The Pandemic as an Opportunity

mRNA Technology of the Future

Even before the Covid-19 pandemic, the novel mRNA technology had been considered a great hope for the pharmaceutical industry. Since some time, companies like Moderna (USA), BioNTech and CureVac (both Germany) have been involved in mRNA research, focusing particularly on immune therapies against cancer, but also on the development of vaccines. Observers speak of a potential "therapeutic revolution." According to Moderna, mRNA "could be used to create a new category of medicines with significant potential."[1] Investors became interested. When Moderna landed the biotech sector's largest IPO to date in late 2018 - the company generated a market capitalization of $7.6 billion - it attracted significant attention beyond this industrial branch. In Germany, CureVac was financed by SAP founder Dietmar Hopp and BioNTech by former Hexal owners Thomas and Andreas Strüngmann. In the fall of 2019, BioNTech went public in the USA, where it was valued at $3.5 billion - significantly less than Moderna, but still more than most other German biotech companies.[2]

"System-Relevant Industries"

The major breakthrough for mRNA technology has been achieved in the struggle against the Covid-19 pandemic. With substantial government support - which was needed to ensure success as fast as possible - BioNTech, CureVac and Moderna managed to develop highly effective vaccines. BioNTech and Moderna have long since been used for inoculations. CureVac's approval is expected by June. Last year, the German government pledged €375 million in funding to BioNTech and €252 million to CureVac. In June 2020, the government owned German Development Bank (KfW) acquired roughly 23 percent of CureVac's shares for about €300 million - reportedly to forestall a possible U.S. takeover. In the meantime, the German government has reiterated that KfW's investment in CureVac was "based on economic and health policy interests," not "limited" to the procurement of vaccines. Its aim was to "strengthen system-relevant industries, such as those in the field of medical biotechnology in Germany."[3] With success: in terms of mRNA, Germany is "one of the world's centers of gravity," Peter Albiez, Managing Director at the pharmaceutical giant Pfizer Germany, is quoted to have said.[4]

The Covid Business

BioNTech is using the pandemic to reinforce its position on the market. Whereas AstraZeneca and Johnson & Johnson have committed themselves to selling their vaccines at cost prices - at least for the duration of the acute phase of the pandemic - BioNTech and Pfizer, its US cooperating partner company, are reaping profits with their vaccine. Yesterday, BioNTech raised its 2021 sales forecast from around €10 - €12.4 billion, and is not ruling out a further hike due to new contracts for vaccine supplies. In 2020, its annual sales reached only €28 million. In the first quarter of 2021 alone, BioNTech could reap a net profit of €1.13 billion on €2.05 billion in sales. The annual net profit is currently estimated to be "at least six to seven billion euros." This would make BioNTech the "most profitable German pharmaceutical enterprise." A specialized-journalist noted that for the period following 2021, "high sales from the Covid-19 business are already mapped out." "The Covid business will provide the company located in Mainz, an enormous backup for years to come" - and not least of all "for its expansion."[5]

Vaccine Monopolist

BioNTech also owes its booming business to the German government, which, already during the development phase, had pressured the EU Commission to order 200 million doses of the vaccine. Then, following several subsequent orders, the EU placed a bulk order of 900 million vaccine doses, plus an option for an additional 900 million with the German manufacturer. The doses are supposed to be delivered by 2023. Given that the EU, in fact, relies on a single producer - making it therefore a monopolist - had even raised eyebrows with some of Germany's business commentators. It also provoked dissention within the EU. According to reports, France had sought to limit the orders.[6] Observers attribute this attempt to the fact that the French biotech company, Valneva, whose vaccines were supposed to be approved in the fall, did not have a chance, and that the German manufacturer was awarded the entire order. That is all the more strange, because the BioNTech vaccine is the most expensive, meaning that now the poorer EU members in East and Southeast Europe have to pay a multiple in costs to Germany. The retail price for each of the 1.8 billion doses is at €19.50 - up from the previously €15.50 - and six to seven times the price of other vaccines.

Germany, the mRNA Center

BioNTech is using its Corona profits for expansion. Thanks to the profits, there is "an enormous potential for expanding our pipeline in the sector of contagious diseases and oncology and even beyond, to access new areas of therapy," declared the company CEO Uğur Şahin.[7] Foreign production sites will also be expanded. Still this year, BioNTech seeks to open a subsidiary in Singapore, initially, for the production of vaccines.[8] Berlin is simultaneously working on laying a broad foundation for the entire mRNA sector in Germany. In late April, Germany's Minister of Health Jens Spahn announced that, over the next few years, Germany should be developed into a global mRNA research and production center. This pertains not only to giants of the sector, such as BioNTech and CureVac, but also for diverse suppliers. Berlin will promote smaller "hubs" as well - even after the pandemic is over - and will invest heavily in the "mRNA Center Germany."[9]

"Protect Head Start"

MRNA Center Germany benefits from the fact that, for the time being, Chinese pharmaceutical companies had placed their development of mRNA vaccines on the back burner, prioritizing conventional technologies. The first Chinese mRNA vaccine reaches its third test phase only in May. The German branch, on a par with the US American sector, still has a head start. To not jeopardize that head start, the German government is blocking the waiver of vaccine patents. If "uncontrolled production sites should spring up" now, "the rivals, Russia and China would have access to the methods," it was explained. Thus "the western companies could lose a large portion of their head start."[10] Therefore, during the last EU Summit at the end of last week, Chancellor Angela Merkel prevailed in blocking patent waivers - to the benefit of mRNA Center Germany.

For more information on this topic: Global Vaccine Rivalries.

[1] Siegfried Hofmann: Die RNA-Revolution - Biotech-Firmen wetteifern um die Medikamente der Zukunft. handelsblatt.com 07.12.2018.

[2] Siegfried Hofmann: Der Börsengang der Mainzer Biontech bringt die Rangordnung der deutschen Biotech-Branche durcheinander. handelsblatt.com 10.10.2019.

[3] Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Reinhard Houben, Manfred Todtenhausen, Michael Theurer, weiterer Abgeordneter und der Fraktion der FDP. Deutscher Bundestag, Drucksache 19/26753. Berlin, 04.03.2021.

[4] Maike Telgheder: "Eine Impfstoffrevolution": mRNA-Technologie hilft dem Pharmastandort Deutschland. handelsblatt.com 20.04.2021.

[5] Siegfried Hofmann: Impfstoff-Boom: Biontech steuert auf Jahresgewinn von mehr als sechs Milliarden Euro zu. handelsblatt.com 10.05.2021.

[6] Tobias Kaiser, Christoph B. Schiltz: Frankreich blockiert neue Impfstoff-Bestellung der EU. welt.de 07.05.2021.

[7] Siegfried Hofmann: Impfstoff-Boom: Biontech steuert auf Jahresgewinn von mehr als sechs Milliarden Euro zu. handelsblatt.com 10.05.2021.

[8] Siegfried Hofmann: Biontech baut mRNA-Produktionsstätte in Singapur. handelsblatt.com 10.05.2021.

[9] Daniela Hüttemann: Deutschland soll mRNA für die ganze Welt produzieren. pharmazeutische-zeitung.de 30.04.2021.

[10] Bert Fröndhoff, Jan Dirk Herbermann, Christoph Herwartz, Jan Hildebrand, Jürgen Klöckner, Moritz Koch: Warum die EU das Biontech-Patent nicht einfach freigibt. handelsblatt.com 06.05.2021.