This Vaccine Maker Sits on Cash Almost Equal to Its Market Value – Barron’s

This biotechnology company has nearly 90% of its market value in cash and investments but is being shunned by investors even as they gravitate to the sector this year.

The company is BioNTech (Ticker BNTX). It partnered with Pfizer to produce the leading Covid vaccine, Comirnaty, whose original messenger RNA technology was developed by BioNTech. It is rare to find any sizable company with so much cash relative to its market cap.

That could offer an opportunity for investors because investors effectively are ascribing little value to the companys Covid vaccine franchise and a drug pipeline geared toward cancer treatments.

What could go right? A large stock buyback program, a payout of a chunk of that cash to investors, potential activist pressure to rein in expenses or distribute the cash or a sale of the company in what has become a more frothy market for biotech companies.

Here are the numbers: The German biotech reported its fourth-quarter results last Wednesday and said it ended the fourth quarter with $19.3 billion of cash and investments, against a current market value of $22.1 billion. It has minimal borrowings and a book value of $22 billion with only $1 billion of intangible assets.

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BioNTech shares rose 1.3% Monday at $93 and trade near a 52-week low. The stock is off nearly 30% in the past year, versus an 10% gain for the iShares Biotechnology ETF (IBB). Its down 80% from its 2021 high of $441.

Wall Street is lukewarm on BioNTech despite the big cash position because of waning sales of Covid vaccines and a cancer-focused drug pipeline without any potential blockbusters that may not deliver its first commercial product until 2026. TD Cowen analyst Yaron Werber wrote recently that the clinical/commercial outlook for each of the oncology drugs is unclear now, making it tough to include them in valuation models. Then there is the risk that the company spends a big chunk of the cash on a questionable acquisition.

We think BNTXs emerging pipeline beyond COVID has upside potential long-term. However, we continue to think investor focus for shares remains on COVID, where we continue to have limited long-term visibility and think uncertainty could create a headwind for shares, particularly in the context of increasing investments spend, wrote UBS analyst Eliana Merle in a client note. She has a Neutral rating and price target of $110.

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BioNTechs founders, Ugur Sahin, the CEO, and his wife, Ozlem Tureci, the chief medical officer, are cancer experts and have researched the disease for decades. BioNTech is developing treatments for lung and other cancers.

The company is upbeat on the oncology pipeline, noting 10 Phase 2 and 3 trials under way and a goal of 10 indication approvals by 2030.

The companys 2023 sales were below the Street estimate and its 2024 revenue projection of about $3 billion (nearly all Covid related) was $300 million below the consensus projection.

The FactSet

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That projected loss, while not great, is much better than many biotechs with high burn rates and no approved drugs.

The company effectively trades for just one times sales, based on its enterprise value (market value less net cash), a low valuation for a drug company. And BioNTech does offer optionality, or the ability to capitalize on a Covid resurgence that would boost vaccine demand.

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Management has indicated that it intends to focus on building out a pipeline of about a dozen drugs, mostly oncology related. The company said in its earnings press release that it will continue to evaluate appropriate corporate development opportunities to help drive growth and create.

But BioNTech has also said that it plans to husband its cash. On its second-quarter earnings conference call last year, Ryan Richardson, the chief strategy officer, said we think its an immense asset to the company to have a strong balance sheet.

The company plans to spend about $2.7 billion on research and development this year, nearly equal to its projected revenues. Thats a hefty amount and could become the focus on investors if the stock continues to languish.

Barrons has written favorably on BioNTech and the stock has proven a disappointment. At current levels, investors are paying little for its core business given all the cash. That could be a good setup for the rest of 2024.

Write to Andrew Bary at andrew.bary@barrons.com

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This Vaccine Maker Sits on Cash Almost Equal to Its Market Value - Barron's