Bavarian Nordic A S

Welcome everyone to this Q1 update from Bavaria Nordic on a lovely green day. My name is Rolf Sandsen from Investor Relations and today in this conference call we also have Paul Chapin our CEO and Henrik Juul CFO to give the presentation and comments to all the questions you may have to the session we have as usual afterwards. As you may recall, last time we had some issues for some analyst investors having difficulties getting through with questions. If you realize difficulties getting through, please give me a call or send me a text so I can manage to get your questions to management if it's not possible to get through. But before we start this presentation, please note that this announcement includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside our control, but would cause actual results to differ materially from 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. So with this, I will hand it over to you, Paul, to start the Q1 presentation.

Thanks, Rolf, and welcome everyone to our Q1 earnings. If you turn to slide three, we've obviously had a tremendously strong start to the year. I'll let Henrik talk about the numbers in a few slides time. But basically, we recorded almost 1.4 billion kroner in revenue, representing a 62% growth compared to this time last year. And we've established an EBITDA margin of 31%. So as I said, extremely strong start to the year. And that's due to all parts of the business. So on travel health, We saw a strong start, which I'll go into more details. And on public preparedness, we had originally said it would be a light quarter for our public preparedness due to the back-end loaded nature of the existing orders. We were, however, able, due to a strong manufacturing performance, to bring some orders forward, allowing us to record these strong numbers. And importantly, we've already announced a new order from the U.S. government, which while helps the revenues this year, is really securing good solid revenues for 26. In addition to the strong financial performance, we've also launched a chikungunya vaccine, vinkunya, where it's been approved in the US, Europe, and also in the UK. In terms of the next slide, as I said, the performance of the public preparedness was due to existing orders that we already had in the books. But we were able, as I said, due to the excellent manufacturing performance to bring forward certain deliveries. We have, as I said, secured this order from BARDA for 144 million US dollars. That does allow us to secure or increase the existing contracts on the 2.5 billion kroner to 2.65 billion kroner. So a little bit short of the bottom end of the guidance for the public preparedness this year, but we're still incredibly confident that we will be able to secure new contracts We are currently negotiating a new framework agreement with HERA, and we're also in negotiations with a number of different governments around the world. We continue to manufacture at full scale, meaning that the timing of new orders will be fine in that we have inventory and stock on hand. In addition to the strong performance, we've also had the approval for our freeze-dried version of Jenaeus. That's going to be incredibly important moving forward, as the U.S. government is only going to be stockpiling freeze-dried. That's helped secure the recent order we just announced, but obviously we will, in the coming months, start negotiating for a new contract that will replace the existing contract. If we turn to the next slide, on travel health, we've really seen a strong performance. I will leave it to Henrik to talk really about the various different numbers, but we've seen strong performance for rabies, TBE, and other vaccines such as typhoid. And even within CUNY, we've recorded our first sales rapidly after the approval from the FDA, and actually even before the recommendation from ACIP. What we're seeing in terms of travel health is the market has grown. We've seen strong brand performance in various different areas where we've seen market share gains. This together with some stocking from wholesalers really tells the picture of a very strong performance in Q1. So let's go to the next slide. This is some data from some external data which is predicting that vaccine sales will grow 6% year on year between now and 2030. The interesting thing is when you start looking at the different vaccine sales sectors, it's the travel health that really shows the strongest growth of 20% over the coming years. And I'll get into some of the reasons for that growth. But basically, in travel health, it's more resistant to some of the vaccine skepticism that we see is on the rise. Mainly, this is because people who are seeking vaccination for travel are already convinced about the need for vaccination. And it's also due to a number of new vaccines that are thought or believed that will be introduced in the coming years, including chikungunya. So it's an extremely exciting sector to be in, and one that we actually identified way back in 2020 when we bought the original first couple of assets from GSK. Let's go to the next slide, slide seven. One of the areas that we, that explain this growth in travel health is that for certain vaccines, such as the tick-borne encephalitis vaccine, ENCIPOL, we see an expansion of the endemic regions. So what you're seeing here is a graph of Germany. The red area are areas which are at high risk of the infected ticks. The orange areas are areas that are where ticks infected ticks are being found and are expected to become red or endemic in the years to come. And this is a picture that we also see in Sweden and in other areas of the Nordics and Baltics, is that the endemic region is expanding. Therefore, the growth that we're seeing in TBE is expected to continue as the endemic regions continue to expand. If we go to the next slide, another reason for strong growth in travel health will be the emergence of new vaccines addressing unmet medical needs. And one of these areas is chikungunya. Obviously, vincunya, our chikungunya vaccine, has now been approved by the FDA, but it's also approved in Europe and by the UK. And we've made a filing application to Health Canada. We expect the approval next year. I already said it in the beginning, we've seen some initial sales as we launched in the US very rapidly post the approval, almost a record for the industry, I would say. And we are gearing up for the launch in Europe in the coming weeks. With the approval comes some commitments to the regulators and we will be initiating studies in children and also an efficacy study or a planned efficacy study later this year. And as I said, we are gearing up for launch very, very soon. To go to the next slide, we really feel that Vinconia is well positioned to become the preferred choice for travelers who are potentially at risk of getting chikungunya. The reason for this is, Vinconia is based on a viral-like particle technology, which means that it cannot cause an infection. And so it's designed specifically to be safe, particularly for populations who may have a weakened immune system or the elderly. The data that's been generated for the approval shows a very rapid onset of protection within one week. So these are very, very important in terms of the favorable safety profile, the rapid onset of protection, and the fact that it's in a pre-filled syringe makes it the preferred administration for healthcare professionals. As we launch and are launching the product, our focus is to ensure that we get solid recommendations from the authorities, drive awareness of the dangers of chikungunya, and also to try and promote the benefits of vincunia. If we go to the next slide, talk a little bit about the pipeline. We have a number of programs in our pipeline. One is for converting our manufacturing for mpox, smallpox vaccine away from eggs into a proprietary cell line. This is something that is really innovative. It's going to improve yields, improve our capacity, ensuring that not only can we deal with future Mpox outbreaks, but God forbid that if smallpox was ever re-emerged, we would be able, with partners, to deal with a global pandemic. We have agreed with the FDA a regulatory path. And part of this includes performing a clinical study to show that the product produced in the cell line is the same as the product produced in eggs. And this study will start later this year. On chikungunya, we do have some commitments, as I mentioned. We'll be initiating a pediatric inefficacy study later this year. We have a fully funded program from the US Department of Defense for equine encephalitis. And our two new targets, Lyme and Epstein-Barr virus, are, as planned, gearing up to enter the clinic next year. And with that, I will hand over the presentation to Henrik Juul. Yeah, thank you very much, Paul.

And on the next slide, we will start with a breakdown of the commercial performance for the first quarter. So as already said, fantastic quarter with strong growth of 62%. in total revenue versus prior year, and basically driven by strong performance in both our business segments, public preparedness and our travel health business. Public preparedness, 83% up compared to prior year, driven by executing orders that we secured already last year. And as Paul also said, we had expected on public preparedness a somewhat more light corner, With a lot of efforts from our organization, we managed to pull some of these forward to secure earlier revenue. So very good performance there. Travel Health delivered 52% growth over prior year and mainly driven by our rapist and our TBE businesses that showed extremely strong growth of 53% and 62% respectively. The rapist business was grown basically, again, the market continues to grow. um we have gained market shares in key markets both in the us where we are have gained five percentage points back to 77 percent of the market and in germany we have seen significant growth when comparing to q1 of 24 where there was some supply constraints in some of the european markets and on top of of that significant market growth we have also regained markets here in the german market So we today have 97% of that market. So very strong growth from the grapevius business. On TBE, Paul already alluded to the endemic expansion, and we have really seen the impact of that with a market growth of 17%, pure market growth, and the comparison of apple to apple, really, because we have no supply constraints within this part of the business last year. So very nice market growth. And on top of that, we could add a two percentage point market share gain in our largest market, Germany. So very strong growth there. In Germany, I have to say both our rapist and TV business was slightly impacted by some wholesalers stocking up. Whether that is something that will have a negative impact going forward or not is still to be seen. Typically, wholesalers can also stock up. on a more permanent level when they see there is an uptick in demand in the market. So very, very strong indications, very strong performance from these two products here. VivoTIF Vaxcora remains to be in the relaunch phase, and we're very pleased that we saw the first Vincunia revenue on the list here in the first quarter in record time after we got the approval in the US and even ahead of the ACIP recommendation. we managed to supply into the market and we caught revenue of 5 million, the Danish Krona here. So altogether, 1.3 billion and 47 million in revenue for the first quarter, up 62% compared to prior year. On the next slide, you will see a full profit and loss. And there I will start mentioning, first of all, our Gross margin, we talked about the revenue already. Gross margin of 51%. That is 2% or better than our full year performance last year. And basically, it reflects a more smooth period within manufacturing, where we have seen better yields. We have seen higher success rates, et cetera, which is obviously very good for the margins. R&D costs, slightly lower than last year. and back-end loaded this year. As you will recall, we have guided to spend approximately 900 million Danish kroner this year, so a relatively low first quarter. It's back-end loaded, and most of the project R&D costs will be spent on post-licensure committed trials on Chikungunya. SD&A costs went up from 209 to 250. And it's really driven by the launch of Chikungunya, but also the Bari Nordic expanding into new markets like the UK, Canada, France, and these markets really to support the launch of Chikungunya, but also to support taking back products from our partnership with Maneva. So adding all of this together gives an EBITDA of 420 million Danish kroner or a margin of 31%. So very strong level of profitability in the quarter. Next slide. Just want to use this slide to remind you about what we promised you at the Capital Markets Day last year with regards to the gross market improvements. As you know, we are tech-transferring our two products, the rabies and TBE vaccines from GSK to Bayer and Nordic. And in that process, we are expecting to improve the gross margins. as we take full control, and we will no longer be paying a premium to GSK, and we can harvest some of the process benefits as well. So we are planning a 30% reduction in cost of goods sold on these two vaccines, which eventually will translate into a 15 to 20 percentage point improvement in gross margin. It will come stepwise. We have completed the transfer of the the rabies vaccine already, but we need to floss out the GSK-based inventories before we start seeing a real impact from that. The TBE tech transfer is coming right behind, and we are planning to finalize that over the next few months here. And then the same goes for the TBE vaccine. We need to floss out GSK inventory. So we will start to see some impact late this year from rabies. full impact radius next year then we'll start to see impact from TPE and from 27 we should see a full year impact of this 15 to 20 percentage point improvement in gross market and remember these two products last year together we had a revenue of 1,850,000,000 approximately. So you can do your math and see what those 15 to 20 percentage points mean in terms of overall EBITDA levels. It's a significant contribution to our future profitability as a company. Next slide. A few words on our cash flow and balance sheet for the period. We saw negative cash flow from operating activities. We had a positive net profit, but that was more than offset by an increase in net working capital. and networking capital primarily driven by a reduction in current liabilities as we paid a milestone to GSK that was recorded the previous quarter but not paid, so it ended up being a current liability. Cash flow from investment activities that is mainly consisting of a milestone payment to Emergent Biosolutions, or actually two, of a total of 50 million US dollars related to the approvals by EMA and by FDA of our Wim Cunha vaccine. So you will see all of these milestone payments are going through the system as we speak right now. To the right, securities, cash and cash equivalent, you will see we have right now approximately 1.2 billion Danish kroner. We still owe GSK the last milestones related to the finalization of the transfer of the TBE vaccine. And in total, we owe them approximately 739 million Danish kroner. We also have an amount still not paid included in current liabilities of 20 million U.S. dollars to Emergent BioSolutions. But as you will see on this page here, we have sufficient cash to honor those commitments that will take place over the next few months as we finalize the tech transfer. On the next slide, I just want to remind you on that one that we are reiterating or confirming our full year guidance for the year, so we are still expecting revenue between 5.7 and 6.7 billion Danish kroner and expect to end the year with an EBITDA margin between 26 and 30 percent. I will on this slide here just highlight, and you can see here that now The level of secured orders in our public preparedness business now stands at 2,650,000,000, as there was 150,000,000 Danish kroner impact from the recently announced option that was exercised by BARDA. So, a contribution to 25, but primarily securing the business for 26 from that order. I would also like to highlight on this slide here as well, as you will have seen, the US dollar, has depreciated in value against Euro and Danish kroner over the last period here. And when we did the guidance, we assumed a level of seven Danish kroner per US dollar. Right now it's around 6.6, so it has declined. But we have hedged all known exposure in US dollar, so therefore it should have no material impact on our guidance for this year. So with that, I'll just end up saying great start of the year. We can confirm the guidance. I think we have made some very important company announcements recently, particularly on our tic and conga regulatory process, but also securing business with the US government. Some for this year, but also for next year. So with that, I will open up for Q&A. So operator, please open for Q&As.