Bavarian Nordic A S

Good day and thank you for standing by. Welcome to the Bavarian Nordic half-year report Q2 for the six-month period ended 30th of June 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I will now like to hand the conference over to your speaker today, Rolf Sørensen, Head of Investor Relations. Please go ahead.

Thank you, Operator, and welcome everyone to this, our Q2 update from Premier 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 Juul, that 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 walkthrough 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 assurances and other factors, many of which are outside 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 Q2 report for 2025. The focus of today's presentation 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 moving forward, as I said, the focus really is on our financial performance. So if you turn to slide three, we've had a very strong performance in the first six 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. Vinconia has been approved, obviously in the US, Europe, and UK, and we are launching, according to plan, and currently have launched in the US, Germany and France and are on track to meet the guidance for this year. For public preparedness, we've already secured 3.1 billion kroner of contracts. And what that means is that represents at least our base business that we've communicated previously is one and a half to two 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 810 million kroner. And when you take that, into consideration that would improve our EBITDA margin by year end to 40, 42%. So a really, really strong six months, balanced growth across the portfolio, and an exceptional performance by the company. 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 five years ago, we decided to commercialize the business by acquiring assets, 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 Bavaria Nordic, we would be able to turn these assets around. And here we are again today reporting very strong growth, primarily driven by rabies and TBE, demonstrating that this strategy that we created five 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 two 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 at 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 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 the consolidation plan that we had post-tech transfer, but we are accelerating this now due to the high demand that we've seen 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 two 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 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, US and the UK. And we have launched now in addition to the US, 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 US and in Germany and the UK. And that's for travelers going to areas where there is a current outbreak or a high risk of outbreaks in the future. And we really believe, so 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 they're 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. 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. We're 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 warming, 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 gonna 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 US government for the freeze-dried doses that we'd already manufactured and will manufacture moving forward. As I said, we've already secured 3.1 billion kroner 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, even 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 slide, a little bit on the pipeline. So the first program here on our pipeline slide is what we're calling MVABN 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 two 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 endpox 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 CHIC 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 perform. And we have a number of other programs in early stage for Lyme and Epstein-Barr virus, which will be moving into the clinic next year. And with that, I will hand over the presentation to Henrik Juel.

Yeah, 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 six 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 917 million Danish kroner in revenue for the quarter and approximately one and a half and a little more billion Danish kroner in revenue for the first six 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 book patterns 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 and Rabiret, 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 six months. Paul already alluded to some of the key drivers behind this strong growth, modest growth in the US market growth, but a seven percentage point market share increase if we compare year over year. Insipor, our TBE vaccine, delivered negative growth of 16%, which was to a large extent anticipated after a very strong first quarter where we had indications that there were inventory buildup at wholesaler levels. So if we look at the first six months, that is sort of evened out, and we are actually delivering a 14% growth from in support the first six months compared to last year. And key growth drivers here is really strong market growth in Germany, reflecting the endemic expansion, 15% growth. VivoTIF, I will focus on year-to-date, 96 million Danish kroner versus 98 last year, so close to last year's level, but not fully there. We are not too happy with the performance of this product here, 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 markets here. However, unfortunately, in a declining markets. The typhoid market in the US 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. Vexcora, 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. Vimkunja, 13 million after six months. Paul talked to where we have launched US, 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 50 and 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 and that we will, with Vimkunja, 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 66 million for the first six months. So altogether, close to 3 billion Danish kroner in revenue, 33 percent 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 Vannevar, where we have a Japanese encephalitis and a cholera vaccine, which will come to an end by year and 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 this product 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%. 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 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 Chicken Cognac. Also, to a little extent, our initiatives on lime and EBV, but these are still early states and not that expensive yet. On a six-month basis, we have spent around 465, which is approximately corresponding to the 900 million we have indicated for the full year. SG&A costs 250 million, close to that, for the second quarter. Our focus here is very much on the launch of Vimkunja. or chikungunya vaccine. And if you look at the first six months, we have spent nearly 500 million. So it's up approximately 50 million compared to the 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 US, 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 six months, 32%, so 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 six 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 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 the merchant 50 million US dollars. These have been paid as well. But also the recognition of the final milestones to GSK of 100 million euros. The milestones to GSK, they have been recognized as achieved, but they have not been paid out yet and will be so in Q3 for 30 million of the 100 and the remaining part, the 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 1.7 billion Danish kroner is what we hold in cash and cash equivalents. As I said, we still owe 100 million euros to GSK, but we also have the net proceeds from the sale of the PRV of 810 million Danish kroner, which has already been arrived at our bank account here in July. Continued very solid financial position as well Next slides 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 the revenue interval that we guide Previous guidance says revenue between 5.7 to 6.7 trillion Danish kroner, and we are now refining that to between 6 and 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 percent for the full year. And when we include the proceeds from the voucher, 810 million Danish kroner, 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 2.5 billion to 2,750,000. basically driven by the strong performance by both our rabies but also our TBE vaccine. Public preparedness, given the higher degree of visibility we now have, we are narrowing the window to between 3.1 and 3.7 billion Danish kroner. And remember here that the low end of this guidance has already been secured by contracts. 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 two minutes only on this. I assume you're all aware of the content of the offer. The consortium Inocera, consisting of Pemira and Nordic Capital, will make an all-caste offer on Pemira Nordic of 233 kroner 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 at the next following weeks here? We are anticipating that the consortium next week, when the four weeks review by the Danish Financial Supervisory Board is over, that they will announce a comprehensive offer documents laying out the detail of the offer. And with that, our board will have an obligation to announce a board statement, a comprehensive board statement, basically reflecting on the offer and the process behind it. So a lot of the questions that we are being 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's.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will now take the first question from the line of Thomas Powers from SEB. Please go ahead.

Yes, great. Thank you very much. A couple of questions here from my side. So first of all, what's the reason why you've not communicated any dividend payouts, share buybacks with excess capital you now have following the PRV sale? I don't think it's fully saturated 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 the 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 Geneos for H1 and H2. You lift the low end by some 300 million on revenue, and also R&D seems quite nicely split between the two halves. So any color here to make me understand why you're still at 26 as 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? For me, just to get a better understanding on that. on the potential impact to R&D cost guidance of 900 million for the year, which could be phased into 2026, depending on whether you're able to start that study in H2. Thank you.

Okay, thank you, Thomas. Mr. Senrek, 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, the margin guidance. You're absolutely right. And I think what explains how can we go from 32% yesterday 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 six 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 US 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 percent 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 900 million Danish kroner.

Okay, great. Thank you very much.

Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone. The next question comes from Romy O'Connor from Van Lanscott Kempen. Please go ahead.

Hi. Thank you for the presentation. Two questions, please. The first on your public preparedness business. So I see that the big part of the revenue guide for 2025 is based on contributions from here. But I would like to ask if you see any risk for further reduction of contracts, given that we see a revenue decrease in this half the year, and what risks do you see here? And I also want to discuss maybe your thoughts on the recent Chikagunya outbreak and whether you can comment on revenue splits that we see in relevant geographies, given that the launch now is in Germany and France. Thank you.

I'm not sure we got the first question. That was regarding public preparedness business, where you talked about a decline and loss of contracts. 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.

Could you elaborate on further, please?

So, yeah, maybe loss of contracts with the U.S., things like this. Just any color. Also on the narrowing of the guidance, perhaps.

Okay, first of all, we haven't lost any contracts. When we guided in the beginning of the year, we guided 3 to 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 group of 3.1 so we are into that interval between 3 to 4 and there are still dialogues and further upsides but we also have to realize that we are eight months into the year so therefore I think we believe it's prudent to say that we have an interval now of 3.1 to 3.7 billion Danish kroner. And then your second question was regarding the country split between Czech and Konya. 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 to that 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.

Thank you.

Thank you. There are no more questions on the phone. I would like to Now to turn the conference back to Paul Chaplin for closing remarks. My apologies, there is another question. Should we take it?

Yes, let's take the next question.

Thank you. The next question comes from the line of Thomas Bowers from SCB. Please go ahead.

Oh, thank you very much. Just a quick follow-up here. So when we look at Rappapur right now, it, of course, seems like going somewhat more or better than usually 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 like see a gradual 15-20 basis point improvement to gross margins over a one to two 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 the rapiers product end-to-end at Bavaria Nordic, and that has all been approved by the regulators. But we are still sort of flossing 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 rapist business.

Okay, got it. And then maybe another follow-up just on Insipur. So, of course, not overly surprising maybe that you see a decline here in Q2 compared to the very strong Q1. So if there's anything, I know there's a lot of noise with inventory starting, 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-like style here in the first half that made that Q1 so strong?

Maybe I can take that one. So hi, Thomas. 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 simply because there was a price improvement, price increase. that we put in place. So most likely we will return to what we're typically seeing, the ramp up in Q1 and Q2 being the peak. Okay, got it.

Thank you very much.

Thank you. There are no further questions. I would like to hand back over to Paul Chaplin for closing remarks.

Thank you. Thanks everyone for joining the call and for the questions. Have a great weekend. Thank you. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.