Frankfurt The success of Mainz-based Biontech SE in Covid vaccine development has put the German biotech industry in the spotlight. However, hopes that the rise of the mRNA and oncology specialist will pull the entire industry up with it have hardly been confirmed so far. The euphoria of the capital market and the enthusiasm of politicians for the industry have now evaporated.
The breakthrough with the Mainz-based vaccine mainly boils down to the establishment of a dominant player in the German biotech scene, which is likely to further expand its relative lead despite the now sharply declining Covid revenues, especially in relation to the around four dozen drug developers among the German biotechs.
A look at the business figures, stock market valuation and research strategies makes it clear how far Biontech has now set itself apart from the rest of the industry: Thanks to the huge income from the sale of its Covid vaccine, Biontech has achieved a total of 36 billion euros in the past two years, about two and a half times as much much turnover as all other companies in the biotechnology sector combined.
Around two-thirds of this remained with the company after deducting manufacturing costs, taxes, dividends and share buybacks. At the end of the year, the Mainz-based company had just under 14 billion euros in liquid funds. But you have to add around seven billion euros in customer receivables from partner Pfizer, which are expected to flow to Mainz in the course of the year.
All in all, Biontech currently has around 21 billion euros in financial reserves. For comparison: the total inflow of venture capital into the other companies in the German biotech industry has added up to around 15 billion euros over the last 25 years.
In the current year, according to the company forecast, the Mainz-based company’s revenues from the vaccine business will fall sharply to “only” around five billion euros. But even at this level, Biontech will be by far the company with the highest turnover in the German biotech industry and will generate more than enough cash flow in its operating business to finance the rapidly growing research activities in the field of vaccines and cancer drugs.
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With a view to the stock market valuation, little has changed in the relative overweight of the Mainz company, despite sharp price losses since 2021. With a stock market value of around 28 billion euros, Biontech still surpasses the rest of the industry, including Qiagen, by around nine billion euros.
As far as the medical development pipeline of the German biotech industry is concerned, Biontech now provides around 30 percent of all clinical projects. In this respect in particular, the dominance is likely to continue to increase.
With a planned research budget of around 2.5 billion euros, the Mainz-based company will already be spending significantly more on drug research in 2023 than all other German biotechs combined. And the gap is likely to widen in the coming years.
Because among the companies in the industry focused on drug development, Biontech will remain the only company for the time being that generates significant cash flows and cash reserves from the operative business. The few other new developments in the industry that have ever been approved have so far turned out to be insignificant niche products.
The Munich-based company Morphosys, whose cancer drug Monjuvi has been approved for two years, is relatively the furthest advanced in the transformation to an operational biopharmaceutical company. However, its sales have so far proved to be disappointing and are far from sufficient to finance further projects.
Morphosys is testing Monjuvi and two other oncology compounds in late-stage and relatively large studies. Even if successful, approvals hardly seem possible before 2025.
Otherwise, the pipeline of promising products in advanced development phases is rather thin in the industry. Most of the clinical development projects are still in the early stages. With a number of drug candidates, progress has been a long time coming.
Some companies such as Adrenomed, Affimed or Inflarx were able to present promising data for their products, but still have to prove this in larger and possibly lengthy phase 3 studies.
Biotechs have to manage with cash reserves
The financing climate in the industry, which has meanwhile deteriorated significantly, does not necessarily endanger the ongoing projects. Overall, however, companies and their investors are being forced to make better use of the available reserves.
Above all, the financing of new projects and start-ups is becoming more difficult as a result, as experts from the venture capital scene report. This in turn slows down the supply of new clinical projects.
Biontech, on the other hand, is in a completely different situation thanks to huge Covid earnings and cash reserves. The company can use its own basic research and technology base to tackle new clinical projects and strengthen the pipeline through acquisitions and license deals.
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The recently agreed purchase of the rights to a cancer drug candidate from the US company Onco-C4 is an example that will probably be followed by others, as the company’s management made clear in the most recent quarterly call.
The strategy aims to complement the program with late-stage product candidates that offer prospects for approval in the coming years. Admittedly, success is not yet guaranteed for Biontech either. But at least the Mainz-based company has a growing chance of getting the first oncology products approved in addition to the Covid vaccine in the foreseeable future.
The rest of the industry cannot afford such strategies and is currently being slowed down in basic research. There is much to suggest that Biontech will initially remain a lone star among the pharmaceutical-oriented companies on the German biotech scene.
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