Tag: European Market

The emerging biotech’s first commercial vaccine, for COVID-19, received its first authorization in December 2020, and its early-stage pipeline and mRNA technology platforms have caught the eye of several large pharmaceutical companies, resulting in collaborations and partnerships. BioNTech’s internal discovery platform is focused on mRNA, including off-the-shelf and personalized mRNA drugs, but opportunistic acquisitions have brought in targeted antibodies and cell therapies as well. As such, BioNTech is not overly reliant on any one key drug candidate or drug class at this point, and it is poised to tackle cancer via many different mechanisms.

Further, the company has a burgeoning vaccine pipeline for infectious diseases. In partnership with the Bill & Melinda Gates Foundation, BioNTech is developing vaccines for HIV and tuberculosis, and the company’s COVID-19 program in partnership with Pfizer and Fosun Pharma was built off an existing partnership with Pfizer for an influenza vaccine. The COVID-19 vaccine, Comirnaty (BNT162b2), quickly progressed through human trials, culminating in authorization in the United States and Europe in December 2020.

Financial Strength

BioNTech has historically burned through cash to fund research and development of its pipeline. The company has minimal debt on its balance sheet, as it has funded discovery and development with equity issues and collaboration payments from partnerships with large pharmaceutical firms. Outside of BioNTech’s COVID-19 vaccine candidates, we think the earliest approval could arrive in 2023, which would put the company on a path toward steady profitability. Management has taken advantage of a couple of opportunities to acquire early-stage assets and expand its geographic footprint to establish a U.S. research hub at low prices.

BioNTech’s revenue soared to EUR 5.3 billion in the second quarter, with roughly EUR 1 billion in direct revenue for its COVID-19 vaccine in BioNTech territories and EUR 4.1 billion in gross profit share and milestones from partners (chiefly Pfizer, which reported $7.8 billion in COVID-19 vaccine revenue in the quarter). BioNTech now expects full-year revenue from the COVID-19 vaccine of EUR 15.9 billion in 2021. Based on these changes, full global sales of Pfizer/BioNTech’s COVID-19 vaccine of $35 billion in 2021 and $39 billion in 2022, as sales in developing markets and third-dose booster sales to developed markets continue to grow. Increased our assumed probability of approval for Pfizer/ BioNTech’s flu program BNT161 from 60% to 70% given continuing validation of this technology in infectious diseases.

Overall, these changes boost our fair value estimate to $172 per share from $139. BioNTech (and peer Moderna) rapidly building a moat based on novel mRNA technology, although multiple potential competitors, significant uncertainty around the duration of COVID-19 revenue beyond 2022, and ongoing validation of this technology outside of COVID-19 prevent us from assigning BioNTech a moat at this time. While the initial series continues to show 90%+ efficacy at preventing severe disease, efficacy against symptomatic infection has been slowly declining, from a peak of 96% down to 84% in individuals that are more than four months past their second dose. Both Pfizer/BioNTech and Moderna have early phase 2 data showing that a third dose of their authorized vaccines significantly boosts neutralizing antibody activity against the original strain and variants, including the delta variant.

Bulls Say’s

BioNTech’s pipeline, which relies on expertise in mRNA and bioinformatics, will be difficult to replicate by competitors.
BioNTech will be able to command a premium price with its personalized cancer therapies, if successful.
The rapid development of COVID-19 vaccine Comirnaty bodes well for the rest of BioNTech’s pipeline and the future of its mRNA research platform.

Company Profile

BioNTech is a Germany-based biotechnology company that focuses on developing cancer therapeutics, including individualized immunotherapy, as well as vaccines for infectious diseases, including COVID-19. The company’s oncology pipeline contains several classes of drugs, including mRNA-based drugs to encode antigens, neoantigens, cytokines, and antibodies; cell therapies; bispecific antibodies; and small-molecule immunomodulators. BioNTech is partnered with several large pharmaceutical companies, including Roche, Eli Lilly, Pfizer, Sanofi, and Genmab. Comirnaty (COVID-19 vaccine) is its first commercialized product.

(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

The concessions business earns high profit margins and enjoys significant barriers to entry. In contrast, the contracting business is less attractive on a stand-alone basis but allows Vinci to draw on its expertise to bid on less competitive concession Greenfield projects, where construction capabilities are needed and thus allow Vinci to selectively bid for higher-margin contracting projects compared with pure-play contracting firms.

Vinci’s highly profitable acquisition of its motorway concession portfolio from the French government in 2006 has formed the backbone of the firm over the past 15 years. However, subsequent public disapproval of the deal has seen the state become less generous in awarding long-term extensions to Vinci’s existing network. Mergers and acquisitions have helped Vinci become the second-largest airport operator. The acquisition of the energy contracting division of ACS will provide Vinci with exposure to the fast-growing renewable energy sector as well as eight concessions mainly in electrical transmission.

Financial Strength

Vinci has been able to withstand the worst of global travel restrictions, which have kept earnings from the group’s concessions business heavily depressed, without a significant impact on the group’s balance sheet. Vinci has enough liquidity to meet financial and operating requirements despite low visibility on the duration of the recovery for the concession segment. Vinci holds EUR 9 billion of cash and cash equivalents, which is enough to cover debt repayments until 2025. Vinci also has access to an unused EUR 8 billion credit facility, which brings Vinci’s total liquidity to EUR 17.3 billion at the end of June 2021. Both Vinci’s airport and auto routes businesses have experienced a sharp upturn in traffic once travel restrictions have eased, which is expected to continue for the rest of 2021. Vinci’s healthy balance sheet has allowed the company to refinance debt at extremely attractive rates.

Bull Says

Vinci’s portfolio of diversified concession assets is a unique opportunity for investors to own irreplaceable infrastructure across multiple assets. Returns are supported by long-term concession contracts and favorable demographics.
Vinci’s balance sheet and global presence will allow the company to be well-positioned to boost their portfolio of high-quality assets, should governments look to privatize ageing infrastructure.

A record high order book of EUR 43 billion for the contracting segment provides earnings visibility as traffic from the concessions business recovers.

Company Profile

Vinci DG (XPAR) is one of the world’s largest investors in transport infrastructure. Significant concession assets include 4,400 kilometers of toll roads in France and 45 airports across 12 countries, making Vinci the world’s second-largest airport operator in terms of managed passenger numbers. The concessions business contributes less than one fifth of group revenue but the majority of operating profit. Vinci’s contracting business is made up of three divisions, offering a broad variety of engineering and construction services.

(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

• Recent and upcoming divestments will streamline the business and provide increased focus to deliver shareholder returns. 
• Recent product launches indicate solid sales momentum, with near-term product pipeline potentially providing further upside.  
• Selective bolt-on acquisitions to supplement organic growth. 
• Operating efficiency focuses to further support earnings growth.
• As the new management team improves Company culture, investors are less likely to ascribe a discount to the stock based on legacy issues.  

Key Risks

We see the following key risks to investment thesis:

• Recently launched products fail to deliver sales growth as expected by the market.
• New product pipeline fails to yield “blockbuster” products or delays in bringing key products to market.
• R&D programs do not yield new long-term ideas.
• Increased competition (pricing pressure & innovative products) from new entrants or existing players.  
• Value destructive M&A.
• Regulatory / litigation risks.

Management’s outlook

Assuming a continuation of the return to normal global healthcare systems including prescription dynamics particularly oncology in 2H21, and that no Gilenya and Sandostatin LAR generics enter in FY21 in the US, management anticipates (in cc); (1) FY21 net sales to grow low to mid-single digit, with Innovative Medicines to grow mid-single digit and Sandoz to decline low to mid-single digit, and core operating income to grow mid-single digit (ahead of sales), with Innovative Medicines growing mid to high-single digit, ahead of sales, and Sandoz declining low to mid-teens. (2) 2H21 net sales growth to accelerate from 3% in 1H21 to mid-single digit, as the Company continues to return to normal prescribing behaviors, as well as further Sandoz stabilization, and core operating income growth to be high-single digit, driven by higher sales and ongoing productivity programs partly offset by increased investments in growth drivers and pipeline.

Company Description  

Novartis AG (NOVN) is an innovative healthcare company headquartered in Basel, Switzerland, with approximately 125,000 employees. In 2017, the Group reported net sales of US$49.1bn, while R&D throughout the Group amounted to approximately US$9.0bn. The Company sells its products in approximately 155 countries. The group has two segments which it reports on: (1) Innovative Medicines (Oncology / Pharmaceutical), and (2) Sandoz generics division.    

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.