AstraZeneca PLC (AZN) and BioNTech SE (BNTX) are two prominent biotechnology companies that have been actively engaged in manufacturing COVID-19 vaccines since the pandemic. Based in Cambridge, U.K., AZN focuses on discovering, developing, and commercializing prescription medicines in oncology, cardiovascular, renal and metabolism, respiratory, infection, neuroscience, and autoimmunity worldwide. In comparison, Germany-based BNTX develops and commercializes patient-specific immunotherapies for cancer and other infectious diseases using different scientific approaches and technology platforms. It also offers diagnostic products and drug discovery services for other therapeutic areas.
Substantial government investments and private funding enabled biotech companies to develop an effective COVID-19 vaccine in late 2020. Regulatory approvals for emergency use and pre-signed supply agreements allowed these companies to distribute their vaccines globally, thereby raking in substantial profits. As new coronavirus variants are emerging, the need for a third dose of vaccine or booster shot and vaccine mandates for children above five years should allow COVID-19 vaccine makers to witness a substantial rise in their profit margins. The global vaccines market is expected to grow at 10.7% CAGR and reach $104.87 billion by 2027. So, both AZN and BNTX are expected to benefit over the long run.
While AZN lost 2.8% over the past six months, BNTX has surged 15.2%. BNTX is a clear winner with 136.1% gains versus AZN’s 17.2% in terms of the past nine month’s performance. But which of these stocks is a better pick now? Let us find out.
Latest Developments
After a detailed study, the University of Oxford announced on December 23, 2021, that AZN’s Vaxzevria has shown to have significantly boosted levels of antibodies against the Omicron SARS-CoV-2 variant, following its third dose booster. The levels seen after the third dose booster were higher than the neutralizing antibodies found in individuals who had been previously infected with and recovered naturally from COVID-19. Two doses of Vaxzevria have been associated with protection against the Delta variant in real-world studies. This study is expected to help Vaxzevria witness high demand in the coming months.
On December 9, 2021, the U.S. Food and Drug Administration (FDA) had expanded the Emergency Use Authorization (EUA) of a booster dose of the BNTX and Pfizer Inc.’s (PFE) Pfizer-BioNTech COVID-19 vaccine among individuals of 16 years of age and older. Against the background of the newly-emerging variants such as Omicron, the booster vaccination has enabled immunity to increase and improve protection against COVID-19 in all age groups studied so far. This EUA is a critical milestone for PFE and BNTX.
Recent Financial Results
AZN’s total revenue for its fiscal 2021 third quarter, ended September 30, 2021, increased 50% year-over-year to $9.87 billion. The company’s gross profit came in at $6.11 billion, representing a 17.3% year-over-year improvement. Its operating loss came in at $1.67 billion for the quarter, compared to an operating profit of $1.17 billion in the prior-year period. AZN’s net loss came in at $1.65 billion, versus a $651 million net profit in the year-ago period. Its loss per share came in at $1.10, compared to an EPS of $0.49 in the prior-year period. The company had $7.07 billion in cash and cash equivalents as of September 30, 2021.
For its fiscal 2021 third quarter, ended September 30, 2021, BNTX’s total revenue increased 23.7% year-over-year to €6.09 billion ($6.90 billion). The company’s operating income came in at €4.72 billion ($5.36 billion), compared to an operating loss of €186.40 million ($211.38 million) in the prior-year period. Its net income came in at €3.21 billion ($3.64 billion) for the quarter, versus €210 million ($238.14 million) in the year-ago period. Its EPS came in at €12.35, compared to a loss of €0.88 in the prior-year period. The company had €2.39 billion ($2.71 billion) in cash and equivalents as of September 30, 2021.
Expected Financial Performance
Analysts expect AZN’s EPS to increase 60.2% year-over-year for the fiscal year 2021 and 20.8% next year. Its revenue is expected to grow 36.4% year-over-year for fiscal 2021 and 18.9% in 2022.
In comparison, BNTX’s EPS is expected to grow 59300% year-over-year in the fiscal year 2021 but fall 4.4% next year. The company’s revenue is expected to increase 3232.5% year-over-year in fiscal 2021 but decline 4.5% in 2022.
Valuation
In terms of forward EV/Sales, BNTX is currently trading at 3.04x, which is 91.1% higher than AZN’s 5.81x. In terms of non-GAAP forward PEG, BNTX’s 0.02x compares with AZN’s 0.78x.
Profitability
AZN’s trailing-12-month revenue is almost 2.1 times BNTX’s. However, BNTX is more profitable, with a 74.7% EBITDA margin versus AZN’s 19.3%.
Furthermore, BNTX’s ROE, ROA, and ROTC of 155.5%, 81.6%, and 126.9% compare with AZN’s 5.5%, 2.4%, and 3.6%, respectively.
POWR Ratings
While BNTX has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, AZN has an overall C grade, equating to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
Both AZN and BNTX have a B grade for Growth, which is consistent with their impressive growth over the past year. AZN’s revenue increased 26.8% year-over-year, while BNTX’s revenue grew 8263% during the period.
BNTX has a B grade for Value, which is in sync with its lower-than-industry valuations. BNTX has a 3.85 forward EV/EBITDA ratio, 76.2% lower than the 16.18x industry average. AZN’s C grade for Value reflects its slightly higher-than-industry valuation ratios. AZN’s 19.45 forward EV/EBITDA multiple is 20.3% higher than the 16.18x industry average.
Of 468 stocks in the Biotech industry, BNTX is ranked #17. AZN is ranked #38 of 189 stocks in the Medical - Pharmaceuticals industry.
Beyond what we have stated above, our POWR Ratings system has also rated AZN and BNTX for Quality, Momentum, Stability, and Sentiment. Get all AZN ratings here. Also, click here to see the additional POWR Ratings for BNTX.
The Winner
As new variants of coronavirus become a cause for concern for nations worldwide, vaccine mandates are expected to become stringent. With high demand and growing investments in the biotech and pharmaceutical industries, AZN and BNTX are well-positioned to benefit from these tailwinds. However, we think relatively lower valuations and higher profit margins make BNTX a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Biotech industry, and here for those in the Medical - Pharmaceuticals industry.
AZN shares were unchanged in after-hours trading Monday. Year-to-date, AZN has gained 19.78%, versus a 29.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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