CureVac Vs. BioNTech: It does not end well

The market value of the biotech company Tübingen CureVac (WKN: A2P71U) falls like a rock. In the last 12 months, the price has fallen by as much as 55% to EUR 13.67 today (all data as of 6 July 2022).

And now it’s getting started on a legal level

The management around Franz-Werner Haas sees the CureVac patents through the competitor’s corona vaccine BioNTech (WKN: A2PSR2) wound. CureVac has therefore brought an action against BioNTech and two subsidiaries before the Düsseldorf Regional Court.

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However, CureVac does not seek an injunction and does not appear to intend to prevent the production, sale and distribution of Comirnaty. Instead, CureVac’s innovative performance should be recognized.

So in the end it’s about one thing …

License revenue should pay for what was not achieved in the approval process, I suppose. As a reminder: Corona vaccine candidate CVnCoV missed the statistical targets in the summer of 2021. Researchers were unable to clearly determine the efficacy of participants in the CureVac study over the age of 60, who accounted for 9% of the cases studied. So the vaccine did not come on the market.

It is still unknown whether the legal route will bear fruit. To bet on the stock for this reason alone would be pure speculation. The whole company situation tells me quite clearly: hands off! And I also want to tell you why.

Can CureVac handle money?

We fools know that even if a company loses money, shareholders can make money by buying a good company at the right price. Biotechnology companies like CureVac, for example, often lose money for years before succeeding with a new therapy. But even if the successes are well known, do not forget the many unprofitable companies that simply spend all their money and then collapse. The important question is: How long can CureVac maintain its current combustion rate before entering the drain?

We calculate this so-called cash runway by dividing the liquidity portfolio by cash burn. When CureVac last presented its balance sheet in March 2022, the company had no debt and had € 658 million in cash. Last year, the company burned 782 million euros. From March 2022, the company therefore had a liquidity reserve of about ten months. It is a fairly short liquidity reserve, I think.

Fortunately, CureVac sales grew 102% over the past year. However, the crucial thing is whether the company can grow its business in the future. And here lies the friction.

CureVac’s $ 800 million cash consumption represents about 31% of its $ 2.5 billion market value. That’s a lot. And if the company were to sell enough shares to fund another year of growth at the current stock price, it would likely result in a rather expensive dilution for all shareholders.

CureVac’s money burning worries me

An investment is therefore out of the question for me. But you might want to speculate in a twist. How do we arrive at an assessment assumption in this case? The first thing I look at for unprofitable companies is the relationship between price and sales. With 21.9, it’s way too high. Some competitors are rated significantly higher, but CureVac has so many alarm bells ringing that I set the bar high for the rating.

And even if you only put CureVac in your depot as a small gamble with some play money, you should be strict. After all, there are some significantly better investment opportunities on the market right now.

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Henning Lindhoff does not own any of the mentioned shares. The Motley Fool does not own any of the listed shares.

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