Inventory

9 Months Ended

Sep. 30, 2023

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

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(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.