After reporting worse than anticipated second-quarter earnings on Aug. 8, shares of BioNTech (BNTX 0.97%) are tumbling, deepening the stock's decline to 65% over the last 12 months. The culprit is the biotech's lackluster sales of Comirnaty, its coronavirus vaccine developed in conjunction with Pfizer. With its future jab sales uncertain at best, it could have a rough ride for the rest of the year and beyond.
But does that make its long-term prospects any less appealing to investors, and is there any chance of a recovery in the near term? Let's address the first question to start.
The Comirnaty dip could just be a bump in the road
The bottom line for investors is that the recent weakness in Comirnaty sales doesn't have much to do with the stock's potential over the next decade. But, it does indicate that the biotech stock's next few years are likely to be unrewarding for shareholders compared to the past few.
Whereas professional analysts estimated on average that BioNTech's vaccine would bring in around $4 billion in the second quarter, in actuality, it sold only around $3.2 billion. That's a big whiff, to be sure, and it calls into question the security of the company's base of revenue in the near term. Per management, the problem is order rescheduling, which means that future earnings whiffs might be in the works if customers keep deciding to defer or alter their orders.
Beyond the next couple of years, it'll likely commercialize other medicines, so don't put too much weight on the lower-than-expected sales of one quarter. In the meantime, it'll be working with Pfizer to update Comirnaty against the circulating viral variants to spur significant new purchasing activity from governments. That's probably why management remains confident that it'll live up to its guidance for between $13.3 billion and $17.3 billion in 2022.
Given that it just signed an agreement with the U.S. government to deliver at least 105 million doses of Comirnaty, it could well end the year on track. If it succeeds in getting the updated jabs out the door and continues to see demand for them, there is a faint possibility that 2023 could see its top line grow. But that'd fly in the face of those pesky estimates by financial analysts, which call for BioNTech's top line to shrink to around $10.4 billion next year regardless of any updated shots. And with few expecting as much interest in procuring coronavirus vaccines in 2023 as there was in 2020, the analysts are likely to be in the right ballpark.
What should investors do?
The company plans to launch multiple new programs over the next three to five years while also continuing to adapt and improve its coronavirus vaccine. Maintaining its strong position in the coronavirus vaccine market isn't a given, as competitors like Novavax are angling to steal from BioNTech's global market share of 63%, and its shot may ultimately be proven to perform better at preventing infection and severe disease than BioNTech's. Overall, it's hard to see how the time between now and when it has multiple products on the market might possibly go well for shareholders. Nonetheless, it's exactly those expectations for poor performance that could make BioNTech a brilliant contrarian buy at some point in the next couple of years.
Without much optimism in the market for its revenue to keep growing, the stock's valuation may fall, making it cheaper and cheaper -- but never as a result of any real threats to the biotech's continued operation. Investors who are willing to buy shares when everyone else is selling will probably need to wait a good while for their investment to break even, but they might also benefit big after it does. And that's especially true if some of the company's more ambitious plans come to fruition, like its pan-coronavirus (more durable against future variants) vaccine slated to start its proof of concept trial before the end of the year. On the other hand, if you're a bit impatient about seeing your investment start to pay off, or if you're not willing to bet on a distant turnaround, it's probably best to avoid BioNTech for now.