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

Good day, and thank you for standing by. Welcome to Bavarian Nordic Half Year Report Second Quarter for the 6-month period ended 30th of June 2022 conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Rolf Sass. Please go ahead.

Thank you, operator, and good morning to some, and good afternoon to the rest of you, and welcome to this Q2 quarter from Bavarian Nordic. I can honestly say that this is maybe the busiest, most exciting, surprising and most decisive quarter we have seen in a very, very long time here in Bavarian Nordic. May I just remind you that we -- the purpose of this call is to answer the most questions we can within the time frame to analysts and investors. And in the room, we have, as usual, our President and CEO, Paul Chaplin; and Executive Vice President, Henrik Juuel, that will walk through the presentation. And afterwards, we have the Q&A session. Before we run through the presentation. I will just briefly go through this forward-looking statements. That 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 materially from the results discussed. Forward-looking statements include statements regarding our short-term objectives, opportunities, financial expectations for the share and cash position [indiscernible] 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. So with this, I will hand over the presentation to you, Paul.

Thanks, Rolf, and welcome, everyone, to our Q2 update. If you move to Slide 3, I just want to make a few opening statements before I walk through some of the key events of the first half of '22. So this year was always going to be extremely challenging. We knew, most likely, we will continue to face COVID headwinds on our sales of our rabies and TBE. It's also a year of very strong investment. We were investing in our manufacturing infrastructure, expanding our bulk manufacturing to allow us to bring our 2 new vaccines, rabies and TBE, while after that investment, we would then be able to also produce our samllpox, monkeypox and other vaccines in parallel. We were engaging in 2 tech transfers internally on our new fill and finish line, one for freeze-dried generics and the other office for rabies. And in parallel, we were doing a tech transfer for the fill/finish with Encepur. On top of that, we were planning and are investing DKK 2 billion in R&D, the single largest investment in R&D in our history, and that was to bring RSV and ABNCoV2 into Phase 3. Two very exciting assets that could potentially meet huge unmet medical need, and would add to the future growth opportunities of the company and align us with our vision of becoming one of the largest pure-play vaccine companies in the world. And as I'll show you in the coming slides, we've made fantastic progress on most of those activities. But of course, everything that we're going to talk about today has been overshadowed by monkeypox, which emerged with an extraordinary international outbreak since May. And I have to say I'm extremely proud of all of the employees who have really rallied and have gone more than the extra mile, the challenge to deliver our vaccine, which is the vaccine that everyone wants, to all countries that need this vaccine to address the current international outbreak. So with that, let's move to the next slide, Slide 4, let's just talk about some of the key highlights in the first half of the year. If we take RSV, we've made great progress on this program. We have both PRIME status and breakthrough therapy designation in Europe and in -- with the FDA. We've done a license agreement with Nuance Pharma for China and selected Asian markets, already gearing up and preparing for the successful launch of this product. And we've initiated Phase 3, and we remain on track to enroll the 20,000 subjects by year-end. On our COVID-19 candidate, ABNCoV2. As you know, we had to change gears a little bit in terms of how we were going to approach the registration due to the regulatory landscape. I think we've managed to navigate that extremely well. We now have all the regulatory approvals in place, and we're still in line to start the Phase 3 trial later this month. On rabies and TBE, we've really seen a tremendous turnaround in the first half of this year. On rabies, I think the rebound of rabies has gone much faster than we had originally anticipated. In the U.S., we're already ahead of pre-COVID levels, and in Germany, we're seeing a strong rebound. On TBE, despite the disappointing start to the year, in Q2, we have seen positive growth numbers and really the first signs that we're coming out of the COVID cloud, but I will allow Henrik to talk more about these 2 markets. And then as I said, on top of what was going to be a challenging and busy year, monkeypox came along. We'll talk more about that in the coming slides, but we have completely changed gears within the company in terms of what we're doing in manufacturing since May, until the end of next year and probably going into the best part of next year, we're only going to be manufacturing JYNNEOS and IMVANEX. We've scaled up, and we're looking to expand capacity by working with others. If you go to the next slide, Slide 5. So the monkeypox outbreak [indiscernible]. Before this year, cases of monkeypox have been recorded in the U.K., U.S. Israel, and I think it's Singapore from travelers, isolated incidences that were quickly controlled through public health measures and the use of actually IMVANEX in certain instances. This is an unprecedented case in that we've got more than 40,000 cases spanning 96 countries, which has never been seen before outside of the endemic areas in Africa. WHO in the 23rd of July declared this as an outbreak, a public health emergency; and the U.S. in early August declared a national emergency, just highlighting the seriousness of the current outbreak. We're beginning to see some slight differences. So in the United Kingdom, which is one of the first countries to notify cases early in May, we're beginning to see a decline in a number of new cases, which is extremely encouraging. However, in other parts of the world, we're seeing a growth of cases. If we take Brazil since the last update, it's more than double the number of cases. And unfortunately, in Brazil 77 infected children have been confirmed between the ages of 0 and 17. So I think that gives you a picture that in many parts of the world, monkeypox is growing. However, in some of the countries, which recorded the earliest infections due to various reasons, it looks as if the number of cases are in decline, which is extremely encouraging. If we go to the next slide, we've had an extremely busy summer on some of the regulatory issues. But if I -- if you go to the bottom right-hand corner of the slide, I'll talk a little bit about manufacturing. So our bulk facility has been approved by both the FDA and EMA since 2010, and those approvals still remain in place. In terms of fill/finish, we transferred the fill/finish activities from a contract manufacturer in Germany last year to our new fill/finish line in Denmark. That line was inspected and approved by the Danish Medicines Agency last year, but we're still awaiting FDA inspection and approval and the final approval from EMA. So in early May when the first cases appeared and we opened contract negotiations with various governments, the early doses that we supplied were made based on, in Europe at least, batch exemptions where countries accepted exemptions to the various batches. But since the summer, our facility is now approved both by the U.S. and the EU. So we're good to go. In terms of the various approvals, IMVANEX was approved in 2013 but only for the smallpox indication. That's now been expanded since the summer to include monkeypox. Similarly, in Canada, where it's under the trade name IMVAMUNE, it was approved in 2013 for smallpox, but this has already expanded in 2020 to include monkeypox. And as I'm sure you know, JYNNEOS, which was approved in the U.S. in 2019, already had the monkeypox indication along with smallpox. So with all these regulatory advances, which happened in almost record time, I would say, we now have full approvals for manufacturing and full approval for the indication for those smallpox and monkeypox in all major jurisdictions. If we go to the next slide to talk a little bit about supply. As I said, we have done everything in our power to ensure that the limited supplies we had on stock. We were able to meet the demand that we receive from all around the world. And in meeting that demand, the way we've achieved that is by offering a certain amount of doses in the near term and then fulfilling the demand over the coming months as we ramp up production. So we have been able to ensure access of JYNNEOS IMVANEX to more than 70 countries across America, Europe, Asia and Oceania. We have agreements with PAHO and HERA. We are giving access to a broad range of countries in Europe, Latin America and the Caribbean. It is also clear, however, that while we're doing an awful lot in terms of manufacturing, and I'll come back to that in the coming slide, we need more capacity. And the only way that we can achieve that in the short term is through partnerships and licenses. And I'll come back to that in some of the future slides. Of course, we always get a lot of questions on how many doses and what have you delivered. I think to give some guidance on that, we have secured orders for around 9 million doses and some of that is split between '22 and already in '23. We will skew more towards '23. Most of those orders are for what I call the here and now, doses that people desperately need to control the current outbreak situation that we are -- that the world is facing. However, there are indications with certain countries, but the discussion is also moving to larger quantities, which are clearly for stockpiling. And we've already made the announcement of a relatively large order in the EU. And this is basically the largest order that we've ever received for IMVANEX outside of the U.S., and that gives you indications that there is a growing demand, and we would expect probably more orders to be fulfilled by the time we come out with guidance for '23. If we go to the next slide, this is a fairly busy table with. But just trying to give you an overview of the current recommendations in various countries of the vaccines that they're recommending. I would say everyone is recommending MVA, which is our vaccine. A few territories are also recommending a second-generation vaccine such as ACAM2000. And again, pretty much across the board, the vaccine is being recommended for close contacts, but also in a prophylactic setting, the so-called PrEP indication, for health care workers but also high-risk individuals. Various dose-sparing strategies have been employed around the globe. And while Bavarian Nordic does not set policy, we are here to support our customers with the data that we have. And for example, in the U.K., they rapidly move to a single vaccination. Others, such as France and Canada and Germany are delaying the booster vaccination. And in early August, the U.S. decided to go a different track, which was to try and extract 5 doses from 1 vial and administer a much smaller volume intradermally, which is under the skin. This is based on relatively limited data, but nonetheless is being rolled out. In Europe, last week I believe it was, there was also [indiscernible] came out suggesting that this could be a suitable approach in a temporary measure as a vaccine supply is at a low, but also highlighted that there was very little data to support the stability of smaller volumes in a vial, extracting the 5 doses and the like. So that is an overview of how the vaccines are currently being utilized around the world. So if we go to the next slide and talk a little bit about manufacturing. One of the questions that I'm always getting is how come it takes so long to manufacture a vaccine. And just at the bottom of this slide, obviously, you have to produce the bulk vaccine and then you need to convert that by fill -- filling in for glass vials, packaging. And in both cases, you need to ensure the qualities of vaccines by doing an array of so-called release tests or quality tests. You can see the process from the beginning to the end takes approximately 6 months, which is a long time. But to try and explain that, for the bulk vaccine, there is in excess of 30 individual tests that have to be formed on the vaccine, one of those tests takes approximately 80 days. So -- and if that test fails for whatever reason, you need to repeat. You can do the math yourself, that takes a long time. So it's really on ensuring the quality of the product that takes so long before we finalize the manufacturing. In addition to this manufacturing, when this comes to scale up, it can take 12 months before you start manufacturing because of the raw materials. So if you're planning to be operating at one batch a week, and then there is a national emergency in terms of the monkeypox outbreak and you want to scale up to 4 batches a week, you are scrambling to make sure that you've got the raw materials to do that in a relatively short period of time. Having said all that, these are challenges that we're very familiar with, have overcome in the past. And as I said, what we've managed to do since May is we were operating at [ 1 ] batch a week in terms of fill/finish. We've doubled that capacity. We've partnered with Grand River, a contract manufacturer in the U.S., which will initially double our manufacturing capacity and could potentially further increase that once the tech transfer is complete. We're scaling up on the bulk production, again, doubling our capacity. Going from 2 batches to 4 batches a week, which will be in place by the end of this year. And we're not finished yet. It's clear that we need even more capacity to meet the demand moving forward into '23. And we are looking to expand both bulk manufacturing and fill/finish capacity by partnering and talking to others. So on Slide 10, on ABNCoV2, I mean, the only thing I really want to say here is, obviously, the regulatory environment change. We had to change our Phase 3 design in record time, I would say, and we have all the regulatory approvals in place. And we do plan to start this study, which will be comparing the safety and eugenicity of ABNCoV2 to an approved COVID vaccine. And that enrollment will start this month, and we're still on track to have the readout by year-end. Similarly on the next slide, on RSV. We've initiated the study. Enrollment is proceeding according to plan. We're on track to complete the 20,000 subjects enrolled, and that's made it before year-end. As you know, we'll have a readout in the first half of next year. And we are on track for that, and we remain extremely excited about the opportunity of our RSV candidates. And as I said, time is coming that we'll find out whether this differentiated approach works next year. And with that, I will hand over the presentation to Henrik Juuel.

Thank you very much, Paul. So let's jump directly into an update on our commercial and our financial performance for the second quarter and the first 6 months of this year. And we start on Slide #13, where we have the breakdown of our revenue split for the second quarter. Paul already alluded to the strong performance of the rabies market that we have seen during the second quarter. Extremely strong market development that actually led us to a growth of our revenue by 85% compared to last year. Very strong growth in the U.S. market that means that we are already now seeing a U.S. rabies market that is at a slightly higher level than what we saw back in the second quarter of 2019 pre-COVID. We've also seen an extremely strong development in the European rabies market, strong -- very strong growth that I will come back to. We are not yet at the pre-COVID levels, but I think we are seeing a very strong growth there as well. The TBE or in-support revenue for the second quarter ended at DKK 144 million, so slightly below last year's level. But the very positive thing here is that we are seeing momentum coming back. We have seen a quarter with positive growth in the market following several quarters of declines. So again, also a very positive trend on the TBE market. And then, of course, driven by monkeypox, we have recognized DKK 117 million in revenue from the sale of smallpox, monkeypox vaccines. So that is revenue all recognized in June, and it's really just the first part of, you can say, executing on all the orders we have secured during this monkeypox outbreak. Remember, the outbreak started in May, so we are actually extremely proud that we managed to already ship out doses in the months of June. Altogether, for the quarter, that gives a revenue of DKK 537 million, so 45% higher than the second quarter of last year. And for the first half, it is DKK 857 million, slightly below the level of first 6 months last year, all explained by a different phasing of our smallpox vaccine in 2021 and something that we will definitely catch up with during the second half of this year. Turning to the next slide. So here, we are looking at the rabies business. And again, the upper left corner, you see the development that the market development in the U.S. market. As you can see here, up 26% year-over-year. So very strong performance, and we are actually now at a level higher than what we saw in 2019 prior to the COVID-19 outbreak. So very strong market performance in the U.S. In Germany, which is our other big markets, rabies market, we have seen extremely strong growth, more than 400% growth year-over-year. But of course, this is a pure travelers vaccine market. So it was also extremely hard hit by the COVID situation, and we are still approximately 40% below the pre-COVID market size level. But again, more than 400% growth in the markets where we are the clear market leader, with approximately 95% market share. This also has a significant impact on our business. So I think generally speaking, on the rabies market, we are seeing traveling picking up faster than what we had originally anticipated. And that, of course, has a very positive impact, particularly on our rabies business. So yes, to the right, DKK 234 million. As we said, 85% up driven by strong market performance. We have kept our market share at around 65% in the U.S., which is pretty much in line with the level that we saw prior to the competition facing a stock-out situation. And then I also have to, of course, say here that we have also had some positive impact by the very strong dollar development, approximately DKK 20 million of the growth in the first half year we can subscribe to a stronger dollar this year compared to last year. So next slide, we're looking at the TBE markets, and that's a pure European market. That's the only place it is endemic at the moment, and we are using Germany as a proxy for the development in Europe. Here, we also, as I said earlier, we've seen a very strong market development, actually 38% up compared to the second quarter '21, an extremely strong performance following several quarters where we saw the market decline. And this growth was actually strong enough to bring the first half year into a positive growth territory, growing by 13%. So very strong growth and a good signal that we are also getting out of this COVID situation for the TBE business as well. But still some way to go, approximately 20%, 25% below the full pre-COVID levels. The numbers to the right, slightly below the last year's level, with DKK 144 million in revenue. This is despite the positive market development, and is caused by inventory movements at wholesalers but also at partner levels. This is typically what happens when demand surges so quickly. That means that the wholesalers are basically emptying their inventories, and we'll need to replenish that in some of the following quarters. Our market share in the key market of Germany remained stable around the 30%. So next slide, just a few words on our in-licensed products where we have 3. We have the recently launched HEPLISAV B. It's a hepatitis B vaccine that we have in-licensed for the German market from the U.S. company, Dynavax. It was launched in May, and we have seen good revenue already during the second quarter. That is, of course, mainly to fill up the whole supply chain. So it's a little too early to say how we are doing from a commercial perspective. But definitely, from a logistics perspective, I think we have had a good start. Then we have the 2 products in-licensed from Valneva. We have the DUKORAL Cholera vaccine; and we have IXIARO, Japanese sensor phyllites vaccine that are in-licensed for both the German and the Swiss market. And here, I think we have, and particularly for the IXIARO, we have seen a very strong development these first 6 months. And again, a traveler's vaccine that has been positively impacted by the picking up of traveling that we see in the market. So strong performance. And that together across these 3 products here, we have recognized more than DKK 50 million in revenue for the first 6 months. So also a nice additional contribution. And remember, I think this is, you can say, being launched without any, material significant, additional resources, as we are basically using the commercial setup that we have in place in both Germany and in Switzerland. On the next slide, we have a full P&L. [indiscernible] DKK 857 million, we already talked about the [indiscernible] for that one. Production costs for the first half year of DKK 723 million, driven by, of course, the revenue, but again, also impacted to some extent by the planned shutdown of our bulk facility, which has now reopened again. R&D development costs DKK 290 million, so significantly up compared to last year and explained by the ongoing RSV Phase 3 trial that is, of course, consuming some cash. Then on SG&A, DKK 253 million, in line with the level we saw last year as well. So at the bottom of this table, you see an EBITDA showing a loss of DKK 212 million. On the next slide. On the -- in terms of our cash flow for the period, I'm now talking to the table to the upper left. So the net cash flow for the period was a negative of DKK 307 million, driven by negative cash flow from operating activities, to some extent, offset by improved working capital position. We saw a negative impact from investment activities, and this includes investments in the expansion of our bulk facility so we can manufactured in Encepur and Rabipur in the future on our site in Kvistgaard. It also includes the money that we invest behind the tech transfer of these 2 products as well. Cash flow from financing activities, a positive contribution of DKK 301 million, and mainly explained by support from the Danish Ministry of Health through our ABNCoV2 project. To the right, I don't want to take you through all those details on the balance sheet, but just highlight here that, by the end of June, we had securities, cash and cash equivalents of nearly DKK 3.3 billion. If we deduct all the debt that we have, that gives us a net cash position of DKK 2.4 billion. And if we add back the real debt, not our repo positions, I think this brings us -- or gives us a cash availability of DKK 2.8 billion. So a really strong cash position that enables us to continue investing as we planned for this year. My final slide, this is one I've been really looking forward to share with you. Of course, we have, I think on the guidance side, been quite busy over the summer here as well. And as we have closed more and more orders related to the monkeypox situation, we have also adjusted our guidance, 6x actually, over the last couple of months. Remember, the original guidance that we issued in March reflect that the investment year that Paul talked to in his introduction, we spent nearly DKK 2 billion in R&D this year. And we also were challenged a little by the fact that we had to shut down the bulk facility to do the expansion of the work in Kvistgaard. That facility has now reopened, but that these things together really meant that we came out with guidance of relatively low revenue levels and a loss of more than DKK 1 billion. So now we have adjusted 6x, as I said, and we are guiding today expected revenue between DKK 2.7 billion and DKK 2.9 billion, and EBITDA getting closer to a breakeven [ now guided ] between DKK 100 million to DKK 300 million, and the cash position better than DKK 1.7 billion. So while the monkeypox orders clearly have had a huge impact on these guidance, I also have to say that the current performance of our commercial business in [ participated ] but also the first signs of the TBE business gaining momentum again has also contributed to our adjustment of the guidance. So with this guidance, I think we are extremely excited about the first half of this year. It is a fantastic opportunity for Bavarian Nordic at the moment to really make a difference. So what we mean by our vision, but also take advantage, of course, also of the commercial opportunities and the financial opportunities that we see in the market today. So with that, we will open up for questions and answer session.

[Operator Instructions] And the first question comes from the line of Thomas Bowers from Danske Bank.

A couple of questions here. So firstly, just on the monkeypox vaccine. So can you maybe comment a little bit on how the dose order backlog looks like for '23 now in total, with all also combined small orders that you haven't announced? And then second question, just on Encepur and Rabipur. So how do current inventory levels at wholesalers and pharmacies look like right now compared to what you saw at, say, pre-COVID levels? And can you maybe add a bit of color on how you see the sales development going in here to the first part of the third quarter? Then thirdly, just on your '22 guidance. Just to clarify, the exchange rate that you use. Is that still DKK 6.95? and how much of the monkeypox revenue in H2 is actually going to be paid in U.S. dollars? And then maybe just if I can squeeze in a last question just on dose sparing. So you can say once the inventory levels of the vaccine -- monkeypox vaccine starts to sort of improve here during the next couple of months, maybe year end, do you actually expect the EUA to actually be removed immediately? Or is there sort of a risk that this will continue?

Thomas, this is Henrik. Thanks for the questions. I think the dose order backlog, I think the closest we can get to give you an answer is actually what Paul said earlier in his presentation here. I think if you look at the orders that we have closed today, that is we are talking approximately 9 million doses going across '22 and '23, and if you look at the expected delivery times, they are skewed somewhat towards 2023, which basically, I think you can interpret as, we have actually now secured more business already here in August for next year than what we have used to upgrade our guidance this year. I have to say, though, that the exact split between '22 and '23 is extremely sensitive to the final delivery schedules. We could have some orders that we are planning to deliver in November, December that could happen in January, February or the other way around. The good thing, of course, is that we are not talking any lost business. It's simply a matter of logistics. So the sort of split between '22 and '23, extremely sensitive to these things here. On your other question, the Encepur, Rabipur wholesale inventory levels, we do not have a, you can say, full insight into the exact inventory levels that they hold. There are many wholesalers out there. But it is clear and particularly with a product like Rabipur, when you have a sudden uptick like this, it will eat into the inventory levels at the wholesaler. So my expectation is that they are running at low inventory levels right now. It takes typically some quarters for the wholesalers to adjust, and then they will start adjusting their own forecast. So we are running, I think, at relatively low inventory levels with the wholesalers. That is our best estimate at the moment. The U.S. dollar, in our guidance, it reflects in the current levels of the U.S. dollar. We have seen in the first half year, the only real income we have had there in U.S. dollar is the RabAvert business. So it did help us with approximately DKK 20 million from a stronger U.S. dollar this year. Clearly, additional business to the U.S. government later this year, we will also benefit from that. But if you look at our full P&L, we should also remember that we have a very expensive RSV study in U.S. dollar as well. So we will see some of that being eaten up further down the P&L. But still, I think with our current business and expectations in U.S. dollar, we actually see that it's a net positive to our business. The stronger U.S. dollar, which we couldn't say early in the year where we did not have these monkeypox on us. So that's very, very positive. I think there was a question also on...

Yes. No, I can take that one. Yes, so the dose sparing intradermal approach is a temporary approach. So in Europe, it's actually successfully written as a temporary measure while vaccine doses are low. And in the U.S., it's governed by the EUA, which is only in place once there's -- while there is a declared emergency. So if and when the emergency is over, this is on a temporary measure and it will revert back to how the vaccine is recommended on the label.

Okay. So by defining the emergencies, that also due to the lack of vaccines? Or is it also due to general emergency as we see right now with the outbreak?

No, it's due to the emergency, not necessarily caused by the lack of vaccines, but the number of cases in monkeypox.

The next question comes from the line of Gil Blum from Needham & Company.

So maybe an organizational question first. So will recognition of previously contracted JYNNEOS be delayed because the bulk that's currently -- that was produced for those doses is now being used for near-term orders?

Yes, I can take that. Yes, so -- just so that we're all on the same page. There is a substantial amount of bulk inventory that the U.S. has purchased over the last few years. That equates to approximately 15 million liquid doses or around about 13 million freeze-dried doses. We're already eating into that inventory with the 5.5 million liquid doses that's already been placed. So that bulk would need to be replaced to fill the options that already began to be awarded earlier this year, which is to create a stockpile of 13 million freeze-dried. So yes, it will impact the timing maybe of the freeze-dried, depending on what additional orders we get -- we receive from the U.S. But as I said, the option to start manufacturing freeze-dried was $119 million that was awarded, if I remember rightly, in early June that has not been touched and it's still sitting there, and that is part of the larger option of $299 million. But the exact timing of [indiscernible] right now is a little unsure because, of course, we've also pushed out the tech transfer of the 3 facilities as we're manufacturing JYNNEOS liquid. But we do anticipate that any bulk that is utilized in the current manufacturing of liquid will be replaced, and that we will, at some point, with the manufacturing of freeze-dried.

Okay. That's very helpful. Can you provide any commentary on any differences for per dose pricing across company contracts? Are there differences?

So pricing, well, first of all, I would say no, because we use the same approach for everyone. There are, however, differences in price based on the volume that's being ordered and/or potentially longer-term commitments that governments are shown. So those are the 2 factors that could create a discount, so to speak, on the price. But the same mechanisms are used for all customers.

All right. And maybe a longer view question. In our discussions with KOLs, it seems that due to the unprecedented size of this outbreak, monkeypox might be something that's going to stick around with us, so -- maybe into the future. Is the company also viewing this current outbreak in those terms?

I missed the last part of the question, sorry.

I was asking if -- is Bavarian Nordic also viewing monkeypox as something that's going to be long term with us, similar to how COVID is probably going to be long term?

I mean that is one scenario, of course, but it will remain at a certain level within the community. I would say even if it doesn't remain at a certain level, I think this is yet again another what is [indiscernible] to the worldwide community that you can't simply ignore an infectious disease in one 'part of the world because it will eventually cross borders. And kind of as I said there've been warning signals for the last 4 years with travelers returning for Nigeria, that this was on the cards. And so I think even if through vaccination, public health measures and all the rest of it, we as a society, on top of the outbreak, it's just a matter of time before it returns.

Right. And maybe a last one on COVID. There's been a lot in the news recently that the potential filings for approval of Omicron-specific and other variance-specific vaccinations by the fall. Could that potentially affect enrollment in your Phase 3 study?

Yes, it's a good question. And the early indications are from the sites that we've contracted, we don't believe so. But as I mentioned in the presentation, it's not the first time we've been hit with challenges in the regulatory landscape. So it's something that we certainly keep an eye on. But at the moment, we don't believe so. Because as you may have seen, we will be recruiting fairly rapidly to get to the endpoint of the study. But it is a concern that you raise and flag, and it's one that we'll keep an eye on.

And the next question comes from the line of Peter Verdult from Citi.

Firstly, just high-level management bandwidth. I mean monkeypox, I'm sure, is keeping you extremely busy on both vaccine issue program. So just making sure that if there's enough [ vaccine ] to execute on [indiscernible] just on supply, when we last [indiscernible] to supply 15 million, 20 million doses next year.

Yes, I think you broke up a little bit there, Pete. But I think I heard the gist and if I don't, then you can come back and correct me. One, I think, was related to the bandwidth. And I think you're completely right when you say that we're extremely busy, and I mentioned that in the presentation. I think the areas that have really been impacted by monkeypox is in manufacturing, where we've had to short notice, change all our plans to regear to manufacture JYNNEOS. However, they had a busy year and instead of being busy on other things, they're are now extremely busy on one product, which is JYNNEOS IMVANEX. So I think we can and we will manage, with the caveat, as I said, we do need to expand our capacity through partnerships. I think the good thing is, is that in terms of the R&D, the clinical development, our 2 Phase 3 programs, while the folks there are also extremely busy, they have not really been impacted by monkeypox. So it's almost like we can compartmentalize the 2 activities and move -- forge ahead with all the different program. So we remain confident that we can live up to all our plans. I think the second part of your question related to capacity, I think, and I think I heard you mentioned 15 million, 20 million doses next year. As I said, that number really comes from scale up in drug substance, the bulk, where we'll be at 4 batches a week -- where we lost 4 batches -- where we will be up 4 batches a week with the current capacity that we're anticipating in terms of fill/finish with the partnerships that we've already announced.

Dear speakers, please be advised Peter's line has been disconnected.

Yes. Okay.

Are you happy to take another question?

The next question comes from the line of Boris Peaker from Cowen.

So my first question on JYNNEOS. Can you tell us what are the raw materials? And I guess more importantly, if you were to run your manufacturing facility at capacity for, let's say, the next year or 2, do you have the raw material supply to support that? Or is that a limiting factor?

Yes. Thanks, Boris. So one of the raw materials, it's an egg-based production. And of course, if you're going to go and double your capacity, you're going to be using a hell a lot more eggs. And there's lead time to get the flocks up and running. The good thing is, as I said, on that one, we obviously had been planning to be operating at 2 batches a week next year, and we've already been in dialogue about scaling up our capacity and things like that. So I think we can manage. Some of the other raw materials are single-use plastic items, which I like gold dust in the industry. But again, I think through our network and support from certain governments, we will also be okay on that. So we may not have secured everything, but we are confident that we can be operating at 4 batches a week at the turn of the year.

How many eggs are required to make a single dose of JYNNEOS?

A single dose or a batch?

Yes, batch.

Yes -- no, a batch -- it's not like flu. So I think -- and I'm probably going to be wrong whatever I say. But I would have a stab at 5,000 eggs a batch.

How many, a thousand?

5,000.

5,000. Got it. Great. And my last question just on financials. So you reported some sales of third-party products, what is your arrangement with these third-party products? And how should we think about their margin?

Yes. Thanks, Boris. Yes, we have recognized DKK 53 million for the first 6 months. And the way it works with these is that we have the rights to promote these products in -- 2 of them, both in Switzerland and Germany, and the HEPLISAV B product in Germany only. And we basically buy the products from the manufacturer and then we earn a certain margin. I cannot be specific on the margin as per agreement with our partners. But -- and it is obviously lower than the margin that we earn on the other products. But the good thing is that we are here leveraging the synergies in our organization as we can carry these products through the existing commercial organization. And for instance, in Germany, it means that we are now going to the doctors with actually with 5 vaccines in the bag, which also has that added benefit that our sales organization, they have something new to talk about all the time and they have a good excuse to go into the clinic and can meet our customers. So it is a good business. It's DKK 53 million. I think we're off to a good start. We are seeing, in particular, IXIARO benefiting from traveling picking up again, just like we see in our rabies business as well.

And the question comes from the line of Peter Verdult from Citi.

It's Pete here again. Sorry about before, I think I got disconnected. If it happens again, I will give up. But Paul, I heard your answer to the first question. My remaining question -- and I apologize if one of those have been asked already while I was off the call. But when we last sat down together, Paul, I think you intimated that if you execute it to your plans, you might be in a position to supply 15 million to 20 million doses from your Danish plant next year. Any update on that number? Is that still sort of the aspiration? And then secondly, just on stockpiling and preparedness. The U.S. has got up to 200 million doses of ACAM2000 that they're not using. Are you seeing that the willingness to replace or create a separate stockpile there? And I realize you can't name countries, but can you at least give an indication of how many other major countries you feel are thinking about monkeypox, not just here and now, but in terms of long-term preparedness and potentially stockpiling?

Yes, so the second part of your question, is it our aspiration? Yes, certainly, 15 million, 20 million is what we can manufacture. Of course, we need to secure orders for that before we do it. But that's certainly what we believe we can squeeze out of our facility next year. The question about ACAM and the U.S. government, I mean, I think -- again, this is me speculating, because it's not on the basis of any contract, any confirmed or firm discussions. But I believe whenever you're facing an outbreak, like we are with monkeypox, it does make people rethink about their requirements. Now the U.S. has been clear for decades on having a smallpox stockpile requirement. I think the current outbreak, in my opinion, has highlighted that they don't have enough JYNNEOS and that I think it will lead to a rethink of how many doses of JYNNEOS they really want, both as a samllpox stockpile, but also for the continued control and/or preparation for the reemergence of monkeypox. I would say the majority of discussions that we have right now are still of, what I would call, the here and now, which is doses that we currently need. There are a handful of governments, I would say, that are showing indications that they're thinking in terms of moving beyond the here and now to, okay, we better be better prepared. Because it's been clear within the community that those governments that have doses on stock have been better prepared than those governments who have been scrambling to get doses. So yes, we're seeing a shift, but it's just a handful of countries right now.

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

Just a few follow-up questions. So first of all, to a potential bulk manufacturing partner, can you talk about which kind of structure you're looking for? Would that be sort of traditional CMO or a larger pharma company? And given the complexity of doing tech transfer on bulk, how fast do you think that could be done if you sign it during -- such a deal during next couple of months? And then secondly, to the third pie, revenues for IXIARO, DUKORAL and HEPLISAV B, what kind of levels should we sort of be looking at just for sort of housekeeping to the modeling for the full year of 2022? And is that a sort of a mid-single-digit growth area going forward? Is it a high single digit? Is it high double digit? What is sort of the benchmark rate, which is used for growth going forward?

Yes. Thanks, Michael. I'll take the first one. So that was related to what sort of partnerships we'll be looking for. I think as I said, there are 2 things that we need. One, in the short term, we definitely need a higher capacity, particularly on fill and finish. And that's because certain governments already have a large stockpile of drug substance, and we will be creating quite a large amount of drug substance over the coming months. So the immediate need, I think, is on fill/finish. And we are in discussions with both traditional CMOs, but also vaccine manufacturers, whether that's large pharma or not. In terms of bulk, there are some discussions about transferring bulk. And to your point, that is not going to be as easy as fill and finish, not that fill and finish is easy, but it won't be harder. And I think that falls into the next bracket of do we need to consider medium, longer-term solutions for drug substance. I don't think that is a short-term fix.

But could we see the -- but could it be something that you would be doing sort of near term in order to be sure that when and if there's need for more bulk capacity, then you can also respond to that?

There are discussions on drug substance, yes. And we're not rolling it out, but I think we're just aware and you raised it yourself, that the complexity of the drug substance, with an egg-based process, is going to take a bit more time. But to your point, the sooner you start the sooner you finish, right? So we are in discussions both on filling and drug substance.

Okay.

Yes. Okay. Michael, this is Henrik, for your third question here. Let me try to answer your question on the partner segment. As you know, we're talking about 3 products here and they actually, I think if we were to also give you some input the gross potential, I think we have to take them one by one basically. And if you look at -- if we take the small one first, DUKORAL. I think first half year is approximately -- it's a single-digit million Danish kronor. So not a huge income from DUKORAL, and the growth on that one is probably also limited. If we then take HEPLISAV B, which was launched here in May, I think it's still a little too early. And what we see in the numbers right now is mainly pipeline filling. Of course, we have expectations that this product, which is superior to sort of competing product in the market as it's a one dose only -- sorry, it's a 2 dose versus 3 dose business, I think yes., And so we have high expectations that we will take market share. But it's a little too early because the what we see right now is mainly filling up the supply chain. Then we have IXIARO, which is more than half of the revenue we have recognized this year and which has really benefited from sales or traveling, traveling picking up again. And I think without having all the insight into the -- to this product here, as it's partner product, I think just benchmarking it to our Rabipur business in Germany, which has shown similar strong growth. That business is still sort of 40% below the pre-COVID level. So I do believe that there is still a good growth potential in IXIARO. But of course, that assumes that travel will continue to pick up and grow even beyond what we see today. So there should be a good growth potential from IXIARO, and also HEPLISAV B once we start seeing the market data and we can demonstrate that, and we're going to take market share.

Dear speakers, there are no further questions. I would now like to hand the conference over to our speakers for closing remarks.

Yes, thank you. And thank you, everyone, for your time and attention and the questions, and have a great day. Thank you.

That concludes our conference for today. Thank you for participating. You may all have a nice day.