Who’s Made Bank on BioNTech?

These funds made the biggest bets on the Covid-19 vaccine maker, and boy has it paid off

Sunniva Kolostyak 9 December, 2021 | 5:48AM
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There are a couple of bets we all wish we made this year. Wouldn’t it have been great to get in on the GameStop rally and sell at the top? On the less risky side, however, several stocks have had an amazing year. We are taking a look at them to see why 2021 was in their favour, and, moreover, which funds were savvy enough to cash in.

We are kicking off this miniseries of articles with BioNTech (BNTX). The German biotechnology company has had the biggest growth of any of the stocks under Morningstar coverage this year. Founded in 2008 and floated in 2019, it is up an extraordinary 243.27% so far this year. According to our fair value estimate, the stock is trading at a 58% premium, meaning it has a Morningstar Star Rating of 2.

What is BioNTech?

BioNTech has been a difficult company to overlook this past year. Indeed, it is one of the key names in the Covid-19 vaccination rollout following its partnership with Pfizer. The German company started as a specialist in mRNA biotechnology, mainly developing personalised cancer treatments, and has since expanded into various drug classes. That includes a burgeoning vaccine pipeline for infectious diseases like HIV and tuberculosis.

Meanwhile, its coronavirus programme, BioNTech’s first commercial vaccine (known as Comirnaty), was developed off the back of an existing partnership with Pfizer (PFE) for an influenza vaccine - and you can read more about why we think Pfizer, unlike BioNTech, has a wide economic moat. The company also has standing partnerships with several other pharmaceuticals like Roche, Eli Lilly, Sanofi and Genmab.

According to Morningstar’s sector strategist Karen Andersen, the vaccine's excellent efficacy, strong supply, and early leadership on the market all support $35 billion in Comirnaty sales in 2021 and $43 billion in 2022. BioNTech books half of Pfizer's gross profits, profit share from other smaller partners, and direct sales in Germany and Turkey.

Omicron’s Impact

The long-term market for coronavirus vaccines is uncertain, though even if there is demand for continued vaccination in the long run, Morningstar expects the market to be competitive.

This comes despite concerns around the new omicron variant and speculations around vaccine efficacy. As a result, we have not changed our fair value estimate for BioNTech or other Covid-19 vaccine producers--and current valuations already include booster jab considerations. BioNTech has said we should know more about the efficacy of existing vaccines against omicron in a couple of weeks, following completion of some lab tests. If a new vaccine is needed, it should take about another six months to develop.

Andersen says: “While Pfizer's broad biopharma portfolio continues to support a wide moat, we think Moderna and BioNTech are still in the process of building sustainable competitive advantages, given the uncertainty around the future spread of Covid-19, the applicability of mRNA technology to other vaccines and treatments, and defence against similar or improved competing technologies.”

Who Bet on BioNTech in Time?

Some interesting funds made big bets on BioNTech. For example, the Bill & Melinda Gates Foundation chose to allocate 33.68% of its assets to the company--approximately one million shares. The foundation is also working in partnership with BioNTech to develop several of the vaccines currently in its pipeline.

This is still some way off the biggest holdings. Among funds, the Vanguard Capital Opportunity Fund holds the highest number of shares (2.2 million), but this is only 2.30% of its entire portfolio. A couple of other US funds have similar setups: PrimeCap Odyssey Aggressive Growth Fund has allocated 3.96% of its portfolio to 1.64 million shares, and American Funds Europacific Growth has 0.23% allocated to 1.57 million shares.

Among UK-domiciled funds, Baillie Gifford Long Term Global Growth Investment has made the biggest bet. It gives BioNTech a portfolio weighting of 2.64% or half a million shares.

Surprisingly, however, BioNTech is not even in its top five stocks, where instead we find Moderna at the top, followed by Amazon (AMZN), Tesla (TSLA), Nvidia (NVDA) and Meituan (3690). Healthcare accounts for 20.92% of the fund, which is more than the category average of about 16%.

And speaking of category average, the Baillie Gifford fund has significantly outperformed the category and the index since the beginning of the pandemic. According to Morningstar data, it purchased its first BioNTech stocks in January 2020, when the share price was almost a tenth of what it trades at today. Its year-to-date return is 11.75% while its 3-year annualised return is 38.81%.

Four more UK funds are also invested in the company, but not nearly to the same degree--all have allocated less than 0.4% to BioNTech.

Elsewhere in Europe, German fund DWS Aktien Strategie Deutschland holds 1.2% of its assets in BioNTech, while the stock accounts for 2.85% of Candriam Equities L Biotechnology, a fund domiciled in Luxembourg. Among smaller funds, a few European strategies have allocated up to 7.45%. These usually have a small-cap or a biotech focus.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Sunniva Kolostyak

Sunniva Kolostyak  is data journalist for Morningstar.co.uk

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