Who really put its money at stake for vaccine R&D? The case of BioNTech
Authors: Chiara Mauro and Alessandro Bruzzese
The COVID-19 outbreak response has been unprecedented both in terms of rapidity as well as innovation in vaccines R&D. In fact, around 80 different vaccine programs had started their clinical trials by February 2021 (Zimmer at al., 2021), and already three of them have been approved by EMA. Several factors have contributed to this phenomenon, including urgent demand of the worldwide population and faster regulatory processes.
Such vaccine race required a considerable amount of funds to be deployed rapidly for very risky investments with a high probability of failure. The effort involved private, and public funds with all governments pledging to find solutions to the problem that paralysed the world, but who really put its money at stake for vaccine R&D?
This article analyses the primary sources of funding of the BioNTech vaccine capable of bringing new hope only eight months after the WHO declaration of global pandemic status (Ducharme, 2020).
The BioNTech project, called Project Lightspeed, started in mid-January 2020 immediately after the genetic sequences of COVID 19 were made public (BioNTech, 2021). The vaccine BNT162b2 is based on the innovative mRNA technology developed by the German company, which is the holder of market authorisation worldwide (Pfizer, 2020).
Pfizer & Fosun Pharmaceuticals
The first companies who believed in BioNTech innovative technology were two massive conglomerate companies, namely Pfizer in the global arena and Fosun Pharmaceuticals in China. The two companies agreed on a complex collaboration with BioNTech (BioNTech, 2020).
In March 2020, BioNTech started its partnership with Pfizer to boost the development of the vaccine and scale-up manufacturing capabilities, leveraging the American company’s expertise in vaccine development. Pfizer was the second biggest pharmaceutical company by total revenue in 2020, with revenues estimated at about $50bln ( Proclinical, 2020). According to the agreement, Pfizer makes a $113mln equity investment in BioNTech and a cash payment of $72mln. Furthermore, BioNTech is eligible to receive future milestone payments from Pfizer of up to $563mln ( BusinessWire 2020; S&P Global Intelligence 2020).
Moreover, the two companies agreed to share the development costs equally, although BioNTech will be repaying its share only after commercialising the vaccine (Pfizer, 2020).
The two companies jointly conducted clinical trials in Europe, the USA and other locations from April 2020. BioNTech and its partners provided the clinical supply of the vaccine for clinical trials while at this stage, Pfizer and BioNTech are working together to scale up production capacity to provide worldwide supply (Pfizer, 2020).
Fosun Pharmaceuticals, which is majority-owned by the Chinese conglomerate and investment company Fosun, is another stakeholder which invested in the BioNTech vaccine (Fosun, 2021).
Interestingly, Fosun pharmaceutical is co-owner, together with the Chinese government of Sinopharm, which produces another vaccine, the so-called BBIP-CorV (Fosun Pharma, 2021).
Early on in the pandemic, the Chinese pharmaceutical company made a $50mln equity investment in BioNTech to speed up vaccine production. Moreover, it paid $85mln in vaccine development and commercialisation fees. Fosun and BioNTech will be setting up a strategic alliance to produce Covid-19 vaccines in China for the Chinese market. The two companies also work together on clinical development, conducting trials in China, leveraging on the company’s regulatory and commercial capabilities in the country (Cookson, 2020). Caixin reports that Fosun Pharmaceutical will produce up to 200mln doses of the BioNTech vaccine in China (Reuters 2020, Bao Zhiming et al. 2020).
German Grant Scheme
The Federal Republic of Germany, which traditionally has substantial pharmaceutical activities within its borders, has been at the forefront of financing research and development of Covid-19 vaccines. In June 2020, the Federal Ministry for Education and Research (BMBF) launched a special programme worth €750mln in grants to help companies start off with large trials and speed up production on a scale as soon as the successful vaccine is found (BMBF, 2020).
Several German companies, including BioNTech, announced in September and October 2020 that they had secured financing through this programme. Among these companies, BioNTech secured the most considerable amount of grants, worth €375mln. Within German borders, BioNTech has a solid track record of being awarded public funding from the German government. For instance, in 2007, the start-up was supported by Go-Bio Biotechnology Federal Research Ministry funding initiative, which helped life sciences and researchers, to start their own company (Anja Karliczek, 2020).
Several conditions for applicants were stated in the Federal Gazette to receive the Covid-19 grant funding, among which were the completion of pre-clinical trials in accordance with the regulatory authority and the credible implementation of clinical trials by mid-November at the latest. Applicants must also demonstrate that the structural, regulatory and financial prerequisites for the implementation of the project are present (Federal Gazette, 2020).
The candidates were evaluated by a group of experts, composed of representatives from the pharmaceutical industry, clinical research and regulatory agencies. The assessment was based not only on technical and scientific quality but also on the capacity of upscaling production and presentation of realistic timeframe and milestones to be planned by the company.
In fact, the company is paid according to instalments, with an initial payment at the beginning of the project and further instalments to be related to the achievement of milestones. The failure to reach such goals is related to discontinuing grants. Eight milestones were selected including the pre-clinical evaluation, the initiation and implementation of clinical trials (Phase I, IIa, IIb, III), the upscaling of production capacity to supply trials and the general population, the submission for regulatory approval and finally the concession of market authorisation (BioNTech, 2020).
The EIB financial mechanisms
The European Union actively partakes in the world race to find an effective and safe vaccine as part of the Coronavirus Global Response, the commission plan to fight COVID-19. The EIB has been one of the leading players at union level pledging €4.9bln billion in partnership with the European Commission (European Commission, 2020).
In particular, the EIB provided BioNTech with a loan of €100mln in June 2020 (European Investment Bank, 2020). This loan is backed by the InnovFin Corporate Research Equity programme and the European Fund for Strategic Investments. This is considered a flagship initiative by EIB as the whole process from the assessment made by the investment committee to the approval of the loan took only two months, while it usually takes one year (Chris Knight EIB, 2020). The project’s success is given by the great effort of the EIB and by the solid track record of BioNTech, which also benefited from EU financing mechanism in the past. In fact, BioNTech received a loan in December 2019 to develop patient-specific immunotherapies to treat cancer and other diseases (BioNTech, 2020). Therefore, immediately after the COVID-19 outbreak, BioNTech was quickly identified as one of the companies capable of developing an effective vaccine.
The EIB provided €100mln debt at favourable conditions to BioNTech, which are disbursed in two tranches of €50mln on completion of set milestones. Such investment aims at financing R&D expenses as well as to help set-up large-scale commercial manufacturing facilities (European Investment Bank, 2020).
Furthermore, the public investment addressed a market failure of financial markets in so far as investing in the vaccine was considered too risky from a private perspective, as the production technology used in BioNTech is very innovative. In this investment the European Fund for Strategic Investments plays a crucial role as it allows the EIB to take on board more risk and crowd-in private money, acting as a cushion aimed at preserving EIB and private capital (EFSI, 2020).
EFSI was established in 2015 following the Investment Plan for Europe thanks to the €7bln contribution of the EIB and a European Commission guarantee of €26bln with the aim of tackling the insufficient investments made by private and public actors across the EU in the aftermath of the eurozone financial crisis. Moreover, these instruments have long term impact, boosting innovation and competitiveness of the European economy (European Investment Bank, 2021).
The EIB operation was also backed by InnovFin resources and expertise. In particular the project is supported by a credit enhancement from a first loss piece delivered under the InnovFin Corporate Risk-Sharing Equity product (European Investment Bank 2021). InnovFin is a joint initiative of EIB and EIF aimed at providing a wide range of financial tools for very innovative businesses and entities (EFSI, 2020). It is part of Horizon 2020, the most significant EU Research and Innovation programme with around €80bln funding available from 2014 to 2020 (European Investment Bank, 2021). Thanks to the provision of funds at favourable conditions, the instrument should stimulate breakthrough ideas and take them from the lab to the market.
The US and Operation Warp Speed
After the announcement of 90% estimated efficacy of the BioNTech vaccine, the US administration was among the first lining up to take credit for the discovery. The response from the company has been immediate: Kathrin Jansen, the head of vaccine R&D at Pfizer, claimed that they have never received money from the American public, private partnership programme Operation Warp Speed (The New York Times, 2020).
OWS is the largest US government initiative for the development, manufacturing and distribution of vaccines, officially announced on the 15th of May 2020 (US Dept of Defense, 2021). The partnership includes as main subjects the Department of Health and Human Services and its agencies, the Department of Defense and the private sector. Its objectives and operations focus on vaccine, therapeutics and testing of diagnostics, their development, production, distribution, security and assurance. Among the programme beneficiaries, there are eight different companies (e.g., Johnson and Johnson, AstraZeneca-Oxford, Moderna), which received research funding for a total amount of around $11bln. This list does not include Pfizer as it did not receive any funding from OWS for the development, clinical trial and manufacturing of the vaccine.
The CEO of Pfizer explained that […] the reason why I did that was because I wanted to liberate our scientists [from] any bureaucracy that comes with having to give reports and agree how we are going to spend the money in parallel or together […] (Axios, 2020).
On the other hand, the US administration claims that Pfizer was indeed part of the OWS given the significant supply agreement they signed together in July 2020.
In particular, the U.S. government made an advance purchase order of 100 million doses of BNT162 for a total payment of $1.95bln, with the option to acquire up to an additional 500 million doses (Pfizer, 2021). Nevertheless, it is important to underline that the company did not get paid until FDA approval. It could be argued that this advance guarantee from the US government has been a significant incentive and de-risked the project (Dale, 2020). However, the great majority of the risk comes before market authorisation as at the moment demand far-exceeds supply capabilities. Finally, similar advanced purchase agreements were made also by other governments such as Japan, the UK and the EU.
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