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

Hello, and welcome to the Deutsche Bank Depositary Receipts Virtual Investor Conference, DBVIC. I'm pleased to announce that our next presentation will be from Bavarian Nordic from Denmark. Before I introduce our speaker, a few points to note. Please submit your questions in the questions box below the slides. Once the Q&A session has ended, don't log out. You will automatically be transferred into the Bavarian Nordic boot, where you can continue to ask questions via chat and access shareholder materials. On a final note, all of today's presentations recorded can be accessed by the Deutsche Bank website, adr.db.com. At this point, I'm very pleased to welcome Henrik Juuel, Chief Financial Officer of Bavarian Nordic, which trades on the Copenhagen Stock Exchange under the symbol, BAVA, and in the U.S. on the OTC markets as BVNRY. Over to you, Henrik.

Thank you very much, Seth, and thanks to Deutsche Bank for having us here today and giving me the opportunity to represent Bavarian Nordic. It's a pleasure being here. So let's jump into the presentation here. First of all, our standard cautionary statement. I will leave that hanging for a couple of seconds here. And then let's move into the main presentation. Bavarian Nordic is a fully integrated vaccines company with a bold ambition to become one of the largest pure play vaccine companies. We have a strategy that rests on 3 pillars. First of all, we have an R&D pipeline, which we need to bring products to the market to help us grow to become one of the largest pure play vaccine companies. We have already launched commercial vaccines in the markets, and we need to get the most out of these to help us to, again, drive the top line and grow the company. And last but not least, we also have a pillar working on strategic and selecting -- selected M&As or license marketing and distribution agreements and I think the best example of that one is the acquisition, we just announced completion of from Emergent BioSolutions. We bought the Travel Health business. But I'll come back a little later in the presentation and talk about that. Bavarian Nordic, at a glance, who are we and where are we on this journey to become one of the largest pure play vaccine companies? We are, today, as I said, a fully integrated company, meaning that we are spanning across all the different parts of the value chain from R&D innovation over manufacturing and to commercialization of life-saving vaccines. We have global commercial operations in place in key markets. We have end-to-end manufacturing going all the way from bulk to finished products. We are listed on the NASDAQ Copenhagen Exchange, and we are part of the lead index -- C25 Index. We have 7 commercial products. We're leading positions in the markets. On top of that, we have 3 additional in-licensed vaccines, and we have a pipeline that is quite rich in the late stage. We have 3 Phase III assets, RSV, Chikungunya and 1 in COVID-19 as well. That is summarized on this slide here, where we to the left, we can see the commercial stage assets we have. We have 6 products. If we count Mpox and smallpox as 2, it's actually 7 products that are at the commercial stages. Mpox, smallpox, we have a Rabies vaccine acquired from GSK back in 2019. We have a tick-borne encephalitis vaccine also acquired from GSK back in 2019. Then we have 2 vaccines acquired with the recent acquisition from Emergent BioSolutions, that is a Cholera vaccine, and it's a Typhoid vaccine. And then finally, we have an Ebola vaccine that is licensed to Janssen Pharmaceuticals. To the right, you see our current pipeline. And as you will see, we have actually 3 assets already running in Phase III. First one is our RSV, respiratory syncytial virus vaccine, which has completed enrollment into Phase III and where we anticipate readout in the middle of this year. Then we also have a Chikungunya vaccine in Phase III. Recruitment has been completed, and this asset was acquired again as part of the acquisition from Emergent BioSolutions and we are anticipating readout from this trial in the second half of 2023. Finally, on the Phase III place here, we also have a COVID-19 vaccine that is reading out also in the middle of this year. Then we have 2 projects running in earlier phases. We have an equine encephalitis program currently running in Phase II and financed by the U.S. Department of Defense. And finally, we have one project in early stage Phase I within immuno-oncology. So quite a rich product portfolio and pipeline as well. Let's talk a little about the acquisition that we just closed where we acquired the Travel Health business from Emergent BioSolutions that basically gave us 2 commercial assets, Vivotif against Typhoid and Vaxchora against Cholera. Two, you can say, mature products that have been approved in many countries already. And on top of that, we also acquired a Chikungunya asset running in Phase III. Besides the commercial assets and the pipeline assets we acquired here, we also get access to a new R&D site in San Diego, started by very qualified people. We also get a fully fledged manufacturing site in Bern, Switzerland, currently manufacturing Vivotif and Vaxchora, the 2 commercial stage assets. And then we also get more salespeople on board that complements our existing commercial infrastructure very well. So an extremely good fit with our existing organization products that is targeting the Travel segment. And with this acquisition, we're actually making Bavarian Nordic the largest travel vaccine company in the world. So what markets are we addressing with this acquisition? Yes. Basically, the Typhoid market, we anticipate based on external research, could reach USD 250 million by '28. Cholera market somewhat smaller, but still a USD 75 million market potential. And then we have the Chikungunya vaccine market, where there today is no vaccine available and where external research has indicated that this market could potentially be worth USD 500 million. So in total, with this acquisition, we will actually be able to address approximately USD 800 million market. I can't do this presentation without talking about Mpox or monkeypox, as it was called not long ago. Mpox is an endemic disease in Western Africa. And in the past, before the outbreak we saw last year, we saw only sporadic cases typically of people traveling back from some of these endemic areas. But last year, we saw this unprecedented outbreak where we saw cases -- many cases arising very quickly across many countries. We are in a situation where we, Bavarian Nordic, we have the only FDA and EMA approved vaccine against Mpox. And we are very pleased that we managed to organize ourselves quickly last year and actually managed to supply approximately 4 million doses into the market last year to combat the Mpox outbreak, and we managed to give more than 70 countries access to our vaccine. This also helped us make record-breaking financial performance back in 2022. WHO has just called off the global health emergency situation related to Mpox. What that said, Mpox remains a public health issue. While the cases are not at the level they were during the outbreak last year, there are still cases in many countries across the globe. So it's out there. And we are seeing in some regions that we are actually starting to see an increase. We have seen that in certain pockets in the U.S., like Chicago recently. We have seen it in some European markets and in some South Asian markets as well. So it's still a public health issue, while it's not, you can say, a global emergency situation any longer. And it's an issue that the governments are taking really serious. What could be next on the horizon for Mpox and Bavarian Nordic. If you look at it sort of region by region, then in the U.S., Bavarian Nordic, we have a contract with them on a freeze-dried version of our smallpox, Mpox vaccine. That work is ongoing. It's in development. Today, we have a liquid-frozen version that is approved by the FDA. This freeze-dried version will require bulk that was last year used for the -- to combat basically the outbreak. So it is our anticipation that the U.S. government will place new orders in order to -- for us to be able to fulfill the orders on the future freeze-dried vaccine. So more orders are expected to come from the U.S. government. We, last year, also signed a contract with Canada, a 10-year long contract expiring in 2031. In France, there are discussions around an ambition to replenish the stockpile of old smallpox vaccines with new third-generation like Jynneos, our product. And then we also have a framework contract in place with HERA, which is the new BARDA-like organization in the European Union. So there are many talks going on. I think while the Mpox outbreak last year, of course, gave us orders and gave us an opportunity to make a difference in a specific outbreak, it also opened the doors to dialogues with new governments and it raised the awareness around the need to be prepared for further outbreaks, but also to be prepared for other potential pox viruses. If we talk about our pipeline, then we have our RSV candidate, where we have completed enrollment. More than 20,000 subjects has been enrolled into this trial here. RSV stands for respiratory syncytial virus. It's a flu-like virus, where there today is no vaccine available. Actually, that's not 100% correct. GSK just got the first vaccine approved not long ago. Pfizer soon will have as well. And we are in the chase, together with Moderna also to get our vaccine approved. It's a market with a significant unmet medical need. It hospitalizes and kills the same number of people as influenza does. And the industry has been fighting it for decades to come up with a vaccine that can prevent you from this disease. So finally, it seems to be happening. And we are anticipating readout from our Phase III trial in the mid of this year. So while we will not be first to the finish line with this one here, we could be the third or maybe even the fourth to the market. We believe there is plenty of space for a player like Bavarian Nordic in this market here as it is estimated to be worth USD 4 billion to USD 6 billion on an annual basis. And we do believe that we potentially would have a good position in the market as we have a differentiated approach. We have a vaccine candidate where we have encoded 5 different antigens, stimulating a very broad immune response. And of course, we hope that, that will translate into some meaningful differentiations in the marketplace. So a project that we have very high hopes to and where we will have readout in the middle of this year, so not long from now. Then Chikungunya was added with the acquisition we did from Emergent BioSolutions. Chikungunya is a mosquito-borne virus, which is becoming increasingly endemic, and there is no vaccine available today. The market here, opportunity is estimated to be worth around USD 500 million. And we are now running in Phase III. We have completed enrollment, and we anticipate readout from this trial here in the second half of '23. So another significant opportunity that we acquired from Emergent BioSolutions. On the pipeline side, I also have to mention our COVID-19 asset. We do have a COVID-19 vaccine in development. It's a VLP platform that is based on -- that has proven to be a very safe platform in other indications. It's a platform that has proven to provide a high level of neutralizing antibodies. I think what we are targeting with this vaccine here is to create an universal booster vaccine that will give you a long-lasting protection, and that will give you protection across the different variants of concern. So again, for this disease area, WHO has called off the global health emergency. But I think we do believe that the market still needs better vaccines. We have vaccines available in the market today. But we also know from experience that the protection, the durability of protection for these vaccines are not the best. We are, at the moment, facing some changing and a more tough regulatory environment for COVID-19. First of all, as there are vaccines available and there's no longer a global health emergency situation, the regulators are not as flexible as they used to be, and they are not as fast in their response either. And to take an example, in the U.S. market, they are now requiring that the new vaccines for the market has to be bivalent, meaning that there has to target the original Wuhan strain, but also one of the latest variants as well at the same time, which is not what we are targeting. But I think we do believe we have a good vaccine candidate. We are anticipating data readout pretty soon also in the middle of this year. And of course, the data will show whether there is a position in the market. We will have to be able to come out and demonstrate that even though our vaccine is not adapted to the latest variants that it is providing protection across all the variants of concern. So time will show, but a challenging market at the moment. If we look into this year, 2023, what can we then expect in terms of the news flow? I think on the monkeypox or Mpox as it's called now, we are now executing on the order book that we created last year in connection with the outbreak. We build up a significant order book, and we are, this year, guiding total revenue of around DKK 6 billion, out of which approximately DKK 4.4 billion corresponds to the confirmed orders on Mpox that we secured last year. We also expect more orders on Mpox. We have actually secured a few smaller orders during the first quarter already of this year, and we expect to continue with more orders to come. And of course, we hope that some of them will be of a size where we will need to go out and announce them as well. Then, on the pipeline, this is going to be a very unusual but also exciting year for Bavarian Nordic as we will have 3 Phase III assets reading out. RSV, first of all, top line results by mid of this year. We also have our partner, Nuance, who we have provided a license for China and selected other Asian markets. They are progressing the development into Phase I and later Phase III, which will eventually trigger milestone payments to Bavarian Nordic amounting to a total of close to DKK 200 million. And on COVID-19, we are anticipating also around mid of this year, 12 months durability data from our Phase II study and also the readout from our Phase III starting mid of this year. And then finally, as I already talked about, the Chikungunya asset we acquired from Emergent BioSolutions also anticipating readout this year, could be in the fourth -- third or fourth quarter of this year. To the right, I just want to remind you about our financial guidance for 2023. Approximately DKK 6 billion in revenue and DKK 2.2 billion in EBITDA. These numbers does not include the recent acquisitions from Emergent BioSolutions. We just closed the transaction yesterday, actually, and we will in connect -- at the latest in connection with our second quarter announcement in August, we will provide fully consolidated and updated guidance, including the acquired assets. We have -- without making it a guidance, we have been out informing the market previously that we estimate the impact on revenue could be approximately DKK 200 million this year, EBITDA a minus of DKK 400 million for the acquired assets, driven by the investments behind Chikungunya primarily this year. So that actually took me to the end of the presentation, and I will now open up for questions.

And I had a question here. A person asking if I can speak to the global distribution of your vaccines. Is further global expansion for existing portfolio a growth driver? Good question. Thank you. I think back in 2019, we made the step to commercialize Bavarian Nordic, and we acquired 2 vaccines from GSK. That was the Rabies vaccine and a tick-borne encephalitis vaccine. And in connection with that, we basically established our own distribution network, our own commercial organization. So today, we have our own commercial organization in key strategic markets, primarily the U.S.. It's Germany, Switzerland. It's the Nordic countries in Europe, and we have partners in other parts of the world. But in terms of distribution, we have a global reach at the moment. The acquisition from Emergent BioSolutions is extremely complementary when we look at the commercial side of it. We are adding on some more sales representatives, which will complement what we already have in place. Then I have another question here. What is driving strong growth for Rabipur in the U.S. and Germany? Thanks for asking that question. It's correct that we have seen extremely strong growth for Rabipur, both in the U.S. and in Germany. If we take the U.S. first, then actually the growth we have seen in the market is so hard that it's actually taken the market to a level it has never been at before. We believe some of that could be a sort of a, you can say, building up a backlog of people who want to get vaccinated during COVID. They're now getting out in the nature again and that backlog is being executed at the moment. But we also do take some credit ourselves for the increase. We are the clear market leader within the Rabies vaccine business in the U.S. with approximately 70% of the market. And we are dedicated to this disease area. And actually, the revenue we saw last year for our product in this market, Rabipur or RabAvert, as it's called in the U.S., delivers the highest revenue ever even across the years where GSK owned it. So very, very strong performance. In Germany, the strong growth we see there is actually a rebound from the COVID-19 pandemic. In Germany, the Rabies vaccine is a pure traveler's vaccine, so the market was reduced to a tenth of the normal market during the pandemic. And now with traveling coming back, we are actually seeing a significant rebound, which is also quite visible on the travel vaccine market. So very strong growth, driven by, first of all, strong market growth, but also strong brand performance, both in Germany and the U.S. for Bavarian Nordic. Then I get a question to the integration? How has integration progressed following the acquisition of the travel vaccines from Emergent BioSolutions? Actually, the integration itself kicks off today as we only closed the transaction yesterday. So since we signed the deal, we have worked together with Emergent BioSolutions being prepared for what we call day 1, which is really today here. And now the real integration work starts. So we are very well prepared for that task and very well organized to get under that task. I think we have proven with the acquisition we did from GSK and the performance of those assets that this is a discipline that we master. Let's see if we have more questions. Yes, then I have one here. How is Bavarian Nordic managing its capital allocation? What is the company's approach to balancing investments in R&D, commercialization and other areas of the business? That's a good question. Thank you. I think the whole driver behind our ambition to become one of the largest pure play vaccine companies, that is actually that we want to be able to afford taking all our R&D assets to the finish line, taking them to the market, while still being a profitable company. And that simply means that short and near term, we need to grow our top line significantly so that we are still profitable in situations where we are running more expensive Phase III trials. So -- and of course, we need to make some compromises and priorities when it comes to R&D commercialization. But at the moment, I would say, when it comes to M&A discussions, commercial assets has the priority. Therefore, we were also happy to see that we could get the Vivotif, Vaxchora from Emergent BioSolutions. We did get the Chikungunya, which is a very attractive asset that it is very late stage. So hopefully, that will soon be able to contribute also to the top line. But in terms of all the M&As, our priority is really on commercial assets primarily at the moment. I have a question here. Does Bavarian Nordic expect to replace the stockpile of ACAM2000 with Jynneos? We certainly hope to do that, expecting it's maybe a little too strong word, but I think we basically -- we do believe we are in a very strong position to tap into this market here. I think the whole Mpox outbreak last year, I think, exposed the smallpox vaccines available. Jynneos is the only vaccine approved against both smallpox and Mpox. It's a very safe alternative to ACAM2000. So we do believe that we stand a good chance to tap into the ACAM2000 market going forward. Key milestones to the end of this year? I think I already talked to some of those. I think we have 3 Phase III assets reading out. We also hope before the end of the year that we can announce more Mpox, smallpox orders beyond the ones we already included in our guidance so far today. So I'm just waiting to see if there are more questions coming up. I believe I have answered the ones that are here right now. Yes, I do believe that these are all the questions so far. So with that, I would like to thank you all for listening in, and thank you all for the good questions here, and have a good day. Bye.