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

Ladies and gentlemen, thank you for standing by, and welcome to the Bavarian Nordic Annual Report 2020 Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Friday 12 March, 2021. I would now like to turn the conference over to first speaker today, Rolf Sass. Thank you. Please go ahead.

Yes. Thank you, operator, and good afternoon to some and good morning to the others to this presentation of Bavarian Nordics Annual Accounts 2020. With me in the room, I have Paul Chaplin, President and CEO; Henrik Juuel, Executive Vice President, CFO. Before I hand over the presentation, I will read the following statements. This presentation includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside our control that could cause actual results to differ 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 petition over to you, Paul.

Thanks, Rolf, and welcome, everyone, to our annual accounts for 2020. If you turn to Slide 3, Bavarian Nordic is a fully integrated, profitable vaccine company that aspires to be one of the largest pure-play vaccine companies by '25. We've built up a fully integrated infrastructure so we have beginning to end commercial manufacturing, proven R&D capability, and now a commercial infrastructure supporting key markets in the U.S. and EU. 2020 was about the integration of our 2 new assets, which were vaccines against rabies and TBE, which combines to create portfolio of [ market ] products of 4 products. And with that integration, we rapidly expanded as a company last year and grew by 40% with more than 700 employees. We have a really exciting pipeline with some late-stage assets. One is RSV, the other, as I'll talk more about, is COVID-19, both of which have near-term triggers during 2021. On to Slide 4. 2020, as I said, was a really important year. And it is the beginning of our transition to become a commercial company. And I have to say that despite the headwinds of COVID, we had a near-perfect execution of our plans to integrate our 2 new assets against rabies and TBE. And that is credit to all our employees at Bavarian Nordic. So we even managed to maintain our guidance and revenue, as you'll hear from Henrik later. Our revenue was in line with expectations. And our EBITDA and cash is even better than guided. And this, as I said, was despite the fact that COVID-19 had an impact on some of our sales, but this was actually offset by better-than-expected JYNNEOS business as we received a more than USD 200 million order from the U.S. government. But it wasn't all about smallpox and JYNNEOS. We actually were able to gain or maintain that market share for rabies and TBE despite the difficult markets, and it really endorses our commercial strategy that we believe these assets, with a key focus, we can actually grow these assets better at Bavarian Nordic than their predecessors. Other key drivers of activity in 2020. We finished the expansion of our commercial manufacturing and have now added a commercial fill/finish capability, and we're already beginning to transfer our first product, JYNNEOS, onto the line. And we licensed the COVID vaccine asset from a VAT back from -- and now we're encouraging preclinical results, which I'll walk you through in the coming slides. We have decided to accelerate this program and enter Phase II, which I'll talk more about in the coming slides. So on Slide 5, thanks to the strong support from new and existing shareholders, we were able to complete an offering this week, where we raised just over DKK 1 billion by issuing new shares. This investment will now allow us to kick start at our COVID program and move that into a large Phase II study, which I'll talk about. The whole supply of vaccines, COVID vaccines, has really shown that there are a number of bottlenecks in the manufacturing supply of vaccines because as I've said many times the production of vaccines is a difficult task. And we also want to use some of the proceeds to have flexibility to potentially take advantage of opportunities where we could utilize our manufacturing capabilities to produce for third parties. And the rest of the proceed is really to ensure that we can continue to execute on our strategy, which is expanding our commercial portfolio, potentially through additional M&As and to strengthen our cash position. On Slide 6, one question I've had very recently, obviously, with the announcement that we're moving forward with COVID is, aren't you a little late? And is there really a need for a new COVID vaccine, given that there are a number of vaccines already approved? Well, it's true that great advances have been made, and there are a number of vaccines approved and more to come. However, the durability of -- or how long lasting that protection is or the breadth of that protection that is afforded by the current vaccines against the very circulating variance is unclear. It is, however, clearer by the day that COVID-19 is not going to be eradicated. And it is a disease that will remain with us and have to be managed through frequent vaccinations. And it's likely that regular boosters are going to be required to boost that protective immune response to protect us from the ongoing disease. So what we're hoping to do with our candidates is actually to demonstrate that this vaccine candidate, which has some excellent preclinical data, really showing that it's highly immunogenic, can act as a universal booster to people previously vaccinated, increasing the durability of the response and providing a broader response against the various circulating variance that we see today. So if we go to Slide 7, just to remind you what the candidate is. It's a capsid viral like particle platform which we've licensed in from AdaptVac, which is a technology that was bought out of Copenhagen University. This is a highly flexible platform where one component is not specific for the specific disease or how the vaccine is designed. So the actual capsid itself can be manufactured and used in any vaccines using this technology. The specific path of the platform is the protein, which is manufactured with a small linker, which binds to the capsid of very high densities. This high-density expression of the antigen of choice, in this case, the surface protein of SaaS is expressed in exactly the same way to the immune system as the immune system with seizure came across the virus. For that reason, viral-like particles are normally highly immunogenic, as we know from the HPV vaccines and one that we believe will be an excellent booster in the current environment where the majority of the population is likely to be vaccinated against COVID-19. If you go to the next page, this is the exciting -- or some of the exciting preclinical data that we reported earlier this week, we did a nonhuman primate study where we looked at various different regimes of the vaccine. I'm only showing one for simplicity, but we looked at single vaccinations that were adjuvanted or 2 shots nonadjuvanted. And here, I've shown you one group, where, after the second vaccination, you can see that there are very, very strong neutralizing antibodies on the left-hand side of the graph, which is about 50x higher than the high human convalescent serum. Now it's very difficult always to compare immune responses across studies and across different animal studies. However, if you remember, many of the current vaccines that are currently licensed, 2 shots of, for example, RNA vaccines gives you comparable titers to the convalescent sera, not significantly higher titers as we're seeing here. These strong titers translate into a very robust protection from SARS when these animals are challenged. So the graph on the right-hand side, you're looking at the viral copies following the challenge. The gray are the control animals at day 2, 4 and 6 post challenge. And you can see apart from 2 animals, there is complete 100% sterilizing protection in all the animals that are vaccinated with our viral like particle. And these 2 animals that have a small amount of virus at day 2 are significantly lower than the controls and completely eliminate the virus by Day 4. This is extremely strong efficacy data, again, superior to what has previously been published for other COVID-19 vaccines. On Slide 9, our partner, AdaptVac, together with an EU consol team has actually started the first Phase I/II study today. Actually, I believe, and there, they'll be looking at the safety and immunogenicity of this vaccine candidate with or without adjuvant in just under 50 healthy adult volunteers. And the first data we expect to be reported in Q2. In parallel, we have now decided to also push forward into Phase II, where we plan to start the study in Germany already in April, where we will be boosting people who have previously been vaccinated up to 200 volunteers. As I said, looking for how strong that booster response can be, how durable the response is and whether we can get broad neutralizing antibodies against the various circulating variants of SARS. And we will be ready to potentially start the Phase III after the summer. But for that, obviously, we continue to look for further funding to move the program into Phase III. Slide 10. A little bit about our RSV program. So this year, we -- and in fact, we have started the human challenge study. This is where we will vaccinate volunteers with our highly promising RSV vaccine and then challenge those individuals with RSV and look for, hopefully, a reduction in the viral load in the blood following challenge in the vaccinated individuals compared to placebo. This will be pivotal key data that we'll be reporting in the second half of this year that will, hopefully, encourage us beyond what we already believe that this is a highly efficacious candidate and support entering Phase III next year. Slide 11, let's talk a little bit about the integration of our 2 new vaccines, Rabipur/RabAvert and Encepur. At the beginning of the year, many investors, rightly so I guess, were concerned about the challenges that lay ahead. We were a company with no real commercial infrastructure or proven commercial capabilities, and we face an enormous task to build up a new infrastructure that was capable of taking over some of the key markets as rapidly as possible, while, in parallel, transferring the manufacturing process from our partner GSK. As I said, sitting here a year on, it's almost a perfect execution of the plan, say almost because I'm a perfectionist, this probably was perfect execution of the plan. We now have a commercial infrastructure in place in our key markets in the U.S. and EU. We've actually transferred to date, or I should say a few weeks ago, up to 18 countries, which covered more than 90% of the projected revenues of these 2 products. We've partnered with Valneva, another vaccine company in selected EU markets and Canada, and we've initiated the tech transfer. To remind you, the tech transfer is a lengthy process, unfortunately. It begins with taking over the packaging, which will happen already this year. Then we'll take over the fill/finish and finally, the drug substance. To support that tech transfer, we've initiated the expansion of our bulk facility, which will be completed next year. This will not only support taking in Rabipur and Encepur in-house, but will also increase our manufacturing capacity as we will now be able to manufacture both products in parallel, greatly increasing our capacity. So a very strong performance in 2020 despite the challenges that we faced, the unexpected challenges we faced with a world-wide pandemic. I'm extremely proud of the lead management and the employees and the strong support that we have obviously received from our investors, so thank take you. And with that, I'll hand over the presentation.

Thank you, Paul. So this is Henrik Juuel, CFO, speaking. So let's turn to a few slides talking about the commercial and our financial performance for 2020 and the fourth quarter. And we will start looking into the rabies market, where you will remember that the rabies market for Bavarian Nordic is characterized by 2 very distinct markets. We have the U.S. market and the German markets, representing the bulk of our rabies business. And the U.S. market, which is an endemic market, both has the post-exposure and pre-exposure segments, whereas the German market is a pure travelers market or pre-exposure market as we call it. So if we look at the -- how the U.S. market performed during 2020, then, obviously, the U.S. market was impacted by COVID-19 due to some of the lockdowns, but showed much more resilience compared to the European market. If you look to the right, you will see that the German market has totally nearly been eroded due to COVID-19 as people are not traveling and not needing any rabies vaccines. But as I said, I think the U.S. market, if we compare just the fourth quarter of 2020 to the prior year, went down by 38%, which is, of course, a massive drop, but still a much more resilient market than the European rabies market. So I think -- going forward, I think we are -- with regards to the German market, we are not expecting that to recover until we see travel resuming again. And you will have seen in our guidance, I will come back to that in a few slides as well, that we are guiding with a range on the revenue. And the other range of what we are guiding will assume that there will be some return to travel in the late third quarter and in the fourth quarter of this year. But in the U.S., I think, here, I think we did see somewhat of a soft fourth quarter in the U.S. rabies market, simply due to, I think, more than half of the states were in quite severe lockdown. So if we turn to the next slide, the other markets relating to the other product that we acquired, the tick-borne encephalitis market, I think here, we are looking at Germany only. This is only relevant for Europe and Germany, I think, is a good proxy for how the market is doing in Europe. If you compare the fourth quarter 2020 to '19, you will see that it's slightly down, but close to the same level. We did see some good signs in the third quarter of 2020 that the market was recovering. But I think, as we all know, I think then in the fourth quarter, many markets went into lockdowns again. And this had somewhat negative impact also on the TBE market. I have to say though that the fourth quarter is typically a low season for the TBE business. So I think for the TBE market, I think these are clear evidence that there is -- the underlying demand is still there, and it's all about the access to vaccinations. The access, you can say, is relevant from 2 perspectives. First of all, there are some of the restrictions in some areas. People have simply not been able or allowed to go to their physicians. But we have also seen situations where people are basically self-imposed restrictions and they are afraid of going to the doctor until it's more safe out there. So with regards to 2021, I think we are, of course, opening for very soon, reopening of those key markets in Europe. Remember, the main vaccination season that kicks off very soon, typically in April. That's when we start to see the larger volumes of TBE vaccinations. So hopefully, we are having a gradual opening of these markets in front of us. So that was a little about how the markets have performed for these 2 products. Let's look at our specific performance. And if we, again, first start with the rabies business, if you look at the full year, it is 35% down compared to 2019 when GSK was managing this business. And that is, of course, a mix of basically the European market being nearly all gone and the U.S. market being somewhat down. But with our significant market share gains in the U.S., we have, to a very large extent, compensated for that loss of market in the U.S. So I think, all in all, I think, with a strong performance in U.S., we are really pleased with the rabies performance for 2020, where we managed to gain market share. For the fourth quarter, we did see a drop in market share from approximately 79% in the third quarter down to 70% in the fourth quarter. That was fully expected as the competitor came back after a stock out situation. I think the current market share level is still significantly above the market share that [indiscernible] the U.S. had prior to the stock out situation. So strong performance in the U.S. Now we just need to see, again, the reopening in the U.S., first of all, to drive both the post and preexposure market. And then, of course, in Europe, we need to see travel resuming back to something a little more normal. On the next slide, our performance -- Encepur performance and the TBE markets, here we have seen for the full year. A drop compared to 2019 of 14%. But this is all explained by the COVID-19 impact. And here, it's really not the demand as I said that has been impacted. However it is the access to vaccinations that during the second and third quarter actually lowered the market size. I think what we're really pleased about with our performance here is that we have managed to consolidate our position. Historically, GSK did suffer market share loss to our key competitors in the market. But we, during 2020, which was our first year of commercialization, we managed to consolidate our position and keep our 30% share of the market. So now it's really all about driving further market share gains. And then, of course, again, as I said, the upper end of our guidance scenario for revenue does reflect that we are seeing a reopening of the market soon so that people can get access to vaccinations. Next slide, I have a few slides now on the financial performance of 2020. These are not breaking news as we actually came out with the -- and pre-announced our financial results end of January. And I'm happy to say that there has been no changes to these figures. They are orders in now, and they are 100% in line with the numbers we announced in January. So to take them from the top and down, DKK 1.852 billion in revenue for the year against the guidance of DKK 1.9 billion. Remember, that was the guidance that we issued in February before anyone knew anything about the impact from COVID. So we do regard this as meeting the guidance. If you look at the doughnut chart to the right, you will see the breakdown of the full year revenue. Our highest revenue product was Rabipur/RabAvert, our rabies business, DKK 628 million changed from our revenue in 2020 despite the impact and particularly on the European part of the business. That's #2, we have our smallpox business with Generis, both BDS, but also finish products to the U.S. government. And on the third place, we have Encapur product, DKK 455 million. Remember, we also got a milestone payment from Janssen when our Ebola vaccine was approved, DKK 67 million. And finally, we had some contract work, primarily sponsored by BARDA and related to the CMC work for our fill and finish facility and support to the free tried Phase III trial. If you look further down the P&L, you will see that our R&D expenses for 2020 came in DKK 341 million, so somewhat lower than in '19 and this is simply due to the phasing of our main pipeline asset, RSV, where we spent more money in '19 and not so much in 2020 SG&A costs came in at DKK 564 million, significantly above the '19 million level and explained by, of course, the commercialization of our business. We also sold a Priority Review Voucher, which was finally closed in January of 2020, and that brought us DKK 628 million in additional cash and income. So right at the bottom, you will see our EBITDA that ended at DKK 740 million, above the latest guidance we issued of DKK 725 million. And significantly above the DKK 675 million we originally guided in EBITDA in February 2020. Turning to the next page. Just a few words on our cash flow and the balance sheet. Yes, basically, on the cash flow, we saw it was more or less neutral for the year, minus DKK 5 million net cash flow. Cash flow from operating activities was positive, of course, significantly positively impacted by the sale of the Priority Review Voucher. And some negative contribution from working capital, where we, during the year, increased our inventories as we took over markets from GSK. Cash flow from investment activities includes seller movements, selling and buying sources depending on the cash we have at hand. But it's -- if you look at the real tangible investments, it did include a little more than DKK 200 million of investments in property, plant and equipment related to the finalization of our fill and finish plant, but also the initiation of the expansion of our Board facility. And furthermore, the investment line also includes payment of milestones to GSK amounting to nearly DKK 400 million. Cash flow from financing activities, we saw positive contribution of approximately DKK 1.3 billion, and that was the net impact of the significant rights offering we did in the beginning of 2020. And where we use some of that to pay back the bridge loan, we took in December '19 to pay GSK the upfront consideration for the acquisition. On the table to the right, I don't want to go too much into the details of that, but just highlight the securities, cash and cash equivalents. So basically, our cash position, we ended at nearly DKK 1.7 billion and had guided DKK 1.6 billion, so still quite well above the guided number, which gives us a good and solid position. But remember, we still have a deferred consideration to GSK of DKK 2.8 billion, and we are going to continue investing in the expansion of our plants, and therefore, it makes a lot of sense. Now we are embarking on the -- to advance our COVID-19 program further to go out and raise the cash for that, which was never in our original plans. Next and final page in the presentation here. I'll talk a little about our guidance for '21. So we are guiding at this time an intel, revenue will be between DKK 1.9 billion and DKK 2.2 billion. The low end of this guidance here reflects a scenario where a lockdown continues beyond the first quarter and into the second quarter, in particular, in key markets like the U.S. and Germany, where we have the majority of our business. The higher end of the revenue, but also the EBITDA guidance, that reflects a scenario where we are going to see a gradual reopening now basically and continuing into the second quarter, which will allow people access to vaccinations, but also, which will eventually translate into travel and picking up in the third and fourth quarter of this year. We are not anticipating any impact on our smallpox business and our Ebola business as we speak today. The EBITDA guidance is between DKK 100 million and GSK 250 million. And again, reflects the same scenario as the revenue guidance, and we do expect that to end the year with a cash position of between DKK 1.4 billion and DKK 1.6 billion, and this includes net proceeds of approximately DKK 1.1 billion from the private placement we did earlier this week. R&D spend for '21 is expected to be at approximately DKK 750 million, including up to DKK 200 million to support Phase II and scale up for our COVID-19 vaccine. And the latter, we are expecting to capitalize, and therefore, I think the amount that you will find by the end of the year and the P&L will be approximately DKK 550 million in R&D. And in order to understand our cash position by the end of the year, and we have added some notes below. We are continuing to invest in our facility expansions and also in the tech transfer from GSK that will amount to a total of DKK 650 million in '21. We are also in -- as part of the whole transfer from GSK, we will take over the remaining markets during the first half and as we also start taking order packaging, this will increase our inventories. Therefore, we expect working capital to increase by approximately DKK 300 million. We will also continue to pay milestones to GSK during '21, probably at a level close to what we paid in 2020. But of course, these milestone payments are closely linked to the -- to specific milestones in the whole integration project. Our cash position also assumes that we make a drawdown of DKK 30 million existing credit facility we have with the European Investment Bank. Yes. I think that's basically some of the important assumptions to understand to fully understand the cash position by the end of the year. To the right, we have summarized what are some of the key activities and milestones that will keep us busy again in '21. And if you look at within R&D, I think it is, of course to complete that Phase II human challenge trial that we have initiated in RSV, where we expect to actually read out in September, providing us a good and sound basis for deciding on the Phase III, potential Phase III in '22. And the Phase III in '22, we are already, this year, preparing ourselves in terms of preparing the manufacturing, basically, the material that we need for that potential Phase III. And together, these do the human challenge trial and the preparation for the Phase III will be the second, although the most significant expense within our R&D budget for '21. The new thing here is, of course, also, as we have announced, we are now going to kick start the advance of the development of the COVID-19 vaccine candidate. We have committed to invest up to DKK 200 million into a regulatory Phase I/II starting and scale-up of manufacturing to Phase III volume levels. We are continuing to see funding even for those Phases, but in order not to lose momentum and lose important time in this project, we have decided to kick start basically the development. We will also continue the work towards the -- getting the freeze-dried version of our smallpox product eventually approved. And we will continue working with intravenous administration of our new Brachyury containing construct as well. On the commercial side, I think we have the full commercial infrastructure in place. During 2020, I think, we did extremely well and had a strong brand performance. So we are in a good position to -- for '21 to basically drive profitable growth for these products. Of course, we are very dependent on how COVID-19 develops. But definitely, we have a good starting position. Key focus area will also be to take over the physical distribution for the remaining markets. As Paul alluded to earlier, we already took over 18 markets corresponding to more than 90% of the total revenue from these 2 products. And then, of course, I think, it's also all about improving the awareness of Bavarian Nordic as a key commercial player in the markets amongst the health care physicians. On the manufacturing side, this year will actually be exciting because we have completed the construction and qualification of our brand-new fill and finish facility, and this year will be the first time that we are actually going to fill commercial products on the line. So quite an exciting milestone ahead of us. Then we -- also in 2020, we initiated the expansion of our bulk facility. And plan is that, this year, we will complete the construction of that. And of course, we will also progress the whole technology transfer of the 2 acquired products, which is a longer project, eventually ending with taking over bulk '24. So again, I think busy calendar ahead of us for '21 with some quite exciting milestones ahead of us. So with that, I think I will turn the word back to the operator and ask for questions.

[Operator Instructions] Our first question comes from the line of Michael Novod from Nordia.

It's Michael Novod from Nordea Copenhagen. A range of questions. First to the ABN COB2 COVID vaccine. Could you comment a bit on -- I don't know whether you can, but the assay used for your vaccine when measuring utilizing antibodies in nonhuman primates? And then secondly, also, the route of challenge in the nonhuman primates and the dose as well as whether you see CD4 and CD8 T cell responses in these monkeys? That's for the COVID? And then secondly, on the Encepur and Rabipur and RabAvert. Is there any chance you can try to at least in sort of ballpark frames, try to give us where you see those 2 products split wise in 2021? Just so we have a feeling of how you see it?

Michael, this is Henrik. I think Rabipur/RabAvert, we feel that it's a little too early to start breaking down our revenue expectations for '21, simply given the uncertainty we are facing with the partial reopening. So I can only allude to what we have previously said about these 2 products here that we -- generally, I think we expect that for the Rabipur, the rabies business. This is a business that should normally grow low single digits at least, just the market, and then, on top of that, would come our, you can say, market share in business as well, whereas Encepur business in normal circumstances should be growing at least high single-digit numbers annually. But of course, I think, it is uncertain times, and therefore, we prefer to wait a couple of months to become more specific on the exact breakdown of our guidance.

Okay.

On the COVID-19 question. So the assay was against norovirus in the B-cell [indiscernible] facility. So very similar to how most people are looking at the utilization. The challenge dose was 1x 10:5, [ TCIB550 ] which is in line with others. I mean, the change dose in strain varies from the various companies, but it's been -- some have gone as low as one-time set in the fall, and some have gone as high 10:6 or 2x 10:6. So we're at 1x 10:5.

And CD4 and CD8?

The interesting thing with the viral like particle is at both in mice and in the primates, we really didn't see a very strong induction in T cells at all. And in the challenge, post-challenge, one of the interesting things is the animals that had a stronger protection or at least really significantly reduced viral load stronger and a very low T cell response, meaning that it really looked like it was just a neutralizing antibody for clearing the virus or...

And your next question comes from the line of Peter Welford from Jefferies.

I got a few. Firstly, just given COVID-19 for a minute. Just so we can understand on this. Firstly, on the German study that you're doing, the Phase II. Am I right understanding that's a single dose, and that's going to be -- and I right noting in volunteers, you have either already been vaccinated and is that with any vaccine or alternatively prior infection? I guess just trying to understand, are you going to be doing antibody testing pre-enrollment patients in that? Or what are the sort of enrollment criteria to determine that in terms of -- and then we'll presumably then you'll be measuring neutralizing antibody titers to your dose. Second question then just on the manufacturing of this vaccine. We've heard from a variety of different companies talking about the pros and cons of the different technologies and manufacturing. I guess, from your perspective, could you talk a little bit about how you manufacture this vaccine and the ease, particularly the protein part, the issue that you can manufacture the various protein fragments that are needed for this? And then equally, do you have the option to use this technology beyond COVID-19 from AdaptVac? Or is it solely at the moment COVID-19? And anything beyond that would require a separate negotiation. And then sorry, just on doing a bit different one for Henrik. I may just be really silly here and I'm not understanding, but could you just run through just with regards to the cash investments, how this works from a -- I'm a little bit confused as to what the DKK 650 million does and does not include because we have the milestones to GSK. I think you talked about roughly the same as last year. There's then also the investment in COVID-19, which could be up to DKK 200 million. The CapEx in the facility, which, I think, you talked about in total, could be DKK 650 million over the years. Could you just -- I add all this up, I guess, to more than DKK 650 million could you just expect exactly which numbers are included in the DKK 650 million? And what we should be considering to the investment this year?

Okay. I'll try answer. I'll try and answer your COVID question. So yes, the Phase II that we plan to run will be in people that have already been vaccinated. And it will be a single-shot nonadjuvanted. And then we will be looking, exactly to your point, how strong that boost immune response is in terms of neutralizing antibodies, and everything actually. But looking at whether you get a broader neutralizing response against the various variants. So unlike the monkeys, where we only looked at SARS, COVID-2, we'll be looking at the other frequent circulating variants that are currently around. In terms of the inclusion criteria, we're still pulling together the protocol and actually still plan to have those discussions. But we want to keep it as simple as possible, so we can go as fast as possible. So we'll probably just need proof of vaccination, not really -- obviously, they will have pre-lead and titers done. That won't be part of the screening. Then on manufacturing. So that as you -- as I tried to explain, there are 2 components. There's the bacterial captive, which is currently produced in the e-coli. It's a relatively simple manufacturing process, although nothing is important manufacturing, but it is a enviros, very simple, very high-yielding process. So you could produce very large quantities of that and have it stored. The recombinant protein for this vaccine is currently produced in insect cells. But other manufacturing processes like yeast could be used. And again, the process is a relatively simple one. And then you combine the 2 products together, and the purification is also relatively simple. So although we're trying to see whether we can have a universal boost to give broad responses. If that wasn't the case, and you really needed to make new vaccines against new circulating variants, I believe this platform is as fast as RNA, particularly if you've got quantities of the capsid already stored. Then you had a question about the license from AdaptVac. Is it only for SARS, and that is exactly the case. It's the SARS only. Currently, if we wanted to expand that, obviously, that's a new discussion with AdaptVac. I think I covered everything you asked? Yes. That's right.

This is Henrik. To your question on investments, I think the -- our total investments anticipated for '21 amounts to DKK 650 million. And approximately half of that relates to the expansion of our bulk facility. So let's just call that DKK 325 million then but to finalize that, which ends in '22, that number happens to be DKK 650 million, and I think that can create a little confusion, of course, because the full investment over the next 2 years to expand our bulk facility is expected to be DKK 650 million. And for '21, total investments is as well DKK 650 million. Half of that goes to the bulk facility, DKK 325 million, then another DKK 150 million to DKK 200 million is related to the tech transfer project ongoing. So that's a mix of capitalized expenses and some equipment that is required for that. And then there is a chunk of other investments, typical maintenance-type of investments. So I hope that clarified it. But I think these 2x DKK 650 million of that and confused the picture a little.

So to be clear that when we consider overall then the cash flow, you've got the DKK 650 million. But then on top of that, we need to consider the payments to GSK of roughly DKK 394 million on similar to this year. And on top of that, then the capitalized R&D for the COVID-19 vaccine?

Correct. And I think when we issued the guidance, we have laid that out under the cash position assumptions. But you're right.

[Operator Instructions] And your next question comes from the line of Alex Cogut from Kempen.

Can you hear me?

Yes.

Yes.

All right. So I was just wondering, with respect to your COVID vaccine, how are you looking to fund the Phase III? Is it more towards government contracts? Or do you expect some corporate partnerships? And then, ultimately, where do you expect the demand to come from for your candidates?

Yes. So in terms of funding, I think there are a number of sources, and we're not bound by any of them. To be honest, we're open to any sort of funding that we can achieve. So I think, last year, the EU countries made a decision that they would not really fund the development of the vaccines, but would have advanced prepurchase orders. That, I think, in my opinion, has backfired because the EU is not as advanced in the queue for the vaccines as other countries who have actually invested in the development as well as in the advanced prepurchase orders. So I think that has caused a change in attitude. So currently, we have seen a change in attitude, but there are a number of governments approaching us, interested in potentially funding the development of the next-generation COVID vaccine. So it could be a government. It could be, again, our usual friends across the pond, the U.S. government and BARDA. And having said that, it could also be a corporate sponsor, who is also interested in a universal booster. On the -- where will the demand be? If I and other people are right in that COVID is not going to be eliminated and that there will be new variants and persistent disease, that means there is going to be a need for persistent vaccinations and boosters. Some of the existing vaccines that are already approved. There are articles out there. It's not really in my own opinion. There are articles out there questioning whether, for example, the adenoviral based vaccines can actually be used as frequent boosters. If that turns out to be the case, they can't because of vector immunity. Then the 3 main players that are currently supplying vaccines would be out. The other thing is, as I said, this -- based on the data currently that we have, this is a very strong immunogenic candidate that we have, that could really create a very strong booster response. What we're seeing currently with the first wave COVID-19 vaccines is that they're highly effective, which is fantastic. But they are actually inducing very low levels in neutralizing antibodies. And how durable those antibody responses are, we don't know. But if they wane off as quickly as some data is suggesting, you are going to need frequent boosters. So I think the demand really is a booster vaccine.

Understood. That's very clear. And with respect to your RSV program, how do you expect the human challenge data to still inform the design of the Phase III? And then with respect to the Phase III trial design, how big of a trial do you expect to need considering potential behavioral changes that could lead to still a lower RSV season in '22 and '23?

Yes. So to your point about the Phase III design, the reason we postponed the initiation of the Phase III this year is simply because of the rates of RSV, extremely low. Due to the social distancing and lockdowns last year, and we anticipate it may happen again this year. We are going to keep an eye on the RSV rates, obviously, because we need to make a decision, do we go next year or not. But to your point, we're looking at 12,000 to 14,000 subjects, with certain assumptions of efficacy and certain assumptions of attack rates. And obviously, if the attack rate of the virus remains very low, we probably can't be conducting the study in the same way so we have to postpone. So it's all about keeping an eye on the rates of RSV this year. And making a judgment call, is it the right time to go or not? In terms of what do we expect to see and how could it affect the Phase III design. So we're looking hopefully for a significant reduction in the viral load in the blood post challenge compared to the placebo. That would give us an indication of the level of efficacy that we could expect to see in the field. So without that indication, you are basically making an assumption in your statistical design for Phase III, whereas after the human challenge, if it's positive, of course, which we anticipate, we will get a stronger indication, are we looking at a 50% efficacy, are we looking at a 60% efficacy or something higher. And that can help design the study even making it smaller or larger, which is obviously one of the components is how good your vaccine is. So that's what we hope.

There are no further questions at this time. Please continue.

Okay. Well, thank you, everyone, for your time and for the questions, and I hope you have a great weekend.

And that does conclude our conference for today. Thank you for participating. You may all disconnect.