Item 1. Financial Statements

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Item 1. Financial Statements

MODERNA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except per share data)


	March 31,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	5,048	$	6,848
Investments	5,067		3,879
Accounts receivable	3,173		3,175
Inventory	1,942		1,441
Prepaid expenses and other current assets	1,120		728
Total current assets	16,350		16,071
Investments, non-current	9,171		6,843
Property and equipment, net	1,341		1,241
Right-of-use assets, operating leases	132		142
Restricted cash, non-current	12		12
Deferred tax assets	521		326
Other non-current assets	82		34
Total assets	$	27,609	$	24,669
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	199	$	302
Accrued liabilities	1,608		1,472
Deferred revenue	5,599		6,253
Income taxes payable	1,592		876
Other current liabilities	240		225
Total current liabilities	9,238		9,128
Deferred revenue, non-current	464		615
Operating lease liabilities, non-current	95		106
Financing lease liabilities, non-current	646		599
Other non-current liabilities	91		76
Total liabilities	10,534		10,524
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, par value $0.0001; 162 shares authorized as of March 31, 2022 and December 31, 2021; no shares issued or outstanding at March 31, 2022 and December 31, 2021	—		—
Common stock, par value $0.0001; 1,600 shares authorized as of March 31, 2022 and December 31, 2021; 400 and 403 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	—		—
Additional paid-in capital	3,644		4,211
Accumulated other comprehensive loss	(184)		(24)
Retained earnings	13,615		9,958
Total stockholders’ equity	17,075		14,145
Total liabilities and stockholders’ equity	$	27,609	$	24,669

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

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in millions, except per share data)


	Three Months Ended March 31,
		2022		2021
Revenue:
Product sales		$	5,925	$	1,733
Grant revenue		126		194
Collaboration revenue		15		10
Total revenue		6,066		1,937
Operating expenses:
Cost of sales		1,017		193
Research and development		554		401
Selling, general and administrative		268		77
Total operating expenses		1,839		671
Income from operations		4,227		1,266
Interest income		15		4
Other expense, net		(13)		(10)
Income before income taxes		4,229		1,260
Provision for income taxes		572		39
Net income		$	3,657	$	1,221

Earnings per share:
Basic		$	9.09	$	3.05
Diluted		$	8.58	$	2.84

Weighted average common shares used in calculation of earnings per share:
Basic		402		400
Diluted		426		430

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

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in millions)


	Three Months Ended March 31,
		2022		2021
Net income		$	3,657	$	1,221
Other comprehensive loss, net of tax:
Available-for-sales securities:
Unrealized losses on available-for-sale debt securities		(178)		(2)
Less: net realized losses on available-for-sale securities reclassified in net income		7		—
Net decrease from available-for-sale debt securities		(171)		(2)
Cash flow hedges:
Unrealized gains on derivative instruments		25		—
Less: net realized (gains) on derivative instruments reclassified in net income		(14)		—
Net increase from derivatives designated as hedging instruments		11		—
Total other comprehensive loss		(160)		(2)
Comprehensive income		$	3,497	$	1,219

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

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, in millions)


	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

Exercise of options to purchase common stock	1	—		12		—		—		12

Stock-based compensation	—	—		44		—		—		44
Other comprehensive loss, net of tax	—	—		—		(160)		—		(160)
Repurchase of common stock	(4)	—		(623)		—		—		(623)
Net income	—	—		—		—		3,657		3,657
Balance at March 31, 2022	400	$	—	$	3,644	$	(184)	$	13,615	$	17,075


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		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	2	—		28		—		—		28

Stock-based compensation	—	—		30		—		—		30
Other comprehensive loss, net of tax	—	—		—		(2)		—		(2)
Net income	—	—		—		—		1,221		1,221
Balance at March 31, 2021	401	$	—	$	4,860	$	1	$	(1,023)	$	3,838

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

MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	Three Months Ended March 31,
	2022		2021
Operating activities
Net income	$	3,657	$	1,221
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation	44		30
Depreciation and amortization	79		15
Amortization/accretion of investments	18		5

Deferred income taxes	(146)		(50)
Changes in assets and liabilities:
Accounts receivable	1		(1,819)
Prepaid expenses and other assets	(414)		(12)
Inventory	(501)		(448)
Right-of-use assets, operating leases	10		2
Accounts payable	(35)		(15)
Accrued liabilities	114		285
Deferred revenue	(805)		3,666
Income taxes payable	716		90
Operating lease liabilities	(10)		(2)
Other liabilities	35		3
Net cash provided by operating activities	2,763		2,971
Investing activities
Purchases of marketable securities	(5,572)		(726)
Proceeds from maturities of marketable securities	441		339
Proceeds from sales of marketable securities	1,377		242
Purchases of property and equipment	(132)		(35)
Investment in convertible notes	(35)		—
Net cash used in investing activities	(3,921)		(180)
Financing activities

Proceeds from issuance of common stock through equity plans	12		28

Repurchase of common stock	(623)		—
Changes in financing lease liabilities	(31)		(2)
Net cash (used in) provided by financing activities	(642)		26
Net (decrease) increase in cash, cash equivalents and restricted cash	(1,800)		2,817
Cash, cash equivalents and restricted cash, beginning of year	6,860		2,636
Cash, cash equivalents and restricted cash, end of period	$	5,060	$	5,453
Non-cash investing and financing activities
Purchases of property and equipment included in accounts payable and accrued liabilities	$	64	$	21
Right-of-use assets obtained through finance lease modifications and reassessments	$	—	$	51
Right-of-use assets obtained in exchange for financing lease liabilities	$	94	$	—

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

MODERNA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Description of the 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 generation of transformative 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®) at the 100 µg dose level in individuals 18 years of age or older. Subsequently, we have also received authorization for our COVID-19 vaccine from health agencies in more than 70 countries and from the World Health Organization. In addition, we have received authorization for a two-dose 100 µg primary series of our COVID-19 vaccine in adolescents aged 12-17 years in more than 40 countries. We have received authorization for a two-dose 50 µg primary series of our COVID-19 vaccine in children ages 6 to 11 in more than 35 countries. The FDA, European Medicines Agency (EMA), Swissmedic and other health agencies around the world have authorized a booster dose of our COVID-19 vaccine at the 50 µg dose level for adults ages 18 years and older.

In January 2022, we received full commercial approval for Spikevax to prevent COVID-19 in individuals 18 years of age and older in the United States. Spikevax also has full commercial approval in individuals 18 years of age and older in Canada and the United Kingdom. In April 2022, we submitted a request for an EUA for a two-dose 25 μg primary series of our COVID-19 vaccine in children 6 months to 6 years of age to the FDA. Similar requests for pediatric authorizations are underway with international regulatory authorities.

2. Summary of Basis of Presentation and Recent Accounting Standards

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements that accompany these notes have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K). 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 Update (ASU) of the Financial Accounting Standards Board (FASB). This report should be read in conjunction with the audited consolidated financial statements in our 2021 Form 10-K.

The condensed consolidated financial statements include Moderna, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2022 are consistent with those described in our 2021 Form 10-K. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the operating results to be expected for the full fiscal year or future operating periods.

Use of Estimates

We have made estimates and judgments affecting the amounts reported in our condensed 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 revenues 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 allowance on deferred tax assets, leases, fair value of financial instruments, derivative financial instruments, inventory, firm purchase commitment liabilities,

useful lives of property and equipment, research and development expenses, and stock-based compensation. The actual results that we experience may differ materially from our estimates.

Comprehensive Income

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

The components of accumulated other comprehensive loss for the three months ended March 31, 2022 were as follows (in millions):


	Unrealized Loss on Available-for-Sale Debt Securities		Net Unrealized Gains on Derivatives Designated As Hedging Instruments		Total
Accumulated other comprehensive loss, balance at December 31, 2021	$	(40)	$	16	$	(24)
Other comprehensive loss	(171)		11		(160)
Accumulated other comprehensive loss, balance at March 31, 2022	$	(211)	$	27	$	(184)

Restricted Cash

We include our restricted cash balance in the cash, cash equivalents and restricted cash reconciliation of operating, investing and financing activities in the condensed consolidated statements of cash flows.

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in millions):


	March 31,
	2022		2021
Cash and cash equivalents	$	5,048	$	5,442

Restricted cash, non-current	12		11
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	5,060	$	5,453

Recently Issued Accounting Standards Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our condensed 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 Gavi (on behalf of the COVAX Facility).

Product sales by customer geographic location were as follows (in millions):


	Three Months Ended March 31,
		2022		2021
United States		$	945	$	1,358
Europe		2,076		284
Rest of world (1)		2,904		91
Total		$	5,925	$	1,733

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

As of March 31, 2022, our COVID-19 vaccine (marketed under the brand name Spikevax) was our only commercial product authorized for use.

As of March 31, 2022 and December 31, 2021, we had deferred revenue of $5.9 billion and $6.7 billion, respectively, related to customer deposits. We expect $5.5 billion of our deferred revenue related to customer deposits as of March 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 revenue is recognized.

4. Grant Revenue

In September 2020, we entered into an agreement with the Defense Advanced Research Projects Agency (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 therapeutics and vaccines. As of March 31, 2022, the committed funding, net of revenue earned was $7 million. An additional $33 million of funding will be available if DARPA exercises additional contract options.

In April 2020, we entered into an agreement with the Biomedical Advanced Research and Development Authority (BARDA), a division of the Office of the Assistant Secretary for Preparedness and Response within the U.S. Department of Health and Human Services (HHS), for an award of up to $483 million to accelerate development of mRNA-1273, our 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 approximately $1.7 billion. All contract options have been exercised. As of March 31, 2022, the remaining available funding, net of revenue earned was $378 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. Three of the four contract options have been exercised. As of March 31, 2022, the remaining available funding, net of revenue earned was $46 million, with an additional $8 million available if the final contract option is exercised.

In January 2016, we entered a global health project framework agreement with the Bill and Melinda Gates Foundation (Gates Foundation) to advance mRNA-based development projects for various infectious diseases, including human immunodeficiency virus (HIV). As of March 31, 2022, the available funding, net of revenue earned was $7 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):


	Three Months Ended March 31,
		2022		2021
BARDA		$	122	$	192
Other grant revenue		4		2
Total grant revenue		$	126	$	194

5. Collaboration Agreements

We have entered into collaboration agreements with strategic collaborators to accelerate the discovery and advancement of potential mRNA medicines across therapeutic areas. As of March 31, 2022 and December 31, 2021, we had collaboration agreements with AstraZeneca plc (AstraZeneca), Merck & Co., Inc (Merck), Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited (together, Vertex), and others. Please refer to our 2021 Form 10-K under the heading “Third-Party Strategic Alliances” and Note 5 to our consolidated financial statements for further description of these collaboration agreements.

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


	Three Months Ended March 31,
Collaboration Revenue by Strategic Collaborator:		2022		2021

Merck		$	10	$	—
Vertex		4		9
Other		1		1
Total collaboration revenue		$	15	$	10

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


	December 31, 2021		Additions		Deductions		March 31, 2022
Contract Assets:
Accounts receivable	$	9	$	3	$	(9)	$	3
Contract Liabilities:
Deferred revenue	$	204	$	3	$	(15)	$	192

As of March 31, 2022, the aggregated amount of the transaction price allocated to performance obligations under our collaboration agreements that are unsatisfied or partially unsatisfied was $268 million.

In addition to the collaboration agreements 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.

6. Financial Instruments

Cash and Cash Equivalents and Investments

The following tables summarize our cash and available-for-sale securities by significant investment category at March 31, 2022 and December 31, 2021 (in millions):


	March 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non- Current Marketable Securities
Cash and cash equivalents	$	5,048	$	—	$	—	$	5,048	$	5,048	$	—	$	—
Available-for-sale:
Certificates of deposit	251		—		—		251		—		251		—
U.S. treasury bills	515		—		(2)		513		—		513		—
U.S. treasury notes	7,956		—		(147)		7,809		—		2,820		4,989
Corporate debt securities	5,665		—		(117)		5,548		—		1,470		4,078
Government debt securities	122		—		(5)		117		—		13		104
Total	$	19,557	$	—	$	(271)	$	19,286	$	5,048	$	5,067	$	9,171

	December 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated 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

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


	March 31, 2022
	Amortized Cost		Estimated Fair Value
Due in one year or less	$	5,094	$	5,067
Due after one year through five years	9,415		9,171
Total	$	14,509	$	14,238


	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. 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. Any impairment that is not credit related is recognized in other comprehensive loss, net of applicable taxes. A credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. We did not recognize any impairment charges related to available-for-sale securities for the three months ended March 31, 2022 and 2021. We did not record any credit-related allowance to available-for-sale securities as of March 31, 2022 and December 31, 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 the length of time the securities have been in an unrealized loss position at March 31, 2022 and December 31, 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 March 31, 2022:

U.S. treasury bills	$	(2)	$	513	$	—	$	—	$	(2)	$	513
U.S. treasury notes	(147)		7,722		—		—		(147)		7,722
Corporate debt securities	(117)		4,646		—		1		(117)		4,647
Government debt securities	(5)		116		—		—		(5)		116
Total	$	(271)	$	12,997	$	—	$	1	$	(271)	$	12,998

As of December 31, 2021:

U.S. treasury bills	$	—	$	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 March 31, 2022 and December 31, 2021, we held 569 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 do we believe that we are more-likely-than-not to conclude we will have to sell them before recovery of their carrying values. We also believe that we will be able to collect both principal and interest amounts due to us at maturity.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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).

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


	Fair value at March 31, 2022			Fair Value Measurement Using
			Level 1			Level 2
Assets:
Money market funds	$	2,808		$	2,808		$	—
Certificates of deposit	251			—			251
U.S. treasury bills	513			—			513
U.S. treasury notes	7,809			—			7,809
Corporate debt securities	5,548			—			5,548
Government debt securities	117			—			117
Derivative instruments (Note 7)	35			—			35
Total	$	17,081		$	2,808		$	14,273
Liabilities:
Derivative instruments (Note 7)	$	9		$	—		$	9


	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

As of March 31, 2022 and December 31, 2021, we did not have non-financial assets or liabilities measured at fair value on a recurring basis and did not have any Level 3 financial assets or financial liabilities.

In addition, as of March 31, 2022, we had $30 million in equity investments without readily determinable fair values, which are recorded within other non-current assets in our condensed consolidated balance sheets and excluded from the fair value measurement tables above. We did not have equity investments as of December 31, 2021.

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 condensed 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 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 other current assets or other current liabilities, respectively, in our condensed consolidated balance sheets. The gains or losses resulting from changes in the fair value of these hedges are initially recorded as a component of accumulated other comprehensive income (loss) (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 condensed consolidated statements of income. 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 condensed consolidated statements of income. As of March 31, 2022, we had net deferred gains of $35 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 accounts receivable, accounts payable and lease liabilities in Euro, Japanese Yen and Swiss Franc, 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 other current assets or other current liabilities in our condensed 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 condensed consolidated statements of income. 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 condensed consolidated statements of income.

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


	March 31, 2022
	Notional Amount			Fair Value
			Asset (1)			Liability (2)
Derivatives designated as cash flow hedging instruments:
Foreign currency forward contracts	$	969		$	35		$	—

Derivatives not designated as hedging instruments:
Foreign currency forward contracts	627			—			9
Total derivatives	$	1,596		$	35		$	9


	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 derivatives	$	1,935		$	21		$	7

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

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

Gains on our foreign currency derivatives, net of tax, recognized in our condensed consolidated statements of comprehensive income for the three months ended March 31, 2022 were as follows (in millions):


	Three Months Ended March 31, 2022
Derivatives in cash flow hedging relationships:
Foreign currency forward contracts	$	25

The effect of our foreign currency derivatives in our condensed consolidated statements of income for the three months ended March 31, 2022 and 2021 was as follows (in millions):


	Statement of Income Classification	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Derivatives in cash flow hedging relationships:
Foreign currency forward contracts
Net gain reclassified from AOCI into income	Product sales	$	14	$	—

Derivatives not designated as hedging instruments:
Foreign currency forward contracts
Net realized and unrealized gain	Other expense, net	$	28	$	35

There were no cash flow hedging activities for the three months ended March 31, 2021.

8. Inventory

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


	March 31,		December 31,
	2022		2021
Raw materials	$	1,072	$	870
Work in progress	513		338
Finished goods	357		233
Total inventory	$	1,942	$	1,441

Inventory is recorded at the lower of cost or net realizable value. On a quarterly basis, we evaluate the composition of inventory to identify excess, obsolete, slow-moving or otherwise unsaleable items. 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 of inventory and firm purchase commitment liabilities requires judgment, including consideration of many factors, such as estimates of future product demand, current and future market conditions, potential product obsolescence, expiration and utilization of raw materials under firm purchase commitments and contractual minimums, among others.

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 condensed consolidated statements of income. For the three months ended March 31, 2022, inventory write-downs were $189 million and losses on firm purchase commitments, recorded as an accrued liability in our condensed consolidated balance sheets, were $159 million. Such charges were immaterial for the three months ended March 31, 2021.

9. Property and Equipment, Net

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


	March 31,		December 31,
	2022		2021
Manufacturing and laboratory equipment	$	179	$	175
Leasehold improvements	353		313
Furniture, fixtures and other	16		11
Computer equipment and software	18		16
Internally developed software	8		9
Right-of-use asset, financing (Note 11)	951		857
Construction in progress	247		212
Total	1,772		1,593
Less: Accumulated depreciation	(431)		(352)
Property and equipment, net	$	1,341	$	1,241

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $79 million and $15 million, respectively.

10. Other Balance Sheet Components

Prepaid Expenses and Other Current Assets

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


	March 31,		December 31,
	2022		2021
Down payments for materials and supplies	$	396	$	287
Down payments to manufacturing vendors	234		118
Prepaid services	205		126
Value added tax receivable	104		70
Tenant improvement allowance receivable	51		51
Interest receivable	36		27
Derivative assets	35		21
Prepaid income tax	23		—
Other current assets	36		28
Prepaid expenses and other current assets	$	1,120	$	728

Accrued Liabilities

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


	March 31,		December 31,
	2022		2021
Clinical trials	$	288	$	283
Raw materials	228		260
Royalties	207		241
Development operations	87		137
Manufacturing	275		227
Other external goods and services	174		79
Loss on future firm purchase commitments(1)	159		—
Compensation-related	74		126
Other	116		119


Accrued liabilities	$	1,608	$	1,472

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

Other Current Liabilities

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


	March 31,		December 31,
	2022		2021
Lease liabilities - financing (Note 11)	$	160	$	165
Lease liabilities - operating (Note 11)	46		46

Other	34		14
Other current liabilities	$	240	$	225

Deferred Revenue

The following table summarizes the activities in deferred revenue for the three months ended March 31, 2022 (in millions):


	December 31, 2021		Additions		Deductions		March 31, 2022
Product sales	$	6,658	$	1,755	$	(2,548)	$	5,865
Grant revenue	6		—		—		6
Collaboration revenue	204		3		(15)		192
Total deferred revenue	$	6,868	$	1,758	$	(2,563)	$	6,063

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. 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), an industrial technology center located in Norwood. We also lease other office and lab spaces globally for our business operations.

Operating Leases

Cambridge Campus

We occupy a multi-building campus in Technology Square in Cambridge, Massachusetts with a mix of offices and research laboratory space totaling approximately 261,000 square feet. Our Cambridge campus leases have expiry ranges from 2024 to 2029.

In addition, we are investing in a new Moderna Science Center (MSC) in Cambridge, to create a purpose-built space to support our next chapter of discovery (see Note 12). In connection with our MSC investment, in September 2021, we entered into amendments 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.

Finance Leases

Moderna Technology Center

Our MTC comprises three main buildings: MTC South, MTC North and MTC East. Each of the MTC South and the MTC North is approximately 200,000 square feet and provides office, laboratory and light manufacturing space, directly supporting improvement in our manufacturing capabilities. The MTC East is approximately 240,000 square feet for expansion of our commercial and clinical activities. The MTC campus is leased through 2042 and we have the option to extend the term for three extension periods of five years.

Embedded Leases

We have entered into multiple contract manufacturing service agreements with third parties which contain embedded leases within the scope of ASC 842. These leases expire from 2022 through 2023. As of March 31, 2022 and December 31, 2021, we had lease liabilities of $173 million and $166 million, respectively, related to the embedded leases. As of March 31, 2022 and December 31, 2021, we had right-of-use assets of $171 million and $173 million, respectively.

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


	March 31,		December 31,
	2022		2021
Assets:
Right-of-use assets, operating, net (1) (2)	$	132	$	142
Right-of-use assets, financing, net (3) (4)	693		665
Total	$	825	$	807

Liabilities:
Current:
Operating lease liabilities (5)	$	46	$	46
Financing lease liabilities (5)	160		165
Total current lease liabilities	206		211
Non-current:
Operating lease liabilities, non-current	95		106
Financing lease liabilities, non-current	646		599
Total non-current lease liabilities	$	741	$	705
Total	$	947	$	916

(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 and equipment in the condensed consolidated balance sheets, net of accumulated depreciation.

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

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


Fiscal Year		Operating Leases		Financing Leases (1)
2022	(remainder of the year)	$	41	$	169
2023		39		39
2024		15		21
2025		16		22
2026		16		22
Thereafter		51		1,111
Total minimum lease payments		178		1,384
Less amounts representing interest or imputed interest		(37)		(578)
Present value of lease liabilities		$	141	$	806

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

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 the three months ended March 31, 2022 and the year ended December 31, 2021, we had not experienced any material 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 OrdersWe 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 March 31, 2022, we had $2.5 billion of non-cancelable purchase commitments related to raw materials and manufacturing agreements, which are expected to be paid through 2025. As of March 31, 2022, we had $190 million of non-cancelable purchase commitments related to clinical services and other goods and services which are expected to be paid through 2026. These amounts represent our minimum contractual obligations, including termination fees.

In addition to purchase commitments, we have agreements with third parties for various goods and 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 March 31, 2022, we had cancelable open purchase orders of $3.4 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 March 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

On June 26, 2017, we entered into sublicense agreements with Cellscript, LLC and its affiliate, mRNA RiboTherapeutics, Inc. to sublicense certain patent rights. Pursuant to each agreement, we are required to pay certain license fees, annual maintenance fees, minimum royalties on future net sales and milestone payments contingent on achievement of certain development, regulatory and commercial milestones for specified products, on a product-by-product basis. 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. For the three months ended March 31, 2022 and 2021, we recognized $207 million and $84 million, respectively, of royalty expenses associated with our product sales, which was recorded to cost of sales in our condensed consolidated statements of income.

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 March 31, 2022.

Moderna Science Center

In September 2021, we announced an investment in the MSC, in Cambridge, Massachusetts. The MSC is expected to integrate scientific and non-scientific spaces, including our principal executive offices, and will be 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 will undergo an approximately two-year building project. Following 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 $1.1 billion non-cancellable rent payments for the initial lease term. We expect to begin a phased move-in process in 2023.

13. Stock-Based Compensation and Share Repurchase Program

Stock-Based Compensation

The following table presents the components and classification of stock-based compensation expense for the three months ended March 31, 2022 and 2021 as follows (in millions):


	Three Months Ended March 31,
		2022		2021
Options		$	25	$	22
Restricted Common Stock (RSUs) and Performance Stock Units (PSUs)		17		7
Employee Stock Purchase Plan (ESPP)		2		1
Total		$	44	$	30

Cost of sales		$	8	$	4
Research and development		20		14
Selling, general and administrative		16		12
Total		$	44	$	30

As of March 31, 2022, there was $538 million of total unrecognized compensation cost related to unvested stock-based compensation with respect to options, RSUs and PSUs granted. That cost is expected to be recognized over a weighted-average period of 3.2 years at March 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. Pursuant to the 2021 Repurchase Program, we were authorized to repurchase up to $1.0 billion of our outstanding common stock, with an expiration date no later than August 2, 2023. 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 a new Share Repurchase Program (2022 Repurchase Program) of our common stock, with no expiration date. Pursuant to the 2022 Repurchase Program, we may repurchase up to $3.0 billion of our outstanding common stock. The timing and actual number of shares repurchased 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.

During the three months ended March 31, 2022, we repurchased 4 million shares of our common stock under the 2021 Repurchase Program and the 2022 Repurchase Program for an aggregate of $623 million, including commissions and fees. As of March 31, 2022, there was a total of $2.5 billion remaining for repurchases of our common stock under the 2022 Repurchase Program.

14. Income Taxes

The following table summarizes our income tax expense (in millions, except for percentages):


	Three Months Ended March 31,
	2022			2021
Income before income taxes	$	4,229		$	1,260
Provision for income taxes	$	572		$	39
Effective tax rate	13.5		%	3.1		%

Our effective tax rate for the three months ended March 31, 2022 was lower than the U.S. statutory rate, primarily due to the benefit of the foreign derived intangible income deduction and a discrete item for excess tax benefits related to stock-based compensation. The increase in our effective tax rate for the three months ended March 31, 2022 compared to the effective tax rate for the same period in 2021 is mainly attributable to the benefit recorded in 2021 related to the release of the valuation allowance on the majority of our deferred tax assets.

We file U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. We are not currently subject to any tax assessment from an income tax examination in the United States or any other major taxing jurisdiction.

Effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S. tax purposes. Unless modified or repealed, and based on current assumptions, the mandatory capitalization would increase our cash tax liabilities, but also increase our foreign-derived intangible income deduction resulting in a decrease to our effective tax rate.

15. Earnings per Share

The computation of basic earnings 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 during the period as determined by using the treasury stock method.

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


	Three Months Ended March 31,
		2022		2021
Numerator:
Net income		$	3,657	$	1,221
Denominator:
Basic weighted-average common shares outstanding		402		400
Effect of dilutive securities		24		30
Diluted weighted-average common shares outstanding		426		430

Basic EPS		$	9.09	$	3.05
Diluted EPS		$	8.58	$	2.84

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


	Three Months Ended March 31,
	2022	2021
Stock options	2	1

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