Bavarian Nordic A/S (BAVA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to half year report Q2 for the 6-month period ended 30 June 2020 conference call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, 26th of August 2020. I would like to hand the conference over to your speaker today, Rolf Sass. Please go ahead, sir.

Yes. Thank you, speaker. And welcome to this first half announcement call for Bavarian Nordics first half. With me today, I have our Executive Vice President Henrik Juuel, CFO. And my name is Rolf Sørensen, VP Investor Relations. Before we start our presentation, I will read the following disclaimer. This presentation includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside of our control that could cause actual results to differ materially from the results discussed. Forward-looking statements include statements regarding our short-term objectives and opportunities, financial expectations for the full year and financial preparedness as of year-end as well as statements concerning our plans, objectives, goals, future events, performance and/or information that is not historical information. All such forward-looking statements are expressly qualified by these cautionary statements. 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 the presentation over to Henrik Juuel.

Thank you very much, Rolf, and a warm welcome to all of you. Good morning, and good afternoon, and welcome again to Bavarian Nordic Half Year 2020 Earnings Call. As you all have noticed, unfortunately, Paul couldn't be with us today. He is homesick, and we are expecting him back in the office very soon. I promised him to send his regards, but that's unfortunately the situation. And today, you will have to do with Rolf and myself. So to start, I think first half of 2020 has been a very, very busy period for Bavarian Nordic; however, also a very, very successful period for the company. We have made significant progress basically on all our strategic initiatives, and that is despite the COVID-19 situation. I think on this next slide number -- Slide #3 in the deck, I would just list to you some of the most important events and achievements. First of all, I think the whole commercial transition is moving extremely fast. It's on track. We have put the organization in place. We are taking over key markets, et cetera. And we signed the agreement in June with Valneva. I will come back in more details on what's happening on this commercial track. We -- also in July, we finally got the Ebola vaccine approved in the EU in our cooperation with Janssen. And just prior to that, we even got an order for new bulk of the Ebola vaccine valued to the tune of approximately USD 14 million. We also got a new contract in April in our smallpox business with USD 202 million over a 2-year period, with USD 106 million as the first option and the majority of that actually having an impact already this year. And we also got the announcement out this week that we have positive top line data on our Phase III results for the freeze-dried version, and I will come back to what that really means to us on one of the later slides. Within the manufacturing, I think we have spent a lot of resources really protecting our manufacturing sites to make sure that we can continue uninterrupted. And that has been quite successful. We have seen no delays in manufacturing nor in the projects that we are running to support the transition of the acquired products and the expansion of the facilities. The last bullet says that we also recently finally signed the agreement with AdaptVac on the COVID-19 vaccine which we are very pleased with. I will come back and talk a bit more about that project also on one of the subsequent slides. And finally, despite we are impacted on our travel vaccines business, we are in a position where we can maintain the guidance for the full year and even raise it for our cash position expected by the end of the year. So let's turn to the next slide. I think this next slide basically groups all the achievements that we have seen by our strategic pillars. So I will not repeat all of the details, but just highlight that, for instance, within the commercial, I think this is all about establishing a real full-scale commercial operation, enabling us to expand the business and drive future profitable growth. Within R&D, our ambition is to expand and advance the portfolio of our pipeline projects. We got the Ebola vaccine approved. We got the new order, et cetera, on the line. You can say the potential for future Ebola business as well. We also, in June, announced positive top line data from the Phase I equine encephalitis study sponsored by the Department of Health, and we are now seeking further funding for that project so that we can advance it further into the clinic. We have also started testing new modes of administration within our immuno-oncology business. We have 2 smaller studies with intravenous administration running at the moment. Turning to the manufacturing side. Here, I think we have 3 important tracks running. First of all, we have the fill-and-finish facility, which will really once that is up and running enabling us to have a full end-to-end manufacturing capability. So right now, I think the only thing remaining is really the qualification, and we are expecting to have the first product on the line late this year, which will be the liquid-frozen version of JYNNEOS so that we can deliver up to the 1.4 million doses to BARDA under the contract we signed earlier this year. Second initiative within manufacturing, that is to expand the bulk facility so that we -- first of all, we can accommodate the manufacturing of the rabies and TBE vaccines, but also so that we can create more flexibility within our bulk facility and being able to produce different bulks in parallel. So that is also progressing well, and we had -- over the summer here, we actually started the excavation of the ground, and you will see later when we come back to our cash position I think this is one of the reasons that we are going to have quite a high cash spend in the second half of the year, as we have not spent much of the investment we have guided for this year yet. So that is to come in the second half year. Third initiative within manufacturing that is to take transfer process of the 2 projects. That is still in its early stages naturally, but it is progressing well and in accordance with the plans. The other items on this slide here, I will deal with in the following slides in more detail. So next slide, let's talk a little about the significant commercial transition that we are undergoing right now. With the acquisition of these 2 vaccines from GSK, we needed to put a commercial organization in place very, very quickly. And we are pleased and proud to say that we have basically the organization in place today. All the global positions, starting with the Head of the Global Sales JC May and his leadership team is now fully in place, so are the teams in our 2 key markets, the U.S. and Germany. And even this week, we have the field force in Germany trained, ready to go into the market on the road 1st of September when we take over the physical distribution and the market authorizations in Germany. So very well on track in terms of the building up the commercial organization. Also another very important step that is to take over the physical distribution and the market authorizations in the individual markets. So we started this summer with Holland. Smaller market but important, as it will be our future distribution hub for global distribution. 1st of July, we basically took over distribution there, meaning that GSK in the future will send the finished products to down location in Holland, and we will distribute from there into the markets where we have taken or won. 1st of August, major achievement, we took over physical distribution in the U.S., and we are planning to do the same 1st of September in Germany. And this, I think, taking all the physical distribution is a huge, huge task involving a lot of people in our organization. You need to have all the logistics in place, contracts in place with the logistics service providers, system integrations. You need contracts with your wholesalers. You -- even in some markets like the U.S., you need a lot of the contracts in place with the payers, et cetera. So a lot of work has taken place before we could actually transfer these markets over. We will -- as you will see, at the end of the slide below there, you will see from the left, the U.S. from August; Holland, July; Germany expected 1st of September, and then the other markets will follow after that. These markets are smaller markets. And looking at our current plans, that means that by the end of this year, we will actually have transferred over 90% of the turnover will be under our control in terms of physical distribution. Final thing is we also, during the first half year here, signed distribution and marketing agreement with the French vaccine company, Valneva. Meaning that Valneva will market and distribute our 2 products, Rabipur/RabAvert and Encepur, in selected European countries plus Canada where we will then -- on the other hand, we will market and distribute their 2 products, IXIARO and DUKORAL in Germany and Switzerland. And the whole philosophy behind this deal is to exploit synergies. Bavarian Nordic and Valneva are, you can see we are relatively modest in size when it comes to our presence in certain geographies. And it simply doesn't make sense for Bavarian Nordic to establish the sales forces in some of these smaller European markets. Valneva is already there in some of the markets, and we are building, you can say, a strong presence in both Germany and Switzerland. So we will -- in this cooperation, we will basically explore synergies between the 2 companies so that we take the products where we are strong, they take all 4 products where they are strong. In terms of timing, we think that the first markets to be transferred to Valneva later this year and the rest next year. The products that will be transferred to us will happen probably most likely second half of next year. So a significant transition we have gone through in the whole commercial area and well on track. On the next slide, this is one of the old slides, as most of you know. I just wanted to put it here to remind you all about the importance of the positive Phase III top line results we announced earlier this week. I think it was not a surprise to us. but of course, it was a very, very important milestone that we could take off because it means that we can basically continue our plans on the freeze-dried version of JYNNEOS, which is to have the final results late this year from the study, so that we can file next year and expect -- with an expected approval in '22. And remember, I think, out there, the carrot is waiting for us, USD 299 million contract that we have already and which we can execute upon once we have an approved product, and we have the fill-and-finish facility up and running. So another thing I would just highlight here as well is, again, just to remind you about the contract that we were awarded earlier this year, total of USD 202 million in 2 options. First has been executed by BARDA already, and that is an amount of USD 106 million, whereof the majority of that will be revenue recognized this year. And you can see, we have also listed here that most of the revenue will actually come in Q2 and Q3. There will be some in Q4 as well. And in Q2, we actually saw more than half of that contract being revenue recognized, helping us to achieve the DKK 700 million total revenue for the second quarter. On the next slide, a few words about RSV. Again, you know this slide. There's no change in our plans. We are still planning for initiating the Phase III study next year. And the study, as such, the design of that is unchanged. It will be over 2 seasons with 12,000 to 14,000 subjects, and it will cost this USD 90 million to USD 110 million. However, we also, at the moment, in a period where we want to -- we need to assess the feasibility of conducting such a study due to COVID-19. So that is a feasibility assessment we will do over the next month or two. It is quite clear that if we assess that the prevalence of RSV is too low in the market next year, then we will not risk a significant investment in a study like this, and then we will change our plans accordingly. We haven't made that decision. So it's still our plan, and we are still preparing ourselves for the initiation of Phase III next year. On the next slide, an update on our COVID-19 vaccine program with AdaptVac. Again, here, we are very pleased that we over the summer managed to finalize the agreement with AdaptVac and got it signed. Giving us the global commercialization rights to the vaccine. So really, right now, I think our job is to accelerate the development and the speed in this program. We right now have a time line where we are targeting a Phase I/II that's started to be initiated late this year with the readout beginning of next year and then targeting an approval by the end of '21. And that is, of course, you can say, all pending funding that we are currently seeking. There is funding within -- achieved by AdaptVac to conduct a Phase I study. That will take place later this year, but we are seeking funding, so that we can expand that to a Phase I/II and thereby accelerate the time lines. So this is really something that we are very excited about. And we do believe that we have a vaccine candidate here that is unique in certain sense. We do believe that it is one of the candidates that can meet some of the important criteria from the WHO, for instance, being suitable for all ages including the elderly, and a vaccine candidate that has the ability to be used as a single shot only. On the next slide, I will move into the sales performance and the financial performance for the second quarter and the first half year and I will start off with the newly the acquired products. So on Rabipur/RabAvert, our rabies business, we saw total revenue for the second quarter of DKK 142 million. That was 44% below the same period last year but in the markets that we assessed to have declined by 75% during the second quarter. Meaning that we actually outperformed the market during the second quarter. And how did we do that? I think, basically, the key explanation to this is that we have a very, very strong position in the more resilient part of the rabies business, which is the U.S. business, which is less about travel. It is primarily a post-exposure, also pre-exposure but for local endemic use. We have managed to increase our market share in the U.S. market since the first quarter of '19 to the second quarter of this year for 64% to 85%. So we have -- you can say by that way, we have managed to compensate for some of the market decline. It is clear, though, that the European market suffers from the -- from COVID-19, and we have seen in some of the biggest European markets that the market has dropped by 80% to 90%. It's clear if people are not traveling, there will be very little use of the rabies vaccine in Europe. However, that part of our business is the least profitable, and we have a very strong position in the more resilient part of the business. If we look at the first 6 months performance, DKK 360 million versus DKK 435 million for the same period last year, so that's 17% down. Our assessment is that the market in the same period has been reduced by around 40%. And again, it's the same explanations. It's the significant market share gain in the U.S. It is our strong position in the U.S. And of course, then it's also a little tailwind we saw in the beginning of the year with our competitor being out of stock, impacting, in particular, January and February. So -- and looking a little forward, I think we -- in the U.S., we are quite optimistic on the U.S. market, and we are actually seeing some positive trends, both on market share but also that the market could return to a more normal situation. In the U.S., we see that there are several indicators that the outdoor activities are on the rise now in the U.S. So we could actually look into an improving U.S. market. In Europe, I think we will have to wait and see when travel normalizes. Until then, we should not expect much from the rabies business in Europe. On the next slide, let's have a look at the Encepur sales for the second quarter. It was DKK 193 million, 10% down compared to same period previous year. That is actually also a bit better than what we have seen in the market, global market. I can only look at April, May here, was down approximately 38%. And there could be some, again, like we saw in the first quarter, there can be some time lags and inventory movements on the wholesaler levels between the quarters. And if we look at the first half year, DKK 295 million against DKK 386 million, so that's down by 24%, which is pretty much in line with the market decline that we have seen over the 6 months period. And I think on the Encepur business, I think we are more comfortable that this will return to normal sooner than the rabies business. The underlying demand of the TBE vaccine is unaffected by COVID-19, and the decline we have seen, we believe, is really caused by the shutdown that we saw in several markets. If we look into the Q2 numbers, we can see already in June, we saw quite a good month, even better than the prior year. So some of that catch-up effect we had hoped for. I think another very, very important point here is that during this period here, we managed to maintain market share of TBE, which is contrary to what we have seen historically the last years where Encepur has lost market share to competition. So we have, during this period, managed to stabilize the market share basically. On the next slide, an overview of the financial results. Very, very positive results for the second quarter. If I stop there, DKK 700 million revenue, of course, significantly impacted by the smallpox revenue, which is nearly half, DKK 320 million out of the DKK 700 million is from the BARDA order. But still DKK 700 million and an EBITDA close to DKK 200 million. So very, very good results. For the first 6 months, we're looking at total revenue of DKK 1.065 billion, and we are looking at an EBITDA of DKK 839 million, where, of course, the sale of the Priority Review Voucher that we did in the first quarter also has a significant positive impact here. And on the EBITDA, I think it's simply important to understand that this is heavily front-loaded partly or to a large extent, of course, due to the PRV income, where there's no cost associated. But also due to some of the seasonality that we see on the revenue side. As I said previously we have included so far slightly more than half of the expected BARDA revenue this year. And on the other products, we know that we are moving out of the seasons. There will still be more, of course, in the third quarter. TBE season typically ends around August. We will see this year if COVID-19 has changed that. And for the fourth quarter, I think historically, we haven't seen high revenues for either products, on the rabies or the TBE product, except in '19, where we saw a significant rabies business due to a stock-out situation from our competitor. I think all of this together has enabled us to maintain our full year guidance. And we have even chosen to upgrade our cash guidance from previously DKK 1.350 billion to now DKK 1.5 billion, so an increase by DKK 150 million. And that has -- it's a sum of many items put together, but one of the key drivers of that has really been that the BARDA revenue comes in a lot of it in the second and third quarter, enabling us to also get the cash impact of those before the year-end. Let's turn to the next slide. It's an overview of our financial position. Again, as I said, very, very strong cash position. We have in cash now nearly DKK 2.4 billion. And on top of that, we have unutilized credit lines from our European Investment Bank loan that has not been drawn upon yet. Below those, we have just listed the bank and institutional debt overview. And at the end, just to complete the picture, we have included the deferred consideration to GSK. Remember, we still owe GSK up to EUR 495 million. So this approximately DKK 3.2 billion, that is the net present value. So that's the book value of the deferred consideration, which is calculated as net present value on a probability adjusted milestone payments. And you can, of course, then ask, okay, how are you going from the DKK 2.4 billion to DKK 1.5 billion by the end of the year. Yes, we are going to consume quite a significant amount of cash in the second half of the year. Some of it will go into the continued investment in manufacturing. Remember, we guided previously that we would invest approximately DKK 300 million in the changes within manufacturing. We have first 6 months invested DKK 66 million, and we only just started the excavation, and we have -- are going to buy some of the equipment as well that we need for the tech transfer of the 2 vaccines from GSK. So it is heavy back-end loaded, the investments going into the manufacturing. Second important item is that as we take over physical distribution from GSK, we have an obligation to take over the local inventories of finished goods. So that will consume some cash. And on top of that, after we have taken all physical distribution, that means also future manufacturing orders that we place with GSK will be shipped and delivered to our distribution hub, meaning that by the end of the year, we will not only have the inventory we took over from GSK but we will also have new products that have been manufactured since we took over. And we are talking about products being manufactured in campaigns. So we can actually see the inventory level that we will be carrying on our balance sheet can be jumping up and down between quarters due to these campaigns. And as in particular, TBE is a seasonal product, of course, we need to make sure that by the end of this year, we have sufficient inventory to be prepared for the season next year. Final item to explain the significant cash consumption, our milestone payments to GSK. We are expecting to pay approximately EUR 50 million to GSK this year that are triggered by some of the important marketing authorizations that will shift hands during this period of time. But still, after this significant cash consumption, which is all in line with our plans, no change there at all, we will be leaving this year with a cash position of approximately DKK 1.5 billion, so still in a very strong position. Turning to the final slide, which is basically our usual overview of key strategic activities and milestones this year. I will not repeat all of this, but just highlight a few that we have still to deal with this year. I think, first of all, on the commercial side, we talked about most of it. Physical distribution, we put there a bracket as we have started it. But after September, I think we have covered maybe 75%, and we will continue that. And by the end of the year, as I said, we have taken over physical distribution for corresponding to 80% to 90% of our turnover. The fourth bullet is within the commercial group, that is you can say the task to increase awareness and establish new market for monkeypox, I think we have to be honest and admit that, that is not having much traction at the moment due to COVID-19 overshadowing this, but that is still something that we, of course, are working on and will continue to be a task for us in the time ahead of us. We need to establish this market. Now we have the indication for monkeypox. The next strategic pillar in our R&D area. We have talked about most. We haven't talked about chordoma yet. And there, I think we are awaiting the readout from our BN-Brachyury study in chordoma later this year. So hopefully, by the end of the year, we can tick that one off with some positive outcome, but that is still to be seen and to come. And then, of course, what is not on this slide here yet as this is based on our target and strategy and plans when we entered into the year is, of course, the COVID-19 project, which will receive a lot of attention from our side and which you will find on this list of key strategic activities going forward. Finally, we have the -- all the activities within the manufacturing. We have talked about those. They are all on track despite COVID-19. So we're very pleased with that. And then, of course, on top of all these achievements here, we are extremely pleased that we have managed to maintain our guidance and even increase it for cash position. So all in all, a very busy and exciting agenda here at Bavarian Nordic and a very significant transformation that we are undergoing. And halfway through this year, here, we are very pleased with the progress so far. Well, thank you very much, and then I will hand the word back to the operator and ask you to open up for Q&A, please.

[Operator Instructions] Sir, your first question comes from the line of Chad Messer from Needham Partners.

This is Gil Blum on for Chad. So a few -- you -- earlier you spoke of kind of taking over the physical distribution from GSK. The people that come along with the physical distribution, are you basically just rehiring the same key distributors?

We are not taking over any people. I think basically, the physical distribution, when it's -- where with GSK, it was handled also by third-party logistics service providers. So we are basically moving it from one third-party logistics service provider to another. And in this case, for Europe, it's -- we are using the company moving on to very professional logistics service provider, meaning that we have -- we are not taking over any organization. Of course, we have had to hire our own people. We need planners who can deal with the GSK and the manufacturing on. So we have taken that over and making sure that we have -- we are basing our orders on the right forecast from our commercial team, et cetera. But we are not taking over any people from distributors or from GSK in this respect.

Also, could you perhaps provide any color about the expected reductions in RSV rate? Is there other existing evidence that COVID-19 is reducing infection rates in RSV?

Yes. I think there are some -- I think, in particular, if you look at flu, we have seen that. If you look at the prevalence rate in some markets and you look at the prevalence rates January, February this year, there was a sudden drop in the prevalence rate when the COVID situation came in simply due to the social distancing, using of masks, et cetera. But of course, what is not 100% clear is that because it's under-registered or is it really a lower prevalence? And that is why I think we -- as a company, I think we need to make a very, very thorough and thoughtful consideration in our assessment about do we believe that the prevalence rate is really lower or not. That's not an easy answer to that, but there are some indications that some of these diseases, you have seen a drop in prevalence due to social distancing and use of masks and other protective measures.

I guess wearing a mask is a positive thing at all times. Are there any expectations for backlog in the TBE market, which would kind of change the normal seasonality that's seen in this market?

Sorry, what do you mean bad luck or...

Backlog.

Backlog.

Sorry. Yes. Sorry. Okay. Yes. Well, that's a very good question. I think normally, you can say the season would end towards the end of the summer here. But of course, due to the interruption that COVID-19 created, I think there is, of course, a chance that some of those people, who did not get vaccinated, will go to the doctor now, and that could extend the season a little longer than we have seen in the normal years. And of course, that's what we hope for. But it's yet to be seen, of course. But we are now sending our 1st of September, our reps will be on the ground in Germany and will, of course, push for extending the season and running a campaign, let the people know that they do not need to wait until next year to get vaccinated.

All right. Congratulations on the recent positive readout.

Thank you very much. Thanks for the questions.

Your next question comes from the line of Michael Novod from Nordea.

It's Michael Novod from Nordea in Copenhagen. I have a range of questions. So first of all, if we just get a bit more granularity on the backlog on both on TBE potentially also on not on backlog but more on the demand side on the rabies vaccines in the U.S. because if we look at Symphony/IMS IQVIA data, then we can see there's a significant rebound in July on the rabies sales in the U.S. Do you see some of the same things going into August? We're now 2 months into your third quarter. So maybe you could just give a bit more granularity because normally, we would see that around 60% of the full year sales would be in the first half of the year. And if you apply that to your first half sales in 2020, then we only get to around DKK 1.1 billion in TBE plus rabies sales. So it would be great to get some more granularity on how you see the demand situation also going into August. And then secondly, on the dialogue you have regarding funding for your COVID-19 vaccine beyond Phase I/II, how is sort of the process? Can you give a bit more commentary on the structure of that process? Do you actually get feedback on an ongoing basis? Or is it a complete black box regarding this? And then lastly, on your Brachyury vaccine in chordoma. How should we sort of interpret the outcome? Because we know from other trials in chordoma that it's a bit of a strange disease in terms of using the RECIST 1.1 criteria. So do you have some interactions with the FDA regarding sort of how to measure the response when you look at the data? Whether it's going to be RECIST 1.1 or there could be other measures to include?

Okay. Thank you, Michael. I think, first of all, on the 2 vaccines, I think the -- on the TBE and potential backlog, I think, again, I think that's a very good question. Of course, we hope to see that the season will be longer than we have seen usually. As I said in my presentation, we saw very, very strong June numbers, indicating some catch-up and some of the backlog being rectified. And of course, we are, with our field force in place, I think we are going to push for an extended season. Whether we will manage or not, we will see. There might be some who will say, okay, I didn't make it due to COVID-19 and the shutdowns, I'll get vaccinated next year. But I'm sure there will also be some who are just queuing up and will get vaccinated. So I do expect to see some impact of the backlog being emptied. On the rabies, I can't comment in detail on the Q3 numbers. But again, I can say that we have -- we are seeing some good numbers in the U.S., and there is a trend in the U.S. towards being more outdoor activities, actually some of it driven by COVID-19. We are seeing the national parks opening up again, but we are seeing other measures indicating much more outdoor activity levels. That could push for some market growth again within rabies in the U.S. Yes. So I think the -- we have good hopes for TBE. I can't see -- unless we get a shutdown again, I can't see why the TBE market shouldn't return to normal basically. And then we feel we will be in a good position. We have stabilized the market share. We have our field force in place for the next season. And on the rabies side, U.S., there are definitely opportunities there. Also on the pre-exposure part, with more outdoor activities, you don't have to wait until you have been in contact with a rabid animal. So we can go and push more for the pre-exposure market domestically in the U.S. So I think the only tricky thing, of course, is the rabies business in Europe, where we simply just have to face the music and say, until the travel resumes more to normal, this market will be significantly under water. On the next one, the funding -- sorry, did that answer that first one, Michael?

Yes. That was perfect. It was perfect.

On the funding side, I think that's another good question. I think, of course, we are seeking funding through all the channels that we know about. These processes vary very much from very formalized processes where you submit, you apply for funding, together with a lot of others and where there are strict time lines and feedback periods, et cetera. And then some other channels where it's much more informal discussions, talking about opportunities, et cetera. And of course, we are seeking funding from all parts, basically. On the Brachyury...

Can I just ask a follow-up to the funding?

Sure.

Yes. I was just wondering whether you have any sort of contact to sort of local government, i.e., the Danish government because we see sort of the German government being extremely active on CureVac. You've seen the U.S. government being extremely active on some of their assets, whereas in Denmark, we may have seen politicians complain about selling an old vaccine facility 5 years ago. So is there any kind of interactions with the Danish government as they should be aware you have a significant vaccine capacity, I don't know, 30 miles north of the capital?

That's right. Yes. There are contacts with the Danish government as well. But this is something we are pushing harder at the moment so that there are even better contacts. But there are contacts and ongoing meetings with people representing the government. And on the -- I just have to -- just to mention here to make sure that it is clear to everyone. And in terms of the funding of the study here, there is funding already for the Phase I study. We want to expand that study in order to accelerate the time lines to a larger Phase I/II. That, we do not have funding for today. So there is funding for the Phase I study that can go ahead. But the larger expanded Phase I/II is part of the funding that we are seeking.

And that larger expansion, is that also going to sort of -- is that sort of the initial plans also for the Q4 start? Or how should we think about that?

That is the plan for the Q4 start, yes. Good. And on the Brachyury chordoma study, I think, as you know, it has originally been designed that we should measure the outcome using RECIST. And we can't change that, of course, but you can argue whether was that the right measure to use. I think we do see some interesting data when you look at other ways of measuring the shrinkage of the tumor, et cetera. But in terms of using the data from the study to move forward, I think we have to stick to the study designs. But of course, we can still try to apply other measures to the study, other ways of measuring this to read, get some different readings out of it.

[Operator Instructions] We got another question that comes from the line of Thomas Bowers from Danske Bank.

Yes. Thomas from Danske. Just to kick off here with sort of a follow-up to the COVID-19 vaccine and funding here. So from CEPI, the last update here from CEPI here on Monday, they are now saying that they're evaluating 9 additional candidates on top of that, the 9 they have already backed and supported. So I'm just wondering, is there any dialogue with CEPI? And do you have any kind of indications what they are looking at here? Are they are they considering other large clinical programs? Or are you may be the only candidates that are seeking funding for Phase III? And then the 8 other parties are maybe looking to get some early-stage funding? And then my second question, just on the ACIP recommendation. So is there any update on this? I guess you still need the last meeting and then maybe add some color to that on the possibility to get these DoD orders? Or would this be mostly an event coming in the wake of the conclusion? So -- well, most of all the timing of news from ACIP.

Okay. Thank you, Thomas. First, on the COVID-19 funding, yes, I think, of course, we are in the race with CEPI that -- and I think what are they funding? I think the -- to start with, I think they have chosen as many of the others to fund the ones that are ahead of the pack, but I think they have also realized that these might not necessarily be the best vaccines, ultimately. So therefore, they are in the second round, which they extended due to a lot of applications. I think they are looking at later stage, which means maybe only like 6 months behind. The leaders looking at different technologies, that is definitely our hope because that's where we can differentiate us coming out with a different technology where we can tick more of the boxes in terms of what WHO are asking for. But it's a process where basically you submit. And I think CEPI, they are working hard internally. And there's not a lot of insight into how they actually make their decisions. So we can only, I think, keep pushing for a positive outcome of the process, but we are definitely in the race with CEPI and with others as well. In terms of the ACIP recommendation, there's no news. And then as we talked about, I think this is expected to be slow-moving process when ACIP are changing their recommendations. But we do believe, of course, that the up to 1.4 million doses that we are going to deliver via BARDA will not be sitting idle in the stockpile, but will be used, we believe, by DoD and by first-line responders as well. So of course, we hope to see an update on the ACIP recommendation within perhaps the next year or so. But it's a little unclear how long that can take.

Sir, we got another question, comes from the line of Peter Welford from Jefferies.

First of all, could we just talk about the guidance for a minute, just with regards to the revenue outlook? I guess, I was wondering if you can sort of talk a little bit about how we should be thinking about this. Given the sort of structure you've given us for Rabipur, Encepur and how we should think about that, I think you've been very clear on the trajectory for that this year. And you've also outlined the JYNNEOS booking of the U.S. government, $106 million, which I think together then with represents the majority of the outlook you've got of DKK 1.9 billion. But on top of that, I think we've also got the $10 million milestone on the Ebola from Janssen. I think there's also -- maybe is it a $25 million funding from the government for the freeze-dried Phase III, which obviously is now broadly finished. So I guess if we put all this together, I guess, can you help us think about what it is we're missing in terms of how -- it doesn't seem incredibly conservative still to keep the DKK 1.9 billion revenue outlook. And then I've got another question -- follow-up question on the pipeline, but maybe you can do that first.

Yes. No. Thanks, Peter. Thanks for the questions. No, I think you are touching upon all the right components. So I think let's take them one at a time. I think first of all, the TBE business. I think, we have not in our guidance, assume that the season will be longer. We have assumed some catch-up that we have seen already in June and a little in August. But we are not assuming that the season extends beyond what we have seen historically. So that means you will see relatively little revenue from the TBE business in the period going from September to December. And on the rabies business, I think we noted last year, we had a very abnormal December before we took over the business due to the stock-out situation. But basically, what we have assumed in our guidance is, first of all, taking the seasonality into perspective. And then, of course, we have not expected much from the European rabies business. Basically, we are not expecting any change in the travel patterns this year. And on the JYNNEOS side, I think we have -- first half year, we have included, I think, close to 60% of the revenue, we expect from that part of the business. And then on top of that, you're right, then we have the Ebola milestone of USD 10 million. And that takes us -- if we add all that together, that takes us to close to the DKK 1.9 billion. But of course, it's all a question of the outlook for Encepur and Rabipur. And there are, of course, scenarios where those can play out better. Longer season on Encepur, and you can say, pickup of the market in the U.S. beyond what we are expecting right now. So there are these 2 upsides to the top line.

And do you envisage the majority, if not all, of the $106 million U.S. government contract for smallpox? Will that almost all be booked during the course of 2020?

The majority, not all of the $106 million. It will be lower than $100 million for the full year. As I said, we have -- year-to-date, we have revenue recognized close to 60% of the full year. Then you can you can more or less do the math. So what we have said all the time is it's the majority of the $106 million, but it's not all of the $106 million. I think the -- remember, the $106 million, that is, first of all, the delivery of bulk batches, but it's also up to $1.4 million liquid-frozen doses, where many of these will be delivered into next year.

Understood. And then -- sorry. Go ahead.

Go ahead, please.

No. And then I was just going to ask just with regards to the pipeline. It gets little attention these days in the sense, obviously, understandably, the focus has shifted very much towards infectious diseases. But curious beyond Brachyury on the other oncology vaccine parts of the, I guess, pipeline and the platform. Just with regards to bigger thinking, what is the strategy here in terms of -- is there still a significant amount of internal resources allocated to these sorts of programs a few other developments? Is it something where there is potentially a strategic review of that business? Or is it perhaps a business where you could consider doing either a broad collaboration or some sort of other deal to perhaps I guess, complete your transition, if you like, and make it less of a drain, I guess, on the Bavarian Nordic?

Yes. Good question, Peter. I think on the immuno-oncology, you can say right now our strategy that is to test some of our candidates using new administration methods basically, so that is intravenous and intratumor, and we are already now testing in 2 smaller trials in intravenous. But I think what you have noticed is that we have started to communicate on these immuno-oncology projects differently. We used to highlight each and every small trial. And the situation with immuno-oncology is that we need a lot of attempts, but they are small, relatively inexpensive studies. So we don't want to push them too hard. That's also why we have not listed up these 2 smaller studies we are running now with intravenous. But those are -- one is with Brachyury. The other one is with a new platform that we are testing in intravenous as well. So I think at some point, in not the too far distant future, I think we will provide a more fresh update on the whole immuno-oncology area.

Sir, we got a follow-up question, comes from the line of Michael Novod from Nordea.

Just a sort of a housekeeping question. When you start to actually sell IXIARO and DUKORAL, will it show in specific products in the P&L? Or will that sort of be booked under?

I think we are planning to show them specifically, just like we do today, we highlight the revenue by the product. So I think the setup that we have with Valneva is that we are actually buying the products at a certain agreed transfer price, and then we sell them just like we sell Rabipur, Encepur, et cetera.

Sir, we don't have any questions at this moment. Please continue.

Thank you very much for -- you all for listening in and showing the interest in Bavarian Nordic. Very pleased to have you here today. And again, I should send my regards from Paul to all of you. Thanks. Have a good day.

This concludes our conference for today. Thank you for participating. You may now all disconnect. Speakers, please stay in the line.