Item 8. Financial Statements and Supplementary Data

MODERNA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm						112
Consolidated Balance Sheets as of December 31, 2022 and 2021						114
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020						115
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020						116
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020						117
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020						119
Notes to Consolidated Financial Statements						120

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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, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 24, 2023, 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 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. 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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						Product Sales Revenue Recognition
Description of the Matter						As discussed in Note 2 to the consolidated financial statements, the Company has entered into supply agreements with the U.S. Government, other international governments and organizations. Under the supply agreements, including related amendments, the Company is entitled to upfront deposits for COVID-19 vaccine supply, which are initially recorded as deferred revenue. Revenue is recognized pursuant to Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, based 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. The Company must evaluate the contractual terms and conditions in its supply agreements to determine the timing of revenue recognition. For the year ended December 31, 2022, product sales revenue totaled $18.4 billion. Auditing the Company's revenue recognition was especially challenging due to the volume of executed supply agreements, including related amendments, the varying contractual terms within the agreements, and because the amounts are material to the consolidated financial statements and related disclosures.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company's internal controls over the recognition of revenue related to product sales. This included testing controls over the Company's process to evaluate the contractual terms of the supply agreements, including related amendments, and determine the appropriate revenue recognition. We also tested the Company’s controls over evaluating transfer of control and customer acceptance, as applicable, and controls over the Company’s IT systems that are important to the initiation, processing and recording of revenue transactions. To test the recognition of revenue associated with supply agreements, including related amendments, our audit procedures included, among others, evaluating the contractual terms of supply agreements, testing the transfer of control, and assessing the timing of revenue recognition. For example, we performed procedures to test the completeness and accuracy of the underlying data in the Company’s revenue calculations, including testing the mathematical accuracy of the Company’s calculations, and testing the accuracy of revenue recognized by tracing key terms to the supply agreements, including related amendments, and agreeing a sample of revenue transactions to supporting documentation, including evidence of control transfer. We also assessed the appropriateness of the related disclosures in the consolidated financial statements.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

Boston, Massachusetts

February 24, 2023

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MODERNA, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

			December 31,
			2022						2021
Assets
Current assets:
Cash and cash equivalents			$	3,205					$	6,848
Investments			6,697						3,879
Accounts receivable			1,385						3,175
Inventory			949						1,441
Prepaid expenses and other current assets			1,195						728
Total current assets			13,431						16,071
Investments, non-current			8,318						6,843
Property, plant and equipment, net			2,018						1,241
Right-of-use assets, operating leases			121						142
Deferred tax assets			982						326
Other non-current assets			988						46
Total assets			$	25,858					$	24,669
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable			$	487					$	302
Accrued liabilities			2,101						1,472
Deferred revenue			2,038						6,253
Income taxes payable			48						876
Other current liabilities			249						225
Total current liabilities			4,923						9,128
Deferred revenue, non-current			673						615
Operating lease liabilities, non-current			92						106
Financing lease liabilities, non-current			912						599
Other non-current liabilities			135						76
Total liabilities			6,735						10,524
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.0001; 162 shares authorized as of December 31, 2022 and 2021; no shares issued or outstanding at December 31, 2022 and 2021			—						—
Common stock, par value $0.0001; 1,600 shares authorized as of December 31, 2022 and 2021; 385 and 403 shares issued and outstanding as of December 31, 2022 and 2021, respectively			—						—
Additional paid-in capital			1,173						4,211
Accumulated other comprehensive loss			(370)						(24)
Retained earnings			18,320						9,958
Total stockholders’ equity			19,123						14,145
Total liabilities and stockholders’ equity			$	25,858					$	24,669

The accompanying notes are an integral part of these consolidated financial statements.

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MODERNA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

			Years Ended December 31,
			2022						2021						2020
Revenue:
Product sales			$	18,435					$	17,675					$	200
Grant revenue			388						735						529
Collaboration revenue			440						61						74
Total revenue			19,263						18,471						803
Operating expenses:
Cost of sales			5,416						2,617						8
Research and development			3,295						1,991						1,370
Selling, general and administrative			1,132						567						188
Total operating expenses			9,843						5,175						1,566
Income (loss) from operations			9,420						13,296						(763)
Interest income			200						18						25
Other expense, net			(45)						(29)						(6)
Income (loss) before income taxes			9,575						13,285						(744)
Provision for income taxes			1,213						1,083						3
Net income (loss)			$	8,362					$	12,202					$	(747)
Earnings (loss) per share:
Basic			$	21.26					$	30.31					$	(1.96)
Diluted			$	20.12					$	28.29					$	(1.96)
Weighted average common shares used in calculation of earnings (loss) per share:
Basic			394						403						381
Diluted			416						431						381

The accompanying notes are an integral part of these consolidated financial statements.

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MODERNA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

			Years Ended December 31,
			2022						2021						2020
Net income (loss)			$	8,362					$	12,202					$	(747)
Other comprehensive (loss) income, net of tax
Available-for-sale securities:
Unrealized (losses) gains on available-for-sale debt securities			(348)						(42)						2
Less: net realized losses (gains) on available-for-sale securities reclassified to net income (loss)			26						(1)						(1)
Net (decrease) increase from available-for-sale debt securities			(322)						(43)						1
Cash flow hedges:
Unrealized gains on derivative instruments			130						74						—
Less: net realized (gains) on derivative instruments reclassified to net income (loss)			(154)						(58)						—
Net (decrease) increase from derivatives designated as hedging instruments			(24)						16						—
Total other comprehensive (loss) income			(346)						(27)						1
Comprehensive income (loss)			$	8,016					$	12,175					$	(746)

The accompanying notes are an integral part of these consolidated financial statements.

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MODERNA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

															Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income						Accumulated Deficit						Total Stockholders’ Equity
																					Shares						Amount
Balance at December 31, 2019																					337						$	—					$	2,670					$	2					$	(1,497)					$	1,175
Proceeds from public offering of common stock, net of issuance costs of $2																					48						—						1853						—						—						1,853
Exercise of options to purchase common stock																					14						—						179						—						—						179
Issuance of common stock under employee stock purchase plan																					—						—						7						—						—						7
Stock-based compensation																					—						—						93						—						—						93
Other comprehensive income, net of tax																					—						—						—						1						—						1
Net loss																					—						—						—						—						(747)						(747)
Balance at December 31, 2020																					399						$	—					$	4,802					$	3					$	(2,244)					$	2,561

															Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive (Loss) Income						Retained Earnings (Accumulated Deficit)						Total Stockholders’ Equity
																					Shares						Amount
Balance at December 31, 2020																					399						$	—					$	4,802					$	3					$	(2,244)					$	2,561
Exercise of options to purchase common stock																					7						—						112						—						—						112
Issuance of common stock under employee stock purchase plan																					—						—						12						—						—						12
Stock-based compensation																					—						—						142						—						—						142
Other comprehensive loss, net of tax																					—						—						—						(27)						—						(27)
Repurchase of common stock																					(3)						—						(857)						—						—						(857)
Net income																					—						—						—						—						12,202						12,202
Balance at December 31, 2021																					403						$	—					$	4,211					$	(24)					$	9,958					$	14,145

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															Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Loss						Retained Earnings						Total Stockholders’ Equity
																					Shares						Amount
Balance at December 31, 2021																					403						$	—					$	4,211					$	(24)					$	9,958					$	14,145
Vesting of restricted common stock																					1						—						—						—						—						—
Exercise of options to purchase common stock																					4						—						50						—						—						50
Issuance of common stock under employee stock purchase plan																					—						—						15						—						—						15
Stock-based compensation																					—						—						226						—						—						226
Other comprehensive loss, net of tax																					—						—						—						(346)						—						(346)
Repurchase of common stock																					(23)						—						(3,329)						—						—						(3,329)
Net income																					—						—						—						—						8,362						8,362
Balance at December 31, 2022																					385						$	—					$	1,173					$	(370)					$	18,320					$	19,123

The accompanying notes are an integral part of these consolidated financial statements.

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MODERNA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

			Years Ended December 31,
			2022						2021						2020
Operating activities
Net income (loss)			$	8,362					$	12,202					$	(747)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation			226						142						93
Depreciation and amortization			348						232						31
Leased assets expensed			—						—						62
Amortization/accretion of investments			31						54						10
Deferred income taxes			(559)						(318)						—
Other non-cash items			28						—						—
Changes in assets and liabilities:
Accounts receivable			1,790						(1,784)						(1,385)
Prepaid expenses and other assets			(1,699)						(489)						(241)
Inventory			492						(1,394)						(47)
Right-of-use assets, operating leases			21						(58)						(11)
Accounts payable			240						204						12
Accrued liabilities			612						989						388
Deferred revenue			(4,157)						2,824						3,842
Income taxes payable			(828)						876						—
Operating lease liabilities			(14)						17						12
Other liabilities			88						123						8
Net cash provided by operating activities			4,981						13,620						2,027
Investing activities
Purchases of marketable securities			(11,435)						(12,652)						(2,956)
Proceeds from maturities of marketable securities			3,151						1,338						1,137
Proceeds from sales of marketable securities			3,548						3,105						215
Purchases of property, plant and equipment			(400)						(284)						(68)
Investment in convertible notes and equity securities			(40)						(30)						—
Net cash used in investing activities			(5,176)						(8,523)						(1,672)
Financing activities
Proceeds from offerings of common stock, net of issuance costs			—						—						1,853
Proceeds from issuance of common stock through equity plans			65						124						186
Repurchases of common stock			(3,329)						(857)						—
Changes in financing lease liabilities			(184)						(140)						(6)
Net cash (used in) provided by financing activities			(3,448)						(873)						2,033
Net (decrease) increase in cash, cash equivalents and restricted cash			(3,643)						4,224						2,388
Cash, cash equivalents and restricted cash, beginning of year			6,860						2,636						248
Cash, cash equivalents and restricted cash, end of year			$	3,217					$	6,860					$	2,636
Supplemental cash flow information
Cash paid for income taxes			$	2,729					$	480					$	1
Cash paid for interest			$	25					$	14					$	9
Non-cash investing and financing activities
Purchases of property, plant and equipment included in accounts payable and accrued liabilities			$	72					$	111					$	18

The accompanying notes are an integral part of these consolidated financial statements.

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MODERNA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

Moderna, Inc. (collectively, with its consolidated subsidiaries, any of Moderna, we, us, our or the Company) is a biotechnology company pioneering messenger RNA (mRNA) therapeutics and vaccines to create a new class of medicines to improve the lives of patients. 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 and cardiovascular diseases, independently and with our strategic collaborators.

On December 18, 2020, we received an Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA) for the emergency use of the Moderna COVID-19 Vaccine (also referred to as mRNA-1273 and marketed under the brand name Spikevax®). In January 2022, we received full commercial approval for Spikevax in the United States.

As of December 31, 2022, Spikevax is authorized by the FDA and global regulators in more than 70 countries. In addition, our Omicron-targeting bivalent boosters, targeting the BA.1 Omicron variant combined with Spikevax (mRNA-1273.214) and targeting the BA.4/BA.5 Omicron variant combined with Spikevax (mRNA-1273.222), are authorized by regulatory agencies around the globe. We generate worldwide product sales from Spikevax and the two authorized Omicron-targeting boosters.

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 Accounting Standard Codification (ASC) and Accounting Standards Updates (ASU) of the 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

We have made estimates and judgments affecting the amounts reported in our consolidated financial statements and the accompanying notes. We base our estimates on historical experience and various relevant assumptions 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 at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods that are not readily apparent from other sources. Significant estimates relied upon in preparing these financial statements include, but are not limited to, critical accounting policies or estimates related to revenue recognition, income taxes, valuation of deferred tax assets, inventory valuation, firm purchase commitment liabilities, fair value of financial instruments, derivative financial instruments, leases, useful lives of property, plant and equipment, research and development expense, and stock-based compensation. The actual results that we experience may differ materially from our estimates.

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 one segment.

Revenue Recognition

Our revenue is primarily generated through product sales. We also generate grant revenue from government-sponsored and private organizations, and collaboration revenue through collaboration arrangements.

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Product Sales

Product sales are associated with our COVID-19 vaccine supply agreements with the U.S. Government, other international governments and organizations. These agreements and related amendments generally do not include variable consideration, such as discounts, rebates or returns. Under certain of these agreements, we are entitled to upfront deposits for our COVID-19 vaccine supply, initially recorded as deferred revenue. We recognize revenue from product sales, using the five-step model under ASC 606 (Revenue from Contracts with Customers), 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.

We pay distribution fees to certain customers in connection with the sales of our product. We record distribution fees paid to our customers as a reduction of revenue, unless the payment is for a distinct good or service from the customer and we can reasonably estimate the fair value of the goods or services received. If both conditions are met, we record the consideration paid to the customer as an operating expense. These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale. Such distribution fees were immaterial for the years ended December 31, 2022 and 2021. We did not have any distribution fees for the year ended December 31, 2020.

Grant Revenue

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); the Bill & Melinda Gates Foundation (Gates Foundation) and 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 grant revenue from these contracts as we perform services under these arrangements when the funding is committed. Associated expenses are recognized when incurred as research and development expense. Grant revenue 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 have entered into several strategic collaborations and other similar arrangements with third parties for research and other licenses, development and commercialization of certain products and product candidates. 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 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.

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. Restricted cash is classified as either current or non-current based on the terms of the underlying lease arrangement and is included in either prepaid expenses and other current assets or other non-current assets in our consolidated balance sheets.

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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 millions):

						December 31,
						2022						2021						2020
Cash and cash equivalents						$	3,205					$	6,848					$	2,624
Restricted cash (1)						—						—						1
Restricted cash, non-current (2)						12						12						11
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows						$	3,217					$	6,860					$	2,636

(1) Included in prepaid expenses and other current assets in the consolidated balance sheets.

(2) Included in other non-current assets in the consolidated balance sheets.

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) income, a component of stockholders’ equity. Realized gains and losses are determined using the specific-identification method, and are included in other expense, net in our consolidated statements of operations. 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.

Investments in publicly traded equity securities with readily determinable fair values are recorded at quoted market prices for identical securities, with changes in fair value recorded in other expense, net, in our consolidated statements of operations. Investments in equity securities without readily determinable fair values are recorded at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for identical or similar securities. Such adjustments are recorded in other expense, net, in our consolidated statements of operations.

Accounts Receivable and Allowance for Doubtful Accounts

We have accounts receivable amounts 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. Amounts payable to us are recorded as accounts receivable when our 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 no allowance for doubtful accounts at December 31, 2022 or 2021. There was no bad debt expense for the years ended December 31, 2022, 2021 or 2020.

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Concentrations of Credit Risk

Financial instruments that subject us to significant concentrations of credit risk consist primarily of cash equivalents, restricted cash, marketable securities, and accounts receivable. Our investment portfolio comprises 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. 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.

We are also subject to credit risk from our accounts receivable related to our product sales and collaborators. We sell our products primarily to U.S. Government, other international governments and organizations. We do not require collateral or other security to support accounts receivable. To date, we have not experienced any losses with respect to the collection of our accounts receivable.

Significant Customers

Our accounts receivable are generally unsecured and are from customers in different countries. We generated revenue from product sales to the U.S. Government, other international governments and organizations, grants made by government-sponsored and private organizations, and to a lesser extent, 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,
			2022						2021						2020						2022						2021
European Commission			28		%				32		%				*						29		%				46		%
U.S. Government (excluding BARDA)			23		%				29		%				24		%				*						*
Takeda Pharmaceutical Company			10		%				*						*						*						*
BARDA			*						*						65		%				*						16		%
Ministry of Health, Labor, and Welfare of Japan			*						*						*						30		%				*
UK Health Security Agency			*						*						*						11		%				*

________

** - 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. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. 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.

The gains or losses resulting from changes in the fair value of cash flow hedges are initially recorded as a component of accumulated other comprehensive (loss) income (AOCI) in stockholders’ equity and subsequently reclassified to product sales in the period during which the hedged transaction affects earnings. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, within the defined hedge period, we reclassify the gains or losses on the related cash flow hedge from AOCI to other expense, net, in our consolidated statements of operations. 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. Gains or losses associated with foreign currency derivatives that are not designated as hedging instruments for accounting purposes are recorded within other expense, net, in our consolidated statements of operations.

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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. ASC 820 (Fair Value Measurement) 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 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, 2022, 2021, and 2020.

Inventory

Inventory is recorded at the lower of cost or net realizable value, with cost determined using first-in, first-out and average cost methods for different components of inventory. 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. We also assess whether we have any excess firm, non-cancelable, purchase commitment liabilities, resulting from our supply agreements with third-party vendors, on a quarterly basis. The determination of net realizable value and firm purchase commitment liabilities requires judgment, including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market conditions, potential product obsolescence, expiration and utilization of raw materials under firm purchase commitments and contractual minimums, among others. We hold raw materials beyond our one year forecasted production plan, which were classified as non-current and included in other non-current assets in our consolidated balance sheets.

Pre-launch Inventory

Costs relating to raw materials and production of inventory in preparation for product launch prior to regulatory approval are capitalized when future commercialization is considered probable, the future economic benefit is expected to be realized, and we believe that material uncertainties related to the ultimate regulatory approval have been significantly reduced. For pre-launch inventory that is capitalized, we consider a number of factors based on the information available at the time, including the product candidate’s current status in the drug development and regulatory approval process, results from the related clinical trials, results from meetings with relevant regulatory agencies prior to the filing of regulatory applications, potential impediments to the approval process such as product safety or efficacy, historical experience, viability of commercialization and market trends. As of December 31, 2022, we did not have any capitalized pre-launch inventory on our consolidated balance sheets.

Property, Plant and Equipment

Property, plant 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, plant and equipment are described below:

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						Estimated Useful Life
Land and land improvements						Not depreciated
Manufacturing and laboratory equipment						5 years
Leasehold improvements						Lesser of estimated useful life of improvement or remaining life of related lease
Computer equipment and software						3 to 5 years
Furniture and fixtures						5 years
Right-of-use asset, financing						Lease term

Construction in progress includes direct costs related to the construction of various property, plant and equipment, including leasehold improvements, and is stated at original cost. Once the asset is placed into service, these capitalized costs will be allocated to certain property, plant and equipment categories and will be depreciated over the estimated useful life of the underlying assets.

Impairment of Long-Lived Assets

We evaluate our long-lived assets, which consist of property, plant 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. Impairment expenses for the years ended December 31, 2022, 2021 and 2020 were immaterial.

Leases

Leases are classified at their commencement 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 finance leases based on the economic substance of the agreement. We recognize lease 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 expenses in our 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.

We do not separate non-lease components from lease components for all classes of underlying assets. We do not recognize right-of-use assets and lease liabilities for leases with a lease term of 12 months or less. Instead, these lease payments are recognized in the statements of operations on a straight-line basis over the lease term.

Collaboration Arrangements

We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808 (Collaborative Arrangements) 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. To the extent the arrangement is within the scope of ASC 808, we assess whether aspects of the arrangement between us and our collaboration partner are within the scope of other accounting literature. 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. Please refer to our "Revenue Recognition" policy within Note 2 for additional discussion of revenue recognition under these types of arrangements. If we conclude that some or all aspects of the arrangement are 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.

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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, 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. Research and development costs also include costs and shared cost associated with third-party collaboration arrangements, including upfront fees and milestones paid to third-parties in connection with technologies that had not reached technological feasibility and did not have an alternative future use.

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 expensed when incurred.

Stock-Based Compensation

We issue stock-based awards to employees and non-employees, generally in the form of stock options, restricted stock units (RSUs), and performance stock units (PSUs). We account for our stock-based compensation awards in accordance with ASC 718 (Compensation—Stock Compensation). Most of our stock-based awards have been made to employees. We measure compensation cost for equity awards 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. We estimate the expected term of our stock options granted to employees and non-employees 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. The expected volatility is based on a blended average of average historical stock volatilities of selected guideline companies over the expected term of the stock options, historical volatility of our stock price, and implied stock price volatility derived from the price of exchange traded options on our stock. We will continue to apply this process until a sufficient amount of historical information regarding the expected term and historical volatility of our own stock price becomes available. 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 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. We made an accounting policy election to recognize forfeitures of stock-based awards as they occur.

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 temporary differences between the financial reporting and tax bases of assets and liabilities. These differences are measured using the enacted statutory tax rates and laws that will be in effect when the 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 tax 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 uncertain tax positions, as well as the related net interest and penalties.

Earnings (Loss) per Share

We calculate diluted net earnings (loss) per share attributable to common stockholders by dividing net earnings (loss) by the weighted average number of common shares outstanding after giving consideration to the dilutive effect of restricted common stock and stock options that are outstanding during the period. For periods in which we have generated a net loss, 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.

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Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss) for the period. Other comprehensive income (loss) consists of unrealized gains and losses on our investments and derivatives designated as hedging instruments. Total comprehensive income (loss) for all periods presented has been disclosed in the consolidated statements of comprehensive income (loss).

The components of accumulated other comprehensive loss for the years ended December 31, 2022 and 2021 were as follows (in millions):

			Unrealized Gain (Loss) on Available-for-Sale Debt Securities						Net Unrealized Gain (loss) on Derivatives Designated As Hedging Instruments						Total
Accumulated other comprehensive income, balance at December 31, 2020			$	3					$	—					$	3
Other comprehensive loss			(43)						16						(27)
Accumulated other comprehensive loss, balance at December 31, 2021			(40)						16						(24)
Other comprehensive loss			(322)						(24)						(346)
Accumulated other comprehensive loss, balance at December 31, 2022			$	(362)					$	(8)					$	(370)

Share Repurchases

Shares of our common stock repurchased pursuant to our repurchase programs are retired. The purchase price of such repurchased shares of common stock is recorded as a reduction to additional paid-in-capital. If the balance in additional paid-in-capital is exhausted, the excess is recorded as a reduction to retained earnings.

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. 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. Product Sales

Product sales are primarily associated with our COVID-19 vaccine supply agreements with the U.S. Government, other international governments and organizations.

Product sales by customer geographic location were as follows for the periods presented (in millions):

						Years Ended December 31,
						2022						2021						2020
United States						$	4,405					$	5,393					$	194
Europe						6,732						6,834						—
Rest of world (1)						7,298						5,448						6
Total						$	18,435					$	17,675					$	200

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(1) Includes product sales recognized under the agreement with Gavi (on behalf of the COVAX Facility), which facilitates the allocation and distribution of our COVID-19 vaccines around the world, particularly for low- and middle-income countries.

As of December 31, 2022, our COVID-19 vaccine (marketed under the brand name Spikevax) and Omicron-targeting bivalent boosters (mRNA-1273.214 and mRNA-1273.222) were our only commercial products authorized for use. As of December 31, 2021 and 2020, our COVID-19 vaccine was our only commercial product authorized for use.

As of December 31, 2022 and 2021, we had deferred revenue of $2.6 billion and $6.7 billion, respectively, related to customer deposits. We expect $2.0 billion of our deferred revenue related to customer deposits as of December 31, 2022 to be realized in less than one year. Timing of product manufacturing, delivery and receipt of marketing approval will determine the period in which product sales is recognized.

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4. Grant Revenue

In September 2020, we entered into an agreement with the DARPA for an award of up to $56 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, 2022, the committed funding, net of revenue earned was $6 million. An additional $24 million of funding will be available if DARPA exercises additional contract options.

In April 2020, we entered into an agreement with BARDA for an award of up to $483 million to accelerate development of mRNA-1273, our original vaccine candidate against COVID-19. The agreement was amended in both 2020 and 2021 to provide for additional commitments to support various late-stage clinical development efforts of mRNA-1273, including a 30,000 participant Phase 3 study, pediatric clinical trials and pharmacovigilance studies. In March 2022, we entered into a further amendment to the BARDA agreement, increasing the amount of potential reimbursements by $308 million, in connection with costs associated with the clinical development for the adolescent and pediatric studies and the Phase 3 pivotal study. The maximum award from BARDA, inclusive of the 2020, 2021 and 2022 amendments, was $1.7 billion. All contract options have been exercised. As of December 31, 2022, the remaining available funding, net of revenue earned was $137 million.

In September 2016, we received from BARDA an award of up to $126 million, subsequently adjusted to $117 million in 2021, to help fund our Zika vaccine program. In September 2022, the performance period of the grant expired, and BARDA was released of the obligation to fund the remaining $36 million of the award.

In January 2016, we entered a global health project framework agreement with the Gates Foundation to advance mRNA development projects for various infectious diseases, including human immunodeficiency virus (HIV). As of December 31, 2022, the available funding, net of revenue earned was $6 million, with up to an additional $80 million available if additional follow-on projects are approved.

The following table summarizes grant revenue for the periods presented (in millions):

			Years Ended December 31,
			2022						2021						2020
BARDA			$	372					$	713					$	522
Other grant revenue			16						22						7
Total grant revenue			$	388					$	735					$	529

5. Collaboration Agreements

AstraZeneca – Strategic Alliances in Cardiovascular and Oncology

In March 2013, we entered into an Option Agreement, the AZ Option Agreement, and a related Services and Collaboration Agreement (2013 AZ Agreements), the AZ Services Agreement, with AstraZeneca, which were amended and restated in June 2018 (2018 A&R Agreements). Under the 2018 A&R 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. As of the effective date of the 2013 AZ Agreements, AstraZeneca made upfront cash payments to us totaling $240 million in exchange for the acquired options and our performance of certain research-related services, each as described above. In 2016, AstraZeneca exercised a product option under the 2013 AZ Agreements to obtain exclusive rights to develop and commercialize with respect to AstraZeneca's VEGF-A product (AZD8601).

In January 2016, we entered into a Strategic Drug Development Collaboration and License Agreement (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 agreed to work together on an immuno-oncology program focused on the intratumoral delivery of a potential mRNA medicine to make the IL-12 protein.

In the third quarter of 2022, AstraZeneca terminated our collaborations with them, including the development of VEGF-A and IL-12 programs, for which termination became effective on November 21, 2022. All rights to these two programs reverted to us. As a result of the termination, we recognized the remaining deferred revenue of $76 million as collaboration revenue in the period.

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Merck – Strategic Alliances in Infectious Diseases and Personalized mRNA Cancer Vaccines

2016 Cancer Vaccine Strategic Alliance-Personalized mRNA Cancer Vaccines

In June 2016, we entered into a personalized mRNA cancer vaccines (PCV) Collaboration and License Agreement with Merck (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 were 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. We received an upfront payment of $200 million from Merck upon execution of the agreement.

2018 Expansion of the Cancer Vaccine Strategic Alliance-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). Under the PCV/SAV Agreement, Merck was responsible for conducting Phase 1 and Phase 2 clinical trials for mRNA-5671 and for all costs associated with such activities, and we were 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 PCV increased to $243 million. In December 2021, Merck elected to terminate the Merck participation election with respect to the joint SAV program, including KRAS development candidate, mRNA-5671.

In September 2022, Merck exercised its option for PCVs, including mRNA-4157, pursuant to the terms of the PCV/SAV Agreement. In the fourth quarter of 2022, in accordance with the PCV/SAV Agreement, we granted a worldwide license to Merck for future development and commercialization, upon receipt of the participation payment of $250 million from Merck, and recognized collaboration revenue of $250 million. Under the PCV/SAV Agreement, we are principally responsible for providing manufacturing capacity and manufacturing PCVs for clinical trials and Merck is responsible for conducting the Phase 3 clinical trial for mRNA-4157. We and Merck will equally share the costs for the joint operations. A detailed joint development plan and budget are expected to be finalized in 2023. We concluded that the collaboration arrangement under the Merck Participation Term is within the scope of ASC808.

Vertex – Strategic Alliance in Cystic Fibrosis

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. The Vertex Agreement, which was amended in July 2019 (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 cystic fibrosis transmembrane conductance regulator (CFTR) proteins. Pursuant to the Vertex Agreement, we lead discovery efforts during an initial research period, 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.

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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.

The following table summarizes our total consolidated net revenue from our strategic collaborators for the periods presented (in millions):

						Years Ended December 31,
Collaboration Revenue by Strategic Collaborator:						2022						2021						2020
Merck						$	309					$	23					$	26
AstraZeneca						80						7						33
Vertex						48						26						15
Other						3						5						—
Total collaboration revenue						$	440					$	61					$	74

The following table presents changes in the balances of our receivables and contract liabilities related to our strategic collaboration agreements during the year ended December 31, 2022 (in millions):

						December 31, 2021						Additions						Deductions						December 31, 2022
Contract Assets:
Accounts receivable						$	9					$	318					$	(310)					$	17
Contract Liabilities:
Deferred revenue						$	204					$	16					$	(139)					$	81

As of December 31, 2022, the aggregated amount of the transaction price allocated to performance obligations under our collaboration agreements that are unsatisfied or partially unsatisfied was $89 million.

In addition to the collaborative arrangements mentioned above, we have other collaborative and licensing arrangements that we do not consider to be individually significant to our business at this time. Pursuant to these agreements, we may be required to make upfront payments and payments upon achievement of various development, regulatory and commercial milestones, which in the aggregate could be significant. Future milestone payments, if any, will be reflected in our consolidated financial statements when the corresponding events become probable. In addition, we may be required to pay significant royalties on future sales if products related to these arrangements are commercialized.

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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, 2022 and 2021 (in millions):

						December 31, 2022
						Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value						Cash and Cash Equivalents						Current Marketable Securities						Non- Current Marketable Securities
Cash and cash equivalents						$	3,205					$	—					$	—					$	3,205					$	3,205					$	—					$	—
Available-for-sale:
Certificates of deposit						188						—						—						188						—						188						—
U.S. treasury bills						767						—						—						767						—						767						—
U.S. treasury notes						7,781						—						(229)						7,552						—						4,182						3,370
Corporate debt securities						6,595						—						(226)						6,369						—						1,560						4,809
Government debt securities						148						—						(9)						139						—						—						139
Total						$	18,684					$	—					$	(464)					$	18,220					$	3,205					$	6,697					$	8,318
						December 31, 2021
						Amortized Cost						Unrealized Gains						Unrealized Losses						Fair Value						Cash and Cash Equivalents						Current Marketable Securities						Non- Current Marketable Securities
Cash and cash equivalents						$	6,848					$	—					$	—					$	6,848					$	6,848					$	—					$	—
Available-for-sale:
Certificates of deposit						80						—						—						80						—						80						—
U.S. treasury bills						479						—						—						479						—						479						—
U.S. treasury notes						6,595						—						(31)						6,564						—						1,984						4,580
Corporate debt securities						3,508						—						(20)						3,488						—						1,323						2,165
Government debt securities						112						—						(1)						111						—						13						98
Total						$	17,622					$	—					$	(52)					$	17,570					$	6,848					$	3,879					$	6,843

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The amortized cost and estimated fair value of available-for-sale securities, by contractual maturity at December 31, 2022 and 2021 were as follows (in millions):

						December 31, 2022
						Amortized Cost						Estimated Fair Value
Due in one year or less						$	6,792					$	6,697
Due after one year through five years						8,687						8,318
Total						$	15,479					$	15,015
						December 31, 2021
						Amortized Cost						Estimated Fair Value
Due in one year or less						$	3,882					$	3,879
Due after one year through five years						6,892						6,843
Total						$	10,774					$	10,722

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 impairment at the end of each reporting period. We did not record any impairment charges related to our available-for-sale securities during the years ended December 31, 2022, 2021, and 2020. We did not recognize any credit-related allowance to available-for-sale securities as of December 31, 2022 and 2021.

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, 2022 and 2021 (in millions):

						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, 2022:
U.S. treasury bills						$	—					$	128					$	—					$	—					$	—					$	128
U.S. treasury notes						(101)						3,956						(128)						3,541						(229)						7,497
Corporate debt securities						(138)						3,505						(88)						1,890						(226)						5,395
Government debt securities						(2)						46						(7)						93						(9)						139
Total						$	(241)					$	7,635					$	(223)					$	5,524					$	(464)					$	13,159
As of December 31, 2021:
U.S. treasury securities						$	—					$	329					$	—					$	—					$	—					$	329
U.S. treasury notes						(31)						6,332						—						—						(31)						6,332
Corporate debt securities						(20)						2,573						—						1						(20)						2,574
Government debt securities						(1)						112						—						—						(1)						112
Total						$	(52)					$	9,346					$	—					$	1					$	(52)					$	9,347

At December 31, 2022 and 2021, we held 582 and 384 available-for-sale securities, respectively, out of our total investment portfolio that were in a continuous unrealized loss position. 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.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize our financial assets measured at fair value on a recurring basis as of December 31, 2022 and 2021 (in millions):

						Fair value at December 31, 2022						Fair Value Measurement Using
									Level 1						Level 2
Assets:
Money market funds						$	1,079					$	1,079					$	—
Certificates of deposit						188						—						188
U.S. treasury bills						767						—						767
U.S. treasury notes						7,552						—						7,552
Corporate debt securities						6,369						—						6,369
Government debt securities						139						—						139
Derivative instruments (Note 7)						6						—						6
Total						$	16,100					$	1,079					$	15,021
Liabilities:
Derivative instruments (Note 7)						$	32					$	—					$	32

						Fair value at December 31, 2021						Fair Value Measurement Using
									Level 1						Level 2
Assets:
Money market funds						$	2,329					$	2,329					$	—
Certificates of deposit						80						—						80
U.S. treasury bills						479						—						479
U.S. treasury notes						6,564						—						6,564
Corporate debt securities						3,488						—						3,488
Government debt securities						111						—						111
Derivative instruments (Note 7)						21						—						21
Total						$	13,072					$	2,329					$	10,743
Liabilities:
Derivative instruments (Note 7)						$	7					$	—					$	7

During the years ended December 31, 2022 and 2021, we did not have non-financial assets or liabilities measured at fair value on a recurring basis.

In addition, as of December 31, 2022, we had $42 million in equity investments without readily determinable fair values, which are recorded within other non-current assets in our consolidated balance sheets and excluded from the fair value measurement tables above. We did not have equity investments as of December 31, 2021.

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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: (1) forecasted product sales that are denominated in foreign currencies and (2) 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.

Cash Flow Hedges

We mitigate the foreign exchange risk arising from the fluctuations in foreign currency denominated product sales in Euro and Japanese Yen through a foreign currency cash flow hedging program, using forward contracts and foreign currency options that do not exceed 15 months in duration. We hedge these cash flow exposures to reduce the risk that our earnings and cash flows will be adversely affected by changes in exchange rates. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. The derivative assets or liabilities associated with our hedging activities are recorded at fair value in prepaid expenses and other current assets or other current liabilities, respectively, in our consolidated balance sheets. The gains or losses resulting from changes in the fair value of these hedges are initially recorded as a component of AOCI in stockholders’ equity and subsequently reclassified to product sales in the period during which the hedged transaction affects earnings. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, within the defined hedge period, we reclassify the gains or losses on the related cash flow hedge from AOCI to other expense, net, in our consolidated statements of operations. We evaluate hedge effectiveness at the inception of the hedge prospectively, and on an on-going basis both retrospectively and prospectively. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded as a component of other expense, net, in our consolidated statements of operations. As of December 31, 2022, we had net deferred losses of $11 million on our foreign currency forward contracts included in AOCI that are expected to be recognized into product sales within the next 12 months.

Balance Sheet Hedges

We enter into foreign currency forward contracts to hedge fluctuations associated with foreign currency denominated monetary assets and liabilities, primarily cash, accounts receivable, accounts payable, and lease liabilities in Euro, Swiss Franc and Japanese Yen, that 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 prepaid expenses and other current assets or other current liabilities in our consolidated balance sheets, and gains and losses resulting from changes in the fair value are recorded as a component of other expense, 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, net, in our consolidated statements of operations.

Total gross notional amount and fair value for foreign currency derivatives were as follows (in millions):

						December 31, 2022
						Notional Amount						Fair Value
									Asset (1)						Liability (2)
Derivatives designated as cash flow hedging instruments:
Foreign currency forward contracts						$	120					$	—					$	11
Derivatives not designated as hedging instruments:
Foreign currency forward contracts						1,368						6						21
Total derivatives						$	1,488					$	6					$	32

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						December 31, 2021
						Notional Amount						Fair Value
									Asset (1)						Liability (2)
Derivatives designated as cash flow hedging instruments:
Foreign currency forward contracts						$	565					$	20					$	—
Derivatives not designated as hedging instruments
Foreign currency forward contracts						$	1,370					$	1					$	7
Total						$	1,935					$	21					$	7

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(1) As presented in the consolidated balance sheets within prepaid expenses and other current assets.

(2) As presented in the consolidated balance sheets within other current liabilities.

Gains on our foreign currency derivatives, net of tax, recognized in our consolidated statements of comprehensive income (loss) for the years ended December 31, 2022 and 2021 were as follows (in millions):

						Years Ended December 31,
						2022						2021
Derivatives in cash flow hedging relationships:
Foreign currency forward contracts						$	130					$	74

The effect of derivative instruments in our consolidated statements of operations for the years ended December 31, 2022 and 2021 was as follows (in millions):

						Statement of Operations Classification						Year Ended December 31, 2022						Year Ended December 31, 2021
Derivatives in cash flow hedging relationships:
Foreign currency forward contracts
Net gains reclassified from AOCI into income						Product sales						$	154					$	58
Derivatives not designated as hedging instruments:
Foreign currency forward contracts
Net realized and unrealized gains (losses)						Other expense, net						$	48					$	(8)

There were immaterial hedging gains and losses for the year ended December 31, 2020.

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8. Inventory

Inventory as of December 31, 2022 and 2021 consisted of the following (in millions):

						December 31,						December 31,
						2022						2021
Raw materials						$	575					$	870
Work in progress						205						338
Finished goods						169						233
Total inventory						$	949					$	1,441
Inventory, non-current (1)						$	910					$	—

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(1) Consisted of raw materials with an anticipated consumption beyond one year. Inventory, non-current is included in other non-current assets in the consolidated balance sheets.

Inventory write-downs as a result of excess, obsolescence, scrap or other reasons, and losses on firm purchase commitments are recorded as a component of cost of sales in our consolidated statements of operations. For the year ended December 31, 2022, inventory write-downs were $1.3 billion. Inventory write-downs were immaterial for the years ended December 31, 2021 and 2020. For the year ended December 31, 2022, losses on firm purchase commitments were $617 million. As of December 31, 2022, the accrued liability for loss on firm future purchase commitments in our consolidated balance sheets was $268 million. There were no such charges in 2021 or 2020, or accrued liabilities at December 31, 2021.

9. Property, Plant and Equipment

Property, plant and equipment, net as of December 31, 2022 and 2021 consisted of the following (in millions):

						December 31,
						2022						2021
Land and land improvements						$	11					$	—
Manufacturing and laboratory equipment						284						175
Leasehold improvements						460						313
Furniture and fixtures						21						11
Computer equipment and software						38						25
Construction in progress						281						212
Right-of-use asset, financing						1,581						857
						2,676						1,593
Less: Accumulated depreciation						(658)						(352)
Property, plant and equipment, net						$	2,018					$	1,241

Depreciation and amortization expense for the years ended December 31, 2022, 2021, and 2020 was $348 million, $232 million, and $31 million, respectively.

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10. Other Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets, as of December 31, 2022 and 2021 consisted of the following (in millions):

						December 31,
						2022						2021
Down payments to manufacturing vendors						$	229					$	118
Down payments for materials and supplies						219						287
Prepaid services						216						126
Prepaid income taxes						187						23
Value added tax receivable						140						70
Interest receivable						61						27
Tenant improvement allowance receivable						42						51
Convertible note receivable						36						—
Other current assets						65						26
Prepaid expenses and other current assets						$	1,195					$	728

Other Non-Current Assets

Other non-current assets, as of December 31, 2022 and 2021 consisted of the following (in millions):

						December 31,
						2022						2021
Inventory, non-current (1)						$	910					$	—
Other						78						46
Other non-current assets						$	988					$	46

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(1) Consisted of raw materials with an anticipated consumption beyond one year.

Accrued Liabilities

Accrued liabilities, as of December 31, 2022 and 2021 consisted of the following (in millions):

						December 31,
						2022						2021
Manufacturing						$	400					$	227
Clinical trials						319						283
Raw materials						316						260
Loss on future firm purchase commitments(1)						268						—
Other external goods and services						264						79
Royalties						203						241
Compensation-related						190						126
Development operations						88						137
Other						53						119
Accrued liabilities						$	2,101					$	1,472

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(1) Related to losses that are expected to arise from firm, non-cancellable, commitments for future raw material purchases (Note 8).

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Other Current Liabilities

Other current liabilities, as of December 31, 2022 and 2021 consisted of the following (in millions):

						December 31,
						2022						2021
Lease liabilities - financing (Note 11)						$	161					$	165
Lease liabilities - operating (Note 11)						35						46
Other						53						14
Other current liabilities						$	249					$	225

Deferred Revenue

The following table summarizes the activities in deferred revenue during the year ended December 31, 2022 (in millions):

						December 31, 2021						Additions						Deductions						December 31, 2022
Product sales						$	6,658					$	2,510					$	(6,542)					$	2,626
Grant revenue						6						—						(2)						4
Collaboration revenue						204						16						(139)						81
Total deferred revenue						$	6,868					$	2,526					$	(6,683)					$	2,711

11. Leases

We have entered into various long-term non-cancelable lease arrangements for our facilities and equipment expiring at various times through 2042. Certain of these arrangements have free rent periods or escalating rent payment provisions, which we recognize lease cost under such arrangements on a straight-line basis over the life of the leases. We have two campuses in Massachusetts, our Cambridge campus and our Moderna Technology Center (MTC), located in Norwood. We also lease other office and lab spaces globally for our business operations.

Cambridge Campus

We occupy a multi-building campus at Technology Square in Cambridge, Massachusetts with a mix of offices and research laboratory space totaling approximately 292,000 square feet. Our Cambridge campus leases have expiry ranges from 2024 to 2029. All our Cambridge leases are classified as operating leases.

We are also investing in a new Moderna Science Center (MSC) in Cambridge, Massachusetts to create a purpose-built space to support our next chapter of discovery (see Note 12). As of December 31, 2022, we did not gain the control of the underlying leased asset at the MSC, and therefore we did not recognize the related right-of-use asset and lease liability on our consolidated balance sheets. In connection with our MSC investment, in September 2021, we entered into an amendment to our lease agreements to allow for an option for early termination of the leases, either in part or full. Notification of the intent to exercise the option must be provided by August 2023. We have not elected to exercise this option.

Moderna Technology Center

We have an industrial technology center in Norwood, Massachusetts, our Moderna Technology Center (MTC), which comprises three buildings, MTC South, MTC North, and MTC East, totaling approximately 686,000 square feet. Our MTC leases expire in 2042 and we have the option to extend the term for three extension periods of five years each. All our MTC leases are classified as finance leases.

Embedded Leases

We have entered into multiple contract manufacturing service agreements with third parties which contain embedded leases within the scope of ASC 842. As of December 31, 2022 and 2021, we had lease liabilities of $440 million and $166 million, respectively, related to the embedded leases. As of December 31, 2022 and December 31, 2021, we had right-of-use assets of $639 million and $173 million, respectively, related to the embedded leases. All our embedded leases are classified as finance leases.

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Operating and financing lease right-of-use assets and lease liabilities as of December 31, 2022 and 2021 were as follows (in millions):

						December 31,
						2022						2021
Assets:
Right-of-use assets, operating, net (1) (2)						$	121					$	142
Right-of-use assets, financing, net (3) (4)						1,150						665
Total						$	1,271					$	807
Liabilities:
Current:
Operating lease liabilities (5)						$	35					$	46
Financing lease liabilities (5)						161						165
Total current lease liabilities						196						211
Non-current:
Operating lease liabilities, non-current						92						106
Financing lease liabilities, non-current						912						599
Total non-current lease liabilities						1,004						705
Total						$	1,200					$	916

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(1) These assets are real estate related assets, which include land, office and laboratory spaces.

(2) Net of accumulated amortization.

(3) These assets are real estate assets related to the MTC leases as well as assets related to contract manufacturing service agreements.

(4) Included in property, plant and equipment in the consolidated balance sheets, net of accumulated depreciation.

(5) Included in other current liabilities in the consolidated balance sheets.

The components of the lease costs were as follows for the periods presented (in millions):

						Years ended December 31,
						2022						2021						2020
Operating lease costs						$	48					$	24					$	17
Financing lease costs:
Amortization of right-of-use assets, financing leases						280						189						1
Interest expense for financing lease liabilities						29						17						10
Total financing lease costs						$	309					$	206					$	11
Short term lease costs						$	—					$	49					$	13
Variable lease costs						$	165					$	100					$	5

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Supplemental cash flow information relating to our leases was as follows for the periods presented (in millions):

						December 31,
						2022						2021						2020
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows used in operating leases						$	(57)					$	(19)					$	(15)
Operating cash flows used in financing leases						(25)						(14)						(9)
Financing cash flows used in financing leases						(184)						(140)						(8)
Operating lease non-cash items:
Changes in right-of-use assets related to lease modifications and reassessments						$	—					$	(7)					$	7
Right-of-use assets obtained in exchange for operating lease liabilities						20						72						17
Finance lease non-cash items:
Changes in right-of-use assets related to lease modifications and reassessments						$	—					$	674					$	46
Right-of-use assets obtained in exchange for financing lease liabilities						777						126						—
Changes in financing lease liabilities						4						3						1

Weighted average remaining lease terms and discount rates as of December 31, 2022 and 2021 were as follows:

						December 31,
						2022						2021
Remaining lease term:
Operating leases						6 years						5 years
Finance leases						22 years						28 years
Discount rate:
Operating leases						7.5		%				6.8		%
Finance leases						3.6		%				3.1		%

Future minimum lease payments under non-cancelable lease agreements as of December 31, 2022, were as follows (in millions):

Fiscal Year						Operating Leases						Financing Leases (1)
2023						$	43					$	195
2024						22						126
2025						19						127
2026						18						106
2027						18						23
Thereafter						42						1,088
Total minimum lease payments						162						1,665
Less amounts representing interest						(35)						(592)
Present value of lease liabilities						$	127					$	1,073

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(1) Include certain optional lease term extensions, predominantly related to the MTC leases, which represent a total of $662 million of undiscounted future lease payments.

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12. Commitments and Contingencies

Legal Proceedings

We are involved in various claims and legal proceedings of a nature considered ordinary course in our business. The outcome of any such proceedings, regardless of the merits, is inherently uncertain; therefore, assessing the likelihood of loss and any estimated damages is difficult and subject to considerable judgment. We are not currently a party to any legal proceedings for which a material loss is probable, or for which a loss is reasonably estimable at this time.

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 our leases for laboratory and office space that require us 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, 2022 and 2021, we had not experienced any significant losses related to these indemnification obligations, and no 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 no related reserves were established.

Purchase Commitments and Purchase Orders

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, 2022, we had $2.1 billion of non-cancelable purchase commitments related to raw materials and manufacturing agreements, which are expected to be paid through 2026. As of December 31, 2022, $268 million of the purchase commitments related to raw materials was recorded as an accrued liability for loss on future firm purchase commitments. As of December 31, 2022, we had $177 million of non-cancelable purchase commitments related to clinical services and other goods and services which are expected to be paid through 2027. These amounts represent our minimum contractual obligations, including termination fees.

In addition to purchase 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, 2022, we had cancelable open purchase orders of $2.5 billion in total under such agreements for our significant clinical operations and 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, 2022, 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

In 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. Commercial milestone payments and royalties based on annual net sales of licensed products for therapeutic and prophylactic products are accounted for as additional expense of the related product sales in the period in which the corresponding sales occur. In 2022, 2021, and 2020 we recognized $635 million, $641 million, and $7 million, respectively, of royalties and commercial milestone payments associated with our product sales, which was recorded to cost of sales in our consolidated statements of operations.

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In December 2022, we entered into a non-exclusive patent license agreement with the National Institute of Allergy and Infectious Diseases (NIAID), an Institute or Center of the National Institutes of Health (NIH) to license certain patent rights concerning stabilizing prefusion coronavirus spike proteins and the resulting stabilized proteins for use in COVID-19 vaccine products. Pursuant to the agreement, we have agreed to pay low single-digit royalties on future net sales, a minimum annual royalty payment, and certain contingent development, regulatory and commercial milestone payments on a licensed product-by-licensed product basis. In addition, in December 2022, we made a catch-up royalty payment of $400 million to NIAID, which was recorded to cost of sales in our consolidated statements of operations.

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 was not deemed probable as of December 31, 2022.

Moderna Science Center

In September 2021, we announced an investment in the development of the MSC in Cambridge, Massachusetts. The MSC is expected to integrate scientific and non-scientific spaces, including our principal executive offices, and is built to support our growth as we continue to advance our pipeline of mRNA medicines. In relation to the investment, we entered into a lease agreement for approximately 462,000 square feet and are currently undergoing an approximately two-year building project. Following completion of the building project, the lease term is 15 years, subject to our right to extend the lease for up to two additional seven-year terms. Pursuant to this lease agreement, we are committed to approximately $1.0 billion non-cancellable rent payments for the initial lease term. We expect to begin a phased move-in process in the fourth quarter of 2023.

13. Stockholders' Equity

On February 14, 2020, we sold 26,315,790 shares of common stock at a price of $19.00 per share through a public equity offering. The aggregate net proceeds from the offering were $478 million, net of underwriting discounts, commissions and offering expenses. In addition, the underwriters exercised their options to purchase an additional 3,947,368 shares of common stock at the public offering price less underwriting discounts, resulting in additional net proceeds of $72 million.

On May 21, 2020, we sold 17,600,000 shares of common stock at a price of $76.00 per share through a public equity offering. The aggregate net proceeds from the offering were $1.3 billion, net of underwriting discounts, commissions and offering expenses.

14. Stock-Based Compensation

Equity Plans

In connection with our initial public offering (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 Stock Option and Incentive Plan (the 2016 Equity 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. 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 Equity Plan will be added back to the shares of common stock available for issuance under the 2018 Equity Plan.

The Board of Directors may grant to employees, nonemployee directors, consultants and independent advisors equity-based awards during their period of service, generally in the form of stock options, restricted stock units, and performance stock units. 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 twelve quarterly installments over the following twelve quarters. Stock options granted under the 2018 Equity Plan and 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.

As of December 31, 2022, we had a total of 51 million shares reserved for future issuance under our Equity Plans, of which 28 million shares were reserved for equity awards previously granted, and 23 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.

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Options

We have granted options generally through the 2018 Equity Plan and 2016 Equity Plan. The following table summarizes our option activity during the year ended December 31, 2022:

						Number of Options (in millions)						Weighted Average Exercise Price per Share												Weighted- Average Remaining Contractual Term						Aggregate Intrinsic Value (1) (in millions)
Outstanding at December 31, 2021						27.41						$	27.08											5.8 years						$	6,247
Granted						2.69						150.05
Exercised						(4.78)						10.51
Canceled/forfeited						(0.39)						109.93
Outstanding at December 31, 2022						24.93						42.23												5.7 years						3,478
Exercisable at December 31, 2022						16.91						22.12												4.8 years						2,677
Expected to vest at December 31, 2022						8.02						84.57												7.4 years						800

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(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, 2022.

The total intrinsic value of options exercised was $714 million, $1.6 billion, and $786 million for the years ended December 31, 2022, 2021, and 2020, 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 excess tax benefits realized from tax deductions from option exercises were $144 million and $325 million during the years ended December 31, 2022 and 2021, respectively. For the year ended December 31, 2020, there were no excess tax benefits realized from tax deductions from option exercises due to cumulative losses and valuation allowances. The total consideration recorded as a result of stock option exercises was approximately $50 million, $112 million, and $179 million for the years ended December 31, 2022, 2021, and 2020.

Restricted Common Stock Units (RSUs) and Performance Stock Units (PSUs)

We have granted RSUs and PSUs generally through the 2018 Equity Plan. The following table summarizes our RSU and PSU activity during the year ended December 31, 2022:

			Number of Units (in millions)						Weighted Average Grant Date Fair Value per Unit
Outstanding, non-vested at December 31, 2021			2.14						$	88.55
Issued			1.83						149.82
Vested			(0.82)						66.56
Canceled/forfeited			(0.25)						102.66
Outstanding, non-vested at December 31, 2022			2.90						132.25

The total grant date fair value of RSUs and PSUs vested during the years ended December 31, 2022, 2021, and 2020, was $55 million, $18 million, and $5 million, respectively. The total intrinsic value of RSUs and PSUs vested during the years ended December 31, 2022, 2021, and 2020, was $125 million, $141 million and $14 million, respectively.

During 2022 and 2021, we granted an immaterial amount of PSUs, respectively, primarily to certain senior executives with vesting that is contingent upon the achievement of specified preestablished goals over the performance period, generally three years. The actual number of common shares ultimately issued is calculated by multiplying the number of PSUs by a payout percentage ranging from 0% to 200%. The estimated fair value of PSUs is based on the grant date fair value.

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2018 Employee Stock Purchase Plan

In November 2018, we adopted the 2018 Employee Stock Purchase Plan (ESPP). We make one or more offerings, consisting of one or more purchase periods, each year to our eligible employees to purchase shares under the ESPP. Offerings usually begin every six months and continue for six-month periods, referred to as offering periods. The purchase price at which shares are sold under the ESPP equals 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. There were 123,308, 81,423, and 251,752 shares of common stock sold at a weighted average price of $122.83, $145.90, and $27.97 per share under the ESPP during the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, 3 million shares were available for future issuance under the ESPP.

Valuation and Stock-Based Compensation Expense

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 options granted and ESPP for the years ended December 31, 2022, 2021, and 2020 were as follows:

						Weighted Average
						Years Ended December 31,
						2022						2021						2020
Options:
Risk-free interest rate						2.46		%				0.84		%				0.83		%
Expected term						6.13 years						6.10 years						6.11 years
Expected volatility						50		%				46		%				58		%
Expected dividends						—		%				—		%				—		%
Weighted average fair value per share						$	76.02					$	91.84					$	19.30
ESPP:
Risk-free interest rate						3.56		%				0.08		%				0.14		%
Expected term						0.50 years						0.50 years						0.50 years
Expected volatility						51		%				34		%				54		%
Expected dividends						—		%				—		%				—		%
Weighted average fair value per share						$	50.18					$	64.25					$	32.18

Stock-Based Compensation Expense

The following table presents the components and classification of stock-based compensation expense for the years ended December 31, 2022, 2021, and 2020 (in millions):

			Years Ended December 31,
			2022						2021						2020
Options			$	123					$	96					$	78
RSUs and PSUs			97						42						12
ESPP			6						4						3
Total			$	226					$	142					$	93
Cost of sales			$	45					$	22					$	—
Research and development			93						68						56
Selling, general and administrative			88						52						37
Total			$	226					$	142					$	93

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For the years ended December 31, 2022, 2021, and 2020, we recognized stock-based compensation expense of $18 million, $16 million, and $10 million, respectively, related to performance-based awards, including awards with vesting or commencement contingent upon our IPO. Stock-based compensation expenses related to non-employee awards were immaterial for the years ended December 31, 2022, 2021, and 2020.

As of December 31, 2022, there were $571 million of total unrecognized compensation cost related to non-vested stock-based compensation with respect to options, RSUs and PSUs granted. That cost is expected to be recognized over a weighted-average period of 2.9 years at December 31, 2022.

Share Repurchase Programs

On August 2, 2021, our Board of Directors authorized a Share Repurchase Program (2021 Repurchase Program) of our common stock, with an expiration date no later than August 2, 2023. Pursuant to the 2021 Repurchase Program, we were authorized to repurchase up to $1.0 billion of our outstanding common stock. By the end of January 2022, we had repurchased the entire $1.0 billion of common stock that was authorized under the 2021 Repurchase Program.

On February 22, 2022, our Board of Directors authorized an additional share repurchase program of our common stock, with no expiration date, for up to $3.0 billion. On August 1, 2022, our Board of Directors authorized an increase of $3.0 billion under the repurchase program for our common stock, with no expiration date (collectively with the February 22, 2022 authorization, the 2022 Repurchase Programs). The timing and actual number of shares repurchased under the 2022 Repurchase Programs will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities, and shares may be repurchased through open market purchases through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

The following table summarizes activity related to our share repurchase programs (in millions, except per share data):

						Years Ended December 31,
						2022						2021
Number of shares repurchased						23						3
Average price per share (1)						$	142.83					$	245.76
Aggregate purchase price						$	3,329					$	857
Remaining authorization at end of period						$	2,814					$	143

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(1) Average price paid per share includes related expenses.

15. Employee Benefit Plans

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 100% of the first 3%, and 50% of the next 3% contributed by a participant. All matching contributions are immediately vested. Total matching contributions to the 401(k) Plan were $20 million, $10 million, and $5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

We maintain various defined benefit plans to provide termination and postretirement benefits to certain eligible employees outside of the U.S. The unfunded benefit plan obligations were $8 million and $9 million as of December 31, 2022 and 2021, respectively, which were recognized in other long-term liabilities in our consolidated balance sheets.

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16. Income Taxes

Income (loss) before income taxes for the years ended December 31, 2022, 2021, and 2020 consisted of the following (in millions):

			Years Ended December 31,
			2022						2021						2020
United States			$	9,433					$	13,108					$	(745)
Foreign			142						177						1
Income (loss) before income taxes			$	9,575					$	13,285					$	(744)

The provision for income taxes for the years ended December 31, 2022, 2021, and 2020 consisted of the following components (in millions):

			Years Ended December 31,
			2022						2021						2020
Current:
Federal			$	1,687					$	1,304					$	—
State			47						35						—
Foreign			57						40						3
Total current			$	1,791					$	1,379					$	3
Deferred:
Federal			$	(569)					$	(288)					$	—
State			(7)						(6)						—
Foreign			(2)						(2)						—
Total deferred			(578)						(296)						—
Total provision for income taxes			$	1,213					$	1,083					$	3

The reconciliation of the federal statutory income tax rate to our effective tax rate for the years ended December 31, 2022, 2021, and 2020 was as follows:

			Years Ended December 31,
			2022						2021						2020
Federal statutory tax rate			21.0		%				21.0		%				21.0		%
Change in valuation allowance			—		%				(5.4)		%				(47.4)		%
Foreign-derived intangible income			(7.4)		%				(4.8)		%				—		%
Stock-based compensation windfall			(1.6)		%				(2.6)		%				19.8		%
Federal research and development credits			(0.5)		%				(0.7)		%				3.8		%
State taxes, net of federal benefits			0.4		%				0.5		%				3.6		%
Non-deductible items			—		%				—		%				(0.8)		%
Other			0.8		%				0.1		%				(0.3)		%
Effective tax rate			12.7		%				8.1		%				(0.3)		%

Our effective tax rate for the year ended December 31, 2022 was 12.7% and was lower than the federal statutory tax rate, primarily due to the tax benefit of the foreign-derived intangible income deduction (FDII) and excess tax benefit related to stock-based compensation. Our effective tax rate for the year ended December 31, 2021 was lower than the federal statutory tax rate primarily due to the tax benefits related to the release of the valuation allowance on most of our deferred tax assets, FDII and stock-based compensation. Our effective tax rate for the year ended December 31, 2020 was lower than the federal statutory tax rate primarily due to the valuation allowance on our deferred tax assets.

As of January 1, 2022, pursuant to the Tax Cuts and Jobs Act of 2017 ("TCJA"), research and development costs in the current period are required to be amortized over five or fifteen years, depending on where the research is conducted. The new capitalization requirement significantly increased our deferred tax assets and cash tax liabilities, but also decreased our effective tax rate by increasing the foreign-derived intangible income deduction.

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The President signed into law the Inflation Reduction Act (the “IRA”) on August 16, 2022. The Act includes a new 15% corporate minimum tax and a 1% excise tax on the value of corporate stock repurchases, net of new share issuances, after December 31, 2022. We do not expect these provisions to have a material impact on our consolidated financial position; however, we will continue to evaluate their impact as further information becomes available.

Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for income tax purposes, tax credit carryforwards and the tax effect of net operating loss carryforwards. Significant components of our deferred tax assets and tax liabilities as of December 31, 2022 and 2021 were as follows (in millions):

			December 31,
			2022						2021
Deferred tax assets:
Net operating loss carryforwards			$	59					$	69
Stock-based compensation			68						44
Capitalized licenses, research and development and start-up costs			704						204
Tax credit carryforwards			97						80
Deferred revenue			16						43
Operating lease liabilities			26						32
Financing lease liabilities			135						136
Other comprehensive income			106						—
Inventory reserve and capitalization			86						—
Other			69						67
Total deferred tax assets			1,366						675
Less: valuation allowance			(155)						(149)
Net deferred tax assets			$	1,211					$	526
Deferred tax liabilities:
Right-of-use assets, financing			$	(117)					$	(119)
Right-of-use assets, operating			(26)						(31)
Property, plant and equipment			(85)						(49)
Other			(1)						(1)
Total deferred tax liabilities			(229)						(200)
Net deferred tax assets			$	982					$	326

On a quarterly basis, we reassess the valuation allowance on our deferred tax assets, weighing positive and negative evidence to assess the realizability of the deferred tax assets. In the first quarter of 2021, we reassessed the valuation allowance noting the increase in positive evidence, including significant revenue growth, expectations regarding future profitability, and successful supply chain and manufacturing capabilities to meet global product demand. After assessing both the positive evidence and negative evidence, we determined it was more likely than not that we will realize the majority of our deferred tax assets, and we released the valuation allowance on the majority of our deferred tax assets, accordingly. We continue to maintain a valuation allowance on certain state deferred tax assets. The valuation allowance increased by $6 million in the year ended December 31, 2022, primarily due to generation of state net operating losses and credits.

The table below summarizes changes in the valuation allowance for deferred tax assets for the periods presented (in millions):

			Years Ended December 31,
			2022						2021						2020
Valuation allowance at beginning of the period			$	149					$	823					$	471
Decreases recorded as benefit to income tax provision			(12)						(722)						—
Increases to valuation allowance			18						48						352
Valuation allowance at December 31			$	155					$	149					$	823

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At December 31, 2022, we had $828 million of state net operating loss carryforwards, which begin to expire in 2032. At December 31, 2022, we also had state research and development tax credit carryforwards of $122 million, the majority of which will begin to expire in 2030.

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, 2022, 2021, and 2020 were as follows (in millions):

			Years Ended December 31,
			2022						2021						2020
Unrecognized tax benefits at beginning of the period			$	68					$	—					$	—
Decrease due to prior positions:
Tax positions for prior years			(1)						—						—
Increase due to current year tax positions:
Additions based on tax positions for current year			57						54						—
Additions based on tax positions for prior years			4						14						—
Unrecognized tax benefits at end of the period			$	128					$	68					$	—

As of December 31, 2022, we had $128 million of net unrecognized tax benefits, which would affect our tax rate if recognized. 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.

We file U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. All tax years since our date of incorporation remain open to examination by the major taxing jurisdictions, as carryforward attributes generated in past years may be adjusted upon examination by the Internal Revenue Service or the state authorities. There are no open tax examinations at this time.

17. Earnings (Loss) per Share

The computation of basic earnings (loss) per share (EPS) is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and potential dilutive common shares outstanding during the period as determined by using the treasury stock method.

Basic and diluted EPS for the years ended December 31, 2022, 2021 and 2020 were calculated as follows (in millions, except per share data):

			Years Ended December 31,
			2022						2021						2020
Numerator:
Net income (loss)			$	8,362					$	12,202					$	(747)
Denominator:
Basic weighted-average common shares outstanding			394						403						381
Effect of dilutive securities			22						28						—
Diluted weighted-average common shares outstanding			416						431						381
Basic EPS			$	21.26					$	30.31					$	(1.96)
Diluted EPS			$	20.12					$	28.29					$	(1.96)

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The following common stock equivalents, presented based on amounts outstanding as of December 31, 2022, 2021 and 2020, were excluded from the calculation of diluted net income (loss) per share attributable to common stockholders for the periods indicated because their inclusion would have been anti-dilutive (in millions):

						December 31,
						2022						2021						2020
Options						3						1						34
RSUs and PSUs						—						—						2
Total						3						1						36

18. Geographic Information

Geographic Revenue

We operate in one 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 millions):

						Years Ended December 31,
						2022						2021						2020
United States						$	5,150					$	6,177					$	764
Europe						6,815						6,846						33
Rest of world (1)						7,298						5,448						6
Total						$	19,263					$	18,471					$	803

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(1) Includes product sales recognized under the agreement with Gavi, which facilitates the allocation and distribution of our COVID-19 vaccines around the world, particularly for low- and middle-income countries.

Our property, plant and equipment, including financing right-of-use assets, by geographic area was as follows (in millions):

						December 31,
						2022						2021
United States						$	1,267					$	1,050
Europe						714						181
Rest of world						37						10
Total						$	2,018					$	1,241