | | 0 | | 21.4 (0) | | 0 |
| Nausea | 0 | | 0 | | 21.4 (0) | | 0 |
| Fever | 0 | | 0 | | 7.1 (0) | | 13.3 (0) |
There was one unsolicited SAE in the 100 µg group subject, post the second dose, which was assessed as related and reported as a Suspected Unexpected Serious Adverse Reaction, or SUSAR (subject had asymptomatic Grade 4 elevation in serum AST and Grade 3 elevation in ALT), which was resolved rapidly. A potential dose-dependent increase in the rate of unsolicited related adverse reactions across the dose level groups was observed. There were no safety concerns identified by the IST or the SMC. There were no AEs of special interest or medically-attended AEs. The unsolicited AEs are provided in the table below.
Unsolicited AEs reported for the safety set in the Phase 1 trial for Chikungunya vaccine (mRNA-1388)
|
| | | | | | | |
| | 25 µg | | 50 µg | | 100 µg | | Placebo |
| | No., % of subjects |
| Dose 1 | N=15 | | N=15 | | N=15 | | N=15 |
| Any AE | 4 (26.7) | | 6 (40.0) | | 3 (20.0) | | 8 (53.3) |
| Any related AEs | 0 | | 1 (6.7) | | 1 (6.7) | | 2 (13.3) |
| Any grade 3+ | 0 | | 2 (13.3) | | 0 | | 1 (6.7) |
| Any related grade 3+ | 0 | | 0 | | 0 | | 0 |
| Any MA-AEs | 1 (6.7) | | 0 | | 0 | | 0 |
| SAEs | 0 | | 0 | | 0 | | 0 |
| Any related SAE | 0 | | 0 | | 0 | | 0 |
| AESIs | 0 | | 0 | | 0 | | 0 |
| Dose 2 | N=15 | | N=14 | | N=14 | | N=15 |
| Any AE | 3 (20.0) | | 3 (21.4) | | 6 (42.9) | | 6 (40.0) |
| Any related AEs | 0 | | 0 | | 4 (28.6) | | 0 |
| Any grade 3+ | 1 (6.7) | | 2 (14.3) | | 4 (28.6) | | 0 |
| Any related grade 3+ | 0 | | 0 | | 3 (21.4) | | 0 |
| Any MA-AEs | 0 | | 0 | | 0 | | 1 (6.7) |
| SAEs | 0 | | 0 | | 1 (7.1) | | 0 |
| Any related SAE | 0 | | 0 | | 1 (7.1) | | 0 |
| AESIs | 0 | | 0 | | 0 | | 0 |
The trial is ongoing to measure antibody persistence and safety approximately one year after the second dose.
II. PROGRAM DESCRIPTIONS IN OUR CANCER VACCINES MODALITY
We designed our cancer vaccines modality to treat or cure cancer by enhancing immune responses to tumor neoantigens, defined below. This modality has two programs currently for neoantigen vaccines, a personalized cancer vaccine, or PCV, program, and a vaccine against neoantigens related to a common oncogene called KRAS, both conducted in collaboration with Merck. The goal of a cancer vaccine is to safely expose the patient’s immune system to tumor related antigens, known as neoantigens, to enable the immune system to elicit a more effective antitumor response. Our cancer vaccines modality is focused on the use of mRNA to express neoantigens found in a particular tumor in order to elicit an immune response via T cells that recognize those neoantigens, and therefore the tumor. These neoantigens can either be unique to a patient, as in the case of our personalized cancer vaccine program, or can be related to a driver oncogene found across subsets of patients, as in the case of our KRAS vaccine program.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
OpportunityDisease overview
More than 1.61.8 million new cancer cases and approximately 600,000 deaths due to cancer were predicted in the United States for 2017.2020, according to the NIH. Despite the recent success of checkpoint inhibitors, the majority of patients with the most common types of epithelial cancer still do not benefit from checkpoint inhibitors, as many patients still have incomplete or no response to currently available therapies. In addition, treatment resistance is thought to arise from a number of mechanisms, principally the local immunosuppressive effects of cancer cells, which prevent either access to or recognition by T cells.
Recent breakthroughs in cancer immunotherapy, such as checkpoint inhibitors and chimeric antigen receptor T cell therapies, have demonstrated that powerful antitumor responses can be achieved by activating antigen specific T cells. We believe one approach to improve the efficacy of checkpoint inhibitors is to develop vaccines that increase both the number and antitumor activity of a patient’s T cells that recognize tumor neoantigens.
Our approach
Cancer vaccines: Product features
We are developing mRNA-basedbelieve that mRNA technology is an attractive approach for cancer vaccines for many reasons, including:
•mRNA vaccines can deliver multiple neoantigens concatenated in a single mRNA molecule. We currently encode up to utilize34 neoantigens in one ofour personalized cancer vaccines (mRNA-4157), and four KRAS mutations in our KRAS vaccine (mRNA-5671). Given that a T cell response against a single antigen has the anti-tumor killing capacitypotential to eradicate cancer cells, we believe that delivering multiple neoantigens could increase the probability of T cells to drive anti-tumor efficacy. Evidence of tumor killinga successful treatment outcome for a patient.
•mRNA encoding for neoantigens is translated and processed by T cells in treating certain cancers has increased in the last decade with advances in immunotherapies. The immune system’s anti-tumor response relies on T cells recognizing tumor cells as non-self and eradicating these “foreign” cells. Human Leukocyte Antigen, or HLA, complexes are a diverse set of genes, or alleles, that present fragments of proteins from inside (HLA I) or outside (HLA II) cellspatients’ endogenous cellular mechanisms for presentation to the immune system. A person’s HLA type defines what HLA alleles they express and can restrict what antigen may be presentedsystem. Neoantigen peptides are then potentially processed in multiple ways to their give rise to different, smaller peptides for presentation by theimmune system. Antigens presentedWe believe this endogenous antigen production and presentation has the potential to drive a more effective immune response.
•mRNA vaccines can be efficiently personalized. The shared features of mRNA, combined with our investments in HLA molecules are recognized by T cell receptors, or TCRs, present on the cell surfaceautomated manufacturingtechnology, enable us to manufacture individual cGMP batches of CD4 and CD8 T cells. These two main classes of T cells have distinct mechanisms to potentially attack tumor cells; CD4 cells play an important role in activating other immune cells after recognition of antigens in HLA II molecules, whereas CD8 cells can have direct cytotoxic cell killing capabilities upon recognition of antigens in HLA I molecules. Both cell types have been demonstrated to have important roles in driving an effective anti-tumor immune response.
Over the past three decades there have been many attempts to developpersonalized cancer vaccines fewrapidly, in parallel. For example, we have demonstrated the ability to manufacture and release a “custom-designed” vaccine for an individual patient within 60 days of which have been successful. Key reasons include (1) past attempts were directed against shared “self” non-mutated antigens; (2) nearly all previous attempts utilize peptide fragments to try to mimic peptides displayed by HLA I molecules, this method may not have been able to mimicsequencing the natural processing and presentation of antigens bypatient’s tumor for the immune system and therefore may not be recognized; and (3) earlier work was done in the era prior to the benefit of checkpoint inhibitors.
We believe one approach to improve the efficacy of checkpoint inhibitors is to develop vaccines that increase both the number and antitumor activity of a patient’s T cells that recognize tumor neoantigens. Our cancer vaccines modality is focused on the use of mRNA to express neoantigens found in a particular cancer in order to elicit an immune response via T cells that recognize those neoantigens, and therefore the tumor. These neoantigens can either be unique, as in the case of our personalized cancer vaccine program or can be related to a driver oncogene found across subsets of patients, as in the case of our KRAS vaccine program.(mRNA-4157).
PCVPersonalized Cancer Vaccines (PCV) (mRNA-4157 and NCI-4650): Summary)
We are collaborating with Merck to use the strength of our platform to develop cancer vaccines with multiple neoantigens unique to each patient, also known as personalized cancer vaccines, or PCVs
Recent breakthroughs in cancer immunotherapy have demonstrated that powerful antitumor responses can be achieved by activating antigen specific T cells in a variety of cancer settings. Despite these advances, many patients still have incomplete or no response to anti-cancer therapies. One approach is to administer a cancer vaccine that encodes for peptides containing mutations found in their cancer, i.e., to create aOur personalized cancer vaccine, composed of neoantigens unique toor PCV, is currently being evaluated in a patient’s tumor. Previous attempts have demonstrated the ability of mRNAPhase 1 and peptide-based platforms to drive immune responses toward patient-specific neoantigens. Preclinical studies have shown that the combination of cancer vaccines with checkpoint inhibitors provides improved benefit over single-agent therapies. Our platforma Phase 2 study. The Phase 1 trial is positioned for bringing personalized cancer vaccines to patients with our proprietary in silico design of each patient’s neoantigen-based mRNA vaccine, to be coupled with our automated cell-free manufacturing processesassessing mRNA-4157 alone and infrastructure based in Norwood, MA, as well as our digital infrastructure. We believe these attributes coupled with our proprietary LNPs help differentiate our approach from ongoing efforts at developing mRNA-based cancer vaccines. mRNA-4157 is administered either as monotherapy, or in combination with pembrolizumab, marketed inKEYTRUDA®. The Phase 2 trial is assessing the United States as KEYTRUDA. This is in collaboration with Merck as governed by a joint steering committee. NCI-4650 is a personalized cancer vaccine being tested by the National Cancer Institute, or NCI, as a monotherapy for patients with advanced, metastatic cancers. NCI-4650 differs from mRNA-4157 in its neoantigen selection process. Both mRNA-4157 and NCI-4650 are in Phase 1 trials in the United States. As of February 15, 2019, 13 patients have been dosed in Part A of the trial (mRNA-4157 monotherapy) and 20 patients have been dosed in Part B of the study (mRNA-4157 in combination with pembrolizumab). In our dose escalationKEYTRUDA vs. KEYTRUDA alone. (KEYTRUDA is a registered trademark of mRNA-4157 in Part A (monotherapy), we have detected antigen specific T cell responses.We and our strategic collaborator Merck have submitted the protocol to the FDA for a randomized Phase 2 trial of mRNA-4157 in resected melanoma at high risk of recurrence.Sharp & Dohme Corp.)
PCV (mRNA-4157 and NCI-4650)(mRNA-4157): Our product concept
Rapid, personalized current good manufacturing practice, or cGMP, manufacturing to bring personalized cancer vaccines to patients
As tumors grow they acquire mutations, some of which create new protein sequences, or neoantigens, that can be presented on HLA molecules in the tumor and recognized as non-self by T cells. These neoantigens can be shared, as in mRNA-5671, or are completely unique to an individual patient’s tumor. In addition to the neoantigens being unique and patient specific, the presentation of those neoantigens is also dependent on a patient’s specific HLA type. Identification of patient-specific HLA type and tumor neoantigens through next generation sequencing paired with our proprietary,in silico design of each patient’s mRNA
vaccine and rapid manufacturing for a specific patient allows us to rapidly deliver a completely unique and personalized medicine to patients.
We believe that antigen-encoded mRNA is an attractive technology platform for neoantigen vaccination for cancer patients for the following reasons:
mRNA vaccines can deliver multiple unique and personalized neoantigens in a single mRNA molecule;
mRNA vaccines unique to each particular patient can be rapidly designed in silico and manufactured with automation in personalized, individual cGMP batches; and
mRNA encoding for neoantigens is translated and processed by patients’ endogenous cellular processing and presentation to the immune system.
Our personalized cancer vaccine program, mRNA-4157, consists of an mRNA that encodes up to 34 neoantigens, predicted to elicit both class I (CD8) and class II (CD4) responses, designed against each individual patient’s tumor mutations and specific to their HLA type. NCI-4650 includes both neoantigens known to be immunogenic as identified through ex vivo experimentation on the patient’s immune cells and neoantigens predicted by the NCI bioinformatics algorithm. For both mRNA-4157 and NCI-4650, theThe neoantigens are encoded in a single mRNA sequence and therefore termed a neoantigen concatemer. Each patient-specific mRNA-4157 and NCI-4650 is formulated in our proprietary LNPs designed for intramuscular injection. An illustration of the intended design of mRNA-4157 and NCI-4650 is shown in the figure below.
Each mRNA-4157 and NCI-4650 is produced using an integrated batch manufacturing process that is the same regardless of the sequence of the neoantigens to be produced. The overall process involves five major steps that are highly integrated and intended to enable a robust chain of custody and chain of identity. An overview of the system is provided in the figure below.
The process includes the following steps:
| |
2. | Next generation sequencing, or NGS, of tumor DNA and RNA; |
| |
3. | Vaccine design using our proprietary bioinformatics algorithm for up to 34 patient-specific neoantigens; |
| |
4. | Manufacture of the designed mRNA; and |
| |
5. | Administration of the mRNA to the same patient that provided the tumor sample. |
Specifically, for each patient, the tumor sample and peripheral blood samples are collected and immediately sent for NGS analysis. Whole exome sequencing, or WES, data are generated from both the tumor and blood samples, with the blood sample serving as the germline (un-mutated) reference. WES results from the blood sample are also to be used to determine the patient’s HLA-type using an NGS-based approach. The tumor transcriptome is determined by mRNA sequencing, or RNA-Seq. The HLA typing, WES, and RNA-Seq results for each patient are provided as inputs to our proprietary vaccine design algorithm which predicts which neoantigens could be the most immunogenic. The mRNA sequence is then manufactured using an automated workflow to enable a rapid turnaround time. The final drug product is shipped to the clinical site for administration to the same patient that provided the original biopsy.
PCV (mRNA-4157 and NCI-4650): Preclinical information
We have utilized model antigens as surrogates for PCV to demonstrate the ability to elicit a robust T cell response with a single mRNA
We have completed preclinical studies to characterize the ability of an mRNA vaccine to induce a robust and specific T cell response to multiple antigens. Specifically, the ability of our mRNA vaccines to elicit:
Specific and robust T cell responses to murine neoantigens were observed by vaccinating mice with mRNA vaccines that encode previously published immunogenic epitopes from the MC38 mouse tumor cell line and measuring T cell responses to mutant but not wild type antigens. The responses to mRNA vaccination were also significantly higher than responses to the adjuvanted peptide as per a study we conducted. In this study, mice were vaccinated with either empty LNP, adjuvanted peptides corresponding to previously published data or mRNAs encoding the same neoantigen sequences formulated in LNPs. Mice were vaccinated on day 1, 8, and 15 and T cell responses were measured on day 18 using flow cytometry by re-stimulating splenocytes with either control (medium), wild type or mutant (neoantigens) peptides. In an ideal case, one would see a high T cell response when re-stimulated with mutant neoantigen and would not see an equivalent response for re-stimulation with media and wild type peptide. We believe this would indicate a clear specific response for mutant neoantigens with no response to self. As shown in the figure below, the T cell response by mRNA encoding for neoantigens was much higher than that for peptides. The T cell response for mRNA vaccine re-stimulated with wild type was higher than baseline and close to that with control (medium). The T cell responses for mutant peptide were significantly higher than those against wild type peptide.
T-cell response for our mRNA PCV in mouse study
Specific and robust T cell responses to multiple antigens encoded in a single mRNA sequence. The T cell response after vaccinating mice with mRNA vaccine encoding for 16 specific antigens previously reported to be immunogenic in mice as shown in the figure below. mRNA was formulated in a proprietary LNP and delivered intramuscularly to mice on day 1 and day 8. T cell responses were measured on day 15 by re-stimulating splenocytes with either control (medium) or peptides corresponding to each antigen (1, 2, 6, 9, and 12) in the mRNA vaccine and measured by interferon gamma. Measurements are in spot forming units, or SFU, per 1 million cells per well.
An mRNA concatemer encoding distinct class I (antigens 6, 9, and 12) and class II antigens (antigen 2) can elicit specific T cell responses to each antigen as shown in the figure below.
Unique T cell response to specific antigens encoded by mRNA in mouse study
PCV (mRNA-4157 and NCI-4650)(mRNA-4157): Clinical data
Our Phase 1 trial for PCV is currently ongoing in the United States
The Phase 1 trial is an open-label, multicenter study to assess the safety, tolerability, and immunogenicity of mRNA-4157 alone in subjects with resected solid tumors and in combination with the CPI,checkpoint inhibitor, pembrolizumab (marketed in the United States as KEYTRUDA), in subjects with inoperableresected and unresected solid tumors. The study is sponsored by us. mRNA-4157 is administered by intramuscular injection on the first day of each 21-day cycle and for a maximum of 9nine doses. mRNA-4157 is administered as monotherapy (Part A) or in combination with pembrolizumab (Parts, B, C, and D) in the United States. FourStudies have shown mRNA-4157 to be well tolerated at all dose levelslevels. The majority of 0.04 mg, 0.13 mg, 0.39 mg,adverse events from mRNA-4157 have been low grade and 1 mg will be exploredreversible. Encouraging data emerging from an expansion arm in Part A and Part B through dose escalation. The following cancers are being investigated: non-small cell lung cancer (subject to certain entry criteria), small cell lung cancer, melanoma, bladder urothelial carcinoma, human papillomavirus-negativepatients with head and neck squamous cell carcinoma, and a varietycancer has recently caused us to increase the size of solid malignancies.that cohort, which continues to recruit trial participants.
The key objectives of the study include:
for Part A—To determine the safety and tolerability of mRNA-4157 monotherapy in subjects with resected solid tumors and to assess the immunogenicity of mRNA-4157;
for Parts B, C and D—To determine the safety, tolerability, and recommended Phase 2 dose of mRNA-4157 administered in combination with pembrolizumab; and
for Part D—To assess the immunogenicity of mRNA-4157 with pembrolizumab from apheresis samples in certain subjects.
A schematic of the trial is shown in the figure below.
As of February 15, 2019, 33 patients have been dosed with mRNA-4157. Thirteen of the 33 patients have been treated with mRNA-4157 monotherapy in Part A and 20 patients have been treated with mRNA-4157 and pembrolizumab in Part B. In Part A, patients have been dosed up to the 1 mg dose level which is currently ongoing. In Part B, patients have been dosed up to the 1 mg dose
level which is currently ongoing. There have been no dose-limiting toxicities or significant related toxicities observed in these patients to date. Parts C and D of the study are currently recruiting.
In our dose escalation of mRNA-4157 in Part A (monotherapy), we have detected antigen specific T cell responses. This is measured by restimulating unexpanded peripheral blood mononuclear cells with sets of peptides corresponding to neoantigens encoded by the patient-specific mRNA-4157 and is shown in the figure below. Individual data points indicate technical replicates.
Antigen-specific T cell responses for one patient at the 0.13 mg dose level in Part A of the Phase 1 clinical trial for PCV vaccine (mRNA-4157)
We and our strategic collaborator Merck have submitted a new protocol to the FDA to commence a randomized Phase 2 study totrial will assess whether post-operative adjuvant therapy with mRNA-4157 in combination with pembrolizumab, improves relapse-free survival compared to pembrolizumab alone. The study has a primary endpoint of relapse free survival with a primary analysis at 12 months and will be conducted with patients that have had complete resection of cutaneous melanoma but remain at high risk of recurrence.
A schematic of the Phase 2 trial is shown in the figure below.
NCI-4650 is in an ongoing investigator-initiated, single-arm, open-label trial involving up to 12-patients with advanced metastatic disease sponsored by National Cancer Institute.
KRAS vaccine (mRNA-5671): Summary
In collaboration with Merck, we are developing a cancer vaccine (mRNA-5671) with mRNAs encoding for a concatemer of mutations in the KRAS oncogene protein
Although monotherapy checkpoint inhibitor treatment can provide significant benefit for some cancer patients, many have incomplete or no response to therapy, presenting a need for alternative therapies to stimulate antitumor immunological responses. Finding oncogenic driver mutations that encode targetable T cell epitopes has considerable therapeutic implications. Point mutations in the KRAS gene occur in about 22% of human cancers, such as colorectal, non-small cell lung and pancreatic cancers. Direct inhibition of KRAS has proven challenging and to date, there are no successful KRAS-targeted cancer therapies. It has been reported that KRAS-mutant neoantigens can be presented on certain human HLAs. Therefore, one approach is to immunize the body to naturally synthesize neoantigen peptides that contain common KRAS mutations for presentation to the immune system by mRNA. We have designed an mRNA to generate and present KRAS neoantigens to the immune system from the four most common KRAS mutations. We are advancing this program through clinical trials in collaboration withThe Phase 1 trial is being conducted by Merck and we have transferredis currently ongoing in the IND to Merck, since Merck is the sponsor of the Phase 1 trial. Patients will either be dosed with mRNA-5671 as monotherapy or in combination with the checkpoint inhibitor pembrolizumab.United States.
KRAS vaccine (mRNA-5671): Our product concept
Our approach is to encode multiple mutations of KRAS in our mRNA vaccine administered together with a checkpoint inhibitor.
Oncogenic driver mutations that encode targetable T cell neoantigens have considerable potential therapeutic implications: (1) driver mutations are subject to positive selection, as they confer survival advantages for the tumor, and (2) such neoantigens could be shared between patients, enabling an easier approach to developing and manufacturing such therapeutic or curative interventions.
KRAS is a frequently mutated oncogene in epithelial cancers, primarily lung, colorectal cancer, or CRC, and pancreatic cancers. The four most prevalent KRAS mutations associated with these malignancies are G12D, G12V, G13D, and G12C, which constitute 80% to 90% of KRAS mutations. KRAS has multiple downstream signaling pathways, and although drugs have been developed to target individual effectors, direct inhibition of KRAS could be more efficacious. Direct inhibition of KRAS has proven challenging, as have past efforts at generating a cancer vaccine against KRAS. These attempts have proven to be ineffective, likely due to either the lack of concomitant administration of a checkpoint inhibitor or vaccines which have been only minimally immunogenic. None of the historic attempts at a KRAS vaccine used mRNA.
Immune stimulators are often incorporated in vaccines to improve immune response to the antigens of interest. STimulator of INterferon Gene, or STING, is a cytosolic nucleotide sensor known to trigger type 1 interferon responses and has been reported to promote antigen specific T cell responses. STING has been reported to promote antitumor immunity and vaccines including STING agonists (e.g., cyclic dinucleotides) show overall improvement of immune responses to poorly immunogenic antigens. Merck has opted to advance mRNA-5671 without STING mRNA and may choose to include STING mRNA in further clinical development of this vaccine.
In order to drive T cell mediated antitumor responses, our mRNA vaccine includes an mRNA encoding for a concatemer of sequences encoding the four most common KRAS mutations, encapsulated in our proprietary LNP. Our mRNA vaccine will be dosed either as monotherapy or in combination with a checkpoint inhibitor. An illustration of one approach for mRNA-5671 is shown in the figure below.
KRAS vaccine (mRNA-5671): Preclinical information
We have observed the utility of KRAS mRNA vaccine in vivo
The immunogenicity of our KRAS vaccine is supported by several preclinical studies in which we observed that our mRNA encoding for KRAS mutations can be made in cells and presented in transgenic mice with specific HLA I alleles.
One of these models was a transgenic mouse model expressing a specific human HLA. This is shown in the figure below. These transgenic mice were vaccinated with either mRNA encoding A11-positive control antigens (control), single mutant KRAS neoantigen or the concatemer of the four most common mutant KRAS neoantigens, plus mRNA encoding STING. mRNA was formulated in our proprietary LNP and delivered intramuscularly on day 1 and day 15, T cell responses were measured on day 22 by re-stimulating splenocytes with either medium, or wild type or mutant KRAS peptides (panel A—KRAS mutation 1 and panel B – KRAS mutation 2). Robust and specific antigen specific CD8+IFNγ+ T cell responses were detected in splenocytes after re-stimulation with KRAS mutation 1 peptide and KRAS mutation 2 peptide.
T-cell response to restimulation with KRAS mutation 1 peptide in mouse model study with mRNA vaccine encoding for KRAS mutation 1 peptide
Panel (A)
T-cell response to restimulation with KRAS mutation 2 peptide in mouse model study with mRNA vaccine encoding for KRAS mutation 2 peptide
Panel (B)
KRAS vaccine (mRNA-5671): Clinical plan
Merck will lead the clinical development of the KRAS vaccine program
The next step is to conductconducting an open-label, multi-center, dose-escalation and dose expansion Phase 1 study to evaluate the safety and tolerability of mRNA-5671 administered as an intramuscular injection both as a monotherapy and in combination with pembrolizumab. Merck may choose to measure T cell responses in this trial. The IND was originally filed by us and then transferred to Merck and remains open.
III. PROGRAM DESCRIPTIONS IN OUR
INTRATUMORAL IMMUNO-ONCOLOGY MODALITY
We designed our intratumoral immuno-oncology modality to treat or cure cancer by transforming the tumor microenvironment to drive anti-cancer T cell responses against tumors. This modality currently has three programs. Our mRNA technology within this modality allows for the combination of multiple therapeutics that can be directly injected into a tumor with the goal of activating the tumor microenvironmentimmune cells to kill cancer cells in the injected tumor as well as in distal tumors, known as the abscopal effect. Intratumoral administration allows for localized effect of these therapeutics that could be toxic if administered systemically. This exploratory modality has three development candidates.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
OpportunityDisease overview
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As noted above, more than 1.61.8 million new cancer cases and approximately 600,000 deaths due to cancer were predicted in the United States for 2017.2020, according to the NIH. There have been several advances in the treatment of cancer through immune-mediated therapies in recent years. However, the outlook for many patients with advanced cancer remains poor, especially in tumors that have little immune system engagement and are thereforesometimes termed immunologically “cold.” We aim to activate the tumor microenvironment with our mRNA therapeutics,therapeutic candidates, in conjunction with a checkpoint inhibitor, to activate the immune system against these otherwise immunologically cold tumors.
Intratumoral immuno-oncology: Our approach
Our intratumoral
We believe our approach to immuno-oncology modalityusing mRNA medicines could complement checkpoint inhibitors and has several advantages over recombinant protein-based drugs, including:
•mRNA focuses and limits exposure of immune stimulatory proteins. One of the intrinsic properties of mRNA is focusedits transient nature. This allowsfor short exposure of the proteins encoded by the mRNA in the target tissue, thereby potentially enhancing tolerability.
•mRNA can produce membrane associated immune stimulatory proteins. In contrast to recombinant proteins, mRNA administered to a tumorsite can lead to the production of either secreted or membrane proteins, depending on driving robust, specific anti-cancer T cell responses, transforming cold tumors with an immunosuppressive microenvironment intothe mRNA sequence.
•Multiplexing of mRNA allows access to multiple immune stimulatory pathways. The ability to combine multiple mRNAs to express multipleproteins allows for activation of several immune pathways simultaneously. For example, OX40L/IL-23/IL-36γ (Triplet) (mRNA-2752) encodes for two secreted cytokines (IL-23 and IL-36γ) and one that is immunologically “hot” thereby resultingmembrane protein (OX40L).
•mRNA sequences can be engineered to reduce off-target effects. mRNA sequences can be designed to minimize translation in a productive anti-cancer immune response. Our goal is to discover and develop locally administered, or intratumoral, immune-mediated therapies to deliver mRNA encoding for potent off-target tissues. Forimmune-stimulatory proteins this can potentially prevent toxicities.
•Local administration of mRNA can create a concentration gradient for encoded proteins. mRNA administered intratumorally allows for thelocal production of encoded immune-stimulatory proteins, such as cytokines. The mRNA and encoded protein are expected to form a concentration gradient that can act at the sitedecreases as a function of the injecteddistance from the tumor, reducethereby potentially lowering undesirable systemic toxicities, and potentially create an “abscopal effect” where distal tumor sites are also impacted. These may be combined with checkpoint inhibitors to boost the response. All of the mRNAs utilized in this modality are designed to decrease the amount of protein that could be made in hepatocytes through incorporation of microRNA binding sites, thus potentially reducing off-target effects and resulting in better tolerability.increasing immune-stimulatory effects close to the tumor.
Earlier efforts by others on the utility of intratumoral immune-mediated therapies have been established in murine models of cancer. In many of our preclinical studies focusing on demonstrating bioactivity and efficacy in mice, we have employed surrogate mRNAs encoding murine homologs, given that human proteins may not be sufficiently cross-reactive in mice, and that the use of human proteins in mice would be expected to elicit anti-foreign protein immune responses.
OX40L (mRNA-2416): Summary
Our immuno-oncology approach to enhance specific T cell responses in the tumor microenvironment via expression of the membrane T cell co-stimulator OX40L by intratumoral injection of OX40L mRNA
There have been several recent advances in the treatment of cancer through activation of the immune system. However, many patients with advanced stages of cancer respond to few therapies and continue to face a poor outlook. Alternative strategies to activate an immunologic anti-tumor response, while at the same time reducing systemic toxicities, are required. To this end, we have developed an investigational mRNA therapeutic coding for wildtype OX40 ligand, or OX40L, protein, a membrane protein normally expressed on antigen presenting cells upon immune stimulation that augments an activated immune response. mRNA-2416 encodes for wild-type OX40L which is a membrane protein, a class of proteins that we believe cannot be manufactured for administration to tumor cells by recombinant technologies. mRNA-2416 is being developed for the treatment of solid tumors following local intratumoral injection. We are currently sponsoring a Phase 1/2 trial that is ongoing in the United States. AsStates, which includes Phase 1 dose escalation cohorts of October 22, 2018, 26 patients were dosed with mRNA-2416 of which three patients were unclassified since they were early on in the study prior to the planned first evaluation after starting treatment, six patients were noted to have a best overall response of stable disease, 16 patients clinically progressed prior to the planned first evaluation after starting treatment, and one patient progressed based on the planned first evaluation after starting treatment. As of October 22, 2018, two patients with ovarian cancer have demonstrated clinical observations of regression in certain injected lesionsas monotherapy and in an adjacent uninjected lesion. These clinical observations from these two ovarian cancer patients do not meet partial response criteria as per the response evaluation criteria in solid tumors, or RECIST, guidelines version 1.1. Based on these clinical observations, we have opted to expand the trial tocombination with durvalumab, followed by a Phase 2 expansion cohort in patients with advanced ovarian carcinoma.carcinoma in combination with durvalumab.
OX40L (mRNA-2416): Mechanistic overview
OX40L is a T cell co-stimulator
The generationTable of optimal T cell responses requires T cell receptor, or TCR, engagement by presented epitopes (e.g., cancer antigens) and a positive secondary signal achieved through co-stimulatory molecules like OX40. OX40 receptor (also known as TNFRSF4, orContents
CD134) is a member of the tumor necrosis factor, or TNF, receptor superfamily and is upregulated on activated immune effector cells upon TCR activation. OX40 is endogenously stimulated via OX40L, a homotrimeric membrane protein normally expressed on professional antigen presenting cells. Binding of OX40 by OX40L in the presence of a recognized antigen enhances the expansion of CD4 and CD8 T cells, increases T cell effector function, and enhances survival of experienced T cells for increased memory capacity. Prior clinical attempts of activating OX40 with agonist antibodies may have been hampered via antibody interactions with other cells. We believe that introduction of OX40L in tumor sites via mRNA may serve to boost T cell responses, and we believe intratumoral administration of mRNA encoding for OX40L may be an attractive method of enhancing anti-cancer immunity.
OX40L (mRNA-2416): Our product concept
Our approach is to deliver OX40L mRNA in a lipid nanoparticle intratumorally to produce a membrane T cell co-stimulator
Our product consists of mRNA coding for the human sequence of OX40L formulated in our proprietary LNP. mRNA-2416 was designed to decrease the amount of protein that could be made in hepatocytes through incorporation of a microRNA binding site, thus potentially reducing off-target effects and resulting in better tolerability. Following intratumoral injection, a specific anti-tumor immune response is expected to be induced via proliferation and migration of T cell clones with specificity for the cancer that may also result in systemic anti-tumor responses. An illustration of our approach for this program is shown in the figure below. An earlier concept of this development candidate included a legacy LNP. However, we observed sufficient toxicity findings in an IND-enabling GLP toxicology study to abandon the legacy LNP. Toxicity findings were largely diminished when the development candidate was switched from a legacy LNP to our proprietary LNP.
OX40L (mRNA-2416): Preclinical information
We have demonstrated the ability to inhibit tumor growth in mouse models of cancer using our approach
Intratumoral administration of mouse OX40L mRNA in our proprietary LNP resulted in production of OX40L protein in the tumor microenvironment and draining lymph node in mice. The activity of mouse OX40L, or mOX40L, was evaluated in syngeneic models, including an H22 hepatocellular carcinoma model. With this model, H22 cancer cells were subcutaneously implanted on the flank of BALB/c mice. Following tumor growth, mice were randomized into treatment groups and treated with weekly intratumoral injections of formulated mRNA encoding mOX40L or a negative control mRNA. Repeated weekly intratumoral injections of mOX40L mRNA in a syngeneic H22 mouse model resulted in 50% of the mRNA-treated mice with no measurable disease at the end of the study. Survival of mice treated with negative control mRNA and mRNA encoding murine OX40L are depicted in gray and red respectively in the figure below. Mice with subcutaneous H22 tumors were treated intratumorally with 7.5 µg of mRNA formulated in LNPs on Days 8, 16, and 24 post cancer cell implant. 6 of 12 mice treated with mOX40L mRNA were complete responders with no detectable tumor burden at day 100, whereas negative control mRNA formulated in LNPs yielded no complete responders. Survival curves were plotted by considering any reason a mouse was removed from study, including the predetermined tumor burden endpoint of 2,000 mm 3 , as a survival event.
We further demonstrated generation of anti-cancer immunological memory after OX40L mRNA treatment, as no tumor growth was observed in mice in the six initial complete responders that were re-injected with the same H22 cancer cells, as shown below.
50% complete responders (n=12) with mouse OX40L mRNA in H22 syngeneic mouse model study
OX40L (mRNA-2416): Clinical data
Our interim data indicate that intratumoral treatment with OX40L mRNA has no dose limiting toxicities, and has led to clinical observations of tumor regression in two patients with ovarian cancer but the tumor regression at the doses studied do not meet RECIST criteria for partial responses in the Phase 1/2 trial in the United States
The Phase 1/2 trial for mRNA-2416 is an open-label, multicenter study of repeated intratumoral injections of mRNA-2416 as a monotherapy and in combination with durvalumab in patients with advanced relapsed/refractory solid tumor malignancies and lymphomas in the United States. mRNA-2416 will be administered at day 1States and day 15 of a 28-day cycle with a maximum of 6 cycles. The dose levels being tested are 1 mg, 2 mg, 4 mg, and 8 mg.Israel. The objectives of this Phase 1/2 study include evaluating safety and tolerability of mRNA-2416 administered intratumorally, and to define the maximum tolerated dose and recommended dose for expansion.expansion alone and in combination with durvalumab. Other endpoints include pharmacokinetic analyses as well as assessment of biomarkers of immunological response in tumor.
The study includes 2 dosing periods: dose escalation period followed by an expansion period atlevels being tested in the recommended dose for expansion. Patients are enrolled into one of the following three biopsy cohorts:
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A. | Baseline biopsy in abscopal distal, untreated tumor, second biopsy within cycle 1 at day 22 to 28 at distal tumor |
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B. | Baseline biopsy in primary tumor to be treated, second biopsy 24 to 48 hours post-dose cycle 1 day 1 in injected tumor |
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C. | Baseline biopsy in primary tumor to be treated, second biopsy 24 to 48 hours post-dose cycle 2 day 1 in injected tumor |
A schematicmonotherapy arm of the trial design is shownwere 1 µg, 2 µg, 4 µg, and 8 µg. The monotherapy arm of the study has been completed and we are not planning an expansion cohort of mRNA-2416 as a monotherapy. We have completed a dose-finding cohort at 4 µg mRNA-2416 given in the figure below.combination with durvalumab (IMFINZI®) and are currently enrolling a Phase 2 expansion cohort in ovarian cancer.
As of November 15, 2018, 28January 1, 2021, 60 patients have beenwere dosed with mRNA-2416 (39 patients in monotherapy and 21 patients in combination with durvalumab). As of February 12, 2020, safety was reported on 39 patients treated with monotherapy mRNA-2416. A subsetmRNA-2416 has been tolerable at all dose levels with no dose-limiting toxicities reported and the majority of biopsies of treated lesions from those patients detected higher OX40L protein levels after mRNA-2416 administration. In approximately 18% of patients, wetreatment related adverse events being grade 1 or 2. We have observed rapid onset of multiple grade 2 and a single grade 3 transient reversiblesystemic injection related reactions in seven patients, all of which were resolved with antihistamines, corticosteroids, or supplemental oxygen. Three suspected unexpected serious adverse reactions, or SUSARs, have been reported. Of the three, one was the grade 3 serious adverse event, or SAE, described above. A second case was reported for a grade 2reversible.
non-infectious systemic inflammatory response syndrome, and the patient was kept overnight at the hospital. In the third case, a patient, diagnosed with Stage IIIC ovarian carcinoma, experienced a skin ulceration during treatment, deemed to be a non-serious adverse event, located within the injected tumor, which had begun to regress following treatment with mRNA-2416. After the last administered dose of mRNA-2416, and after the patient withdrew from the trial for personal reasons, the wound was smaller in size. Subsequently, the patient underwent additional treatment for disease progression with Cytoxan/Avastin, the wound increased significantly in size, and Avastin was discontinued due to patient preference and wound healing concerns. The patient was then hospitalized due to worsening of the skin ulceration, by which time the injected tumor was noted to be absent (though other lesions were present). Although no longer in the study, this hospitalization was deemed by the investigator as a suspected unexpected serious adverse reaction related to study drug, but deemed by us as possibly related to study drug. After discharge from the hospital, the patient died. This death was reported to be due to disease progression, not study drug. After the intratumoral injection of mRNA-2416 in other patients, no other skin ulceration has been observed related to study drug.
As of February 15, 2019, we have dosed five additional patients, for a total of 33 patients dosed with mRNA-2416, and we have not seen any dose limiting toxicities. The study is currently in its dose-confirmation phase at doses up to 8mg.
We have collected and analyzed eight paired biopsies of tumors pre- and post-injection of mRNA-2416 through October 22, 2018. Of these eight, six paired biopsies are from injected lesions and two are from uninjected lesions. In three of the six paired biopsies from injected lesions where tumors showed evidence of the location of the injection site and had viable tissue from the biopsy to analyze, we have observed an increase in OX40L protein after mRNA administration. In one of these cases, we have observed OX40L protein expression in the injected lesion for a biopsy collected at cycle 1 day 2 as shown by quantitative immunofluorescence staining in the figure below. Staining in red denotes OX40L protein and 4’,6-diamidino-2-phenylindole, or DAPI, stains DNA to indicate nuclei in blue. Cytokeratin staining in green indicates keratin filaments often used to mark epithelial cancer cells.
OX40L protein production in tumor cells of a patient with ovarian cancer dosed with mRNA-2416
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Before treatment with mRNA-2416 | | After treatment with mRNA-2416 |
In the remaining three of the six paired biopsies from injected lesions, we did not observe OX40L protein increase, possibly because there was no noted evidence of injection site or there was extensive tissue necrosis.
Of the 26evaluable cases for patients dosed with mRNA-2416 as of October 22, 2018, there are twoNovember 13, 2019, 14 achieved a best overall response rate (BOR) of stable disease, of these patients with ovarian cancer. These6 had stable disease for ≥14 weeks; 15 patients had progressive disease per RECIST 1.1. Clinical observations include a reduction in injected tumor size in two patients with ovarian cancer, have clinical observations of regression in certain injected lesionsone patient with breast cancer and in an adjacent uninjected lesion. These clinical observations do not meet partial response criteria as per RECIST guidelines version 1.1. One of these patients in group 2A has received eight doses of 2 mg and was still on treatment as of October 22, 2018. In thisone patient a reduction in an injected lesion was observed after the fourth dose. In addition, for the same patient, a reduction in an adjacent uninjected lesion was observed. We did not observe an increase in OX40L protein production in this uninjected lesion in the post-treatment biopsy at cycle 1 day 27.with pseudomyxoma peritonei.
The Phase 1/2 trial for OX40L (mRNA-2416) is ongoing. We have filed a protocol amendment to the FDA for a Phase 2 expansion cohort in patients with advanced ovarian carcinoma as part of the current trial.
OX40L+IL23+IL36γOX40L/IL-23/IL-36γ (Triplet) (mRNA-2752): SummaryClinical update
Our immuno-oncology approach to transform the tumor microenvironment: intratumoral injection of OX40L+IL23+IL36γ
Despite recent advances in immune-mediated therapies for cancer, the outlook for many patients with advanced cancer is poor. We are developing Triplet (mRNA-2752) and other programs to drive anti-cancer T cell responses by transforming cold tumor microenvironments into productive, “hotter” immune landscapes with local intratumoral therapies. Triplet (mRNA-2752) utilizes the intrinsic advantage of mRNA to multiplex and to produce membrane and secreted proteins with mRNA in a single investigational medicine. Triplet (mRNA-2752) includes three mRNAs encoding human OX40L, interleukin 23, or IL23,IL-23, and interleukin 36 gamma, or IL36γ IL-36γ, that are encapsulated in our proprietary LNP and administered intratumorally. OX40L is a membrane protein, whereas IL23IL-23 and IL36γIL-36γ are secreted cytokines. We believe our approach has the advantage of localized high concentration gradients of IL23IL-23 and IL36γIL-36γ compared to recombinant proteins administered systemically or intratumorally. Additionally, the mRNA for OX40L encodes for the wild type membrane protein, which we believe recombinant protein technologies cannot enable. The combination of OX40L, IL23,IL-23, and IL36γIL-36γ has shown robust activity in preclinical cancer models and is synergistic with checkpoint inhibitors. In addition, this combination elicits an anti-tumor response on distal tumors (via the “abscopal effect”), as well as treated tumors in preclinical studies. We have initiated dosing in aA Phase 1 studytrial of Triplet (mRNA-2752).
OX40L+IL23+IL36γ (Triplet) (mRNA-2752): Mechanistic overview
Triplet (mRNA-2752) is designed and tailored to activate the immune system in two waysongoing.
This potential mRNA medicine is a novel mRNA-based therapeutic agent containing multiple mRNAs that code for the wild type human OX40L, IL23, and IL36γ proteins that have distinct functions yet work synergistically in mediating anti-cancer responses. Triplet (mRNA-2752) brings two approaches into a single multi-mechanism therapy:
T cell co-stimulation that could strengthen specific anti-cancer adaptive immune responses (mediated by OX40L); and
pro-inflammatory cytokines/chemokines to ignite or transform an inflammatory response within the tumor microenvironment (IL23 and IL36γ).
The generation of optimal T cell responses requires T cell receptor, or TCR, engagement by presented epitopes (e.g., cancer antigens) and a positive secondary signal achieved through co-stimulatory molecules like OX40. OX40 receptor (also known as TNFRSF4 and CD134) is a member of the tumor necrosis factor, or TNF, receptor superfamily and is upregulated on activated immune effector cells upon TCR activation. OX40 is endogenously stimulated via OX40L, a homotrimeric membrane protein normally expressed on professional antigen presenting cells. Binding of OX40 by OX40L in the presence of a recognized antigen enhances the expansion of CD4 and CD8 T cells, increases T cell effector function, and enhances survival of experienced T cells for increased memory capacity. Therefore, introduction of OX40L via mRNA may serve to boost T cell responses. We believe that in addition to boosting T cell responses via OX40L expression, the expression of pro-inflammatory cytokines within a treated tumor may serve to ignite and transform an immunologically cold tumor microenvironment into a productive anti-cancer immune response. The initial focus was on cytokines with well-established roles in initiating inflammation and bridging innate to adaptive immunity in humans; namely the IL1 and IL12 families, respectively. Specifically, anti-cancer effects have been observed by introduction of IL1 family member IL36γ in preclinical mouse models of cancer. IL12 family members, including IL23, are often referred to as central coordinators of immune responses, largely due to their capacity to bridge innate to adaptive immunity.
OX40L+IL23+IL36γOX40L/IL-23/IL-36γ (Triplet) (mRNA-2752): Our product concept
The potential advantage of mRNA to target multiple immuno-stimulatory pathways in tumors
We are developing Triplet (mRNA-2752) for the treatment of advanced or metastatic solid tumor malignancies or lymphoma as a single agent or in combination with checkpoint inhibitors. Triplet (mRNA-2752) includes three mRNAs encoding OX40L, IL23,IL-23, and IL36γIL-36γ, encapsulated in our proprietary LNP. Triplet (mRNA-2752) is designed to make these proteins in cells of the local tumor environment or lymph node. Our approach potentially has the advantage of localized gradients of two important cytokines IL23IL-23 and IL36γIL-36γ, rather than a systemic administration or intratumoral injection of cytokine proteins that would lead to quick diffusion away from the tumor. Additionally, the mRNA for OX40L encodes for the wild type membrane protein, which would be challenging to administer to either a tumor or systemically as a recombinant membrane protein capable of co-stimulation of T cells. mRNA for IL23IL-23 produces a single-chain fusion protein of the IL12BIL-12B and IL23AIL-23A subunits, with a linker between the subunits. mRNA for IL36γIL-36γ produces a protein with introduced signal peptide to bypass a need for upstream processing for release and activity. In addition, all three mRNA were designed to decrease the amount of protein that could be made in hepatocytes through incorporation of microRNA binding sites, thus potentially reducing off-target effects and resulting in better tolerability. An illustration
Table of our approach for Triplet (mRNA-2752) is shown in the figure below.Contents
OX40L+IL23+IL36γ (Triplet) (mRNA-2752): Preclinical information
The OX40L+IL23+IL36γ combination promotes tumor killing in mice of injected and non-injected tumors, along with a lasting T cell effect
As described earlier, preclinical work was conducted using mouse homologs. The combination local therapy of OX40L+IL23+IL36γ mRNAs achieved 70-100% complete response rates in two MC38 syngeneic mouse models of cancer, one that is normally relatively responsive and the other completely refractory to systemic checkpoint inhibitor treatment. The triple combination therapy had better results than individual and doublet mRNA combinations. In one study, mice carrying bilateral MC38-S tumors received 5 µg total mRNA injected into the right flank tumor only (2.5 µg each mRNA administered for doublets and 1.67 µg each for triplet combinations). The survival plots are graphed in the figure below. Survival events were triggered when animals surpassed the predetermined tumor burden endpoint of 2,000 mm 3 (for both tumors combined). Animals removed from study for other reasons were censored and indicated below as horizontal lines prior to Day 100. 20 mice were included in each cohort depicted, and there were 10, 11, and 20 complete responders (i.e., no measurable disease at either tumor site) for the IL23+IL36γ, IL23+OX40L and OX40L+IL23+IL36γ treatment groups, respectively, at 100 days post cancer cell implant. We also found that a single dose of OX40L+IL23+IL36γ mRNA was able to induce complete disease control at both treated and distal sites, sometimes known as an abscopal effect. This underscores the potential of our approach to lead to a well tolerated and broadly active therapy for treatment of multilesional and metastatic cancers.
100% (n=20) complete responders with mouse OX40L+IL23+IL36γ mRNA in MC38 dual flank syngeneic mouse model study
In addition to OX40L+IL23+IL36γ mRNA monotherapy activity, we have further observed that a single suboptimal dose of OX40L+IL23+IL36γ mRNA therapy was synergistically active with systemically administered anti-PD-1/PD-L1 as well as anti-CTLA4 antibodies, again demonstrating complete response rates of > 70%.
OX40L+IL23+IL36γOX40L/IL-23/IL-36γ (Triplet) (mRNA-2752): Clinical planupdate
The Phase 1 trial for Triplet (mRNA-2752) has initiated in the United States
We have initiated aan ongoing Phase 1 study that is designed as an open-label, multicenter study of intratumoral injections of Triplet (mRNA-2752) alone or in combination with checkpoint inhibitors.durvalumab (anti-PD-L1) with sites in the United States and Israel. The objectives of this study include:
•assessment of safety and tolerability of Triplet (mRNA-2752) administered alone and in combination with checkpoint inhibitors;durvalumab;
•define the maximum tolerated dose, or MTD, and recommended dose for expansion, or RDE, for intratumoral injections of Triplet (mRNA-2752) alone and in combination with checkpoint inhibitors;durvalumab; and
•assessment of anti-tumor activity, protein expression in tumors, and pharmacokinetics, and exploratory endpoints that include assessment of immunological responses.
A schematic of the clinical trial design is shown in the figure below. There are three treatment arms:
arm A—Triplet (mRNA-2752) alone;
arm B—Triplet (mRNA-2752) in combination with durvalumab, a PD-L1 inhibitor; and
arm C—Triplet (mRNA-2752) in combination with tremelimumab, a CTLA-4 inhibitor.
The study consists of 3two arms: Arm A, Triplet monotherapy and Arm B, Triplet in combination with durvalumab. There are dose escalation and 3 dose confirmation parts for each study arm followed by a dose expansion for Arms B and C. Once the first two dose levels in Arm A are cleared for safety, dose escalationexpansions for Arm B will start. Once the first dose level in Arm B is cleared for safety, dose escalation for Arm C will start. ThereB. mRNA-2752 will be a 28-day stagger between the first and second patient in each study arm. The doses for the study areevaluated at 0.25, 0.5, 1, 2, 4, and 4 mg of Triplet (mRNA-2752). In Arm A, Triplet (mRNA-2752)8 µg. mRNA-2752 is to beadministered once every two weeks for cycle 1, followed by once every four weeks for cycles 2 through 6. Durvalumab is administered every 2 weeks for 3 doses. In Arm B, the combination of Triplet (mRNA-2752) with durvalumab is to be administered every 4 weeks for 3 cycles. For Arm C, the combination of Triplet (mRNA-2752) with tremelimumab is to be administered every 4 weeks for 3 cycles.four weeks. Biopsy and blood samples to be collected prepre- and post treatmentpost-treatment with mRNA in both dose escalation and dose expansion to assess protein expression and changes in tumor immune landscape.
As of February 28, 2019, threeJanuary 1, 2021, 44 patients in Arm A have been dosed with mRNA-2752, including 19 patients in monotherapy and cleared25 patients in combination with durvalumab. Safety in this study was reported as of April 8, 2020, on 29 cases, including 17 patients treated with mRNA-2752 monotherapy and 12 patients in combination with durvalumab. Across dose levels tested, study treatment has been well tolerated with no dose-limiting toxicities, one patient with Grade 3 toxicity (at 4 µg dose level) and no Grade 4/5 toxicities related to treatment. One partial response with an 81% decrease in target lesions has been observed in a squamous cell bladder cancer patient on the combination arm; stable disease has been observed in nine patients (five on mRNA-2752 monotherapy and four treated with durvalumab combination). Tumor shrinkage was observed in seven patients in injected and/or un-injected target lesions (three on monotherapy and four on combination).
As of April 8, 2020, biomarker data from the first eight cohorts (monotherapy at dose levels between 0.25 µg– 4 µg; combination at 0.25 µg and 0.5 µg) demonstrated increased IL-23 and IL-36g protein expression, evidence of a pro-inflammatory effect of treatment including elevated interferon gamma, tumor necrosis factor alpha and PD-L1. Data consistent with demonstration of proof of mechanism. All post-treatment plasma cytokine levels evaluated were well below what has been suggested as clinically toxic levels for these cytokines in cytokine release syndromes. Significant increases in PD-L1 protein levels predominantly in immune cells in the tumor microenvironment were observed at days 2, 15 and 29 post-treatment demonstrating the sustained immunomodulatory effect of treatment. In the patient with the first dose levelpartial response, increased T cells, particularly of 0.25 mg of Triplet (mRNA-2752), and we are enrolling patients for the second 0.5 mg dose level.proliferating CD8+ cytotoxic T cells were observed post treatment.
IL12IL-12 (MEDI1191): Summary
Our immuno-oncology approach to transform the tumor microenvironment: IL12 as a localized secreted protein in collaboration with AstraZeneca
Another strategy for cancer patients with immunologically cold tumors is to transform the tumor microenvironment by introducing pro-inflammatory cytokines directly into tumors or draining lymph nodes. In collaboration with AstraZeneca, we are developing MEDI1191, thatwhich is an mRNA for IL12IL-12 encapsulated in our proprietary LNP to be delivered intratumorally. Systemic administration of recombinant IL12IL-12 protein was poorly tolerated in early clinical trials and exhibited generally low response rates. MEDI1191 can enhance the immune response by positively impacting both antigen presenting cells and T cells, and local, intratumoral expression of IL12IL-12 can potentially improve tolerability compared to systemic protein treatments. AstraZeneca is planningconducting a Phase 1 clinical trial for MEDI1191, which is to be co-administered with a checkpoint inhibitor.
IL12 (MEDI1191): Mechanistic overview
IL12 is a powerful immune-modulator that bridges innate and adaptive responses
The IL12 family members are often referred to as central controllers of immune responses due to their capacity to bridge from innate to adaptive immunity. IL12 is a potent immune-modulator typically associated with a type 1 immune response and production of interferon-gamma. While preclinical studies using IL12 have resulted in dramatic antitumor effects in syngeneic cancer models, clinical development of systemically administered recombinant IL12 has been hampered by systemic toxicity.
IL12IL-12 (MEDI1191): Our product concept
In collaboration with AstraZeneca, we are developing intratumoral delivery of IL12 in combination with a checkpoint inhibitor
Intratumoral delivery of IL12IL-12 has been observed to be a feasible approach to overcome the toxicity associated with systemic IL12IL-12 administration. For example, intratumoral delivery of an IL12IL-12 containing DNA plasmid by injection followed by electroporation has shown promising activity in combination with pembrolizumab in a Phase 1 study with patients with metastatic melanoma. Such an approach may be limited to accessible lesions amenable to electroporation. In contrast, it may be more feasible to inject our mRNA delivered by our proprietary LNP into both accessible and visceral tumors.
MEDI1191 is being developed for the treatment of advanced or metastatic solid tumors in combination with a checkpoint inhibitor. MEDI1191 consists of our proprietary LNP encapsulating an mRNA for human IL12BIL-12B (p40) and IL12AIL-12A (p35) subunits. The mRNA produces a single-chain fusion protein of the IL12BIL-12B and IL12AIL-12A subunits, with a linker between the subunits. The mRNA sequence has been engineered to enhance protein production and is designed to decrease the amount of protein that might be made in hepatocytes for better tolerability. An illustration of our approach for IL12 is shown in the figure below.
IL12IL-12 (MEDI1191): Preclinical information
We have conducted several preclinical studies in which we observed activity with our approach
As described earlier, our
Our preclinical work wasstudies were conducted with a mouse homolog of IL12.IL-12. In a tumor model that we have characterized as completely refractory to checkpoint therapy and associated with an immunosuppressive tumor microenvironment, treatment with IL12IL-12 transformed the tumor microenvironment, with notable activation of natural killer and dendritic cells, and an increase in cytotoxic lymphocytes. In this checkpoint inhibitor refractory mouse model of cancer, a single dose of IL12IL-12 mRNA yielded around
30% complete response rates as an mRNA monotherapy as shown in panel A below and was synergistically active with systemically administered anti-PD-L1 antibody, or α PD-L1, demonstrating complete response rates of > 70%, as shown in panel B of the figure below. The x-axis represents days after subcutaneous implantation of MC38-R tumor cells. Test articles were administered on Day 11 for mRNA treatments and on Days 11, 14, 18, and 21 for antibody treatments. All antibody treatments were administered at 20 mg/kg. There were 15 mice per group in this study. Survival curves were plotted by considering any reason a mouse was removed from study, including the predetermined tumor burden endpoint of 2,000 mm3, as a survival event. NTC is a non-translating control mRNA. Synergy of locally administered IL12IL-12 mRNA with systemic α PD-L1 treatment was also observed on distal tumors that were not directly administered mRNA.
Approximately 30% (n=15) complete responders with highest dose
tested for mouse IL12 mRNA in MC38 mouse model study
Panel (A)
Approximately 70% (n=15) complete responders at highest dose tested
for mouse IL12 mRNA with α PD-L1 antibody in MC38 mouse model study
Panel (B)
IL12IL-12 (MEDI1191): Clinical plan
AstraZeneca will sponsor and lead the clinical development for MEDI1191
We are responsible for generating a preclinical data package to support IND/CTAthe filing of an IND and clinical trial authorization (CTA) and clinical supply for early clinical development. AstraZeneca will leadis leading the early clinical development. We expect a lower starting dose for MEDI1191 in the clinical trial compared to our other intratumoral programs.
We expect AstraZeneca to initiateis currently enrolling an open-label international multicenter Phase 1 clinical trial of intratumoral injections of MEDI1191 alone orand in combination with athe checkpoint inhibitor, and the IND for MEDI1191 is open.durvalumab.
IV. PROGRAM DESCRIPTIONS IN OUR
LOCALIZED REGENERATIVE THERAPEUTICS MODALITY
We designed our localized regenerative therapeutics modality to develop mRNA medicines to address injured or diseased tissues. Our mRNA technology in this modality allows for the local production of proteins that provide a therapeutic benefit in the targeted tissue. The development of our program in this modality, AZD8601, for the local production of VEGF-A, is being led by our strategic collaborator, AstraZeneca. This program recently completed a Phase 1a/b clinical trial in which we observed both a dose-dependent protein production and a pharmacologic effect, as measured by changes in local blood flow in patients. We believe thesethis data provideprovides clinical proof of mechanism for our mRNA technology outside of the vaccine setting as a potential therapeutic.setting.
Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Localized regenerative therapeutics modality:therapeutics: Opportunity
There are multiple applications for tissue regeneration. With AstraZeneca, we have focused on ischemic heart failure for the first program. Coronary artery disease, the primary cause of ischemic heart failure, affects the arteries providing blood supply to the cardiac muscle. In 2015, coronary artery disease resulted in 366,000 deaths in the United States, and 8.9 million deaths globally.
Localized regenerative therapeutics: Product features
We believe our approach to localized regenerative therapeutics using mRNA has several advantages over alternative approaches, including:
•mRNA can be administered locally to produce the desired protein for an extended duration. Local exposure to the therapeutic protein encodedby our mRNA is sustained by the ongoing translation of the mRNA into protein, often from hours to days. This pharmacokinetic profile closely mimics the optimal tissue exposure profile for regenerative applications and cannot be achieved by injections of recombinant proteins that rapidly diffuse out of the tissue after injection.
•Local administration of mRNA allows for focused activity. mRNA administered to a specific tissue or organ should allow for local production ofthe encoded protein, which could lead to lower levels of encoded protein in distant or systemic locations. This could help to prevent potential toxicity from production of the encoded protein outside of the targeted tissue.
•mRNA allows for dose-dependent and repeated production of the encoded protein. mRNA therapies should also allow for dose titration andrepeat dosing. This provides several advantages over gene therapy. Gene therapy typically results in a permanent change to cellular DNA that may result in uncontrolled or constant production of the desired protein in local tissue or in distant sites, which could cause local or systemic side effects. Further, some gene therapy delivery vehicles are associated with immune responses that limit the ability to repeat dose, preventing dose titration.
VEGF-A (AZD8601): Program summary
Addressing ischemic heart failure—VEGF-A as a localized therapeutic in collaboration with AstraZeneca
Heart disease is the leading cause of death in the United States, accounting for one in every four deaths, and is often due to the inability of adult humansadults to regenerate heart tissue. Current approved therapies do not specifically address heart regeneration. Previous attempts at cardiac regeneration have included stem cell grafting and gene therapy, but have faced challenges with safety or efficacy. In collaboration with AstraZeneca, we are pioneering a unique approach to treating ischemic heart failure, a condition where the cardiac muscle does not get enough blood supply to perform its contractile function. Vascular Endothelial Growth Factor A, or VEGF-A, can promote cardiac tissue revascularization. The goal of this program is to promote recovery of cardiac function through partial tissue regeneration. The mRNA in this program is in a saline formulation without LNPs and is expected to act locally. Our strategic collaborator AstraZeneca has conducted a Phase 1a/b clinical study in diabetic patients in Europe. The study has met its primary objectives of describing safety and tolerability and secondary objectives of dose-dependent protein production and changes in blood flow. AstraZeneca has moved this program to a Phase 2a trial that is being conducted in Europe and is designed to test safety and tolerability of epicardial injections for patients undergoing coronary artery bypass grafting surgery.
VEGF-A (AZD8601): Disease overview
VEGF-A can promote blood vessel growth to potentially address ischemic heart failure
Heart disease is the leading cause of death in the United States, accounting for one in every four deaths. Coronary artery disease, or CAD, the primary cause of ischemic heart failure, affects the arteries providing blood supply to the cardiac muscle. CAD resulted in 366,000 deaths in the United States, and 8.9 million deaths globally in 2015.
Several treatments are available for patients with ischemic heart failure. Current treatments include revascularization of the coronary arteries to relieve symptoms and improve cardiac function;function and therapies that reduce blood pressure or potentially help eliminate excess fluids in congested tissues, including: beta-blockers, angiotensin-converting enzyme inhibitors, angiotensin II inhibitors, and aldosterone receptor blockers as diuretics. However, adult humans are unable to regenerate myocardium tissue following injury and the treatment options described above cannot compensate for this.
VEGF-A is a potent angiogenic factor that promotes growth of blood vessels. Preclinical data suggests that expression of this growth factor in the ischemic heart could increase blood flow and partially restore cardiac function.
VEGF-A (AZD8601): Our product concept
Local delivery of VEGF-A mRNA to increase local concentration of VEGF-A protein while reducing systemic distribution of therapeutic VEGF-A protein
VEGF-A protein acts as a powerful promoter of blood vessel growth. Systemic injection of VEGF-A protein increases VEGF-A exposure throughout the body, which can lead to side effects, but is very short-lived in circulation. Therefore, any therapy involving VEGF-A needs to be localized to elevate local protein concentration and drive revascularization while minimizing systemic side effects. AstraZeneca has opted to pursue the localized application of VEGF-A mRNA in a simple saline formulation in the heart muscle to elevate local protein concentration for longer periods due to increased local protein production. This potentially allows for an extended pharmacodynamic effect at the specific site of injection compared to systemic or local administration of a recombinant
protein version of VEGF-A. Some of the early animal work for mRNA VEGF-A was published by our academic co-founder Dr. Kenneth Chien inNatureBiotechnologyin 2013, showing improved cardiac function with increased survival with treatment.
VEGF-A (AZD8601): Preclinical information
AstraZeneca has observed the activity of VEGF-A for ischemic heart failure in several preclinical animal models
Preclinical work hasstudies have been conducted at AstraZeneca in models of ischemic heart failure. In mouse, rat, and pig models of myocardial infarction, direct injection in the heart muscle (myocardium) of VEGF-A mRNA led to elevated cardiac VEGF-A protein levels and improved cardiac function. The data have been published by AstraZeneca inMolecular Therapy in 2018. The table below illustrates the beneficial effects of AZD8601 in the mini pig, two months after the myocardial infarct procedure and injection of the VEGF-A mRNA. In this table, left ventricular ejection fraction, or LVEF, was measured using echocardiography two months after intracardial mRNA administered 7 days after myocardial infarction. The data are means ± standard error of the means.
Significant improvement in LVEF with VEGF mRNA measured 2 months after administration in mini pig study
|
| | | |
| LVEF, % | | p-value |
Control—Citrate saline | 47.0 ± 0.8 | | |
AZD8601 1 mg dose | 51.0 ± 0.9 | | <0.01 |
AZD8601 10 mg dose | 52.0 ± 1.0 | | <0.01 |
VEGF-A (AZD8601): Clinical data
AstraZeneca has completed a Phase 1a/b trial in Germany; A Phase 2a trial is currently ongoing in Finland and an additional clinical trial application has been filed in the Netherlands for this study.Germany
The Phase1a/b clinical trial for the AZD8601 program has met its primary objectives of describing safety and tolerability and secondary objectives of protein production and changes in blood flow post AZD8601 administration. AstraZeneca has moved this program to a Phase 2a trial.
The Phase 1a/b study was a randomized, double-blind, placebo-controlled study in men with type 2 diabetes mellitus.mellitus conducted in Europe. VEGF-A mRNA was administered by intradermal injection into the forearm skin in single ascending doses. The study was conducted in Europe. The primary objective was to evaluate the safety and tolerability of the drug product into the forearm skin, with safety follow-up for 6six months.
The study was divided into Part A (single ascending-dose cohorts) and Part B (pharmacodynamic cohort). There were three treatment regimens in Part A. Regimens were either AZD8601 at site 1 and placebo at site 2, placebo at site 1 and AZD8601 at site 2, or placebo at both sites. Each regimen comprised six 50 µL injections at one site and six 50 µL injections at a second site on the forearm. In part B, the regimen comprised one 50 µL intradermal injection of either AZD8601 or placebo at each of four sites on the forearm.
There were 27 patients in Part A with 18 receiving AZD8601 in at least one site of the forearm and 9 patients receiving placebo. There were three dose cohorts in Part A, each with 9 patients. In the first cohort, AZD8601 dose was at 24 µg per patient (4 µg per injection). The AZD8601 dose was increased to 72 µg and 360 µg in the next two dose cohorts. There were 15 patients in Part B receiving AZD8601 in at least two sites on the forearm per patient. In Part B, each patient received 200 µg of AZD8601 or placebo.
VEGF-A protein post injection of mRNA was produced at a high level, above the set expected threshold, as shown in the figure below. Expression was measured by skin microdialysis. At each sampling time, mean VEGF-A protein levels across all mRNA treated sites from patients across all cohorts were higher than that of placebo up to the 24-26 hour time point. Data are means with error bars showing standard error of the mean, or SEM. Asterisk indicates p-value <0.05.
VEGF-A protein levels in patients in Part A of the Phase 1a/b trial
The bioactivity of the VEGF-A protein post injection of mRNA was observed by an increase in blood flow at injection sites up to 7 days following a single injection, as shown in the figure below. Measurements were made using laser doppler imaging 7 and 14 days after administration (study part A, n = 27). Data shown are means with error bars showing SEM. Asterisk indicates p-value <0.05.
VEGF-A led to increase in blood flow at day 7 and day 14 in patients in the Phase 1a/b trial
As shown above, administration of AZD8601 demonstrated protein production and changes in local blood flow in diabetic patients. Tolerability of our mRNA injected intradermally was demonstrated for all dose levels. The only causally treatment-related adverse events were mild injection-site reactions, occurring in 32 of 33 participants receiving VEGF-A mRNA across both parts of the study design. All adverse events of injection-site reaction were of mild intensity. No deaths, serious adverse events, or adverse events leading to discontinuation occurred. A list of adverse events is provided in the table below.
Adverse events for the Phase 1a/b trial for AZD8601
|
| | | | | |
| | | | | | |
| | Part A (n = 27) | | Part B (n = 15) |
| | Placebo
only (1)
(n = 9) | | VEGF-A mRNA/
placebo (1) (n = 18) | | VEGF-A mRNA/
placebo (2) (n = 15) |
| Participants with any AE, n (%) | 5 (55.6) | | 18 (100.0) | | 14 (93.3) |
| Causally treatment-related, n (%) | 0 | | 18 (100.0) | | 14 (93.3) |
| Treatment-unrelated, n (%) | 5 (55.6) | | 0 | | 0 |
| Participants with causally treatment-related AEs, n (%) | | | | | |
| Injection-site reaction [mild] | 0 | | 18 (100.0) | | 14 (93.3) |
| Participants with treatment-unrelated AEs, n (%) | | | | | |
| Injection-site reaction [mild] | 1 (11.1) | | 0 | | 0 |
| Injection-site erythema [mild] | 1 (11.1) | | 2 (11.1) | | 0 |
| Asthenia [mild] | 0 | | 1 (5.6) | | 0 |
| Tinea pedis [mild] | 0 | | 0 | | 1 (6.7) |
| Arthropod bite [mild] | 0 | | 1 (5.6) | | 1 (6.7) |
| Injury [moderate] | 0 | | 1 (5.6) | | 0 |
| Skin abrasion [mild] | 0 | | 1 (5.6) | | 0 |
| Muscle spasms [mild] | 0 | | 1 (5.6) | | 0 |
| Back pain [mild or moderate] | 2 (22.2) | | 0 | | 0 |
| Myalgia [moderate] | 0 | | 0 | | 1 (6.7) |
| Dizziness [mild] | 0 | | 1 (5.6) | | 0 |
| Headache [mild] | 1 (11.1) | | 0 | | 0 |
| Pruritus [mild] | 0 | | 1 (5.6) | | 0 |
| Tooth extraction [mild] | 0 | | 1 (5.6) | | 0 |
| Nasopharyngitis [moderate] | 1 (11.1) | | 0 | | 0 |
| |
(1)
| There are two injection sites and it can be either VEGF-A mRNA/placebo, placebo/VEGF-A mRNA, or placebo/placebo at injection sites 1/2. |
| |
(2)
| Randomized order of VEGF-A and placebo injections. |
The program is currently in a Phase 2a clinical trial. It is a randomized, double-blind, placebo-controlled, multi-center, Phase 2a study to evaluate safety and tolerability of epicardial injections of AZD8601 during coronary artery bypass grafting surgery. Some of the outcomes to be monitored in the Phase 2a study include adverse and serious adverse events, electrocardiogram, or ECG, and LVEF. The study is being conducted in Europe. The study is intentionally designed to provide initial safety and tolerability data in about 24 coronary artery bypass patients.
V. PROGRAM DESCRIPTIONS IN OUR SYSTEMIC SECRETED THERAPEUTICS MODALITY
We designed our systemic secreted therapeutics modality to increase levels of desired proteins in circulation or in contact with the extracellular environment. We aim to use cells in the human body to produce proteins encoded by mRNA that are secreted to achieve a therapeutic effect in one or more tissues or cell types. The goal of this modality is to provide secreted proteins, such as antibodies or enzyme replacement therapies across a wide range of diseases, such as heart failure, infectious diseases, and rare genetic diseases. This modality has benefitted from our strategic alliances with AstraZeneca, DARPA, and the Bill & Melinda Gates Foundation.
This modality currently has three programs. Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs, and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”
Systemic secreted therapeutics modality: Opportunity
The ability to systemically deliver mRNA for a therapeutic effect would allow us to address a number of diseases of high unmet medical need. Systemically delivered, secreted therapeutics address conditions often treated with recombinant proteins that are typically administered to the blood stream. These current therapies include:
Enzyme replacement therapies, or ERTs, for rare diseases;
Antibodies for membrane and extracellular soluble targets; and
Circulating modulation factors for common and rare diseases such as growth factors and insulin.
Our approach
Our systemic secreted therapeutics modality comprises programs where mRNAs instruct various cells of the human body to secrete proteins for therapeutic effect. For systemic therapeutic programs that utilize cells in the liver, the liver is a highly productive tissue for secreted protein production. The human liver can make tens of grams of proteins per day, well above the amounts necessary for the pharmacologic effect for virtually all protein therapeutics. We have demonstrated that mRNA can make and secrete monoclonal antibodies and soluble modulating factors in non-human primates. These proteins made in non-human primates can exert their pharmacological activity by binding to targets with biological effect.
The antibody against Chikungunya virus is our first systemic secreted therapeutic and patients are currently being dosed in a Phase 1 study. It will help us understand the fundamental relationship between mRNA dose and secreted protein production. The secreted human antibody is also a protein complex, not ordinarily made by the liver, which will be a test case for making human proteins in liver normally made by other cell types.
This modality also includes engineered proteins such as our Relaxin and PKU programs and is not limited to native forms of proteins. Recombinant protein therapeutics, which focus on secreted proteins, generate over $200 billion in annual worldwide sales.
Antibody against Chikungunya virus (mRNA-1944): Summary
Systemic mRNA administration to instruct cells to secrete antibodies, in this case for passive immunization to prevent Chikungunya infection
We are using this program to help understand how mRNA can be used to make complex secreted proteins in the human body and to address the potential health threat of Chikungunya virus, particularly for the military and others exposed to this virus. This program highlights a potentially important advancement of our platform and expansion of our modalities.
Chikungunya is a serious health problem with and is estimated to have caused at least three million cases during the 2005-2015 epidemic. There are no vaccines or prophylactic treatments for this disease. This virus can cause severe arthritic-like conditions in approximately 15% of the infected people. This program offers a passive immunization approach using antibodies to prevent infection, to complement our vaccine approach. In this program, we utilize two mRNAs encoding for light chain and heavy chain of an antibody against the envelope glycoprotein E. We plan to administer these mRNAs encapsulated in our proprietary LNPs intravenously to people to prevent infection by the Chikungunya virus. We are being financially supported for specific activities by DARPA and have an open IND for mRNA-1944.
Antibody against Chikungunya virus (mRNA-1944): Disease overview
Addressing a significant global health need
Chikungunya virus is a mosquito-borne alphavirus posing a significant public health problem in tropical and subtropical regions. While Chikungunya has been present in Africa for centuries, recent outbreaks and epidemics in new regions have arisen due to the expanding distribution of the Aedes mosquito in which it resides. A Chikungunya epidemic beginning in 2004 in Kenya spread to India and was exported to nearly all regions of the world and brought Chikungunya to the attention of the western world. As of April 2016, Chikungunya cases had been reported in 103 countries and territories around the world, including 46 countries and territories throughout the Americas. Chikungunya virus infection is characterized by an acute onset of fever, rash, myalgia, and sometimes debilitating polyarthralgia, giving the virus its name, which means “that which bends up” when translated from Makonde. It is rarely fatal, but neurological sequelae such as Guillain-Barre syndrome and chronic arthritis have been recognized.
Chikungunya virus is an alphavirus of the Togaviridae family with a positive-strand RNA genome. The viral structural proteins are naturally expressed as a single polyprotein followed by subsequent cleavage by viral and cellular proteases into capsid (C) and envelope (E) glycoproteins E3, E2, 6k, and E1. The E proteins are major targets of protective neutralizing antibody responses that can be tested for in assays.
There are currently no effective therapies or approved vaccines to treat or prevent Chikungunya infection or disease, and effective mosquito control has proven challenging, even in higher income countries. Currently, infected individuals are treated with non-steroidal anti-inflammatory drugs to relieve some symptoms. Therefore, in addition to an effective prophylactic vaccine, we believe there is a need for systemic secreted antibody for passive immunity to the Chikungunya virus.
Antibody against Chikungunya virus (mRNA-1944): Our product concept
A systemically delivered mRNA instructing cells to secrete an antibody to glycoprotein E to neutralize Chikungunya
The mRNA-1944 development candidate contains two mRNAs that encode the heavy and light chains of the Chikungunya antibody and utilizes our proprietary LNPs. The mRNA-1944 development candidate encodes a fully human IgG antibody isolated from B cells of a patient with a prior history of Chikungunya infection. Thus mRNA-1944 encodes a fully human IgG antibody against the envelope protein E2. The systemic antibody against Chikungunya virus titers can be evaluated in clinical trials by enzyme-linked immunosorbent assay, or ELISA, to quantify the amount of expressed IgG. A neutralization assay can be used to ensure that the mRNA expressed antibody was properly folded and functional.
Antibody against Chikungunya virus (mRNA-1944): Preclinical information
Systemic mRNA administration results in antibody production and protection from Chikungunya infection in animals
In immunodeficient AG129 mice (lacking the IFN-α/ß and -γ receptors) Chikungunya causes a lethal disease and mice succumb to infection within 3-4 days with ruffled fur and weight loss. Protection in this model is mediated by antibodies against the Chikungunya viral proteins that must provide complete protection or sterilizing immunity. Therefore, this challenge model was used to establish a correlate of protection using activity and systemic IgG concentration data.
An in vivo study in AG129 mice was completed to determine the activity of mRNA encoded antibody against Chikungunya virus. The test article was administered to mice as prophylaxis at 0.02, 0.1, and 0.5 mg/kg by IV tail injection. A subset of animals (n=10) were challenged 24 hours post prophylaxis with Chikungunya virus strain LR006 and monitored for morbidity and mortality. Complete survival of mice was observed after treatment with the highest dose of 0.5 mg/kg of mRNA-1944.
In addition, the pharmacokinetics were evaluated in cynomolgus monkeys through intravenous infusion at 0.3, 1.0, and 3.0 mg/kg. The average serum antibody level was quantified at various time points to demonstrate a half-life of 23 days. The maximum serum concentration of the antibody was found to be 16.2 µg/mL with dose 1 and 28.8 µg/mL with dose 2, as shown in the figure below.
Expression of antibody against Chikungunya virus with repeat dosing of mRNA-1944 or placebo in non-human primate study
In addition, mRNA-1944 was tested in rats and non-human primates in a repeat-dose study via IV infusion up to 5 and 3 mg/kg, respectively. There were no dose-limiting toxicities related to mRNA-1944 observed and all other observations were generally reversible.
Antibody against Chikungunya virus (mRNA-1944): Clinical plan
We have initiated dosing of a Phase 1 trial of mRNA-1944 in the United States
We are conducting a Phase 1 single ascending dose 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, 1 mg/kg cohorts with 8 subjects per cohort) of mRNA-1944 administered via intravenous infusion. Other objectives are to determine the pharmacokinetics of four dose levels of mRNA-1944, to determine if the antibodies produced are sufficiently active to neutralize viral infection in assays and to determine the pharmacodynamics of anti-Chikungunya virus IgG levels. As of February 20, 2019, dosing of the first dose level cohort has been completed (0.1 mg/kg, 8 subjects) in the Phase 1 trial of mRNA-1944.
Each of the four dose level cohorts initially doses three sentinel subjects, with a seven-day interval between each sentinel subject. Safety data on each sentinel subject as well as cumulative safety data are reviewed by the internal safety team, or IST, seven days following infusion of mRNA-1944 prior to the second and third sentinel subjects are dosed, as per the schematic described below. The IST will also review safety data for the three sentinels and recommend expansion to five subjects at that dose level with an overall randomization ratio of 3:2 (mRNA-1944:placebo). The safety monitoring committee, or SMC, reviews the safety data for the dose level and recommend escalation to the next dose level. A schematic of the trial design is shown below.
Blood samples will be collected at pre-defined time points post dose to determine mRNA-1944 concentration and concentration of encoded antibody against Chikungunya virus.
Relaxin (AZD7970): Summary
In collaboration with AstraZeneca we are developing a secreted systemic engineered protein for heart failure
Chronic heart failure continues to be a leading cause of death worldwide. While numerous treatments are currently available, the needs of many heart failure patients are not met. Relaxin is a well-studied natural protein hormone that is known to have cardiovascular protective effects. Earlier attempts at developing relaxin as a protein therapeutic have failed. Serelaxin, a recombinant relaxin protein therapeutic with a short 30 minute half-life recently failed to meet its primary endpoints in a Phase 3 trial. We believe that engineering the Relaxin protein for a longer duration and repeat dosing might overcome the shortcomings of earlier attempts. In collaboration with AstraZeneca, we use mRNA encoding for a relaxin protein designed for a long duration of action. It is also designed to be produced by the body with human post-translational modifications.
Relaxin (AZD7970): Disease overview
Heart failure continues to be a major health concern despite multiple treatment options
Heart failure is the inability of the heart to pump blood efficiently and presents itself as either an impairment of ejection of the blood (systolic heart failure) or defective ventricular filling (diastolic heart failure). It is associated with fluid retention in peripheral tissues, including the lungs, leading to tissue congestion, dyspnea, fatigue, and ultimately death. Heart failure is a major unmet medical need as it is the leading cause of hospitalization in the elderly worldwide and accounts for 1.1 million cases annually in the United States. The aging population and the improved survival rates from myocardial infarcts have increased the lifetime risk of developing heart failure to one in five.
Current treatments for heart failure include therapies that reduce blood pressure or potentially help eliminate the excess of fluid in congested tissues (beta-blockers, angiotensin-converting enzyme inhibitors, angiotensin II inhibitors, and aldosterone receptor blockers). Despite long-term combined treatments, the needs for these patients are often unmet, as evidenced by the high mortality rate in this patient population (i.e., 36.5% in a median 3-year follow-up).
Relaxin is a naturally occurring hormone, present in both men and women, that has been shown to promote vasodilation and angiogenesis, regulate extracellular matrix turnover, and suppress arrhythmias post myocardial infarction. Though prior studies have failed to demonstrate long-term benefit in clinical studies, we believe that our novel approach can overcome potential flaws of previous approaches.
Relaxin (AZD7970): Our product concept
We have engineered a long-acting Relaxin to extend its otherwise short half-life
AZD7970 is an mRNA encoding a human relaxin protein designed and engineered to have an extended half-life. We have also utilized our proprietary LNPs to enable repeat dosing. We believe AZD7970 can address the short half-life of serelaxin. AZD7970 is intended for IV-administered repeat dosing.
Relaxin (AZD7970): Preclinical information
We have observed extended exposure with our mRNA encoding for an engineered version of Relaxin
We have observed that relaxin mRNA gives rise to a long-lasting systemic and functional protein following IV dosing with proprietary LNPs. Prolonged duration of relaxin protein production was observed both in rodents and non-human primates. Systemic protein levels of the Relaxin protein in plasma of IV dosed cynomolgus monkeys following a single injection of mRNA were assessed using a commercially available antibody. Exposure to the fusion protein made from our mRNA was considerably extended (up to 10 days), as shown in the figure below. In contrast, earlier published studies described the half-life of relaxin administered as a recombinant protein to be of a few minutes. An IND-enabling GLP toxicology program for Relaxin (AZD7970) is ongoing.
Relaxin protein levels in serum upon administration of mRNA encoding for
relaxin in our proprietary LNP in non-human primate study
Relaxin (AZD7970): Clinical plan
AstraZeneca may conduct a Phase 1 trial.
Fabry disease (mRNA-3630): Summary
Our approach to Fabry disease with a secreted alpha galactosidase protein
Fabry disease is an X-linked hereditary defect in glycosphingolipid metabolism caused by mutations in the GLA gene, which encodes for the lysosomal protein alpha galactosidase, or α-GAL. It is one of a number of lysosomal storage diseases. Decreased activity of α-GAL results in the lysosomal accumulation of substrates (Gb3 and Lyso-Gb3) within cells and tissues, ultimately impairing cell/tissue function. Currently, there are several approved therapies for the treatment of Fabry disease including enzyme replacement therapy, or ERT, and chaperone therapy. However, patients continue to suffer from renal decline with ERTs and limited patient eligibility for chaperone therapy, as well as immunogenic side effects of ERTs. With our platform technology, the cells in the human body can be instructed to produce α-GAL from the liver and other tissues to properly insert α-GAL into lysosomes. Additionally, these tissues can secrete it into circulation for delivery to other tissues. We are developing an intravenously administered mRNA that encodes α-GAL enzyme and we plan to conduct a Phase 1/2 clinical trial to evaluate the safety and efficacy of mRNA-3630 in Fabry patients.
Fabry disease (mRNA-3630): Disease overview
Fabry disease is a lysosomal storage disorder
Fabry disease is a progressive, multiorgan, X-linked lysosomal storage disorder with an annual incidence of approximately 1:80,000. Affected individuals have a deficiency in α-GAL, resulting in a reduced or complete inability to metabolize glycosphingolipids in the lysosomes. Thus, patients accumulate glycosphingolipids such as Gb3 within lysosomes, which ultimately results in cellular and tissue dysfunction. In Fabry patients, multiple organs are impacted including the kidney and heart; and the vasculature gastrointestinal, and neurological systems. The severity of the disease is related to the lack of enzyme activity in patient cells. Classic Fabry patients are the most affected individuals, and generally retain <1% of normal enzyme activity. Diagnosis of Fabry disease occurs generally during childhood, but in some patients it is diagnosed later in life, usually after the patient presents with a stroke or renal complications.
Currently, there are several approved therapies for the treatment of Fabry disease. Agalsidase beta, which is marketed as Fabrazyme by Sanofi Genzyme, and Agalsidase alpha, which is approved and marketed as Replagal outside the United States by Shire, are enzyme replacement therapies, or ERTs, administered to most Fabry patients. Both of those therapies are versions of α-GAL ERTs that are administered intravenously, often require long infusion times and can lead to undesired immune reactions. These enzymes are effective at decreasing substrate accumulation in some tissues and slowing disease progression, however patients that have been on ERTs for 10 years still have renal function decline at a rate greater than normal healthy individuals. In addition to ERTs, Amicus Therapeutics has approval in the United States and European market for migalastat, a small molecule chaperone therapy which treats a subset of patients.
Fabry disease (mRNA-3630): Our product concept
We intend to utilize the cells in the human body to produce and secrete α-GAL
The mRNA encoding α-GAL is designed to instruct the cells of the human body to produce complex functional intracellular proteins for utilization in the lysosome and secretion out of the cell for uptake by other tissues. This is intended to replace the enzyme α-GAL insufficient or missing in Fabry patients. Our mRNA-3630 program consists of an mRNA encoding human α-GAL encapsulated in our proprietary LNP. The mRNA sequence is optimized for protein expression. mRNA-3630 will be administered intravenously to encode enzymatically-active α-GAL protein to restore this deficient or defective enzyme.
An illustration of our approach is shown in the figure below. The mRNA encoding for α-GAL, once inside the cell, is translated to α-GAL protein by ribosomes and translocated to the endoplasmic reticulum. The protein sequences traverse the secretory pathway of the cell. The protein is either sent to the lysosome where it reduces the level of Gb3 in target cells or is directed for secretion outside the cells, allowing for broad distribution of the protein.
Fabry disease (mRNA-3630): Preclinical information
With a single dose of our mRNA encoding for α-GAL, we observed a sustained reduction in lyso-Gb3
We have conducted several in vivo pharmacology studies to demonstrate nonclinical proof-of-concept for α-GAL therapy. Administration of proprietary LNP formulated α-GAL mRNA to the Fabry mouse model resulted in a significant and durable reduction of globotriaosylsphingosine, or lyso-Gb3, in tissue and serum for 12 weeks following a single dose, as shown in the figure below. In this study, there were 3 Fabry GLA -/- mice per group. Data was normalized to the control sequence group for the specific time point.
Reduction in lyso-Gb3 in tissue with single administration of α-GAL mRNA in mouse model study
In addition, we have evaluated plasma α-GAL in non-human primates following IV administration of 0.5 mg/kg mRNA-3630 every other week for four doses. There were four animals per group. These data indicate consistent circulation of enzyme in circulation following repeated administrations as shown in the figure below.
Repeat dosing of α-GAL mRNA in non-human primate study
Anti α-GAL antibodies were not detected in these animals. Non-human primate tissues were examined after the last dose and showed greater than wild-type levels of enzyme as determined by activity assessment and shown in the figure below. The IND-enabling GLP toxicology program for mRNA-3630 is ongoing.
Increase inα-Galactosidase level in key tissues after repeat dosing ofα-GAL mRNA in non-human primate study
Fabry disease (mRNA-3630): Clinical plan
We plan to conduct a Phase 1/2 open label clinical trial with multiple ascending doses to evaluate the safety, tolerability, and efficacy of our development candidate in patients.
VI. PROGRAM DESCRIPTIONS IN OUR SYSTEMIC INTRACELLULAR THERAPEUTICS MODALITY
We designed our systemic intracellular therapeutics modality to increase levels of intracellular proteins. We aim to useproteins, using cells in the human body to produce proteins encoded by mRNA that are located in the cytosol or specific organelles of the cell to achieve a therapeutic effect in one or more tissues or cell types. The goal of this modality is to provide intracellular proteins, such as intracellular enzymes and organelle-specific proteins, as safe, tolerable, and efficacious therapies. Our initial focus within this exploratory modality is on rare genetic diseases.
This modality currently has three programs. Our pipeline is shown in two formats, with a cell map illustrating the diversity of biology addressed by our mRNA pipeline programs,four programs: PA, MMA, PKU and a traditional format that shows the current stages of development of our pipeline programs, in the section of this Annual Report on Form 10-K titled “Business—Our Pipeline.”GSD1a.
Systemic intracellular therapeutics modality:therapeutics: Opportunity
Systemically delivered, intracellular therapeutics focus on areas currently not addressable with recombinant proteins, which are typically administered systemically and cannot reach the inside of the cell. Objectives for potential new therapies in this area include, for example, increasing the levels of:
•intracellular pathway proteins;
•soluble organelle-specific proteins; and
•organelle-specific membrane proteins.
Methylmalonic acidemia (mRNA-3704): Summary
Program aimsSystemic intracellular therapeutics: Product features
Systemically delivered, intracellular therapeutics, we believe, would allow us to target areas of biology that cannot be addressed using recombinant proteins.
Our potential advantages in these areas include:
•Using mRNA to encode for intracellular and organelle-specific proteins. Our modality permits the expression of intracellular proteins,including those that must be directly translated and moved into organelles such as mitochondria. The ability of mRNA to produce an intracellular, mitochondrial enzyme to treat a pediatric, genetic, metabolic disorderprotein inside of the cell enables production of these protein types that we believe are beyond the reach of recombinant proteins.
Isolated methylmalonic academia,
•mRNA can produce hard-to-make or MMA, is a rare, life-threatening, inherited metabolic disorder that is primarily caused by a defect in the mitochondrial enzyme methylmalonyl-coenzyme A mutase, or MUT. It primarily affects the pediatric population. There is no approved therapy for the disorder, including no approved enzyme replacement therapy,complex proteins. For example, some proteins, due to their folding requirements or complexity, arechallenging to make using recombinant technologies, but can potentially be produced by human cells using administered mRNA.
•Native post-translational modifications are possible through intracellular protein production using mRNA. mRNA administered to a humancell uses natural secretory pathways inside the complexitycell to make and process the encoded protein. The resulting post-translational modifications, such as glycosylation, are human as opposed to recombinant proteins where these post-translational modifications are native to the non-human cells used for manufacture. These non-human post-translational modifications in recombinant proteins may lead to sub-optimal therapeutic outcomes, side effects and increased immunogenicity.
•mRNA can sustain production of proteins, which can increase exposure to proteins with short half-lives. mRNA can lead to proteinproduction by cells that can last from hours to days depending on design. This feature could increase the protein and its mitochondrial localization. Liver or combined liver-kidney transplant is one optionlevels of short half-life proteins for severely affected individuals. therapeutic benefit.
•mRNA allows for desirable pharmacology in complex metabolic diseases. Our platform may allowmRNA technology potentially permits several differentiatedpharmacologic features for treating complex metabolic diseases, including the cells inability to repeat dose as needed, a rapid onset of action, the human bodyability to produce these and other complex mitochondrial enzymes. Therefore, we are developing an intravenously (IV)-administered mRNA encoding MUT in our proprietary LNP, in order to restore this deficient or defective mitochondrial enzyme in the liver and other cells. We have observed preclinical proof-of-concept in two different MMA mouse models, notably with a marked improvement in survival and reduction of biochemical abnormalities in a severe MMA mouse model, and have received Rare Pediatric Disease Designation and Orphan Drug Designation from the FDA and Orphan Drug Designation from the European Commission. 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 expect to initiate a Phase 1/2 clinical trial in MMA patients with MUT deficiency,adjust dose levels real-time based on individual patient needs, and the IND for this Phase 1/2 clinical trial is open.
Methylmalonic acidemia (mRNA-3704): Disease overview
MMA is a rare, life-threatening pediatric disorder with no approved therapies that address the underlying defect
MMA associated with MUT deficiency is a serious inborn error of metabolism disorder with significant morbidity and mortality. There are approximately 500-2,000 MMA MUT deficiency patients in the United States based on estimated birth prevalence (0.3-1.2:100,000 newborns) and mortality rates. Mortality is significant, with reported mortality rates of 50% for MMA patients with complete MUT deficiency (mut 0) (median age of death 2 years) and 40% for MMA patients with partial MUT deficiency (mut -) (median age of death 4.5 years) in a large European study.
MMA mainly affects the pediatric population and usually presents in the first few days or weeks of life. The occurrence of acute metabolic decompensations is the hallmark of the disorder and decompensations are typically more frequent in the first few years of life. Each decompensation is life-threatening and often requires hospitalization and management at an intensive care unit. Surviving patients often suffer from numerous complications including chronic renal failure and neurologic complications such as movement disorders, developmental delays, and seizures. Consequently, the health-related quality of life for MMA patients and their families is significantly impaired.
The disorder is autosomal recessive and primarily caused by loss-of-function mutations in the gene encoding MUT, a mitochondrial enzyme that metabolizes certain proteins and fats, resulting in complete (mut 0) or partial (mut -) enzyme deficiency. Over 250 mutations have been reported to date for MUT, with many MMA patients carrying private mutations. The most frequent mutations include p.N219Y and p.R369H, occurring with allelic frequencies of 8% in a large European cohort (n=151). Population-specific mutations have been reported, such as the p.R108C and p.G717V mutations identified in Hispanic and African-American patients,
respectively. Due to a deficiency in the MUT enzyme resulting in a blockage in a metabolic pathway, the disorder is biochemically characterized by the accumulation of toxic metabolites such as methylmalonic acid in all body fluids and tissues.
There are currently no approved therapies that address the underlying defect for MMA. Carglumic acid (marketed as Carbaglu) is approved in the EU for the acute treatment of hyperammonemia due to various organic acidemias including MMA. Liver transplant and combined liver-kidney transplant have emerged as effective treatment options for severely affected individuals, resulting in substantial reductions in metabolic decompensations and circulating methylmalonic acid concentrations.
Methylmalonic acidemia (mRNA-3704): Our product concept
We are utilizing our ability to produce a complex intracellular enzyme (MUT)stop dosing. Gene therapies may also prove to be useful for treating rare genetic diseases; however, mRNA is not limited by pre-existing immunity that is localizedmay exist for certain gene therapies using viral vectors, and does not localize to the mitochondrianucleus or require persistent changes to cellular DNA to have the desired effect.
MUT is a complex intracellular enzyme that exists as a homodimer, and requires mitochondrial localization and engagement with its cofactor (a derivative
Table of vitamin B 12 ) to be enzymatically active. mRNA has the capability to encode any type of protein, including a functional, intracellular protein that is trafficked to the proper subcellular localization within target cells.Contents
We are developing an mRNA encoding human MUT encapsulated in our proprietary LNPs for intravenous, or IV, administration for the treatment of isolated MMA associated with MUT deficiency. The sequence has been engineered to improve protein translation. To function, the mRNA-encoded MUT protein is translocated to its site of action in the mitochondria as shown in the figure below.
Methylmalonic acidemia (mRNA-3704): Preclinical information
We have observed pronounced improvement in survival due to mRNA treatment in an MMA mouse model
We have conducted a series of in vitro and in vivo pharmacology studies to demonstrate preclinical proof-of-concept for human MUT mRNA in two different mouse models of MMA representing the spectrum of MUT deficiency (mut 0 and mut - ) as published by us in Cell Reports in 2017. As an example, a 12-week repeat-dose study in MMA mut 0 mice (Mut -/-; Tg INS-MCK- Mut) at 0.5 mg/kg IV every other week has shown a pronounced improvement in survival due to human MUT mRNA treatment, with all treated mice surviving 12 weeks in contrast to control mice which all perished within a few weeks. The figure below shows the Kaplan-Meier curve of PBS-injected (n=6 mice) and human MUT mRNA (n=6 mice) treated MMA mut 0 mice and PBS-injected (n=6 mice) healthy heterozygote mice. The three asterisks indicate p-value < 0.001 for human MUT mRNA vs. PBS-injected MMA mut0 mice from the log-rank test.
Improved survival in a 12-week study with mRNA encoding for human MUT in mouse disease model study
In addition, the data indicated that the treated MMA mut0 mice doubled their body weights and approached the body weights of PBS-injected healthy mice in this 12-week repeat dose study. In contrast, surviving PBS-injected MMA mut 0 mice did not gain weight.
Increase in body weight in a 12-week study with mRNA encoding human MUT in mouse disease model study
hMUT mRNA treated MMA mut0 mice showed significant and sustained reductions in the toxic disease metabolites, including plasma methylmalonic acid, compared to pre-treatment levels, in a 6-week repeat dose study in MMA mut0 mice. This is shown in the figure below. Arrows denote weekly IV administration of human MUT mRNA (0.2 mg/kg). Plasma was collected 4 days prior to treatment and 3 days after each dose administration. Washout levels were for the 10-day washout following 5 th dose administration of human MUT mRNA. The asterisk indicates a p-value < 0.01 from paired t-tests of post-treatment vs. pre-treatment levels.
Decrease in plasma methylmalonic acid in 6-week repeat dose study with mRNA encoding for human MUT in MMA mut 0 mouse model study
Additionally, a pharmacokinetic study performed in wild type mice demonstrated that human MUT can be elevated above wild type level MUT levels. Specifically, human MUT protein expression in liver peaked at 16 hours after a single IV injection of human MUT mRNA (0.5 mg/kg) with a concentration of 85 ng/mg protein, ~2-3 fold higher than endogenous human and mouse MUT in liver.
There were no dose-limiting toxicities related to mRNA-3704 in juvenile rats and immature non-human primates in a repeat IV dose one-month IND-enabling GLP toxicology study up to the top doses tested. An independent IND-enabling GLP cardiovascular safety study in non-human primates also indicated mRNA-3704 showed no dose-limiting toxicities.
Methylmalonic acidemia (mRNA-3704): Clinical plan
We are conducting a global natural history study and the IND for the Phase 1/2 clinical trial is open
We are conducting a global natural history study in methylmalonic acidemia, or MMA, and propionic acidemia, or PA, that was initiated in 2018. Some of the patients participating in the natural history study may enter our interventional clinical trials.
Our natural history study aims to identify and correlate clinical and biomarker endpoints for both MMA and PA. We also have a PA program (mRNA-3927) that addresses a disease closely related to MMA. There is synergy in combining the natural history study for MMA and PA. The natural history study is a global, multi-center, non-interventional study for patients with confirmed diagnosis of MMA due to MUT deficiency or PA. Up to 60 MMA patients and up to 60 PA patients in the United States and Europe will be followed prospectively for 1-3 years. Retrospective data will be collected as available. As of February 27, 2019, 20 MMA patients and 12 PA patients had enrolled in the natural history study.
We plan to conduct an open-label, multi-center, dose escalation Phase 1/2 study of multiple ascending doses of mRNA-3704 in patients with isolated MMA due to MUT deficiency between 1 to 18 years of age with elevated plasma methylmalonic acid concentrations. The objectives of this study are to evaluate the safety, pharmacodynamics (as assessed by changes in plasma methylmalonic acid), and pharmacokinetic profile of mRNA-3704 in patients affected by MMA.
During the dose-escalation phase, three dose levels of mRNA-3704 are planned to be investigated in this study. The first dose level will enroll adolescents aged 12-18. Once safety and tolerability is determined, we intend to enroll patients who are between the ages of 1 and 18 years old. An additional cohort to evaluate a fourth dose level may be considered. Patients will receive twelve doses of mRNA-3704 administered via IV infusion every 3 weeks.
Three patients will be enrolled sequentially within each dose level cohort. Enrollment of the first three patients within each dose cohort will be staggered by 21 days using a sentinel dosing strategy approach to allow for safety observation after dosing. For the evaluation of safety data prior to escalation to the next dose level, a modified 3+3 design using predefined dose limiting toxicity criteria will be used. Dose escalation recommendations to open the next dose level cohort will be made by an independent SMC and will include review of safety and pharmacodynamic activity through at least 21 days following the first dose administration of mRNA-3704, the dose limiting toxicity window, for all patients.
Upon establishment of a dose with acceptable safety and pharmacodynamic activity in dose escalation, additional patients will be enrolled in a dose-expansion phase to allow for further characterization of the safety and pharmacodynamic activity of mRNA-3704. Patients in both phases of study will participate in a pre-dosing observational period to characterize baseline (pre-treatment) biomarker levels, followed by a treatment period, and then a two-year follow-up period after withdrawal of treatment.
The Phase 1/2 study is expected to be conducted in the United States and Europe. A schematic of the trial is shown in the figure below.
Propionic acidemia (mRNA-3927): Summary
We aim to produce an intracellular, mitochondrial enzyme complex to treat a pediatric metabolic disorder
Propionic acidemia, or PA, is a rare, life-threatening, inherited metabolic disorder due to a defect in the mitochondrial enzyme propionyl-CoA carboxylase, or PCC. It primarily affects the pediatric population. There is no approved therapy for PA, including no approved enzyme replacement therapy, due to the complexity of the enzyme, which comprises six copies each of two different subunits (PCCA and PCCB), and its mitochondrial localization. The only effective treatment for severely affected individuals is liver transplant, aimed at increasing enzyme activity to reduce the occurrence of life-threatening acute metabolic crises. Our platform is uniquely positioned to potentially address this disease by enabling synthesis of this complex enzyme that is localized in the mitochondria of the cell. We are developing an IV-administered mRNA therapeutic comprising two different mRNAs encoding PCCA and PCCB in our proprietary LNP to replace the defective PCC enzyme with functional enzyme in liver and other cells. We expecthave received Rare Pediatric Disease Designation and Orphan Drug Designation from the FDA and Orphan Drug Designation from the European Commission for the PA program. The FDA has also granted Fast Track designation to mRNA-3927. We plan to initiate a Phase 1/2 clinical trial in PA patients.patients in 2021.
Propionic acidemia (mRNA-3927): Disease overview
PA is an inherited metabolism disorder with significant morbidity and mortality and no approved therapy
PA is a serious inborn error of metabolism disorder, closely related to MMA, with significant morbidity and mortality. There are approximately 325-2,000 PA patients in the United States based on estimated birth prevalence (0.2-1.2:100,000 newborns) and mortality rates. The vast majority of patients present with life-threatening metabolic crises during the first days or weeks of life, with mortality rates ranging from 13-53% during the neonatal period. Similar to MMA, the cardinal feature of the disorder is the occurrence of life-threatening acute metabolic decompensations that are more frequent in the first few years of life. Longer term sequelae include cardiac complications (cardiomyopathy, arrhythmias) and severe neurologic complications.
The disorder is caused by a defect or deficiency in PCC, an enzyme that is one step upstream in the same metabolic pathway as the MUT enzyme that is deficient in MMA. PCC is a complex hetero-dodecamer enzyme composed of six alpha subunits (PCCA) and six beta subunits (PCCB). The disorder is autosomal recessive, with PA patients generally having loss-of-function mutations in either PCCA or PCCB (and in rare instances, mutations in both PCCA and PCCB). To date, over 100 mutations have been identified for both PCCA and PCCB genes and, similar to MMA, most of the mutations are private. Also similar to MMA, due to this enzyme deficiency resulting in a metabolic block, the disorder is biochemically characterized by the accumulation of toxic metabolites such as 3-hydroxypropionic acid and 2-methylcitrate, among others, and these metabolites may be used as biomarkers of disease.
There is no approved therapy for PA to treat the underlying defect, including no enzyme replacement therapy, due to the complexity of PCC and mitochondrial localization. Carglumic acid (marketed as Carbaglu) is approved in the EU for the acute treatment of hyperammonemia due to various organic acidemias, including PA. Management of the disorder is otherwise limited to strict dietary restrictions and other supportive measures similar to MMA. Liver transplant is a radical yet effective treatment, with the aim of increasing PCC enzyme activity in liver for severely affected individuals.
Propionic acidemia (mRNA-3927): Our product concept
We are utilizing the strength of our platform to produce a complex enzyme comprising two different proteins that localize to the mitochondria
The ability of our platform to encode for large, multimeric complexes such as PCC and enable production of intracellular, mitochondrial proteins makes mRNA especially suited to potentially address PA. We are developing an IV-administered combination mRNA approach, which contains two mRNAs, one for each of the subunits of PCC (PCCA and PCCB) encapsulated in our proprietary LNP. The intent is to potentially treat the entire PA population, regardless of whether an individual has a defect or deficiency in the PCC alpha or beta subunit. The mRNA sequences have been engineered to improve protein translation and encode enzymatically-active PCC with the proper subcellular localization in the mitochondria. An illustration
Table of our approach is shown in the figure below.Contents
Propionic acidemia (mRNA-3927): Preclinical information
We have demonstrated activity in a PA mouse model in a long-term repeat dose study
A series ofin vitro andin vivo pharmacology studies have been performed to demonstrate preclinical proof-of-concept for the combined PCCA and PCCB mRNA therapy. PCCA and PCCB mRNAs administered in PA patient fibroblasts (both PCCA and PCCB-deficient) showed production of active PCC enzyme with the proper subcellular localization in mitochondria at concentrations above wild-type levels.In vivo studies in PA (PCCA -/-/- [A138T]) mice have resulted in a dose-dependent increase in hepatic PCC activity with a concomitant decrease in disease biomarkers. Notably, a reduction in plasma ammonia levels was observed 3-4 weeks after a single IV administration (1 mg/kg) of PCCA and PCCB mRNA encapsulated in our proprietary LNP in PA mice (n=4-5/group). The data isare shown in panel A of the figure below. Additionally, a 6-month repeat-dose study in PA mice showed decreased heart weight (normalized to body weight) in mice treated with monthly IV administration of PCCA and PCCB mRNA (1 mg/kg) compared to control mRNA (n=6/group). This is shown in panel B of the figure below. Data in both panels is presented as mean ± standard deviation.
Reduction in plasma ammonia with PCCA+PCCB mRNA in PA mouse model study
Panel (A)
Decrease in heart weight with PCCA+PCCB mRNA in 6 month repeat dose study in PA mouse model study
Panel (B)
In the 6-month repeat dose study in PA mice, a significant and sustained lowering of additional disease biomarkers (e.g., 2-methylcitrate, or 2MC) was observed throughout the duration of the 6-month study. A comparison of 2-methylcitrate levels as a result of monthly IV administration of PCCA and PCCB mRNAs (0.5-1 mg/kg) compared to control mice injected with a control (luciferase) mRNA is shown in the figure below (n=6/group). Data isare presented as mean ± standard deviation. The IND-enabling GLP toxicology program for PA (mRNA-3927) is ongoing.has been completed.
Plasma 2-methylcitrate levels with repeat dosing of PCCA+PCCB
mRNA in PA mouse model study
Propionic acidemia (mRNA-3927): Clinical plan
We are conducting a global natural history study and are planning a Phase 1/2 clinical trial
The clinical development plan for mRNA-3927 includes a global, natural history study in MMA and PA that was initiated in 2018 and a planned Phase 1/2 study in pediatric patients diagnosed with PA.PA planned for early 2021.
We have launched a natural history study aimed at identifying and correlating clinical and biomarker endpoints. This is a global, multi-center, non-interventional study for patients with confirmed diagnosis of PA or MMA due to MUT deficiency. Up to 60 PA and 60 MMA patients in the United States and Europe will be followed prospectively for 1-3 years. Retrospective data will be collected as available. As of February 27, 2019, 20 MMA patients and 12 PA patients had enrolled in the natural history study.
We plan to conduct an open-label, multi-center, dose escalationoptimization Phase 1/2 study of multiple ascending doses of mRNA-3927 in pediatric patients with PA in the United StatesNorth America and Europe. The objectives of this study are to evaluate the safety and tolerability of mRNA-3927 administered via IV infusion, to assess the pharmacodynamic response from changes in plasma biomarkers, and to characterize the pharmacokinetic profile of mRNA-3927.
Methylmalonic acidemia (mRNA-3705)
Program aims to produce an intracellular, mitochondrial enzyme to treat a pediatric, genetic, metabolic disorder
Isolated methylmalonic academia, or MMA, is a rare, life-threatening, inherited metabolic disorder that is primarily caused by a defect in the mitochondrial enzyme methylmalonyl-coenzyme A mutase, or MUT. It primarily affects the pediatric population. There is no approved therapy that addresses the underlying disorder, including no approved enzyme replacement therapy, due to the complexity of the protein and its mitochondrial localization. Liver or combined liver-kidney transplant is one option for severely affected individuals. Our platform may allow the cells in the human body to produce these and other complex mitochondrial enzymes. Therefore, we are developing an IV-administered mRNA encoding MUT in our proprietary LNP, in order to restore this deficient or defective mitochondrial enzyme in the liver and other cells. We have observed preclinical proof-of-concept in two different MMA mouse models, notably with a marked improvement in survival and reduction of biochemical abnormalities in a severe MMA mouse model. We recently ceased development of mRNA-3704 and will return to the clinic with the next generation formulation, mRNA-3705. To date, the new drug product mRNA-3705 has demonstrated greater potency and prolonged lowering of methylmalonic acid in mutase deficient mice when compared to mRNA-3704. mRNA-3705 has received
Rare Pediatric Disease Designation from the FDA. A Phase 1/2 clinical study with mRNA-3705 is in planning and will be initiated in 2021.
Methylmalonic acidemia (mRNA-3705): Disease overview
MMA is a rare, life-threatening pediatric disorder with no approved therapies that address the underlying defect
There are an estimated 500-2,000 MMA MUT deficiency patients in the United States based on estimated birth prevalence (0.3-1.2:100,000 newborns) and mortality rates. Mortality is significant, with mortality rates of 50% for MMA patients with complete MUT deficiency (mut 0) (median age of death 2 years) and 40% for MMA patients with partial MUT deficiency (mut -) (median age of death 4.5 years) reported in a large European study.
MMA mainly affects the pediatric population and usually presents in the first few days or weeks of life. The occurrence of acute metabolic decompensations is the hallmark of the disorder and decompensations are typically more frequent in the first few years of life. Each decompensation is life-threatening and often requires hospitalization and management at an intensive care unit. Surviving patients often suffer from numerous complications including chronic renal failure and neurologic complications such as movement disorders, developmental delays, and seizures. Consequently, the health-related quality of life for MMA patients and their families is significantly impaired.
The disorder is autosomal recessive and primarily caused by loss-of-function mutations in the gene encoding MUT, a mitochondrial enzyme that metabolizes certain proteins and fats, resulting in complete (mut 0) or partial (mut -) enzyme deficiency. There are currently no approved therapies that address the underlying defect for MMA. Carglumic acid (marketed as Carbaglu) is approved in the EU for the acute treatment of hyperammonemia due to various organic acidemias including MMA. Liver transplant and combined liver-kidney transplant have emerged as effective treatment options for severely affected individuals, resulting in substantial reductions in metabolic decompensations and circulating methylmalonic acid concentrations.
Methylmalonic acidemia (mRNA-3705): Our product concept
We are utilizing our ability to produce a complex intracellular enzyme (MUT) that is localized to the mitochondria
MUT is a complex intracellular enzyme that exists as a homodimer, and requires mitochondrial localization and engagement with its cofactor (a derivative of vitamin B12) to be enzymatically active. mRNA has the capability to encode any type of protein, including a functional, intracellular protein that is trafficked to the proper subcellular localization within target cells.
We are developing an mRNA encoding human MUT encapsulated in our proprietary LNPs for IV administration for the treatment of isolated MMA associated with MUT deficiency. The sequence has been engineered to improve protein translation. To function, the mRNA-encoded MUT protein is translocated to its site of action in the mitochondria.
Methylmalonic acidemia (mRNA-3705): Preclinical information
mRNA-3705 shows greater potency and more prolonged lowering of plasma methylmalonic acid compared to mRNA-3704 in animal studies.
We previously demonstrated, in a series of in vitro and in vivo pharmacology studies, that human MUT mRNA effectively directs the biosynthesis of active MUT protein with physiologically correct mitochondrial localization in vitro, and improves survival and corrects biochemical abnormalities in two different mouse models of MMA representing the spectrum of MUT deficiency (mut0 and mut-), as published by us in Cell Reports in 2017 and EBioMedicine in 2019. Technology and process improvements enabled the development of an updated drug product, mRNA-3705, which shows greater potency and better pharmacology compared to mRNA-3704. As shown in the figure below, mRNA-3705 produced approximately 3-times more MUT protein than mRNA-3704 in livers of rats 24 hours after a single intravenous injection.
mRNA-3705mRNA-3705 produced higher levels of MUT protein in the livers of rats compared to mRNA-3704
In MMA mice with partial MUT deficiency (Mut-/-;TgINS-CBA-G715V, mut-), mRNA-3705 showed greater potency and prolonged the reduction in plasma methylmalonic acid levels compared to mRNA-3704 in a 4-week study, as shown in the figure below. This data suggests that the minimal efficacious dose may be lower for mRNA-3705 than for mRNA-3704.
mRNA-3705 treatment produced a greater and more sustained reduction in plasma methylmalonic acid compared to mRNA-3704 in a 4-week study in mut- mice
Furthermore, mRNA-3705 treatment of a more severe MMA mouse model (Mut-/-;TgINS-MCK-Mut, mut0) improved survival, increased body weight, and produced a sustained reduction of plasma methylmalonic acid levels compared to PBS treatment in a 12-week study.
Methylmalonic acidemia (mRNA-3705): Clinical plan
We are conducting a global natural history study and a Phase 1/2 clinical trial in North America and Europe
We are conducting a global natural history study in methylmalonic acidemia, or MMA, and propionic acidemia, or PA, that was initiated in 2018. Our natural history study aims to identify and correlate clinical and biomarker endpoints for both MMA and PA. The natural history study is a global, multi-center, non-interventional study for patients with confirmed diagnosis of MMA due to
MUT deficiency or PA. Up to 60 MMA patients and up to 60 PA patients in the United States and Europe will be followed prospectively for 1-3 years. Enrollment in the study has been completed. Retrospective data are also being collected as available.
We recently ceased development of mRNA-3704 and will return to the clinic with the next generation formulation, mRNA-3705. The new drug product mRNA-3705 has demonstrated greater potency and prolonged lowering of methylmalonic acid in mutase deficient mice when compared to mRNA-3704. An open-label, multi-center, dose finding Phase 1/2 study of mRNA-3705 in patients with isolated MMA due to MUT deficiency between 1 to 18 years of age is in planning and will enter clinic in 2021. The objectives of this study are to evaluate the safety, pharmacodynamics (as assessed by changes in plasma methylmalonic acid), and pharmacokinetic profile of mRNA-3705 in patients affected by MMA.
Phenylketonuria (PKU) (mRNA-3283): Summary
Our approach to Phenylketonuria with an mRNA encoding for an intracellular protein
Phenylketonuria, or PKU, is a rare inherited metabolic disease resulting from a deficiency in the metabolism of phenylalanine, or PHE, due to mutations within the enzyme phenylalanine hydroxylase, or PAH. The most effective treatment is a restrictive diet of low protein, which controls PHE intake. Approximately 20-56% of PKU patients respond to sapropterin dihydrochloride (marketed as Kuvan in the United States), a synthetic BH4 cofactor for PAH which improves PHE metabolism, but does not fully cure patients. In addition, in May 2018, Biomarin has received approval for pegylated phenylalanine lyase, or PAL, marketed as Palynziq. Palynziq is a pegylated recombinant bacterial enzyme which metabolizes PHE in the blood. We believe the immune risk is, at least in part, driven by bacterial PAL. With our mRNA technology, cells in the human body can be instructed to produce functional PAH, decreasing PHE levels in the blood and restoring production of tyrosine. We are developing an intravenously administered mRNA which encodes for the PAH enzyme and is encapsulated in our proprietary LNP. We plan to conduct a Phase 1 clinical trial for mRNA-3283.
Phenylketonuria (mRNA-3283): Disease overview
There are options to treat PKU which are not widely applicable, and efforts by other companies are likely to face hurdles
PKU occurs in approximately 1:10,000-15,000 live births in the United States. Based on current population estimates that would translate into approximately 21,000-32,000 PKU patients in the United States. Affected individuals have a deficiency in the enzyme PAH, resulting in a reduced or complete inability to metabolize the essential amino acid phenylalanine into tyrosine. Thus, PKU patients suffer from a phenylalanine intoxication and a subsequent deprivation of tyrosine, leading to severe mental disability if left untreated.
PAH is expressed as a monomer, but functions as a tetramer and requires tetrahydrobiopterin (BH4) as a cofactor to complete the conversion of PHE to tyrosine, thereby maintaining adequate PHE:TYR ratios within circulation. To date, greater than 950 gene variants have been identified in the PAH gene, resulting in PKU.
Diagnosis of PKU occurs primarily through newborn screening in available countries, followed by genetic confirmation. Newly diagnosed patients receive medical formulas containing protein with low PHE content to control blood PHE and provide adequate nutrition for growing infants. As patients age, they are tested for sensitivity to synthetic BH4 and may transition to Kuvan. Approximately 20% of patients respond favorably to Kuvan, which can aid in PHE control. Nonresponsive patients are treated mainly with restricted diet; however, adherence to the diet is challenging, resulting in poor compliance. When PHE levels are not adequately controlled, patients begin to show multiple signs of disease, including depression, anxiety, poor executive function, and attention deficit hyperactivity disorder, or ADHD. In May 2018, Biomarin received approval to market Palynziq.
One option for PKU patients may be treatment with gene therapy. We believe there are potential advantages for mRNA therapeutics for this disorder over gene therapy as described in the systemic intracellular therapeutics modality section.
Phenylketonuria (mRNA-3283): Our product concept
We intend to utilize the cells in the human body to produce PAH intracellularly
We believe mRNA therapy is a viable therapeutic modality for PKU patients due to its ability to instruct cells in the human body to produce complex functional intracellular proteins such as PAH. Our program mRNA-3283 consists of an mRNA encoding human PAH encapsulated in our proprietary LNPs. The mRNA sequence is optimized for protein synthesis and contains a microRNA
binding site to reduce or potentially eliminate synthesis of protein outside of the target tissues. mRNA-3283 is designed to be administered intravenously to encode enzymatically-active PAH protein in liver to restore this deficient or defective enzyme as illustrated in the figure below.enzyme.
Phenylketonuria (mRNA-3283): Preclinical information
We have demonstrated the ability to impact PHE levels by repeat dosing of our mRNA in preclinical studies
We have conducted severalin vitro andin vivo pharmacology studies to demonstrate preclinical proof-of-concept for PAH therapy. A PKU mouse model demonstrated a significant reduction of blood PHE levels post dose as shown in the figure below. The study included IV administration of PAH mRNA every 7 days at 0.5 mg/kg in a PAH-/- mouse model. Data point with asterisk is marked zero since it was not collected due to a snow storm. PHE level was measured using liquid chromatography with a combination of two mass analyzers (LC-MS/MS). The IND-enabling GLP toxicology program for PKU (mRNA-3283) is ongoing.
PHE reduction with repeat dosing of PAH mRNA in PKU mouse model study
Phenylketonuria (mRNA-3283): Clinical plan
We plan to conduct a Phase 1 open label clinical trial with single ascending dose to evaluate the safety, tolerability, and activity of our development candidate in patients.
Glycogen storage disease type 1a (GSD1a) (mRNA-3745)
Our approach to glycogen storage disease type 1a using an mRNA encoding for intracellular human glucose 6-phosphatase
Glycogen storage disease type 1a (GSD1a) is an inherited metabolic disease caused by the deficiency in the catalytic activity of glucose 6-phosphatase (G6Pase), which is encoded by the glucose 6-phosphatase gene (G6PC). The G6Pase enzyme is involved in the metabolic pathways of glycogenolysis and gluconeogenesis which allow the liver and kidney to release glucose into the blood. Those affected by GSD1a present with life-threatening hypoglycemia and a wide range of severe metabolic derangements and long-term complications such as hyperlipidemia, lactic acidemia, hepatomegaly, hepatocellular adenomas, and end-stage renal disease. The standard of care consists of strict diet control. Enzyme replacement therapy (ERT) is not an option for these patients due to challenges associated with delivering an enzyme inside the cell. Strict diet control via the frequent consumption of uncooked cornstarch is effective in improving hypoglycemia. However, the underlying pathologies continue and its efficacy in preventing the long-term metabolic complications has yet to be established. With our mRNA platform, cells in the liver may be instructed to produce functional G6Pase, with the goal of restoring the homeostasis of glycogenolysis and gluconeogenesis pathways and correcting the underlying pathologies. We are developing an intravenously administered mRNA which encodes for G6Pase and is encapsulated in our proprietary LNP. We have demonstrated activity in mouse models in the form of reduction in both liver and serum biomarkers and improvements in liver morphology. We plan to conduct a Phase 1 clinical trial for mRNA-3745.
Glycogen storage disease type 1a (mRNA-3745): Disease overview
There are no approved therapies for GSD1a that address the enzymatic deficiency
GSD1a is an inherited metabolic disorder caused by a deficiency in the catalytic activity of G6Pase. G6Pase catalyzes the hydrolysis of glucose-6-phosphate to glucose and inorganic phosphate, the final step of glycogenolysis and gluconeogenesis that mainly takes place in liver and kidney. GSD1a patients suffer from severe fasting hypoglycemia, hepatomegaly, nephromegaly, lactic acidemia, hypertriglyceridemia, hyperuricemia, hypercholesterolemia, hepatic steatosis, and growth retardation. In addition, hepatocellular adenomas occur in 70% to 80% of GSD1a patients by their third decade of life and carries risk of transformation into hepatocellular carcinomas. Proteinuria has been observed in over half of patients above 25 years of age.
GSD1a occurs in approximately 1:100,000 live births in the United States and European Union but is more common in Ashkenazi Jews where the incidence is reported to be 1:20,000 live births. There are an estimated 2,500 people in the United States and over 4,000 people in the European Union with GSD1a. Although strict diet therapy, including frequent feeding with uncooked cornstarch, allows GSD1a patients to live into adulthood by preventing hypoglycemia, the underlying pathological processes remain uncorrected resulting in the development of many long-term complications including liver adenomas and hepatocellular carcinoma. While gene therapy is being investigated for treatment of GSD1a, we believe there are potential advantages for mRNA therapeutics for this disorder over gene therapy.
Glycogen storage disease type 1a (mRNA-3745): Our product concept
We intend to utilize the cells in the human body to produce G6Pase intracellularly
We believe that our platform can address GSD1a with its ability to instruct cells in the human body to produce complex functional intracellular membrane proteins such as G6Pase. Our program, mRNA-3745, consists of an mRNA encoding for modified human G6Pase encapsulated in our proprietary LNPs. The human G6Pase sequence is modified for improved protein production and G6Pase activity. mRNA-3745 is designed to be administered intravenously and encodes G6Pase protein to restore this deficient or defective enzyme.
Glycogen storage disease type 1a (mRNA-3745): Preclinical information
We have demonstrated the ability to improve hypoglycemia and other metabolic abnormalities associated with GSD1a in a mouse model
We have conducted several in vitro and in vivo pharmacology studies to demonstrate preclinical proof-of-concept for GSD1a therapy. mRNA encoding for G6Pase introduced in human cells resulted in robust production of active G6Pase with subcellular localization into endoplasmic reticulum. We have examined the activity of mRNA encoding for human G6Pase in a liver-specific G6Pase -/- mouse model (G6PC.LKO). Like GSD1a patients, the G6PC.LKO mice are unable to produce endogenous glucose, leading to severe hypoglycemia during the fasting state.
In a dose-response study performed in G6PC.LKO mice, we treated the mice with three different doses of 0.2, 0.5, and 1 mg/kg of G6Pase mRNA encapsulated in our proprietary LNP and examined fasting glucose, serum triglycerides, and liver enzymes (n=5-8). Of note, mice treated with G6Pase mRNA showed a dose-dependent improvement in fasting glycemia and a reduction in serum triglycerides, without a significant increase in liver enzymes (e.g. alanine transaminase - ALT). Fasting blood glucose and triglycerides are shown in the figure below. Each bar represents the mean ± standard deviation. Single and double asterisk denotes p < 0.05 and p < 0.0001, respectively, by one-way ANOVA, followed by Dunnett’s post-hoc test for multiple comparisons.
Serum biomarkers after single dose of G6Pase mRNA in G6PC.LKO mice
In the same study, a reduction in liver weight compared to the control-treated group was observed after 24 hours of administration of G6Pase encoded mRNA in LNP. The reduction in liver weight was associated with significant improvement in liver morphology presumably due to reduction in liver glucose 6-phosphate, glycogen, and triglycerides.
Reduction in liver weight 24 hours after IV administration of G6Pase mRNA in G6PC.LKO mice
In addition, data for a 7-week repeat-dose study in G6PC.LKO mice receiving G6Pase mRNA in LNP at 0.25 mg/kg IV every other week have shown a pronounced improvement in fasting glycemia, in comparison with the G6PC.LKO mice receiving a control mRNA treatment as shown below (n=7-9).
Restoration of blood glucose above therapeutic threshold with repeat dosing of G6Pase mRNA in G6PC.LKO mice
Glycogen storage disease type 1a (mRNA-3745): Clinical plan
We are planning a Phase 1 clinical trial
We plan to conduct an open-label, dose escalation Phase 1 study of mRNA-3745 in adolescent and adult patients with GSD1a in the United States. The objectives of this study are to evaluate the safety and tolerability of mRNA-3745, to assess the pharmacodynamic response through changes in maintenance of euglycemia, and to characterize the pharmacokinetic profile of mRNA-3745.
MANUFACTURING (PRODUCT SUPPLY AND TECHNICAL DEVELOPMENT)
We believe manufacturing
Manufacturing plays a critical role in our value chain and our ability to develop a new class of medicines. Our manufacturing capabilities currently support theour Research Engine and the Early Development Engine, with future plansEngines, in addition to support demand from theour Late Stage Development and Commercial Engine. Engines. These capabilities have rapidly accelerated as a result of COVID-19 vaccine production.
Within the Research Engine, our manufacturing provides mRNA drug substance and formulated drug product for platform research and therapeutic area drug discovery. For the Early Development Engine, we manufacture mRNA and drug product for IND-enabling GLP toxicology studies and initial human clinical studies. For the Late Stage Development Engine, we produce mRNA and drug product for phase 3 studies. In addition, within the Commercial Engine, we manufacture drug substance and drug product in collaboration with our contract manufacturing organizations, or CMOs, both in the U.S. and internationally. Our approach to date has been to proactively invest and build manufacturing capacity internally and externally with our network of strategic partners in anticipation of demand from internal researchdemand. This capacity planning was immediately leveraged and development, as well as fromexpanded during our strategic collaborators. We have done so by making significant investmentsCOVID-19 vaccine ramp-up into a commercial product in our internal manufacturing capability and in a network of external manufacturing partners.response to the ongoing pandemic.
Overview of our manufacturing operating model
Our manufacturing activities focus on the following:
Manufacturing Technology.•Commercial Production: Our manufacturing technology developmentexpertise includes state-of-the-art technologies for mRNA and drug product manufacturing, andas well as quality control testing to attain a robust and consistent supply that matches target product profiles. ManufacturingOur manufacturing technology also needsis built to support scale-up and support industrialization of products for ultimate commercial approval.
Supply. •Research and Development Support: The product supply for the Research Engine enables platform research and drug discovery in our therapeutic areas. Within the Early Development Engine, supply is directed towards IND-enabling GLP toxicology programs or current good manufacturing practice, or cGMP, supplies for earlyand vaccine areas, in addition to activities related to clinical studies of our investigational medicines.
We have invested in a dedicated in-house manufacturing facility in Norwood, MA, given
Given our expectations for significant ongoing pipeline expansion and the long lead time required to build manufacturing infrastructure, we built a dedicated in-house manufacturing facility in building manufacturing infrastructure. Through December 31, 2018, we had net capitalized costsNorwood, MA, Moderna Technology Center (MTC). The campus is comprised of approximately $140 million related to our Norwood facility. The facilitytwo distinct buildings (MTC South and MTC North). MTC South is approximately 200,000 square feet; can scale up tofeet, with a production capacity of over 100 cGMP lots per year; and can accommodate over 200 ofyear. MTC North is approximately 240,000 square feet, directly supporting improvement in our employees. This facility is expected to supportmanufacturing capabilities. MTC supports our Research Engine supply, IND-enabling GLP toxicology study supplies, and our Phase 1 and Phase 2 pipeline activities, and potentially later-stage clinical development activities (e.g., Phase 3 CMV vaccine clinical trials), as well as certain commercial activities.
Norwood includes the following areas:
five cGMP suites for the manufacture of mRNACOVID-19 vaccine drug substance and bulk drug product;production.
dedicated cGMP suites for sterile filling;
cGMP suites for the manufacture of personalized cancer vaccines, or PCVs;
cGMP suites for the manufacture of critical raw materials;
space for packaging, labeling, and storage of vialed products;
temperature-controlled warehouse for incoming and outgoing products;
quality control laboratories;
pilot scale manufacturing space for scale-up and manufacture of toxicology supplies;
space for the manufacture of research grade mRNA; and
clean utilities including purified water and water for injection generation and controlled distribution.
The facilityMTC campus has been designed with a high level of automation and state-of-the-art digital integration ofto handle manufacturing records and data. In addition, we have deployed an automated material and resource management system, a manufacturing execution, system, a laboratory execution system, a laboratory information management system, and an asset and document management system, to ensure the digital integration of our manufacturing, product testing and release, and regulatory filings. In addition, substantial manufacturing capabilities are realized via CMO relationships in the U.S. and abroad, providing drug substance and fill finish capacity for the COVID-19 vaccine.
Manufacturing technology developmentTechnology Development
In order to
To support our broad pipeline of products, spanningwhich span multiple therapeutic areas and multiple routes of administration (e.g., intramuscular, intratumoral, and intravenous), there is close collaboration between our Platform Research and Technical Development teams to facilitate rapid and seamless clinical translation of scientific breakthroughs. This, in turn, enables us to develop potential vaccines and therapies to serve a widening patient population.
Technical Development encompasses the technology underpinningdesign and optimization of robust and consistent manufacturing processes, product characterization, fit-for-purpose formulations, and product presentations. For instance, our novel hardware platforms’ automation and robotics, coupled with the flexibility of our in-house digital development systems, allows for thousands of experiments and process parameters across our projects, thus supporting our drug product pharmaceutical readiness. Moreover, our recent technical manufacturing is critical to our success. Over the last few years,advances have enabled internalization of new key capabilities, including DNA plasmids and small molecules.
In parallel, we have invested heavilyrefined existing processes, resulting in this technologyincreased manufacturing scale and more robust stability of our mRNA and drug product. These improvements allow us significant control over our supply chain, resulting in larger production yields and longer shelf life of our products. Furthermore, formulation development advancements have added new drug product images, including lyophilization, giving us a path from frozen to enablerefrigerated storage conditions.
Our substantial investments in recent years in Technical Development enabled the breadth and depth of our pipeline, and laid the foundation to prepare us tohelp meet futurethe needs and requirements as our programs enter later phases ofassociated with late stage development and commercialization.the commercialization of the COVID-19 vaccine.
Our technology efforts are intended to span the development
Table of robust and consistent manufacturing processes, assays to fully characterize the product, and fit-for-purpose formulations and product presentations. In addition, manufacturing activities include the development of novel hardware platforms that incorporate significant automation and robotics which are applicable broadly across programs but also specifically to personalized cancer vaccines. All of these activities are being developed with a focus on achieving appropriate cost of goods and scalability.Contents
Our advances over the last few years have enabled us to more efficiently scale our mRNA and drug product manufacturing at successfully larger production yields. We have made significant investments in analytical characterization to determine critical product quality attributes and enable manufacturing site and scale changes over the course of development. In addition, pharmaceutical readiness of our drug product has enabled a wide variety of routes of administration (e.g., intramuscular, intratumoral, and intravenous).
We have also invested in the establishment of technology for the manufacture of some of our key raw materials, including DNA plasmid and many small molecules. This vertical integration allows us to exert significant control over the value chain, though we will continue to use a combination of internal and external manufacture of these raw materials.
Supply of mRNA for the Research Engine and Early Development EngineEngines
Supply for the Research Engine
We believe that our internal manufacturing capacity is key to the advancement of our platform technology development and therapeutic area discovery efforts. High throughput
High-throughput automation and custom-engineeredcustom engineered equipment enableallow us to produce multipleand deliver high quality mRNA and formulated constructs withinin a limited timeframe from order to delivery. We currently have infrastructureshort period of time: our proprietary platform is capable of producing up to 1,000 lots of mRNA sequences and formulations per month with a turnaround time of a few weeks from sequence to final product. The typical scale of mRNA manufactured by this team is 1-101–1,000 mg. Since 2014, we have produced over 27,000 batches of research-grade mRNA. This has been possible, in part, thanks to the ability of researchers in the Moderna ecosystem to order constructs through an integrated digital portal that tracks materials end-to-end in less than 45 days. In addition, multiple integrated algorithms that leverage artificial intelligence and machine learning optimize manufacturability, reduce failures, and increase quality of mRNA sequences.
Supply for the Early Development Engine
Analogous to the Research Engine, we have proactively established manufacturing capabilities forthat support the Early Development Engine.Engine in three key areas: GLP Tox, Clinical Studies, and Personalized Cancer Vaccines. We started supplyingsupply mRNA and formulated product to enableconduct IND-enabling GLP toxicology studies, and forstudies. In addition, human clinical studies meetingrely on supply to meet required cGMP standards, with a combination ofstandards. This is achieved via internal manufacturing at our Cambridge headquartersMTC and external manufacturing at well-established contract manufacturing organizations or CMOs. Norwood has the capability(CMOs). We selected specialized CMOs to support a total of five programs in late 2015. We will continue to selectively partner with CMOs to complement our capacity and capacityprovide supply contingency where needed. Our MTC facility is also suited to produce research and clinical supply for our programs as well as to enable rapid technology development and scale-up for future needs. Our manufacturing also produces cGMP Personalized Cancer Vaccines (PCVs). Due to the specialized nature of personalized medicine (i.e., where a batch is specifically designed and manufactured for a single patient), the manufacturing Personalized Vaccine Unit (PVU) has unique requirements. We will continuedigitally integrate patient-specific data from sequencing tumor samples to selectivelyautomatically design PCVs for patients. We have developed proprietary bioinformatics designed algorithms linked to an automated manufacturing process for rapid production of formulated mRNA, with a typical turnaround time of a few weeks. We have operationalized PCV manufacturing at the MTC campus to meet our Phase 1 and 2 pipeline supply needs by using single-use systems with fast “needle-to-needle” turnaround times. Unlike traditional process development, each PCV batch is manufactured for a single patient and thus scaled-out (in parallel) with extensive use CMOsof automation and robotics to complementaccount for the larger number of patients involved in later phases of development and commercialization. We have shown consistent quality in our internal capacityproduction of over 160 patient batches, each with unique mRNA sequences.
These capabilities have allowed us to provide supply contingency and expanded capability where needed.
This extensive capacity has helped enablebuild our broad pipeline of 2024 development candidates, including the significant output necessaryrequired to supply ourrelated toxicological and human clinical studies. Though the underpinnings ofWhile the technology utilized acrossthat underpins these 2024 programs areis the same, each program typically requires customization driven in part by itsbased on target product profile.profiles. These custom features range from varying molecular architecture to different routes of administration, and often necessitaterequiring multivalent products. For example, our CMV vaccine (mRNA-1647) requires six different mRNA sequences to be manufactured for inclusion in an intramuscular mRNA medicine, whereas OX40L (mRNA-2416) requires a single mRNA sequence for inclusion in an intratumoral mRNA medicine. All programs, with the exception of PCV, require that we progressively scale up supply over time to meet the clinical demand requiredrequirements across development phases, in addition to the different phases of development and prepare the processnecessary preparation for regulatory approval and eventually commercial supply, where biggerproduction, which demand larger batch sizes will be required.sizes. In contrast, the PCV program is designedseeks to provide each patient withdevelop a cancer vaccine that is designed and manufactured for thata specific patient, thus increasing the number of batches to match the number of patients treated.unique batches. As we scale the manufacturing output for particular programs,each program, we plan to continuously improve yield, purity, and the pharmaceutical properties of our development candidates from IND-enabling GLP toxicology studies through commercial launch, including improvement to shelf life stability and solubility properties of drug product and drug substance. Typically after a change in process, more time may be required for pharmaceutical property testing, such as 6- or 12-month stability testing. This time lag may necessitate resupplying clinical materials, or making additional cGMP batches to meet clinical trial demand, before such pharmaceutical property testing is completed.candidates.
Supply of mRNA and formulated product for toxicology studies: Early on, we established the internal capability to produce mRNA and formulated product for IND-enabling GLP toxicology studies for our development candidates under GLP standards.
Supply of cGMP mRNA and formulated product for human clinical studies: We have incrementally built the capability to produce and supply mRNA drug product for clinical development. In our early years, we outsourced cGMP supply. We selected specialized CMOs to support a total of five programs by the end of 2015. In 2016, we built and qualified two cGMP suites in our Cambridge facility for the manufacture of mRNA drug substance and formulated drug product. While we had the internal capability to produce drug product, we continued to work with our external CMO network for redundant capacity and to provide sterile filling capability.
cGMP manufacture of PCV: Due to the specialized nature of personalized medicine, in which a batch is specifically manufactured for a single patient, the PCV program has unique requirements. In this program, we digitally integrate patient-specific data from
sequencing tumor samples and automatically design PCVs for patients. We have developed proprietary bioinformatics design algorithms, and have linked them to an automated manufacturing process for rapid production of formulated mRNA that can be turned around in a matter of weeks. The PCV manufacturing capability is termed Personalized Vaccine Unit, or PVU. PCV manufacturing is conducted using custom automated and engineering solutions utilizing single-use systems with fast “needle-to-needle” turnaround time. We have operationalized PCV manufacture within our external CMO network to meet our Phase 1 supply needs, while in parallel working to internalize manufacturing. Unlike traditional process development, where the product is scaled up in quantity for later phases of development and commercialization, each PCV is manufactured for a single patient and thus scaled-out with extensive use of automation and robotics for the larger numbers of patients involved in later phases of development and commercialization.
Supply for the Late StageLate-Stage Development and Commercialization EngineEngines
As we manufacture the COVID-19 vaccine, our development pipeline advancescontinues to later stageadvance to later-stage development and potential commercialization, we will needtowards commercialization. Our platform approach allows us to continue to evolve our manufacturing suites and other capabilities at Norwood. We believe at this time theour MTC campus. Building expansions and enhancements have continued throughout scale-up of our COVID-19 vaccine manufacturing capabilities. The modular nature of the NorwoodMTC suites will permitpermits us to manufacture multiple products in parallel. For instance, we can produce drug substance and drug product for a number of registrational trials and potentiallyour phase 3 CMV clinical trial while manufacturing COVID-19 drug substance and drug product for commercialization for certain rare disease indications. In other instances, we may build additional capabilities to support our Late Stage Development and Commercialization Engine.substance.
Quality unitUnit
Quality is core to the way we operate. We seek to ensure quality at Moderna through a combination of a robust Quality Management System or QMS,(QMS), our quality culture, and through our people. In accordance with applicable regulations, we have established, documented, and implemented a QMS to assure continued compliance with the requirements therein. The QMS facilitates cGMP compliance by implementing practices that identify the various processes required by the QMS,processes, their application throughout the organization, and the sequence of interaction of these processes.
The primary mode of documenting these key practices is through policies, standard operating procedures (SOPs), forms, and other quality records, which include an overarching Quality Policy and Quality Manual. We have implemented measurement tools and metrics to monitor, measure, and analyze these practices to support cGMP operations, achieve planned results, and support continuous improvement. We monitor these quality metrics through formal governance processes, including Quality Management Review or QMR, and our Quality Council(QMR), to enable continuous improvement. We have also established an independent Quality Unit that fulfills quality assurance and quality control responsibilities.
Our Quality Unit grew into an international organization with the introduction of COVID-19 vaccine manufacturing. Quality drives our quality culture and ensures it is applied consistently and thoughtfully across the globe.
While the Quality Unit is ultimately accountable and responsible for quality, qualitythis is everyone’s responsibility. All cGMP personnel are empowered to ensure quality systems are appropriately maintained and executed.
We have established a culture that encourages transparency, accountability, and ownership of quality at all levels in the organization. As we scale the quality organization, we have focused on hiring the best talent with the required experience, training, and education.
Supply chain unitChain Unit
We have established a robustan international supply chain to enable sufficient supply of the raw materials used to produce our mRNAs and the components of our formulations.formulations, securing supply for COVID-19 vaccine alongside clinical and preclinical demands. We have worked with our supply chain vendors to characterize critical raw materials and to understand their impact on the quality of mRNA drug substance and formulated drug product. We have also assessedassess the quality system and performance of our supply chain vendors and workedwork with them to comply with regulatory requirements.
DIGITAL INFRASTRUCTURE
We believe that digital technologies, such as robotics, automation, artificial intelligence, or AI, and cloud computing, are critical to operationalize our strategy, accelerate our pace of learning and execute at scale. Since our inception, we have invested over $100 million in our digital technologies, robotics/automation, analytics, data science and AI. Given our growth, we expect we will invest more than an additional $100 million in digital over the next 5 years. Our approach to bring these digital technologies into our workflows and processes has involved the following:
•utilization of a consistent set of digital building blocks;
•application of digital technologies in multiple business processes; and
•rapid iterations for maximum optimization.
We have seen several benefits from our investments in digitization, most importantly through the depth of our platform technology and breadth of our pipeline. Other benefits include:
•Quality: Reduction in human errors by enabling automation, repeatability, and seamless integration;
•Scalability: Growth in our pipeline to 2024 programs;
•Speed: Rapid manufacture of research-grade mRNA from the Research Engine; and
•Cost efficiencies: Digital infrastructure utilized across our platform, drug discovery, clinical development, and manufacturing to maximize efficiencies.
Our digital building blocks
We utilize six building blocks for our digital infrastructure:
•Cloud enablementis a critical component of our digital infrastructure. We are at the forefront of mRNA technology. We generate complex datasets, and our scientists need computational power and agility to operate without being limited by traditional computing technology. Maintaining digital infrastructure in the cloud provides the benefits of lower costs by simplifying provisioning and administration, flexibility, scalability, ease of maintenance, disaster recovery, and information security.
•Integration of business processesenables us to streamline processes and bring data together in a consistent manner, avoiding caches ofinformation and manual intervention. This efficient flow of data between systems enables the automation of our business processes.
•Internet of thingsallows for smart interconnected devices that provide real-time synchronization of operations. The data from equipmentprovides real-time guidance to our scientists and engineers.
engineers and helps us in supply chain and manufacturing with compliance and traceability, including tracking material, controlling inventory and optimizing instrument usage.
•Automationallows us to scale our operations reliably and reproducibly. With the help of custom hardware solutions and state-of-the-art robotics,we can continue to increase our operating efficiency, reduce errors, and improve our quality and compliance.
•Advanced analyticsenable us to draw insights from our data. We are constantly generating large data sets that can provide important insights ifmined appropriately and regularly.
•Artificial intelligence, or AI, is enabling key breakthroughs in predictive modeling. It will allow us to improve our mRNA design algorithmsbased on machine learning, and will provide us with critical insights into research, supply chain, manufacturing, and other processes.
Digital technologies to enable our Research Engine
We have deployed multiple digital technologies across our Research Engine to drive a rapid pace of learning, enable efficient workflows and business processes, and draw insights from vast amounts of data. Our aim is to provide our platform and discovery scientists with access to an environment that helps them through each step of their research cycle.
Drug Design Studio:Our proprietary in-house digital application suite contains a Sequence Designer module to tailor an entire mRNA, with ever-improvingrule sets that contain our accumulated learning about mRNA design. Drug Design Studio utilizes cloud-based computational capacity to run various algorithms we have developed to design each mRNA sequence. The utility of cloud-based capacity allows us to provide flexible computational capacity on demand, allowing the Research Engine to power parallel intake and design of multiple mRNA sequences. Once a sequence is designed, it can be ordered digitally using an internal order form application within Drug Design Studio.
Manufacture of research grade mRNA:Once an order is optimized, the mRNA production process is triggered. We have developed proprietary interfacesthat allow the manufacturing team to track production orders at every stage. We have automated several manufacturing steps using both off-the-shelf and custom automation. The equipment used in the manufacture of research-grade mRNA is integrated with the digital interfaces to capture, extract, and interpret the data generated at each step of the manufacturing process, building digital traceability on each mRNA order. We have also embedded real-time algorithms and analytics tools to allow for automated decision-making at some stages, accelerate the quality control workflows, and provide for continuous improvement of manufacturing processes.
Dispatching and shipping mRNA:Because we produce large quantities of research-grade mRNA, we require digital tools to track their shipment to ourscientists and to external contract research organizations, or CROs, conductingin vivo studies. Our dispatching and shipping application automatically generates bar-coded labels, allowing for traceability of product.
Inventory and registry:Material used in research and created in production, including mRNA, cell lines, chemicals, and reagents, is tracked in our Inventoryapplication. This application supports numerous workflow tools such as consumption, aliquoting, material transfer, and stock alerts. Critical material types are assigned unique registry identification by our Registry application.
Study design:Using our Drug Design Studio, our scientists can design theirin vivostudies using our proprietary Study Design application. This applicationcapturesin vivo study protocol design parameters, including dose amount, number of doses, frequency, samples, and assays for each sample. This application serves two purposes. It allows our scientists to maintain and track theirin vivo study designs and associated research grade mRNA. Our Study Design application also allows ourin vivo pharmacology teams to track the various ongoing studies and leverage external CROs to manage thein vivo demand as needed.
Experiment management:We have deployed Electronic Lab Notebooks for experiment management, allowing our scientists to streamline documentation oftheir experiments and track it in a standardized, searchable repository. We have also integrated Electronic Lab Notebooks further with our other research tools to connect inventory,in vivo studies, and instrument data.
Advanced analytics and AI to accelerate the pace of learning:We utilize AI to enable various parts of our platform and drug discovery. Examples include:
•Neural networks for protein engineering: One way to optimize the efficacy of the proteins encoded by our mRNA is to engineer the sequence ofthe protein itself. We use neural networks to analyze and model protein sequences. We train these models by inputting orthologous sequences from thousands of organisms, from which we can generate potential protein sequences optimized for specific attributes.
•Neural networks for mRNA engineering: The redundancy in the genetic code allows for a large number of mRNA sequences that encode thesame protein. mRNA sequence may impact translation, thereby impacting the amount of protein produced in circulation. We are developing AI tools to predict mRNA sequences that can enhance protein expression.
Bayesian AI for•Automated Sanger sequencing mRNAanalysis: Sanger sequencing is us used repeatedly to quality check, or QC, our DNA templates and final mRNA; while the data contain every nucleotide in a sequence, it is very complex to analyze. A fully automated data pipeline starts processing raw data the moment it is saved to the cloud by the sequencers. The pipeline spawns numerous AWS computer servers to run an analysis algorithm and then shuts the servers down, resulting in minimal costs. The results are viewable in a powerful, dynamic visualization tool. We have run over 3 million Sanger data files through this system. We have further improved our Sanger analysis with a convolutional neural network, or CNN, to better analyze the tail sections of mRNA sequence produced in our Research Engine as partwell.
Table of our quality control requirements. Analysis of sequencing data can be cumbersome and time-consuming. We are developing Bayesian models to accelerate the assessment of sequencing data and more rapidly provide our scientists with high quality mRNA.Contents
Digital technologies to enable our Early Development Engine
We have deployed multiple digital technologies across our Early Development Engine to drive the rapid pace of advancement, in parallel, of our development candidates into the clinic.
Digital systems for cGMP manufacture:We are committed to having integrated systems connected with robotics to drive our manufacturing in a paperlessenvironment, and have designed and deployed automation to drive efficient manufacturing operations. We have also deployed digital tools within manufacturing process development that give us the ability to track, analyze, and rapidly deploy manufacturing process improvements. Additionally, we have implemented several digital systems across manufacturing process development, quality, supply chain, and operations, including:
•enterprise Quality Management System, or QMS, to electronically manage deviations, investigation, and correction and preventive actions;
•Laboratory Information Management System, or LIMS, to manage our analytical development data and automate our manufacturing quality control;
•computerized maintenance management system to manage equipment maintenance and calibration; and
•SAP/S4 Hana system for enterprise resource planning, or ERP, manufacturing execution system, and manufacturing control system to manage inventories, track raw material consumption, digitally integrate equipment with manufacturing recipes in batch records, and control automated equipment.
Digital systems for clinical development and clinical operations:In order to track the timelines of various development candidates through the EarlyDevelopment Engine, we have created a set of integrated applications. Workflows include timelines for regulatory filings, planning for IND-enabling GLP toxicology studies, scheduling for cGMP manufacturing, and clinical operations management. Below is a summary of our applications:
•Our portfolio application is a digital interface that maintains and tracks the timelines across multiple workstreams for each of our development candidates.
•The supply application manages the manufacturing schedule of IND-enabling GLP toxicology supplies and cGMP manufacture of clinical supplies to support our programs. This application helps us see how the manufacturing schedule changes over time, identifies supply/demand mismatches, and enables resource planning with real-time alerts should we have any issues.
•The GLP toxicology application tracks the planned and ongoing IND-enabling GLP toxicology studies and allows us to manage timelines with our external vendors.
•The regulatory application tracks timelines related to regulatory affairs including, pre-IND meetings, IND/CTA submission dates, and other planned regulatory interactions.
•Our clinical operations application allows us to track our ongoing trials by accessing clinical operations information in real-time from our CROs. It also has multiple tools and analytics to draw key insights, including, for example, enrollment by trial and enrollment by site to maintain our program timelines.
Digital systems for PCV:The PCV program aims to design, manufacture, and deliver a drug product that includes an mRNA sequence encoding for eachpatient’s specific neoantigens. The personalized nature of the PCV program adds additional steps and complexity in the overall patient treatment process. We have addressed those additional steps and complexity by digitizing and automating steps within the process, as described below.
•Each patient is provided a unique identifier. We track the entire workflow using a single integrated tracker based on this unique identifier. This is one of many ways we ensure that each patient receives the specific drug product lot manufactured for them.
•We use neural networks to design the mRNA sequences for the PCV program. Our proprietary vaccine design algorithm selects the top twenty neoantigens to be used and determines their amino acid sequences to trigger the desired immune response.
•We utilize Monte Carlo simulations of PCV supply/demand to manage our capacity. Since each drug product lot is personalized to a patient, there is a need to manage supply and demand to avoid bottlenecks at any stage of the workflow.
Digital systems for the Commercial Engine: We are building our commercial engine to establish medical affairs engagements with doctors, support our sales and marketing capabilities and deliver a world-class patient experience. In addition to a patient- and doctor-centric view, our commercial engine will strengthen our supply chain demand forecasting and our compliance. We are looking at building a robust serialization process for regulatory requirements as well as anti-counterfeiting technologies to ensure safe, efficacious medicines to patients.
Digital technologies to support our business processes
We have deployed several digital systems across finance, manufacturing, and human resources to automate our business processes and drive efficiencies. We have implemented the SAP S4/Hana system for ERP. In December 2016 we implemented the finance, procurement and inventory management modules and further scaled the ERP to support manufacturing, quality and supply chain in September 2017 and added the Norwood site and processes in July 2018. We have implemented various cloud-based solutions to improve business processes and drive efficiencies. For example, we have implemented the Workday system for human resource planning and management and integrated various applications across payroll, 401k services, equity plan management and expense reporting. Our class-leading integration platform, Dell Boomi, allows us to have a highly interconnected environment, moving us from simple cloud-to-cloud integrations to an evolving use of the integration platform for master data management, systems account management, and ultimately for cost savings and improved user experience.
THIRD-PARTY STRATEGIC ALLIANCES
Strategic alliances
To accelerate the discovery and advancement of potential mRNA medicines across therapeutic areas, we have entered into, and intend to seek other opportunities to form, alliances with a diverse group of strategic collaborators. We have forged productive strategic alliances with pharmaceutical and biotechnology companies, government agencies, academic laboratories, foundations and research institutes with therapeutic area expertise and resources in an effort to advance our discovery and development programs, while leveraging our platform and our Research and Early Development Engines.
One key principle of our approach to strategic alliances is to share the rewards and risks of developing a new mRNA modality, where we may have early research data and desire a strategic collaborator to join us in advancing early development candidates within such modality into the clinic. Representative relationships and associated programs include the following:
•AstraZeneca for the localized regenerative therapeutics modality, such as the VEGF-A program (AZD8601) program currently in Phase 2a;
•AstraZeneca for the intratumoral immuno-oncology modality, such as the IL12IL-12 program (MEDI1191); currently in Phase 1;
AstraZeneca for the systemic secreted therapeutics modality, such as the Relaxin program (AZD7970);
Merck for the prophylactic vaccines modality, such as the RSV vaccine program (mRNA-1777) currently being prepared for a Phase 2;
•Merck for the cancer vaccines modality, such as the personalized cancer vaccine program (mRNA-4157) currently in Phase 12 using a workflow that enables a rapid turnaround time to bring personalized vaccines to patients, and the KRAS vaccine program (mRNA-5671); currently in Phase 1;
•DARPA for the systemic secreted therapeutics modality, such as the antibody against Chikungunya virus program (mRNA-1944) currently in Phase 1; and
•Vertex for the lung delivery modality, such as the CF/cystic fibrosis, or CF, and cystic fibrosis transmembrane conductance regulator, or CFTR program currently in research.research;
•Vertex for gene editing, aimed at the discovery and development of LNPs and mRNAs for the delivery of gene-editing therapies for the treatment of CF; and
•Chiesi Farmaceutici S.P.A. for the discovery and development of potential mRNA medicines for the treatment of pulmonary arterial hypertension.
We view strategic alliances as important drivers for accelerating execution of our goal of rapidly developing mRNA medicines to treat patients across a wide range of medical and disease challenges. To maintain the integrity of our platform, the terms of our agreements with our strategic collaborators generally provide that our strategic collaborators receive rights to develop and commercialize potential mRNA medicines that we design and manufacture, as opposed to rights to use our platform to generate new mRNA, and that we generally own mRNA-related intellectual property arising from research activities performed under the strategic alliance.
We plan to continue to identify potential strategic collaborators who can contribute meaningful resources and insights to our programs and allow us to more rapidly expand our impact to broader patient populations.
AstraZeneca (NYSE:(NASDAQ: AZN)—Strategic Alliances in Cardiovascular and Oncology
We have had three alliances with AstraZeneca.AstraZeneca, two of which are ongoing. Our first strategic alliance established in 2013 and amended and restated in 2018, was to discover, develop, and commercialize potential mRNA medicines for the treatment of cardiovascular and cardiometabolic diseases, as well as selected targets for cancer. The relationship with AstraZeneca was expanded in 2016 by entering into a new immuno-oncology strategic alliance which is now focused on the joint development of a potentialan mRNA investigational medicine to make the IL12IL-12 protein. It was further expanded in 2017 by entering into anothera third strategic alliance which is focused on the joint development of a potential mRNA medicine to make the relaxin protein, following discovery and preclinical development of the relevant development candidate internally. This last strategic alliance related to relaxin was terminated in December 2020. Additionally, AstraZeneca has made several equity investments in Moderna, which totaltotaling approximately $290.0 million through December 31, 2018.2020, although AstraZeneca has disclosed it is no longer a Moderna shareholder as of that date.
2013 Agreements with AstraZeneca, amended and restated in 2018
In March 2013, we entered into an Option Agreement and a related Services and Collaboration Agreement with AstraZeneca, which were amended and restated in June 2018. We refer to these amended and restated agreements as the 2018 (2018 A&R Agreements.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.
Pursuant to the 2018 A&R Agreements, AstraZeneca is responsible for all research, development and commercialization activities and associated costs, while we provide specified research and manufacturing services, at AstraZeneca’s expense, during a research and evaluation period, as described below, to further AstraZeneca’s activities conducted pursuant to an agreed upon services plan. AstraZeneca may request we provide additional services, at AstraZeneca’s expense. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufacture (or have manufactured) mRNA for all research, development and commercialization purposes under the 2018 A&R Agreements until, on a product-by-product basis, the expiration of the time period for which we are entitled to receive earn-out payments with respect to such product pursuant to the 2018 A&R Agreements.
As of the effective date of the original Option Agreement and Services and Collaboration Agreement in 2013, and as further reflected in the 2018 A&R Agreements, AstraZeneca acquired forty options that it may exercise to obtain exclusive rights to clinically develop and commercialize identified development candidates (and related back-up candidates) directed to specified targets that arise during the research and evaluation period. During the research and evaluation period for research candidates, AstraZeneca may elect to designate a limited number of research candidates as development candidates in order to continue preclinical development on such development candidates (and related back-up candidates). From such pool of development candidates designated by AstraZeneca, during a specified option exercise period, AstraZeneca may then exercise one of its options to obtain exclusive rights to clinically develop and commercialize an identified development candidate (and related back-up candidates) in certain fields. If AstraZeneca does not exercise one of its options to acquire exclusive rights to clinically develop and commercialize a particular development candidate during the defined option exercise period for such development candidate, AstraZeneca’s rights to exercise an option and other rights granted under the 2018 A&R Agreements with respect to such development candidate (and related back-up candidates) will terminate, all rights to exploit such development candidate (and related back-up candidates) will be returned to us and all data and results generated by AstraZeneca with respect to such development candidate (and related back-up candidates) will be either assigned or licensed to us. Upon the earlier of termination of the 2018 A&R Agreements for any reason and a specified anniversary of the effective date of the original Option Agreement and Services and Collaboration Agreement in 2013, all unexercised options, and the right to exercise any and all options if not previously exercised by AstraZeneca, will automatically terminate.
On a target-by-target basis, we and AstraZeneca have agreed to certain defined exclusivity obligations under the 2018 A&R Agreements with respect to the research, development and commercialization of mRNA medicines for such target in certain fields. In addition, we and AstraZeneca have agreed to certain defined exclusivity obligations with respect to the research, development and commercialization of mRNA medicines coding for the same polypeptide as any development candidate being developed under the 2018 A&R Agreements.
As of the effective date of the original Option Agreement and Services and Collaboration Agreement in 2013, AstraZeneca made upfront cash payments to us totaling $240.0 million in exchange for the acquired options and our performance of certain research-related services, each as described above. AstraZeneca will pay us a $10.0 million option exercise payment with respect to each development candidate (and related back-up candidates) for which it exercises an option. We are also eligible to receive, on a product-by-product basis, up to $400.0 million in aggregate contingent option exercise payments upon the achievement of certain development, regulatory and commercial milestone events. Additionally, we are entitled to receive, on a product-by-product basis, earn-out payments on worldwide net sales of products ranging from a high-single digit percentage to 12%, subject to certain reductions, with an aggregate minimum floor. As ofThrough December 31, 2018,2020, we have received from AstraZeneca an option exercise payment of $10.0 million and a clinical milestone payment of $30.0 million with respect to AstraZeneca’s VEGF-A product (AZD8601) that is currently being developed in a Phase 2a clinical trial in the cardiovascular and cardiometabolic fields. Additionally, as ofthrough December 31, 2018,2020, we have received $120.0 million from AstraZeneca under the 2018 A&R Agreements for the achievement of specified technical milestones.
Unless earlier terminated, Further detail on the terms of the 2018 A&R Agreements, will continue untilincluding the expiration of AstraZeneca’s earn-out and contingent option exercise payment obligations for optioned product candidates. Either party may terminate the 2018 A&R Agreements upon the other party’s material breach, eitherfinancial arrangements are included in its entirety or in certain circumstances, with respectNote 5 to relevant candidates, subject to a defined materiality threshold and specified notice and cure provisions. If AstraZeneca has the right to terminate the 2018 A&R Agreements for our material breach, then AstraZeneca may elect, in lieu of terminating the 2018 A&R Agreements, in their entirety or with respect to such candidates, to have the 2018 A&R Agreements remain in effect, subject to reductions in certain payments we are eligible to receive and certain adjustments to AstraZeneca’s obligations under the 2018 A&R Agreements. AstraZeneca may terminate the 2018 A&R Agreements in full, without cause, upon 90 days’ prior notice to us.Financial Statements (“Collaboration Agreements”).
2016 Strategic Alliance with AstraZeneca—IL12IL-12
In January 2016, we entered into a new Strategic Drug Development Collaboration and License Agreement which we refer to as the 2016(2016 AZ Agreement,Agreement) with AstraZeneca to discover, develop and commercialize potential mRNA medicines for the treatment of a range of cancers.
Under the terms of the 2016 AZ Agreement, we and AstraZeneca have agreed to work together on an immuno-oncology program focused on the intratumoral delivery of a potential mRNA medicine to make the IL12IL-12 protein. The 2016 AZ Agreement initially included research activities with respect to a second discovery program. During a limited period of time, each party had an opportunity to propose additional discovery programs to be conducted under the 2016 AZ Agreement. We are responsible for conducting and funding all discovery and preclinical development activities under the 2016 AZ Agreement in accordance with an agreed upon discovery program plan for the IL12IL-12 program and any other discovery program the parties agree to conduct under the 2016 AZ Agreement. For the IL12IL-12 program and any other discovery program the parties agree to conduct under the 2016 AZ Agreement, during a defined election period that commenced as of the effective date of the 2016 AZ Agreement (for the IL12IL-12 program) and otherwise will commence on initiation of any such new discovery program, AstraZeneca may elect to participate in the clinical development of a development candidate arising under the 2016 AZ Agreement from such program. If AstraZeneca so elects (as it has for the IL12IL-12 program), AstraZeneca will lead clinical development activities worldwide and we will be responsible for certain activities, including being solely responsible for manufacturing activities, all in accordance with an agreed upon development plan. AstraZeneca will be responsible for funding all Phase 1 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan), and Phase 2 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan) up to a defined dollar threshold. We and AstraZeneca will equally share the costs of Phase 2 clinical development activities in excess of such dollar threshold, all Phase 3 clinical development activities and certain other costs of late-stage clinical development activities, unless we elect not to participate in further development and commercialization activities and instead receive tiered royalties, as described below.
We and AstraZeneca will co-commercialize products in Further detail on the United States in accordance with an agreed upon commercialization plan and budget, and on a product-by-product basis will equally share the U.S. profits or losses arising from such commercialization. Notwithstanding, on a product-by-product basis, prior to a specified stage of development of a given product, we have the right to elect not to participate in the further development and commercialization activities for such product. If we make such election, instead of participating in the U.S. profits and losses share with respect to such product, we are obligated to discuss future financial terms with AstraZeneca. If we are unable to agree on future financial terms within a short defined period of time, we are entitled to receive tiered royalties at default rates set forth in the 2016 AZ Agreement, ranging from percentages in the mid-single digits to 20% on worldwide net sales of products, subject to certain reductions with an aggregate minimum floor. AstraZeneca has sole and exclusive responsibility for all ex-U.S. commercialization efforts. Unless we have elected to not to participate in further development (in which case royalties on ex-U.S. net sales will be at the default rates as described above, unless otherwise agreed by the parties), we are entitled to tiered royalties at rates ranging from 10% to 30% on ex-U.S. net sales of the products, subject to certain reductions with an aggregate minimum floor. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufacture (or have manufactured) products for all development and commercialization purposes. We and AstraZeneca have agreed to certain defined exclusivity obligations with each other under the 2016 AZ Agreement with respect to the development and commercialization of mRNA medicines for IL12.
Unless earlier terminated, our strategic alliance under the 2016 AZ Agreement will continue on a product-by-product basis (i) until both parties cease developing and commercializing such product without the intention to resume, if we have not elected our right not to participate in further development and commercialization of such product or (ii) on a country-by-country basis, until the end of the applicable royalty term for such product in such country, if we have elected our right not to participate in further development and commercialization of such product.
Either party may terminate the 2016 AZ Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the 2016 AZ Agreement in the event the other party challenges such party’s patent rights, subject to certain defined exceptions. AstraZeneca has the right to terminate the 2016 AZ Agreement in full or with respect to any program for scientific, technical, regulatory or commercial reasons at any time upon 90 days’ prior written notice to us. On a product-by-product basis, we have the right to terminate the 2016 AZ Agreement in certain cases if AstraZeneca has suspended or is no longer proceeding with the development or commercialization of such product for a period of twelve consecutive months, subject to specified exceptions, including tolling for events outside of AstraZeneca’s control. On a product-by-product basis, if the 2016 AZ Agreement is terminated with respect to a given product, AstraZeneca’s rights in such product will terminate and, to the extent we terminated for AstraZeneca’s breach, patent challenge or cessation of development or AstraZeneca terminated in its discretion, AstraZeneca will grant us reversion licenses and take certain other actions so as to enable us to continue developing and commercializing such product in the oncology field.
If we continue developing and commercializing a given product following termination of the 2016 AZ Agreement, by AstraZenecaincluding the financial arrangements are included in its discretion with respectNote 5 to such product, AstraZeneca is entitled to receive a mid-single digit royalty on our worldwide net salesFinancial Statements (“Collaboration Agreements”).
Table of such product and a high-single digit percentage of the amounts received by us from a third party in consideration of a license to such third party to exploit such product, in each case, until AstraZeneca recovers an amount equal to specified development costs incurred by AstraZeneca under the 2016 AZ Agreement with respect to such product prior to such termination. Such percentages increase by a low to mid-single digit amount to the extent such termination occurs after such product achieves a specified stage of development.Contents
2017 Strategic Alliance with AstraZeneca—Relaxin
In October 2017, we entered a new Collaboration and License Agreement which we refer to as the 2017(2017 AZ Agreement,License Agreement) under which AstraZeneca mayhad the right to 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 LNPs. We discovered and performed preclinical development activities for AZD7970 prior to the initiation of the strategic alliance with AstraZeneca under the 2017 AZ License Agreement.
Under the terms of On December 16, 2020, the 2017 AZ License Agreement we will fund and be responsible for conducting preclinical development activities for AZD7970 through completion of IND-enabling GLP toxicology studies and AstraZeneca will lead pharmacological studies, each in accordance with an agreed upon discovery program plan. During a defined election period that commences as of the effective date of the 2017 AZ Agreement, AstraZeneca may elect to participate in further development and commercialization of AZD7970. Upon such election, AstraZeneca will lead clinical development activities for AZD7970 worldwidewas terminated by mutual agreement, and we will be responsible for manufacturing AZD7970, certain regulatory matters and any other development activities that we agree to perform and that are set forth in an agreed upon development plan. AstraZeneca will be responsible for funding Phase 1 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan, up to a cap above which such costs are shared), and Phase 2 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan, up to a cap above which such costs are shared) up to a defined dollar threshold. Thereafter, we and AstraZeneca will equally share the costs of Phase 2 clinical development activities in excess of such defined dollar threshold, all Phase 3 clinical development activities and certain other costs of late-stage clinical development activities, unless we elect not to participate in further development and commercialization activities and instead receive tiered royalties as described below. If the development candidate is determined to be IND-ready, and AstraZeneca does not timely elect to participate in the clinical development of AZD7970, AstraZeneca is obligated to reimburse us for certain costs we incurred in the manufacture and development of AZD7970 since execution of the 2017 AZ Agreement.
We and AstraZeneca will co-commercialize AZD7970 in the United States in accordance with an agreed upon commercialization plan and budget, and will equally share U.S. profits or losses arising from such commercialization. Notwithstanding, prior to a specified stage of development of AZD7970, we havereceived the right to elect not to participate in the further development and commercialization activities for AZD7970. If we make such election, instead of participating in the U.S. operating profits and losses share with respect to AZD7970, we are obligated to discuss future financial terms with AstraZeneca. If we are unable to agree on future financial terms within a short, defined period of time, we are entitled to receive tiered royalties at default rates set forth in the 2017 AZ Agreement, ranging from percentages in the mid-single digits to the low 20s on worldwide net sales by AstraZeneca of AZD7970, subject to certain reductions with an aggregate minimum floor. AstraZeneca has sole and exclusive responsibility for all ex-U.S. commercialization efforts. Unless we have elected not to participate in further development (in which case royalties on ex-U.S. net sales will be at the default rates as described above, unless otherwise agreed by the parties), we are entitled to receive tiered royalties at rates ranging from 10% to 30% on annual ex-U.S. net sales of AZD7970, subject to certain reductions, with an aggregate minimum floor. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufacture (or have manufactured) products for all development and commercialization purposes. Additionally, we and AstraZeneca have agreed to certain defined exclusivity obligations under the 2017 AZ Agreement with respect to the development and commercialization of mRNA medicines for Relaxin.
Unless earlier terminated, our strategic alliance under the 2017 AZ Agreement will continue (i) until the expiration of AstraZeneca’s election period, if it does not elect to participate in the clinical development of AZD7970, (ii) until both parties cease developing and commercializing AZD7970 without the intention to resume, if we have not elected our right not to participate in further development and commercialization of AZD7970, (iii) on a country-by-country basis, until the end of the applicable royalty term for AZD7970 in such country, if we have elected our right not to participate in further development or commercialization of AZD7970 or (iv) following completion of IND-enabling studies with respect to AZD7970, if we provide AstraZeneca with written notice that we do not reasonably believe that the product is IND-ready.
Either party may terminate the 2017 AZ Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the 2017 AZ Agreement in the event the other party challenges the validity or enforceability of such party’s patent rights, subject to certain defined exceptions. AstraZeneca has the right to terminate the 2017 AZ Agreement in
full for scientific, technical, regulatory or commercial reasons at any time upon 90 days’ prior written notice to us. We have the right to terminate the 2017 AZ Agreement in certain cases if AstraZeneca has suspended or is no longer proceeding with the development or commercialization of AZD7970 for a period of twelve consecutive months, subject to specified exceptions, including tolling for events outside of AstraZeneca’s control. If AstraZeneca does not timely elect to participate in clinical development of AZD7970, or the Agreement is terminated, AstraZeneca’s rights in AZD7970 will terminate and, to the extent we terminated for AstraZeneca’s breach, patent challenge or cessation of development or AstraZeneca terminated in its discretion, AstraZeneca will grant us reversion licenses and take certain other actions so as to enable us to continue developing and commercializing AZD7970 in the cardiovascular and cardiometabolic fields.
If we continue developing and commercializing AZD7970 following a termination of the 2017 AZ Agreement by AstraZeneca in its discretion, AstraZeneca is entitled to receive a mid-single digit royaltydevelop relaxin on our worldwide net sales of AZD7970 and a high-single digit percentage of the amounts received by us from a third party in consideration for a licenseown without any further obligation to such third party to exploit AZD7970, in each case until AstraZeneca recovers an amount equal to specified development costs incurred by AstraZeneca under the 2017 AZ Agreement with respect to AZD7970 prior to such termination. Such percentages increase by a low to mid-single digit amount to the extent such termination occurs after such product achieves a specified stage of development.AstraZeneca.
Merck (NYSE: MRK)—Strategic Alliances in Infectious Diseases and Cancer Vaccines
We have established a multi-faceted relationship with Merck Sharp & Dohme Corp., or Merck, (Merck) that includes distinct strategic alliances directed to the research, development, and commercialization of mRNA medicines for the prevention and treatment of viral infections and for the treatment of cancer. In connection with these alliances, Merck has also made several equity investments in Moderna totaling approximately $182.0 million.million, although Merck has disclosed the sale of its direct equity interest.
2015 Strategic Alliance with Merck—Infectious Disease
In January 2015, we entered into a Master Collaboration and License Agreement with Merck which we refer to as the 2015(2015 Merck Agreement,Agreement), to research, develop, and commercialize potential mRNA medicines for the prevention and treatment of infections by RSVRSV. As a part of the May 2019 amendment of the 2015 Merck Agreement, we and three additional undisclosed viruses.Merck agreed to conclude the collaboration as it relates to development of potential mRNA medicines for other viruses, including mRNA-1278 for the prevention of varicella zoster virus (VZV) infection. Pursuant to the 2015 Merck Agreement, Merck iswas primarily responsible for research, development and commercialization activities and associated costs. We arewere responsible for designing and, at Merck's cost, manufacturing all mRNA constructs for preclinical and Phase 1 and Phase 2 clinical development purposes, and Merck pays us for such manufacture. Responsibility for manufacturing mRNA constructs for late stage clinical development and commercialization purposes is to be determined.
The focus of the initial four-year period ofpurposes. On October 7, 2020, the 2015 Merck Agreement ending in January 2019, was the discovery and development of mRNA vaccines and antibodies directed to the four viruses that were the subject of the 2015 Merck Agreement. The 2015 Merck Agreement also includes an additional three-year period during which Merck may continue to preclinically and clinically develop product candidates that arise from the initial four-year research period. Merck may, prior to the end of the seventh year of the 2015 Merck Agreement, elect to exclusively develop and commercialize up to five product candidates.
During the four-year discovery and development phase of the alliance, webetween us and Merck agreedrelated to work exclusively with each other to develop potential mRNA medicines for the preventionour collaboration on RSV was terminated by mutual agreement, and treatment of infections by the four viruses that were the subject of the 2015 Merck Agreement. Additionally, we and Merck have agreed to certain defined exclusivity obligations following the four-year discovery and development phase of the alliance.
Under the terms of the 2015 Merck Agreement, we received a $50.0 million upfront payment. We are eligible to receive, on a product-by-product basis, up to $300.0 million in aggregate milestone payments upon the achievement of certain development, regulatory and commercial milestone events. To date, we have received from Merck a clinical milestone payment of $5.0 million with respect to the initiation of a Phase 1 clinical trial for a Merck RSV vaccine product candidate. On a product-by-product basis, we are also entitled to receive royalties on Merck’s net sales of products at rates ranging from the mid-single digits to low teens, subject to certain reductions, with an aggregate minimum floor. Additionally, concurrent with entering into the 2015 Merck Agreement, Merck made a $50.0 million equity investment in us.
Unless earlier terminated, the 2015 Merck Agreement will continue on a product-by-product and country-by-country basis for so long as royalties are payable by Merck on a given product in a given country. Either party may terminate the 2015 Merck Agreement upon the other party’s material breach, either in its entirety or with respect to a particular program, product candidate, product or country, subject to specified notice and cure provisions. Merck may terminate the 2015 Merck Agreement in full or with respect to a particular product candidate or product upon certain advance notice to us for any reason, or earlier if Merck determines the alliance or product is no longer commercially practicable. If Merck has the right to terminate the 2015 Merck Agreement, in its entirety or with respect to a program, product candidate or product, for our material breach, then Merck may elect, in lieu of terminating the 2015 Merck Agreement, to have the 2015 Merck Agreement remain in effect, subject to reductions in certain payments we are eligible to receive
with respect to the terminable rights. Upon a termination of the 2015 Merck Agreement with respect to a program, all licenses and other rights granted to Merck with respect to such program will terminate andpursue the continued development and commercialization of product candidates and products, will revertincluding RSV, reverted to us. IfFurther detail on the terms of the 2015 Merck Agreement, is terminated with respectincluding the financial arrangements are included in Note 5 to a given product candidate or product, all licenses and other rights granted to Merck with respect to such product candidate or product will terminate and, to the extent we terminated for Merck’s breach, Merck will grant us licenses under select Merck technology for our continued development and commercialization of such product candidate or product.Financial Statements (“Collaboration Agreements”).
2016 Expansion of the Infectious Disease Strategic Alliance with Merck
In January 2016, we expanded our infectious disease strategic alliance with Merck. Specifically, we and Merck agreed to amend the original 2015 Merck Agreement to include the research, development, and commercialization of mRNA medicines for the prevention and treatment of infection by the varicella zoster virusVZV in place of one of the viruses initially included under the 2015 Merck Agreement. Under the terms of the amended 2015 Merck Agreement, we received an upfront payment of $10.0 million from Merck for the inclusion of the new program and we agreed with Merck to increase the tiered royalty rates ranging from the mid-single digits to low-teens for net sales of products directed to this virus. In 2020, Merck elected not to continue with this program, and it was terminated.
2016 Cancer Vaccine Strategic Alliance—Personalized mRNA Cancer Vaccines with Merck
In June 2016, we entered into a personalized mRNA cancer vaccines (PCV) Collaboration and License Agreement with Merck which we refer to as the PCV Agreement,(PCV Agreement) to develop and commercialize PCVs for individual patients using our mRNA vaccine and formulation technology. Under the strategic alliance, we identify genetic mutations present in a particular patient’s tumor cells, synthesize mRNA for these mutations, encapsulate the mRNA in one of our proprietary LNPs and administer to each patient a unique mRNA cancer vaccine designed to specifically activate the patient’s immune system against her or his own cancer cells.
Pursuant to the PCV Agreement, we are responsible for designing and researching PCVs, providing manufacturing capacity and manufacturing PCVs, and conducting Phase 1 and Phase 2 clinical trials for PCVs, alone and in combination with KEYTRUDA (pembrolizumab), Merck’s anti-PD-1 therapy, all in accordance with an agreed upon development plan and budget. We received an upfront payment of $200.0 million from Merck, which we will use to fund the performance of our activities set forth in the agreed upon development plan and budget. In November 2017, we and Merck announced the achievement of a key milestone for the first-in-human dosing of a PCV (mRNA-4157) as a part of the alliance. The Phase 1 open-label, dose escalation, multicenter clinical trial in the United States (KEYNOTE-603) is designed to assess the safety, tolerability and immunogenicity of mRNA-4157 alone in subjects with resected solid tumors and in combination with KEYTRUDA, in subjects with unresectable solid tumors.
Until the expiration of a defined period of time following our completion of Phase 1 and Phase 2 clinical trials for PCVs under the PCV Agreement and delivery of an associated data package to Merck, Merck has the right to elect to participate in future development and commercialization of PCVs by making a $250.0 million participation payment to us. If Merck exercises its election and pays the participation payment, then the parties will equally co-fund subsequent clinical development of PCVs, with Merck primarily responsible for conducting clinical development activities under a jointly agreed development plan and budget. Each party may also conduct additional clinical trials for PCVs that are not included in the jointly agreed development plan and budget, in which case the non-conducting party will reimburse the conducting party for half of the total costs for such trials, plus interest, from its share of future profits resulting from sales of such PCVs, if any. Merck will lead worldwide commercialization of PCVs, subject to Moderna’s option to co-promote PCVs in the United States, and the parties will equally share the profits or losses arising from worldwide commercialization. Until a PCV becomes profitable, we may elect to defer payment of our share of the commercialization and related manufacturing costs and instead reimburse Merck for such costs, plus interest, from our share of future profits resulting from sales of such PCV, if any. Subject to customary “back-up” supply rights granted to Merck, we will manufacture (or have manufactured) PCVs for preclinical and clinical purposes. Manufacture of PCVs for commercial purposes will be determined by the parties in accordance withFurther detail on the terms of the PCV Agreement.Agreement, including the financial arrangements are included in Note 5 to our Financial Statements (“Collaboration Agreements”).
If Merck does not exercise its right to participate in future development and commercialization
Table of PCVs, then we will retain the exclusive right to develop and commercialize PCVs developed during the strategic alliance, subject to Merck’s rights to receive a percentage in the high teens to the low 20s, subject to reductions, of our net profits on sales of such PCVs. During a limited period following such non-exercise, Merck has the right to perform clinical trials of such PCVs in combination with KEYTRUDA, for which we agree to use reasonable efforts to supply such PCVs. During such limited period, we also have the right to perform clinical studies of PCVs in combination with KEYTRUDA, for which Merck agrees to use reasonable efforts to supply KEYTRUDA. In addition, following its non-exercise, Merck is also entitled to receive a percentage in the high teens to the low 20s, subject to reductions, of our net profits on sales of certain PCVs first developed by us following such non-exercise and reaching a specified development stage within a defined period of time.Contents
We and Merck have agreed to certain defined, limited exclusivity obligations with respect to the development and commercialization of PCVs.
2018 Expansion of the Cancer Vaccine Strategic Alliance with Merck—Shared Neoepitope Cancer Vaccines
In April 2018, we and Merck agreed to expand our cancer vaccine strategic alliance to include the development and commercialization of our KRAS vaccine development candidate, mRNA-5671, and potentially other shared neoantigen mRNA cancer vaccines (SAVs). We preclinically developed mRNA-5671 prior to its inclusion in the cancer vaccine strategic alliance and it is comprised of a novel mRNA construct designed by us and encapsulated in one of our proprietary LNPs. The PCV Agreement was amended and restated to include the new SAV strategic alliance which we refer to as(PCV/SAV Agreement). Further detail on the PCV/SAV Agreement.
We and Merck have agreed to certain exclusivity obligations with respect to SAVs and particular SAV programs, which obligations are subject to termination or expiration upon certain triggering events.
Underterms of the PCV/SAV Agreement, Merck will be responsible for conducting Phase 1 and Phase 2 clinical trials for mRNA-5671 and for all costs associated with such activities, in accordance with a jointly agreed development plan and budget, and we will be responsible for manufacturing and supplying all mRNA-5671 required to conduct such trials and for all costs and expenses associated with such manufacture and supply. Underincluding the PCV/SAV Agreement, our budgeted commitment for PCVs increased to $243.0 million. Until the expiration of a defined period of time following our completion of Phase 1 and Phase 2 clinical trials for mRNA-5671 under the PCV/SAV Agreement and delivery of an associated data package to Merck, Merck has the right to elect to participate in future development and commercialization of mRNA-5671 by making a participation payment to us. If Merck exercises its participation rights, then the parties will equally co-fund subsequent clinical development of mRNA-5671, with Merck primarily responsible for conducting clinical development activities under a jointly agreed development plan and budget. If Merck declines to participate in future development and commercialization activities following the initial Phase 1 and Phase 2 clinical trials for mRNA-5671, then we will retain the rights to develop and commercialize mRNA-5671. If Merck elects to participate in future development and commercialization of mRNA-5671, Merck may also conduct additional clinical trials for mRNA-5671 thatfinancial arrangements are not included in the jointly agreed development plan and budget, in which case we will reimburse Merck for half of the total development costs for such clinical trials, plus interest, from our share of future profits resulting from sales of mRNA-5671, if any. Merck will lead worldwide commercialization of mRNA-5671, subjectNote 5 to our option to co-promote mRNA-5671 in the United States, and the parties will equally share the profits or losses arising from worldwide commercialization. Until mRNA-5671 becomes profitable, we may elect to defer payment of our share of the commercialization and related manufacturing costs and instead reimburse Merck for such costs, plus interest, from our share of future profits resulting from sales of mRNA-5671, if any. Subject to “back-up” supply rights granted to Merck, we will manufacture (or have manufactured) mRNA-5671 and other SAVs for preclinical and clinical purposes. After Merck exercises its right to participate in future development and commercialization of mRNA-5671 and other SAVs, the parties are obligated to discuss responsibility for future manufacturing, giving consideration to applicable criteria.
Pursuant to the PCV/SAV Agreement, for a defined period of time, either party may propose that the parties conduct additional programs for the research and development of SAVs directed to different shared neoantigens. If the parties agree to conduct any such programs, then we will be responsible for conducting and funding pre-clinical discovery and research activities for such SAVs, and otherwise the programs would be conducted on substantially the same terms as the mRNA-5671 program. If we or Merck propose a new SAV program and the other party does not agree to conduct such program, then the PCV/SAV Agreement includes provisions allowing the proposing party to proceed with such development, at the proposing party’s expense. In such case, the non-proposing party will have the right to opt-in to such SAV program any time before the proposing party commits to performing Good Laboratory Practice (GLP)-toxicity studies. Until the expiration of a defined period of time following our completion of Phase 1 and Phase 2 clinical trials for any SAV program mutually agreed by the parties under the PCV/SAV Agreement and delivery of an associated data package to Merck, Merck has the right to elect to participate in future development and commercialization of such SAV by making a participation payment to us.
Unless earlier terminated, the PCV/SAV Agreement will continue on a program-by-program basis until Merck terminates its participation in such program. Following any such termination, we will retain the exclusive right to develop and commercialize PCVs or SAVs developed as a part of such program, subject to restrictions and certain limited rights retained by Merck.
In connection with the amendment of the PCV Agreement to include the development and commercialization of mRNA-5671 and potentially other SAVs, Merck made a $125.0 million equity investment in us.Financial Statements (“Collaboration Agreements”).
Vertex (Nasdaq: VRTX)—2016 Strategic Alliance in Cystic Fibrosis
In July 2016, we entered into a Strategic Collaboration and License Agreement (Vertex Agreement) with Vertex Pharmaceuticals Incorporated, and Vertex Pharmaceuticals (Europe) Limited together, Vertex, which we refer to as the Vertex Agreement.(together, Vertex). The Vertex Agreement is aimed at the
discovery and development of potential mRNA medicines for the treatment of cystic fibrosis or CF,(CF) by enabling cells in the lungs of people with CF to produce functional CFTRcystic fibrosis transmembrane conductance regulator (CFTR) proteins.
Pursuant to Further detail on the terms of the Vertex Agreement, including the financial arrangements are included in Note 5 to our Financial Statements (“Collaboration Agreements”).
Vertex —2020 Strategic Alliance in Cystic Fibrosis
In September 2020, we leadentered into a new Strategic Collaboration and License Agreement with Vertex (Vertex 2020 Agreement). The Vertex 2020 Agreement is aimed at the discovery efforts during aand development of potential medicines to treat CF by delivering gene-editing therapies to lung cells to facilitate production of functional CFTR proteins.
The three-year research period leveraging our Platform technologyof the Vertex 2020 Agreement will initially focus on the identification and mRNA delivery expertise along with Vertex’s scientific experienceoptimization of novel LNPs and mRNAs that can deliver gene-editing therapies to cells in CF biology and the functional understanding of CFTR.lungs. Following the initial three-year period, Vertex is responsible for conducting development and commercialization activities for candidates and products that arise from the strategic alliance, including the costs associated with such activities. Vertex is also obligated to pay us for research services in connection with our performance of certain activities during the research period in accordance with a jointly agreed research plan. Subject to customary “back-up” supply rights granted to Vertex, under the agreement, we exclusively manufacture (or have manufactured)are the exclusive manufacturer of related mRNA and LNPs for pre-clinical,preclinical, clinical, and commercialization purposes.
Under Further detail on the terms of the Vertex 2020 Agreement, including the financial arrangements are included in Note 5 to our Financial Statements (“Collaboration Agreements”).
Chiesi—2020 Collaboration and License Agreement with Chiesi
In September 2020, we receivedentered into a $20.0 million upfront payment from Vertex. Vertex hasCollaboration and License Agreement (Chiesi Agreement) with Chiesi Farmaceutici S.P.A. (Chiesi). The Chiesi Agreement is aimed at the right to extenddiscovery and development of potential mRNA medicines for the initial three-year research periodtreatment of pulmonary arterial hypertension (PAH), a rare disease characterized by one additional year by making an additional payment to us. We are eligible to receive up to $275.0 millionhigh blood pressure in aggregate milestone payments upon the achievement of certain development and regulatory milestone events, and Vertex will also pay us tiered royalties at rates ranging from the low- to high-teens on worldwide net sales of products arising from the strategic alliance, subject to certain reductions, with an aggregate minimum floor. In connection with the strategic alliance, Vertex also made a $20.0 million equity investment in us.
During the termarteries of the Vertexlungs. Further detail on the terms of the Chiesi Agreement, we and Vertex have agreedincluding the financial arrangements are included in Note 5 to certain defined exclusivity obligations under the Vertex Agreement with respect to the development and commercialization of certain mRNA medicines.our Financial Statements (“Collaboration Agreements”).
Unless earlier terminated, the Vertex Agreement will continue until the expiration of all royalty terms. Vertex may terminate the Vertex Agreement for convenience upon 90 days’ prior written notice, except if termination relates to a product in a country where Vertex has received marketing approval, which, in such case, Vertex must provide 180 days’ prior written notice. Either party may terminate the Vertex Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the Vertex Agreement in the event that the other party challenges the validity or enforceability of such party’s patent rights, subject to certain exceptions, or if the other party becomes insolvent.
Strategic alliances with government organizations and foundations
Defense Advanced Research Projects Agency (DARPA)
In October 2013, DARPA awarded Moderna up to approximately $25$24.6 million under Agreement No. W911NF-13-1-0417 to research and develop potential mRNA medicines as a part of DARPA’s Autonomous Diagnostics to Enable Prevention and Therapeutics, or ADEPT, program, which is focused on assisting with the development of technologies to rapidly identify and respond to threats posed by natural and engineered diseases and toxins. As of December 31, 2018,2020, $19.7 million of the award amount has been funded. This award followed an initial award from DARPA of approximately $1.4 million given in March 2013 under Agreement No. W31P4Q-13-1-0007. The DARPA awards have been deployed primarily in support of our vaccine and antibody programs to protect against Chikungunya infection.
In September 2020, we entered into an agreement with 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 under Agreement No. HR0011-20-9-0118 if DARPA exercises additional contract options.
Biomedical Advanced Research and Development Authority (BARDA)
In September 2016, we received an award of up to approximately $125$125.8 million under Agreement No. HHSO100201600029C from BARDA, a component of the Office of the Assistant Secretary for Preparedness and Response or ASPR,(ASPR), within the U.S. Department of Health and Human Services or HHS,(HHS), to help fund our Zika vaccine program. Under the terms of the agreement with BARDA, an initial base award of approximately $8$8.2 million supported toxicology studies, a Phase 1 clinical trial, and associated manufacturing activities. Additionally, four contract options were awarded under the agreement with BARDA. Three out of four of these options have been exercised, bringing the total current award to approximately $117$117.3 million to support an additional Phase 1 study of an improved Zika vaccine candidate, Phase 2 and Phase 3 clinical studies, as well as large-scale manufacturing for the Zika vaccine.
In April 2020, we entered into an agreement with BARDA for an award of up to $483.3 million to accelerate development of mRNA-1273, our COVID-19 vaccine. 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 December 31, 2020, the remaining available funding net of revenue earned was $444.3 million.
The Bill & Melinda Gates Foundation
In January 2016, we entered a global health project framework agreement with the Bill & Melinda Gates Foundation to advance mRNA-based development projects for various infectious diseases. The Bill & Melinda Gates Foundation has committed up to $20.0 million in grant funding to support our initial project related to the evaluation of antibody combinations in a preclinical setting as well as the conduct of a first-in-human Phase 1 clinical trial of a potential mRNA medicine to help prevent human immunodeficiency virus, or HIV, infections. Follow-on projects which could bring total potential funding under the framework agreement up to $100.0 million (including the HIV antibody project) to support the development of additional mRNA-based projects for various infectious diseases
can be proposed and approved until the sixth anniversary of the framework agreement, subject to the terms of the framework agreement, including our obligation to grant to the Bill & Melinda Gates Foundation certain non-exclusive licenses.
INTELLECTUAL PROPERTY
Our patent estate and approach, a strategic asset
Since our inception, we have considered the creation and building of our intellectual property, or IP, portfolio as a critical part of our mission. In a relatively short amount of time, we have built a significant patent estate that includes over 650600 world-wide pending patent applications and over 140270 issued or allowed U.S. and foreign patents covering key components of our proprietary platform technology, investigational medicines, and development candidates. The figure below shows our internally-developedinternally developed estate and indicates the number of patents approved since 2010.
We regularly identify inventions and trade secrets as we surmount various challenges with our platform to create modalities. We seek to protect our proprietary position by, among other means, filing U.S. and certain foreign patent applications related to our platform, modality, and program inventions. Our company trade secrets and know-how are appropriately guarded to maintain our business
advantage. We also seek to identify and obtain third party licenses where useful to maintain our advantageous IP position in the mRNA medicines field. We seek to obtain and maintain, and intend to strategically enforce, patents in appropriate jurisdictions for our platform technologies, modalities, and programs, in particular, in instances where insurmountable business competition threatens advancement of future commercial products.programs.
Protecting our platform, modality, and program investments: Building an expansive, multi-layered IP estate
We have built a substantial IP estate that includes numerous patents and patent applications related to the development and commercialization of mRNA vaccine and therapeutic development candidates, including related platform technologies. Our platform IP protects advances in mRNA design and engineering, proprietary LNP components, delivery systems, processes for the manufacture and purification of drug substances and products, and analytical methods. A significant portion of our platform IP estate further provides multi-layered protection for our modalities and programs.
With respect to our platform,IP estate, our solely-owned patent portfolio consists of more than 80145 issued or allowed U.S. patents or patent applications and approximately 60more than 125 granted or allowed patents in jurisdictions outside of the U.S. covering certain of our proprietary platform technology, inventions, and improvements, and covering key aspects of our clinical and most advanced development candidates. Additional patent applications are also pending that, in many cases, are counterparts to the foregoing U.S. and foreign patents.
Most of the patents and applications (if issued) in our portfolio have or will have expiry dates extending out to 2033 at the earliest and at least 20402041-2042 for patents ultimately granting based on our more recently-filedrecently filed patent applications.
We also rely on trademarks, trade secrets, and know-how relating to our proprietary technology and programs, continuing innovation, and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the field of mRNA therapeutic and vaccine technologies. We additionally plan to rely on data exclusivity, market exclusivity, and patent term extensions when available, and plan to seek and rely on regulatory protection afforded through orphan drug designations. We also possess substantial proprietary know-how associated with related manufacturing processes and expertise.
IP protecting our platform
We have a broad IP estate covering key aspects of our platform. This estate provides multiple layers of protection covering the making and use of the mRNA drug substance and delivery technologies.
With respect to our platform, we have a portfolio that includes approximately 70100 issued or allowed U.S. patents or patent applications, and more than 55approximately 220 granted foreign patents and pending foreign patent applications covering platform innovations that are directly related to the design, formulation and manufacturing of mRNA medicines.
For example, these patents and patent applications include claims directed to:
•mRNA chemistry imparting improved properties for vaccine and therapeutic uses;
•methods for mRNA sequence optimization to enhance the levels and fidelity of proteins expressed from our mRNA medicines;
•methods for identifying epitopes having superior suitability in cancer vaccine contexts;
•engineering elements tailored to enhance stability and the in vivo performance of mRNA medicines;
•proprietary lipid nanoparticle, or LNP, delivery systems, including novel lipid components designed for optimal expression of both therapeutic and vaccine mRNAs, in particular, prophylactic infectious disease and cancer vaccine mRNAs, intratumoral immuno-oncology therapeutics, local regenerative therapeutics, systemic secreted therapeutics, and systemic intracellular therapeutics; and
•innovative processes for the manufacture and analysis of mRNA drug substance and formulated drug product.
IP protection for modalities
Our IP estate provides protection for the multiple programs within our modalities both at the product-specific level and at various broader levels. For example, we have patent coverage for LNP-encapsulated mRNAs having specific chemical modification suited for vaccine and therapeutic mRNA use. Our estate also includes IP covering certain LNP-encapsulated mRNAs coding for infectious disease antigens for use in prophylactic vaccination. Our mRNA chemistry, formulation and manufacturing patent applications and related know-how and trade secrets may also provide us with additional IP protection relating to our development candidates.
Our patent portfolio for our investigational medicines and development candidates features nineapproximately 50 issued or scheduled-to-issue patents, with many additional pending applications in the U.S. and foreign jurisdictions directed to our development candidates.
Prophylactic vaccines
For programs within our prophylactic vaccines modality, we typically pursue patent protection featuring composition of matter and method of use claims. Our global patent protection strategy may vary based on the unique geographic prevalence of various infectious diseases.
Our earliest investigational medicines in the infectious disease pipeline, vaccines containing
We have filed several patent applications covering our COVID-19 vaccine. Claims covering our COVID-19 vaccine compositions and methods of vaccinating subjects against SARS-CoV-2 infection with lipid nanoparticle-encapsulated mRNA encoding HA antigens including H10 and H7, for the prevention of human infection with the influenza H10N8 or H7N9 avian influenza A viruses, respectively,prefusion-stabilized Spike protein antigen are protected byfeatured in a patent family that includes a pending PCT application, two pending U.S. patent applications, 7 pending U.S. provisional patent applications, and foreign patent applications filed in Argentina and Taiwan. Priority dates for these applications span a period from late January through late May 2020. The U.S. government has rights in certain of the foregoing patent applications. Issued U.S. Patent No. 10,702,600 includes claims to lipid nanoparticle-encapsulated mRNA encoding betacoronavirus spike protein. Claims to methods of using such compositions to elicit an immune response in subjects are featured an allowed and soon to be issued U.S. patent application featured. Corresponding vaccine composition and method of use claims are also featured in a pending European patent application. These patents and applications enjoy an October 2015 priority date.
Further coverage for our COVID-19 vaccine and many of our other prophylactic vaccines is found in a broad, infectious disease vaccine patent family featuring claims to lipid nanoparticle-encapsulated mRNAs encoding infectious disease antigens and methods using such compositions for vaccination. This patent family includes two issued U.S. patents, threetwo pending U.S. patent applications and pending patent applications in each of Europe, Japan, Canada, Australia, Brazil, China, Hong Kong, India, Japan, Russia, and Singapore. Issued U.S. Patent No. 9,872,900 features claims to H10Nos. 10,022,435 and H7 mRNA vaccine compositions. Issued U.S. Patent No. 10,022,435 features10,709,779 feature claims directed to methods of vaccinating subjects against infection with the lipid nanoparticle-encapsulated mRNAs encoding infectious disease antigens. Also pending is a PCT application covering certain prophylactic vaccination methods relating to our influenza H10N8 or H7N9 mRNA vaccines.
We have two collaborations for infectious disease vaccines, an RSV vaccine and a VZV vaccine, that have extensive patent coverage, each vaccine having pending PCT applications, pending U.S. patent applications, and pending patent applications outside the United States, for example, in several African, Asian, European, Middle Eastern, South American, and other jurisdictions.
Patent coverage for our human CMV vaccine, which includes mRNAs encoding several surface glycoproteins of the CMV virus, can be found in a pending PCT application, pending applications in Australia, Canada, Europe Japan, and Japan. In the United States, our CMV vaccine is covered in a pending U.S. patent application and in issued U.S. Patent No. 10,064,935.Nos. 10,064,935, 10,383,937 and 10,716,846. Three provisional patent applications and a pending PCT application feature claims to clinical formulations of our CMV vaccine and methods of use.
Patent applications directed to our hMPV+hMPV/PIV3 vaccine are pending in the United States, Europe and Hong Kong. Four U.S. patents have been filed internationally. The patent family features an issued U.S. patent, a pending U.S. patent application, which is allowed and soon to issue, a pending PCT application, and pending patent applications in at least a half dozen countries throughout Asia, the Middle East, and South America. Issuedfeaturing hMPV/PIV3 vaccines with U.S. Patent No. 10,064,934 hashaving claims covering LNP-encapsulated mRNA vaccines that encode the PIV3 and hMPV fusion proteins.proteins, U.S. Patent No. 10,272,150 having claims covering administration methods for these LNP-encapsulated mRNA vaccines, U.S. Patent No. 10,543,269 having claims covering vaccines that include HMPV-encoding mRNA formulated in LNPs, and U.S. Patent No. 10,702,599 having claims covering vaccines that include PIV3-encoding mRNA formulated in LNPs. A pending provisional patent application features claims to clinical aspects of our hMPV/PIV3 vaccine.
Our Chikungunya and Zika mRNA vaccines arevaccine is covered in a series of patent familyfamilies directed to various mosquito-borne viruses. ThisThese patent family includesfamilies include three issued U.S. Patents that cover our Zika vaccines, U.S. Patent No.Nos. 10,124,055, 10,449,244 and 10,653,767, several pending U.S. patent applications, one of which is recently allowed and
soon to be issued as a U.S. patent, a PCT application, and several pending European and Hong Kong patent applications.
We filed patent applications in several jurisdictions covering RSV vaccines. At least two U.S. and two European patent applications are pending, as well asare applications in several additional applications filed in variousAfrican, Asian, andEuropean, Middle Eastern, South American, and other jurisdictions. Also pending is a provisional application featuring our pediatric RSV vaccine.
A pending provisional patent application includes claims covering our vaccine program for the prevention of human infection with seasonal influenza virus. The program also is protected by the broad, infectious disease vaccine patent family described above, in particular, issued U.S. Patent No. 9,872,900 having claims to HA-encoding mRNA vaccine compositions.
One of our earliest investigational medicines in the infectious disease pipeline, a vaccine containing mRNA encoding the H7 HA antigen for the prevention of infection with the influenza H7N9 avian influenza A virus is also protected by the broad, infectious disease vaccine patent family described above. In particular, issued U.S. Patent No. 9,872,900 includes claims to H7 mRNA vaccine compositions.
Pending patent applications in the United States, Australia, Canada, Europe, and Japan include claims covering our EBV vaccine and methods of use.
Pending patent applications in the United States and Europe include claims covering our Nipah vaccine and methods of use.
Cancer vaccines
Composition of matter and method claims also protect programs within our cancer vaccines modality. Proprietary methods around the making and therapeutic use of our PCVs and resulting vaccine compositions are described and claimed in pending U.S. provisional patent applications,four pending U.S. patent applications, a pending PCT application, four pending European patent applications, and athree pending patent applicationapplications in each of Australia, Canada, China, and Japan.Japan, and one or two pending patent applications in each of India, South Korea, New Zealand, Russia, Singapore and South Africa. These applications also relate to various vaccine design formats, in particular, polyepitopic vaccine formats, and methods of treating cancer with such personalized cancer vaccines. We also possess substantial know-how and trade secrets relating to the development and commercialization of our cancer vaccine programs, including related manufacturing process and technology.
Likewise, our KRAS antigen cancer vaccine and methods of treating cancer featuring such vaccines are covered in issued U.S. Patent No. 10,881,730, which includes claims to lipid nanoparticle-encapsulated mRNA encoding mutant KRAS antigens, and in a pending U.S. patent application and pending PCT applications.applications in Australia, Canada, Europe, and Japan, as well as in several other European, South American, Asian and Middle Eastern jurisdictions.
Intratumoral immuno-oncology
To protect programs within our intratumoral immuno-oncology modality, we have filed numerous patent applications featuring claims to mRNAs encoding immune-stimulatory proteins and methods of treating cancer using such compositions.
Three of our immuno-oncology programs are designed to be administered intratumorally to alter the tumor microenvironment in favor of mounting an immune response against tumors. Our OX40L mRNA program and our mRNA program that includes mRNAs that encode OX40L, IL23IL-23 and IL36γIL-36γ are covered by eight issued U.S. patents, U.S. Patent Nos. 10,143,723, 10,172,808, 10,285,950, 10,322,090, 10,322,191, 10,379,767, 10,383,951 and 10,172,808, respectively,10,406,113, by several pending U.S. patent applications, two of which are allowed and soon to issue, and by several pending patent applications in foreign jurisdictions including European, Asian, South American and other jurisdictions. These applications feature claims to the mRNA therapeutics as compositions of matter, formulations that include such mRNAs and methods of reducing tumors and treating cancer featuring these development candidates. Similar claims cover our IL12IL-12 development candidate which can be found in aissued U.S. Patent No. 10,646,549, and in pending patent applications in the United States, Australia, Canada, China, Europe Korea,and Japan, as well as several other jurisdictions in Asia, South America and the United States.Middle East.
Localized regenerative therapeutics
Our localized regenerative therapeutics modality is focused on regenerative therapeutics. Our sole program, VEGF-A, is being developed in collaboration with AstraZeneca and is covered by a pending PCTU.S. patent application and directby several national phase patent applications filed in certain South American, Asian and Middle Eastern jurisdictions. The VEGF patent applications are solely-owned by Moderna.
Systemic intracellular therapeutics
Within our systemic intracellular therapeutics modality, we have threefour programs featuring expression of intracellular enzymes for the treatment of rare diseases. For our rare disease programs, we generally pursue patent protection featuring composition of matter and method of use claims, for example, pharmaceutical composition and method of treatment claims. Our most advanced rare disease development candidate, MMA, is covered by a patent family that includes two issued U.S. Patents, U.S. Patent No. 10,406,112 and U.S. Patent No. 10,426,738, two pending U.S. patent applications, a pending internationalPCT patent application, and foreign patent applications filed in Australia, Canada, Japan, Europe and the Middle East. There are also pending U.S. patent applications having focused, product-specific claims for MMA, all of which are undergoing accelerated examination in the United States Patent and Trademark Office, or USPTO.
For our PA development candidate, we have two pending PCT patent applications coveringpending in the United States, Canada, Europe, and Japan which cover mRNA encoding the alpha and beta subunits of the enzyme propionyl-CoA carboxylase (PCCA and PCCB, respectively), for the treatment of PA.
For our PKU development candidate, we have a pending PCT and a pending provisional patent application covering mRNA encoding phenylalanine hydroxylase, or PAH, for the treatment of PKU.
For our Glycogen Storage Disorder, Type 1a (GSD1a) development candidate, we have 2 pending PCT and 2 pending provisional patent applications covering mRNA encoding glucose 6-phosphatase (G6Pase) for the treatment of this disorder.
Any U.S. and foreign patents that may issue from these threefour patent families would be expected to expire in 2036 for the earliest of the MMA patents and 20382038-2041 for the remaining MMA, PA, PKU and PKUGSD1a patents, excluding any patent term adjustments and any patent term extensions.
As further described below, we have filed or intend to file patent applications on these and other aspects of our technology and development candidates, and as we continue the development of our intended products, we plan to identify additional means of obtaining patent protection that would potentially enhance commercial success, including protection for additional methods of use, formulation, or manufacture.
Systemic secreted and cell-surface therapeutics
Our systemic secreted and cell-surface therapeutics modality features programs directed to expression of secreted or cell-surface proteins including antibodies, circulating modulation factors, secreted enzymes and secreted enzymes. Antibodies are featured in a passive vaccination approach we are developing to protect individuals against infectious disease viruses. In this regard, we are advancing mRNA encoding antransmembrane proteins. Our mRNA-encoded antibody against Chikungunya virus reported positive interim Phase 1 results in clinical trials and utilizes the clinicsame lipid nanoparticle (LNP) formulation being advanced for our MMA program and are seeking patentother rare disease programs. Patent protection for this development candidatemRNA-encoded antibody against Chikungunya virus is being sought by way of a pending PCTU.S. and European patent application,applications, in which we share joint ownership rights.
Our Relaxin development candidate is being developed in collaboration with AstraZeneca and is covered by several pending foreign patent applications outside the United States, for example, in several Asian, European, Middle Eastern, South American and other jurisdictions, and by a pending U.S. application undergoing accelerated examinationand by issued U.S. Patent No. 10,730,924.
Our PD-L1 and IL-2 development candidates are covered in the USPTO.three recently filed U.S. provisional patent applications.
For our Fabry development candidate, we have pending U.S. patent applications undergoing accelerated examination and pending patent applications in Australia, Canada, Europe, and Japan covering mRNA encoding alpha-galactosidase A.
Trademarks
Our registered trademark portfolio currently contains approximately 85at least 125 registered trademarks, consisting of at least 10 registrations in the United States and approximately 75115 registrations in Australia, Canada, China, the EU, Japan, Singapore, Sweden, and under the Madrid Protocol. In addition, we have other pending trademark applications, consisting of trademark applications in the United States, Australia, Canada, China, the EU, Italy, Japan, Singapore, and under the Madrid Protocol.
In-licensed intellectual property
While we develop and manufacture our potential mRNA medicines using our internally created mRNA technology platform, we also seek out and evaluate third party technologies and IP that may be complementary to our platform.
Patent sublicense agreements with Cellscript and mRNA RiboTherapeutics
The Trustees of the University of Pennsylvania, or Penn, owns tenseveral issued U.S. patents, granted European patents and three pending U.S. patent applications directed, in part, to nucleoside-modified mRNAs and their uses, or the Penn Modified mRNA Patents. mRNA RiboTherapeutics, Inc., or MRT, obtained an exclusive license to the Penn Modified mRNA Patents and granted its affiliate, Cellscript, LLC, or Cellscript, a sublicense to the Penn Modified mRNA Patents in certain fields of use.
In June 2017, we entered into two sublicense agreements, one with Cellscript, and one with MRT, which agreements we collectively refer to as the Cellscript-MRT Agreements. Together, the Cellscript-MRT Agreements grant us a worldwide, sublicensable sublicense to the Penn Modified mRNA Patents to research, develop, make, and commercialize products covered by the Penn Modified mRNA Patents, or licensed products, for all in vivo uses in humans and animals, including therapeutic, prophylactic, and diagnostic applications. The Cellscript-MRT Agreements are non-exclusive, although Cellscript and MRT are subject to certain time restrictions on granting additional sublicenses for in vivo uses in humans under the Penn Modified mRNA Patents.
We paid Cellscript and MRT aggregate sublicense grant fees of $28 million upon entering into the Cellscript-MRT Agreements, $25 million in early 2018, and $22 million in early 2019. Cellscript and MRT are collectively eligible to receive, on a licensed product-by-licensed product basis, milestone payments totaling up to $0.5 million upon the achievement of certain regulatory-based events for diagnostic products, and milestone payments totaling up to $1.5 million upon the achievement of certain development and regulatory-based events for either therapeutic or prophylactic products, and up to $24 million upon the achievement of certain commercial-based events for either therapeutic or prophylactic products. The Cellscript-MRT Agreements require us to pay royalties based on annual net sales of licensed products at rates in the low single digits for therapeutic, prophylactic, and diagnostic uses, and royalties based on annual net sales of licensed products sold for research uses at rates in the mid-single digits, subject to certain reductions, with an aggregate minimum floor. Following the first commercial sale of licensed products under a Cellscript-MRT Agreement, we are required to pay Cellscript or MRT, as applicable, minimum annual royalties ranging from $10,000—$400,000 depending on the use of such licensed product, with all such payments creditable against earned royalties on net sales.
The Cellscript-MRT Agreements will expire upon the expiration or abandonment of the last to expire or become abandoned of the Penn Modified mRNA Patents. Cellscript or MRT, as applicable, may terminate its respective Cellscript-MRT Agreement if we fail to make required payments or otherwise materially breach the applicable agreement, subject to specified notice and cure provisions. Cellscript or MRT, as applicable, may also terminate the applicable Cellscript-MRT Agreement upon written notice in the event of our bankruptcy or insolvency or if we challenge the validity or enforceability of the Penn Modified mRNA Patents. We have the right to terminate each Cellscript-MRT Agreement at will upon 60 days’ prior notice to Cellscript or MRT, as applicable, provided that we cease all development and commercialization of licensed products upon such termination. If rights to MRT or Cellscript under the Penn Modified mRNA Patents are terminated (e.g., due to bankruptcy of MRT or Cellscript), the terminated party will assign its interest in the respective Cellscript-MRT Agreement to the licensor from which it received rights under the Penn Modified mRNA Patents and our rights will continue under the new licensor.
Formulation technology in-licenses
Our development candidates use internally developed formulation technology that we own. We do, however, have rights to use and exploit multiple issued and pending patents covering formulation technologies under licenses from other entities. If in the future we elect to use or to grant our strategic collaborators sublicenses to use these in-licensed formulation technologies, we or our strategic collaborators may be liable for milestone and royalty payment obligations arising from such use. We consider the commercial terms of these licenses and their provisions regarding diligence, insurance, indemnification and other similar matters, to be reasonable and customary for our industry.
In addition, we have entered into material transfer agreements that have provided us with opportunities to evaluate third party delivery systems.
EMPLOYEES
We had approximately 1,300 full-time employees as of December 31, 2020, representing a 59% increase over our 830 full-time employees as of the end of the prior year. Of our total full-time employees as of December 31, 2020, nearly 600 joined us during the course of the year. This growth in our employee base has largely been as a result of developments related to our COVID-19 vaccine. We have approximately 760 full-timeundertaken significant hiring of employees to facilitate manufacturing of the vaccine, in addition to building out our commercial and regulatory organizations, as well as other functions, to support this roll-out. As part of this expansion, we have also increased our hiring outside the United States during 2020, and at year-end we had employees in Switzerland, the United Kingdom, Canada and Spain. Much of this hiring has been of talent with experience at other pharmaceutical companies as we seek to build out our commercial and regulatory capabilities, particularly at more senior levels of the company. We have also continued to hire talent to support our research and clinical capabilities across the rest of our pipeline, unrelated to our COVID-19 vaccine.
We operate in a highly competitive environment for human capital, particularly as we seek to attract and retain talent with experience in the biotechnology and pharmaceutical sectors. Our workforce is highly educated, and as of December 31, 2020, 51% of whomour employees hold Ph.D., M.D., J.D., or Master’s degrees. Among our employees, 44%46% are female and 54% are male. Among our leadership (which we define as employees at the vice president level and above), as of December 31, 2020, approximately 37% are female, an increase from 35% in the prior year. 35% of our U.S. employees identify as female, 55% identifyracially or ethnically diverse as male,of December 31, 2020, an increase from 32% in the prior year. In 2020, we expanded our emphasis on belonging, inclusion & diversity, creating a Conscious Inclusion education series for senior leaders, conducting several internal seminars, panels, and <1% have chosen notdiscussions on inclusion, launching a new employee resource group in support of our Black and African American employees, and adding a full-time senior-level role focused on belonging, equity, inclusion and diversity.
To help promote alignment between our employees and our shareholders, all employees participate in our equity programs through the receipt of new hire and annual equity grants, and the percentage of equity as a component of overall pay mix increases with seniority. We believe that in addition to identify themselves or selected other. incentivizing growth that leads to shareholder value, broad eligibility for our equity programs helps promote employee retention as these awards generally vest over a four-year period.
In response to the COVID-19 pandemic, we undertook several initiatives to ensure the safety of our workforce and continuity of our operations. We created a Response Team that was responsible for implementing safety measures testing at our Cambridge and Norwood sites. This included regular COVID-19 testing, temperature and health screening as well as implementing digital tools to facilitate contact tracing and providing personal protective equipment (PPE). Throughout the pandemic, much of our workforce has worked remotely, wherever possible. We also implemented remote hiring and onboarding programs to facilitate significant hiring during 2020 in a remote work environment. In December 2020, following the receipt of an Emergency Use Authorization from the FDA for our COVID-19 vaccine, we made the vaccine available to our employees and adult members of their households to help ensure continuity of our operations due to the critical nature of our production of the vaccine.
None of our employees is represented by a labor union, and none of our employees has entered into a collective bargaining agreement with us.us, other than a small number of employees in Spain who are covered by collective bargaining agreements governing certain benefits. We consider our employee relations to be good.
We believe that our employees are highly engaged, and we and our employees have for the last four years been recognized by surveys conducted by external groups.Science magazine ranked us as a top 10 employer for each of the last four years; we were ranked #7 in 2015, #3 in 2016, #6 in 2017, and #4 in 2018.six years. We were also namedmeasure employee engagement through a top workplace by the Boston Globe in 2016 and 2017.vendor-supplied engagement software, using validated external benchmarks to track quarter-over-quarter employee engagement factors.
Our approach to attracting and retaining talent within Moderna
We are committed to ensuring that our employees find that their careers at Moderna are filled with purpose, growth and fulfillment. We believe that a career at Moderna provides opportunity for:
•Impact: Our people will have the opportunity to do work that is unparalleled in terms of its innovation and scope of impact on people’s lives.
•Growth: For the intellectually curious, we provide incredible opportunities for growth. We invest in the development of our people as scientists and as leaders.
•Wellness: We are committed to the health and wellbeing of our employees and their families by providing family friendly benefits and opportunities to be healthy.
•Inclusive environment: We believe in the benefits of bringing together a diverse set of perspectives and backgrounds, and creating an environment where differences are celebrated and leveraged.
•Compelling rewards: To attract and retain the best talent, we provide competitive rewards that help to drive groundbreaking work and allow employees to share in the value we will create together.together, including through our equity programs.
Our approach to training our employees
We have established a structured training curriculum for our employees called Moderna University and have a full-time team dedicated to developing the curriculum and conducting activities for Moderna University. The objective of Moderna University is for every employee to be deeply familiar with our core technology and able to learn about technologies that might further enable our science. In addition, Moderna University is also focused on creating strong leaders within the company through management and leadership training. There are four core areas within Moderna University including:
•Professional development: Includes on-site training programs for our employees including for example, leadership, tools to improve interpersonal communication, and project management.
•Digital learning library: We have built an online library of videos of a variety of scientific material that our employees can access flexibly. This content includes:
◦Presentations by external speakers to scientific seminars conducted in-house;
◦Scientific courses at external universities; and
◦Peer-to-peer video series in which in-house experts provide an introductory view of complex topics they tackle within their teams.
•Learning management system: We have deployed a digital system to track and administer training programs for each of our employees. Training content is developed digitally and offered to our employees.
•New hire orientation: This program is designed to onboard all new employees. During this training program, new employees meet with the management team and senior functional leaders to learn about the Company and functional activities.
Our systems
To further develop and retain our workforce, we conduct periodic talent reviews that identify key talent within the organization. We use that data to inform specific development opportunities for key current and potential future leaders, and to support our people
We have implemented the Workday system to provide an integrated platform to support employee benefits, payroll, and performance management. In addition, as described in the previous section,periodic succession planning activities for key roles. These steps together ensure we have deployed a digital learning management systemrobust understanding of our workforce and a talent pipeline to deploy various training programs.grow future leaders.
CORPORATE SOCIAL RESPONSIBILITY
In pursuit of our mission to deliver on the promise of mRNA science to create a new generation of transformative medicines for patients, we have scaled our operations, invested in research, and hired top-tier talent. As we continue to mature, we believe it is important to develop long-term programs that underscore our commitment to corporate social responsibility. Please refer to the "Corporate Responsibility"“Citizenship” section of our website, which can be found at www.modernatx.com, for a description of some of the measures we have taken to support our commitment to corporate social responsibility.
COMPETITION
The biotechnology and pharmaceutical industries utilize rapidly advancing technologies and are characterized by intense competition. There is also a strong emphasis on intellectual property and proprietary products.
We believe that mRNA as a medicine coupled with our capabilities across mRNA technology, drug discovery, development, and manufacturing provide us with a competitive advantage. However, we will continue to face competition from different sources including major pharmaceutical companies, biotechnology companies, academic institutions, government agencies, and public and private research institutions. For any products that we eventually commercialize, we will not only compete with existing therapies but also compete with new therapies that may become available in the future.
We face significant competition in the market for our COVID-19 vaccine, particularly from established pharmaceutical companies with longer operating histories and significant experience in producing and marketing pharmaceutical products. Competition for the sale of our COVID-19 vaccine can be impacted by a number of factors, including: the efficacy of our vaccine in preventing COVID-19 (particularly in the prevention of severe cases of COVID-19); the ability of our vaccine, or future iterations of the vaccine, to protect effectively against variants of the SARS-CoV-2 virus; perceptions of the efficacy of our vaccine; concerns about potential side effects from the vaccine, its safety or tolerability; the novelty of mRNA-based technology; storage and handling conditions for our vaccine and the ease or difficulty with which it can be distributed; and the fact that our COVID-19 vaccine requires two doses, whereas certain competitors’ vaccines may only require a single dose. The competitiveness of our COVID-19 vaccine in the future may also depend upon whether we are successful in efforts to combine this with other vaccines, like seasonal flu, and whether our competitors are successful in these efforts. Our competitive positioning may also be affected by the fact that we do not have as long a history of producing pharmaceutical products or existing commercial relationships compared to certain of our competitors.
We compete in the segment of pharmaceutical and biotechnology industries. There are additional companies that are working on potential mRNA medicines.medicines, some of which have reached commercialization. Companies with clinicalmRNA programs with mRNA include BioNTech (which has partnered with Pfizer for the production and commercialization of a COVID-19 vaccine) and CureVac (which also is developing a COVID-19 vaccine). Other competitors include eTheRNA Immunotherapies and Translate Bio and those with preclinical programs include Arcturus Therapeutics, Ethris, Genevant Sciences, Stemirna Therapeutics and GlaxoSmithKline. We also compete against other pharmaceutical companies in the market for COVID-19 vaccines that do not utilize mRNA-based technologies, including AstraZeneca and Johnson & Johnson, among others.
GOVERNMENT REGULATION
Government authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, such as our investigational medicines and any future investigational medicines. Generally, before a new drug or biologic can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.
U.S. drug and biological product development
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations and biologics under the FDCA, the Public Health Service Act, or PHSA, and their implementing regulations. Both drugs and biologics also are subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or following approval may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approve pending applications, withdrawal of an approval, license revocation, a clinical hold, untitled or warning letters, voluntary or mandatory product recalls, market withdrawals, product seizures, total or partial
suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
Our investigational medicines and any future investigational medicines must be approved by the FDA through a biologics license application, or BLA, or new drug application, NDA process before they may be legally marketed in the United States. The process generally involves the following:
•completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with GLP requirements;
•submission to the FDA of an IND application, which must become effective before human clinical trials may begin;
•approval by an institutional review board, or IRB, or independent ethics committee at each clinical trial site before each trial may be initiated;
•performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practice, or GCP, requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;
•submission to the FDA of a BLA or an NDA;
•a determination by the FDA within 60 days of its receipt of a BLA or an NDA to accept the filing for review;
•satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the biologic or drug will be produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the biologic or drug’s identity, strength, quality and purity;
•potential FDA audit of the clinical trial sites that generated the data in support of the BLA or NDA;
•payment of user fees for FDA review of the BLA or NDA; and
•FDA review and approval of the BLA or NDA, including consideration of the views of any FDA advisory committee, prior to any commercial marketing or sale of the biologic or drug in the United States.
The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our investigational medicines and any future investigational medicines will be granted on a timely basis, or at all.
Preclinical studies
Before testing any biological or drug candidate, including our product candidates, in humans, the product candidate must undergo rigorous preclinical testing. Preclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin. Some long-term preclinical testing may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.
Clinical trials
The clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCP requirements, which include the requirement that all patients provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information about certain clinical trials, including clinical trial results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website.
Where a gene therapy study is conducted at, or sponsored by, institutions receiving National Institutes of Health, or NIH, funding for recombinant DNA research, priorIn addition to the submission of an IND to the FDA before initiation of a clinical trial in the past a protocol and related documentation have been submitted to and the study registered with the NIH Office of Science Policy, or OSP, pursuant to the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA; however, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Pursuant to the NIH Guidelines, researchUnited States, certain human clinical trials involving recombinant or synthetic nucleic acid molecules must be approvedhad historically been subject to review by the Recombinant DNA Advisory Committee, or RAC, of the National Institutes of Health, or NIH, Office of Biotechnology Activities, or the OBA, pursuant to the NIH
Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight framework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinical trials of gene therapy products, and requesting public comment on its proposed modifications. During the public comment period, which closed October 16, 2018, the NIH announced that it will no longer accept new human gene transfer protocols for review as a part of the protocol registration process or convene the RAC to review individual clinical protocols. In April 2019, NIH announced the updated guidelines, which reflect these proposed changes, and clarified that these trials will remain subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local level will continue as set forth in the NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conductedutilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment. The NIH also has been responsible for convening the Recombinant DNA Advisory Committee, or RAC, a federal advisory committee that discusses protocols that raise novel or particularly important scientific, safety or ethical considerations, at one of its quarterly public meetings. The OSP notified the FDA of the RAC’s decision regarding the necessity for full publicenvironment, and such review may result in some delay before initiation of a gene therapy protocol. RAC proceedings and reports are posted to the OSP web site and may be accessed by the public. In August 2018, the NIH published a notice in the Federal Register to seek public comment on its proposal to amendclinical trial. While the NIH Guidelines to streamline oversight for human gene transfer clinicalare not mandatory unless the research protocols and reduce duplicative reporting requirements while focusing thein question being conducted at or sponsored by institutions receiving NIH Guidelines more specifically on biosafety issues associated with research involvingfunding of recombinant or synthetic nucleic acid molecules. The notice included proposed amendmentsmolecule research, many companies and other institutions not otherwise subject to eliminate RAC review and reporting requirements to NIH for human gene transfer research protocols and to modify the roles and responsibilities of investigators, institutions, IBCs, the RAC, and the NIH to be consistent with these goals. During the comment
period and effective August 2018, the NIH stated it will no longer accept new human gene transfer protocols for the protocol registration process under the NIH Guidelines or convene the RAC to review individual human gene transfer protocols. The NIH Office of Science Policy also will not accept annual reports, safety reports, amendments or other documentation for any previously registered human gene transfer protocols under the NIH Guidelines. The roles and responsibilities of IBCs at the local level will continue as described in the NIH Guidelines. Such trials remain subject to FDA and other clinical trial regulations, and only after FDA, IBC and other relevant approvals are in place can these protocols proceed. During this time, IBCs and IRBs will not be required to submit documentation to the NIH assessing whether a particular protocol meets the criteria for RAC review.voluntarily follow them.
A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a BLA or NDA. The FDA will accept a well-designed and well-conducted foreign clinical study not conducted under an IND if the study was conducted in accordance with GCP requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.
Clinical trials generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, and may overlap.
•Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability, and safety of the product candidate.
•Phase 2 clinical trials generally involve studies in disease-affected patients to evaluate proof of concept and/or determine the dosing regimen(s) for subsequent investigations. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted.
•Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product, and provide an adequate basis for product labeling.
In August 2018, the FDA released a draft guidance entitled “Expansion Cohorts: Use in First-In-Human Clinical Trials to Expedite Development of Oncology Drugs and Biologics,” which outlines how drug developers can utilize an adaptive trial design commonly referred to as a seamless trial design in early stages of oncology drug development, i.e., the first-in-human clinical trial, to compress the traditional three phases of trials into one continuous trial called an expansion cohort trial. Information to support the design of individual expansion cohorts are included in IND applications and assessed by FDA. Expansion cohort trials can potentially bring efficiency to drug development and reduce developmental costs and time.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and are commonly intended to generate additional safety data regarding use of the product in a clinical setting. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a BLA or NDA.
Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA and the investigators 15 calendar days after the trial sponsor determines the information qualifies for reporting for serious and unexpected suspected adverse events, findings from other studies or animal or in vitro testing that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but in no case later than seven calendar days after the sponsor’s initial receipt of the information.
Phase 1, Phase 2, Phase 3, and other types of clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides
authorization for whether a trial may move forward at designated check points based on access to certain data from the trial. Concurrent with clinical trials, companies usually complete additional animal studies and also must develop additional information about the chemistry and physical characteristics of the drug or biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality, and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the investigational medicines do not undergo unacceptable deterioration over their shelf life.
FDA review process
Following completion of the clinical trials, data are analyzed to assess whether the investigational product is safe and effective for the proposed indicated use or uses. The results of preclinical studies and clinical trials are then submitted to the FDA as part of a BLA or NDA, along with proposed labeling, chemistry, and manufacturing information to ensure product quality and other relevant data. A BLA is a request for approval to market a biologic for one or more specified indications and must contain proof of the biologic’s safety, purity, and potency. An NDA for a new drug must contain proof of the drug’s safety and efficacy. The marketing application may include both negative and ambiguous results of preclinical studies and clinical trials, as well as positive findings. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA. FDA approval of a BLA or NDA must be obtained before a biologic or drug may be marketed in the United States.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA or NDA must be accompanied by a user fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. Additionally, no user fees are assessed on BLAs or NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.
The FDA reviews all submitted BLAs and NDAs before it accepts them for filing and may request additional information rather than accepting the BLA or NDA for filing. The FDA must make a decision on accepting a BLA or NDA for filing within 60 days of receipt, and such decision could include a refusal to file by the FDA. Once the submission is accepted for filing, the FDA begins an in-depth review of the BLA or NDA. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months, from the filing date, in which to complete its initial review of an original BLA or NDA for a new molecular entity and respond to the applicant, and six months from the filing date of an original BLA or NDA designated for priority review. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and NDAs, and the review process is often extended by FDA requests for additional information or clarification.
Before approving a BLA or NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.
The FDA also may audit data from clinical trials to ensure compliance with GCP requirements. Additionally, the FDA may refer applications for novel products or products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making decisions on approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. After the FDA evaluates a BLA or NDA, it will issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the biologic or drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the BLA or NDA identified by the FDA. The Complete Response Letter may require additional clinical data, additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, preclinical studies, or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit the BLA or NDA, addressing all of the deficiencies identified in the letter, or withdraw the application or request an opportunity for a hearing. Even if such data and information are submitted, the FDA may decide that the BLA or NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
Orphan drug designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making the product available in the United States for this type of disease or condition will be recovered from sales of the product.
Orphan drug designation must be requested before submitting a BLA or NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation on its own does not convey any advantage in or shorten the duration of the regulatory review and approval process.
If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years from the date of such approval, except in limited circumstances, such as
a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues. Competitors, however, may receive approval of either a different product for the same indication or the same product for a different indication; in the latter case, because health care professionals are free to prescribe products for off-label uses, the competitor’s product could be used for the orphan indication despite our orphan exclusivity. Orphan drug exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval before we do for the same drug and same indication, as defined by the FDA, for which we are seeking approval, or if our product is determined to be contained within the scope of the competitor’s product for the same indication or disease. If we pursue marketing approval for an indication broader than the orphan drug designation we have received, we may not be entitled to orphan drug exclusivity. Orphan drug status in the European Union, or EU, has similar, but not identical, requirements and benefits.
Expedited development and review programs
The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria. Specifically, new drugs and biologics are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast track designation applies to both the product and the specific indication for which it is being studied. The sponsor can request the FDA to designate the product for fast track status any time before receiving BLA or NDA approval, but ideally no later than the pre-BLA or pre-NDA meeting. Any product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs intended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it treats a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biologic designated for priority review in an effort to facilitate the review.
A product may also be eligible for accelerated approval, if it treats a serious or life-threatening condition and generally provides a meaningful advantage over available therapies. In addition, it must demonstrate an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of a drug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. If the FDA concludes that a drug or biologic shown to be effective can be safely used only if distribution or use is restricted, it will require such post-marketing restrictions, as it deems necessary to assure safe use of the product. If the FDA determines that the conditions of approval are not being met, the FDA can withdraw its accelerated approval for such drug or biologic.
Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits of breakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from the FDA to ensure an efficient drug development program.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or the time period for FDA review or approval may not be shortened. Furthermore, fast track designation, priority review, accelerated approval, and breakthrough therapy designation do not change the standards for approval, but may expedite the development or approval process.
Emergency Use Authorization (EUA)
The Secretary of Health and Human Services may authorize unapproved medical products, including vaccines, to be marketed in the context of an actual or potential emergency that has been designated by the U.S. government. The COVID-19 pandemic has been designated as such a national emergency. After an emergency has been announced, the Secretary of Health and Human Services may authorize the issuance of and the FDA Commissioner may issue EUAs for the use of specific products based on criteria established by the FDCA, including that the product at issue may be effective in diagnosing, treating, or preventing serious or life-threatening diseases when there are no adequate, approved, and available alternatives. An EUA is subject to additional conditions and restrictions and is product-specific. An EUA terminates when the emergency determination underlying the EUA terminates. An EUA is not a long-term alternative to obtaining FDA approval, licensure, or clearance for a product. FDA may revoke an EUA for a variety of
reasons, including where it is determined that the underlying health emergency no longer exists or warrants such authorization, so it is not possible to predict how long an EUA may remain in place.
Pediatric information
Under the Pediatric Research Equity Act, as amended, a BLA or NDA or supplement to a BLA or NDA must contain data to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration must submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 study. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints, and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from preclinical studies, early phase clinical trials, and/or other clinical development programs.
Post-marketing requirements
Following approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping activities, reporting of adverse experiences, complying with promotion and advertising requirements, which include restrictions on promoting products for unapproved uses or patient populations (known as ‘‘off-label use’’), and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. Prescription drug and biologic promotional materials must be submitted to the FDA in conjunction with their first use. Further, if there are any modifications to the drug or biologic, including changes in indications, labeling or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or NDA or BLA or NDA supplement, which may require the development of additional data or preclinical studies and clinical trials.
The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy, or REMS, to assure the safe use of the product. If the FDA concludes a REMS is needed, the sponsor of the BLA or NDA must submit a proposed REMS. The FDA will not approve the BLA or NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Newly discovered or developed safety or effectiveness data may require changes to a drug’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures, including a REMS or the conduct of post-marketing studies to assess a newly discovered safety issue. Product approvals may be withdrawn for non-compliance with regulatory standards, or if problems occur following initial marketing.
FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP regulations. In addition to our own manufacturing facilities, we rely, and expect to continue to rely, on third parties for the production of certain clinical and commercial quantities of our products in accordance with cGMP regulations. We, and these manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, the maintenance of records and documentation, and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMP regulations, could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA or NDA, including recall.
U.S. patent term restoration and marketing exclusivity
Depending upon the timing, duration, and specifics of FDA approval of our investigational medicines and any future investigational medicines, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent
Term Restoration Act of 1984, commonly referred to as the Hatch Waxman Amendments. The Hatch Waxman Amendments permit restoration of the patent term of up to five years as compensation for patent term lost during product development and FDA regulatory review process. Patent term restoration, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one half the time between the effective date of an IND and the submission date of a BLA or NDA, plus the time between the submission date of a BLA or NDA and the approval of that application, except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to an approved drug is eligible for such an extension and the application for the extension must be submitted prior to the expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond the current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant BLA or NDA.
Marketing exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications. The FDCA provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving abbreviated new drug applications, or ANDAs, for drugs containing the active agent for the original indication or condition of use. The FDCA also provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.
During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovator drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder. Three-year and five-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.
An abbreviated approval pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed reference biological product was created by the Biologics Price Competition and Innovation Act of 2009, or BPCI Act. This amendment to the PHSA, in part, attempts to minimize duplicative testing. Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials. Interchangeability requires that a biological product be biosimilar to the reference product and that the product can be expected to produce the same clinical results as the reference product in any given patient and, for products administered multiple times to an individual, that the product and the reference product may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biological product without such alternation or switch.
A reference biological product is granted 12 years of data exclusivity from the time of first licensure of the product and the FDA will not accept an application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensure of the reference product. ‘‘First licensure’’ typically means the initial date the particular product at issue was licensed in the United States. Date of first licensure does not include the date of licensure of (and a new period of exclusivity is not available for) a biological product if the licensure is for a supplement for the biological product or for a subsequent application by the same sponsor or manufacturer of the biological product (or licensor, predecessor in interest, or other related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength, or for a modification to the structure of the biological product that does not result in a change in safety, purity, or potency.
Pediatric exclusivity is another type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing regulatory exclusivity periods. This six month exclusivity may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA issued ‘‘Written Request’’ for such a trial.
European Union drug development
In the EU, our future products also may be subject to extensive regulatory requirements. As in the United States, medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has been obtained.
Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls. Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the EU clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the EU, the EU Member States have transposed and applied the provisions of the Directive differently. This has led to significant variations in the member stateMember State regimes. Under the current regime, before a clinical trial can be initiated it must be approved in each of the EU countries where the trial is to be conducted by two distinct bodies: the National Competent Authority, or NCA, and one or more Ethics Committees, or ECs. Under the current regime all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the Member State where they occurred.
The EU clinical trials legislation currently is undergoing a transition process mainly aimed at harmonizing and streamlining clinical trial authorization, simplifying adverse event reporting procedures, improving the supervision of clinical trials, and increasing their transparency. Recently enactedIn April 2014, the EU adopted a new Clinical Trials Regulation EU(EU) No 536/2014, ensureswhich is set to replace the current Clinical Trials Directive 2001/20/EC. It is expected that the rulesnew Clinical Trials Regulation (EU) No 536/2014 will apply following confirmation of full functionality of the Clinical Trials Information System (CTIS), the centralized EU portal and database for conducting clinical trials foreseen by the Regulation, through an independent audit, currently expected to occur in December 2021. It will overhaul the current system of approvals for clinical studies in the EUEU. Specifically, the new Regulation, which will be identical.directly applicable in all Member States (and so does not require national implementing legislation in each Member State), aims at simplifying and streamlining the approval of clinical studies in the EU. For instance, the new Regulation provides for a streamlined application procedure via a single point and strictly defined deadlines for the assessment of clinical study applications.
Pediatric investigation plan
An application for marketing authorization of a medicinal product for human use which is not yet authorized in the European UnionEU shall be considered valid only if it includes a Pediatric Investigational Plan, or PIP, according to Regulation (EC) No. 1901/2006.2006 unless a waiver applies (e.g., because the relevant disease or condition occurs only in adults). The PIP or the application for waiver shall be submitted with a request for agreement, except in duly justified cases, early during the product development phase and not later than upon completion of the human pharmacokinetic studies in healthy subjects. The end of Phase 1 pharmacokinetic studies can coincide with the initial tolerability studies, or the initiation of the adult Phase 2 studies (proof-of-concept studies); in any case, submission of the PIP cannot be after initiation of pivotal trials or confirmatory (Phase 3) trials.
The Pediatric Committee, a scientific committee established at the Community level, shall assess the content of any PIP, waivers, and deferrals for a medicinal product submitted to it in accordance with the regulation on medicinal products for pediatric use and formulate an opinion thereon.
European Union drug review and approval
In the European Economic Area, or EEA, which is comprised of the 2827 Member States of the EU and Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations.
The Community MA is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the EMA, and is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, advanced therapy medicines such as gene therapy, somatic cell therapy or tissue engineered medicines, and medicinal products containing a new active substance indicated for the treatment of HIV, AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune, and other immune dysfunctions and viral diseases. TheFor those products for which the use of the Centralized Procedure is optional for products containingnot mandatory, applicants may elect to use the Centralized Procedure where either the product contains a new active substance not yet authorized in the EEA, or for productswhere the applicant can show that constitutethe product constitutes a significant therapeutic, scientific, or technical innovation or for which arethe Centralized Procedure is in the interest of public health in the EU.patients at a European level.
National MAs,Marketing Authorizations, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MAMarketing Authorization can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MAMarketing Authorization in any Member State at the time of application, it can be approved simultaneously in various Member States through the
Decentralized Procedure. Under the Decentralized Procedure an identical dossier is submitted to the competent authorities of each of the Member States in which the MAmarketing authorization is sought, one of which is selected by the applicant as the Reference Member State, or RMS. The competent authority of the RMS prepares a draft assessment report, a draft summary of the product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Concerned Member States Concerned)States) for their approval. If the Concerned Member States Concerned raise no objections, based on a potential serious risk to public health, in relation to the assessment, SPC, labeling, or packaging proposed by the RMS, the product is subsequently granted a national MAmarketing authorization in all the Member States (i.e., in the RMS and the Concerned Member States Concerned)States).
Under the above described procedures, before granting the MA,marketing authorization, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk benefit balance of the product on the basis of scientific criteria concerning its quality, safety, and efficacy.
Now that the UK (which comprises Great Britain and Northern Ireland) has left the European Union, Great Britain will no longer be covered by centralized MAs (under the Northern Irish Protocol, centralized marketing authorizations will continue to be recognized in Northern Ireland). All medicinal products with a current centralized marketing authorization were automatically converted to Great Britain MAs on January 1, 2021. For a period of two years from January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, the UK medicines regulator, may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized procedure, in order to more quickly grant a new Great Britain MA. A separate application will, however, still be required.
European exclusivity
In the EU,EEA, new innovative products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an additional two years of market exclusivity upon the grant of a marketing authorization. TheDuring the period of data exclusivity if granted, prevents regulatory authoritiesgeneric or biosimilar applicants may not reference the innovator’s preclinical or clinical trial data contained in the EU from referencingdossier of the innovator’s data to assessreference product when applying for a generic or biosimilar applicationmarketing authorization for a period of eight years afterfrom the date on which the reference product was first authorized in the EEA. During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization application can be submitted, and the innovator’s data may be referenced, but not approved for two years.no generic or biosimilar product can be marketed until the expiration of the market exclusivity period. The overall 10-year period will be extended to a maximum of 11 years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are determined to bring a significant clinical benefit in comparison with currently approved therapies. Even if an innovative medicinal product gains the prescribed period of data exclusivity, another company may market another version of the product if such company obtained a marketing authorization based on an application with a completely independent data package of pharmaceutical tests, preclinical tests and clinical trials.
European Union orphan designation and exclusivity
In the EU,EEA, the EMA’s Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of life threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU community, (oror where it is unlikely that the development of the medicine would generate sufficient return to justify the investment)necessary investment in its development, and in each case for which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or, if a method exists, the product would be a significant benefit to those affected).
In the EU,EEA, orphan drug designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal product approval. This period may be reduced to six years if, at the end of the fifth year, it is established that the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. During the period of market exclusivity, marketing authorization may only be granted to a “similar medicinal product” for the same therapeutic indication if: (i) a second applicant can establish that its product, although similar to the authorized product, is safer, more effective or otherwise clinically superior; (ii) the marketing authorization holder for the authorized product consents to a second orphan medicinal product application; or (iii) the marketing authorization holder for the authorized product cannot supply enough orphan medicinal product. Orphan drug designation must be requested before submitting an application for marketing approval. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
European data collection
The collection and use of personal health data in the European UnionEU is governed by the provisions of the Data Protection Directive, and as of May 2018 the General Data Protection Regulation, or GDPR. This directive imposes several requirements relating to the
consent of the individuals to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent national data protection authorities, and the security and confidentiality of the personal data. The Data Protection Directive and GDPR also impose strict rules on the transfer of personal data out of the EU to the United States. Failure to comply with the requirements of the Data Protection Directive, the GDPR, and the related national data protection laws of the EU Member States may result in fines and other administrative penalties. The GDPR introduces new data protection requirements in the EU and substantial fines for breaches of the data protection rules. The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerous and adversely affect our business, financial condition, results of operations, and prospects.
European Union drug marketing
Much like the Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order, or use of medicinal products is also prohibited in the EU. The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States, such as the U.K. Bribery Act 2010. Infringement of theserelevant EU laws could result in substantial fines and imprisonment.
Payments may be made to physicians in limited circumstances, and in certain EU Member States such payments must be publicly disclosed. Moreover, agreements with physicians for the provision of services often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization, and/or the regulatory authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.
Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the UK voted in favor of leaving the EU (commonly referred to as Brexit). Thereafter, on March 29, 2017, the country formally notified the EU of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. The UK formally left the EU on January 31, 2020. A transition period began on February 1, 2020, during which EU pharmaceutical law remained applicable to the UK, however this ended on December 31, 2020. Since the regulatory framework in the UK covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from EU Directives and Regulations, Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the UK, as UK legislation now has the potential to diverge from EU legislation. It remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the UK in the long-term. The MHRA has recently published detailed guidance for industry and organizations to follow from January 1, 2021 now the transition period is over, which will be updated as the UK’s regulatory position on medicinal products evolves over time.
Rest of the world regulation
For other countries outside of the EU and the United States, such as countries in Eastern Europe, Latin America, Middle East, or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary from country to country. Additionally, the clinical trials must be conducted in accordance with GCP requirements and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, or criminal prosecution.
Other healthcare laws
Healthcare providers, physicians, and third party payors, including governmental payors such as Medicare and Medicaid,will play a primary role in the recommendation and prescription of any products for which we obtain marketing approval. Our future arrangements with third party payors, healthcare providers, and physicians may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute any drugs for which we obtain marketing approval. In the United States, these laws include, without limitation, state and federal anti-kickback, false claims, physician transparency, and patient data privacy and security laws and regulations, including but not limited to those described below.
•The Anti-Kickback Statute, or AKS, makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer, or pay any remuneration, directly or indirectly, in cash or in kind, that is intended to induce or reward referrals, including the purchase, recommendation, order or prescription of a particular drug or any other good or service, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to five years in prison, criminal fines, administrative civil money penalties, and exclusion from participation in federal healthcare programs. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it.
•The federal False Claims Act imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money to the federal government. The government may deem manufacturers to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Claims which include items or services resulting from a violation of the federal Anti-Kickback Statute are false or fraudulent claims for purposes of the False Claims Act. Our future marketing and activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information, and other information affecting federal, state, and third-party reimbursement for our products, and the sale and marketing of our product and any future investigational medicines, are subject to scrutiny under this law.
•Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, knowingly and willfully executing a scheme, or attempting to execute a scheme, to defraud any healthcare benefit program, including private payors, or falsifying, concealing, or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, impose, among other things, specified requirements on covered entities and their business associates relating to the privacy and security of individually identifiable health information, including mandatory contractual terms and required implementation of technical safeguards of such information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state Attorneys General new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
•The Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act, the ACA,(ACA), imposed new annual reporting requirements for certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, for certain payments and “transfers of value” provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners.
•Analogous state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and apply regardless of payor impose a variety of obligations on. Such laws are enforced by various state agencies and through private actions. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance guidance, require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, and restrict marketing practices or require disclosure of marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances. Such data privacy and security laws may differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts. For example, in California the California Consumer Protection Act (CCPA), which went into effect on January 1, 2020, establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the
collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. Further, a new California privacy law, the California Privacy Rights Act (CPRA), was passed by California voters on November 3, 2020. The CPRA will create additional obligations with respect to processing and storing personal information that are scheduled to take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022). While clinical trial data and information governed by HIPAA are currently exempt from the current versions of the CCPA and CPRA, other personal information may be applicable and possible changes to the CCPA and CPRA may broaden its scope.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions, and settlements in the healthcare industry. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other related governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines, imprisonment, disgorgement, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, reputational harm, additional oversight, and reporting obligations if we become subject to a corporate integrity agreement or similar settlement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to similar actions, penalties, and sanctions. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business.
Current and future healthcare reform legislation
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our investigational medicines, restrict or regulate post-approval activities, and affect our ability to profitably sell any investigational medicines for which we obtain marketing approval. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any strategic collaborators, may receive for any approved products.
The ACA, for example, contains provisions that subject biological products to potential competition by lower-cost biosimilars and may reduce the profitability of drug products through increased rebates for drugs reimbursed by Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and, annual fees based on pharmaceutical companies’ share of sales to federal health care programs. With theWe expect that current presidential administration and Congress, therelaws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any strategic collaborators, may receive for any approved products.
Since its enactment, there have been numerous judicial, administrative, orexecutive, and legislative changes, including modification, repeal, or replacement of all, orchallenges to certain provisionsaspects of the ACA, which may impact reimbursement for drugs and biologics. On January 20, 2017, an Executive Order was signed directing federal agencies with authoritieswe expect there will be additional challenges and responsibilities underamendments to the ACA to waive, defer, grant exemptions from, or delayin the implementation of any provisionfuture. For example, various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court, and the Trump Administration issued various Executive Orders that eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on states, individuals,
healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, an Executive Order was signed terminating the cost-sharing subsidies that reimburse insurers underAdditionally, Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. The loss of the cost share reduction paymentsIt is expected to increase premiums on certain policies issued by qualified health plans under the ACA. Further, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party payors, the viability ofunclear whether the ACA marketplace, and providers are not yet known.
In addition,will be overturned, or further amended, particularly given the Centers for Medicare & Medicaid Services, or CMS, has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have thenew administration. We cannot predict what effect of relaxing the essential health benefits required underfurther changes to the ACA for plans sold through such marketplaces. Further, each chamber of Congress has put forth multiple bills this year designed to repeal or repeal and replace portions of the ACA. While Congress has not passed repeal legislation, the Tax Reform Act includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACAwould have on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” Congress may consider other legislation to repeal and replace elements of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.our business.
Additionally, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted:
•The Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 20252030 unless additional Congressional action is taken. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, as well as subsequent legislation, these reductions have been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic.
•The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, the federal government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement, and requirements for substitution of generic products for branded prescription drugs to limit the growth of government paid health care costs. For example, the federal government has passed legislation requiring pharmaceutical manufacturers to provide rebates and discounts to certain entities and governmental payors to participate in federal healthcare programs. Additionally, the currentprevious administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. While any proposed measures will require authorization through additional legislation to become effective, Congress and the administration have eachhas indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.
Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation, from other countries and bulk purchasing.
Packaging and distribution in the United States
If our products are made available to authorized users of the Federal Supply Schedule of the General Services Administration additional laws and requirements apply. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion, and other activities also are potentially subject to federal and state consumer protection and unfair competition laws.
The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage, and security requirements intended to prevent the unauthorized sale of pharmaceutical products.
The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other
penalties, injunctions, exclusion from federal healthcare programs, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a firm to enter into supply contracts, including government contracts. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.
Changes in regulations, statutes, or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
Other U.S. environmental, health, and safety laws and regulations
We may be subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.
In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.
CORPORATE INFORMATION
We were incorporated under the laws of the State of 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. Moderna LLC was the successor in interest to Moderna Therapeutics, Inc., a Delaware corporation incorporated in 2009 as Newco LS18, Inc. by Flagship Pioneering. In August 2018, we changed our name from Moderna Therapeutics, Inc. to Moderna, Inc. Our principal corporate office is located at 200 Technology Square, Cambridge, MA 02139, and our telephone number is (617) 714-6500.
Our website, addresswww.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 www.modernatx.com.frequently updated and new information is shared. The information on our website and that we disclose through social media channels is not incorporated by reference in this Annual Report on Form 10-K or in any other filings we make with the Securities and Exchange Commission, or SEC.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended, or the Exchange Act. These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding us and other issuers that file electronically with the SEC. The SEC’s Internet website address is http://www.sec.gov.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. Any of the risk factors we describe below could adversely affect our business, financial condition or results of operations. The market price of our common stock could decline if one or more of these risks or uncertainties actually occur, causing you to lose all or part of the money you paid to buy our common stock.your investment. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. Certain statements in this Annual Report on Form 10-K are forward-looking statements. See the section of this Annual Report on Form 10-K titled “Special Note Regarding Forward-Looking Statements”.
Risks related to COVID-19 and our development of mRNA-1273, our vaccine against the SARS-CoV-2 virus
While we have received Emergency Use Authorization from the U.S. Food and Drug Administration and other provisional, interim or conditional authorizations from regulatory authorities outside the United States for our COVID-19 vaccine (mRNA-1273), we may encounter difficulties producing or successfully commercializing the vaccine consistent with our existing or potential contractual obligations.
In response to the global pandemic caused by SARS-CoV-2, we are pursuing the rapid manufacture and continued clinical testing of our COVID-19 vaccine (mRNA-1273). While we have received an Emergency Use Authorization (EUA), from the U.S. FDA and other authorizations for the distribution of our COVID-19 vaccine from regulatory authorities outside the United States (including Canada, the UK, the EU, Switzerland, Qatar, Israel and Singapore), we may encounter difficulties producing the vaccine on the timelines and in the quantities set forth in our existing supply agreements, and those potential difficulties could also prevent us from successfully signing or performing under future supply agreements for the COVID-19 vaccine. Our ability to commercialize an effective vaccine depends on the success of our manufacturing capability, both at our own manufacturing facility, and those of our manufacturing partners, which we rapidly scaled in response to the pandemic and in parallel with our development and clinical testing of our vaccine. We are also committing substantial financial resources and personnel to the development, manufacture and distribution of our COVID-19 vaccine, including to support the scale-up of manufacturing to enable our pandemic response, which may cause delays in or otherwise negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of COVID-19 as a global health concern. Our business could be negatively impacted by our allocation of significant resources—including managerial and financial resources—to a global health threat against which our vaccine may not be fully effective, and may ultimately prove unsuccessful or unprofitable. Furthermore, notwithstanding our entry into supply agreements for the COVID-19 vaccine with the U.S. and foreign governments, there are no assurances that our vaccine will be approved for distribution and commercial use in all countries covered by such supply agreements.
Although we have a dedicated manufacturing facility, we do not have sufficient manufacturing infrastructure to support a global roll-out of the COVID-19 vaccine on our own. For example, we have entered into a strategic collaboration with Lonza Ltd. to enable increased production of our COVID-19 vaccine. We have also entered into a collaboration with Catalent, Inc. for large-scale, commercial fill-finish manufacturing of our COVID-19 vaccine in the United States, and a collaboration with Laboratorios Farmacéuticos Rovi, S.A., or ROVI, and Recipharm for large-scale, commercial fill-finish manufacturing of mRNA-1273, for supply to markets outside of the U.S. from ROVI’s facilities in Spain, and Recipharm’s facilities in France. We have engaged other collaborators, and may need to engage others in the future, including contract manufacturing organizations, government and non-government organizations, and other funding and manufacturing sources, to assist in meeting our capacity needs in support of our global roll-out. Prior to 2020, we have not previously ramped our organization for a commercial launch of any product, and doing so in a pandemic environment with an urgent, critical global need creates additional challenges such as distribution channels, intellectual property disputes or challenges, and the need to establish teams of people with the relevant skills worldwide. We may also face challenges with sourcing a sufficient amount of raw materials to support the demand for our COVID-19 vaccine. We may be unable to effectively create a supply chain for the vaccine that will adequately support demand as we are reliant on our third-party collaborators being able to fulfill demand. Any capacity issues or delays experienced by any of our third-party collaborators may result in us not being able to meet certain product volume or delivery timing obligations under our supply agreements for the COVID-19 vaccine. Furthermore, we will encounter significant additional capital requirements as we continue to expand our commercial launch efforts. While our collaboration with BARDA and revenue from customer contracts will help us meet these capital requirements, additional investment, whether from our own capital resources or through collaborations with others, will be necessary. We cannot guarantee that any of these new challenges and requirements will be met in a timely manner or at all.
In addition, another party may ultimately be successful in producing a more efficacious vaccine or other treatment for COVID-19. In particular, given the widespread media attention on the current pandemic, there are efforts by public and private entities to develop a COVID-19 vaccine as fast as possible, including by AstraZeneca, GlaxoSmithKline/Sanofi, Johnson & Johnson, Novavax and Pfizer/BioNTech. The Pfizer/BioNTech vaccine has also received an EUA in the United States and other territories (including the EU and UK), and other vaccines, including the AstraZeneca vaccine, have been authorized elsewhere.
Those other entities may develop COVID-19 vaccines that, as compared to mRNA-1273 or any other COVID-19 vaccine that we may develop, are more effective, become the standard of care, have broader market acceptance, are safer or have fewer or less severe side effects, are more convenient, are developed at a lower cost, or may be more successfully commercialized. Many of these other organizations are much larger than we are and have access to larger pools of capital and broader manufacturing infrastructure. Larger pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and may have the resources to heavily invest to accelerate development and commercialization of their vaccine candidates. Our business could be materially and adversely affected if competitors develop and commercialize one or more COVID-19 vaccines before we can fully expand our commercialization capabilities.
The success or failure of other entities, or perceived success or failure, may adversely impact our ability to obtain any future funding for our COVID-19 vaccine commercialization effort. In addition, we may not be able to compete effectively if our product candidates do not satisfy government procurement requirements with respect to biodefense products.
We are devoting significant resources to the scale-up, development and commercialization of our COVID-19 vaccine, including for use by the U.S. government and other global governmental and commercial partners.
We continue to work toward the large-scale technical development, manufacturing scale-up in several countries and larger scale deployment of our COVID-19 vaccine. The number of doses of this vaccine that we are able to produce and distribute is dependent on our ability, and the ability of our contract manufacturers, to successfully and rapidly scale up manufacturing capacity. To support the scale-up, we have expended and will need to continue to expend significant resources and capital. We may need to, or we may be required by the federal government to, divert resources and capital from our other programs. We may also seek and secure significant additional funding through contractual arrangements and collaborations with third parties. We may be unable to enter into such arrangements on favorable terms, or at all, which would adversely affect our ability to develop, manufacture and distribute the COVID-19 vaccine.
As part of this effort, we have a commitment from BARDA to fund up to $954.9 million to enable the initiation of and support the planning and execution of Phase 2 and Phase 3 clinical trials of mRNA-1273 under our own IND, as well as the scale-up of mRNA-1273 manufacture in 2020 to enable our pandemic response. To the extent our funding collaborators have discretion over the distribution of funding commitments, we may not ultimately receive the full amount of committed funds and could be exposed to urgent needs for additional funding to support our manufacturing activities. Our funding collaborators may also impose restrictions on or mandate input as to our conduct of clinical trials, manufacturing activities or distribution activities, which may cause delays in the event of disagreement.
We have entered into, and plan to continue entering into, supply agreements for the COVID-19 vaccine that include cash deposits from the purchasers. In the event we are unable to successfully obtain regulatory authorization or approval for the commercialization of the vaccine in the relevant jurisdictions, or we fail to meet certain product volume or delivery timing obligations under our supply agreements, we may be required to refund significant portions of the deposits, which could have a material and adverse effect on our financial condition.
We have already incurred expenses in connection with the distribution of our COVID-19 vaccine, and these expenses could increase over time. Such expenses include the cost of implementing pharmacovigilance to collect, analyze and monitor safety data and to identify and evaluate adverse reactions to our COVID-19 vaccine as it is administered in jurisdictions around the globe.
In addition, since we have received an EUA for the COVID-19 vaccine and have commenced commercialization activities, we have a widely used vaccine in circulation in the United States and other countries prior to our receipt of full marketing approval. This is also the case in other countries, such as the UK, where a form of emergency or conditional approval has been granted, but not a full marketing approval. Unexpected safety issues, including any that we have not yet observed in our Phase 1, 2 or 3 clinical trials for the COVID-19 vaccine, could lead to significant reputational damage for Moderna and our technology platform going forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional financial resources.
The positive efficacy and safety data from the ongoing clinical studies of our COVID-19 vaccine and the EUA granted by the FDA may not be predictive of the final results of the clinical trials, which is one of a number of factors that may delay or prevent us from receiving full regulatory approval of our vaccine.
The positive efficacy and safety data we have announced from the ongoing studies of our COVID-19 vaccine are based on analyses of those studies to date, and while the efficacy assessment is now considered final, efficacy, effectiveness, safety, and immunogenicity data continue to accumulate. Further results from the ongoing studies for mRNA-1273, as well as the experience of the millions of individuals who have been vaccinated with mRNA-1273, could show diminished immunogenicity, or protection, as compared to the
results released to date as efficacy and antibody persistence may wane over time. Additionally, we may observe new, more frequent or adverse events of greater severity in subjects participating in these ongoing clinical studies or among those individuals who have been vaccinated with mRNA-1273. In addition, the interpretation of the data from our clinical trials of mRNA-1273 by the FDA and other regulatory agencies may differ from our interpretation of such data and the FDA or other regulatory agencies may require that we conduct additional studies or analyses.
The assays being used to estimate the effectiveness of vaccine candidates being developed to prevent COVID-19 have only recently been developed and are continuing to evolve. Validation reports for these assays have been submitted for review to regulatory agencies. Results obtained in clinical studies of mRNA-1273 with subsequent versions of these assays may be less positive than the results we have obtained to date. Moreover, the samples of convalescent sera, or blood samples from people who have recovered from COVID-19, used to benchmark the level of antibodies produced by subjects receiving mRNA-1273 in clinical studies, have been taken from a small number of people and may not be representative of the antibody levels in a broader population of people who have recovered from COVID-19, particularly as variant strains have begun to emerge. The future results in clinical studies of mRNA-1273 may not be as positive when compared to the antibody levels in other samples of convalescent sera. Various preclinical animal studies of mRNA-1273 are ongoing, including preclinical studies in non-human primates. If safety data observed in these preclinical studies are inconsistent with safety data from clinical studies, we may be required to conduct additional studies of mRNA-1273. Any of these factors could delay or prevent us from receiving regulatory approval of mRNA-1273, including a biologics license application, or BLA, apart from the EUA by the FDA in the United States and related authorizations in other jurisdictions, and there can be no assurance that mRNA-1273 will be otherwise approved in a timely manner, if at all.
We may be unsuccessful in adapting our COVID-19 vaccine (mRNA-1273) or developing future versions of our COVID-19 vaccine to protect against variants of the SARS-CoV-2 virus and a market for vaccines against these variants may not develop.
Our current COVID-19 vaccine (mRNA-1273) was developed based upon the genetic sequence of the SARS-CoV-2 virus that was first detected in Wuhan, China. As the pandemic has continued, the SARS-CoV-2 virus continues to evolve, and new strains of the virus or those that are already in circulation may prove more transmissible or cause more severe forms of COVID-19 disease than the predominant strains to date. There is a risk that mRNA-1273 will not be as effective in protecting against variant strains of the SARS-CoV-2 virus expressing variants of the spike protein, particularly strains with mutations in the receptor binding domain and N-terminal domain. Although we have shown comparable neutralization titers with the majority of variants that we have tested (including the B.1.1.7 strain, which was first detected in the United Kingdom), we did see a 6.4-fold reduction in neutralization titers in the B.1.351 strain (first detected in South Africa). The ultimate impact to protection against this variant remains unknown, but we are actively working to mitigate this risk by beginning non-clinical investigations into the immunogenicity of a modification to mRNA-1273, designed to reflect the mutations of the B.1.351 variant. However, these efforts may be unsuccessful, and failure to adapt our vaccine to this or other variants of the SARS-CoV-2 virus could lead to significant reputational harm, in addition to adversely affecting our financial results. It is also possible that we may expend significant resources adapting our COVID-19 vaccine to protect against variants of the SARS-CoV-2 virus, but that a market for this adapted vaccine does not develop or demand does not align with our projections or cost expenditures.
The regulatory pathway for mRNA-1273 is continually evolving, and may result in unexpected or unforeseen challenges.
To date, our COVID-19 vaccine has moved rapidly through the FDA regulatory review and EUA process, as well as the review and authorization process in a number of other jurisdictions, including the UK and EU. The speed at which all parties are acting to create and test many therapeutics and vaccines for COVID-19 is atypical, and evolving or changing plans or priorities within the FDA or the regulatory authorities in other jurisdictions, including changes based on new knowledge of COVID-19 and how the disease affects the human body, and new variants of the virus, may significantly affect the regulatory timeline for further authorizations or approvals for our COVID vaccine. We cannot anticipate or predict with certainty the timelines or regulatory processes that may be required for the authorization or approval of updated versions of our COVID-19 vaccine, or vaccines that may be developed to fight against variants of the SARS-CoV-2 virus.
The FDA has the authority to grant an EUA to allow unapproved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions when there are no adequate, approved, and available alternatives. Although we have been granted an EUA by the FDA for our COVID-19 vaccine (specifically mRNA-1273), the FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long the EUA will remain in place. Such revocation could adversely impact our business in a variety of ways, including if mRNA-1273 is not yet approved by the FDA pursuant to a BLA, as we and our manufacturing partners have invested in the supply chain to provide mRNA-1273 under the EUA.
Similarly, the European Medicines Agency (EMA) has granted a conditional marketing authorization for mRNA-1273. The EMA has the authority to grant a conditional marketing authorization in a public health emergency, on the basis of less comprehensive clinical data than normally required, but where the benefit of immediate availability of the product outweighs the risk inherent in the fact that
additional data are still required. A conditional marketing authorization is a formal marketing authorization of the vaccine and covers all batches produced for the EU, however we are obliged to provide certain additional information and data by specified timelines, as conditions of the authorization and the EMA can take regulatory action if we do not comply with such conditions. Conditional marketing authorizations are valid for one year and can be renewed annually, however there is a risk that the EMA may decide not to renew our conditional authorization. If new data emerges that shows the benefits of our vaccine do not continue to outweigh its risks, the EMA can suspend or revoke our authorization. Similar authorizations that we have received for mRNA-1273, including those in the UK and Canada, are temporary, emergency authorizations that could similarly be revoked if the conditions for granting the authorization no longer apply. Any such revocation of the temporary authorization to distribute mRNA-1273, without receiving final approval to distribute the vaccine, could adversely impact our ability to realize the full financial benefit of our existing or future supply agreements.
Our ability to produce a successful vaccine and deliver it to customers may be curtailed by one or more government actions or interventions, which may be more likely during a global health crisis such as COVID-19.
Given the significant global impact of the COVID-19 pandemic, it is possible that one or more government entities may take actions that directly or indirectly have the effect of diminishing some of our rights or opportunities with respect to our COVID-19 vaccine, limiting our economic prospects. In the U.S., the Defense Production Act of 1950, as amended (the “Defense Production Act”), gives the U.S. government rights and authorities that may directly or indirectly diminish our own rights or economic opportunities with respect to our COVID-19 vaccine. Our current and potential third-party service providers may be impacted by government entities potentially invoking the Defense Production Act or other potential restrictions to all or a portion of services they might otherwise offer. As of January 21, 2021, President Biden has stated his intent to use the Defense Production Act to maximize the manufacture of vaccine and vaccine supplies, and that this effort will prioritize supplies that could cause bottlenecks including glass vials, stoppers, syringes, needles and the fill and finish capacity to package vaccine into vials.
Government entities imposing restrictions or limitations on our third-party service providers may require us to obtain alternative service sources for our COVID-19 vaccine or our vaccine candidates. If we are unable to timely enter into alternative arrangements, or if such alternative arrangements are not available on satisfactory terms, we will experience delays in the development or production of our COVID-19 vaccine and our vaccine candidates, increased expenses, and delays in distribution or commercialization of our COVID-19 vaccine, or, when and if approved, our vaccine candidates.
In addition, our supply contracts with the U.S. government for our COVID-19 vaccine contain certain restrictions on our ability to export vaccine that is produced from our U.S.-dedicated supply chain to serve markets outside the U.S. prior to satisfying our delivery obligations to the U.S. government. Furthermore, governments have threatened to block or limit the export of COVID-19 vaccines manufactured in their territories in instances where the manufacturers have been delayed or have not fully satisfied their delivery obligations to those governments. Governments of the jurisdictions in which we or our contract manufacturing partners produce our COVID-19 vaccine may impose export restrictions, prohibiting us from delivering orders of our COVID-19 vaccine to customers in other jurisdictions. Such restrictions may also delay or prevent production of the vaccine. The imposition of export controls could severely and adversely impact our manufacturing activities, commercial activities and financial results.
In addition, during a global health crisis, such as the COVID-19 pandemic, where the spread of a disease needs to be controlled, closed or heavily regulated national borders will create challenges and potential delays in our development and production activities and may necessitate that we pursue strategies to develop and produce our vaccines and vaccine candidates within self-contained national or international borders, at potentially much greater expense and with longer timeframes for public distribution.
Certain aspects of our business may be adversely affected by the ongoing coronavirus pandemic.
The extent to which the COVID-19 pandemic impacts our business and operating results will depend in part on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, including potential variants of SARS-CoV-2, and the actions taken to contain COVID-19 or treat its impact, among others.
The spread of COVID-19 has resulted in the delay and interruption of certain of our business operations. Many of our clinical trials have been affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed (or continue to be paused or delayed) due to changes in hospital or university policies, federal, state or local regulations or restrictions, prioritization of hospital resources toward pandemic efforts, travel restrictions, concerns for patient safety in a pandemic environment, or other reasons related to the pandemic. More specifically, as previously disclosed, certain of our clinical trials have been adversely affected, resulting in paused enrollment or delayed site initiations. As COVID-19 continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) have been implemented in many countries, and may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. Further, if the spread of the COVID-19 pandemic continues and our operations are adversely impacted, including due to facility access restrictions or from an outbreak in a facility, we risk manufacturing delays, or default and/or nonperformance under existing agreements.
Infections and deaths related to the pandemic have disrupted and may continue to disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay the review and/or approval by the FDA and other regulatory agencies with respect to, our clinical trials. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our development candidates.
We currently utilize third parties to, among other things, manufacture raw materials, components, parts, and consumables, perform quality testing and ship our products. For example, we rely on third-party manufacturers such as Lonza Ltd., Catalent Inc. and ROVI to enable larger scale manufacture and/or fill/finish capabilities for our mRNA vaccine (mRNA-1273) against the SARS-CoV-2 virus and others, such as McKesson, for shipping and distribution. We also manufacture our development candidates and investigational medicines and perform various services at our manufacturing facility. Certain of our third-party manufacturers and suppliers may pause their operations in response to the COVID-19 outbreak or otherwise encounter delays in providing their services. If either we or any third-party manufacturers or third parties in the supply chain for materials used in the production of our COVID-19 vaccine, development candidates or investigational medicines are adversely impacted by restrictions resulting from the COVID-19 outbreak, our supply chain may be disrupted, limiting our ability to manufacture our COVID-19 vaccine, as well as investigational medicines for our clinical trials, research and development operations and commercialization. In addition, delays and disruptions experienced by our strategic collaborators due to the COVID-19 outbreak could adversely impact the ability of such parties to fulfill their obligations, which could affect the clinical development or regulatory approvals of development candidates and investigational medicines under joint control.
The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on our business, including our ability to successfully commercialize our COVID-19 vaccine. Due to the pandemic, we may have difficulty meeting expectations with respect to commercial sales. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and may result in further, significant disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 could materially and adversely affect our business, prospects, operating results and financial condition, and the value of our common stock.
The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the situation closely.
Risks related to our business and creating a new class of medicines
We attempt to distribute our technology, biology, execution, and financing risks across a wide variety of therapeutic areas, disease states, programs, and technologies. However, our assessment of, and approach to, risk may not be comprehensive or effectively avoid delays or failures in one or more of our programs or modalities. Failures in one or more of our programs or modalities could adversely impact other programs or modalities in our pipeline and have a material adverse impact on our business, results of operations, and ability to fund our business.
We are creating a new class of medicines based on mRNA to improve the lives of patients. From the beginning, we designed our strategy and operations to realize the full potential value and impact of mRNA over a long time horizon across a broad array of human diseases. We have made investments in our platform, infrastructure, and clinical capabilities that have enabled us to establish a large pipeline of development candidates, of which many are in clinical trials or have an open IND. As our development candidates and investigational medicines progress, we or others may determine that: certain of our risk allocation decisions were incorrect or insufficient; we made platform level technology mistakes; individual programs or our mRNA science in general has technology or biology risks that were unknown or under-appreciated; our choices on how to develop our infrastructure to support our scale will result in an inability to manufacture our investigational medicines for clinical trials or otherwise impair our manufacturing; or we have allocated resources in such a way that large investments are not recovered and capital allocation is not subject to rapid re-direction. All of these risks may relate to our current and future programs sharing similar science (including mRNA science) and infrastructure, and in the event material decisions in any of these areas turn out to have been incorrect or under-optimized, we may experience a material adverse impact on our business and ability to fund our operations and we may never realize what we believe is the potential of mRNA.
mRNA drugs have only been authorized for emergency, or other provisional or conditional use for COVID-19, and there is no guarantee that any other mRNA drug will be granted an EUA or will be granted full approval in the future as a result of efforts by others or us. mRNA drug development has substantial clinical development and regulatory risks due to the novel nature of this new class of medicines.
Other than the EUA and other similar authorizations for COVID-19 vaccines, no mRNA medicines have been granted EUA or have been granted full approval to date by the FDA or other regulatory agencies. Successful discovery and development of other mRNA medicines by us or our strategic collaborators is highly uncertain and depends on numerous factors, many of which are beyond our or their control. We have made and will continue to make a series of business decisions and take calculated risks to advance our development efforts and pipeline, including those related to mRNA technology, delivery technology, and manufacturing processes, which may be shown to be incorrect based on further work by us, our strategic collaborators, or others. Although we have received an EUA from the FDA for mRNA-1273, there may never be products in which mRNA is the primary active ingredient approved outside the context of authorization for emergency use. Our mRNA investigational medicines that appear promising in the early phases of development may fail to advance, experience delays in the clinic, experience clinical holds, or fail to reach the market for many reasons, including:
•discovery efforts at identifying potential mRNA medicines may not be successful;
•nonclinical or preclinical study results may show potential mRNA medicines to be less effective than desired or to have harmful or problematic side effects;
•clinical trial results may show potential mRNA medicines to be less effective than expected (e.g., a clinical trial could fail to meet one or more endpoint(s)) or to have unacceptable side effects or toxicities;
•adverse effects in any one of our clinical programs or adverse effects relating to our mRNA, or our LNPs, may lead to delays in or termination of one or more of our programs;
•the insufficient ability of our translational models to reduce risk or predict outcomes in humans, particularly given that each component of our investigational medicines and development candidates may have a dependent or independent effect on safety, tolerability, and efficacy, which may, among other things, be species-dependent;
•manufacturing failures or insufficient supply of cGMP materials for clinical trials, or higher than expected cost could delay or set back clinical trials, or make mRNA-based medicines commercially unattractive;
•our improvements in the manufacturing processes for this new class of medicines and potential medicines may not be sufficient to satisfy the clinical or commercial demand of our investigational medicines or regulatory requirements for clinical trials;
•changes that we make to optimize our manufacturing, testing or formulating of cGMP materials could impact the safety, tolerability, and efficacy of our investigational medicines and development candidates;
•pricing or reimbursement issues or other factors that delay clinical trials or make any mRNA medicine uneconomical or noncompetitive with other therapies;
•failure to timely advance our programs or receive the necessary regulatory approvals or a delay in receiving such approvals, due to, among other reasons, slow or failure to complete enrollment in clinical trials, withdrawal by trial participants from trials, failure to achieve trial endpoints, additional time requirements for data analysis, data integrity issues, preparation of a BLA, or the equivalent application, discussions with the FDA or EMA, a regulatory request for additional nonclinical or clinical data, or safety formulation or manufacturing issues may lead to our inability to obtain sufficient funding; and
•the proprietary rights of others and their competing products and technologies that may prevent our mRNA medicines from being commercialized.
Currently, mRNA is considered a gene therapy product by the FDA. Unlike certain gene therapies that irreversibly alter cell DNA and could act as a source of side effects, mRNA-based medicines are designed to not irreversibly change cell DNA; however, side effects observed in gene therapy could negatively impact the perception of mRNA medicines despite the differences in mechanism. In addition, because no product in which mRNA is the primary active ingredient has been approved outside the context of authorization for emergency use, the regulatory pathway for approval is uncertain. The number and design of the clinical trials and preclinical studies required for the approval of these types of medicines have not been established, may be different from those required for gene therapy products, or may require safety testing like gene therapy products. Moreover, the length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one pharmaceutical product to the next, and may be difficult to predict.
Our business is highly dependent on the clinical advancement of our programs and modalities. Delay or failure to advance programs or modalities could adversely impact our business.
Using our platform, we are developing product features for medicines based on mRNA. Over time, our platform work led to commonalities, where a specific combination of mRNA technologies, delivery technologies, and manufacturing processes generated a set of product features shared by multiple programs. This is what we call a “modality.” We have historically utilized, and expect to continue to utilize, earlier programs in a modality to understand the technology risks within the modality, including manufacturing and pharmaceutical properties. Even if our earlier programs in a modality are successful in any phase of development any of such earlier programs may fail at a later phase of development, and other programs within the same modality may still fail at any phase of development including at phases where earlier programs in that modality were successful. This may be a result of technical challenges unique to that program or due to biology risk, which is unique to every program. As we progress our programs through clinical development, there may be new technical challenges that arise that cause an entire modality to fail.
While we aim to segregate risk using modalities, there may be foreseen and unforeseen risks across modalities in whole or in part. These include, but are not limited to, mRNA, chemical modifications, and LNPs and their components. In addition, if any one or more of our clinical programs encounter safety, tolerability, or efficacy problems, developmental delays, regulatory issues, or other problems, our platform approach and business could be significantly harmed. We may believe that a particular modality has been de-risked but later determine that new and different risks exist with respect to such modality.
In addition, the biology risk across the majority of our pipeline represents targets and pathways not clinically validated by one or more approved drugs. While we believe we have made progress in seeking to reduce biology risk in certain settings, such as for vaccine targets for which we and others have shown the utility of neutralizing antibodies, the risk that the targets or pathways that we have selected may not be effective will continue to apply across the majority of our current and future programs.
While we attempt to diversify our risks by developing one or more programs in each modality, there are risks that are unique to each modality and risks that are applicable across modalities. These risks may impair our ability to advance one or more of our programs in clinical development, obtain regulatory approval, or ultimately commercialize our programs, or cause us to experience significant delays in doing so, any of which may materially harm our business.
Certain features in our development candidates and investigational medicines, including those related to mRNA, chemical modifications, surface chemistries, LNPs, and their components, may result in foreseen and unforeseen risks that are active across some or all of our modalities. Any such portfolio spanning risks, whether known or unknown, if realized in any one of our programs would have a material and adverse effect on our other programs and on our business as a whole.
There are specific additional risks to certain of our modalities and our programs as a whole. For example, prophylactic vaccines typically require clinical testing in thousands to tens of thousands of healthy volunteers to define an approvable benefit-risk profile. The need to show a high degree of safety and tolerability when dosing healthy individuals could result in rare and even spurious safety findings, negatively impacting a program prior to or after commercial launch. While we believe that certain safety, tolerability, and levels of immunogenicity we have observed in the clinical trials in our prophylactic vaccine programs are sufficient to initiate additional trials, there can be no assurance that we will observe acceptable safety or efficacy profiles in later-stage trials required for approval of these programs. For neoantigen cancer vaccines, to date, no molecular (non-cell-based) therapeutic protein vaccine has been shown to be effective against cancer and there are many clinical and manufacturing challenges to personalized medicines, including cell-based therapies and vaccines. These risks include: a rapid production turn-around time that is measured in weeks in order to supply patients in our clinical trials before further progression and mutation of their tumors, the significant costs incurred in making individualized vaccines, and potential lack of immune responses potentially due to the biology of the tumor or immune status of the patient. These and other risks apply to our PCV and other neoepitope investigational medicine programs. Additionally, there may be challenges in delivering an adequate quantity of active pharmaceutical ingredient (API) required to drive efficacy due to the limitation in volume of API that can be delivered to a specific location, like a tumor or injured tissue. Our therapies for local injections often require specialized skills for conducting a clinical trial that could delay trials or slow or impair commercialization of an approved investigational medicine due to the poor adoption of injected local therapeutics or intratumoral therapies. In addition, the uncertain translatability of target selection from preclinical animal models, including mouse and non-human primate models, to successful clinical trial results may be impossible, particularly for immuno-oncology and systemic therapies, and cancer vaccines. In general, several biological steps are required for delivery of mRNA to translate into therapeutically active medicines. These processing steps may differ between individuals or tissues, and this could lead to variable levels of therapeutic protein, variable activity, immunogenicity, or variable distribution to tissues for a therapeutic effect. Gene therapies and mRNA-based medicines may activate one or more immune responses against any and all components of the drug product (e.g., the mRNA or the delivery vehicle, such as an LNP) as well as against the encoded protein, giving rise to potential immune reaction related adverse events. Eliciting an immune response against the encoded protein may impede our ability to achieve a pharmacologic effect upon repeat administration or a side effect. These risks apply to all of our programs, including our systemic secreted therapeutics and systemic intracellular therapeutics modalities.
Risks related to our finances
We have incurred significant losses since our inception and we may incur significant losses again in the future.
We have incurred net losses in each year since our inception in 2009, including net losses of $747.1 million, $514.0 million and $384.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had an accumulated deficit of $2.24 billion. Although we had entered into advance purchase agreements for the supply of our COVID-19 vaccine totaling $11.7 billion for deliveries scheduled for 2021 as of December 31, 2020, we may ultimately be unsuccessful in delivering under these agreements or those that we have subsequently enter into, and we may continue to recognize a loss in 2021 or in future years.
We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities and the development of our platform. To date, we have financed our operations primarily through the sale of equity securities and proceeds from strategic alliances and through grants from governmental and private organizations, and more recently through upfront payments from the supply agreements that have been invested into the manufacture, development and commercialization of our COVID-19 vaccine. The amount of our future net losses, if any, will depend upon whether we can successfully commercialize our COVID-19 vaccine and deliver on existing and future supply agreements, as well as the rate of our future expenditures. To the extent we are unsuccessful in commercializing our products (including our COVID-19 vaccine), our access to financing and liquidity will likely depend upon our ability to obtain funding through equity or debt financings, sales of assets, strategic alliances, or additional grants. Other than with respect to our COVID-19 vaccine, we have not commenced or completed pivotal clinical trials for any of our programs in clinical trials, which means that for most of our investigational medicines it may be several years, if ever, before we or our strategic collaborators have a product ready for commercialization. Even if we obtain regulatory approval to market an investigational medicine, our future revenues will depend upon the size of any markets in which our investigational medicines have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors, and adequate market share in those markets. In addition, under certain of our supply agreements for the COVID-19 vaccine, we rely on our customers to pay us portions of the purchase price upon the achievement of certain regulatory or performance milestones.
In the event that such milestones are never achieved, our customers could terminate their agreements with us, and we may not receive such regulatory or performance milestone payments. If we do not receive such milestone payments, our business may be materially harmed.
We expect to continue to incur significant expenses and could recognize significant operating losses in future periods. We anticipate that our expenses will increase substantially if and as we:
•continue or expand our research or development of our programs in preclinical development;
•continue or expand the scope of our mRNA clinical trials for our investigational medicines;
•initiate additional preclinical, clinical, or other studies for our development candidates and investigational medicines, including under our strategic alliance agreements;
•continue to invest in our platform to conduct research to identify novel mRNA technology improvements, including identifying novel methods of mRNA delivery, such as LNPs, that improve distribution and uptake of mRNA to specific tissues;
•change or add to internal manufacturing capacity or capability;
•change or add additional manufacturers or suppliers;
•add additional infrastructure to our quality control and quality assurance groups to support our operations as we progress our investigational medicines toward commercialization;
•attract and retain skilled personnel, particularly in Cambridge and Norwood, Massachusetts, Basel, Switzerland, and in other global regions where we have established and may continue to establish operations;
•create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts, including new sites in the United States and abroad;
•seek marketing approvals and reimbursement for our investigational medicines;
•establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
•seek to identify and validate additional development candidates and investigational medicines;
•acquire or in-license other development candidates, investigational medicines, and technologies;
•make milestone or other payments under any in-license agreements;
•maintain, protect, and expand our IP portfolio; and
•experience any delays or encounter issues with any of the above.
We have a limited history of recognizing revenue from product sales and may not be able to achieve or maintain long-term sustainable profitability.
Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaborators, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our products and investigational medicines, including our commercialization of our COVID-19 vaccine. Our ability to recognize revenues from product sales depends heavily on our success in:
•manufacturing and delivering supply of our COVID-19 vaccine (and any boosters developed in connection with variants, if any) in accordance with contractual terms;
•completing research, preclinical, and clinical development of our development candidates and investigational medicines;
•seeking and obtaining U.S. and foreign marketing approvals for investigational medicines for which we complete clinical trials;
•developing a sustainable, stable, consistent, and transferable manufacturing process or processes for our development candidates and investigational medicines;
•developing a sustainable, scalable, consistent, time sensitive, and transferable manufacturing process for our personalized cancer vaccine investigational medicine;
•furthering the development of our own manufacturing capabilities and manufacturing relationships with third parties in order to provide adequate (in amount and quality) products and services to support clinical development and the market demand for our investigational medicines, if approved;
•obtaining market acceptance of our investigational medicines as a treatment option;
•launching and commercializing investigational medicines for which we obtain marketing approval and reimbursement, either by collaborating with a strategic collaborator or, if launched independently, by establishing a sales force, marketing, and distribution infrastructure;
•addressing any competing technological and market developments;
•implementing additional internal systems and infrastructure;
•negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;
•maintaining, defending, protecting, and expanding our portfolio of IP rights, including patents, trade secrets and know-how; and
•attracting, hiring, and retaining qualified personnel.
We anticipate incurring significant costs associated with the commercialization of our COVID-19 vaccine, and even if one or more of the other investigational medicines that we are developing is approved for commercial sale, we anticipate incurring significant costs associated the commercialization of any such approved investigational medicine. Our expenses could increase beyond expectations if we are required by the FDA, the EMA, or other regulatory agencies to perform clinical and other studies or make changes to our manufacturing or quality systems in addition to those that we currently anticipate. Even though we have begun to generate revenues from the sale of our COVID-19 vaccine, we may not be able to achieve or maintain long-term sustainable profitability and may need to obtain additional funding to continue operations.
Our quarterly and annual operating results may fluctuate. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline and negatively impact our financing or funding ability as well as negatively impact our ability to exist as a standalone company.
Our financial condition and operating results have varied in the past and will continue to fluctuate from quarter-to-quarter and year-to-year in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following, as well as other factors described elsewhere in this Annual Report on Form 10-K:
•our ability to manufacture and deliver supply of our COVID-19 vaccine;
•delays or failures in advancement of existing or future development candidates into the clinic or investigational medicines in clinical trials;
•the feasibility of developing, manufacturing, and commercializing our programs;
•our ability to manage our growth;
•the outcomes of research programs, clinical trials, or other product development or approval processes conducted by us and our strategic collaborators;
•our ability to develop or successfully commercialize mRNA medicines;
•the ability of our strategic collaborators to develop and successfully commercialize mRNA medicines or other products developed from our IP;
•our relationships, and any associated exclusivity terms, with strategic collaborators;
•our contractual or other obligations to provide resources to fund our development candidates and investigational medicines, and to provide resources to our strategic collaborators or to the strategic alliances themselves;
•our operation in a net loss position for the foreseeable future;
•risks associated with the international aspects of our business including the conduct of clinical trials in multiple locations and potential commercialization in such locations;
•our ability to consistently manufacture our development candidates and investigational medicines;
•risks associated with committing financial resources and personnel to the commercialization of our COVID-19 vaccine, including to support a scale-up of manufacturing to enable a pandemic response;
•our ability to accurately report our financial results in a timely manner;
•our dependence on, and the need to attract and retain, key management and other personnel;
•our ability to obtain, protect, and enforce our IP rights;
•our ability to prevent the theft or misappropriation of our IP, know-how, or technologies;
•advantages that our competitors and potential competitors may have in securing funding, obtaining the rights to critical IP or developing competing technologies or products;
•our ability to obtain additional capital that may be necessary to expand our business;
•our strategic collaborators’ ability to obtain additional capital that may be necessary to develop and commercialize products under our strategic alliance agreements;
•business interruptions such as power outages, strikes, acts of terrorism, or natural disasters; and
•the ultimate impact of the COVID-19 pandemic, or any other health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole.
Due to the various factors mentioned herein, and others, the results of any of our prior quarterly or annual periods should not be relied upon as indications of our future operating performance.
Our financial results may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline. We do not control the timing of disclosure of any such milestones related to any of our programs that are managed by our strategic collaborators. Any disclosure by our strategic collaborators or competitors of data or other events that are perceived as negative, whether or not such data are related to other data that we or others release, may have a material adverse impact on our stock price or overall valuation. Our stock price may decline as a result of unexpected clinical trial results in one or more of our programs, including adverse safety events reported for any of our programs.
If we are unsuccessful in commercializing our COVID-19 vaccine, we may need to seek and secure significant funding through financings or from other sources. Clinical data or trial execution that creates delays, setbacks, or failures in one or more of our programs or modalities or the entire pipeline could result in an impaired ability or inability to finance or fund the Company in the future.
We are currently advancing our pipeline of 20 programs in24 development 11 of which are incandidates with 13 having entered clinical studies. Discovering development candidates and developing investigational medicines is expensive, and we expect to continue to spend substantial amounts to (i) perform basic research, perform preclinical studies, and conduct clinical trials of our current and future programs, (ii) continue to develop and expand our platform and infrastructure and supply preclinical studies and clinical trials with appropriate grade materials (including current good manufacturing practices, or cGMP materials), (iii) seek regulatory approvals for our investigational medicines, and (iv) launch and commercialize any products for which we receive regulatory approval, including building our own commercial sales, marketing, and distribution organization. Furthermore, our ongoing work on our COVID-19 vaccine, including the development of new formulations to respond to variants of the SARS-CoV-2 virus, will require significant additional investment during 2021 and beyond, some of which may not be reimbursed or otherwise paid for by our collaborators or through commercial sales.
As of December 31, 2018,2020, we had approximately $1.7$5.25 billion in cash, cash equivalents, and investments. We expect that our existing cash, cash equivalents, and investments will be sufficient to fund our current operations through at least the next twelve months. However, our operating plan may change as a result of many factors currently unknown to us, including with respect to our development, manufacturing and commercialization of our COVID-19 vaccine, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, structured financings, government or other third-party funding, sales of assets, marketing and distribution arrangements, other collaborations and licensing arrangements, or a combination of these approaches. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, our investigational medicines. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. Our spending will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with discovery of development candidates and development of our investigational medicines are highly uncertain, we are unable to estimate the actual funds we will require for
development, marketing, and commercialization activities. Our future funding requirements, both near and long term, will depend on many factors, including, but not limited to:
•the initiation, progress, timing, costs, and results of preclinical or nonclinical studies and clinical trials for our development candidates and investigational medicines;
•the results of research and our other platform activities;
•the clinical development plans we establish for our investigational medicines;
•the terms of any agreements with our current or future strategic collaborators;
•the number and characteristics of development candidates and investigational medicines that we develop or may in-license;
•the outcome, timing, and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, and other comparable foreign regulatory authorities;
•the cost of filing, prosecuting, defending, and enforcing our patent claims and other intellectual property, or IP rights, including patent infringement actions brought by third parties against us regarding our investigational medicines or actions by us challenging the patent or IP rights of others;
•the effect of competing technological and market developments, including other products that may compete with one or more of our development candidates or investigational medicines;
•the cost and timing of completion and further expansion of clinical and commercial scale manufacturing activities sufficient to support all of our current and future programs, whether in-house or outsourced; and
•the cost of establishing sales, marketing, and distribution capabilities for any investigational medicines for which we may receive marketing approval and reimbursement in regions where we choose to commercialize our medicines on our own.
To date, we have financed
We expect to recognize significant revenue in 2021 upon the delivery of our operations primarily through the sale of equity securities and revenue from strategic alliances andCOVID-19 vaccine pursuant to our supply agreements; however, at this time we cannot be certain that additional fundingpredict whether we will be availablecontinue to recognize significant revenue in future years based solely on favorable terms, or at all.sales of our COVID-19 vaccine. Until we can generate sufficient product or royalty revenue to fully finance our operations and long-term strategic plan, which we may never do, we expect to finance our future cash needs through a combination of product sales, public or private equity or debt offerings, structured financings, debt financings, collaborations, strategic alliances, sales of assets, licensing arrangements, and other marketing or distribution arrangements. Any fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our investigational medicines. In addition, we cannot guarantee that future financing will be available in sufficient amounts, at the right time, on favorable terms, or at all. Negative clinical trial data or setbacks, or perceived setbacks, in our programs or with respect to our technology could impair our ability to raise additional financing on favorable terms, or at all. If our commercialization of our COVID-19 vaccine is unsuccessful, there can be no assurance that we will have the funds necessary to meet our existing payment obligations to third parties, or be able to raise such funds when needed, on terms acceptable to us, or at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. If we raise additional funds through public or private equity offerings, the terms of these securities may include liquidation or other preferences that may adversely affect our stockholders’ rights.
Further, to the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, your ownership interest will be diluted. If we raise additional capital through debt financing,financings, we would be subject to fixed payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional capital through marketing and distribution arrangements, sales of assets or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our development candidates and investigational medicines, technologies, future revenue streams, or research programs. We also could be required to seek strategic collaborators for one or more of our current or future investigational medicines at an earlier stage than otherwise would be desirable or relinquish our rights to development candidates, investigational medicines, or IP that we otherwise would seek to develop or commercialize ourselves. If we are unable to raise additional capital in sufficient amounts, at the right time, on favorable terms, or at all, we may have to significantly delay, scale back, or discontinue the development or commercialization of one or more of our products or investigational medicines, or one or more of our other research and development initiatives. Any of the above events could significantly harm our business, prospects, financial condition, and results of operations, cause the price of our common stock to decline, and negatively impact our ability to fund operations.
We attempt to distribute our technology, biology, execution and financing risks across a wide variety of therapeutic areas, disease states, programs, and technologies. However, our assessment of, and approach to, risk may not be comprehensive or effectively avoid delays or failures in one or more
The investment of our programs or modalities. Failurescash, cash equivalents, and investments is subject to risks which may cause losses and affect the liquidity of these investments.
As of December 31, 2020, we had approximately $5.25 billion in one or morecash, cash equivalents, and investments. These investments are subject to general credit, liquidity, market, and interest rate risks. We may realize losses in the fair value of our programs or modalities could adversely impact other programs or modalities in our pipeline andthese investments, which would have a material adverse impactnegative effect on our business,consolidated financial statements. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our investment portfolio may have an adverse effect on our results of operations, liquidity, and financial condition.
The amount of and our ability to fund our business.use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations and uncertainty.
We are creating
As of December 31, 2020, we had federal and state net operating loss carryforwards of $2.26 billion and $1.70 billion, respectively, a new class of medicines based on mRNA, to improve the lives of patients. From the beginning, we designed our strategy and operations to realize the full potential value and impact of mRNA over a long time horizon across a broad array of human diseases. We have made investments in our platform, infrastructure, and clinical capabilities that have enabled us to establish a pipeline of 20 programs in development, 11portion of which, areif unused, will begin to expire in clinical studies. As our development candidates2030 and investigational medicines progress, we or others may determine: that certain of our risk allocation decisions were incorrect or insufficient; that we made platform level technology mistakes; that individual programs or our mRNA science in general has technology or biology risks that were unknown or underappreciated; that our choices on how to develop our infrastructure to support our scale will result in an inability to manufacture our investigational medicines for clinical trials or otherwise impair our manufacturing; or that we have allocated resources in such a way that large investments are not recovered and capital allocation is not subject to rapid re-direction. All of these risks may relate to our current and future programs sharing similar science (including mRNA science) and infrastructure, and in the event material decisions in any of these areas turn out to have been incorrect or under-optimized, we may experience a material adverse impact on our business and ability to fund our operations and we may never realize what we believe is the potential of mRNA.
No mRNA drug has been approved in this new potential class of medicines, and may never be approved as a result of efforts by others or us. mRNA drug development has substantial clinical development and regulatory risks due to the novel and unprecedented nature of this new class of medicines.
As a potential new class of medicines, no mRNA medicines have been approved to date by the FDA or other regulatory agency. Successful discovery and development of mRNA medicines by either us or our strategic collaborators is highly uncertain and depends on numerous factors, many of which are beyond our or their control. We have made and will continue to make a series of business decisions and take calculated risks to advance our development efforts and pipeline, including those related to mRNA technology, delivery technology, and manufacturing processes, which may be shown to be incorrect based on further work by us, our strategic collaborators, or others. To date, there has never been a Phase 3 trial or a commercialized product in which mRNA is the primary
active ingredient. Our mRNA medicines that appear promising in the early phases of development may fail to advance, experience delays in the clinic, experience clinical holds, or fail to reach the market for many reasons, including:
discovery efforts at identifying potential mRNA medicines may not be successful;
nonclinical or preclinical study results may show potential mRNA medicines to be less effective than desired or to have harmful or problematic side effects;
clinical trial results may show potential mRNA medicines to be less effective than expected (e.g., a clinical trial could fail to meet one or more endpoint(s)) or to have unacceptable side effects or toxicities;
adverse effects in any one of our clinical programs or adverse effects relating to our mRNA, or lipid nanoparticles, or LNPs, may lead to delays in or termination of one or more of our programs;
the insufficient ability of our translational models to reduce risk or predict outcomes in humans, particularly given that each component of our investigational medicines and development candidates may have a dependent or independent effect on safety, tolerability, and efficacy, which may, among other things, be species-dependent;
manufacturing failures or insufficient supply of cGMP materials for clinical trials, or higher than expected cost could delay or set back clinical trials, or make mRNA based medicines commercially unattractive;
our improvements in the manufacturing processes for this new class of potential medicines may not be sufficient to satisfy the clinical or commercial demand of our investigational medicines or regulatory requirements for clinical trials;
changes that we make to optimize our manufacturing, testing or formulating of cGMP materials could impact the safety, tolerability, and efficacy of our investigational medicines and development candidates;
pricing or reimbursement issues or other factors that delay clinical trials or make any mRNA medicine uneconomical or noncompetitive with other therapies;
failure to timely advance our programs or receive the necessary regulatory approvals or a delay in receiving such approvals, due to, among other reasons, slow or failure to complete enrollment in clinical trials, withdrawal by trial participants from trials, failure to achieve trial endpoints, additional time requirements for data analysis, data integrity issues, biologics license application, or BLA, or the equivalent application, discussions with the FDA or EMA, a regulatory request for additional nonclinical or clinical data, or safety formulation or manufacturing issues may lead to our inability to obtain sufficient funding; and
the proprietary rights of others and their competing products and technologies that may prevent our mRNA medicines from being commercialized.
Currently, mRNA is considered a gene therapy product by the FDA. Unlike certain gene therapies that irreversibly alter cell DNA and could act as a source of side effects, mRNA based medicines are designed to not irreversibly change cell DNA; however, side effects observed in gene therapy could negatively impact the perception of mRNA medicines despite the differences in mechanism. In addition, because no product in which mRNA is the primary active ingredient has been approved, the regulatory pathway for approval is uncertain. The number and design of the clinical and preclinical studies required for the approval of these types of medicines have not been established, may be different from those required for gene therapy products or may require safety testing like gene therapy products. Moreover, the length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one pharmaceutical product to the next, and may be difficult to predict.
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
We have incurred net losses in each year since our inception in 2009, including net losses of $384.7 million, $255.9 million and $216.2 million for the years ended December 31, 2018, 2017 and 2016,2032, respectively. As of December 31, 2018,2020, we also had an accumulated deficit of $1.0 billion .
We have devoted most of our financial resources tofederal and state research and development including our clinicaltax credit carryforwards of $73.3 million and preclinical development activities$26.1 million, respectively, which, if unused, begin to expire in 2030 and the development of our platform. To date, we have financed our operations primarily through the sale of equity securities and proceeds from strategic alliances and, to a lesser extent, through grants from governmental and private organizations. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, sales of assets, strategic alliances, or additional grants. We have not commenced or completed pivotal clinical studies for any of our programs in clinical trials, or investigational medicines, and it will be several years, if ever, before we or our strategic collaborators have an investigational medicine ready for commercialization. Even if we obtain regulatory approval to market an
investigational medicine, our future revenues will depend upon the size of any markets in which our investigational medicines have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors, and adequate market share in those markets. We may never achieve profitability.
2029, respectively. We expect to continueutilize all of these net operating loss and tax credit carryforwards to incur significant expensesoffset our future income tax liabilities in the taxable year ending December 31, 2021. Federal net operating losses generated in taxable years beginning after December 31, 2017 generally may not be carried back to prior taxable years, and increasingwhile such federal net operating losses generated in taxable years beginning after December 31, 2017 will not be subject to expiration, the deduction for such net operating loss in any taxable year will be limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss deduction itself. However, the Coronavirus Aid, Relief and Economic Security Act repeals the 80% limitation on the utilization of such federal net operating losses for taxable years beginning after December 31, 2017 and beginning before January 1, 2021 and allows for federal net operating losses generated in taxable years beginning after December 31, 2017 and before January 1, 2021 to be carried back to each of the foreseeable future. We anticipatefive taxable years preceding the taxable year in which the loss arises. This change in law temporarily allowing for the carryback of federal net operating losses is not expected to produce any material benefit for the issuer. In general, under Sections 382 and 383 of the Internal Revenue Code, a corporation that our expenses will increase substantially ifundergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs or tax credits, or credits (including federal research and as we:
continuedevelopment tax credits), to offset future taxable income or expand our researchtaxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or developmentmore stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. As of December 31, 2020, none of our programs in preclinical development;
continueNOLs or expand the scope of our mRNA clinical studies for our investigational medicines;
initiate additional preclinical, clinical, or other studies for our development candidatescredits will expire due to Sections 382 and investigational medicines, including under our strategic alliance agreements;
continue to invest383. However, future changes in our platform to conduct research to identify novel mRNA technology improvements, including identifying novel methods of mRNA delivery, such as LNPs that improve distribution and uptake of mRNA to specific tissues;
change or add to internal manufacturing capacity or capability;
change or add additional manufacturers or suppliers;
add additional infrastructure to our quality control and quality assurance groups to support our operations as we progress our investigational medicines toward commercialization;
attract and retain skilled personnel, particularly in Cambridge and Norwood, MA;
create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts, including new sites in the United States and abroad;
seek marketing approvals and reimbursement for our investigational medicines;
establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval;
seek to identify and validate additional development candidates and investigational medicines;
acquire or in-license other development candidates, investigational medicines, and technologies;
make milestone or other payments under any in-license agreements;
maintain, protect, and expand our IP portfolio; and
experience any delays or encounter issues with any of the above.
Our quarterly and annual operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline and negatively impact our financing or funding ability as well as negatively impact our ability to exist as a standalone company.
Our financial condition and operating results have varied in the past and will continue to fluctuate from quarter-to-quarter and year-to-year in the future due to a variety of factors,ownership, many of which are beyondoutside of our control. Factors relating to our business that may contribute to these fluctuations includecontrol, could result in an ownership change under Sections 382 and 383 of the following, as well as other factors described elsewhere in this Annual Report on Form 10-K:
delays or failures in advancement of existing or future development candidates into the clinic or investigational medicines in clinical trials;
the feasibility of developing, manufacturing,Internal Revenue Code and commercializing our programs;
limit our ability to manageutilize our growth;
the outcomes of research programs, clinical trials,NOLs and credits. Our NOLs or other product development or approval processes conducted by us and our strategic collaborators;
our ability to develop or successfully commercialize mRNA medicines;
the ability of our strategic collaborators to develop and successfully commercialize mRNA medicines or other products developed from our IP;
our relationships, and any associated exclusivity terms, with strategic collaborators;
our contractual or other obligations to provide resources to fund our development candidates and investigational medicines, and to provide resources to our strategic collaborators or to the strategic alliances themselves;
our operation in a net loss position for the foreseeable future;
risks associated with the international aspects of our business including the conduct of clinical trials in multiple locations and potential commercialization in such locations;
our ability to consistently manufacture our development candidates and investigational medicines;
our ability to accurately report our financial results in a timely manner;
our dependence on, and the need to attract and retain, key management and other personnel;
our ability to obtain, protect, and enforce our IP rights;
our ability to prevent the theft or misappropriation of our IP, know-how or technologies;
potential advantages that our competitors and potential competitorscredits may have in securing funding, obtaining the rights to critical IP or developing competing technologies or products;
our ability to obtain additional capital that mayalso be necessary to expand our business;
our strategic collaborators’ ability to obtain additional capital that may be necessary to develop and commercialize productsimpaired under our strategic alliance agreements;
business interruptions such as power outages, strikes, acts of terrorism, or natural disasters; and
our ability to use our net operating loss carryforwards to offset future taxable income.
Due to the various factors mentioned herein, and others, the results of any of our prior quarterly or annual periods should not be relied upon as indications of our future operating performance.
The net lossesstate law. Accordingly, we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results of operations may not be able to utilize a good indicationmaterial portion of our future performance.NOLs or credits if we undergo an ownership change prior to the utilization of all of such NOLs or credits. In any particular quarter or quarters, our operating resultsaddition, the rules regarding timing of revenue and expense recognition for tax purposes in connection with various transactions we have undertaken are complex and uncertain in various respects and could be belowsubject to challenge by taxing authorities. In the expectations of securities analysts or investors, which could cause our stock price to decline. While as a general matter we intend to periodically report on the status of our development programs, including articulating anticipated next steps in the form of development plans or potential data readouts, we do not currently plan to provide forward-looking guidance on the timing of those next steps. In addition, we do not control the timing of disclosure ofevent any such milestones relatedchallenge is sustained, our remaining net operating losses could be materially reduced and/or we could be determined to any of our programs that are managed by our strategic collaborators. Any disclosure by our strategic collaborators or competitors of data or other events that are perceived as negative, whether or not such data are related to other data that we or others release, may havebe a material adverse impact on our stock price or overall valuation. Our stock price may decline as a result of unexpected clinical trial results incash taxpayer for one or more of our programs, including adverse safety events reported for any of our programs.years.
Our business is highly dependent on the clinical advancement of our programs and modalities. Delay or failure to advance programs or modalities could adversely impact our business.
Using our platform, we are developing product features for medicines based on mRNA. Over time, our platform work led to commonalities, where a specific combination of mRNA technologies, delivery technologies, and manufacturing processes generated a set of product features shared by multiple programs. This is what we call a “modality.” We have historically utilized, and expect to continue to utilize, earlier programs in a modality to understand the technology risks within the modality, including manufacturing and pharmaceutical properties. Even if our earlier programs in a modality are successful in any phase of development any of such earlier programs may fail at a later phase of development, and other programs within the same modality may still fail at any phase of development including at phases where earlier programs in that modality were successful. This may be a result of technical challenges unique to that program or due to biology risk, which is unique to every program. As we progress our programs through clinical development, there may be new technical challenges that arise that cause an entire modality to fail.
While we aim to segregate risk using modalities, there may be foreseen and unforeseen risks across modalities in whole or in part. These include, but are not limited to, mRNA, chemical modifications, and LNPs and their components. In addition, if any one or more
of our clinical programs encounter safety, tolerability, or efficacy problems, developmental delays, regulatory issues, or other problems, our platform approach and business could be significantly harmed.
In addition, the biology risk across the majority of our pipeline represents targets and pathways not clinically validated by one or more approved drugs. While we believe we have made progress in seeking to reduce biology risk in certain settings, such as for vaccine targets for which we and others have shown the utility of neutralizing antibodies, the risk that the targets or pathways that we have selected may not be effective will continue to apply across the majority of our current and future programs.
While we attempt to diversify our risks by developing one or more programs in each modality, there are risks that are unique to each modality and risks that are applicable across modalities. These risks may impair our ability to advance one or more of our programs in clinical development, obtain regulatory approval or ultimately commercialize our programs, or cause us to experience significant delays in doing so, any of which may materially harm our business.
Certain features in our development candidates and investigational medicines, including those related to mRNA, chemical modifications, surface chemistries, LNPs, and their components, may result in foreseen and unforeseen risks that are active across some or all of our modalities. Any such portfolio spanning risks, whether known or unknown, if realized in any one of our programs would have a material and adverse effect on our other programs and on our business as a whole.
There are specific additional risks to certain of our modalities and our programs as a whole. For example, prophylactic vaccines typically require clinical testing in thousands to tens of thousands of healthy volunteers to define an approvable benefit-risk profile. The need to show a high degree of safety and tolerability when dosing healthy individuals could result in rare and even spurious safety findings, negatively impacting a program prior to or after commercial launch. While we believe that certain safety, tolerability, and levels of immunogenicity we have observed in the early-stage clinical trials in our prophylactic vaccine programs is sufficient to initiate additional trials, there can be no assurance that we will observe acceptable safety or efficacy profiles in later-stage trials required for approval of these programs. For neoantigen cancer vaccines, to date, no molecular (non-cell-based) therapeutic protein vaccine has been shown to be effective against cancer and there are many clinical and manufacturing challenges to personalized medicines, including cell-based therapies and vaccines. These risks include: a rapid production turn-around time that is measured in weeks in order to supply patients in our clinical trials before further progression and mutation of their tumors, the significant costs incurred in making individualized vaccines, and potential lack of immune responses potentially due to the biology of the tumor or immune status of the patient. These and other risks apply to our personalized cancer vaccine, or PCV, and other neoepitope investigational medicine programs. Additionally, there may be challenges in delivering an adequate quantity of active pharmaceutical ingredient, or API, required to drive efficacy due to the limitation in volume of API that can be delivered to a specific location, like a tumor or injured tissue. Our therapies for local injections often require specialized skills for conducting a clinical trial that could delay trials or slow or impair commercialization of an approved investigational medicine due to the poor adoption of injected local therapeutics or intratumoral therapies. In addition, the uncertain translatability of target selection from preclinical animal models, including mouse and non-human primate models, to successful clinical trial results may be impossible, particularly for immuno-oncology and systemic therapies, and cancer vaccines. In general, several biological steps are required for delivery of mRNA to translate into therapeutically active medicines. These processing steps may differ between individuals or tissues, and this could lead to variable levels of therapeutic protein, variable activity, immunogenicity, or variable distribution to tissues for a therapeutic effect. Gene therapies and mRNA based medicines may activate one or more immune responses against any and all components of the drug product (e.g., the mRNA or the delivery vehicle, such as a lipid nanoparticle) as well as against the encoded protein, giving rise to potential immune reaction related adverse events. Eliciting an immune response against the encoded protein may impede our ability to achieve a pharmacologic effect upon repeat administration or a side-effect. These risks apply to all of our programs, including our systemic secreted therapeutics and systemic intracellular therapeutics modalities.
Risks related to the research, development, regulatory review, and approval of our existing and future pipeline
Preclinical development is lengthy and uncertain, especially for a new class of medicines such as mRNA, and therefore our preclinical programs or development candidates may be delayed, terminated, or may never advance to the clinic, any of which may affect our ability to obtain funding and may have a material adverse impact on our platform or our business.
Much of our pipeline is in preclinical development, and these programs could be delayed or not advance into the clinic. Before we can initiate clinical trials for a development candidate, we must complete extensive preclinical studies, including IND-enabling GLPgood laboratory practice (GLP), toxicology testing, that support our planned Investigational New Drug applications, or INDs in the United States, or similar applications in other jurisdictions. We must also complete extensive work on Chemistry, Manufacturing, and Controls or CMC,(CMC) activities (including yield, purity and stability data) to be included in the IND filing.submission. CMC activities for a new class of medicines such as mRNA require extensive manufacturing processes and analytical development, which is uncertain and lengthy. For instance, batch failures as we scale up our manufacturing have occurred and may continue to occur. In addition, we have in the past and may in the future have difficulty identifying appropriate buffers and storage conditions to enable sufficient shelf life of batches of our preclinical or clinical development candidates. If we are required to produce new batches of our development candidates due to insufficient shelf life, it may delay the commencement or completion of preclinical studies or clinical trials of such development candidates. For example, we cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA
or other regulatory authorities will accept the results of our preclinical testing or our proposed clinical programs or if the outcome of our preclinical testing, studies, and CMC activities will ultimately support the further development of our programs. As a result, we cannot be sure that we will be able to submit INDs or similar applications for our preclinical programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.
Clinical development is lengthy and uncertain, especially with a new class of medicines such as mRNA medicines. Clinical trials of our investigational medicines may be delayed, including as a result of the COVID-19 pandemic or other pandemics in the future, and certain programs may never advance in the clinic or may be more costly to conduct than we anticipate, any of which can affect our ability to fund the Company and wouldcould have a material adverse impact on our platform or our business.
Clinical testing is expensive and complex and can take many years to complete, and its outcome is inherently uncertain. We may not be able to initiate, may experience delays in, or may have to discontinue clinical trials for our investigational medicines. We and our strategic collaborators also may experience numerous unforeseen events during, or as a result of, any clinical trials that we or our strategic collaborators conduct that could delay or prevent us or our strategic collaborators from successfully developing our investigational medicines, including:
•the FDA, other regulators, institutional review boards, or IRBs,Institutional Review Boards (IRBs), or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site for any number of reasons, including concerns regarding safety and aspects of the clinical trial design;
•we may experience delays in reaching, or fail to reach, agreement on favorable terms with prospective trial sites and prospective contract research organizations or CROs,(CROs), the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
•we have in the past and willintend to continue to optimize our manufacturing processes, including through changes to the scale and site of manufacturing, which may lead to potentially significant changes in our clinical trial designs, requiring additional cost and time, and, as a consequence, lead to a delay in plans for progressing one or more investigational medicines;
•the outcome of our preclinical studies and our early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results;
•we may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful;
•in an effort to optimize product features, we have in the past and may continue to make changes to our investigational medicines after we commence clinical trials of an investigational medicine, which may require us to repeat earlier stages of clinical testing or delay later stage testing of the investigational medicine;
•clinical trials of any investigational medicines may fail to show safety or efficacy, or produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional nonclinical studies or clinical trials, or we may decide to abandon product development programs;
•differences in trial design between early stageearly-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials;
•preclinical and clinical data are often susceptible to varying interpretations and analyses, and many investigational medicines believed to have performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval;
•our investigational medicines may have undesirable side effects, such as the immunogenicity of the LNPs or their components, the immunogenicity of the protein made by the mRNA, or degradation products, any of which could lead to serious adverse events, or SAEs, or other effects. One or more of such effects or events could cause regulators to impose a clinical hold on the applicable trial, or cause us or our investigators, IRBs or ethics committees to suspend or terminate the trial of that investigational medicine or any other of our investigational medicines for which a clinical trial may be ongoing;
•the number of trial participants required for clinical trials of any investigational medicines may be larger than we anticipate, identification of trial participants for such trials may be limited, enrollment in these clinical trials may be slower than we anticipate due to perceived adverse effects, competitive trials, size of the patient population, or other reasons, or participants may withdraw from clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;
•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or withdraw from the trial, which may require that we add new clinical trial sites;
•regulators may elect to impose a clinical hold, or we or our investigators, IRBs, or ethics committees may elect to suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable benefit risk ratio;
•the cost of preclinical or nonclinical testing and studies and clinical trials of any investigational medicines may be greater than we anticipate;
•the supply or quality of our investigational medicines or other materials necessary to conduct clinical trials may be insufficient or inadequate;
•safety and efficacy concerns regarding one or more of our investigational medicines will be considered by us and by the FDA and other global regulators as we pursue clinical trials of new investigational medicines, develop effective informed consent documentation and work with IRBs and scientific review committees (SRCs);
•safety or efficacy concerns regarding our investigational medicines may result from any safety or efficacy concerns arising from nonclinical or clinical testing of other therapies targeting a similar disease state or other therapies, such as gene therapy, that are perceived as similar to ours; and
•the FDA or other regulatory authorities may require us to submit additional data such as long-term toxicology studies, or impose other requirements before permitting us to initiate a clinical trial.
We could also encounter delays if a clinical trial is suspended or terminated by us, the FDA or other regulatory authorities, ethics committees, or the IRBs of the institutions in which such trials are being conducted, or if such trial is recommended for suspension or termination by the Data Safety Monitoring Board, or DSMB,data safety monitoring board for such trial. We have in the past been, and may in the future be, delayed in gaining clearance from the FDA or other regulators to initiate clinical trials through the imposition of a clinical hold in order to address comments from such regulators on our clinical trial design or other elements of our clinical trials. The clinical trials of other companies working on mRNA medicines have been put on clinical hold by the FDA. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues, or adverse side effects, including those experienced by other investigational medicines in the same class as our investigational medicines, failure to demonstrate a benefit, or adequate benefit risk ratio, from using an investigational medicine, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our investigational medicines. We must also complete extensive CMC activities that require extensive manufacturing processes and analytical development, which is uncertain and lengthy. For instance, batch failures as we scale up our manufacturing have occurred and may continue to occur. In addition, we have in the past and may in the future have difficulty identifying appropriate buffers and storage conditions to enable sufficient shelf life of batches of our clinical development candidates or investigational medicines. If we are required to produce new batches of our development candidates or investigational medicines due to insufficient shelf life, it may delay the commencement or completion of clinical trials of such development candidates or investigational medicines.
Moreover, the FDA has indicated that prior to commencing later stagelater-stage clinical trials for our programs we will need to develop assays to measure and predict the potency of a given dose of our investigational medicines. Any delay in developing assays that are acceptable to the FDA or other regulators could delay the start of future clinical trials. Further, the FDA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data for our clinical trials. Additionally, we have conducted and may conduct in the future clinical trials that utilize an “open-label” trial design. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. The results from an open-label trial may not be predictive of future clinical trial results when studied in a controlled environment with a placebo or active control. Further, the FDA or other regulators may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.
Significant preclinical or nonclinical testing and studies or clinical trial delays for our investigational medicines also could allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our investigational medicines and harming our business and results of operations. Any delays in the development of our investigational medicines may harm our business, financial condition, and prospects significantly.
mRNA medicines are a novel approach, and negative perception of the efficacy, safety, or tolerability of any investigational medicines that we develop could adversely affect our ability to conduct our business, advance our investigational medicines, or obtain regulatory approvals.
As a potential new class of medicines, no mRNA medicines have been approved to date by the FDA or other regulators. Adverse events in clinical trials of our investigational medicines or in clinical trials of others developing similar products and the resulting publicity, as well as any other adverse events in the field of mRNA medicine, or other products that are perceived to be similar to mRNA medicines, such as those related to gene therapy or gene editing, could result in a decrease in the perceived benefit of one or more of our programs, increased regulatory scrutiny, decreased confidence by patients and clinical trial collaborators in our investigational medicines, and less demand for any product that we may develop. Our large pipeline of development candidates and
investigational medicines could result in a greater quantity of reportable adverse events, including suspected unexpected serious adverse reactions, or SUSARs, other reportable negative clinical outcomes, manufacturing reportable events or material clinical events that could lead to clinical delay or hold by the FDA or applicable regulatory authority or other clinical delays, any of which could negatively impact the perception of one or more of our programs, as well as our business as a whole. In addition, responses by U.S., state, or foreign governments to negative public perception may result in new legislation or regulations that could limit our ability to develop any investigational medicines or commercialize any approved products, obtain or maintain regulatory approval, or otherwise achieve profitability. More restrictive statutory regimes, government regulations, or negative public opinion would have an adverse effect on our business, financial condition, results of operations, and prospects and may delay or impair the development of our investigational medicines and commercialization of any approved products or demand for any products we may develop.
Because we are developing some of our development candidates or investigational medicines for the treatment of diseases in which there is little clinical experience and, in some cases, using new endpoints or methodologies, the FDA or other regulatory authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results.
There are no pharmacologic therapies approved to treat the underlying causes of many diseases that we currently attempt to address or may address in the future. For instance, for methylmalonic acidemia, or MMA, or propionic acidemia, or PA, few clinical trials have been attempted. In addition, there has been limited clinical trial experience for the development of pharmaceuticals to treat these rare diseases in general, and we are not aware of a registrational trial that led to approval of a drug to treat these diseases. There have been some historical trials with other agents to address organic acidemias which may have utilized clinical endpoints that are less applicable to our efforts with our MMA and PA programs that address the underlying defect. As a result, the design and conduct of clinical trials of investigational medicines for the treatment of these disorders and other disorders may take longer, be more costly, or be less effective as part of the novelty of development in these diseases.
Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoint to a degree of statistical significance in any pivotal or other clinical trials we or our strategic collaborators may conduct for our programs. Further, even if we do achieve the pre-specified criteria, our trials may produce results that are unpredictable or inconsistent with the results of the more traditional efficacy endpoints in the trial. The FDA also could give overriding weight to other efficacy endpoints over a primary endpoint, even if we achieve statistically significant results on that endpoint, if we do not do so on our secondary efficacy endpoints. The FDA also weighs the benefits of a product against its risks and the FDA may view the efficacy results in the context of safety as not being supportive of licensure. Other regulatory authorities in Europe and other countries may make similar findings with respect to these endpoints.
Some of our investigational medicines are classified as gene therapies by the FDA and the EMA, and the FDA has indicated that our investigational medicines will be reviewed within its Center for Biologics Evaluation and Research, or CBER. Even though our mRNA investigational medicines are designed to have a different mechanism of action from gene therapies, the association of our investigational medicines with gene therapies could result in increased regulatory burdens, impair the reputation of our investigational medicines, or negatively impact our platform or our business.
There have been few approvals of gene therapy products in the United States or foreign jurisdictions, and there have been well-reported significant adverse events associated with their testing and use. Gene therapy products have the effect of introducing new DNA and potentially irreversibly changing the DNA in a cell. In contrast, mRNA is highly unlikely to localize to the nucleus, integrate into the DNA, or otherwise make any permanent changes to cell DNA. Consequently, we expect that our investigational medicines will have a different potential side effect profile from gene therapies.
Regulatory requirements governing gene and cell therapy products have evolved and may continue to change in the future, and the implications for mRNA-based therapies is unknown. For example, the FDA has established the Office of Tissues and Advanced Therapies within CBER to consolidate the review of gene therapy and related products, and convenes the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. In the EU, mRNA has been characterized as a Gene Therapy Medicinal Product. In certain countries, mRNA therapies have not yet been classified or any such classification is not known to us, specifically, in Japan, the PMDA has not taken a position on the regulatory classification. Notwithstanding the differences between our mRNA investigational medicines and gene therapies, the classification of some of our mRNA investigational medicines as gene therapies in the United States, the EU and potentially other counties could adversely impact our ability to develop our investigational medicines, and could negatively impact our platform and our business. For instance, a clinical hold on gene therapy products across the field due to risks associated with altering cell DNA irreversibly may apply to our mRNA investigational medicines irrespective of the mechanistic differences between gene therapies and mRNA.
Adverse events reported with respect to gene therapies or genome editing therapies could adversely impact one or more of our programs. Although our mRNA development candidates and investigational medicines are designed not to make any permanent changes to cell DNA, regulatory agencies or others could believe that adverse effects of gene therapies products caused by introducing new DNA and irreversibly changing the DNA in a cell could also be a risk for our mRNA investigational therapies, and as a result may delay one or more of our trials or impose additional testing for long-term side effects. Any new requirements and guidelines promulgated by regulatory review agencies may have a negative effect on our business by lengthening the regulatory review process,
requiring us to perform additional or larger studies, or increasing our development costs, any of which could lead to changes in regulatory positions and interpretations, delay or prevent advancement or approval and commercialization of our investigational medicines or lead to significant post-approval studies, limitations, or restrictions. As we advance our investigational medicines, we will be required to consult with these regulatory agencies and advisory committees and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of some or all of our investigational medicines.
A breakthrough therapy designation or fast track designation by the FDA for a drug may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the drug will receive marketing approval.
We may seek a breakthrough therapy designation for one or more of our investigational medicines. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the BLA.
Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that one of our investigational medicines meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our investigational medicines qualify as breakthrough therapies, the FDA may later decide that the investigational medicine no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
We may seek Fast Track Designation for some of our investigational medicines. If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address significant unmet medical needs for this condition, the drug sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular investigational medicine is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review, or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track Designation alone does not guarantee qualification for the FDA’s priority review procedures.
We may experience delays in identifying and enrolling participants in our clinical trials which would delay the progress of our investigational medicines and result in increased expenses.
We depend on enrollment of participants in our clinical trials for our investigational medicines. We may find it difficult to enroll trial participants in our clinical studies,trials, which could delay or prevent clinical studiestrials of our investigational medicines. Identifying and qualifying trial participants to participate in clinical studiestrials of our investigational medicines is critical to our success. The timing of our clinical studiestrials depends on the speed at which we can recruit trial participants to participate in testing our investigational medicines. Delays in enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our investigational medicines. If trial participants are unwilling to participate in our studiestrials because of negative publicity from adverse events in our trials or other trials of similar products, or those related to specific therapeutic area, or for other reasons, including competitive clinical studiestrials for similar patient populations, the timeline for recruiting trial participants, conducting studies, and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our product, or termination of the clinical studiestrials altogether.
We may not be able to identify, recruit, and enroll a sufficient number of trial participants, or those with required or desired characteristics to achieve diversity in a study,trial to complete our clinical studiestrials in a timely manner. In addition, as we did in our Phase 3 clinical study of mRNA-1273 in September 2020, we may slow enrollment in a trial to focus on achieving greater diversity in the subject population. Patient and subject enrollment is affected by factors including:
•severity of the disease under investigation;
•complexity and design of the study protocol;
•size of the patient population;
•eligibility criteria for the study in question, including age-based eligibility criteria limiting subject enrollment to adolescent or pediatric populations;
•proximity and availability of clinical study sites for prospective trial participants;
•availability of competing therapies and clinical studies,trials, including between our own clinical trials;
•efforts to facilitate timely enrollment in clinical studies;trials;
•patient referral practices of physicians;
•ability to monitor trial participants adequately during and after treatment;
•ability to recruit clinical trial investigators with the appropriate competencies and experience;
•clinicians’ and trial participants’ perceptions as to the potential advantages and side effects of the investigational medicine being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating;
•the need, in the case of our personalized cancer vaccine, to wait for the manufacture of the personalized drug product; and
•our ability to obtain and maintain participant informed consent; andconsent.
the risk that trial participants enrolled in clinical trials will not complete a clinical trial.
In addition, our clinical trials will compete with other clinical trials for investigational medicines that are in the same therapeutic areas as our investigational medicines, and this competition will reduce the number and types of trial participants available to us, because some trial participants who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by a third party. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of trial participants who are available for our clinical trials at such clinical trial sites. Moreover, because in some cases our investigational medicines represent a departure from more traditional methods for disease treatment and prevention, potential trial participants and their doctors may be inclined to use conventional therapies or other new therapies rather than enroll trial participants in any future clinical trial involving mRNA investigational medicines. Additionally, if new investigational medicines, such as gene editing therapies, show encouraging results, potential trial participants and their doctors may be inclined to enroll trial participants in clinical trials using those investigational medicines. If such new investigational medicines show discouraging results or other adverse safety indications, potential trial participants and their doctors may be less inclined to enroll trial participants in our clinical trials. We also have entered into strategic alliances under which our strategic collaborators control the development of certain of our investigational medicines, which may provide us limited or no ability to influence the enrollment rate of our clinical trials. Even if we are able to enroll trial participants, there is no guarantee that they will ultimately be dosed as part of, or complete, a clinical trial.
mRNA medicines are a novel approach, and negative perception of the efficacy, safety, or tolerability of any investigational medicines that we develop could adversely affect our ability to conduct our business, advance our investigational medicines, or obtain regulatory approvals.
Other than the EUA and other similar authorizations for COVID-19 vaccines, including ours, no mRNA medicines have been granted EUA or have been approved to date by the FDA or any other regulatory agency. Adverse events in clinical trials of our investigational medicines or in clinical trials of others developing similar products and the resulting publicity, as well as any other adverse events in the field of mRNA medicine, or other products that are perceived to be similar to mRNA medicines, such as those related to gene therapy or gene editing, could result in a decrease in the perceived benefit of one or more of our programs, increased regulatory scrutiny, decreased confidence by patients and clinical trial collaborators in our investigational medicines, and less demand for any product that we may develop. Our large pipeline of development candidates and investigational medicines could result in a greater quantity of reportable adverse events, including suspected unexpected serious adverse reactions, other reportable negative clinical outcomes, manufacturing reportable events or material clinical events that could lead to clinical delay or hold by the FDA or applicable regulatory authority or other clinical delays, any of which could negatively impact the perception of one or more of our programs, as well as our business as a whole. In addition, responses by U.S., state, or foreign governments to negative public perception may result in new legislation or regulations that could limit our ability to develop any investigational medicines or commercialize any approved products, obtain or maintain regulatory approval, or otherwise achieve profitability. More restrictive statutory regimes, government regulations, or negative public opinion would have an adverse effect on our business, financial condition, results of operations, and prospects and may delay or impair the development of our investigational medicines and commercialization of any approved products or demand for any products we may develop.
Because we are developing some of our development candidates or investigational medicines for the treatment of diseases in which there is little clinical experience and, in some cases, using new endpoints or methodologies, the FDA or other regulatory authorities may not consider the endpoints of our clinical trials to provide clinically meaningful results.
There are no pharmacologic therapies approved to treat the underlying causes of many diseases that we currently attempt to address or may address in the future. For instance, for both MMA and PA, few clinical trials have been attempted. In addition, there has been limited clinical trial experience for the development of pharmaceuticals to treat these rare diseases in general, and we are not aware of a registrational trial that led to approval of a drug to treat these diseases. There have been some historical trials with other agents to address organic acidemias which may have utilized clinical endpoints that are less applicable to our efforts with our MMA and PA
programs that address the underlying defect. As a result, the design and conduct of clinical trials of investigational medicines for the treatment of these disorders and other disorders may take longer, be more costly, or be less effective as part of the novelty of development in these diseases.
Even if the FDA does find our success criteria to be sufficiently validated and clinically meaningful, we may not achieve the pre-specified endpoint to a degree of statistical significance in any pivotal or other clinical trials we or our strategic collaborators may conduct for our programs. Further, even if we do achieve the pre-specified criteria, our trials may produce results that are unpredictable or inconsistent with the results of the more traditional efficacy endpoints in the trial. The FDA also could give overriding weight to other efficacy endpoints over a primary endpoint, even if we achieve statistically significant results on that endpoint, if we do not do so on our secondary efficacy endpoints. The FDA also weighs the benefits of a product against its risks and the FDA may view the efficacy results in the context of safety as not being supportive of licensure. Other regulatory authorities in Europe and other countries may make similar findings with respect to these endpoints.
Some of our investigational medicines are classified as gene therapies by the FDA and the EMA, and the FDA has indicated that our investigational medicines will be reviewed within its Center for Biologics Evaluation and Research (CBER). Even though our mRNA investigational medicines are designed to have a different mechanism of action from gene therapies, the association of our investigational medicines with gene therapies could result in increased regulatory burdens, impair the reputation of our investigational medicines, or negatively impact our platform or our business.
There have been few approvals of gene therapy products in the United States or foreign jurisdictions, and there have been well-reported significant adverse events associated with their testing and use. Gene therapy products have the effect of introducing new DNA and potentially irreversibly changing the DNA in a cell. By contrast, mRNA is highly unlikely to localize to the nucleus, integrate into the DNA, or otherwise make any permanent changes to cell DNA. Consequently, we expect that our investigational medicines will have a different potential side effect profile from gene therapies.
Regulatory requirements governing gene and cell therapy products have evolved and may continue to change in the future, and the implications for mRNA-based therapies are unknown. For example, the FDA has established the Office of Tissues and Advanced Therapies within CBER to consolidate the review of gene therapy and related products, and convenes the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. In the European Union, mRNA has been characterized as a gene therapy medicinal product, which falls within a broader category known as Advanced Therapy Medicinal Products, or ATMPs, which are subject to additional regulatory requirements. In certain countries, mRNA therapies have not yet been classified or any such classification is not known to us; specifically, in Japan, the Pharmaceuticals and Medical Devices Agency has not taken a position on the regulatory classification. Notwithstanding the differences between our mRNA investigational medicines and gene therapies, the classification of some of our mRNA investigational medicines as gene therapies in the United States, the European Union, and potentially other countries could adversely impact our ability to develop our investigational medicines, and could negatively impact our platform and our business. For instance, a clinical hold on gene therapy products across the field due to risks associated with altering cell DNA irreversibly may apply to our mRNA investigational medicines irrespective of the mechanistic differences between gene therapies and mRNA.
Adverse events reported with respect to gene therapies or genome editing therapies could adversely impact one or more of our programs. Although our mRNA development candidates and investigational medicines are designed not to make any permanent changes to cell DNA, regulatory agencies or others could believe that adverse effects of gene therapies products caused by introducing new DNA and irreversibly changing the DNA in a cell could also be a risk for our mRNA investigational therapies, and as a result may delay one or more of our trials or impose additional testing for long-term side effects. Any new requirements and guidelines promulgated by regulatory review agencies may have a negative effect on our business by lengthening the regulatory review process, requiring us to perform additional or larger studies, or increasing our development costs, any of which could lead to changes in regulatory positions and interpretations, delay or prevent advancement or approval and commercialization of our investigational medicines, or lead to significant post-approval studies, limitations, or restrictions. As we advance our investigational medicines, we will be required to consult with these regulatory agencies and advisory committees and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of some or all of our investigational medicines.
A breakthrough therapy designation or fast track designation by the FDA for a drug may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the drug will receive marketing approval.
We may seek a breakthrough therapy designation for one or more of our investigational medicines. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the BLA.
Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that one of our investigational medicines meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. Even if we are successful in obtaining accelerated approval in the United States or under comparable pathways in other jurisdictions, we may face requirements and limitations that will adversely affect our prospects. For example, we may be approved only for a very limited indication, we may not successfully complete required post-approval trials, such trials may not confirm the clinical benefit of our drug, or approval of the drug may be withdrawn. In addition, even if one or more of our investigational medicines qualify as breakthrough therapies, the FDA may later decide that the investigational medicine no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.
We have received Fast Track Designation for some of our investigational medicines and may seek Fast Track Designation for others. If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address significant unmet medical needs for this condition, the drug sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular investigational medicine is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process, review, or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track Designation alone does not guarantee qualification for the FDA’s priority review procedures.
We may fail to obtain and maintain orphan drug designations from the FDA or EMA for our future investigational medicines, as applicable.
Our strategy includes filing for orphan drug designation where available for our investigational medicines, and we have received orphan drug designation from both the FDA and the European Commission for MMA (mRNA-3704) and PA (mRNA-3927) and our prior MMA candidate (mRNA-3704). Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages, and user-fee waivers. However, orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process. If a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full new drug application or NDA, or biologics license application, or BLA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the original manufacturer is unable to assure sufficient product quantity.
In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may receive and be approved for the same condition, and only the first applicant to receive approval will receive the benefits of marketing exclusivity. Even after an orphan-designated product is approved, the FDA can subsequently approve a later drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective, or makes a major contribution to patient care. In addition, while we may seek additional orphan drug designation for our investigational medicines, we may never receive such further designations.
The criteria for designating an “orphan medicinal product” in the European Economic Area (consisting of Member States of the European Union, plus Iceland, Liechtenstein and Norway, or the EEA) are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if it meets the following criteria: (i) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; and (ii) either the prevalence of such condition must not be more than five in 10,000 persons in the EEA when the application is made; or without the benefits derived from orphan status, it must be unlikely that the marketing of the medicine would generate sufficient return in the EEA to justify the investment needed for its development; and (iii) there exists no satisfactory method of diagnosis, prevention or treatment of such condition, or if such a method exists, the product will be of significant benefit to those affected by the condition. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers made available by the EEA and its Member States to support research into, and the development and availability of, orphan drugs, however orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If products with an orphan designation obtain a marketing authorization, they can receive ten years of market exclusivity, during which time no “similar medicinal product” for the same indication may be placed on the market. A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. Market exclusivity may, however, be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Orphan medicine marketing exclusivity may also be revoked in certain cases, such as if it is established that a similar medicinal product is safer, more effective or otherwise clinically superior or if not enough orphan medicinal product can be supplied.
Our investigational medicines may face competition from biosimilars approved through an abbreviated regulatory pathway.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 or collectively the ACA, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 or BPCIA,(the BPCIA), which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first approved by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first approved. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of the other company’s product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.
We believe that any of our investigational medicines approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressionalCongressional action or otherwise, or that the FDA will not consider our investigational medicines to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
Any clinical trials of our oncology-related products that we conduct with a seamless trial design may not be acceptable to regulatory authorities in the form submitted, or at all, which may delay our clinical development and limit or change the type of information we may gather from our clinical trials.
We may pursue a development program for our oncology-related products that relies upon a seamless trial design, which presents additional risks compared to traditional three-phase development programs. A seamless trial design can be achieved through a first-in-human or FIH,(FIH) multiple expansion cohort trial, which has a single protocol with an initial dose-escalation phase and also contains three or more additional patient cohorts with cohort-specific objectives. FIH multiple expansion cohort trials are intended to expedite development by seamlessly proceeding from initial determination of a potential effective dose to individual cohorts that have trial objectives typical of Phase 2 trials. Challenges and risks associated with such seamless trial designs include challenges in the timely dissemination of new safety information to investigators, IRBs, and regulators, exposing a large number of patients across cohorts to potentially suboptimal or toxic doses of an investigational drug, exposing more patients than is needed to achieve the cohort’s objectives, and missed interpretations of preliminary trial results and unplanned analyses which can lead to delays in clinical development. Regulatory authorities may find our seamless trial designs unacceptable based on these and other risks of utilizing such designs.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, investigational medicines we may develop, and our ability to generate revenue will be materially impaired.
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain, and may prevent us from obtaining approvals for the commercialization of any development candidates and investigational medicines we may develop. Any mRNA medicine we may develop and the activities associated with its development and commercialization, including design, testing, manufacture, recordkeeping,record-keeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to comprehensive regulation by the FDA and by comparable global health authorities. To obtain the requisite regulatory approvals to commercialize any of our investigational medicines, we and our strategic collaborators must demonstrate through extensive preclinical studies and clinical trials that our products are safe, pure, and potent or effective in humans, including the target population. Successful completion of clinical trials is a prerequisite to submitting a BLA to the FDA, a Marketing Authorization Application, or MAA,marketing authorization application (MAA) to the EMA, and similar marketing applications to comparable global regulatory authorities, for each investigational medicine and, consequently, the ultimate approval and commercial marketing of any investigational medicines.
Failure to obtain marketing approval for an investigational medicine will prevent us from commercializing the investigational medicine in a given jurisdiction. We have not received approval to market any investigational medicines from regulatory authorities in any jurisdiction, and it is possible that none of our investigational medicines or any investigational medicines we may seek to develop in the future will ever obtain regulatory approval. We have limited experience in filing and supporting the applications necessary to gain marketing approvals and may need to rely on third-party contract research organizations, or CROs or regulatory consultants to assist us in this process. To our knowledge, there is no current precedent for an mRNA basedmRNA-based medicine such as the types we are developing being approved for sale by the FDA or any other global regulatory agency. Although we expect to submit BLAs for our mRNA basedmRNA-based investigational medicines in the United States, other jurisdictions may consider our mRNA basedmRNA-based investigational medicines to be new drugs, not biologics, and require different marketing applications. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each
therapeutic indication to establish the investigational medicine’s safety and efficacy. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Any investigational medicines we develop may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the investigational medicines involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical, or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of an investigational medicine. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable. Additional delays or non-approval may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies,trials, and the review process.
Regulatory agencies also may approve an mRNA medicine for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our treatment candidates.investigational medicines.
The FDA and other regulatory agencies review the CMC section of regulatory filings. Any aspects found unsatisfactory by regulatory agencies may result in delays in clinical trials and commercialization. In addition, the regulatory agencies conduct pre-approval inspections or PAIs, at the time of a BLA. Any findings by regulatory agencies and failure to comply with requirements may lead to delay in approval and failure to commercialcommercialize the potential mRNA investigational medicine.
If we experience delays in obtaining approval or if we fail to obtain approval of any investigational medicines we may develop, the commercial prospects for those investigational medicines will be harmed, and our ability to generate revenues will be materially impaired.
We may never obtain EMA or other foreign regulatory body approval for any of our investigational medicines, and even if we do, we may never be able to commercialize any of our investigational medicines in any other jurisdiction, which would limit our ability to realize their full market potential.
Approval by
To date, our COVID-19 vaccine (mRNA-1273) is our only product that has obtained an EUA from the FDA in the United States and similar authorizations in other jurisdictions. Approval of an investigational medicine by the FDA, if obtained, does not ensure approval by regulatory authorities in other countries or jurisdictions. In order to eventually market any of our investigational medicines in any particular foreign jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding safety and efficacy. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods.
Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials which could be costly and time-consuming.time consuming. Regulatory requirements can vary widely from country to countrycountry-to-country and could delay or prevent the introduction of our products in those countries. The foreign regulatory approval process involves all of the risks associated with FDA approval. We do not have any investigational medicines approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be unrealized.
Our planned clinical trials or those of our strategic collaborators may reveal significant adverse events not seen in our preclinical or nonclinical studies and may result in a safety profile that could delay or terminate clinical trials, or delay or prevent regulatory approval or market acceptance of any of our investigational medicines.
There is typically an extremely high rate of attrition for product candidates across categories of medicines proceeding through clinical trials. These product candidates may fail to show the desired safety and efficacy profile in later stages of clinical trials despite having progressed through nonclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in later-stage clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. Most investigational medicines that commence clinical trials are never approved as products and
there can be no assurance that any of our current or future clinical trials will ultimately be successful or support further clinical development of any of our investigational medicines.
Some of our investigational medicines are developed or intended to be co-administered with other developmental therapies or approved medicines. For example, our PCV investigational medicine (mRNA-4157) and our KRAS investigational medicine (mRNA-5671) in collaboration with Merck & Co., or Merck, (mRNA-5671) may be co-administered with Merck’s anti-PD-1 therapy, pembrolizumab. Our IL12IL-12 investigational medicine (MEDI1191) in collaboration with AstraZeneca (MEDI1191) is being developed to be co-administered with checkpoint inhibitors (e.g., anti-PD-L1, anti-CTLA4). These combinations may have additional side effects. The uncertainty resulting from the use of our investigational medicines in combination with other therapies may make it difficult to accurately predict side effects in future clinical trials.
Some of our development candidates and investigational medicines are developed or intended for adolescent and/or pediatric patients under the age of eighteen. For example, we have an open IND foreighteen, including our hMPV/PIV3 vaccine (mRNA-1653), pediatric RSV vaccine (mRNA-1345), PA development candidate (mRNA-3927) and MMA development candidate (mRNA-3704)(mRNA-3705). The first pediatric subjects in the Phase 1b age de-escalation clinical trial of mRNA-1653 have been enrolled and dosed. During the COVID-19 related pause, the Safety Monitoring Committee reviewed a preliminary data set on these small initial group of pediatric patients and recommended continuation of the study with no modification in the planned trial execution. Our PA development candidate (mRNA-3927) for which we are conducting a first-in-human Phase 1/2 studytrial in patients between one and eighteen years of age.age has resumed study start up activities. If participants are enrolled in the trial and successfully dosed, thisthey will be the first of our investigational medicines given to subjects eighteen years of age or younger and the first of ourrare disease investigational medicines from our systemic intracellular therapeutics modality dosed in humans. The uncertainty resulting from the first dosing of young, human subjects with an investigational medicine from our systemic intracellular therapeutics modality makes it difficult to accurately predict if significant adverse events or other side effects will be observed.
Most of our investigational medicines are formulated and administered in an LNP which, when administered, may lead to systemic side effects related to the components of the LNP, some of which may not have been previously tested in humans. While we have continued to optimize our LNPs, there can be no assurance that our LNPs will not have undesired effects. Our LNPs could contribute, in whole or in part, to one or more of the following: immune reactions, infusion reactions, complement reactions, opsonization reactions, antibody reactions, or reactions to PEG. Certain aspects of our investigational medicines may induce immune reactions from either the mRNA or the lipid as well as adverse reactions within liver pathways or degradation of the mRNA or the LNP, any of which could lead to significant adverse events in one or more of our clinical trials. Many of these types of side effects have been seen for
previously developed LNPs. There may be resulting uncertainty as to the underlying cause of any such adverse event, which would make it difficult to accurately predict side effects in future clinical trials and would result in significant delays in our programs.
If significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting trial participants to any of our clinical trials, trial participants may withdraw from trials, or we may be required to abandon the trials or our development efforts of one or more development candidates or investigational medicines altogether. We, the FDA or other applicable regulatory authorities, or an IRB, may impose a clinical hold or suspend or terminate clinical trials of an investigational medicine at any time for various reasons, including a belief that participants in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the drug from obtaining or maintaining marketing approval, unfavorable benefit risk ratio may inhibit market acceptance of the approved product due to its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition, and prospects.
Even if we obtain regulatory approval for an investigational medicine, and even though we have obtained an EUA for our COVID-19 vaccine, our products will remain subject to regulatory scrutiny.
Even if we obtain regulatory approval in a jurisdiction,the applicable regulatory authority may still impose significant restrictions on the indicated uses or marketing of our product, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet the specifications in the BLA. The holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.
If we fail to comply with applicable regulatory requirements following approval of any of our investigational medicines, a regulatory agency may:
•issue a warning letter asserting that we are in violation of the law;
•seek an injunction or impose civil or criminal penalties or monetary fines;
•suspend or withdraw regulatory approval or revoke a license;
•suspend any ongoing clinical studies;trials;
•refuse to approve a pending BLA or supplements to a BLA submitted by us;
•seize product; or
•refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize any approved products and generate revenues.
If any of our investigational medicines cause undesirable side effects, it could delay or prevent their regulatory approval, limit the commercial potential, or result in significant negative consequences following any potential marketing approval. Investigational medicines we may develop may be associated with an adverse immune response or other serious adverse events, undesirable side effects, or unexpected characteristics. In addition to serious adverse events or side effects caused by any of our investigational medicines, the administration process or related procedures also can cause undesirable side effects. If any such events occur, the clinical trials of any of our investigational medicines could be suspended or terminated.
If in the future we are unable to demonstrate that such adverse events were caused by factors other than our investigational medicine, the FDA, the EMA, or other regulatory authorities could order us to cease further development of, or deny approval of, any of our investigational medicines for any or all targeted indications. Even if we are able to demonstrate that all future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled trial participants to complete the trial. Moreover, if we elect, or are required, to delay, suspend, or terminate any clinical trial of any of our investigational medicines, the commercial prospects of such investigational medicines may be harmed and our ability to generate product revenues from any of these investigational medicines may be delayed or eliminated. Any of these occurrences may harm our ability to identify and develop investigational medicines, and may harm our business, financial condition, result of operations, and prospects significantly.
Additionally, if we successfully obtain regulatory approval for an investigational medicine, the FDA or other regulatory authority could require us to adopt a Risk Evaluation and Mitigation Strategy or REMS, to ensure that the benefits of treatment with such investigational medicine outweigh the risks for each potential patient, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients, a communication plan to health care practitioners, extensive patient monitoring, or
distribution systems and processes that are highly controlled, restrictive, and more costly than what is typical for the industry. Furthermore, if we or others later identify undesirable side effects caused by any product that we develop, several potentially significant negative consequences could result, including:
•regulatory authorities may suspend or withdraw approvals or revoke licenses of such product;
•regulatory authorities may require additional warnings on the label;
•we may be required to change the way a product is administered or conduct additional clinical trials;
•we could be sued and held liable for harm caused to patients and their children; and
•our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of any products we may identify and develop and could have a material adverse impact on our business, financial condition, results of operations, and prospects.
If we are successful in gaining approval for any of our investigational medicines, we will continue to face significant regulatory oversight of the manufacturing and distribution of our products. Product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP and adherence to commitments made in the BLA. If we or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.
Our ability
Even though mRNA-1273 has been granted an EUA, mRNA-1273 will remain the subject of regulatory scrutiny. For example, the EUA issued by the FDA contains numerous conditions of authorization, including the requirement to generate product revenue is dependent on the success of one or more of our development candidates or investigational medicines, each of which is at an early-stage of development and will require significant additional development and clinical testing before we can seek marketing approval and begin commercial sales.
Our ability to generate product revenue is highly dependent on our or our strategic collaborators’ ability to develop, obtain regulatory approval of, and successfully commercialize one or more of our development candidates or investigational medicines. Our development candidates or investigational medicines are in the early stages of development and will require additional clinical and nonclinical development, regulatory review and approval in each jurisdiction in which we intend to market the products. In addition, substantial investment, access to sufficient commercial manufacturing capacity, and significant marketing efforts will be required before we can generate any revenue from product sales. To date, our investigational medicines have been tested in fewer than 1,000
subjects in the aggregate. Before obtaining marketing approval from regulatory authorities for the sale of our investigational medicines, we must conduct extensive clinicalpost-authorization observational studies to demonstrateevaluate the safetyassociation between mRNA-1273 and efficacya pre-specified list of the investigational medicines in humans.adverse events of special interest, along with deaths and hospitalizations, and severe COVID-19. We cannotor others could identify previously unknown side effects, or known side effects could be certain that any of our investigational medicines will be successfulobserved as being more frequent or severe than in clinical studies or earlier post-marketing periods, in which case:
•sales of mRNA-1273 may be more modest than originally anticipated;
•the FDA and theyother regulatory agencies may not receive regulatory approval even if they are successful in clinical studies. Even if approved, our investigational medicines also need to demonstrate health economic benefit in order to establish pricing and reimbursement. Werevoke an EUA or other authorizations for mRNA-1273;
•we may also needdecide, or be required, to conduct recalls or send field alerts to physicians, pharmacists and hospitals;
•additional evaluationnonclinical or clinical studies, changes in labeling, or changes to manufacturing processes, specifications and/or facilities may be required; and
•government investigations or lawsuits, including class action suits, may be brought against us.
Further, should we be unable to follow the conditions of safetyauthorization included in the EUA, the FDA may revoke EUA for mRNA-1273. Any of the above occurrences could reduce or prevent sales of mRNA-1273, increase our expenses and health outcomes in a post-approval setting.impair our ability to successfully commercialize mRNA-1273.
Risks related to the manufacturing of our commercial products, development candidates, investigational medicines and our future pipeline
Our mRNA products, development candidates and investigational medicines are based on novel technologies and any development candidates and investigational medicines we develop may be complex and difficult to manufacture. We may encounter difficulties in manufacturing, product release, shelf life, testing, storage, supply chain management, or shipping.shipping for any of our medicines, including our COVID-19 vaccine. If we or any of our third-party manufacturers encounter such difficulties, our ability to supply commercial product or material for clinical trials or any approved product could be delayed or stopped.
The manufacturing processes for our commercial products, development candidates and investigational medicines are novel and complex. ThereOther than vaccines for active immunization to prevent COVID-19 caused by SARS-CoV-2, including our COVID-19 vaccine, that have received EUAs from the FDA or similar authorizations by authorities in other jurisdictions, there are no mRNA medicines commercialized to date or manufactured at such scale. Due to the novel nature of this technology and our limited experience at larger scale production, we may encounter difficulties in manufacturing, product release, shelf life, testing, storage, and supply chain management, or shipping. These difficulties could be due to any number of reasons including, but not limited to, complexities of producing batches at larger scale, equipment failure, choice and quality of raw materials and excipients, analytical testing technology, and product instability. In an effort to optimize product features, we have in the past and may in the future make changes to our development candidates or investigational medicines in their manufacturing and stability formulation and conditions. This has in the past resulted in and may in the future result in our having to resupply batches for preclinical or clinical activities when there is insufficient product stability during storage and insufficient supply. Insufficient stability or shelf life of our development candidates
and investigational medicines could materially delay our or our strategic collaborators’ ability to continue the clinical trial for that development candidate or investigational medicine or require us to begin a new clinical trial with a newly formulated drug product, due to the need to manufacture additional preclinical or clinical supply.
Our rate of innovation is high, which has resulted in and will continue to cause a high degree of technology change that can negatively impact product comparability during and after clinical development. Furthermore, technology changes may drive the need for changes in, modification to, or the sourcing of new manufacturing infrastructure or may adversely affect third-party relationships.
The process to generate mRNA investigational medicines encapsulated in LNPs is complex and, if not developed and manufactured under well-controlled conditions, can adversely impact pharmacological activity. Furthermore, prior to our recent scale-up for our COVID-19 vaccine, we havehad not manufactured mRNA medicines at commercial scale. We may encounter difficulties in scalingcontinuing to scale up our manufacturing process, thereby potentially impacting clinical and commercial supply.
We are scaling up our batch size to accommodate the clinical supply requirements of some of our programs. However, in many cases, we may have to utilize multiple batches of drug substance and drug product to meet the clinical supply requirement of a single clinical trial. Failure in our ability to scale up batch size or failure in any batch may lead to a substantial delay in our clinical trials.trials or in the commercialization of any approved product.
As we continue developing new manufacturing processes for our drug substance and drug product, the changes we implement to manufacturing process may in turn impact specification and stability of the drug product. Changes in our manufacturing processes may lead to failure of batches and this could lead to a substantial delay in delivery of commercial product or conduct of our clinical trial.trials. Our mRNA investigational medicines may prove to have a stability profile that leads to a lower than desired shelf life of the final approved mRNA medicine. This poses risk in supply requirements, wasted stock, and higher cost of goods.
We are dependent on a number of equipment providers who are also implementing novel technology. Further, we have developed our own custom manufacturing equipment for certain of our investigational medicines. If such equipment malfunctions or we encounter unexpected performance issues, we could encounter delays or interruptions to clinical and commercial supply. Due to the number of different programs, we may have cross contamination of productsinvestigational medicines inside of our factories, CROs, suppliers, or in the clinic that affect the integrity of our products.investigational medicines.
As we scale the manufacturing output for commercial production and particular programs, we plan to continuously improve yield, purity, and the pharmaceutical properties of our commercial products, development candidates and investigational medicines from IND-enabling studies through commercial launch, including shelf life stability, and solubility properties of drug product and drug substance. Because of continuous improvement in manufacturing processes, we may switch processes for a particular program during development. However, after the change in process, more time is required for pharmaceutical property testing, such as 6 or 12 month stability testing. That may require resupplying clinical material or making additional cGMP batches to keep up with clinical trial demand before such pharmaceutical property testing is completed.
We are utilizing a number of raw materials and excipients that have a single source of supply, are new to the pharmaceutical industry, and are being employed in a novel manner. Some of these raw materials and excipients have not been scaled to a level to support
commercial supply and could experience unexpected manufacturing or testing failures, or supply shortages. Such issues with raw materials and excipients could cause delays or interruptions to clinical and commercial supply of our investigational medicines.
We have established a number of analytical assays, and may have to establish several more, to assess the quality of our mRNA investigational medicines. We may identify gaps in our analytical testing strategy that might prevent release of product or could require product withdrawal or recall. For example, we may discover new impurities that have an impact on product safety, efficacy, or stability. This may lead to an inability to release mRNA investigational medicines until the manufacturing or testing process is rectified.
Our productproducts and product intermediates are extremely temperature sensitive, and we may learn that any or all of our productsinvestigational medicines are less stable than desired. We may also find that transportation conditions negatively impact product quality. This may require changes to the formulation or manufacturing process for one or more of our investigational medicines and result in delays or interruptions to clinical or commercial supply. In addition, the cost associated with such transportation services and the limited pool of vendors may also add additional risks of supply disruptions.
As our drug development pipeline increases and matures, the increased demand for clinical and commercial supplies from our facilities and third parties may impact our ability to operate. We will require increased capacity across our entire supply chain. Furthermore, we rely on many service providers, including those that provide manufacturing or testing services, all of whom have inherent risks in their operations that may adversely impact our operations.
Completion of our clinical trials and commercialization of our vaccine candidates require access to, or development of, facilities to manufacture our vaccine candidates at sufficient yields and at commercial-scale. We have limited experience manufacturing any of our vaccine candidates in the volumes that are necessary to support large-scale clinical trials or commercial sales. Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency or quality. In addition, other companies, many with substantial resources, compete with us for access to the materials needed to manufacture our vaccines.
We currently utilize, and expect to continue to utilize, third parties to, among other things, manufacture raw materials, components, parts, and consumables, and to perform quality testing. If the field of mRNA and other nucleic acid medicines continues to expand, we may encounter increasing competition for these materials and services. Demand for third-party manufacturing or testing facilities may grow at a faster rate than their existing capacity, which could disrupt our ability to find and retain third-party manufacturers capable of producing sufficient quantities of such raw materials, components, parts, and consumables required to manufacture our mRNA investigational medicines. The use of service providers and suppliers could expose us to risks, including, but not limited to:
•termination or non-renewal of supply and service agreements with third parties in a manner or at a time that is costly or damaging to us;
•disruptions to the operations of these suppliers and service providers caused by conditions unrelated to our business or operations, including the bankruptcy of the supplier or service provider; and
•inspections of third-party facilities by regulatory authorities that could have a negative outcome and result in delays to or termination of their ability to supply our requirements.
Our reliance on third-party manufacturers may adversely affect our operations or result in unforeseen delays or other problems beyond our control. Because of contractual restraints and the limited number of third-party manufacturers with the expertise, required regulatory approvals and facilities to manufacture our bulk vaccines on a commercial scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions in the production of our vaccine. A third-party manufacturer may also encounter difficulties in production. These problems may include:
•difficulties with production costs, scale up and yields;
•availability of raw materials and supplies;
•quality control and assurance;
•shortages of qualified personnel;
•compliance with strictly enforced federal, state and foreign regulations that vary in each country where products might be sold; and
•lack of capital funding.
As a result, any delay or interruption could have a material adverse effect on our business, financial condition, or results of operations.
The illegal distribution and sale by third parties of counterfeit versions of mRNA products, stolen products, or alternative third-party distribution and sale of mRNA products could have a negative impact on our financial performance or reputation.
Third parties could illegally distribute and sell counterfeit versions of mRNA products, especially on online marketplaces, which do not meet the rigorous manufacturing and testing standards under cGMP. Counterfeit products are frequently unsafe or ineffective, and may even be life-threatening. Counterfeit medicines may contain harmful substances or the wrong dose. However, to distributors and users, counterfeit products may be visually indistinguishable from the authentic version.
Reports of adverse reactions to counterfeit products, increased levels of counterfeiting, or unsafe mRNA products could materially affect patient confidence in our mRNA products. It is possible that adverse events caused by unsafe counterfeit or other non-mRNA products will mistakenly be attributed to our mRNA products. In addition, thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and which are sold through unauthorized channels could adversely impact patient safety, our reputation, and our business. Public loss of confidence in the integrity in mRNA products as a result of counterfeiting, theft, or improper manufacturing processes could have a material adverse effect on our business, results of operations, and financial condition.
We are subject to regulatory and operational risks associated with the physical and digital infrastructure at both our internal manufacturing facilities and at those of our external service providers.
In 2018, we completed construction of a new manufacturing facility, Moderna Technology Center, or MTC, in Norwood, MA, or Norwood,Massachusetts that, among other things, is intended for cGMP manufacture of drug substance and drug product. While the design of the facility is based on current standards for biotechnology facilities and it has been visited by the FDA, it has not been reviewedsubject to formal review, inspection or pre-approved by any regulatory agency, nor has the facility been inspected by any regulatory agency, such as the FDA. We have only recently begunbegan producing drug substanceproduct and drug productsubstance at Norwoodthe MTC for our preclinical and clinicalcommercial use. We could incur delays in implementing the full operational state of the facility, causing delays to clinical supply or extended use of third-party service providers, resulting in unplanned expenses. In constructing the Norwood facility, we have incurred substantial expenditures, and expect to incur significant additional expenditures in validating and operating the facility in the future.
We have designed Norwoodthe MTC to incorporate a significant level of automation of equipment with integration of several digital systems to improve efficiency of operations. We have attempted to achieve a high level of digitization for a clinical and commercial manufacturing facility relative to industry standards. While this is meant to improve operational efficiency, this may pose additional risk of process equipment malfunction and even overall manufacturing system failure or shutdown due to internal or external factors including, but not limited to, design issues, system compatibility, or potential cybersecurity breaches. ThisOur facilities or those of our contract manufacturers may also be subject to intentional attacks or acts of sabotage, whether by outside actors, contractors or employees. These disruptions may lead to delay in supply or shutdown of our facility.facility or facilities. Any disruption in our manufacturing capabilities at Norwoodthe MTC, or those of our contract manufacturers, could cause delays in our production capacity for our drug substances or drug products, impose additional costs, or may require us to identify, qualify, and establish an alternative manufacturing site, the occurrence of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
As we expand our development and commercial capacity, we may establish additional manufacturing capabilities inside the NorwoodMTC footprint or expand to other locations or geographies, which may lead to regulatory delays or prove costly. If we fail to select the correct location, complete the construction in an efficient manner, recruit the required personnel, and generally manage our growth effectively, the development and production of commercial products or our investigational medicines could be delayed or curtailed. Additional investments may be needed if changes in our manufacturing process lead to required changes in Norwood’sthe MTC’s infrastructure.
There are risks inherent in pharmaceutical manufacturing operations that could affect our ability and the ability of our third-party manufacturers or contract manufacturing organizations to meet our delivery requirements or provide adequate amounts of material.
The convergence of process and analytical technology, raw materials, consumables, equipment, physical infrastructure, including a clean room environment, and air handling and other utilities, results in complex procedures and systems that have to work effectively to manufacture our investigational medicines. Failure or process defects in any of the interrelated systems at either our manufacturing facilities or those of our third-party providers, could adversely impact our ability to manufacture and supply our COVID-19 vaccine or our investigational medicines.
Our products and investigational medicines are inherently sensitive to shipping and storage conditions, which, in some cases, requires cold-chain logistics and could be subject our investigational medicines to risk of loss or damage.
Our COVID-19 vaccine and our investigational medicines are sensitive to temperature, storage, and handling conditions. Loss in investigational medicines could occur if the product or product intermediates are not stored or handled properly. Shelf life for our products and investigational medicines may vary by product and is not fully quantified and is expected to be variable, and it is possible that our investigational medicines could be lost due to expiration prior to use. ThisCold-chain logistics are required for certain of our investigational medicines, as well as for our COVID-19 vaccine. If we or third-party distributors do not effectively maintain effective cold-chain supply logistics, then we may experience an unusual number of returned or out of date products and critical batches of products may be rendered unusable.
Failure to effectively maintain cold-chain supply logistics, by us or third parties, has in the past and could in the future lead to additional manufacturing costs and delays in our ability to supply required quantities for clinical trials, commercial sale, or otherwise.
We are subject to significant regulatory oversight with respect to manufacturing our COVID-19 vaccine and our mRNA investigational medicines. Our manufacturing facilities or the manufacturing facilities of our third-party manufacturers or suppliers may not meet regulatory requirements. Failure to meet cGMP requirements set forth in regulations promulgated by the FDA, EMA, and other global health authorities could result in significant delays in any approval of and costs of our products.
The manufacturing of vaccines and therapeutics for clinical trials or commercial sale is subject to extensive regulation. Components of a finished product approved for commercial use or used in clinical trials must be manufactured in accordance with cGMP requirements. These regulations govern manufacturing processes and procedures, including record keeping, and the implementation and operation of quality systems to control and assure the quality of products and materials used in clinical trials. Poor control of the cGMP production processes can lead to product quality failures that can impact our ability to supply product, resulting in cost overruns and delays to clinical timelines, which could be extensive. Such production process issues include but are not limited to:
•critical deviations in the manufacturing process;
•facility and equipment failures;
•contamination of the product due to an ineffective quality control strategy;
•facility contamination as assessed by the facility and utility environmental monitoring program;
•ineffective process, equipment, or analytical change management, resulting in failed lot release criteria;
•raw material failures due to ineffective supplier qualification or regulatory compliance issues at critical suppliers;
•ineffective product stability;
•failed lot release or facility and utility quality control testing;
•ineffective corrective actions or preventative actions taken to correct or avoid critical deviations due to our developing understanding of the manufacturing process as we scale; and
•failed or defective components or consumables.
We must supply all necessary documentation in support of a BLA or other marketing authorization application on a timely basis and must adhere to the FDA’s, EMA’s, and other countries’ cGMP requirements which are enforced, in the case of the FDA, in part through its facilities inspection program.
Regulatory authorities typically require representative manufacturing site inspections to assess adequate compliance with cGMPscGMP and manufacturing controls as described in the filing. If either we or one of our third-party manufacturing sites fails to provide sufficient quality assurance or control, the product approval to commercialize may not be granted. Inspections by regulatory authorities may occur at any time during the development or commercialization phase of products. The inspections may be product specific or facility specific for broader cGMP inspections or as a follow up to market or development issues that the regulatory agency may identify. Deficient inspection outcomes may influence the ability of our third-party manufacturers or suppliers to fulfill their supply obligations, impacting or delaying supply or delaying programs.
The manufacturing process for our COVID-19 vaccine, and for any other products that we may develop, is subject to the FDA and foreign regulatory authority approval process, and we may need to contract with manufacturers who we believe can meet applicable FDA and foreign regulatory authority requirements on an ongoing basis. If we or our third-party manufacturers are unable to reliably produce products or investigational medicines to specifications acceptable to the FDA or other regulatory authorities, we or our strategic collaborators may not obtain or maintain the approvals we or they need to commercialize such products. Even if we or our strategic collaborators obtain regulatory approval for any of our mRNA medicines, and even though we have received an EUA for our COVID-19 vaccine, there is no assurance that either we or our contract manufacturing organizations will be able to manufacture the approved medicine to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product, or to meet potential future demand. Any of these challenges could delay completion of clinical trials, require bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our investigational medicines, impair commercialization efforts, or increase our cost of goods. The occurrence of any of the foregoing could have an adverse effect on our business, financial condition, results of operations, and growth prospects.
In addition, we may not have direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance, and qualified personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply or manufacture materials or products for such companies, which exposes our contract manufacturers to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may generally affect the regulatory status of our contract manufacturers’ facility. In addition, to the extent that we rely on foreign contract manufacturers, including for our COVID-19 vaccine, we are or will be subject to additional risks, including the need to comply with import and export regulations. Our failure, or the failure of our third-party manufacturers or other strategic collaborators, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of investigational medicines or products, operating restrictions, and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and investigational medicines (including those of our strategic collaborators) and our overall business operations. Our
potential future dependence upon others for the manufacture of our investigational medicines and raw materials may adversely affect our future profit margins and our ability to commercialize any products that receive regulatory approval on a timely and competitive basis.
The FDA, the EMA, and other foreign regulatory authorities may require us to submit product samples of any lot of any approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA, the EMA, or other foreign regulatory authorities may require that we do not distribute a lot or lots until the relevant agency authorizes such release. Deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. Our third-party contract manufacturers have, in the past, experienced lot failures and some may have experienced product recalls. Lot failures have in the past caused, and lot failures or product recalls in the future with respect to product produced by either our own facilities or those of our third-party manufacturers could cause, us and our strategic collaborators to delay clinical trials or product launches, which could be costly to us and otherwise harm our business, financial condition, results of operations, and prospects.
We also may encounter problems hiring and retaining the experienced scientific, quality-control, and manufacturing personnel needed to operate our manufacturing processes and operations, which could result in delays in production or difficulties in maintaining compliance with applicable regulatory requirements. While we will train and qualify all personnel around the appropriate handling of our products and materials, we may not be able to control for or ultimately detect intentional sabotage or negligence by any employee or contractor.
Risks specific to certain investigational medicines
Our personalized cancer vaccine, or PCV, investigational medicine is uniquely manufactured for each patient using a novel, complex manufacturing process and we may encounter difficulties in production.
We custom design and manufacture PCVs that are unique and tailored specifically for each patient. Manufacturing unique lots of PCVs is susceptible to product loss or failure due to issues with:
•logistics associated with the collection of a patient’s tumor, blood, or other tissue sample;
•shipping such samples to a facility for genetic sequencing;
•next generation sequencing of the tumor mRNA;
•identification of appropriate tumor-specific mutations;
•the use of a software program, including proprietary and open source components, which is hosted in the cloud and a part of our investigational medicine, to assist with the design of the patient-specific mRNA, which software must be maintained and secured;
•effective design of the patient-specific mRNA that encodes for the required neoantigens;
•batch specific manufacturing failures or issues that arise due to the uniqueness of each patient-specific batch that may not have been foreseen;
•quality control testing failures;
•unexpected failures of batches placed on stability;
•shortages or quality control issues with single-use assemblies, consumables, or critical parts sourced from third-party vendors that must be changed out for each patient-specific batch;
•significant costs associated with individualized manufacturing that may adversely affect our ability to continue development;
•successful and timely manufacture and release of the patient-specific batch;
•shipment issues encountered during transport of the batch to the patient site of care; and
•the ability to define a consistent safety profile at a given dose when each participant receives a unique vaccine.
We have built and installed custom manufacturing equipment for PCV whichthat has been incorporated into a personalized vaccine unit in Norwood.the MTC. This unit is currently operational and we are producing batches of PCV from our location and a third-party supplier's.the MTC. This equipment may not function as designed, which may lead to deviations in the drug product being produced. This can lead to increased batch failure and the inability to supply patients enrolled in the clinical trial. If our clinical development plans are expanded, due to the custom nature of the equipment and single-use assemblies, we may not be able to supply this expanded need reliably without significant investments. In addition, there will be considerable time to scale up our facilities or build new facilities before we can begin to meet any commercial demand if our PCV product is approved. This expansion or addition of new facilities could also lead to product comparability issues which can further delay introduction of new capacity.
Because our PCVs are manufactured for each individual patient, we will be required to maintain a chain of identity with respect to each patient’s tissue sample, sequence data derived from such tissue sample, results of analysis of such patient’s genomic analysis, and the custom manufactured product for each patient. Maintaining such a chain of identity is difficult and complex, and failure to do so has in the past and may in the future result in product mix up, adverse patient outcomes, loss of product, or regulatory action including
withdrawal of any approved products from the market. Further, as our PCV investigational medicine is developed through early-stage clinical studiestrials to later-stage clinical trials towards approval and commercialization, we expect that multiple aspects of the complicated collection, analysis, manufacture, and delivery process will be modified in an effort to optimize processes and results. These changes may not achieve the intended objectives, and any of these changes could cause our PCVs to perform differently than we expect, potentially affecting the results of clinical trials.
Risks related to our reliance on third parties
We have in the past entered into, and in the future may enter into, strategic alliances with third parties to developfor the development and commercialization of our products, development candidates and investigational medicines. If these strategic alliances are not successful, our business could be adversely affected.
We have limited resources to conduct clinical operations and have not yet establishedwe are in the process of establishing infrastructure for sales, marketing, orand distribution. Accordingly, we have entered into strategic alliances under which our strategic collaborators have provided, and may in the future provide, funding and other resources for developing, manufacturing and potentially commercializing our investigational medicines. We expect to enter into additional strategic alliances to access additional funding, capabilities, and expertise in the future. Our existing strategic alliances, and any future strategic alliances we enter into, may pose a number of risks, including the following:
•strategic collaborators may not perform their obligations as expected;
•the clinical trials conducted as part of such strategic alliance may not be successful;
•strategic collaborators may not pursue development and commercialization of any investigational medicines that achieve regulatory approval or may elect not to continue or renew development or commercialization of programs based on clinical trial results, changes in the strategic collaborators’ focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
•strategic collaborators may delay clinical trials, provide insufficient funding for clinical trials, stop a clinical trial, abandon an investigational medicine, repeat or conduct new clinical trials, or require a new formulation of an investigational medicine for clinical testing;
•strategic collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or investigational medicines if the strategic collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
•products or investigational medicines developed in strategic alliances with us may be viewed by our strategic collaborators as competitive with their own investigational medicines or products, which may cause strategic collaborators to cease to devote resources to the development or commercialization of our investigational medicines;
•a strategic collaborator with marketing and distribution rights to one or more of our products or investigational medicines that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of any such product;
•disagreements with strategic collaborators, including disagreements over proprietary rights, contract interpretation, or the preferred course of development of any investigational medicines, may cause delays or termination of the research, development, or commercialization of such investigational medicines, may lead to additional responsibilities for us with respect to such investigational medicines, or may result in litigation or arbitration, any of which would be time-consuming and expensive;
•strategic collaborators may not properly maintain or defend our IP rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our IP or proprietary information or expose us to potential litigation;
•disputes may arise with respect to the ownership of IP developed pursuant to our strategic alliances;
•strategic collaborators may infringe the IP rights of third parties, which may expose us to litigation and potential liability;
•strategic alliances may be materially amended, or terminated for the convenience of the strategic collaborator and, if materially amended, or terminated, the development of our investigational medicines may be delayed, and we could be required to raise additional capital to pursue further development or commercialization of the applicable investigational medicines;
•future relationships may require us to incur non-recurring and other charges, increase our near- and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business;
•we could face significant competition in seeking appropriate strategic collaborators and the negotiation process is time-consuming and complex; and
•our international operations through any future collaborations, acquisitions, or joint ventures may expose us to certain operating, legal, and other risks not encountered in the United States.
If our strategic alliances do not result in the successful development and commercialization of programs, or if one of our strategic collaborators materially amends, or terminates its agreement with us, we may not receive any future research funding or milestone, earn-out, royalty, or other contingent payments under the strategic alliances. If we do not receive the funding we expect under these agreements, our development of investigational medicines could be delayed and we may need additional resources to develop our
investigational medicines. In addition, in general our strategic collaborators have the right to terminate their agreements with us for convenience. A strategic collaborator has in the past terminated its agreement with us. If one of our strategic collaborators terminates its agreement with us, we may find it more difficult to attract new strategic collaborators and the perception of us in the business and financial communities could be adversely affected. All of the risks relating to product development, regulatory approval, and commercialization described in this Annual Report on Form 10-K apply to the activities of our strategic collaborators.
Our strategic collaborators control aspects of our clinical trials, regulatory activities, and other aspects of our strategic alliances, which could result in delays and other obstacles in the development and commercialization of our proposed products and materially harm our results of operations.
For some programs, we depend on strategic collaborators to design and conduct clinical trials for our investigational medicines. As a result, we may not control the manner or time schedule in which these clinical trials are conducted, which may negatively impact our business operations. In addition, if any of our strategic collaborators withdraws support for one or more of our programs or proposed products or otherwise impairs their development, our business could be negatively affected.
We may seek to establish additional strategic alliances and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans. Certain of our strategic alliance agreements may restrict our ability to develop certain products.
Our development programs and the potential commercialization of our development candidates and investigational medicines will require substantial additional cash to fund expenses. For some of our investigational medicines, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those investigational medicines.
We face significant competition in seeking appropriate strategic collaborators. Whether we reach a definitive agreement for any additional strategic alliances will depend, among other things, upon our assessment of the strategic collaborator’s resources and expertise, the terms and conditions of the proposed strategic alliance, and the proposed strategic collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject investigational medicine, the costs and complexities of manufacturing and delivering such investigational medicine to trial participants, the potential of competing drugs, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The strategic collaborator may also consider alternative investigational medicines or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our investigational medicine. The terms of any additional strategic alliances or other arrangements that we may establish may not be favorable to us.
We are also restricted under our existing strategic alliance agreements from entering into certain future agreements on certain terms with potential strategic collaborators to pursue other targets on our own. These restrictions on working with targets, polypeptides, routes of administration, and fields could limit our ability to enter into strategic collaborations with future strategic collaborators or to pursue certain potentially valuable development candidates or investigational medicines.
We may not be able to negotiate additional strategic alliances on a timely basis, on favorable terms, or at all. Strategic alliances are complex and time-consuming to negotiate and document. If we are unable to negotiate and enter into new strategic alliances, we may have to curtail the development of the investigational medicine for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on favorable terms or at all. If we do not have sufficient funds, we may not be able to further develop our investigational medicines or bring them to market and generate product revenue.
We are dependent on single-source suppliers for some of the components and materials used in, and the processes required to develop, our products, development candidates and investigational medicines.
We currently depend on single-source suppliers for some of the components and materials used in, and manufacturing processes required to develop and commercialize, our products, development candidates and investigational medicines. We cannot ensure that these suppliers or service providers will remain in business, have sufficient capacity or supply to meet our needs, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to work with us. Our use of single-source suppliers of raw materials, components, key processes, and finished goods exposes us to several risks, including disruptions in supply, price increases, or late deliveries. There are, in general, relatively few alternative sources of supply for substitute components. These vendors may be unable or unwilling to meet our future demands for our clinical trials or commercial sale. Establishing additional or replacement suppliers for these components, materials, and processes could take a substantial amount of time and it may
be difficult to establish replacement suppliers who meet regulatory requirements. Any disruption in supply from any single-source supplier or service provider could lead to supply delays or interruptions which would damage our business, financial condition, results of operations, and prospects.
If we have to switch to a replacement supplier, the manufacture and delivery of our products, development candidates or investigational medicines could be interrupted for an extended period, which could adversely affect our business. Establishing additional or replacement suppliers for any of the components or processes used in our products or investigational medicines, if required, may not be accomplished quickly. If we are able to find a replacement supplier, the replacement supplier would need to be qualified and may require additional regulatory authority approval, which could result in further delay. While we seek to maintain adequate inventory of the single sourcesingle-source components and materials used in our products, any interruption or delay in the supply of components or materials, or our inability to obtain components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand for our investigational medicines.
In addition, as part of the FDA’s approval of our investigational medicines, we will also require FDA review of the individual components of our process, which include the manufacturing processes and facilities of our single-source suppliers.
Our reliance on these suppliers, service providers, and manufacturers subjects us to a number of risks that could harm our reputation, business, and financial condition, including, among other things:
•delays to the development timelines for our development candidates or investigational medicines;
•interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;
•delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component;
•a lack of long-term supply arrangements for key components with our suppliers;
•inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;
•difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;
•production delays related to the evaluation and testing of components from alternative suppliers, and corresponding regulatory qualifications;
•delay in delivery due to our suppliers’ prioritizing other customer orders over ours;
•damage to our reputation caused by defective components produced by our suppliers; and
•fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.
If any of these risks materialize, costs could significantly increase and our ability to meet demand for our products could be impacted.
We rely on and expect to continue to rely on third parties to conduct aspects of our research, preclinical studies, protocol development, and clinical trials for our development candidates or investigational medicines. If these third parties do not perform satisfactorily, comply with regulatory requirements, or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our investigational medicines and our business could be substantially harmed.
We currently rely and expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators, to conduct our clinical trials. We currently rely and expect to continue to rely on third parties to conduct certain research and preclinical testing activities. In some cases, these third parties may terminate their engagements with us. If we need to enter into alternative arrangements, it would delay our discovery or product development activities.
Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our regulatory or contractual responsibilities. We will be responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the applicable protocol, legal and regulatory requirements, and scientific standards. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with regulations, commonly referred to as Good Clinical Practices, or GCPs for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions. For any violations of laws and regulations during the conduct of our preclinical studies and clinical trials, we could be subject to warning letters or enforcement action that may include civil penalties up to and including criminal prosecution.
We and our CROs will be required to comply with regulations, including GCPs, for conducting, monitoring, recording, and reporting the results of preclinical studies and clinical trials to ensure that the data and results are scientifically credible and accurate and that the trial participants are adequately informed, among other things, of the potential risks of participating in clinical trials. We also are responsible for ensuring that the rights of our clinical trial participants are protected. These regulations are enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, and comparable foreign regulatory authorities for any
investigational medicines in clinical development. The FDA enforces GCP regulations through periodic inspections of clinical trial sponsors, principal investigators, and trial sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our future clinical trials will comply with GCPs. In addition, our clinical trials must be conducted with investigational medicines produced in accordance with the requirements in cGMP regulations. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action.
Although we intend to design the clinical trials for certain of our investigational medicines, our strategic collaborators will design the clinical trials that they are managing (in some cases, with our input) and in the case of clinical trials controlled by us, we expect that CROs will conduct all of the clinical trials. As a result, many important aspects of our development programs, including their conduct and timing, will be outside of our direct control. Our reliance on third parties to conduct future preclinical studies and clinical trials will also result in less direct control over the management of data developed through preclinical studies and clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also potentially lead to mistakes as well as difficulties in coordinating activities. Outside parties may:
•have staffing difficulties;
•fail to comply with contractual obligations;
•experience regulatory compliance issues;
•undergo changes in priorities or become financially distressed;
•form relationships with other entities, some of which may be our competitors;
•have human errors; or
•be subject to cyber attacks.cyber-attacks.
These factors may materially adversely affect the willingness or ability of third parties to conduct our preclinical studies and clinical trials and may subject us to unexpected cost increases that are beyond our control. If the CROs do not perform preclinical studies and clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development, regulatory approval, and commercialization of our investigational medicines may be delayed, we may not be able to obtain regulatory approval and commercialize our investigational medicines, or our development programs may be materially and irreversibly harmed. If we are unable to rely on preclinical and clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of any clinical trials we conduct and this could significantly delay commercialization and require significantly greater expenditures.
We also expect to rely on other third parties to transport, store, and distribute the required materials for our clinical trials.trials and for our manufacturing processes. In the past certain of our third-party vendors have mishandled our materials, resulting in loss of full or partial lots of material. Any further performance failure on the part of these third parties could result in damaged products and could delay clinical development or marketing approval of any investigational medicines we may develop or commercialization of our medicines, if approved, producing additional losses and depriving us of potential product revenue, causing us to default on our contractual commitments, result in losses that are not covered by insurance, and damage our reputation and overall perception of our products in the marketplace.
Risks related to our intellectual property
Other companies or organizations may challenge our patent rights or may assert patent rights that prevent us from developing and commercializing our products.
mRNA medicines isare a relatively new scientific field, the continued development and potential use of which has resulted in many different patents and patent applications from organizations and individuals seeking to obtain intellectual propertyIP protection in the field. We have obtained grants and issuances of patents on mRNA medicines and our delivery technology. The issued patents and pending patent applications in the United States and in key markets around the world that we own, claim many different methods, compositions, and processes relating to the discovery, development, manufacture, and commercialization of mRNA medicines and our delivery technology, including LNPs.
As the field of mRNA therapeutics and vaccines is maturing, patent applications are being processed by national patent offices around the world. There is uncertainty about which patents will issue, and, if they do, as to when, to whom, and with what claims. It is likely that there will be significant litigation and other proceedings, such as interference, reexamination, and opposition proceedings, as well as inter partes and post-grant review proceedings introduced by provisions of the America Invents Act, which became available to third-party challengers on September 16, 2012, in various patent offices relating to patent rights in the mRNA field. WeAn opposition has been filed against one of our European platform patents covering uridine-modified mRNAs and we expect that further oppositions will
be filed in the European Patent Office or EPO,(EPO) and elsewhere relating to patents and patent applications in our portfolio. In many cases, the possibility of appeal exists for either us or our opponents, and it may be years before final, unappealable rulings are made with respect to these patents in certain jurisdictions. The timing and outcome of these and other proceedings is uncertain and may adversely affect our business if we are not successful in defending the patentability and scope of our pending and issued patent claims. For example, a third party request for reexamination has been granted against of one of our U.S. patents, which relates to our influenza vaccine program. We cannot be certain that such patent will survive or that the claims will remain in the current form. In addition, third parties may attempt to invalidate our intellectual propertyIP rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual propertyIP rights. Our defense against any attempt by third parties to circumvent or invalidate our intellectual propertyIP rights could be costly to us, could require significant time and attention of our management, and could have a material adverse impact on our business and our ability to successfully compete in the field of mRNA therapeutics.
There are many issued and pending third-party patents that claim aspects of oligonucleotide delivery technologies that we may need for our mRNA therapeutic and vaccine candidates.candidates or marketed products, including our COVID-19 vaccine, if approved. There are also many issued third-party patents that claim targeting genes or portions of genes that may be relevant for mRNA medicines we wish to develop. For example, we are aware of a third-party patent directed to methods of using mRNA to treat Fabry disease. In addition, there may be issued and pending patent applications that may be asserted against us in a court proceeding or otherwise based upon the asserting party’s belief that we may need such patents for our mRNA therapeutic candidates. Thus, it is possible that one or more organizations will hold patent rights to which we may need a license, or hold patent rights which could be asserted against us. If those organizations refuse to grant us a license to such patent rights on reasonable terms
or a court rules that we need such patent rights that have been asserted against us and we are not able to obtain a license on reasonable terms, we may be unable to perform research and development or other activities or market products, including our COVID-19 vaccine, covered by such patents.
If we become involved in patent litigation or other proceedings related to a determination of rights, we could incur substantial costs and expenses, substantial liability for damages, or be required to stop our product development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual propertyIP rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, ex parte reexaminations, post-grant review, and inter partes review proceedings before the U.S. Patent and Trademark Office or USPTO,(USPTO) and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. In certain instances, we have instituted and may in the future institute inter partes review proceedings against issued U.S. patents and opposition proceedings against European patents owned by third parties in the field of mRNA medicines. We have a number of these proceedings ongoing against third-party patents related to cancerRNA vaccinations and mRNA delivery. If we are unsuccessful in invalidating certain of the third-party patents that we are currently challenging, those third parties may attempt to assert those patents against us should certain of our investigational medicines obtain regulatory approval. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our development candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our investigational medicines. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our investigational medicines may infringe. In addition, third parties may obtain patents in the future and claim that our technologies infringe upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our investigational medicines, any molecules formed during the manufacturing process, or any final product itself, the holders of any such patents may obtain injunctive or other equitable relief, which could effectively block our ability to commercialize such investigational medicine unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture, or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable investigational medicine unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all. For example, if we are unsuccessful in invalidating certain of the third-party patents that we are currently challenging, those third parties may attempt to assert those patents against us should certain of our investigational medicines obtain regulatory approval.
Defense of infringement and other claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products, or obtain one or more licenses from third parties, which may not be made available on commercially favorable terms, if at all, or may require substantial time and expense.
In addition, such licenses are likely to be non-exclusive and, therefore, our competitors may have access to the same technology licensed to us. If we fail to obtain a required license and are unable to design around a patent, we may be unable to effectively market some of our technology and products, which could limit our ability to generate revenues or achieve profitability and possibly prevent
us from generating revenue sufficient to sustain our operations. Moreover, we expect that a number of our collaborations will provide that royalties payable to us for licenses to our intellectual propertyIP may be offset by amounts paid by our collaborators to third parties who have competing or superior intellectual propertyIP positions in the relevant fields, which could result in significant reductions in our revenues from products developed through collaborations.
In addition, in connection with certain license and strategic alliance agreements, we have agreed to indemnify certain third parties for certain costs incurred in connection with litigation relating to intellectual propertyIP rights or the subject matter of the agreements. The cost to us of any litigation or other proceeding relating to intellectual propertyIP rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of any litigation could delay our research, development and developmentcommercialization efforts and limit our ability to continue our operations.
We may not be successful in obtaining or maintaining necessary intellectual propertyIP rights to product components and manufacturing processes for our development pipeline.
Presently we have rights to certain IP, through licenses from third parties and under patents that we own, to develop our development candidates orand investigational medicines. Because our pipeline may involve additional development candidates that could require the use of proprietary rights held by third parties, the growth of our business could depend in part on our ability to acquire, in-license, or use these proprietary rights. In addition, our development candidates orand investigational medicines may require specific formulations to
work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party IP rights from third parties that we identify. The licensing and acquisition of third-party IP rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party IP rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.
For example, we sometimes collaborate with U.S. and foreign academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology resulting from the collaboration. Regardless of such right of first negotiation for intellectual property,IP, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us. If we are unable to do so, the institution may offer the IP rights to other parties, potentially blocking our ability to pursue our program.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party IP rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party IP rights, our business, financial condition, and prospects for growth could suffer.
If we are not able to obtain and enforce patent protection for our discoveries, our ability to effectively compete using our development candidates will be harmed.
Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the patent and other IP laws of the United States and other countries, so that we can prevent others from unlawfully using our inventions and proprietary information. However, we may not hold proprietary rights to some patents required for us to develop, manufacture, and commercialize our proposed products.
Because certain U.S. patent applications are confidential until the patents issue, such as applications filed prior to November 29, 2000, or applications filed after such date which will not be filed in foreign countries, third parties may have filed patent applications for technology covered by our pending patent applications without our being aware of those applications, and our patent applications may not have priority over those applications. In addition, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions, including our COVID-19 vaccine.
For this and other reasons, we may be unable to secure desired patent rights, thereby losing exclusivity. Further, we may be required to obtain licenses under third-party patents to market our proposed products or conduct our research and development or other activities. If licenses are not available to us on favorable terms, we may not be able to market the affected products or conduct the desired activities.
Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. In addition, we may rely on third-party strategic collaborators to file patent applications relating to proprietary technology that we develop jointly as a part of certain strategic alliances. The process of obtaining patent protection is expensive and time-consuming. If our present or future strategic collaborators fail to file and prosecute all necessary and desirable patent applications at a reasonable cost and in a timely
manner, our business may be adversely affected. Despite our efforts and the efforts of our strategic collaborators to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. While issued patents are presumed valid, this does not guarantee that the patent will survive a validity challenge or be held enforceable. Any patents we have obtained, or obtain in the future, may be challenged, invalidated, adjudged unenforceable, or circumvented by parties attempting to design around our intellectual property.IP. Moreover, third parties or the USPTO may commence interference proceedings involving our patents or patent applications. Any challenge to, finding of unenforceability or invalidation, or circumvention of, our patents or patent applications, would be costly, would require significant time and attention of our management, could reduce or eliminate royalty payments to us from third-party licensors, and could have a material adverse impact on our business.
Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards that the USPTO and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. Similarly, the ultimate degree of protection that will be afforded to biotechnology inventions, including ours, in the United States and foreign countries, remains uncertain and is dependent upon the scope of the protection decided upon by patent offices, courts, and lawmakers. Moreover, there are periodic discussions in the U.S. Congress of the United States and in international jurisdictions about modifying various aspects of patent law. For example, the America Invents Act, which took effect in March 2013, included a number of changes to the patent laws of the United States. If any of the enacted changes prevent us from adequately protecting our discoveries, including our ability to pursue infringers of our patents to obtain injunctive relieve or for substantial damages, our business could be adversely affected. One major provision of the America Invents Act changed U.S. patent practice from a first-to-invent to a first-to-file system. If we fail to file an invention before a competitor files on the same invention, we no longer have the ability to provide proof that we were in possession of the invention prior to the competitor’s filing date, and thus would not be able to obtain patent protection for our invention. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. In certain countries, for example, methods for the medical treatment of humans are not patentable.
Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that will be allowed in any patents issued to us or to others. We also rely to a certain extent on trade secrets, know-how, and technology, which are not
protected by patents, to maintain our competitive position. If any trade secret, know-how, or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected.
Failure to obtain and maintain all available regulatory exclusivities and broad patent scope and to maximize patent term restoration or extension on patents covering our products may lead to loss of exclusivity and early biosimilar entry resulting in a loss of market share and/or revenue.
In addition, we may choose not to enforce our intellectual property rights in certain circumstances or for certain periods of time. For example, in October 2020 we announced that while the COVID-19 pandemic continues, we will not enforce our COVID-19 related patents against those making vaccines intended to combat the pandemic. We also noted that to eliminate any perceived intellectual property barriers to vaccine development during the pandemic period, upon request we are also willing to license our intellectual property for COVID-19 vaccines to others for the post pandemic period. However, we may never enter into such licenses of our intellectual property for the post-pandemic period, and our business may be otherwise adversely impacted by our decision not to enforce this intellectual property during the pandemic.
We license patent rights from third-party owners. If such owners do not properly or successfully obtain, maintain, or enforce the patents underlying such licenses, our competitive position and business prospects may be harmed.
We are a party to licenses that give us rights to third-party IP that is necessary or useful for our business. In particular, we have obtained licenses from Cellscript, LLC and its affiliates to patent rights covering modified mRNA chemistries and from certain other parties for IP useful in our formulation efforts. We may enter into additional licenses to third-party IP in the future.
Our success will depend in part on the ability of our licensors to obtain, maintain, and enforce patent protection for our licensed IP. Our licensors may not successfully prosecute the patent applications we license. Even if patents issue in respect of these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue such litigation less aggressively than we would. Without protection for the IP we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects. In addition, we sublicense our rights under various third-party licenses to our strategic collaborators. Any impairment of these sublicensed rights could result in reduced revenues under our strategic alliance agreements or result in termination of an agreement by one or more of our strategic collaborators.
Disputes may also arise between us and our licensors regarding IP subject to a license agreement, including:
Table of rights granted under the license agreement and other interpretation-related issues;Contents
whether and the extent to which our technology and processes infringe on IP of the licensor that is not subject to the licensing agreement;
our right to sublicense patent and other rights to third parties under collaborative development relationships;
our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our investigational medicines, and what activities satisfy those diligence obligations; and
the ownership of inventions and know-how resulting from the joint creation or use of IP by our licensors and us and our strategic collaborators.
If disputes over IP that we have licensed prevent or impair our ability to maintain our current licensing arrangements on favorable terms, we may be unable to successfully develop and commercialize the affected development candidates.
We are generally also subject to all of the same risks with respect to protection of IP that we license, as we are for IP that we own, which are described below. If we or our licensors fail to adequately protect this IP, our ability to commercialize products could suffer.
If we fail to comply with our obligations in the agreements under which we license IP rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
Licensing of IP is important to our business and involves complex legal, business, and scientific issues and is complicated by the rapid pace of scientific discovery in our industry. We are a party to certain IP license agreements that are important to our business and expect to enter into additional license agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty, and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.
In some cases, patent prosecution of our licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or other protection for the proprietary IP we license from them, we could lose our rights to the IP and our competitors could market competing products using the IP. In certain cases, we control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our strategic collaborators. Disputes may arise regarding IP subject to a licensing agreement, including:
•the scope of rights granted under the license agreement and other interpretation-related issues;
•the extent to which our technology and processes that are not subject to the licensing agreement infringe on IP of the licensor;
•the sublicensing of patent and other rights under our collaborative development relationships;
•our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
•the ownership of inventions and know-how resulting from the joint creation or use of IP by our licensors and us and our strategic collaborators; and
•the priority of invention of patented technology.
If disputes over IP that we have licensed prevent or impair our ability to maintain our current licensing arrangements on favorable terms, we may be unable to successfully develop and commercialize the affected development candidates or investigational medicines. We are generally also subject to all of the same risks with respect to protection of IP that we license, as we are for IP that we own, which are described below. If we or our licensors fail to adequately protect this IP, our ability to commercialize products could suffer.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to patent protection, we rely heavily upon know-how and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants, and third parties, to protect our confidential and proprietary information, especially where we do not believe patent protection is appropriate or obtainable. In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.
Certain former employees have obtained employment with companies or academic institutions that could be considered competitive with us and are operating their business in areas that are similar to ours, including in their business model, product discovery efforts, mRNA basedmRNA-based product development, or formulation technology such as our LNPs. This competition may be limited by contractual provisions which may or may not be enforceable by us in the Commonwealth of Massachusetts or other jurisdictions. In addition, we may not be aware of such competitive employment arrangements until after our trade secrets have been disclosed to potentially competitive companies.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, from time to time we may beare subject to claims that we, or our employees, consultants, or independent contractors, have inadvertently or otherwise used or disclosed intellectual property,IP, including trade secrets or
other proprietary information, of any of our employees’ former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable IP rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be subject to claims challenging the inventorship or ownership of our patents and other IP.
We may be subject to claims that former employees, collaborators, or other third parties have an ownership interest in our patents or other IP. Ownership disputes may arise, for example, from conflicting obligations of consultants or others who are involved in developing our development candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable IP rights, such as exclusive ownership of, or right to use, valuable IP. Such an outcome could have a material adverse impact on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope, or requests for patent term adjustments. If we fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If there are material defects in the form, preparation, prosecution, or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
Periodic maintenance fees, renewal fees, annuity fees, and various other governmental fees on patents or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies
require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance wouldcould have a material adverse impact on our business.
Issued patents covering our development candidates and investigational medicines could be found invalid or unenforceable if challenged in court.
If we or one of our strategic collaborators initiated legal proceedings against a third party to enforce a patent covering one of our development candidates or investigational medicines, the defendant could counterclaim that the patent covering our development candidate or investigational medicine is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including patent eligible subject matter, lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include reexamination, post-grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation of or amendment to our patents in such a way that they no longer cover our development candidates or investigational medicines. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannotthere may be certain that there is no invalidating prior art of whichthat we and the patent examiner were unaware of during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part and perhaps all, of the patent protection onfor our development candidates and investigational medicines. Such a loss of patent protection wouldcould have a material adverse impact on our business.
Changes in U.S. patent and regulatory law could diminish the value of patents in general, thereby impairingimpair our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property,IP, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and therefore obtaining and enforcing biotechnology patents is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Furthermore, depending on the Supreme Court’s review of the ACA, or legislation to repeal or amend the ACA, the twelve years of regulatory exclusivity currently provided to certain biologic products in the United States may be reduced or eliminated, as further discussed above under the risk factor entitled “Our investigational medicines may face competition from biosimilars approved through an abbreviated regulatory pathway.” Any such reduction or elimination could impair the length of exclusivity against biosimilar products.
We may not be able to protect our IP rights throughout the world.
Filing, prosecuting, and defending patents on development candidates and investigational medicines in all countries throughout the world would be prohibitively expensive, and our IP rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect IP rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other IP rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending IP rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other IP protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our IP rights around the world may be inadequate to obtain a significant commercial advantage from the IP that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. As a result, in response to the COVID-19 pandemic, it is possible that certain countries may take steps to facilitate compulsory licenses that permit the distribution of a COVID-19 vaccine in those countries. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the relevant patent rights. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
Our reliance on government funding and collaboration from governmental and quasi-governmental entities for certain of our programs adds uncertainty to our research and development efforts with respect to those programs and may impose requirements that increase the costs of development, commercialization and production of any programs developed under those government-funded programs.
The development of each of our Zika vaccines (mRNA-1325 and mRNA-1893)vaccine (mRNA-1893), our antibody against Chikungunya virus (mRNA-1944), and our Chikungunya vaccine (mRNA-1388), are currently being funded through subcontracts with funding from either BARDA or DARPA. Our COVID-19 vaccine is being developed in collaboration with NIAID. BARDA has agreed to fund the advancement of our COVID-19 vaccine to FDA licensure. Contracts and grants funded by the U.S. government and its agencies, including our agreements funded by BARDA and DARPA and our collaboration with NIAID, include provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to:
•terminate agreements, in whole or in part, for any reason or no reason;
•reduce or modify the government’s obligations under such agreements without the consent of the other party;
•claim rights, including IP rights, in products and data developed under such agreements;
•audit contract-related costs and fees, including allocated indirect costs;
•suspend the contractor or grantee from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;
•impose U.S. manufacturing requirements for products that embody inventions conceived or first reduced to practice under such agreements;
•suspend or debar the contractor or grantee from doing future business with the government;
•control and potentially prohibit the export of products;
•pursue criminal or civil remedies under the False Claims Act, False Statements Act, and similar remedy provisions specific to government agreements; and
•limit the government’s financial liability to amounts appropriated by the U.S. Congress on a fiscal-year basis, thereby leaving some uncertainty about the future availability of funding for a program even after it has been funded for an initial period.
We may not have the right to prohibit the U.S. government from using certain technologies developed by us, and we may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the U.S. government. The U.S. government generally takes the position that it has the right to royalty-free use of technologies that are developed under U.S. government contracts.
In addition, government contracts and grants, and subcontracts and subawards awarded in the performance of those contracts and grants, normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:
•specialized accounting systems unique to government contracts and grants;
•mandatory financial audits and potential liability for price adjustments or recoupment of government funds after such funds have been spent;
•public disclosures of certain contract and grant information, which may enable competitors to gain insights into our research program; and
•mandatory socioeconomic compliance requirements, including labor standards, non-discrimination, and affirmative action programs, and environmental compliance requirements.
Further, under these agreements we are subject to the obligations to and the rights of the U.S. government set forth in the Bayh-Dole Act of 1980 (Bayh-Dole Act). As a result, the U.S. government may have rights in certain inventions developed under these government-funded programs, including a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive, or nonexclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations, also referred to as “march-in rights.” While the U.S. government has sparingly used, and to our knowledge never successfully exercised, such march-in rights, any exercise of the march-in rights by the U.S. government could harm our competitive position, business, financial condition, results of operations, and prospects. If the U.S. government exercises such march-in rights, we may receive compensation that is deemed reasonable by the U.S. government in its sole discretion, which may be less than what we might be able to obtain in the open market. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.
In addition, the U.S. government requires that any products embodying any invention generated through the use of U.S. government funding be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S. manufacturers for products covered by such intellectual property.
As an organization, we are relatively new to government contracting and new to the regulatory compliance obligations that such contracting entails. If we fail to maintain compliance with those obligations, we may be subject to potential liability and to termination of our contracts.
As a U.S. government contractor, we are subject to financial audits and other reviews by the U.S. government of our costs and performance on their contracts, as well as our accounting and general business practices related to these contracts. Based on the results of its audits, the government may adjust our contract-related costs and fees, including allocated indirect costs. Although adjustments arising from government audits and reviews have not had a material adverse impact on our financial condition or results of operations in the past, we cannot assure you that future audits and reviews will not have those effects.
The Coalition for Epidemic Preparedness Innovations is a global organization that has publicly stated its intent to work with multiple global organizations on potential vaccines and therapies targeting the novel coronavirus, including other companies working on mRNA based approaches. There is a possibility that our confidential information may become exposed to others during this process, including the details and timing of our vaccine efforts.
Risks related to the commercialization of our pipeline
We have nolimited sales, distribution, orand marketing experience, and may investhave only recently invested significant financial and management resources to establish these capabilities.capabilities as a result of our rapid development and commercialization of our COVID-19 vaccine. If we are unable to effectively establish such capabilities or enter into agreements with third parties to market and sell our future products if approved, weor to help ensure compliance with local regulatory requirements, our ability to generate revenues may be unable to generate any revenues.adversely affected.
Given our stage of development,
Our COVID-19 vaccine (mRNA-1273) represents the first product that we have nocommercialized for sales, distribution or marketing experience.and marketing. To successfully commercialize anyenable the successful commercialization of this vaccine and other products that may result from our development programs, we will need to developare investing in the development of sales, marketing, distribution, managerial and marketingother non-technical capabilities in the United States, Europe, and other regions, eitherboth on our own orand with others. We may enter into strategic alliances with other entities to utilize their mature marketing and distribution capabilities, but we may be unable to enter into marketing agreements on favorable terms, if at all. To the extent that we rely on third parties to commercialize our approved products, if any, we will receive lower revenues than if we commercialized these products ourselves. In addition, we may have little or no control over the sales efforts of third parties involved in our commercialization efforts. If our future strategic collaborators do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we may be unable to generate sufficient product revenue to sustain our business. We are and will be competing with many companies that currently have extensive and well-funded marketing and sales operations. In the event that we develop our own marketing or sales force, we will also have to compete with such companies to recruit, hire, train and retain marketing and sales personnel. Without a significant internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
The commercialization and distribution of our COVID-19 vaccine also subjects us to pharmacovigilance obligations under various regulatory regimes in the jurisdictions in which our vaccine is distributed. Under these regulations, we are generally required to collect, process, analyze and monitor safety data and to identify and evaluate adverse reactions to our COVID-19 vaccine as it is administered in those jurisdictions. We partner with third party organizations to assist us in collecting and processing this safety data as it is reported from healthcare providers, recipients of our vaccine and others. To the extent that we or the third parties with whom we contract to conduct these pharmacovigilance activities are unable to comply with relevant regulations, including with respect to the timely processing of safety data, we may be subject to sanctions, increased costs, reputational harm, or our authorizations to distribute the COVID-19 vaccine in the relevant jurisdictions may be revoked or curtailed. There are a limited number of third-party service providers who are qualified and capable of providing pharmacovigilance services on a global basis, and our inability to identify or contract with qualified service providers may impede our commercial activities.
We are and will be competing with many companies that currently have extensive and well-funded marketing, sales and pharmacovigilance operations. In the event that we develop our own marketing or sales force, we will also have to compete with such companies to recruit, hire, train and retain marketing and sales personnel. We have and will continue to incur expenses associated with hiring third-party contractors to assist in conducting local pharmacovigilance services. Without a significant internal team or the support of a third party to perform these functions, we may be unable to compete successfully against these more established companies.
Certain of our customers for our COVID-19 vaccine prepay us for a portion of the product payment for the vaccine doses that they expect to receive from us, and under the terms of certain of our supply agreements, we may be required to refund some or all of those prepayments if a customer reduces its purchase commitment or if we fail to deliver the purchased volume.
Certain of our customers for our COVID-19 vaccine prepay us for a portion of the product payment for the vaccine doses that they expect to receive from us. In some cases, this prepayment can be substantial. We are generally not required by our contracts to retain these prepayments in cash or otherwise and we have generally used these prepayments to make capital expenditures and fund the manufacturing scale-up and commercialization of our vaccine. Under certain supply agreements with customers for our COVID-19 vaccine, if we fail to deliver a portion or all of the committed number of doses by a certain date, a customer may reduce the volume of vaccine doses that it commits to purchase or the contract may be terminated. Upon termination by the customer, we would generally be required to refund a portion of that customer’s prepayment. We may not have the cash or other available resources to satisfy that repayment obligation. Even if we are able to satisfy the repayment obligation from available resources, we may need to seek additional sources of capital to fund our operations, which funding may not be available when needed or on acceptable terms. In either of those circumstances, our business, financial condition, results of operations, and reputation could be materially and adversely affected. Furthermore, in the future, customers may elect not to prepay us for our services in which case we would have to find other sources of funding for our capital expenditures and operations, which may not be available when needed or on acceptable terms.
The pharmaceutical market is intensely competitive. If we are unable to compete effectively with existing drugs,products, new treatment methods, and new technologies, we may be unable to commercialize successfully any drugsproducts that we develop.
The pharmaceutical market is intensely competitive and rapidly changing. Many large pharmaceutical and biotechnology companies, academic institutions, governmental agencies, and other public and private research organizations are pursuing the development of novel drugsproducts for the same diseases that we are targeting or expect to target. Many of our competitors have:
•greater financial, technical, and human resources than we have at every stage of the discovery, development, manufacture, and commercialization of products;
•more extensive experience in preclinical testing, conducting clinical trials, obtaining regulatory approvals, and in manufacturing, marketing, and selling drug products;
•investigational medicines that are based on previously tested or accepted technologies;
•products that have been approved or are in late stages of development; and
•collaborative arrangements in our target markets with leading companies and research institutions.
We will face intense competition from drugsproducts that have already been approved and accepted by the medical community for the treatment of the conditions for which we may develop drugs.products. For example, we announced in September 2020 that we plan to develop a vaccine for the seasonal flu. Although we believe there is an unmet need for a highly effective seasonal flu vaccine, this is a well-developed market and we may not be successful in either developing a successful product or achieving a market share for our product that justifies our investment. We also expect to face competition from new drugsproducts that enter the market. There are a number of drugsproducts currently under development, which may become commercially available in the future, for the treatment of conditions for which we are trying, or may in the future try, to develop drugs.products. These drugsproducts may be more effective, safer, less expensive, or marketed and sold more effectively, than any products we develop. While we believe that our COVID-19 vaccine has and will continue to have a competitive profile, it is possible it will not compete favorably with these products and product candidates, or others, and as a result, we may not achieve commercial success. Moreover, positive data and/or the commercial success of competitive products could negatively impact our stock price.
We anticipate competing with the largest pharmaceutical companies in the world, many of which are all currently conducting research in the fields of infectious diseases, immuno-oncology, rare genetic diseases, and cancer vaccines. Some of these companies have greater financial and human resources than we currently have. In addition to these large pharmaceutical companies, we may directly compete with fully-integrated biopharmaceutical companies and other immunotherapy-focused oncology companies, as well as a number of companies focused on mRNA medicines or shared tumor antigen and neoantigen therapeutics, some of which have entered into collaboration and funding agreements with larger pharmaceutical or biotechnology companies.
If we successfully develop investigational medicines, and obtain approval for them, we will face competition based on many different factors, including:
•the safety and effectiveness of our products relative to alternative therapies, if any;
•the ease with which our products can be administered and the extent to which patients accept relatively new routes of administration;
•the timing and scope of regulatory approvals for these products;
•the availability and cost of manufacturing, marketing, and sales capabilities;
•the price of any approved mRNA medicine;
•reimbursement coverage; and
•patent position.
Our competitors may develop or commercialize products with significant advantages over any products we develop based on any of the factors listed above or on other factors. In addition, our competitors may develop strategic alliances with or receive funding from larger pharmaceutical or biotechnology companies, providing them with an advantage over us. Our competitors may therefore be more successful in commercializing their products than we are, which could adversely affect our competitive position and business. Competitive products may make any products we develop obsolete or noncompetitive before we can recover the expenses of developing and commercializing our products, if approved.
The commercial success of any current or future investigational medicine, if approved, will depend upon the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.
Ethical, social, and legal concerns about genetic research could result in additional regulations restricting or prohibiting the products and processes we may use. Even with the requisite approvals, the commercial success of our products will depend in part on the medical community, patients, and third-party or governmental payors accepting mRNA medicines in general, and our products in particular, as medically useful, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, trial participants, patients, third-party payors, and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of our investigational medicines, if approved for commercial sale, will depend on a number of factors, including:
•the potential efficacy and potential advantages over alternative treatments;
•the ability to offer our products, if approved, at competitive prices;
•the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;
•the prevalence and severity of any side effects resulting from checkpoint inhibitors or other drugsproducts or therapies with which our products are co-administered;
•relative convenience and ease of administration;
•any restrictions on the use of our products, if approved, together with other medications;
•the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
•the strength of marketing and distribution support and timing of market introduction of competitive products;
•publicity concerning our products or competing products and treatments; and
•sufficient third-party insurance coverage or reimbursement, and patients’ willingness to pay out-of-pocket in the absence of third-party coverage or adequate reimbursement.
Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical studies,trials, market acceptance of the product will not be known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the products may require significant resources and may never be successful. Our efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors due to the complexity and uniqueness of our programs.
Even if we are successful in gettingobtaining marketing approval for any product, commercial success of any approved products will also depend in large part on the availability of coverage and adequate reimbursement from third-party payors, including government payors such as the Medicare and Medicaid programs, and entry into managed care organizations, which may be affected by existing and future healthcare reform measures designed to reduce the cost of healthcare. Third-party payors could require us to conduct additional studies, including post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and divert our resources. If government and other healthcare payors do not provide adequate coverage and reimbursement levels for any of our products once approved, whether due to healthcare reform legislation or otherwise, market acceptance and commercial success would be reduced.
In addition, if any of our products are approved for marketing, we or a strategic collaborator will be subject to significant regulatory obligations regarding the submission of safety and other post-marketing information and reports for such product, and will need to continue to comply (or ensure that our third-party providers comply) with cGMP and current GCPs for any clinical trials that we or a strategic collaborator conduct post-approval. In addition, there is always the risk that we or a strategic collaborator or regulatory authority might identify previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or frequency. Compliance with these requirements is costly, and any such failure to comply or other issues with our investigational medicines identified post-approval could have a material adverse impact on our business, financial condition, and results of operations.
We will need to obtain FDA approval of any proposed product names, and any failure or delay associated with such approval may adversely impact our business.
Any name we intend to use for our proposed products will require approval from the FDA regardless of whether we have secured a trademark registration from the USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. The FDA may object to any product name we submit if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product names, we may be required to adopt an alternative name for our proposed products. If we adopt an alternative name, we would lose the benefit of any existing trademark applications for such developmental candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our products, if approved.
We market our products outside of the United States, and we will beare subject to the risks of doing business outside of the United States.
Because we market our COVID-19 vaccine, and we plan to market ourany other products, if approved, outside of the United States, our business is subject to risks associated with doing business outside of the United States, including an increase in our expenses, diversion of our management’s attention from the acquisition or development of investigational medicines, or forgoing profitable licensing opportunities in these geographies. We are not permitted to market or promote any of our developmental candidates or investigational medicines before we receive regulatory approval from the applicable regulatory authority in that foreign market, and we may never receive such regulatory approval for any of our developmental candidates or investigational medicines. To obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials, manufacturing, commercial sales, pricing and distribution of our developmental candidates and investigational medicines, and we cannot predict success in these jurisdictions. We are rapidly expanding our global operations and third-party arrangements to support the worldwide manufacture and distribution of our COVID-19 vaccine, which is a complex task that we are undertaking on an accelerated timeline. Accordingly, our business and financial results in the future couldmay be adversely affected due to a variety of factors associated with our expanding global business, including:
•efforts to develop an international commercial sales, marketing, and supply chain and distribution organization;organization, including efforts to mitigate longer accounts receivable collection times, longer lead times for shipping, and potential language barriers;
•our customers’ ability to obtain reimbursement for our products in foreign markets;
•our inability to directly control commercial activities because we are relying on third parties;
•different medical practices and customs in foreign countries affecting acceptance in the marketplace;
•changes in a specific country’s or region’s political and cultural climate or economic condition;condition, including as a result of the COVID-19 pandemic;
unexpected changes•increased legal and compliance burden associated with establishing, maintaining and operating legal entities in foreign countries;
•the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements, including the European General Data Protection Regulation 2016/679, or GDPR;
•the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute, and regulatory requirements;
the difficulty of effective enforcement of contractual provisions in local jurisdictions;jurisdictions, and the existence of potentially relevant third-party IP rights;
•inadequate IP protection in foreign countries;countries, and the existence of potentially relevant third-party IP rights;
•trade-protection measures including trade restrictions, import or export licensing requirements such as Export Administration Regulations promulgated by the U.S. Department of Commerce and fines, penalties, or suspension or revocation of export privileges;privileges, the imposition of government controls, and changes in tariffs;
•the effects of applicable foreign tax structures and potentially adverse tax consequences; and
•significant adverse changes in foreign currency exchange rates.
In addition to FDA and related regulatory requirements in the United States and abroad, we are subject to extensive additional federal, state and foreign anti-bribery regulations, which include the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, and similar laws in other countries outside of the United States.
The FCPA prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. Various laws, regulations and executive orders also restrict the use and dissemination outside the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. As we expand our presence outside the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside the United States, which could limit our growth potential and increase our development costs.
We are developing and implementing a corporate compliance program based on what we believe are current best practices in the pharmaceutical industry for companies similar to ours, but we cannot guarantee that we, our employees, our consultants, or our third-party contractors are or will be in compliance with all federal, state, and foreign regulations regarding bribery and corruption. Moreover, our strategic collaborators and third-party contractors located outside the United States may have inadequate compliance programs or may fail to respect the laws and guidance of the territories in which they operate. The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial condition, and results of operationsoperations.
The insurance coverage and reimbursement status of newly-approved products, particularly in a new categoryclass of medicines, is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments such as the medicines that we hope to develop and sell. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. In addition, because our personalized cancer vaccine and intratumoral immuno-oncology investigational medicines represent new approaches to the treatment of cancer, we cannot accurately estimate how these products would be priced, whether reimbursement could be obtained, or any potential revenue. Sales of our investigational medicines will depend substantially, both domestically and abroad, on the extent to which the costs of our investigational medicines will be paid by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers, and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our investigational medicines. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment in any of our products. In the U.S., we may establish various programs to help patients afford our products, which may include patient assistance programs and co-pay coupon programs for eligible patients.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products, including genetic medicines.medicines and coverage may be more limited than the purposes for which the medicine is approved by the FDA or comparable foreign regulatory authorities. Third-party payors decide which medications they will pay for and establish reimbursement levels. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services or CMS,(CMS), an agency within the U.S. Department of Health and Human Services or HHS,(HHS), as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for novel products such as ours. Factors payors consider in determining reimbursement are based on whether the product is:
•a covered benefit under its health plan;
•safe, effective and medically necessary;
•appropriate for the specific patient;
•cost-effective; and
•neither experimental nor investigational.
In the United States, no uniform policy for coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for our products can differ significantly from payor to payor. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the reimbursement rate that the payor will pay for the product. One payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product. Third-party payors may also limit coverage to specific products on an approved list, or
formulary, which might not include all of the FDA-approved products for a particular indication. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors. Many third-party payors are also increasingly requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Furthermore, many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price (ASP), and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. We cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue from, our product candidates or assure that coverage and reimbursement will be available for any product that we may develop.
A decision by a third-party payor not to cover or not to separately reimburse for our medical products or therapies using our products could reduce physician utilization of our products once approved. Assuming there is coverage for our product candidates, or therapies using our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States will be available for our current or future product candidates, or for any procedures using such product candidates, and any reimbursement that may become available may not be adequate or may be decreased or eliminated in the future.
Coverage and reimbursement of our COVID-19 vaccine, which was recently granted EUA, may be subject to unique regulatory policies. Under the ACA preventive care mandate, non-grandfathered group health plans and health insurance coverage offered in the individual or group market typically have at least one year before it must provide first-dollar coverage for a newly issued preventive care requirement or guideline. However, pursuant to the CARES Act, non-grandfathered group health plans and health insurance coverage offered in the individual or group market must cover any qualifying coronavirus preventive service 15 business days after the United States Preventive Services Task Force, or Advisory Committee on Immunization Practices (ACIP) designates such service as preventive. On December 19, 2020, ACIP voted 11–0 in favor of the interim recommendation for use of the Moderna COVID-19 vaccine. Currently, third party payors do not offer coverage or reimbursement for the vaccine. However, third-party reimbursement for providers administering our COVID-19 vaccine may affect market acceptance of the product. Currently, the CARES Act and its implementing regulations state (i) providers that participate in the CDC COVID-19 Vaccination Program must administer a COVID-19 immunization regardless of an individual’s ability to pay or health insurance coverage status, (ii) providers may not seek any reimbursement, including through balance billing, from an immunization recipient, (iii) that coverage is required, without cost-sharing, for the administration of the immunization even if a third party, such as the federal government, pays for the cost of the immunization, and that (iv) private health insurance plans must cover COVID-19 immunizations and their administration even when provided by out-of-network providers for the duration of the public health emergency for COVID-19.
There is no guarantee payors will provide coverage and reimbursement for our COVID-19 vaccine during or after the termination of the public health emergency, nor can we guarantee that even if coverage is provided, the approved reimbursement amount will be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. The FDA may revoke EUA of mRNA-1273 or may not approve the BLA, if submitted. Under the CARES Act and an accompanying interim final rule, Medicare beneficiaries are expected to have coverage for COVID-19 vaccines through Medicare Part B with no cost sharing. Coverage is further expected to apply whether the vaccine receives FDA authorization through an EUA or is licensed under a BLA and will likely extend to employer-sponsored and individual health plans subject to the ACA’s preventive services standards. The outcome of current and future clinical trials, as well as the market demand for COVID-19 vaccines may impact patient eligibility and current and future coverage determinations. It is unclear whether the FDA will approve the administration of our COVID-19 vaccine for patients under eighteen years of age or if the vaccine will be required to be administered once (i.e. one-time, double dose), annually, or if future booster shots will be required. We cannot predict continued prevalence of COVID-19, whether herd immunity will be achieved which would affect the need for future administration of the vaccine, or whether mRNA-1273 will be effective against future mutations or variants of the SARS-CoV-2 virus. Such factors may impact if mRNA-1273 shall be reimbursable under Medicare Part D rather than Part B and if mRNA-1273 will be excluded from participating in certain federal entitlement programs such as the Vaccines for Children Program.
Reimbursement agencies in Europe may be more conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement in the United States and have not been approved for reimbursement in certain European countries.
Outside the United States, certain countries, including a number of member states of the European Union, set prices and reimbursement for pharmaceutical products, or medicinal products, as they are commonly referred to in the European Union, with limited participation from the marketing authorization holders. We cannot be sure that such prices and reimbursement will be acceptable to us or our strategic collaborators. If the regulatory authorities in these foreign jurisdictions set prices or reimbursement
levels that are not commercially attractive for us or our strategic collaborators, our revenues from sales by us or our strategic collaborators, and the potential profitability of our drug products, in those countries would be negatively affected. An increasing number of countries are taking initiatives to attempt to reduce large budget deficits by focusing cost-cutting efforts on pharmaceuticals for their state-run healthcare systems. These international price control efforts have impacted all regions of the world, but have been most drastic in the European Union. Additionally, some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. As a result, we might obtain
marketing approval for a product in a particular country, but then may experience delays in the reimbursement approval of our product or be subject to price regulations that would delay our commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.
Moreover, increasing efforts by governmentalpayment methodologies may be subject to changes in healthcare legislation and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our investigational medicines.regulatory initiatives. For example, CMS may develop new payment and delivery models, such as bundled payment models. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their products, resulting in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. For example, at the federal level, the U.S. government’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the U.S. government recentlysent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases.
Additionally, the U.S. government previously released a “Blueprint”, or plan, to reduce the cost of drugs. This Blueprint contains certain measures that the HHS is already working to implement. For example, on November 30, 2018,in May 2019, CMS announcedissued a proposedfinal rule that would amendamends the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things, the proposedfinal rule changes would allownow allows Medicare Advantage plans the option to use pre authorization, or PA, and step therapy, a type of pre-authorization, for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. In addition, there have been several changes to the 340B drug pricing program, which imposes ceilings on prices that drug manufacturers can charge for medications sold to certain health care facilities. Some of these changes are undergoing legal challenges, and their status is currently in question. It is unclear how these developments could affect covered hospitals who might purchase our future products and affect the rates we may charge such facilities for our approved products in the future, if any.
On July 24, 2020 and September 13, 2020, former President Trump signed a series of Executive Orders aimed at lowering drug prices and at implementing several of the administration's proposals. In response, the FDA released a final rule on September 24, 2020, which went into effect on November 30, 2020, creating a process for states to build and submit to the FDA importation plans for drugs from Canada. Further, on November 20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or ST, for six protected classes of drugs and, with certain exceptions, permit plans to implement PA and ST inMFN Model under which Medicare Part B drugs;reimbursement rates will be calculated for certain drugs and changebiologicals based on the definitionlowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita. The MFN Model regulations mandate participation by identified Part B providers and was intended to apply in all U.S. states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027. However, on December 28, 2020, a judge in the U.S. District Court for the Northern District of “negotiated prices”California granted a preliminary injunction prohibiting CMS from implementing the MFN Model. Additionally, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as add a definitionsafe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to an order entered by the U.S. District Court for the District of “price concession”Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Implementation of the this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the regulations. It is unclear whetherBiden administration and may be amended or repealed. Although a number of these, and other proposed changesmeasures will be accepted. require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new legislative measures to control drug costs.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, or restrictions on certain product access, and marketing cost disclosure and transparency measures, which, in some cases, are designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions on coverage or access could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates that we successfully commercialize or put pressure on our product pricing.
We expect to experience pricing pressures in connection with the sale of any of our investigational medicines, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward
pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Recent federal legislation and actions by federal, state and local governments may permit reimportation of drugs from foreign countries into the United States, including foreign countries where the drugs are sold at lower prices than in the United States, which could materially adversely affect our operating results.
We may face competition in the United States for our development candidates and investigational medicines, if approved, from therapies sourced from foreign countries that have placed price controls on pharmaceutical products. In the United States, the Medicare Modernization Act contains provisions that call for the promulgation of regulations that expand pharmacists’ and wholesalers’ ability to import cheaper versions of an approved drug and competing products from Canada, where there are government price controls. Further, the Medicare Modernization Act provides that these changes to U.S. importation laws will not take effect unless and until the Secretary of HHS certifies that the changes will pose no additional risk to the public’s health and safety and will result in a significant reduction in the cost of products to consumers. On September 23, 2020, the Secretary of HHS made such certification to Congress, and on October 1, 2020, the FDA published a final rule that allows for the importation of certain prescription drugs from Canada. Under the final rule, States and Indian Tribes, and in certain future circumstances pharmacists and wholesalers, may submit importation program proposals to the FDA for review and authorization. Since the issuance of the final rule, several industry groups have filed federal lawsuits challenging multiple aspects of the final rule, and authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. On September 25, 2020, CMS stated drugs imported by States under this rule will not be eligible for federal rebates under Section 1927 of the Social Security Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since these drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs. Separately, the FDA also issued a final guidance document outlining a pathway for manufacturers to obtain an additional National Drug Code (NDC) for an FDA-approved drug that was originally intended to be marketed in a foreign country and that was authorized for sale in that foreign country. Since the issuance of the final rule, on November 23, 2020, several industry groups filed federal lawsuits in the U.S. District Court for the District of Columbia, requesting injunctive relief to prevent certification from the Secretary of HHS from taking effect and challenging multiple aspects of the final rule. This litigation has not progressed. If implemented, drug importation may materially and adversely affect the price we receive for any of our products and product candidates. The market implications of these rules and guidance are unknown at this time. For example, proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability.
Healthcare legislative reform discourse and potential or enacted measures may have a material adverse impact on our business and results of operations and legislative or political discussions surrounding the desire for and implementation of pricing reforms may adversely impact our business.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the ACA was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and promoted a new Medicare Part D coverage gap discount program. Considerable uncertainty remains regarding the implementation and impact of the ACA.
Some of the provisions of the ACA have yet to be fully implemented, while certain provisions
Since its enactment, there have been subjectnumerous judicial, administrative, executive, and legislative challenges to judicial and Congressional challenges. The Tax Cuts and Jobs Act of 2017, or the TCJA, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable featureaspects of the ACA, and therefore becausewe expect there will be additional challenges and amendments to the mandate was repealed as part ofACA in the Tax Cuts and Jobs Act, the remaining provisionsfuture. Various portions of the ACA are invalid as well. The administrationcurrently undergoing legal and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018, the same judge issued an order staying the judgment pending appeal. It is unclear how this decision and any subsequent appeals and other efforts to repeal and replace the ACA will impact the ACA.
CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurersconstitutional challenges in the individualUnited States Supreme Court; the Trump Administration issued various Executive Orders that eliminated cost sharing subsidies and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Further, on October 13, 2017, an Executive Order was signed terminating the cost-sharing reduction, or CSR, subsidies that reimburse insurers under the ACA. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. The loss of the cost share reduction payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. Further, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects
of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.
Another Executive Order was signed directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACAvarious provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. With the current presidential administrationdevices; and Congress there may be additional administrativehas introduced several pieces of legislation aimed at significantly revising or legislative changes, including modification, repeal, or replacement of all, or certain provisionsrepealing the ACA. The United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA. However, it remainsACA in early 2021. The implementation of the ACA is ongoing, the law appears likely to be seencontinue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the ACA are likely to continue, with unpredictable and uncertain results. It is unclear whether new legislation modifying the ACA will be enacted and, if so, preciselyoverturned, repealed, replaced, or further amended. We cannot predict what affect further changes to the new legislation will provide, when it will be enacted and what impact it willACA would have on the availability of healthcare and containing or lowering the cost of healthcare. The implications of a potential repeal or replacement of the ACA, for our and our strategic collaborators’ business and financial condition, if any, are not yet clear.business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. The Budget Control Act of 2011, among other things, created measures for spending reductions by the U.S. Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This
includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year. These reductions will remain in effect through 20272030 unless additional Congressional action is taken. However, pursuant to the CARES Act and subsequent legislation, these Medicare sequester reductions will be suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the COVID-19 pandemic. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount (from 50% under the ACA to 70%) that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.
Throughout the COVID-19 pandemic, there has been public concern over the availability and accessibility of critical medical products, and the CARES Act enhances FDA’s existing authority with respect to drug shortage measures. Under the CARES Act, we must have in place a risk management plan that identifies and evaluates the risks to the supply of approved drugs for certain serious diseases or conditions for each establishment where the drug or API is manufactured. The risk management plan will be subject to FDA review during an inspection. If we experience shortages in the supply of our marketed products, our results could be materially impacted.
Further, legislative and regulatory proposals have been made to expand post approvalpost-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance, or interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our development candidates, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post marketingpost-marketing conditions and other requirements.
The delivery of healthcare in the EU,European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our investigational medicines, restrict or regulate post-approval activities, and affect our ability to commercialize any products for which we obtain marketing approval.
We expect that additional foreign, state, and federal healthcare reform measures or proposals will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our investigational medicines or additional pricing pressures. In the event that the pricing structures for healthcare products, such as the investigational medicines we are developing, change materially and limit payments for such investigational medicines, our business will be adversely impacted as our products may no longer be commercially viable based on their expected net present value, we may have invested significant resources in products that cannot be commercially developed, or we may determine that assets that have reached an early phase of development cannot or will not be taken into further development, notwithstanding their clinical viability. In addition, development assets or clinical programs that are part of our strategic alliances may no longer be deemed commercially viable to pursue based on our strategic collaborators’ assessments of the impact of any proposed, announced, or legislated pricing reforms.
We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state, and foreign legislative and regulatory developments are likely, and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from investigational medicines that we may successfully develop and for which we may obtain regulatory approval, and may affect our overall financial condition and ability to develop investigational medicines.
Due to the novel nature of our technology, we face uncertainty related to pricing and reimbursement for these investigational medicines.
Target patient populations for certain of our investigational medicines, such as those for rare genetic diseases, may be relatively small, and certain of our investigational medicines, like PCV, require customization on an individual scale. As a result, the pricing and reimbursement of our investigational medicines, if approved, must be adequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our investigational medicines will be adversely affected. The manner and level at which reimbursement is provided for services related to our investigational medicines (e.g., for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our products.
In addition, third-party payor coverage for our COVID-19 vaccine is not currently available and there is no guarantee payors will provide coverage for the vaccine during or after the termination of the public health emergency. We cannot guarantee that even if coverage is provided, the approved reimbursement amount will be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment. While coverage will most likely be provided under Medicare Part B, it is unclear whether such coverage may be re-designated to Part B and it is further unclear to what extent other payors, including certain federal entitlement programs, such as the Vaccines for Children Program, will provide coverage for the product.
If the market opportunities for our development candidates or investigational medicines are smaller than we believe they are, our revenue may be adversely affected and our business may suffer. Because the target patient populations for some of our programs are difficult to ascertain or small, we must be able to successfully identify clinical trial participants and achieve a significant market share to maintain profitability and growth.
An important area of focus of our research and product development activities is the development of treatments for severe rare genetic diseases. Our projections of both the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our programs are based on estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect andincorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of clinical trial participants or patients in the United States, Europe, and elsewhere may turn out to be lower than expected, potential clinical trial participants or patients may not be otherwise amenable to treatment with our products, or new clinical trial participants or patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.
The market opportunities of some of our programs may be limited to those patients who are ineligible for or have failed prior treatments and for which the market opportunities may be small.
The FDA often approves new therapies initially only for use by patients with relapsed or refractory advanced disease. We expect to initially seek approval of our PCV and intratumoral immuno-oncology investigational medicines in this context. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval in earlier lines of treatment and potentially as a first line therapy but there is no guarantee that our investigational medicines, even if approved, would be approved for earlier lines of therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.
Our projections of both the number of people who have the cancers we may be targeting, as well as the subset of people with these cancers in a position to receive second or third line therapy, and who have the potential to benefit from treatment with our investigational medicines, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of trial participants may turn out to be lower than expected. Additionally, the potentially addressable patient population for our investigational medicines may be limited or may not be amenable to treatment with our investigational medicines. Even if we obtain significant market share for our products, if approved, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications.
Risks related to our business and operations
We will need to develop and expand our Company,company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.
We have
As of December 31, 2020, we had approximately 7601,300 full-time employees and, in connection with the growth and advancement of our pipeline and becomingoperating as a public company, we expect to increase the number of employees and the scope of our operations. To manage our anticipated development and expansion, including potential expansion outside of the United States, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities, and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these development activities.
As a growing biotechnology company, we are actively pursuing development candidates and investigational medicines in many therapeutic areas and across a wide range of diseases. Successfully developing products for and fully understanding the regulatory and manufacturing pathways to all of these therapeutic areas and disease states requires a significant depth of talent, resources, and corporate processes in order to allow simultaneous execution across multiple areas. Due to our limited resources and early stage of growth, we may not be able to effectively manage this simultaneous execution and the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business
opportunities, loss of employees, and reduced productivity among remaining employees. The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of our investigational medicines. If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our COVID-19 vaccine or our other investigational medicines, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.
Our future success depends on our ability to retain key employees, consultants, and advisors and to attract, retain, and motivate qualified personnel. We may not be able to retain employees or executives who have vested stock options.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific, and medical personnel. We are highly dependent upon members of our management and
scientific teams. Each of our executive officers and all of our employees, including key scientists and clinicians, are employed “at will,” meaning we or each officer or employee may terminate the employment relationship at any time. The loss of any of these persons’ services may adversely impact the achievement of our research, development, financing, and commercialization objectives. We currently do not have “key person” insurance on any of our employees. Many of our key employees, including members of our executive team, have been with us for a long period of time, and have valuable, fully vested stock options or other long-term equity incentives. We may not be able to retain these employees due to the competitive environment in the biotechnology industry, particularly in Cambridge, MA.Massachusetts.
In addition, we rely on consultants, contractors, and advisors, including scientific and clinical advisors, to assist us in formulating our research and development, regulatory approval, manufacturing and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. The loss of the services of one or more of our current employees or advisors might impede the achievement of our research, development, regulatory approval, manufacturing and commercialization objectives. In addition, we have flexibly grown our workforce through the use of contractors and part time workers. We may not be able to retain the services of such personnel which might result in delays in the operation of our business.
Recruiting and retaining other qualified employees, consultants, and advisors for our business, including scientific and technical personnel, also will be critical to our success. Competition for skilled personnel, including in mRNA and LNP research, clinical operations, regulatory affairs, therapeutic area management, and manufacturing, is intense and the turnover rate can be high. We may not be able to attract and retain personnel on favorable terms given the competition among numerous pharmaceutical and biotechnology companies and academic institutions for individuals with similar skill sets. In addition, adverse publicity, failure to succeed in preclinical or clinical trials or applications for marketing approval may make it more challenging to recruit and retain qualified personnel. Furthermore, we may not be successful commercializing our first product and as a result, we may be unable to attract and retain highly qualified sales and marketing professionals to support our COVID-19 vaccine and our future products, if approved. The inability to recruit, or loss of services of certain executives, key employees, consultants, or advisors, may impede the progress of our research, development and global commercialization objectives and have a material adverse impact on our business, financial condition, results of operations, and prospects.
Our internal computer systems and physical premises, or those of our strategic collaborators, other contractors, consultants, or regulatory agencies with which we share sensitive data or information may fail or suffer security breaches, which could result in a material disruption of our product development programs and our manufacturing operations.
Our internal computer systems and those of our current and any future strategic collaborators, vendors, contractors, consultants or regulatory authorities with whom we share sensitive data or information are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, cybersecurity threats, war, and telecommunication and electrical failures. We have experienced, and may experience in the future, cyber-attacks on our information technology systems by threat actors of all types (including but not limited to nation states, organized crime, other criminal enterprises, individual actors and/or advanced persistent threat groups). In addition, we may experience intrusions on our physical premises by any of these threat actors. If any such cyber-attack or physical intrusion were to cause interruptions in our operations, such as a material disruption of our development programs or our manufacturing operations, whether due to a loss of our trade secrets or other proprietary information, it would have a material and adverse effect on us. For example, the loss of clinical trial data from one or more ongoing or completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In addition, because of our approach to running multiple clinical trials in parallel, any breach of our computer systems or physical premises may result in a loss of data or compromised data integrity across many of our programs in many stages of development. Any such breach, loss, or compromise of clinical trial participant personal data may also subject us to civil fines and penalties, or claims for damages either under the GDPR and relevant member state law in the EU, other foreign laws, and the federal Health Insurance
Portability and Accountability Act of 1996 (HIPAA), and other relevant state and federal privacy laws in the United States including the California Consumer Privacy Act (the CCPA). On May 13, 2020, the Federal Bureau of Investigation (FBI) and Cybersecurity and Infrastructure Security Agency (CISA), announced that the FBI was investigating the targeting and compromise of U.S. organizations conducting COVID-19-related research by People’s Republic of China, or PRC-affiliated cyber actors. Furthermore, on July 16, 2020, the National Security Agency and other U.S. and foreign agencies released a joint cybersecurity advisory regarding the Russian Intelligence Services’ targeting of COVID-19 research and vaccine development. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, including but not limited to information related to our rapid manufacture of mRNA-1273, we could incur liability, our competitive and reputational position could be harmed, and the further development and commercialization of our investigational medicines could be delayed. The CCPA is of particular concern since it provides for a private right of actions for certain breaches of personal information.
We may use our financial and human resources to pursue a particular research program or investigational medicine and fail to capitalize on programs or investigational medicines that may be more profitable or for which there is a greater likelihood of success.
Because we have limited resources, we must choose to pursue and fund the development of selected research programs or investigational medicines and may forego or delay pursuit of opportunities with other programs or investigational medicines that could later prove to have greater commercial potential. Our resource allocation decisions, or our contractual commitments to provide resources to our strategic collaborators under strategic alliance agreements, may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for investigational medicines may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular investigational medicine, we may relinquish valuable rights to that investigational medicine through a strategic alliance, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such investigational medicine, or we may allocate internal resources to an investigational medicine in a therapeutic area in which it would have been more advantageous to enter into a strategic alliance.
If we are not successful in discovering, developing, and commercializing additional products beyond our current portfolio, our ability to expand our business and achieve our strategic objectives would be impaired.
Although a substantial amount of our efforts will focus on the commercialization of our COVID-19 vaccine and the clinical trials and potential approval of our investigational medicines, a key element of our strategy is to discover, develop, and potentially commercialize additional products beyond our current portfolio to treat various conditions and in a variety of therapeutic areas. We intend to do so by investing in our own drug discovery efforts, exploring potential strategic alliances for the development of new products, and in-licensing technologies. Identifying new investigational medicines requires substantial technical, financial, and human resources, whether or not any investigational medicines are ultimately identified. Even if we identify investigational medicines that initially show promise, we may fail to successfully develop and commercialize such products for many reasons, including the following:
•the research methodology used may not be successful in identifying potential investigational medicines;
•competitors may develop alternatives that render our investigational medicines obsolete;
•investigational medicines we develop may nevertheless be covered by third parties’ patents or other exclusive rights;
•an investigational medicine may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
•an investigational medicine may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
•an approved product may not be accepted as safe and effective by patients, the medical community or third-party payors.
If we are unsuccessful in identifying and developing additional products, our potential for growth may be impaired.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any product or investigational medicine that we may develop, such as our COVID-19 vaccine.
We face an inherent risk of product liability exposure related to the development, testing, manufacturing and marketing of our COVID-19 vaccine and our other current or future investigational medicines in clinical trials. Product liability claims and related cross-claims and claims for indemnification may be brought against us by patients, healthcare providers or others using, prescribing, selling or otherwise coming into contact with our COVID-19 vaccine or other investigational medicines. For example, we may be sued if the COVID-19 vaccine or any other investigational medicine allegedly causes injury or is found to be otherwise unsuitable during clinical trials, manufacturing, or, if approved, marketing, sale or commercial use. If we cannot successfully defend ourselves against claims that our medicines caused injuries, we could incur substantial liabilities.
•decreased demand for any investigational medicine that we may develop;
•loss of revenue;
•substantial monetary awards to patients, healthy volunteers, or their family members;
•payments to indemnify clinical trial sites and other clinical trial partners;
•significant time and costs to defend the related litigation;
•withdrawal of clinical trial participants;
•withdrawal of regulatory or marketing approval in a territory;
•the inability to commercialize any investigational medicine(s) that we may develop; and
•injury to our reputation and significant negative media attention.
Notwithstanding the risks undertaken by all persons who participate in clinical trials or who receive our COVID-19 vaccine, and the information on risks provided to study investigators and patients participating in our clinical trials or receiving our COVID-19 vaccine, it is possible that product liability claims will be asserted against us relating to the worsening of a patient’s condition, injury or death alleged to have been caused by one of our products or investigational medicines or our COVID-19 vaccine. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, knowledge of risks, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. Such claims might not be fully covered by product liability insurance. If we succeed in marketing products, including our COVID-19 vaccine, product liability claims could result in an FDA investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs, and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, suspension or withdrawal of approvals or license revocation. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our stock price.
We are also exposed to liabilities that are unique to developing and commercializing an mRNA vaccine in the context of an ongoing global pandemic. Although the U.S. government and certain foreign governments have contractually agreed to indemnify us or make statutory immunity available to us, such indemnification or statutory immunity may not be available to cover potential claims or liabilities resulting from the research, development, manufacture, distribution or commercialization of our COVID-19 vaccine. Substantial claims arising from the vaccine outside the scope of or in excess of U.S. government or foreign government indemnity or statutory immunity could harm our financial condition and operating results. Moreover, any adverse event or injury for which we are liable, even if fully covered under an indemnity or immunity, could negatively affect our reputation, thereby making it more difficult for us to compete effectively.
We carry product liability insurance which we believe to be sufficient in light of our current commercial and clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for investigational medicines, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in individual, mass tort and class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.
If the costs of maintaining adequate insurance coverage increase significantly in the future, our operating results could be materially adversely affected. Likewise, if insurance coverage should become unavailable to us or become economically impractical, we would be required to operate our business without indemnity from commercial insurance providers. Additionally, even if we maintain insurance coverage for a type of liability, a particular claim may not be covered if it is subject to a coverage exclusion or we do not otherwise meet the conditions for coverage. If we operate our business without insurance, or with inadequate insurance, we could be responsible for paying claims or judgments against us, which could adversely affect our results of operations or financial condition.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our investigational medicines and begin commercializing those products in the United States, our operations will be directly, or indirectly through our prescribers, customers, and purchasers, subject to various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Act, and Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our proposed sales, marketing, and educational programs. In addition, we may be subject to patient privacy laws enacted
by both the federal government and the states in which we conduct our business. The laws that will affect our operations include, but are not limited to the following:
•The federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the for the purchase, order or recommendation or arranging of, any good, leasing, or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act or federal civil money penalties statute. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, and formulary managers on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, they are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. The ACA amends the intent requirement of the federal Anti-Kickback Statute to provide that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.
•The federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payors that are false or fraudulent. In addition, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute. Manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. Companies that submit claims directly to payors may also be liable under the False Claims Act for the direct submission of such claims. The False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the False Claims Act and to share in any monetary recovery. The ACA provides, and recent government cases against pharmaceutical and medical device manufacturers support, the view that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the False Claims Act.
•The anti-inducement law prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program.
•HIPAA and its implementing regulations, which create new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private), or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it.
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their implementing regulations, imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, health care clearinghouses, and health care providers as well as their respective “business associates,” those independent contractors or agents of covered entities that create, receive, maintain, transmit or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
•The U.S. Federal Food, Drug and Cosmetic Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics, and medical devices.
•Federal transparency laws, including the federal Physician Payment Sunshine Act, which require disclosure of payments and other transfers of value provided by manufacturers of drugs, devices, biologicals and medical supplies to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners.
•State, local and foreign law and their regulatory equivalents of each of the above federal laws, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services
reimbursed by any third-party payor, including private insurers and may be broader in scope than their federal equivalents; state and foreign laws that require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines and other relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing and state laws governing the privacy and security of health information in certain circumstances are also applicable to us and many of them differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances.
Additionally, on November 20, 2020, HHS finalized a regulation that, among other things, removed safe harbor protection for price reductions from pharmaceutical manufacturers and created new safe harbor for certain fixed fees. Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a plan sponsor under Medicare Part D has been delayed to January 1, 2023. Implementation of the this change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager service fees are currently under review by the Biden administration and may be amended or repealed. It is not clear at this time what effect, if any, these and other changes to the Anti-Kickback Safe Harbors, will have on our business.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the business. If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to significant sanctions, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm, exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to similar penalties. Any action for violation of these laws, even if successfully defended, could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business. In addition, the approval and commercialization of any product candidate we develop outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. All of these could harm our ability to operate our business and our financial results.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the European Union and the UK. The provision of benefits or advantages to induce or reward improper performance generally is also governed by the national anti-bribery laws of EU Member States, and the UK Bribery Act 2010 in the UK. Infringement of these laws could result in substantial fines and imprisonment. EU Directive 2001/83/EC, which is the EU Directive governing medicinal products for human use, provides that, where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and relevant to the practice of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so remains applicable in the UK despite its departure from the EU.
Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization, or the regulatory authorities of the individual European Union Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.
The collection and use of personally identifiable data, including health data and medical data (personal data) in the European Union is regulated by the GDPR, which became effective on May 25, 2018. The GDPR applies to personal data processed in connection with clinical trial activities in EU Member States. The GDPR imposes strict requirements on controllers and processors of personal data, including special protections for “sensitive information” which includes health and genetic information of data subjects residing in the EU. The GDPR grants individuals the opportunity to object to the processing of their personal data, allows them to exercise certain data subject requests, including to request deletion of personal data in certain circumstances, and provides the individual with an express right to seek legal recourse in the event the individual believes his or her rights have been violated. Further, the GDPR imposes strict rules on the transfer of personal data out of the European Union to the United States or other regions that have not been deemed to offer “adequate” privacy protections. Failure to comply with the requirements of the GDPR may result in monetary penalties of up to €20 million or 4% of annual worldwide revenue, whichever is higher. In addition to risking such fines for any failure
to comply with the GDPR, we may require substantial costs in connection with our efforts to put in place additional mechanisms ensuring compliance with European data protection requirements.
Further, the U.K.’s decision to leave the EU, often referred to as Brexit, has created uncertainty in data protection issues involving the U.K. For example, pursuant to a post-Brexit trade deal between the U.K. and the EU, transfers of personal information from the European Economic Area to the U.K. are not considered restricted transfers under the GDPR for a period of up to six months from January 1, 2021. However, unless the European Commission makes an adequacy finding with respect to the U.K. before the end of that period, the U.K. will be considered a “third country” under the GDPR and transfers of European personal information to the U.K. will require an adequacy mechanism to render such transfers lawful under the GDPR. Additionally, although the U.K. enacted a Data Protection Act in May 2018 that is designed to be consistent with the GDPR, uncertainty remains regarding how data transfers to and from the U.K. will be regulated notwithstanding Brexit. The full effects of Brexit are uncertain and will remain so until the U.K. and EU reach a definitive resolution with regards to outstanding trade and legal matters. Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations, and financial condition could be adversely affected by Brexit is uncertain.
There is significant uncertainty related to the manner in which data protection authorities will seek to enforce compliance with GDPR. For example, it is not clear if the authorities will conduct random audits of companies doing business in the EU, or if the authorities will wait for complaints to be filed by individuals who claim their rights have been violated. Enforcement uncertainty and the costs associated with ensuring GDPR compliance may be onerous and adversely affect our business, financial condition, results of operations, and prospects.
We or the third parties upon whom we depend may be adversely affected by natural disasters, health epidemics or other business interruptions such as cybersecurity attacks and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters or health epidemics could severely disrupt our operations, and have a material adverse impact on our business, results of operations, financial condition, and prospects. If a natural disaster, power outage, cybersecurity attack, health epidemic or other event occurred that prevented us from using all or a significant portion of our headquarters, damaged critical infrastructure, such as our manufacturing facilities or those of our third-party contract manufacturers, limited our ability to access or use our digital information systems or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. Cybersecurity liability insurance is difficult to obtain and may not cover any damages we would sustain based on any breach of our computer security protocols or other cybersecurity attack. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse impact on our business.
If our products become subject to a product recall it could harm our reputation, business, and financial results.
The FDA and similar foreign governmental authorities have the authority to require the recall of certain commercialized products. In the case of the FDA, the authority to require a recall of a biologic product must be based on an FDA finding that a batch, lot of other quantity of the biologic product presents an imminent or substantial hazard to the public health. In addition, foreign governmental bodies have the authority to require the recall of any investigational medicine in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a product is found. A government-mandated or voluntary recall by us or our strategic collaborators could occur as a result of manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our investigational medicines would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. A recall announcement could harm our reputation with customers and negatively affect our sales, if any.
If we engage in future acquisitions, joint ventures, or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and collaborations, including licensing or acquiring complementary products, IP rights, technologies, or businesses. Any potential acquisition, joint venture, or collaboration may entail numerous risks, including:
•increased operating expenses and cash requirements;
•the assumption of additional indebtedness or contingent liabilities;
•assimilation of operations, IP, and products of an acquired company, including difficulties associated with integrating new personnel;
•the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;
•retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or investigational medicines and regulatory approvals; and
•our inability to generate revenue from acquired technology or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake acquisitions, we may utilize our cash, issue dilutive securities, assume or incur debt obligations, incur large one-time expenses, and acquire intangible assets that could result in significant future amortization expense.
Moreover, we may not be able to locate suitable acquisition or strategic collaboration opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
Risks related to ownership of our common stock
The price of our common stock has been volatile and fluctuates substantially, which could result in substantial losses for stockholders.
Our stock price has been, and in the future, may be, subject to substantial volatility. From December 7, 2018, our first day of trading on the Nasdaq Global Select Market, through December 31, 2020, our stock has traded within a range of a high price of $178.50and a low price of $11.54 per share. In addition, since we began our development efforts with respect to our COVID-19 vaccine in early 2020, our stock has experienced pronounced and extended periods of volatility. As a result of the volatility in our stock price, our stockholders could incur substantial losses.
Public statements by us, government agencies, the media, competing vaccine developers, financial analysts, or others relating to the coronavirus outbreak (including regarding our and others’ efforts to develop a coronavirus vaccine) have in the past resulted, and may in the future result, in significant fluctuations in our stock price. Given the global focus on the coronavirus pandemic, information in the public arena on this topic, whether or not accurate, has had and will likely continue to have an outsized impact (positive or negative) on our stock price. Information related to our clinical trials, manufacturing, regulatory and commercialization efforts with respect to our COVID-19 vaccine, or information regarding such efforts by competitors with respect to their vaccines and potential vaccines, or the evolution of the pandemic, may meaningfully impact our stock price.
The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above your initial purchase price. The market price for our common stock may be influenced by many factors, including:
•the success of our COVID-19 vaccine sales;
•results of clinical trials of our investigational medicines or those of our competitors;
•the success of competitive products or technologies;
•commencement or termination of strategic alliances;
•regulatory or legal developments in the United States and other countries;
•developments or disputes concerning patent applications, issued patents, or other proprietary rights;
•the recruitment or departure of key personnel;
•product revenue;
•the level of expenses related to any of our products, investigational medicines or clinical development programs;
•the results of our efforts to discover, develop, acquire, or in-license additional investigational medicines;
•actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts;
•variations in our financial results or those of companies that are perceived to be similar to us;
•changes in the structure of healthcare payment systems;
•market conditions in the pharmaceutical and biotechnology sectors;
•general economic, industry, and market conditions;
•the numerous programs in our pipeline, the development of which could each generate news or significant adverse events that could impact financial results or recommendations by securities analysts; and
•public announcements by us or our strategic collaborators regarding the progress of our development candidates or investigational medicines or similar public announcements by our competitors.
If our quarterly or annual results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in our results may, in turn, cause the price of our stock to fluctuate substantially. We believe that period-to-period comparisons of our results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in our filings incorporated by reference herein or in future periodic reports; variations in our quarterly operating results from our expectations or those of securities analysts or investors; downward revisions in securities analysts’ estimates; and announcement by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments.
In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation often has been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources, which could seriously harm our business, financial condition, and results of operations, and prospects.
We have broad discretion in the use of our cash, cash equivalents, and investments, and may not use them effectively.
Our management will have broad discretion in the application of our cash, cash equivalents, and investments, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Furthermore, our operating expenses have significantly increased due to development and manufacturing activities for our COVID-19 vaccine program, and we may not deploy our expanded capital base effectively. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse impact on our business, cause the price of our common stock to decline, and delay the development of our investigational medicines. Pending their use, we may invest our cash, cash equivalents, and investments in a manner that does not produce income or that loses value.
We are in the early stages of developing our policies and practices regarding pre-approval access and any policy we develop and implement may result in a negative perception of our Company and have a material adverse impact on our business.
As we advance our pipeline, patients and their physicians have sought access to our investigational medicines outside of sponsored clinical trials and prior to regulatory approval. While we will continue to review and respond to these early access requests, at this stage in our development of a new class of medicines, we are not providing access to our investigational medicines outside of the clinical trial setting. As our development programs progress further, we will continue our dialogue with patients and their families, advocacy leaders, physicians, and others on this and other topics. We will post our pre-approval access policies in accordance with regulatory guidelines.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market could occur at any time, subject to certain restrictions described below. These sales, or the perception in the market that holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
The holders of up to 61.1 million shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
Additionally, the number of shares of our common stock reserved for issuance under our 2018 Stock Option and Incentive Plan automatically increased on January 1, 2020 and will automatically increase each January 1 thereafter by 4% of the number of shares of common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by our compensation committee. Our Compensation Committee elected not to increase the number of shares reserved for issuance under our 2018 Stock Plan on January 1, 2021. If our Compensation Committee elects to increase the number of shares available for future grant each year, our stockholders may experience additional dilution.
In addition, certain of our employees, executive officers, and directors have entered or may enter into Rule 10b5-1 trading plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5-1 trading plan, a broker executes trades pursuant to parameters established by the employee, director, or officer when entering into the plan, without further direction from the employee, officer, or director. A Rule 10b5-1 trading plan may be amended or terminated in some circumstances. Our employees, executive officers, and directors also may buy or sell additional shares outside of a Rule 10b5-1 trading plan when they are not in
possession of material, nonpublic information. To the extent that sales or other distributions of Moderna stock by our executive officers or directors are reported publicly, whether or not conducted under a 10b5-1 plan, such sales or distributions could lead to a decline in our stock price.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish rights to our technologies or development candidates or investigational medicines.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic alliances, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted and the terms may include liquidation that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license IP rights, and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through collaborations and alliances and licensing arrangements with third parties or through asset sales, we may have to relinquish valuable rights to our technologies or development candidates or investigational medicines, or grant licenses on terms unfavorable to us.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Our executive officers, directors, five percent stockholders, and their affiliates beneficially own approximately 21.1% of our outstanding common stock, as of February 16, 2021. Therefore, these stockholders will have the ability to influence us through their ownership positions. For example, these stockholders, acting together, may be able to exert significant influence over matters such as elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.
Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.
Our amended and restated certificate of incorporation, by-laws, and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and amended and restated by-laws include provisions that:
•authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;
•create a classified board of directors whose members serve staggered three-year terms;
•specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer, or our president;
•prohibit stockholder action by written consent;
•establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
•provide that our directors may be removed only for cause;
•provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
•specify that no stockholder is permitted to cumulate votes at any election of directors;
•expressly authorize our board of directors to modify, alter, or repeal our amended and restated by-laws; and
•require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restated by-laws.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.
Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We do not currently intend to declare or pay cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Our amended and restated by-laws designate the Court of Chancery of the State of Delaware or the United States District Court for the District of Massachusetts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our amended and restated by-laws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of or based on a breach of a fiduciary duty owed by any of our current or former directors, officers, or other employees to us or our stockholders, (3) any action asserting a claim against us or any of our current or former directors, officers, employees, or stockholders arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated by-laws, or (4) any action asserting a claim governed by the internal affairs doctrine (the Delaware Forum Provision). The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act, or the Exchange Act. Our amended and restated by-laws further provide that the United States District Court for the District of Massachusetts is the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the Federal Forum Provision). We have chosen the United States District Court for the District of Massachusetts as the exclusive forum for such causes of action because our principal executive offices are located in Cambridge, Massachusetts. In addition, our amended and restated by-laws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
We recognize that the Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware or the Commonwealth of Massachusetts, as applicable. Additionally, the forum selection clauses in our amended and restated by-laws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees, which may discourage the filing of lawsuits against us and our directors, officers, and employees, even though an action, if successful, might benefit our stockholders. While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is unenforceable or invalid, and if the Federal Forum Provision is found to be unenforceable, we may incur additional costs in resolving such matters. The Court of Chancery of the State of Delaware and the United States District Court for the District of Massachusetts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
General risk factors
Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition, or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and financial markets, including by the current COVID-19 pandemic, or any other health epidemic. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the most recent global financial crisis, could result in a variety of risks to our business, including weakened demand for our investigational medicines and our ability to raise additional capital when needed on favorable terms, if at all. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Our business and operations in the UK and EU may be negatively impacted by the United Kingdom’s withdrawal from the EU.
On June 23, 2016, the UK held a referendum in which a majority of voters approved an exit from the EU, or Brexit. After nearly three years of negotiation and political and economic uncertainty, the UK’s withdrawal from the EU became effective on January 31, 2020. There was a transitional period, during which EU laws, including pharmaceutical laws, continued to apply in the UK, however this
ended on December 31, 2020. The UK and EU have signed a EU-UK Trade and Cooperation Agreement, which became provisionally applicable on January 1, 2021 and will become formally applicable once ratified by both the UK and the EU. This agreement provides details on how some aspects of the UK and EU’s relationship regarding medicinal products will operate, particularly in relation to Good Manufacturing Practice, however there are still many uncertainties. The long-term effects of Brexit will depend in part on how the EU-UK Trade and Cooperation Agreement, and any future agreements signed by the UK and the EU, take effect in practice. Such a withdrawal from the EU is unprecedented, and it is unclear how the restrictions on the UK’s access to the European single market for goods, capital, services and labor within the EU and the wider commercial, legal and regulatory environment, could impact our current and future operations and clinical activities in the UK.
We expect that, now the transition period has expired, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replicate or replace, including those related to the regulation of medicinal products. Any of these effects of Brexit, and others we cannot anticipate, could negatively impact our business and results of operations in the UK.
The uncertainty concerning the UK’s legal, political and economic relationship with the EU following Brexit may also be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).
Our employees, principal investigators, and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, and consultants. Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations applicable in the EU and other jurisdictions; provide accurate information to the FDA, the EMA, and other regulatory authorities; comply with healthcare fraud and abuse laws and regulations in the United States and abroad; or report financial information or data accurately or disclose unauthorized activities to us. Such misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. Sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, financial condition, results of operations, and prospects, including the imposition of significant fines or other sanctions.
Employee litigation and unfavorable publicity could negatively affect our future business.
Our employees may, from time to time, bring lawsuits against us regarding injury, creating a hostile work place, discrimination, wage and hour disputes, sexual harassment, or other employment issues. In recent years there has been an increase in the number of discrimination and harassment claims generally. Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims have had a significant negative impact on some businesses. Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel, and have suffered reputational harm that has negatively impacted their business. If we were to face any employment-related claims, our business could be negatively affected.
We have never generated any revenue from product sales and may never be profitable.
Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaborators, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize our investigational medicines. We do not anticipate generating revenues from product sales for the foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in:
completing research, preclinical, and clinical development of our development candidates and investigational medicines;
seeking and obtaining U.S. and foreign marketing approvals for investigational medicines for which we complete clinical studies;
developing a sustainable, stable, consistent, and transferable manufacturing process or processes for our development candidates and investigational medicines;
developing a sustainable, scalable, consistent, time sensitive, and transferable manufacturing process for our personalized cancer vaccine investigational medicine;
furthering the development of our own manufacturing capabilities and manufacturing relationships with third parties in order to provide adequate (in amount and quality) products and services to support clinical development and the market demand for our investigational medicines, if approved;
obtaining market acceptance of our investigational medicines as a treatment option;
launching and commercializing investigational medicines for which we obtain marketing approval and reimbursement, either by collaborating with a strategic collaborator or, if launched independently, by establishing a sales force, marketing, and distribution infrastructure;
addressing any competing technological and market developments;
implementing additional internal systems and infrastructure;
negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;
maintaining, defending, protecting, and expanding our portfolio of IP rights, including patents, trade secrets and know-how; and
attracting, hiring, and retaining qualified personnel.
Even if one or more of the investigational medicines that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved investigational medicine. Our expenses could increase beyond expectations if we are required by the FDA, the EMA, or other regulatory agencies to perform clinical and other studies or make changes to our manufacturing or quality systems in addition to those that we currently anticipate. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.
Our internal computer systems, or those of our strategic collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs and our manufacturing operations.
Our internal computer systems and those of our current and any future strategic collaborators, vendors, and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, cybersecurity threats, war, and telecommunication and electrical failures. While we have not experienced any such material system failure, accident, or security breach to date that we are aware of, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from one or more ongoing or completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In addition because of our approach to running multiple clinical trials in parallel, any breach of our computer systems may result in a loss of data or compromised data integrity across many of our programs in many stages of development. Any such breach, loss, or compromise of clinical trial participant personal data may also subject us to civil fines and penalties, either under the General Data Protection Regulation, or GDPR, and relevant member state law in the EU, other foreign laws, and the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and other relevant state and federal privacy laws in the United States. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed, and the further development and commercialization of our investigational medicines could be delayed.
We may use our financial and human resources to pursue a particular research program or investigational medicine and fail to capitalize on programs or investigational medicines that may be more profitable or for which there is a greater likelihood of success.
Because we have limited resources, we must choose to pursue and fund the development of selected research programs or investigational medicines and may forego or delay pursuit of opportunities with other programs or investigational medicines that could later prove to have greater commercial potential. Our resource allocation decisions, or our contractual commitments to provide resources to our strategic collaborators under strategic alliance agreements, may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for investigational medicines may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular investigational medicine, we may relinquish valuable rights to that investigational medicine through a strategic alliance, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such investigational medicine, or we may allocate internal resources to an investigational medicine in a therapeutic area in which it would have been more advantageous to enter into a strategic alliance.
If we are not successful in discovering, developing, and commercializing additional products beyond our current portfolio, our ability to expand our business and achieve our strategic objectives would be impaired.
Although a substantial amount of our efforts will focus on the clinical trials and potential approval of our existing investigational medicines, a key element of our strategy is to discover, develop, and potentially commercialize additional products beyond our current portfolio to treat various conditions and in a variety of therapeutic areas. We intend to do so by investing in our own drug discovery efforts, exploring potential strategic alliances for the development of new products, and in-licensing technologies. Identifying new investigational medicines requires substantial technical, financial, and human resources, whether or not any investigational medicines are ultimately identified. Even if we identify investigational medicines that initially show promise, we may fail to successfully develop and commercialize such products for many reasons, including the following:
the research methodology used may not be successful in identifying potential investigational medicines;
competitors may develop alternatives that render our investigational medicines obsolete;
investigational medicines we develop may nevertheless be covered by third parties’ patents or other exclusive rights;
an investigational medicine may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
an investigational medicine may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
an approved product may not be accepted as safe and effective by trial participants, the medical community or third-party payors.
If we are unsuccessful in identifying and developing additional products, our potential for growth may be impaired.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any investigational medicine that we may develop.
We face an inherent risk of product liability exposure related to the testing of any of our current or future investigational medicines in clinical trials, and we may face an even greater risk if we commercialize any investigational medicine that we may develop. If we cannot successfully defend ourselves against claims that our investigational medicines caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
decreased demand for any investigational medicine that we may develop;
loss of revenue;
substantial monetary awards to patients, healthy volunteers, or their children;
significant time and costs to defend the related litigation;
withdrawal of clinical trial participants;
the inability to commercialize any investigational medicine(s) that we may develop; and
injury to our reputation and significant negative media attention.
We carry product liability insurance which we believe to be sufficient in light of our current clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for investigational medicines, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in
adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval for any of our investigational medicines and begin commercializing those products in the United States, our operations will be directly, or indirectly through our prescribers, customers, and purchasers, subject to various federal and state fraud and abuse laws and regulations, including, without limitation, the federal Health Care Program Anti-Kickback Statute, the federal civil and criminal False Claims Act, and Physician Payments Sunshine Act and regulations. These laws will impact, among other things, our proposed sales, marketing, and educational programs. In addition, we may be subject to patient privacy laws enacted by both the federal government and the states in which we conduct our business. The laws that will affect our operations include, but are not limited to the following:
The federal Health Care Program Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing, or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers, and formulary managers on the other. The ACA amends the intent requirement of the federal Anti-Kickback Statute to provide that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it.
The federal civil and criminal false claims laws and civil monetary penalty laws prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payors that are false or fraudulent. The ACA provides, and recent government cases against pharmaceutical and medical device manufacturers support, the view that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the False Claims Act.
HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private).
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, health care clearinghouses, and health care providers.
The U.S. Federal Food, Drug and Cosmetic Act, which prohibits, among other things, the adulteration or misbranding of drugs, biologics, and medical devices.
Federal transparency laws, including the federal Physician Payment Sunshine Act, which require disclosure of payments and other transfers of value provided to physicians and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations.
State law equivalents of each of the above federal laws, state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, and state laws governing the privacy and security of health information in certain circumstances are also applicable to us and many of them differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is prohibited in the EU. The provision of benefits or advantages to physicians is
also governed by the national anti-bribery laws of EU Member States, such as the UK Bribery Act 2010. Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain EU Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization or the regulatory authorities of the individual EU Member States. These requirements are provided in the national laws, industry codes, or professional codes of conduct, applicable in the EU Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.
The collection and use of personal health data in the European Union had previously been governed by the provisions of the Data Protection Directive, which has been replaced by the GDPR which became effective on May 25, 2018. While the Data Protection Directive did not apply to organizations based outside the EU, the GDPR has expanded its reach to include any business, regardless of its location, that provides goods or services to residents in the EU. This expansion would incorporate our clinical trial activities in EU member states. The GDPR imposes strict requirements on controllers and processors of personal data, including special protections for “sensitive information” which includes health and genetic information of data subjects residing in the EU. GDPR grants individuals the opportunity to object to the processing of their personal information, allows them to request deletion of personal information in certain circumstances, and provides the individual with an express right to seek legal remedies in the event the individual believes his or her rights have been violated. Further, the GDPR imposes strict rules on the transfer of personal data out of the EU to the United States or other regions that have not been deemed to offer “adequate” privacy protections. Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States, which may deviate slightly from the GDPR, may result in significant fines. As a result of the implementation of the GDPR, we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules.
There is significant uncertainty related to the manner in which data protection authorities will seek to enforce compliance with GDPR. For example, it is not clear if the authorities will conduct random audits of companies doing business in the EU, or if the authorities will wait for complaints to be filed by individuals who claim their rights have been violated. Enforcement uncertainty and the costs associated with ensuring GDPR compliance may be onerous and adversely affect our business, financial condition, results of operations, and prospects.
If we fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We will becomeare subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment, and disposal of hazardous materials and wastes. Our operations will involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also may produce hazardous waste products. We generally anticipate contractingcontract with third parties for the disposal of these materials and wastes. We will not be able to eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from any use by us of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential
liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Unfavorable U.S. or global economic conditions could adversely affect our business, financial condition, or results of operations.
Our results of operations could be adversely affected by general conditionsChanges in the global economy and financial markets. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the most recent global financial crisis, could result in a variety of risks to our business, including weakened demand for our investigational medicines and our ability to raise additional capital when needed on favorable terms, if at all. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
We or the third parties upon whom we depend may be adversely affected by natural disasters or other business interruptions such as cybersecurity attacks and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Natural disasters could severely disrupt our operations, and have a material adverse impact on our business, results of operations, financial condition, and prospects. If a natural disaster, power outage, cybersecurity attack, or other event occurred that prevented us from using all or a significant portion of our headquarters, damaged critical infrastructure, such as our manufacturing facilities or those of our third-party contract manufacturers, limited our ability to access or use our digital information systems or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. Cybersecurity liability insurance is difficult to obtain and may not cover any damages we would sustain based on any breach of our computer security protocols or other cybersecurity attack. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse impact on our business.
If our products become subject to a product recall it could harm our reputation, business, and financial results.
The FDA and similar foreign governmental authorities have the authority to require the recall of certain commercialized products. In the case of the FDA, the authority to require a recall of a biologic product must be based on an FDA finding that a batch, lot of other quantity of the biologic product presents an imminent or substantial hazard to the public health. In addition, foreign governmental bodies have the authority to require the recall of any investigational medicine in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a product is found. A government-mandated or voluntary recall by us could occur as a result of manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our investigational medicines would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. A recall announcement could harm our reputation with customers and negatively affect our sales, if any.
The investment of our cash, cash equivalents, and investments is subject to risks which may cause losses and affect the liquidity of these investments.
As of December 31, 2018, we had approximately $1.7 billion in cash, cash equivalents, and investments. These investments are subject to general credit, liquidity, market, and interest rate risks. We may realize losses in the fair value of these investments, which would have a negative effect on our consolidated financial statements. In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our investment portfolio may have an adverse effect on our results of operations, liquidity, and financial condition.
Comprehensive tax reform legislationlaw could adversely affect our business and financial condition.
On December 22, 2017, the TCJA was signed into law, which significantly reforms the Internal Revenue Code of 1986, as amended, or the Code.
The TCJA, among other things, contains significant changesCompany is subject to corporate taxation, including reduction of the corporateevolving and complex tax rate from a top marginal tax rate of 35% to a flat rate of 21%, limitation of the tax deduction for net business interest expense to 30% of adjusted taxable income (with certain excepted businesses), limitation of the deduction for net operating losses generated during or after 2018 to 80% of annual taxable income and elimination of net operating loss carrybacks, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurredlaws in the testingjurisdictions in which it operates. The rules dealing with U.S. federal, state, and local and non-U.S. income taxation are constantly under review by persons involved in the legislative process and by tax authorities. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of certain drugs for rare diseases or conditions generally referredour common stock. In recent years, many such changes have been made and changes are likely to as “orphan drugs”). We continue to examineoccur in the impact thisfuture. Future changes in tax reform legislation maylaws could have on our business. However, thea material adverse effect of the TCJA on our business, whether adversecash flow, financial condition or favorable, is uncertain and may not become evident for some periodresults of time.operations. We urge investors to consult with their legal and tax advisers regarding the implications of the TCJApotential changes in tax laws on an investment in our common stock.
If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements prove inaccurate, our actual results may vary from those reflected in our projections and accruals.
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues, and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure you, however, that our estimates, or the assumptions underlying them, will be correct.
The amount of and our ability to use net operating losses and research and development credits to offset future taxable income may be subject to certain limitations and uncertainty.
As of December 31, 2018, we had federal and state net operating loss carryforwards of $426.6 million and $402.0 million, respectively, a portion of which will begin to expire in 2030. As of December 31, 2018, we also had federal and state research and
development tax credit carryforwards of $36.8 million and $18.8 million, respectively, which begin to expire in 2029. These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities. In general, under Sections 382 and 383 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or tax credits, or NOLs or credits, to offset future taxable income or taxes. For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Our existing NOLs or credits may be subject to limitations arising from ownership changes in connection with our initial public offering or after our initial public offering. Our ability to utilize NOLs or credits could be further limited by Sections 382 and 383 of the Code. In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Sections 382 and 383 of the Code. Our NOLs or credits may also be impaired under state law. Accordingly, we may not be able to utilize a material portion of our NOLs or credits. In addition, the rules regarding timing of revenue and expense recognition for tax purposes in connection with various transactions we have are complex and uncertain in various respects and could be subject to challenge by taxing authorities. In the event any such challenge is sustained, the net operating losses could be materially reduced and/or we could be determined to be a material cash taxpayer for one or more years. Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generating U.S. federal and state taxable income. As described above we have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future, and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOL or credit carryforwards. Under the TCJA, NOLs generated after December 31, 2017 will not be subject to expiration but the deduction for such NOLs in any taxable year will be limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. The TCJA also reduced the corporate income tax rate to 21%, from a prior rate of 35%. This may cause a reduction in the potential economic benefit of our NOLs and other available deferred tax assets.
If we engage in future acquisitions, joint ventures, or strategic collaborations, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and collaborations, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition, joint venture, or collaboration may entail numerous risks, including:
increased operating expenses and cash requirements;
the assumption of additional indebtedness or contingent liabilities;
assimilation of operations, intellectual property, and products of an acquired company, including difficulties associated with integrating new personnel;
the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or investigational medicines and regulatory approvals; and
our inability to generate revenue from acquired technology or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake acquisitions, we may utilize our cash, issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
Moreover, we may not be able to locate suitable acquisition or strategic collaboration opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate about our research, development candidates, investigational medicines, and the diseases our development candidates and investigational medicines are being developed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business, resulting in potential regulatory actions against us. For example, patientssubjects may use social media channels to comment on their experience in an ongoing blinded clinical studytrial or to report an alleged adverse event. When such disclosures occur, there is a risk that we fail to monitor and comply with applicable adverse event
reporting obligations or we may not be able to defend our business or the public’s legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what we may say about our development candidates and investigational medicines. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any social networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions, or incur other harm to our business.
Risks related to ownership of our common stock
The price of our common stock has been volatile and fluctuates substantially, which could result in substantial losses for stockholders.
Our stock price has been and in the future may be subject to substantial volatility. For example, our stock traded within a range of a high price of $24.40 and a low price of $13.03 per share for the period of December 7, 2018, our first day of trading on the Nasdaq Global Select Market, through March 6, 2019. As a result of this volatility, our stockholders could incur substantial losses.
The stock market in general, and the market for biopharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above your initial purchase price. The market price for our common stock may be influenced by many factors, including:
results of clinical trials of our investigational medicines or those of our competitors;
the success of competitive products or technologies;
commencement or termination of strategic alliances;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents, or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our investigational medicines or clinical development programs;
the results of our efforts to discover, develop, acquire, or in-license additional investigational medicines;
actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities analysts;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry, and market conditions;
the numerous programs in our pipeline, the development of which could each generate news or significant adverse events that could impact financial results or recommendations by securities analysts; and
public announcements by us or our strategic collaborators regarding the progress of our development candidates or investigational medicines or similar public announcements by our competitors.
If our quarterly or annual results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in our results may, in turn, cause the price of our stock to fluctuate substantially. We believe that period-to-period comparisons of our results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation often has been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management’s attention and resources, which could seriously harm our business, financial condition, results of operations, and prospects.
We have incurred and will continue to incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives. We are subject to financial reporting and other requirements for which our accounting and other management systems and resources may not be adequately prepared.
As a public company, and particularly after we are no longer an “emerging growth company,” we incur significant legal, accounting, and other expenses that we did not incur as a private company. In addition, the federal securities laws, including the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the Securities and Exchange CommissionSEC and Nasdaq have imposed various requirements on public companies, including requirements to file annual, quarterly, and event driven reports with respect to our business and financial condition, and to establish and maintain effective disclosure and financial controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consumingtime consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance. We may not be able to produce reliable financial statements or file these financial statements as part of a periodic report in a timely manner with the SEC or comply with the Nasdaq listing requirements. In addition, we could make errors in our financial statements that could require us to restate our financial statements.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our management on our internal control over financial reporting, including an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. However, while we remainwere an emerging“emerging growth company, we willcompany” as defined in the Jumpstart Our Business Startups Act, our auditors were not be required to include an attestation report onformally attest to the effectiveness of our internal control over financial reporting issued byreporting. As of the end of our independent registered public accounting firm. To achieve compliancefiscal year ended December 31, 2019, we qualified as a “large accelerated filer” as defined in the
Securities Exchange Act of 1934, as amended, or the Exchange Act and, as a result, ceased to qualify as an emerging growth company. Accordingly, commencing with Section 404 withinour Annual Report on Form 10-K for the prescribed period,year ended December 31, 2019, we will be engaged in a processwere required to document and evaluatehave our auditors formally attest to the effectiveness of our internal control over financial reporting which is both costlypursuant to Section 404. Our compliance with Section 404 necessitates that we incur substantial accounting expense and challenging. In this regard, weexpend significant management efforts. We will need to continue to dedicate internal resources, potentially engage outside consultants, and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits smaller “emerging growth companies” to implement many of these requirements over a longer period and up to five years from our initial public offering. We intend to take advantage of this new legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Stockholder activism, the current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives.
We are in the early stages of developing our policies and practices regarding pre-approval access and any policy we develop and implement may result in a negative perception of our company and have a material adverse impact on our business.
As we advance our pipeline, patients and their physicians have sought access to our investigational medicines outside of sponsored clinical trials and prior to regulatory approval. While we will continue to review and respond to these early access requests, at this stage in our development of a new class of medicines, we are not providing access to our investigational medicines outside of the clinical trial setting. As our development programs progress further, we will continue our dialogue with patients and their families, advocacy leaders, physicians, and others on this and other topics. We will post our pre-approval access policies in accordance with regulatory guidelines.
As a general matter, we do not currently plan on providing forward-looking guidance regarding the expected timing of milestones in our business. We plan to report on the status of our programs, including the achievement of milestones and related data, on a retrospective basis, or as otherwise required by U.S. federal securities laws applicable to us, which may lead to speculation about our prospects that could have a material adverse effect on our business.
We believe the nature of our portfolio is not suitable to providing forward-looking guidance on the expected timing of individual program milestones, particularly data readout timing. While as a general matter we intend to periodically report on the status of our development programs, including articulating anticipated next steps in the form of development plans or potential data readouts, we do not currently plan to provide forward-looking guidance on the timing of those next steps. In addition, we do not control the timing of disclosure of any such milestones related to any of our programs that are managed by our strategic collaborators. Any disclosure by our strategic collaborators of data that is perceived as negative, whether or not such data is related to other data that we or others
release, may have a material adverse impact on our stock price or overall valuation. Not providing forward-looking guidance on the expected timing of program milestones may lead to speculation by investors, shareholders, analysts, and other market participants and in the media as to the progress of our individual development candidates, investigational medicines, or our programs as a whole, which may have a material adverse impact on our stock price or valuation.
If certain communications distributed by a previously-named proposed underwriter that did not participate in our initial public offering were held to violate the Securities Act, purchasers of securities in our initial public offering may have the right to seek refunds or damages.
Prior to the effectiveness of our Registration Statement on Form S-1 for our initial public offering, a previously-named proposed underwriter and its employees or representatives distributed unauthorized communications regarding our initial public offering. This previously-named proposed underwriter did not participate as an underwriter in the initial public offering. Neither we nor any of the underwriters of our initial public offering were involved in any way in the preparation or distribution of the communications by the previously-named proposed underwriter and its employees or representatives, and neither we nor any of the underwriters of the initial public offering had any knowledge of these communications until after they were distributed. Upon learning of these communications, we directed the previously-named proposed underwriter to cease and to retract such communications. Each of these communications by the previously-named proposed underwriter may have constituted a prospectus that did not meet the requirements of the Securities Act. Any potential investor who viewed or received these communications should not rely upon them in any manner in making a decision whether to purchase our securities. We and the underwriters in our initial public offering disclaim all responsibility for the content of these communications. If the communications by the previously-named proposed underwriter constitute violations of the Securities Act, the purchasers of our securities in our initial public offering may have the ability to pursue recovery of the consideration paid in connection with their purchase or, if they had already sold the securities, damages resulting from their purchase.
We are an “emerging growth company,” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.
We are an “emerging growth company,” or EGC, as defined in the JOBS Act. We will remain an EGC until the earlier of:
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(i) | the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; |
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(ii) | December 31, 2023, being the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering; |
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(iii) | the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or |
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(iv) | the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission or SEC, which means the first day of the year following the first year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our second fiscal quarter. For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include: |
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002;
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of reduced reporting burdens in this Annual Report on Form 10-K (including the information incorporated herein by reference). We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, the JOBS Act provides that an EGC may take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, while we are an EGC we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not EGCs.
Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale entered into during our initial public offering lapse, the trading price of our common stock could decline. Only the shares of common stock sold in our initial public offering by us are currently freely tradable without restriction in the public market. The lock-up agreements will expire 180 days from the date of our initial public offering, subject to earlier release of all or a portion of the shares subject to such agreements by the representatives of the underwriters in their sole discretion. After the lock-up agreements expire, up to an additional 302.7 million shares of common stock will be eligible for sale in the public market. Approximately 33% of these additional shares are held by directors, executive officers and other affiliates and will be subject to certain limitations of Rule 144 under the Securities Act of 1933, as amended, or the Securities Act.
In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our existing equity compensation plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline. Additionally, the number of shares of our common stock reserved for issuance under our 2018 Stock Option and Incentive Plan automatically increased on January 1, 2019 and will automatically increase each January 1 thereafter by 4% of the number of shares of common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by our compensation committee. Unless our board of directors elects not to increase the number of shares available for future grant each year, our stockholders may experience additional dilution.
In addition, certain of our employees, executive officers, and directors have entered or may enter into Rule 10b5-1 trading plans providing for sales of shares of our common stock from time to time. Under a Rule 10b5-1 trading plan, a broker executes trades pursuant to parameters established by the employee, director, or officer when entering into the plan, without further direction from the employee, officer, or director. A Rule 10b5-1 trading plan may be amended or terminated in some circumstances. Our employees, executive officers, and directors also may buy or sell additional shares outside of a Rule 10b5-1 trading plan when they are not in possession of material, nonpublic information.
The holders of 236.0 million shares of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act, subject to the 180-day lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish rights to our technologies or development candidates or investigational medicines.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic alliances, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through collaborations and alliances and licensing arrangements with third parties or through asset sales, we may have to relinquish valuable rights to our technologies or development candidates or investigational medicines, or grant licenses on terms unfavorable to us.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.
The trading market for our common stock relies, in part, on the research and reports that industry or financial analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Our executive officers, directors, five percent stockholders, and their affiliates beneficially own approximately 53% of our outstanding common stock. Therefore, these stockholders will have the ability to influence us through their ownership positions. For example, these stockholders, acting together, may be able to exert significant influence over matters such as elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or
discourage unsolicited acquisition proposals or offers for our common stock that you may believe are in your best interest as one of our stockholders.
We have broad discretion in the use of our cash, cash equivalents and investments and may not use them effectively.
Our management will have broad discretion in the application of our cash, cash equivalents and investments, and could spend our funds in ways that do not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse impact on our business, cause the price of our common stock to decline, and delay the development of our investigational medicines. Pending their use, we may invest our cash, cash equivalents and investments in a manner that does not produce income or that loses value.
Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.
Our amended and restated certificate of incorporation, by-laws, and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and amended and restated by-laws include provisions that:
authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock;
create a classified board of directors whose members serve staggered three-year terms;
specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chief executive officer, or our president;
prohibit stockholder action by written consent;
establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;
provide that our directors may be removed only for cause;
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
specify that no stockholder is permitted to cumulate votes at any election of directors;
expressly authorize our board of directors to modify, alter, or repeal our amended and restated by-laws; and
require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate of incorporation and amended and restated by-laws.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.
Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
An active trading market for our common stock may not be sustained.
Our shares of common stock began trading on the Nasdaq Global Select Market on December 7, 2018. Given the limited trading history of our common stock, there is a risk that an active trading market for our shares will not be sustained, which could put downward pressure on the market price of our common stock and thereby affect the ability of our stockholders to sell their shares.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We do not currently intend to declare or pay cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may
preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Our amended and restated by-laws designate the Court of Chancery of the State of Delaware or the United States District Court for the District of Massachusetts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our amended and restated by-laws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of or based on a breach of a fiduciary duty owed by any of our current or former directors, officers, or other employees to us or our stockholders, (3) any action asserting a claim against us or any of our current or former directors, officers, employees, or stockholders arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated by-laws, or (4) any action asserting a claim governed by the internal affairs doctrine. Our amended and restated by-laws further provide that the United States District Court for the District of Massachusetts is the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. In addition, our amended and restated by-laws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provisions; provided, however, that stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. We have chosen the United States District Court for the District of Massachusetts as the exclusive forum for such causes of action because our principal executive offices are located in Cambridge, MA. On December 19, 2018, the Court of Chancery of the State of Delaware issued a decision declaring that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are ineffective and invalid under Delaware law. On January 17, 2019, the decision was appealed to the Delaware Supreme Court. While the Delaware Supreme Court recently dismissed the appeal on jurisdictional grounds, we expect that the appeal will be re-filed after the Court of Chancery issues a final judgment. Unless and until the Court of Chancery’s decision is reversed by the Delaware Supreme Court or otherwise abrogated, we do not intend to enforce our federal forum selection provision designating the District of Massachusetts as the exclusive forum for Securities Act claims. In the event that the Delaware Supreme Court affirms the Court of Chancery’s decision or otherwise determines that federal forum selection provisions are invalid, our board of directors intends to amend promptly our amended and restated by-laws to remove our federal forum selection bylaw provision. As a result of the Court of Chancery’s decision or a decision by the Delaware Supreme Court affirming the Court of Chancery’s decision, or if the federal forum selection provision is otherwise found inapplicable to, or unenforceable in respect of, one or more of the specified actions or proceedings, we may incur additional costs, which could have an adverse effect on our business, financial condition or results of operations. We recognize that the federal forum selection clause may impose additional litigation costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders do not reside in or near the Commonwealth of Massachusetts. Additionally, the forum selection clauses in our amended and restated by-laws may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. The Court of Chancery of the State of Delaware and the United States District Court for the District of Massachusetts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
Item 1B - Unresolved Staff Comments
None.
Item 2. Properties
We have two campuses in Massachusetts. We occupy a multi-building campus in Technology Square near the Kendall Square area in Cambridge, MA in multi-tenanted locations with a mix of offices and research laboratory space totaling approximately 200,000175,000 square feet. Kendall Square is the location of our corporate headquarters, platform, drug discovery, manufacturing process development, and clinical development. Our facilities in Kendall Square are leased and the lease expiry ranges from 2020 to 2027, with the majority of the space being leased through 2027,2029, with the option to extend.
We have a 200,000 square foot manufacturing facility in Norwood, MA, where we manufactureModerna Technology Center (MTC). The campus is comprised of two buildings (MTC South and MTC North). MTC South is approximately 200,000 square feet, with a production capacity of over 100 cGMP lots per year. MTC North is approximately 240,000 square feet and provides lab and office space, directly supporting improvement in our products and perform various services. This facilitymanufacturing capabilities. MTC South is leased through 2032 and we have the option to extend it for two ten-year terms. In February 2019, we entered into a lease agreement for office and laboratory space, located in Norwood, MA, totaling 222,163 square feet. This facilityMTC North is leased into early 2031 and we have the option to extend it for up to four additional five-year terms.
Item 3. Legal Proceedings
We are not currently a party to any material legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Our Common Stock
Our common stock began trading on the Nasdaq Global Select Market under the symbol "MRNA"“MRNA” on December 7, 2018. Prior to that time, there was no public market for our common stock.
Stock Performance Graph
The following performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Moderna, Inc. under the Securities Act or the Exchange Act.
The following graph shows a comparison from December 7, 2018, the date on which our common stock first began trading on the Nasdaq Global Select Market, through December 31, 20182020 of the cumulative total return for our common stock, the Nasdaq Composite Total Return Index and the Nasdaq Biotechnology Index, each of which assumes an initial investment of $100 and reinvestment of all dividends. Such returns are based on historical results and are not intended to suggest future performance.
The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.
Stockholders
We had approximately 48774 stockholders of record as of March 6, 2019;February 16, 2021; however, because many of our outstanding shares are held in accounts with brokers and other institutions, we believe we have more beneficial owners. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid cash dividends on our common stock and do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used for the operation and growth of
our business. Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on various factors, including applicable laws, our results of operations, financial condition, future prospects, then applicable contractual restrictions and any other factors deemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of receiving cash dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about our equity compensation plans in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference.
Recent Sales of Unregistered Securities
The following list sets forth information regarding all unregistered securities sold by us in the period covered by this Annual Report on Form 10-K. No underwriters were involved in the sales and the certificates representing the securities sold and issued contain legends restricting transfer of the securities without registration under the Securities Act or an applicable exemption from registration.
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1. | On January 30, 2018 and February 15, 2018, we issued and sold an aggregate of 55,666,004 shares of our Series G preferred stock to 92 accredited investors at a per share purchase price of $10.06 for aggregate gross consideration of $560 million. |
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2. | On May 7, 2018, we issued and sold an aggregated of 5,000,000 shares of our Series H preferred stock to one accredited investor at a per share purchase price of $25.00 for aggregate gross consideration of $125 million, which includes a $13 million premium associated with the 2018 amended and restated personalized cancer vaccines agreement with Merck & Co. entered into in conjunction with the Series H issuance. |
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3. | Between January 1, 2018 and December 6, 2018, under our 2016 Stock Option and Grant Plan and our 2018 Stock Option and Incentive Plan, we issued to certain of our employees, consultants and board members options to purchase an aggregate of 19,223,123 shares of our common stock, with a weighted-average exercise price of $17.01, in exchange for their services to us. |
We deemed the offer, sale and issuance of the securities described in paragraphs (1) and (2) above to be exempt from registration under the Securities Act, in reliance on Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, regarding transactions by an issuer not involving a public offering. All purchasers of securities in transactions exempt from registration pursuant to Regulation D represented to us that they were accredited investors and were acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.
We deemed the grants and exercises of restricted stock, restricted stock units and stock options described in paragraphs (3) above as exempt pursuant to Section 4(a)(2) of the Securities Act or in reliance on Rule 701 of the Securities Act as offers and sales of securities under compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. Each of the recipients of securities in any transaction exempt from registration either received or had adequate access, through employment, business or other relationships, to information about us.None.
Issuer Purchases of Equity Securities
Not applicableapplicable.
Use of Proceeds from Public Offering of Common Stock
On December 11, 2018, we closed our initial public offering, in which we issued and sold 26,275,993 shares of common stock at a public offering price of $23.00 per share (an aggregate offering of $604.3 million), resulting in net proceeds to us of $563.0 million after deducting $33.2 million of underwriting discounts and commissions and offering costs of $8.1 million. All of the shares issued and sold in the offering were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-228300), which was declared effective by the SEC on December 6, 2018. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC acted as joint book-running managers of the offering and as representatives of the underwriters. No offering expenses were paid directly or indirectly to any of our directors or officers, or their associates, or persons owning 10% or more of any class of our equity securities or to any other affiliates.
There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act. We are holding the balance of the net proceeds in cash, cash
equivalents and investments. We invested the funds received in short-term, interest-bearing investment-grade securities and government securities.
Item 6. Selected Consolidated Financial DataReserved
The selected consolidated financial data set forth below should be read together with our consolidated financial statements and the related notes to those statements, as well as the section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The statements of operations data for the years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In the opinion of management, the consolidated financial data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. Our historical results are not necessarily indicative of results that may be expected in the future.
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| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| | (in thousands, except share and per share data) |
| Statement of Operations Data: | | | | | |
| Revenue: | | | | | |
| Collaboration revenue | $ | 122,512 |
| | $ | 176,974 |
| | $ | 101,536 |
|
| Grant revenue | 12,556 |
| | 28,851 |
| | 6,860 |
|
| Total revenue | 135,068 |
| | 205,825 |
| | 108,396 |
|
| Operating expenses: | | | | | |
| Research and development | 454,082 |
| | 410,459 |
| | 274,717 |
|
| General and administrative | 94,252 |
| | 64,722 |
| | 57,450 |
|
| Total operating expenses | 548,334 |
| | 475,181 |
| | 332,167 |
|
| Loss from operations | (413,266 | ) | | (269,356 | ) | | (223,771 | ) |
| Interest income | 27,023 |
| | 15,235 |
| | 11,312 |
|
| Other income (expense), net | 1,835 |
| | (1,875 | ) | | (2,709 | ) |
| Loss before provision for (benefit from) income taxes | (384,408 | ) | | (255,996 | ) | | (215,168 | ) |
| Provision for (benefit from) income taxes | 326 |
| | (80 | ) | | 1,043 |
|
| Net loss | (384,734 | ) | | (255,916 | ) | | (216,211 | ) |
| Reconciliation of net loss to net loss attributable to common stockholders: | | | | | |
| Premium paid on repurchases of preferred stock | (4,127 | ) | | — |
| | — |
|
| Accretion of redeemable convertible preferred units to redemption value | — |
| | — |
| | (8,663 | ) |
| Cumulative preferred stock dividends | (12,996 | ) | | (13,925 | ) | | (5,440 | ) |
| Net loss attributable to common stockholders | $ | (401,857 | ) | | $ | (269,841 | ) | | $ | (230,314 | ) |
Net loss per share attributable to common stockholders, basic and diluted (1) | $ | (4.95 | ) | | $ | (4.18 | ) | | $ | (3.79 | ) |
| Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted | 81,114,183 |
|
| 64,497,544 |
|
| 60,747,426 |
|
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| | | | | | | | | | | |
| | December 31, |
| | 2018 | | 2017 | | 2016 |
| | (in thousands) |
| Balance Sheet Data: | | | | | |
| Cash, cash equivalents, and investments | $ | 1,694,417 |
| | $ | 901,880 |
| | $ | 1,294,707 |
|
Working capital (2) | 1,340,203 |
| | 591,762 |
| | 924,350 |
|
| Total assets | 1,962,149 |
| | 1,084,489 |
| | 1,417,161 |
|
| Total deferred revenue | 274,408 |
| | 339,668 |
| | 501,989 |
|
| Redeemable convertible preferred stock | — |
| | 1,176,661 |
| | 1,176,661 |
|
| Total stockholders’ equity (deficit) | 1,530,241 |
| | (551,365 | ) | | (334,810 | ) |
(1) Basic and diluted net loss per share attributable to common stockholders give effect to the conversionTable of all redeemable convertible preferred stock to common stock and give effect to the 1-for-2.18 reverse stock split of our common stock completed in connection with the Company’s initial public offering in December 2018.Contents
(2) We define working capital as current assets less current liabilities. Please refer to our consolidated balance sheets and notes to our financial statements for further details regarding our current assets and current liabilities.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, 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 the “Risk“Part I, Item 1A - Risk Factors” section of this Annual Report on Form 10-K, 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.
Overview
We are a clinical stage biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines to create a new generation of potentially 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 designedcreated six modalities to date:
•prophylactic vaccines;
•systemic secreted and cell surface therapeutics;
•cancer vaccines;
•intratumoral immuno-oncology;
•localized regenerative therapeutics; and
•systemic intracellular therapeutics.
We have designated our prophylactic vaccines and systemic secreted and cell surface therapeutics modalities as our “core modalities”. In these core modalities, our strategy and operations to realize the full potential value and impact of mRNA over a long time horizon across a broad array of human diseases. We built and continueis to invest in additional development candidates using our accumulated innovations in technology, our process insights and our preclinical and clinical experience. Our exploratory modalities continue to be a platformcritical part of advancing our strategy to maximize the application of our potential mRNA medicines.
2020 Business Highlights
We brought five new development candidates forward in 2020: a COVID-19 vaccine (mRNA-1273); interleukin-2 (IL-2); programmed death-ligand 1 (PD-L1); a pediatric Respiratory Syncytial Virus (RSV) vaccine; and an Epstein-Barr Virus (EBV) vaccine, as part of our mission to use our technology to advance global public health.
In response to the technological frontierglobal coronavirus pandemic, we are pursuing the rapid development and manufacture of mRNA medicines. We have made forward investmentsour mRNA-1273 vaccine, for the treatment of SARS-CoV-2, the novel strain of coronavirus that causes COVID-19, in scalable infrastructurecollaboration with the Vaccine Research Center and capabilities to pursue a pipelineDivision of potential medicines that reflect the breadthMicrobiology and Infectious Diseases of the National Institute of Allergy and Infectious Diseases, or NIAID, part of the National Institutes of Health, or 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 for ongoing clinical development, manufacturing and distribution of the COVID-19 vaccine at a scale necessary to meet demand in a global pandemic environment. This capital investment includes the ongoing clinical development for updated versions of the COVID-19 vaccine that may provide continued protection against variants of the SARS-CoV-2 virus. BARDA has committed to fund up to $954.9 million to accelerate the clinical development and manufacturing process scale-up of our COVID-19 vaccine. 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.
In February and May 2020, we completed two separate public equity offerings, resulting in aggregate net proceeds of $1.85 billion, net of underwriting discounts, commissions 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 our COVID-19 vaccine.
In December 2020, we received an Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA) and an Interim Order from Health Canada authorizing our COVID-19 vaccine for use in the U.S. and Canada.Since January 1, 2021, we have received additional provisional, interim or conditional approvals for the use and distribution of our COVID-19 vaccine from regulatory authorities in the European Union, the United Kingdom, Switzerland, Qatar, Israel and Singapore.
In August 2020, we entered into a supply agreement with the U.S. Government (the U.S. Supply Agreement) for the supply of 100 million doses of our COVID-19 vaccine. The agreement was subsequently amended in December 2020, in connection with the U.S. Government's exercise of an option for an additional 100 million doses, bringing the total to 200 million doses of our COVID-19 vaccine for a total consideration of up to $3.19 billion. The total consideration includes approximately $300.0 million of incentive payments which we earned as a result of securing an Emergency Use Authorization (EUA) before January 31, 2021. As a result of our satisfying the requirements for this incentive payment, the total price for the supply of the first 100 million doses, inclusive of the $300.0 million incentive, is $1.53 billion. We will receive such incentive payments as product is delivered to and accepted by the U.S. Government. Pursuant to the U.S. Supply Agreement, the U.S. Government made a $601.4 million upfront payment to us which represents approximately 50% of the fixed price per dose that we are entitled to receive for the committed first 100 million doses. We will receive the remainder of the fixed price per dose upon delivery and acceptance of contracted doses to the U.S. Government. We are required to secure, manage and maintain storage for any contracted doses of mRNA-1273 based on the specific requirements of the contract and deliver the product to designated government facilities. We will be reimbursed for such services at a negotiated price. Subsequent to December 31, 2020, the U.S. Government exercised a second option to purchase 100 million doses on February 11, 2021, bringing its total order to 300 million doses, with a remaining option for 200 million doses. The price for each option is fixed at a price of $1.65 billion per 100 million doses. The U.S. Supply Agreement contains terms and conditions that are customary for U.S. Government agreements of this nature, including provisions giving the U.S. Government the right to terminate the agreement if the applicable Contracting Officer determines that a termination is in the U.S. Government’s interest. Following any such termination, we and the U.S. Government may agree upon the amount to be paid or remaining to be paid to us because of the termination.
In addition, we have entered into supply agreements with several other governmental agencies outside the United States for the supply of our COVID-19 vaccine. The agreements are generally subject to receipt of authorization or approval for the use and distribution of the vaccine from the relevant regulatory authority in each jurisdiction. Under these agreements, we are entitled to upfront deposits for our COVID-19 vaccine supply, initially recorded as deferred revenue. As of December 31, 2020, we had approximately $3.80 billion in deferred revenue in connection with the supply agreements with the U.S. Government and other governmental agencies, which will be recognized as revenue when revenue recognition criteria have been met. Between the granting of the EUA by the FDA on December 18, 2020 and the end of 2020, we delivered 12.8 million doses of our COVID-19 vaccine and recognized product sales of $199.9 million. In addition, we delivered 4.0 million doses of our COVID-19 vaccine to the U.S. government under the BARDA agreement through December 31, 2020, for a total of nearly 17 million doses delivered to the U.S. government and Canada between receipt of our EUA authorization and the end of the year and satisfying the criteria for revenue recognition.
For more information on our strategic priorities for 2021, please see “Business—The mRNA opportunity. Opportunity—Our strategic priorities,” above.
The early investment we made in our manufacturing and digital capabilities prepared us to rapidly scale our production to accommodate between 700 million doses and 1 billion doses of our COVID-19 vaccine in 2021. We are continuing to invest and add staff to build up to potentially 1 billion doses for 2021.
We have a diverse development pipeline, of 20 development candidates, 11 of which are in clinical studies. Our therapeutic and vaccine development programs span infectious diseases, oncology, cardiovascular diseases, and rare genetic diseases. We have established strategic alliances with leading biopharmaceutical companies, including AstraZeneca, Merck & Co., or Merck, and Vertex Pharmaceuticals, or Vertex, as well as government-sponsored and private organizations focused on global health initiatives, including Biomedical Advanced Research and Development Authority, or BARDA, Defense Advanced Research Projects Agency, or DARPA, and the Bill & Melinda Gates Foundation. As we unlock the inherent advantages of mRNA, we aim to address as many diseases and impact as many patients as our technology, talent, and capital permit.
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 of December 31, 2018, we have raised over $3.2 billion in total funding from a wide range of strategic sources, including $2.4 billion of financing from private equity financings and our initial public offering, or IPO, and $0.8 billion in upfront payments, milestone payments and option exercise payments from AstraZeneca, Merck, Alexion Pharma Holdings, or Alexion, and Vertex. As of December 31, 2018,2020, we had cash, cash equivalents and investments of approximately $1.7 billion.$5.25 billion, of which $82.1 million was related to product sales and $2.84 billion was related to customer deposits for the future supply of our COVID-19 vaccine. We use this capital to fund operations and investing activities across research for technology creation, drug discovery and clinical development programs, infrastructure and capabilities to enable the Research Engineour research engine and Early Development Engineearly development engine (which includes our manufacturing facility in Norwood)Moderna Technology Center), our digital infrastructure, creation of our portfolio of intellectual property, acquisition of key raw materials and supplies to support our commercial production quantities, development of a commercial team, expansion into global markets and administrative support.
On December 11, 2018, we completed our IPO, whereby we sold 26,275,993 shares of common stock at a price of $23.00 per share. The aggregate net proceeds from the IPO were $563.0 million, net of underwriting discounts, commissions and offering expenses. Upon the closing of the IPO, all outstanding shares of redeemable convertible preferred stock converted into 236,012,913 shares of common stock. As of December 31, 2018, we had 328,798,904 shares outstanding shares of our common stock.
Since our inception, we have incurred significant operating losses. Our net losses were $384.7$747.1 million, $255.9$514.0 million and $216.2$384.7 million for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively. As of December 31, 2018 ,2020, our accumulated deficit was $1.0 billion . We expect to$2.24 billion.
For the foreseeable future, 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, including as we:
•continue our platform research and drug discovery and development efforts;
•conduct clinical studiestrials for our investigational medicines;
•manufacture our COVID-19 vaccine;
•manufacture clinical studytrial 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;
•build up our commercial operations and organization; and
•continue to operate as a public company.
We do not expect to generate 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 anyfurther of our investigational medicines, we expect to incur significant commercialization expenses.
expenses, which include establishing a sales, marketing, manufacturing, and distribution infrastructure globally. As a result, we willmay need substantial additional funding to support our continued operations and pursue our growth strategy. Untilstrategy in addition to our product sales. If we can generate significant revenue from sales of our medicines, if ever,fail to become profitable or are unable to sustain profitability on a continuing basis, we expectmay be required 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 not be unableable 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 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 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.
The COVID-19 pandemic impacted certain of our business operations. For instance, we are experiencing disruptions in the conduct of certain of our clinical trials, including our ability to initiate and complete our clinical trials within the originally anticipated timelines. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may or continue to be paused or delayed. While to date we have not experienced significant disruptions in our supply chain and distribution, an extended duration of this pandemic could result in such disruptions in the future.
Financial Operations Overview
Revenue
To date,
The following table summarizes revenue for each period presented (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Revenue: | | | | | |
| Grant revenue | $ | 528,905 | | | $ | 12,173 | | | $ | 12,556 | |
| Product sales | 199,872 | | | — | | | — | |
| Collaboration revenue | 74,618 | | | 48,036 | | | 122,512 | |
| Total revenue | $ | 803,395 | | | $ | 60,209 | | | $ | 135,068 | |
We began to record product sales for our COVID-19 vaccine subsequent to its authorization for emergency use by the FDA and Health Canada in December 2020. For the year ended December 31, 2020, we have not generated any revenuerecognized $199.9 million of product sales from the salesales of potential mRNA medicines. Ourour COVID-19 vaccine.
Other than product sales, our revenue has been primarily derived from strategic alliances with strategic collaborators and government-sponsored and private organizations including BARDA, DARPA and the Gates Foundation and from strategic alliances with AstraZeneca, Merck and Vertex to discover, develop, and commercialize potential mRNA medicines.
The following is a summary
Table of revenue recognized for the years ended December 31, 2018, 2017 and 2016 (in thousands):
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Revenue: | | | | | |
Collaboration revenue(1) | $ | 122,512 |
| | $ | 176,974 |
| | $ | 101,536 |
|
| Grant revenue | 12,556 | | 28,851 | | 6,860 |
| Total revenue | $ | 135,068 |
| | $ | 205,825 |
| | $ | 108,396 |
|
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(1)
| Includes collaboration revenue from an affiliate. |
Total revenue for the years ended December 31, 2018, 2017 and 2016 was $135.1 million, $205.8 million and $108.4 million, respectively. Cash received from strategic alliances was $57.6 million, $43.1 million and $324.2 million for the years ended December 31, 2018, 2017 and 2016, 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 of December 31, 2018 and 2017 was $274.4 million and $339.7 million, respectively.
The following table summarizes collaboration revenue for the years ended December 31, 2018, 2017 and 2016periods presented (in thousands):
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| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Collaboration revenue: | | | | | |
| AstraZeneca | $ | 45,993 |
| | $ | 30,021 |
| | $ | 32,427 |
|
| Merck | 66,082 |
| | 62,895 |
| | 47,708 |
|
| Vertex | 10,437 |
| | 9,138 |
| | 3,456 |
|
| Alexion | — |
| | 74,365 |
| | 17,191 |
|
| Other | — |
| | 555 |
| | 754 |
|
| Total collaboration revenue | $ | 122,512 |
| | $ | 176,974 |
| | $ | 101,536 |
|
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| BARDA | $ | 521,652 | | | $ | 7,608 | | | $ | 6,736 | |
| Other grant revenue | 7,253 | | | 4,565 | | | 5,820 | |
| Total grant revenue | $ | 528,905 | | | $ | 12,173 | | | $ | 12,556 | |
Collaboration
Grant revenue from BARDA increased significantly in 2020, as a result of an award to accelerate development of our COVID-19 vaccine.
The following table summarizes collaboration revenue for the years endedperiods presented (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Collaboration revenue: | | | | | |
| AstraZeneca | $ | 32,624 | | | $ | 5,233 | | | $ | 45,993 | |
| Merck | 26,076 | | | 36,608 | | | 66,082 | |
| Vertex | 15,505 | | | 6,195 | | | 10,437 | |
| Other | 413 | | | — | | | — | |
| Total collaboration revenue | $ | 74,618 | | | $ | 48,036 | | | $ | 122,512 | |
We expect our product sales to significantly increase in 2021. As of December 31, 2018, 20172020, we had signed supply agreements of approximately $11.65 billion for the future supply of our COVID-19 vaccine and 2016 was generated primarilyhad deferred revenue of $3.80 billion associated with customer deposits received or billable under these agreements. Additional supply agreements have been agreed upon since December 31, 2020, and others are under discussion for 2021 and 2022 deliveries. In addition, we expect to continue to receive funding from our strategic alliancescontract with AstraZeneca, Merck, Vertex and Alexion. Our arrangements with Alexion were terminated in October 2017 and all rights to mRNA researched, developed, or supplied as partBARDA. As of December 31, 2020, the programs with Alexion reverted to us.
Grantremaining available funding net of revenue is generated primarily from contracts with DARPA, BARDA, and the Bill & Melinda Gates Foundation, to develop mRNA medicines.
For further information on our revenue recognition policies, see the section of this Annual Report on Form 10-K titled “Critical accounting policies and significant judgments and estimates—Revenue recognition.”
Our ability to generate revenue from sales of mRNA medicines and become profitable depends upon our ability to successfully develop and commercialize mRNA medicines. For the foreseeable future, we do not expect to generate revenue from product sales.earned was $444.3 million. To the extent that existing or potential future strategic alliancesproducts generate revenue, our revenue may vary due to many uncertainties in the independent development of our mRNA medicines under theseand pursuant to our strategic alliances and other factors.
We expect to continue to incur losses for the foreseeable future, and we expect these losses to increasesignificant expenses as we continue our research and development and commercialization efforts. We expect our programs to mature and advance 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. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may incur losses in the future.
Cost of Sales
Cost of Sales includes raw materials, personnel and facility and other costs associated with manufacturing our commercial product. These costs include production materials, production costs at our manufacturing facilities, third-party manufacturing costs, and final formulation and packaging costs. Cost of Sales also includes shipping costs and royalties payable to third parties based on sales of our products.
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 studies,trials, and in-licensing arrangements;
costs of•expenses associated with developing manufacturing capabilities and acquiring developing, and manufacturing materials for preclinical studies, clinical trials and clinical studies,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 years ended December 31, 2018, 20172020, 2019 and 20162018 (in thousands):
| | | | Years Ended December 31, | | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| Program expenses by modality: | | | | | | Program expenses by modality: | | | | | |
| Prophylactic vaccines | $ | 25,404 |
| | $ | 67,888 |
| | $ | 20,374 |
| Prophylactic vaccines | $ | 707,150 | | | $ | 47,650 | | | $ | 25,404 | |
| Cancer vaccines | 35,891 |
| | 31,818 |
| | 4,135 |
| Cancer vaccines | 29,440 | | | 44,003 | | | 35,891 | |
| Intratumoral immuno-oncology | 15,405 |
| | 20,340 |
| | 8,022 |
| Intratumoral immuno-oncology | 8,755 | | | 17,607 | | | 15,405 | |
| Systemic secreted and cell surface therapeutics | | Systemic secreted and cell surface therapeutics | 1,503 | | | 11,240 | | | 18,207 | |
| Localized regenerative therapeutics | 91 |
| | 1,684 |
| | 193 |
| Localized regenerative therapeutics | 4 | | | 3,326 | | | 91 | |
| Systemic secreted therapeutics | 18,207 |
| | 7,175 |
| | — |
| |
| Systemic intracellular therapeutics | 45,695 |
| | 3,093 |
| | — |
| Systemic intracellular therapeutics | 20,982 | | | 33,360 | | | 45,695 | |
Total program-specific expenses by modality (1) | 140,693 |
| | 131,998 |
| | 32,724 |
| Total program-specific expenses by modality (1) | 767,834 | | | 157,186 | | | 140,693 | |
| Other research and development expenses: | | | | | | Other research and development expenses: | |
| Discovery programs | 34,643 |
| | 40,190 |
| | 52,360 |
| Discovery programs | 55,601 | | | 55,376 | | | 34,643 | |
| Platform research | 91,720 |
| | 86,473 |
| | 83,414 |
| Platform research | 93,501 | | | 91,097 | | | 91,720 | |
| Technical development and unallocated manufacturing expenses | 83,117 |
| | 29,606 |
| | 36,016 |
| Technical development and unallocated manufacturing expenses | 279,489 | | | 85,304 | | | 83,117 | |
| Shared discovery and development expenses | 44,250 |
| | 47,513 |
| | 49,516 |
| Shared discovery and development expenses | 117,759 | | | 59,087 | | | 44,250 | |
| Stock-based compensation | 37,659 |
| | 21,679 |
| | 20,687 |
| Stock-based compensation | 56,155 | | | 48,259 | | | 37,659 | |
Other expenses(2) | 22,000 |
| | 53,000 |
| | — |
| Other expenses(2) | — | | | — | | | 22,000 | |
| Total research and development expenses | $ | 454,082 |
| | $ | 410,459 |
| | $ | 274,717 |
| Total research and development expenses | $ | 1,370,339 | | | $ | 496,309 | | | $ | 454,082 | |
__________
| |
(1)
| Includes a total of 21, 18 and 12 development candidates at December 31, 2018, 2017 and 2016, respectively. As of February 15, 2019, we have a total of 20 development candidates, as there will be no further development of our first Zika candidate, mRNA-1325. Program-specific expenses include external costs and allocated manufacturing costs of mRNA supply and consumables, and reflect these expenses beginning in the period the program was internally advanced to development. |
(1)Includes a total of 21 development candidates at each of December 31, 2020, 2019 and 2018. 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.
| |
(2)
| Relates to in-licensing agreements entered into in June 2017 with Cellscript, LLC and its affiliate mRNA RiboTherapeutics, Inc. to sublicense certain patent rights. |
(2)Relates to an in-licensing agreement entered into in June 2017 with Cellscript, LLC to sublicense certain patent rights.
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 program-specific coststhe 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 summary 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.
We have developed six modalities. As of February 15, 2019, we had 11 programs in clinical trials and a total of 20 development candidates, summarized by modality as follows:
Prophylactic vaccines included eight development candidates: RSV vaccine (mRNA-1777), CMV vaccine (mRNA-1647), hMPV+PIV3 vaccine (mRNA-1653), VZV vaccine (mRNA-1278), H10N8 vaccine (mRNA-1440), H7N9 vaccine (mRNA-1851), Zika vaccine (mRNA-1893), and Chikungunya vaccine (mRNA-1388). We currently have seven programs for which the Phase 1 trial is either ongoing or has been completed;
Cancer vaccines included two development candidates: Personalized cancer vaccine, or PCV, (mRNA-4157) and KRAS vaccine (mRNA-5671). We are collaborating with Merck on both programs. PCV is in a Phase 1 clinical trial and we and Merck have submitted a protocol to the FDA for a randomized Phase 2 clinical trial of mRNA-4157, and the KRAS vaccine has an open IND;
Intratumoral immuno-oncology included three development candidates: OX40L (mRNA-2416), OX40L+IL23+IL36γ (Triplet) (mRNA-2752), and IL12 (MEDI1191). The OX40L and OX40L+IL23+IL36γ programs are currently in Phase 1 clinical trials and the IND for a Phase 1 clinical trial of IL12 is open;
Localized regenerative therapeutics included one development candidate, VEGF-A (AZD8601). The program is being led by AstraZeneca through clinical development and is in a Phase 2a clinical trial;
Systemic secreted therapeutics included three development candidates: antibody against Chikungunya virus (mRNA-1944), Relaxin (AZD7970), and Fabry disease (mRNA-3630). The antibody against Chikungunya virus development candidate is in collaboration with DARPA and the program is in a Phase 1 clinical trial. The Relaxin program in collaboration with AstraZeneca and the Fabry disease program are both in preclinical development; and
Systemic intracellular therapeutics included three development candidates: MMA (mRNA-3704), PA (mRNA-3927), and PKU (mRNA-3283). The MMA program has an open IND, and the PA and PKU programs are in preclinical development.
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
As we continue to progress mRNA-1273 through the development process toward a Biologics License Application approval and indication expansion of mRNA-1273 during the current pandemic, we expect to continue to incur significant additional expenses. At this time, the magnitude of these potential expenditures is not known. In connection with the BARDA agreement to accelerate development of mRNA-1273, significant grant revenue and expenses are expected in 2021. BARDA's funding is expected to offset those expenses that are covered under the BARDA agreement, subject to our obtaining reimbursement from BARDA.
Changes 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, such as our CMV vaccine (mRNA-1647) and our COVID-19 vaccine, 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 and as we identify and develop additional programs. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. 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. Additionally,Moreover, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.
GeneralSelling, general and administrative expenses
General
We started to incur sales and marketing expenses in the fourth quarter of 2020 to prepare for commercial operations in connection with the sale of our COVID-19 vaccine. Selling, 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. Selling, general and administrative expenses, including IP-related expenses, totaled $188.3 million, $109.6 million and $94.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. IP-related expenses, including our internal personnel-related costs, were $13.5 million, $13.4 million and $11.9 million, for the years ended December 31, 2020, 2019 and 2018, respectively.
We anticipate selling, general and administrative expenses will increase as researchwe continue to expand the number of programs in development and development expands. These increases will likely relate toprepare for the establishment of commercial activities both within and outside the United States. We have already incurred additional personnel and increased costs related to finance, legal and IP-related matters along with increased expenses related to operating asbuilding out a publicly traded company, such as fees relatedregulatory, sales and marketing team to audit, legal,support the sale, marketing and tax services, regulatory compliance programs, and investor relations. In addition, ifdistribution of our COVID-19 vaccine. If we obtain regulatory approval for any of our investigational medicines, and do not enter into aone or more third-party commercialization collaboration and manufacturing arrangements, we expect towill incur significant additional expenses related to building a sales and marketing team to support medicine sales, marketing, and distribution activities.out these functions.
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 in the United States and foreign jurisdictions. Costs to secure and defend our IP are expensed as incurred, and are classified as selling, general and administrative expenses.
General and administrative expenses, including IP-related expenses, totaled $94.3 million, $64.7 and $57.5 for the years ended December 31, 2018, 2017 and 2016, respectively. IP-related expenses, including our internal personnel-related costs, were $11.9 million, $10.7 million and $10.9 million, for the years ended December 31, 2018, 2017 and 2016, respectively. We did not incur litigation expenses related to our IP during the years ended December 31, 2018, 2017 and 2016.
Other income (expense), net
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 income (expense)
Other income (expense),expense, net
Other expense, net consists of interest expense, gains (losses) from the sale of investments in marketable securities, interest expense, and other income and expense unrelated to our core operations. Interest expense is primarily derived from our finance leases related to our Moderna Technology Center manufacturing facility, or MTC South, and Moderna Technology Center North, or MTC North.
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 consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these 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 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 consolidated financial statements prospectively from the date of change in estimates.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our
consolidated financial statements require the most significant judgments and estimates.
Revenue recognition
Product Sales
Product sales are associated with our COVID-19 vaccine supply agreements with the U.S. Government and international government agencies. These agreements generally do not provide provisions for various forms of variable consideration, such as discounts, rebates or returns. We have primarily generatedrecognize revenue from our strategic alliances. product sales, using the five-step model under ASC 606, based on the fixed price per dose according to the contracts when control of the product transfers to the customer and customer acceptance has occurred, unless such acceptance provisions are deemed perfunctory.
Collaboration Revenue
Our strategic alliances with strategic collaborators typically contain multiple elements, including research and other licenses, options to obtain development and commercialization rights, research and development services, obligations to develop and manufacture preclinical and clinical material, and options to obtain additional research and development services and preclinical and clinical material. Such arrangements provide for various types of payments to us, including upfront fees, funding of research and development services and preclinical and clinical material, technical, development, regulatory, and commercial milestone payments, licensing fees, option exercise fees, and royalty and earnout payments on product
sales. Such payments are often not commensurate with the timing of revenue recognition and therefore result in deferral of revenue recognition.
We analyze our strategic alliancecollaboration arrangements to assess whether they are within the scope of Financial Standards Accounting Board, or FASB, Accounting Standards Codification or ASC Topic 808,Collaborative Arrangements (ASC 808), or ASC 808 to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. This assessment is performed throughout the lifeIf we conclude that some or all aspects of the arrangement based on changes in the responsibilities of all parties in the arrangement. For strategic alliance arrangements that are deemed to be within the scope of ASC 808, we assess which elements of the arrangement are deemed to be within the scope of ASC 808 and do not represent a transaction with a customer, we recognize our allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the related expense in the period incurred. If we conclude that some or all aspects of the arrangement represent a transaction with a customer, we account for those aspects of the arrangement within the scope of ASC 606 (Revenue from Contracts with Customers).
To determine the appropriate amount of revenue to be recognized for arrangements that we determine are within the scope of ASC 606, we perform the following steps: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) each performance obligation is satisfied. ASC 606 requires significant judgment and estimates and results in changes to, but not limited to: (i) the determination of the transaction price, including estimates of variable consideration, (ii) the allocation of the transaction price, including the determination of estimated selling price, and (iii) the pattern of recognition, including the application of proportional performance as a measure of progress on service-related promises and application of point-in-time recognition for supply-related promises.
The transaction price is generally comprised of an upfront payment due at contract inception and variable consideration in the form of payments for our services and materials and milestone payments due upon the achievement of specified events. Other payments the Company could be entitled to include tiered royalties earned when customers recognize net sales of licensed products. We also consider the guidanceexistence of any significant financing component within our arrangements and have determined that a significant financing component does not exist in FASB ASC Topic 605-45, Revenue Recognition—Principal Agent Considerations, or ASC 605-45 in determiningour arrangements as substantive business purposes exist to support the appropriate treatment forpayment structure other than to provide a significant benefit of financing. We measure the transactions between us and our strategic collaborators, includingtransaction price based on the accounting treatment for arrangements inamount of consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer. We utilize either the expected value method or the most likely amount method to estimate the amount of variable consideration, depending on which method is expected to better predict the amount of consideration to which we will be entitled. Amounts of variable consideration are reimbursedincluded in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. With respect to arrangements that include payments for research services performed by a third party. Generally, transactions underdevelopment or regulatory milestone payment, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within our strategic alliance arrangementscontrol or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement until the triggering event occurs. At the end of each reporting period, we re-evaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on either a grosscumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or net basis based onpredominant item to which the nature and contractual terms ofpayments relate, we recognize revenue upon the arrangement along with an evaluation oflater of: (i) when the indicatorsrelated sales occur or (ii) when the performance obligation to identify the principal participant of the arrangement which could require significant judgment.
For those elements of the arrangement that are accounted for under ASC 605, revenue is recognized for each unit of accounting whensome or all of the following criteria are met:
persuasive evidence of an arrangement;
deliverypayment has occurred been allocated has been satisfied (or partially satisfied). Consideration that would be received for optional goods and/or services have been rendered;is excluded from the transaction price at contract inception.
We generally allocate the seller’stransaction price to the buyer is fixed or determinable; and
collectability is reasonably assured.
Further, we analyze multiple element arrangements in accordance with FASB ASC Topic 605-25, Revenue Recognition—Multiple Element Arrangements, or ASC 605-25. The evaluation involves subjective determinations and requires management to make judgments about individual deliverables and whether such deliverables represent separate units of accounting, or whether they must be accounted for as a single unit of accounting. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customereach performance obligation based on a standalone basis, and (ii) if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially controlled by us. In assessing whether an item has standalone value, we consider factors such as the research, manufacturing, and commercialization capabilities of the strategic collaborator, and the availability of the associated expertise in the general marketplace. In addition, we consider whether the strategic collaborator can use the other deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s), and whether there are other vendors that can provide the undelivered element(s).
Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting based on the relative selling price method and the applicable revenue recognition criteria in ASC 605-25 are appliedbasis. We develop assumptions that require judgment to determine the appropriate period and pattern of recognition. We determine the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly, we determine the estimatedstandalone selling price for unitseach performance obligation in consideration of accounting within each arrangement using vendor-specific objective evidence, or VSOE, of selling price if available, third-party evidence, or TPE, of selling price if VSOE is not available, or best estimate of selling price, or BESP, if neither VSOE nor TPE is available. We typically use BESP to estimate the selling price, because we generally do not have VSOE nor TPE of selling price for our units of accounting. Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the strategic collaboratorcustomer and estimated research and development costs. We validateHowever, in certain instances, we allocate variable consideration entirely to one or more performance obligation if the BESPterms of the variable consideration relate to the satisfaction of the respective performance obligation and the amount allocated is consistent with the amount we would expect to receive for unitsthe satisfaction of accounting by evaluating whether changes in the key assumptions used to determine the BESP will have a significant effect on the allocationrespective performance obligation.
Table of arrangement consideration between multiple units of accounting.Contents
We recognize arrangement considerationrevenue based on the amount of the transaction price that is allocated to each unit of accountingrespective performance obligation when allor as the performance obligation is satisfied by transferring a promised good or service to the customer. For performance obligations that are satisfied at a point in time, we recognize revenue when control of the revenue recognition criteria under ASC 605-25goods and/or services is transferred to the customer. For performance obligations that are satisfied for that particular unit of accounting. We willover time, we recognize revenue associated with licenses, options, orby measuring the discount related to an option upon (i) deliveryprogress toward complete satisfaction of the license or (ii)performance obligation using a single method of measuring progress which depicts the earlier of exercise or expirationperformance in transferring control of the option, ifassociated goods and/or services to the underlyingcustomer. We generally use input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. With respect to arrangements containing a license has standalone valueto our intellectual property that is determined to be distinct from the other deliverables to be provided after delivering that license. Ifperformance obligations identified in the license does not have standalone value, thearrangement, we recognize revenue from amounts allocated to the license will be combinedwhen the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the related undelivered items as a single unit of accounting and recognized over the estimated period of performance or deliverynature of the combined unit of accounting.
Revenue relatedperformance obligation to the units of accounting that contain several deliverables is recognized as the last to be delivered element is provided, which is generally over the period that research services are provided. If there is no discernible pattern of performance or objectively measurable performance measures do not exist, we recognize revenue on a straight-line basis over the expected period of performance. Conversely, if the pattern of performance can be determined and objectively measurable performance measures exist, then we recognize revenue under the arrangement using the proportional performance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative revenue earned determined using the straight-line method or proportional performance, as applicable, as of the period end date.
Our third-party arrangements may include options for our strategic collaborators to acquire development and commercialization rights to our mRNA programs or, with respect to specific targets or options, to receive research and development services or pre-clinical or clinical materials from us. Options are considered substantive if, at the inception of the arrangement, we are at risk as todetermine whether the strategic collaborator will choose to exercisecombined performance obligation is satisfied over time or at a point in time and, if over time, the option. The evaluationappropriate method of whether an option is substantive requires significant judgment. In determining if the option is substantive, we consider the overall objectivemeasuring progress for purposes of the arrangement, the benefit the third party might obtain from the arrangement without exercising the option, the likelihood that the option will be exercised, or if the third partyrecognizing revenue. Significant management judgment is required or compelled through significant incentive to exercise the option. When an option is considered substantive, we do not consider the option or item underlying the option to be a deliverable at inception of the arrangement and the associated option fee is not included in the allocable arrangement consideration, assuming the option is not priced at a significant and incremental discount. Conversely, if we determine that an option is not substantive, we will consider the item underlying the option to be a deliverable at the inception of the arrangement and the associated option exercise fee is included in the allocable arrangement consideration. In addition, if the price of the option includes a significant and incremental discount, then the option is not considered substantive.
Our arrangements may include additional payments that are subject to achievement of milestone events, including specific technical, development, regulatory, and commercial milestones. At the inception of an arrangement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (i) the consideration is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) the consideration relates solely to past performance, and (iii) the consideration is reasonably relative to all of the deliverables and payment terms within the arrangement. We evaluate factors such as scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the respective milestones anddetermining the level of effort required under an arrangement and investment requiredthe period over which we are expected to achievecomplete our performance obligations under an arrangement. We evaluate the respective milestones in making this assessment. There is considerable judgment involved in determining whethermeasure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Any such adjustments are recorded on a milestone satisfies all of the criteria required to conclude that a milestone is substantive. In accordance with FASB ASC Topic 605-28, Revenue Recognition—Milestone Method, or ASC 605-28, a technical, development, or regulatory milestone that is considered substantive will be recognized ascumulative catch-up basis, which would affect revenue in its entirety upon successful accomplishment of the milestone. Amounts received from milestones that are not considered substantive would be considered additional arrangement consideration and allocated to the identified units of accounting. Revenue from commercial milestone payments will be accounted for as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.
We will recognize royalty revenuenet loss in the period of saleadjustment.
Prelaunch Inventory
Prior to an initial regulatory approval for our investigational medicines, we expense costs relating to raw materials and production of the related medicine(s), based on the underlying contract terms, provided that the reported sales are reliably measurable, we have no remaining undelivered elements,inventory as research and assuming all other revenue recognition criteria are met.
Our contracts with DARPA, BARDA, and the Bill & Melinda Gates Foundation provide for reimbursed costs, which may include overhead and general and administrative costs as well as a related profit margin. We recognize revenue from these contracts as we perform services under the arrangements so long as an agreement has been executed and the fees for the services are fixed or determinable, legally billable, and reasonably assured of collection. Recognized amounts reflectdevelopment expense in our performance under the agreements. We do not recognize revenue under these agreements for amounts related to contract periods where funding is not yet committed, as fees above committed funding thresholds would not be considered fixed or determinable, or reasonably assured of collection. Revenues and related expenses are presented gross in the 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.
Upon the authorization of distribution and use of our COVID-19 vaccine under an EUA in December 2020, we havebegan to capitalize inventory costs associated with our COVID-19 vaccine, as it was determined we are the primary obligor under the arrangements relativethat inventory costs incurred subsequent to the research and development services we perform as lead technical expert.EUA had a probable future economic benefit.
Research and development costs
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses, a significant portion of which are clinical study expenses conducted by third-party service providers. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us in arrears for services performed or when contractual milestones are met. Examples of estimated accrued research and development expenses include fees paid to:
•CROs to conduct our clinical trials;
•investigative sites in connection with clinical trials;
•vendors for laboratory services, supplies, and distribution of materials in connection with clinical trials; and
•vendors in connection with preclinical development activities.
We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with CROs that conduct and manage clinical trials on our behalf. The financial terms of these contracts are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period and adjust accordingly.
We make estimates of our research and development accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We recognize costs for certain development activities based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites, such as number of sites activated, number of patient enrollments and visits, and patient duration. We determine accrual estimates through financial models that take into account discussions with applicable personnel and service providers as to the progress or state of completion of trials. We periodically confirm the accuracy of these estimates with the service providers and make adjustments, if necessary. Upon settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements. Our historical accrual estimates have not been materially different from our actual costs. However, due to the nature of estimates, we
cannot provide assurance that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our research activities and clinical trials.
Stock-based compensation
We issue stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units. Historically, we also granted unit options and incentive units to our employees and non-employees, which were exchanged into options and restricted stock awards in connection with the series of transactions pursuant to which Moderna LLC became a wholly-owned subsidiary of Moderna Therapeutics, Inc., or the 2016 Reorganization (please refer to Note 1 to our consolidated financial statements). We measure and recognize compensation expense for our stock-based awards granted to our employees and non-employee directors based on the estimated grant date fair value in accordance with FASB ASC Topic 718, Compensation—Stock Compensation, or ASC 718. We account for stock-based awards to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, which requires the fair value of the unvested portion of the equity awards granted to non-employees to be re-measured as of each reporting date..
Our stock-based awards are subject to either service or performance-based vesting conditions. We recognize compensation expense related to awards to employees and non-employee directors with service-based vesting on a straight-line basis based on the grant date fair value over the requisite service period, which is generally the vesting period. Compensation expense related to awards to employees and non-employee directors with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using an accelerated attribution method to the extent the achievement of the performance condition is probable. Compensation expense related to awards to non-employees with service-based vesting conditions is recognized on the then-current fair value at each reporting date prior to the measurement date over the requisite service period, which is generally the vesting period. Compensation expense related to awards to non-employees with performance-based vesting conditions is recognized based on the then-current grant date fair value at each reporting date prior to the measurement date over the requisite service period using an accelerated attribution method to the extent the achievement of the performance condition is probable. As of January 1, 2017, weWe made an accounting policy election to recognize forfeitures of stock-based awards as they occur upon adoption of FASB ASU No. 2016-09, Compensation—Stock Compensation.
occur. We classify stock-based compensation expense in our consolidated statements of operations in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified. In future periods, we expect stock-based compensation expense to increase, due in part to our existing unrecognized stock-based compensation expense and as we grant additional stock-based awards to continue to attract and retain our employees.
We determine the fair value of restricted stock and restricted stock units, based on the fair value of our common stock. We estimate the fair value of our stock options and, prior to the 2016 Reorganization, unit options and incentive units using the Black-Scholes option pricing model, which requires inputs of subjective assumptions, including: (i) the expected volatility of our stock (or, prior to the 2016 Reorganization, units);stock; (ii) the expected term of the award; (iii) the risk-free interest rate; (iv) expected dividends; and (v) the fair value of common stock (or, prior to the 2016 Reorganization, units).stock. Due to the lack of company specific historical and implied volatility data, we based our estimate of expected volatility on the estimate and expected volatilities of a guideline group of publicly traded companies. For these analyses, we select companies with comparable characteristics to ours including enterprise value, risk profiles, and with historical share price information sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated
expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We estimate the expected term of our stock options granted to employees and non-employee directors using the simplified method, whereby, the expected term equals the average of the vesting term and the original contractual term of the option. We utilize this method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. For stock options granted to non-employees, we utilize the contractual term of the option as the basis for the expected term assumption. For the determination of the risk-free interest rates we utilize the U.S. Treasury yield curve for instruments in effect at the time of measurement with a term commensurate with the expected term assumption. The expected dividend yield is assumed to be zero as we have never paid dividends and do not have current plans to pay any dividends on our common stock. Historically, for periods prior to our IPO, the fair value of our equity instruments underlying our stock-based awards were determined on each grant date by our board of directors based on valuation estimates from management considering our most recently available independent third-party valuation of our equity instruments. Our board of directors also assessed and considered, with input from management, additional objective and subjective factors that we believed were relevant and which may have changed from the date of the most recent valuation through the grant date.
Income taxes
We account for income taxes based on an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. We determine our deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
Realization of our deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are uncertain. Valuation allowances are provided, if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2018,2020, we continued to maintain a full valuation allowance against all of our deferred tax assets based on management’s evaluation of all available evidence.
evidence, including our history of incurring significant losses from operations. We will continue to monitor the realizability of our deferred tax assets as we may generate profits in 2021 if we are able to fulfill our obligations under the supply agreements for our COVID-19 vaccine. We may release all or a portion of the valuation allowance in the near-term; however, the release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, our level of profitability, revenue growth, clinical program progression and expectations regarding future profitability. We may become subject to income tax audits and adjustments by local tax authorities. The nature of uncertain tax positions is subject to significant judgment by management and subject to change, which may be substantial. We develop our assessment of uncertain tax positions, and the associated cumulative probabilities, using internal expertise and assistance from third-party experts. As additional information becomes available, estimates are revised and refined. Differences between estimates and final settlement may occur resulting in additional tax expense.
We record reserves for potential tax payments to various tax authorities related to uncertain tax positions. These reserves are based on a determination of whether and how much of a tax benefit taken by us in our tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. Potential interest and penalties associated with such uncertain tax positions is recorded as a component of income tax expense. To date, no amount has been recorded for uncertain tax positions.
On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA) was enacted. The TCJA, among other things, contains significant changes to corporate taxation, including reduction
Table of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits.Contents
Due to the timing of the enactment and the complexity involved in applying the provisions of the TCJA, we made reasonable estimates and recognized the effects of the TCJA in our consolidated financial statements as of December 31, 2017. The TCJA resulted in a $64.1 million reduction to deferred tax assets and a corresponding reduction in our valuation allowance. As we collected and prepared necessary data, and interpreted the additional guidance of the TCJA, we completed our analysis to determine the effects of the TCJA as of December 31, 2018. No material adjustments were made in 2018.
Recently issued accounting pronouncements
We have reviewed all recently issued standards and have determined that other than as disclosed in Note 2 to our consolidated financial statements, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.
Results of operations
The following table summarizestables summarize our consolidated statements of operations for each period presented (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Change 2020 vs. 2019 |
| 2020 | | 2019 | | Change | | % |
| Revenue: | | | | | | | |
| Grant revenue | $ | 528,905 | | | $ | 12,173 | | | $ | 516,732 | | | 4,245 | % |
| Product sales | 199,872 | | | — | | | 199,872 | | | 100 | % |
| Collaboration revenue | 74,618 | | | 48,036 | | | 26,582 | | | 55 | % |
| Total revenue | 803,395 | | | 60,209 | | | 743,186 | | | 1,234 | % |
| Operating Expenses: | | | | | | | |
| Cost of sales | 7,933 | | | — | | | 7,933 | | | 100 | % |
| Research and development | 1,370,339 | | | 496,309 | | | 874,030 | | | 176 | % |
| Selling, general and administrative | 188,267 | | | 109,620 | | | 78,647 | | | 72 | % |
| Total operating expenses | 1,566,539 | | | 605,929 | | | 960,610 | | | 159 | % |
| Loss from operations | (763,144) | | | (545,720) | | | (217,424) | | | 40 | % |
| Interest income | 24,715 | | | 38,530 | | | (13,815) | | | (36) | % |
| Other expense, net | (6,084) | | | (7,526) | | | 1,442 | | | (19) | % |
| Loss before provision for (benefit from) income taxes | (744,513) | | | (514,716) | | | (229,797) | | | 45 | % |
| Provision for (benefit from) income taxes | 2,551 | | | (695) | | | 3,246 | | | (467) | % |
| Net loss | $ | (747,064) | | | $ | (514,021) | | | $ | (233,043) | | | 45 | % |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Revenue: | | | | | |
| Collaboration revenue | $ | 122,512 |
| | $ | 176,974 |
| | $ | 101,536 |
|
| Grant revenue | 12,556 |
| | 28,851 |
| | 6,860 |
|
| Total revenue | 135,068 |
| | 205,825 |
| | 108,396 |
|
| Operating Expenses: | | | | | |
| Research and development | 454,082 |
| | 410,459 |
| | 274,717 |
|
| General and administrative | 94,252 |
| | 64,722 |
| | 57,450 |
|
| Total operating expenses | 548,334 |
| | 475,181 |
| | 332,167 |
|
| Loss from operations | (413,266 | ) | | (269,356 | ) | | (223,771 | ) |
| Other income, net | 28,858 |
| | 13,360 |
| | 8,603 |
|
| Loss before provision for (benefit from) income taxes | (384,408 | ) | | (255,996 | ) | | (215,168 | ) |
| Provision for (benefit from) income taxes | 326 |
| | (80 | ) | | 1,043 |
|
| Net loss | $ | (384,734 | ) | | $ | (255,916 | ) | | $ | (216,211 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Change 2019 vs. 2018 |
| 2019 | | 2018 | | Change | | % |
| Revenue: | | | | | | | |
| Grant revenue | $ | 12,173 | | | $ | 12,556 | | | $ | (383) | | | (3) | % |
| Collaboration revenue | 48,036 | | | 122,512 | | | (74,476) | | | (61) | % |
| Total revenue | 60,209 | | | 135,068 | | | (74,859) | | | (55) | % |
| Operating Expenses: | | | | | | | |
| Research and development | 496,309 | | | 454,082 | | | 42,227 | | | 9 | % |
| General and administrative | 109,620 | | | 94,252 | | | 15,368 | | | 16 | % |
| Total operating expenses | 605,929 | | | 548,334 | | | 57,595 | | | 11 | % |
| Loss from operations | (545,720) | | | (413,266) | | | (132,454) | | | 32 | % |
| Interest income | 38,530 | | | 27,023 | | | 11,507 | | | 43 | % |
| Other (expense) income, net | (7,526) | | | 1,835 | | | (9,361) | | | (510) | % |
| Loss before (benefit from) provision for income taxes | (514,716) | | | (384,408) | | | (130,308) | | | 34 | % |
| (Benefit from) provision for income taxes | (695) | | | 326 | | | (1,021) | | | (313) | % |
| Net loss | $ | (514,021) | | | $ | (384,734) | | | $ | (129,287) | | | 34 | % |
Revenue
The following table summarizes
Total revenue increased by $743.2 million, or 1,234% in 2020, due to increases in grant revenue, product sales and collaboration revenue. Grant revenue increased by $516.7 million, or 4,245% in 2020, mainly due to an increase in revenue from BARDA related to our COVID-19 vaccine development in 2020. Product revenue by source for each period presented (in thousands):was $199.9 million in 2020 from sales of our COVID-19 vaccine
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | Change 2018 vs. 2017 | | Change 2017 vs. 2016 |
| | 2018 | | 2017 | | 2016 | | $ | | % | | $ | | % |
| Collaboration revenue | $ | 122,512 |
| | $ | 176,974 |
| | $ | 101,536 |
| | $ | (54,462 | ) | | (31 | )% | | $ | 75,438 |
| | 74 | % |
| Grant revenue | 12,556 |
| | 28,851 |
| | 6,860 |
| | (16,295 | ) | | (56 | )% | | 21,991 |
| | 321 | % |
| Total revenue | $ | 135,068 |
| | $ | 205,825 |
| | $ | 108,396 |
| | $ | (70,757 | ) | | (34 | )% | | $ | 97,429 |
| | 90 | % |
Total revenue decreased by $70.8$74.9 million, or 34%55% in 2018,2019, primarily due to decreasesdecrease in both collaboration revenue and grant revenue. Collaboration revenue decreased by $54.5$74.5 million, or 31%61% in 20182019, mainly due to decreased revenue across all our strategic alliances, particularly AstraZeneca and Merck, largely driven by higher revenue in 2017 due toour adoption of ASC 606 and the accelerated recognition of $70 million of revenue upon the terminationcompletion of the Alexion strategic alliance arrangementinitial four-year research period under the 2016 Merck Agreement. Grant revenue remained relatively flat in October 2017, partially2019. There was a decrease in revenue from DARPA as the research and development activities under the DARPA awards were substantially concluded at the end of 2018, offset by increases in collaboration revenue, primarily from AstraZeneca and to a lesser extent from Merck. Grant revenue decreased by $16.3 million, or 56% in 2018 largely attributable to a decrease in revenue of $13.4 million from the BARDA contract, primarily due to revisions to the Zika program and a focus on preclinical studies of mRNA-1893, a follow on to mRNA-1325.
Total revenue increased by $97.4 million, or 90% in 2017, due to increases in both collaboration revenue and grant revenue recognized in 2017. Collaboration revenue increased by $75.4 million, or 74% in 2017, mainly driven by $70.3 million of revenue recognized as a result of the termination of the Alexion strategic alliance arrangements. Grant revenue increased by $22.0 million, or 321% in 2017, largely attributable to the recognition of a full year of revenue from the BARDA contract, which was entered in the second half of 2016 in support of the development of an mRNA vaccine for Zika.Gates Foundation and BARDA.
Operating expenses
The following table summarizes
Cost of sales
We began capitalizing our operatingCOVID-19 vaccine inventory costs in December 2020, in connection with an Emergency Use Authorization from the FDA and an Interim Order from Health Canada for use of our COVID-19 vaccine, and based upon our expectation that these costs would be recoverable through commercialization of mRNA-1273. Prior to the capitalization of our COVID-19 vaccine inventory costs, such costs were recorded as research and development expenses in the period incurred. We expensed $242.0 million of pre-launch inventory costs in 2020. Our cost of sales were $7.9 million, or 4.0% of our product sales, in 2020, comprised of third-party royalties of $6.9 million and shipping and handling costs of $1.0 million as the associated inventory costs were expensed previously. If inventory sold during 2020 was valued at cost, our cost of sales for each period presented (in thousands):2020 would have been $62.4 million, or 31.2% of our product sales. At December 31, 2020, we had $187.5 million of zero-cost COVID-19 vaccine inventory that we expect to sell prior to March 31, 2021. We expect our cost of sales as a percentage of our product sales will increase, reflecting the full cost of manufacturing, subsequent to the utilization of our zero-cost mRNA-1273 inventory.
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | Change 2018 vs. 2017 | | Change 2017 vs. 2016 |
| | 2018 | | 2017 | | 2016 | | $ | | % | | $ | | % |
| Research and development | $ | 454,082 |
| | $ | 410,459 |
| | $ | 274,717 |
| | $ | 43,623 |
| | 11 | % | | $ | 135,742 |
| | 49 | % |
| General and administrative | 94,252 |
| | 64,722 |
| | 57,450 |
| | 29,530 |
| | 46 | % | | 7,272 |
| | 13 | % |
| Total operating expenses | $ | 548,334 |
| | $ | 475,181 |
| | $ | 332,167 |
| | $ | 73,153 |
| | 15 | % | | $ | 143,014 |
| | 43 | % |
Research and development expenses
Research and development expenses increased by $43.6$874.0 million, or 11%176% in 2018,2020. The increase was primarily attributable to an increase in clinical trial expenses of $321.2 million, an increase in manufacturing expenses of $301.7 million, an increase in personnel related costs of $105.2 million, an increase in technology and facility related expenses of $74.2 million, and an increase in consulting and outside services of $60.7 million. The increase in 2020 was largely attributable to mRNA-1273 clinical development and pre-launch inventory buildup prior to the authorization from the FDA. The increase in personnel related costs was primarily driven by an increase in the number of employees supporting our mRNA-1273 development activities as well as other research and development programs.
Research and development expenses increased by $42.2 million, or 9% in 2019. The increase was primarily attributable to an increase in personnel related costs of $26.6$37.4 million, an increase in clinical trial and manufacturing costs of $16.9 million, and an increase in stock-based compensation of $16.0 million, an increase$10.6 million. The increases were partially offset by a decrease in consulting and outside services of $13.1 million, an increase in facility and equipment relatedin-licensing costs of $12.4$22.0 million related to in-licensing agreements executed in 2017 with Cellscript, LLC and an increaseits affiliate mRNA RiboTherapeutics, Inc. (Cellscript) to sublicense certain patent rights, and a decrease in depreciationlab supplies and amortization expensematerials of $4.3$8.2 million. The increases in personnel related costs and stock-based compensation were largely driven by an increase in the number of employees supporting our research and development programs. These increasesThe in-licensing costs decreased in 2019 as the sublicense grant fees were partially offset byfully recognized at the end of 2018.
We expect that research and development expenses will increase as we continue to progress mRNA-1273 through the development process toward a decrease of $31.0 million inBLA approval and indication expansion during the current pandemic, and continue to develop our pipeline and advance our product candidates into later-stage development. In addition, we also expect to incur significant costs related to in-licensing agreements executed in 2017 with Cellscript, LLCthe development of new generations of our COVID-19 vaccine designed to address new variants of the virus.
Selling, general and its affiliate mRNA RiboTherapeutics, Inc. to sublicense certain patent rights.administrative expenses
Research
Selling, general and developmentadministrative expenses increased by $135.7$78.6 million, or 49%72% in 2017,2020. The increase was mainly due to an increase in personnel related costs of $30.9 million, an increase in consulting and outside services of $26.9 million, and an increase in legal and other licensing expenses of $14.2 million. The increases in personnel costs and consulting and outside services were primarily attributable to $53.0increased headcount and mRNA-1273 vaccine candidate commercialization-related activities.
General and administrative expenses increased by $15.4 million, or 16% in costs related2019. The increase was primarily due to in-licensing agreements executed in 2017 with Cellscript, LLC and its affiliate mRNA RiboTherapeutics, Inc. to sublicense certain patent rights, an increase in clinical trial and manufacturinginsurance costs of $45.1$5.2 million, for our preclinical studiesan increase in consulting and clinical trials,outside services of $4.9 million, an increase in information technology and facility-related costs of $4.0 million and an increase in personnel related costs of $36.5 million due to an increase$2.5 million. The increases in the numberinsurance costs,
Table of employees supporting our research and development programs.Contents
General and administrative expenses
General and administrative expenses increased by $29.5 million, or 46% in 2018, primarily due to an increase in stock-based compensation of $16.5 million, an increase in personnel related costs of $7.2 million, and an increase in consulting and outside services of $3.5 million. The increase in stock-based compensation was mainly attributable to certain performance-based equity awards with vesting or commencement contingent on our IPO and an increase in the number of employees. The increase in personnel related costs were primarily driven by an increase in the number of employees. These increasesemployees and the increase in consulting and outside services werecosts in support of our public company readiness.being a publicly traded company.
General
We expect that selling, general and administrative expenses increased by $7.3 million, or 13% in 2017, mainly due to anwill increase in personnel related costs of $6.7 million, driven by an increase in2021 as compared to 2020 as we continue to expand the number of employees.programs and our business operations, and continue to build out our global commercial, regulatory, sales and marketing infrastructure to support the commercialization of our COVID-19 vaccine.
Other
Interest income (expense), net
The following table summarizes other
Interest income (expense), net for each period presented (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | | Change 2018 vs. 2017 | | Change 2017 vs. 2016 |
| | 2018 | | 2017 | | 2016 | | $ | | % | | $ | | % |
| Interest income | $ | 27,023 |
| | $ | 15,235 |
| | $ | 11,312 |
| | $ | 11,788 |
| | 77 | % | | $ | 3,923 |
| | 35 | % |
| Gain (loss) on investment | 31 |
| | (1,085 | ) | | (2,399 | ) | | 1,116 |
| | (103 | )% | | 1,314 |
| | (55 | )% |
| Interest expense | (3,096 | ) | | (132 | ) | | (139 | ) | | (2,964 | ) | | 2245 | % | | 7 |
| | (5 | )% |
| Other income (expense), net | 4,900 |
| | (658 | ) | | (171 | ) | | 5,558 |
| | (845 | )% | | (487 | ) | | 285 | % |
| Total other income, net | $ | 28,858 |
| | $ | 13,360 |
| | $ | 8,603 |
| | $ | 15,498 |
| | 116 | % | | $ | 4,757 |
| | 55 | % |
Other income, net increased by $15.5 million, or 116% in 2018, primarily due to an increase of $11.8 million in interest incomegenerated from our investments in marketable securities drivendecreased by $13.8 million, or 36%, in 2020, mainly attributable to an overall higher marketlower interest rate andrate.
Interest income generated from our investments in marketable securities increased by $11.5 million, or 43%, in 2019, mainly driven by a higher weighted average balance of cash and investments, primarily from the net proceeds from the issuance of redeemable convertible preferred stock. our IPO.
Other (expense) income, net
The following tables summarizes other (expense), income, net for each period presented (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | Change 2020 vs. 2019 |
| 2020 | | 2019 | | Change | | % |
| Gain on investments | $ | 1,301 | | | $ | 323 | | | $ | 978 | | | 303 | % |
| Interest expense | (9,886) | | | (6,612) | | | (3,274) | | | 50 | % |
| Other income (expense), net | 2,501 | | | (1,237) | | | 3,738 | | | (302) | % |
| Total other expense, net | $ | (6,084) | | | $ | (7,526) | | | $ | 1,442 | | | (19) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Change 2019 vs. 2018 |
| 2019 | | 2018 | | Change | | % |
| Gain on investments | $ | 323 | | | $ | 31 | | | $ | 292 | | | 942 | % |
| Interest expense | (6,612) | | | (3,096) | | | (3,516) | | | 114 | % |
| Other (expense) income, net | (1,237) | | | 4,900 | | | (6,137) | | | (125) | % |
| Total other (expense) income, net | $ | (7,526) | | | $ | 1,835 | | | $ | (9,361) | | | (510) | % |
Total other expense, net decreased by $1.4 million, or 19% in 2020. The decrease was primarily due to an increase in foreign currency gains and a reclassification of other income in 2020, offset by a higher interest expense driven by a new finance lease commenced in 2020 for a laboratory and office space, Moderna Technology Center North (MTC North). Please refer to Note 11 to our consolidated financial statements.
Total other expense, net increased by $5.6$9.4 million in 2019. The increase was mainly dueattributable to a one-time $7.0 million cash receipt in 2018 as consideration for the waiver of a third party's previously negotiated commitment. This increase was partially offset bycommitment, and higher interest expense in 2019 of $3.0$3.5 million related to our Norwoodfinancing lease financing obligation.liabilities. We beganstarted recording the interest expense in July 2018 upon the completion of our NorwoodModerna Technology Center manufacturing facility, in July 2018.or MTC South. Please refer to Note 711 to theour consolidated financial statements.
OtherProvision for (benefit from) income net increased by $4.8 million, or 55% in 2017, primarily due to an increasetaxes
There was a tax provision of $3.9$2.5 million in interest2020, primarily related to foreign income from our investmenttaxes. There were no significant income tax benefits or provisions in marketable securities, driven by an overall higher market interest rate2019 and a higher weighted average balance2018.
Table of cash and investments during 2017 compared to 2016, and a decrease of $1.3 million in loss from the sale of our investments in marketable securities in 2017 compared to 2016.Contents
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. During 2020, we entered into supply agreements with the U.S. Government and several governmental agencies outside the United States for the supply of mRNA-1273, our COVID-19 vaccine, and received upfront deposits of $2.92 billion, of which $82.1 million was recognized as product sales. In addition, we raised $1.85 billion in total through two public equity offerings in 2020. As of December 31, 2018, we have raised an aggregate of $2.4 billion of proceeds through private equity financing and from our IPO, and $0.8 billion from upfront payments, milestone payments, and option exercise fees related to our strategic alliances. As of December 31, 2018,2020, we had cash, cash equivalents and investments of $1.7$5.25 billion. Cash, and 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 of December 31, 2018,2020, we had current and non-current investments of approximately $863.1 million$1.98 billion and $173.0 million,$0.64 billion, respectively.
We began construction of our Norwood manufacturingMTC South facility, or Norwood, in the second half of 2016.2016 and completed construction in 2019. In the second quarter of 2019, we entered into an additional lease for office and laboratory space nearby for our MTC North facility and construction on this facility began in 2019, and is continuing. Our capital expenditures related to Norwoodour MTC facilities were $86.5$46.6 million, $59.9$3.9 million and $18.2$86.5 million for the years ended December 31, 2018, 2017,2020, 2019 and 2016,2018, respectively. Cash disbursements related to Norwoodour MTC facilities were $94.5$41.7 million, $41.2$14.6 million and $3.1$94.5 million for the years ended December 31, 2020, 2019 and 2018, 2017, and 2016, respectively. Norwood officially opened in July 2018.
On January 30, 2018 and February 15, 2018, we issued Series G preferred stock for total gross proceeds of $560.0 million. On May 7, 2018, we issued Series H preferred stock for gross proceeds of $125.0 million of which $13.0 million iswas determined to be a premium and recorded to deferred revenue as part of the Merck PCV/SAV agreement executed contemporaneously with our Series H redeemable convertible preferred stock issuance. Please refer to Note 3 to our consolidated financial statements.
On December 11, 2018, we closed our IPO, whereby we sold 26,275,993 shares of common stock at a price of $23.00 per share. The shares began trading on the NASDAQ Global Select Market on December 7, 2018. The aggregate net proceeds received by us from the IPO were $563.0 million, net of underwriting discounts, commissions and offering expenses payable by us.expenses.
In February 2020, we completed a public equity offering of 30,263,158 shares of common stock, including exercise of the underwriters' option over-allotment option, at a price of $19.00 per share. The aggregate net proceeds from the offering were $549.5 million, net of underwriting discounts, commissions and offering expenses.
In May 2020, we completed a public equity offering of 17,600,000 shares of common stock, at a price of $76.00 per share. The aggregate net proceeds from the offering were $1.30 billion, net of underwriting discounts, commission and offering expenses.
We have used and intend to use the net proceeds from these equity offerings: (i) to fund working capital needs (raw materials, labor and capital equipment purchases) related to the manufacturing of mRNA-1273 for distribution in the United States and outside the United States, assuming necessary regulatory approvals are obtained and the remainder, if any, (ii) to fund clinical development and drug discovery in existing and new therapeutic areas, (iii) to fund further development of our mRNA technology platform and the creation of new modalities, or (iv) to fund working capital and other general corporate purposes.
Cash flow
The following table summarizes the primary sources and uses of cash for each period presented (in thousands):
| | | | Years Ended December 31, | | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| Net cash provided by (used in): | | | | | | Net cash provided by (used in): | | | | | |
| Operating activities | $ | (330,865 | ) | | $ | (331,484 | ) | | $ | 66,734 |
| Operating activities | $ | 2,026,971 | | | $ | (458,968) | | | $ | (330,865) | |
| Investing activities | (372,472 | ) | | 416,095 |
| | (648,607 | ) | Investing activities | (1,671,928) | | | (14,945) | | | (373,094) | |
| Financing activities | 1,226,842 |
| | 168 |
| | 472,910 |
| Financing activities | 2,033,193 | | | 51,121 | | | 1,226,842 | |
| Net increase (decrease) in cash and cash equivalents | $ | 523,505 |
| | $ | 84,779 |
| | $ | (108,963 | ) | Net increase (decrease) in cash and cash equivalents | $ | 2,388,236 | | | $ | (422,792) | | | $ | 522,883 | |
Operating activities
We derive cash flows from operations primarily from cash collected from customer deposits related to our COVID-19 vaccine supply agreements as well as certain government-sponsored and private organizations and strategic alliances. Our cash flows from operating activities are significantly influencedaffected by our use of cash for operating expenses and working capital to support the business. WePrior to 2020, we have historically experienced negative cash flows from operating activities as we have invested early in our mRNA technologies, development pipeline, digital infrastructure, manufacturing technology, and infrastructure.
Net cash provided by operating activities in 2020 was $2.03 billion and consisted of net loss of $747.1 million less non-cash adjustments of $197.0 million, plus a net change in assets and liabilities of $2.58 billion. Non-cash items primarily included stock-based compensation of $93.0 million, leased assets expensed of $62.3 million, depreciation and amortization of $31.3 million, and amortization of investment premiums and discounts of $10.2 million. The net change in assets and liabilities was primarily due to an increase in deferred revenue of $3.84 billion, an increase in accrued liabilities of $388.4 million, an increase in accounts payable of $11.9 million, and an increase in operating lease liabilities of $11.8 million, partially offset by an increase in accounts receivable of $1.39 billion, an increase in prepaid expenses and other assets of $241.0 million, an increase of inventory of $46.5 million, and an increase in operating lease right-of-use assets of $10.5 million.
Net cash used in operating activities in 2019 was $459.0 million and consisted of net loss of $514.0 million less non-cash adjustments of $108.7 million, plus a net change in assets and liabilities of $53.7 million. Non-cash items primarily included stock-based compensation of $81.1 million, depreciation and amortization of $31.0 million, and amortization of investment premiums and discounts of $3.7 million. The net change in assets and liabilities was primarily due to a decrease in deferred revenue of $44.1 million, a decrease in accounts payable of $24.0 million, a decrease in other liabilities of $6.2 million, an increase in right-of-use assets, operating leases of $5.7 million and an decrease in accrued liabilities of $3.4 million, partially offset by an increase in operating lease liabilities, non-current of $12.6 million, a decrease in prepaid expenses and other assets of $9.8 million and a decrease in accounts receivable of $6.7 million.
Net cash used in operating activities in 2018 was $330.9 million and consisted of net loss of $384.7 million less non-cash adjustments of $96.5 million, plus a net change in assets and liabilities of $42.6 million. Non-cash items primarily included stock-based compensation of $72.6 million and depreciation and amortization of $24.9 million. The net change in assets and liabilities was primarily due to a decrease in deferred revenue of $65.3 million, and an increase in prepaid expenses and other assets of $5.3 million, partially offset by an increase in accounts payable of $15.0 million and an increase in accrued liabilities of $8.8 million.
Net cash used in operating activities in 2017 was $331.5 million and consisted of net loss of $255.9 million less non-cash adjustments of $61.7 million, plus a net change in assets and liabilities of $137.2 million. Non-cash items primarily included stock-based compensation of $40.1 million and depreciation and amortization of $20.5 million. The net change in assets and liabilities in 2017 was primarily due to a decrease in deferred revenue of $162.3 million mainly driven by revenue recognition of $70.3 million resulting from termination of Alexion strategic alliance arrangements, a decrease in accounts payable of $12.8 million, partially offset by an increase in accrued liabilities of $34.4 million including a $25.0 million in-license payment accrual.
Net cash provided by operating activities in 2016 was $66.7 million and consisted of net loss of $216.2 million less non-cash adjustments of $57.0 million, plus a net change in assets and liabilities of $226.0 million. Non-cash items primarily included stock-based compensation of $39.4 million and depreciation and amortization of $15.1 million. The net change in assets and liabilities in 2016 was mainly driven by an increase in deferred revenue of $164.1 million largely attributable to the upfront payments of $200.0 million and $20.0 million received in 2016 under the strategic alliance arrangements with Merck and Vertex, respectively, a decrease in accounts receivable of $52.3 million mainly attributable to the collection of $60.0 million milestone payment in 2016 under the AstraZeneca strategic alliance arrangements, an increase in accounts payable of $5.9 million, and an increase in accrued liabilities of $5.3 million.
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 in 2020 was $1.67 billion, which included purchases of marketable securities of $2.96 billion and purchases of property and equipment of $67.4 million, partially offset by proceeds from maturities of marketable securities of $1.14 billion and proceeds from sales of marketable securities of $214.7 million.
Net cash used in investing activities in 2019 was $14.9 million, which included purchases of marketable securities of $1.15 billion and purchases of property and equipment of $31.6 million, partially offset by proceeds from maturities of marketable securities of $993.2 million and proceeds from sales of marketable securities of $168.7 million.
Net cash used in investing activities in 2018 was $372.5$373.1 million, which included purchases of marketable securities of $1,227.7 million$1.23 billion and capital expenditurespurchases of property and equipment of $105.8 million, partially offset by proceeds from maturities of marketable securities of $783.4 million and proceeds from sales of marketable securities of $177.0 million.
Net cash provided by investing activities in 2017 was $416.1 million, which included proceeds from maturities of marketable securities of $800.4 million, proceeds from sales of marketable securities of $402.5 million, partially offset by purchases of marketable securities of $727.2 million, and capital expenditures of $58.4 million.
Net cash used in investing activities in 2016 was $648.6 million, which included purchases of marketable securities of $1,415.5 million, capital expenditures of $33.1 million, and an increase in restricted cash of $8.9 million, partially offset by proceeds from maturities of marketable securities of $675.2 million, and proceeds from sales of marketable securities of $133.7 million.
Financing activities
We generated cash from financing activities of $1,226.8$2.03 billion in 2020, primarily from net proceeds from equity offerings of $1.85 billion, net proceeds from the issuance of common stock through our equity plans of $179.6 million, and proceeds from the purchase of common stock under our employee stock purchase plan of $7.0 million.
We generated cash from financing activities of $51.1 million in 2019, primarily from net proceeds from the issuance of common stock under our equity plans of $47.3 million, and net proceeds from the purchase of common stock from our employee stock purchase plan of $2.9 million.
We generated cash from financing activities of $1.23 billion in 2018, primarily from net proceeds from the issuance of redeemable convertible preferred stock of $661.1 million and net proceeds from the issuance of common stock of $563.0 million in connection with our IPO.
We had insignificant financing activities in 2017.
We generated cash from financing activities of $472.9 million in 2016 primarily from net proceeds from the issuance of preferred stock of $473.5 million.
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 $1,006.6 million$2.24 billion and $621.9 million$1.50 billion as of December 31, 20182020 and 2017,2019, respectively. We expect to continue to incur significant losses in the foreseeable future and expect our expenses to increase in connection with our ongoing activities, particularly as we continue research and development of our development candidates and clinical activities for our investigational medicines. In addition, weWe also expect our expenses to incur additional costsincrease associated with operating as a public company. Our expenses will also increase if, and as, we:
leveragemanufacturing costs, including our platform to expandarrangements with our programs or advance our programs into preclinical and clinical development;
further develop our current programs;
seek to research and develop additional programs;
seek to research and develop additional modalities of mRNA medicines;
seek regulatory approvals for any investigational medicines that successfully complete clinical trials;
increase manufacturing capacity and production volume;
hire additional clinical, manufacturing, quality control, and scientific personnel, expand our operational, financial, and management systems, and increase personnel, including personnel to support our clinical developmentinternational supply and manufacturing effortspartners. Our ongoing work on mRNA-1273 will require significant cash outflows during 2021, most of which may not be reimbursed or otherwise paid for by our partners or collaborators.
We believe that our cash, cash equivalents, and investments as of December 31, 2020, will be sufficient to enable us to fund our projected operations as a public company;
establish a sales, marketing, medical affairs, and distribution infrastructure to commercialize any investigational medicine for which we may obtain marketing approval and intend to commercialize onthrough at least the next 12 months from the issuance of our own or jointly;
maintain, expand, and protect our intellectual property portfolio; and
acquire or in-license other programs and technologies.
financial statements. 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 thatincluding 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 of December 31, 2018, will
If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be sufficient to enable us to fund our projected operations through at least the next 12 months.
Our future funding requirements will depend on many factors, including, but not limited to:
the rate of progress in the development of our development candidates;
the initiation, progress, timing, costs, and results of clinical trials for our investigational medicines and future investigational medicines;
the number and characteristics of programs that we develop;
the costs of development efforts for our programs that are not subject to reimbursement from our strategic collaborators;
the costs of mRNA materials;
the costs necessary to obtain regulatory approvals, if any, for our investigational medicines in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained;
the continuation of our existing strategic alliances and entry into new collaborations;
the cost and timing of completion of additional manufacturing facilities and activities, including potential commercial-scale manufacturing;
the costs we incur in maintaining business operations;
the costs associated with being a public company;
the revenue from any future sales of any approved mRNA medicines for which we are entitled to a profit share, royalties and milestones;
the time and unreimbursed costs necessary to commercialize mRNA medicines in territories in which our investigational medicines are approved for sale;
the effect of competing technological and market developments; and
the costs we incur in the filing, prosecution, maintenance, and defense of our extensive patent portfolio and other intellectual property rights.
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 orofferings, structured financings and debt offerings andfinancings, government funding arrangements, potential future strategic alliances from which we receive upfront fees, milestone payments, and other forms of consideration. Additionalconsideration, and marketing, manufacturing, distribution and licensing arrangements. If we are required to finance future cash needs, 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.
Off balance sheet arrangements
As of December 31, 2018,2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual obligations and commitments
The following table summarizes our contractual obligations as of December 31, 20182020 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| | Total | | Less than 1
year | | 1 - 3 years | | 3 - 5 years | | More than 5
years |
Norwood leases(1) | $ | 103,277 |
| | $ | 6,388 |
| | $ | 13,259 |
| | $ | 13,929 |
| | $ | 69,701 |
|
Operating leases, excluding Norwood leases (2) | 108,492 |
| | 13,639 |
| | 28,082 |
| | 23,513 |
| | 43,258 |
|
Purchase obligations(3) | 2,478 |
| | 937 |
| | 1,541 |
| | — |
| | — |
|
License agreement obligations(4) | 22,000 |
| | 22,000 |
| | — |
| | — |
| | — |
|
| Total contractual cash obligations | $ | 236,247 |
| | $ | 42,964 |
| | $ | 42,882 |
| | $ | 37,442 |
| | $ | 112,959 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| Total | | Less than 1 year | | 1 - 3 years | | 3 - 5 years | | More than 5 years |
Operating leases (1) | $ | 173,747 | | | $ | 15,492 | | | $ | 31,921 | | | $ | 32,735 | | | $ | 93,599 | |
Financing leases (1) | 513,312 | | | 36,579 | | | 23,902 | | | 24,772 | | | 428,059 | |
Purchase obligations (2) | 686,472 | | | 677,539 | | | 8,855 | | | 78 | | | — | |
Total contractual cash obligations (1) | $ | 1,373,531 | | | $ | 729,610 | | | $ | 64,678 | | | $ | 57,585 | | | $ | 521,658 | |
_______
| |
(1)(1)The amounts in the table include a total payment of $338.9 million associated with our MTC South and MTC North leases for the optional lease extension periods. For accounting purpose, a lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised. Please refer to Note 11 to our consolidated financial statements. (2)The amounts represent non-cancelable fixed payment obligations related to purchases of raw materials, contract manufacturing services, clinical services and other goods or services in the normal course of business.
| We lease land and a building located in Norwood, MA. The Norwood leases for the building facilities, land, and adjacent land, will each expire in September 2032 with options to extend each of the terms for two extension periods of ten years each at then market-based rent. The amounts in the table above represent the fixed contractual lease obligations, and do not include the optional extensions. Please refer to Note 7 to our consolidated financial statements. |
| |
(2)
| We have various lease agreements for office and laboratory space in Cambridge, MA, expiring at various times through December 2027. |
| |
(3)
| The amounts represent non-cancellable fixed payment obligations under certain clinical service agreements. |
| |
(4)
| We have license agreements with a non-cancelable fixed payment obligation with Cellscript, LLC and its affiliate mRNA RiboTherapeutics, Inc. We have not included variable and contingent payments including annual license maintenance fees, potential milestone payments, and royalty payments because each of these amounts are not fixed and estimable. Cellscript, LLC and its affiliate mRNA RiboTherapeutics, Inc. are, however, eligible to receive, on a product-by-product basis, milestone payments upon the achievement of development, regulatory and commercial milestones totaling up to $25.5 million for therapeutic and prophylactic products and $0.5 million for diagnostic products. Additionally, we have other in-license agreements with third parties which require us to make future development, regulatory and commercial milestone payments for specified products associated with the agreements. The achievement of these milestones has not occurred and such milestone payments are immaterial. |
Under our strategic collaboration agreements, we are committed to perform certain research, development, and manufacturing activities. Please refer to Note 3 to the consolidated financial statements. As part of our personalized mRNA cancer vaccines, or PCV, collaboration and license agreement with Merck, we are committed to perform certain research, development, and manufacturing activities related to PCV products through an initial Phase 2 clinical trial up to a budgeted amount of $200.0$243.0 million as of December 31, 2018. In April 2018, we amended the PCV agreement with Merck and the budgeted commitment increased to $243.0 million.2020. Please refer to Note 35 to the consolidated financial statements. The expenses we expect to incur as part of our commitments under the PCV and other collaboration agreements were not included in the above table as we are not able to determine the timing and amounts of such expenses.
We have agreements with certain vendors for various services, including services related to clinical operations and support and contract manufacturing, which we are not contractually able to terminate for convenience. Certain agreements provide for termination rights subject to termination fees or wind down costs. Under such agreements, we are contractually obligated to make certain payments to vendors, mainly to reimburse them for their unrecoverable outlays incurred prior to cancellation. The exact amounts of such obligations are dependent on the timing of termination, and the exact terms of the relevant agreement and cannot be reasonably estimated. At December 31, 2018,2020, we had cancelable open purchase orders of $64.2$896.9 million in total under such agreements for our clinical operations and support.support and contract manufacturing. These amounts represent only our estimate of those items for which we had a contractual commitment to pay at December 31, 2018,2020, assuming we would not cancel these agreements. The actual amounts we pay in the future to the vendors under such agreements may differ from the cancelable open purchase order amounts of $64.2$896.9 million.
In addition to the above obligations, we enter into a variety of agreements and financial commitments in the normal course of business. The terms generally allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. It is not possible to predict the maximum potential amount of future payments
under these agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement.
In February 2019, we entered into a lease agreement for office and laboratory space located in Norwood, MA, or the new Norwood lease. The rent payment obligation for the new Norwood lease will commence fourteen months after the date the premises are delivered to us and expire in 2031. Contemporaneously, we entered into a sublease agreement to sublease a portion of the new Norwood lease space to a third party.
The following table summarizes our contractual obligations in connection the new Norwood lease and the effects that such obligations are expected to have on our liquidity and cash flows in future periods from December 31, 2018 (in thousands): |
| | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| | Total | | Less than 1
year | | 1 - 3 years | | 3 - 5 years | | More than 5
years |
| New Norwood lease, net of sublease income | $ | 39,336 |
| | $ | — |
| | $ | 5,401 |
| | $ | 6,510 |
| | $ | 27,425 |
|
JOBS Act and emerging growth company status
In April 2012, the JOBS Act was enacted. As an "emerging growth company," or EGC under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. Additionally, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, while we are an EGC we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not EGCs.
We will remain classified as an EGC until the earlier of (i) the last day of our first fiscal year in which we have total annual gross revenues of $1.07 billion or more, (ii) December 31, 2023, being the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (iii) the date on which we have issued more than $1.0 billion of non-convertible debt instruments during the previous three fiscal years, or (iv) the date on which we are deemed a “large accelerated filer” under the rules of the SEC .
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our primary exposure to market risk relates to changes in interest rates. As of December 31, 20182020 and 2017,2019, we had cash, cash equivalents, restricted cash, and investments in marketable securities of $1.7$5.25 billion and $0.9$1.26 billion, respectively. Our investment portfolio is comprised ofcomprises money market funds and marketable debt securities (including U.S. Treasury securities, debt securities of U.S. government agencies and corporate entities, and commercial paper)., which are classified as available-for-sale securities. Our primary investment objectives are the preservation of capital and the maintenance of liquidity, and our investment policy defines allowable investments based on quality of the institutions and financial instruments designed to minimizehave very low risk exposure. We generally hold investments in marketable debt securities to maturity to limit our exposure to interest rate risk. Our exposure to interest rate sensitivity is affected by changes in the general level of U.S. interest rates.
Our available for salemarketable securities are subject to interest rate risk and will fall in value if market interest rates increase.
We generally hold investments in marketable debt securities to maturity to limit our exposure to interest rate risk. Due to the short-term maturities and low risk profiles of our investments, we do not anticipate a significant exposure to interest rate risk. If market interest rates were to increase immediately and uniformly by 100 basis points, or one percentage point from levels at December 31, 20182020 and 2017,2019, the net fair value of our interest sensitive marketable securities would not experience a material change in fair market value.
We currently do not have significant exposure to foreign currencies as we hold no foreign exchange contracts, option contracts, or other foreign hedging arrangements. Further, our operations andForeign Currency Risk
Our revenue generating activities areand operations have been primarily denominated in U.S. dollars. OurAs we expand internationally our results of operations may beand cash flows will become increasingly subject to fluctuations due to changes in foreign currency exchange rates. To help manage the exposure to foreign currency exchange rate fluctuations, we have implemented a balance sheet hedging program.
Balance Sheet Hedging Activities
We use foreign currency forward contracts to mitigate foreign currency exchange risk associated with foreign currency-denominated monetary assets and liabilities. Notwithstanding our efforts to mitigate some foreign currency exchange risks, there can be no assurance that our hedging activities will adequately protect us against the risks associated with foreign currency fluctuations. We believe the counterparties to our foreign currency forward contracts are creditworthy multinational commercial banks. While we believe the risk of counterparty nonperformance is not material, a sustained decline in the financial stability of financial institutions as a result of disruption in the financial markets could affect our ability to secure creditworthy counterparties for our foreign currency hedging programs.
As of December 31, 2020, a hypothetical adverse movement of 10 percent in foreign currency exchange rates compared to the U.S. dollars across all maturities would have resulted in potential declines in the future.
Inflation generally affects us by increasing our cost of labor. We do not believe that inflation had a material effectfair value on our business, financial condition,foreign currency forward contracts used in balance sheet hedging of approximately $36.5 million. We expect that any increase or resultsdecrease in the fair value of operations during the years ended December 31, 2018, 2017 and 2016.portfolio would be substantially offset by increases or decreases in the underlying exposures being hedged. We did not have any foreign currency hedge activities prior to 2020.
Item 8. Financial Statements and Supplementary Data
MODERNA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Moderna, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Moderna, Inc. (the Company) as of December 31, 20172020 and 2018,2019, the related consolidated statements of operations, comprehensive loss,, redeemable convertible preferred stock and stockholders' (deficit)stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018,2020, and the related notes(collectively (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| | | | | | | | |
| | |
| | Collaboration Revenue |
| Description of the Matter | | As discussed in Note 2 to the consolidated financial statements, the Company recognizes revenue under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606). The Company recognized $74.6 million in collaboration revenue for the year ended December 31, 2020.
The Company recognizes revenue based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good or service to the customer. In determining the total revenue to be recognized under the proportional performance models, the Company develops assumptions that require judgment to determine the total expected effort for each performance obligation, including both internal and external estimated research and development costs. For performance obligations that are satisfied at a point in time, the Company recognizes revenue when control of the goods and/or services is transferred to the customer. For performance obligations that are satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Auditing the Company’s proportional performance models is especially challenging because the assessment of progress required a high degree of audit judgment due to the subjectivity, including estimating the remaining research and development costs necessary to satisfy a performance obligation. The recognition of revenue pursuant to collaboration arrangements is subject to these estimates and judgments developed by management, as the underlying proportional performance models are sensitive to changes in the assumptions, including the Company’s estimate in determining the remaining level of effort required under an arrangement.
|
| How We Addressed the Matter in Our Audit | | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the collaboration revenue recognition process. This included testing controls over the review of management's significant judgments and estimates related to the inputs to the proportional performance model including (i) an estimate of the total and remaining pre-clinical and clinical activities, (ii) an estimate of the total and remaining amount of clinical material to be delivered and (iii) an estimate of the total and remaining costs to
be incurred related to each performance obligation.
To evaluate the Company’s proportional performance models utilized for the Company’s ongoing recognition of revenue for its collaborative arrangements, our audit procedures included, among others, reading the agreements and all related schedules, and testing the accuracy and completeness of the underlying data used in evaluating the estimates and significant judgments, described above. To assess the reasonableness of the Company’s significant estimates and judgments, we corroborated management estimates and judgments through a review of the agreements and evaluated the accuracy of the prior period estimates and judgments as a potential source of corroborating or contradictory evidence. We also discussed the judgments with the Company’s research and development personnel that oversee the collaboration arrangements.
|
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2014.
Boston, MAMassachusetts
March 13, 2019February 26, 2021
MODERNA, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
| | | | December 31, | | December 31, |
| | 2018 | | 2017 | | 2020 | | 2019 |
| Assets | �� | | | Assets | | | |
| Current assets: | | | | Current assets: | |
| Cash and cash equivalents | $ | 658,364 |
| | $ | 134,859 |
| Cash and cash equivalents | $ | 2,623,850 | | | $ | 235,876 | |
| Investments | 863,063 |
| | 621,170 |
| Investments | 1,983,758 | | | 867,124 | |
| Accounts receivable | 11,686 |
| | 11,881 |
| Accounts receivable | 1,390,560 | | | 5,369 | |
| Accounts receivable from affiliate (Note 14) | 899 |
| | 1,536 |
| |
| Inventory | | Inventory | 46,527 | | | 0 |
| Prepaid expenses and other current assets | 28,399 |
| | 12,826 |
| Prepaid expenses and other current assets | 252,152 | | | 19,403 | |
| Restricted cash | 595 |
| | 951 |
| Restricted cash | 1,032 | | | 1,032 | |
| Total current assets | 1,563,006 |
| | 783,223 |
| Total current assets | 6,297,879 | | | 1,128,804 | |
| Investments, non-current | 172,990 |
| | 145,851 |
| Investments, non-current | 638,848 | | | 159,987 | |
| Property and equipment, net | 211,977 |
| | 139,031 |
| Property and equipment, net | 296,889 | | | 201,495 | |
| Right-of-use assets, operating leases | | Right-of-use assets, operating leases | 90,201 | | | 86,414 | |
| Restricted cash, non-current | 11,532 |
| | 11,798 |
| Restricted cash, non-current | 11,053 | | | 10,791 | |
| Other non-current assets | 2,644 |
| | 4,586 |
| Other non-current assets | 1,880 | | | 1,931 | |
| Total assets | $ | 1,962,149 |
| | $ | 1,084,489 |
| Total assets | $ | 7,336,750 | | | $ | 1,589,422 | |
| Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) | | | | |
| Liabilities and Stockholders’ Equity | | Liabilities and Stockholders’ Equity | | | |
| Current liabilities: | | | | Current liabilities: | |
| Accounts payable | $ | 31,210 |
| | $ | 20,725 |
| Accounts payable | $ | 18,359 | | | $ | 7,090 | |
| Accrued liabilities | 79,073 |
| | 72,715 |
| Accrued liabilities | 469,591 | | | 67,652 | |
| Deferred revenue | 109,056 |
| | 96,739 |
| Deferred revenue | 3,867,193 | | | 63,310 | |
| Other current liabilities | 3,464 |
| | 1,282 |
| Other current liabilities | 33,665 | | | 5,063 | |
| Total current liabilities | 222,803 |
| | 191,461 |
| Total current liabilities | 4,388,808 | | | 143,115 | |
| Deferred revenue, non-current | 165,352 |
| | 242,929 |
| Deferred revenue, non-current | 177,419 | | | 138,995 | |
| Deferred lease obligation, non-current | 10,006 |
| | 7,586 |
| |
| Lease financing obligation | 33,489 |
| | 15,687 |
| |
| Operating lease liabilities, non-current | | Operating lease liabilities, non-current | 97,421 | | | 93,675 | |
| Financing lease liabilities, non-current | | Financing lease liabilities, non-current | 109,874 | | | 38,689 | |
| Other non-current liabilities | 258 |
| | 1,530 |
| Other non-current liabilities | 1,853 | | | 138 | |
| Total liabilities | 431,908 |
| | 459,193 |
| Total liabilities | 4,775,375 | | | 414,612 | |
| Commitments and contingencies (Note 7) |
| |
| |
| Redeemable convertible preferred stock, par value $0.0001; 0 and 448,686,791 shares authorized as of December 31, 2018 and 2017, respectively; 0 and 448,686,791 shares issued and outstanding as of December 31, 2018 and 2017, respectively; aggregate liquidation preference of $0 and $1,209,940 as of December 31, 2018 and 2017, respectively | — |
| | 1,176,661 |
| |
| Stockholders’ equity (deficit): | | | | |
Preferred stock, $0.0001 par value; 162,000,000 and 0 shares authorized at December 31, 2018 and 2017, respectively; 0 shares issued or outstanding at December 31, 2018 and 2017 | — |
| | — |
| |
| Common stock, par value $0.0001; 1,600,000,000 and 696,581,112 shares authorized as of December 31, 2018 and 2017, respectively; 328,798,904 and 65,206,999 shares issued and outstanding as of December 31, 2018 and 2017, respectively | 33 |
| | 6 |
| |
| Commitments and contingencies (Note 12) | | Commitments and contingencies (Note 12) | 0 | | 0 |
| Stockholders’ equity: | | Stockholders’ equity: | |
Preferred stock, $0.0001 par value; 162,000,000 shares authorized at December 31, 2020 and 2019; 0 shares issued or outstanding at December 31, 2020 and 2019 | | Preferred stock, $0.0001 par value; 162,000,000 shares authorized at December 31, 2020 and 2019; 0 shares issued or outstanding at December 31, 2020 and 2019 | 0 | | | 0 | |
| Common stock, par value $0.0001; 1,600,000,000 shares authorized as of December 31, 2020 and 2019; 398,787,678 and 336,536,985 shares issued and outstanding as of December 31, 2020 and 2019, respectively | | Common stock, par value $0.0001; 1,600,000,000 shares authorized as of December 31, 2020 and 2019; 398,787,678 and 336,536,985 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 40 | | | 34 | |
| Additional paid-in capital | 2,538,155 |
| | 71,679 |
| Additional paid-in capital | 4,801,849 | | | 2,669,426 | |
| Accumulated other comprehensive loss | (1,320 | ) | | (1,157 | ) | |
| Accumulated other comprehensive gain | | Accumulated other comprehensive gain | 3,004 | | | 1,804 | |
| Accumulated deficit | (1,006,627 | ) | | (621,893 | ) | Accumulated deficit | (2,243,518) | | | (1,496,454) | |
| Total stockholders’ equity (deficit) | 1,530,241 |
| | (551,365 | ) | |
| Total liabilities, redeemable convertible preferred stock and stockholders’ equity | $ | 1,962,149 |
| | $ | 1,084,489 |
| |
| Total stockholders’ equity | | Total stockholders’ equity | 2,561,375 | | | 1,174,810 | |
| Total liabilities and stockholders’ equity | | Total liabilities and stockholders’ equity | $ | 7,336,750 | | | $ | 1,589,422 | |
The accompanying notes are an integral part of these consolidated financial statements.
MODERNA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Revenue: | | | | | |
| Grant revenue | $ | 528,905 | | | $ | 12,173 | | | $ | 12,556 | |
| Product sales | 199,872 | | | 0 | | | 0 | |
| Collaboration revenue | 74,618 | | | 48,036 | | | 122,512 | |
| Total revenue | 803,395 | | | 60,209 | | | 135,068 | |
| Operating expenses: | | | | | |
| Cost of sales | 7,933 | | | 0 | | | 0 | |
| Research and development | 1,370,339 | | | 496,309 | | | 454,082 | |
| Selling, general and administrative | 188,267 | | | 109,620 | | | 94,252 | |
| Total operating expenses | 1,566,539 | | | 605,929 | | | 548,334 | |
| Loss from operations | (763,144) | | | (545,720) | | | (413,266) | |
| Interest income | 24,715 | | | 38,530 | | | 27,023 | |
| Other (expense) income, net | (6,084) | | | (7,526) | | | 1,835 | |
| Loss before provision for (benefit from) income taxes | (744,513) | | | (514,716) | | | (384,408) | |
| Provision for (benefit from) income taxes | 2,551 | | | (695) | | | 326 | |
| Net loss | (747,064) | | | (514,021) | | | (384,734) | |
| Reconciliation of net loss to net loss attributable to common stockholders: | | | | | |
| Premium paid on repurchase of preferred stock | 0 | | | 0 | | | (4,127) | |
| Cumulative preferred stock dividends | 0 | | | 0 | | | (12,996) | |
| Net loss attributable to common stockholders | $ | (747,064) | | | $ | (514,021) | | | $ | (401,857) | |
| Net loss per share attributable to common stockholders, basic and diluted | $ | (1.96) | | | $ | (1.55) | | | $ | (4.95) | |
| Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted | 381,333,059 | | | 330,802,136 | | | 81,114,183 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Revenue: | | | | | |
| Collaboration revenue | $ | 76,519 |
| | $ | 146,953 |
| | $ | 69,109 |
|
| Collaboration revenue from affiliate (Note 14) | 45,993 |
| | 30,021 |
| | 32,427 |
|
| Grant revenue | 12,556 |
| | 28,851 |
| | 6,860 |
|
| Total revenue | 135,068 |
| | 205,825 |
| | 108,396 |
|
| Operating expenses: | | | | | |
| Research and development | 454,082 |
| | 410,459 |
| | 274,717 |
|
| General and administrative | 94,252 |
| | 64,722 |
| | 57,450 |
|
| Total operating expenses | 548,334 |
| | 475,181 |
| | 332,167 |
|
| Loss from operations | (413,266 | ) | | (269,356 | ) | | (223,771 | ) |
| Interest income | 27,023 |
| | 15,235 |
| | 11,312 |
|
| Other income (expense), net | 1,835 |
| | (1,875 | ) | | (2,709 | ) |
| Loss before provision for (benefit from) income taxes | (384,408 | ) | | (255,996 | ) | | (215,168 | ) |
| Provision for (benefit from) income taxes | 326 |
| | (80 | ) | | 1,043 |
|
| Net loss | (384,734 | ) | | (255,916 | ) | | (216,211 | ) |
| Reconciliation of net loss to net loss attributable to common stockholders: | | | | | |
| Premium paid on repurchase of preferred stock | (4,127 | ) | | — |
| | — |
|
| Accretion of redeemable convertible preferred units to redemption value | — |
| | — |
| | (8,663 | ) |
| Cumulative preferred stock dividends | (12,996 | ) | | (13,925 | ) | | (5,440 | ) |
| Net loss attributable to common stockholders | $ | (401,857 | ) | | $ | (269,841 | ) | | $ | (230,314 | ) |
| Net loss per share attributable to common stockholders, basic and diluted | $ | (4.95 | ) | | $ | (4.18 | ) | | $ | (3.79 | ) |
| Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted | 81,114,183 |
| | 64,497,544 |
| | 60,747,426 |
|
The accompanying notes are an integral part of these consolidated financial statements.
MODERNA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Net loss | $ | (747,064) | | | $ | (514,021) | | | $ | (384,734) | |
| Other comprehensive income (loss): | | | | | |
| Unrealized gain (loss) on available-for-sale debt securities, net of tax of $0, $1,148 and $0, for the years ended December 31, 2020, 2019 and 2018, respectively | 2,501 | | | 3,447 | | | (132) | |
| Less: amounts recognized for net realized gain included in net loss | (1,301) | | | (323) | | | (31) | |
| Total other comprehensive income (loss) | 1,200 | | | 3,124 | | | (163) | |
| Comprehensive loss | $ | (745,864) | | | $ | (510,897) | | | $ | (384,897) | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Net loss | $ | (384,734 | ) | | $ | (255,916 | ) | | $ | (216,211 | ) |
| Other comprehensive (loss) income: | | | | | |
| Unrealized (loss) gain on available-for-sale debt securities | (132 | ) | | (342 | ) | | 223 |
|
| Less: Amounts recognized for net realized (gain) included in net loss | (31 | ) | | (412 | ) | | (60 | ) |
| Total other comprehensive (loss) income | (163 | ) | | (754 | ) | | 163 |
|
| Comprehensive loss | $ | (384,897 | ) | | $ | (256,670 | ) | | $ | (216,048 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
MODERNA, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except unit and share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable Convertible Preferred Stock | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders’ Equity |
| | Shares | | Amount | | | Shares | | Amount | | | | |
| Balance at December 31, 2017 | | 448,686,791 | | | $ | 1,176,661 | | | | 65,206,999 | | | $ | 6 | | | $ | 71,679 | | | $ | (1,157) | | | $ | (621,893) | | | $ | (551,365) | |
| Vesting of restricted common stock | | — | | | — | | | | 856,135 | | | — | | | — | | | — | | | — | | | — | |
| Issuance of Series G redeemable convertible preferred stock, net of issuance costs of $10,517 | | 55,666,004 | | | 549,413 | | | — | | | — | | | 51 | | | — | | | — | | | 51 | |
| Issuance of Series H redeemable convertible preferred stock, net of issuance costs of $474 | | 5,000,000 | | | 111,546 | | | | — | | | — | | | — | | | — | | | — | | | — | |
| Repurchase of Series D redeemable convertible preferred stock | | (269,180) | | | (704) | | | | — | | | — | | | (2,009) | | | — | | | — | | | (2,009) | |
| Repurchase of Series E redeemable convertible preferred stock | | (544,100) | | | (3,355) | | | | — | | | — | | | (2,118) | | | — | | | — | | | (2,118) | |
| Exercise of options to purchase common stock | | — | | | — | | | | 446,864 | | | — | | | 1,427 | | | — | | | — | | | 1,427 | |
| Conversion of redeemable convertible preferred stock into common stock | | (508,539,515) | | | (1,833,561) | | | | 236,012,913 | | | 24 | | | 1,833,537 | | | — | | | — | | | 1,833,561 | |
| Proceeds of initial public offering, net of issuance costs of $41,322 | | — | | | — | | | | 26,275,993 | | | 3 | | | 563,023 | | | — | | | — | | | 563,026 | |
| Stock-based compensation | | — | | | — | | | | — | | | — | | | 72,565 | | | — | | | — | | | 72,565 | |
| Other comprehensive loss, net of tax | | — | | | — | | | | — | | | — | | | — | | | (163) | | | — | | | (163) | |
| Net loss | | — | | | — | | | | — | | | — | | | — | | | — | | | (384,734) | | | (384,734) | |
| Balance at December 31, 2018 | | 0 | | | $ | 0 | | | | 328,798,904 | | | $ | 33 | | | $ | 2,538,155 | | | $ | (1,320) | | | $ | (1,006,627) | | | $ | 1,530,241 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable Convertible Preferred Stock | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Gain (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| | Shares | | Amount | | | Shares | | Amount | | | | |
| Balance at December 31, 2018 | | 0 | | | $ | 0 | | | | 328,798,904 | | | $ | 33 | | | $ | 2,538,155 | | | $ | (1,320) | | | $ | (1,006,627) | | | $ | 1,530,241 | |
| Vesting of restricted common stock and restricted stock units | | — | | | — | | | | 621,432 | | | — | | | — | | | — | | | — | | | — | |
| Exercise of options to purchase common stock | | — | | | — | | | | 6,945,306 | | | 1 | | | 47,258 | | | — | | | — | | | 47,259 | |
| Purchase of common stock under employee stock purchase plan | | — | | | — | | | | 171,343 | | | — | | | 2,891 | | | — | | | — | | | 2,891 | |
| Transition adjustment from adoption of ASC 606 (Note 2) | | — | | | — | | | | — | | | — | | | — | | | — | | | 27,984 | | | 27,984 | |
| Transition adjustment from adoption of ASC 842 (Note 2) | | — | | | — | | | | — | | | — | | | — | | | — | | | (3,790) | | | (3,790) | |
| Stock-based compensation | | — | | | — | | | | — | | | — | | | 81,122 | | | — | | | — | | | 81,122 | |
| Other comprehensive income, net of tax | | — | | | — | | | | — | | | — | | | — | | | 3,124 | | | — | | | 3,124 | |
| Net loss | | — | | | — | | | | — | | | — | | | — | | | — | | | (514,021) | | | (514,021) | |
| Balance at December 31, 2019 | | 0 | | | $ | 0 | | | | 336,536,985 | | | $ | 34 | | | $ | 2,669,426 | | | $ | 1,804 | | | $ | (1,496,454) | | | $ | 1,174,810 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable Convertible Preferred Units | | Redeemable Convertible Preferred Stock | | | Common Units | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated (Deficit) Equity | | Total Stockholders’ Equity (Deficit) |
| | Units | | Amount | | Shares | | Amount | | | Units | | Amount | | Shares | | Amount | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2015 | 394,685,560 |
| | $ | 695,574 |
| | — |
| | $ | — |
| | | 59,121,793 |
| | $ | 6 |
| | — |
| | $ | — |
| | $ | 7 |
| | $ | (566 | ) | | $ | (149,207 | ) | | $ | (149,760 | ) |
Vesting of restricted common stock | — |
| | — |
| | — |
| | — |
| | | 143,348 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Exercise of options to purchase common stock | — |
| | — |
| | — |
| | — |
| | | 18,348 |
| | — |
| | — |
| | — |
| | 6 |
| | — |
| | — |
| | 6 |
|
Accretion of redeemable convertible preferred units | — |
| | 8,663 |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | (8,663 | ) | | — |
| | — |
| | (8,663 | ) |
| Distribution to unit holders | — |
| | (1,108 | ) | | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | (363 | ) | | — |
| | — |
| | (363 | ) |
Exchange of redeemable convertible preferred units and common units for redeemable convertible preferred stock and common stock, respectively, in connection with reorganization | (394,685,560 | ) | | (703,129 | ) | | 394,685,550 |
| | 703,129 |
| | | (59,283,489 | ) | | (6 | ) | | 59,244,956 |
| | 6 |
| | — |
| | — |
| | — |
| | — |
|
Issuance of Series F
redeemable convertible
preferred stock, net of
issuance costs of $599 | — |
| | — |
| | 54,001,241 |
| | 473,532 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Vesting of restricted common stock | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 4,291,916 |
| | — |
| | 300 |
| | — |
| | (300 | ) | | — |
|
Exercise of options to purchase common stock | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 4,816 |
| | — |
| | 5 |
| | — |
| | — |
| | 5 |
|
| Stock-based compensation | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | 40,013 |
| | — |
| | — |
| | 40,013 |
|
Unrealized gain on marketable securities | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | 163 |
| | — |
| | 163 |
|
| Net loss | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (216,211 | ) | | (216,211 | ) |
| Balance at December 31, 2016 | — |
| | — |
| | 448,686,791 |
| | 1,176,661 |
| | | — |
| | — |
| | 63,541,688 |
| | 6 |
| | 31,305 |
| | (403 | ) | | (365,718 | ) | | (334,810 | ) |
| Vesting of restricted common stock | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 1,644,769 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Exercise of options to purchase common stock | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 20,542 |
| | — |
| | 212 |
| | — |
| | — |
| | 212 |
|
| Redeemable convertible preferred stock issuance costs | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | (152 | ) | | — |
| | — |
| | (152 | ) |
| Stock-based compensation | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | 40,314 |
| | — |
| | (259 | ) | | 40,055 |
|
| Unrealized loss on marketable securities | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | (754 | ) | | — |
| | (754 | ) |
| Net loss | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (255,916 | ) | | (255,916 | ) |
| Balance at December 31, 2017 | — |
| | — |
| | 448,686,791 |
| | 1,176,661 |
| | | — |
| | — |
| | 65,206,999 |
| | 6 |
| | 71,679 |
| | (1,157 | ) | | (621,893 | ) | | (551,365 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable Convertible Preferred Stock | | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Gain (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| | Shares | | Amount | | | Shares | | Amount | | | | |
| Balance at December 31, 2019 | | 0 | | | 0 | | | | 336,536,985 | | | $ | 34 | | | $ | 2,669,426 | | | $ | 1,804 | | | $ | (1,496,454) | | | $ | 1,174,810 | |
| Proceeds of public offerings, net of issuance costs of $2,120 | | — | | | — | | | | 47,863,158 | | | 5 | | | 1,852,720 | | | — | | | — | | | 1,852,725 | |
| Vesting of restricted common stock | | — | | | — | | | | 247,349 | | | — | | | — | | | — | | | — | | | — | |
| Exercise of options to purchase common stock | | — | | | — | | | | 13,888,434 | | | 1 | | | 179,642 | | | — | | | — | | | 179,643 | |
| Purchase of common stock under employee stock option purchase plan | | — | | | — | | | | 251,752 | | | — | | | 7,040 | | | — | | | — | | | 7,040 | |
| Stock-based compensation | | — | | | — | | | | — | | | — | | | 93,021 | | | — | | | — | | | 93,021 | |
| Other comprehensive income, net of tax | | — | | | — | | | | — | | | — | | | — | | | 1,200 | | | — | | | 1,200 | |
| Net loss | | — | | | — | | | | — | | | — | | | — | | | — | | | (747,064) | | | (747,064) | |
| Balance at December 31, 2020 | | 0 | | | $ | 0 | | | | 398,787,678 | | | $ | 40 | | | $ | 4,801,849 | | | $ | 3,004 | | | $ | (2,243,518) | | | $ | 2,561,375 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Redeemable Convertible Preferred Units | | Redeemable Convertible Preferred Stock | | | Common Units | | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated (Deficit) Equity | | Total Stockholders’ Equity (Deficit) |
| | Units | | Amount | | Shares | | Amount | | | Units | | Amount | | Shares | | Amount | | | | |
| Balance at December 31, 2017 | — |
| | — |
| | 448,686,791 |
| | $ | 1,176,661 |
| | | — |
| | $ | — |
| | 65,206,999 |
| | $ | 6 |
| | $ | 71,679 |
| | $ | (1,157 | ) | | $ | (621,893 | ) | | $ | (551,365 | ) |
| Vesting of restricted common stock | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 856,135 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Issuance of Series G redeemable convertible preferred stock, net of issuance costs of $10,517 | — |
| | — |
| | 55,666,004 |
| | 549,413 |
| | | — |
| | — |
| | — |
| | — |
| | 51 |
| | — |
| | — |
| | 51 |
|
| Issuance of Series H redeemable convertible preferred stock, net of issuance costs of $474 | — |
| | — |
| | 5,000,000 |
| | 111,546 |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Repurchase of Series D redeemable convertible preferred stock | — |
| | — |
| | (269,180 | ) | | (704 | ) | | | — |
| | — |
| | — |
| | — |
| | (2,009 | ) | | — |
| | — |
| | (2,009 | ) |
| Repurchase of Series E redeemable convertible preferred stock | — |
| | — |
| | (544,100 | ) | | (3,355 | ) | | | — |
| | — |
| | — |
| | — |
| | (2,118 | ) | | — |
| | — |
| | (2,118 | ) |
| Exercise of options to purchase common stock, net | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 446,864 |
| | — |
| | 1,427 |
| | — |
| | — |
| | 1,427 |
|
Conversion of redeemable convertible preferred stock into common stock | — |
| | — |
| | (508,539,515 | ) | | (1,833,561 | ) | | | — |
| | — |
| | 236,012,913 |
| | 24 |
| | 1,833,537 |
| | — |
| | — |
| | 1,833,561 |
|
Proceeds of initial public offering, net of issuance costs of $41,322 | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | 26,275,993 |
| | 3 |
| | 563,023 |
| | — |
| | — |
| | 563,026 |
|
| Stock-based compensation | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | 72,565 |
| | — |
| | — |
| | 72,565 |
|
| Unrealized loss on marketable securities | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | (163 | ) | | — |
| | (163 | ) |
| Net loss | — |
| | — |
| | — |
| | — |
| | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (384,734 | ) | | (384,734 | ) |
| Balance at December 31, 2018 | — |
| | — |
| | — |
| | $ | — |
| | | — |
| | $ | — |
| | 328,798,904 |
| | $ | 33 |
| | $ | 2,538,155 |
| | $ | (1,320 | ) | | $ | (1,006,627 | ) | | $ | 1,530,241 |
|
The accompanying notes are an integral part of these consolidated financial statements.
MODERNA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Operating activities | | | | | |
| Net loss | $ | (747,064) | | | $ | (514,021) | | | $ | (384,734) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Stock-based compensation | 93,021 | | | 81,122 | | | 72,565 | |
| Depreciation and amortization | 31,251 | | | 31,021 | | | 24,862 | |
| Leased assets expensed | 62,286 | | | 0 | | | 0 | |
| Amortization/accretion of investments | 10,185 | | | (3,742) | | | (1,866) | |
| Loss on disposal of property and equipment | 238 | | | 316 | | | 891 | |
| Changes in assets and liabilities: | | | | | |
| Accounts receivable | (1,385,191) | | | 7,216 | | | 832 | |
| Inventory | (46,527) | | | 0 | | | 0 | |
| Prepaid expenses and other assets | (241,041) | | | 9,751 | | | (5,289) | |
| Right-of-use assets, operating leases | (10,542) | | | (5,664) | | | 0 | |
| Accounts payable | 11,875 | | | (23,964) | | | 15,017 | |
| Accrued liabilities | 388,392 | | | (3,362) | | | 8,787 | |
| Deferred revenue | 3,842,307 | | | (44,119) | | | (65,260) | |
| Deferred lease obligation | 0 | | | 0 | | | 2,420 | |
| Operating lease liabilities | 11,792 | | | 12,647 | | | 0 | |
| Other liabilities | 5,989 | | | (6,169) | | | 910 | |
| Net cash provided by (used in) operating activities | 2,026,971 | | | (458,968) | | | (330,865) | |
| Investing activities | | | | | |
| Purchases of marketable securities | (2,956,295) | | | (1,145,226) | | | (1,227,709) | |
| Proceeds from maturities of marketable securities | 1,137,129 | | | 993,181 | | | 783,373 | |
| Proceeds from sales of marketable securities | 214,686 | | | 168,654 | | | 177,008 | |
| Purchases of property and equipment | (67,448) | | | (31,554) | | | (105,766) | |
| Net cash used in investing activities | (1,671,928) | | | (14,945) | | | (373,094) | |
| Financing activities | | | | | |
| Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs | 0 | | | 0 | | | 661,111 | |
| Proceeds from offerings of common stock, net of issuance costs | 1,852,725 | | | 0 | | | 563,026 | |
| Repurchases of redeemable convertible preferred stock | 0 | | | 0 | | | (8,182) | |
| Proceeds from issuance of common stock under equity plans | 179,643 | | | 47,259 | | | 1,427 | |
| Proceeds from purchase of common stock under employee stock purchase plan | 7,040 | | | 2,891 | | | 0 | |
| Charges to financing lease liabilities | (6,215) | | | 971 | | | 0 | |
| Reimbursement of assets under financing lease obligation | 0 | | | 0 | | | 11,635 | |
| Payments on financing lease obligation | 0 | | | 0 | | | (2,175) | |
| Net cash provided by financing activities | 2,033,193 | | | 51,121 | | | 1,226,842 | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 2,388,236 | | | (422,792) | | | 522,883 | |
| Cash, cash equivalents and restricted cash, beginning of year | 247,699 | | | 670,491 | | | 147,608 | |
| Cash, cash equivalents and restricted cash, end of year | $ | 2,635,935 | | | $ | 247,699 | | | $ | 670,491 | |
| Supplemental cash flow information | | | | | |
| Cash paid for income taxes | $ | 572 | | | $ | 416 | | | $ | 294 | |
| Cash paid for interest | $ | 8,528 | | | $ | 5,585 | | | $ | 2,998 | |
| Non-cash investing and financing activities | | | | | |
| Issuance costs included in accounts payable and accrued liabilities | $ | 0 | | | $ | 0 | | | $ | 2,638 | |
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 17,617 | | | $ | 4,676 | | | $ | 12,892 | |
| Leasehold improvements included in prepaid and other current assets | $ | 0 | | | $ | 0 | | | $ | 10,089 | |
| Lease financing obligation | $ | 0 | | | $ | 0 | | | $ | 10,089 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Operating activities | | | | | |
| Net loss | $ | (384,734 | ) | | $ | (255,916 | ) | | $ | (216,211 | ) |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | |
| Stock-based compensation | 72,565 |
| | 40,055 |
| | 39,360 |
|
| Depreciation and amortization | 24,862 |
| | 20,537 |
| | 15,114 |
|
| Amortization of investment premiums and discounts | (1,866 | ) | | 1,086 |
| | 2,478 |
|
| Loss on disposal of property and equipment | 891 |
| | — |
| | — |
|
| Changes in assets and liabilities: | | | | | |
| Accounts receivable | 195 |
| | 1,476 |
| | (8,642 | ) |
| Accounts receivable from affiliate (Note 14) | 637 |
| | (1,370 | ) | | 60,979 |
|
| Prepaid expenses and other assets | (5,289 | ) | | 579 |
| | (7,887 | ) |
| Accounts payable | 15,017 |
| | (12,766 | ) | | 5,993 |
|
| Accrued liabilities | 8,787 |
| | 34,369 |
| | 5,328 |
|
| Deferred revenue | (65,260 | ) | | (162,321 | ) | | 164,129 |
|
| Deferred lease obligation | 2,420 |
| | 2,932 |
| | 3,828 |
|
| Other liabilities | 910 |
| | (145 | ) | | 1,977 |
|
| Deferred income taxes | — |
| | — |
| | 288 |
|
| Net cash (used in) provided by operating activities | (330,865 | ) | | (331,484 | ) | | 66,734 |
|
| Investing activities | | | | | |
| Purchases of marketable securities | (1,227,709 | ) | | (727,203 | ) | | (1,415,461 | ) |
| Proceeds from maturities of marketable securities | 783,373 |
| | 800,438 |
| | 675,200 |
|
| Proceeds from sales of marketable securities | 177,008 |
| | 402,530 |
| | 133,700 |
|
| Purchases of property and equipment | (105,766 | ) | | (58,401 | ) | | (33,144 | ) |
| Decrease (increase) in restricted cash | 622 |
| | (1,269 | ) | | (8,902 | ) |
| Net cash (used in) provided by investing activities | (372,472 | ) | | 416,095 |
| | (648,607 | ) |
| Financing activities | | | | | |
| Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs | 661,111 |
| | — |
| | 473,532 |
|
| Proceeds from initial public offering of common stock, net of issuance costs | 563,026 |
| | — |
| | — |
|
| Repurchases of redeemable convertible preferred stock | (8,182 | ) | | — |
| | — |
|
| Distributions to preferred and common unit holders | — |
| | (1,483 | ) | | (633 | ) |
| Proceeds from issuance of common stock through equity plans | 1,427 |
| | 212 |
| | 11 |
|
| Reimbursement of assets under financing lease obligation | 11,635 |
| | 2,724 |
| | — |
|
| Payments on financing lease obligation | (2,175 | ) | | (1,285 | ) | | — |
|
| Net cash provided by financing activities | 1,226,842 |
| | 168 |
| | 472,910 |
|
| Net increase (decrease) in cash and cash equivalents | 523,505 |
| | 84,779 |
| | (108,963 | ) |
| Cash and cash equivalents, beginning of year | 134,859 |
| | 50,080 |
| | 159,043 |
|
| Cash and cash equivalents, end of year | $ | 658,364 |
| | $ | 134,859 |
| | $ | 50,080 |
|
| Supplemental cash flow information | | | | | |
| Income taxes paid | $ | 294 |
| | $ | 398 |
| | $ | 905 |
|
| Interest in connection with financing lease obligation | $ | 2,998 |
| | $ | — |
| | $ | — |
|
| Non-cash investing and financing activities | | | | | |
| Issuance costs included in accounts payable and accrued liabilities | $ | 2,638 |
| | $ | 152 |
| | $ | 89 |
|
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 12,892 |
| | $ | 19,959 |
| | $ | 10,014 |
|
| Leasehold improvements included in prepaid and other current assets | $ | 10,089 |
| | $ | 1,748 |
| | $ | — |
|
| Lease financing obligation (Note 7) | $ | 10,089 |
| | $ | 1,748 |
| | $ | 12,500 |
|
| Dividends and accretion of redeemable convertible preferred units | $ | — |
| | $ | — |
| | $ | 8,663 |
|
| Tax distributions to members included in accounts payable and accrued liabilities | $ | — |
| | $ | — |
| | $ | 1,464 |
|
The accompanying notes are an integral part of these consolidated financial statements.
MODERNA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Moderna, Inc. is a Delaware Corporation, incorporated under the laws of the State of Delaware on July 22, 2016 (collectively, with its consolidated subsidiaries, any of Moderna, Company, we, us, or our). In August 2018, we changed our name from Moderna Therapeutics, Inc. to Moderna, Inc.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 potentially 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 vaccines and therapeutics for infectious diseases, immuno-oncology, rare diseases, autoimmune and cardiovascular diseases, independently and with our strategic collaborators.
In December 2020, we received an Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA) and an Interim Order from Health Canada authorizing the Moderna COVID-19 vaccine (also referred to as mRNA-1273) in the U.S. and Canada.
Since inception, we have incurred significant net losses, which were $384.7$747.1 million, $255.9$514.0 million, and $216.2$384.7 million for the years ended December 31, 2020, 2019 and 2018, 2017respectively. On February 14, 2020 and 2016, respectively.May 21, 2020, we sold 30,263,158 and 17,600,000 shares of common stock at a price of $19.00 and $76.00 per share through public equity offerings, with aggregate net proceeds from the offering of $549.5 million and $1.30 billion, respectively, net of underwriting discounts, commissions and offering expenses. As of December 31, 2018,2020, we had an accumulated deficit of $1.0$2.24 billion.
As of December 31, 2020, we had 21 mRNA development programs in our portfolio with 13 having entered the clinic. We expect to 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, and administrative support.
We do not expect to generate 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.
As a result, In addition, we anticipate that our expenses will need substantial additional fundingincrease significantly in connection with our development and commercializing our mRNA-1273 vaccine and ongoing activities to support our continued operationsplatform research, drug discovery and pursueclinical development, including development of any new generations of vaccines against variants of SARS-CoV-2, infrastructure and Research Engine and Early Development Engine (which includes our growth strategy. Until we can generate significant revenue from potential mRNA medicines, if ever, we expect toModerna Technology Center), digital infrastructure, creation of a portfolio of intellectual property, and administrative support. We may finance our operationsfuture cash needs that exceed our operating costs 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 December 31, 20182020 will be sufficient to enable us to fund our projected operations through at least the next 12 months.
Becausemonths from the issuance of theour financial statements. We are subject to numerous risks and uncertainties associated with pharmaceutical development and commercialization, and 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 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.
Initial public offering
On December 11, 2018, we completed our initial public offering (IPO), whereby we sold 26,275,993 shares of common stock at a price of $23.00 per share. The aggregate net proceeds received by us from the IPO were $563.0 million, net of underwriting discounts and commissions of $33.2 million and offering expenses of $8.1 million payable by us. Upon the closing of the IPO, all of the outstanding shares of our redeemable convertible preferred stock were converted into 236,012,913 shares of the common stock. As of December 31, 2018, we did not have any convertible preferred stock issued or outstanding.
Reverse Stock Split
On November 27, 2018, we effected a 1-for-2.18 reverse stock split of our common stock. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares. All share and per share data in the consolidated financial statements and notes to the consolidated financial statements have been retrospectively revised to reflect the reverse stock split. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the appropriate securities agreements. Shares of common stock reserved for issuance upon the conversion of our redeemable convertible preferred stock were proportionately reduced and the respective conversion prices were proportionately increased.
Reorganization
On August 10, 2016, we completed a series of reorganizational transactions (the 2016 Reorganization). As part of the transactions: (i) each issued and outstanding redeemable convertible preferred unit and common unit of Moderna LLC as of the date of the 2016 Reorganization was exchanged for shares of redeemable convertible preferred stock and common stock, respectively, of Moderna
Therapeutics, Inc.; (ii) previously outstanding incentive units of Moderna LLC were exchanged for shares of restricted common stock of Moderna Therapeutics, Inc.; (iii) previously outstanding options to purchase common units of Moderna LLC were exchanged for options to purchase common stock of Moderna Therapeutics, Inc.; and (iv) for the effects of a ten-for-one forward stock split (Stock Split). If such outstanding units or options were subject to vesting at the time of the 2016 Reorganization, then such shares or options issued by Moderna Therapeutics, Inc. were subject to continued vesting pursuant to the same terms.
The consolidated financial statements for the year ended December 31, 2016, reflect the exchange of common units to common stock, redeemable convertible preferred units to redeemable convertible preferred stock and the incremental compensation expense associated with the modification of certain of our stock-based compensation awards. All unit and per unit data and all share and per share data in the consolidated financial statements have been adjusted for the Stock Split (Note 8).
Common Control Transactions
Effected by the Reorganization, our ownership and control remained substantially the same both before and immediately after the exchange of Moderna LLC membership interests for Moderna Therapeutics, Inc. stock.
Prior to December 28, 2017, we had incorporated several wholly owned subsidiaries, which were limited liability companies that made a “check the box” election to be taxed as a C corporation. On December 28, 2017, ModernaTX, Inc., our wholly owned subsidiary, executed an Agreement and Plan of Merger with these subsidiaries whereby each subsidiary merged into ModernaTX, Inc. with ModernaTX, Inc. being the surviving corporation. As all entities in the merger were wholly owned subsidiaries of Moderna LLC, which was a wholly owned subsidiary of Moderna Inc., the reporting entity, we concluded the merger is outside of the scope of Financial Accounting Standards Board (FASB), Accounting Standards Codification (ASC) Topic 805, Business Combinations and was accounted for at the carrying value of the net assets or equity interests transferred.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). 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 ASCAccounting Standard Codification (ASC) and Accounting Standards UpdateUpdates (ASU) of the FASB.Financial Accounting Standards Board (FASB).
The consolidated financial statements include the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
Conformity with GAAP requires us to make
We have made estimates and judgments that affectaffecting the amounts reported amounts and related disclosures in theour 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, derivative financial instruments, inventory, and useful lives of long-lived assets. We base our estimates and judgments on historical informationexperience and other market-specific or various relevant assumptions including in certain circumstances, future projections, that we believe to be reasonable under the circumstances. Ourcircumstances, 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 couldthat 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 of financial instruments, useful lives of property and equipment, income taxes, and our valuation allowance on our deferred tax assets.
Segment Information
We have determined that our chief executive officer is the chief operating decision maker (CODM). The CODM reviews financial information presented on a consolidated basis. Resource allocation decisions are made by the CODM based on consolidated results. There are no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels or components below the consolidated unit level. As such, we have concluded that we operate as one1 segment. All our long-lived assets are located
Revenue Recognition
On January 1, 2019, we adopted ASC 606 (Revenue from Contracts with Customers) using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2019. We recognized the cumulative effect of the adoption as an adjustment to the opening balance of accumulated deficit in the United States.current period consolidated balance sheet. Results for reporting periods beginning after January 1, 2019 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with our historic accounting (ASC 605). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
Revenue Recognition
To determine the appropriate amount of revenue to be recognized for arrangements that we determine are within the scope of ASC 606, we perform the following five steps (the five-step model): (i) identify the contract(s) with our customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as each performance obligation is satisfied.
Our revenue is primarily generated through collaboration arrangements and grants from government-sponsored and private organizations. Ourorganizations, product sales and collaboration arrangements typically contain multiple elements, or deliverables, including licenses, options to obtain development and commercialization rights, research and development services, and obligations to develop and manufacture preclinical and clinical material. Such arrangements provide for various types of payments to us, including upfront payments, funding of research and development activities, funding for the purchase of preclinical and clinical material, technical, development,arrangements.
regulatory and commercial milestone payments, licensing fees, option exercise payments, and royalties based on product sales. We have received grants from various government-sponsored and private organizations for research and related activities. Grant revenue is recognized in the period grant-related activities are performed.
We analyze our collaboration arrangements to assess whether they are within the scope of FASB ASC Topic 808, Collaborative Arrangements (ASC 808) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. For arrangements under the scope of ASC 808, we recognize our allocation of the shared costs incurred with respect to the jointly conducted activities as a component of the related expense in the period incurred. We also consider the guidance in FASB ASC Topic 605-45, Revenue Recognition—Principal Agent Considerations in determining the appropriate treatment for the transactions between us and the strategic collaborator and the transactions between us and other third parties. The classification of transactions under the collaboration arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Any consideration related to activities in which we are considered the principal, which includes being the primary obligor and having the risks and rewards of ownership, are accounted for as gross revenue. We recognize revenue in accordance with FASB ASC Topic 605, Revenue Recognition (ASC 605). Accordingly, revenue is recognized for each unit of accounting when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. We are often entitled to bill according to contractual terms of our collaboration arrangements and receive payment in advance of satisfying the revenue recognition criteria. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified as deferred revenue in current liabilities. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as deferred revenue, non-current.
Collaboration Revenue
We analyze multiple-element arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition—Multiple-Element Arrangements (ASC 605-25). Accordingly, we evaluate multiple-element arrangements to determine: (i) the deliverables included in the arrangement; and (ii) whether each deliverable in the arrangement meets the criteria to be considered a separate unit of accounting, or should be combined with other deliverables and accounted for as a single unit of accounting. This evaluation involves subjective determinations and requires us to make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of the arrangement. Deliverables are considered separate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis; and (ii) if the arrangement includes a general right of return relative to the delivered item(s), the delivery or performance of the undelivered item(s) is considered probable and substantially in our control. In assessing whether an item has standalone value, we consider factors such as the research, manufacturing, and commercialization capabilities of the strategic collaborator and the availability of the associated expertise in the general marketplace. In addition, we consider whether the strategic collaborator can use the other deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered element(s).
We allocate total consideration that is fixed or determinable to each unit of accounting based on the relative selling price of each deliverable. We determine the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly, we determine the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence (VSOE) of selling price, if available, third-party evidence (TPE) of selling price if VSOE is not available, or best estimate of selling price (BESP) if neither VSOE nor TPE is available. We typically use BESP to estimate the selling price, since we generally do not have VSOE or TPE of selling price for our units of accounting. Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.
We recognize arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605 are satisfied for that particular unit of accounting. In the event that a deliverable does not represent a separate unit of accounting, we recognize revenue from the combined unit of accounting when the last element to be delivered is provided to the customer. If the last element to be delivered is provided over a period of time, revenue is recognized over our contractual or estimated performance period for the undelivered elements, which is typically the term of our research and development obligations or manufacturing obligations. If there is no discernible pattern of performance or objectively measurable performance measures do not exist, then we recognize revenue under the arrangement ratably over the estimated period of performance. Conversely, if the pattern of performance in which the service is provided to the strategic collaborator can be determined and objectively measurable performance measures exist, then we recognize revenue under the arrangement using the proportional performance method.
Our third-party arrangements may include options for our strategic collaborators to acquire development and commercialization rights to mRNA programs or with respect to specific targets or options to receive research and development services or preclinical or clinical materials from us. Options are considered substantive if, at the inception of the arrangement, we are at risk as to whether the strategic collaborator will choose to exercise the option. The evaluation of whether an option is substantive requires significant judgment. In determining if the option is substantive, we consider the overall objective of the arrangement, the benefit the third-party might obtain from the arrangement without exercising the option, the likelihood that the option will be exercised, or if the customer is required or compelled through significant incentive to exercise the option. When an option is considered substantive, we do not consider the option or item underlying the option to be a deliverable at inception of the arrangement and the associated option fee is not included in the allocable arrangement consideration, assuming the option is not priced at a significant and incremental discount. Conversely, if we determine that an option is not substantive, we will consider the item underlying the option to be a deliverable at the inception of the arrangement and the associated option exercise fee is included in the allocable arrangement consideration. In addition, if the price of the option includes a significant and incremental discount, then the option is not considered substantive.
At the inception of an arrangement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (i) the consideration is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone; (ii) the consideration relates solely to past performance; and (iii) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the respective milestone and the level of effort and investment required to achieve the respective milestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. If milestones are considered substantive, in accordance with FASB ASC Topic 605-28, Revenue Recognition—Milestone Method , revenue from milestone payments is recognized in its entirety upon successful accomplishment of the milestone. Conversely, upon achievement of a milestone that is not considered substantive, the corresponding amount earned is considered additional arrangement consideration and allocated to the identified units of accounting. Amounts allocated to any units of accounting for which performance has been partially completed are recognized, with a cumulative catch-up for the recognized portion of the unit of accounting when the payment is earned. Revenue from commercial milestone payments will be accounted for as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.
We will recognize royalty revenue in the period of sale of the related product(s), based on the underlying contract terms, provided that the reported sales are reliably measurable and we have no remaining undelivered elements.
Grant Revenue
Our
We have contracts with 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); the U.S. government’s Defense Advanced Research Projects Agency (DARPA), Biomedical Advanced Research (BARDA), and; the Bill & Melinda Gates Foundation (Gates Foundation) are contracts, providingand other government-sponsored and private organizations for research and development related activities that provide for payments for reimbursed costs, which may include overhead and general and administrative costs as well as a related profit margin. We recognize revenue from these contracts as we perform services under thethese arrangements so long as an agreement has been executed andwhen the fees for the services are fixed or determinable, legally billable, and reasonably assured of collection. Recognized amounts reflect our performance under the agreements. We do not recognize revenue under these agreements for amounts related to contract periods where funding is not yet committed,committed. Associated expenses are recognized when incurred as fees above committed funding thresholds would not be considered fixed or determinable, or reasonably assured of collection.research and development expense. Revenues and related expenses are presented gross in the consolidated statements of operations as we have determined we are the primary obligor under the arrangements relative to the research and development services we perform as lead technical expert.
Collaboration Revenue
We account for a contract with a customer that is within the scope of ASC 606 using the five-step model. We account for a contract with a customer that is within the scope of ASC 606 when all of the following criteria are met: (i) the arrangement has been approved by the parties and the parties are committed to perform their respective obligations; (ii) each party’s rights regarding the
goods and/or services to be transferred can be identified; (iii) the payment terms for the goods and/or services to be transferred can be identified; (iv) the arrangement has commercial substance; and (v) collection of substantially all of the consideration to which we will be entitled in exchange for the goods and/or services that will be transferred to the customer is probable. We also determine the term of the contract based on the period in which we and our customer have present and enforceable rights and obligations for purposes of identifying the performance obligations and determining the transaction price.
We evaluate contracts that contain multiple promises to determine which promises are distinct. Promises are considered to be distinct and therefore, accounted for as separate performance obligations, provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and (ii) the promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.Individual goods or services (or bundles of goods and/or services) that meet both criteria for being distinct are accounted for as separate performance obligations. Promises that are not distinct at contract inception are combined and accounted for as a single performance obligation. Options to acquire additional goods and/or services are evaluated to determine if such option provides a material right to the customer that it would not have received without entering into the contract. If so, the option is accounted for as a separate performance obligation. If not, the option is considered a marketing offer which would be accounted for as a separate contract upon the customer’s election.
The transaction price is generally comprised of an upfront payment due at contract inception and variable consideration in the form of payments for our services and materials and milestone payments due upon the achievement of specified events. Other payments the Company could be entitled to include tiered royalties earned when customers recognize net sales of licensed products. We measure the transaction price based on the amount of consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer. We utilize either the expected value method or the most likely amount method to estimate the amount of variable consideration, depending on which method is expected to better predict the amount of consideration to which we will be entitled. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.With respect to arrangements that include payments for a development or regulatory milestone payment, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within our control or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement until the triggering event occurs. At the end of each reporting period, we re-evaluate the probability of achievement of each milestone and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, wherein the license is deemed to be the sole or predominant item to which the payments relate, we recognize revenue upon the later of: (i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been allocated has been satisfied (or partially satisfied). Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.
We generally allocate the transaction price to each performance obligation based on a relative standalone selling price basis. We develop assumptions that require judgment to determine the standalone selling price for each performance obligation in consideration of applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated research and development costs. However, in certain instances, we allocate variable consideration entirely to one or more performance obligation if the terms of the variable consideration relate to the satisfaction of the respective performance obligation and the amount allocated is consistent with the amount we would expect to receive for the satisfaction of the respective performance obligation.
We recognize revenue based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good or service to the customer. For performance obligations that are satisfied at a point in time, we recognize revenue when control of the goods and/or services is transferred to the customer. For performance obligations that are satisfied over time, we recognize revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. We generally use input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. With respect to arrangements containing a license to our intellectual property that is determined to be distinct from the other grantsperformance obligations identified in the arrangement, we recognize revenue from amounts allocated to the license when the license is transferred to the licensee and awards when allthe licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. Significant management judgment is required in
determining the level of effort required under an arrangement and the period over which we are expected to complete our performance obligations under an arrangement. We evaluate the grant are fulfilled,measure of progress each reporting period and, present such revenuesif necessary, adjust the measure of performance and related expenses grossrevenue recognition. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue and net loss in the consolidated financial statements.period of adjustment.
Product Sales
Product sales are associated with our COVID-19 vaccine supply agreements with the U.S. Government and international government agencies. These agreements generally do not provide provisions for various forms of variable consideration, such as discounts, rebates or returns. We recognize revenue from product sales, using the five-step model under ASC 606, based on the fixed price per dose according to the contracts when control of the product transfers to the customer and customer acceptance has occurred, unless such acceptance provisions are deemed perfunctory.
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents.
Restricted Cash
Restricted cash is composed of amounts held on deposit related to our lease arrangements. The funds are maintained in money market accounts and are recorded at fair value. We classify our restricted cash as either current or non-current based on the terms of the underlying lease arrangement.
Cash, Cash Equivalents and Restricted Cash shown in the Consolidated Statements of Cash Flows
The following table provides a reconciliation of cash, cash equivalents and restricted cash in the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Cash and cash equivalents | | $ | 2,623,850 | | | $ | 235,876 | |
| Restricted cash | | 1,032 | | | 1,032 | |
| Restricted cash, non-current | | 11,053 | | | 10,791 | |
Total cash, cash equivalents and restricted cash shown in the consolidated
statements of cash flows | | $ | 2,635,935 | | | $ | 247,699 | |
Investments
We invest our excess cash balances in marketable debt securities. We classify our investments in marketable debt securities as available-for-sale. We report available-for-sale investments at fair value at each balance sheet date, and include any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive loss,gain (loss), a component of stockholders’ (deficit) equity. Realized gains and losses are determined using the specific-identification method, and are included in other expense,(expense) income, net in our consolidated statements of operations. Should any adjustment to fair value reflect a decline in the value of the investment, we consider all available evidence to evaluate the extent to which the decline is “other than temporary” and, if so, we recognize the associated unrealized loss through a charge to our consolidated statement of operations. We did not record any impairment charges related to our marketable securities during the years ended December 31, 2018, 2017 and 2016. We classify our available-for-sale marketable securities as current or non-current based on each instrument’s underlying effective maturity date and for which we have the intent and ability to hold the investment for a period of greater than 12 months. Marketable securities with maturities of less than 12 months are classified as current and are included in investments in the consolidated balance sheets. Marketable securities with maturities greater than 12 months for which we have the intent and ability to hold the investment for greater than 12 months are classified as non-current and are included in investments, non-current in the consolidated balance sheets.
We evaluate securities for impairment at the end of each reporting period. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include whether a decline in fair value below the amortized cost basis is due to credit-related factors or non-credit-related factors, the financial condition and near-term prospects of the issuer, and our intent and ability to hold the investment to allow for an anticipated recovery in fair value. A credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. Any impairment that is not credit- related is recognized in other comprehensive (loss) income, net of applicable taxes.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts
We have accounts receivable areamounts due from our product sales and related vaccine supply agreements and our grant agreements. We also have accounts receivable amounts due from strategic collaborators as a result of manufacturing and research and development services provided under collaboration arrangements, or milestones achieved, but not yet paid. We also haveAmounts payable to us are recorded as accounts receivable amounts due fromwhen our grant agreements.right to consideration is unconditional. To estimate the allowance for doubtful accounts, we make judgments about the creditworthiness of our customers based on ongoing credit evaluation and historical experience. There was no0 allowance for doubtful accounts at December 31, 2018,2020, and 2017.2019. There was no0 bad debt expense for the years ended December 31, 2018, 20172020, 2019 or 2016.2018.
Concentrations of Credit Risk
Financial instruments that subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities, and accounts receivable. Our investment portfolio is comprised ofcomprises money market funds, marketable debt securities, including U.S. Treasury securities, debt securities of U.S. government agencies and corporate entities and commercial paper. Our cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds can be used in business operations. Bank accounts in the United States are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. Our primary operating accounts significantly exceed the FDIC limits.
Significant Customers
Our accounts receivable are generally unsecured and are from customers in different countries. We generated 91%, 86% and 94% of our revenue for the years ended December 31, 2018, 2017 and 2016, respectively, from strategic collaborators. The remaining 9%, 14%, 6% of our revenue for the years ended December 31, 2018, 2017 and 2016, respectively, were generated from grants made by government-sponsored and private organizations.organizations, product sales to the U.S. Government and international government agencies, and to a lesser extent, strategic alliances in 2020. Historically, we generated revenue primarily from strategic alliances.
A significant portion of our revenue to date has been generated from the following entities that accounted for more than 10% of total revenue and accounts receivable for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Percentage of Revenue Years Ended December 31, | | Percentage of Accounts Receivable December 31, |
| 2020 | | 2019 | | 2018 | | 2020 | | 2019 |
| Merck | * | | 61 | % | | 49 | % | | * | | 13 | % |
| BARDA | 65 | % | | 13 | % | | * | | 22 | % | | 54 | % |
| Vertex | * | | 10 | % | | * | | * | | 17 | % |
| AstraZeneca | * | | * | | 34 | % | | * | | * |
| U.S. Government (excluding BARDA) | 24 | % | | * | | * | | * | | * |
| European Commission | * | | * | | * | | 28 | % | | * |
| United Kingdom Government | * | | * | | * | | 11 | % | | * |
| South Korea Government | * | | * | | * | | 24 | % | | * |
|
| | | | | | | | | | | | | | |
| | Percentage of Revenue Years Ended December 31, | | Percentage of Accounts Receivable December 31, |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 |
| Merck | 49 | % | | 31 | % | | 44 | % | | 30 | % | | 13 | % |
| AstraZeneca | 34 | % | | 15 | % | | 30 | % | | * |
| | 11 | % |
| Alexion | * |
| | 36 | % | | 16 | % | | * |
| | * |
|
| Vertex | * |
| | * |
| | * |
| | 22 | % | | * |
|
| BARDA | * |
| | 10 | % | | * |
| | 13 | % | | 31 | % |
| DARPA | * |
| | * |
| | * |
| | 16 | % | | 18 | % |
| Massachusetts Life Sciences Center | * |
| | * |
| | * |
| | 12 | % | | * |
|
* - Represents an amount of less than 10%
Derivative Instruments and Hedging Activities
We record all derivatives on our consolidated balance sheets at fair value. The accounting for changes in the fair value of a derivative depends on whether the derivative has been designated and qualifies for hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain risk, even though hedge accounting does not apply or we elect not to apply hedge accounting. Foreign currency gains or losses associated with derivatives that are not designated as hedging instruments for accounting purposes are recorded within other (expense) income, net, in our consolidated statements of operations.
Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. FASB ASC Topic 820, Fair Value Measurement (ASC 820), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from our independent sources. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used to value the assets and liabilities:
•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
•Level 2: Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Our cash equivalents and marketable securities are reported at fair value determined using Level 1 and Level 2 inputs (Note 5)6). The fair value of our foreign currency forward contracts is calculated using Level 2 inputs, which include currency spot rates, forward rates, interest rate curve and credit or non-performance risk (Note 7). We do not have any non-financial assets or liabilities that should be recognized or disclosed at fair value on a recurring basis at December 31, 2018, 20172020, 2019 and 2016.2018.
As of December 31, 2018, 20172020 and 2016,2019, we maintain letters of credit of $12.1 million $12.7 million, and $11.5$11.8 million, respectively, related to our lease arrangements, which are secured by money market accounts in accordance with certain of our lease agreements. The amounts are recorded at fair value using Level 1 inputs and included as restricted cash in our consolidated balance sheets.
Inventory
Inventory is recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out (FIFO) basis. We periodically review the composition of inventory in order to identify excess, obsolete, slow-moving or otherwise unsaleable items. If unsaleable items are observed and there are no alternate uses for the inventory, we will record a write-down to net realizable value in the period that the decline in value is first recognized through a charge to cost of sales. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required.
Prior to an initial regulatory approval for our investigational medicines, we expense costs relating to raw materials and production of inventory as research and development expense in our 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.
Upon the authorization of distribution and use of our COVID-19 vaccine under an EUA in December 2020, we began to capitalize inventory costs associated with our COVID-19 vaccine, as it was determined that inventory costs incurred subsequent to the EUA had a probable future economic benefit.
Construction in Progress
Construction in progress includes certain build-to-suit leasedirect costs incurredrelated to the construction of various property and other direct expenses for our manufacturing facility in Norwood, MA (Norwood),equipment, including leasehold improvements, and is stated at original cost. Construction in progress includes costs incurred under construction contracts including project management services, engineering services, design services and development, construction services and other construction-related fees and services. Such costs are not depreciated until the asset is completed and placed into service. Once unfinished sections of our Norwood manufacturing facility become operational,the asset is placed into service, these capitalized costs will be allocated to certain property and equipment categories and will be depreciated over the estimated useful life of the underlying assets. Construction in progress also includes direct costs related to the construction of various property and equipment, including leasehold improvements. Such costs are not depreciated until the asset is completed and placed into service.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment are described below:
| | | | | | | | |
| | |
| | Estimated Useful Life |
Building | | 34 years |
| Laboratory equipment | | 5 years |
| Leasehold improvements | | Lesser of estimated useful life of improvement or remaining life of related lease |
| Computer equipment and software | | 3 years |
Other assets including automobiles, furnitureInternally developed software | | 3 years |
Furniture, fixtures and fixturesother | | 5 years |
| Right of use asset, financing | | Lease term |
Expenditures for maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost of the assets disposed of, and the related accumulated depreciation, are removed from the accounts, and any resulting gain or loss is recorded to other (expense) income, (expense), net.
Software Capitalization
We capitalize certain software development costs incurred in connection with obtaining or developing internal-use software including external direct costs of services, and payroll costs for employees directly involved with the software development. Capitalized software costs are included in property and equipment and we begin amortization of those costs when the software will be used to perform the function intended. Capitalized software costs associated with projects are amortized over three years. Costs incurred during the preliminary project stage and post-implementation stage, as well as maintenance and training costs, are expensed as incurred. There were no amounts recorded for internally developed software net of amortization as of December 31, 2018 or 2017.
Impairment of Long-Lived Assets
We evaluate our long-lived assets, which consist of property and equipment, to determine if facts and circumstances indicate that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, we assess the recoverability of the long-lived assets by comparing the projected future undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. If such review indicates that such cash flows are not expected to be sufficient to recover the recorded value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets or based on appraisals. For the year ended December 31, 2020, we incurred $1.6 million of impairment expenses. We did 0t record any impairment expenses for the years ended December 31, 2018, 201731,2019 and 2016,2018.
Leases
We adopted ASC 842 (Leases) on January 1, 2019 on a modified retrospective basis under which we didrecognized and measured leases existing at, or entered into after, the beginning of the period of adoption. We elected the optional transition approach of not record any impairment expenses.adjusting our comparative period financial statements for the impacts of adoption. Therefore, we recognized the effects of applying ASC 842 as a cumulative-effect adjustment to accumulated deficit as of January 1, 2019, the effective date of this standard.
Leases
Leases are classified at their inceptioncommencement date, which is defined as the date on which the lessor makes the underlying asset available for use by the lessee, as either operating or capitalfinance leases based on the economic substance of the agreement. We recognize rentlease right-of-use assets and related liabilities in our consolidated balance sheets for both operating and finance leases. Lease liabilities are measured at the lease commencement date as the present value of the future lease payments using the interest rate implicit in the
lease. If the rate implicit is not readily determinable, we will utilize our incremental borrowing rate as of the lease commencement date. Lease right-of-use assets are measured as the lease liability plus initial direct costs and prepaid lease payments less lease incentives. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised.
We recognize operating lease cost in operating expense forin our operating leases,consolidated statements of operations, inclusive of rent escalation provisions and rent holidays, on a straight-line basis over the respective lease term. For our finance leases, we recognize depreciation expense associated with the leased asset acquired and recognize interest expense related to the portion of the financing in our consolidated statements of operations. Additionally, we recognize tenant improvement allowances for our operating leases as a deferred lease obligation and amortize the tenant improvement allowances as a reduction to rent expense on a straight-line basis over the respective lease term. At December 31, 2018, 2017
Cost of Sales
Cost of sales includes cost of raw materials, production, transportation, freight and 2016, no capital leases were recorded inindirect overhead costs associated with our product revenue during the consolidated balance sheets.
In accordance with the requirements of ASC 840, Leases, if we are deemed to be the owner of a property, we are required to account for the property as a depreciable assetperiod and the related lease agreement must be accounted for as an imputed financing obligation. Significant judgments are required to make this determination, which relate to actions, guarantees, and investments that we make as a lessee that may be actions that only an owner would take. Our Norwood manufacturing facility lease executed in August 2016 was
subject to this lease accounting guidance. As we are involved in the constructionthird-party royalties on net sales of our manufacturing facility, including being responsibleproduct. Cost of sales also includes adjustments for costsexcess and obsolete inventory to the extent management determines that did not qualify as normal tenant improvements, we are deemed tothe cost cannot be the owner of the building during the construction period. During the Norwood construction period, we capitalized the fair value of the building as of lease commencement as construction in progress along with a corresponding lease financing obligation in the consolidated balance sheets. Construction costs incurred were capitalized in construction in progress including project management services, engineering services, design services and development, construction services and other construction-related fees and services. Once our Norwood manufacturing facility becomes operational, these capitalized costs will be allocated to certain property and equipment categories and will be depreciated over the estimated useful life of the underlying assets. The fair value of the building at lease commencement was determined to be $12.5 million by a third-party valuation specialist primarily using an income capitalization approach. The income capitalization approach wasrecovered based on rents charged for competitive properties as adjusted for applicable expenses incurred through ownership of the building and is considered a Level 3 fair value measurement (Note 7).estimates about future demand.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, overhead costs, prelaunch inventory costs, contract services, and other outside costs. The value of goods and services received from contract research organizations and contract manufacturing organizations in the reporting period are estimated based on the level of services performed, and progress in the period in cases when we have not received an invoice from the supplier.
Equipment or facilities that are acquired or constructed for research and development activities and that have alternative future uses, in research and development projects or otherwise, should be capitalized and depreciated as tangible assets. However, the costs of equipment or facilities that are acquired or constructed and intangibles that are purchased from others for a particular research and development project and that have no alternative future uses and therefore no separate economic values are considered research and development costs and are expensed when incurred. Certain equipment and leased facilities purchased for our COVID-19 vaccine program prior to the EUA from the FDA were deemed to have no alternative use. The related acquisition costs of such equipment and lease facilities of $109.6 million were charged to research and development expense for the year ended December 31, 2020. We did 0t recognize such expense for the years ended December 31, 2019 or 2018.
Patent Costs
Costs to secure, defend and maintain patents are expensed as incurred, and are classified as selling, general and administrative expenses due to the uncertainty of future benefits.
Stock-Based Compensation
We issue stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock units (RSUs). Historically, we had also issued incentive units and unit options to our employees and non-employees. We account for our stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation (ASC 718). Most of our stock-based awards have generally been made to employees. The fair value of the non-employees’ awards are subject to re-measurement at each reporting date until the vesting date in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. We measure compensation cost for all equity awards for employees at their grant-date fair value and recognize compensation expense over the requisite service period, which is generally the vesting period, on a straight-line basis. The grant date fair value of stock options is estimated using the Black-Scholes option pricing model, which requires management to make assumptions with respect to the fair value of our common stock on the grant date, including the expected term of the award, the expected volatility of our stock, calculated based on a period of time generally commensurate with the expected term of the award, risk-free interest rates and expected dividend yields of our stock. Historically, for periods prior to our IPO, the fair value of the shares of common stock and common units underlying our stock-based awards were determined on each grant date by our board of directors based on valuation estimates from management considering our most recently available independent third-party valuation of our common stock. Our board of directors also assessed and considered, with input from management, additional objective and subjective factors that we believed were relevant and which may have changed from the date of the most recent valuation through the grant date. The grant date fair value of RSUs is estimated based on the fair value of our underlying common stock. For performance-based stock awards, we recognize stock-based compensation expense over the requisite service period using the accelerated attribution method when achievement is probable. We classify stock-based compensation expense in our consolidated statement of operations in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified.
Redeemable Convertible Preferred Units and Redeemable Convertible Preferred Stock
We record all redeemable convertible preferred units and redeemable convertible preferred stock at their respective transaction prices on the dates of issuance less issuance costs. Our redeemable convertible preferred units and redeemable convertible preferred stock are classified as temporary equity and excluded from stockholders’ (deficit) equity as the potential redemption of such units or stock is outside our control. We adjusted the carrying value of the redeemable convertible preferred units to the redemption value as the units became redeemable upon the passage of time. Upon the 2016 Reorganization, the redemption rights upon the passage of time were removed and the redeemable convertible preferred stock became redeemable only upon the occurrence of certain contingent events. We do not adjust the carrying value of the redeemable convertible preferred stock to the redemption value until the contingent events are considered to be probable of occurring. Upon the closing of the IPO, all outstanding shares of our redeemable convertible preferred stock were converted into 236,012,913 shares of the common stock. As of December 31, 2018, we did not have any convertible preferred stock issued or outstanding.
Income Taxes
We use an asset and liability approach to account for income taxes. We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to be in effect for the years in which differences are expected to reverse. Valuation allowances are provided when the expected realization of deferred tax assets does not meet a “more likely than not” criterion. We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted. Changes in these estimates may result in significant increases or decreases to our tax provision in a period in which such estimates are changed, which in turn would affect net income or loss.
We recognize tax benefits from uncertain tax positions if we believe the position is more likely than not to be sustained on examination by the taxing authorities based on the technical merits of the position. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of any reserves for tax positions that are not more likely than not to be sustained, as well as the related net interest and penalties.
Prior to the 2016 Reorganization, in accordance with the operating agreement of Moderna LLC, to the extent possible without impairing our ability to continue to conduct our business and activities, and in order to permit our members to pay taxes on our taxable income, we were required to make distributions to the members in the amount equal to the estimated tax liability of each member computed as if the member paid U.S. income tax at the highest marginal federal and state rate applicable to an individual, in the event that taxable income is generated for the member. We distributed $1.5 million during 2017 for taxable income generated for 2016.
Net Loss per Share Attributable to Common Stockholders
We apply the two-class method to compute basic and diluted net loss per share attributable to common stockholders when we have issued units or shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income (loss) for the period had been distributed. During periods of loss, there is no allocation required under the two-class method since the potentially participating securities do not have a contractual obligation to fund our losses.
We calculate basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. The weighted average numberUpon the closing of commonour IPO, all outstanding shares outstanding were retroactively adjusted to reflect the impact of the Stock Split and the Reverse Stock Split. Additionally, for the year ended December 31, 2016, upon the 2016 Reorganization, the weighted average number of common shares outstanding reflects the impact of the exchange of common units and vested incentive units to common stock based on the associated conversion ratio. For the year ended December 31, 2018, upon the IPO, the weighted average number of common shares outstanding reflects the impact of the exchange ofour redeemable convertible preferred stock were converted into common stock (Note 8).stock.
We calculate diluted net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding after giving consideration to the dilutive effect of redeemable convertible preferred stock, restricted common stock restricted stock units and stock options that are outstanding during the period. We have generated a net loss in all periods presented, therefore the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive.
Deferred Issuance Costs
We capitalize certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings, including the IPO, as deferred issuance costs until such financings are consummated. After consummation of our equity financing, these costs are recorded as a reduction of the proceeds generated as a result of the offering. Should the planned equity financing be abandoned, the deferred issuance costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations.
Comprehensive Loss
Comprehensive loss includes net loss and other comprehensive income (loss) for the period. Other comprehensive income (loss) mainly consists of unrealized gains and losses on our investments. Total comprehensive lossincome (loss) for all periods presented hashave been disclosed in the consolidated statements of comprehensive loss.
The components of accumulated other comprehensive lossgain (loss) for the years ended December 31, 20182020 and 20172019 are as follows (in thousands):
| | | | | |
| Unrealized Gain on Available-for-Sale Debt Securities |
| Accumulated other comprehensive loss, balance at December 31, 2018 | $ | (1,320) | |
| Other comprehensive income | 3,124 | |
| Accumulated other comprehensive gain, balance at December 31, 2019 | 1,804 | |
| Other comprehensive income | 1,200 | |
| Accumulated other comprehensive gain, balance at December 31, 2020 | $ | 3,004 | |
|
| | | |
| | Unrealized Gain (Loss) on Available-for-Sale Debt Securities |
| Accumulated other comprehensive loss, balance at December 31, 2016 | $ | (403 | ) |
| Other comprehensive loss | (754 | ) |
| Accumulated other comprehensive loss, balance at December 31, 2017 | (1,157 | ) |
| Other comprehensive loss | (163 | ) |
| Accumulated other comprehensive loss, balance at December 31, 2018 | $ | (1,320 | ) |
Emerging Growth Company Status
We are an “emerging growth company,” (EGC) as defined in the Jumpstart Our Business Startups Act, (JOBS Act), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. We may take advantage of these exemptions until we are no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates. We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of our IPO or such earlier time that we are no longer an EGC.
Recently Adopted Accounting Standards
In MarchJune 2016, the FASB issued ASU No. 2016-09, Improvements2016-13, 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 Employee Share Based Payment Accounting. The new standard simplified several aspectsrecognize an allowance for credit losses rather than reducing the carrying value of the accounting for share-based payments, including allowing an entity-wide accounting policy electionasset. The amendments in this standard should be applied on a modified retrospective basis to either estimate the number of awards that are expected to vest or account for forfeitures as they occur.all periods presented. We adopted this standard asin the first quarter of January 1, 20172020. Based on the composition of our investment portfolio and elected to account for forfeitures as they occur. We recordedinvestment policy, the cumulative impactadoption of applying this standard did not have a material impact on our consolidated financial statements and recognizeddisclosures.
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 cumulative increaseCloud Computing Arrangement That Is a Service Contract. This standard requires capitalizing implementation costs incurred to additional paid-in capital anddevelop or obtain internal-use software (and hosting arrangements that include an increase to accumulated deficit of $0.3 million included in stock-based compensationinternal-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 redeemable convertible preferred stock2020. The adoption of this standard did not have a material impact on our consolidated financial statements and stockholders’ (deficit) equity.disclosures.
Recently Issued Accounting Standards Not Yet Adopted
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 May 2014,September 2020, we entered into an agreement with the FASB issued ASU No. 2014-09, RevenueDefense 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 December 31, 2020, the committed funding, net of revenue earned was $4.6 million, with an additional $51.4 million available if DARPA exercises additional contract options.
In April 2020, we entered into an agreement with BARDA for an award of up to $483.3 million to accelerate development of mRNA-1273, our vaccine candidate against COVID-19. 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 ContractsBARDA 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 December 31, 2020, the remaining available funding net of revenue earned was $444.3 million.
In September 2016, we received an award of up to $125.8 million from BARDA, to help fund our Zika vaccine program. NaN of the 4 contract options have been exercised. As of December 31, 2020, the remaining available funding net of revenue earned was $70.8 million, with Customers (Topic 606),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 December 31, 2020, the available funding net of revenue earned was $11.4 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 for and as of the periods presented (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended |
| 2020 | | 2019 | | 2018 |
| BARDA | $ | 521,652 | | | $ | 7,608 | | | $ | 6,736 | |
| Other grant revenue | 7,253 | | | 4,565 | | | 5,820 | |
| Total grant revenue | $ | 528,905 | | | $ | 12,173 | | | $ | 12,556 | |
| | | | | |
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Deferred grant revenue | | $ | 5,261 | | | $ | 2,777 | |
4. Product Sales
In December 2020, we began selling our COVID-19 vaccine to the U.S. Government and international government agencies. Under the supply agreements with these government agencies, we received or billed for upfront deposits for our future vaccine supply, which supersedes all existingare initially recorded as deferred revenue. We recognize revenue recognition requirements, including most industry specific guidance. The new revenue standard provides a single comprehensive modelbased on the fixed price per dose when control of the product has transferred and customer acceptance has occurred, unless such acceptance provisions are deemed perfunctory.
Product sales by customer geographic location was as follows (in thousands):
| | | | | | | | |
| | Year Ended December 31, 2020 |
| United States | | $ | 193,630 | |
| Rest of world | | 6,242 | |
| Total | | $ | 199,872 | |
There were no product sales in 2019 and 2018. We had one commercial product, our COVID-19 vaccine, authorized for use as of December 31, 2020.
As of December 31, 2020, we had deferred revenue of $3.80 billion related to customer deposits, classified as current deferred revenue in accountingour consolidated balance sheet. Timing of product manufacturing, delivery and receipt of marketing approval will determine the period in which revenue is recognized.
5. Collaboration Agreements
The following table summarizes our total consolidated net revenue from our strategic collaborators for revenue arising from contracts with customers.the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| Collaboration Revenue by Strategic Collaborator: | | 2020 | | 2019 | | 2018 (1) |
| Merck | | $ | 26,076 | | | $ | 36,608 | | | $ | 66,082 | |
| AstraZeneca | | 32,624 | | | 5,233 | | | 45,993 | |
| Vertex | | 15,505 | | | 6,195 | | | 10,437 | |
| Other | | 413 | | | 0 | | | 0 | |
| Total collaboration revenue | | $ | 74,618 | | | $ | 48,036 | | | $ | 122,512 | |
________
(1) Under Topic 606, an entity recognizes revenue when its customer obtains controlASC 605
The following table presents changes in the balances of promised goods or services, in an amount that reflectsour receivables and contract liabilities related to our strategic collaboration agreements during the consideration whichyear ended December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2019 | | Additions | | Deductions | | December 31, 2020 |
| Contract Assets: | | | | | | | | |
| Accounts receivable | | $ | 1,972 | | | $ | 120,821 | | | $ | (117,249) | | | $ | 5,544 | |
| Contract Liabilities: | | | | | | | | |
| Deferred revenue | | $ | 199,528 | | | $ | 121,882 | | | $ | (81,228) | | | $ | 240,182 | |
During the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performsyear ended December 31, 2020, we recognized the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Topic 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The new revenue standard also requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. We will adopt the new revenue standard in the first quarter of 2019 and apply the modified retrospective method with the cumulative effect of initially applying this new revenue standard recognized at the date of initial application.
We expect changes in our revenue recognition policy as a result of the new revenue standard, the most significant of which is expected to be the method of revenue recognition for certain elements over time. Under the legacy revenue standard, revenue is recognized ratably over the estimated period of performance while revenue will be recognized based on a proportional performance model under the new revenue standard. In addition, we expect that certain of our accounting conclusions will require significant judgment and estimates, including, but not limited to, (1) the evaluation of variable consideration, including milestone payments, (2) allocation of variable consideration to one or more performance obligations, (3) evaluation of whether a significant financing component is present, and (4) determination of the revenue recognition method for services performed under the arrangement. We expect changeschange in the accounting for contingent milestone payments due fromcontract liability balances related to our strategic collaborators as the inclusion of milestone payments in the transaction price could acceleratecollaboration agreements (in thousands):
| | | | | | | | | | | |
| Revenue recognized in the period from: | | | Year Ended
December 31, 2020 |
Amounts included in contract liabilities at the beginning of the period (1) | | | $ | 72,863 | |
Performance obligations satisfied (or partially satisfied) in previous reporting periods (2) | | | 8,366 | |
______________
(1) We first allocate revenue recognized under the new revenue standard compared to the legacy revenue standard, based on an assessment of the probability of achievement of the milestones and the likelihood of a significant reversal of such revenueindividual contract liability balance outstanding at each reporting date.
We expect the adoption of the new revenue standard could have a material impact on our consolidated financial statements and disclosure. The cumulative effect of the initial adoption of the new revenue standard will be primarily associated with our AZ 2013 Agreements, AZ 2018 A&R Agreements, Merck PCV/SAV Agreement and Vertex Agreement (Note 3). We are still in the process of finalizing our evaluation of the effect of the new revenue standard on our historical financial statements and disclosures. As we are completing our evaluation of the new revenue standard, new information may arise that could change our current understanding of the impact to revenue recognized and our views on the expected impact to the periods prior to adoption.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes all existing lease guidance. This guidance offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. The new standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Lessees are required to classify leases as either finance or operating leases. If the lease is effectively a financed-purchase by the lessee, it is classified as a financing lease, otherwise it is classified as an operating lease. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASC 842 provides accounting guidance for transactions that meet specific criteria for a leaseback transaction. If the criteria are not met, the transaction is considered a “failed sale” and the transaction must be accounted for as a financing arrangement. The new standard will be effective for us on January 1, 2020. Upon adoption, lessees must apply a modified retrospective transition approach for leases existing at, or entered after, the beginning of the earliest comparative period presenteduntil the revenue exceeds that balance. If additional consideration is received on those contracts in subsequent periods, we assume all revenue recognized in the financial statements. We are currently evaluatingreporting period first applies to the potential impact ASU 2016-02 may have onbeginning contract liability.
(2) Related to changes in estimated costs for our financial positionfuture performance obligations and resultsestimated variable considerations.
As of operations. Our assessment will include, but is not limited to, evaluatingDecember 31, 2020, the impact this standard has on the lease of our corporate headquarters at 200 Technology Square in Cambridge, MA, the lease of our office and laboratory space at 500 Technology Square, Cambridge, MA and our manufacturing and additional facilities in Norwood, MA, (Note 7), and the identification of any embedded leases.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230):Restricted Cash, which requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, the new guidance requires a reconciliationaggregated amount of the totals in the statementtransaction price allocated to performance obligations under our collaboration agreements that are unsatisfied or partially unsatisfied was $327.7 million.
Table of cash flows to the related captions in the balance sheet. This reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements. The new standard will be effective for us on January 1, 2019. The adoption of this standard is expected to change our statement of cash flow presentation and disclosure.Contents
In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, which is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance generally consistent with the accounting for employee share-based compensation. The new standard will be effective for us on January 1, 2020. The adoption of this standard is not expected to have a material impact on our consolidated financial statements and disclosure.
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). This standard should be applied either retrospectively or prospectively, and will be effective for us on January 2021, with early adoption permitted. We are currently evaluating the potential impact this standard may have on our consolidated financial statements and results of operations upon adoption.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies the interaction between Topic 808 and Topic 606, Revenue from Contracts with Customers. Currently, Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements is often based on an analogy to other accounting literature or an accounting policy election. Similarly, aspects of Topic 606 have resulted in diversity in practice on the effect of the revenue standard on the accounting for collaborative arrangements. The standard will become effective for us beginning on January 1, 2021, with early adoption permitted. We are currently evaluating the potential impact this standard may have on our consolidated financial statements and disclosure.
3. Collaboration Agreements
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, 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. Under the 2013 AZ Agreements, we granted AstraZeneca certain exclusive rights and licenses, and options to obtain exclusive rights to 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. Pursuant to the 2013 AZ Agreements, AstraZeneca was responsible for all research, development and commercialization activities, while we provided specified research and manufacturing services during a research and evaluation period, as described below, to further AstraZeneca’s activities pursuant to an agreed upon services plan. Under the 2013 AZ Agreements, AstraZeneca could have requested we provide additional services, at AstraZeneca’s expense. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufactured (or had manufactured) mRNA for all research, development and commercialization purposes under the 2013 AZ Agreements until, on a product-by-product basis, the expiration of the time period for which we are entitled to receive earn-out payments with respect to such product pursuant to the 2013 AZ Agreements.
As of the effective date of the 2013 AZ Agreements, AstraZeneca acquired forty40 options that it may exercise to obtain exclusive rights to clinically develop and commercialize identified development candidates (and related back-up candidates) directed to specified targets that arise during the research and evaluation period. During the research and evaluation period for research candidates under the 2013 AZ Agreements, AstraZeneca could have elected to designate a limited number of research candidates as development candidates in order to continue preclinical development on such development candidates (and related back-up candidates). From such pool of development candidates designated by AstraZeneca, during a specified option exercise period, AstraZeneca could have then exercised one of its options to obtain exclusive rights to clinically develop and commercialize an identified development candidate (and related back-up candidates). If AstraZeneca did not exercise one of its options to acquire exclusive rights to clinically develop and commercialize a particular development candidate during the defined option exercise period for such development candidate, AstraZeneca’s rights to exercise an option and other rights granted under the 2013 AZ Agreements with respect to such development candidate (and related back-up candidates) would terminate, all rights to exploit such development candidate (and related back-up candidates) would be returned to us and all data and results generated by AstraZeneca with respect to such development candidate (and related back-up candidates) would be either assigned or licensed to us. Upon the earlier of termination of the 2013 AZ Agreements for any reason and a specified anniversary of the effective date of the 2013 AZ Agreements, all unexercisedexercised options, and the right to exercise any and all options if not previously exercised by AstraZeneca, would automatically terminate. On a target-by-target basis, we and AstraZeneca agreed to certain defined exclusivity obligations under the 2013 AZ Agreements with respect to the research, development and commercialization of mRNA medicines for such target.
As of the effective date of the 2013 AZ Agreements, AstraZeneca made upfront cash payments to us totaling $240.0 million. Under the 2013 AZ Agreements, we were entitled to receive payments that are not related to any specific program of up to $180.0 million in the aggregate for the achievement of three3 technical milestones relating to toxicity, delivery, and competition criteria. We achieved the toxicity and competition milestones in the year ended December 31, 2015. The delivery milestone has expired. Under the 2013 AZ Agreements, AstraZeneca was obligated to pay us a $10.0 million option exercise fee with respect to each development candidate (and related back-up candidates) for which it exercised an option. In addition, upon AstraZeneca’s exercise of each option, we were eligible to receive certain payments contingent upon the achievement of specified clinical, regulatory, and commercial events. For any product candidate optioned by AstraZeneca, we were eligible to receive, per product candidate, up to $100.0 million in payments for achievement of development milestones, up to $100.0 million payments for achievement of regulatory milestones, and up to $200.0 million payments for achievement of commercial milestones. Additionally, under the 2013 AZ Agreements, we were entitled to
receive, on a product-by-product basis, earn-out payments on worldwide net sales of products ranging from a high-single digit percentage to 12%, subject to certain reductions, with an aggregate minimum floor.
We received from AstraZeneca under the 2013 AZ Agreements an option exercise payment of $10.0 million (the 2016 VEGF Exercise) in the year ended December 31, 2016, and a clinical milestone payment of $30.0 million with respect to AstraZeneca’s VEGF-A product (AZD8601) during the year ended December 31, 2018, that is currently being developed in a Phase 2 clinical trial in certain fields.
trial. Unless earlier terminated, the 2013 AZ Agreements would have continued until the expiration of AstraZeneca’s earn-out and contingent option exercise payment obligations for optioned product candidates. Either party had the right to terminate the 2013 AZ Agreements upon the other party’s material breach, either in its entirety or in certain circumstances, with respect to relevant candidates, subject to a defined materiality threshold and specified notice and cure provisions. If AstraZeneca had the right to terminate the 2013 AZ Agreements for our material breach, then AstraZeneca could have elected, in lieu of terminating the 2013 AZ Agreements, in their entirety or with respect to such candidates, to have the 2013 AZ Agreements remain in effect, subject to reductions in certain payments we were eligible to receive and certain adjustments to AstraZeneca’s obligations under the 2013 AZ Agreements. AstraZeneca had the right to terminate the 2013 AZ Agreements in full, without cause, upon 90-days’ prior notice to us.
2016 Strategic Alliance with AstraZeneca – IL12 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.
Under the terms of the 2016 AZ Agreement, we and AstraZeneca have agreed to work together on an immuno-oncology program focused on the intratumoral delivery of a potential mRNA medicine to make the IL12IL-12 protein.The 2016 AZ Agreement initially included research activities with respect to a second discovery program. During a limited period of time, each party had an opportunity to propose additional discovery programs to be conducted under the 2016 AZ Agreement. We are responsible for conducting and funding all discovery and preclinical development activities under the 2016 AZ Agreement in accordance with an agreed upon discovery program plan for the IL12IL-12 program and any other discovery program the parties agree to conduct under the 2016 AZ Agreement. For the IL12IL-12 program and any other discovery program the parties agree to conduct under the 2016 AZ Agreement, during a defined election period that commenced as of the effective date of the 2016 AZ Agreement (for the IL12IL-12 program) and otherwise will commence on initiation of any such new discovery program, AstraZeneca may elect to participate in the clinical development of a development candidate arising under the 2016 AZ Agreement from such program. If AstraZeneca so elects (as it has for the IL12IL-12 program), AstraZeneca will lead clinical development activities worldwide and we will be responsible for certain activities, including being solely responsible for manufacturing activities, all in accordance with an agreed upon development plan. AstraZeneca will be responsible for funding all Phase 1 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan), and Phase 2 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan) up to a defined dollar threshold. We and AstraZeneca will equally share the costs of Phase 2 clinical development activities in excess of such dollar threshold, all Phase 3 clinical development activities and certain other costs of late-stage clinical development activities, unless we elect not to participate in further development and commercialization activities and instead receive tiered royalties, as described below.
We and AstraZeneca will co-commercialize products in the U.S. in accordance with an agreed upon commercialization plan and budget, and on a product-by-product basis will equally share the U.S. profits or losses arising from such commercialization. Notwithstanding, on a product-by-product basis, prior to a specified stage of development of a given product, we have the right to elect not to participate in the further development and commercialization activities for such product. If we make such election, instead of participating in the U.S. profits and losses share with respect to such product, we are obligated to discuss future financial terms with AstraZeneca. If we are unable to agree on future financial terms within a short, defined period of time, we are entitled to receive tiered royalties at default rates set forth in the 2016 AZ Agreement, ranging from percentages in the mid-single digits to 20% on worldwide net sales of products, subject to certain reductions with an aggregate minimum floor. AstraZeneca has sole and exclusive responsibility for all ex-U.S. commercialization efforts. Unless we have elected to not to participate in further development (in which case royalties on ex-U.S. net sales will be at the default rates as described above, unless otherwise agreed by the parties), we are entitled to tiered royalties at rates ranging from 10% to 30% on ex-U.S. net sales of the products, subject to certain reductions with an aggregate minimum floor. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufacture (or have manufactured) products for all development and commercialization purposes. We and AstraZeneca have agreed to certain defined exclusivity obligations with each other under the 2016 AZ Agreement with respect to the development and commercialization of mRNA medicines for IL12.IL-12.
Unless earlier terminated, our strategic alliance under the 2016 AZ Agreement will continue on a product-by-product basis (i) until both parties cease developing and commercializing such product without the intention to resume, if we have not elected our right not
to participate in further development and commercialization of such product or (ii) on a country-by-country basis, until the end of the applicable royalty term for such product in such country, if we have elected our right not to participate in further development and commercialization of such product.
Either party may terminate the 2016 AZ Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the 2016 AZ Agreement in the event the other party challenges such party’s patent rights, subject to certain defined exceptions. AstraZeneca has the right to terminate the 2016 AZ Agreement in full or with respect to any program for scientific, technical, regulatory or commercial reasons at any time upon 90 days’ prior written notice to us. On a product-by-product basis, we have the right to terminate the 2016 AZ Agreement in certain cases if AstraZeneca has suspended or is no longer proceeding with the development or commercialization of such product for a period of twelve consecutive months, subject to specified exceptions, including tolling for events outside of AstraZeneca’s control. On a product-by-product basis, if the 2016 AZ Agreement is terminated with respect to a given product, AstraZeneca’s rights in such product will terminate and, to the extent we terminated for AstraZeneca’s breach, patent challenge or cessation of development or AstraZeneca terminated in its discretion, AstraZeneca will grant us reversion licenses and take certain other actions so as to enable us to continue developing and commercializing such product in the oncology field.
If we continue developing and commercializing a given product following termination of the 2016 AZ Agreement by AstraZeneca in its discretion with respect to such product, AstraZeneca is entitled to receive a mid-single digit royalty on our worldwide net sales of such product and a high-single digit percentage of the amounts received by us from a third party in consideration of a license to such third party to exploit such product, in each case, until AstraZeneca recovers an amount equal to specified development costs incurred by AstraZeneca under the 2016 AZ Agreement with respect to such product prior to such termination. Such percentages increase by a low to mid-single digit amount to the extent such termination occurs after such product achieves a specified stage of development.
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 LNPs. We discovered and performed preclinical development activities for AZD7970 prior to the initiation of the strategic alliance with AstraZeneca under the 2017 AZ Agreement.
Under the terms of the 2017 AZ Agreement, we will fund and be responsible for conducting preclinical development activities for AZD7970 through completion of IND-enabling GLP toxicology studies and AstraZeneca will lead pharmacological studies, each in accordance with an agreed upon discovery program plan. During a defined election period that commences as of the effective date of the 2017 AZ Agreement, AstraZeneca may elect to participate in further development and commercialization of AZD7970. Upon such election, AstraZeneca will lead clinical development activities for AZD7970 worldwide and we will be responsible for manufacturing AZD7970, certain regulatory matters and any other development activities that we agree to perform and that are set forth in an agreed upon development plan. AstraZeneca will be responsible for funding Phase 1 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan, up to a cap above which such costs are shared), and Phase 2 clinical development activities (including costs associated with our manufacture of clinical materials in accordance with the development plan, up to a cap above which such costs are shared) up to a defined dollar threshold. Thereafter, we and AstraZeneca will equally share the costs of Phase 2 clinical development activities in excess of such defined dollar threshold, all Phase 3 clinical development activities and certain other costs of late-stage clinical development activities, unless we elect not to participate in further development and co-commercialization activities and instead receive tiered royalties as described below. If the development candidate is determined to be IND-ready, and AstraZeneca does not timely elect to participate in the clinical development of AZD7970, AstraZeneca is obligated to reimburse us for certain costs we incurred in the manufacture and development of AZD7970, since execution of the 2017 AZ Agreement.
We and AstraZeneca will co-commercialize AZD7970 in the United States in accordance with an agreed upon commercialization plan and budget, and will equally share U.S. profits or losses arising from such commercialization. Notwithstanding, prior to a specified stage of development of AZD7970, we have the right to elect not to participate in the further development and commercialization activities for AZD7970. If we make such election, instead of participating in the U.S. profits and losses share with respect to AZD7970, we are obligated to discuss future financial terms with AstraZeneca. If we are unable to agree on future financial terms within a short, defined period of time, we are entitled to receive tiered royalties at default rates set forth in the 2017 AZ Agreement, ranging from percentages in the mid-single digits to the low 20s on worldwide net sales by AstraZeneca of AZD7970, subject to certain reductions, with an aggregate minimum floor. AstraZeneca has sole and exclusive responsibility for all ex-U.S. commercialization efforts. Unless we have elected not to participate in further development (in which case royalties on ex-U.S. net sales will be at the default rates as described above, unless otherwise agreed by the parties), we are entitled to receive tiered royalties
at rates ranging from 10% to 30% on annual ex-U.S. net sales of AZD7970, subject to certain reductions with an aggregate minimum floor. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufacture (or have manufactured) products for all development and commercialization purposes. Additionally, we and AstraZeneca have agreed to certain defined exclusivity obligations under the 2017 AZ Agreement with respect to the development and commercialization of mRNA medicines for Relaxin.
Unless earlier terminated, our strategic alliance under the 2017 AZ Agreement will continue (i) until the expiration of AstraZeneca’s election period, if it does not elect to participate in the clinical development of AZD7970, (ii) until both parties cease developing and commercializing AZD7970 without the intention to resume, if we have not elected our right not to participate in further development and commercialization of AZD7970, (iii) on a country-by-country basis, until the end of the applicable royalty term for AZD7970 in such country, if we have elected our right not to participate in further development and commercialization of AZD7970 or (iv) following completion of IND-enabling studies with respect to AZD7970, if we provide AstraZeneca with written notice that we do not reasonably believe that the product is IND-ready.
Either party may terminate the 2017 AZ Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the 2017 AZ Agreement in the event the other party challenges the validity or enforceability of such party’s patent rights, subject to certain defined exceptions. AstraZeneca has the right to terminate the 2017 AZ Agreement in full for scientific, technical, regulatory or commercial reasons at any time upon 90 days’ prior written notice to us. We have the right to terminate the 2017 AZ Agreement in certain cases if AstraZeneca has suspended or is no longer proceeding with the development or commercialization of AZD7970 for a period of twelve consecutive months, subject to specified exceptions, including tolling for events outside of AstraZeneca’s control. If AstraZeneca does not timely elect to participate in clinical development of AZD7970, or the Agreement is terminated, AstraZeneca’s rights in AZD7970 will terminate and, to the extent we terminated for AstraZeneca’s breach, patent challenge or cessation of development or AstraZeneca terminated in its discretion, AstraZeneca will grant us reversion licenses and take certain other actions so as to enable us to continue developing and commercializing AZD7970 in the cardiovascular and cardiometabolic fields.
If we continue developing and commercializing AZD7970 following a termination of the 2017 AZ Agreement by AstraZeneca in its discretion, AstraZeneca is entitled to receive a mid-single digit royalty on our worldwide net sales of AZD7970 and a high-single digit percentage of the amounts received by us from a third party in consideration for a license to such third party to exploit AZD7970, in each case until AstraZeneca recovers an amount equal to specified development costs incurred by AstraZeneca under the 2017 AZ Agreement with respect to AZD7970 prior to such termination. Such percentages increase by a low to mid-single digit amount to the extent such termination occurs after such product achieves a specified stage of development.
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 Collaborationcollaboration Agreement with AstraZeneca, or the 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.
Pursuant to the 2018 A&R Agreements, AstraZeneca is responsible for all research, development and commercialization activities and associated costs, while we provide specified research and manufacturing services during a research and evaluation period, as described below, to further AstraZeneca’s activities conducted pursuant to an agreed upon services plan. During this research and evaluation period, these research services, and manufacturing services in excess of a specified threshold, are provided at AstraZeneca’s expense, and manufacturing services below the specified threshold are provided at no additional expense to AstraZeneca. AstraZeneca may request we provide additional research and manufacturing services, at AstraZeneca’s expense, following the end of the research and evaluation period. Subject to customary “back-up” supply rights granted to AstraZeneca, we exclusively manufacture (or have manufactured) mRNA for all research, development and commercialization purposes under the 2018 A&R Agreements until, on a product-by-product basis, the expiration of the time period for which we are entitled to receive earn-out payments with respect to such product pursuant to the 2018 A&R Agreements.
As of the effective date of the 2013 AZ Agreements, and as further reflected in the 2018 A&R Agreements, AstraZeneca acquired forty
40 options that it may exercise to obtain exclusive rights to clinically develop and commercialize identified development candidates (and related back-up candidates) directed to specified targets that arise during the research and evaluation period. During the research and evaluation period for research candidates, AstraZeneca may elect to designate a limited number of research candidates as development candidates in order to continue preclinical development on such development candidates (and related back-up candidates). From such
pool of development candidates designated by AstraZeneca, during a specified option exercise period, AstraZeneca may then exercise one of its options to obtain exclusive rights to clinically develop and commercialize an identified development candidate (and related back-up candidates) in certain fields. If AstraZeneca does not exercise one of its options to acquire exclusive rights to clinically develop and commercialize a particular development candidate during the defined option exercise period for such development candidate, AstraZeneca’s rights to exercise an option and other rights granted under the 2018 A&R Agreements with respect to such development candidate (and related back-up candidates) will terminate, all rights to exploit such development candidate (and related back-up candidates) will be returned to us and all data and results generated by AstraZeneca with respect to such development candidate (and related back-up candidates) will be either assigned or licensed to us. Upon the earlier of termination of the 2018 A&R Agreements for any reason and a specified anniversary of the effective date of the 2013 AZ Agreements, all unexercised options, and the right to exercise any and all options if not previously exercised by AstraZeneca, will automatically terminate.
On a target-by-target basis, we and AstraZeneca have agreed to certain defined exclusivity obligations under the 2018 A&R Agreements with respect to the research, development and commercialization of mRNA medicines for such target in certain fields. In addition, we and AstraZeneca have agreed to certain defined exclusivity obligations with respect to the research, development and commercialization of mRNA medicines coding for the same polypeptide as any development candidate being developed under the 2018 A&R Agreements.
Unless earlier terminated, the 2018 A&R Agreements will continue until the expiration of AstraZeneca’s earn-out and contingent option exercise payment obligations for optioned product candidates. Either party may terminate the 2018 A&R Agreements upon the other party’s material breach, either in its entirety or in certain circumstances, with respect to relevant candidates, subject to a defined materiality threshold and specified notice and cure provisions. If AstraZeneca has the right to terminate the 2018 A&R Agreements for our material breach, then AstraZeneca may elect, in lieu of terminating the 2018 A&R Agreements, in their entirety or with respect to such candidates, to have the 2018 A&R Agreements remain in effect, subject to reductions in certain payments we are eligible to receive and certain adjustments to AstraZeneca’s obligations under the 2018 A&R Agreements. AstraZeneca may terminate the 2018 A&R Agreements in full, without cause, upon 90 days’ prior notice to us.
Accounting Treatment
2013 Option Agreement and Services and Collaboration Agreement
We determined that theCombined 2018 AZ Agreements
The 2013 Agreements, should be evaluatedas amended by the 2018 A&R Agreements, and the 2016 AZ Agreement, referred to as the Combined 2018 AZ Agreements, are treated as a single contractagreement for accounting purposes as the AZ Services Agreement and the AZ Option Agreementthese agreements were negotiated in contemplation of one anothereach other. The Combined 2018 AZ Agreements represent a transaction with a customer and executed contemporaneously.therefore is accounted for in accordance with ASC 606. We concludedidentified 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, are underas amended by the scope of ASC 8082018 A&R Agreements, collectively referred to as AstraZeneca and Moderna are both active participants and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. Additionally, we evaluated the 2013 AZ Agreements for recognition and measurement in accordance with ASC 605-25 and ASC 605-28. Prior to the 2016Combined 2018 AZ Agreement we determined there were multiple deliverables in the 2013 AZ Agreements, including the licensesPerformance 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 exploit mRNA constructs codingreceive development and commercialization rights and manufacturing services for specific targets, research services,an oncology development pool services, supply of mRNA for research activities, and supply of mRNA for development pool activities.target.
We concluded that the licensesresearch license is not distinct from the research and development pool services or the manufacturing obligations related to exploit mRNA constructs coding for specific targets does not qualify for separation from any of other deliverablesthe 2018 A&R Agreements, as AstraZeneca cannot fully exploit the value of the licensesresearch 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. Accordingly,Any supply requested by AstraZeneca has to obtain the research services, development pool services, supply of mRNA for research activities, and supply of mRNA for development pool activities from us, which significantly limits the ability for AstraZeneca to fully exploit the licenses for their intended purpose on a standalone basis. Accordingly, we concluded the delivered licenses do not have standalone value from the undelivered elements and we accounted for allin excess of the deliverables as one unit of accounting.
We concluded thatminimum quantities specified in the options to obtain exclusive rights to clinically develop and commercialize up to forty development candidates (and related backup candidates) for identified cardiovascular/cardiometabolic or oncology targets were substantive and therefore notagreement are considered a deliverable at the inception of the 2013 AZ Agreements, as AstraZeneca is not contractually obligated to exercise thecustomer options and we are at risk with regard to whether AstraZeneca will exercise the optionstreated as a result of the uncertain outcome of the research and development activities. Additionally, research and development services and certain mRNA supply outside of the specified deliverables, including clinical development supply, were determined to be substantive and therefore not considered a deliverable at the inception of the 2013 AZ Agreements.separate contracts for accounting purposes. Further, we concluded that AstraZeneca cannot exploit the options and the additional mRNA supply were not priced at a significant or incremental discount. Accordingly, AstraZeneca’s options and additional mRNA supply were not considered deliverables and the associated fees were not included in the allocable arrangement consideration.
The total arrangement consideration allocated to the single unit of accounting was the $240.0 million upfront pursuant to the 2013 AZ Agreements. We determined the period of performance for the research services, development pool services, supply of mRNA for
research activities, and supply of mRNA for development pool activities is ten years. As such, the $240.0 million arrangement consideration was being recognized ratably over the such ten years is no other discernible pattern of recognition.
We evaluated the contingent payments that we were eligible to receive under the 2013 AZ Agreements upon the achievement of certain technical, development, regulatory, and commercial milestone events. More specifically, we could have received additional payments of up to $180.0 million contingent on the achievement of three technical milestones for certain toxicity, delivery, and competition criteria that were not related to a specific product candidate. Such payments were payable only once, regardless of the number of options exercised. In addition, upon AstraZeneca’s exercise of each option, we were eligible to receive certain payments contingent upon the achievement of specified clinical, regulatory, and commercial events.
We concluded at the outset of the arrangement that two of the three technical milestones that are not related to a specific product candidate, specifically, the toxicity milestone and the delivery milestone, were substantive as the efforts to achieve the milestone are our responsibility and therefore achieved based on our past performances. Further, we concluded that these milestones were substantive on the basis of the contingent nature of the milestone, in consideration of factors such as the scientific, clinical, regulatory and other risks that must be overcome to achieve the milestone as well as the level of effort and investment required. Accordingly, payments upon the achievement of each of these substantive milestone events will be recognized as revenue in full in the period in which the associated milestone is achieved. We determined that the competition milestone did not qualify as substantive, as it was based, in part, on the performance of our competitors and therefore not achieved solely based on our past performances. Similarly, we concluded at the outset of the arrangement that nonevalue of the development and regulatory milestones qualified as substantive milestones,commercialization license for IL-12 without receipt of supply as the effortsdevelopment and commercialization license does not convey to achieveAstraZeneca the milestones are AstraZeneca’s responsibilityright to manufacture and therefore combined the milestone is not achieved based on our past performances. Accordingly, upon achievementdevelopment and commercialization license and the manufacturing obligations for IL-12 into one performance obligation.
The following table summarizes the composition of a non-substantive milestone, the contingent payment earnedtotal transaction price for the periods presented (in thousands):
| | | | | | | | | | | | | | |
| | Transaction Price |
| | 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 | | 35,830 | | | 40,782 | |
| Total | | $ | 396,830 | | | $ | 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 as additional arrangement consideration over the remaining estimated period of performance, if any, with a cumulative catch up for the elapsed portion of the performance period being recognized when the payment is earned. The contingent payments uponrelated sales occur as they were determined to relate predominately to the achievement of alllicense granted and therefore have been excluded from the transaction price. In addition, we are eligible to receive future milestones and royalties on future commercial milestones willsales 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 accounted for in the same manner as royalties, and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.material rights). We will recognize royalty revenue in the period of sale of the related product(s), based on the underlying agreement terms, providedhave concluded that the reported sales are reliably measurable, assuming all other revenue recognition criteria are met.
Duringexercise 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 $5.0 million decrease to the transaction price during the year ended December 31, 2015, we achieved two contingent technical milestones that were not related to2020, resulting from a specific product candidate, the toxicity milestone and the competition milestone, pursuant to the 2013 AZ Agreements. As the toxicity milestonechange in estimate of variable consideration.
The transaction price was determined to be substantive, the payment of $60.0 million was recognized as revenue in 2015. As the competition milestone was determined to be non-substantive, the payment of $60.0 million is being recognized as additional arrangement consideration over the remaining estimated period of performance, with a cumulative catch up for the elapsed portion of the performance period being recognized when the payment was earned. For the year ended December 31, 2015, we recognized $16.2 million in revenue for the achievement of the competition milestone event, including a cumulative catch up of $15.7 million from the effective date of the agreement to the achievement date of the respective milestone.
We recognized $0.6 million for each of the years ended December 31, 2017 and 2016, relatedallocated to the performance obligations based on the relative estimated standalone selling prices of certain manufacturing services which we concluded were considered substantive optionseach performance obligation. We developed the estimated standalone selling price for the licenses included in the arrangement. These services are recognized as services are performed.
2016 Strategic Alliance with AstraZeneca – IL12
Given that the IL12 target was removed from the 2013 AZ Agreements for the purposes of the 2016Combined 2018 AZ Agreement we determined the 2016 AZ Agreement is considered a material modification to the 2013 AZ Agreements and therefore should be evaluated with the 2013 AZ Agreements as a single contract. For the purposes of this accounting treatment discussion, we refer to the 2013 AZ AgreementsPerformance Obligation and the 2016 AZ Agreement collectively as the 2013/2016 AZ Agreements.
We evaluated the 2013/2016 AZ Agreements in accordance with ASC 605-25. We determined there were multiple deliverables in the 2013/2016 AZ Agreements including: (i) licenses to exploit mRNA constructs codingcombined performance obligation for specific targets from the 2013 Agreements, (ii) research services from the 2013 Agreements, (iii) development pool services from the 2013 Agreements, (iv) supply of mRNA for research activities from the 2013 Agreements, (v) supply of mRNA for development pool activities from the 2013 Agreements, (vi) preclinical development obligations for the IL12 program under the 2016 AZ Agreement, (vii) preclinical development obligations for the other program under the 2016 AZ Agreement, (viii)a development and commercialization rights for IL12 under the 2016 AZ Agreement, (ix) developmentlicense and commercialization rights for the other program under the 2016 AZ Agreement, (x) manufacturing and supply services for IL12 under the 2016 AZ Agreement, and (xi) manufacturing and supply services for the other program under the 2016 AZ Agreement. We concluded AstraZeneca’s options to obtain development and commercialization rights for IL12 and the other program under the 2016 AZ Agreement during the election period were non-substantive. While AstraZeneca was not obligated to exercise its options to obtain the respective development and commercialization rights, they could exercise the option for no additional
consideration. As such, we concluded there was no significant risk as to whether AstraZeneca would exercise its options. Therefore, the development and commercialization rights were included as deliverables at the inception of the 2016 AZ Agreement. Additionally, as it relates to the option to obtain exclusive rights to clinically develop and commercialize development candidates for identified cardiovascular, cardiometabolic or oncology targets pursuant to the 2013 AZ Agreements and the right to receive additional manufacturing and research services, consistent with the initial assessment of the 2013 AZ Agreements, we concluded that such options are substantive as there was still significant uncertainty as to whether AstraZeneca would exercise the options and therefore such options were not considered a deliverable at the date of the modification.
Consistent with the initial assessment of the 2013 AZ Agreements, we concluded as of the modification date that the licenses to exploit mRNA constructs coding for specific targets does not qualify for separation from the research services, development pool services, and supply of mRNA for research activities and development pool activities as AstraZeneca cannot fully exploit the value of the licenses without receipt of such services and supply. Accordingly, the licenses do not have standalone value from the research services, development pool services, and supply of mRNA for research activities and development pool activities and we accounted for these deliverables as one unit of accounting. As it relates to the additional deliverables pursuant to the 2016 AZ Agreement, we concluded the preclinical development obligations for each research program qualify for separation from each other and from the other deliverables as AstraZeneca will benefit from the results of the respective toxicology studies and product development to determine whether to nominate the respective product candidate for further development. Therefore, we concluded the preclinical development obligations for each research program have standalone value from the undelivered elements and represent a separate unit of accounting for each program. Additionally, we concluded that each of the development and commercialization rights do not qualify for separation from the related manufacturing and supply services for the respective program. This isIL-12 primarily because AstraZeneca has to rely on us to provide the related manufacturing and supply services to fully exploit the value of the respective development and commercialize rights. Accordingly, we accounted for the development and commercialization rights and the related manufacturing and supply services as a combined unit of accounting for each program. As a result, we determined there were five units of accounting under the 2016 AZ Agreement: (i) combined unit of accounting from the 2013 AZ Agreements, (ii) preclinical development obligations for IL12 (iii) preclinical development obligations for the other immuno-oncology program, (iv) combined development and commercialization rights and manufacturing and supply services for IL12, and (v) combined development and commercialization rights and manufacturing and supply services for the other immuno-oncology program.
We determined that neither VSOE nor TPE of selling price is available for any of the units of accounting identified at inception of the 2016 AZ Agreement. Accordingly, the selling price of each unit of accounting was determined based on our BESP. We developed the BESP for all units of accounting with the objective of determining the price at which it would sell such item if it were to be sold regularly on a standalone basis. We determined the BESP for each unit of accounting based the individual components comprising the unit of accounting, as applicable. For units of accounting that included or were solely comprised of a service component, we considered the nature of the services to be performed and estimates of the associated effort and cost of the services, adjusted for a reasonable profit margin that would be expected to be realized under other similar arrangements. For units of accounting that included a manufacturing and supply component, we considered the nature and duration of our obligation and estimates of the associated effort and cost of the manufacturing, adjusted for a reasonable profit margin that would be expected to be realized under similar arrangements. For units of accounting that included a license component, we considered the probability weightedprobability-weighted present value of expected future cash flows associated with each license related to theeach specific or general research area, as applicable.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.
Total We developed the estimated arrangement consideration under the 2016 AZ Agreement was determined to be $240.4 million comprised of: (i)$218.2 million remaining deferred revenue under the 2013 AZ Agreements as of the 2016 AZ Agreement effective date and (ii) $22.2 million of estimated considerationstandalone selling price for the anticipatedservices and/or manufacturing and supply included in each of the performance obligation, as applicable, primarily based on the nature of the services related to IL12be performed and/or goods to be manufactured and estimates of the other immuno-oncology program.
associated costs, adjusted for a reasonable profit margin that would be expected to be realized under similar contracts. The aggregate allocable arrangement consideration of $240.4 million was allocated amongst the separate units of accounting using the relativeestimated standalone selling price method as follows: (i) combined unit of accounting from the 2013 Agreements: $209.6 million, (ii) preclinical development obligations for IL12: $4.1 million (iii) preclinical development obligations for the other immuno-oncology program: $4.7 million, (iv) combinedmaterial right to receive development and commercialization rights and manufacturing and supply services for IL12: $10.4an 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 December 31, 2020 (in thousands):
| | | | | | | | |
| | Transaction Price |
| Combined 2018 AZ Agreements: | | December 31, 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 | | 85,750 | |
| Material right to receive development and commercialization rights | | 1,591 | |
| Total | | $ | 396,830 | |
| Remaining unsatisfied performance obligation | | $ | 87,225 | |
As of December 31, 2020, $77.5 million of the remaining performance obligations that are unsatisfied is expected to be recognized as revenue through December 31, 2029 and (v) combined$9.7 million is expected to be recognized as revenue at the earlier of expiration or modification of the Combined 2018 AZ Agreement.
We measure proportional performance over time using an input method based on cost incurred relative to the total estimated costs for the Combined 2018 AZ Agreement Performance Obligation and the preclinical development and commercialization rights and manufacturing and supply services for IL-12 and the other immuno-oncology program: $11.6 million.oncology target performance obligations. We recognize revenue related to the amounts allocated to the combined accounting unit pertainingperformance obligation for a development and commercialization license and manufacturing obligations for IL-12 based on the point in time upon which control of supply is transferred to the 2013 Agreements ratably over the remaining period of performanceAstraZeneca for each delivery of the research services, development pool services, mRNA supply for research services and development pool services as there is no other discernible pattern of recognition. associated supply.
We recognize revenue relatedfor the Combined 2018 AZ Agreement Performance Obligation by determining the proportion of effort incurred as a percentage of total effort we expect to amountsexpend. This ratio is applied to the transaction price allocated to this combined performance obligation. We also estimate the preclinical development obligations for IL12 unit of accountingplan, including expected demand from AstraZeneca, and the preclinical development obligationsassociated costs for the other immuno-oncology program unit of accountingthis combined performance obligation, as we will satisfy this combined performance obligation as the respectivemanufacturing services are performed. We recognizeManagement has applied significant judgment in the process of developing our budget estimates. Any changes to these estimates will be recognized in the period in which they change as a cumulative catch up.
The following table summarizes the revenue related to amounts allocatedrecognized for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Combined AZ Agreements | | $ | 18,371 | | | $ | 4,650 | | | $ | 45,393 | |
The revenue recognized for the year ended December 31, 2020 includes the amortization of deferred revenue due to the combined development and commercialization rights and manufacturing and supplysatisfaction of our performance obligation during the period, including a cumulative catch-up adjustment of $12.5 million due to changes in estimated costs for our future performance obligations.
The following table summarizes the balances of deferred revenue at period end, which is classified as current or non-current in the consolidated balance sheets based on the period the services for IL12 unitare expected to be performed or control of accounting and the combined development and commercialization rights and manufacturing and supply services for the other immuno-oncology program as the respective supply is delivered, assuming AstraZeneca exercises its option to obtain the respective development and commercialization rights, or upon expiration of such option. The contingent option exercise payments upon the achievement of certain milestones events and option exercise earn-out payments will continueexpected to be recognized consistent with the initial assessment.transferred (in thousands):
In August
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Combined AZ Agreements | | $ | 57,192 | | | $ | 73,669 | |
2016 AstraZeneca exercised its option to obtain development and commercialization rights for an identified development candidate (AZD8601) (and related back-up candidates) under the 2013 AZ Agreements. VEGF Exercise
We concluded such option was substantivethat the 2016 VEGF Exercise should be treated as a separate transaction for accounting purposes, represents a transaction with a customer and was not considered a deliverabletherefore is accounted for in the 2013 AZ Agreements, under the 2013/2016 AZ Agreements or under the 2018 A&R Agreements. In conjunctionaccordance with the option exercise, we received $10.0 million upon the option exercise and are entitled to reimbursementASC 606. We identified one performance obligation in this arrangement which is comprised of the manufacturing cost of the clinical supply. In May 2018, we received a $30.0 million payment upon the achievement of a clinical event related to AZD8601. We determined the deliverables pertaining to option exercise are: (i) the rightexclusive license to develop and commercialize VEGF and the product candidate (and related back-up candidates) and (ii) the relatedmanufacturing of clinical supply of mRNA.supply. We concluded that the right to develop and commercialize the identified development candidate (and related back-up candidates) doesVEGF license is not qualify for separationdistinct from the related clinical supply of mRNA. This is primarily due to the fact that AstraZeneca must rely upon us to provide the related clinical supply of mRNA to fully exploit the value of the respective development and commercialize rights. Accordingly, we concluded the delivered item does not have standalone value from the undelivered element and we accounted for the deliverables as a combined unit of accounting. Arrangement consideration consists of: (i) the product option fee of $10.0 million; (ii) the $30.0 million clinical event payment; and (iii) the estimated reimbursement for the clinical supply of mRNA. However, we could not reasonably estimate the consideration pertaining to the clinical supply of mRNA as the supply requirements are uncertain until the Phase 3 study design is complete. Therefore, total arrangement consideration could not be reasonably estimated as of December 31, 2018, 2017 or 2016. As a result, the $10.0 million product option fee and the $30.0 million clinical event payment have been deferred and will continue to be, along with future consideration received, until the consideration pertaining to the clinical supply of mRNA can be reasonably estimated. Once the total arrangement consideration can be estimated, the arrangement consideration was be recognized as the clinical supply is provided to AstraZeneca for use in the clinical trial.
2017 Strategic Alliance with AstraZeneca – Relaxin
We determined the 2017 AZ Agreement should be accounted for separately from the 2013/2016 AZ Agreements, as the Relaxin program was not subject to the 2013/2016 AZ Agreements at the time when we entered into the 2017 AZ Agreement and the agreements are not otherwise interrelated or interdependent on each other.
We concluded the 2017 AZ Agreement is under the scope of ASC 808 as AstraZeneca and Moderna are both active participants in the development, manufacturing and commercialization activities and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. Additionally, we determined the development, manufacturing and commercialization activities are not deliverables under ASC 605-25. As a result, the activities conducted pursuant to the development, manufacturing and commercialization activities will be accounted for as a component of the related expense in the period incurred. We considered ASC 605-45 in determining the appropriate treatment for the transactions between AstraZeneca and Moderna and concluded that reimbursement for transactions in which we are considered to be the principal, which includes being the primary obligor and having the risks and rewards of ownership, are accounted for as gross revenue. We recognized $0.6 million from our 2017 AZ Agreement in 2018. No revenue was recognized from the 2017 AZ Agreement in 2017.
2013 Agreements with AstraZeneca, amended and restated in 2018
As the 2018 A&R Agreements amended and restated the 2013 AZ Agreements, we determined the 2018 A&R Agreements are considered a material modification to the 2013/2016 AZ Agreements. For purpose of this accounting treatment discussion, we refer to the 2013/2016 AZ Agreements and the 2018 A&R Agreements collectively as the Combined 2018 AZ Agreements.
We evaluated the Combined 2018 AZ Agreements in accordance with ASC 605-25. We determined there were multiple deliverables in the Combined 2018 AZ Agreements including: (i) licenses to exploit mRNA constructs coding for specific targets from the 2018 A&R Agreements, (ii) supply of mRNA for research activities and for development pool activities from the 2018 A&R Agreements, (iii) preclinical development obligations for the IL12 program under the 2016 AZ Agreement, (iv) preclinical development obligations for the other program under the 2016 AZ Agreement, (v) development and commercialization rights for IL12 under the 2016 AZ Agreement, (vi) development and commercialization rights for the other program under the 2016 AZ Agreement, (vii) manufacturing and supply services for IL12 under the 2016 AZ Agreement, and (viii) manufacturing and supply services for the other program under the 2016 AZ Agreement. We concluded AstraZeneca’s options to obtain development and commercialization rights for IL12 and the other program under the 2016 AZ Agreement during the election period were non-substantive. While AstraZeneca was not obligated to exercise its options to obtain the respective development and commercialization rights, they could exercise the option for no additional consideration. As such, we concluded there was no significant risk as to whether AstraZeneca would exercise its options. Therefore, the development and commercialization rights were included as deliverables under the Combined 2018 AZ Agreements. Additionally, pursuant to the 2018 A&R AZ Agreements, as it relates to the option to obtain (i) exclusive rights to clinically develop and commercialize development candidates for the identified cardiovascular and cardiometabolic targets and the oncology target (ii) research and development pool services and (iii) certain additional manufacturing services, we concluded that such options are substantive as there was still significant uncertainty as to whether AstraZeneca would exercise the options and therefore such options were not considered a deliverable at the date of the modification.
Consistent with the assessment of the 2013/2016 AZ Agreements, we concluded the licenses to exploit mRNA constructs coding for specific targets does not qualify for separation from the supply of mRNA for research activities and development pool activities asbecause AstraZeneca cannot fully exploit the value of the licenseslicense without receipt of such supply. Accordingly,This is due to limitations inherent in the licenses doconveyed wherein AstraZeneca does not have standalone value from the supply of mRNA for research activities and development pool activities and we accounted for these deliverables as one unit of accounting (the combined unit of accounting fromcontractual right to manufacture during the 2018 A&R Agreements). Further, we concluded the preclinical development obligations for each research program qualify for separation from each other and from the other deliverables as AstraZeneca will benefit from the resultsterm of the respective toxicology studies and product development to determine whether to nominateagreement.
The following table summarizes the respective product candidate for further development. Therefore, we concluded the preclinical development obligations for each research program have standalone value from the undelivered elements and represent a separate unit of accounting for each program. Additionally, we concluded that eachcomposition of the total transaction price for the periods presented (in thousands):
| | | | | | | | | | | | | | |
| | Transaction Price |
| | December 31, |
| 2016 VEGF Exercise: | | 2020 | | 2019 |
| Option exercise fee | | $ | 10,000 | | | $ | 10,000 | |
| Milestone payment | | 30,000 | | | 30,000 | |
| Sublicense reimbursement | | 2,250 | | | 2,250 | |
| Estimated reimbursement for clinical supply | | 18,062 | | | 15,621 | |
| Total | | $ | 60,312 | | | $ | 57,871 | |
We are eligible to receive future milestones and royalties on future commercial sales under this arrangement. We utilize the most likely amount method to estimate any development and commercialization rights doregulatory milestone payments to be received and the amount of estimated reimbursement for clinical supply. As of December 31, 2020, there were no milestones that had not qualify for separation frombeen achieved included in the related manufacturingtransaction price. We considered the stage of development and supply services for the respective program. This is primarily because AstraZeneca hasrisks associated with the remaining development required to rely on us to provideachieve each milestone, as well as whether the related manufacturing and supply services to fully exploit the valueachievement of the respective development and commercialize rights. Accordingly, we accounted for the development and commercialization rights and the related manufacturing and supply servicesmilestone is outside of our or AstraZeneca’s control. The outstanding milestone payments were fully constrained, as a combined unitresult of accounting for each program. As a result, we determined there were five unitsthe uncertainty whether any of accounting under the Combined 2018 AZ Agreements: (i) combined unit of accounting from the 2018 A&R AZ Agreements, (ii) preclinical development obligations for IL12 (iii) preclinical development obligations for the other immuno-oncology program, (iv) combined development and commercialization rights and manufacturing and supply services for IL12, and (v) combined development and commercialization rights and manufacturing and supply services for the other immuno-oncology program.
milestones would be achieved. We determined that neither VSOE nor TPE of sellingany commercial milestones and sales-based royalties will be recognized when the related sales occur as they were determined to relate predominantly to the license granted and therefore have also been excluded from the transaction price. We re-evaluate the transaction price is available for any of the units of accounting identified at the modification date. Accordingly, the selling priceend of each unit of accounting was determined based on our BESP. We developedreporting period and as uncertain events are resolved or other changes in circumstances occur. When a milestone payment is included in the BESP for each unit of accounting withtransaction price in the objective of determining the price at whichfuture, it would sell such item if it were to be sold regularly on a standalone basis. We determined the BESP for each unit of accountingis recognized as revenue based on the individual components comprising the unit of accounting, as applicable. For units of accounting that included or were solely comprised of a service component, we considered the naturerelative completion of the servicesunderlying performance obligation. There was a $2.4 million increase to the transaction price during the year ended December 31, 2020, resulting from a change in estimate of variable consideration.
The following table summarizes the total transaction price allocated to the single performance obligation under the arrangement, and the amount of the transaction price unsatisfied as of December 31, 2020 (in thousands):
| | | | | | | | |
| | |
| | Transaction Price |
| | December 31, 2020 |
| 2016 VEGF Exercise combined performance obligation | | 60,312 | |
| Remaining unsatisfied performance obligation | | 41,877 | |
As of December 31, 2020, the remaining performance obligations that are unsatisfied is expected to be performed and estimates of the associated effort and cost of the services. For units of accounting that included a manufacturing and supply component, we considered the nature and duration of our obligation and estimates of the associated effort and cost of the manufacturing under similar arrangements. For units of accounting that included a license component, we considered the probability weighted present value of expected future cash flows associated with each license related to the specific or general research area,recognized as applicable. 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.revenue through December 31, 2025.
Total estimated arrangement consideration under the Combined 2018 AZ Agreements was determined to be $217.1 million comprised of: (i) $145.9 million remaining deferred revenue under the 2013/2016 AZ Agreements as of the modification date and (ii) $71.2 million of estimated consideration for the anticipated manufacturing and supply services related to IL12 and the other immuno-oncology program. The aggregate allocable arrangement consideration of $217.1 million was allocated amongst the separate units of
accounting using the relative selling price method as follows: (i) combined unit of accounting from the 2018 A&R AZ Agreements of $144.3 million ; (ii) preclinical development obligations for IL12 of $0.5 million; (iii) preclinical development obligations for the other immuno-oncology program of $5.4 million; (iv) combined development and commercialization rights and manufacturing and supply services for IL12 of $33.1 million; and (v) combined development and commercialization rights and manufacturing and supply services for the other immuno-oncology program of $33.8 million. We recognize revenue related to amountsthe amount of the transaction price allocated to the accounting units pertainingVEGF Exercise performance obligation based on the point in time upon which control of supply is transferred to AstraZeneca for each delivery of the 2018 A&R AZ Agreements asassociated supply.
The following table summarizes the mRNA supply for research services and development pool services are delivered. We recognize revenue related to amounts allocated to the preclinical development obligations for IL12 unit of accounting and the preclinical development obligationsrecognized for the other immuno-oncology program unitperiods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| 2016 VEGF Exercise | | $ | 14,253 | | | $ | 583 | | | $ | 0 | |
Table of accounting as the respective services are performed. We recognizeContents
The revenue related to amounts allocated to the combined development and commercialization rights and manufacturing and supply services for IL12 unit of accounting and the combined development and commercialization rights and manufacturing and supply servicesrecognized for the other immuno-oncology program as the respective supply is delivered, assuming AstraZeneca exercises its option to obtain the respective development and commercialization rights, or upon expiration of such option. The contingent option exercise payments upon the achievement of certain milestones events and option exercise earn-out payments will continue to be recognized consistent with the initial assessment.
For the yearsyear ended December 31, 2018, 2017 and 2016 we recognized collaboration revenue2020 includes the amortization of $46.0 million, $30.0 million and $32.4 million respectively, from AstraZeneca. We had deferred revenue due to the satisfaction of $157.0our performance obligation during the period, offset by a cumulative catch-up adjustment of $0.4 million and $169.6 million,due to changes in estimated costs for our future performance obligations.
The following table summarizes the balances of deferred revenue at period end, which is classified as current or non-current in the consolidated balance sheets based on the period the services are expected to be performed or control of December 31, 2018 and 2017, respectively, from AstraZeneca.the supply is expected to be transferred (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| 2016 VEGF Exercise | | $ | 29,335 | | | $ | 41,266 | |
Merck – Strategic Alliances in Infectious Diseases and Cancer Vaccines
2015 Strategic Alliance with Merck – Infectious Disease
In January 2015, we entered into a Master Collaboration and License Agreement with Merck, which was amended in January 2016, June 2016, and May 2019, and which we refer to, as amended, as the 2015 Merck Agreement. Pursuant to the 2015 Merck Agreement, we and Merck agreed to research, develop, and commercialize potential mRNA medicines for the prevention and treatment of infections by RSV. The 2015 Merck Agreement was terminated on October 7, 2020, by mutual agreement, and the right to pursue the continued development and commercialization of product candidates and products, including RSV, reverted to us.
As a part of the May 2019 amendment of the 2015 Merck Agreement, we and three additional undisclosed viruses.Merck agreed to conclude the collaboration as it relates to development of potential mRNA medicines for other viruses, including mRNA-1278 for the prevention of varicella zoster virus (VZV) infection. Pursuant to the 2015
Merck Agreement, Merck iswas primarily responsible for research, development, and commercialization activities and associated costs.costs of such research and commercialization. We arewere responsible for designing and, at Merck's cost, manufacturing all mRNA constructs for preclinical and Phase 1 and Phase 2 clinical development purposes. In addition,purposes, and we arewere responsible for performing collaborationcertain costs associated with the conduct of a Phase 1 clinical trial for a RSV vaccine product candidate (mRNA-1172).
We and design activities set forth in a platform work plan, a proof of biology work plan and Moderna development program work plans. Responsibility for manufacturing mRNA constructs for late stage clinical development and commercialization purposes is to be determined. A Joint Steering Committee comprised of representatives of each party oversees the performance of collaboration activities.
The focus of the initial four-year period of the 2015 Merck Agreement, ending in January 2019, was the discovery and development of mRNA vaccines and antibodies directed to the four viruses that were the subject of the 2015 Merck Agreement. The 2015 Merck Agreement also includes an additional three-year period during which Merck may continue to preclinically and clinically develop product candidates that arise from the initial four-year research period. Merck may, prior to the end of the seventh year of the 2015 Merck Agreement, elect to exclusively develop and commercialize up to five product candidates.
During the four-year discovery and development phase of the alliance, we and Merck agreed to work exclusively with each other to develop potential mRNA medicines for the prevention and treatment of infections by the four viruses that were the subject of the 2015 Merck Agreement. Additionally, we and Merck have agreed to certain defined exclusivity obligations followingduring the four-year discovery and development phaseterm of the alliance. Under2015 Merck Agreement with respect to mRNA investigational medicines against RSV. As part of the May 2019 amendment of the 2015 Merck Agreement, we grantand Merck agreed to certain licensesexceptions to Merckthe existing exclusivity obligations, pursuant to enable Merck to perform its collaboration activities.which we will no longer be restricted from researching, developing, and commercializing an mRNA investigational medicine for the prevention of a specific set of respiratory infections, including RSV, for the pediatric population.
Under the terms of the 2015 Merck Agreement, we received a $50.0 million upfront payment. We arewere eligible to receive, on a product-by-product basis, up to $65.0 million inadditional milestone payments forupon the achievement of certain development, milestones, upregulatory, and commercial milestone events, as well as royalties on Merck’s net sales of products at rates ranging from the mid-single digits to $60.0 million in payments for achievementlow teens, subject to certain reductions, with an aggregate minimum floor. During the term of regulatory milestones and up to $175.0 million in payments for achievement of commercial milestones. As of December 31, 2017,the agreement, we have received from Merck a clinical milestone payment of $5.0 million with respect to the initiation of a Phase 1 clinical trial for a Merck RSV vaccine product candidate. On a product-by-product basis, we are also entitled to receive royalties on Merck’s net sales of products at rates ranging from the mid-single digits to low teens, subject to certain reductions, with an aggregate minimum floor. Additionally, concurrentConcurrent with entering into the 2015 Merck Agreement, Merck made a $50.0 million equity investment in Moderna.
Unless earlier terminated, the 2015 Merck Agreement will continue on a product-by-productus, and country-by-country basis for so long as royalties are payable by Merck on a given product in a given country. Either party may terminate the 2015 Merck Agreement upon the other party’s material breach, either in its entirety orconcurrent with respect to a particular program, product candidate, product or country, subject to specified notice and cure provisions. Merck may terminateamending the 2015 Merck Agreement in full or with respect to a particular
product candidate or product upon certain advance notice to us for any reason, or earlier if Merck determines the alliance or product is no longer commercially practicable. If Merck has the right to terminate the 2015 Merck Agreement, in its entirety or with respect to a program, product candidate or product, for our material breach, then Merck may elect, in lieu of terminating the 2015 Merck Agreement to have the 2015 Merck Agreement remain in effect, subject to reductions in certain payments we are eligible to receive with respect to the terminable rights. Upon a termination of the 2015 Merck Agreement with respect to a program, all licenses and other rights granted to Merck with respect to such program will terminate and the continued development and commercialization of product candidates and products will revert to us. If the 2015 Merck Agreement is terminated with respect to a given product candidate or product, all licenses and other rights granted to Merck with respect to such product candidate or product will terminate and, to the extent we terminated for Merck’s breach, Merck will grant us licenses under select Merck technology for our continued development and commercialization of such product candidate or product.
2016 Expansion of the Infectious Disease Strategic Alliance
In January 2016, we expanded our infectious disease strategic alliance with Merck. Specifically, we and Merck agreed to amend the original 2015 Merck Agreement to include the research, development, and commercialization of mRNA medicines for the prevention and treatment of infection by the varicella zoster virus in place of one of the viruses initially included under the 2015 Merck Agreement. Under the terms of the amended 2015 Merck Agreement, we received an upfront payment of $10.0 million from Merck for the inclusion of the new program and we agreed with Merck to increase the royalty rates ranging from the mid-single digits to low-teens for net sales of products directed to this virus.Merck.
Accounting Treatment
We concluded thedetermined that all aspects of amended 2015 Merck Agreement should be accounted for separately from Merck’s investment in our Series E redeemable convertible preferred stock, asrepresent a transaction with a customer and therefore the agreements are not interrelated or interdependent on each other. Further, the investment in the Series E redeemable convertible preferred stock was negotiated with terms representative of fair value at the same purchase price paid by other investors. As such, the proceeds related to the equity investment were excluded from the consideration related to the 2015 Merck Agreement.
We concluded theamended 2015 Merck Agreement is under the scope of ASC 808 as Merck and Moderna are both active participants and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. Additionally, we evaluated the 2015 Merck Agreementaccounted for recognition and measurement in accordance with ASC 605-25606. The four-year research period was complete as of December 31, 2018 and ASC 605-28. The agreement contains multiple deliverables, includingwe recognized the licenses for collaboration activities, ourtotal transaction price of $65.0 million (the $60.0 million in aggregate upfront payments and a $5.0 million payment pertaining to achievement of a development milestone) in full as we concluded there were no unsatisfied performance of certain collaboration activities, mRNA design activities, our performance of platform work plan activities, our performance of proof of biology program activities, our performance of activities forobligations pertaining to the Moderna development programs, manufacturing of non-cGMP mRNA, exclusivityamended 2015 Merck Agreement. Additionally, we concluded the following customer options were marketing offers as such options did not provide any discounts or other rights that would be considered a material right in the arrangement: (i) research services during the three-year period following the initial four-year research period during which Merck could continue to preclinically and participation in joint steering committee services. In addition,clinically develop product candidates and (ii) clinical mRNA supply for Phase 1 and Phase 2 was concluded to be substantive and therefore not considered a deliverable at the inception of the 2015 Merck Agreement. Further, we concluded that the clinical mRNA supply was not priced at a significant and/or incremental discount. Accordingly, the clinical mRNA supply was not considered a deliverable and the associated fees were not included in the allocable arrangement consideration.
We concluded the licenses for performing collaboration activities do not qualify for separation from any of the other deliverables in the agreement as Merck cannot fully exploit the value of such licenses without receipt of mRNA design services and non-cGMP mRNA supply from us. The products and services to be provided by us, which involve specialized expertise, particularly as it relates to mRNA technology, are not available inbeyond the marketplace. Accordingly, Merck has to obtaininitial four-year research period. Therefore, such services and supply pursuant to the collaboration activities, design activities, platform work plan, proof of biology program, development programs, manufacturing of non-cGMP mRNA, exclusivity and joint steering committee services from us which significantly limits the ability for Merck to utilize such licenses for its intended purpose on a standalone basis. Accordingly, the delivered licenses do not have standalone value from the undelivered elements and we accounted for all of the deliverables as one unit of accounting.
The total arrangement consideration to be allocated to the single unit of accounting at inception of the arrangement consists of the $50.0 million upfront payment and estimated amounts related to research and development services and manufacturing that are included in the unit of accounting. We determined the period of performance of the undelivered elements is commensurate with the four-year discovery and development phase of the collaboration. As such, the $50.0 million arrangement consideration was recognized ratably over the four-year period, as there is no other discernible pattern of recognition.
We have evaluated all the milestones that may be received under the arrangement. We concluded at the outset of the arrangement that none of the future development and regulatory milestones qualified as substantive milestones, as the efforts to achieve the milestones are Merck’s responsibility and therefore the milestone is not achieved based on our past performance. Accordingly, upon achievement of a development or regulatory milestone event, the corresponding amount earned will be recognized as additional arrangement consideration over the remaining estimated period of performance, if any, with a cumulative catch up for the elapsed portion of the
performance period being recognized when the payment is earned. All commercial milestones willoptions would be accounted for inas a separate contract if exercised by the same manner as royalties, and recorded as revenue upon achievementcustomer.
After completion of the milestone, assuming all other revenue recognition criteria are met. We will recognize royalty revenue in theinitial four-year research period, of saleand as part of the related product(s), based on the underlying agreement terms, assuming all other revenue recognition criteria are met.
We recognized $3.2 million, $1.0 million and $2.1 million for the years ended December 31, 2018, 2017 and 2016, respectively, related to the performance of certain manufacturing services which were considered substantive options in the arrangement. These services are recognized as they are performed.
We determined the 2016May 2019 amendment of the 2015 Merck Agreement, Merck elected to replace oneestablish a new RSV vaccine product candidate and elected to conduct a Phase 1 clinical trial. We are responsible for
Table of Merck’s exclusive viruses, should be combined with the original 2015 Merck Agreement and the comparable deliverablesContents
certain costs associated with the new virus should be combinedconduct of the Phase 1 clinical trial. We determined that our obligation under the May 2019 amendment to reimburse Merck for certain costs associated with the deliverables fromRSV vaccine Phase 1 clinical trial represents consideration payable to a customer and is accounted for as a reduction of the original 2015transaction price. The consideration amount is determined based on the most likely method and recorded as contra-revenue as costs are incurred. The one-time payment upon election by Merck Agreements into a single unitto continue developing RSV is fully constrained as it is contingent upon completion of accounting.the RSV Phase 1 clinical trial and upon decisions to be made by Merck to continue development thereafter.
The following table summarizes the composition of the total transaction price for the periods presented (in thousands):
| | | | | | | | | | | | | | |
| | Transaction Price |
| | December 31, |
| 2015 Merck Agreement: | | 2020 | | 2019 |
| Upfront payments | | $ | 60,000 | | | $ | 60,000 | |
| Development milestones | | 5,000 | | | 5,000 | |
| Reduction of reimbursements paid to Merck | | (12,353) | | | (5,265) | |
| Total | | $ | 52,647 | | | $ | 59,735 | |
We utilize the most likely amount method to estimate any development and regulatory milestone payments to be received. As such,of December 31, 2020, there were no milestones that had not been achieved included in the $10.0 milliontransaction price. We considered the stage of consideration pertaining todevelopment and the amendment was added to the remaining deferred revenue at the time of modification and recognized ratably over the remaining period of performance which is commensuraterisks associated with the remaining discoverydevelopment required to achieve each milestone, as well as whether the achievement of the milestone is outside of our or Merck’s control. The outstanding milestone payments were fully constrained, as a result of the uncertainty whether any of the milestones would be achieved. We re-evaluate the transaction price at the end of each reporting period and development phase.
as uncertain events are resolved or other changes in circumstances occur. For the yearsyear ended December 31, 2018, 2017 and 2016, we recognized collaboration revenue of $24.62020, there was a$7.1 million $22.9 million and $27.5 million, respectively, from deduction to the transaction price related to reimbursements paid to Merck 2015 Agreementfor RSV vaccine Phase I clinical trial costs.
The following table summarizes the total transaction price allocated to the combined performance obligation under the arrangement, and the 2016 Amendment. We had deferred revenueamount of $16.3 million and $32.1 millionthe transaction price unsatisfied as of December 31, 20172020 (in thousands):
| | | | | | | | |
| | Transaction Price |
| | December 31, 2020 |
| 2015 Merck Agreement | | $ | 52,647 | |
| Remaining unsatisfied performance obligation | | $ | 0 | |
The following table summarizes the revenue and 2016, respectively,contra-revenue recognized for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Contra-revenue under the May 2019 Amendment | | $ | (7,088) | | | $ | (5,265) | | | $ | 0 | |
| Collaboration revenue under the 2015 Merck Agreement | | 62 | | | 492 | | | 24,582 | |
| Total contra-revenue | | $ | (7,026) | | | $ | (4,773) | | | $ | 24,582 | |
Contra-revenue recognized was related to consideration payable to Merck under the May 2019 Amendment of the 2015 Merck Agreement. Collaboration revenue recognized was pursuant to separate agreements with Merck related to the exercise of customer options to purchase clinical mRNA supply to further develop a product candidate after the initial four-year research period. Clinical mRNA supply was recognized as collaboration revenue at a point in time upon which control of supply was transferred to Merck for each delivery of the associated supply. We had no deferred revenue as of December 31, 2020 or December 31, 2019 from the amended 2015 Merck Agreement as all performance obligations under the amended 2015 Merck Agreement and the 2016 Amendment. As we substantiallywere completed the deliverables during the four-year discovery and development phase, all deferred revenue was recognized as of December 31, 2018.
On October 7, 2020, the 2015 Master Collaboration and License Agreement between us and Merck related to our collaboration on RSV was terminated by mutual agreement. Merck will complete the Phase 1 study and transition the program to Moderna. The termination did not have an impact to our consolidated financial statements as of and for the year ended December 31, 2020.
2016 Cancer Vaccine Strategic Alliance—PersonalizedAlliance-Personalized mRNA Cancer Vaccines
In June 2016, we entered into a personalized mRNA cancer vaccines (PCV) Collaboration and License Agreement with Merck Sharp & Dohme Corp., or Merck, which we refer to as the PCV Agreement, to develop and commercialize PCVs for individual patients using our mRNA vaccine and formulation technology. Under the strategic alliance, we identify genetic mutations present in a particular patient’s tumor cells, synthesize mRNA for these mutations, encapsulate the mRNA in one of our proprietary LNPs and administer to each patient a unique mRNA cancer vaccine designed to specifically activate the patient’s immune system against her or his own cancer cells.
Pursuant to the PCV Agreement, we are responsible for designing and researching PCVs, providing manufacturing capacity and manufacturing PCVs, and conducting Phase 1 and Phase 2 clinical trials for PCVs, alone and in combination with KEYTRUDA (pembrolizumab), Merck’s anti-PD-1 therapy, all in accordance with an agreed upon development plan and budget and under the oversight of a committee comprised of equal representatives of each party. The parties have entered into a clinical quality agreement with respect to Moderna’s manufacture and supply activities. We received an upfront payment of $200.0 million from Merck. In November 2017, we and Merck announced the achievement of a key milestone for the first-in-human dosing of a PCV (mRNA-4157) as a part of the alliance. The Phase 1 open-label, dose escalation, multicenter clinical trial in the United States (KEYNOTE-603) is designed to assess the safety, tolerability and immunogenicity of mRNA-4157 alone in subjects with resected solid tumors and in combination with KEYTRUDA, in subjects with unresectable solid tumors.
Until the expiration of a defined period of time following our completion of Phase 1 and Phase 2 clinical trials for PCVs under the PCV Agreement and delivery of an associated data package to Merck, Merck has the right to elect to participate in future development and commercialization of PCVs by making a $250.0 million participation payment to us. If Merck exercises its election and pays the participation payment, then the parties will equally co-fund subsequent clinical development of PCVs, with Merck primarily responsible for conducting clinical development activities under a jointly agreed development plan and budget. Each party may also conduct additional clinical trials for PCVs that are not included in the jointly agreed development plan and budget, in which case the non-conducting party will reimburse the conducting party for half of the total costs for such trials, plus interest, from its share of future profits resulting from sales of such PCVs, if any. Merck will lead worldwide commercialization of PCVs, subject to Moderna’s option to co-promote PCVs in the United States, and the parties will equally share the profits or losses arising from worldwide commercialization. Until a PCV becomes profitable, we may elect to defer payment of our share of the commercialization and related manufacturing costs and instead reimburse Merck for such costs, plus interest, from our share of future profits resulting from sales of such PCV, if any. Subject to customary “back-up” supply rights granted to Merck, we will manufacture (or have manufactured) PCVs for preclinical and clinical purposes. Manufacture of PCVs for commercial purposes will be determined by the parties in accordance with the terms of the PCV Agreement. Under the PCV Agreement, we grant certain licenses to Merck to perform its collaboration activities.
If Merck does not exercise its right to participate in future development and commercialization of PCVs, then Moderna will retain the exclusive right to develop and commercialize PCVs developed during the strategic alliance, subject to Merck’s rights to receive a percentage in the high teens to the low 20s, subject to reductions of our net profits on sales of such PCVs. During a limited period
following such non-exercise, Merck has the right to perform clinical studies of such PCVs in combination with KEYTRUDA, for which we agree to use reasonable efforts to supply such PCVs. During such limited period, we also have the right to perform clinical studies of PCVs in combination with KEYTRUDA, for which Merck agrees to use reasonable efforts to supply KEYTRUDA. In addition, following its non-exercise, Merck is also entitled to receive a percentage in the high teens to the low 20s, subject to reductions, of our net profits on sales of certain PCVs first developed by us following such non-exercise and reaching a specified development stage within a defined period of time.
We and Merck have agreed to certain defined, limited exclusivity obligations with respect to the development and commercialization of PCVs.
2018 Expansion of the Cancer Vaccine Strategic Alliance—SharedAlliance-Shared Neoepitope Cancer Vaccines
In April 2018, we and Merck agreed to expand our cancer vaccine strategic alliance to include the development and commercialization of our KRAS vaccine development candidate, mRNA-5671 or V941, and potentially other shared neoantigen mRNA cancer vaccines (SAVs). We preclinically developed mRNA-5671 prior to its inclusion in the cancer vaccine strategic alliance and it is comprised of a novel mRNA construct designed by us and encapsulated in one of our proprietary LNPs. The PCV Agreement was amended and restated to include the new SAV strategic alliance (PCV/SAV Agreement).
We have granted Merck certain licenses and we and Merck have agreed to certain exclusivity obligations with respect to SAVs and particular SAV programs, which obligations are subject to termination or expiration upon certain triggering events.
Under the PCV/SAV Agreement, Merck will be responsible for conducting Phase 1 and Phase 2 clinical trials for mRNA-5671 and for all costs associated with such activities, in accordance with a jointly agreed development plan and budget, and we will be responsible for manufacturing and supplying all mRNA-5671 required to conduct such trials and for all costs and expenses associated with such
manufacture and supply. Under the PCV/SAV Agreement, our budgeted commitment for PCVsPCV increased to $243.0 million. Until the expiration of a defined period of time following the completion of Phase 1 and Phase 2 clinical trials for mRNA-5671 under the PCV/SAV Agreement and our delivery of an associated data package to Merck, Merck has the right to elect to participate in future development and commercialization of mRNA-5671 by making a participation payment to us. If Merck exercises its participation rights, then the parties will equally co-fund subsequent clinical development of mRNA-5671, with Merck primarily responsible for conducting clinical development activities under a jointly agreed development plan and budget. If Merck declines to participate in future development and commercialization activities following the initial Phase 1 and Phase 2 clinical trials for mRNA-5671, then we will retain the rights to develop and commercialize mRNA-5671. If Merck elects to participate in future development and commercialization of mRNA-5671, Merck may also conduct additional clinical trials for mRNA-5671 that are not included in the jointly agreed development plan and budget, in which case we will reimburse Merck for half of the total development costs for such clinical trials, plus interest, from our share of future profits resulting from sales of mRNA-5671, if any. If Merck does conduct additional clinical trials for mRNA-5671, we will be responsible for manufacturing and supplying all mRNA-5671 required to conduct such trials. Merck will lead worldwide commercialization of mRNA-5671, subject to our option to co-promote mRNA-5671 in the United States, and the parties will equally share the operating profits or losses arising from worldwide commercialization. Until mRNA-5671 becomes profitable, we may elect to defer payment of our share of the commercialization and related manufacturing costs and instead reimburse Merck for such costs, plus interest, from our share of future profits resulting from sales of mRNA-5671, if any. Subject to “back-up” supply rights granted to Merck, we will manufacture (or have manufactured) mRNA-5671 and other SAVs for preclinical and clinical purposes. After Merck exercises its right to participate in future development and commercialization of mRNA-5671 and other SAVs, we will grant the applicable development and commercialization licenses and the parties are obligated to discuss responsibility for future manufacturing, giving consideration to applicable criteria.
Pursuant to the PCV/SAV Agreement, for a defined period of time, either party may propose that the parties conduct additional programs for the research and development of SAVs directed to different shared neoantigens. If the parties agree to conduct any such programs, then we will be responsible for conducting and funding preclinical discovery and research activities for such SAVs, and otherwise the programs would be conducted on substantially the same terms as mRNA-5671 program. If we or Merck propose a new SAV program and the other party does not agree to conduct such program, then the PCV/SAV Agreement includes provisions allowing the proposing party to proceed with such development, at the proposing party’s expense. If Merck is the proposing party, we will be responsible for manufacturing and supplying material for such program at Merck’s expense. In such case, the non-proposing party will have the right to opt-in to such SAV program any time before the proposing party commits to performing Good Laboratory Practice (GLP)-toxicity studies. Until the expiration of a defined period of time following our completion of Phase 1 and Phase 2 clinical trials for any SAV program mutually agreed by the parties under the PCV/SAV Agreement and our delivery of an associated data package to Merck, Merck has the right to elect to participate in future development and commercialization of such SAV by making a participation payment to us.
Unless earlier terminated, the PCV/SAV Agreement will continue on a program-by-program basis until Merck terminates its participation in such program. Following any such termination, we will retain the exclusive right to develop and commercialize PCVs or SAVs developed as a part of such program, subject to restrictions and certain limited rights retained by Merck.
In connection with the amendment of the PCV Agreement to include the development and commercialization of mRNA-5671 and potentially other SAVs, Merck made a contemporaneous equity investment in our Series H redeemable convertible preferred stock, resulting in gross proceeds of $125.0 million, of which $13.0 million iswas determined to be a premium and recorded to deferred revenue.
Accounting Treatment
2016 Cancer Vaccine Strategic Alliance—Personalized mRNA Cancer Vaccines
We determined that the PCVPCV/SAV Agreement should be accounted for separately from a prior collaboration agreement withthe amended 2015 Merck Agreement, as the agreements were not negotiated in contemplation of one another and the elements within each of the agreements are not closely interrelated or interdependent on each other. We concluded the PCVThe PCV/SAV Agreement represents a transaction with a customer and therefore is under the scope of ASC 808 as Merck and Moderna are both active participants and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. Additionally, we evaluated the PCV Agreementaccounted for recognition and measurement in accordance with ASC 606.
We identified the provisionsfollowing performance obligations in the PCV/SAV Agreement: (i) a research license and research and development services, including manufacturing and supply of ASC 605-25 and ASC 605-28. The arrangement contains multiple deliverables, including licenses to perform collaboration activities underPCVs, during the proof of concept (POC) plan, collaborationterm for the PCV program, referred to as the PCV Performance Obligation, and (ii) research license and manufacturing and supply of mRNA-5671 during the POC term for the KRAS program, referred to as the KRAS Performance Obligation. We concluded that the research license is not distinct from the research and development activities, potentially an additional POC term study, POC committee services, exclusivity, regulatory matters,including manufacturing and supply of PCVs, during the POC period, manufacturing capabilities and a clinical quality agreement.
We concluded that Merck’s right to elect to participate in future development and commercialization of PCVs is substantive and therefore is not considered a deliverable at the inception ofterm for the PCV Agreement. Merck is not contractually obligated to exercise the right. Additionally, because of the uncertain outcome of the research and development activities, we are at risk as to whether Merck will exercise its right to elect to participate in future development and commercialization of PCVs. Further, we determined that Merck’s right was not priced at a significant or incremental discount. Accordingly, Merck’s right was not considered a deliverable and the associated participation payment was not included in the allocable arrangement consideration.
We concluded that the licenses to perform the collaboration activities do not qualify for separation from any of the other deliverables in the arrangementprogram, as Merck cannot fully exploit the value of such licensesthe license without receipt of such services and supply. Our productsservices and servicessupply involve specialized expertise, particularly as they relateit relates to mRNA technology that is not available in the marketplace. Accordingly, Merck must obtainTherefore, the services and supply underresearch license has been combined with the collaboration research and development activities, additional POC term study, POC committee services, exclusivity, regulatory matters,including manufacturing and supply of PCVs, during the POC period, manufacturing capabilities and clinical quality agreement from us, which significantly limits the ability for Merck to utilize such licenses for its intended purpose on a standalone basis. As the delivered licenses do not have standalone value from the undelivered elements, we accounted for all of the deliverables as one unit of accounting.
The total arrangement consideration to be allocated to the single unit of accounting consists of the $200.0 million upfront payment. We determined the period of performance of the undelivered elements is through the expected date of delivery of the data and information generated and collected under the plan, which is commensurate with the initial five-year arrangement term. As such, the $200.0 million arrangement consideration is being recognized ratably over the initial five-year period, as there is no other discernible pattern of recognition.
2018 Expansion of the Cancer Vaccine Strategic Alliance—Shared Neoepitope Cancer Vaccines
Consistent with the PCV Agreement, the PCV/SAV Agreement was accounted for separately from the 2015 Merck Agreement, as amended, as the agreements were not negotiated in contemplation of one another and the elements within each of the agreements are not closely interrelated or interdependent on each other. Conversely, the PCV/SAV Agreement was accounted for as a modification to the PCV Agreement because the amendment expanded the existing scope of the arrangement. Accordingly, the newly negotiated obligations under the PCV/SAV Agreement are accounted for together with the remaining unfulfilled obligations under the PCV Agreement. Similarly, the equity investment in our Series H redeemable convertible preferred stock was considered together with the PCV/SAV Agreement as the transactions were executed contemporaneously in contemplation of one another. Further, the purchase price paid by Merck with respect to the investment in the Series H redeemable convertible preferred stock was not representative of fair value on the date of such purchase. As such, the incremental proceeds received in excess of the fair value of the underlying stock related to the equity investment were included in the consideration related to the PCV/SAV Agreement.
We evaluated the PCV/SAV Agreement for recognition and measurement in accordance with the provisions of ASC 605-25. The arrangement contains multiple deliverables. As it relates to the PCV program, there were no substantive changes to the deliverables
pursuant to the PCV/SAV Agreement other than an expansion of certain collaboration research and development activities and related manufacturing and supply obligations effected through the revisions made to the POC plan that resulted in an increase to the associated budget. Accordingly, the deliverablesterm for the PCV program, include licenses to perform collaboration activities underinto a single performance obligation. Similarly, we concluded that the POC plan, collaboration research and development activities, potentially an additional POC term study, POC committee services, exclusivity, regulatory matters, manufacturing and supply of PCVs duringlicense is not distinct from the POC period, manufacturing capabilities and a clinical quality agreement. As it relates to the KRAS program, the deliverables include licenses to perform collaboration activities under a POC plan and manufacturing and supply of mRNA-5671 during the POC period.
As of the date of inception of the PCV/SAV Agreement, we concluded that Merck’s rights to elect to participate in future development and commercialization of PCVs and mRNA-5671 are substantive and therefore are not considered deliverables at the inception of the PCV/SAV Agreement. Merck is not contractually obligated to exercise either of the rights. Additionally, because of the uncertain outcome of the research and development activities, we are at risk as to whether Merck will exercise its rights to elect to participate in future development and commercialization of PCVs and/or mRNA-5671. Further, we determined that Merck’s rights were not priced at a significant or incremental discount. Accordingly, neither of Merck’s such rights were considered deliverables and the associated participation payments were not included in the allocable arrangement consideration. Similarly, we concluded that Merck’s rights to obtain additional license(s) covering the PCV program and/or other SAV programs, research and development services associated with certain programs and manufacturing and supply in support of certain programs, are substantive and therefore are not considered deliverables at the inception of the PCV/SAV Agreement. Merck is not contractually obligated to exercise any of the rights. Additionally, because of the uncertain outcome of the research and development activities, we are at risk as to whether Merck will exercise its rights to obtain any of such goods and/or services. Further, we determined that Merck’s rights were not priced at a significant or incremental discount. Accordingly, none of Merck’s such rights were considered deliverables and the associated payments were not included in the allocable arrangement consideration.
Consistent with the assessment under the PCV Agreement, we concluded that the licenses to perform the collaboration activitiesterm for the PCVKRAS program, do not qualify for separation from any of the other deliverables in the arrangement under the terms of the PCV/SAV Agreement as Merck cannot fully
exploit the value of such licensesthe license without receipt of such services and supply. Our products and services involve specialized expertise, particularly as they relate to mRNA technology that is not available in the marketplace. Accordingly, Mercksupply which must obtain the services and supply under the collaboration research and development activities, additional POC term study, POC committee services, exclusivity, regulatory matters, manufacturing and supply of PCVs during the POC period, manufacturing capabilities and clinical quality agreement from us, which significantly limits the ability for Merck to utilize such licenses for their intended purpose on a standalone basis. As the delivered licenses do not have standalone value from the undelivered elements, we accounted for all of the deliverables associated with the PCV program as one unit of accounting (the PCV Unit of Accounting). Similarly, we concluded that the licenses to perform the collaboration activities for the KRAS program do not qualify for separation from the associated manufacturing and supply of mRNA-5671 as Merck cannot fully exploit the value of such licenses without receipt of such supply.be provided by us. This is due to the contractual limitations inherent in the licenses conveyed wherein Merck does not have the contractual right to manufacture during the POC period. Accordingly, Merck must obtainterm. Therefore, the research license has been combined with the manufacturing and supply of mRNA-5671, during the POC period from us, which significantly limits the abilityterm for Merck to utilize such licenses for their intended purpose on a standalone basis. As the delivered licenses do not have standalone value from the undelivered elements, we accounted for all of the deliverables associated with the KRAS program, as one unit of accounting (the KRAS Unit of Accounting).into a single performance obligation. Conversely, we concluded that the PCV Unit of AccountingPerformance Obligation and the KRAS Unit of Accounting qualify for separationPerformance Obligation are distinct from each other because Merck can fully exploit the value of each program for its intended purpose without the deliverablespromises associated with the other program. Additionally, we concluded the arrangement doesfollowing customer options are marketing offers as such options did not includeprovide any discounts or other rights that would be considered a generalmaterial right in the arrangement: (i) Merck participation election license related to future joint development and commercialization on a program-by-program basis, (ii) manufacturing and supply in support of return.certain SAV programs and/or the PCV program upon Merck election to not participate in future development and commercialization of that program and (iii) research and development services associated with certain SAV programs. Therefore, such options will be accounted for as a separate contract upon the customer’s election.
The following table summarizes the composition of the total transaction price for the periods presented (in thousands):
| | | | | | | | | | | | | | |
| | Transaction Price |
| | December 31, |
| PCV/SAV Agreement: | | 2020 | | 2019 |
| Upfront payment | | $ | 200,000 | | | $ | 200,000 | |
| Premium associated with the contemporaneous sale of Series H redeemable convertible preferred stock | | 13,050 | | | 13,050 | |
| Reimbursement for clinical supply | | 310 | | | 0 | |
| Total | | $ | 213,360 | | | $ | 213,050 | |
We determined that neither VSOE nor TPEre-evaluate the transaction price at the end of sellingeach reporting period. During the year ended December 31, 2020, there was a $0.3 million increase to the transaction price is availablefrom a reimbursement for either ofclinical supply.
The transaction price was allocated to the units of accounting identified at inception ofperformance obligations based on the modified arrangement with Merck. Accordingly, therelative estimated standalone selling price of each unit of accounting was determined based on our BESP as of the date of the modification.performance obligation. We developed the BESP for each of the units of accounting included in the PCV/SAV Agreement with the objective of determining theestimated standalone selling price at which we would sell such an item if it were to be sold regularly on a standalone basis. We developed the BESP for the licenseslicense included in each of the PCV Unit of AccountingPerformance Obligation and the KRAS Unit of AccountingPerformance Obligation 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 BESPestimated standalone selling price for the services andand/or manufacturing and supply included in each of the PCV Unit of AccountingPerformance Obligation and the KRAS Unit of AccountingPerformance Obligation, as applicable, primarily based on the nature of the services to be performed andand/or goods to be producedmanufactured and estimates of the associated effort and cost, associated with the services to be performed and products to be manufactured,adjusted for a reasonable profit margin that would be expected to be realized under similar contracts.
Allocable arrangement consideration at inception
The following tables summarize the allocation of the modifiedtotal transaction price to the identified performance obligations under the arrangement, is comprised of: (i)and the remaining unrecognized portionamount of the $200.0 million upfront paymenttransaction price unsatisfied as of $125.7 million and (ii) the premium associated with the contemporaneous sale of Series HDecember 31, 2020 (in thousands):
redeemable convertible preferred stock of $13.0 million. The aggregate allocable arrangement consideration of $138.7 million was allocated among the separate units of accounting using the relative selling price method as follows: (i) PCV Unit of Accounting: $132.9 million and (ii) KRAS Unit of Accounting: $5.8 million. The shares of Series H redeemable convertible preferred stock purchased by Merck were recorded at their respective fair value on the date of issuance. | | | | | | | | |
| | Transaction Price |
| PCV/SAV Agreement: | | December 31, 2020 |
| PCV performance obligation | | $ | 206,356 | |
| KRAS performance obligation | | 7,004 | |
| Total | | $ | 213,360 | |
| Remaining unsatisfied performance obligation | | $ | 51,007 | |
As of December 31, 2020, the date of the PCV/SAV Agreement, we determined the period ofremaining performance for the PCV Unit of Accounting remains through theobligations that are unsatisfied is expected date of delivery of the data and information generated and collected under the associated plan, which continues to be commensurate with the initial five-year arrangement term. Accordingly,recognized as revenue through December 31, 2024.
Table of the date of the modification, the amountContents
We will recognize revenue related to amounts allocated to the PCV UnitPerformance Obligation over time as the underlying services are performed using a proportional performance model. We measure proportional performance using an input method based on the costs incurred relative to the total estimated costs of Accountingresearch and development efforts. We recognize revenue related to the amounts allocated to the KRAS Performance Obligation based on the point in time upon which control of supply is beingtransferred to Merck for each delivery of the associated supply.
The following table summarizes the revenue recognized ratably onfor the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| PCV/SAV Agreement | | $ | 33,103 | | | $ | 41,382 | | | $ | 41,498 | |
The revenue recognized during the year ended December 31, 2020 includes the amortization of deferred revenue due to the satisfaction of our performance during the period, offset by a prospective basis overcumulative catch-up adjustment of $3.5 million due to changes in estimated costs for our future performance obligations.
The following table summarizes the remaining periodbalances of performance,deferred revenue, which is estimated to be 3.1 years,classified as there is no other discernible pattern of recognition. We determinedcurrent or non-current in the period of performance for the KRAS Unit of Accounting iscondensed consolidated balance sheets based on the period over which the underlying manufacturing andservices are expected to be performed or control of the supply willis expected to be provided pursuant to the associated plan. As such, the amount allocated to the KRAS Unit of Accounting is being recognized over such period based on a proportionate amount of arrangement consideration as the related products are delivered.
We recognized collaboration revenuetransferred for the years ended December 31, 2018, 2017 and 2016 of $41.5 million, $40.0 million and $20.2 million, respectively, from the Merck PCV Agreement and the Merck PCV/SAV Agreement. We had deferred revenue as of December 31, 2018 and 2017 of $111.3 million and $139.8 million, respectively, from the Merck PCV Agreement and the Merck PCV/SAV Agreement.periods presented (in thousands):
| | | | | | | | | | | | | | |
| | December 31 |
| | 2020 | | 2019 |
| PCV/SAV Agreement | | $ | 51,007 | | | $ | 83,799 | |
Vertex – 2016 Strategic Alliance in Cystic Fibrosis
In July 2016, we entered into a Strategic Collaboration and License Agreement, with Vertex Pharmaceuticals Incorporated, and Vertex Pharmaceuticals (Europe) Limited, together, Vertex, which we refer to as the Vertex Agreement. The Vertex Agreement, which was amended in July 2019, which we refer to as the 2019 Vertex Amendment, is aimed at the discovery and development of potential mRNA medicines for the treatment of cystic fibrosis (CF) by enabling cells in the lungs of people with CF to produce functional CFTRcystic fibrosis transmembrane conductance regulator (CFTR) proteins.
Pursuant to the Vertex Agreement, we lead discovery efforts during a three-yearan initial research period that currently extends until March 2020, leveraging our Platform technology and mRNA delivery expertise along with Vertex’s scientific experience in CF biology and the functional understanding of CFTR. Vertex is responsible for conducting development and commercialization activities for candidates and products that arise from the strategic alliance, including the costs associated with such activities. Subject to customary “back-up” supply rights granted to Vertex, we exclusively manufacture (or have manufactured) mRNA for preclinical, clinical and commercialization purposes. The parties established a joint steering committee to oversee and coordinate activities under the Vertex Agreement. We and Vertex have granted each other certain licenses under the Vertex Agreement.
Under the terms of the Vertex Agreement, we received a $20.0 million upfront payment from Vertex. In July 2019, Vertex has the rightelected to extend the initial three-year research period by onesix months by making a $2.0 million payment to us pursuant to the 2019 Vertex Amendment. In March 2020, based on the promising preclinical data generated to date, Vertex extended the conduct of the initial Research Plan through the First Extended Research Term (an additional year18-month term) by making an additional payment to us. Vertex has rights to further extend the research period for 2 additional one-year periods by making an additional payment to us for each one-year extension. We are eligible to receive up to $55.0 million in payments for achievement of development milestones, up to $220.0 million in payments for achievement of regulatory milestones and potentially could receive an additional $3.0 million milestone payment for achievement of a regulatory milestone for second and each subsequent product under the Vertex Agreement. Vertex will also pay us tiered royalties at rates ranging from the low- to high-teens on worldwide net sales of products arising from the strategic alliance, subject to certain reductions, with an aggregate minimum floor. In connection with the strategic alliance, Vertex also made a $20.0 million equity investment in us.
During the term of the Vertex Agreement, we and Vertex have agreed to certain defined exclusivity obligations under the Vertex Agreement with respect to the development and commercialization of certain mRNA medicines.
Unless earlier terminated, the Vertex Agreement will continue until the expiration of all royalty terms. Vertex may terminate the Vertex Agreement for convenience upon 90 days’ prior written notice, except if termination relates to a product in a country where Vertex has received marketing approval, which, in such case, Vertex must provide 180 days’ prior written notice. Either party may terminate the Vertex Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the Vertex Agreement in
the event that the other party challenges the validity or enforceability of such party’s patent rights, subject to certain exceptions, or if the other party becomes insolvent.
Accounting Treatment
The total transaction price for the Vertex Agreement was determined to be $24.4 million, comprised of the $20.0 million upfront payment and $4.4 million in research and development funding related to the research and development services and supply of non-cGMP mRNA. As of December 31, 2019, all performance obligations under the Vertex Agreement were completed. The 2019 Vertex Amendment represents a contract modification and is accounted for as a separate contract. As of December 31, 2020, all performance obligations under the 2019 Vertex Amendment were completed and the total transaction price of $4.5 million, comprised of the $2.0 million upfront payment and $2.5 million in research and development funding related to the research and development services and supply of non-cGMP mRNA, was fully recognized.
The First Extended Research Term represents a contract modification and is accounted for as a separate contract. Pursuant to the 2019 Vertex Amendment, we identified one performance obligation comprised of: (i) a research, development and commercialization license and (ii) research and development services, including manufacturing and supply of non-cGMP mRNA, during the 18-month First Extended Research Term. We concluded that the license is not distinct from the research and development services, including manufacturing and supply of non-cGMP mRNA. Additionally, we concluded that the following customer options are marketing offers as such options did not provide any discounts or other rights that would be considered a material right in the arrangement: (i) Vertex’s rights to extend the extended initial research period and (ii) clinical mRNA supply and/or non-cGMP mRNA supply beyond the extended initial research period. Therefore, such options will be accounted for as a separate contract upon the customer’s election.
The following table summarizes the composition of the total transaction price for the First Extended Research Term at December 31, 2020 (in thousands):
| | | | | | | | |
| | Transaction Price |
| Vertex Agreement - First Extended Research Term: | | December 31, 2020 |
| Upfront payment | | $ | 4,000 | |
| Research and development | | 39,798 | |
| Total | | $ | 43,798 | |
We utilize the most likely amount method to determine the amount of research and development funding to be received. As of December 31, 2020, there were no milestones included in the transaction price. We considered the stage of development and the risks associated with the remaining development required to achieve each milestone, as well as whether the achievement of the milestone is outside of our or Vertex’s control. The outstanding milestone payments were fully constrained, as a result of the uncertainty whether any of the milestones would be achieved. We determined that any sales-based royalties will be recognized when the related sales occur as they were determined to relate predominantly to the license granted and therefore have also been excluded from the transaction price. We re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur. There was a $8.6 million increase to the transaction price during the year ended December 31, 2020, resulting from a change in the estimate of variable consideration.
The following table summarizes the total transaction price allocated to the single performance obligation under the arrangement, and the amount of the transaction price unsatisfied as of December 31, 2020 (in thousands):
| | | | | | | | |
| | Transaction Price |
| | December 31, 2020 |
| First Extended Research Term transaction price | | $ | 43,798 | |
| Remaining unsatisfied performance obligation | | $ | 30,346 | |
As of December 31, 2020 the aggregate amount of transaction price allocated to the remaining performance obligations that are unsatisfied is expected to be recognized as revenue through the fourth quarter of 2021.
We concludedrecognize revenue related to amounts allocated to the single performance obligation over time as the underlying services are performed using a proportional performance model. We measure proportional performance using an input method based on the costs incurred relative to the total estimated costs of the research and development efforts.
The following table summarizes the revenue recognized for the periods presented (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Vertex First Extended Research Term | | $ | 13,452 | | | $ | 0 | | | $ | 0 | |
| Vertex Agreement/2019 Amendment | | 2,053 | | | 6,197 | | | 10,400 | |
| Total | | $ | 15,505 | | | $ | 6,197 | | | $ | 10,400 | |
The revenue recognized during the year ended December 31, 2020, includes the amortization of the deferred revenue due to the satisfaction of our performance during the period, offset by a cumulative catch-up adjustment of $0.2 million due to changes in estimated costs for our future performance obligations.
The following table summarizes the balances of deferred revenue, classified as current and non-current in the condensed consolidated balance sheets based on the term of the research period for the periods presented (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
Vertex Agreement (1) | | $ | 2,648 | | | $ | 793 | |
____________
(1) Balance as of December 31, 2019 represents deferred revenue related to the Vertex 2019 Amendment
Vertex —2020 Strategic Alliance in Cystic Fibrosis
In September 2020, we entered into a new Strategic Collaboration and License Agreement with Vertex (Vertex 2020 Agreement). The Vertex 2020 Agreement is aimed at the discovery and development of potential medicines to treat CF by delivering gene-editing therapies to lung cells to facilitate production of functional CFTR proteins.
The three-year research period of the Vertex 2020 Agreement will initially focus on the identification and optimization of novel LNPs and mRNAs that can deliver gene-editing therapies to cells in the lungs. Following the initial three-year period, Vertex is responsible for conducting development and commercialization activities for candidates and products that arise from the strategic alliance, including the costs associated with such activities. Vertex is also obligated to pay us for research services in connection with our performance of certain activities in accordance with a jointly agreed research plan. Subject to customary “back-up” supply rights granted to Vertex, under the agreement, we are the exclusive manufacturer of related mRNA and LNPs for preclinical, clinical, and commercialization purposes.
Under the terms of the Vertex 2020 Agreement, we received a $75.0 million upfront payment from Vertex. We are eligible to receive up to $380.0 million in milestone payments upon the achievement of certain development, regulatory, and commercial milestone events with respect to any products that result from the strategic alliance, and Vertex will also pay us a tiered percentage of its gross profits derived from worldwide net sales of products arising from the strategic alliance.
During the term of the Vertex 2020 Agreement, we and Vertex have agreed to certain defined exclusivity obligations with respect to the development and commercialization of certain mRNA medicines.
Unless earlier terminated, the Vertex 2020 Agreement will continue until the expiration of all payment obligations. Vertex may terminate the Vertex 2020 Agreement for convenience upon 90 days’ prior written notice, except if termination relates to a product in a country where Vertex has received marketing approval; in such case, Vertex must provide 180 days’ prior written notice. Either party may terminate the Vertex 2020 Agreement upon the other party’s material breach, subject to specified notice and cure provisions. Each party may also terminate the Vertex 2020 Agreement in the event that the other party challenges the validity or enforceability of such party’s patent rights, subject to certain exceptions, or if the other party becomes insolvent.
Accounting Treatment
We determined that all aspects of the 2020 Vertex Agreement represent a transaction with a customer and therefore should be accounted for in accordance with ASC 606. We also determined that the 2020 Vertex Agreement should be accounted for separately from theother Vertex investment in our Series F redeemable convertible preferred stock,Agreements as the transactions are not interrelated or interdependentagreements contemplate research on each other. Further, the investment in the Series F redeemable convertible preferred stock was negotiated with terms representative of fair value at the same purchase price paid by other investors. As such, the proceeds related to the equity investment were excluded from the consideration related to the Vertex Agreement.
separate research candidates. We concluded the Vertex Agreement is under the scope of ASC 808 as Vertex and Moderna are both active participants and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangement. Additionally, we evaluated the Vertex Agreement for recognition and measurement in accordance with ASC 605-25 and ASC 605-28. The agreement contains multiple deliverables, includingidentified one performance obligation comprised of: (i) a research, development and commercialization license, a manufacturing license, a formulationlicense; and delivery technology license, collaboration activities, regulatory matters,(ii) research and development
services, including manufacturing and supply of non-cGMP mRNA, exclusivityperformed as part of the Initial Research Plan and joint steering committee services. Additionally, we concluded that Vertex’s right to extendthe Additional Research Plan (collectively, the research period for an additional year is substantive as Vertex is not contractually obligated to exercise the right. Therefore, the right is not considered a deliverable at the inception of the Vertex Agreement. Because of the uncertain outcome of the research activities, we are at risk as to whether Vertex will exercise the extension right. In addition, clinical mRNA supply was concluded to be substantive and therefore not considered a deliverable at the inception of the Vertex Agreement. Further, we concluded that the extension right and the clinical mRNA supply were not priced at a significant or incremental discount. Accordingly, the extension right and clinical mRNA supply were not considered deliverables and the associated fees were not included in the allocable arrangement consideration.
period). We concluded that the licenses dolicense is not qualify for separationdistinct from anythe research and development services, including manufacturing and supply of non-cGMP mRNA used in the performance of the other deliverables in the agreementresearch services, as Vertex cannot fully exploit the value of the licenses without receipt of such services and supply until a product candidate has been identified. Our services and supply involve specialized expertise, particularly as it relates to mRNA technology that is not available in the marketplace. Accordingly, Vertex has to obtain the collaboration activities, regulatory matters, manufacturing and supply, exclusivity and joint steering committee services from us which significantly limits Vertex’s ability to utilize the licenses for their intended purpose on a standalone basis. Therefore, the delivered items do not have standalone value from the undelivered elements and we accounted for all the deliverables as one unit of accounting.
The total arrangement consideration to be allocated to the single unit of accounting at inception of the arrangement consists of the $20.0 million upfront payment and estimated amounts related to research and development services and manufacturing that are included in the unit of accounting. We determined the period of performance of the undelivered elements is commensurate with the initial three-year research period. As such, the $20.0 million arrangement consideration is recognized ratably over the initial three-year period, as there is no other discernible pattern of recognition.
We evaluated all the milestones that may be received under the arrangement. We concluded at the outset of the arrangement that none of the future development and regulatory milestones qualified as substantive milestones as the efforts to achieve the milestones are Vertex’s responsibility and therefore the milestones are not achieved based on our past performances. Accordingly, upon achievement of a development or regulatory milestone event, the corresponding amount earned will be recognized as additional arrangement consideration over the remaining estimated period of performance, if any, with a cumulative catch up for the elapsed portion of the performance period being recognized when the payment is earned. All commercial milestones will be accounted for in the same manner as royalties, and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met. We will recognize royalty revenue in the period of sale of the related product(s), based on the underlying agreement terms, assuming all other revenue recognition criteria are met.
For the years ended December 31, 2018, 2017 and 2016, we recognized collaboration revenue of $10.4 million, $9.1 million, and $3.5 million , respectively, from Vertex. We had deferred revenue $3.3 million and $10.0 million as of December 31, 2018 and 2017, respectively, from Vertex.
Alexion – 2014 Strategic Alliance in Rare Diseases
In January 2014, we entered into an Option Agreement and a related Services and Collaboration Agreement, which we refer to as the 2014 Alexion Agreements, with Alexion Pharma Holding Unlimited Company (Alexion) to research, develop and commercialize potential therapeutic mRNA medicines for the treatment of certain rare diseases. Pursuant to the 2014 Alexion Agreements, we granted certain licenses to Alexion and we provided specified research and manufacturing services pursuant to an agreed upon services plan. Under the 2014 Alexion Agreements, Alexion could have requested we provide additional services, at Alexion’s expense, following the end of the research and evaluation period. Under the terms of the 2014 Alexion Agreements, we received an upfront payment of $100.0 million from Alexion. On July 27, 2017, Alexion exercised its right to terminate the 2014 Alexion Agreements without cause effective as of October 25, 2017. At the time of termination, Alexion had not exercised any options to acquire rights to develop and commercialize any products. Upon the termination of the 2014 Alexion Agreements, all rights to mRNA researched, developed or supplied as a part of the programs under the 2014 Alexion Agreements reverted back to us. During the term of the 2014 Alexion Agreements, the parties were subject to certain exclusivity obligations. In connection with entering into the 2014 Alexion Agreements, Alexion also made a $25.0 million equity investment in us.
Accounting Treatment
We determined that the 2014 Alexion Agreements should be evaluated as a single contract for accounting purposes as the Option Agreement and the Services and Collaboration Agreement were negotiated in contemplation of one another. Additionally, we concluded the 2014 Alexion Agreements should be accounted for separately from Alexion’s $25.0 million investment in our Series D redeemable convertible preferred stock, as the agreements are not interrelated or interdependent on each other. Further, the investment in the Series D redeemable convertible preferred stock was negotiated with terms representative of fair value at the same purchase price paid by other investors. As such, the proceeds related to the equity investment were excluded from the consideration related to the 2014 Alexion Agreements.
We concluded the 2014 Alexion Agreements are under the scope of ASC 808 as Alexion and Moderna are both active participants and are exposed to significant risks and rewards that are dependent on commercial success of the activities of the arrangements. Additionally, we evaluated the 2014 Alexion Agreements for recognition and measurement in accordance with ASC 605-25 and ASC 605-28. The deliverables in the arrangement contain multiple deliverables, including evaluation licenses for certain mRNA constructs coding for specific targets, research services, development pool services, mRNA coding for research polypeptides, research phase API, and exclusivity. In addition, we concluded that Alexion’s options to acquire rights to develop and commercialize up to ten development candidates were substantive options and therefore not considered a deliverable at the inception of the 2014 Alexion Agreements. Alexion was not contractually obligated to exercise such options. As a result of the uncertain outcome of the research and development activities, we were at risk as to whether Alexion would exercise the options. Additionally, clinical mRNA supply was determined to be substantive and therefore not considered a deliverable at the inception of the 2014 Alexion Agreements. Further, we concluded that Alexion’s options and the clinical mRNA supply were not priced at a significant or incremental discount. Accordingly, Alexion’s options and the clinical mRNA supply were not considered a deliverable and the associated fees were not included in the allocable arrangement consideration.
We concluded that the evaluation licenses for certain mRNA constructs coding for specific targets did not qualify for separation from any of the other deliverables in the arrangement as Alexion could not fully exploit the value of these licenseslicense 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. Accordingly, Alexion had to obtainTherefore, the license has been combined with the research and development services, development pool services,including manufacturing and supply of non-cGMP supply, into a single performance obligation. Additionally, we concluded the provision of clinical mRNA coding for research polypeptides, research phase API,supply and/or non-cGMP mRNA supply provided to Vertex at their option represents a customer option and exclusivity from us, which significantly limited Alexion’s ability to utilize the licenses for their intended purposes onis considered a standalone basis. Accordingly, the delivered licensesmarketing offer as such options did not have standalone value fromprovide any discounts or other rights that would be considered a material right in the undelivered elements and wearrangement. Such options will be accounted for all ofas a separate contract upon the deliverables as one unit of accounting.customer’s election.
The total arrangement considerationtransaction price was determined to be $75.0 million, comprised of the upfront payment. We utilize the most likely amount method to determine the amount of research and development funding to be received associated with the Additional Research Plan. Our funding estimate is based on our experience bringing research candidates to the point of nomination by our collaboration partners, including our experience with Vertex under separate transactions. We have fully constrained such amounts and will not include any expected funding in the transaction price until the scope of such services have been agreed to amongst the parties. We also utilize the most likely amount method to estimate any development and regulatory milestone payments to be received. Further, there were no milestones included in the transaction price. We considered the stage of development and the risks associated with the remaining development required to achieve each milestone, as well as whether the achievement of the milestone is outside of our or Vertex’s control. The outstanding milestone payments were fully constrained, as a result of the uncertainty whether any of the milestones would be achieved. We determined that any sales-based royalties will be recognized when the related sales occur as they were determined to relate predominantly to the license granted, and therefore have also been excluded from the transaction price.
For the 2020 Vertex Agreement, the total transaction price was allocated entirely to a single performance obligation. We recognize revenue related to amounts allocated to the single unit of accounting at inception consistedperformance obligation over time as the underlying services are performed using a proportional performance model. We measure proportional performance using an input method based on the costs incurred relative to the total estimated costs of the $100.0research and development efforts.
For the year ended December 31, 2020, we did not recognize any revenue associated with the 2020 Vertex Agreement. As of December 31, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations that are unsatisfied is $75.0 million, which is expected to be recognized as revenue through the third quarter of 2023. We had deferred revenue of $75.0 million as of December 31, 2020, which is classified as current and non-current in the consolidated balance sheets based on the term of the research period.
Chiesi—2020 Collaboration and License Agreement with Chiesi
In September 2020, we entered into a Collaboration and License Agreement with Chiesi Farmaceutici S.P.A. (Chiesi), which we refer to as the Chiesi Agreement. The Chiesi Agreement is aimed at the discovery and development of potential mRNA medicines for the treatment of Pulmonary Arterial Hypertension (PAH), a rare disease characterized by high blood pressure in the arteries of the lungs.
Pursuant to the Chiesi Agreement, we lead discovery efforts during a four-year research period, leveraging our Platform technology and mRNA delivery expertise along with Chiesi’s scientific experience in PAH biology. Chiesi is responsible for conducting development and commercialization activities for candidates and products that arise from the collaboration, including the costs associated with such activities. Chiesi is also obligated to pay us for our performance of research activities during the research period in accordance with a jointly agreed research plan. Under the agreement, we are the exclusive manufacturer of related candidates and products for preclinical, clinical, and commercialization purposes.
Under the terms of the Chiesi Agreement, we are entitled to receive a $25.0 million upfront payment from Chiesi. Chiesi has the right to extend the initial four-year research period by one additional year by making an additional payment to us. We are eligible to receive up to $405.0 million in aggregate milestone payments upon the achievement of certain development, regulatory and estimated amounts relatedcommercial milestone events, and Chiesi will also pay us tiered double-digit royalties on worldwide net sales of products arising from the collaboration, subject to certain reductions, with an aggregate minimum floor.
During the term of the Chiesi Agreement, we and Chiesi have agreed to certain defined exclusivity with respect to the development and commercialization of certain mRNA medicines.
Accounting Treatment
We determined that all aspects of the Chiesi Agreement represent a transaction with a customer and therefore should be accounted for in accordance with ASC 606. We identified the following performance obligations in the Chiesi Agreement: (i) a research license and research and development services, including manufacturing and supply during the research period; (ii) a material right for the first product development and commercialization license; and (iii) a material right for the second product development and commercialization license. We concluded that the license is not distinct from the research and development services, including manufacturing and supply of non-cGMP mRNA, during the four-year research period, as Chiesi cannot fully exploit the value of the 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. Therefore, the license has been combined with the research and development services, including manufacturing and supply of non-cGMP supply, into a single performance obligation. Additionally, we concluded the provision of clinical mRNA supply and/or non-cGMP mRNA supply beyond the four-year research period and the right to extend the research period for one additional year represent customer options and are considered marketing offers as such options did not provide any discounts or other rights that would be considered a material right in the arrangement. Such options will be accounted for as a separate contract upon the customer's election.
The following table summarizes the composition of the total transaction price for the periods presented (in thousands):
| | | | | | | | |
| | Transaction Price |
| Chiesi Agreement: | | December 31, 2020 |
| Upfront payment | | $ | 25,000 | |
| Research and development | | 17,496 | |
| Total | | $ | 42,496 | |
We utilize the most likely amount method to determine the amount of research and development funding to be received associated with the research period. We also utilize the most likely amount method to estimate any development and regulatory milestone payments to be received. Further, there were no milestones included in the unittransaction price. We considered the stage of accounting. We determineddevelopment and the period of performance of the undelivered elements was commensuraterisks associated with the ten-year services term. As such, the $100.0 million arrangement consideration was being recognized ratably over the ten-year period, as there was no other discernible pattern of recognition.
Upon exercise of each option, we were eligible to receive, per product candidate, certain payments contingent upon achievement ofremaining development regulatory, and commercial milestones. At the time of termination, no milestones had been achieved. We evaluated all of the milestones that may have been received under the arrangement. We concluded at the outset of the arrangement that none of the future development and regulatory milestones qualified as substantive milestones, as the effortsrequired to achieve the milestones were Alexion’s responsibility and therefore theeach milestone, would not be achieved based on our past performance. Accordingly, upon achievement of a development or regulatory milestone event,as well as whether the corresponding amount earned would have been recognized as
additional arrangement consideration over the remaining estimated performance period, if any, with a cumulative catch-up for the elapsed portion of the performance period being recognized in full when the payment was earned. All commercial milestones would have been accounted for in the same manner as royalties, and recorded as revenue upon achievement of the milestone assuming all other revenue recognition criteriais outside of our or Chiesi’s control. The outstanding milestone payments were met. We would have recognized royalty revenue in the period of salefully constrained, as a result of the uncertainty whether any of the milestones would be achieved. We determined that any sales-based commercial milestone payments and royalties will be recognized when the related product(s),sales occur as they were determined to relate predominantly to the license granted and therefore have also been excluded from the transaction price.
The transaction price was allocated to the performance obligations based on the underlying agreement terms, provided thatrelative estimated standalone selling prices of each performance obligation. We developed the reported sales were reliably measurableestimated standalone selling price for the services and we had no remaining undelivered elements, assuming all other revenue recognition criteria were met. No options were exercisedmanufacturing and therefore no milestones or royalties were earned undersupply included in the 2014 Alexion Agreements prior to termination.
In conjunction withperformance obligation, as applicable, primarily based on the terminationnature of the 2014 Alexion Agreementsservices to be performed and the 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. We developed the estimated standalone selling prices for the licenses included in 2017,the associated performance obligations based on an analysis of our other transactions with collaboration partners and third party comparable transactions. In developing such estimates, we determined there were no remaining deliverablesalso 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 2014 Alexion Agreementsassociated license. The estimated standalone selling price of the material rights to receive development and commercialization rights was developed by estimating the amount of discount that Chiesi 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 transaction price to the identified performance obligations under the arrangement, and the amount of the transaction price unsatisfied as of December 31, 2020 (in thousands):
| | | | | | | | |
| | Transaction Price |
| | December 31, 2020 |
| Chiesi Agreement transaction price | | $ | 42,496 | |
| Remaining unsatisfied performance obligation | | $ | 42,293 | |
| | |
We recognize revenue related to amounts allocated to the combined research license and research and development services performance obligation over time as the agreements and all unexercised options were terminated. Therefore, $70.3 million of deferred revenue was recognized in full uponunderlying services are performed using a proportional performance model. We measure proportional performance using an input method based on the termination in 2017. There were no other amounts for which we were entitled pursuantcosts incurred relative to the termination.total estimated costs of the research and development efforts. We will recognize revenue associated with the material rights as revenue at the earlier of the exercise or expiry of the material rights.
For the yearsyear ended DeecemberDecember 31, 2017 and 2016,2020, we recognized collaboration revenue of $74.4$0.2 million and $17.2 million, respectively, from Alexion.the Chiesi Agreement. We had no collaborationdid not recognize any revenue for the year ended December 31, 2018, from Alexion. We had no deferred revenue as of December 31, 2018 and 2017, respectively, from Alexion.
4. Grants
Biomedical Advanced Research and Development Authority (BARDA)
In September 2016, we received an award of up to $125.8 million under Agreement No. HHSO100201600029C from BARDA, a component of the Office of the Assistant Secretary for Preparedness and Response, or ASPR within the U.S. Department of Health and Human Services, or HHS, to help fund our Zika vaccine program. Under the terms of the agreement with BARDA, an initial base award of $8.2 million supported toxicology studies, a Phase 1 clinical trial, and associated manufacturing activities. Contract options were available, for $117.6 million to support an additional Phase 1 study of an improved Zika vaccine candidate, Phase 2 and Phase 3 clinical studies, as well as large-scale manufacturing for the Zika vaccine.
As of December 31, 2018, three of the four contract options had been exercised resulting in $117.3 million of available funding with an additional $8.5 million available if the final contract option is exercised. For the years ended December 31, 2018, 2017 and 2016, we recognized revenue of $6.8 million, $20.1 million and $0.9 million, respectively, relating to the BARDA Agreement.
The Bill & Melinda Gates Foundation
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. The Gates Foundation has committed up to $20.0 million in grant funding to support our initial project related to the evaluation of antibody combinations in a preclinical setting as well as the conduct of a first-in-human Phase 1 clinical trial of a potential mRNA medicine to help prevent human immunodeficiency virus, or HIV, infections. Follow-on projects which could bring total potential funding under the framework agreement up to $100.0 million (including the HIV antibody project) to support the development of additional mRNA-based projects for various infectious diseases can be proposed and approved until the sixth anniversary of the framework agreement, subject to the terms of the framework agreement, including our obligation to grant to the Gates Foundation certain non-exclusive licenses.
As of December 31, 2018, up to $20.0 million has been committed for funding with up to an additional $80 million available, if additional follow-on projects are approved. For the years ended December 31, 2018, 2017 and 2016, we recognized $1.4 million, $1.1 million, and $1.6 million, respectively, related to the Gates Foundation agreement. Deferred revenue of $0.8 million and $2.2 million was recorded as of December 31, 2018, and 2017, respectively, related to the Gates Foundation agreement.
Defense Advanced Research Projects Agency (DARPA)
In October 2013, DARPA awarded us up to $24.6 million underChiesi Agreement No. W911NF-13-1-0417, which was subsequently adjusted to $20.5 million in 2016, to research and develop potential mRNA medicines as a part of DARPA’s Autonomous Diagnostics to Enable Prevention and Therapeutics, or ADEPT, program, which is focused on assisting with the development of technologies to rapidly identify and respond to threats posed by natural and engineered diseases and toxins. The DARPA awards have been deployed primarily in support of our vaccine and antibody programs to protect against chikungunya infection.
As of December 31, 2018 and 2017, $19.7 million has been committed, and an additional $3.2 million is available at the election of DARPA. We recognized $3.5 million, $7.7 million, $3.8 million, for the years ended December 31, 2018, 20172019 and 2016, respectively, related2018. As of December 31, 2020, $17.3 million of the remaining performance obligations that are unsatisfied is expected to be recognized as revenue through the DARPA agreement.third quarter of 2024 and $25.0 million is expected to be recognized as revenue at the earlier of the exercise or expiry of the material rights.
We had deferred revenue of $25.0 million as of December 31, 2020, classified as non-current in the consolidated balance sheets based on the term of the research period. 5.
6. Financial Instruments and Fair Value Measurements
Cash and Cash Equivalents and Investments
The following tables summarize our cash and available-for-sale securities by significant investment category at December 31,
20182020 and
20172019 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2018 |
| | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non- Current Marketable Securities |
| Cash and cash equivalents | | $ | 658,365 |
| | $ | 20 |
| | $ | (21 | ) | | $ | 658,364 |
| | $ | 658,364 |
| | $ | — |
| | $ | — |
|
| Available-for-sale: | | | | | | | | | | | | | | |
| Level 2: | | | | | | | | | | | | | | |
| Certificates of deposit | | 173,102 |
| | 42 |
| | (36 | ) | | 173,108 |
| | — |
| | 157,920 |
| | 15,188 |
|
| U.S. treasury securities | | 152,205 |
| | 18 |
| | (48 | ) | | 152,175 |
| | — |
| | 152,175 |
| | — |
|
| Debt securities of U.S. government agencies and corporate entities | | 712,065 |
| | 40 |
| | (1,335 | ) | | 710,770 |
| | — |
| | 552,968 |
| | 157,802 |
|
| | | $ | 1,695,737 |
| | $ | 120 |
| | $ | (1,440 | ) | | $ | 1,694,417 |
| | $ | 658,364 |
| | $ | 863,063 |
| | $ | 172,990 |
|
| | | December 31, 2017 |
| | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non- Current Marketable Securities |
| Cash and cash equivalents | | $ | 134,859 |
| | $ | — |
| | $ | — |
| | $ | 134,859 |
| | $ | 134,859 |
| | $ | — |
| | $ | — |
|
| Available-for-sale: | | | | | | | | | | | | | | |
| Level 2: | | | | | | | | | | | | | | |
| Certificates of deposit | | 245,884 |
| | 35 |
| | (218 | ) | | 245,701 |
| | — |
| | 198,398 |
| | 47,303 |
|
| U.S. treasury securities | | 118,278 |
| | — |
| | (354 | ) | | 117,924 |
| | — |
| | 117,924 |
| | — |
|
| Debt securities of U.S. government agencies and corporate entities | | 404,016 |
| | 61 |
| | (681 | ) | | 403,396 |
| | — |
| | 304,848 |
| | 98,548 |
|
| | | $ | 903,037 |
| | $ | 96 |
| | $ | (1,253 | ) | | $ | 901,880 |
| | $ | 134,859 |
| | $ | 621,170 |
| | $ | 145,851 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non- Current Marketable Securities |
| Cash and cash equivalents | | $ | 2,623,849 | | | $ | 1 | | | $ | 0 | | | $ | 2,623,850 | | | $ | 2,623,850 | | | $ | 0 | | | $ | 0 | |
| Available-for-sale: | | | | | | | | | | | | | | |
| Certificates of deposit | | 238,774 | | | 49 | | | (4) | | | 238,819 | | | 0 | | | 215,389 | | | 23,430 | |
| U.S. treasury securities | | 491,549 | | | 69 | | | 0 | | | 491,618 | | | 0 | | | 491,618 | | | 0 | |
| Debt securities of U.S. government agencies and corporate entities | | 1,888,022 | | | 4,294 | | | (147) | | | 1,892,169 | | | 0 | | | 1,276,751 | | | 615,418 | |
| | $ | 5,242,194 | | | $ | 4,413 | | | $ | (151) | | | $ | 5,246,456 | | | $ | 2,623,850 | | | $ | 1,983,758 | | | $ | 638,848 | |
|
| | | | | | | | | | | | | | |
| | December 31, 2019 |
| | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value | | Cash and Cash Equivalents | | Current Marketable Securities | | Non- Current Marketable Securities |
| Cash and cash equivalents | | $ | 225,874 | | | $ | 0 | | | $ | 0 | | | $ | 225,874 | | | $ | 225,874 | | | $ | 0 | | | $ | 0 | |
| Available-for-sale: | | | | | | | | | | | | | | |
| Certificates of deposit | | 82,028 | | | 79 | | | (6) | | | 82,101 | | | 10,002 | | | 69,197 | | | 2,902 | |
| U.S. treasury securities | | 117,891 | | | 260 | | | (2) | | | 118,149 | | | 0 | | | 110,186 | | | 7,963 | |
| Debt securities of U.S. government agencies and corporate entities | | 834,187 | | | 2,708 | | | (32) | | | 836,863 | | | 0 | | | 687,741 | | | 149,122 | |
| | $ | 1,259,980 | | | $ | 3,047 | | | $ | (40) | | | $ | 1,262,987 | | | $ | 235,876 | | | $ | 867,124 | | | $ | 159,987 | |
The amortized cost and estimated fair value of marketable securities, by contractual maturity at December 31, 20182020 and 20172019 are as follows (in thousands):
| | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Amortized Cost | | Estimated Fair Value |
| Due in one year or less | | $ | 1,980,963 | | | $ | 1,983,758 | |
| Due after one year through five years | | 637,382 | | | 638,848 | |
| Total | | $ | 2,618,345 | | | $ | 2,622,606 | |
| | December 31, 2019 |
| | Amortized Cost | | Estimated Fair Value |
| Due in one year or less | | $ | 864,958 | | | $ | 867,124 | |
| Due after one year through five years | | 159,148 | | | 159,987 | |
| Total | | $ | 1,024,106 | | | $ | 1,027,111 | |
|
| | | | | | | | |
| | | December 31, 2018 |
| | | Amortized Cost | | Estimated Fair Value |
| Due in one year or less | | $ | 864,003 |
| | $ | 863,063 |
|
| Due after one year through five years | | 173,369 |
| | 172,990 |
|
| Total | | $ | 1,037,372 |
| | $ | 1,036,053 |
|
| | | December 31, 2017 |
| | | Amortized Cost | | Estimated Fair Value |
| Due in one year or less | | $ | 622,020 |
| | $ | 621,170 |
|
| Due after one year through five years | | 146,158 |
| | 145,851 |
|
| Total | | $ | 768,178 |
| | $ | 767,021 |
|
At December 31, 2018, we held 25 available-for-sale securities, or an estimated fair value of $82.8 million, out of our total investment portfolio that were in a continuous unrealized loss position for more than 12 months with a gross unrealized loss of $0.4 million. At December 31, 2017, we held 173 available-for-sale securities, or an estimated fair value of $602.0 million, out of our total investment portfolio that were in a continuous unrealized loss position for more than 12 months with a gross unrealized loss of $0.3 million. We concluded that the net declines in market value of our available-for-sale securities investment portfolio were temporary in nature and did not consider any of our investments to be other-than-temporarily impaired.
In accordance with our investment policy, we place investments in investment grade securities with high credit quality issuers, and generally limit the amount of credit exposure to any one issuer. We evaluate securities for other-than-temporary impairment at the end of each reporting period. Impairment is evaluated considering numerous factors,We did 0t record any impairment charges related to our available-for-sale securities during the years ended December 31, 2020, 2019 and their relative significance varies depending on2018. We did not recognize any credit losses related allowance to available-for-sale securities as of the situation. Factors considered includeyears ended December 31, 2020 and 2019.
The following table summarizes the amount of gross unrealized losses and the estimated fair value for our available-for-sale securities in an unrealized loss position by length of time the securities have been in an unrealized loss position at December 31, 2020 and extent to which fair value has been2019 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 Months | | 12 Months or More | | Total |
| | Gross Unrealized Losses | | Estimated Fair Value | | Gross Unrealized Losses | | Estimated Fair Value | | Gross Unrealized Losses | | Estimated Fair Value |
| As of December 31, 2020: | | | | | | | | | | | | |
| Certificates of deposit | | $ | (4) | | | $ | 81,524 | | | $ | 0 | | | $ | 0 | | | $ | (4) | | | $ | 81,524 | |
| Debt securities of U.S. government agencies and corporate entities | | (148) | | | 507,016 | | | 0 | | | 0 | | | (148) | | | 507,016 | |
| Total | | $ | (152) | | | $ | 588,540 | | | $ | 0 | | | $ | 0 | | | $ | (152) | | | $ | 588,540 | |
| | | | | | | | | | | | |
| As of December 31, 2019: | | | | | | | | | | | | |
| Certificates of deposit | | $ | (6) | | | $ | 12,822 | | | $ | 0 | | | $ | 0 | | | $ | (6) | | | $ | 12,822 | |
| U.S. treasury securities | | (2) | | | 9,979 | | | 0 | | | 0 | | | (2) | | | 9,979 | |
| Debt securities of U.S. government agencies and corporate entities | | (32) | | | 62,360 | | | 0 | | | 0 | | | (32) | | | 62,360 | |
| Total | | $ | (40) | | | $ | 85,161 | | | $ | 0 | | | $ | 0 | | | $ | (40) | | | $ | 85,161 | |
At December 31, 2020 and 2019, we held 108 and 19 individual available-for-sale securities, respectively, out of our total investment portfolio that were in a continuous unrealized loss position for less than the cost basis, the financial condition and near-term prospects of the issuer, and our intent and ability to hold the investment to allow for an anticipated recovery in fair value. Furthermore, the aggregate of individual unrealized losses that had been outstanding for 12 months or less was not significant as of December 31, 2018, 2017 and 2016.months. We neither intend to sell these investments nor conclude that we are more-likely-than-not that we will have to sell them before recovery of their carrying values. We also believe that we will be able to collect both principal and interest amounts due to us at maturity.
Assets and Liabilities Measured at Fair Value on a Recurring Basis 6.The following tables summarize our financial assets measured at fair value on a recurring basis as of December 31, 2020 and 2019 (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value at December 31, 2020 | | Fair Value Measurement Using |
| | | Level 1 | | Level 2 |
| Assets: | | | | | | |
| Money market funds | | $ | 620,947 | | | $ | 620,947 | | | $ | 0 | |
| Certificates of deposit | | 238,819 | | | 0 | | | 238,819 | |
| U.S. treasury securities | | 491,618 | | | 0 | | | 491,618 | |
| Debt securities of U.S. government agencies and corporate entities | | 1,892,169 | | | 0 | | | 1,892,169 | |
| Derivative instruments (Note 7) | | 293 | | | 0 | | | 293 | |
| Total | | $ | 3,243,846 | | | $ | 620,947 | | | $ | 2,622,899 | |
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value at December 31, 2019 | | Fair Value Measurement Using |
| | | Level 1 | | Level 2 |
| Assets: | | | | | | |
| Certificates of deposit | | $ | 82,101 | | | $ | 0 | | | $ | 82,101 | |
| U.S. treasury securities | | 118,149 | | | 0 | | | 118,149 | |
| Debt securities of U.S. government agencies and corporate entities | | 836,863 | | | 0 | | | 836,863 | |
| Total | | $ | 1,037,113 | | | $ | 0 | | | $ | 1,037,113 | |
During the years ended December 31, 2020 and 2019, we did not have any financial liabilities measured at fair value on a recurring basis and did not have non-financial assets or liabilities measured at fair value on a recurring basis.
7. Derivative Financial Instruments
We transact business in various foreign currencies and have international sales and expenses denominated in foreign currencies. Therefore, we are exposed to certain risks arising from both our business operations and economic conditions. Our risk management strategy includes the use of derivative financial instruments to hedge foreign currency exchange rate fluctuations on monetary assets or liabilities denominated in foreign currencies. We do not enter into derivative financial contracts for speculative or trading purposes. We do not believe that we are exposed to more than a nominal amount of credit risk in our foreign currency hedges, as counterparties are large, global and well-capitalized financial institutions. We classify cash flows from our derivative transactions as cash flows from operating activities in our consolidated statements of cash flows.
Balance Sheet Hedges
Our foreign currency forward contracts, primarily accounts receivable, are not designated for hedge accounting treatment. Therefore, these forward contracts are accounted for as derivatives whereby the fair value of the contracts are reported as other current assets or other current liabilities on our consolidated balance sheets, and gains and losses resulting from changes in the fair value are recorded as a component of other (expense) income, net, in our consolidated statements of operations. The gains and losses on these foreign currency forward contracts generally offset the gains and losses in the underlying foreign currency denominated assets and liabilities, which are also recorded to other (expense) income, net, in our consolidated statements of operations.
Total gross notional amount and fair value for foreign currency derivatives that are not designated as hedging instruments are accounted for as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | Notional Amount | | Fair Value |
| | | Asset (1) | | Liability |
| Derivatives not designated as hedging instruments | | | | | | |
| Foreign currency forward contracts | | $ | 368,448 | | | $ | 293 | | | $ | 0 | |
| Total | | $ | 368,448 | | | $ | 293 | | | $ | 0 | |
_________
(1) As presented in the consolidated balance sheet within other current assets.
We did not have any derivative instruments as of December 31, 2019.
The effect of foreign currency forward contracts not designated as hedging instruments in our consolidated statements of operations for the year ended December 31, 2020 was as follows (in thousand):
| | | | | | | | | | | | | | |
| | Statement of Operations Classification | | Year Ended
December 31, 2020 |
| Derivatives not designated as hedging instruments | | | | |
| Foreign currency forward contracts | | Other (expense) income, net | | $ | 293 | |
| Total | | | | $ | 293 | |
There were no hedging activities for the years ended December 31, 2019 and 2018.
8. Inventory
Inventory as of December 31, 2020 consists of the following (in thousands):
| | | | | | | | | | |
| | December 31, | | |
| | 2020 | | |
| Raw materials | | $ | 36,222 | | | |
| Work in progress | | 9,015 | | | |
| Finished goods | | 1,290 | | | |
| Total inventory | | $ | 46,527 | | | |
We did 0t have any inventory at December 31, 2019.
9. Property and Equipment
Property and equipment, net as of December 31, 2020 and 2019 consists of the following (in thousands):
| | | | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 | | |
| Laboratory equipment | | $ | 120,714 | | | $ | 108,257 | | | |
| Leasehold improvements | | 179,901 | | | 152,426 | | | |
| Furniture, fixtures and other | | 4,662 | | | 3,316 | | | |
| Computer equipment and software | | 13,398 | | | 11,985 | | | |
| Internally developed software | | 7,020 | | | 7,020 | | | |
| Right-of-use asset, financing | | 56,348 | | | 9,853 | | | |
| Construction in progress | | 34,507 | | | 3,222 | | | |
| | 416,550 | | | 296,079 | | | |
| Less: Accumulated depreciation | | (119,661) | | | (94,584) | | | |
| Property and equipment, net | | $ | 296,889 | | | $ | 201,495 | | | |
Depreciation and amortization expense for the years ended December 31, 2020, 2019 and 2018 was $31.3 million, $31.0 million, $24.9 million, respectively.
10. Other Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets, as of December 31, 20182020 and 20172019 consists of the following (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Down payments to manufacturing vendors | | $ | 216,538 | | | $ | 0 | |
| Prepaid expenses | | 15,647 | | | 8,475 | |
| Tenant incentives receivables | | 10,242 | | | 4,093 | |
| Interest receivable on marketable securities | | 9,725 | | | 6,835 | |
| Prepaid expenses and other current assets | | $ | 252,152 | | | $ | 19,403 | |
|
| | | | | | | | |
| | | December 31, |
| | | 2018 | | 2017 |
| | | | | |
| Prepaid expenses | | $ | 10,401 |
| | $ | 7,839 |
|
| Tenant incentives receivables | | 10,089 |
| | 1,748 |
|
| Interest receivable on marketable securities | | 7,909 |
| | 3,239 |
|
| Prepaid expenses and other current assets | | $ | 28,399 |
| | $ | 12,826 |
|
Property and Equipment, NetAccrued Liabilities
Property and equipment, net
Accrued liabilities, as of December 31, 20182020 and 20172019 consists of the following (in thousands):
|
| | | | | | | | |
| | | December 31, |
| | | 2018 | | 2017 |
| | | | | |
| Building | | $ | 140,442 |
| | $ | — |
|
| Laboratory equipment | | 96,907 |
| | 77,351 |
|
| Leasehold improvements | | 13,741 |
| | 12,222 |
|
| Furniture, fixtures and other | | 2,122 |
| | 290 |
|
| Computer equipment and software | | 11,513 |
| | 9,420 |
|
| Internally developed software | | 7,020 |
| | 7,020 |
|
| Construction in progress | | 4,688 |
| | 80,759 |
|
| | | 276,433 |
| | 187,062 |
|
| Less: Accumulated depreciation | | (64,456 | ) | | (48,031 | ) |
| Property and equipment, net | | $ | 211,977 |
| | $ | 139,031 |
|
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Clinical trials | | $ | 97,249 | | | $ | 6,291 | |
| Compensation-related | | 95,247 | | | 27,428 | |
| Raw materials | | 78,085 | | | 0 | |
| Manufacturing | | 53,412 | | | 5,872 | |
| Development operations | | 29,253 | | | 2,567 | |
| Property and equipment | | 17,576 | | | 4,029 | |
| Commercial | | 6,922 | | | 0 | |
| Other external goods and services | | 91,847 | | | 21,465 | |
| Accrued liabilities | | $ | 469,591 | | | $ | 67,652 | |
Depreciation and amortization expense for the years ended December 31, 2018, 2017 and 2016 was $24.9 million, $20.5 million, $15.1 million, respectively.
AccruedOther Current Liabilities
Accrued
Other current liabilities, as of December 31, 20182020 and 20172019 consists of the following (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Lease liabilities - financing | | $ | 24,328 | | | $ | 0 | |
| Lease liabilities - operating | | 5,972 | | | 3,583 | |
| Other | | 3,365 | | | 1,480 | |
| Other current liabilities | | $ | 33,665 | | | $ | 5,063 | |
The following table summarizes the activities in deferred revenue during the year ended December 31, 2020 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2019 | | Additions | | Deductions | | December 31, 2020 |
| Product sales | | $ | 0 | | | $ | 3,881,303 | | | $ | (82,134) | | | $ | 3,799,169 | |
| Grant revenue | | 2,777 | | | 6,775 | | | (4,291) | | | 5,261 | |
| Collaboration revenue | | 199,528 | | | 121,882 | | | (81,228) | | | 240,182 | |
| Total deferred liabilities | | $ | 202,305 | | | $ | 4,009,960 | | | $ | (167,653) | | | $ | 4,044,612 | |
11. Leases
|
| | | | | | | | |
| | | December 31, |
| | | 2018 | | 2017 |
| | | | | |
| In-licenses | | $ | 22,000 |
| | $ | 25,000 |
|
| Property and equipment | | 12,089 |
| | 14,624 |
|
| Compensation-related | | 23,406 |
| | 18,221 |
|
| External goods and services | | 21,578 |
| | 14,870 |
|
| Accrued liabilities | | $ | 79,073 |
| | $ | 72,715 |
|
7. Commitments and Contingencies
Lease Obligations
We have entered into various long-term non-cancelable operating lease arrangements for our facilities and equipment expiring at various times through 2032. Certain of these arrangements have free rent periods or escalating rent payment provisions, which we recognize rent expenselease cost under such arrangements on a straight-line basis.basis over the life of the leases. We have two2 campuses in Massachusetts. Massachusetts, our Cambridge facility and our Moderna Technology Center (MTC), located in Norwood.
Operating Leases
Cambridge facility
We occupy a multi-building campus inmulti-floor building at Technology Square in Cambridge, MAMassachusetts with a mix of offices and research laboratory space totaling approximately 200,000175,000 square feet. Our Cambridge facility leases have expiry ranges from 2020 to 2027. 2029.
In August 2019, we entered into an amendment to our lease agreements to consolidate our Technology Square space in Cambridge, Massachusetts. This included entering into a forward-starting lease agreement starting in January 2020 to acquire approximately 50,000 square feet of additional space at 200 Technology Square. In addition, our current 200 Technology Square lease has been extended for two years to 2029. As part of the lease amendment, we completely exited our leased space of approximately 60,000 square feet at 500 Technology Square by May 2020.
We haverecord operating lease cost for each of our operating leases on a straight-line basis from lease commencement date through the end of the lease term. Operating lease cost is recorded in operating expenses in our consolidated statements of operations
Finance Leases
Moderna Technology Center North (MTC North)
In February 2019, we entered into a new lease agreement for office and laboratory space of approximately 200,000 square feet, of a manufacturing facilityMTC North, located in Norwood, MA. This facility is leased through 2032.
Cambridge Leases
In May 2016, we entered into a lease agreement for 124,760 square feet of office and laboratory space at 200 Technology Square in Cambridge, Massachusetts. The lease commenced on September 1, 2016, within the base rent subject to increases oversecond quarter of 2019 and had an 11-year term. We will occupy the premises in six phases which started in September 2016, with the last phase estimated to begin in December 2020.initial expiration date of 2031. We have the option to extend the lease term for two extension periodsup to 4 additional five-year terms. Contemporaneously, we entered into an agreement to sublease approximately 64 percent of five years each, at market-based rates.the leased space to a third party. In additionMay 2020, we entered into an amendment to rent
payments, the lease also provides thatwhereby we pay our proportionate share of operating expenses and taxes duringexercised an option available in the term of the lease. Asoriginal lease to receive a tenant improvement allowance in the amount of square footage$22.2 million to be leased increasespaid back over the term of the lease we will recognize each phase’s total rent payments on a straight-line basis over the respective lease term. The lease provides us with an initial tenant allowance of $10.00 per square foot against which costs incurred will be capitalized as leasehold improvements. We have provided a security deposit of $1.3 million, that is classified as non-current restricted cash on the consolidated balance sheet. As we occupy additional space through the six phases of occupancy, the security deposit will increase up to $2.2 million. In December 2018, in relation to the expansion of space from the agreement entered into May 2016, we entered into sublease agreements for 34,268 square feet to expand our of officeinterest and laboratory space at 200 Technology Square in Cambridge, Massachusetts. The leases commence on January 1, 2019 and expire at various times through October 31, 2020.
In August 2015, we entered into a facility lease agreement for 61,618 square feet of office and laboratory space at 500 Technology Square in Cambridge, MA. The lease commenced in April 2016, with rental fees beginning at a rate of $3.9 million per annum and escalating over the six-year term of the lease. The lease provides a $3.1 million tenant improvement allowance against which costs incurred will be capitalized as leasehold improvements. The lease also provides that we pay our proportionate share of operating expenses and taxes duringextend the term of the lease. We record rent expense on a straight-line basis throughlease to 2035. In May 2020, we also amended our MTC North sublease agreement. As the endresult of that amendment, effective June 1, 2020, we obtained an additional, approximately 28,000 square feet, or 12 percent of the lease term, inclusiveleased space in MTC North and the remainder of the periodspace in which there are no scheduled rent payments, and record deferred rent onJuly 2020 when the consolidated balance sheet, accordingly. We have providedsublease expired. The lease modifications to MTC North in the second quarter of 2020 resulted in a security deposit of $1.0 million, that is classified as non-current restricted cash on the consolidated balance sheet.change in lease classification, from operating to finance.
Norwood Leases
Moderna Technology Center manufacturing facility (MTC South)
In August 2016, we entered into a lease agreement for approximately 200,000 square feet of office, laboratory, and light manufacturing space, MTC South, in Norwood, MA. The lease commencement date for accounting purposes was October 1, 2016. In connection with this lease, the landlord provided a tenant improvement allowance of approximately $24.2 million for costs associated with the design, engineering, and construction of tenant improvements for the building. For accounting purposes, we were deemed to be the owner of the building during the construction period as we were involved in the construction project, including having responsibilities for cost overruns for planned tenant improvements that did not qualify as normal tenant improvements under the lease accounting guidance. During the construction period, we capitalized the fair value of the building as of lease commencement along with a corresponding lease financing obligation. We also capitalized project construction costs incurred by us as an asset. Property and equipment, net included $86.4 million, $75.0 million and $18.2 million as of December 31, 2018, 2017 and 2016, respectively, related to construction in process costs for the building. We completed construction of the building and started our Norwood operation in July 2018. During the third and fourth quarters of 2018, we transferred $161.6 million of construction in process to property and equipment, including the building of $140.4 million. Certain manufacturing equipment and processes are still in progress which are expected to be completed in 2019. The carrying value of the lease financing obligation related to the building, was $33.5 million and $15.7 million, as of December 31, 2018 and 2017, respectively. We recorded $10.5 million and $14.5 million in accrued liabilities on the consolidated balance sheets related to Norwood property and equipment as of December 31, 2018 and 2017, respectively.
During the construction period, we bifurcated our future lease payments pursuant to the lease into: (i) a portion that is allocated to the building; and (ii) a portion that is allocated to the land on which the building is located, which is recorded as rental expense. The fair value of the building and the land were estimated by us with the assistance of a third-party valuation expert and giving consideration to comparable properties. Although we did not begin making lease payments pursuant to the lease until October 2017, the portion of the lease obligation allocated to the land is treated for accounting purposes as an operating lease commencing on October 1, 2016. Rent expense, comprised solely of land rent, was approximately $1.2 million, $1.3 million and $0.2 million during the years ended December 31, 2018, 2017 and 2016, respectively, related to the lease. We incurred $3.0 million in interest expense and $1.8 million in depreciation expense relating to the building for the year ended December 31, 2018. There was no expense recorded for the years ended December 31, 2017 or 2016 as the building had not been placed in service.
Upon completion of the construction of the building, we evaluated the lease and determined that it did not meet the criteria for “sale-leaseback” treatment. Accordingly, we depreciate the building and incur interest expense related to the lease financing obligation recorded on our balance sheet. We bifurcate our lease payments pursuant to the lease into: (i) a portion that is allocated to the building; and (ii) a portion that is allocated to the land on which the building was constructed. The portion of the lease obligation allocated to land is treated as an operating lease.
Massachusetts. The lease will terminateexpire in September 2032. We have the option to extend the term for two2 extension periods of ten years each at market-based rents. The base rent is subject to increases over the term of the lease.
Embedded Leases
We have provided a security depositentered into multiple contract manufacturing service agreements with third parties which contain embedded leases within the scope of $8.9ASC 842. As of December 31, 2020, we had lease liabilities of $24.3 million that is classifiedrelated to the embedded leases. Certain embedded leases dedicated to our COVID-19 vaccine program prior to the EUA from the FDA were deemed to have no alternative use. The related right-of-use assets of $62.3 million were charged to research and development expense for the year ended December 31, 2020.
Operating and financing lease right-of-use assets and lease liabilities as non-current restricted cash onof December 31, 2020 and 2019 were as follows (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Assets: | | | | |
Right-of-use assets, operating, net (1) (2) | | $ | 90,201 | | | $ | 86,414 | |
Right-of-use assets, financing, net (3) (4) | | 55,045 | | | 9,544 | |
| Total | | $ | 145,246 | | | $ | 95,958 | |
| | | | |
| Liabilities: | | | | |
| Current: | | | | |
Operating lease liabilities(5) | | $ | 5,972 | | | $ | 3,583 | |
Financing lease liabilities(5) | | 24,328 | | | 0 | |
| Total current lease liabilities | | 30,300 | | | 3,583 | |
| Non-current: | | | | |
| Operating lease liabilities, non-current | | 97,421 | | | 93,675 | |
| Financing lease liabilities, non-current | | 109,874 | | | 38,689 | |
| Total non-current lease liabilities | | 207,295 | | | 132,364 | |
| Total | | $ | 237,595 | | | $ | 135,947 | |
_______
(1) These assets are real estate related assets, which include land, office and laboratory spaces.
(2) Net of accumulated depreciation.
(3) These assets are real estate assets related to the MTC North and MTC South leases.
(4) Included in property and equipment in the consolidated balance sheets, asnet of December 31, 2018 and 2017.accumulated depreciation.
In April 2017, we entered into a lease agreement for land adjacent to Norwood. We determined, for accounting purposes, this land lease should be accounted for separately from(5) Included in other current liabilities in the lease entered in August 2016. consolidated balance sheets.
The lease commenced in April 2017, with rental fees
beginning at a rate of $0.3 million per annum and escalating over the thirty-five year term of the lease. We record rent expense on a straight-line basis through the endcomponents of the lease term, inclusive ofcosts for the period in which there are no scheduled rent payments,year ended December 31, 2020 and record deferred rent on the consolidated balance sheet, accordingly.2019 were as follows (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Operating lease costs | | $ | 16,939 | | | $ | 17,015 | |
| Financing lease costs: | | | | |
| Amortization of right-of-use assets, financing leases | | 1,011 | | | 309 | |
| Interest expense for financing lease liabilities | | 9,891 | | | 6,557 | |
| Total financing lease costs | | $ | 10,902 | | | $ | 6,866 | |
| Short term lease costs | | $ | 13,322 | | | $ | 0 | |
| Variable lease costs | | $ | 5,229 | | | $ | 4,399 | |
Total rent expense for the yearsyear ended December 31, 2018 2017 and 2016 was $19.1 million, $18.6 million, $13.7 million, respectively. million.
Supplemental cash flow information relating to our leases for the year ended December 31, 2020 and 2019 was as follows (in thousands):
| | | | | | | | | | | | | | |
| | December 31, |
| | 2020 | | 2019 |
| Cash paid for amounts included in measurement of lease liabilities: | | | | |
| Operating cash flows used in operating leases | | $ | (15,089) | | | $ | (16,121) | |
| Operating cash flows used in financing leases | | (8,523) | | | (5,585) | |
| Financing cash flows used in financing leases | | (7,519) | | | 0 | |
| | | | |
| Operating lease non-cash items: | | | | |
| Right-of-use assets reduced through lease modifications and reassessments | | 6,755 | | | 2,717 | |
| Right-of-use assets obtained in exchange for operating lease liabilities | | 17,107 | | | 34,014 | |
| | | | |
| Finance lease non-cash items: | | | | |
| Right-of-use assets obtained through lease modifications and reassessments | | 46,495 | | | 0 | |
| Charge to financing lease obligation | | 1,304 | | | 971 | |
| | | | |
| | | | |
| | | | |
| | | | |
Weighted average remaining lease terms and discount rates as of December 31, 2020 were as follows:
| | | | | | | | |
| | December 31, |
| | 2020 |
| Remaining lease term: | | |
| Operating leases | | 11 years |
| Finance leases | | 25 years |
| Discount rate: | | |
| Operating leases | | 10.3 | % |
| Finance leases | | 13.1 | % |
Future minimum lease payments under non-cancelable operating lease agreements as of December 31, 2018, are2020, were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Fiscal Year | | Operating Leases (1) | | Financing Leases (1) | |
| 2021 | | $ | 15,492 | | | $ | 36,579 | | |
| 2022 | | 15,913 | | | 11,848 | | |
| 2023 | | 16,008 | | | 12,054 | | |
| 2024 | | 16,168 | | | 12,279 | | |
| 2025 | | 16,567 | | | 12,493 | | |
| Thereafter | | 93,599 | | | 428,059 | | |
| Total minimum lease payments | | 173,747 | | | 513,312 | | |
| Less amounts representing interest or imputed interest | | (70,354) | | | (379,110) | | (2) |
| Present value of lease liabilities | | $ | 103,393 | | | $ | 134,202 | | |
|
| | | | |
Years ending December 31(1): | | |
| 2019 | | $ | 20,027 |
|
| 2020 | | 20,404 |
|
| 2021 | | 20,937 |
|
| 2022 | | 20,208 |
|
| 2023 | | 17,235 |
|
| Thereafter | | 112,958 |
|
| Total | | $ | 211,769 |
|
_________
(1) The amounts in the table above do not includeInclude the optional extensions in the NorwoodMTC North and MTC South lease terms or the Norwood obligations entered into after December 31, 2018.which represent a total of $338.9 million un-discounted future lease payments.
(2) MTC South interest is based on an imputed interest rate of 17.2%. MTC North interest is based upon an incremental borrowing rate of 8.2%.
12. Commitments and Contingencies
Strategic Collaborations
Under our strategic collaboration agreements, we are committed to perform certain research, development, and manufacturing activities. As part of our PCV Agreement and PCV/SAV Agreement with Merck, we are committed to perform certain research, development and manufacturing activities related to PCV products through an initial Phase 2 clinical trial up to a budgeted amount of $243.0 million and $200.0 million as of December 31, 20182020 and 2017, respectively2019 (Note 3)5).
Legal Proceedings
We are not currently a party to any material legal proceedings.
Indemnification Obligations
As permitted under Delaware law, we indemnify our officers, directors, and employees for certain events, occurrences while the officer, or director is, or was, serving at our request in such capacity. The term of the indemnification is for the officer’s or director’s lifetime.
We have standard indemnification arrangements in itsour leases for laboratory and office space that require itus to indemnify the landlord against any liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or non-performance under our leases.
We enter into indemnification provisions under our agreements with counterparties in the ordinary course of business, typically with business partners, contractors, clinical sites and customers. Under these provisions, we generally indemnify and hold harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of our activities. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited.
Through December 31, 20182020 and 2017,2019, we had not0t experienced any losses related to these indemnification obligations, and no0 material claims were outstanding. We do not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no0 related reserves were established.
Purchase Commitments and Purchase Orders
In May 2020, we entered into a 10-year strategic collaboration agreement with Lonza Ltd. to enable larger scale manufacture for our COVID-19 vaccine and additional Moderna products in the future. This agreement was reflected in the Global Long Term Agreement entered into between Moderna and Lonza on September 4, 2020. Under the terms of the agreement, we established dedicated manufacturing suites at Lonza’s facilities in the United States and Switzerland for the manufacture of mRNA-1273 at both sites. Certain arrangements under this strategic collaboration agreement are within the scope of lease accounting (see Note 11).
We enter into agreements in the normal course of business with vendors and contract manufacturing organizations (CMOs) for raw materials and manufacturing services and with vendors for preclinical research studies, clinical trials and other goods or services. As of December 31, 2018,2020, we had $2.5$659.5 million of non-cancelable purchase commitments related to raw materials and manufacturing agreements, including the Lonza agreement, which are expected to be paid through 2021. As of December 31, 2020, we had $27.0 million of non-cancelable purchase commitments for clinical services and other goods and services which will beare expected to be paid during 2019 and 2020.through 2024. These amounts represent our minimum contractual obligations, including termination fees.
In addition to manufacturingpurchase commitments, we have agreements with third parties for various services, including services related to clinical operations and support and contract manufacturing, for which we are not contractually able to terminate for convenience and avoid any and all future obligations to the vendors. Certain agreements provide for termination rights subject to termination fees or wind down costs. Under such agreements, we are contractually obligated to make certain payments to vendors, mainly, to reimburse them for their unrecoverable outlays incurred prior to cancellation. At December 31, 2018,2020, we had cancelable open purchase orders of $64.2$896.9 million
in total under such agreements for our significant clinical operations and support.support and contract manufacturing. These amounts represent only our estimate of those items for which we had a contractual commitment to pay at December 31, 2018,2020, assuming we would not cancel these agreements. The actual amounts we pay in the future to the vendors under such agreements may differ from the purchase order amounts.
Licenses to Patented Technology
On June 26, 2017, we entered into sublicense agreements with Cellscript, LLC and its affiliate, mRNA RiboTherapeutics, Inc. to sublicense certain patent rights. Pursuant to each agreement, we are required to pay certain license fees, annual maintenance fees, minimum royalties on future net sales and milestone payments contingent on achievement of certain development, regulatory and commercial milestones for specified products, on a product-by-product basis. We concluded the assets acquired in connection with the sublicense agreements should be accounted for as an asset acquisition of in-process research and development. Accordingly, all payments to be made that meet the characteristics of research and development expenses with no alternative future use will be expensed in the period in which they are incurred. As such, the initial sublicense payments totaling $28.0 million were expensed at inception and future sublicense payments will be recorded when it becomes certain we will be obliged to make the future payments. Additionally, theThe development and regulatory milestone payments, up to $1.5 million for therapeutic and prophylactic products and up to $0.5 million for diagnostic products will be recognized as a cost of the asset acquired upon resolution of the associated contingency and will be capitalized or expensed depending on the nature of the associated asset as of the date of recognition. Conversely, commercial milestone payments, up to $24.0 million, and royalties based on annual net sales of licensed products for therapeutic and prophylactic products will be accounted for as additional expense of the related product sales in the period in which the corresponding sales occur. In conjunctionconnection with these sublicense agreements, we recognized sublicense grant fees of $22.0 million in 2018 and have no further obligation for additional sublicense grant fees. We recognized $6.9 million of royalties associated with our product sales in 2020.
Additionally, we have other in-license agreements with third parties which require us to make future development, regulatory and commercial milestone payments for specified products associated with the agreements entered in 2017, we recognized expenseagreements. The achievement of $53.3 million, and paid consideration of $28.3 million in 2017. We recorded $25.0 million of accrued liabilities in the consolidated balance sheetthese milestones was not deemed probable as of December 31, 2017. For the year ended December 31, 2018, we recognized expense of $22.0 million and paid consideration of $25.0 million, which was previously accrued as of December 31, 2017.2020.
8. Redeemable Convertible Preferred Units and Common Units
As of December 31, 2018 and 2017, we had no outstanding, redeemable convertible preferred units, common units or incentive units as a result of the 2016 Reorganization.
Redeemable Convertible Preferred Units
Prior to the 2016 Reorganization on August 10, 2016, we had two classes of units: (i) capital units, comprising preferred units and common units; and (ii) incentive units, comprising non-voting and voting incentive units. As of January 1, 2016, we had 59,121,793 common units, 394,685,560 preferred units outstanding (Series A, B, C, D and E), and 2,791,240 incentive units outstanding.
2016 Reorganization
On August 10, 2016, we completed a series of reorganizational transactions, which included the Stock Split. Moderna Therapeutics, Inc. continued to exist as the parent corporation with Moderna LLC surviving as the wholly owned subsidiary of Moderna Therapeutics, Inc. As part of the transactions: (i) each issued and outstanding redeemable convertible preferred unit and common unit of Moderna LLC outstanding as of the 2016 Reorganization was exchanged for shares of redeemable convertible preferred stock and common stock, respectively, of Moderna Therapeutics, Inc.; (ii) previously outstanding incentive units of Moderna LLC were exchanged for shares of restricted common stock of Moderna Therapeutics, Inc.; (iii) previously outstanding options to purchase common units of Moderna LLC were exchanged for options to purchase common stock of Moderna Therapeutics, Inc; and (iv) for the effect of the Stock Split. If such outstanding units or options were subject to vesting at the time of the 2016 Reorganization, then such shares or options issued by Moderna Therapeutics, Inc. were subject to continued vesting pursuant to the same terms.
The following is a summary of the impact of the 2016 Reorganization.
Each outstanding redeemable convertible preferred unit of Series A, B, C, D and E of Moderna LLC was exchanged for shares of Series A, B, C, D and E redeemable convertible preferred stock, respectively, of Moderna.
Each outstanding common unit of Moderna LLC was exchanged for shares of common stock of Moderna, and if such outstanding unit was subject to vesting at the time of such exchange, then such common stock was issued by Moderna subject to continued vesting to the same extent as such outstanding common unit.
Each outstanding incentive unit issued pursuant to Moderna LLC’s 2013 Equity Incentive Plan was exchanged for shares of restricted common stock of Moderna Therapeutics, Inc. under Moderna Therapeutics, Inc.’s 2016 Stock Option and Grant Plan. Additionally, incentive unit holders were granted options to purchase common stock of Moderna
Therapeutics, Inc. If such outstanding incentive unit was subject to vesting at the time of such exchange, then such restricted common stock and stock options were issued by Moderna Therapeutics, Inc. subject to continued vesting to the same extent as such outstanding incentive unit.
Each outstanding option to purchase common units issued pursuant to Moderna LLC’s 2013 Unit Option and Grant Plan was exchanged for an option to purchase common stock of Moderna Therapeutics, Inc. under Moderna Therapeutics, Inc. 2016 Stock Option and Grant Plan, and if such outstanding unit option was subject to vesting at the time of such exchange, then such stock option was issued by Moderna Therapeutics, Inc. subject to continued vesting to the same extent as such outstanding unit option.
9.13. Redeemable Convertible Preferred Stock and Common Stock
On February 28, 2018 and May 7, 2018, the Board of Directors approved an amendment to our Certificate of Incorporation resulting in a total of 775,000,000 shares of common stock and a total of 509,352,795 shares of redeemable convertible preferred stock being authorized, respectively. Upon completion of our IPO, our authorized capital stock consists of 1,600,000,000 shares of common stock, par value $0.0001 per share, and 162,000,000 shares of preferred stock, par value $0.0001 per share, all of which shares of preferred stock are undesignated.
On December 11, 2018, we completed our IPO, whereby we sold 26,275,993 shares of common stock at a price of $23.00 per share. The aggregate net proceeds received by us from the IPO were $563.0 million, net of underwriting discounts and commissions of $33.2 million and offering expenses of $8.1 million payable by us. Upon the closing of the IPO, all of the outstanding shares of our redeemable convertible preferred stock were converted into 236,012,913 shares of the common stock. As of December 31, 2018,2020 and 2019, we did not0t have any convertible preferred stock issued or outstanding.
Each share of Common Stock is entitled to one vote. The holders of Common Stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to all the rights, powers and preferences of the undesignated preferred stock.
Our redeemable convertible preferred stock on the day immediately prior to the closing of our IPO, or December 11, 2018, and December 31, 2017 consisted of the following (in thousands, except share amounts): |
| | | | | | | | | | | | | | |
| | | Redeemable Convertible Preferred Shares Authorized | | Redeemable
Convertible
Preferred
Shares
Issued and
Outstanding | | Carrying Value | | Liquidation Preference As of December 11, 2018 |
| | | | | |
| | | | | |
| | | | | | | | | |
| Series A redeemable convertible preferred stock | | 42,000,000 |
| | 42,000,000 |
| | $ | 182 |
| | $ | 2,859 |
|
| Series B redeemable convertible preferred stock | | 122,296,280 |
| | 122,296,280 |
| | 770 |
| | 12,493 |
|
| Series C redeemable convertible preferred stock | | 85,669,774 |
| | 85,669,774 |
| | 36,238 |
| | 41,750 |
|
| Series D redeemable convertible preferred stock | | 63,291,156 |
| | 63,021,976 |
| | 163,355 |
| | 188,840 |
|
| Series E redeemable convertible preferred stock | | 81,428,340 |
| | 80,884,240 |
| | 498,525 |
| | 498,814 |
|
| Series F redeemable convertible preferred stock | | 54,001,241 |
| | 54,001,241 |
| | 473,532 |
| | 474,131 |
|
| Series G redeemable convertible preferred stock | | 55,666,004 |
| | 55,666,004 |
| | 549,413 |
| | 560,000 |
|
| Series H redeemable convertible preferred stock | | 5,000,000 |
| | 5,000,000 |
| | 111,546 |
| | 125,000 |
|
| Balance at December 11, 2018 | | 509,352,795 |
| | 508,539,515 |
| | $ | 1,833,561 |
| | $ | 1,903,887 |
|
|
| | | | | | | | | | | | | | |
| | | Redeemable Convertible Preferred Shares Authorized | | Redeemable
Convertible
Preferred
Shares
Issued and
Outstanding | | | | Liquidation Preference As of December 31, 2017 |
| | | | | | |
| | | | | Carrying Value | |
| | | | | | | | | |
| Series A redeemable convertible preferred stock | | 42,000,000 |
| | 42,000,000 |
| | $ | 182 |
| | $ | 2,701 |
|
| Series B redeemable convertible preferred stock | | 122,296,280 |
| | 122,296,280 |
| | 770 |
| | 11,801 |
|
| Series C redeemable convertible preferred stock | | 85,669,774 |
| | 85,669,774 |
| | 36,238 |
| | 39,676 |
|
| Series D redeemable convertible preferred stock | | 63,291,156 |
| | 63,291,156 |
| | 164,059 |
| | 179,462 |
|
| Series E redeemable convertible preferred stock | | 81,428,340 |
| | 81,428,340 |
| | 501,880 |
| | 502,169 |
|
| Series F redeemable convertible preferred stock | | 54,001,241 |
| | 54,001,241 |
| | 473,532 |
| | 474,131 |
|
| Balance at December 31, 2017 | | 448,686,791 |
| | 448,686,791 |
| | $ | 1,176,661 |
| | $ | 1,209,940 |
|
Redeemable Convertible Preferred Stock
We determined the exchange of common units, Series A, B, C, D and E redeemable convertible preferred units, incentive units, restricted stock units, and unit options upon the 2016 Reorganization was a modification of such units. Accordingly, the Series A, B, C, D and E redeemable convertible preferred stock were recorded at their historical carrying values, including previously accrued cumulative dividends, on the effective date of the 2016 Reorganization.
Contemporaneous with the 2016 Reorganization,On February 14, 2020, we entered into a preferred stock purchase agreement which authorized the sale and issuance of up to 68,337,129 shares of our Series F redeemable convertible preferred stock at a purchase price of $8.78 per share. We completed a financing in August 2016 which resulted in the issuance of an aggregate of 54,001,241 shares of Series F redeemable convertible preferred stock at an issuance price of $8.78 per share for gross proceeds of $474.1 million, less issuance costs of approximately $0.6 million.
In February 2018 and May 2018, we completed additional preferred stock financings which resulted in the issuance of 55,666,004 shares of Series G redeemable convertible preferred stock and 5,000,000 shares of Series H redeemable convertible preferred stock , respectively. Series G redeemable convertible preferred stock was issued at a purchase price of $10.06 per share for gross proceeds of $560.0 million, less issuance costs of $10.5 million. Series H redeemable convertible preferred stock was issued at a purchase price of $25.00 per share for gross proceeds of $112.0 million, less issuance costs of $0.4 million. The Series H preferred stock is not convertible at the option of the holder until after February 7, 2020, after which, it will be convertible into common stock on a one-for-1.14 basis because the applicable original issuance price for such series is $25.00 and the initial applicable conversion price is $21.93 (adjusted for the reverse stock split). The initial carrying amount of the Series H redeemable convertible preferred stock was recorded at its fair value of $22.39 per share, which we determined based in part on an independent third-party valuation contemporaneously performed. The difference between the purchase price and the fair value of Series H redeemable convertible preferred stock was determined to be the premium associated with the Merck PCV/SAV Agreement entered in conjunction with the Series H issuance and recorded to deferred revenue of $13.0 million (Note 3).
In September 2018, we repurchased 269,180 shares of our Series D redeemable convertible preferred stock and 544,100 shares of our Series E redeemable convertible preferred stock for an aggregate purchase price of $8.2 million. The repurchase was recorded as a decrease of carrying value of preferred stock and the excess of the purchase price paid to an existing shareholder over the carrying amount of redeemable convertible preferred stock surrendered was recorded to additional paid-in capital.
The following table summarizes the activity for each series of our outstanding redeemable convertible preferred stock for the years ended December 31, 2018 and 2017 (in thousands, except share data):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Series A Redeemable Convertible Preferred Stock | | Series B Redeemable Convertible Preferred Stock | | Series C Redeemable Convertible Preferred Stock | | Series D Redeemable Convertible Preferred Stock | | Series E Redeemable Convertible Preferred Stock | | Series F Redeemable Convertible Preferred Stock | | Series G Redeemable Convertible Preferred Stock | | Series H Redeemable Convertible Preferred Stock | | Total Redeemable Convertible Preferred Stock |
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount |
| December 31, 2015 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Exchange of units for stock on 2016 Reorganization (split adjusted) | 42,000,000 |
| | 182 |
| | 122,296,280 |
| | 770 |
| | 85,669,774 |
| | 36,238 |
| | 63,291,156 |
| | 164,059 |
| | 81,428,340 |
| | 501,880 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 394,685,550 |
| | 703,129 |
|
| Issuance of Series F redeemable convertible preferred stock, net of issuance costs of $599 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 54,001,241 |
| | 473,532 |
| | — |
| | — |
| | — |
| | — |
| | 54,001,241 |
| | 473,532 |
|
| Balance at December 31, 2017 | 42,000,000 |
| | $ | 182 |
| | 122,296,280 |
| | $ | 770 |
| | 85,669,774 |
| | $ | 36,238 |
| | 63,291,156 |
| | $ | 164,059 |
| | 81,428,340 |
| | $ | 501,880 |
| | 54,001,241 |
| | $ | 473,532 |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | 448,686,791 |
| | $ | 1,176,661 |
|
| Issuance of Series G redeemable convertible preferred stock, net of issuance costs of $10,517 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 55,666,004 |
| | 549,413 |
| | — |
| | — |
| | 55,666,004 |
| | 549,413 |
|
| Issuance of Series H redeemable convertible preferred stock, net of issuance costs of $474 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5,000,000 |
| | 111,546 |
| | 5,000,000 |
| | 111,546 |
|
| Repurchase of Series D redeemable convertible preferred stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (269,180 | ) | | (704 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (269,180 | ) | | (704 | ) |
| Repurchase of Series E redeemable convertible preferred stock | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (544,100 | ) | | (3,355 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (544,100 | ) | | (3,355 | ) |
| Conversion of redeemable convertible preferred stock | (42,000,000 | ) | | (182 | ) | | (122,296,280 | ) | | (770 | ) | | (85,669,774 | ) | | (36,238 | ) | | (63,021,976 | ) | | (163,355 | ) | | (80,884,240 | ) | | (498,525 | ) | | (54,001,241 | ) | | (473,532 | ) | | (55,666,004 | ) | | (549,413 | ) | | (5,000,000 | ) | | (111,546 | ) | | (508,539,515 | ) | | (1,833,561 | ) |
| Balance at December 31, 2018 | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
| | — |
| | $ | — |
|
Prior to the conversion of the redeemable convertible preferred stock into the common stock upon the closing of the IPO in December 2018, the holders of the redeemable convertible preferred stock had the following rights:
Voting Rights
The holders of redeemable convertible preferred stock were entitled to vote on all matters and had the number of votes equal to the number ofsold 26,315,790 shares of common stock into which the shares of redeemable convertible preferred stock were convertible. Certain directors comprising the Board of Directors were elected by majority vote of holders of redeemable convertible preferred stock. A majority vote of the holders of redeemable convertible preferred stock was required to liquidate or dissolve the Company, amend the Certificate of Incorporation or Bylaws, reclassify common stock or establish another class of capital stock, create shares that would rank senior to or authorize additional shares of redeemable convertible preferred stock, declare a dividend or make a distribution, change the authorized number of directors constituting the Board of Directors, or establish a new employee stock option plan.
Dividends
Dividends were cumulative and accrued annually, whether or not declared, and whether or not there were net profits available to pay dividends. The holders of Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock and Series D redeemable convertible preferred stock were entitled to dividends, at a rateprice of $19.00 per share per annum,through a public equity offering. The aggregate net proceeds from the offering were $477.7 million, net of $0.004, $0.006, $0.02568,underwriting discounts, commissions and $0.171, respectively. The holders ofoffering expenses. In addition, the Series E redeemable convertible preferred stock, Series F redeemable convertible preferred stock, Series G redeemable convertible preferred stock and Series H redeemable convertible preferred stock were not entitledunderwriters exercised their options to dividends with respect to such shares. All accrued dividends on the redeemable convertible preferred stock were forfeited, as a result of the conversion to common stock, in connection with the closing of our IPO on December 11, 2018.
Liquidation Preference
The holders of the redeemable convertible preferred stock had preferences in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, as defined in the Third Amended and Restated Certificate of Incorporation. The preferences are set forth below:
| |
i. | first, to the holders of Series H redeemable convertible preferred stock and Series G redeemable convertible preferred stock, on a pari passu basis, an amount equal to the greater of (a) each respective original issue price plus dividends declared but unpaid or (b) such amount that would be payable had all respective shares been converted to common stock; |
| |
ii. | next, to the holders of the Series F redeemable convertible preferred stock an amount equal to the greater of (a) the original issue price plus dividends declared but unpaid or (b) such amount that would be payable had all respective shares been converted to common stock; |
| |
iii. | next, to the holders of the Series E redeemable convertible preferred stock an amount equal to the greater of (a) the original issue price plus dividends declared but unpaid or (b) such amount that would be payable had all respective shares been converted to common stock; |
| |
iv. | next, to the holders of the Series C redeemable convertible preferred stock an amount equal to the greater of (a) the original issue price plus the Series C redeemable convertible preferred stock dividends accrued but unpaid or (b) such amount that would be payable had all respective shares been converted to common stock; |
| |
v. | next, pari passu, in relation to the holders of the Series A redeemable convertible preferred stock an amount equal to the greater of (a) the original issue price plus the Series A redeemable convertible preferred stock dividends accrued but unpaid or (b) such amount that would be payable had all respective shares been converted to common stock and in relation to the holders of the Series B redeemable convertible preferred stock an amount equal to the greater of (a) the original issue price plus the Series B redeemable convertible preferred stock dividends accrued but unpaid or (b) such amount that would be payable had all respective shares been converted to common stock;
|
| |
vi. | next, to the holders of the Series D redeemable convertible preferred stock an amount equal to the Series D redeemable convertible preferred stock dividends accrued but unpaid; and |
| |
vii. | finally, to all holders of common stock, pro rata based on the number of shares held by each such holder. |
Redemption
Pursuant to the Third Amended and Restated Certificate of Incorporation as of May 7, 2018 the redeemable convertible preferred stock did not have any redemption rights that were at the election of the holder. However, the redeemable convertible preferred stock was entitled to payment upon the occurrence of certain contingent events.
As it relates to the payment upon the occurrence of a contingent event, we evaluated the redeemable convertible preferred stock in accordance with the guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480), and determined that the payment of liquidation amounts due upon the occurrence of a contingent event was not solely within our control and accordingly the redeemable convertible preferred stock was classified in temporary equity in the consolidated balance sheet. As it relates to the accretion to redemption value, the redeemable convertible preferred stock was not then redeemable, nor was it probable that the instrument would become redeemable, as it was only redeemable upon the occurrence of a contingent event. Accordingly, no accretion was recognized for the redeemable convertible preferred stock and it would not have been accreted until it was probable that the shares would become redeemable. At December 31, 2017 , the occurrence of the contingent events was not considered probable.
Conversion
Each share of Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock, Series F redeemable convertible preferred stock, and Series G redeemable convertible preferred stock was convertible at the option of the holder, at any time, into the number of shares of fully paid and non-assessable shares of common stock determined by dividing the applicable original issue price for such series of redeemable convertible preferred stock by the applicable conversion price then in effect for such series. The applicable conversion price was initially $0.11, $0.17, $0.70, $4.65, $13.45, $19.14, and $21.93 per share (as adjusted for the reverse stock split), for the Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock, Series F redeemable convertible preferred stock, and Series G redeemable convertible preferred stock, respectively. In the case of Series H redeemable convertible preferred stock, shares were not convertible at the option of the holder until the date that was twenty-one months following the date of filing of the Third Amended and Restated Certificate of Incorporation, February 7, 2020, after which, shares were convertible at the option of the holder withpurchase an applicable conversion price of $21.93 per share, consistent with the mechanics of conversion for the other series of redeemable convertible preferred stock (as adjusted for the reverse stock split). Each applicable conversion ratio would have been adjusted, if applicable, at the time of conversion of a share of redeemable convertible preferred stock into common stock. The adjustment contemplated cash distributions
made to holders of the redeemable convertible preferred stock through the date of conversion by decreasing the number of shares of common stock into which the redeemable convertible preferred stock converted by an amount equal to the distributions divided by the fair value of the common stock at the time of conversion. All outstanding shares of redeemable convertible preferred stock were automatically converted into fully paid and non-assessableadditional 3,947,368 shares of common stock at the applicable conversion ratio then in effect upon: (i) the date and time, or the occurrence of an event, specified by vote or written consent of the requisite vote; (ii) the closing of a public offering pursuant to an effective registration statement under the Securities Actprice less underwriting discounts, resulting in additional net proceeds of 1933, as amended, as approved by the Board of Directors; or (iii) the date and time, or occurrence of an event, specified by vote or written consent of the holders of a majority or two-thirds (as applicable) of the then outstanding$71.8 million.
On May 21, 2020, we sold 17,600,000 shares of the associated series of redeemable convertible preferred stock (applicable on a series-by-series basis).
In the case of Series H redeemable convertible preferred stock, in the event of an automatic conversion prior to the twenty-one-month anniversary, shares converted at (a) in the case of an IPO, a 10% discount to the price per share of common stock sold pursuant to this Annual Report on Form 10-K; provided that such discountedat a price was no lower than $21.93 or (b) in the case of a liquidation, dissolution, winding up or deemed liquidation event, a 10% discount to the price$76.00 per share payable tothrough a public equity offering. The aggregate net proceeds from the holdersoffering were $1.30 billion, net of common stock; provided that such discounted price was no lower than $21.93.underwriting discounts, commissions and offering expenses.
Common stock
Holders of common stock are entitled to one vote per share and are entitled to receive dividends, if and when declared by our Board of Directors. In the event of liquidation, holders of common stock share ratably in our assets legally available for distribution to our shareholders. Holders of common stock have no preemptive, subscription, redemption or conversion rights.
10.14. Stock-Based Compensation
Equity Plans
In October 2013, we adopted the 2013 Equity Incentive Plan (the 2013 Incentive Plan) and the 2013 Unit Option and Grant Plan (the 2013 Option Plan), which provided for the grant of incentive units, non-qualified unit options, and restricted and unrestricted unit awards to our employees, officers, directors, advisors, and outside consultants. Historically, we also granted restricted stock to founders, officers, directors, and advisors outside any of the Plans.
In August 2016, we adopted the 2016 Stock Option and Grant Plan (the 2016 Equity Plan), which replaced the 2013 Option Plan and the 2013 Incentive Plan. The 2016 Equity Plan and provided for the grant of incentive stock options, non-qualified stock options, restricted stock, unrestricted stock, and restricted stock units to our employees, officers, directors, consultants, and other key persons.
In connection with the IPO, we adopted the 2018 Stock Option and Incentive Plan (the 2018 Equity Plan) in November 2018. The 2018 Equity Plan became effective on the date immediately prior to the effective date of the IPO and replaced our 2016 Plan. The 2018 Equity Plan provides flexibility to our compensation committee to use various equity-based incentive awards as compensation tools to motivate our workforce. We have initially reserved 13,000,000 shares of our common stock for the issuance of awards under the 2018 Equity Plan. The 2018 Equity Plan provides that the number of shares reserved and available for issuance under the plan will
automatically increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by the Compensation and Talent Committee of our compensation committee.Board of Directors. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2018 Equity Plan and the 2016 Plan will be added back to the shares of common stock available for issuance under the 2018 Equity Plan.
The terms and conditions of stock-based awards are defined at the sole discretion of our Board of Directors. We issue service-based awards, vesting over a defined period of service, and performance-based awards, vesting upon achievement of defined conditions. Service based awards generally vest over a four-year period, with the first 25% of such awards vesting following twelve months of continued employment or service. The remaining awards vests in twelve12 quarterly installments over the following twelve quarters. Stock options granted under the 2016 Equity Plan expire ten years from the date of grant and the exercise price must be at least equal to the fair market value of common stock on the grant date.
The number of shares initially reserved for issuance under the 2016 Equity Plan was 37,280,385. On March 3, 2017 and February 28, 2018, our Board of Directors approved 11,009,178 and 11,467,886 additional shares, respectively, of common stock be authorized for issuance under the 2016 Equity Plan, resulting in an aggregate of 59,757,449 shares authorized for issuance under the 2016 Equity Plan. Upon adoption of the 2016 Equity Plan and consummation of the 2016 Reorganization, there were no shares outstanding or available for future grant under any of the preceding equity plans.
As of December 31, 2018,2020, we had a total of 58.664.2 million shares reserved for future issuance under our Equity Plans, of which 50.836.3 million shares were reserved for optionsequity awards previously granted, and 7.827.9 million shares were available for future grants under the 2018 Equity Plan. No additional awards will be granted under the 2016 Equity Plan as it was replaced by the 2018 Equity Plan.
Options
We have granted options generally through the 2018 Equity Plan and 2016 Equity Plan. The following table summarizes our option activity as of December 31, 2020 and 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Options | | Weighted Average Exercise Price per Share | | Weighted Average Grant Date Fair Value per Share | | Weighted- Average Remaining Contractual Term | | Aggregate Intrinsic Value (1) (in thousands) |
| Outstanding at December 31, 2019 | | 45,536,915 | | | $ | 13.82 | | | $ | 7.35 | | | 7.2 years | | $ | 286,310 | |
| Granted | | 5,036,520 | | | 36.04 | | | 19.30 | | | | | |
| Exercised | | (13,888,434) | | | 12.93 | | | 6.68 | | | | | |
| Canceled/forfeited | | (2,627,468) | | | 18.14 | | | 10.56 | | | | | |
| Outstanding at December 31, 2020 | | 34,057,533 | | | 17.14 | | | 9.12 | | | 6.7 years | | 2,976,235 | |
| Exercisable at December 31, 2020 | | 17,461,374 | | | 10.99 | | | 5.67 | | | 5.4 years | | 1,632,365 | |
| Expected to vest at December 31, 2020 | | 16,596,159 | | | 23.61 | | | 12.75 | | | 8.2 years | | 1,343,870 | |
_______
(1)Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of common stock for those options in the money as of December 31, 2020.
The total intrinsic value of options exercised was $785.7 million, $75.6 million and $5.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. The aggregate intrinsic value represents the difference between the exercise price and the selling price received by option holders upon the exercise of stock options during the period. The total consideration recorded as a result of stock option exercises was approximately $179.6 million for the year ended December 31, 2020.
Restricted Common Stock Units
We have granted restricted stock unit awards generally through the 2018 Equity Plan. The following table summarizes our restricted stock unit activity during the year ended December 31, 2020:
| | | | | | | | | | | |
| Number of Units | | Weighted Average Grant Date Price per Unit |
| Outstanding, non-vested at December 31, 2019 | 1,177,249 | | | $ | 19.01 | |
| Issued | 1,478,093 | | | 37.37 | |
| Vested | (247,349) | | | 20.28 | |
| Canceled/forfeited | (215,033) | | | 23.64 | |
| Outstanding, non-vested at December 31, 2020 | 2,192,960 | | | 30.85 | |
The total fair value of restricted stock units vested during the years ended December 31, 2020, 2019 and 2018, were $5.0 million, $5.5 million, and 0, respectively.
2018 Employee Stock Purchase Plan
In November 2018, we adopted the 2018 Employee Stock Purchase Plan (the ESPP), which became effective on December 5, 2018. The ESPP initially reserves and authorizes the issuance of up to a total of 810,000 shares of common stock to participating employees. We will make one1 or more offerings, consisting of one1 or more purchase periods, each year to our employees to purchase shares under the ESPP. Offerings will usually begin every six months and will continue for six-month periods, referred to as offering periods. The purchase price at which shares are sold under the ESPP will be equal to 85% of the lower of the fair market value of the shares on the first business day of the offering period or the last business day of the purchase period. Employees are generally eligible to participate through payroll deductions of between 1% to 50% of their compensation and may not purchase more than 3,000 shares of common stock during each purchase period or $25,000 worth of shares of common stock in any calendar year. We had not made any offeringsbegan our first ESPP offering on June 1, 2019. There were 251,752 shares of common stock sold at a weighted average price of $27.97 per share under the ESPP during the year ended December 31, 2018.
2016 Reorganization
Pursuant to the 2016 Reorganization, we cancelled all outstanding incentive units of Moderna LLC and exchanged such incentive units into 7,241,077 shares of restricted stock of Moderna Therapeutics, Inc., based on an applicable conversion ratio, which are subject to the same vesting conditions as the originally issued incentive units. In addition, we issued to the incentive unit holders 5,489,308 options to purchase common stock of Moderna Therapeutics, Inc., based on the original number of incentive units granted, as split adjusted, less the number of shares of restricted stock issued in conjunction with the 2016 Reorganization. The weighted average grant date fair value of such restricted stock was $12.15 per share, based on the fair value of the common stock as of the 2016 Reorganization. The options to purchase common stock issued in relation to the incentive units were granted with a strike price of $19.15 and an expiration date of ten years from the 2016 Reorganization, but otherwise subject to the same vesting conditions as the original incentive units. The weighted average grant date fair value of such options issued was $3.34 per option, based on the Black-Scholes option pricing model.
We accounted for the exchange of incentive units in Moderna LLC for restricted stock and for the additional options granted to purchase common stock of Moderna Therapeutics, Inc., as a modification in accordance with the requirements of ASC 718. Accordingly, we determined there was excess fair value of the replacement awards over the fair value of the cancelled awards at the cancellation date, which resulted in incremental compensation expense of $30.9 million related to234 employees and former employees, and $1.5 million related to 13 non-employees. The incremental fair value related to vested awards was recognized immediately as compensation expense in the year ended December 31, 2016. The incremental fair value of unvested awards and any remaining unrecognized compensation of the original awards are recognized as compensation expense over the remaining vesting period. Additionally, the non-employee incentive units which were exchanged into restricted stock and the additional options to purchase common stock are re-measured based on the fair value of the respective modified award at each reporting date.
Options
We have granted options generally through the 2018 Equity Plan and 2016 Equity Plan. The following table summarizes our option activity as2020. As of December 31, 20182020, 3.6 million shares were available for future issuance under the ESPP.
Valuation and 2017:Stock-Based Compensation Expense
|
| | | | | | | | | | | | | | |
| | | Number of Options | | Weighted- Average Exercise Price per Share | | Weighted- Average Grant Date Fair Value per Share | | Weighted- Average Remaining Contractual Term | | Aggregate Intrinsic Value (1) (in thousands) |
| Outstanding at December 31, 2017 | | 33,684,134 |
| | 9.31 |
| | 4.91 |
| | 7.8 years | | 130,587 |
|
| Granted | | 19,223,123 |
| | 17.01 |
| | 9.33 |
| | | | |
| Exercised | | (446,864 | ) | | 4.05 |
| | 2.36 |
| | | | |
| Canceled/forfeited | | (1,639,261 | ) | | 12.70 |
| | 7.58 |
| | | | |
| Outstanding at December 31, 2018 | | 50,821,132 |
| | 12.16 |
| | 6.59 |
| | 7.1 years | | 220,434 |
|
| Exercisable at December 31, 2018 | | 22,118,203 |
| | 7.86 |
| | 3.53 |
| | 5.8 years | | 179,459 |
|
| Vested and expected to vest at December 31, 2018 | | 28,705,512 |
| | 15.48 |
| | 8.95 |
| | 8.2 years | | 40,983 |
|
_______
(1)Aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of common stock for those options in the money as of December 31, 2018.
The total intrinsic value of options exercised was $5.3 million, less than $0.1 million and $0.2 million for the years ended December 31, 2018, 2017 and 2016, respectively.
Stock-based compensation for options granted under our Equity Plans and share purchases under our ESPP is determined using the Black-Scholes option pricing model. The weighted-average assumptions used to estimate the fair value of the options granted and ESPP for the years ended December 31, 2018, 20172020, 2019 and 20162018 are as follows:
|
| | | | | | | | | | | | |
| | | Weighted Average |
| | | Years Ended December 31, |
| | | 2018 | | 2017 | | 2016 |
| | | | | | | |
| Risk-free interest rate | | 2.76 | % | | 2.02 | % | | 1.65 | % |
| Expected term | | 6.27 years |
| | 6.21 years |
| | 5.98 years |
|
| Expected volatility | | 63 | % | | 63 | % | | 68 | % |
| Expected dividends | | — | % | | — | % | | — | % |
| Weighted average fair value per share | | $ | 9.33 |
| | $ | 7.96 |
| | $ | 3.82 |
|
The risk-free interest rate assumption for options is based on the U.S. Treasury yield curve rate at the date of grant with a maturity approximating the expected term of the grant. The expected term assumption for options granted to employees is determined using the simplified method that represents the average of the contractual term of the option and the weighted average vesting period of the option. We use the simplified method because we do not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. For non-employee options, the contractual term of the option issued is used as the expected term. Assumption as to expected volatility for our common stock is based on an average of the historical volatility of a peer group of public companies that we believe are similar in nature to us. The historical volatility is generally calculated based on a period of time commensurate with the expected term assumption. The assumed dividend yield is based upon our expectation of not paying dividends in the foreseeable future. Prior to the IPO, the fair values per share was determined by our board of directors as of the date of each grant based on the independent third-party valuations, taking into consideration various objective and subjective factors.
Restricted Common Stock
We have granted restricted stock awards generally through the 2016 Equity Plan. The following table summarizes our restricted stock activity during the year ended December 31, 2018:
|
| | | | | | |
| | Number of
Shares | | Weighted Average Grant Date per Share |
| Outstanding, non-vested at December 31, 2017 | 1,081,205 |
| | $ | 12.15 |
|
| Issued | — |
| | — |
|
| Vested | (856,135 | ) | | 12.15 |
|
| Canceled/forfeited | (26,473 | ) | | 12.15 |
|
| Outstanding, non-vested at December 31, 2018 | 198,597 |
| | 12.15 |
|
The aggregate fair value of restricted stock awards vested during the years ended December 31, 2018, 2017 and 2016, were $11.9 million, $21.1 million, $51.1 million, respectively.
Restricted Common Stock Units
We have granted restricted stock awards generally through the 2016 Equity Plan. The following table summarizes our restricted stock unit activity during the year ended December 31, 2018:
|
| | | | | | |
| | Units | | Weighted-Average
Grant Date per Unit |
| Outstanding, non-vested at December 31, 2017 | 458,715 |
| | $ | 11.93 |
|
| Issued | — |
| | — |
|
Vested (1) | (401,371 | ) | | 11.93 |
|
| Canceled/forfeited | — |
| | — |
|
Pending settlement (1) | 401,371 |
| | 11.93 |
|
| Outstanding, non-vested at December 31, 2018 | 458,715 |
| | — |
|
| | | | | | | | | | | | | | | | | | | | |
| | Weighted Average |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| Options: | | | | | | |
| Risk-free interest rate | | 0.83 | % | | 2.29 | % | | 2.76 | % |
| Expected term | | 6.11 years | | 6.07 years | | 6.27 years |
| Expected volatility | | 58 | % | | 61 | % | | 63 | % |
| Expected dividends | | 0 | % | | 0 | % | | 0 | % |
| Weighted average fair value per share | | $ | 19.30 | | | $ | 11.35 | | | $ | 9.33 | |
| | | | | | |
| ESPP: | | | | | | |
| Risk-free interest rate | | 0.14 | % | | 1.95 | % | | * |
| Expected term | | 0.50 years | | 0.50 years | | * |
| Expected volatility | | 54 | % | | 53 | % | | * |
| Expected dividends | | 0 | % | | 0 | % | | * |
| Weighted average fair value per share | | $ | 32.18 | | | $ | 5.98 | | | * |
_________
(1) The vested restricted stock units will be settled for common stock on the date which is 360 days after the consummation of the IPO.* - Not applicable
Stock-Based Compensation Expense
The following table presents the components and classification of stock-based compensation expense for the years ended December 31, 2018, 20172020, 2019 and 20162018 as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Options | $ | 77,748 | | | $ | 74,780 | | | $ | 63,288 | |
| Restricted common stock and units | 12,401 | | | 5,125 | | | 9,277 | |
| Employee stock purchase plan | 2,872 | | | 1,217 | | | 0 | |
| Total | $ | 93,021 | | | $ | 81,122 | | | $ | 72,565 | |
| Research and development | $ | 56,155 | | | $ | 48,259 | | | $ | 37,659 | |
| Selling, general and administrative | 36,866 | | | 32,863 | | | 34,906 | |
| Total | $ | 93,021 | | | $ | 81,122 | | | $ | 72,565 | |
|
| | | | | | | | | | | |
| | Years Ended
December 31, |
| | 2018 | | 2017 | | 2016 |
| | | | | | |
| Options | $ | 63,288 |
| | $ | 31,724 |
| | $ | 23,607 |
|
| Restricted common stock and units | 9,277 |
| | 8,331 |
| | 11,370 |
|
| Common | — |
| | — |
| | 4,383 |
|
| Total | $ | 72,565 |
| | $ | 40,055 |
| | $ | 39,360 |
|
| Research and development | $ | 37,659 |
| | $ | 21,679 |
| | $ | 20,687 |
|
| General and administrative | 34,906 |
| | 18,376 |
| | 18,673 |
|
| Total | $ | 72,565 |
| | $ | 40,055 |
| | $ | 39,360 |
|
For the years ended December 31, 2018, 20172020, 2019 and 2016,2018, we recognized stock-based compensation expense of $10.6$9.6 million, $0.8$9.8 million and $1.2$10.6 million, respectively, related to performance-based awards, including awards with vesting or commencement contingent upon the IPO, for which achievement of such performance-based condition was deemed probable. ForStock-based compensation expenses related to non-employee awards were immaterial for the years ended December 31, 2018, 20172020, 2019 and 2016, $0.7 million, $1 million and $2.4 million, respectively, of stock-based compensation expense related to non-employee awards.2018.
As of December 31, 2018,2020, there were $217.6$226.8 million of total unrecognized compensation cost related to non-vested stock-based compensation with respect to options and restricted stock granted. That cost is expected to be recognized over a weighted-average period of 3.72.9 years at December 31, 2018.2020.
11.
15. Employee Benefit Plan
We provide a retirement savings option to our eligible U.S. employees through the Moderna, Inc. 401(k) Plan (the 401(k) Plan), subject to certain limitations. As allowed under Section 401(k) of the Internal Revenue Code, the 401(k) Plan allows tax deferred salary deductions for eligible employees. We match 50% up to the first 6% contributed by a participant. All matching contributions are immediately vested. Total matching contributions to the 401(k) Plan were $2.1$5.0 million, $2.1$4.2 million, $1.2$2.1 million for the years ended December 31, 2018, 20172020, 2019 and 2016,2018, respectively.
12.16. Income Taxes
Loss before provision for (benefit from) income taxes for the years ended December 31, 2018, 20172020, 2019 and 20162018 consist of the following (in thousands):
| | | | Years Ended
December 31, | | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| United States | $ | (380,473 | ) | | $ | (247,784 | ) | | $ | (211,786 | ) | United States | $ | (745,445) | | | $ | (508,595) | | | $ | (380,473) | |
| Foreign | (3,935 | ) | | (8,212 | ) | | (3,382 | ) | Foreign | 932 | | | (6,121) | | | (3,935) | |
| Loss before provision for (benefit from) income taxes | $ | (384,408 | ) | | $ | (255,996 | ) | | $ | (215,168 | ) | Loss before provision for (benefit from) income taxes | $ | (744,513) | | | $ | (514,716) | | | $ | (384,408) | |
The provision for (benefit from) income taxes for the years ended December 31, 2018, 20172020, 2019 and 20162018 consist of the following components (in thousands):
| | | | Years Ended
December 31, | | Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2020 | | 2019 | | 2018 |
| Current: | | | | | | Current: | | | | | |
| Federal | $ | (26 | ) | | $ | (252 | ) | | $ | 704 |
| Federal | $ | 0 | | | $ | 0 | | | $ | (26) | |
| State | 352 |
| | 172 |
| | 51 |
| State | 32 | | | 505 | | | 352 | |
| Foreign | | Foreign | 2,519 | | | 0 | | | 0 | |
| Total current | 326 |
| | (80 | ) | | 755 |
| Total current | 2,551 | | | 505 | | | 326 | |
| Deferred: |
| | | | | Deferred: | |
| Federal | — |
| | — |
| | 288 |
| Federal | 0 | | | (1,200) | | | 0 | |
| Total deferred | — |
| | — |
| | 288 |
| Total deferred | 0 | | | (1,200) | | | 0 | |
| Total income tax provision for (benefit from) income taxes | $ | 326 |
| | $ | (80 | ) | | $ | 1,043 |
| |
| Total provision for (benefit from) income taxes | | Total provision for (benefit from) income taxes | $ | 2,551 | | | $ | (695) | | | $ | 326 | |
The reconciliation of the U.S. statutory income tax rate to our effective tax rate for the years ended December 31, 2018, 20172020, 2019 and 20162018 are as follows:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Tax effected at statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State taxes, net of federal benefit | 3.6 | % | | 7.9 | % | | 6.3 | % |
| Non-deductible items | (0.8) | % | | 1.6 | % | | 0 | % |
| Change in valuation allowance | (47.4) | % | | (33.0) | % | | (28.5) | % |
| Federal research and development credits | 3.8 | % | | 2.5 | % | | 1.5 | % |
| Foreign tax rate differential | 0.0 | % | | (0.2) | % | | (0.2) | % |
| Stock compensation windfall | 19.8 | % | | 0 | % | | 0 | % |
| Other | (0.3) | % | | 0.2 | % | | (0.2) | % |
| Effective tax rate | (0.3) | % | | 0.0 | % | | (0.1) | % |
|
| | | | | | | | |
| | Years Ended
December 31, |
| | 2018 | | 2017 | | 2016 |
| Tax effected at statutory rate | 21.0 | % | | 34.0 | % | | 34.0 | % |
| State taxes, net of federal benefit | 6.3 | % | | 8.5 | % | | 5.1 | % |
| Non-deductible items | 0.0 | % | | (1.3 | )% | | (3.0 | )% |
| Change in valuation allowance | (28.5 | )% | | (20.4 | )% | | (40.2 | )% |
| Federal research and development credits | 1.5 | % | | 4.8 | % | | 4.3 | % |
| Foreign tax rate differential | (0.2 | )% | | (1.1 | )% | | (0.5 | )% |
| Impact of federal rate change on net deferred taxes | 0.0 | % | | (25.0 | )% | | 0.0 | % |
| Other | (0.2 | )% | | 0.5 | % | | (0.2 | )% |
| Effective tax rate | (0.1 | )% | | 0.0 | % | | (0.5 | )% |
The significant components of our deferred tax assets and tax liabilities as of December 31, 20182020 and 20172019 are as follows (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2020 | | 2019 |
| Deferred tax assets: | | | |
| Net operating loss carry-forwards | $ | 587,211 | | | $ | 268,173 | |
| Stock-based compensation | 33,089 | | | 43,978 | |
| Capitalized licenses, research and development and start-up costs | 13,985 | | | 19,891 | |
| Tax credit carry-forwards | 99,024 | | | 77,222 | |
| Accrued expenses | 26,962 | | | 7,377 | |
| Deferred revenue | 29,785 | | | 53,475 | |
| Operating lease liabilities | 22,313 | | | 26,571 | |
| Lease financing obligation | 23,718 | | | 10,570 | |
| Capitalized inventory | 38,058 | | | 0 | |
| Other | 0 | | | 11 | |
| Total gross deferred tax assets | 874,145 | | | 507,268 | |
| Less: valuation allowance | (823,468) | | | (470,753) | |
| Total deferred tax assets, net of valuation allowance | 50,677 | | | 36,515 | |
| Deferred tax liabilities: | | | |
| Financing right-of-use assets | (11,539) | | | (2,612) | |
| Operating right-of-use assets | (20,349) | | | (24,944) | |
| Fixed assets | (18,276) | | | (8,959) | |
| Other | (513) | | | 0 | |
| Total deferred tax liabilities | (50,677) | | | (36,515) | |
| Net deferred tax assets | $ | 0 | | | $ | 0 | |
|
| | | | | | | |
| | December 31, |
| | 2018 | | 2017 |
| Deferred tax assets: | | | |
| Net operating loss carry-forwards | $ | 114,932 |
| | $ | 100,372 |
|
| Stock-based compensation | 33,138 |
| | 15,637 |
|
| Capitalized licenses, R&D and start-up costs | 22,143 |
| | 18,732 |
|
| Tax credit carry-forwards | 53,617 |
| | 47,804 |
|
| Accrued expenses | 16,443 |
| | 16,490 |
|
| Deferred revenue | 71,209 |
| | 7,103 |
|
| Lease financing obligation | 9,149 |
| | — |
|
| Other | 2,870 |
| | 1,997 |
|
| Total gross deferred tax assets | 323,501 |
| | 208,135 |
|
| Less: valuation allowance | (308,273 | ) | | (198,650 | ) |
| Total deferred tax assets, net of valuation allowance | 15,228 |
| | 9,485 |
|
| Deferred tax liabilities: | | | |
| Fixed assets | (15,228 | ) | | (9,485 | ) |
| Total deferred tax liabilities | (15,228 | ) | | (9,485 | ) |
| Net deferred tax assets | $ | — |
| | $ | — |
|
We have evaluated the positive and negative evidence bearing upon the realization of our deferred tax assets, including our history of significant losses in every year since our inception and in accordance with the applicable accounting standards, hashave fully reserved the net deferred tax asset. We concluded that realization of our net deferred tax assets is not more-likely-than-not to be realized.realized as of December 31, 2020. The valuation allowance increased by $109.6$352.7 million in the year ended December 31, 2018,2020, primarily due to the increase in net operating loss carry-forwards, stock-based compensation, and research and development tax credits..credits and capitalized inventory.
On December 22, 2017,a periodic basis, we reassess the Tax Cutsvaluation allowance on our deferred income tax assets, weighing positive and Jobs Act (the TCJA) was enacted. The TCJA, among other things, contains significant changesnegative evidence to corporate taxation, including reductionassess the recoverability of the corporatedeferred tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation ofassets. In 2020, we reassessed the tax deductionvaluation allowance and considered negative evidence, including our cumulative losses over the three years ended December 31, 2020, and positive evidence, including our recent EUA for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation ofour COVID-19 vaccine. After assessing both the deduction fornegative and positive evidence, we concluded that we should maintain the valuation allowance on our net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits.
Concurrent with the passing of the TCJA, the U.S. Securities and Exchange Commission (SEC) issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law.
We recognize changes in tax law, including the TCJA, in the period in which the law is enacted. Accordingly, the effects of the TCJA were recognized in the financial statements for the year ended December 31, 2017, resulting in a provisional estimate of $64.1 million reduction toour other deferred tax assets and a corresponding reduction in our valuation allowance. Our preliminary estimate of the effects of the TCJA in 2017, including the re-measurement of deferred tax assets and liabilities, was subject to the finalization of our analysis related to certain matters, such as developing interpretations of the provisions of the TCJA and the filing of our tax returns. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the Act may require further adjustments and changes in estimates. As we collected and prepared necessary data, and interpreted the additional guidance of the TCJA, we completed our analysis to determine the effects of the TCJA as of December 31, 2018. No material adjustments were made2020. The release of the valuation allowance, as well as the exact timing and the amount of such release, continue to be subject to, among other things, our level of profitability, revenue growth, clinical program progression and expectations regarding future profitability. Our total deferred tax asset balance subject to the valuation allowance was approximately $874.1 million at December 31, 2020. We will continue to monitor the need for a full or partial valuation allowance each quarter in 2018.2021 and future periods.
At December 31, 2018,2020, we had approximately $426.6 million$2.26 billion and $402.0 million$1.70 billion of federal and state net operating loss carry-forwards, respectively, of which $380.5$380.1 million of federal and $402.0 million$1.70 billion of state loss carry-forwards begin to expire in 2030.
Additionally, $36.8 million$1.88 billion of federal net operating loss carry-forward will carry forward indefinitely. At December 31, 20182020 we also had federal and state research and development credit carry-forwards of approximately $36.8$73.3 million and $18.8$26.1 million, respectively, which begin to expire in 2029.2030 and 2032, respectively. At December 31, 2018,2020, we also had federal orphan drug and state investment tax credit carry-forwards of approximately $2.5$2.0 million and $3.9 million which begin to expire in 2019.2039 and 2021, respectively.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law. The CARES Act includes provisions relating to several aspects of corporate income taxes. We do not currently expect the CARES Act to have a significant impact on our provision for income taxes; however, we will continue to monitor the provisions of the CARES Act in relation to its operations.
Utilization of the net operating loss (NOL) and tax credit carry-forwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously, or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as amended, or Section 382, as well as similar state provisions and other provisions of the Internal Revenue Code. Ownership changes may limit the amount of NOLs and tax credit carry-forwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5% shareholders in the stock of a corporation by more than 50% in the aggregate over a three-year period. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside our control.
We file U.S. federal income tax returns and income tax returns in the United Statesvarious state, local and the Commonwealth of Massachusetts.foreign jurisdictions. All tax years since the date of our incorporation remain open to examination by the major taxing jurisdictions (state and federal) to which we are subject, as carry-forward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (IRS) or other authorities if they have or will be used in a future period. We are not currently under examination by the IRS, or any other jurisdictions, for any tax year.
We recognize, in our financial statements, the effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A reconciliation of the beginning and ending amounts of unrecognized tax benefits during the years ended December 31, 20182020 and 20172019 are as follows (in thousands):
|
| | | |
| Balance as of December 31, 2016 | $ | 906 |
|
| Decrease due to prior positions | (15 | ) |
| Increase due to current year tax position | 49 |
|
| Balance as of December 31, 2017 | 940 |
|
| Decrease due to prior positions | (799 | ) |
| Increase due to current year tax positions | — |
|
| Balance as of December 31, 2018 | $ | 141 |
|
| | | | | |
| Balance as of December 31, 2018 | $ | 141 | |
| Decrease due to prior positions | 0 | |
| Increase due to current year tax position | 0 | |
| Balance as of December 31, 2019 | 141 | |
| Decrease due to prior positions | 0 | |
| Increase due to current year tax positions | 0 | |
| Balance as of December 31, 2020 | $ | 141 | |
Unrecognized tax benefits may change during the next twelve months for items that arise in the ordinary course of business. We do not anticipate a material change to our unrecognized tax benefits over the next twelve months that would have an adverse effect on our consolidated operating results. We recognize interest and penalties, if applicable, related to uncertain tax positions as a component of income tax expense; however, there have been none to date.expense.
17. Net Loss per Share
Net Loss per Share Attributable to Common Stockholders
Basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2018, 20172020, 2019 and 20162018 are calculated as follows (in thousands, except share and per share data):
| | | | Years Ended
December 31, | | | | | | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 | | Years Ended December 31, |
| | | | | | | | 2020 | | 2019 | | 2018 |
| Numerator: | | | | | | Numerator: | | | | | |
| Net loss | $ | (384,734 | ) | | $ | (255,916 | ) | | $ | (216,211 | ) | Net loss | $ | (747,064) | | | $ | (514,021) | | | $ | (384,734) | |
| Premium paid on repurchase of redeemable convertible preferred stock | (4,127 | ) | | — |
| | — |
| Premium paid on repurchase of redeemable convertible preferred stock | 0 | | | 0 | | | (4,127) | |
| Accretion of redeemable convertible preferred units | — |
| | — |
| | (8,663 | ) | |
| Cumulative dividends on redeemable convertible preferred stock | (12,996 | ) | | (13,925 | ) | | (5,440 | ) | Cumulative dividends on redeemable convertible preferred stock | 0 | | | 0 | | | (12,996) | |
| Net loss attributable to common stockholders | $ | (401,857 | ) | | $ | (269,841 | ) | | $ | (230,314 | ) | Net loss attributable to common stockholders | $ | (747,064) | | | $ | (514,021) | | | $ | (401,857) | |
| Denominator: | | | | | | Denominator: | | | | | |
| Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted | 81,114,183 |
| | 64,497,544 |
| | 60,747,426 |
| Weighted average common shares used in net loss per share attributable to common stockholders, basic and diluted | 381,333,059 | | | 330,802,136 | | | 81,114,183 | |
| Net loss per share attributable to common stockholders, basic and diluted | $ | (4.95 | ) | | $ | (4.18 | ) | | $ | (3.79 | ) | Net loss per share attributable to common stockholders, basic and diluted | $ | (1.96) | | | $ | (1.55) | | | $ | (4.95) | |
The following common stock equivalents, presented based on amounts outstanding as of December 31, 2018, 20172020, 2019 and 20162018 were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because their inclusion would have been anti-dilutive:
| | | | | | | | | | | | | | | | | |
| December 31, |
| 2020 | | 2019 | | 2018 |
| Stock options | 34,057,533 | | | 45,536,915 | | | 50,821,132 | |
| Restricted common stock | 0 | | | 0 | | | 198,597 | |
| Restricted common stock units | 2,192,960 | | | 1,177,249 | | | 458,715 | |
| 36,250,493 | | | 46,714,164 | | | 51,478,444 | |
18. Geographic Information
Geographic Revenue
We operate in 1 reporting segment that primarily focuses on the discovery, development and commercialization of mRNA medicines. Our chief executive officer manages our operations and evaluates our financial performance on a consolidated basis. Most of our principal operations, other than manufacturing, and our decision-making functions are located at our corporate headquarters in the United States.
Total revenue by geographic area of our customers and collaboration partners was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2020 | | 2019 | | 2018 |
| United States | | $ | 764,529 | | | $ | 54,976 | | | $ | 89,075 | |
| Rest of world | | 38,866 | | | 5,233 | | | 45,993 | |
| Total | | $ | 803,395 | | | $ | 60,209 | | | $ | 135,068 | |
Our property and equipment, including financing right-of-use asset, were principally located within the United States as of December 31, 2020 and 2019.
|
| | | | | | | | |
| | December 31, |
| | 2018 | | 2017 | | 2016 |
| | | | | | |
| Redeemable convertible preferred stock | — |
| | 205,151,299 |
| | 205,151,299 |
|
| Stock options | 50,821,132 |
| | 33,684,134 |
| | 25,691,663 |
|
| Restricted common stock | 198,597 |
| | 1,081,205 |
| | 2,998,141 |
|
| Restricted common stock units | 458,715 |
| | 458,715 |
| | — |
|
| | 51,478,444 |
| | 240,375,353 |
| | 233,841,103 |
|
14. Related Party Transactions19. Subsequent Events
Series G Redeemable Convertible Preferred Stock Financing
Subsequent to December 31, 2020, we have entered into several supply agreements with customers to provide our COVID-19 vaccine, up to 125.1 million doses, and have received upfront deposits of $125.4 million, based on the initial confirmed volume, subject to modifications.
On January 30, 2018 andFebruary 18, 2021, the European Commission advised us that we had successfully tendered for the provision of 150 million doses of our COVID-19 vaccine in 2021. This tender is subject to execution of the Purchase Agreement, which is expected shortly following an opt out period for individual Member States that expired on February 15, 2018, respectively,25, 2021.
Subsequent to December 31, 2020, we have entered into Series G Preferred Stock Purchase Agreements, pursuantadditional binding purchase commitments with third-party contractual manufacturing organizations for our COVID-19 vaccine under existing agreements. We are currently committed to minimum non-cancelable purchase obligations of $314.8 million related to these agreements, which we issued and sold an aggregate of 55,666,004 shares of our Series G redeemable convertible preferred stock at a price per share of $10.06, for an aggregate purchase price of $560.0 million. The following table sets forth the number of shares of our Series G redeemable convertible preferred stock that we issued to our related parties in this transaction (in thousands, except share data):
|
| | | | | | |
| Name | | Shares of
Series G
Redeemable
Convertible
Preferred Stock | | Total
Purchase Price |
OCHA LLC(1) | | 50,000 | | $ | 503 |
|
Viking Global Investors LP and affiliated entities(2) | | 745,526 | | $ | 7,500 |
|
______
| |
(1)
| OCHA LLC is an entity controlled by an officer. |
| |
(2)
| Consists of (1) 279,160 shares of Series G redeemable convertible preferred stock held by VGE III Portfolio Ltd.; (2) 148,974 shares of Series G preferred stock held by Viking Global Equities LP; (3) 8,737 shares of Series G redeemable convertible preferred stock held by Viking Global Equities II LP; (4) 129,537 shares of Series G preferred stock held by Viking Global Opportunities Illiquid Investments Sub-Master LP; and (5) 179,118 shares of Series G redeemable convertible preferred stock held by Viking Long Fund Master Ltd. |
Series F Redeemable Convertible Preferred Stock Financing
On August 10, 2016, we entered into a Series F redeemable convertible preferred stock Purchase Agreement pursuant to which we issued and sold an aggregate of 54,001,241 shares of our Series F redeemable convertible preferred stock at a price per share of $8.78, for an aggregate purchase price of $474.1 million. The following table sets forth the number of shares of our Series F redeemable convertible preferred stock that we issued to our related parties in this transaction (in thousands, except share data):
|
| | | | | | |
| Name | | Shares of
Series F
Redeemable
Convertible
Preferred Stock | | Total
Purchase Price |
| AstraZeneca and affiliated entities | | 15,945,330 | | $ | 140,000 |
|
Boston Biotech Ventures LLC(1) | | 10,000 | | $ | 88 |
|
Viking Global Investors LP and affiliated entities(2) | | 5,694,760 | | $ | 50,000 |
|
_______
| |
(1)
| Boston Biotech Ventures LLC is an entity controlled by an officer. |
| |
(2)
| Consists of 5,694,760 shares of Series F preferred stock held by Viking Global Opportunities Illiquid Investments Sub-Master LP. |
Other Transactions
The following is a description of additional transactions we have engaged in for the years ended December 31, 2018, 2017 and 2016, with our related parties.
One of our board members currently serves as Senior Counsel at Covington & Burling LLP (Covington). We paid Covington approximately $0.2 million and $0.2 million for legal services for the year ended December 31, 2018 and 2017, respectively. We had no outstanding accounts payable balances to Covington at December 31, 2018, 2017 and 2016.
AstraZeneca is consideredare expected to be a related party due to its equity ownership in us. We have also entered into strategic alliances with AstraZeneca. For the years ended December 31, 2018, 2017 and 2016, we received paymentspaid through 2021.
Table of $34.0 million, $1.1 million and $72.0
million, respectively. At December 31, 2018 and 2017, our outstanding accounts receivable balances from AstraZeneca were $0.9 million and $1.5 million, respectively. Refer to Note 3 for a discussion of the strategic alliances and related transaction.
15. Selected Quarterly Financial Data (Unaudited)
The following tables provide the unaudited selected quarterly financial data for the years ended December 31, 2018 and 2017 (in thousands, except per share data). We believe that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results of any future period.
|
| | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | 2018 |
| | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
| Total revenue | | $ | 29,039 |
| | $ | 28,851 |
| | $ | 41,757 |
| | $ | 35,421 |
|
| Total operating expenses | | 106,441 |
| | 125,866 |
| | 127,575 |
| | 188,452 |
|
| Loss from operations | | (77,402 | ) | | (97,015 | ) | | (85,818 | ) | | (153,031 | ) |
| Net loss per share attributable to common stockholders - basic and diluted | | $ | (1.16 | ) | | $ | (1.43 | ) | | $ | (1.32 | ) | | $ | (1.14 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | 2017 |
| | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
| Total revenue | | $ | 30,328 |
| | $ | 41,121 |
| | $ | 42,472 |
| | $ | 91,904 |
|
| Total operating expenses | | 95,791 |
| | 135,315 |
| | 110,343 |
| | 133,732 |
|
| Loss from operations | | (65,463 | ) | | (94,194 | ) | | (67,871 | ) | | (41,828 | ) |
| Net loss per share attributable to common stockholders - basic and diluted | | $ | (1.03 | ) | | $ | (1.47 | ) | | $ | (1.05 | ) | | $ | (0.64 | ) |
16. Subsequent Event
In February 2019, we entered into a lease agreement for office and laboratory space located in Norwood, MA, (the new Norwood lease). The rent payment obligation for the new Norwood lease will commence fourteen months after the date the premises are delivered to us. The lease expires in 2031. Contemporaneously, we entered into a sublease agreement to sublease a portion of the new Norwood lease space to a third party. The minimum lease payment, net of sub lease income, is approximately $39.3 million in total through 2031.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintainOur management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that the Companyit files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and formsforms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including theits principal executive officer (our Chief Executive Officer) and principal financial officer (our Chief Financial Officer),officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Ourobjectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures have been designed to provide reasonable assuranceas of achieving their objectives. Based on such evaluation,December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2018.level.
Management’s Annual Report on Internal Control overOver Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regardingOur management is responsible for establishing and maintaining adequate internal control over financial reporting or an attestation report(as such term is defined in Exchange Act Rule 13a-15(f) to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management assessed our internal control over financial reporting as of December 31, 2020. Management based its assessment on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, due to a transition period established by rules of the SEC for newly public companies.as stated in their report included in this Annual Report on Form 10-K.
Changes in Internal Controls over Financial Reporting
No changeDuring the three months ended December 31, 2020, we implemented certain internal controls in the Company’sconnection with our inventory capitalization, product sales and derivative financial instruments. There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2018 that has2020, which have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believe that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by the collusion of two or more people or by a management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Moderna, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited Moderna, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Moderna, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and December 31, 2019, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 26, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting.reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 26, 2021
Item 9B. Other Information
None.
As previously disclosed in a Current Report on Form 8-K filed with the SEC on March 30, 2020 (the “March 30th 8-K”), on March 29, 2020, the Company’s Chief Medical Officer, Tal Zaks, and the Company entered into an Executive Retention Agreement (the “Zaks Retention Agreement”), setting forth the terms of Dr. Zaks’ continued service as the Company’s Chief Medical Officer through at least September 30, 2021 (the “Retention Date”). Details of the Zaks Retention Agreement are included on the March 30th 8-K.
On February 23, 2021, the Company entered into an Amended and Restated Executive Retention Agreement (the “Amended Zaks Retention Agreement”), which modified the original Zaks Retention Agreement. Under the Amended Zaks Retention Agreement, in addition to the benefits already conferred under the original agreement, if a successor Chief Medical Officer is appointed by the Company prior to September 30, 2021, Dr. Zaks will continue to serve as a Special Advisor to our CEO through that date, and as additional consideration, a pro rata share of Dr. Zaks’ 2020 restricted stock unit equity grant, equivalent to 11,449 shares, which otherwise would not have vested until February 2022 will vest as of the Retention Date.
The above summary is not complete and is qualified in its entirety by the Amended Zaks Retention Agreement, a copy of which is attached hereto as Exhibit 10.17 and is incorporated herein by reference.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 20192021 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 20192021 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 20192021 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 20192021 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to the 20192021 Annual Meeting of Stockholders, which we intend to file with the Securities and Exchange Commission within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K.
PART IV
Item 15. Exhibits, Financial Statement Schedules
|
| | | | | | | |
| Exhibit No. | | Exhibit Index |
| 3.1 | | |
| | |
3.1 | | |
| 3.2 | | |
| 4.1 | | |
| 4.2 | | |
10.1#4.3* | | |
| 10.1# | | |
| 10.2# | | |
| 10.3# | | |
| 10.4† | | Master Collaboration and License Agreement, by and between Moderna Therapeutics, Inc. and Merck Sharp & Dohme Corp., dated as of January 12, 2015, as amended by Amendment No. 1 dated as of January 8, 2016, Amendment No. 2 dated as of June 28, 2016, Amendment No. 3 dated as of June 28, 2016 and Amendment No. 4 dated as of June 28, 2016. (1) |
| 10.5† | | |
| 10.6† | | |
| 10.7† | | |
| 10.8† | | |
| 10.9 | | Lease Agreement, by and between Moderna Therapeutics, Inc. and ARE-Tech Square, LLC, dated as of May 26, 2016, as amended by Amendment No. 1 dated as of August 31, 2016, Amendment No. 2 dated as of December 31, 2016,
Amendment No. 3 dated as of April 24, 2017, and Amendment No. 4 dated as of April 13, 2018. (1) |
| 10.10 | | |
10.1010.11 | | |
10.11#10.12# | | |
10.12#10.13# | | |
10.13# | | |
10.14# | | |
10.15# | | |
10.16#10.14# | | |
10.17#10.15# | | Executive Retention and Separation Agreement by and between the Company and Lorence Kim, dated as of May 5, 2020. (7) |
| 10.16# | | Offer Letter by and between the Company and David W. Meline, dated as of June 3, 2020. (8) |
| 10.17#* | | |
| 10.18# | | |
10.18#10.19# | | |
10.19#10.20# | | |
10.20#10.21# | | |
10.21#10.22# | | |
10.22#10.23# | | |
| | | | | | | | |
| 10.24† | | Agreement No. HHSO100201600029C, by and between the Company and the Biomedical Advanced Research and Development Authority, dated as of April 16, 2020, as amended on May 24, 2020, June 16, 2020, July 25, 2020, August 31, 2020 and September 15, 2020. (6) |
10.23#10.25† | | |
| 10.26† | | Award Contract No. W911QY20C0100, by and between Moderna US Inc. and the Army Contracting Command of the U.S. Department of Defense, dated August 9, 2020, as amended September 8, 2020, and September 11, 2020. (6) |
| 10.27* | | |
| 21.1 | | |
| 23.1 | | |
| 31.1 | | |
|
| 31.2 | | |
31.2 | | |
| 32.1+ | | |
| 32.2+ | |
|
| 101.INS | | XBRL Instance Document |
| 101.SCH | | XBRL Taxonomy Extension Schema Document |
| 101.CAL | | XBRL Taxonomy Extension Calculation Document |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document |
| 101.PRE | | XBRL Taxonomy Extension Presentation Link Document |
| 104* | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101 |
____________
|
| | | | |
†* | Filed herewith. |
| † | Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions.
|
|
| # | |
# | Indicates a management contract or any compensatory plan, contract or arrangement. |
|
+
| |
+
| The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.
|
|
| (1) | |
(1) | Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-228300) filed with the Securities and Exchange Commission on November 9, 2018.
|
| (2) | Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-228300) filed with the Securities and Exchange Commission on November 28, 2018.
|
| (3) | Incorporated by reference to the Current Report on Form 8-K (File No. 001-38753) filed with the Securities and Exchange Commission on December 14, 2018.
|
| (4) | Incorporated by reference to the Quarterly Report on Form 10-Q (File No. 001-38753) filed with the Securities and Exchange Commission on November 6, 2019. |
| (5) | Incorporated by reference to the Current Report on Form 8-K (File No. 001-38753) filed with the Securities and Exchange Commission on May 7, 2020. |
| (6) | Incorporated by reference to the Quarterly Report on Form 10-Q (File No. 001-38753) filed with the Securities and Exchange Commission on August 6, 2020. |
| (7) | Incorporated by reference to the Quarterly Report on Form 10-Q (File No. 001-38753) filed with the Securities and Exchange Commission on May 9, 2019. |
| (8) | Incorporated by reference to the Quarterly Report on Form 10-Q (File No. 001-38753) filed with the Securities and Exchange Commission on October 30, 2020. |
Item 16. Form 10-K Summary
Not applicable.
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | |
| | | MODERNA, INC. |
| | | |
| Date: | | By: | MODERNA, INC. |
| | | |
Date: | | By: | /s/ Stéphane Bancel |
March 13, 2019February 26, 2021 | | | |
| | | Stéphane Bancel |
| | | Chief Executive Officer and Director |
| | | |
POWER OF ATTORNEY AND SIGNATURES
Each individual whose signature appears below hereby constitutes and appoints each of Stéphane Bancel and Lorence KimDavid Meline and as such person’s true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that any said attorney-in-fact and agent, or any substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| | | | |
| Signature | | Title | | Date |
Signature | | Title | | Date |
| | | | |
| /s/ Stéphane Bancel | | Chief Executive Officer and Director (Principal Executive Officer) | | March 13, 2019February 26, 2021 |
| Stéphane Bancel | | |
| | | | |
/s/ Lorence Kim, M.D.David Meline | | Chief Financial Officer (Principal Financial Officer) | | March 13, 2019 |
Lorence Kim, M.D. | | |
| | | | |
/s/ Jennifer Lee | | Chief Accounting Officer
( and Principal Accounting Officer)
| | March 13, 2019February 26, 2021 |
Jennifer LeeDavid Meline | | |
| | | | |
| | | | |
| /s/ Noubar B. Afeyan, Ph.D. | | Chairman and Director | | March 13, 2019February 26, 2021 |
| Noubar B. Afeyan, Ph.D. | | |
| | | | |
| /s/ Stephen Berenson | | Director | | March 13, 2019February 26, 2021 |
| Stephen Berenson | | |
| | | | |
/s/ Peter Barton Hutt, LL.M.Sandra Horning, M.D. | | Director | | March 13, 2019February 26, 2021 |
Peter Barton Hutt, LL.M.Sandra Horning M.D. | | |
| | | | |
| /s/ Robert Langer, Sc.D. | | Director | | March 13, 2019February 26, 2021 |
| Robert Langer, Sc.D. | | |
| | | | |
/s/ Elizabeth Nabel,Francois Nader, M.D. | | Director | | March 13, 2019February 26, 2021 |
Elizabeth Nabel,Francois Nader M.D. | | |
| | | | |
/s/ Israel Ruiz | | Director | | March 13, 2019 |
Israel Ruiz | | |
| | | | |
| /s/ Paul Sagan | | Director | | March 13, 2019February 26, 2021 |
| Paul Sagan | | |
| | | | |
/s/ Moncef Slaoui, Ph.D.Elizabeth Tallett | | Director | | March 13, 2019February 26, 2021 |
Moncef Slaoui, Ph.D.Elizabeth Tallett | | |
| | | | |
