When the husband-and-wife team of Dr. Ugur Sahin and Dr. Ozlem Tureci started BioNTech (BNTX +1.29%), they envisioned a diversified European pharmaceutical company focused on cutting-edge cancer treatments. With the authorization and distribution of Comirnaty, the COVID-19 vaccine it developed with Pfizer (PFE 1.02%), the company will have all the resources it needs to pursue its goal.
A current $26 billion market capitalization is pricing in plenty of vaccine success, but BioNTech still may not be getting the credit it deserves for the other drugs in its pipeline using its revolutionary new messenger RNA (mRNA) approach.
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The year of the vaccine
As Pfizer noted in its February earnings release, the Comirnaty partnership could generate $15 billion in sales and roughly $4 billion in profits in 2021 (the companies are in a 50/50 partnership). As more coronavirus vaccines are authorized -- Johnson & Johnson's (JNJ 0.21%) single-shot prophylactic has received emergency use authorization, and Novavax's (NVAX 0.63%) protein-based candidate is slated for consideration soon -- competition will likely drive prices lower after the first wave of supply agreements has been fulfilled.
That said, it appears likely that booster shots will be necessary for at least the next few years. It's hard to estimate what that could mean for doses or profits, but for some comparison, we can look at the flu. About half of Americans get vaccinated for influenza each year, and 95% of flu vaccines are administered in the Americas, Europe, and the western Pacific. That equates to roughly 1.5 billion vaccines per year. That could provide a useful model to estimate the addressable market if COVID-19 becomes endemic. Management believes this will be the case, but most analysts aren't willing to make longer-term projections about a vaccine for a disease that's so uncertain.
Clues about the company's potential
Even so, much of the vaccine news is already incorporated into the stock price. This could give unexpected developments related to other treatment programs more influence over the stock price movement, as well as insight into what the company will rely on post-COVID. There are several programs to keep a close eye on in 2021.
In cancer, BioNTech has two platforms. The first is an off-the-shelf mRNA treatment that targets a fixed combination of antigens, the molecules that trigger an immune response. The second is a more personalized approach targeting antigens specific to each patient. The company expects to launch a pair of phase 2 trials for cancer treatments by midyear. One will be a combination therapy with a Regeneron (REGN 0.05%) product and the other is a drug to treat certain head and neck cancers. All told, management expects to advance as many as three oncology programs into phase 2 trials this year.
Further back in the clinical pipeline are a pair of vaccines being developed in collaboration with the Bill & Melinda Gates Foundation for HIV and tuberculosis. Those are notable largely because of the size of the current treatment markets: $31 billion for HIV and $1.2 billion for tuberculosis. For the year, management expects six pre-clinical programs to advance into phase 1.
How do you value the future of medicine?
Although BioNTech has only recently gained fame, the company has been a star in oncology circles for years. In 2017, people began taking notice when its personalized mRNA treatment for skin cancer was shown to have conclusively prevented tumors in the 13 high-risk patients it treated. In total, the company has 22 programs in the early stages of development. Dr. Sahin and Dr. Tureci estimate it will be 2023 or 2024 before readouts of these studies are available.
Because of that gap in time -- and the risk of failures during clinical trials -- determining whether BioNTech stock is a buy is less about valuation and more about the open-ended potential of a company inventing a new approach to treating disease. By 2024, global spending on medicine is projected to be almost $1.6 trillion. Although the company can only hope to capture a small slice of that gigantic pie, it helps illustrate how much -- and for how long -- BioNTech could grow. (For comparison, the market for cancer treatments alone is estimated at $150 billion.)
Given such an opportunity, an investor has to ask if the management team has the mindset and skills to execute. In BioNTech's husband-and-wife team, the world of medicine has created reluctant entrepreneurs. At 55 and 53 years old, respectively, they are two world-renowned, dedicated oncologists who only started a company to increase the chance that breakthroughs in the lab would make it to patients. That's the kind of backstory healthcare investors can feel good about.
BioNTech has a promising new disease-fighting technology and nearly endless potential to apply it. That, combined with proven founders who hold deep scientific expertise and the mindset of servant leaders, should give investors confidence that the ingredients are here for a great company doing things the right way. Simply put, I believe all the boxes are checked to make shares a buy for the long term.
