BioNTech Earnings: Lowering Our FVE on Lower COVID-19 Profit Share, but Shares Remain Undervalued

We’re lowering our BioNTech BNTX fair value estimate to $202 per ADR from $217 following second-quarter results that were lower than our expectations and that called into question our COVID-19 vaccine profit share estimates for the full year.

BioNTech reported revenue from COVID-19 vaccine Comirnaty (largely from its gross profit share with partner Pfizer) of roughly EUR 166 million, a massive decline from the nearly EUR 3.2 billion in revenue in the same quarter last year, as the firm faces several headwinds. Vaccine supply is transitioning from the bivalent BA.4/5 vaccine to a monovalent XBB-targeting vaccine in September, and BioNTech’s profit share was eroded by Pfizer’s inventory write-offs of old vaccine (similar to Moderna’s recent gross margin pressure).

In addition, demand is becoming more seasonal, with the expectation that most sales will be concentrated in the second half of the year. Finally, the severity of COVID-19 infections this season, and individual demand, is uncertain, and our view of near-term sales potential is further clouded by the transition from a U.S. government contract-based market to a commercial market. Management maintained guidance for full-year revenue of EUR 5 billion, and we’ve lowered our own forecast to EUR 5.5 billion from EUR 6.5 billion, to account for gross margin pressure.

Given the uncertainty around demand, BioNTech is also preparing by continuing to reduce operating expenses for the year, echoing Pfizer’s potential cost-savings plan. We have maintained our assumptions for COVID-19 vaccine demand and pricing, however, and we still assume that Moderna and Pfizer/BioNTech could see combined U.S. demand for 75 million doses in 2023 at an average net commercial price of $70. We think BioNTech is still in the process of building a maintainable competitive advantage in the novel mRNA market.