BioNTech - Q2 2023

Transcript

Operator (participant)

Welcome to BioNTech's second quarter 2023 update 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 (VP of Strategy and Investor Relations)

Thank you. Good morning and afternoon. Thank you for joining us today for BioNTech's second quarter 2023 earnings call. As a brief reminder, the slides that accompany this call and the second quarter 2023 press release that was issued this morning can be found in the investor section of our website. As outlined on slide two, you can see our forward-looking statements disclaimer. Additional information about these statements and other risks are described in our filings made with the US Securities and Exchange Commission.

Forward-looking statements on the call are subject to substantial risks and uncertainties. Speak only as of the call's original date, we undertake no obligation to update or revise any of these statements. On slide three, you can find the agenda for today's call.

Today, I'm joined by the following members of BioNTech's management team: Our CEO and Co-founder, Uğur Şahin, Özlem Türeci, our Chief Medical Officer and Co-founder, Jens Holstein, our Chief Financial Officer, and Ryan Richardson, our Chief Strategy Officer. I would like to turn the call over to Uğur Şahin.

Uğur Şahin (CEO and Co-Founder)

Thank you, Victoria. A warm welcome to all the call participants. We appreciate your continued support. Today, I will summarize our second quarter 2023 highlights and priorities before I pass the call over to my team to provide some further details. Slide five. Let me start reiterating our 2023 strategic priorities that we set at the beginning of the year and highlight our recent progress executing against them.

We pursue our priority to expand and sustain our COVID-19 leadership with Pfizer by advancing our next generation and combination vaccine candidates and by advancing key Comirnaty features. During this quarter, we received recommendations from regulatory authorities and the World Health Organization on the composition of the adapted COVID-19 vaccine for the 2023/2024 fall season.

Based on these recommendations, we, together with our partner, Pfizer, have submitted regulatory packages for an Omicron XBB.1.5-adapted monovalent COVID-19 vaccine to the US, FDA, EMA, and other regulatory agencies. We have also kicked off commercial launch activities for the Omicron XBB.1.5-adapted monovalent COVID-19 vaccine. Our second 2023 strategic priority is to accelerate our oncology pipeline and initiate multiple trials with registrational potential.

Our new collaborations with DualityBio and OncoC4 complement our pipeline with multiple mid- to late-stage clinical programs that will help us to achieve this goal in the near term. In the second quarter at ASCO annual meeting, we and our respective collaboration partners presented three new clinical data sets that Özlem will cover later.

Jointly with our partner, OncoC4, we began a pivotal phase III trial evaluating the next generation anti-CTLA-4 antibody candidate, BNT316, gotistobart, as a second-line treatment for patients with non-small cell lung cancer. Our third strategic goal is to initiate and accelerate clinical programs with high medical need in infectious diseases. We are expecting multiple data readouts for our mRNA-based vaccine candidates in the second half of this year.

In summary, we continued our focused execution against strategic priorities in the second quarter and look forward to additional progress in all three of these areas in the remainder of this year. Slide six. Starting with COVID-19, while variants of concern have emerged in all seasons in the past few years, we expect that in the fall and winter, in line with other common respiratory diseases such as influenza and RSV, also thus SARS-CoV-2 hospitalization will increase. Slide seven.

In 2023, four years after the start of the COVID-19 pandemic, there's a high zero prevalence in the global population as a result of vaccination and/or infection. Profiles of immune responses against SARS-CoV-2 are highly heterogeneous, as individuals have been infected with different variants and/or vaccinated using a variety of vaccine platforms. The substantial genetic and antigenic evolution of SARS-CoV-2 and its spike protein continues with divergence of the evolutionary trajectory from the original wild type virus.

Despite increasing gaps in the genomic surveillance globally, the available sequencing data indicates that the original virus and other early variants such as Alpha, Beta, Gamma, Delta, are no longer detected in humans. As of July 2023, the XBB.1 descendant lineages predominate globally, and they have further antigenic distance from previous variants.

Clinical data have shown that currently approved COVID-19 vaccines provide a level of protection against this new variant. However, with the antigenic drift of current variants of concern, signs of waning protection have been observed starting two to four months after boosters with last season's B4, B5 adapted vaccine, including against severe COVID-19. Due to the greater antigenic distance of this variant of concern and the further immune escape, absolute vaccine effectiveness against hospitalization due to COVID-19 is reduced as time passes between vaccination and subsequent infection.

In summary, this data support a roll-out of a COVID-19 vaccine adapted to the most recent variants of concern this fall. We plan to launch an Omicron XBB.1.5-adapted monovalent COVID-19 vaccine this fall, subject to approval by regulatory authorities.

Our goal is to maintain protection against severe COVID-19 disease, hospitalization, and death, by providing a vaccine that is better matched to the current circulating strains, and that is designed to be more closely aligned to the newer evolving lineages. Slide eight. Let me remind you of the core principles of our overarching strategy. We pursue a multi-technology-driven approach rooted in deep, fundamental understanding of biology and immunobiology. We leverage the power of computational science and AI.

Our acquisition of InstaDeep has expanded our capabilities in that regard. Together, we aim to become the global leader in applying cutting-edge artificial intelligence and machine learning technology and research to discover, design, and develop next-generation immunotherapies at scale. We build novel platforms with the ability to produce multiple product candidates for our clinical pipeline, including approaches that enable and accelerate individualization of treatment.

To leverage synergistic mode of action, we explore opportunities for combining modalities, both developed internally and accessed via collaboration partnerships. Last quarter, we announced that we initiated a collaboration with Duality Biologics to access two of their next-generation antibody-drug conjugates. This quarter, we and Duality shared clinical data from one of these programs and expanded our collaboration to a third encouraging program from Duality Biologics pipeline. Slide nine. ADCs consist of three main components: antibody, linker, payload.

Each of these components has an impact on ADC's pharmacological and clinical properties. ADCs are precision medicines, allowing for targeted drug delivery, particularly to tumor cells with high specificity and potently induced cell death, with the benefit of reduced off-target events. When the monoclonal antibody binds to the target expressed on the tumor cell, the ADC is internalized, allowing for the release of the cytotoxins, which leads to cell death.

We continue to broaden our access to ADCs because we believe this technology has the potential to replace highly toxic chemotherapy regimens to become a new combination backbone for cancer immunotherapy. Advancements in this technology have resulted in its extended use for the treatment of solid tumors. ADCs can also synergize with various immunotherapy modalities, including those in our current immunotherapy pipeline. Our growing ADC pipeline now includes ADCs directed against three distinct targets and is of interest for a broad range of cancer types.

In the future, we plan to combine these ADCs with our proprietary pipeline programs to maximize the patient impact of this exciting modality. With that, I would like to thank you all for your confidence in our success and your continued support. I will now turn the call over to Özlem.

Özlem Türeci (Chief Medical Officer and Co-Founder)

Thank you, Uğur. I'm delighted to speak with everyone today and to provide our pipeline update. Slide 11. Starting with our COVID-19 vaccine, we expect that as SARS-CoV-2 continues to evolve and the risk of severe COVID-19 disease and death continues, there will be persisting demand for vaccine boosting and vaccinations, especially for at-risk and immunocompromised groups. The Omicron XBB sublineages currently account for the majority of COVID-19 cases globally and are antigenically distant from prior circulating SARS-CoV-2 lineages, including Omicron BA.4/5 and the original SARS-CoV-2 strain.

Although Omicron BA.4/5 adapted bivalent vaccines provide some protection against a range of outcomes from XBB-related COVID-19, evidence suggests that vaccines better matched to currently circulating sublineages can help further improve protection against symptomatic disease and severe COVID-19. XBB lineage viruses have reduced neutralization in comparison to earlier Omicron lineages but have similar neutralization profiles to each other.

The spike sequence of XBB.1.5 and XBB.1.16 differ in only two mutations, highlighted here. In May, the EMA and other health authorities provided guidance, highlighting that updated vaccines targeting Omicron XBB.1 sub lineages may help to maintain protection against COVID-19 during the upcoming fall and winter season, when COVID-19 case rates and hospitalizations are expected to increase.

The FDA's Vaccines and Related Biological Products Advisory Committee, the VRBPAC, issued guidance recommending manufacture of an Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for the 2023 and 2024 fall and winter seasons. We and Pfizer submitted regulatory applications to the EMA and to the FDA for our Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for individuals six months of age and older.

Following guidance from regulatory authorities on the requirements for strain changes, the applications include data suggesting that Omicron XBB.1.5-adapted monovalent COVID-19 vaccine may generate improved responses against circulating XBB sub lineages, compared to the current Omicron BA.4-5-adapted bivalent COVID-19 vaccine. Moving to slide 12. We and our partner, Pfizer, tested the potential effectiveness of an Omicron XBB.1.5-adapted monovalent vaccine as a primary series and booster in mice.

Here you see the neutralizing antibody response in mice immunized with a Omicron BA.4-5-adapted bivalent vaccine as booster after two doses of the original vaccine. One group of mice, again, received the BA.4-5-adapted bivalent COVID-19 vaccine as a fourth dose, and the other group received the new XBB.1.5-adapted monovalent COVID-19 vaccine as a fourth dose.

You can see a four to five-fold increase of neutralization of several XBB-related variants when dose four is the XBB.1.5-adapted monovalent vaccine, as compared to last season's bivalent vaccine, indicating that XBB.1.5 variant-adapted monovalent vaccine in the pre-vaccinated setting, has the potential to induce broad, cross-neutralizing antibody titers against multiple XBB sublineages.

We made significant progress toward a monovalent COVID-19 vaccine against Omicron XBB.1.5 with regulatory submissions to the US FDA, EMA, and other regulatory authorities, and we are well prepared to launch an adapted COVID-19 vaccine, if approved in early fall this year. Moving to our oncology pipeline, let me put our second quarter pipeline and advancements into the broader context of our clinical stage pipeline, which is depicted on slide 13.

In the second quarter, the initiation of our pivotal phase III trial in non-small cell lung cancer, marks the first landmark in our strategic collaboration with OncoC4. The randomized phase III trial is evaluating BNT316, a pH-sensitive anti-CTLA-4 antibody with distinctive mode of action and is expected to enroll approximately 600 patients with metastatic immunotherapy-resistant non-small cell lung cancer.

The trial initiation follows the FDA Fast Track designation granted in 2022, and is based on phase I, two safety and efficacy data for the monotherapy in metastatic immune checkpoint inhibitor-resistant non-small cell lung cancer. Further, we expanded our collaboration with Duality and added a third ADC to our oncology pipeline. DB-1305 is currently in a phase I, two clinical trial for solid tumors. I have news from BNT116, our lung cancer antigen-based FixVac candidate.

A second trial with BNT116 has dosed its first patient end of July. Together with our partner, Regeneron, we will evaluate BNT116 in combination with cemiplimab versus cemiplimab monotherapy alone in treatment-naive patients with stage 3B, stage 3C, or stage 4 squamous or non-squamous, non-small cell lung cancer patients with at least 50% PD-L1 expression in a randomized, multicenter, open label, phase II study.

A phase I clinical trial is ongoing with BNT116 to evaluate the safety, tolerability, and preliminary efficacy of BNT116 alone, and in combination with cemiplimab in patients who have progressed on prior PD-1 inhibitor treatment or are not eligible for chemotherapy, and in combination with docetaxel in patients who have received prior PD-1 inhibitor therapy and platinum-based chemotherapy. We are planning to start several trials with our partners imminently.

Firstly, building on compelling phase I data in patients with resectable PDAC in the adjuvant setting that we recently reported in Nature, a phase II trial with autogene cevumeran, BNT122, our individualized cancer vaccine candidate, is planned with our partner, Genentech, evaluating the efficacy and safety of autogene cevumeran in combination with atezolizumab and modified FOLFIRINOX, compared to modified FOLFIRINOX as standard of care alone.

Second, another trial is planned to start with our second ADC developed by DualityBio. BNT324 is a humanized antibody conjugated to a novel DNA topoisomerase I inhibitor via a cleavable linker. The phase I part of the study will evaluate the safety in all comers and determine the recommended phase II dose.

In the phase II dose expansion part, we aim to evaluate safety and efficacy in small cell and non-small cell lung cancer, esophageal cancer, prostate cancer, melanoma, and other solid tumors. On the next couple of slides, I want to summarize the recently presented data from three of our programs at the ASCO annual meeting. On slide 14, starting with BNT316 ONC-392. Antibody targeting of CTLA-4 works primarily by depleting regulatory T-cells, thus their suppression of tumor-specific immunity. Physiologically, CTLA-4 recycles continuously between the cell surface and the endosome.

Interruption of this process by a binding antibody is associated with the development of autoimmunity. Autoimmunity and immune-related adverse events are a major limitation of approved anti-CTLA-4 antibodies that disrupt CTLA-4 recycling by promoting lysosomal degradation of this important immune checkpoint molecule.

BNT316, in contrast, dissociates from the CTLA-4 molecule in the endosome, allows normal recycling of both the antibody and the CTLA-4 molecule, and thus is designed for stronger cancer therapeutic effects and less immune-related adverse effects. Preliminary data showed that BNT316 is well tolerated with no dose-limiting toxicities. The single agent, recommended phase II dose was determined to be 10 mg per kg without MTD being reached.

Severe immune-related grade 3 adverse event rate in the combo dose escalation with pembrolizumab was 23%, which is considered lower than what was reported for comparable IO/IO combinations. The recommended phase II dose for combination is 6 mg per kg. Overall, BNT316, dosed as monotherapy and in combination, was well tolerated, and the safety profile appears to allow higher dosing for a longer duration of treatment as compared, for example, to ipilimumab.

Early efficacy data as monotherapy in platinum-resistant ovarian cancer patients and in combination with pembrolizumab in multiple solid tumors were promising. Slide 15, with our colleagues from OncoC4, we presented data from the phase I/2 study investigating BNT316 in 35 non-small cell lung cancer patients with metastatic lesions that progressed on immune checkpoint inhibition in previous lines. The majority of patients had an ECOG status of 1. The objective response rate was about 30%, and disease control rate was 70%.

Patients that responded to BNT316 had previously failed multiple lines of treatment, including several immune checkpoint inhibitors. In this cohort, BNT316 has shown manageable safety and tolerability when dosed at 10 mg per kg twice and followed with 6 mg per kg every three weeks.

Immune-related adverse events of grade 3/4 were observed in 34% of patients and included immune-mediated colitis, ALT/AST increase, and immune hepatitis. Our findings support the further development of BNT316 in non-small cell lung cancer in the phase III study, PRESERVE-003. Slide 16. Our second presentation at ASCO was together with our colleagues from DualityBio, and about our first clinical data for BNT323, our next generation HER2-targeting ADC. BNT323 is comprised of a HER2-targeting antibody covalently linked to the proprietary DNA topoisomerase I inhibitor via a cleavable linker.

Approved ADCs have shown anti-tumor activity and clinical benefits in multiple types of cancer, and we believe that midterm ADCs as a modality will become a broadly used backbone for combos in oncology. More efficacious and safer anti-HER2 ADCs, for example, regarding potential lung toxicity, may add further clinical benefit.

Preclinical data for BNT 323 described a significantly improved therapeutic window as compared to DS-8201a or T-DM1 analogs to the approved HER2 ADCs, trastuzumab deruxtecan and trastuzumab emtansine, respectively. BNT 323 has a high drug to antibody ratio, and when incubated with rat, monkey, and human plasma, demonstrated outstanding plasma stability. In HER2 positive and HER2 negative mixed cell cultures, BNT 323 inhibited the proliferation of both cell types, demonstrating its bystander effect.

Pharmacokinetic and pharmacodynamic analysis of BNT 323 in xenograft mouse models showed targeted delivery of the toxin into tumor tissue. In vivo studies in monkeys showed a superior stability of BNT 323 and rapid systemic clearance of the toxin. Altogether, these properties result in maintenance of efficacy and reduction of systemic toxicity in animal models. Slide 17.

The program has received Fast Track designation from the FDA and is being evaluated in a phase I, two clinical trial. The study is enrolling pre-treated patients with advanced or metastatic HER2-targetable solid tumors. HER2 status is identified via IHC or ISH for expression level, via NGS for HER2 amplification or HER2 mutation. The majority of patients had a HER2 expression by IHC of two plus or three plus.

We showed preliminary anti-tumor activity in heavily pre-treated HER2-expressing patients with a median of seven prior systemic treatment plans, including other anti-HER2 ADCs, anti-HER2 antibody therapy, or anti-HER2 TKI therapy. In HER2-positive breast cancer patients, the objective response rate is 50%, the disease control rate is 96%. In HER2 low breast cancer patients, the objective response rate is 38%, the disease control rate is 84%.

Anti-tumor activity of BNT323 was also observed in non-breast cancer tumor types, such as colorectal cancer, ovarian cancer, and endometrial cancer. Responses were observed in patients treated with different dose levels and HER2 expression status. BNT323 was well tolerated, and all adverse events were manageable so far. Interstitial lung disease of grade 1 occurred in two patients out of 85 patients. Expansion cohorts are ongoing in selected tumor patients treated at recombinant phase II dose, and we expect further data this year.

Slide 18. Finally, we presented data on our cell therapy product, candidate BNT211. We developed a highly sensitive second-generation CAR targeting Claudin-6, with high specificity. The carcinoembryonic antigen Claudin-6 is an ideal target for cell therapy as it is absent in healthy tissues, but highly expressed in many high medical need cancers.

To improve CAR T cell engraftment and persistence, we co-developed a CAR T cell amplifying RNA vaccine, or CARVac for short. The goal is to keep CAR T cells at therapeutically relevant levels. In animal studies, we have shown that the persistence and effector function of CAR T cells can be further enhanced by repeated administration of CARVac, a nanoparticulate RNA vaccine that encodes Claudin-6. CARVac is based on our Uridine nucleoside mRNA lipoplex vaccine technology and mediates body-wide RNA delivery to lymphoid compartment resident antigen-presenting cells.

In multiple preclinical models, the display of a translated, natively folded CAR target protein on antigen-presenting cells mediated in vivo stimulation and controlled expansion of CAR T cells, induced a memory T cell phenotype along with higher target sensitivity, and enabled tumor control, even if subtherapeutic CAR T cell doses were administered.

We are testing the safety, tolerability, and activity of a combination of Claudin-6 CAR T cells and CARVac in a bifurcated dose escalation study with increasing dose levels of CAR T cells and a fixed CARVac schedule in patients with various cancer types that are Claudin-6 positive, defined as more than 50% of tumor cells with two to three plus intensity.

A dose escalation has been completed for CAR T cells derived from a manual manufacturing process, we have presented data with highly encouraging signs of clinical activity and manageable safety at various conferences in the past. Slide 19. A subsequent cohort of 19 patients have been treated with a CAR T product manufactured with a scalable automated version of the process.

No DLTs have been observed so far, and Claudin-6 CAR T cells, as well as CARVac, were well tolerated, reflecting the safety profile detected in the first dose escalation level. The objective response rate was 41% for all 17 evaluable patients and 75% for eight patients treated at dose level 2, namely 1 x 10^8 CAR T cells. Next to germ cell tumors, which dominated the first dose escalation, we observed ovarian cancer patients responding. We are expecting an additional data readout later this year.

Once we have determined the recommended phase II dose for BNT211, we plan to initiate a pivotal trial in germ cell tumors, which has already received PRIME designation by the EMA. Advancing our pipeline remains a key strategic priority for the year. Next year, we plan to transform our pipeline as we advance multiple programs towards the pivotal stage. I will now pass the presentation to our CFO, Jens Holstein.

Jens Holstein (CFO)

Thank you, Özlem. A warm welcome to everyone who dialed into today's call. Before we go into the financial details for the second quarter and the first half of 2023, I'll start with giving you an overview on some key financial figures, which you can find on the next slide. Our total revenues reached EUR 1.4 billion for the first half of 2023, and are in line with our expectations, with second quarter being the expected weakest quarter in the year.

Our COVID-19 vaccine revenues are, as stated and expected before, heavily influenced by seasonal effects, especially now, as we have summer in our biggest markets in the Northern Hemisphere. As we have outlined in earlier earnings calls, the revenue development for COVID-19 vaccines is expected to mimic a flu-like setting.

I will go into more details concerning our financial guidance in the course of the call, but want to emphasize already now that acknowledging the uncertainties related to the seasonal effect, we reiterate our 2023 COVID-19 vaccine revenue guidance of around EUR 5 billion for the full 2023 financial year. With EUR 1.4 billion in revenues, we ended the first six months of 2023 with an operating result of EUR 91.1 million and generated earnings per share on a fully diluted basis of EUR 1.28.

With respect to the company's financial position, we ended the second quarter of 2023 with EUR 16.8 billion, comprising approximately EUR 14.2 billion cash and cash equivalents, as well as approximately EUR 2.7 billion, partly current and partly non-current security investments, which are part of our investment strategy.

Subsequent to the end of the quarter in July 2023, we received EUR 1.1 billion in cash from our collaboration partner, Pfizer, settling our gross profit share for the first quarter of 2023, alongside with EUR 0.4 billion received until early August in connection with the amended COVID-19 vaccine purchase agreement with the European Commission. In connection with our acquisition of InstaDeep, which closed on 31 July 2023, approximately EUR 450 million were invested in form of cash and shares, not including potential future milestones.

Overall, with this strong cash position in the background, we are on track to launch our new variant-adapted COVID-19 vaccine and intend to start multiple clinical trials across our oncology and infectious disease pipeline, such as the ones with OncoC4 and Duality Biologics that Uğur just mentioned earlier. I'll be moving to our financial results for the second quarter of 2023, as shown on the next slide.

Our total revenues reported reached EUR 166.4 million for the second quarter, compared to EUR 3.2 billion for the comparative prior year period, and decreased with the correspondent lower COVID-19 vaccine market demand. Write-offs by our collaboration partner, Pfizer, significantly reduced our gross profit share in the second quarter and hence negatively influenced our revenues for the three months ended June 2023.

Let me move to cost of sales, which amounted to EUR 162.9 million in the second quarter of 2023, compared to EUR 764.6 million for the comparative prior year period. For the first six months of 2023, the cost of sales reached EUR 258.9 million compared to EUR 2.1 billion for the comparative prior year period. The change is in line with decreasing COVID-19 vaccine sales. Research and development expenses reached EUR 373.4 million for the second quarter of 2023, compared to EUR 399.6 million for the comparative prior period.

For the first six months of 2023, research and development expenses amounted to EUR 707.4 million, compared to EUR 685.4 million for the comparative prior year period. Our R&D expenses are mainly influenced by progressing clinical studies for pipeline candidates, the development of variant-adapted, as well as next generation COVID-19 vaccines, and the expansion of our R&D headcount.

General and administrative expenses amounted to EUR 122.7 million for the second quarter of 2023, compared to EUR 130 million for the comparative prior year period. For the first six months of 2023, G&A expenses reached EUR 242.1 million, compared to EUR 220.8 million for the comparative prior year period.

While in second quarter, some cost savings have been achieved, G&A expenses for the first six months were mainly influenced by increased expenses for IT services, as well as expanding the G&A headcount. Due to a loss-making second quarter of 2023 and the tax effect of a reorganization of the intellectual property rights within the group, income taxes with an amount of EUR 221.8 million were realized, compared to tax expenses of EUR 647.3 million accrued for the comparative prior year period.

In total, for the first six months of 2023, income taxes were realized with an amount of EUR 16.3 million tax income, compared to EUR 2 billion tax expenses accrued for the comparative prior year period. The derived effective income tax rate for the first six months of 2023 were approximately -5.5%, which is expected to change over the 2023 financial year to be in line with the updated estimated annual cash effective income tax rate of somewhere around 21% for the BioNTech group, an improvement that I will elaborate on in a minute.

As mentioned at the beginning, due to mainly seasonal effects of our COVID business, we recognized a loss during the second quarter of 2023, amounting to EUR 190.4 million, compared to EUR 1.7 billion net profit for the comparative prior year period. For the first six months of 2023, net profit reached EUR 311.8 million, compared to EUR 5.4 billion for the comparative prior year period.

Our loss per share for the second quarter of 2023 amounted to EUR 0.79, compared to a dilutive earnings per share of EUR 6.44 for the comparative prior year period. For the first six months of 2023, our diluted earnings per share was EUR 1.28, compared to EUR 20.65 for the comparative prior year period.

Turning to the next slide, I would like to emphasize that we are updating the company's financial outlook for the 2023 financial year with respect to our planned full year R&D and SG&A expenses, as well as our planned expenses and growth and maintenance CapEx for operating activities, excluding effects caused by or driven from in-licensing arrangements, collaborations, or M&A transactions.

Please note that the following numbers reflect current base case projections and are calculated based on constant currency rates, and do not include further transactions that could occur in the second half of 2023. As stated before, we reiterate our estimated COVID-19 vaccine revenues of around EUR 5 billion for the full 2023 financial year. Our guidance is based on the expectation that the demand in our vaccine will pick up in the year's third and fourth quarter, along with our rollout of the adapted COVID-19 vaccine against XBB.1.5.

During the second quarter of 2023, the COVID-19 vaccine supply agreement with the European Commission has been amended. The agreed rephasing of deliveries annually through 2026 will play an important role in the future, as revenues will be recognized over the expanded term.

With the EC contract giving us a level of clarity in terms of revenue expectations, the demand and vaccination rates in other territories, as, for example, the US market, remain uncertain regarding these metrics. Our collaboration partner, Pfizer, confirmed its plans to achieve its goals for their market. Given their detailed plans to support an increase in vaccination rates in the US, we expect to achieve our revenue guidance range, as previously mentioned.

However, substantial uncertainties underlie the demand for COVID-19 vaccines in general, as well as for our vaccine, e.g., the timing of its approval will have an impact on its demand. There has been no precedent on how COVID-19 vaccine rates will evolve after years of a pandemic where people have been vaccinated multiple times.

We expect to learn from this for future years, but we assume that 2023 will be a very special one, given the mentioned circumstances. It is our aim to move our clinical programs forward as quickly, yet cost efficiently as possible, towards becoming a multi-product company. To do so, we have implemented further measures to increase cost consciousness, which led to a company-wide cost optimization and hence reduction of our expected 2023 R&D, SG&A spend and capital expenditures.

The increased flexibility at expenditure level will help us navigate through the just described uncertainties, while remaining focused on the development of the next wave of innovation in various fields and indications.

As summarized for you on this slide, we update our R&D spending for the rest of 2023 from between EUR 2.4 billion and EUR 2.6 billion to between EUR 2 billion and EUR 2.2 billion, including the R&D development costs identified from our latest publicly announced M&A activities. We also update our SG&A expenses from between EUR 650 to 750 million, now to between EUR 600 million and EUR 700 million, and reduce our spending for growth and maintenance CapEx for operating activities from between EUR 500 million and EUR 600 million to between EUR 350 million and EUR 450 million.

As noted before, we have updated our group estimated annual cash effective income tax rate from around 27% to around 21%, excluding potential effects from share-based payment settlements in the course of 2023. Following a reorganization of the intellectual property rights within the group, we recognize deferred tax effects in Germany and the US Previously unrecognized US federal and state deferred tax assets, including unused tax losses and unused tax credits, have been reevaluated and now recognized.

The recognition of these deferred tax assets lead to a decrease in the effective tax rate for the fiscal year of 2023. With that, I would now like to turn the call over to our Chief Strategy Officer, Ryan Richardson, for an update on our strategic outlook for 2023 and concluding remarks. Thank you.

Ryan Richardson (Chief Strategy Officer)

Thank you, Jens. I'll now provide a brief summary of the commercial outlook for our updated COVID-19 vaccine launch and provide an update on our acquisition of InstaDeep before concluding with our strategic outlook for the remainder of the year and beyond. I would like to touch on our key readiness activities that have put us in a strong position to execute on our planned launch this fall. On the back of the regulatory recommendation for an XBB.1.5 adapted monovalent vaccine, we and Pfizer have made more than 40 regulatory submissions in key geographies around the world.

We are on track to begin vaccine distribution once regulatory approval is received, with first shipments expected from September onwards. We believe Comirnaty is positioned to maintain its leading position in multiple key geographies. Most of the world will continue to be supplied under existing pandemic booster contracts.

This includes our contract with the European Union, our largest contract, which was recently renegotiated to extend to a period over four years. In the United States, we expect our first major commercial market opening, where we will leverage Pfizer's commercial capabilities. Turning to the next slide. This week, we announced that our acquisition of InstaDeep has closed following receipt of all required approvals. With the acquisition, we add world-class AI and machine learning technologies and research capabilities to accelerate and enhance our broader strategic vision.

The acquisition will bring over 290 data scientists, ML engineers, and tech professionals to our team, positioning us to lead in this disruptive new field. In combining InstaDeep's AI and ML expertise with our own research and development capabilities, we aim to develop novel therapeutic and vaccine product candidates with increased speed and efficiency.

We also see opportunities to leverage these AI and ML capabilities outside of R&D across other functions at BioNTech. This makes this a highly strategic acquisition with significant long-term transformational potential across our firm. We will operate InstaDeep as an independent technology subsidiary of BioNTech. On the next slide, we showed the three pillars of value creation that we expect from this transaction. The first is to apply cutting-edge AI and machine learning technologies across our therapeutic and vaccine platforms.

We plan to connect these AI-enabled discovery capabilities with automated lab infrastructure to enable high-throughput drug discovery. While we do expect our overall AI investments to increase in the coming years, we do expect some midterm cost efficiencies from the acquisition by internalizing our largest AI technology and services provider.

Finally, we will continue to operate InstaDeep's third-party business, which delivers technology solutions and services to external customers in the technology sector and other industries. We are excited to kick off the next phase of our collaboration with the leadership and bright minds at InstaDeep, and believe that together, we can become a global leader in applying cutting-edge artificial intelligence and machine learning technologies to discover, design, and develop next-generation immunotherapies at scale.

The next slide provides an overview of our expected pipeline news flow for 2023 and 2024. Some of these points have been covered, so I won't go through them all in detail here. With the collective efforts and dedication from our teams, we've achieved remarkable progress for several of our product candidates. At this year's ASCO Congress, we presented data for three of our pipeline candidates.

We're on track to share additional data updates across a range of technologies later this year. In June, we initiated our first phase III trial in oncology. Additionally, we started a phase II trial for one of our FixVac candidates in collaboration with Regeneron, focusing on first-line NSCLC. As Özlem has elaborated, we anticipate initiating several further trials in the near future. On the next slide, I'll summarize the strategic outlook for the remainder of the year. We are on track to roll out our new variant-adapted COVID-19 vaccine in the coming month.

We also plan to initiate multiple registrational oncology clinical trials while expanding our infectious disease pipeline. With the InstaDeep acquisition now closed, we intend to rapidly scale up our activity in AI-enabled drug discovery, and we'll continue to execute transactions to expand our innovation ecosystem and execute on our corporate development strategy to in-license complementary assets.

Before concluding and opening up the floor for questions, I'd like to reiterate that we will hold our Innovation Series event on 7 November 2023. We'll provide further details on the event in the coming weeks. With that, I would like to thank our shareholders for their continued support, and I'll conclude our prepared remarks and open the floor for questions.

Operator (participant)

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. In the interest of time, please limit yourselves to one question only. To withdraw your question, please press star one and one again. Once again, if you would like to ask a question, please press star one and one. We will now go to your first question. one moment, please. Your first question comes from the line of Daina Graybosch from Leerink Partners. Please go ahead.

Daina Graybosch (Senior Managing Director of Immuno-Oncology)

Yeah, thank you for the question. I have one on on ONC-392. The, the phase III that you have started, I forget the name of it, is, is different in design from the phase II in some of the inclusion/exclusion criteria. I wonder if you could talk about why the differences and why you decided to, decided to go forward now in a phase III with single agent CTLA-4, rather than gathering more data and doing a combination study with PD-1 or any other agents in this pretty hard to treat and difficult to do trial setting?

Uğur Şahin (CEO and Co-Founder)

Dana, hi, it's Uğur. Thank you for the question. So, as you know, the, the, phase I, II study collected data in different combinations. We have seen, we have seen single compound activity in non-small cell lung cancer in patients who had received and progressed on the first-line checkpoint blockade treatment. This were, this were encouraging objective response rate around 35%.

We do not see an added benefit in combining that with the current status quo, which is chemotherapy, and therefore decided, in also with favoring, as a clean safety profile to go with a single compound alone. The patient population that have been selected for the study reflects historical patient populations with regard to the inclusion and exclusion criteria.

Daina Graybosch (Senior Managing Director of Immuno-Oncology)

Uka, perhaps a follow-up. I think the difference, and tell me if I'm wrong, was the length for which the patients could have received a prior checkpoint. That it's a lot. You're requiring a longer prior checkpoint than you in phase three, than you did in the phase two. Some phase two patients wouldn't be eligible for phase three. Do you expect any negative impact from?

Uğur Şahin (CEO and Co-Founder)

Yeah, Daina, and, the, the, the protocol has also emerged based on discussion with the FDA and FDA's request.

Daina Graybosch (Senior Managing Director of Immuno-Oncology)

Got it. Thank you.

Operator (participant)

Thank you. We will now go to your next question. Your next question comes from the line of Tazeen Ahmad from Bank of America. Please go ahead.

Tazeen Ahmad (Analyst)

Hi, good morning, and thanks so much for taking my question. Just for point of clarification, as you think about the rest of the year for, COVID vaccine sales, I know you talked about the difficulties involved in really getting a sense for the trends. When you decided to maintain guidance, at least for now, what key factors are you taking into account that gives you confidence that, that sales will be, or revenues rather, will be at least close to, if not at the, the EUR 5 billion mark? I think that's probably the best question for Ryan to answer. Thanks.

Ryan Richardson (Chief Strategy Officer)

Yeah. I'll start, Tazeen, and Jens should also chime in here. You know, I think the starting point here was that we are expecting the total volume of COVID vaccines in the fall to be down. You know, you may remember that last year we had distributed more than 500 million doses of our BA.4/BA.5 variant-adapted vaccine globally. For the full year last year, we had the market in the United States was about 144 million doses.

We are expecting those numbers to come down, both in the United States and globally, we factor that in. However, we've also expect that in the United States, that we're going to see a commercial market opening, a higher price point.

We've, along with Pfizer, have talked about a gross price in the $110 to $130 range. That's our expectation. Higher price point in the US, and much of the rest of the world, we're still expecting contracts that have already been signed to be the primary sort of contractual mode governing the second half of deliveries. Demand will still matter. In the rest of the world, we're still expecting effectively, continuation of the booster contracts, and that's factored in as well.

Jens Holstein (CFO)

Yeah, maybe, Tazeen, just, just to add, I mean, Ryan basically described the situation, and I think we made some statements in our speeches as well in that respect. That, of course, a situation like we currently see hasn't been seen before by any product so far. You know, patients, have received and, and, people have received multiple vaccinations in the last two years, and of course, there is some level of tiredness, so to say on getting vaccinated. We, we, we see the need, you know, for further vaccinations.

I think, specifically for the US, you've heard, probably, you know, some of the plans that Pfizer and as well as our competitor, Moderna, has announced on how the expectations will be going up for the rest of the year to pick up with the vaccination rates. In that respect, you know, the next couple of months, the next two, three months will give us a good sign, you know, how the year will end. There is some uncertainty. We just wanted to make that clear. You know, we see 2023 as a very special year though, too, I have to say so.

You know, from our perspective, that situation that people have received multiple vaccinations, and now are maybe a little bit tired, has to grow into a market where you have annual vaccinations. I think 2023 gives us some indication, but we also believe there will be a further increased potential from our perspective for 2024 and the other years, just given the specific situation that we, that we now have in this year, you know, with two years of multiple vaccinations for people.

Tazeen Ahmad (Analyst)

Okay. Thank you.

Operator (participant)

Thank you. We will now go to your next question. Your next question comes from the line of Akash Tewari from Jefferies. Please go ahead.

Speaker 11

Hey, everyone. Thanks so much for taking our question. This is Amy on for Akash. Pfizer has alluded to an enterprise-wide cost-cutting program, particularly around COVID, if long-term vaccine demand ends up being modest. How would Pfizer's cost cut change your long-term OpEx on your COVID programs and spend more broadly? On a related note, can you go over what's changed in your new 2023 OpEx and CapEx guide? We're seeing that BNT141 isn't on your pipeline slide this quarter. Are there any other components that may be driving these cost cuts? Thanks so much.

Ryan Richardson (Chief Strategy Officer)

Yeah, thank you for the question. I'll speak to the OpEx point and then ask Jens to opine on what's driving the cost lines in our guidance. On the OpEx side, the short answer is, is no. Actually, one of the unique features of our of our economic model for COVID-19 is that our OpEx is very lean.

As you, as you may recall, we get a gross profit share on every COVID vaccine dose produced and delivered through the Pfizer partnership, and only in Germany and Turkey do we book top line product sales and actually have significant OpEx, only in those two countries. That does translate into a very differentiated profile across our P&L, and I think you see some of that leanness reflected in the numbers that we've disclosed today. Jens, do you want to speak to the drivers of the costs that you expect?

Jens Holstein (CFO)

Yeah. I mean, from, from, for us, I mean, we, we, of course, can only talk for us, yeah, and we cannot talk about Pfizer and, and their, their cost-cutting plans that they have announced, in the earnings call. From our perspective, you know, we, we see a little bit less spend, for, the collaboration with Pfizer in the course of 2023. But we also have a close look on our own spending, you know, in the areas of oncology, for example, or in, in, building up production capacities. Those have been, specific areas where we, where we, just look at, you know, controlling our costs going forward to have more flexibility.

Speaker 11

Great. Thanks so much.

Operator (participant)

Thank you. We'll now take your next question. The question comes from the line of Chris Shibutani from Goldman Sachs. Please go ahead.

Chris Shibutani (Senior Analyst and Managing Director of Biotechnology Equity Research)

Yes, two questions, if I can. One on the pipeline and the other more financially related. On the pipeline, BNT122, first-line metastatic melanoma, seemed a bit conspicuous in terms of the absence of mention in the press release and in prepared comments. I do see it in the pipeline table. Have your expectations for this trial changed? I believe we should still be expecting updates in this balance of this year. Then I'll have a follow-up on, on financial.

Ryan Richardson (Chief Strategy Officer)

Yeah. Thanks, Chris. Let me start on the, on the BNT122 and, and Ruben also can, can also chime in here. We've reiterated our guidance for an update later this year. We still intend to provide that. I think on the- on a previous call, we had also mentioned that the full PFS analysis would be triggered on an event basis.

And the fact is, we still haven't met that event trigger, reached that event trigger, which does, which does mean that we're not in a position right now to be specific about the full, the, the data that we're likely to bring out later this year. We do intend to provide an update before year-end, but I think it's, it's likely that there won't be a full data update. So more to come on that.

Özlem Türeci (Chief Medical Officer and Co-Founder)

Yeah. I can just echo what Ryan said. Gathering these events is not entirely under our control, and, therefore, we, at this point, cannot, cannot forecast when we will be able to report the data, interim analysis data point.

Chris Shibutani (Senior Analyst and Managing Director of Biotechnology Equity Research)

Got it. Then on the financial follow-up, a very healthy cash balance, obviously post-COVID, and we are watching the decisions you're making on the capital allocation front. The InstaDeep is an example of that. Ryan, you mentioned during the call, you look to intend to continue to in-license assets. Can you give us a sense for potentially any areas that you feel either disease area, modality, size? A lot of these have been smaller, and InstaDeep was a little bit more kind of adjacent as opposed to immediately obvious. Just be helpful to get a sense for what this mosaic is that you're creating, given your capacity.

Ryan Richardson (Chief Strategy Officer)

Yeah, absolutely. Absolutely, Chris. As you see from the deals we've announced this, so far this year, that you know, we've, we've allocated a little bit less than $1 billion in terms of upfront payments across the InstaDeep transaction and then several in-licensing deals for several assets that we talked about today. I think in that sense, you know, InstaDeep was a sort of strategic exception. We thought that was a very unique opportunity.

I wouldn't expect that that would be one that would be replicated as such. I think the licensing deals and small-scale M&A, I think you can expect us to continue to operate along the same, the same lines as what, as what you've seen so far in the first half of the year.

Relatively small deals. That's our sweet spot. Under $1 billion is our sweet spot. We will look at and consider larger deals. That's, you know, I think it has to be a very, very good strategic fit for us to make a larger move. We do see opportunities in that sub, sub $1 billion range to further bolster the pipeline. In terms of focus areas, as you've seen so far in the first half, IO, differentiated IO assets are going to continue to be an area of focus.

Chris Shibutani (Senior Analyst and Managing Director of Biotechnology Equity Research)

Great. We'll look for more insights on your Innovation Day. Thank you.

Ryan Richardson (Chief Strategy Officer)

Thank you.

Operator (participant)

Thank you. We'll now go to the next question. Your next question comes from the line of Yaron Werber from TD Cowen. Please go ahead.

Speaker 12

Hi, guys. Thanks very much for taking the questions. This is Brendan on for Yaron. Just really quickly wanted to also ask, maybe about the potential flu COVID combo approach here. First, I guess, when you think we might see data from that study, but also maybe a little bit more broadly, kind of what the path forward is for this combo. Really, I guess, trying to understand with each updated booster, how this would kind of play out here.

Just kind of trying to get at, you know, Sanofi kind of cast some doubt a little bit on the whole mRNA approach, obviously from their own perspective, but really how you're kind of thinking about mRNA fitting into the whole COVID flu combo space, from what you're seeing at this point. Thanks.

Ryan Richardson (Chief Strategy Officer)

Yeah, sure. I'll start. As you know, Pfizer currently has an ongoing phase I study of a flu COVID combo vaccine. They also have a phase III study ongoing of their flu, mRNA flu vaccine, which we've licensed the technology to them. We still retain some economics on the program, but they're in, they're in control and driving that program forward, the mono program. We do see opportunity for a combination vaccine.

I think in terms of, of timelines, you know, Pfizer has guided to a potential phase I data update this year for the, for the combination, and they've also guided to near term phase III data on the, on the flu mono, both of which I think will be relevant data points here to help inform the next stage of development.

The last point I would add is just that Pfizer has indicated, I think, just the last couple of days, that, or they've reiterated, that they see a flu, both a flu mono and also a flu COVID combo being starting to become relevant from 2024 onwards. Not, not something to, to look at this year, although I think positive data could obviously be a helpful catalyst for us as well.

Operator (participant)

Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Terence Flynn from Morgan Stanley. Please go ahead.

Terence Flynn (Equity Research Analyst)

Great. Good morning. Thanks for taking the question. I just was wondering if you could elaborate more on the rationale to advance BNT116 into the metastatic setting, while in iNeST, I know you've talked more about the potential there in the adjuvant setting, just wondering if you could kind of compare and contrast those two approaches. Thank you.

Uğur Şahin (CEO and Co-Founder)

Yeah, thank you. The question is, is highly relevant. It's the six-pack approach is based on the off-the-shelf availability of the vaccines. That means in the metastatic setting, the, the disease is, is rapidly progressing. We would like to get as quickly as possible an immune response initiated. Personalized vaccine in the vaccine approach requires around four to six weeks for preparation of the vaccine and is particularly suited for the adjuvant setting.

Because in the adjuvant setting, there is a longer timeframe before patients progress, so that gives us the opportunity to build an immune response that can counteract potential progression of the disease.All these adjuvant trials will have as an endpoint, relapse-free survival as an endpoint, whereas in the metastatic setting, endpoints will be, for example, progression-free survival or OS.

Operator (participant)

Thank you. We will now go to our next question. Your next question comes from the line of Bill Maughan from Canaccord. Please go ahead.

Bill Maughan (Director and Senior Analyst covering Biotechnology)

Hi, thank you. I have a question on self-amplifying RNA. I know that you had to been developing a few programs with your self-amplifying RNA, and it, it's kind of not center stage anymore, but several other companies that are earlier in their cancer vaccine development are using self-amplifying RNA and kind of singing its praises. I was just wondering if we could expect self-amplifying RNA to occupy some more, some more of the spotlight and maybe, you know, be advanced in some programs coming up in the future. Thanks.

Uğur Şahin (CEO and Co-Founder)

Yes, thank you for the question. As you know, we have two empty mRNA amplification programs. It's a self-amplifying mRNA program as well as the trans-amplifying program. If you look closer into the data, into public data of other groups, we have observed that the self-amplifying mRNA in humans are limited in the full, full response on innate, quick initiation of innate response, hindering the full capacity of self-amplifying mRNA.

We are working on a improved approach overcoming this innate immune response limitation on a trans-amplifying mRNA platform, which combines two advantages. The advantage of safety, so the replicate itself is not amplified.

It's, it provides, provides only trans mRNA activity and the target mRNAs are amplified. We thereby separate the target mRNA and the, the replicate mRNA and have the opportunity to combine multiple targets. This is something where we made a lot of progress in the preclinical setting, and we will report end of this year here on this platform, particularly with, we see the suitability in the infected disease setting, particularly in the setting of combination vaccines.

Daina Graybosch (Senior Managing Director of Immuno-Oncology)

Thank you.

Operator (participant)

Thank you. We'll now go to the next question. Your next question comes from the line of Eliana Merle from UBS. Please go ahead.

Speaker 13

Hi, guys. This is Sarah on for Ellie. Thanks so much for taking our question. I guess a quick one on BNT211 and the data update later this year. It's what are the expectations for data there, and what are you guys hoping to see? Thanks.

Özlem Türeci (Chief Medical Officer and Co-Founder)

Thank you for the question. We have an ongoing phase I trial, and we have had a couple of data updates this year and the year before. The trial is ongoing. What we expect to report end of this year is additional data on the one hand on, on safety of different doses and in combination with our CARVac vaccine. Also, data on clinical activity in additional clinical indications. We have been very focused on testicular cancer in the previous updates.

Further, we will report on durability of these responses. We have been focused on objective response rates. Now that the data is maturing, we will provide more insights into durability of those responses and how use of the vaccine impacts them.

Operator (participant)

Thank you. Thank you. We will now take our last question for today. Your last question comes from the line of Simon Baker from Redburn. Please go ahead.

Simon Baker (Partner and Head of Global Biopharma Research)

Thank you for taking my question. It relates to the PRESERVE-003 study. It's a two-stage phase III study. I just wanted to get some idea of what data you will be presenting at the conclusion of stage 1 and any timing that is indicated based on your expectations for the Ventricle and recruitment. I see the clinical trials is showing a primary completion in mid-2026. Is that a reasonable estimate at this stage for the final data at stage 2? Thanks so much.

Özlem Türeci (Chief Medical Officer and Co-Founder)

I didn't fully get that, Simon. Was this about data expectations for the ongoing ONC-392 or ONC-392 trial?

Simon Baker (Partner and Head of Global Biopharma Research)

Yes, it was, because it's a two-stage study, so I wondered what data you will disclose when stage 1 is completed and the dose is selected.

Özlem Türeci (Chief Medical Officer and Co-Founder)

It will be safety data and, and clinical activity data, in different tumor indications.

Uğur Şahin (CEO and Co-Founder)

Well, no, no, this is I think it's a lung cancer trial.

Özlem Türeci (Chief Medical Officer and Co-Founder)

It's, sorry, I didn't get that.

Uğur Şahin (CEO and Co-Founder)

We expect around 2025 ORR data and safety data. We have started the clinical trial with two different doses. We will select one dose to continue. It's a stage approach based on the ORR data initial assessment of the PFS. The clinical trial will continue for full maturation.

Simon Baker (Partner and Head of Global Biopharma Research)

Great. Thanks so much.

Uğur Şahin (CEO and Co-Founder)

Thank you.

Operator (participant)

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

Ryan Richardson (Chief Strategy Officer)

Thank you.