Thanks to its highly promising coronavirus vaccine candidate, BioNTech (NASDAQ:BNTX) stock is up by more than 140% this year so far, appealing to both Robinhood speculators and mainstream biotech investors alike. With the U.S. and Japanese governments each requesting more than 100 million doses of its candidate well before clinical trials are scheduled to conclude, the company's present lack of revenue seems like a minor concern. And, with a compelling pipeline of immunotherapies for various cancers in the works, BioNTech's future looks quite bright, at least at first glance.
On the other hand, BioNTech's ambitious goal of producing personalized immunotherapies seems to be no closer to reality than when the company went public in late 2019, perhaps in part because of its prioritization of the coronavirus vaccine project. Furthermore, its ballooning stock price is likely overvalued in the context of its completely unproven earning potential, not to mention its heavy reliance on larger collaborators like Pfizer (NYSE:PFE) that stand to capture a big chunk of the company's potential coronavirus success.
BioNTech's pipeline and service subsidiaries aren't paying the bills, but Pfizer is
As a clinical-stage company without any drug products on the market, BioNTech's pipeline includes a handful of preclinical and phase 1 programs for various cancers. It also includes a phase 2 program for advanced melanoma and two infectious disease programs, one of which is its coronavirus vaccine project, BNT162.
There's more to BioNTech than its drug development activities, however. The company owns several subsidiaries that provide research services, manufacturing services, and in vitro diagnostic testing devices for other businesses in the biopharma sector, all of which pushed its trailing-12-month gross earnings to $91.2 million. But the company's profit margin is a negative 174.2%, and its year-over-year quarterly revenue growth of 5.8% is fairly weak, so investors shouldn't expect revenue from these services to carry the business or the stock price.
Nor is it reasonable to expect that the coronavirus vaccine program will make the company profitable. Because of its collaboration with Pfizer and the accelerated development timetable necessary to fight the pandemic, it's highly likely that BNT162 will soon be the company's most advanced project, with combined phase 2 and phase 3 trials having started in late July. This means that the company will be leaning heavily on Pfizer's formidable experience when it comes to the finer points of its late-stage clinical trials and the regulatory approval process for its vaccine, though it plans to keep its clinical-scale manufacturing in-house.
Importantly, Pfizer will also be taking the lead financially, paying for most of BioNTech's BNT162 development costs via a combination of cash payments, equity investments, and cost-sharing arrangements. Pfizer has already invested $113 million in equity, and BioNTech is eligible for up to an additional $563 million in milestone payments in total. While the extensive collaboration with Pfizer means that BioNTech's minimal cash on hand probably won't be a barrier to rapid clinical development, it does mean that BioNTech will have limited exposure to the upside of the vaccine's sales if it is proven to be effective.
This stock is no bargain, but it might still be worth a buy
So, does BioNTech have a place in your coronavirus portfolio? If it does, it will probably be in the most speculative segment, and you'll need to be willing to pay a hefty sum per share. As the company's earnings per share (EPS) has consistently tumbled deeper into the negative since going public, its price-to-book ratio has exploded upward. This means that each share now accounts for a smaller sum of earnings -- the stock has consistently risen in price compared with the value of the company's actual assets, which aren't expanding as rapidly.
For me, BioNTech is not worth a buy, but it's definitely worth a hold because its present difficulties may be temporary. If the company's work with Pfizer can provide the cash flow for it to work on its more ambitious immunotherapy projects, it might eventually deliver a winning product. In the meantime, keep an eye on its earnings reports to see how the vaccine project is affecting the balance sheet.