One of the biggest mistakes investors make is seeing a stock go up and thinking they missed the boat. In fact, companies that are succeeding often continue building on the advantages that helped them do well in the first place. In short, winners keep on winning.
That's why it's important to consider a stock like BioNTech (BNTX 0.03%). Sure, the stock has climbed 962% since the beginning of last year. But a lot has happened since. The company's future might be even brighter than its recent past. If so, there could be a lot of gains left for shareholders.
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Are analysts underestimating the COVID-19 vaccine?
With a seemingly unanimous push by U.S. government leaders for boosters to be available by the end of September, one question has been answered: Yes, we're getting boosters. At least those who want one. That means the opportunity for BioNTech and Pfizer (PFE 1.44%), as well as other vaccine makers like Moderna (MRNA 3.46%), might be bigger than first thought.
Those three alone have projected more than $72 billion in 2021 revenue from the jabs. With many contracts already in place and BioNTech estimating capacity of 3 billion doses this year and up to 4 billion next year, analysts are expecting much of the same for 2022. They are even already projecting $6.6 billion for the Pfizer-BioNTech partnership in 2023. Many believe the overall market for COVID booster shots could approach the $6 billion that influenza vaccines pull in each year.
That's a lot of doses and even more dollars. It's hard to say analysts are underestimating. But there are 7.6 billion people in the world. That's a lot of people to protect against a disease that will continue to change as long as there are hosts for it to spread and mutate.
What the estimates might not fully account for are price increases. Pfizer and Moderna have both already raised prices in more-recent supply deals. That could provide an added boost to revenue depending on the buyer's negotiating power. If it's the government of a large developed country, prices aren't likely to budge. If it's a private insurer, the cost per jab could end up meaningfully higher.
What else does the company have up its sleeve, and when?
Comirnaty, BioNTech's COVID vaccine, won't always be the company's only moneymaker. Its treatment for melanoma and other solid tumors is in phase 2 trials and should be wrapping up this time next year. That drug is a collaboration with Genentech. The markets for drugs to treat melanoma and solid tumors are expected to reach $12 billion and $322 billion, respectively, by 2025. That's a lot of opportunity.
The company has other programs targeting solid tumors, both with partners and alone. Overall, only 12 of its 27 programs outside of Comirnaty are even in clinical trials. The partnership with Genentech is the only one beyond phase 1. Drugs in phase 1 don't have a great track record of making it all the way to the market. Even if they do, it will be years before any revenue is realized. BioNTech's pipeline has a lot of potential, but it's likely several years away.
What is it all worth?
To figure out what the stock might be worth, and whether it might be too late to jump on board, it is easiest to look at the company in two pieces: Comirnaty, and everything else.
Thankfully, management provided 2021 guidance for revenue, expenses, and investment, as well as taxes. It also said gross margins would slip from the 83% it posted in the latest quarter. Applying the numbers and extrapolating them over the next few years offers an educated guess at how much the company's only commercialized drug might be worth. The rest is the assumed value of the pipeline.
| Year | Revenue | Costs, Expenses, and Investments | Taxes | Profit |
|---|---|---|---|---|
| 2021* | $18.75 billion | $6.43 billion | $5.27 billion | $8.5 billion |
| 2022 | $18.75 billion | $6.43 billion | $5.27 billion | $8.5 billion |
| 2023 | $3.3 billion | $1.13 billion | $673 million | $1.55 billion |
| Ongoing | $2 billion | $686 million | $407 million | $907 million |
Data source: *BioNTech; Author's calculations.
Discounting those profits at an aggressive 8% rate gives a current value of Comirnaty close to $33 billion. That means the pipeline would be worth the other $55 billion of its $88 billion market cap. That could be a stretch if the future plays out according to these numbers.
Of course, Pfizer has already raised its projections for 2021 Comirnaty revenue to $33.5 billion. And it is a 50/50 partner with BioNTech. In that scenario, Comirnaty would be worth about $40 billion to BioNTech, leaving the pipeline to make up the other $48 billion. That's still a lot of value attributed to potential.
For that reason, it might be too late to buy BioNTech stock, at least at the current price. The company could go on to have great success developing cancer treatments, and I expect it will. But as an investment, it appears the bar will be incredibly high for the company to exceed the expectations the shares are already pricing in.
