Moderna Inc

10. 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 costs under such arrangements on a straight-line basis over the life of the lease. We havetwo main campuses in Massachusetts, our Cambridge campus and our Moderna Technology Center (MTC), an industrial technology center located in Norwood. We also lease various parcels of land, and office and lab spaces across the globe for our business operations.

Cambridge Campus

Our Cambridge campus consists of multiple leased properties, including office and research laboratory spaces totaling approximately 276,000 square feet, exclusive of the Moderna Science Center.

Moderna Science Center

In September 2021, we entered into a lease agreement for a building in Cambridge Massachusetts, comprising approximately 462,000 square feet. This facility, which includes our principal executive offices along with additional office and laboratory spaces, is referred to as the Moderna Science Center (MSC). After an approximatelytwo-year building project, the lease term is 15 years, with options fortwo 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. Following the commencement of the MSC lease, we amended the expiration dates of our existing leases at Technology Square in the fourth quarter of 2023. Originally scheduled to expire ranging from 2024 to 2029, these leases have been adjusted to conclude in early 2025. All our Cambridge leases are classified as operating leases.

Moderna Technology Center

Our Moderna Technology Center is composed ofthree 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 forthree extension periods offive years each. All of our MTC leases are classified as finance leases.

Operating and financing lease right-of-use assets and lease liabilities as of March 31, 2024 and December 31, 2023 were as follows (in millions):

(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.

(4)Included in property, plant 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, 2024, were as follows (in millions):

(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.

11. 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, 2024 and the year ended December 31, 2023, we hadnot experienced any material losses related to these indemnification obligations, andno 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, andno related reserves were established.

Purchase Commitments and Purchase Orders

We enter into agreements in the normal course of business with vendors and contract manufacturing organizations for raw materials and manufacturing services and with vendors for preclinical research studies, clinical trials and other goods or services. As of March 31, 2024, we had $1.8 billion of non-cancelable purchase commitments related to raw materials and manufacturing agreements, which are expected to be paid through 2029. As of March 31, 2024, $24 million of the purchase commitments related to raw materials was recorded as an accrued liability for loss on future firm purchase commitments. As of March 31, 2024, we had $223 million of non-cancelable purchase commitments related to clinical services and other goods and services which are expected to be paid through 2039. 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 winddown 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 March 31, 2024, we had cancelable open purchase orders of $2.6 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 March 31, 2024, 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 2023 Form 10-K under the heading “Business—Intellectual Property—In-licensed intellectual property” and Note 11 to our consolidated financial statements contained therein.

For the three months ended March 31, 2024 and 2023, we recognized $8 million and $86 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 March 31, 2024.

12. 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 months ended March 31, 2024 and 2023 as follows (in millions):

As of March 31, 2024, there was $1.2 billion 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 March 31, 2024.

Share Repurchase Programs

As of March 31, 2024, $1.7 billion of our Board of Directors’ authorization for repurchases of our common stock (the 2022 Repurchase Programs) remains outstanding, 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.

During the three months ended March 31, 2024, there wereno shares repurchased.

13. Income Taxes

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

The effective tax rate for the three months ended March 31, 2024 was higher than the statutory rate, due to certain of our foreign subsidiaries that have taxable income, while we incurred a net loss before income taxes on a consolidated basis. We cannot recognize tax benefits from the loss due to our global valuation allowance, which we continue to maintain against the majority of our global deferred tax assets. The change in our effective tax rate, compared to the same period in 2023, primarily results from the continued application of our valuation allowance and adjustments of our valuation allowance, which was initially established in the third quarter of 2023. For additional details regarding our deferred tax assets and the policies governing our valuation allowance, please refer to Note 13 to our consolidated financial statements in our 2023 Form 10-K.

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. 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.

14. (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 months ended March 31, 2024 and 2023 were calculated as follows (in millions, except per share data):