Moderna has set out its capital allocation priorities under the shadow of overcapacity and lower COVID vaccine demand.

Moderna’s Q4 saw revenues from its COVID-19 messenger RNA (mRNA) vaccine of $4.8 billion, down 30% on the same period 2021. For the full year 2023, Moderna has forecasted just $5 billion in COVID sales from advanced purchase agreements and deferrals – a fraction of the $18.4 billion the vaccine made in 2022.

The plummeting in sales relates to the continued return to normality following the pandemic. While COVID continues to be virulent, vaccine demand has dropped as society moves from government-backed full-population programs to a more seasonal and targeted approach.

Image: DepositPhotos/Nicolas_Raido

But beyond reduced sales, Moderna is also taking on a number of post-COVID costs, including “a charge of $297 million for inventory write-downs related to excess and obsolete COVID-19 products and expense for unutilized manufacturing capacity,” CFO Jamey Mock told investors last week.

He added the firm has been hit with further charges of $376 million related to contract development and manufacturing organization (CDMO) wind-down costs – Moderna’s network during the peak of the pandemic including capacity at Resilience, Catalent, Lonza to name just three – and a loss on firm purchase commitments and related cancellation fees of $281 million.

These were “driven by costs associated with surplus production capacity, overall lower demand and a shift to our most recent Omicron BA.4/5 targeting COVID-19 bivalent booster,” Mock said on the financial call.

Capital plans

As vaccine sales diminish, Moderna is looking to open its coffers to grow its business in directions away from COVID.

The firm’s top investment priority has been to reinvest in its base business across other disease areas using its mRNA platform to target influenza and a range of latent diseases, for example. In 2022, Moderna invested $3.3 billion in R&D, and is projected to invest an additional $4.5 billion in 2023.

But the firm is increasingly turning to “attractive external investments and collaboration opportunities,” Mock said. Since the beginning of the year, the firm has ramped up its collaborative activity, partnering with both CytomX and Personalis, along with its first-ever venture into M&A: the $85 million acquisition of OriCiro.

And just last week, the firm forged a partnership with Life Edit Therapeutics to discover and develop in vivo mRNA gene editing therapies. “We believe the combination of Moderna’s mRNA platform with LifeEdit proprietary gene editing technologies, including base editing capabilities, has the opportunity to advance potentially life transformative or curative therapies for some of the most challenging genetic diseases,” Mock said, before hinting more external deals are likely to occur going forward.

Finally, Moderna has been pursuing a strategy to return capital to shareholders. “In 2022, we repurchased 23 million shares for $3.3 billion at an average price of $143 per share. and we have $2.8 billion of share repurchase authorization remaining.”