Bavarian Nordic A/S

Thank you, operator, and welcome, everyone, to this -- our Q2 update from Bavarian Nordic. Yes, my name is Rolf Sørensen from Investor Relations.

And in today's conference call, we have, as usual, our CEO, Paul Chaplin; and our CFO, Henrik Juuel, will give the presentation and comments. And after that, we have the Q&A session.

And at the end, we will also provide a brief walk-through of the offer and the process we are looking into. Before we start the presentation, please note that this announcement includes forward-looking statements that involve risks and uncertainties and other factors, many of which are outside of our control, but could cause actual results to differ materially from the results discussed.

Forward-looking statements include statements concerning our plans, objectives, goals, future events, performance and other information that is not historical information. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law.

And with this, I will hand it over to you, Paul, to start the presentation.

Thanks, Rolf, and welcome, everyone, to our Q2 report for 2025. The focus of today's presentation and talk is really on our first half year results.

And while Henrik will give an update at the end on the offer process and the process move forward, as I said, the focus really is on our financial performance. So if you turn to Slide 3, we've had a very strong performance in the first 6 months of this year.

We've seen a 33% improvement in revenues compared to this time last year, resulting in an EBITDA margin of 32%. And that's really a result of selling actually 5 million doses of our vaccines across the portfolio, and that's 5 million lives that we've saved in the first half of this year through the sale of our vaccines.

We see a balanced growth across the portfolio. On Travel Health, we've seen a 24% improvement compared to last year.

And that's mainly driven by our sales of rabies and TBE and I'll come back to that more in the next slide. Vimkunya has been approved, obviously, in the U.S., Europe and U.K., and we are launching according to plan and currently have launched in the U.S., Germany and France, and are now on track to meet the guidance for this year.

For Public Preparedness, we've already secured DKK 3.1 billion of contracts. And what that means is that represents at least our base business that we've communicated previously is DKK 1.5 billion to DKK 2 billion.

So this is exceeding our base business, and we're on track to deliver that by year-end. And with that, and Henrik will go into more details later, we are refining our guidance in terms of the revenue spread but maintaining our EBITDA margin of 26% to 30%.

Also, during the course of this year, we have sold our Priority Review Voucher resulting in net income of DKK 810 million. And when you take that into consideration, that would improve our EBITDA margin by year-end to 42%.

So a really, really strong 6 months balanced growth across the portfolio and an exceptional performance by the company. If you go to the next slide.

So as I mentioned, Travel Health has grown by 24% compared to this time last year. And as you know, we've seen strong growth in this sector quarter-on-quarter.

I want to take a step back and I know I keep reminding everyone, but I do want to take a step back and remind you of the strategy in that 5 years ago, we decided to commercialize the business by acquiring assets that didn't have probably the right focus with the previous ownership due to other priorities. And we believe that with a renewed focus from Bavarian Nordic we would be able to turn these assets around.

And here we are again today on reporting very strong growth, primarily driven by rabies and TBE demonstrating that this strategy that we created 5 years ago is really coming to life and has created a platform that will allow us as it has already to acquire other assets. So on rabies, it's a mixture of 2 different things, either a gain in market share or a growth in the market depending on the different territories we look at.

In the U.S., we've seen a moderate growth in the rabies market of 5%, but we also saw a 7% improvement in our market share. In Germany, we have a very high market share of 97% but we actually saw a remarkable growth in the first half of this year of 93%.

And this growth is due to a number of different things that I'm sure many of you have seen, there are a number of cases being reported in the media of deaths of travelers, which has really raised the profile of the need for a rabies vaccine. And in fact, the demand for rabies is really -- and TBE is going from strength to strength.

We have already decided to start increasing the manufacturing output for both those vaccines. This is part of our consolidation plan that we had post tech transfer that we are accelerating this now due to the high demand that we're seeing for both vaccines.

On TBE, we have seen a growth in the first half compared to last year. That was primarily due to a strong growth in Q1 which has cooled off a little bit in Q2 due to presumably stocking in Q1, but still a 14% growth overall in the first half of the year.

And importantly, we have seen a market share improvement of 2 percentage points to 30%. I should also mention that the tech transfer of TBE from GSK is now complete.

It's been completed on time, on budget. We're just awaiting the regulatory -- normal regulatory approvals, which we expect to receive by year-end.

So a real success story in terms of our travel health franchise. If you go to the next slide, what we've added to our Travel Health portfolio is a vaccine against Chikungunya.

As I said, it's approved in the EU, U.S. and the U.K., and we have launched now in addition to the U.S., Germany and France with additional launches planned for later this year.

We have applied for an approval with Health Canada. We've initiated one of the post-marketing commitments that we have to initiate a pediatric study and as I mentioned already, we've sold the Priority Review Voucher.

Public recommendations are in place in the U.S. and in Germany and the U.K.

And that's for travelers going to areas where there is a current outbreak or high risk of outbreaks in the future. And we really believe that we're on progress to meet the guidance.

The launch plan is going according to plan. We are seeing some uptake and interest in the vaccine.

And we believe Chikungunya will be a key asset to our Travel Health portfolio in the coming years. If you go to the next slide, this slide almost demonstrates the issue that we have in that it's a very complicated picture of where Chikungunya outbreaks have been seen whether there's historical outbreaks, current outbreaks, there's differences between the CDC's recognition of outbreaks to the WHO.

But the one picture that this says is it's now becoming relatively clear that Chikungunya is misunderstood, is not well understood and is misdiagnosed and underrepresented. It's probably not by coincidence that since vaccines have become available the number of cases and outbreaks of Chikungunya are on the increase.

And if you go to the next slide, that's also true in Europe. And this is a warning, I think, for all health authorities that now in Europe, we're seeing locally transmitted not for the first case, but probably record number of cases of locally transmitted Chikungunya from people, travelers coming back infected and through mosquitoes infecting others.

There are close to 30 clusters or outbreaks and more than 120 cases in France and Italy. And as I said, this should be a warning because with global -- the mosquitoes that can transmit Chikungunya are already in Europe and other parts of the world.

They're just waiting for the right conditions for the virus to spread. And we're already beginning to see that spread and global warming is probably only going to increase that threat.

If you go to the next slide on Public Preparedness. We've seen a strong performance in the first half of the year due to sales to numerous governments but also the supplemental payments from the U.S.

government for the freeze-dried doses that we'd already manufactured and will manufacture moving forward. As I said, we've already secured DKK 3.1 billion in contracts and that will mean even if we stay at that level, we will outperform our base business quite significantly.

We do still see strong demand for our Public Preparedness business. And we have a number of ongoing studies, either in pediatrics, which we'll be reading out in the coming months, which will allow us, hopefully, to expand our label to include the entire population.

Go to the next one, a little bit on the pipeline. So the first program here on our pipeline slide is what we're calling an MVA-BN cell line.

This is based on years of work where we've developed a proprietary cell line that would allow us to change the manufacturing process from eggs to a more robust modern process using cell lines, bioreactors and standard techniques. That process has been developed.

We have been in dialogue with the regulators, and we'll be initiating very soon a Phase II clinical study, which will show the comparability from a safety, immunogenicity point of view of our mpox vaccine produced in the cell line to the traditional way of producing it in eggs. And this is really going to increase our capacity and flexibility to manufacture in the future.

We currently have a process and capabilities with partnerships and our own capabilities to address an mpox outbreak as we have over the last couple of years. The cell line will allow us to -- and I hope this never happens, but will allow us to address a smallpox outbreak globally.

We have other programs I mentioned on Chikungunya, sorry, I should use the right word, Chikungunya vaccine. We have a number of post-market commitments.

One we've already initiated with the pediatric study, a second is to demonstrate efficacy. But there while we're doing all the preparation work, we have to wait for an outbreak in a certain therapy before we can perform.

And we have a number of other programs in early stage for Lyme and Epstein–Barr virus, which we will be moving into the clinic next year. And with that, I will hand over the presentation to Henrik Juuel.

Yes. Thank you very much, Paul.

So on the next slide, that is Slide 10, let's have a quick look at the commercial performance for the first 6 months of the year. For the first quarter, for the second quarter, we delivered 16% growth comprised of 35% growth from our Public Preparedness business and 5% from our Travel Health business.

If we start with the Public Preparedness business, that corresponded to DKK 917 million in revenue for the quarter and approximately DKK 1.5 billion and a little more DKK 1 billion in revenue for the first 6 months more or less precisely half of the order book that we have already secured for this year. And you can say, at the level of the low end of the annual base business that we have communicated to the market within our Public Preparedness business.

So a good year for our Public Preparedness business, where we are executing on the order book that we have created so far. If we then look at the Travel Health business, so 5% growth for the quarter.

That is driven to a large extent by our rabies vaccines, Rabipur/RabAvert that continued the very strong growth we have seen in the last quarters. This quarter, it was 26% and actually taking us to 37% growth for the first 6 months.

Paul already alluded to some of the key drivers behind this strong growth, modest growth in the U.S. market growth, but a 7 percentage point market share increase if we compare year-over-year.

Encepur, our TBE vaccine delivered negative growth of 16%, which was, to a large extent, anticipated after a very strong first quarter, where we have indications that there were inventory buildup at wholesaler levels. So if we look at the first 6 months, that has sort of evened out, and we are actually delivering a 14% growth from Encepur first 6 months compared to last year.

And key growth drivers here is really strong market growth in Germany, reflecting the endemic expansion, 15% growth. I will focus on year-to-date DKK 96 million versus DKK 98 million last year, so close to last year's level, but not fully there.

We are not too happy with the performance of this product and we have taken measures to drive stronger performance in the market. And actually, over the last few months, we have achieved to win a couple of percentage point market share.

However, unfortunately, in a declining market, the typhoid market in the U.S. has been declining the last few months.

And as we are approximately a 20% market shareholder, it's not within our reach to drive the market. We are fighting for market share and the measures we have taken so far seems to work.

So we are definitely hoping to bring this product back to where it should be. Vaxchora, down compared to last year where we, last year, had the opportunity to participate in an outbreak and supply our product there.

So not 100% fair comparison this time. Vimkunya, DKK 13 million after 6 months.

Paul talked to where we have launched U.S., France, Germany, where we have launched recently. So we are still in the launch phase, but we are confirming our expectations to the full year of between DKK 50 million and DKK 100 million.

And we can see that actually the overall awareness in the market of the criticality of Chikungunya viruses is increasing. So we are very confident that we will deliver on our targets that we will -- with Vimkunya have a great opportunity and a good growth driver for the years to come.

Other revenue which is driven by the contract work that we do for various governments. I think this time mainly this is the equine encephalitis program, sponsored by the U.S.

Department of Defense. So that fluctuates a bit between quarters.

And this time, it ended at DKK 66 million for the first 6 months. So altogether, close to DKK 3 billion in revenue to 33% up compared to prior year.

Before I turn to the next slide, just a reminder that we are going to phase out the partnership with Valneva, where we have a Japanese encephalitis and a cholera vaccine which will come to an end by year-end this year. But also our agreement with Dynavax on the hepatitis B vaccine is coming to an end by April next year.

All handled in good cooperation with our partners, but just to remind you that these products will leave our portfolio with these deadlines here. On the next slide, full P&L where we talk to the revenue.

So I will start here with the gross margin, 55%, which is a significant improvement over the 44% order to compare them quarter-by-quarter. It's 50% last year, and that is really due to a continued trend from the first quarter.

We saw manufacturing getting into more routine manufacturing, improving both the success rates on the batches produced, but also improving the yields. So a good quarter, not a good quarter from a manufacturing point of view.

R&D costs very much driven by the committed trials. Paul alluded to on Chikungunya also to a little extent, our initiatives on Lyme and EBV, but these are still early stages and not that expensive yet.

On a 6-months basis, we have spent on R&D DKK 465 million, which is approximately corresponding to the DKK 900 million we have indicated for the full year. SG&A costs, DKK 250 million close to that for the second quarter.

Our focus here is very much on the launch of Vimkunya, our Chikungunya vaccine. And if you look at the first 6 months, we have spent nearly DKK 500 million.

So it's up approximately DKK 50 million compared to same period last year. That number is going to be higher for the second half year as we are ramping up the spend behind the launch of Vimkunya.

In the U.S., we are still awaiting the publication of the MMR ACIP recommendation, but gearing up the investments behind the launch, and we are going to launch in more countries in the second half of the year, which will require investments as well. So if we look further down the P&L, the quarter delivered an EBITDA margin of 33% and for the first 6 months, 32% to strong EBITDA margin again, driven by a good manufacturing period, but also explained to some extent by back-end loaded sales and marketing costs that we will see in the second half of the year.

So strong financial performance for the quarter and for the first 6 months. Let's turn to the next slide here, where we look at the cash flow and the balance sheet for the period.

What we saw in the first half year was positive cash flow from operating activities, obviously driven by positive net profit to some extent, offset by a negative development in working capital, as we have seen so far this year an increase in inventory, which we expect to be reduced in the second half of the year. Cash flow from investment activities mainly driven by the milestone payments we have recognized to both emergent USD 50 million.

These have been paid as well, but also the recognition of the final milestones to GSK of EUR 100 million. The milestones to GSK, they have been recognized has achieved, but they have not been paid out yet and will be so in Q3 for EUR 30 million of EUR 100 million, and the remaining part, the EUR 70 million will be paid in the beginning of '26.

So if we look at the balance sheet, I will only highlight our cash position there. So close to DKK 1.7 billion what we hold in cash and cash equivalents.

As I said, we still own USD 100 million to GSK, but we also have the net proceeds from the sale of the PRV of DKK 810 million, which has already been arrived at our bank account here in July. So continued very solid financial position as well.

Next slide, our outlook for '25. Based on the strong continued performance from the Travel Health business and more visibility on Public Preparedness business, we have decided to refine our guidance and basically narrow the revenue interval that we guide.

Previous guidance set revenue between DKK 6 billion and -- sorry, DKK 5.7 billion to DKK 6.7 billion, and we are now refining that to between DKK 6 billion and DKK 6.6 billion, so increasing the lower end but also narrowing the window. The EBITDA margin, excluding the voucher, remains unchanged.

It will be between 26% and 30% for the full year. And when we include the proceeds from the voucher of DKK 810 million, this EBITDA margin will change from 40% to 42%.

And below on the slide here, you can see how the guidance on revenue stacks up between the different business areas here. So Travel Health, we are increasing our expectations from DKK 2.5 billion to DKK 2.750 billion, basically driven by the strong performance by both our rabies but also our TBE vaccine.

Public Preparedness, given the more -- the higher degree of visibility we now have, we are narrowing the window to between DKK 3.1 billion and DKK 3.7 billion. And remember here, that the low end of this guidance has already been secured by contracts.

So a refinement of our guidance within the already existing one. Final slide from my side.

As Paul mentioned in the beginning of the meeting, the focus of this call here is really on our results and our progress year-to-date in the business. But of course, we can't have this call without just mentioning and giving you an update on the takeover offer.

So I'll just spend 2 minutes only on this. I assume you're all aware of the content of the offer.

The consortium Innosera based on consisting of Premier and Nordic Capital will make an all-cash offer on Bavarian Nordic of DKK 233 per share. This is coming out of a very intense process involving negotiations and due diligence, et cetera, and ended up being a recommended offer.

So what can we expect now in the next following weeks here? We are anticipating that the consortium next week when the 4 weeks review by the Danish Financial Supervisory Board is over that they will announce comprehensive offer documents laying out the detail of the offer.

And with that, our Board will have an obligation to announce a Board statement -- comprehensive board statement basically reflecting on the offer and the process behind it. So a lot of the questions that we have been faced with at the moment, I think, will be answered by these documents that we are expecting to be announced at the latest Tuesday next week.

So I think that is what we were planning to say about the offer today. So I will give the word back to the operator and ask for Q&A.

A couple of questions from my side. So first of all, what's the reason why we've not communicated any payout -- dividend payout, share buybacks with excess capital, you now have following the PRV sale.

I don't think it sort of fully fluctuate with previous communication. I understand the current M&A process.

But is there another underlying reason for this? And then just on the margin guidance for the year.

You speak to 26%, 30% adjusted EBITDA, you are now at 32% for H1, which sort of implies an EBITDA for second half below 25%, just to get to the sort of midpoint level here. Immediately P&L, I think the product mix looks very balanced between travel and JYNNEOS for H1 and H2, you live the low end by some DKK 300 million on revenue and also R&D seems quite nice split between the 2 halves.

So any color here to make me understand why you're still at 26% at the low end would be appreciated. And then my last question, just on the R&D cost outlook.

Can you maybe just try to break down the approximate cost related to this pending Chikungunya outbreak study just for me just to get a better understanding on the potential impact to R&D cost guidance of DKK 900 million for the year. which could be phased into 2026, depending on whether you're able to start that study in H2.

Okay. Thank you, Thomas.

This is Henrik. Let me try to answer these questions.

First of all, I think what we have communicated previously with regards to potential payout is that we, first of all, we need to pay back to GSK and Emergent BioSolutions. And then we would, in the autumn come back to the market and on the back of these payments, consider potential share buybacks.

So that is, in principle, still the case. But of course, right now, we have a process ongoing which means that we cannot go out and do share buybacks until that has been resolved.

Next question to margin guidance. You're absolutely right.

And I think what explains how can we go from 32% year-to-date to 26% to 30% by year-end. The main explanations for that, as I tried to explain when I showed the P&L is that we have had first 6 months with very good success in manufacturing.

So second quarter, 55% gross margin. Can we continue that?

I think then that is an upside to our EBITDA margin, but there's no guarantee. We are working with biological manufacturing.

And then as I also explained, our sales and marketing costs are very back-end loaded, both in the U.S. where we have already launched but also in the other markets where we are about to launch.

So therefore, we are still sticking to our margin expectations of 26% to 30% for the full year. On R&D, we do not normally comment on cost of specific studies.

We haven't done that in the past for Chikungunya here. So I can't really say that, but it's still our expectation that our full year R&D spend will be around DKK 900 million.

Two questions, please. The first on your Public Preparedness business.

So I see that the big part of the revenue guidance for 2025 is based on contributions from here. But I'd like to ask if you see any risk for further reduction of contracts given that we see a revenue decrease in this half of the year and what risks do you see here?

And I also want to discuss maybe your thoughts on the recent Chikungunya outbreaks and whether you can comment on revenue splits that we see in the relevant geographies given that the launch now is in Germany and France.

I'm not sure we got the first question. That was regarding Public Preparedness business where you talked about a decline in loss of contracts?

Or could you please repeat?

Yes. I was wondering if you see any risk for further reduction of Public Preparedness contracts in the next half of the year.

Yes. Could you elaborate on further, please?

So yes, maybe loss of contracts U.S., things like this. Just any color.

Also on the narrowing of the guidance perhaps.

Yes. Okay.

First of all, we haven't lost any contracts. When we guided in the beginning of the year, we guided DKK 3 billion to DKK 4 billion in a situation where we have an outbreak in Africa.

And I think we were anticipating probably more orders for Africa, to be honest. We have got 1 million dose order to Africa that we are executing upon.

But we haven't since then received any more orders. Fortunately, we have a good mix of different customers.

So we already have an order book of DKK 3.1 billion. So we are into that interval between DKK 3 billion to DKK 4 billion.

And there are still dialogues and further upsides but we also have to realize that we are 8 months into the year. So therefore, I think we believe it's prudent to say that we have an interval now of DKK 3.1 billion to DKK 3.7 billion.

And then to your second question was regarding the country split between Chikungunya. I think that is really too early to say.

I think we are just at the beginning of the launch in these countries. And the revenue that we see is mainly supplying into the whole supply chain to start with.

So it's very early days. But I think we can add so that we are actually seeing an increasing awareness probably beyond what we could have dreamt of when we developed this product here.

No one knew about Chikungunya, now we see outbreaks in a number of countries. We see the media picking up these stories.

So there is an increased awareness, which we believe will translate into more business opportunities in all these markets.

Yes. Let's take the next question.

Just as a quick follow-up here. So when we look at Rabipur right now it, of course, seems like going somewhat more or better than previously expected growth rate.

So can you maybe just update us when should we sort of expect you to have used the GSK produced inventory? Are we still going to be sort of see a gradual 15, 20 basis point improvement to gross margins over a 1- to 2-year time frame?

Or is this maybe going to speed up a bit here?

That's a good point, Thomas. And I think the situation right now is that we are manufacturing at the rabies product end-to-end at Bavarian Nordic and that has all been approved by the regulators.

But we are still sort of phasing the GSK products out of the system, but actually starting to ship our own manufacturing products. So we should be selling our own products towards the end of this year or into next year, so that as we have guided the market previously, full year impact from 1st of January '26, at least where we will see the improved margins from the rabies business.

Okay. Got it.

And then maybe another follow-up just on Encepur. So of course, that's overly surprising maybe that you see decline here in Q2 compared to the very strong Q1.

So is there anything -- I know there's a lot of noise with inventory stocking. So are we sort of going forward?

Should we expect Q1 to be the stronger quarter going forward? Or was there something sort of special item at play here in first half that made that Q1 so strong.

Maybe I can take that one. Thomas, so well, I guess the short answer is we don't know.

Typically, as you just indicated, Q2 is the strongest because that's the peak of the season for the vaccination. Sometimes the season can start earlier, which is why you see these fluctuations moving.

But I think what we believe happened in Q1 this year is that there was some stocking by the wholesalers because there was a price improvement -- price increase that we put in place. So most likely, we will return to what we've typically seen is a ramp-up in Q1 and Q2 being the peak.

Thank you. Thanks, everyone, for joining the call and for the questions.

Have a great weekend. Thank you.

Bye.