BioNTech SE(BNTX) - 2023 Q3 - Quarterly Report

Unaudited Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statements of Profit or Loss The company's Q3 and YTD 2023 financial performance significantly declined, with total revenues sharply decreasing and diluted EPS falling to €0.67 for Q3 and €1.94 YTD Q3 & YTD 2023 vs 2022 Profit or Loss (in millions €) | Financial Metric | Q3 2023 (unaudited) | Q3 2022 (unaudited) | YTD Q3 2023 (unaudited) | YTD Q3 2022 (unaudited) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 895.3 | 3,461.2 | 2,340.0 | 13,032.3 | | Operating Income | 73.1 | 2,387.5 | 164.2 | 9,349.8 | | Profit for the period | 160.6 | 1,784.9 | 472.4 | 7,155.7 | | Diluted EPS (€) | 0.67 | 6.98 | 1.94 | 27.70 | Interim Condensed Consolidated Statements of Comprehensive Income The company reported a net other comprehensive loss for Q3 and YTD 2023, resulting in total comprehensive income for Q3 2023 of €152.0 million, a steep decline from €1,795.8 million in Q3 2022 Comprehensive Income Summary (in millions €) | Metric | Q3 2023 (unaudited) | Q3 2022 (unaudited) | YTD Q3 2023 (unaudited) | YTD Q3 2022 (unaudited) | | :--- | :--- | :--- | :--- | :--- | | Profit for the period | 160.6 | 1,784.9 | 472.4 | 7,155.7 | | Other comprehensive income/(loss) | (8.6) | 10.9 | (0.8) | 24.3 | | Comprehensive income for the period | 152.0 | 1,795.8 | 471.6 | 7,180.0 | Interim Condensed Consolidated Statements of Financial Position As of September 30, 2023, total assets decreased to €22.21 billion from €23.28 billion at year-end 2022, driven by a sharp reduction in current trade and other receivables Statement of Financial Position (in millions €) | Item | Sep 30, 2023 (unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | 22,207.2 | 23,279.1 | | Total Non-Current Assets | 3,458.1 | 1,357.1 | | Total Current Assets | 18,749.1 | 21,922.0 | | Total Equity | 19,866.8 | 20,055.6 | | Total Liabilities | 2,340.4 | 3,223.5 | | Total Equity and Liabilities | 22,207.2 | 23,279.1 | - Key changes in assets include a significant increase in non-current intangible assets (from €158.5 million to €665.5 million) and other financial assets (from €80.2 million to €1,292.7 million), while current trade and other receivables decreased sharply (from €7,145.6 million to €2,002.0 million)[1] Interim Condensed Consolidated Statements of Changes in Stockholders' Equity Total equity decreased from €20.06 billion at the start of 2023 to €19.87 billion by September 30, primarily due to a €738.5 million share repurchase program offsetting period profit Changes in Equity for Nine Months Ended Sep 30, 2023 (in millions €) | Description | Amount | | :--- | :--- | | Equity as of Jan 1, 2023 | 20,055.6 | | Profit for the period | 472.4 | | Other comprehensive loss | (0.8) | | Share repurchase program | (738.5) | | Share-based payments | 5.2 | | Treasury shares used for acquisition | 103.7 | | Current and deferred taxes | (30.8) | | Equity as of Sep 30, 2023 | 19,866.8 | Interim Condensed Consolidated Statements of Cash Flows Net cash from operating activities for the nine months ended September 30, 2023, significantly decreased to €4.52 billion, leading to a net decrease in cash and cash equivalents of €504.6 million Cash Flow Summary for Nine Months Ended Sep 30 (in millions €) | Cash Flow Activity | 2023 (unaudited) | 2022 (unaudited) | | :--- | :--- | :--- | | Net cash from operating activities | 4,520.5 | 12,748.2 | | Net cash from / (used in) investing activities | (4,259.4) | 125.7 | | Net cash used in financing activities | (765.7) | (1,354.6) | | Net increase / (decrease) in cash | (504.6) | 11,519.3 | | Cash and cash equivalents at end of period | 13,495.8 | 13,423.7 | Selected Explanatory Notes to the Unaudited Interim Condensed Consolidated Financial Statements Corporate Information BioNTech SE is a German-incorporated global immunotherapy company pioneering novel medicines for cancer and infectious diseases by harnessing the immune system through diverse technology platforms - BioNTech SE is a limited company incorporated and domiciled in Mainz, Germany[31] - The company is a next-generation immunotherapy company focused on developing novel medicines against cancer, infectious diseases, and other serious diseases by harnessing the power of the immune system[63] Basis of Preparation and Significant Accounting Policies The interim financial statements were prepared under IAS 34, consistent with 2022 policies, except for a Q2 2023 change in estimate to capitalize pre-launch Comirnaty inventory - The financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting[64] - Beginning in Q2 2023, the company changed its accounting estimate for pre-launch Comirnaty product inventory, which now meets the criteria for capitalization as an asset under IFRS. This change is treated as a change in estimate[66] - The preparation of financial statements requires management to make judgments and estimates, particularly in determining the share of gross profits from collaboration partners, which may be based on preliminary data[48] Revenues from Contracts with Customers Total revenues for Q3 2023 significantly decreased to €895.3 million from €3,461.2 million in Q3 2022, driven by lower COVID-19 vaccine demand and reduced gross profit share from Pfizer Disaggregated Revenue (in millions €) | Revenue Category | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :--- | :--- | :--- | :--- | :--- | | Commercial Revenues | 893.7 | 3,394.8 | 2,336.6 | 12,923.3 | | COVID-19 Vaccine Revenues | 885.0 | 3,378.1 | 2,306.7 | 12,883.9 | | Share of partners' gross profit | 707.0 | 2,554.2 | 1,916.9 | 9,128.4 | | Direct product sales | 195.7 | 564.5 | 260.9 | 2,284.6 | | R&D Revenues | 1.6 | 66.4 | 3.4 | 109.0 | | Total Revenues | 895.3 | 3,461.2 | 2,340.0 | 13,032.3 | - The decrease in commercial revenues corresponds with lower COVID-19 vaccine market demand. Write-downs by collaboration partner Pfizer significantly reduced the gross profit share, negatively impacting revenues for Q3 2023[9] Income and Expenses Q3 2023 saw cost of sales decrease to €161.8 million in line with lower revenues, while R&D expenses increased to €497.9 million due to advancing clinical studies, and finance income rose significantly Key Income and Expense Items (in millions €) | Item | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :--- | :--- | :--- | :--- | :--- | | Cost of Sales | (161.8) | (752.8) | (420.7) | (2,811.5) | | R&D Expenses | (497.9) | (341.8) | (1,205.3) | (1,027.2) | | G&A Expenses | (144.5) | (141.0) | (386.6) | (361.8) | | Finance Income | 156.3 | 60.9 | 363.2 | 448.5 | - R&D expenses for the nine months ended Sep 30, 2023, increased to €1,205.3 million from €1,027.2 million in the prior year, primarily due to higher purchased services[57][74] - Finance income for Q3 2023 was €156.3 million, a significant increase from €60.9 million in Q3 2022, mainly driven by interest income from debt security investments and fair value adjustments of money market funds[232][247] Business Combination In July 2023, BioNTech acquired AI company InstaDeep Ltd. for €517.5 million, recognizing €306.5 million in goodwill to build AI-driven drug discovery capabilities - The acquisition of InstaDeep Ltd. was completed in July 2023 to build capabilities in AI-driven drug discovery and development[249] InstaDeep Acquisition Consideration (in millions €) | Consideration Component | Fair Value | | :--- | :--- | | Cash paid | 358.1 | | Cash to be paid in 2024 | 4.0 | | Designated FX-Hedge | (8.1) | | Shares transferred | 103.7 | | Contingent consideration | 31.8 | | Previously-held equity investment | 27.9 | | Total Consideration | 517.5 | - The acquisition resulted in the recognition of €187.6 million in intangible assets (primarily DeepChain technology) and €306.5 million in goodwill[235][251] Income Taxes The effective income tax rate for the nine months ended September 30, 2023, significantly decreased to 9.7% from 26.8% in 2022, primarily due to deferred tax effects from an internal IP reorganization - The effective income tax rate for the nine months ended Sep 30, 2023, was 9.7%, down from 26.8% in the prior-year period[238] - The decrease in the effective tax rate was primarily due to a reorganization of intellectual property rights within the group, effective June/July 2023, which led to the recognition of deferred tax assets in Germany, the US, and Austria[238][255] - Following the IP reorganization, the company determined it is highly probable that future taxable profits will be available in the U.S., allowing for the recognition of previously unrecognized U.S. federal and state deferred tax assets[255] Financial Assets and Financial Liabilities As of September 30, 2023, total financial assets (excluding cash) decreased to €5.55 billion from €7.42 billion at year-end 2022, while total financial liabilities decreased to €784.7 million from €1.21 billion - Trade and other receivables decreased significantly to €2.0 billion as of Sep 30, 2023, from €7.1 billion as of Dec 31, 2022. These predominantly comprise trade receivables from the COVID-19 collaboration with Pfizer[240][241] - The company held €3.47 billion in security investments as of Sep 30, 2023, which were not held at the end of 2022. These are measured at amortized cost[240][287] - Other financial liabilities at amortized cost, which mainly include obligations from license agreements for COVID-19 vaccine sales, decreased from €785.1 million to €296.6 million[288][290] Issued Capital and Reserves As of September 30, 2023, BioNTech had 237.7 million shares outstanding and completed two share repurchase programs in 2023, including a new $0.5 billion program 2023 Share Repurchase Program Summary | Program | Period | ADSs Purchased | Avg. Price per ADS | Net Amount Spent | | :--- | :--- | :--- | :--- | :--- | | 2022 Program (2nd Tranche) | Jan-Mar 2023 | 2,221,171 | - | $302.1 million | | 2023 Program | Jun-Sep 2023 | 4,646,965 | $107.58 | $500.0 million | Contingencies The company is involved in multiple significant intellectual property disputes and patent infringement lawsuits related to its COVID-19 vaccine, Comirnaty, with uncertain outcomes and no provisions recorded - BioNTech is a defendant in multiple patent infringement lawsuits concerning its COVID-19 vaccine, Comirnaty[275] - - Alnylam Proceedings: Lawsuits in the U.S. alleging infringement of patents related to cationic lipids used in Comirnaty[300] - CureVac Proceedings: Lawsuits in Germany, the U.S., and the U.K. alleging infringement of patents and utility models related to mRNA technology[279][316] - Moderna Proceedings: Lawsuits in Germany, the U.K., the U.S., and other European countries alleging infringement of patents related to mRNA technology[318][319] - Arbutus and Genevant Proceedings: A lawsuit in the U.S. alleging infringement of patents related to lipid nanoparticle technology[325] - The company believes it has strong defenses but considers the outcomes substantially uncertain. No provisions have been recognized, and these matters are treated as contingent liabilities for which a reliable estimate of loss is not currently possible[277][306][324] Events after the Reporting Period After Q3, BioNTech entered two strategic collaborations, including a $70 million upfront deal with MediLink Therapeutics for an ADC candidate and a $55 million upfront deal with Biotheus Inc. for a bispecific antibody - On October 11, 2023, BioNTech signed a strategic collaboration and license agreement with MediLink Therapeutics to develop a next-generation ADC candidate against HER3. The deal includes a $70 million upfront payment and potential milestones over $1 billion[343] - On October 26, 2023, BioNTech signed an exclusive global license and collaboration agreement with Biotheus Inc. to develop, manufacture, and commercialize PM8002, a bispecific antibody targeting PD-L1 and VEGF. The agreement includes a $55 million upfront payment[330] Operating and Financial Review and Prospects Overview BioNTech is a next-generation immunotherapy company focused on developing novel cancer and infectious disease therapies, leveraging diverse technology platforms and a robust pipeline, including Comirnaty - The company's vision is to harness the power of the immune system to develop novel therapies against cancer and infectious diseases, utilizing a broad toolkit of technology platforms[332] - - Strategic Focus: Developing next-generation COVID-19 vaccines, accelerating the oncology pipeline, and diversifying into new therapeutic areas - Growth Strategy: Strengthening technology platforms and digital capabilities through strategic partnerships and acquisitions - Global Reach: Building a global development organization and democratizing access to novel medicines Corporate Development During and after Q3 2023, BioNTech completed the InstaDeep acquisition, signed a UK partnership for cancer treatments, expanded an ADC collaboration, appointed a new CLO, and completed its $0.5 billion share repurchase program - - Acquisition: Completed the acquisition of InstaDeep Ltd. in July 2023 to build world-leading capabilities in AI-driven drug discovery - Partnerships: Signed a long-term partnership with the UK government for personalized cancer treatments and expanded its ADC collaboration with DualityBio - Capital Allocation: Completed its $0.5 billion share repurchase program in September 2023, having repurchased 4.65 million ADSs - Management: Appointed James Ryan, Ph.D. as Chief Legal Officer to the Management Board, effective September 1, 2023 Pipeline of Product Candidates BioNTech provided updates on its extensive clinical pipeline of over 25 candidates, including progress in oncology trials for BNT111 and BNT122, and regulatory approvals for its Omicron XBB.1.5-adapted COVID-19 vaccine - The company's clinical pipeline includes over 25 clinical stage product candidates and more than 30 research programs across oncology and infectious diseases[332] - - Oncology (FixVac): The Phase 2 trial of BNT111 in advanced melanoma achieved full enrollment in September - Oncology (iNeST): The first patient was dosed in a randomized Phase 2 trial of BNT122 in resected pancreatic cancer in October - Oncology (CAR-T): Presented encouraging interim data for BNT211 in solid tumors at the 2023 ESMO Annual Meeting, with plans to initiate a pivotal trial in germ cell tumors - Infectious Disease (COVID-19): The Omicron XBB.1.5-adapted monovalent vaccine was approved and launched in the U.S., Europe, and other key markets - Infectious Disease (Combination Vaccine): Announced positive top-line results from a Phase 1/2 trial of its mRNA-based combination vaccine for influenza and COVID-19, with a pivotal Phase 3 trial expected to start soon Financial Operations Overview BioNTech's Q3 and YTD 2023 financial results show a significant downturn from 2022, with total revenues falling 82% to €2.34 billion and profit dropping to €472.4 million due to lower vaccine demand and increased R&D expenses YTD 2023 vs YTD 2022 Financial Performance (in millions €) | Metric | YTD Q3 2023 | YTD Q3 2022 | Change (€) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 2,340.0 | 13,032.3 | (10,692.3) | (82)% | | Cost of Sales | 420.7 | 2,811.5 | (2,390.8) | (85)% | | R&D Expenses | 1,205.3 | 1,027.2 | 178.1 | 17% | | G&A Expenses | 386.6 | 361.8 | 24.8 | 7% | | Profit for the period | 472.4 | 7,155.7 | (6,683.3) | (93)% | - The decrease in commercial revenues was in line with lower COVID-19 vaccine market demand. The share of gross profit from collaboration partners fell 79% for the nine-month period[402] - Research and development expenses increased by 17% year-over-year for the nine-month period, mainly influenced by progressing clinical studies for pipeline candidates and the development of next-generation COVID-19 vaccines[173] Liquidity and Capital Resources As of September 30, 2023, BioNTech maintained strong liquidity with €13.5 billion in cash and €3.5 billion in security investments, despite a net cash decrease from operating, investing, and financing activities Cash Flow Summary for Nine Months Ended Sep 30 (in millions €) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Operating Activities | 4,520.5 | 12,748.2 | | Investing Activities | (4,259.4) | 125.7 | | Financing Activities | (765.7) | (1,354.6) | | Total Cash Inflow (Outflow) | (504.6) | 11,519.3 | - The company's capital allocation strategy includes significant and increasing operating expenses to advance its preclinical and clinical programs, invest in technology platforms, and expand manufacturing and commercial capabilities[107][496] - A new share repurchase program of up to $0.5 billion was authorized in March 2023 and concluded on September 18, 2023, with €456.5 million spent[480] Risk Factors Risks Related to COVID-19 Vaccine and Commercialization The company faces significant commercial risks for its COVID-19 vaccine, including decreasing demand, intense competition, pricing uncertainty, and reliance on Pfizer's estimates, alongside broader pipeline commercialization challenges - Demand for the COVID-19 vaccine is expected to continue to decrease, which will impact revenue that is heavily dependent on these sales. This creates challenges in managing production and potential inventory write-downs[502] - The company faces significant competition from other COVID-19 vaccine makers and may be unable to maintain a competitive market share[100] - Successful commercialization depends on obtaining and maintaining adequate coverage and reimbursement from government authorities and private payors, which is uncertain and subject to downward pricing pressure from healthcare reform legislation like the U.S. Inflation Reduction Act[489][103] Risks Related to Financial Condition and Capital Requirements BioNTech's financial stability faces risks from fluctuating operating results, a history of losses, anticipated increased R&D expenses requiring additional financing, and limitations on using net operating loss carryforwards - The company's operating results may fluctuate significantly, making future performance difficult to predict. Factors include the size and timing of COVID-19 vaccine orders and progress in clinical trials[104] - The company expects to incur significant and increasing operating expenses as it invests heavily in R&D, expands its clinical trials, and builds out its infrastructure. This may require substantial additional financing in the future[135][496] - The ability to use net operating loss (NOL) carryforwards in Germany and the U.S. to offset future taxable income may be subject to certain limitations and review by tax authorities[512] Risks Related to Business and Operations The company faces operational risks from managing rapid growth, compliance costs, potential non-compliance with trade regulations, exposure to catastrophic events, AI development risks, and increasing ESG scrutiny - The company must manage its rapid development and expansion, which requires improving managerial, operational, and financial systems and recruiting qualified personnel[136] - Business could be adversely impacted by catastrophic global events, including political crises like the conflict in Ukraine, which could affect energy supplies for manufacturing[138] - The company faces risks related to the development and use of Artificial Intelligence (AI), including an uncertain regulatory environment, and increasing expectations regarding Environmental, Social, and Governance (ESG) matters[195][196] Risks Related to Clinical Development and Regulatory Approval BioNTech's success depends on a lengthy, uncertain clinical development and regulatory approval process, facing risks from novel mRNA technology, potential side effects, patient enrollment challenges, and evolving regulatory landscapes for gene and cell therapies - Clinical development is a lengthy, expensive process with an uncertain outcome. Delays can occur due to regulatory holds, difficulty enrolling patients, or inconclusive results[535] - mRNA drug development carries substantial clinical and regulatory risks due to limited regulatory experience with this technology, aside from the COVID-19 vaccines[140] - Product candidates may cause undesirable side effects or have other properties that could delay or prevent regulatory approval. If significant adverse events are observed, trials may be suspended or terminated[532][541] - Results from early-stage clinical trials are not necessarily predictive of future success in later-stage trials, and a number of companies have suffered significant setbacks despite promising initial data[144][145] Risks Related to Manufacturing and Supply Chain The company faces significant manufacturing risks due to complex mRNA processes, including scale-up difficulties, stability issues, single-source supplier dependence, and GMP compliance, potentially leading to delays and inventory write-downs - The manufacturing processes for the company's product candidates are novel and complex, presenting potential difficulties in scaling up, product release, shelf life, testing, and storage[184][186] - The company depends on single-source suppliers for some specialty raw materials and components, creating risks of supply disruption, price increases, and delays[223][669] - Manufacturing facilities are subject to extensive regulation and must comply with Good Manufacturing Practices (GMP). Failure to meet these requirements could result in significant delays, costs, and potential product recalls[226] - The company has faced and continues to face the risk of inventory write-downs or redundant production capacity for its COVID-19 vaccine due to changing demand and new formulations[191] Risks Related to Reliance on Third Parties BioNTech's business heavily relies on third parties like Pfizer, CROs, and licensors, introducing risks of non-performance, agreement termination, lack of control over quality, and IP disputes, which could jeopardize critical technology access - The company relies on third parties, such as CROs and medical institutions, for significant aspects of its preclinical studies and clinical trials, which reduces direct control over these activities[217][218] - Existing and future collaboration arrangements, such as the one with Pfizer, may not be successful. Collaborators may not perform their obligations, may terminate agreements, or may develop competing products[230][245] - The company is heavily reliant on licenses for third-party intellectual property. Disputes with licensors or failure to comply with license obligations could result in the loss of rights that are important to the business[599][687] Risks Related to Intellectual Property The company's competitive position relies heavily on IP, facing substantial risks from ongoing patent litigation by competitors like Moderna and CureVac, and uncertainty in the complex mRNA patent landscape regarding protection and freedom to operate - The company is involved in numerous ongoing patent infringement lawsuits related to its COVID-19 vaccine with competitors such as Alnylam, CureVac, and Moderna, which could be expensive and unsuccessful[580][582][621] - The patent position of biopharmaceutical companies is highly uncertain and involves complex legal questions. There is no guarantee that patent applications will issue or that issued patents will provide sufficient protection[565] - Third-party IP rights could adversely affect the ability to commercialize products, potentially requiring litigation or licensing from third parties, which may not be available on reasonable terms[583][617] - Changes in patent law in the U.S. and other countries, such as the America Invents Act, could diminish the value of patents and impair the ability to protect products[637][638] Risks Related to Government Regulation BioNTech faces significant regulatory risks due to the complex and evolving landscape for novel technologies, including potential classification of mRNA candidates as gene therapies, uncertain approval pathways, and stringent compliance requirements for healthcare fraud, data privacy, and EHS laws - The regulatory landscape for the company's product candidates, particularly those based on novel technologies like mRNA, is uncertain and evolving, which could lead to delays or unexpected costs[704] - Some product candidates are classified as gene therapies by the FDA and EMA, which could result in increased regulatory burdens and negative public perception, despite mechanistic differences[700][701] - The company is subject to federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute), which could expose it to substantial penalties if business practices are found to be non-compliant[726][727] - The company is subject to stringent data privacy laws, such as the GDPR in Europe, which impose strict requirements on the processing of personal and health data, with significant penalties for non-compliance[735][740] Risks Related to Ownership of the ADSs Ownership of BioNTech's ADSs carries risks including significant price volatility, substantial control by principal shareholders, potential dilution from preemptive rights issues, and limitations on judicial forum choice due to Articles of Association - The market price of the company's ADSs has experienced and may continue to experience significant volatility, influenced by news regarding COVID-19 vaccines and clinical data[750] - Principal shareholders and management own a majority of ordinary shares, enabling them to exert significant control over matters subject to shareholder approval[761] - Under German law, ADS holders may not be able to participate in future preemptive subscription rights issues, which could cause dilution to their holdings[759]