Source of the BioNTech graphic: Wikipedia.
BioNTech SE (BNTX) is a Germany-based biotechnology company which has teamed up with Pfizer (NYSE:PFE) to bring a COVID-19 vaccine to the market. There are no market or economic precedents for this pandemic or for how to estimate a value for a successful COVID-19 vaccine, or how to estimate the value of a company who succeeds at a vaccine. Following an approach to assess development progress, prospects for success, commercial positioning and competitive advantages, I will do indicative calculations to reach a success-based value for BioNTech shares.
BioNTech was founded in 2008 on the understanding that every cancer patient’s tumor is unique and therefore each patient’s treatment should be individualized. From our roots in Mainz, Germany, we are driven to become the leading global biotechnology company for individualized cancer medicine.”
The research done by BioNTech in collaboration with Pfizer to develop mRNA-based vaccines for the prevention of influenza was a perfect fit for both parties to initiate a new collaboration on COVID-19 when the opportunity presented.
BioNTech and Pfizer announced their COVID-19 vaccine collaboration on March 17, 2020, and commented as follows:
The collaboration aims to accelerate development of BioNTech’s potential first-in-class COVID-19 mRNA vaccine program, BNT162, which is expected to enter clinical testing by the end of April 2020.”
The collaboration between BioNTech and Pfizer excludes China as BioNTech had already signed a strategic alliance deal with Fosun Pharma on March 16, 2020, for its COVID-19 vaccine.
BioNTech received regulatory approval from German authority Paul-Ehrlich-Institut to commence the first clinical trial of COVID-19 vaccine candidates on April 22, 2020, and announced on April 29, 2020, that they have completed dosing for the first cohort of Phase 1/2 trial of COVID-19 vaccine candidates in Germany. The efficiency and professionalism of the BioNTech/Pfizer team are amply demonstrated already at this early stage in late April 2020. The Phase 1/2 trail then escalated to the USA and on May 5, 2020, BioNTech announced the dosing of the first participants in the U.S. as part of its global COVID-19 mRNA Vaccine Development Program.
BioNTech tested different iterations of its vaccine in a strategy to eventually select the best-performing iteration with regards to safety and efficacy to take forward.
Let’s just simplify this mRNA vaccine for the assessment of likelihood of success. Visualize it as a custom-built vehicle designed to carry a “safe” piece of the COVID-19 causing virus in its boot. The vehicle is then injected into a human body and will trick the immune system into producing an immune response as if it had encountered COVID-19. Traditionally, vaccines will use a naturally occurring virus as a vehicle or a weakened version of the actual COVID-19 causing virus. Not using a “custom built vehicle,” as I will explain later, may present problems for other vaccine makers.
BioNTech financed its COVID-19 vaccine development through the issue of debt and raising capital which allowed the company to follow a profit-orientated commercialization strategy not beholden to governments for grants.
BioNTech announced on July 1, 2020, positive preliminary results from the ongoing Phase 1/2 Study of its mRNA-based Vaccine Candidate against SARS-CoV-2. On July 13, 2020, BioNTech “announced that two of the companies’ four investigational vaccine candidates from their BNT162 mRNA-based vaccine program (BNT162b1 and BNT162b2) being developed to help protect against SARS-CoV-2 (the virus that causes COVID-19), received Fast Track designation from the U.S. Food and Drug Administration (FDA).”
BioNTech reported early success on July 20, 2020, when it provided information on the Phase 1/2 clinical studies. What we are looking for is an antibodies response, a T cell response and safety with references to dosage levels. BioNTech delivered on all three:
The vaccine elicited high, dose level-dependent SARS-CoV-2-neutralizing titers and RBD-binding IgG concentrations after the second dose. Day 43 SARS-CoV-2 neutralizing geometric mean titers were in the range of 0.7-fold (1 µg) to 3.2-fold (50 µg) compared to that of a panel of SARS-CoV-2 infection convalescent human sera.”
T Cell responses
In addition, the initial German trial results demonstrate, for the first time for the BNT62b1 candidate, a concurrent induction of high level CD4+ and CD8+ T cell responses against the SARS-CoV-2 RBD.
The strength of T cell responses varied between subjects. There was no clear dose level dependency of the T cell response between 1 µg to 50 µg, indicating that stimulation and robust expansion of T cells might be accomplished at low mRNA dose levels.”
Overall, the data suggested that BNT162b1 could potentially be administered safely, with a manageable tolerability profile. Local reactions and systemic events after injection with BNT162b1 at all dose levels were transient, generally mild to moderate, with occasional severe events (Grade 3) of flu-like symptoms and injection site reactions. All adverse events resolved spontaneously and were managed with simple measures. No serious adverse events (SAEs) were reported, and there were no withdrawals due to adverse events related to the vaccine.”[My bold]
These excellent results were sufficient to move the UK government to pre-purchase (on terms and conditions not disclosed) 30 million doses of the BioNTech vaccine on the same date, July 20, 2020.
BioNTech announced two days later on July 22, 2020, that the USA government has joined the UK government by pre-purchasing up to 600 million doses of the vaccine, this time actually disclosing pricing. “U. S. government placed an initial order of 100 million doses for $1.95 billion and can acquire up to 500 million additional doses”
The pre-purchase agreements with the UK and the USA were followed also by Japan and BioNTech announced on July 31, 2020, that it will supply Japan with 120 million doses of its BNT162 mRNA-based Vaccine Candidate.
On July 27, 2020, BioNTech announced that they have chosen vaccine iteration BNT162b2 to take forward in a Phase 2/3 vaccine trial, following which, they will apply for FDA approval targeting October 2020.
Assuming clinical success, Pfizer and BioNTech [are] on track to seek regulatory review as early as October 2020 and, if regulatory authorization or approval is obtained, plan to supply up to 100 million doses by the end of 2020 and approximately 1.3 billion doses by the end of 2021”
The big question everybody is asking about the vaccine developers is, can they deliver? BioNTech in collaboration with Pfizer is adamant that they can. The CEO of Pfizer responded to the question in an interview on CNBC on July 28 as follows:
Albert Bourla, CEO of Pfizer: “Our estimations are for real. And off course it is difficult to execute but we have a very, very long experience in executing…” “You need to have a meticulous execution to be able to deliver these results.” “We believe that with normal efficacy of the vaccine, we will have results, enough events that demonstrates statistical significance difference by the end of September, beginning of October. The more efficacious the vaccine is, that [statistical evidence] could come even earlier.” “We are going to cut zero corners [on safety].” “In October we will have enough data, I believe, so that FDA can make [up] their mind about providing approval…”
None of the other vaccine candidate producers can make the same claims as the BioNTech/Pfizer team on pre-selling, FDA anticipated approval, a global footprint and scaled production. Some may claim to be on the same clinical phase, some may claim to have had pre-orders, some may claim to have potential production facilities but no other candidate can make all four claims for the target dates, production volumes, international footprint and government pre-orders which the BioNTech/Pfizer team has placed on record.
It is worth listening to the Pfizer’s CEO interview on CNBC explaining the timeline and expressing confidence in the success of the vaccine as well as delivering scaled production.
That brings us to the “assuming clinical success” provision. Are they likely to succeed?
Dr. Anthony Fauci, Director, National Institute of Allergy and Infectious Diseases, commented in an interview on CNN with Wolf Blitzer on July 27, 2020, on the Phase 3 trial of Moderna (NASDAQ:MRNA) in the USA when asked “will it work”: “…no guarantee, however I must say, in the same breath Wolf, that if you look at the early data, particularly the data from the Phase 1 trial and you look at the kinds of responses that were induced in those volunteers, there were robust antibody responses, they were of a magnitude that you would see in convalescent plasma of individuals who’ve recovered from infection [of COVID-19] and that’s one of the hallmarks of prediction of the success of a vaccine. If you can induce a response with the vaccine that’s comparable to or even better than a response of natural infection, then that’s really a good start. So that’s why it makes me cautiously optimistic even though we can’t guarantee anything but cautiously optimistic that we will have a vaccine that works.”
I have quoted above the excellent results obtained by BioNTech in its Phase 1/2 clinical trials regarding antibodies, “robust” T cell responses exceeding the standards mentioned by Dr. Fauci and meeting safety standards.
The BioNTech Phase 2/3 clinical trial started on the same day (July 27, 2020) as the Moderna Phase 2/3 clinical trial and will be conducted on the same principles.
More information on the vaccines and how they work can be obtained from this excellent National Geographic article.
On July 27, Pfizer and BioNTech launched a trial that combines phase two and three by enrolling a diverse population in areas with significant SARS-CoV-2 transmission. It will examine the vaccine’s effect in 30,000 people from 39 U.S. states and from Brazil, Argentina, and Germany.”
The FDA approval benchmark for the COVID-19 vaccine is 50% efficacy and when the Operation Warp Speed chief adviser was asked by CNN Senior Medical Correspondent Elizabeth Cohen: “Some vaccines are 97% effective, others are 60%, where do you think we’re going to fall with the COVID vaccine?” he answered:
It is very hard to predict, of cause, that’s why we are doing the trail. My personal opinion based on my experience and the biology of this virus, I think this vaccine is going to be highly efficacious. I wouldn’t be surprised if it’s in the 90% [range].” said Moncef Slaoui, chief adviser of Operation Warp Speed. “I think the question that’s open is, for how long will the vaccine afford efficacy.”
His final comment is very important, “for how long will the vaccine afford efficacy?”
Research so far indicates that immunity fades within 2-3 months.
CIDRAP, Centre for Infectious Disease and Policy at the University of Minnesota reports on a study in China that antibodies in COVID-19 patients fade quickly.
“The study, which focused on 37 asymptomatic and 37 symptomatic patients, showed that more than 90% of both groups showed steep declines in levels of SARS-COV-2–specific immunoglobulin G (IgG) antibodies within 2 to 3 months after onset of infection, …”
Antibody levels dropped 70%
Among the main findings was that IgG levels in 93% (28/30) of the asymptomatic group and 97% (30/31) of the symptomatic group declined greatly during the early convalescent phase (by 8 weeks after release from the hospital). Antibody levels dropped by 71.1% in asymptomatic patients and 76.2% in the symptomatic group.”
I have mentioned that success means antibodies and T cell responses but now it seems that “success” is only going to last 2-3 months.
This is an important question for the number of vaccine doses to be commercialized. Moncef Slaoui asked, for how long will the vaccine afford efficacy? The reporter did not follow it up.
BioNTech indicated that its vaccine achieved immune responses specific to the SARS-CoV-2 protein. Does that mean that its vaccine will last longer than 2 months to 3 months? In time we will have the data and the answer, but for now the biological answer is that immunity (judged by antibodies, which still needs to be proven) lasts 2 to 3 months. It follows that it is probable that people will have to receive booster shots every 2 to 3 months. That is why this question is controversial and why this aspect is underreported. The development path of the vaccine is already being questioned by anti-vaxxers and quarterly booster shots are certainly going to be controversial.
We know from the clinical trial data above that the vaccine will most likely be delivered in two initial doses. Judging from the biological immune response data, it would be fair to expect a booster dose quarterly.
I had mentioned above that BioNTech uses a custom made vehicle to deliver an inactive portion of the virus to the human body. The point is that the body must respond to the inactive portion of the COVID-19 causing virus and not to the vehicle. Using a naturally occurring virus as the vehicle can cause the body to respond to the “vehicle” rather than the COVID-19 causing virus, particularly if the body had previously encountered the “vehicle.” This response to the vehicle may become an additional problem with multiple booster shots. Having a custom-built vehicle will be a significant advantage.
Armed with the information above on the development progress, prospects for success, commercial positioning and competitive advantages, we can do initial calculations on the commercialization of a COVID-19 vaccine. That will assist us in estimating the commercial value for BioNTech and what a fair value would be for its shares.
Who needs it? The whole world population of 7.8bn people.
What is the indicative price? See the pre-order from the USA government, $1.95bn for 100 million doses. That is $19.5 per dose and each person will need 2 doses to start out.
It is likely that each person would require quarterly booster shots. That means at least 4 shots per annum.
Not everybody will get vaccinated but this is such an economic emergency that it is likely that vaccination will exceed 60%, so let’s work with 60% of the global population being vaccinated.
The commercialization of all COVID-19 vaccines would therefore be worth $91.26bn based on 60% of the population per shot. The 2 initial shots will be worth twice that at $182.5bn. The 4 annual shots will be worth $365bn.
Moving on to the BioNTech/Pfizer team and given its competitive advantages, it would be fair to estimate that it could capture up to 50% of the market, particularly in the 2020 to 2023 period.
That would calculate a revenue stream of $91.26bn for the 1st two shots over 4 years and booster shots worth $182bn per annum after the 4 years.
This is not a definitive calculation, it is an indicative calculation using current available information. The information and basis for calculation may change going forward or may substantially remain the same. We just do not know but these are very substantial potential revenue streams.
The BioNTech/Pfizer team has not disclosed how they will share the potential revenue stream, but let’s use a 50/50 division for a calculation which will allow us to drill down to BioNTech. It then follows that BioNTech will build up to a revenue stream of $91.26bn by 2023 with substantial income generation already taking place in 2020.
An enterprise value of 2 times revenue would indicate that BioNTech should grow to a market capitalization of around $182.5bn ignoring all its other potential products and the potential future income from the technology of having a proven mRNA delivery vehicle. BioNTech currently has 226 262 336 shares in issue, excluding a small rights offer in progress, for a market cap of around $20bn at its closing price on July 31, 2020, at $82.11. The share price will have to increase to $806 to reach a market cap of $182.5 but one would expect some dilution with rights offers along the way. It is reasonable to place a target price of $200-300 on BioNTech shares by the end of 2020 based on the information available.
I believe that the information available also shows the BioNTech/Pfizer team to be in a commanding position to gain the largest market share from the development of a COVID-19 vaccine. October 2020 is a very near date for data and commercialization certainty. The governments of the USA, the UK and Japan seem to agree.
Disclosure: I am/we are long BNTX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.