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AstraZeneca, BioNTech and Novavax look to expand pipelines

The biotech investment theme has retreated in 2022 as demand for Covid-19 vaccine makers BioNTech [BNTX], Novavax [NVAX] and AstraZeneca [AZN.L] wanes. While the pullback was evident across their earnings, each company managed to beat some analyst estimates.

German biotech firm BioNTech was the first out of the group to report earnings this week. It posted net profit of €1.8bn on revenues of €3.5bn for the three months to 30 September, down from €3.2bn and €6.1bn year-over-year respectively. FactSet data shows that its earnings of €6.98 beat analyst estimates, with overall losses narrower than anticipated. The earnings beat sent shares up 4% on 7 November.

Novavax’s results were also mixed. It announced a net loss of over $169m for the third quarter, though this was less than the loss of $322m during the same period in 2021. Revenue of $735m was up 310% year-over-year, beating market expectations and sending the stock up 1.1% on 9 November. However, an earnings loss of $2.15 missed analyst estimates, reported Simply Wall St.

It was better news for AstraZeneca, with earnings of $1.67, up 55% from the prior-year figure, beating analyst forecasts of $1.52, according to Morningstar. Despite revenue jumping to $11bn in Q3 and beating analysts' expectations of $10.84bn. shares in the company opened lower following the announcement on 10 November. 

Pandemic boost over?

The strong momentum experienced during the pandemic for vaccine technology is dwindling, but other areas of study appear to be compensating for the dip in sales — for some, at least.

As predicted, AstraZeneca reported a decline in revenue for its vaccine to $180m, a hefty drop from $1.05bn year-over-year. However, revenue in its oncology segment saw an uptick of 24% in the first nine months of 2022 and oncology product sales were also up 20%.

The company said it was on track to increase revenue by more than 20% this year and raised its outlook on core earnings per share. Its acquisition of Alexion Pharmaceuticals last year supported its growth.

On the other hand, BioNTech raised its forecasted revenues for its Covid-19 vaccine to the higher end of previous predictions at €16bn—17bn, thanks to increased shipments of its Omicron-adapted vaccine boosters. CEO Ugur Sahin said it had delivered variant vaccines at “unprecedented speed”.

While Novavax revised its full-year revenue guidance to the bottom end of previous forecasts at $2bn, it sees demand for its Covid-19 booster, which is licensed for emergency use in the US, EU and other regions. CEO Stanley Erck said its Q3 progress was down to successful vaccine expansion as the company “achieved policy recommendations globally and expanded our body of clinical evidence supporting the differentiated benefit of our vaccine technology”.

Expanding development pipelines

The key to keeping demand up for biotech companies is likely to be new products and research in other disease areas, beyond Covid-19 vaccines.

For example, AstraZeneca reported a rise in sales of its lung-cancer treatment Tagrisso, ovarian-cancer drug Lynparza and liver-cancer treatment Imfinzi.

BioNTech said that it was planning to expand its research into infectious diseases in 2023. It will also have 10 clinical oncology trials due by then.

In its earnings call, Novavax highlighted pipeline candidates for malaria, as well as a combined Covid-19 and flu jab.

However, Covid-19 boosters will still provide revenues for biotech firms for the foreseeable future. Novavax highlighted the market for adolescents still to have jabs, with “48% yet to complete primary vaccinations”, John Trizzino, CCO of the company said during the earnings call.

Funds in focus: ProShares Ultra Nasdaq Biotechnology ETF

Out of all the funds with holdings in Novavax, AstraZeneca and BioNTech, ETF.com data shows that the ProShares Ultra Nasdaq Biotechnology ETF [BIB] is the best performing. The fund is up 24% in the past month but has fallen 26.6% year to date. 

Among 31 funds that offer exposure to BioNTech, the fund with the largest allocation to the stock is ETFMG Treatments Testing and Advancements ETF [GERM] at 6%. It also has a 1.89% weighting in Novavax. Year-to-date, the fund, which also holds Moderna [MRNA] stock, is down 32.9%.

The ETF with the biggest exposure to AstraZeneca out of 57 funds is the VanEck Pharmaceutical ETF [PPH], where it has a weighting of 4.8%. The fund is down a relatively modest 2.6% in 2022.

Of the 62 funds with exposure to Novavax shares, the ProShares Nanotechnology ETF [TINY] has the largest with a 1.89% weighting. The fund has tumbled by around 29.8% since the start of this year.

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