As of today, 167 COVID-19 vaccine candidates are in development around the world with 28 in clinical human trials. Companies, nonprofits, and governments are partnering to find a safe and effective vaccine against the virus, which has resulted in nearly 750,000 deaths globally and brought economies to a grinding halt. In response, demand for coronavirus vaccine stocks has soared as investors try to pick the most likely winners of the vaccine race.
One of the most promising vaccine candidates is being jointly developed by two large-cap biotech companies, BioNTech (BNTX 0.74%) and Pfizer (PFE 2.40%). The companies have a 50-50 partnership, meaning that BioNTech is responsible for half of the vaccine's development expenses and will receive half of gross profits, regardless of whether or not it actually aids in the distribution of the vaccine.
BioNTech is an experimental biotech company based in Germany that develops various potential vaccines and cancer therapies. In the company's recent earnings call, BioNTech disclosed positive clinical results from its coronavirus vaccine candidate and rising demand for bulk doses. Let's take a closer look at BioNTech's progress and prospects.
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What does clinical trial data show?
In phase 1 clinical trials, all participants who received two doses of messenger RNA (mRNA) vaccine candidate BNT162b1 developed neutralizing antibodies after seven days. Neutralizing antibodies are small proteins that recognize certain components of a pathogen and prevent it from invading healthy cells. Participants' levels of response increased as time passed. According to the peer-reviewed data, 14 days after dosage, all 45 subjects had significant antibody activity levels. Whether or not these levels can protect against COVID-19 requires confirmation in later clinical trials.
While the BNT162b1 and BNT162b2 treatments made it through phase 1/2 together in the BNT162 program, only the latter was selected to advance to the phase 2b/3 stage. Like BNT162b1, BNT162b2 is an mRNA vaccine candidate, but it differs in one important way. This candidate elicited high T-cell response levels in addition to stimulating an antibody response.
T-cells recognize virus-infected cells and tell those cells to self-destruct, preventing spread throughout the body. Unlike antibodies, which may disappear just weeks after dosage, T-cells can form memories of pathogens for months or years. If the BNT162b2 candidate can prompt a T-cell response, this vaccine could be effective in the human body for a longer period of time.
The vaccine candidate will be administered to 30,000 participants in the phase 2b/3 trial. If the final phases are successful, the biotech partners could file for regulatory approval as early as October. Considering the U.S. Food and Drug Administration (FDA) granted Emergency Use Authorization (EUA) to new coronavirus treatments like Remdesivir, days after it demonstrated efficacy in phase 3 trials, BioNTech has little doubt that the FDA will approve BNT162b2 shortly after filing, contingent on positive clinical data. The company is comfortably situated on the pathway towards an EUA, which will expedite public access to the vaccine.
What's the market opportunity?
BioNTech and Pfizer originally expected to produce 100 million doses of the vaccine this year. However, that number will likely skyrocket to 1.3 billion by the end of 2020 as they quickly expand their manufacturing capacity. If the vaccine is priced at $19.50 per dose, the two companies could generate $25.35 billion in revenue next year. Keep in mind, each vaccine candidate was given two doses in clinical trials. Participants may require more than one dose for immunity, leading to an even greater market opportunity.
The U.S., U.K., Canadian, and Japanese governments have already placed orders for the vaccine candidate. These four nations have collectively ordered 250 million doses of the treatment, with the option to purchase 500 million additional doses.
Per the 50-50 partnership, the vaccine's future expenses and gross profits will be shared equally between the companies. BioNTech has a lot to gain from this agreement, as it can leverage Pfizer's international commercial infrastructure to rapidly distribute the vaccine within countries that order it.
The verdict
As of June 30, BioNTech had about $642 million cash and cash equivalents on its balance sheet. Shortly after, the company, along with Pfizer, secured a $1.95 billion order from the U.S. government for BNT162 as part of Operational Warp Speed, the program that calls for the delivery of 300 million doses of coronavirus vaccines by January 2021. The company also obtained a $112 million loan from the European Investment Bank, which will help finance the development of its vaccine candidate.
Currently, the company has about $1.4 billion worth of cash and investments. BioNTech is confident that it can fund expenses with this cash over the next 24 months, so investors should not fear the company selling more stock to raise capital.
This $16.5 billion market cap company could expect tens of billions in revenue if its vaccine candidate is successful. BioNTech also has 12 cancer therapies in clinical trials waiting for the necessary approvals to hit the market. Investors cannot predict which coronavirus or cancer treatment candidates will receive regulatory go-aheads. However, BioNTech's smart partnership would allow the company to distribute its coronavirus vaccine to a huge addressable market through Pfizer's international network, and its safe financial position suggests that buying shares of the pharma giant now will lead to positive returns down the road.
