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

Good day, and thank you for standing by. Welcome to the Bavarian Nordic conference call. [Operator Instructions] Please advance 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.

Yes. Thank you, operator. and welcome to everyone listening in on this rainy Monday here in Copenhagen. My name is Rolf Sørensen, VP, Investor Relations. And online here, we have President and CEO, Paul Chaplin; and Executive Vice President, CFO; Henrik Juuel. Today, we have a pipeline update, where we will go through this very busy summer, where we have presented data on Chikungunya, ABNCoV2 and of course, RSV. And first, we have a few slides. And after that, of course, Q&A session. To start that, before we start, I'd just briefly would have run through the disclaimer and hand it over to Paul afterwards. So 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 our short-term objectives and opportunities, financial expectations for the full year as well as statements concerning our plans, objectives, goals, future events, performance and other information that is not historical information. We undertake no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law. So by this, I will hand over the presentation to you, Paul.

Thanks, Rolf, and welcome, everyone, to our update call today. As Rolf said, it's been an incredibly busy summer as 3 of our Phase III programs have read out. And I want to update you on all those different readouts, and then Henrik Juuel will talk a little bit more about the progress that we're making on the commercial business, and then we'll open up to Q&A. So if you turn to Slide 4, let's start with Chikungunya. Obviously, today, we've reported the positive results from the largest Phase III. But before I get to that, let's just remind you about Chikungunya itself. It's a mosquito-transmitted disease. It's prevalent in large parts of the globe, particularly South America and Asia. And while it has a low fatality, it causes a rather severe disease in terms of fever and joint pain that can become a chronic condition for more than 40% of the people that contract it. Currently, there are no treatments or prophylactic vaccines. And it's an exciting area from a travel vaccine perspective, which is one of our specialties, but also for the millions and millions of people who live in these endemic regions. The market, from a travel perspective, is believed to be in the region of $500 million. So it's an extremely attractive segment and one that would fit in as almost a plug-and-play in terms of our commercial setup as obviously one of our key areas is in travel vaccines. So if you go to Slide 5, today, we reported data from the largest Phase III study, which is in just over 3,000 subjects. These were people aged from 12 all the way up to 64 years of age. And here, what we've shown is that the vaccine candidate, which is based on a viral-like particle, was highly immunogenic, inducing levels of protection in terms of neutralizing antibodies in the majority of subjects by Day 22. Now the important thing here and a key differentiator to the competition is that we also saw these high response rates already at Week 2 and at Week 1, actually. Almost [ 50% ] of the subjects had the same levels of protection. So we're seeing a much faster onset of protection with Chikungunya VLP candidate than the competition, which we think is a key differentiator. In terms of safety, it's extremely well tolerated, with site reactions that were typically mild or moderate in nature. So together with the safety profile, the faster onset of protection, the fact that it comes in a prefilled syringe, which we know physicians prefer, we really think we have a competitive advantage, and we are really setting up this vaccine to be the best-in-class in terms of protecting against Chikungunya. Earlier this summer, we reported on another Phase III in elderly subjects, so that's subjects above 65. And we saw similar results, slightly lower, [ serial ] conversion rate, which is still extremely high. So I think we really are spanning the total age group from adolescents from the age of 12 all the way to elderly adults. The plan, moving forward, is we will -- we're gearing up now to do the regulatory filings. This is the end of the clinical development that was agreed together with the regulators required for filing, and we plan to file next year, with a launch date in '25. So if you go to the next slide, Slide 6, we also, earlier this summer in late June, reported the results from our COVID vaccine ABNCoV2. This is also based on the viral-like particle technology that we licensed in from Copenhagen University. And here, again, we were successful in meeting the primary endpoint of the Phase III. This endpoint was to show that the neutralizing antibodies induced by the vaccine were noninferior to Comirnaty, which is the original RNA vaccine from Pfizer. And here, we were successful. So this clearly demonstrates that this vaccine platform and this COVID vaccine had utility, would have been able -- would have been used in the pandemic because this was obviously against the original Wuhan strain. The other thing that this study shows is that once again, the [indiscernible] shown that public/private partnerships can really work. Historically, we've developed a small pox/mpox vaccine based on a strong partnership with the U.S. government. Here, we've demonstrated that this VLP technology has utility in the pandemic, thanks to the funding and support from the Danish government. Now the regulatory environment for COVID vaccine changed since we began this program and actually since we even began the Phase III. So now, regulators are really requiring variant-specific COVID vaccines, which our vaccine is not. So the future path here is a little bit more complicated. And we have to await the data, which is coming later this month, in how good is the vaccine against the current circulating variant. And that will be key data, and we will need to be extremely strong to overcome the current regulatory requirement to have a variant-specific vaccine. So in the coming weeks, we will report that data and give clarity to the market on how we're going to proceed for this asset. If you go to the next slide, Slide 7, we also had a Phase III readout for RSV. And unfortunately, this was negative. This was completely unexpected, given the prior results, particularly the human challenge trial that we've already reported, which shows very high efficacy, comparable efficacy to other candidates that has gone on to report positive Phase III results. So obviously, it's a setback, it's a disappointment and one that obviously we have to learn from to try and understand why this vaccine failed. But nonetheless, while we try to do that, we are closing this program and will not proceed with any additional funding. And as you'll hear in the coming slides, there was a significant amount of [ future ] R&D in the region of about DKK 0.5 billion that for next year alone, that will no longer be funding. So I think in terms of R&D, you can see a reduction in our overall spend in the coming years. And with that, I'll hand over the presentation to Henrik Juuel.

Thank you, Paul. And while the agenda here today is really about the update on recent development in the pipeline, but I just wanted to remind everyone that Bavarian Nordic is so much more than a pipeline company. We have an extremely strong commercial business. We demonstrated that last time when we announced Q1 numbers. You can see the numbers to the right here, where we basically show very significant growth across the board of our portfolio, driven really by rebound in the markets, but also very strong brand performance, both on our rabies vaccine and our TBE vaccine. And without disclosing too much, we haven't finalized and we haven't announced yet our 2nd quarter results. I can just say that we are seeing this strong performance continue into the 2nd quarter. So we are in a situation with a very strong commercial business, securing profitable growth for the company. We have also recently, as you have seen, announced additional order from BARDA $120 million, with approximately $100 million of those expected already this year. And in connection with that, we raised our full-year guidance for '23, so we are now guiding a revenue level of DKK 6.9 billion approximately and an EBITDA was increased by DKK 100 million to now DKK 2.3 billion. These numbers also includes the anticipated impact from the recent acquisition from Emergent, where we are adding 2 commercial-stage assets upon the Chikungunya asset as well. So we have added approximately DKK 165 million from this business, corresponding to 7.5 months ownership and the negative EBITDA contribution of approximately DKK 375 million, primarily driven by the continued development of the Chikungunya vaccine. So extremely strong positive numbers. We are also seeing beyond that, we have included a few smaller orders on mpox, 3 orders, to be specific, showing that there is still a demand -- continued demand out there for mpox. We're also having very good discussions with the EU on their stockpiling, both in terms of mpox but also small pox stockpiling, eventually. Paul already alluded to the financial impact of the termination of the RSV program. So what we -- will happen financially is that we were, in our guidance, expecting milestone payments related to the development of RSV from our Chinese partner, Nuance, DKK 195 million. Obviously, we are not getting those milestone payments, but they are compensated by the very-strong commercial business, and that's already assumed in our new guidance here. Then for next year, had we been successful with RSV, we would have had to invest more than DKK 500 million into RSV next year in committed trial programs, looking at longevity and other efficacy measures that you are committing to the regulators post approval. This is not going to happen. So before this sad outcome on RSV, we were already in a strong financial position. We had DKK 3 billion in cash by the end of the first quarter. We have spent approximately half of that on the upfront payment to Emergent. But beyond that, we are still in a very good financial position. Before this outcome on RSV, we had absolutely no plans to raise cash, no needs to do so according to our plans. And I would just say that without RSV now, the need is even less. It will -- it's a setback, as Paul said. But short term, I mean this year, then probably the next 2 years, it brings us in a stronger financial position as we are not going to invest in the amounts that was needed to complete the RSV program. So a strong financial position, absolutely no need for us to raise capital to support the current business. We have enough cash and enough runway to look through the period, where we're going to pay back the remaining milestones to GSK, which will end in 2025. So with that, I will give it [ right ] back to you, Paul, for a quick wrap-up.

Yes. Thanks, Henrik. And just before I wrap up and open for Q&A, I just want to turn the clock back a little bit. So in 2020, we decided as a company to change our strategy. Up until that point, we have been known really as a vaccine developer and manufacturer, particularly of our smallpox vaccine. And we know in R&D is risky. For every success, there's normally a few failures along the way. And we wanted to make the business more robust, so that we could withstand some setbacks. So we invested in the acquisitions of our rabies and TBE. And again, thank you for the investors for supporting that. And we've recently added to those acquisitions with the travel franchise from Emergent BioSolutions, creating what is now the largest travel-vaccine company in the world. That, as Henrik has said, is going from strength to strength, despite the COVID pandemic. We're really beginning to see the benefits of what we said we would deliver. We said we would build up a commercial organization. We said we would grow those assets to levels that no one else has taken them, and that's exactly what we're seeing with rabies and TBE. Our smallpox business is growing, continuing to grow. It's a different kind of business as it's directly to government. It's a little bit more lumpy and unpredictable. But nonetheless, we have probably in the region of USD 0.5 billion in the order books with the U.S. government alone in the coming years. So the base business is extremely healthy. Henrik has reinstated several times, there was no need to raise capital before the setback of RSV, and there's certainly no need now that our cash flow is actually only going to improve. So we're in a really healthy position as a company with our commercial business and in an extremely bright future for BN. Today is a day to celebrate with our Chik result. It adds beautifully to the portfolio, will add to the top line and the profitability in the years to come. And with that, I just want to I acknowledge once again that while the RSV is a setback, we have geared up the company to be able to absorb such setbacks and move forward as a healthy company. And with that, I think I will end and open up for Q&A.

[Operator Instructions] And now we're going to take our first question from Peter Verdult from Citi.

Paul, maybe just one for you and a couple for Henrik, but the one for you is more a strategic question. I mean, given how COVID and RSV has played out, how should investors think about the varying, going forward? Do you still see yourself as an R&D-focused company? Or will it be more research and development as we've seen you do with Emergent acquiring those assets, going forward? And if you still are that you're an R&D-focused company, where will future efforts lie? And then two quick financial ones for Henrik, one's a follow-on to the first question. With COVID, RSV, Chikungunya Phase III trials all in this year, given the state of the pipeline, what sort of sensible run rate for R&D would you be giving us for next year, assuming nothing changes with the current pipeline? And then just lastly, you hinted some European stockpiling. But just is there anything else apart from Europe, nothing more in the U.S. than you expect in terms of potential [ geneous ] contracts for 2023?

Yes. Thanks, Peter. Let me take the first one. Well, you gave it to me, so let me take it. Yes, so a focused R&D company, so I think, of course, that term can be labeled to Bavarian Nordic because we had 3 Phase IIIs running in 1 year, which has never happened before, and so in a lot of companies, has never happened before. As I said, I think, back in 2020, we tried to create a more integrated commercial company that had R&D as part of the company. As I said, the focus this year changed a little bit because of the 3 Phase IIIs, which is a very unusual situation. I think moving forward, our near-term focus is really on our commercial business. growing that commercial business, optimizing all the opportunities that we have. Clearly, the R&D will continue but at a completely different level because we'll have very early assets that we'll be bringing through the R&D spend, which I'll let Henrik answer after me, is going to be dramatically reduced in the coming years as we obviously will be at a different stage of development. So I think we were a balanced company before this year with these large Phase IIIs that all came at the same time. So moving forward, our near-term focus is really on the commercial assets, on optimizing those commercial assets, optimizing the profitability. We will bring other assets through into the pipeline, but these are a much earlier stage and the level of investment is much lower. And Henrik, I'll hand over to you.

Yes. Thanks, Peter, for the question. In terms of R&D, I think maybe we should start with looking at the -- what we have guided for this year that we have previously said that R&D spend would be approximately DKK 1.9 billion, including the COVID-19 part that is being capitalized. So the real spend is DKK 1.9 billion. It's clear that with these 2 programs not in the mix, it will be significantly lower. On the other hand, we know that Chik program, fortunately, we have very positive readout announced today. So there will, of course, be some additional costs associated with completing that program, investing in CMC and some committed trials that we have committed to vis-a-vis the regulators. But I think if we exclude the Chikungunya R&D spend the next couple of years, then we should see our R&D spend sort of migrating towards the historical Bavarian Nordic R&D level.

And on the [ geneous ] contracts, anything over and above the European stockpiling, anything major that you -- that could play out this year?

I don't know who's going to answer that, but I can take it. I think the I think the major contracts are in. There are discussions with a number of different governments where they will come in this year. I think it's more likely, therefore, next year or beyond.

Now we're going to take our next question, and the next question comes from the line of Gil Blum from Needham & Company.

So just to make sure I fully understand here, you guys measured for rapid offset of protection of 15 for Chik VLP. This is likely to get on the label. Is that correct?

Yes. We believe it will get on the label because it's one of the measured endpoints in the Phase III.

And how important do you consider protection at 6 months, considering you guys are kind of aiming for the travel market there?

Well, I think the level of protection is still very high at 6 months. And I think that for travel, it's primarily the initial travel, where the focus is in terms of the efficacy. And in our experience, it's about the time to protection because people don't plan their vaccinations well in their time for travel. So it's how many shots do you need before you're protected because that's typically the focus because you're traveling in a few weeks. So as I said, I think the 6-month data at the high 80s as is still extremely strong. And the real advantage for travel is onset or how fast you're protected before you travel.

And maybe a last general one, kind of given this year has been a bit of a clearing of that. Bavarian will be profitable this year, potentially also next year. Do you think we've shifted gears here and we should start considering Bavarian a profitable company for the next few years?

Our strategy is to be profitable, so we will be profitable this year, and we will be in the -- for the years to come. I mean, that's the whole shift in strategy that we made in 2020. And we want to be a profitable business, moving forward.

Now we're going to next question, and the next question comes from the line of Boris Peaker from TD Cowen.

This is Nick on for Boris. Just one for me. Given that there is no approved Chikungunya vaccine currently, there is that competitor that's closer than -- just a little bit closer than you guys. But what is your plan for commercialization? Will there be significant outreach needed to educate physicians on Chikungunya? Will you be able to utilize your rabies and TBE markets? Just some general comments on that would be great.

Yes, thanks the question. So yes, the competition is a little ahead of us, they will be in the market, in the U.S. at least, at least a year before we are. So some marketing and awareness campaigns are required because not everyone is fully aware of Chikungunya. Obviously, our competitor will take the lead on that as they will launch before we do. However, when I say it's an ideal plug-and-play, our whole commercial setup in terms of how we sell our vaccines in the U.S. are geared to the travel market. So of course, we have our customers all lined up. And we can piggyback on the work that our competitor will do in terms of the awareness to have, we hope, a successful launch in the U.S. Likewise, in Europe, in Germany and in other markets, we are geared up for the travel market, where we have relationships with the key people, which will allow us, again, pretty much to plug-and-play. So in Europe and the U.S., we're very much looking to keep this in-house and to use our own commercial setup. In the endemic markets, we're likely to be looking for partners.

Now we're going to take our next question, and the next question comes from the line of Michael Novod from Nordea.

Three questions. First on the Chik [ V ] data. Maybe, Paul, you can talk a bit about -- also go back to one of the earlier questions around 6 months durability. Looking at your data, the size of the trial and how you -- and the size of the population you measure on in terms of comparing to your competitors just to get some flavor on 86% versus 96%. And then also on manufacturing, how progressed is all this? And how -- where will you be manufacturing Chik [ V ] VLP? And then lastly, on [ geneous ], we've seen some very concrete comments from a country like France around trying to address or change their stockpiling strategy. Would that be something mainly for '24? And would that be something that is like a 3-, 4-, 5-year contracting option? Or how should we expect this to materialize if it happens?

Yes. Thanks, Michael. Let's take them in order. On the Chik, so the first thing to point out is that when we're comparing between the two vaccines, our vaccine and that of the competitor, we use completely different assays. So the level of sero conversion and, in fact, the cutoff that's been agreed with the regulator is also different because the assays are different. So you're not really comparing apples-to-apples. That's the first thing. So is there a material difference between 88 and -- I can't remember what the number was, 97, I think so. Probably not, in my opinion, particularly when you look at the size of the trials and you look at the confidence intervals, which I believe will be overlapping. So I think in terms of the longevity and the peak efficacy, let's call it efficacies, based on serial conversion of a certain titer, we're very, very similar. Where we're distinctly different is when you look at the earlier time points. The area it doesn't matter, you can take different assays or whatever. When the competitor looks at earlier time points, there is little or no detectable neutralizing antibodies in their assay. So there, there is a distinct difference. And there, we're not comparing apples to oranges, we're actually comparing "Do you detect something, yes or no?" We do, they don't. So the earlier onset is real, I would say, really, given the size of the trials and the levels that we're reporting and the overlapping [ cost ] intervals, we are all about the same once you get to that 29 days and 6 months time point. In terms of manufacturing of Chik, we will be manufacturing the product in our new facility in Bern in Switzerland. We're currently finalizing the validation as we speak. So that's where we will be launching the product from, and everything remains on track. In terms of [ geneous ], you're right, France is -- we can talk about France as it's more of a public statement from their side on their required -- increased potential -- increased requirements for smallpox vaccine. I believe if this materializes, it will be a multiyear order because the numbers are quite large that have been discussed. The timing of which is always difficult with government predicting exactly when they will make the decision and when the budgets will become available. But there are concrete, I would say, in serious discussions in that area, and we're confident that something will materialize hopefully as early as next year.

[Operator Instructions] Now we're going to take our next question, question comes from line of Peter Welford from Jefferies.

I've got three. Firstly, just going back to people [indiscernible] question at the start really in a way. Obviously, with the removal of RSV in particular, I guess, removes a significant potential sort of avenue of growth longer term, if you like. Does this in any way, create an extra sort of impetus for you to do more deals in the near term? I guess do you feel any pressure to add in more late-stage assets in the near term? Or do you think the current portfolio, together, obviously, now with Chik, is sufficient over the next few years to provide the sort of growth and the sort of [ optionality ] that you're looking for? Secondly then, just coming to RSV, I don't want to sort of dwell on it, but I guess curious if you've done any digging so far as to the rationale why it failed, just more curious from a scientific point of view [indiscernible], is there anything that you sort of uncovered so far as for the potential rationale behind that? And then just on COVID, I guess, understand from the FDA point of view, I think the situation is pretty clear as well, given the sort of market that has been addressed there. I guess curious from a Danish point of view, if you've had any discussions with the Danish government, insofar as we have seen some of the countries, obviously, despite data and despite everything else, take the decision still to back products, given the sort of desire to keep local/national capacity? Any sort of discussion, I guess, so far with the Danish government, bear in mind, with the data you got in hand?

Thanks, Peter. So the first question, yes, there's no hiding from the fact that RSV, where we kept it or partnered it -- partner the program has left a hole in the projected future revenues. What I would say is that our hands are pretty full right now in terms of the new assets we've acquired earlier this year and also coming out of the COVID fall in terms of travel, in terms of building those assets and launching a Chikungunya vaccine in the coming years. So I would say, at the moment, our hands are full. I think we have a healthy commercial business that we're adding to with Chik that will keep us busy in the coming years. So I don't feel the pressure that we need to do more deals or late-stage deals currently. On RSV, I wish I could answer the question why it failed. We are scratching our heads. I mean, we're in a situation where our vaccine, obviously, in the human challenge but also in the Phase III, presented mild symptoms that failed to prevent severe symptoms. And we fundamentally don't understand that outcome. We're not challenging it. I mean the data is the data, and that's one of the things we're really going to try and dig into if we can better understand why that is the case because I'm not aware of another vaccine that prevent -- or a number of vaccines that failed, that prevented mild disease but didn't prevent severe disease. So we are scratching our heads, I'm afraid. On COVID, we haven't had direct discussions with the Danish government in terms of -- obviously, we've had a lot of discussions with them as we as we've developed the vaccine and now move through Phase III. We haven't had specific discussions on their requirements for COVID moving forward. We've mainly kept those discussions with the regulators, both the FDA and DEMA. And there is a level that we'll have. I'm sure, at some stage, we will have direct discussions with the Danish government.

Now we're going to take our next question. And the next question comes from the line of Samir Devani from Rx Securities.

I guess I've got a couple. The first is just on your Chik V, just thinking about the durability. I think you've mentioned sort of 86% at 6 months. I'm just wondering if we would sort of speculate what you might see at a year, 2 years? Is there a level of sero protection which would trigger the requirement for a booster? So I guess that's the first question. And the second question is really more about the commercial business. I know you said you're not under any pressure or you don't feel under any pressure to do deals. But if the focus is on the commercial business, I guess my question is really, do you see many other travel vaccines available to you that you could potentially acquire, going forward?

Yes. Thanks for the question. So one of the post-approval commitments that both we will have and our competitor will have will be to perform an efficacy study in an outbreak scenario of Chikungunya, so currently, these sero conversion or sero protective levels are based on antibody titers that the company and the regulators believe is likely to predict protection, but it's not known. And I would say, these titers are most likely conservative. So post approval, in an outbreak scenario, we are -- we'll have the responsibility to perform an efficacy study, and that will answer many of the questions in forms of what is the true level of efficacy, what is the durability, moving forward. I would still say, let's see what the data looks like after 12 months, but the high [ 80 ] level of efficacy is still at an extremely high level that probably wouldn't require a booster. Where would that be? It just depends, I think, in terms of the overall data set. The other question related again to other travel vaccines or deals that we may do, I think it's clear, for us, is that right now, we have our hands full with our day-to-day business. And our day-to-day business is primarily focusing on the bucket of assets we already have, growing them. Travel vaccines we just acquired this year, really needs to be relaunched to get them to where we want them to be. And now we have a Chik V asset that we have to launch in the next couple of years. So I think that's our primary focus, moving ahead.

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

Yes. Thank you. Thanks, everyone, for joining and all the great questions. Have a great day, and we'll meet up again soon. Thank you.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.