PhilStockWorld Top Trade Alert – May 10, 2023 – BioNTech (BNTX)

So Shel-Bot is 4 for 5 on earnings picks for the week so far and that means this is a project we will continue to work on.  He’s getting better and better at analyzing companies and I’m especially liking our now-famous “The Good, the Bad and the Ugly” reports he’s been producing as it has really helped us focus on what’s happening after the earnings reports are turned in.  

For instance, on BNTX, who I think are worth a toss down here.  Here’s is Shel-Bot’s regular report on the earnings:

⊗Hello, this is Bing. According to the finance results ¹, BioNTech SE (BNTX) reported its Q1 2023 earnings on May 8, 2023. Here are some of the main highlights and analysis:

• • BioNTech reported total revenue of $1.277 billion for Q1 2023, a decrease of 70% compared to Q4 2022, but an increase of 7,344% compared to Q1 2022 ¹. The revenue was mainly driven by the sales of its COVID-19 vaccine Comirnaty, which it co-developed with Pfizer. The company recognized $1.235 billion of its share of gross profit from the vaccine sales in Q1 2023 ¹.
  • BioNTech reported a net profit of $48 million for Q1 2023, a decrease of 98% compared to Q4 2022, but an increase of 2,400% compared to Q1 2022 ¹. The net profit margin was 3.8% for Q1 2023, down from 79.5% for Q4 2022 and up from -0.2% for Q1 2022 ¹. The company attributed the lower profitability to higher R&D expenses, higher taxes, and lower gross margin from the vaccine sales ².
  • BioNTech reported a basic earnings per share (EPS) of $0.194 for Q1 2023, a decrease of 98% compared to Q4 2022, but an increase of 2,370% compared to Q1 2022 ¹. The EPS was below the consensus estimate of -$0.53 ¹.
  • BioNTech reported a cash position of $4.5 billion as of March 31, 2023, an increase of 16% compared to December 31, 2022 ¹. The company said it has sufficient liquidity to fund its operations and growth plans ².
  • BioNTech reiterated its guidance for full-year 2023 COVID-19 vaccine revenue of $15 billion based on current supply contracts ¹. The company also said it expects to produce up to three billion doses of Comirnaty in 2023 and has signed contracts for more than two billion doses so far ².
  • BioNTech also updated on its pipeline progress and strategic priorities for 2023. The company said it is advancing its next-generation COVID-19 vaccine candidate BNT162b3, which has shown improved immunogenicity and stability in preclinical studies ². The company also said it is developing combination vaccines for COVID-19 and influenza, as well as COVID-19 and tuberculosis ². In addition, the company said it is working on key Comirnaty features such as booster shots, pediatric indications, and new formulations ².
  • BioNTech also said it is expanding its oncology portfolio with multiple clinical trials ongoing or planned for its mRNA-based immunotherapies and cell therapies ². The company said it expects to report data from several trials in the second half of 2023 and initiate new trials for its neoantigen vaccine BNT111 and its CAR-T therapy BNT211 ².

Some of the trends that we can observe from these data are:

• • BioNTech’s revenue and profitability are highly dependent on the sales of its COVID-19 vaccine Comirnaty, which may fluctuate depending on the demand, supply, pricing, and competition in the market.
  • BioNTech’s R&D expenses are increasing as it invests in its pipeline development and diversification beyond COVID-19.
  • BioNTech’s cash position is strong and allows it to pursue strategic opportunities such as partnerships, acquisitions, and expansions.
  • BioNTech’s COVID-19 vaccine business is facing challenges such as new variants, regulatory uncertainties, patent waivers, and emerging competitors.
  • BioNTech’s COVID-19 vaccine business is also creating opportunities such as new markets, new indications, new formulations, and new combinations.

And here is our Special “Good, Bad, Ugly” summary report:  

⊗The Good:

• BioNTech reported strong revenue growth of 7,344% year-over-year, driven by the sales of its COVID-19 vaccine Comirnaty, which it co-developed with Pfizer ¹.
• BioNTech reported a net profit of $48 million and a positive EPS of $0.194, demonstrating its ability to generate profitability from its COVID-19 vaccine business ¹.
• BioNTech reported a strong cash position of $4.5 billion, which provides sufficient liquidity to fund its operations and growth plans ¹.
• BioNTech reiterated its guidance for full-year 2023 COVID-19 vaccine revenue of $15 billion based on current supply contracts ¹. The company also said it expects to produce up to three billion doses of Comirnaty in 2023 and has signed contracts for more than two billion doses so far ².
• BioNTech updated on its pipeline progress and strategic priorities for 2023. The company said it is advancing its next-generation COVID-19 vaccine candidate BNT162b3, which has shown improved immunogenicity and stability in preclinical studies ². The company also said it is developing combination vaccines for COVID-19 and influenza, as well as COVID-19 and tuberculosis ². In addition, the company said it is working on key Comirnaty features such as booster shots, pediatric indications, and new formulations ².
• BioNTech also said it is expanding its oncology portfolio with multiple clinical trials ongoing or planned for its mRNA-based immunotherapies and cell therapies ². The company said it expects to report data from several trials in the second half of 2023 and initiate new trials for its neoantigen vaccine BNT111 and its CAR-T therapy BNT211 ².

The Bad:

• BioNTech reported a significant decrease in revenue and profitability compared to Q4 2022, reflecting lower demand and pricing for its COVID-19 vaccine as well as higher R&D expenses and taxes ¹².
• BioNTech reported an EPS below the consensus estimate of -$0.53 ¹, indicating that the market expected a larger loss for the quarter.
• BioNTech’s revenue and profitability are highly dependent on the sales of its COVID-19 vaccine Comirnaty, which may fluctuate depending on the demand, supply, pricing, and competition in the market ¹².
• BioNTech’s R&D expenses are increasing as it invests in its pipeline development and diversification beyond COVID-19 ¹².

The Ugly:

• BioNTech’s COVID-19 vaccine business is facing challenges such as new variants, regulatory uncertainties, patent waivers, and emerging competitors ².
• BioNTech’s COVID-19 vaccine business is also creating opportunities such as new markets, new indications, new formulations, and new combinations ². However, these opportunities may not materialize or may not be profitable enough to offset the potential decline in Comirnaty sales over time.

Shel-Bot (Bing) is better with facts but Warren (ChatGPT) is better with insights, so I asked him to summarize BNTX’s overall prospects:  

♦BioNTech is a biotechnology company that specializes in mRNA-based therapies and vaccines for various diseases, including COVID-19, cancer, infectious diseases, and rare diseases. The company has partnered with Pfizer to develop and commercialize Comirnaty, the first mRNA-based COVID-19 vaccine to receive regulatory approval and emergency authorization in many countries.

Comirnaty has generated significant revenue and profitability for BioNTech, as well as global recognition and reputation. However, as the COVID-19 pandemic evolves and new variants emerge, the demand and pricing for Comirnaty may decline over time, especially as more competitors enter the market and more people get vaccinated. Therefore, BioNTech is investing heavily in its R&D pipeline to diversify its portfolio and create new revenue streams for the future.

The company has more than 20 product candidates in various stages of development, mostly in oncology but also in other areas such as influenza, tuberculosis, multiple sclerosis, and HIV. The company is also advancing its next-generation COVID-19 vaccine candidate BNT162b3, which has shown improved immunogenicity and stability in preclinical studies. The company is also developing combination vaccines for COVID-19 and influenza, as well as COVID-19 and tuberculosis.

In addition, the company is working on key Comirnaty features such as booster shots, pediatric indications, and new formulations. BioNTech’s R&D expenses have increased significantly as it pursues these opportunities, resulting in lower profitability compared to previous quarters.

However, the company has a strong cash position of $4.5 billion, which provides sufficient liquidity to fund its operations and growth plans. The company also reiterated its guidance for full-year 2023 COVID-19 vaccine revenue of $15 billion based on current supply contracts. BioNTech’s outlook is dependent on several factors, such as the evolution of the COVID-19 pandemic and the market dynamics for vaccines, the clinical and regulatory progress of its pipeline candidates, the potential partnerships and collaborations with other companies, and the competitive landscape in its therapeutic areas.

BioNTech has proven its scientific and technological capabilities with Comirnaty, but it still faces many challenges and uncertainties in its quest to become a leading global biotechnology company. BioNTech may be worth the risk as an investment moving forward, but it also requires careful evaluation of its strengths, weaknesses, opportunities, and threats.

In short, the company is a proven R&D operator and $104.68 is a market cap of $25.5Bn and they have $13.8Bn of CASH!!! net of debt.  Earnings should be about $1.5Bn for 2023 – despite all the spending – and that makes their market cap less cash less than 10x what they are making.  Investors are worried that their Covid money will dry up but I don’t think so because the Flu/Covid combination will keep selling.

Either way, we are left with a cash-rich R&D company who have already proven they can quickly scale up and produce Billions of doses on demand – we just have to wait patiently for the next crisis.  

As a new trade, I would play BNTX as follows:  

• • Sell 5 BNTX Dec 2025 $100 puts for $21 ($10,500) 
  • Buy 10 BNTX Dec 2025 $80 calls for $42 ($42,000)
  • Sell 10 BNTX Dec 2025 $130 calls for $22 ($22,000) 

That’s net $11,500 on the $50,000 spread so we have $38,500 (334%) upside potential at $120 in about 2.5 years (954 days).  We care about the days because, if BNTX goes higher, we may sell some short calls for income like the Sept $115s, which are $6 so 5 of those would fetch $3,000 using 128 of 954 days.  

The logic to doing that is we can put a stop at $5,000 and risk $2,000 but the only way we’d stop out is if BNTX made a nice move higher, which benefits our longs.  We have 7 opportunities to make sales like that and if only 4 of them are successful we make $12,000 less let’s say $4,000 in losses and that’s net $8,000 – which pays for most of the spread. 

From the sale of the puts, we have an obligation to buy 500 shares of BNTX for $100 ($50,000) but, in a Portfolio Margin account, the net margin of the spread is only $2,669.34 – so we’re not tying up a lot of margin to make the trade.