As commercial COVID pivot looms, Moderna logs $2.8B in demand-related expenses

As Moderna awaits the arrival of the commercial COVID-19 vaccine market in the U.S., the toll of waning demand worldwide has become painfully apparent.

For all of 2022, the mRNA specialist logged a $1.3 billion charge for inventory write-downs, plus $725 million for contract cancelations. Moderna paid another $776 million for unused manufacturing capacity and CDMO charges, representing total expenses tied to slouching demand of around $2.8 billion.

All told, Moderna reported total 2022 sales costs of $5.4 billion, representing 29% of the company’s $18.4 billion that its roster of COVID shots and boosters brought home for the year. Aside from third-party royalty costs of $1.1 billion—plus other expenses related to activities like actually producing the shot—Moderna credited the charges to “overall lower demand” for its vaccines “in particular from low-income countries.” Moderna also cited a shift in demand to the company’s omicron-busting bivalent boosters, alongside costs “associated with surplus production capacity.”

While Moderna’s total revenue and product sales increased slightly for the full year, the Massachusetts-based biotech came under pressure in the fourth quarter. For the three-month period ending Dec. 31, 2022, Moderna’s revenue clocked in at $5.1 billion, down about $2 billion from the $7.2 billion it generated over the same stretch in 2021. Product sales, meanwhile, were down 30% at $4.9 billion in the fourth quarter.

At the moment, analyst consensus for 2023 puts Spikevax sales at $8.1 billion, Third Bridge’s Lee Brown wrote in a note to clients Thursday. That projection could drop if “demand beyond the [advanced purchased agreements] wanes more than estimated, which seems to be a risk given consensus will need to increasingly backload revenue into the second half,” the analyst explained.

For its part, Moderna'a expectations for this year includes $5 billion from currently signed advanced purchase agreements and contract deferrals from 2022, chief commercial officer Arpa Garay told investors Thursday. Within the first half of the year, the company anticipates $2 billion worth of such revenue. That’s below current consensus estimates of nearly $3 billion, Brown stated.

Moderna has advanced purchase agreements locked in with Canada, Kuwait, Switzerland, Taiwan and the U.K. Its deferrals on 2022 contracts come from the EU, Japan, South Korea and other countries, Garay said.

Beyond Moderna's $5 billion expectation from purchase deals and deferrals, the company is eyeing further sales from markets like the U.S., Europe and Japan, she explained. In those three regions, as well as Australia and Latin America, “contracting discussions with commercial customers are ongoing,” Garay added. Eyeing the U.S. specifically, Moderna figures the U.S. fall 2023 COVID-19 market volume to be about 100 million doses.

“Moderna’s commercial organization is prepared for the transition to a commercial market in the U.S.,” Garay said. The company is prioritizing access, working in tandem with private customers and public organizations like the VA and CDC, and it’s increasing awareness and educating consumers and healthcare providers about the benefits of boosters.

Just last week—and amid increasing political pressure over a prior Spikevax pricing blueprint—Moderna made a major commitment to access by pledging to ensure people can get its shots “regardless of ability to pay.”

“We have built the infrastructure needed to fulfill customer orders and shipments and our commercial and medical organizations have been scaling to execute on this plan,” Garay added. The company had roughly 3,900 employees at the end of 2022 versus 2,700 workers on Dec. 31, 2021.

Meanwhile, as Spikevax sales decline, all eyes are on Moderna’s pipeline, plus its near-term commercial prospect in respiratory syncytial virus, mRNA-1345. Moderna is already revving up launch activities for the shot, which it plans to file with the FDA in the first half of 2023.