BioNTech’s 30 Billion Reasons

The real winner in the Covid-19 vaccine sweepstakes is the German company BioNTech, not Pfizer.

Much has been made of Pfizer reaching the extraordinary mark of $100 billion in revenues in 2022, in large part undoubtedly thanks to the Covid-19 pandemic and its famous Covid-19 “vaccine.” Indeed, Pfizer’s year-end earnings report shows that Covid-19 vaccine sales alone account for nearly 38 percent of those $100 billion in revenues (p. 30).

But revenues are revenues. What counts, of course, are profits. And half of the profits on its Covid-19 vaccine sales are not in fact profits for Pfizer, but rather costs. How could that be? 

Well, it is because “Pfizer’s” Covid-19 vaccine is not in fact Pfizer’s. Legally, Pfizer is not even the manufacturer. Pfizer is rather a contract manufacturer that produces and markets the vaccine on behalf of its actual owner, the German company BioNTech. It says so right on the product’s label! 

And per the terms of the collaboration agreement between the two firms, Pfizer pays BioNTech a 50 percent share of its gross profits for the privilege of doing so. (See my article “50/50 Split: BioNTech and the Pfizer Illusion” or section 4.9.1 of the collaboration agreement here.)

After the deduction of this 50 percent BioNTech share as “cost of sale,” Pfizer has estimated that its own remaining profit margin on Covid-19 vaccine sales is in the “high-20s as a percentage of revenues.” (See, for instance, the quarterly earnings report here, p. 4.)

Let us split the difference and assume a 27.5 percent Pfizer profit margin. Applying this margin to Pfizer’s $37.8 billion in 2022 Covid-19 vaccine revenues gives around $10.4 billion in profits.

So, BioNTech earned the same amount? Well, no. BioNTech earned more. 

Among other possible reasons, this is because whereas the companies split profits 50-50 on sales in the Pfizer sales territory, BioNTech also has its own reserved sales markets (Germany and Turkey) and sells the product in partnership with the Chinese company Fosun Pharma on still other markets (Taiwan, Hong Kong, and Macau, but still not mainland China where the drug has never been authorized).

So, how much did BioNTech earn? It would seem that hardly anyone wanted to know – or, at any rate, not in the Twittersphere. Thus, while Pfizer’s hefty 2022 earnings were the subject of many a viral tweet, with Elon Musk himself even helping out to amplify one with a couple of exclamation points (see below), BioNTech’s late March release of its own 2022 earnings report passed virtually unnoticed on Twitter and elsewhere.

Nonetheless, the company’s 2022 Covid-19 vaccine profit figure is right there: namely, on p. 161 under “Operating Results.” See below. No need to worry about profits on sales of any other products – since BioNTech does not have any other products. €12.95 billion. Or, at the average 2022 rate of exchange, $13.6 billion. So, roughly $3 billion and 30 percent more than Pfizer.

And if the difference in profits is significant, consider the difference in profit margin. BioNTech made €12.95 billion in profits on €17.3 billion in revenues for a whopping 75 percent profit margin! This as compared to Pfizer’s “high 20s” on C-19 vaccine revenues and 34.6 percent on all revenues. (See p. 20 of the Pfizer earnings report for the company’s total pre-tax income.)

BioNTech’s astronomical profit margin reflects the fact that it bears very little of the costs associated with producing the drug. BioNTech does undertake some production activities for some markets: namely, producing synthetic mRNA, which it manufactures at its production facilities in Marburg. 

But the costs involved in this are evidently minor compared to the costs borne by Pfizer. And remember that all the costs borne by Pfizer flow into and thus inflate the widely-cited revenue figures. This is why BioNTech’s profit margin on vaccine sales is so much higher than Pfizer’s.

In 2021, the difference between the BioNTech and Pfizer hauls was even greater, largely due to substantial milestone payments that Pfizer owed BioNTech per the terms of the collaboration agreement. Thus, BioNTech earned €15 billion on an even higher 79 percent profit margin! (See the second column above.)

At the average 2021 rate of exchange, €15 billion is equivalent to roughly $17.75 billion. Pfizer, by comparison, made roughly $10 billion in Covid-19 vaccine profits in 2021. (For Pfizer’s 2021 earnings and the calculation of this figure, see “50/50 Split.”)

So, for 2021 and 2022 combined, BioNTech made over $31 billion in Covid-19 vaccine profits on a 77 percent profit margin as compared to Pfizer’s just over $20 billion on the estimated 27.5 percent profit margin. So, BioNTech made 50 percent more profits on a nearly three times higher profit margin.

Not bad for a company that had never turned any profit before 2021.

Can I get a “!!” from Elon Musk?