BioNTech SE (NASDAQ:BNTX) Q3 2023 Earnings Call Transcript

BioNTech SE (NASDAQ:BNTX) Q3 2023 Earnings Call Transcript November 6, 2023

BioNTech SE beats earnings expectations. Reported EPS is $0.67, expectations were $-0.53.

Operator: Welcome to the BioNTech Third Quarter 2023 Update Call. I would like to hand the call over to Dr. Victoria Meissner, Vice President of Strategy and Investor Relations. Please go ahead.

Victoria Meissner: Thank you. Good morning and afternoon. Thank you for joining us today for BioNTech’s Third Quarter 2023 Earnings Call. As a reminder, the slides that accompany this call and the press release issued this morning can be found in the investor section of our website. On the next slide, you can see our forward-looking statements disclaimer. Additional information about these statements and other risks are described in our filings made with the U.S. Securities and Exchange Commission. Forward-looking statements on the call are subject to substantial risks and uncertainties, speak only as of the call’s original date, and we undertake no obligation to update or revise any of the statements. On Slide 3, you can find the agenda for today’s call.

Today I’m joined by the following members of BioNTech’s management team. Our CEO and Co-Founder, Ugur Sahin; Ozlem Tureci, our Chief Medical Officer and Co-Founder; Jens Holstein, our Chief Financial Officer; and Ryan Richardson, our Chief Strategy Officer. I would like to turn the call over to Ugur Sahin.

Ugur Sahin: Thank you, Victoria. A warm welcome to all those joining us today. I will summarize our third quarter highlights before turning to my colleagues, who will provide further details. Slide 5. Let me start by providing an overview of our strategic priorities and latest achievements. This quarter we continue to build on our global COVID-19 vaccine leadership with first to market Omicron XBB.1.5-adapted vaccine launches across multiple regions worldwide. I thank our team and collaborators for their tireless efforts to make this accomplishment possible, again, in such a short period of time. Our COVID-19 influenza combination program, run in partnership with Pfizer, leveraging our proprietary mRNA technology has also reported positive top-line results.

The Phase 1/2 study evaluating the safety, tolerability, and immunogenicity of co-administered mRNA-based vaccine candidates for COVID-19 and influenza among healthy adults 18 to 64 years of age when compared to a licensed influenza vaccine, demonstrated robust immune responses to influenza A, influenza B, and SARS-CoV-2 strains, as well as a safety profile consistent with the safety profile of the companies’ COVID-19 vaccine. A pivotal Phase 3 study will be initiated in the coming months. Our second strategic priority is to advance our oncology platforms by initiating multiple trials with registrational potential. Jointly with our partner Duality Bio, we are initiating a pivotal Phase 3 trial to evaluate our next-generation antibody conjugate BNT323 in patients with hormone receptor positive HER2-low breast cancer who progress on previous standard of care, but are chemotherapy naive.

Furthermore, during this quarter we and our respective collaboration partners published original scientific data and presented new clinical data across several programs at International Scientific Congresses, including ESMO and SITC, that will inform our development strategies and next steps for these programs. Based on the successful results, we have expanded existing collaborations and made [indiscernible] with specialized developers, which add to our proprietary toolkit of technologies and strengthen our therapeutic product candidate portfolio. This covers the in-licensing of HER3-targeted antibody drug conjugate from MediLink Therapeutics and as announced today, our plan to bring forward an anti-VEGF, anti-PD-L1 bi-specific antibody in collaboration with our partner Biotheus.

Our first strategic priority is to initiate and accelerate clinical programs that target infectious diseases of unmet medical need. In the third quarter, we initiated our third first in human trial in infectious disease this year, a program aimed at advancing mRNA-based vaccine candidates for the prevention of Mpox, run in partnership with the Coalition for Epidemic Preparedness Innovations. In summary, we continued our focused execution against our strategic priorities in the third quarter and look forward to additional progress in all three of these areas for the remainder of the year and into 2024. We will share more detail on our oncology, as well infectious disease programs at our Innovation Series Day in Boston tomorrow, an event that I invite you all to attend in person or online.

Slide 6, focusing on our marketed COVID-19 vaccine COMIRNATY. We continued to build on our global COVID-19 vaccine leadership, the first to market Omicron XBB.1.5-adapted vaccine launches. This was preceded by a robust and successful regulatory process. In late August, the European Medicines Agency recommended full marketing authorization for our monovalent XBB1.5-adapted vaccine. This was followed in September by the U.S. Food and Drug Administration authorizing the adapted vaccine for individuals aged six months to 11 years under emergency use authorization, and for those aged 12 and above. The vaccines have been approved under supplemental biologics license applications. Second, other national health regulators across the globe, including the UK, Japan, Canada, and South Korea have also approved our monovalent adaptive vaccine.

Within two months, we went from the first regulatory recommendations for XBB1.5 adaptive vaccine to our first shipments of the respective vaccine. The ability to execute with such speed was enabled by our continued surveillance and analysis of variants of concern, the strength of our mRNA technology which allows for scalable production, rapid manufacturing and adaptation, and our expertise at navigating the evolving regulatory landscape on a global scale. Historically, we have seen an increase in COVID-19 hospitalizations in the winter in line with other common respiratory diseases. On Slide 7, you can see independent on former projections across scenarios, assuming different vaccination recommendations and immune escape levels. Based on these, it is expected that weekly hospitalizations are likely to increase this winter and have a healthcare impact similar to last year.

COVID-19 burden is currently lower than in previous years. However, the absolute number of hospitalizations and deaths is still high in certain regions with thousands of hospitalizations and hundreds of deaths each week. The emergence of new variants coupled with the veining of both vaccine and infection-induced immunity indicates that susceptibility to infection remains a concern and may increase over time. Moreover, the data shown here suggests that providing simple, stable recommendations for updated doses could contribute to improved vaccine coverage over time, mitigating the risk associated with evolving COVID-19 variants. As shown on Slide 8, long COVID has a significant societal and healthcare system impact, with studies indicating that 10% to 20% of SARS-CoV-2 infected individuals may develop symptoms recognized as long COVID.

It is estimated that 36 million people across Europe may have experienced complications arising from COVID-19 weeks after infection commonly defined as long COVID from the start of the pandemic to date. Studies show that mRNA vaccination has a significant impact in reducing the development of long COVID by 10% to 45%, depending on the criteria used to define symptoms. The protective effect of mRNA vaccination is largely attributed to its ability to reduce susceptibility to infection. We continue to look closely at the role of mRNA vaccination in addressing the unmet need of long COVID. Slide 9. Studies have demonstrated that natural immunity acquired by SARS-CoV-2 infection is variable across individuals and the protection it offers veins over time.

Vaccination can restore and enhance infection acquired immune protection and further reduce the risk of reinfection. The risk of severe COVID-19 disease remains high in vulnerable populations and that vaccination serves to not only reduce the risk, but can also mitigate the risk of long COVID. And preclinical data demonstrate that vaccination with XBB.1 descendant lineage containing candidate, elicits higher neutralizing antibody to currently circulating variants of concern compared to the responses elicited by previously approved COVID-19 vaccines. Given all this and our current understanding of COVID-19 seasonality and its burden on healthcare systems during autumn and winter season, we anticipate the need for annual adaptive vaccines to be a long-term feature of COVID-19 vaccination practices.

With that, I would like to thank you all for your confidence in our success and your continuous support. I will now turn the call over to Ozlem.

Ozlem Tureci: Thank you, Ugur. Glad to be speaking with everyone. Today we will provide a high-level pipeline update. We will delve into the more advanced programs in greater detail at our Innovation Series Day event tomorrow. Starting with an overview of our infectious disease pipeline on Slide 11. In addition to our marketed product, COMIRNATY, we continue to pursue our multi-prompt innovation strategy to improve upon our vaccine with next generation approaches aimed at generating broader and more durable immunity. This includes our stabilized spike vaccine approach being studied in the Phase 2 trial and our T-cell enhancing vaccine candidate in an ongoing Phase 1 trial. We believe that our COVID-19 vaccine has the potential to be combined with a seasonal flu vaccine.

Across many parts of the world, people are currently receiving the Omicron XBB adapted vaccine boosters, at the same time as their flu shots. A combination product has the potential to provide seasonal protection from both viruses with a single shot. We are working together with our partner Pfizer to develop an influenza combination vaccine, which leverages our mRNA technology. We recently reported Phase 1/2 results where our combination candidate showed robust immune responses to influenza A, influenza B, and SARS-CoV-2 strains, as well as a safety profile consistent with the safety profile of a company’s COVID-19 vaccine, which met the criteria for advancement to a Phase 3 trial. In addition to the previously mentioned COVID-19 and influenza vaccine programs, we started multiple first in human trials of our mRNA vaccine candidates in the last year that addressed Shingles, HSV, TB, and Mpox.

On Slide 12, as expected, SARS-CoV-2 continues to evolve. The Omicron XBB sub-lineages currently account for the majority of COVID-19 cases globally, including the XBB descendant EG.5.1, whose dominance is growing. Slide 13. We and our partner Pfizer tested for potential effectiveness of an Omicron XBB.1.5-adapted monovalent vaccine as a primary series and booster in preclinical models. You can see here the neutralizing antibody response in mice immunized with our Omicron BA.4/5 adapted bivalent vaccine as a booster after two doses of the original BNT162b2 vaccine. One group of mice again received the BA.4/5 adapted bivalent COVID-19 vaccine as a fourth dose and the other group received the new XBB.1.5-adapted monovalent COVID-19 vaccine as a fourth dose.

You can see a four to fivefold increase of neutralization of several XBB-related variants when dose four is the XBB.1.5-adapted monovalent vaccine as compared to last season’s BA.4/5-adapted vaccine. These preclinical data indicate that an XBB.1.5 variant-adapted monovalent vaccine in the pre-vaccinated setting has the potential to induce broad cross-neutralizing antibody titers against multiple XBB sub-lineages. We can also see an increase in geometric mean titers of neutralizing antibodies across XBB lineages, including EG.5.1 and BA.2.86 when compared to the previous bivalent BA.4/5 vaccine component arm. Slide 14 shows the design of our ongoing Phase 2/3 clinical study testing the safety, tolerability, and immunogenicity of our Omicron XBB.1.5-adapted monovalent vaccine in 700 vaccine-naive and vaccine-experienced participants.

While data from the study will be reported in 2024, there is already clinical real-world data shown on Slide 15, demonstrating that our XBB.1.5-adapted vaccine elicited significantly higher neutralizing antibody responses against XBB.1.5, XBB.2.3, EG.5.1, and BA2.86 compared to pre-vaccination levels. Moving now to our oncology pipeline on Slide 16, which is grounded in our multimodality toolbox and is advancing through focused execution. We now have one Phase 3 study ongoing and a second Phase 3 expected to dose its first patient soon. Gotistobart, our anti-CTLA-4 monoclonal antibody, which we believe offers a differentiated safety profile, a Phase 3 clinical trial evaluating its efficacy and safety as monotherapy in metastatic non-small cell lung cancer patients who have progressed on previous IO therapy has started in June this year and will enroll 600 patients.

BNT323, our anti HER2 antibody drug conjugate, also being studied in a Phase 3 clinical trial to assessing its efficacy versus investigators’ choice of chemotherapy in patients with hormone receptor positive HER2 low chemotherapy naive breast cancer patients whose disease has progressed on at least two lines of prior endocrine therapy or within six months of first line endocrine therapy plus CDK-4 inhibitor. We’ve also recently initiated two new Phase 2 trials, one in partnership with Genentech is evaluating our individualized cancer vaccine candidate, BNT122, in the adjuvant setting for patients with pancreatic cancer. The other in partnership with Genmab is evaluating our BNT311 bispecific conditionally PDL1-41BB agonistic antibody as a second line treatment for patients with endometrial cancer.

Also, as part of our collaboration with Genmab BNT314, a bi-specific antibody designed to boost anti-tumor immune responses through outcome-dependent 41BB agonistic activity is ready to move from preclinical to Phase 1 clinical testing with the first patient dose expected in the next few months. Within our bi-specific portfolio, I’m excited about our expanded collaboration with Biotheus announced today. We’ve partnered to develop and commercialize PM8002, a bi-specific antibody candidate targeting PD-L1 and VEGSA in various cancer indications. PM8002 is currently being tested in a Phase 2/3 study to evaluate the efficacy and safety of a candidate as monotherapy or in combination with chemotherapy in patients with non-small cell lung cancer.

PM8002 may lead to reduce systemic toxicity by enriching anti-VEGF activity in the tumor environment. Now moving on to our antibody drug conjugate portfolio. During the quarter, one of our[indiscernible], ADCs, BNT324 entered a Phase 1/2 basket trial. Furthermore, on the ADC front, I would like to note our latest addition, YL202, a candidate being developed in partnership with MediLink. We continue to broaden our access to ADCs because we believe this technology has the potential to replace highly toxic chemotherapy regimens to become a new commoditized combination backbone of cancer treatment. In summary, we can see a diversified clinical oncology pipeline in solid tumor indications of high unmet medical need and more than 30 clinical studies.

On slide 17, I would like to highlight five across our multiple platforms that have disclosed clinical data in recent medical conferences this autumn. In September, clinical data from the ongoing Phase 1/2 clinical trial evaluating BNT-323 in patients with advanced and unresectable recurrent or metastatic HER2-expressing solid tumors were presented at the ESGO Annual Meeting. BNT323 was shown to have a manageable safety profile and no new safety signals were observed. It also demonstrated promising anti-tumor activity in patients with advanced, recurrent, or metastatic HER2-expressing endometrial cancer with an objective response rate confirmed and unconfirmed of 58.8% and disease control rate of 94.1%. Data at ESMO, represented alongside our partner, DualityBio, clinical data from the ongoing Phase 1/2 trial evaluating our TROP-2 targeted ADC candidates in patients with advanced solid tumors.

The data suggested a manageable safety profile at lower dose levels and encouraging efficacy signals were observed in non-small cell lung cancer patients with unconfirmed objective response rate of 46.2% in six out of 13 evaluable patients, and an unconfirmed DCR of 92.3% in 12 out of 13 patients. We also reported data from the ongoing Phase 1/2 clinical trial with BNT211 detailing the new dose escalation of Claudin-6 CAR T cells with and without a Claudin-6 encoding mRNA vaccine for the treatment of Claudin-6 positive relapse/refractory solid tumors using an automated manufacturing process. BNT211 demonstrated an encouraging anti-tumor activity and in patients treated at a higher dose level, the addition of CARVac improved CAR T-cell persistence.

The rate of treatment dependent at worst events was dose dependent. After determination of a recommended Phase 2 dose, BioNTech plans to initiate a pivotal trial in germ cell tumors. Also at ESMO, we presented initial data from our first in human Phase 1 dose escalation trials evaluating BNT221, our autologous fully personalized T-cell therapy directed against selected sets of individualized new antigens. Using our proprietary [new stem] (ph) technology on the patient’s peripheral blood cells, we expand memory T-cells and induce nerve T-cells with the aim of generating a strong polyclonal immune response to overcome antigen escape. The initial results showed a manageable safety profile and tumor regression in several patients with anit-PD-1 and anti-CTLA-4 pre-treated advanced on metastatic melanoma.

This past weekend, at SITC, clinical data was shown from the ongoing Phase 1 clinical trial evaluating BNT116, our off-the-shelf mRNA-based cancer vaccine candidate for non-small cell lung cancer patients. The trial evaluates BNT116 alone and in combination with cemiplimab or docetaxel across multiple settings. BNT116 was generally well tolerated with an expected safety profile as monotherapy and in combination with cemiplimab. In heavily pretreated non-smart cell lung cancer patients, treatment with BNT116 with an optional addition of cemiplimab from cycle three onwards showed early clinical activity. These updates show the momentum across our cancer pipeline. This year and next year, we plan to advance our key programs into late stage development, including multiple programs toward the pivotal stage with the aim to deliver the next generation of oncology medicines.

And with that, I now pass the presentation to our CFO, Jens Holstein.

Jens Holstein: Thank you, Ozlem, and a warm welcome to everyone who dialed in today’s call. Before we go into the financial details for the third quarter and the first nine months of 2023, I’ll start by giving you an overview on some key financial highlights which you can find on the next slide. Our total revenues reached EUR2.3 billion for the first nine months of 2023 and were significantly derived from sales of our recently approved Omicron XBB.1.5-adapted monovalent vaccine, which started to pick up at the end of the third quarter of 2023 and are expected to accelerate for the remainder of the year. Our revenues during the first nine months of 2023 were negatively influenced in the amount of approximately EUR0.6 billion, triggered by write-downs and other charges reported by our collaboration partner Pfizer.

As a reminder, as part of our gross profit share arrangement with Pfizer, write-downs and similar charges by Pfizer reduce the gross profit which both parties generally share equally, and this ultimately impacts BioNTech’s revenue figure. As part of this contractual model, we only commercialized COMIRNATY in Germany and Turkey, and commercialization costs remain with the party being responsible for its respective markets. While we have impacted by such write-downs on the top line, our sales and marketing expenses remain low. As we have outlined in earlier earnings calls, the revenue development for COVID-19 vaccines is expected to mimic a flu-like setting. I will go into more details concerning our financial guidance in the course of the call, but want to emphasize now that taking the Pfizer announcement and its implications onto the 2023 revenues into account, we have updated our 2023 COVID-19 vaccine revenue guidance of around EUR5 billion to somewhere around EUR4 billion for the full financial year 2023.

During the first nine months of 2023, we generated a profit before tax of EUR0.5 billion, which on top of our operating results demonstrates our positive financial results generated from our strong financial position, overall resulting in earnings per share on the fully diluted basis of EUR1.94. We started into the financial year 2023 with a total amount of EUR13.9 billion in cash and cash equivalents, which we significantly increased due to our steady cash collection. Hence, we have now ended the third quarter of 2023 with EUR17 billion. This amount comprises approximately EUR13.5 billion reflected as cash and cash equivalents in our financial statement, as well as approximately EUR3.5 billion, partly current and partly non-current security investments.

Subsequent to the end of the quarter, in October 2023, we received EUR565 million in cash from our collaboration partner Pfizer, settling our gross profit share for the second quarter of 2023. Our strong financial position is strategic advantage. These days where financial stability is key for companies in this industry, the cash surplus is a tremendous asset. Our cash position offers us opportunities to invest in capabilities and assets to build a highly innovative later stage R&D pipeline. I’ll be moving to our financial results for the third quarter of 2023 as shown on the next slide. Our total revenues reported reached EUR0.9 billion for the third quarter compared to EUR3.5 billion for the comparative prior year period and decreased corresponding with a lower COVID-19 vaccine market demand.

The already mentioned write-downs by Pfizer reduced our gross profit share in the third quarter by approximately EUR0.5 billion. Let me move to cost of sales, which amounted to EUR161.8 million in the third quarter of 2023 compared to EUR752.8 million for the comparative prior year period. For the first nine months of 2023, the cost of sales reached EUR420.7 million compared to EUR2.8 billion for the comparative prior year period. The change is in line with decreasing COVID-19 vaccine revenues. Research and development expenses reached EUR497.9 million for the third quarter of 2023 compared to EUR341.8 million for the comparative prior year period. For the first nine months of 2023, research and development expenses amounted to EUR1.2 billion compared to EUR1 billion for the comparative prior year period.

Our R&D expenses are mainly influenced by progressing clinical studies for pipeline candidates, the development of variant adapted as well as next generation COVID-19 vaccines, and the expansion of our R&D headcount. General and administrative expenses amounted to EUR144.5 million for the third quarter of 2023 compared to EUR141 million for the comparative prior year period. For the first nine months of 2023, G&A expenses reached EUR386.6 million compared to EUR361.8 million for the comparative prior year period. G&A expenses for the first nine months were mainly influenced by increased expenses for IT services, as well as expanding the G&A headcount. Our profit before tax amounted to EUR227.4 million for the third quarter of 2023 compared to EUR2.4 billion for the comparative prior period.

As mentioned, this reflects the performance in our financial results derived from our strong financial position. Income taxes were accrued with an amount of EUR66.8 million for the third quarter of 2023 compared to EUR0.7 billion for the comparative prior year period. In total, for the first nine months of 2023, income taxes were accrued with an amount of EUR50.5 million compared to EUR2.6 billion for the comparative prior period. The derived effective income tax rate for the first nine months of 2023 were approximately 9.7%, which is expected to change over the 2023 financial year to be in line with the estimated annual cash effective income tax rate of somewhere around 21% for the BioNTech Group. We recognized net profit during the third quarter of 2023 amounting to EUR160.6 million compared to EUR1.8 billion for the comparative prior year period.

For the first nine months of 2023, net profit reached EUR0.5 billion compared to EUR7.2 billion for the comparative prior year period. Our earnings per share on a fully diluted basis for the third quarter of 2023 amounted to EUR0.67 compared to a diluted earnings per share of EUR6.98 for the comparative prior period. For the first nine months of 2023, our diluted earnings per share was EUR1.94 compared to EUR27.70 for the comparative prior period. As mentioned in the beginning, please allow me now to address the inventory write-downs and other charges related to COMIRNATY recently announced by our collaboration partner Pfizer in more detail. Please note, those charges were mainly triggered when the world moved from a pandemic environment into an endemic through-like setting.

In this context, we announced on October 16th an estimated impact of up to EUR0.9 billion. We have assessed the initially announced estimates further, particularly to address the question whether those inventory write-downs and other charges indicated by Pfizer have already been reflected in our accounts. The good news is, the charges which originated at BioNTech’s end have largely already been reflected in our 2022 financial result and to a smaller extent will continue to be reflected during 2023. Ultimately, the impact from our collaboration partners charges onto our revenues have been identified to be roughly EUR0.6 billion for the first nine months of 2023 and EUR0.5 billion for the third quarter of 2023. To explain the partnership mechanism in respect of write-downs and comparable charges, please remember that risks are borne by both partners equally.

As part of our shared responsibilities, both partners are responsible for manufacturing activities. Hence, Pfizer is responsible for a certain level of inventories, and so are we. If, for example, Pfizer writes down inventories under its control, those charges reduce the gross profit that is shared with us. As a result, we are affected by half of those charges. Those charges lead to a decrease in our revenues according to IFRS accounting rules. In cases where we have to book charges for [EG] (ph) write-downs, at our end, those charges lower the gross profit that we share with Pfizer. Let me now turn to the next slide. As stated before, based on what we know of the expected market development and our partners’ guidance for their markets, we update our estimated COVID-19 vaccine revenues from previously around EUR5 billion to somewhere around EUR4 billion for the full 2023 financial year.

Our guidance is influenced by the mentioned write-downs and charges on the Pfizer side in the amount of EUR0.6 billion, as well as our partners reduced expectations on 2023 COVID-19 vaccine sales. We at BioNTech reacted on the volatility around the COVID-19 vaccine market and adapted our cost base in the course of 2023. Our strategic collaboration model with big pharma supports drug development and delivery at scale, but it also provides us additional financial flexibility by leveraging the global clinical trial network of our partners, as well as their commercial network and their internal resources. In comparison to other models, this collaboration setup allows us to accelerate our development initiatives, while having a lower level of expenses.

Our updated financial outlook for the 2023 financial year excludes effects caused by, but not limited to events like in-licensing arrangements, collaborations, or M&A transactions that might take place until the year end. As summarized for you on this slide, we reduce the initial 2023 R&D expense guidance range from initially between EUR2.4 billion and EUR2.6 billion to between EUR1.8 billion and EUR2 billion including the R&D costs identified from our latest publicly announced M&A activities. We also update our SG&A expenses and narrow the initial 2023 guidance range from between EUR650 million and EUR750 million, now to between EUR600 million and EUR650 million. Lastly, we reduced our spending for growth and maintenance CapEx for operating activities from the initial 2023 guidance range of between EUR500 million and EUR600 million to between EUR200 million and EUR300 million euros.

Comparing the initial 2023 guidance to our updated guidance announced today, we are significantly decreasing our spend as we effectively manage our expenditures as part of our ongoing cost review procedures. Nonetheless, let me clarify here as well that we further intend to invest in our capabilities and our pipeline of product candidates as those will create the value of the company in future. As noted before, we have updated our group estimated annual cash effective income tax rate in Q2 from around 27% to around 21%, excluding potential effects from share-based payment settlements in the course of 2023. And with that, I would now like to turn the call over to our Chief Strategy Officer, Ryan Richardson for the corporate overview and concluding remarks.

Thank you very much.

Ryan Richardson: Thank you Jens. I’ll now provide a brief summary of the outlook for our updated COVID-19 vaccine franchise and an overview of our latest progress in oncology before concluding with our strategic outlook for the remainder of the year. We’re making good progress on our three main strategic objectives. Regarding our COVID-19 vaccine franchise, we look forward to advancing our COVID-19 influenza combination vaccine into a Phase 3 trial in the coming months. If successful, we believe simplifying immunization practices for healthcare providers could positively impact compliance and help reduce the burden of these diseases and its impact on healthcare systems. In immunoncology, we are building a unique and powerful portfolio of complementary therapies.

We expect to start multiple trials with registrational potential over the next 12 to 18 months, while continuing to generate data that inform our go, no-go development decisions. And in infectious diseases, we plan to broaden our pipeline with new therapies that target high medical need indications. Now moving to the next slide on the ongoing global rollout of our adaptive vaccine. In the two and a half months following regulatory recommendation for an XBB.1.5-adapted monovalent vaccine, we and Pfizer have shipped vaccine doses to more than 40 geographies around the world. Across key markets, we continue to benefit from a strong market position. In some regions, such as Europe and Japan, we have gained considerable share. In the U.S., where we leverage our partner Pfizer’s commercial capabilities, we are seeing approximately 50% of vaccines going through the retail channel.

We expect that vaccine uptake will continue through increase to the end of the year. A recent national immunization survey in the U.S. by the CDC published last month, more than 30% of adults reported to have received or plan to receive an XBB.1.5 variant-adapted vaccine. We believe this data reflects the potential baseline demand for an annual vaccination. As outlined in the next slide, we expect our COMIRNATY franchise will be a long-term source of revenue. We expect to enter 2024 with a manufacturing base which has been reset to serve the future endemic market. In the next two years, we expect the continuation of several market shifts to play out. Those include the continued opening of private markets and the shift to commercial pricing globally, along with the continued transition from multi-dose vials to single-dose vials and pre-filled syringes, which could bring upside opportunity to the franchise.

We also expect that combination vaccines, if successful in late-stage trials, could present growth opportunities for the franchise from 2025 onwards. We see the potential for increased vaccine uptake from a potential combination flu and COVID vaccine by connecting protection from COVID to a well-accepted paradigm of annual flu vaccination. We will continue to invest for the long term in next generation COVID-19 vaccines with the aim of increasing robustness and durability of immune response. Now turning to the next slide, I’d like to wrap up with a snapshot of the progress we’re making in accelerating our innovative oncology portfolio toward the market. So far in 2023, we and our partners have initiated 11 oncology trials, including six Phase 2/3 trials.

We plan to continue this trend through the initiation of additional late stage trials in the next 12 to 18 months. We will continue to look for additive bolt-on BD and M&A opportunities that fit with our strategy, while reinvesting to build world-class capabilities and accelerate our growth. We remain as optimistic as ever on our ability to continue to create long-term value for patients, our shareholders, and society. Before concluding, I would like to remind and invite you all to attend our Innovation Series event tomorrow starting 9:00 am Eastern Time, where we will provide further details on our pipeline and corporate strategy. With that, I would like to thank everyone for their continued support and open the floor for questions.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Thank you. We’ll now take our first question. It is from the line of Daina Graybosch from Leerink Partners. Please go ahead.

Daina Graybosch: Hi, thank you. I have two financial questions. One, you have many programs going into Phase 3, and that’s certainly going to increase your R&D expenses. And I wonder, Jens, if you can give us any guidance on sort of the near to midterm and how much R&D we should expect in our model? And the second one is, whether you could help us at all with any inventory write-down understanding more predictability behind how we might see that next year and in future few years after that? Thank you very much.

Jens Holstein: Yes. Thanks, Daina. Thanks for the question and let me start with the second one maybe first, with the inventory write-offs. As I stated in my speech, I think this EUR600 million that we had to face from Pfizer this year has been really a reflection of the situation that we moved from the pandemic into an endemic situation. Going forward, of course, we have to, with new variants coming up, always have some sort of write-offs to be reflected, being it on Pfizer’s side or on our side. So there will be something, but not at all at that magnitude that we have seen now with this shift in 2023. So I think from our perspective going forward, the magnitude is a fraction of what we had to announce, unfortunately, for 2023.

Then in terms of the R&D expenses, Ryan was alluding to additional clinical trials, further late stage trials. Of course, that means that our R&D expenses are expected to go up. And that’s something that we envisage and want, because we believe strongly that we have valuable compounds that we need to invest money in. So those numbers will go up in terms of the magnitude for the next couple of years. You’ve got to bear with us a little bit until we give our guidance. But we have and I think we have highlighted that in terms of all our costs for 2023 that we are carefully looking at how much money do we want to spend or do we need to spend. But first and foremost, we want to create value with a cash position that we’ll have and that of course goes hand-in-hand with increased R&D expenses going forward.

Ryan Richardson: Yes. And maybe, Diana, just to add one point to Jens’s remarks on the R&D line. I think it’s important to remember as well that on a number of these pivotal stage or near or soon to be pivotal programs, we do expect to share R&D expenses with a partner. So that’s the case in the Pfizer collaboration, of course, where we share R&D expenses 50-50. And we talked — we mentioned today that we expect a couple of pivotal trials to start with combination vaccines that could become a midterm growth driver if successful. And similarly on the oncology side we have a number of programs that are partnered as well where we share expense.

Daina Graybosch: Great, thank you.

Operator: We’ll now take our next question. This is from the line of Tazeen Ahmad from Bank of America Securities. Please go ahead.

Tazeen Ahmad: Okay. Great guys. Thanks so much. Good morning. I have a couple of questions. It was encouraging to see that the safety profile in general for the COVID and flu combo vaccine resembles what you saw just for the regular COVID vaccine. But I’m wondering if you could just provide any additional data, particularly on what reactogenicity might have looked at and what we found, for example? And then secondly, a financial question. On R&D, can you elaborate on whether at least some of your expenses have come from deprioritizing certain programs and if so, can you talk to us about what programs those were? Thanks.

Jens Holstein: Ugur do you want to take the first one? Or Ozlem?

Ozlem Tureci: Yes, we were struggling with unmuting. Thank you, Tazeen, for the question. The first one was about reactogenicity profile for our variant-adapted vaccine. And that is, in principle, more or less equal to the [indiscernible] vaccine we have developed to the BA4, BA5 adapted version and what we see with the flu mRNA vaccine in the respective dose levels. And that supports that safety profile including the reactogenicity is a platform characteristic. So, in all that regard.

Ugur Sahin: Yeah, so the combo vaccine with regard to the safety and reactogenicity profile does not differ from the dose-dependent reactogenicity profile of the COVID-19 vaccine. That’s [Technical Difficulty] answer and the second question goes to the prioritize programs.

Ozlem Tureci: No, I think that’s —

Jens Holstein: You want to say something, otherwise, shall I jump in, Ugur?

Ozlem Tureci: Yes, you can jump in, Jens.

Jens Holstein: Yes, I’ll jump in. So, I mean, there is — it’s a couple of activities that we undertook during our review of activities. We have keep prioritized few programs, earlier stuff as well. Of course, we’ll keep you updated in terms of updates if they are of relevance in terms of our later stage program, but there’s nothing that I can report at this point in time. We have also in terms of the collaboration with Pfizer on the programs had a very close look as for other programs of — how much money do we really need to spend to come to the desired outcomes. So that’s another part that plays a role. A little bit of shifting from 2023 to 2024. So as always there are a couple of things, but those costs I wouldn’t call as something where you save money.

Deprioritization as well as maybe being able to run clinical trials at a cheaper scale is something that we take as real cost savings. And that has been a big chunk of what we have — what we can explain for the cost reduction.

Tazeen Ahmad: Okay. Thank you.

Operator: Thank you. We’ll now take our next question. Please stand by. This is from the line of Chris Shibutani from Goldman Sachs. Please go ahead.

Chris Shibutani: Thank you very much. Good morning and good afternoon. Two questions, if I may. First on the oncology program, BNT122, the iNeST cancer vaccine, ongoing melanoma study, but we noticed that there was an absence of commentary in the press release. Should we still expect the study to report top line results by year end and perhaps you can comment on what your expectations are for this program and if they’ve changed? My second question is on the COVID flu combination data to make sure in terms of immunogenicity, the press release mentioned titers generated by lead formulations work compared to concomitant administration of COVID and flu vaccines. Is that the immunogenicity comparison that the FDA will be evaluating in Phase 3 or are they looking for titers compared to monotherapy vaccination of COVID and flu separately? Thank you.