BioNTech (BNTX -15.40%) may seem like an unlikely contender to produce a coronavirus vaccine. Between its BNT311 and BNT312 programs targeting solid tumors and its BNT115 program for ovarian cancer, the company's product development pipeline is packed with potential oncology drugs, but little else. In fact, its coronavirus vaccine candidate, BNT162b2, is BioNTech's only clinical-stage project that isn't intended to treat cancer.
Contrary to what you might expect, it also happens to be the company's most advanced project. After taking BNT162b2 all the way from preclinical testing to its final phase of clinical trials, BioNTech may even have the expertise it needs to produce future inoculations for infectious disease without outside assistance. This means that working on BNT162b2 may have opened an entirely new wing of the company's pipeline. You won't find the value of this experience anywhere on BioNTech's balance sheet, but it could well be decisive for the company's future prospects, and it's the key to understanding why BNT162b2 is a game-changer for investors.
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With Pfizer's help, BioNTech is branching out from oncology
BioNTech has been eyeing the infectious disease prophylactic market for at least the past two years, and BNT162b2 was the perfect opportunity for its entry. BioNTech is collaborating with Pfizer (PFE 0.75%) to develop this candidate, so it should be able to lean on Pfizer's deep experience in late-stage clinical trials and vaccine development, not to mention its proven manufacturing and regulatory prowess. This reduces some of the risk involved, and it also enables BioNTech to learn from Pfizer at every step of the way. Importantly, the collaboration builds on a prior agreement to co-develop a new seasonal influenza vaccine, so the companies already have some experience working together.
As part of the collaboration, Pfizer and BioNTech will split the coronavirus inoculation's expenses and gross profits equally if it is approved for sale. Pfizer has already paid BioNTech $185 million in cash and equity investments, and BioNTech is eligible for additional milestone payments of up to $563 million. These revenues are significant, as BioNTech doesn't yet have any products on the market.
Furthermore, Pfizer will handle global distribution of BNT162b2 -- a critical detail, given that the U.S., Canada, and Japan have already pre-ordered hundreds of millions of doses. While biotech investors may argue that these terms ensure BioNTech won't earn as much from sales as it would if it produced the vaccine independently, it's also arguable that the company didn't have the background it needed to produce an effective inoculation until the deal with Pfizer.
BioNTech's trial-by-fire is going smoothly so far
Currently, BioNTech is enrolling patients for the vaccine's final clinical trials. Because of the accelerated timetable of development, the phase 2 and phase 3 trials will be combined into one unit. As a result, the study will focus on linking BNT162b2's efficacy to the proper dosing regimen rather than screening for safety concerns (which was the focus of phase 1). The company plans to recruit as many as 30,000 people for the trial, about the same as other coronavirus vaccine trials at the same stage.
Make no mistake: BioNTech may soon see a huge windfall from BNT162b2, especially if pre-orders continue to roll in. If everything goes according to plan, BioNTech claims that it could file for emergency use authorization of the vaccine candidate as early as October. The long-term implications of such a feat would be very positive, because it means that the company will have established competency in vaccine development over a very short timespan. Plus, regulatory approval in October would mean that BioNTech could start to see revenue from its candidate shortly thereafter.
Finally, investors should also recognize that if the BNT162b2 project doesn't go as planned, the company will still have learned valuable lessons that are in line with its prior goals to move into the vaccine space, and its losses will be mitigated thanks to Pfizer's involvement.
