mRNA And COVID Vaccines Will Create Opportunities Despite Risks

Key Takeaways

• Strategic investment in mRNA cancer immunotherapies and infectious disease vaccines aims to sustain revenue growth and diversify products.
  
• Biotheus acquisition and focus on China could enhance immunotherapy capabilities and bolster long-term earnings.
  
• Declining COVID-19 vaccine demand, legal expenses, and high R&D costs could pressure financials, while execution risks on new products may impact future revenues.

Catalysts

A biotechnology company, develops and commercializes immunotherapies to treat cancer and infectious diseases in Germany.

• BioNTech's investments in mRNA cancer immunotherapies, including FixVac and iNeST, are focused on improving outcomes for various tumor types, which is expected to drive future revenue growth once they achieve market approval.
  
• The company's strategic acquisition of Biotheus aims to bolster its immunotherapy capabilities, with the anticipated expansion into the Chinese market, enhancing long-term earnings potential.
  
• BioNTech is advancing its infectious disease product strategy, including next-generation COVID-19 and combination vaccines, which may lead to sustainable revenue sources despite lower COVID-19 vaccine demand.
  
• With a significant increase in research and development expenses projected for 2025, particularly in late-stage programs like BNT327, the expectation is that these developments will lead to higher net margins upon successful commercialization.
  
• The anticipated data releases in 2025, particularly in oncology with BNT327 and the mRNA cancer immunotherapies, could provide important clinical validation, potentially boosting future earnings if results are positive.

BioNTech Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on BioNTech compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming BioNTech's revenue will decrease by 14.0% annually over the next 3 years.
• The bearish analysts are not forecasting that BioNTech will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate BioNTech's profit margin will increase from -24.2% to the average US Biotechs industry of 17.3% in 3 years.
• If BioNTech's profit margin were to converge on the industry average, you could expect earnings to reach €303.0 million (and earnings per share of €1.23) by about April 2028, up from €-665.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 107.0x on those 2028 earnings, up from -31.1x today. This future PE is greater than the current PE for the US Biotechs industry at 20.2x.
• Analysts expect the number of shares outstanding to grow by 0.94% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.38%, as per the Simply Wall St company report.

BioNTech Future Earnings Per Share Growth

Risks

• The significant reduction in revenues, from around €3.8 billion in 2023 to approximately €2.8 billion in 2024, primarily driven by lower COVID-19 vaccine demand, could impact future revenue streams if the demand does not stabilize.
  
• Legal disputes like the contractual disputes with NIH and the University of Pennsylvania have resulted in substantial payments and expenses, approximately USD 1.6 billion expected to affect the financial position, leading to potential impacts on net margins and earnings.
  
• The substantial increase in research and development expenses, rising to approximately €2.3 billion in 2024 from €1.8 billion in 2023, largely due to advancing late-stage programs, may pressure net margins if the investments do not lead to successful product developments.
  
• The ongoing development and commercialization risks associated with new therapeutic candidates, such as mRNA cancer immunotherapies and BNT327, pose execution risks that could impact future revenues and earnings if they fail to meet regulatory or commercial milestones.
  
• Potential changes in vaccine market dynamics, including competition and variations in public sentiment, especially regarding COVID-19 vaccines, could influence future revenue and financial results negatively, as reflected in the 2025 guidance for decreased total revenues.

Valuation

• The assumed bearish price target for BioNTech is $124.59, which represents one standard deviation below the consensus price target of $141.71. This valuation is based on what can be assumed as the expectations of BioNTech's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $177.85, and the most bearish reporting a price target of just $114.61.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €1.8 billion, earnings will come to €303.0 million, and it would be trading on a PE ratio of 107.0x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of $98.25, the bearish analyst price target of $124.59 is 21.1% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.