Moderna Inc. (MRNA) is a biotechnology company that develops medicines based on messenger ribonucleic acid (mRNA), a single-stranded molecule that transfers genetic information to the cellular machinery responsible for making proteins that help to sustain life. Moderna recently has seen its product sales explode after developing and winning government approval for an mRNA vaccine to protect against COVID-19. Overall, the company develops medicines for infectious diseases, immuno-oncology, cardiovascular diseases, and other diseases. The company primarily generates revenue through grants, product sales, and collaboration arrangements.

The biotechnology and pharmaceutical industries require unusually high levels of investment to fund the development of intellectual property and proprietary products. Moderna's major rivals include Pfizer Inc. (PFE), German-based BioNTech SE (BNTX), Johnson & Johnson (JNJ), U.K.-based AstraZeneca PLC (AZN), German-based CureVac (CVAC), Belgium-based eTheRNA Immunotherapies NV, Translate Bio Inc. (TBIO), and others.

Key Takeaways

  • Moderna is a biotechnology company that develops mRNA-based medicines.
  • Its new COVID-19 vaccine is producing soaring sales, though Moderna still generates most of its revenue through grants.
  • Manufacturing problems in Moderna's European supply chain for its COVID-19 vaccine may cause delivery shortfalls to nations outside the U.S.
  • Moderna recently began testing its COVID-19 vaccine in children aged 6 months to 11 years.

Moderna's Financials

Moderna announced in late February financial results for Q4 of its 2020 fiscal year (FY), which ended Dec. 31, 2020. The company reported a net loss of $272.5 million, more than double its net loss of $123.3 million in the same three-month period a year ago. Revenue, however, surged nearly five-fold to $570.7 million. The increase in revenue was primarily driven by grant revenue and product sales, which are discussed in more detail below.

It was the first quarter in which Moderna recorded revenue for its COVID-19 vaccine, which received emergency use authorization (EUA) in December 2020. Despite the significant rise in revenue, Moderna's research and development expenses increased more than six-fold to $758.9 million. Selling, general, and administrative expenses more than tripled, and cost of sales for the quarter were $7.9 million compared to zero in the year-ago quarter.

Moderna's Business Segments

Moderna operates as a single business segment focused on the discovery, development, and commercialization of mRNA medicines. The company provides a breakdown of this business segment by revenue into three separate categories: grant revenue; product sales; and collaboration revenue. Moderna does not break out profits. We take a closer look at these three categories below.

Grant Revenue

Moderna generates substantial revenue through grants with various government-sponsored and private organizations. The company has contracts with the Biomedical Advanced Research and Development Authority (BARDA), the U.S. government's Defense Advanced Research Projects Agency (DARPA), the Bill & Melinda Gates Foundation, and other organizations. Moderna recognizes revenue from these contracts as it performs services related to the contract arrangements and when funding is committed. The company's grant revenue rose 9,647.9% to $341.4 million in Q4 FY 2020, comprising nearly 60% of total revenue.

Product Sales

Moderna began recording product sales in Q4 FY 2020 after its COVID-19 vaccine received emergency approval from the U.S. Food and Drug Administration (FDA) and Health Canada in December 2020. Currently, all revenue from product sales is derived from supply arrangements for the COVID-19 vaccine with the U.S. government and international governments. Sales of COVID-19 generated $199.9 million in product sales revenue in Q4 FY 2020, comprising about 35% of Moderna's total revenue.

Collaboration Revenue

Moderna has formed strategic alliances with AstraZeneca, Merck & Co. Inc. (MRK), and Vertex Pharmaceuticals Inc. (VRTX) to discover, develop, and commercialize potential mRNA medicines. These collaboration arrangements include research, licenses, development services, and certain options to obtain development and commercialization rights and other related services and material. These arrangements generate revenue through upfront fees, commercial milestone payments, licensing fees, option exercise fees, royalties, and other types of payments. The company generated $29.5 million in collaboration revenue in Q4 FY 2020, up 179.6% from the year-ago quarter. Collaboration revenue accounts for about 5% of total revenue.

Moderna's Recent Developments

On April 16, 2021, Moderna indicated that manufacturing problems with its European supply chain will lead to lower-than-expected deliveries of its COVID-19 vaccine to countries outside the U.S., including Canada and the U.K. The company noted that vaccine manufacturing is a very complex process, and thus volatility in output should be expected. The manufacturing issues are not expected to affect supplies of the vaccine to the U.S.

In early April, Moderna reached an agreement with contract drug manufacturer Catalent Inc. (CTLT) to speed up production of its COVID-19 vaccine. The increased output from the faster pace of production is expected to help Moderna reach its goal of supplying an additional 100 million doses of the vaccine to the U.S. by the end of May, as well as a further 100 million doses by the end of July.

In mid-March 2021, Moderna began testing its COVID-19 vaccine in children aged 6 months to 11 years in the U.S. and Canada. Currently, the company's vaccine is authorized for use in adults aged 18 and older.