Moderna (MRNA-$173.16, NASDAQ) Asks FDA to Permit Labelling to Allow for a 15 Dose Per Vial Designation.

Moderna has applied to the FDA to permit each vial of Covid-19 vaccine to hold 15 doses, rather than the current labelling of 10 doses.

For the media, the public relations statement is that by allowing each vial to hold a total of 15 doses, this will speed up delivery of the vaccine and reduce the physical “bottleneck”, which is the truly correct terminology, based upon an undersupply of vaccine vial bottles worldwide. The media accepts this statement at face value and and the public then is coached to conclude: ‘Moderna, what a great company, always thinking outside the box on how best to speed up delivery in order to more quickly end the pandemic”.

From a revenue perspective, there is a much more important consideration to this FDA application. Contracts are paid for on a per dose basis, not on a per vial basis.

Currently, each Moderna vial shipped contains somewhat more than 11.5 doses within a vial (overfill), but are labelled as holding 10 doses. The excess is to allow for syringe draw loss. Under the present labelling agreement, Moderna only receives 86% of the possible revenue from each vial of Covid-19 vaccine. The customer is paying for 10 doses, but receives 11.5 doses.

On the current label, Moderna, should they ship a total of 50 million vials, will receive revenue based upon an assumed 500 million doses that are paid for by the customer, but in reality, enough vaccine will be delivered to theoretically provide 575 million doses of vaccine. Moderna is missing out on potential revenues (based upon an assumed shipment of 50 million vials in 2021) of over $938 million US.

Should the FDA permit the labelling change, then Moderna will fill each vial to the top, which realistically holds just 15.5 doses. An additional 4 doses to the vial would be added to each vial, but the pricing for each bottle will increase by an additional 5 doses per bottle in the supply agreements. The amended label will dictate that the customer will pay for 15 doses and receive 15.5 doses. Moderna now, assuming the label change is approved will obtain 96.8% of the maximum potential revenues per vial.

If the FDA clears the labelling change, a minimum of 50 million more doses in 2021, normally shipped but unrecorded as a sale, will now be included as revenue, boosting the top line by an estimated $938 million for the remainder of 2021. The customer will need a more expensive, and far more scarce needle, to fully utilize the volume in each vial. That issue is the responsibility of the end user, not Moderna.

Furthermore, it will only require 2 bottles to provide 30 doses, where previously 3 vials were required. Bottles are a significant expense in the manufacturing process, due to the restricted supply, this saving will also add to EBITDA on a go-forward basis.

The ability to increase dose revenues by 10%, simply through a label change, could add as much as $2 per share to 2021 pretax profits for Moderna. Management had recently indicated that ultimate delivery of vials might be 60 million for 2021, based upon increased factory run times and efficiencies identified. This could mean dosage deliveries might be as high as 660 million units. Consensus Wall Street revenue estimates look to be low, should the FDA accept the label revision.

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