BioNTech SE

NASDAQ:BNTX

Earnings Call Analysis

Revenue Drop and Increased R&D Spending Highlight BioNTech's Earnings Call

BioNTech's Q2 2024 revenues fell to EUR 129 million from EUR 168 million year-over-year, reflecting lower COVID-19 vaccine demand. The company reported a significant increase in R&D expenses to EUR 585 million, focusing on late-stage oncology clinical studies. Despite a net loss of EUR 808 million and a EUR 3.36 loss per share, BioNTech's strong cash position of EUR 18.5 billion supports its long-term growth strategy. The company reaffirmed its 2024 financial guidance, expecting R&D expenses between EUR 2.4 to 2.6 billion and SG&A expenses of EUR 700 to 800 million.

Q2 2024 Performance

The second quarter of 2024 was challenging for BioNTech, with total revenues reported at €129 million, down from €168 million in the same period the previous year. This decline is attributed to a seasonal endemic COVID-19 vaccine market, which is considered the low point in this year's COVID-19 vaccine uptake. Despite this revenue dip, the company managed its expenses effectively. The cost of sales dropped significantly from around €163 million to €60 million.

R&D and Operational Expenses

BioNTech saw a notable increase in its research and development (R&D) expenses, which rose to approximately €585 million from €373 million. This increase is primarily due to investments in large clinical studies for late-stage oncology candidates and additional personnel in R&D departments. Sales, general, and administrative expenses also grew, reaching €184 million from €138 million, driven by higher IT expenses and increased headcount to support business scaling.

Financial Results and Net Loss

The company's financial results were impacted by a significant provision related to a contractual dispute, resulting in a negative operating result of €267 million compared to €57 million the previous year. Net loss for the second quarter of 2024 was approximately €808 million, significantly higher than the €190 million net loss in the prior year. The loss per share stood at €3.36, compared to €0.79 per share earlier.

Strong Cash Position and Long-Term Strategy

As of June 30, 2024, BioNTech's cash and cash equivalents and security investments totaled around €18.5 billion, providing strategic flexibility to invest in long-term growth. The company aims to advance its clinical programs towards potential registration while maintaining cost efficiency.

COVID-19 Vaccine Outlook

BioNTech is notably focused on its COVID-19 vaccine efforts, anticipating the approval of its variant-adapted vaccine in the U.S. by mid-September. This approval is expected to drive the majority of the year's revenues in Q4. The company reiterated its guidance for the financial year, expecting R&D expenses to be between €2.4 billion and €2.6 billion, and SG&A expenses between €700 million and €800 million.

Oncology Portfolio Progress

BioNTech made significant strides in its oncology pipeline, presenting promising data and progressing with new trials. The company highlighted key updates, including the success of BNT111 in a Phase II trial for melanoma and ongoing developments in combination therapies. BioNTech remains committed to advancing its innovative oncology technologies towards potential market authorization.

Strategic Investments and Partnerships

Investments in individualized therapies and manufacturing capacities are critical to BioNTech's strategy. The company is enhancing its capabilities to support additional late-stage trials and commercialization. An essential part of this strategy includes leveraging partnerships to realize its ambitious goals, aiming for multiple product launches in oncology by 2030.

Earnings Call Transcript 2024-Q2

[Operator]

Welcome to BioNTech's Second Quarter 2024 Earnings 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, executive]

Thank you. Good morning and good afternoon. Thank you for joining BioNTech's Second Quarter 2024 Earnings Call.

As a reminder, the slides we will be using during this call and the corresponding press release we issued this morning, can be found in the Investor Relations section of our website. On the next slide, you will see our forward-looking statements disclaimer. Additional information about these statements and other risks are described in our filings with the U.S. Securities and Exchange Commission.

Forward-looking statements in this call are subject to significant risks and uncertainties and speak only as of the date of the conference call. We undertake no obligation to update or revise any of these statements. On Slide 3, you can find the agenda for today's call.

Today, I am joined by the following members of BioNTech's management team; Ugur Sahin, Chief Executive Officer and Co-Founder; Ozlem Tureci, Chief Medical Officer and Co-Founder; Jens Holstein, Chief Financial Officer; and Ryan Richardson, Chief Strategy Officer.

With this, I would like to hand over to Ugur.

[Ugur Sahin, executive]

Thank you, Victoria. A warm welcome to all those joining us today. I will start with an overview of the quarter's highlights with a focus on coronary and our late-stage oncology portfolio. talk about some of our recent oncology pipeline advancement in more detail. Jens and Ryan will then provide updates on our financial and corporate progress and the outlook for the remainder of the year.

Slide 5. The second quarter of 2024 was marked by a significant execution across our oncology pipeline and our leading COVID-19 franchise. Our progress in the quarter was set up for an impactful end of 2024 as we continue to progress towards our long-term vision. I would like to highlight achievements in 3 areas: first, with regards to our COVID-19 vaccine leadership. On the back of the first regional approvals, we have initiated the launch of our variant-adaptive vaccine and expect additional approvals in the coming weeks and months.

Second, in oncology, we shared new areas updates at major medical meetings that highlighted our clinical execution and pipeline progress and provided data on several of our assets across modalities. Ozlem will discuss some of these updates in more detail, but I would like to highlight 2 of those specifically.

Last week, we announced that our off-the-shelf BNT11 met the primary endpoint in the ongoing randomized Phase II trial evaluating BNT111 in combination with cemiplimab in patients with Stage III and Stage IV Protenus melanoma. This preliminary result is a significant milestone for our company and underscore our belief in the transformative potential of this new class of medicine and of our technology, which is a key pillar of our oncology strategy.

We have exciting news also with regard to another key pillar of our oncology strategy, namely the development of novel IO ADC combination. This quarter, we started to see of several preparatory trips for our combination therapy strategy. The trial evaluates the combination of our anti-PDI1-VGF bispecific antibody, and our top 2 ADC BNT We look forward to the initiating additional IO ADC combination over the next 12 months.

The third area in which we made progress is our mission towards the creation of sustainable and resilient end-to-end vaccine ecosystem in Africa by expanding our partnership with committed up to USD 145 million to support us to establish mRNA in clinical and commercial scale manufacturing capabilities at our facility in Kigali Randa. These capabilities will contribute to better prepare for potential future epidemic and pandemic in Africa in alignment with our corporate purpose of ensuring equitable access to our medicines.

Slide 6, starting with our COVID-19 franchise. The continuous circulation of staff cost tool leads to the ongoing evolution and emergence of novel variants of virus which we continue to monitor and evaluate for the new evasive potential In September 2022, the HPV dominated globally throughout 2023, with multiple and was successfully addressed by HPV14 variant-adapted COVID-19 vaccine, including our own. This year, JN1 including KP2 became the predominant variant globally, leading to the current search in infections in many regions in the northern hemisphere. Shown on the right part, we use effectiveness data demonstrated the antigenic shift and the distance of lineages from HPV15 has impacted the vaccine effectiveness of the HPV15 adaptive vaccine against a now prevalent Slide 7. Based on this, and additional data, regulatory and public health authorities consequently advised extreme manufacturers to revise the formulation for their authorized COVID-19 vaccines.

The WHO and the EMA recommended the use of JN1 lineage antigen COVID-19 vaccine for the season 2024, 2025, and 17 days later, we were able to submit our application to the European regulator. Based on this recommendation and the consequent EMA approval on July 3, we have begun calling out our update COVID-19 JN1 vaccine in Europe. In the United States, the FDA further recommended the use of as the preferred JN1 lineage antigens for the 2024, 2025 COVID-19 mRNA vaccine on June 30.

Less than 2 weeks later, we initiated our submission with the U.S. FDA. We and our partner, Pfizer are working hard to enable early availability of varying adaptive vaccines for people around the world with the aim of reducing or preventing severe disease or specialization and COVID-19 related debt. We expect the FDA approval of our adaptive vaccine by mid-September, and we aim to deliver the first vaccine to the people in the United States shortly thereafter.

Slide 8. The other area I'm highly excited about is the progress on our oncology pipeline. Before I hand over to Ozlem into the recent achievement let me remind you of our overarching on quality strategy. mRNA cancer immuno therapies were our starting point when we founded BioNTech. And they remain the centerpiece. Ever since we have been pursuing a technology-agnostic approach by not limiting ourselves to any 1 technology. Over the past 2 years, we added platforms to complement the MRNA center.

Today, we have an oncology tool kit featuring multiple modalities, including targeted therapies such as ADCs, and immunomodulators, that open up new combination opportunities to synergistic mechanisms of action. Having this diversity of assets in our pipeline enable us to pursue combination approaches that are proprietary and unique. This strategic advantage allows us to evaluate the activity of each individual compound and to determine dose patient population for which monotherapy or synergistic combinations are best suited.

We believe that our strategy has the potential to address fundamental challenges of cancer and to drive meaningful improvement in the long-term survival rate for patients. And as you will hear from stem, the last quarter has been about executing towards this vision. Before I hand over, I would like to thank you all for your ongoing support as we enter the truly exciting for BioNTech and our progress towards our founding vision. Thank you.

[Özlem Türeci, executive]

Thank you, Ugur. Glad to speaking with everyone today. Our multi-platform clinical pipeline is continuing to grow and to progress. And it is a rich source for a rationally planned novel, novel combinations that we consider a key pillar of our strategy. As you can see, 2 of our modalities, namely mRNA and immunomodulator is are dominantly represented in our pipeline, and particularly so in the advanced clinical stages. Today, I want to focus on priority assets within these modalities, which have our special attention. Our mRNA vaccines and 1 of our IO compounds, Before I cover these assets, let me just mention that a rich clinical pipeline and ambitious plans require execution capability, which we are continuously building -- as you can see on the slide, we are accelerating the pace of pipeline wide patient accruals compared to last quarter compared to 2022, we and our network of partners are now recruiting 6x as many patients per quarter to support enrollment into the clinical trials you saw on the previous slide.

This increase is a testament of our drive towards more and larger mid- to late-stage trials as part of our ambition to achieve multiple product launches in oncology by the year 2030. It also underlines the success of our partnership strategy. which not only gives us access to compounds that complement our own pipeline, but enables us to leverage additional clinical trial execution capacity and know-how and geographic reach.

Now to a center piece of our oncology portfolio, our mRNA cancer vaccine platforms, iNeST and FixVac, which differ in the type of tumor antigens they target. iNeST target neoantigens derived for somatic mutations in cancer sets that are unique to an individual tumor. are manufactured on-demand and personalized to each individual patient. vaccines target multiple nonmutated antigens shared by a majority of patients with a given tumor type and are off shelf. The computational approaches to discover and select these 2 different types of target antigens are 1 of our core competencies.

iNeST and FixVac both use the same technology, namely our proprietary mRNA LPX platform. Today, we have ongoing trials in multiple disease settings and indications across both vaccine platforms. We have reported translational and clinical data over the last couple of years and future data updates from multiple trials shown on the slide Aggregate data that we have reported in the past across iNeST and FixVac trials indicate that uridine mRNA LPX based vaccines have a manageable and largely mild safety profile a single agent in combination with anti-PD-1 PD-L1 compound and in combination with chemotherapy.

Our data also indicates that our Urogen mRNA based vaccines are proficient in inducing and expanding high magnitude, functional and long-lived T cell responses in the majority of patients, which is a prerequisite for clinical activity. Furthermore, our data from small sample size patient cohorts indicates clinical activity alone and in combination with anti-PD-1, PD-L1 treatment.

Several of the now ongoing trials shown on this slide aim to answer the material question of whether our mRNA vaccines are superior to the respective standard of care. In our FixVac program here on the right, I would like to highlight 3 vaccine candidates currently being evaluated in multiple trials in both the metastatic and adjuvant setting. First, BNT113 being well underway in first-line HPV16-positive PD-L1-positive head neck squamous cell carcinoma in a potentially registrational Phase II randomized trial.

Second, BNT116 being investigated in 2 trials as single agent and in various combinations in different non-small cell lung cancer, patient populations and treatment lines. And last but not least, BNT111 being investigated and anti-PD-1 relapsed or refractory melanoma, about which I would like to talk a bit more -- the NT 111 is the Urogen mRNALPX-based vaccine that encodes 4 melanoma associated antigens that collectively cover more than 90% of melanoma patients and are highly immunogenic.

In the randomized 3-arm Phase II clinical trial conducted in collaboration with our partner, Regeneron, we are evaluating the 111 in combination with Regeneron's anti-PD-1 compound, cemiplimab, and we measure activity of BNT111 alone or silicimabalon in a total of enrolled patients with PD-L1 refractory unresectable Stage III or Stage IV melanoma. As Ugur noted earlier, we very recently announced that the trial met its primary endpoint, achieving a statistically significant improvement of overall response rate in the BNT111 cemiplimab combination arm as compared to historical control of anti-PD-1 monotherapy in relapsed refractory patients.

The historic control was based on multiple late-stage clinical trials that established the expected objective response rate for monotherapy checkpoint inhibitors in this setting for this patient population. While the data are further maturing, we do see a trend towards improved overall survival. The BNT11101 trial is based on the early adipomeric Phase I/II trial in patients with advanced melanoma who have exhausted treatment options. The trial established the dose and provided initial safety, efficacy and immunogenicity data on BNT111 a single agent and with checkpoint inhibitors approved in this patient population.

In that proof-of-concept study, we observed that treatment with BNT111 alone or in combination with anti-PD-1 could induce strong high-magnitude T cell responses against at least 1 time tumor-associated antigen in all analyzed patients, most of which were not detectable prior to using the vaccine. As shown here, objective responses by BNT111 were durable with some patients followed up for several years. The safety profile was generally mild and in line with expectations for those patients who were co-treated with checkpoint inhibitors.

The results we are seeing in the Phase II BNG111-01 study are consistent with these prior results. We plan to present the full data from the primary analysis at a medical conference in 2025 and are entering into discussions with regulatory authorities regarding our data and the clinical path forward for this program. Cutaneous melanoma carries a high-end continuous increasing incidence and mortality word.

The introduction of checkpoint inhibitor directed therapies was a breakthrough for patients that led to significant improvements in survival. Nonetheless in advanced disease stages only a furor patients achieve a long-term response and long-term survival after failure of checkpoint inhibitors, there is no established standard of care with only limited and short-lived responses to salvage therapy, while a new adopted strategy has recently become available for this patient population, we do not expect that all patients will be eligible, leaving a significant unmet medical need unaddressed. In this context, our BNT111 may be of interest to potentially have treat the high medical need population.

Moreover, the BNT111 data is a proof of concept in free dimensions. Firstly, a proof of concept for our improved mRNA cancer vaccine technology that uses origin mRNA chemistry a noncoding backbone that is engineered for optimal translational performance and our proprietary lipoplex formulation for systemic delivery. Second, this is a proof of concept for our computational approaches for selecting suitable tumor antigens and targets for our cancer indication-specific 6-leg program candidates.

And lastly, it's a proof of concept for our strategy to combine synergistic modalities. In this case, BNT11 with an established immune checkpoint inhibitor treatment. All 3 of these also applies to BNT122, our individualized mRNA cancer immunotherapy based on our ILS platform and the same delivery technology. We consider individualized cancer vaccines as a medical breakthrough in addressing the high unmet medical need of resectable cancer and in adjuvant or minimal residual disease treatment settings.

Here, I want to highlight ongoing randomized Phase II trials with our individualized vaccine in pancreatic ductal adenocarcinoma and in colorectal cancer. The 5-year survival rate in pancreatic ductal adenocarcinoma after resection alone is 10% and up to 75% of patients with pancreatic ductal carcinoma relapse even though they appear to more for you within 5 years after adjuvant treatment.

As for high-risk Stage 2 or Stage 3 colorectal cancer, about 35% of patients relapsed within 5 years after resection and adjuvant therapy. As discussed -- in the last earnings call, we demonstrated that our individualized vaccine used in patients with adjuvant pancreatic cancer can induce the novo T cell responses that are specific to the individual mutant tumor neoantigens and that the risk of recurrence of cancer for patients with vaccine-induced immune responses was reduced even after a 3-year follow-up period.

At the recent ESMO GI conference, we disclosed findings from the biomarker sub study of our ongoing Phase II IAS prior BNT122-01, involving patients with stage 2 high-risk of a 3 colorectal cancer who remain ctDNA-positive following the surgical excision of the localized cancer upon completion of standard of care adjuvant chemotherapy.

These patients received BNT122 our individualized vaccine in contrast to the conventional wait-and-watch approach. In the subset of patients who were accessible for immunogenicity analysis, a high magnitude de novo T cell response against at least 1 vaccine encoded neoantigen was observed in all patients. These T cell responses were amplified with success of vaccination cycles Notably, in several patients, the T cell responses were sustained even after 2 years of flow.

All 12 patients involved in the immunogens analysis remain disease-free at the time of data cutoff. Enrollment for the main part of the corrector cancer study is underway to establish the safety and efficacy of BNT122 in patients with DNA positive Stage I detected cancer as opposed to the standard wait-and-watch strategy. We anticipate presenting the results from this randomized Phase II study by Day 2025 or early '26.

As multiple Phase II trials are ongoing and our clinical data on mRNA immunotherapies continues to mature, we are scaling up our manufacturing capabilities and capacities for bulk RNA drug supply for off-the-shelf fixed vaccines and also for our individualized vaccine program to build out our manufacturing capacity for personalized mRNA, we are currently building a pilot facility in Mainz, Germany to support our ongoing late-stage trials and potentially in the future commercialization.

We also continue to leverage in study our wholly owned AI hub security company to work with our teams in improving both the up and downstream processes in personalized mRNA manufacturing. From our mRNA cancer vaccines, I'm now moving to our immunomodulatory IO compound, specifically BLT327, which we consider as a key immunomodulatory concept and compelling backbone for novel combination. BNT327 combines 2 validated mechanisms of action.

VEGF A binding inhibitor VEGF A with VEGF-R block tumor and scenes, which leads to reduced tumor cell proliferation and survival. VEG A inhibition also contract formation of the immunosuppressive tumor micro environment as does the PD-L1 arm of a bispecific antibody by reverting PD-L1, PD-1 axis mediated T-cell exhaustion. The PD-L1 arm also anchors despite specific antibody to the tumor bed for efficient and localized scavenging of the VEGF A, which may contribute to mitigate of 2 more on target side effects.

Given that both where anti VEGF A and the entire PD-1 mechanisms are validated across many tumor types and in some cases, as a combination. We have a clear road map ahead of us where to develop BNT327. Beyond these initial indications in which we may combine with standard of care chemotherapy, we plan to evaluate novel the 327 combinations, the first of which were started recently. If Novel combinations may open up new areas of activity. for our anti-VGFA and anti-PD-L1 We and our partner, Biotheus have treated over 600 patients across the wide range of clinical indications with BNT327.

Monotherapy or in combination with various standard of care protocols. This extensive data collection effort provides a solid foundation for making informed data-driven decisions on potential indications and patient cohorts for future registration studies.

Notably, the data demonstrates robust single-agent activity of BNT327 in previously untreated advanced non-small cell lung cancer and high response rates in combination with standard chemotherapy in triple-negative breast cancer and small cell lung cancer, specifically in first line, triple-negative breast cancer we observed an objective response rate approaching 80% with durable responses when combined with The safety profile in these indications was generally well managed and in line with adverse events observed with other therapies targeting PD-L1 and appears to be more favorable than those seen with anti-VEGF agents.

These data have driven our strategic decision to initiate registration trials in small cell lung cancer, non-small cell lung cancer and in triple-negative breast cancer this year and next year. In small cell lung cancer therapeutic options for the treatment of metastatic disease remain limited with few innovative approaches beyond frontline anti PD-1 checkpoint inhibitors, which only achieved response rates of around 20%.

TNBC patients, particularly those with PD-L1 negative tumors have few treatment options as they are not eligible for current anti-PD1 therapies. In metastatic non-small cell lung cancer, while anti-PD-1 inhibitors have significantly changed the treatment landscape. Nearly half of these patients they do not respond to frontline therapy in combination with chemotherapy. We will still start 2 global Phase II dose optimization studies to enable selection of a registrational dose for global registrational trials in these particular indications.

At ASCO, we presented updated preliminary efficacy and safety data from an ongoing Phase I/II study in cohorts of advanced cervical cancer, platinum-resistant relapsed ovarian cancer and advanced non-small cell lung cancer. We will be presenting signal finding data from additional tumor indications at upcoming conferences. This will add to our extensive database and is the basis of our plans for further development in key indications.

Most importantly, as Ugur also noted, it is a strategic goal for us to explore BNT327 as part of novel, novel combinations in particular, with our ADC assets and mRNA therapies. We have started to implement this strategy by investigating BNT327 in combination with our BNT325, further combinations will be announced in the coming months. We are very excited to advance these combination trials with our partner.

On my final slide now, I would like to provide an outlook on upcoming Congress presentation in September with updates on some of our priority assets. At our annual ESMO Congress in Barcelona, here, we will present an update on our 2 trials evaluating BNT113 the first update will include patients with anal have net cervical and other HPV16 carcinoma, and we report mainly safety and immunogenicity findings from the Phase II trial. The second update from a safety run-in cohort of our ongoing Phase II trial evaluating BNT113 dose in combination with perlizumab, versus pembrolizumab alone will include patients with HPV16 positive head neck remoter carcinoma. This update will focus on the safety, immunogenicity and preliminary activity finding softer court.

We will also present the updated results on BNT327 in patients with TNBC with VEGF-R-mutated non-small cell lung cancer and were together with our partner, Biotheus these updates will contain either initial follow update on safety and efficacy of BNT327 as a monotherapy and as a combination with different regimens. And finally, we will be presenting updated results from our ongoing Phase I trial, evaluating safety and efficacy of our CAR T cell in combination with mRNA vaccine in patients with relapsed refractory tumors.

This data will be a follow-up from what was presented at last year's ESMO Congress and will include updated safety and efficacy data as well as data on CAR T cell assistant. We will share additional details on these and further congress complications in the near future. With that, I will now pass the presentation to our CFO, Jens Holstein.

[Jens Holstein, executive]

Thank you, Ozlem, and a warm welcome to everyone who has dialed in today's call. Let me start by reviewing our financial results for the 3 months ended June 30, 2024. Our total revenues reported for the second quarter of 2024 reached approximately EUR 129 million compared with approximately EUR 168 million for the second quarter of 2023.

Our second quarter revenues reflect the current demand of a seasonal endemic COVID-19 vaccine market and I expect it to be the low point in this year's COVID-19 vaccine uptake. Part of our total revenues are derived from the pandemic preparedness agreement with the German government, which is expected to run until early 2027.

Moving to cost of sales. Cost of sales amounted to approximately EUR 60 million for the second quarter of 2024 compared to approximately EUR 163 million for the comparative prior year period. Research and development expenses were approximately EUR 585 million for the second quarter of 2024 compared to approximately EUR 373 million for the comparative prior year period. Of the total R&D spend in the second quarter, we invested approximately 90% in our noncore business, mainly by initiating larger clinical studies for our late-stage oncology candidates and by investing in additional personnel in our R&D departments to run those clinical trials.

Sales, general and administrative expenses amounted to approximately EUR 184 million in the second quarter of compared to about EUR 138 million in the comparative prior year period. The increase in SG&A was mainly due to the increased expenses for our IT environment as well as an increase in head count to support the scaling of our business.

Regarding the company's other operating results during the second quarter of 2024 this amounted to approximately EUR 267 million in negative operating result compared to about EUR 57 million, a negative operating result for the comparative prior year period. This change was primarily due to the recording of a provision related to a contractual dispute.

Income taxes were accrued with an amount of EUR 2 million of tax expenses for the second quarter of 2024 compared to approximately EUR 222 million of realized tax income for the comparative prior year period. The effective income tax rate for the first half of 2024 was approximately 1.3%. For the second quarter of 2024, we reported a net loss of approximately EUR 808 million compared to a net loss of about EUR 190 million for the comparative prior year period.

Our loss per share for the second quarter of 2024 amounted to EUR 3.36 compared to a loss per share of EUR 0.79 for the comparative prior year period. As of June 30, 2024. Our cash and cash equivalents and security investments reached approximately EUR 18.5 billion. Our strong balance sheet provides us with a strategic flexibility to invest in our long-term growth strategy.

As part of that strategy, we will continue to invest in the development of our individualized therapies in the build-out of the manufacturing capacities and capabilities to support additional late-stage starts in commercialization. To create long-term value, we aim to advance our clinical programs quickly, yet cost efficiently towards potential registration.

Turning to the next slide. Today, we are reiterating the company's financial guidance for the current financial year. Consistent with the expectations of approval of our variant adapted COVID-19 vaccine in the United States in mid-September, we expect to recognize the vast majority of our full year revenues mostly in Q4. Independent of the timing of the revenue generation and as communicated earlier in the year, we expect to report a loss for financial year, while we continue to invest in our proprietary assets and technologies.

As such, we also reiterate our R&D and SG&A guidance with EUR 2.4 billion to EUR 2.6 billion for R&D and EUR 700 million to EUR 800 million for SG&A expense. Those expenses are expected to increase in the second half compared to the first half of 2024. Please note that this guidance does not include any M&A transactions payment for collaboration agreements or licensing deals not yet disclosed nor any potential payments resulting from the outcomes of ongoing and/or future legal disputes or related activities such as judgments or settlements, which may have a material effect on our results of operations and/or cash flows.

In summary, our focus so far has been on executing the company's strategy highlighted by the progress in our pipeline. We've advanced and started new potentially registrational trials and have shared encouraging data that demonstrates the potential of our pipeline. Our focus in oncology remains on investing in our innovative technologies that we believe can make a difference while progressing our late-stage programs towards potential market authorization.

Supported by our strong cash position and demonstrated financial discipline, we will continue to invest in our pipeline and focus on generating value for patients and our shareholders. With that, I would like to turn the call over to our Chief Strategy Officer, Ryan Richardson, for an update on our strategic outlook and concluding remarks. Thank you.

[Ryan Richardson, executive]

Thank you, Jens. Our efforts over the last few months have put us in a strong position to execute our COVID-19 vaccine launches this fall season. In June, the European Medicines Agency recommended marketing authorization for our JN1-adopted COVID-19 vaccine followed by European Commission approval on July 3.

We started distributing vaccine doses to EU member state shortly thereafter. We expect the earlier launch of our updated COVID-19 vaccine in Europe relative to last year will allow vaccination campaigns this year to be more closely aligned with seasonal influenza vaccination campaigns. In the United States, the FDA has recommended the use of KP2 as the preferred strain for the '24/'25 season. We and our partner, Pfizer, have initiated a rolling submission with the FDA for our KPI adopted COVID-19 vaccine and expect to be in a position to begin vaccine distribution in the U.S. following regulatory approval with first shipments expected in September.

COVID-19 vaccine demand continues to be globally distributed. We and our partner, Pfizer, are preparing to launch our variant-adopted COVID-19 vaccine in over 40 countries and regions worldwide. We expect approximately 2/3 of demand potential to reside outside the United States. While some regions outside the U.S. continue to be served by government contracts, we anticipate several newly established private markets to open up in regions like the U.K. and Japan.

This could enable broader access to COVID-19 vaccines for individuals who may not qualify under local immunization recommendations, which tend to focus on the higher risk population segments. In addition, we have increased our supply of prefilled syringes, but we'll continue to offer a mix of prefilled syringes, single-dose vials and multi-dose files across regions. We believe the Comernati franchise is well positioned to maintain its leading position globally in the continued fight against COVID-19.

Moving to oncology on the next slide. We will continue to invest in our mRNA cancer vaccine platforms based on our belief that personalized mRNA cancer vaccines have potential to establish a new paradigm in cancer treatment. These vaccines employ cutting-edge mRNA technology, which aims to address the root cause of cancer genomic mutations or neoantigens that are largely specific to each individual's tumor.

Neoantigen selection for each patient is today driven by AI algorithms in a fully in silico process. We believe this is fundamentally distinct from other pharmaceutical products and that it will allow for iterative improvement over time, powered by data assets. In addition to their ability to be combined with other therapies with complementary mechanisms of action, we believe these therapies have potential to extend beyond the product life cycle of a traditional off-the-shelf pharmaceutical product.

The next slide highlights the key pipeline milestones to focus on as we look ahead to '24 and '25. We are entering a catalyst-rich period over the next 18 months. with data updates and regulatory submissions expected for multiple product candidates. This includes, but is not limited to Phase III COVID flu combination vaccine top line data expected this year and data expected in 2025 from both our mRNA cancer vaccine platforms, FixVac and iNeST. We also expect data updates for BNT327, our anti-PD-L1 VEGF bispecific antibody and BNT323, our HER2 ADC in a variety of solid tumor indications.

Finally, we plan to initiate multiple combination trials in solid tumor indications over the next 12 months consistent with our strategy to develop novel combinations, which leverage complementary mechanisms of action.

Turning to the next slide. We continue to focus on our late-stage oncology portfolio in line with our near-term goal to have 10 potentially registrational trials active by the end of the year. While still in the early stages, we are making progress in attracting talented professionals to join our commercial organization to support our first wave of anticipated oncology product launches. We believe that focusing execution on our diverse late-stage pipeline will bring significant potential for mid- and long-term value creation.

On the next slide, I would like to remind everyone that we plan to hold our first artificial intelligence innovation series event via webcast on October 1, followed by our Annual Innovation Series event on November 14. Further details will be released soon. We welcome you to join these events for a deeper look at the exciting developments taking place at Biotech.

With that, I would like to open the floor for questions.

[Operator]

[Operator Instructions] We will now take the first question from the line of Daina Graybosch from Leerink Partners.

[Daina Graybosch, analyst]

This 1 is on the loss early of 2026. I'm wondering if you could talk about what specific programs and settings trials, you think are most likely to be able to launch in 2026. And if that's dependent on accelerated approval, what gives you confidence in accelerated approvals by that date. I guess, was specifically referencing whether any of those are your Phase II vaccine trials.

[Ryan Richardson, executive]

Yes. Thank you, Dana. I'll start briefly and my colleagues can jump in. So I think for 2026, we have a couple of different programs that potentially could launch in that time frame and the first of which is BNT323, or HER2 ADC, and we've highlighted the potential for, we think, for an accelerated approval in second and third line endometrial cancer. So that would be 1 asset where we're expecting data next year.

And if that time line is confirmed with further FDA discussions, we think that, that could be launch opportunity. In addition, we've highlighted the potential for an accelerated pathway with our BNT122 INS in adjuvant colorectal cancer. And we still have further discussions to take place with the FDA, but based on the current study design and the pace of enrollment, we do think that there is the potential if the data is strong also for data to be for submission and potentially launch in that sort of time frame, most likely towards the end of the year or early 2017, but it could fall in '26.

[Operator]

We will now take the next question from the line of Yaron Werber from Cowen.

[Yaron Werber, analyst]

Maybe just a quick question. I know you probably can't say a lot, but BNT111 FixVac when you're looking at historical controls and you're looking at sort of the overall survival sort of trend. Can you give us a sense which historical control do you think are most appropriate just to kind of help gauge what the efficacy could be.

[Özlem Türeci, executive]

Yes. This is a very dire indication. CPI refractory resistant melanoma and the controls against which we compare anti-PD-1, PD-L1 treatments, which have been tested in this indication are chemotherapies, which have been tested in this indication. And as compared to those we see clinically meaningful benefit with regard to objective response rate. .

There is a trend for overall survival, but it is too early to be more specific about PFS -- and OS now, the data will mature. And at the time, when we present the data next year, we will be able to be more specific.

[Operator]

We will now take the next question from the line of Tazeen Ahmad from Bank of America Securities.

[Tazeen Ahmad, analyst]

Regarding the upcoming Phase III COVID combo data later this year, can you frame for us what would be good data? And how would you think that would impact the demand for the regular cover vaccine going forward? And then also related to that, how long will for you think that this product, the combo products would be able to launch.

[Ugur Sahin, executive]

Thanks for your question. So we are expecting that timeframe the safety, immunogenicity data and efficacy data end of this year. And based on the results, we have to see whether the data qualify for submission and potential approval for the season 2025, 2026.

[Tazeen Ahmad, analyst]

What would you consider good data at to be an improvement over the regular COVID vaccine.

[Ugur Sahin, executive]

Can you repeat your question? I didn't get that.

[Tazeen Ahmad, analyst]

What would you consider to be good data relative to the COVID-only vaccine in order to...

[Ugur Sahin, executive]

I think the data is very clear. It's an efficacy trial. It's about comparability with the COVID-19 plus in the plan the additional immunogenic data as supporting the mode of action of the vaccine.

[Operator]

We will now take the next question from the line of Etzer Darout from BMO Capital Markets.

[Etzer Darout, analyst]

Just wondering sort of in the wake of the update and your maintenance of R&D guidance. Is there a specific internal oncology program that potentially benefits here? In other words, maybe potential of acceleration of investments or broadening out of the program. Just so curious to your thoughts around who maybe what programs may benefit from this internally.

[Ryan Richardson, executive]

Yes, yes. Thank you for that question. I mean ultimately, this does come down to portfolio strategy, as or think your question alludes to. And the fact is that we have multiple programs that we think could have potential in non-small cell lung cancer. We've already started the Phase III for BNT316.

We've just brought up data at ASCO for BNT327, which albeit early, we do think is quite promising. And we also have a fixed back program that's also in SCLC. So we've got already critical mass in our portfolio in non-small cell lung cancer indication, and we are planning a multipronged strategy to execute against.

So while we found the data encouraging for we decided to prioritize other programs, frankly, over this in the next phase. I think the important takeaway here though, of course, is that as Genmab now takes this program forward into Phase III, we will still retain an economic stake in the program and a stake in the success -- the future success of the program, but we won't fund Phase III. And we think that that's the right balance given the many shots on goal and exciting data that we're seeing from the portfolio.

[Operator]

We will now take the next question from the line of from HSBC Bank plc.

[Unknown Analyst]

I've got a question on margin progression. So just how should we think about as your oncology pipeline progresses and also in the meantime, you've scaling our manufacturing and potentially investment in R&D and the SG&A. How should we think about that margin progression and especially as you're launching your oncology for those in the future?

[Ryan Richardson, executive]

Yes. We couldn't hear you very well there, but just want to make sure we get the question right. So your question is about how do we see margin progression over the next couple of years, specifically as it relates to oncology. Is that right? .

[Unknown Analyst]

Yes. Yes, I think the launch predominantly we see sort of in oncology space. And just the question on margin progression.

[Jens Holstein, executive]

Maybe I'll start. It's awfully difficult actually to understand you. You're fading away somewhat. But I mean you've seen that, of course, the margin that we have with our -- in our partnership with Pfizer is extremely good. I mean we're close to 100%, given the gross margin share structure that we have with Pfizer. So that's outstanding and certainly not normal.

In terms of oncology, going forward, we would expect that we see similar sort of margins as you see in -- with other companies. I think in looking forward in terms of invoiced medicine, I think we've got to wait a little bit on how we can -- when we can make some statements in terms of the margin. But we're working very hard. I can assure you we're working very hard to bring the costs down for unrealized medicine candidates.

[Ryan Richardson, executive]

Yes. And I would just add 1 point to that. So in addition to what is just said about oncology, I think we're still expecting, of course, our COVID business is going to still be for the next couple of years, still a driver of our overall margins. And I think there, we've got, as we pointed out in the past, a very attractive economic model.

These are our partner, Pfizer, that we think will allow us to keep our overall operating profile quite attractive.

[Operator]

We will now take the next question. From the end of an radar from Jefferies.

[Akash Tewari, analyst]

This is actually Akash. So you recently top line data from your 111 trial in cutaneous melanoma. Our analysis suggests that would have a 24% delta versus roughly the 11% historical control rate for our PD-1. Is that the ballpark way to think about the ORR delta in the study? And what would you have to see on PFS and OS to justify moving this forward into a Phase III.

And maybe just stepping back, what does this trial teach the by OnTech team about the ideal place for cancer vaccine. I feel like one of the lessons from your early INS data was that cancer vaccines were perhaps not well suited for patients with metastatic late-stage disease. And yet these patients were PD-1 refractory. So how should we interpret that?

[Ugur Sahin, executive]

Okay. Thank you. It's a great question. So the personal cancer vaccines have a manufacturing turnaround time in the range of 6 to 8 weeks. And therefore, in the metastatic setting and this type of vaccines, vaccines are difficult to provide clinical benefit since these patients rapidly poles. So the statement of and refers to the personalized vaccines.

With regard to FixVac, we have seen that Fixed has 2 activities is on the 1 side the direct activity due to the adjuvant function. We are seeing a pain into response and have seen now in a number of indications, not only in melanoma, but also in lung cancer, objective responses in patients with advanced cancer. And we expect and that the combination, particularly with a treatment that is able to control the disease for a certain time. And we are particularly into our ADC mRNA vaccine combinations, you will see a number of trials coming up in 2025 for this would be an exciting opportunity for our FixVac. And maybe for the other part, I take is to ask Ozlem.

[Özlem Türeci, executive]

Yes. Your question regarding the 11 was about the clinical benefit, which we would like to see as compared to standard of care. I cannot preempt our disclosures, which will come when we have mature data. But what I can say is, as you know, standard of care objective response rate for this patient population is around 10-ish. So what we would like to see is something well above that.

And this is also what our data shows us. We also want to see duration of response and also this looks clinically meaningful in the current data set, which we have. And then it's obviously also about safety. And what we see is that BNT111 as a fixed bag based on RNA lipoplex technology is -- has a very manageable safety profile -- and in combination with Cemiplimab, we don't see anything which is surprising.

So there is no additive toxicity or so, which for us means that the clinical profile looks very promising for this patient population.

[Operator]

We will now take the next question from the line of Jessica Fye from JPMorgan Chase.

[Jessica Fye, analyst]

It looks like the 1 top line guidance reflects a different expectation for 2024 community sales than what Pfizer's guidance would imply. What gives you confidence in achieving this result. And to the extent that part of the delta is driven by German pandemic preparedness contract, which I believe falls outside the collaboration. Can you quantify what that is contributing to the guidance?

[Jens Holstein, executive]

Yes, let me start and maybe Ryan want to jump in. So I think we are very much aligned with Pfizer in terms of our expectations. We should keep in mind that Pfizer has reiterated its guidance. We did the same today. You should be aware that and take into account that we have a contract, together with the European Union, they have approval in the U.K.

So I think for Europe, this gives us some comfort in terms of how the full year should look like. Of course, there's always some insecurity in that respect. But in that sense, we feel good about it. And in terms of the pandemic patens contract, we have confidentiality with the German government, so we are a bit limited and really stating here some numbers.

But you should expect that there is a significant amount of money being part of what we have reported in the first half. So we have reported outside of if you look into the documents, EUR 120 million. So a big chunk of that in the first half comes from that endemic compares contract.

[Operator]

We will now take the next question from the line of Cory Kasimov from Evercore ISI.

[Unknown Analyst]

So regarding the upcoming data at ESMO for BNT327 and VEGF-R-mutated non-small cell lung cancer, there's obviously been a lot of attention of late on the competitive PD-1 VEGF bispecific that's out there. I'm curious like kind of based on what you know about that compound and the data presented to date, how similar or different do you expect your approach to be? And how confident are you in having competitive data in this population.

[Ugur Sahin, executive]

Yes. Thank you for the question. I can keep it short. I think the data that we are going to present will be competitive. And as you know, the asset that BNT327 is now a molecule that is kind in a valuation not indication at BioNTech and our collaboration partner, Biotheus, and we will see additional studies to be announced end of this year, beginning next year.

[Operator]

We will now take the next question from the line of Chris Shibutani from Goldman Sachs.

[Chris Shibutani, analyst]

Yes. If I could just follow up on the BNT327. Noting from Slide 10, it appears from the change in your pipeline plan are some additional trials there, which seem to signal that BioNTech is quite enthusiastic in that regard. I think it would be helpful, the investor community was certainly attentive during ASCO to understand how your approach may differ from that of a competitor Therapeutics?

And in particular, can I ask you, are you looking to do any head-to-head trial involving KEYTRUDA. How are you thinking about sort of clinical development strategy that we can understand to be differentiated?

[Özlem Türeci, executive]

Thank you for this question, Chris. We cannot comment on the strategy of others. But what we can say is that -- we think that the BNT327 and this concept is highly compelling and qualifies as an IO backbone for various combinations. And our approach here is to be broad with regard to the indications, which we will pursue also in potentially registrational trials. .

We are well poised for that because our partner, Biotheus has already brought a multi indication program ongoing with a number of signal-seeking cohorts in various indications with various standard of care regimen so that we have a wealth of data already and can pick the indications and expand that as mature. And another dimension of diversification is that we see BNT327 as a backbone for many of our pipeline assets, our wholly owned ones, but also those we have partnered because it has such a permissive synergistic 1 mode of action.

[Ugur Sahin, executive]

Yes, regarding -- so we are seeing, of course, data from now a number of indications coming in and continue to mature. And we have seen for data for which, for example, a historical benchmark data are available for, for example, into the negative breast cancer and the extent of clinical benefit that we have seen BNT327 is really encouraging. And for any indication in which pembro is approved as a backbone. Our plan would be, of course, of course, to compare seat of 3 to 7 plus against the counterpart standard of year and more, we would compare against time.

[Operator]

We will now take the next question from the line of Terence Flynn from Morgan Stanley.

[Unknown Analyst]

This is Chris on for Terence. We have 2 part question on BNT122 in colorectal cancer. You guided data by the end of 2025 or early 2026. But is there a potential for an interim analysis that would allow you to look at the data earlier? And then second, what will you and your partner Roche need to see in this trial in order to advance it into Phase III?

[Ugur Sahin, executive]

Yes, we have hinted to the potential analysis in end of 2025. As you know, the study endpoint is disease to survival in this indication and the general principle that we expect from cancer vaccines is that metastatic tumor service, which are present after 3 could be removed by inducing a T service point. The indication that we have chosen is a ctDNA positive indication that means based on the -- on published data.

And we know that this patient population who are ctDNA positive after thirdly, with the Stage 2, Stage 3 colorectal cancer have a in the range of 10 to 12 months. And after chemotherapy, the PFS or is more around 5 medium PFS is there to 8 months. So that means at that time point, we would expect that at least part of the data would be matured.

And then based on the results, yes, it will depend how the results are and better additional studies would be required at the time point of whether the data would be sufficient to continue and request potential regulatory steps.

[Operator]

We will now take the next question from the line of Simon Baker from Reborn Atlantic.

[Simon Baker, analyst]

It's a question on iNeST capacity. I wonder if you can give us an idea of the capacity of the mine facility will give you in 2027? And also, you mentioned the ability to reduce the bottlenecks in vein-to-vein time. I wonder if you could give us an idea of where they stand and where this could currently go to?

And just related to this, based on your comments on 122, is it right to assume that completion of that facility is rather 122 approval is not contingent on completion of that facility.

[Ugur Sahin, executive]

Yes. So at the moment, we can't comment on the capacity of the facility that is being built because we are still in process further product improvements increasing the overall capacity so reliable numbers will be available end of 2025 for the capacity. But the facility has been built with the idea that it could act is a pilot facility.

If 1 of the personalized vaccine product is approved at the time point -- so this is -- this is ongoing work. And parlor building this facility, which is intended to act as a potential pilot facility. We are expanding currently our clinical tire capacity to ensure that we can start additional time in 2025 and later on.

[Ryan Richardson, executive]

And then I think there's -- Simon, you asked about bottlenecks in terms of being than time.

[Simon Baker, analyst]

Yes, please.

[Jens Holstein, executive]

Bottlenecks.

[Ugur Sahin, executive]

Yes. So this is, of course, a completely new process manufacturing a vaccine in real time. And you can imagine and that every step must be validated. So this is the -- we have established personalized manufacturing of mRNA vaccine for the first time in 2014. Since then there have been 2 additional innovation cycles. We have recently implemented additional change in their manufacturing and further reducing turnaround plan, but still manufacturing where use of such a vaccine comes with multiple these tests for the individual better. .

So we are working on making the steps more robust, reducing the cost. And this will become more or less also the value driver of the support being able to reduce the cost substantially and thereby allowing that this is and affordable pool be available for that population of patients.

[Operator]

We will now take the next question -- from the line of Eliana Merle from UBS.

[Eliana Merle, analyst]

Your slides mentioned starting the first novel combo trials at oncology this year. I guess just a strategic question in terms of your oncology combination strategy, given the breadth of your portfolio, I guess, what are the programs that you are most excited about or prioritizing for combinations.

[Özlem Türeci, executive]

Thank you for the question, Eliana. We are, in principle, very excited about the IO ADC combination concept because we expect and also our preclinical data supports is that this is highly synergistic. And as you pointed out, we have started our first trial, which is the first of a series, you will see where we used the BNT327 as IO backbone, which in the first trial, is combined with our top 2 ADC from our partnership with duality in multiple solid cancers.

And this will be extended to additional ADCs from our pipeline to be combined with BNT327. We are also very excited about a combination which is ongoing for quite some time, namely 1 of our priority assets BNT211, which is our CAR T cell in combination with our vaccine, which is designed in this case in a way that it specifically, acts on the adoptively transferred CAR T cells.

And our data, which shows that the vaccine, in fact, adds to the persistence and duration of adoptive transferred CAR T cells is getting strong and strong with data maturing.

[Operator]

We will now take the next question from the line of John Newman from Canaccord Genuity.

[Unknown Analyst]

You're obviously in the midst of very active development for BNT327. I'm wondering specifically for the trials where you're combining with BNT325, your TROP2-ADC, do you see the potential down the road for accelerated approval in some of those indications?

[Ugur Sahin, executive]

I think this is too early to say.

[Operator]

We will now take the next question from the line of a from Deutsche Bank. .

[Unknown Analyst]

Again, on BNT327, I just wanted to understand how you're thinking about the clinical trial design. Are you hoping or aiming to study, mainly PD-L1 positive populations? Or are you going to keep that open and see what the data looks like.

[Ugur Sahin, executive]

Yes. See, this is a great question. Let me share our view. So the introduction of anti-PD-1 treatments led to the division of patient population PDL1 high, PDL1 low and PDL1 negative population. The exciting observation that we made now in 2 indications is that the combination of chemotherapy plus BNT327 appears to be effective in a highly clinically a meaningful manner also under PD-L1 negative population.

And this really provides the great opportunity. So we believe that BNT327 is not only something which is -- which could be better than existing PD-1 treatment. But we see the chance that we overcome the current classification of the patients into PTL-1 negative PD-L1 positive patient competition. This is exciting. And by this, of course, the patient populations would dramatically increase and clinical trials could be done in a much easier way and standard of care could become easier manageable based on treatment combinations that are independent of PD-L1 daily.

[Operator]

This is all the time we have for questions today. I would like to hand back over to the speakers.

[Ryan Richardson, executive]

Yes. Thank you very much for joining us today. .

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.