Bavarian Nordic A S

Good day and thank you for standing by. Welcome to the Bavarian Nordic Q2 and a half year report for the six month period ended 30th of June, 2026 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 one one on your telephone. You will then hear an automated message advising Johannes Reiss. To answer 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, CEO Paul Chaplin. Please go ahead.

Thank you and welcome everyone to our half year conference call. Today we've announced our Q2 results and before I go into them, and then hand over the call to Henrik Juuel, the CFO. Obviously we've announced tremendous results today, driven by very strong growth across the whole commercial portfolio. And before I get into those numbers, I just wanna say these sort of numbers don't happen by chance. It's an endorsement of our strategy, but more importantly, it's an endorsement of our employees and their hard work and dedication, but also our partners around the world and other healthcare professionals who work together with the Verenordic to really ensure that we improve the access to our life saving vaccines. So for the first half year, we've reported just over 3 billion kroner in revenue and an EBITDA margin of 35%. As I said, this really equates to a tremendous result. On travel health, we've seen a tremendous growth of 26% for the first six months. and actually 45% for the second quarter. And that's driven for the whole portfolio, but primarily driven by rabies and TBE, the first assets we acquired back in 2020, but also by a very successful launch for our chikungunya vaccine, vincunia. We have received additional approvals in both Switzerland and Canada for vincunia. and we've continued to launch in different countries and now have 15 countries where we've launched the product and that launch plan will continue into the second half of this year. And I would say is going faster than the original plan that we set out last year. Importantly, these numbers are also contributed by our public preparedness business, which is exceeding our base business of one and a half to 2 billion. and we already have contracts worth 2.3 billion in the books for this year. And this strong performance that we've seen in the first six months is leading to an upgrade in our guidance, which Henrik will talk more about in the coming slides. But essentially we're confirming the approximate upper range of 5.7 billion in revenue and an EBITDA margin of around 30%. We are also coming off the back end of a very strong cash position. And because of that, we have decided to launch another share buyback program up to 750 million Krone. So as I said, very, very strong financial numbers driven by very strong commercial performance across the board. And that is translating into improved access for people who want to receive our life saving vaccine. Let's go to the next slide, slide six. So as I said on travel health, we're really seeing a strong performance, 26% growth compared to this time last year, first half of the year. And if we look at rabies, we are really seeing a strong growth, 40% growth for rabies. If we look at both US and Germany, our key two markets, these are both above 20% and we have very strong market share. and maintaining that strong market share in both those key markets. But also there is outstanding growth in other markets in Europe with a 91% improvement compared to last year. And this I have to say comes down to strong brand performance and an endorsement of our strategy of turning these assets around. We are also obviously seeing continued outbreaks of rabies in the U.S. but I would say we're now moving into the fact that travelers are really much more aware of the devastating effect of rabies and rabies is becoming one of the standard choices of travel health vaccines. On TBE, we've also seen strong growth compared to this time last year and we're seeing a slight improvement in our market share in the key market in Germany. And importantly, and we've talked about this in previous quarters, We have extended the shelf life now to 24 months based on the latest data, and we believe that will have improvements moving forward in terms of our sales. While I'm focusing on this slide to really only talk about rabies and TBE, we shouldn't forget that we are also seeing performance with Vivatif and Vaxcora, our other assets within the Trouble Health portfolio. Go to the next slide, slide seven. On Vinconia, we are still very much in the launch phase. And we obviously, as I already mentioned in the first slide, we've seen additional approvals in both Switzerland and Canada. Switzerland, we've already launched, bringing the total number of countries where we've currently launched to 15. And Canada, hopefully, will be launching later this year. We've also submitted the dossier with our partner Europharma in Brazil. which is the first stage obviously of bringing this product to endemic markets. We are in the guidance readjusting the Vinconia sale guidance down to 200 million kroner for this year and while we are seeing encouraging demand in Europe particularly in Germany with some other markets that we've launched such as the UK In the US, we are seeing headwinds due to the lack of the publication of the ACIP recommendation. This we've talked about before. And unfortunately, while we were hoping that would be already published, it is delayed. And this is causing, as I said, slight headwinds in terms of convincing certain distributors and wholesalers to buy the product. But as I said, encouraging sales in Europe and other territories, and we really believe in Konya will be a future growth story as part of our travel health portfolio. On public preparedness on the next slide. A number of years ago, we guided the market to say that our base business for public preparedness would be somewhere between one and a half to two billion kroner each and every year. And that was based on the and many more. And I must say, since we have guided on that range, we have exceeded the 2 billion range every year. Now, that is primarily because we've come through a number of different Mpox outbreaks, which have obviously impacted sales. And this year, the original guidance was 1.8 to 2 billion kroner, again based on The customer base that was built up. And we have recently announced the number of new contracts. One was with the US government, another was with the undisclosed EU government. And that's meant that this year we've already secured 2.3 billion in contracts. And today we're confirming the upper end of the range, the revised range of 2.5 billion. and this really is an endorsement that we are seeing repeat business from the customer base. And I think really we should be anticipating that our base business is more around the 2 billion Kroner moving forward. We've also seen some regulatory improvements. The EU has approved the younger indication. So MBA is now approved for two years old, and this is important because children are the main targets in Africa and where the disease is endemic and for future UNICEF orders and of course it now means that NVA in Europe and hopefully will expand that to include US and other territories it will be approved for two plus and there are ongoing studies looking at and even younger children that could potentially support an indication for the whole population. This is not only important for access, ensuring that everyone who needs this vaccine can get access to the vaccine, but of course it already, it also improves the indication for NVA and obviously makes it harder should there be any competition arising in the near term. If you go to the next slide, just a few words on the pipeline. We have a lot of lifecycle management activities. These are activities that we invest in to support our commercial portfolio. A large part of the R&D budget for 26 is to support our vincunia vaccine, not only the approvals, but the regulatory requirements. So we have a number of ongoing studies in children, also an efficacy study. which is taking a significant part of the R&D budget. We also have an ongoing study where we're trying to improve the manufacturing process for our MVA smallpox and pox vaccine. This will actually read out preliminary results later this year. We have a study funded by DOD for equine encephalitis which is currently in phase two. and we have submitted a proposal for additional funding to move into phase three. And those discussions are ongoing with DOD. And we have two other assets that are in preclinical. One is for Lyme and one is for EBV. And today we're actually announcing that EBV will actually be initiating the phase one study later this year. We had originally said that that study would start in 27, but we're bringing that forward. And on Lyme, we have further work on our Lyme candidate and have an improved candidate vaccine that will now go into clinical development in 28. And I actually want to spend just a couple of slides talking about Lyme, because we are actually incredibly excited about the new candidate that we've developed. So if you go to the next slide, slide 10, a little bit about Lyme. The number of cases of Lyme disease are increasing both in the US and in Europe. It is a tick-borne disease caused by a bacteria. And in the middle part of this slide, you can see the endemic regions in the US and Europe. And this is caused by a bacteria that has six different strains. And we've been working on a Lyme vaccine for a number of years now, and we have refined our candidate that will now protect based on preclinical data against the six main strains that we see in Europe and the US. And it's based on a new vaccine platform that was developed, which we're referring to as the self-assembling antigen particle or SAP platform. It's a protein-based non-viral particular vaccine that is designed specifically to stimulate very high immune responses in people. and high immune responses translates into better protection. So if we go to the next slide, slide 11, if you look at the left-hand side, what we're looking at here is a positive control line vaccine. This is based on a technology that's currently being developed in the clinic by others. And here you can see what we're looking at is The ability of the vaccine to stimulate immune responses that kill the bacteria that cause Lyme. And with the positive control, there's no protection or activity after two vaccinations. And you can see you actually need three vaccinations to see bacterial killing. And this is at a level that is protective. The second part of that graph is our vaccine candidate. You can see that with one vaccination, you get bacterial killing at a level that is protective. There's equivalent to three vaccinations of the positive control. And if you give two vaccinations, you're now in a completely different league in terms of the immune responses and the bacterial killing. And then on the right hand side, this is a mouse model where you challenge with infected ticks to the three different strains of a line. and with the negative control there's no protection you can detect bacteria and with two shots of our vaccine you get complete protection against all the three different strains that are evaluated in this study. So we have a vaccine candidate that in preclinical models is better than the current vaccines that are being developed whether they're based on RNA or based on other technologies and That I'm showing you this data, this data is actually highly durable, long lasting in the mouse model, which is something that's also a weakness of the current vaccines that have been developed. So we're extremely excited about our Lyme candidate in animal models. It certainly looks better than what's being currently developed by others. We will spend most of next year manufacturing the material and having discussions with regulators and then moving to the clinic in 2018. And with that, I will hand over the presentation to Henrik Juuel.

Thank you very much, Paul. So let's turn to slide number 13, where we start looking into some of the numbers. First slide here is about the commercial performance for the second quarter and the first half year of this year. So second quarter, we delivered very strong revenue performance, 2 billion and 34 million Danish kroner. and more or less equally split between our public preparedness business and our travel health business. And that took us to nearly 3.1 billion Danish kroner for the first six months. So very strong performance during the second quarter. And if we just talk about the individual business legs here, public preparedness first, 975 million for the quarter, very, very strong performance, supply to different customers, but with the US government and HERA, our EU partner being the biggest receivers of products during this quarter here. That takes us on a half year basis to nearly 1.3 billion Danish kroner and we are well on track to deliver on the 2.3 billion that we have secured for the full year and confident that we can deliver on our upgraded guidance of 2.5 and Danish Kroner for the public preparedness business. If we then turn to our travel health business, very, very strong performance. We deliver 45% growth in the second quarter and 26% for the first half year. With these products, one has to be a little careful looking at individual quarters. So I prefer talking to the half year in this case here, as products are, some of them and to varying degree, they are seasonal. But the seasonal pattern does not always remain the same year over year. If we start with our rapist business, very, very strong growth of 40% after six months. And I think mainly driven by significant increased demand, both in Europe and the US, driven by these outbreaks we have seen impacts from rapists, both in Europe, but also on travelers coming back to Europe. So very strong demand. US and Germany basically grew by 20 plus percent. And at the same time, we managed to maintain or gain market share in this business here. So very strong performance. Our Instacore business, we delivered 17% growth, which we are very pleased with. We came out of the first quarter actually with negative growth, but that was based on a very strong first quarter last year. So we are very pleased with the 17% growth on our TBE business. As some of you will recall from our last earnings call, we have been struggling a little with shorter than risk force shelf life on our TBE product. And that has meant that we had to work, I think, very intensively with the wholesalers and distributors in the markets. And we are very happy that we can sit here today Our commercial team, they have done a fantastic job in maintaining our market share during this position and growing the business, the revenue by 17%. And as we said previously, the current 24 months shelf life is an improvement over the initial 18 months we got at the end of last year. And we are very confident that we will work our way back to the 36 months shelf life most likely during next year. So very strong performance by the two product we acquired from GSK back in 2000. VinCunha, we delivered significant growth obviously on an easy background as we only launched April last year. 78 million for the first six months and as Paul already alluded to, we have taken down our assumption for VinCunha and we are now expecting approximately 200 million in revenue and not the 250 we guided for previously. And this is all explained by the short-term headwinds that we see in the US due to the lack of the MNWR application. Other markets are doing as expected or even better. VivoTIV also showing strong growth. That's our typhoid vaccine, 19% growth. And this is an area where we have started to see some of the measures we took by employing an external sales force to help us drive demand in new channels has worked out and we are starting to see this product actually growing in the markets. So all in all 3 billion and 92 million revenue delivered for the first half year so very strong and satisfactory results on the top line. So let's turn to the next page which is our Profit and Loss. And here, looking at the quarter again, 2 billion in revenue, a very strong gross margin of 61%, driven by a favorable product mix, half the public preparedness, half travel health, a lot in the high-priced markets. So that is impacting our gross margin positively. But on top of that, we have also seen continued very strong performance by our operations team meaning high success rates in our production, fewer batches being scrapped, et cetera. So very strong performance leading to a high gross margin. Total operating costs, so that's 482 million. It's lower than what we saw last year for the quarter, but for the half year, it's spot on at the same level we saw in previous years. Lower R&D costs simply due to the timing, primarily of our chicken gunja, and then we see the SG&A cost being higher, mainly explained by some of the expansions we have done within the commercial area, taking business back from our previous partner and building up our presence in new markets. But on a total level, total operating costs unchanged. So for the quarter, turning down to the bottom line, EBITDA margin of 45%, very, very strong profit margin, far beyond We can say our full year expectations, but of course also driven first of all by the high level of revenue which is diluting of the OPEX impact and the strong gross margins as well. So 45% and on a half year basis taking us also to a very strong EBITDA margin of 35%. So let's turn to the next slide where I just want to talk a little about our cash flow and our cash position. So if we first look at the cash flow from operating activities first half year, negative by approximately 400 million. But here you have to remember that that is impacted by the very final milestone we paid to GSK early in the year, 70 million euros. And you will see that in the second quarter we had none of that and we are generating in that quarter alone positive cash flow from operating activities of 351 million. I just want to comment also on the cash flow from financing activities where you will see for the half year negative by 464 million and please remember that that includes our share buyback where the majority of the previous 500 million program was executed during the first half year. So for the quarter net positive cash flow for the period Nielsen for the first half year, but I mentioned the two big reasons for that. The underlying business is generating good, nice cash flow. And that cash flow leads us to a very strong cash position currently of 2.3 billion, allowing us to launch another share buyback program of up to 750 million while still maintaining our financial flexibility to pursue our M&A strategy. The next slide is elaborating a little further on this and in principle nothing new on this one. Just wanted to remind everyone about our capital allocation policy. First priority is of course that we invest in our current business and our pipeline in all the organic growth that we can secure. Secondly, we work to generate an expanded financial flexibility and that second element used to include We will try to balance our cash position with the expected cash flow generation in the future, taking the maturity of our business development pipeline into consideration. And based on all of that, we will evaluate how much cash we need. And at the moment, that balance has led us to initiating the 750 million share buyback program. And our target with all of these initiatives is really to optimize our capital structure, including a suitable leverage of the company in the future. Let's turn to my final slide here, which is just to talk about the outlook. So based on our performance year to date, we are upgrading our financial expectations to the year. Our previous guidance said 5.5 to 5.7 billion Danish kroner, but with the current order book on our property preparedness business, we are upgrading that to approximately 2.5, which gives a total revenue of 5.7 billion. and the Travel Health Guidance for the full year unchanged at approximately 3 billion Danish kroner. And then our EBITDA margin, we have increased from approximately 28% to expected approximately 30%, driven of course by the upgrade on our expectations to the top line, but also by the very strong first six months and the very strong cross market we have seen first half of the year. So with that, I will give the word back to the operator and ask to open up for questions.