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)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	2,932	$	3,205
Investments	4,641		6,697
Accounts receivable, net	1,866		1,385
Inventory	487		949
Prepaid expenses and other current assets	873		1,195
Total current assets	10,799		13,431
Investments, non-current	5,273		8,318
Property, plant and equipment, net	1,952		2,018
Right-of-use assets, operating leases	765		121

Deferred tax assets	—		982
Other non-current assets	661		988
Total assets	$	19,450	$	25,858
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	494	$	487
Accrued liabilities	2,224		2,101
Deferred revenue	1,372		2,038
Income taxes payable	56		48
Other current liabilities	239		249
Total current liabilities	4,385		4,923
Deferred revenue, non-current	166		673
Operating lease liabilities, non-current	697		92
Financing lease liabilities, non-current	575		912
Other non-current liabilities	172		135
Total liabilities	5,995		6,735
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, par value $0.0001; 162 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued or outstanding at September 30, 2023 and December 31, 2022	—		—
Common stock, par value $0.0001; 1,600 shares authorized as of September 30, 2023 and December 31, 2022; 381 and 385 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	—		—
Additional paid-in capital	277		1,173
Accumulated other comprehensive loss	(211)		(370)
Retained earnings	13,389		18,320
Total stockholders’ equity	13,455		19,123
Total liabilities and stockholders’ equity	$	19,450	$	25,858

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

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MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue:
Net product sales	$	1,757	$	3,120	$	3,878	$	13,576
Other revenue	74		244		159		603


Total revenue	1,831		3,364		4,037		14,179
Operating expenses:
Cost of sales	2,241		1,100		3,764		3,498
Research and development	1,160		820		3,439		2,084
Selling, general and administrative	442		278		1,079		757
Total operating expenses	3,843		2,198		8,282		6,339
(Loss) income from operations	(2,012)		1,166		(4,245)		7,840
Interest income	105		58		318		113
Other expense, net	(51)		(7)		(85)		(33)
(Loss) income before income taxes	(1,958)		1,217		(4,012)		7,920
Provision for income taxes	1,672		174		919		1,023
Net (loss) income	$	(3,630)	$	1,043	$	(4,931)	$	6,897

(Loss) earnings per share:
Basic	$	(9.53)	$	2.67	$	(12.89)	$	17.41
Diluted	$	(9.53)	$	2.53	$	(12.89)	$	16.46

Weighted average common shares used in calculation of (loss) earnings per share:
Basic	381		390		382		396
Diluted	381		412		382		419

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

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MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net (loss) income	$	(3,630)	$	1,043	$	(4,931)	$	6,897
Other comprehensive income (loss), net of tax:
Available-for-sale securities:
Unrealized gains (losses) on available-for-sale debt securities	46		(126)		115		(384)
Less: net realized losses on available-for-sale securities reclassified in net (loss) income	6		3		36		18
Net increase (decrease) from available-for-sale debt securities	52		(123)		151		(366)
Cash flow hedges:
Unrealized gains on derivative instruments	—		62		—		133
Less: net realized (gains) losses on derivative instruments reclassified in net (loss) income	—		(50)		8		(94)
Net increase from derivatives designated as hedging instruments	—		12		8		39
Total other comprehensive income (loss)	52		(111)		159		(327)
Comprehensive (loss) income	$	(3,578)	$	932	$	(4,772)	$	6,570

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

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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 June 30, 2023	381	$	—	$	193	$	(263)	$	17,019	$	16,949

Exercise of options to purchase common stock	—	—		6		—		—		6

Stock-based compensation	—	—		77		—		—		77
Other comprehensive income, net of tax	—	—		—		52		—		52
Repurchase of common stock, including excise tax	—	—		1		—		—		1
Net loss	—	—		—		—		(3,630)		(3,630)
Balance at September 30, 2023	381	$	—	$	277	$	(211)	$	13,389	$	13,455


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2022	392	$	—	$	2,413	$	(240)	$	15,812	$	17,985

Vesting of restricted common stock	1	—		—		—		—		—
Exercise of options to purchase common stock	1	—		11		—		—		11

Stock-based compensation	—	—		70		—		—		70
Other comprehensive loss, net of tax	—	—		—		(111)		—		(111)
Repurchase of common stock	(7)	—		(1,006)		—		—		(1,006)
Net income	—	—		—		—		1,043		1,043
Balance at September 30, 2022	387	$	—	$	1,488	$	(351)	$	16,855	$	17,992

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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, 2022	385	$	—	$	1,173	$	(370)	$	18,320	$	19,123
Vesting of restricted common stock	1	—		—		—		—		—
Exercise of options to purchase common stock	3	—		19		—		—		19
Purchase of common stock under employee stock purchase plan	—	—		12		—		—		12
Stock-based compensation	—	—		226		—		—		226
Other comprehensive income, net of tax	—	—		—		159		—		159
Repurchase of common stock, including excise tax	(8)	—		(1,153)		—		—		(1,153)
Net loss	—	—		—		—		(4,931)		(4,931)
Balance at September 30, 2023	381	$	—	$	277	$	(211)	$	13,389	$	13,455


	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	3	—		31		—		—		31
Purchase of common stock under employee stock purchase plan	—	—		9		—		—		9
Stock-based compensation	—	—		164		—		—		164
Other comprehensive loss, net of tax	—	—		—		(327)		—		(327)
Repurchase of common stock	(20)	—		(2,927)		—		—		(2,927)
Net income	—	—		—		—		6,897		6,897
Balance at September 30, 2022	387	$	—	$	1,488	$	(351)	$	16,855	$	17,992

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

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MODERNA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)


	Nine Months Ended September 30,
	2023		2022
Operating activities
Net (loss) income	$	(4,931)	$	6,897
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Stock-based compensation	226		164
Depreciation and amortization	419		268
Amortization/accretion of investments	(41)		35
Loss on equity investments, net	16		—
Deferred income taxes	934		(473)
Other non-cash items	25		36
Changes in assets and liabilities, net of acquisition of business:
Accounts receivable, net	(481)		480
Prepaid expenses and other assets	772		(669)
Inventory	462		(636)
Right-of-use assets, operating leases	(657)		29
Accounts payable	(8)		89
Accrued liabilities	63		354
Deferred revenue	(1,173)		(2,691)
Income taxes payable	8		(810)
Operating lease liabilities	605		(27)
Other liabilities	21		273
Net cash (used in) provided by operating activities	(3,740)		3,319
Investing activities
Purchases of marketable securities	(2,097)		(8,925)
Proceeds from maturities of marketable securities	4,711		2,222
Proceeds from sales of marketable securities	2,725		2,918
Purchases of property, plant and equipment	(487)		(308)
Acquisition of business, net of cash acquired	(85)		—
Investment in convertible notes and equity securities	(23)		(35)
Net cash provided by (used in) investing activities	4,744		(4,128)
Financing activities

Proceeds from issuance of common stock through equity plans	31		40

Repurchase of common stock, including excise tax	(1,153)		(2,927)
Changes in financing lease liabilities	(146)		(123)
Net cash used in financing activities	(1,268)		(3,010)
Net decrease in cash, cash equivalents and restricted cash	(264)		(3,819)
Cash, cash equivalents and restricted cash, beginning of year	3,217		6,860
Cash, cash equivalents and restricted cash, end of period	$	2,953	$	3,041
Non-cash investing and financing activities
Purchases of property and equipment included in accounts payable and accrued liabilities	$	148	$	80
Right-of-use assets obtained through finance lease modifications and reassessments	$	213	$	—
Right-of-use assets obtained in exchange for financing lease liabilities	$	—	$	781

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

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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 advancing a new class of medicines made of messenger RNA (mRNA). mRNA medicines are designed to direct the body’s cells to produce intracellular, membrane or secreted proteins that have a therapeutic or preventive benefit with the potential to address a broad spectrum of diseases. Our platform builds on continuous advances in basic and applied mRNA science, delivery technology and manufacturing, providing us the capability to pursue in parallel a robust pipeline of new development candidates. We are developing therapeutics and vaccines for infectious diseases, immuno-oncology, rare diseases, autoimmune diseases and cardiovascular diseases, independently and with our strategic collaborators.

Our COVID-19 vaccine is our first commercial product and is marketed, where approved, under the name Spikevax®. Our original vaccine, mRNA-1273, targeted the SARS-CoV-2 ancestral strain, and we have leveraged our mRNA platform to rapidly adapt our vaccine to emerging SARS-CoV-2 strains to provide protection as the virus evolves and regulatory guidance is updated.

We have a diverse and extensive development pipeline of 41 development candidates across our 43 development programs, of which 38 are in clinical studies currently.

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, 2022 (2022 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 2022 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 and nine months ended September 30, 2023 are consistent with those described in our 2022 Form 10-K. The only exception pertains to the policy related to net product sales in the U.S. In the third quarter of 2023, we initiated sales of our COVID-19 vaccine in the U.S. commercial market. Please refer to Note 3 for further details regarding the policy. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results to be expected for the full fiscal year or future operating periods. Other revenue in the condensed consolidated statements of operations comprises grant revenue and collaboration revenue that were previously presented as separate line items in our consolidated statements of operations in our 2022 Form 10-K. The associated prior period amounts in the condensed consolidated financial statements, as well as in the notes thereto, have been reclassified to conform to the current presentation.

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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, product sales provisions, income taxes, valuation allowance of deferred tax assets, inventory valuation, firm purchase commitment liabilities, pre-launch inventory, leases, fair value of financial instruments, derivative financial instruments, useful lives of property and equipment, research and development expenses, stock-based compensation, intangible assets, goodwill, credit loss and impairment reviews. The actual results that we experience may differ materially from our estimates.

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/losses on our investments and derivatives designated as hedging instruments. Total comprehensive income (loss) for all periods presented has been disclosed in the condensed consolidated statements of comprehensive income (loss).

The components of accumulated other comprehensive loss for the three and nine months ended September 30, 2023 were as follows (in millions):


	Unrealized Gains on Available-for-Sale Debt Securities		Net Unrealized Gains on Derivatives Designated As Hedging Instruments		Total
Accumulated other comprehensive loss, balance at December 31, 2022	$	(362)	$	(8)	$	(370)
Other comprehensive income	95		8		103
Accumulated other comprehensive loss, balance at March 31, 2023	(267)		—		(267)
Other comprehensive income	4		—		4
Accumulated other comprehensive loss, balance at June 30, 2023	(263)		—		(263)
Other comprehensive income	52		—		52
Accumulated other comprehensive loss, balance at September 30, 2023	$	(211)	$	—	$	(211)

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):


	September 30,
	2023		2022
Cash and cash equivalents	$	2,932	$	3,027
Restricted cash(1)	17		—
Restricted cash, non-current(2)	4		14
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	2,953	$	3,041

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

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

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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. Net Product Sales

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
United States	$	913	$	985	$	916	$	3,380
Europe	103		1,045		739		4,511
Rest of world	741		1,090		2,223		5,685
Total	$	1,757	$	3,120	$	3,878	$	13,576

As of September 30, 2023, our COVID-19 vaccine was our only commercial product authorized for use.

Prior to the third quarter of 2023, we sold our COVID-19 vaccine to the U.S. Government, other international governments and organizations. The agreements and related amendments with these entities generally do not include variable consideration, such as discounts, rebates or returns. Certain of these agreements entitle us to upfront deposits for our COVID-19 vaccine supply, initially recorded as deferred revenue.

As of September 30, 2023 and December 31, 2022, we had deferred revenue of $1.5 billion and $2.6 billion, respectively, related to customer deposits for our COVID-19 vaccine. We expect $1.4 billion of our deferred revenue related to customer deposits as of September 30, 2023 to be realized in less than one year. Timing of product delivery and manufacturing, and receipt of marketing approval for the applicable COVID-19 vaccine will determine the period in which product sales are recognized.

In the third quarter of 2023, we commenced sales of our latest COVID-19 vaccine to the U.S. commercial market, in addition to continuing sales to international governments and organizations. In the U.S., our COVID-19 vaccine is sold primarily to wholesalers and distributors, and to a lesser extent, directly to retailers and healthcare providers. Wholesalers and distributors typically do not make upfront payments to us.

We recognize net product sales when control of the product transfers to the customer, typically upon delivery. Payment terms generally range from 30 to 60 days, in line with customary practices in each country. Net product sales are recognized net of estimated wholesaler chargebacks, invoice discounts for prompt payments and pre-orders, provisions for sales returns, and other related deductions. These provisions are recorded based on contractual terms and our estimate of returns for product sold during the period, using the expected value method or the most likely amount method. We update our estimates quarterly and record necessary adjustments in the period when we identify the adjustments. Product sales, net of provisions, are recorded only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable when the uncertainty associated with the provisions is subsequently resolved. Shipping and handling activities are considered fulfillment activities and not a separate performance obligation. Taxes assessed by governmental authorities that are imposed on and collected from our product sales are excluded from net product sales.

Wholesaler chargebacks, discounts and fees

We contract with retailers, healthcare providers, and group purchasing organizations (GPO) to broaden our customer reach and offer contractual discounts. The chargeback represents the difference between the invoice price billed to the wholesaler and the negotiated price charged to the retailers, healthcare providers and GPO members. For distribution and related services, such as stocking and cold chain storage, we provide compensation to our wholesalers and distributors. We typically offer our customers invoice discounts on product sales for prompt payments and pre-orders. The estimation of these discounts and fees is based on contractual terms and our expectations regarding future customer payment behaviors. Wholesaler fees and invoice discounts are deducted from our gross product sales and accounts receivable at the time such product sales are recognized.

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Product returns

We typically offer customers in the U.S. the right to return products, up to a certain limit as stipulated in our contracts. Estimated returns for our COVID-19 vaccine are determined considering available return rates for similar products, estimated levels of inventory in the distribution channel, projected market demand, and estimated product shelf life. The estimated amount for product returns is presented within accrued liabilities on our condensed consolidated balance sheets and is deducted from our gross product sales in the period the related product sales are recognized.

Other fees

Fees payable to third party payers and healthcare providers, along with fees to our direct customers that are settled via cash payments, including certain patient assistance programs, are recorded as accrued liabilities on our condensed consolidated balance sheets.

Determining the amount of variable consideration to recognize necessitates substantial judgment, especially when assessing factors outside our direct control such as lack of pertinent historical data and limited third-party information. Among all variables, estimating returns presents the most significant judgment due to the broad range of potential outcomes. As we receive more historical data on our product returns, we will incorporate this information into our estimates to improve accuracy. The actual results could differ from our estimates, and such differences could have a material impact to our financial statements.

The following table summarizes product sales provision for the periods presented (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Gross product sales	$	2,420	$	3,120	$	4,541	$	13,576
Product sales provision:
Wholesaler chargebacks, discounts and fees	(479)		—		(479)		—
Returns and other fees	(184)		—		(184)		—
Total product sales provision	$	(663)	$	—	$	(663)	$	—
Net product sales	$	1,757	$	3,120	$	3,878	$	13,576

The following table summarizes the activities related to product sales provision recorded as accrued liabilities for the nine months ended September 30, 2023 (in millions):


	Returns and other fees
Balance at December 31, 2022	$	—
Provision related to sales made in current period	(184)



Balance at September 30, 2023	$	(184)

4. Other Revenue

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Grant revenue	$	44	$	144	$	96	$	453
Collaboration revenue	30		100		63		150
Total other revenue	$	74	$	244	$	159	$	603

Grant Revenue

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. The agreement has been subsequently amended to provide for additional commitments to support various late-stage clinical development efforts of our original COVID-19

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vaccine, mRNA-1273, including a 30,000 participant Phase 3 study, pediatric clinical trials, adolescent clinical trials and pharmacovigilance studies. The maximum award from BARDA, inclusive of all amendments, was approximately $1.8 billion. All contract options have been exercised. As of September 30, 2023, the remaining available funding, net of revenue earned was $97 million.

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 vaccines and therapeutics. As of September 30, 2023, we had earned the committed funding of $32 million. An additional $24 million of funding will be available if DARPA exercises additional contract options.

In January 2016, we entered a global health project framework agreement with the Bill & Melinda Gates Foundation (Gates Foundation) to advance mRNA development projects for various infectious diseases, including human immunodeficiency virus (HIV). As of September 30, 2023, the available funding, net of revenue earned was $4 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
BARDA	$	44	$	141	$	88	$	442
Other grant revenue	—		3		8		11
Total grant revenue	$	44	$	144	$	96	$	453

Collaboration Revenue

We have entered into collaboration agreements with strategic collaborators to accelerate the discovery and advancement of potential mRNA medicines across therapeutic areas. As of September 30, 2023 and December 31, 2022, we had collaboration agreements with Merck & Co., Inc (Merck), Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited (together, Vertex), AstraZeneca plc (AstraZeneca) and others. Please refer to our 2022 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 collaboration revenue from our strategic collaborators for the periods presented (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
Collaboration Revenue by Strategic Collaborator:	2023		2022		2023		2022
Vertex	$	30	$	4	$	62	$	33
Merck	—		20		—		35
AstraZeneca	—		76		—		80
Other	—		—		1		2
Total collaboration revenue	$	30	$	100	$	63	$	150

5. Collaboration Agreements

Merck

In June 2016, we entered into a Collaboration and License Agreement for the development and commercialization of personalized mRNA cancer vaccines (also known as individualized neoantigen therapy, or INT) with Merck. This agreement was subsequently amended and restated in 2018. Our role in this strategic alliance involves identifying genetic mutations in a particular patient’s tumor cells, synthesizing mRNA for these mutations, encapsulating the mRNA in one of our proprietary lipid nanoparticles (LNPs), and administering a unique mRNA INT to each patient. Each INT is designed to specifically activate the patient’s immune system against her or his own cancer cells.

In September 2022, Merck exercised its option for INT, including mRNA-4157, pursuant to the terms of the agreement and in October 2022 paid us an option exercise fee of $250 million. Pursuant to the agreement, we and Merck have agreed to collaborate on further development and commercialization of INT, with costs and any profits or losses to be shared equally on a worldwide basis.

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For the three and nine months ended September 30, 2023, we recognized expenses of $53 million and $122 million, respectively, related to the INT collaboration.

Generation Bio Co.

In March 2023, we entered into a strategic collaboration and license agreement with Generation Bio Co. (GBIO). The collaboration aims to expand the application of each company’s platform by developing novel nucleic acid therapeutics, including those capable of reaching immune cells, to accelerate our respective pipelines of non-viral genetic medicines. Under the agreement, we have the option to license GBIO’s proprietary cell-targeted lipid nanoparticle (ctLNP) and closed-ended DNA (ceDNA) technology for two immune cell programs and two liver programs, with an additional option for either a third immune cell or liver program. We made an upfront payment to GBIO of $40 million, a prepayment of research funding of $8 million, plus a $36 million equity investment. We will fund all research and development activities under the research plans. We expensed, as research and development expense, the upfront payment of $40 million and the equity premium of $13 million, representing the difference between the equity investment of $36 million paid to GBIO and the fair value of the equity instrument acquired in the first quarter of 2023. Additionally, we recorded an equity investment of $23 million, representing the fair value at the closing date, as other non-current assets in our condensed consolidated balance sheet as of March 31, 2023. The equity investment in GBIO is subsequently remeasured and recorded at the quoted market price of GBIO common stock at the end of each reporting period.

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 have occurred. 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. Acquisition

On January 31, 2023, we acquired all outstanding shares of OriCiro Genomics K.K., a Japan-based, privately held biotech company primarily focused on cell-free DNA synthesis and amplification technologies, for $86 million in cash. With this acquisition, we obtained tools for cell-free synthesis and amplification of plasmid DNA, a key building block in mRNA manufacturing. OriCiro’s technology strategically complements our manufacturing process and further accelerates our research and development efforts. The acquisition was accounted for as a business combination requiring all assets acquired and liabilities assumed to be recognized at their fair value as of the acquisition date. Following the acquisition, OriCiro was renamed as Moderna Enzymatics.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the acquisition date (in millions):


	January 31, 2023
Finite-lived intangible asset
Developed technology	$	48
Deferred tax liabilities	(15)
Other assets and liabilities, net	1
Total identifiable net assets	34
Goodwill	52
Total consideration	$	86

The developed technology of $48 million represents the estimated fair value of the cell-free DNA synthesis and amplification technologies, as of the acquisition date. The fair value was determined by applying the cost saving method under the income approach, which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. To estimate the expected cash flows attributable to the development technology, it requires the use of Level 3 fair value measurements and inputs, including estimated expense savings and a discount rate that is based on the estimated weighted-average cost of capital for companies with profiles similar to ours and represents the estimated rate that market participants would use to value this intangible asset. The developed technology is being amortized on a straight-line basis over an estimated useful life of 12 years.

The excess of the consideration over the fair values assigned to the assets acquired and the liabilities assumed of $52 million was recorded as goodwill, which is not deductible for tax purposes. The goodwill is primarily attributable to the expected synergies from the acquired technologies combining with our existing platform technologies and manufacturing capabilities. Our accounting for this acquisition is preliminary and will be finalized upon completion of our analysis to determine the acquisition date fair values of certain assets acquired, liabilities assumed and tax-related items as we obtain additional information during the measurement period of up to one year from the acquisition date.

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7. Financial Instruments

Cash and Cash Equivalents and Investments

The following tables summarize our cash and available-for-sale securities by significant investment category as of September 30, 2023 and December 31, 2022 (in millions):


	September 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Cash and Cash Equivalents		Current Marketable Securities		Non- Current Marketable Securities
Cash and cash equivalents	$	2,932	$	—	$	—	$	2,932	$	2,932	$	—	$	—
Available-for-sale:

U.S. treasury bills	529		—		—		529		—		529		—
U.S. treasury notes	4,643		—		(121)		4,522		—		2,354		2,168
Corporate debt securities	4,854		—		(141)		4,713		—		1,680		3,033
Government debt securities	156		—		(6)		150		—		78		72
Total	$	13,114	$	—	$	(268)	$	12,846	$	2,932	$	4,641	$	5,273

	December 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	$	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

The amortized cost and estimated fair value of available-for-sale securities by contractual maturity as of September 30, 2023 and December 31, 2022 were as follows (in millions):


	September 30, 2023
	Amortized Cost		Estimated Fair Value
Due in one year or less	$	4,720	$	4,641
Due after one year through five years	5,462		5,273
Total	$	10,182	$	9,914


	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

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-

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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 and nine months ended September 30, 2023 and 2022. We did not record any credit-related allowance to available-for-sale securities as of September 30, 2023 and December 31, 2022.

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 as of September 30, 2023 and December 31, 2022 (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 September 30, 2023:

U.S. treasury bills	$	—	$	284	$	—	$	—	$	—	$	284
U.S. treasury notes	(9)		904		(112)		3,545		(121)		4,449
Corporate debt securities	(5)		562		(136)		3,716		(141)		4,278
Government debt securities	—		8		(6)		141		(6)		149
Total	$	(14)	$	1,758	$	(254)	$	7,402	$	(268)	$	9,160

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 September 30, 2023 and December 31, 2022, we held 416 and 582 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).

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The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in millions):


	Fair value at September 30, 2023			Fair Value Measurement Using
			Level 1			Level 2
Assets:
Money market funds	$	1,438		$	1,438		$	—
Certificates of deposit	30			—			30
U.S. treasury bills	1,163			—			1,163
U.S. treasury notes	4,522			—			4,522
Corporate debt securities	5,012			—			5,012
Government debt securities	150			—			150
Equity investments(1)	44			44			—
Derivative instruments (Note 8)	7			—			7
Total	$	12,366		$	1,482		$	10,884
Liabilities:
Derivative instruments (Note 8)	$	12		$	—		$	12


	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 8)	6			—			6
Total	$	16,100		$	1,079		$	15,021
Liabilities:
Derivative instruments (Note 8)	$	32		$	—		$	32

(1)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 income (expense), net, in our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2023, we recognized net losses of $33 million and $16 million, respectively, on equity investments from changes in fair value of the securities. We did not have equity investments in publicly traded securities with readily determinable fair values during 2022.

As of September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, we had $42 million, at each balance sheet date, 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.

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8. 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 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 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 operations. We evaluate hedge effectiveness at the inception of the hedge prospectively, and on an ongoing 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 operations. As of September 30, 2023, we had no deferred gains or losses 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, 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 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 condensed consolidated statements of operations.

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


	September 30, 2023
	Notional Amount			Fair Value
			Asset(1)			Liability(2)



Derivatives not designated as hedging instruments:
Foreign currency forward contracts	$	1,147		$	7		$	12
Total derivatives	$	1,147		$	7		$	12


	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

(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 (loss) for the three and nine months ended September 30, 2023 and 2022 were as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Derivatives in cash flow hedging relationships:
Foreign currency forward contracts	$	—	$	62	$	—	$	133

The effect of our foreign currency derivatives in our condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022 was as follows (in millions):


		Three Months Ended September 30,				Nine Months Ended September 30,
	Statement of Income Classification	2023		2022		2023		2022
Derivatives in cash flow hedging relationships:
Foreign currency forward contracts
Net gain (loss) reclassified from AOCI into income	Product sales	$	—	$	50	$	(8)	$	94

Derivatives not designated as hedging instruments:
Foreign currency forward contracts
Net realized and unrealized gain	Other expense, net	$	1	$	26	$	50	$	95

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9. Inventory

Inventory as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Raw materials	$	149	$	575
Work in progress	61		205
Finished goods	277		169
Total inventory	$	487	$	949

Inventory, non-current(1)	$	211	$	910

(1)Consisted of raw materials with an anticipated consumption beyond one year. Inventory, non-current is included in other non-current assets in the condensed 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 condensed consolidated statements of operations. For the three and nine months ended September 30, 2023, inventory write-downs were $1.3 billion and $1.9 billion, respectively. For the three and nine months ended September 30, 2022, inventory write-downs were $333 million and $1.0 billion, respectively. For the three and nine months ended September 30, 2023, losses on firm purchase commitments were zero and $141 million, respectively. For the three and nine months ended September 30, 2022, losses on firm purchase commitments were $7 million and $349 million, respectively. Inventory write-downs were mainly related to obsolete inventory due to shelf-life expiration and inventory in excess of expected demand. Losses on firm purchase commitments were primarily related to excess raw material purchase commitments that will expire before the anticipated consumption of those raw materials. These charges in 2023 were primarily driven by a continued shift in product demand to the latest variant-targeted COVID-19 vaccine and a decline in customer demand as the COVID-19 vaccine market continues to transition to an endemic seasonal market in 2023. In the third quarter of 2023, we completed our long-range financial planning process, incorporating revised forecasts of vaccination rates. This resulted in the reassessment of future demand for our COVID-19 vaccine, leading to a strategic initiative to resize our manufacturing cost structure. This initiative, launched in the same quarter, involved reassessing our inventory levels and renegotiating with our suppliers to reduce our purchase commitments related to raw materials which were not expected to be consumed before expiration. This initiative resulted in a raw materials write-down of $903 million, included in the total inventory write-down amount for the quarter, and incurred other related expenses during the quarter.

As of September 30, 2023 and December 31, 2022, the accrued liability for losses on firm future purchase commitments in our condensed consolidated balance sheets was $98 million and $268 million, respectively. As of September 30, 2023 and December 31, 2022, we had inventory on hand of $698 million and $1.9 billion, respectively. Our raw materials and work-in-progress inventory had variable shelf lives and were expected to be consumed over the next three years. The shelf life of our COVID-19 vaccine product is nine months.

Pre-launch Inventory

In June 2023, we completed submission of a regulatory application to the U.S. Food and Drug Administration (FDA) for our updated COVID-19 vaccine candidate targeting the Omicron XBB.1.5 sublineage of SARS-CoV-2 (mRNA-1273.815). The submission was based on guidance from the FDA, which advised that COVID-19 vaccines should be updated to a monovalent XBB.1.5 composition. This guidance from the FDA was in alignment with other regulators and global public health agencies recommending a monovalent XBB.1.5 composition. We started manufacturing and capitalizing pre-launch inventory costs related to mRNA-1273.815 in the second quarter of 2023, prior to regulatory approval. As of June 30, 2023, we had capitalized pre-launch inventory of $183 million in our condensed consolidated balance sheets. Beginning in September 2023, we received authorization for the use of mRNA-1273.815 in several countries and commenced supply of this vaccine to customers.

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10. Property, Plant and Equipment, Net

Property, plant and equipment, net, as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Land	$	32	$	11
Manufacturing and laboratory equipment	334		284
Leasehold improvements	490		460
Furniture, fixtures and other	26		21
Computer equipment and software	55		38

Construction in progress	720		281
Right-of-use assets, financing (Note 12)	1,367		1,581
Total	3,024		2,676
Less: Accumulated depreciation	(1,072)		(658)
Property, plant and equipment, net	$	1,952	$	2,018

Depreciation and amortization expense for three and nine months ended September 30, 2023 was $246 million and $414 million, respectively. Depreciation and amortization expense for the three and nine months ended September 30, 2022 was $113 million and $268 million, respectively.

11. Other Balance Sheet Components

Accounts Receivable, net

Accounts receivable, net, as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Accounts receivable	$	2,360	$	1,385
Less: Wholesalers chargebacks, discounts and fees	(479)		—
Less: Allowance for expected credit loss	(15)		—

Accounts receivable, net	$	1,866	$	1,385

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets, as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Prepaid income taxes	$	210	$	187
Prepaid services	187		216
Income tax receivable	116		10
Down payments for materials and supplies	61		219
Interest receivable	52		61
Collaboration receivable	44		11
Tenant improvement allowance receivable	42		42
Down payments to manufacturing vendors	39		229
Value added tax receivable	26		140




Convertible note receivable	—		36

Other current assets	96		44
Prepaid expenses and other current assets	$	873	$	1,195

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Other Non-Current Assets

Other non-current assets, as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Downpayments and prepayments, non-current	$	238	$	—
Inventory, non-current(1)	211		910
Equity investments	86		42
Goodwill (Note 6)	52		—
Finite-lived intangible asset (Note 6)	45		—
Restricted cash	4		12
Other	25		24
Other non-current assets	$	661	$	988

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

Accrued Liabilities

Accrued liabilities, as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Manufacturing	$	779	$	400
Clinical trials	263		319
Compensation-related	251		190
Provisions related to product sales (Note 3)	184		—
Other external goods and services	145		264
Commercial	137		48
Development operations	110		88
Property, plant and equipment	108		5
Loss on future firm purchase commitments(1)	98		268
Royalties	78		203
Raw materials	71		316

Accrued liabilities	$	2,224	$	2,101

(1)Related to losses that are expected to arise from firm, non-cancellable, commitments for future raw material purchases (Note 9).

Other Current Liabilities

Other current liabilities, as of September 30, 2023 and December 31, 2022 consisted of the following (in millions):


	September 30,		December 31,
	2023		2022
Lease liabilities - financing (Note 12)	$	150	$	161
Lease liabilities - operating (Note 12)	33		35

Other	56		53
Other current liabilities	$	239	$	249

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Deferred Revenue

The following table summarizes the activities in deferred revenue for the nine months ended September 30, 2023 (in millions):


	December 31, 2022		Additions		Deductions		September 30, 2023
Product sales	$	2,626	$	207	$	(1,340)	$	1,493
Grant revenue	4		2		(2)		4
Collaboration revenue	81		19		(59)		41
Total deferred revenue	$	2,711	$	228	$	(1,401)	$	1,538

12. 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 lease. We have two main 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.

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 292,000 square feet. Our Cambridge campus leases have expiry ranges from 2024 to 2029. All our Cambridge leases are classified as operating leases.

In September 2021, we entered into a lease agreement for a building space, approximately 462,000 square feet, in Cambridge, Massachusetts. This space is designated to be the Moderna Science Center (MSC). Following an estimated two-year building project, the lease term is 15 years, with options for two additional seven-year extensions. During the third quarter of 2023, we commenced the lease and recognized the related right-of-use asset and lease liability on our condensed consolidated balance sheets. In connection with our MSC investment, in September 2021, we entered into amendments to our Technology Square 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 December 2023. We have not elected to exercise this option.

Moderna Technology Center

Our MTC is comprised of 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 of 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. These leases will expire by the end of 2023. In the third quarter of 2023, as part of our strategic initiative to optimize our manufacturing footprint, we amended a contract manufacturing service agreement, resulting in decreases of $262 million in each of the right-of-use assets and lease liabilities. Additionally, it resulted in accelerated depreciation of the right-of-use assets of $161 million. As of September 30, 2023 and December 31, 2022, we had lease liabilities of $149 million and $440 million, respectively, related to the embedded leases. As of September 30, 2023 and December 31, 2022, we had right-of-use assets of $161 million and $639 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 September 30, 2023 and December 31, 2022 were as follows (in millions):


	September 30,		December 31,
	2023		2022
Assets:
Right-of-use assets, operating, net(1) (2)	$	765	$	121
Right-of-use assets, financing, net(3) (4)	601		1,150
Total	$	1,366	$	1,271

Liabilities:
Current:
Operating lease liabilities(5)	$	33	$	35
Financing lease liabilities(5)	150		161
Total current lease liabilities	183		196
Non-current:
Operating lease liabilities, non-current	697		92
Financing lease liabilities, non-current	575		912
Total non-current lease liabilities	1,272		1,004
Total	$	1,455	$	1,200

(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 September 30, 2023, were as follows (in millions):


Fiscal Year		Operating Leases		Financing Leases(1)
2023	(remainder of the year)	$	6	$	154
2024		102		21
2025		80		22
2026		82		23
2027		84		23
Thereafter		869		1,097
Total minimum lease payments		1,223		1,340
Less amounts representing interest or imputed interest		(493)		(615)
Present value of lease liabilities		$	730	$	725

(1)Includes certain optional lease term extensions, predominantly related to the MTC leases, which represent a total of $668 million of undiscounted future lease payments.

13. 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.

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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 and nine months ended September 30, 2023 and the year ended December 31, 2022, 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 for raw materials and manufacturing services and with vendors for preclinical research studies, clinical trials and other goods or services. As of September 30, 2023, we had $2.1 billion of non-cancelable purchase commitments related to raw materials and manufacturing agreements, which are expected to be paid through 2029. As of September 30, 2023, $98 million of the purchase commitments related to raw materials was recorded as an accrued liability for loss on future firm purchase commitments. As of September 30, 2023, we had $273 million of non-cancelable purchase commitments related to clinical services and other goods and services which are expected to be paid through 2038. 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. As of September 30, 2023, we had cancelable open purchase orders of $3.1 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 as of September 30, 2023, 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

We have patent license agreements with Cellscript, LLC and its affiliate, mRNA RiboTherapeutics, Inc., and the National Institute of Allergy and Infectious Diseases. Under these agreements, we are required to pay royalties and certain milestone payments. For further information on our licensing and royalty payments, please refer to our 2022 Form 10-K under the heading “In-licensed intellectual property” and Note 12 to our consolidated financial statements contained therein.

For the three and nine months ended September 30, 2023, we recognized $78 million and $176 million, respectively, of royalty expenses associated with our product sales. For the three and nine months ended September 30, 2022, we recognized $106 million and $470 million, respectively, of royalty expenses associated with our product sales. These royalty expenses were recorded to cost of sales in our condensed 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 and sales-based royalties for specified products associated with the agreements. The achievement of these milestones have not yet occurred as of September 30, 2023.

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14. Stock-Based Compensation and Share Repurchase Programs

Stock-Based Compensation

The following table presents the components and classification of stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022 as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Options	$	32	$	15	$	102	$	67
Restricted Common Stock (RSUs) and Performance Stock Units (PSUs)	43		54		117		93
Employee Stock Purchase Plan (ESPP)	2		1		7		4
Total	$	77	$	70	$	226	$	164

Cost of sales	$	7	$	10	$	28	$	31
Research and development	40		28		115		67
Selling, general and administrative	30		32		83		66
Total	$	77	$	70	$	226	$	164

As of September 30, 2023, there was $701 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 2.9 years as of September 30, 2023.

Share Repurchase Programs

As of September 30, 2023, $1.7 billion of our Board of Directors’ authorization for repurchases of our common stock remains outstanding (the 2022 Repurchase Programs), with no expiration date. 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 for the nine months ended September 30, 2023 (in millions, except per share data):


	Nine Months Ended September 30,
	2023
Number of shares repurchased	8
Average price per share(1)	$	143.31
Aggregate purchase price	$	1,153
Remaining authorization at end of period	$	1,667

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

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15. Income Taxes

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
(Loss) income before income taxes	$	(1,958)		$	1,217		$	(4,012)		$	7,920
Provision for income taxes	$	1,672		$	174		$	919		$	1,023
Effective tax rate	(85.5)		%	14.3		%	(22.9)		%	12.9		%

The effective tax rate for the three and nine months ended September 30, 2023 was higher than the statutory rate, primarily due to an increase in valuation allowance against deferred tax assets. The effective tax rates for the three and nine months ended September 30, 2023 also include a discrete benefit from stock-based compensation. The increase in income tax expense for the three months ended September 30, 2023 was predominantly driven by an increase in valuation allowance on deferred tax assets of $1.7 billion. The decrease in income tax expense for the nine months ended September 30, 2023 was predominantly driven by a significant decrease in pre-tax income, partially offset by an increase in valuation allowance of $1.7 billion.

As of December 31, 2022, we maintained a state valuation allowance on deferred tax assets of $155 million, primarily due to tax attributes that we expected would expire prior to their utilization, and we maintained no valuation allowance on federal or foreign deferred tax assets. We periodically reassess the need for valuation allowances on our deferred tax assets, considering both positive and negative evidence to evaluate whether it is more likely than not that all or a portion of such assets will not be realized. In the third quarter of 2023, following the completion of our long-range financial planning process, we reassessed the evidence and concluded that a valuation allowance was necessary due to the preponderance of negative evidence, including:

A year-to-date pre-tax loss and a projected pre-tax loss for the full year 2023, serving as a significant source of objectively verifiable negative evidence in accordance with ASC 740 (Income Taxes).
A projected three-year cumulative loss resulting from our long-range financial planning process. This projection is due to a significant decrease in expected sales of our COVID-19 vaccine as we transition to a seasonal market. Additionally, we anticipate substantial research and development expenses for our on-going Phase 3 clinical trials and to advance our product candidates into later-stage development. These factors contribute additional negative evidence with respect to the realizability of our deferred tax assets. The projections are based upon revenue from our currently approved drug product, which we believe can be reasonably estimated. In contrast, future taxable income projections from our investigational medicines are deemed inherently subjective and not objectively verifiable; they are insufficient to override negative evidence, and therefore, they are not assigned any weight in our valuation allowance analysis assessment.

Our evaluation also included whether there were other sources of taxable income that would allow us to realize our deferred tax assets, such as taxable income in carryback years, available tax planning strategies and the future reversals of taxable temporary differences. After assessing these strategies and all evidence, we determined it was more likely than not that we will not realize all of our deferred tax assets and therefore increased the valuation allowance by $1.7 billion in the third quarter of 2023. Significant management judgment is required in assessing the realizability of our deferred tax assets. In the event that actual results differ from our estimates, we adjust our estimates in future periods and we may need to modify our valuation allowance, which could materially impact our financial position and results of operations.

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 U.S. or any other major taxing jurisdiction.

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16. (Loss) Earnings per Share

The computation of basic (loss) 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 and nine months ended September 30, 2023 and 2022 were calculated as follows (in millions, except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
Net (loss) income	$	(3,630)	$	1,043	$	(4,931)	$	6,897
Denominator:
Basic weighted-average common shares outstanding	381		390		382		396
Effect of dilutive securities	—		22		—		23
Diluted weighted-average common shares outstanding	381		412		382		419

Basic EPS	$	(9.53)	$	2.67	$	(12.89)	$	17.41
Diluted EPS	$	(9.53)	$	2.53	$	(12.89)	$	16.46

Anti-dilutive potential common shares excluded from the EPS computation above	28		4		28		3

17. Subsequent Events

In September 2023, we entered into a strategic research and development collaboration agreement with Immatics, a clinical-stage biopharmaceutical company in the discovery and development of T cell-redirecting cancer immunotherapies. Upon satisfaction of all closing conditions, the transaction was finalized in October 2023, and we made an upfront payment of $120 million to Immatics. We are currently in the process of evaluating the accounting implications for this transaction.

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