Coronavirus vaccine powerhouse BionNTech (NASDAQ:BNTX) made its U.S. public debut less than a year ago in October 2019, when it raised $150 million selling 10 million American depositary shares (ADSes) at $15 per ADS. Investing $5,000 in the initial U.S. public offering would be worth over $21,300 right now, an outstanding three-bagger in around 10 months.
Of course, it's unlikely that anyone investing last October could have anticipated BioNTech's rapid increase in valuation, which is mostly tied to the development of the drugmaker's coronavirus vaccine that recently entered phase 3 clinical development.
A new vaccine technology
BioNTech, like Moderna (NASDAQ:MRNA) that uses the same technology, was able to quickly design and develop its vaccine using the company's messenger RNA (mRNA) technology.
mRNAs are the intermediaries between DNA genes and the proteins they code for. DNA has successfully been used as a basis for gene therapy, and protein-based drugs have been around for decades, but mRNA-based drugs and vaccines are a relatively unproven but promising technology.
The biggest advantage of mRNA vaccines is how easy it is to turn the virus' genetic information into a potential vaccine. Development of traditional protein-based vaccines requires creating a process for expressing the viral protein -- typically in cells grown in an incubator -- followed by developing a purification stem to separate the viral protein away from the rest of the proteins the expression cells use to grow and survive.
By injecting an mRNA coding for a viral protein, BioNTech is able to skip the time-consuming manufacturing step and have the patients' cells produce the viral protein. At that point, mRNA and protein-based vaccines take a similar course, with the patients' immune systems recognizing the viral protein as foreign and mounting an immune response.
Because the structure of mRNAs is all relatively similar, it was easy for Moderna and BioNTech to design and manufacture their mRNA-based vaccines quicker than protein-based vaccines. In fact, BioNTech chose to design and test four different vaccine candidates in an early stage clinical before deciding which one to advance to late-stage testing.
A little help from its friends
BioNTech arguably wouldn't have been able to move as quickly as it has if it hadn't been for a partnership with Pfizer (NYSE:PFE), as well as one with Fosun Pharma in China. Together the two companies made $236 million in equity investment in the company that, together with cost sharing and upfront payments, will cover a majority of BioNTech's development costs for the coronavirus vaccine.
In addition to the cash, Pfizer undoubtedly offers BioNTech expertise on running clinical trials. The coronavirus vaccine isn't BioNTech's first drug candidate, but the biotech hadn't advanced any of its pipeline candidates into phase 3 development until its coronavirus program rocketed to its lead candidate.
What if you invest $5,000 today?
Whether BioNTech can continue to increase its current valuation is largely dependent on whether -- and how long -- its coronavirus vaccine is able to protect patients from getting COVID-19.
The vaccine faces substantial competition from Moderna and other developers of coronavirus vaccines, but the ultimate valuation is likely to be determined by the long-term efficacy of the vaccine.
The best financial opportunity for BioNTech is a vaccine that protects patients for about a year. While a lifetime protection would be best for patients, if BioNTech's vaccine requires an annual booster, the biotech could prosper from sales of its coronavirus vaccine year after year.
If, however, the vaccine protects patients from the coronavirus that causes COVID-19 for multiple years, it's hard to see how BioNTech is poised for substantial growth from its current market cap of $15 million.
Assuming a one-time vaccine at around $20 per dose and 500 million doses per year, BioNTech would generate $10 billion annually -- split with Pfizer -- but the one-time nature of the treatment would limit the long-term valuation of the BioNTech.
Of course, showing that its mRNA technology can create a vaccine for COVID-19 would give confidence that BioNTech can advance the rest of its infectious disease pipeline, helping prop up its valuations a little. Ultimately, though, investors should keep in mind that these are unusual times, and future development of vaccines isn't likely to be nearly as swift.