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

Welcome to the Bavarian Nordics Capital Markets Day in 2024. We have a busy agenda, and I'll walk through that in a little while. But the whole management team is here today. There's very -- there's a lot of familiar faces to me at least. So I think many -- most of you have met me numerous times, but we have the whole management team. Some will be presenting, but we'll have Q&A sessions throughout this morning where the whole management team will be present where you can ask questions. And with that, I thought it would just be good just to start with a quick round of introductions. I'm Paul Chaplin, I'm the CEO, but maybe if you just want to ...

My name is Anu Kerns and I am responsible for people and organization and sustainability, and I've been with Bavarian Nordic for a bit over 3 years.

Hi, I'm Laurence De Moerlooze, I'm the Chief Medical Officer in charge of clinical development, regulatory affairs and pharmacovigilance and I've joined Bavarian Nordic in April 2020.

Good morning. My name is Russell Thirsk, I'm Chief Operating Officer at Bavarian Nordic, coming up to my 2-year anniversary.

Good morning, everyone. My name is JC May. I'm the Chief Commercial Officer, joined in January 2020 after 25 years in the industry.

Good morning, everybody. My name is Henrik Juuel. I'm the Chief Financial Officer of Bavarian Nordic and I've been with the company for 5.5 years now.

Thanks guys. So Luc Debruyne is also here. He will be talking. He's the Chairman. But I'll allow him to introduce himself when he comes up in a few minutes. So just to run through the agenda, Luc will start with a brief introduction into what's unique about the vaccine industry, what are the opportunities and what are some of the challenges we face. I will take over and talk about the strategy and the road ahead. JC will follow and talk about 1 of the strategic objectives, which is our growth story. Russell will also then talk about the innovative solutions that we have in terms of a reliable supply. Henrik will follow at the end with a more deep dive into the financials. And in between, we have a guest speaker, Marie who will be here shortly, who will give you an overview of Chikungunya, which obviously is very topical as it's 1 of the vaccines that we'll be launching next year. As I said, to try and get through this agenda, we will have Q&A sessions throughout this morning. So please hold back with your questions until then. All questions should be directed to me, and then I will make sure that the relevant person with all the knowledge can answer that particular question. So without more ado, I would like to invite Luc up to the podium.

Thank you very much, Paul, for this introduction. Hello, everyone. I'm Luc Debruyne. I'm the Chairman since last year. So since 1 year, and I've been observer of the Board the year before. So 2 years actually that I'm here. I'm actually currently Chairman of an investment fund as well, so I can be on your side as well. Funds Plus in Belgium. I teach at University of Leuven and I work for CEPI as the Chair of their investment committee. CEPI is the Coalition for Epidemic Preparedness Innovations. And before that, I was 27 years at GSK. I was born there and worked in vaccines. And I'm very pleased actually to welcome you here. And it says Capital Markets Day, but I would call it rather meet the management team and their plan today. So you will hear later from Paul as you have seen on the agenda. But -- and this maybe it looks a bit unusual to have the Chairman to introduce a Capital Markets Day, but I thought at the long-time experience in vaccines that I have, I wanted to share my perspective on what vaccines is really about. And what I can say is that vaccines is really special. It's very special because of the impact that you can have on global health and you will hear later today on what that means for Bavarian Nordic. And the sentence that I like to use is there is no contradiction between doing great business and doing good for the world. And vaccines actually combines that very well because you tackle all those challenges that are out there. I don't want to read through the slide. I mean, we all know that it saves millions of lives, and we've all just gone through the COVID pandemic. Without vaccines, we would have been not sitting here. So we all know the value of vaccines. But what is important is also to know that the opportunity is out there going forward as well. It's a growing business. It's not something that will stop. Millions of people are being vaccinated every day and health care ministers start realizing that actually prevention is the best intervention you can do before you have to spend lots of money in medical care or hospitalization. And climate change, you can put vaccination at the same level, prevention at the same level. Climate change, technological innovations, the awareness, the outbreaks that we have from time to time and let's not forget, I mean, the world is a scary place now, geopolitics, biodefense, all of that, vaccines play a role in every aspect of that. Now you are investors or analysts, and you're obviously interested in, is this really a good business to invest in. And my answer is clearly yes, because it's very specific features that diversify it from other business. It's a growing market, so the opportunity is absolutely there. Don't forget. People tend to forget, but it has, and Henrik will show that later, it has pharma-like operating margins, so it can compete with pharma. We will not discuss GSK, but I'm a bit linked to that, as you might know, just look at their business, what is driving their business is vaccines. Long product life cycles, no patent cliffs. I think that is really the feature of vaccines, very long life cycles. And then if you look at how many players there are, Well, there are -- since COVID many who pretend they will be in vaccines. But honestly, I always say you cannot wake up in the morning as a CEO of a pharma company and decide, let's do vaccines. It doesn't work like that. You will hear later from Russell. It's huge capital investments. It takes a long time before you can make the vaccine, and you need the expertise. 70% of the time in manufacturing is spent on quality controls. You're injecting healthy people with vaccines. Healthy babies, healthy mothers, healthy elderly people, healthy adolescence. So it needs to be top-notch quality. You don't want to wake up as a CEO again. with a recall of a vaccine that didn't have the quality to be delivered. So these are really attractive things that segregate vaccines business from another business. That's why being a pure-play company is very important. Now what I also want to say is a bit disappointing for investors, which is analysts and investors want to know every month, every quarter what the number will be. As I said, I have to disappoint you. It doesn't work like that in vaccines. Vaccines is quite volatile from a quarter or month-to-month basis. Why? Because you have a combination of public and Paul will talk about a public and private market. We're actually sometimes unpredictable when the government will put the order out, yes or no. Or in the case, for instance, of BARDA business in the U.S., when they will replenish their stockpile, yes or no or when they will donate it, for instance, for an outbreak in Nigeria or in DRC and then replenish. You don't know what the exact time, it can be this quarter, it can be next quarter. So it's a bit volatile. And of course, outbreaks are unpredictable. And then as you will hear from Russell lead times take a long time. So sometimes, we are making the vaccine today that actually will only be ready next year. So the forecasting principles are very volatile as well. And it's very important that finance, commercial and supply chain work very well together to manage all of that. But the beauty is it's a long-run investment. And that's why I want to put your lens actually. It's a long-term investment in vaccines. You don't follow up this patent cliff, and it's a growing business. So with that, I want to leave you to the team, the experts actually of Bavarian Nordic so that they can convince you of the plan that they have to grab that opportunity and to make sure that it's worth investing from your perspective. Over to you, Paul.

Thank you, Luc. So before I start talking about the road forward and -- the exciting road forward, I should say, and the opportunities that we see at Bavarian Nordic, I just want to take a step back and talk a little bit about the journey that we've been on. So historically, I mean, Luc mentioned that he was born at GSK. I should say that I was born at Bavarian Nordic, and I've seen Bavarian Nordic transitioned from everything from a small startup to an R&D-focused company with manufacturing to what we are today, which is a fully fledged commercial entity. So I've been on this long journey and can talk to it. Before 2020, we really were an R&D-focused company. We had manufacturing of 1 product, which was our smallpox/mpox business, which was government contracting primarily to the U.S. It was a profitable business, but the problem with government business, as I'm sure many of you know, is the revenue can be lumpy. It can be very big revenue, but it's lumpy and unpredictable. And it makes it a little bit difficult to guide the investors on exactly how we're going to grow. So in 2018, 2019, we made a decision that we wanted to commercialize the business. And to do that, we were looking for assets that we could purchase. And in 2020, we were successful with the purchase of the rabies and TBE business. And at that time, we had no commercial setup and manufacturing was really for 1 product, but we believed that if we took these assets that were -- I always refer to them as unloved assets that didn't have a clear focus with their current owners, with our renewed focus, we would be able to grow those assets. Now to achieve that, we had to do a number of things. We had to change our manufacturing setup and Russell will talk more about that. We've had to invest heavily to allow us to produce more products in parallel. We've invested in fill and finish allowing us to have the end-to-end manufacturing. We also had to build up a commercial infrastructure from scratch. We essentially had no commercial infrastructure whatsoever. And of course, with that came risk, but here we are. Last year, we sold more doses of rabies and TBE than anyone previously, endorsing that strategy and the success that we've managed to do in terms of building up manufacturing and our commercial setup. So where we are now is we had a vision back in 2020 to become 1 of the largest pure play vaccine companies by '25. And no matter how you slice or dice Bavarian Nordic in terms of our revenue, our profitability or the portfolio that we've generated, we are one of the largest pure play vaccine companies today. That's 2 years ahead of schedule. And we're now a highly profitable business, and we have a platform to which we can grow. Now of course, in that expansion, we have gone to a really global presence. So we now have R&D centers in Munich, in Denmark and in 2 sites in the U.S. We have manufacturing here in Denmark, but also in Switzerland. And we have a presence in many other countries around the globe. So we've gone from 400 employees to more than 1,400 employees and still growing. So we really have a global presence. And as I said, we've now set a platform in which we can build on. So another way of looking at this journey is let's look at how we've progressed in terms of the revenues and the profitability. On the left-hand slide is the development in our products. As I said before, 2020, we had JYNNEOS, a smallpox/mpox vaccine, which we sold primarily to the U.S. We now have 8, 9 products, depending on where you talk about a product for indication, which we sell around the globe. And if you look at the development of the revenues on the graph on the right, so if you look at 2019, we were a sub DKK 1 billion revenue company at best breakeven because we had 1 product, lumpy revenues, albeit a very interesting segment. In 2020, '21, we increased those revenues to the DKK 1.52 billion despite the fact that we had started building up a travel franchise, and then we were hit with COVID. We still stuck to our guns and tried to sell those products despite the headwinds due to COVID, and we were successful in building up that platform so that when we saw the return of travel in '22 and particularly last year in '23, we were able to take full advantage. And as I said, -- we've sold more doses of rabies and TBE than anyone else who's previously owed those assets, which is an endorsement of JC's work but also the strategy. Obviously, last week, we reported record preliminary, I should remember to say, preliminary record numbers for '23. The USD 1 billion in revenue and a high profit margin of almost 37% or, I should say, 37%. That was not only due to the resurgence in travel. It was due to the surge in orders for mpox due to the outbreak of mpox in '22, and that carried over into '23. That surge in orders for mpox isn't sustainable. And the main reason for that is we've got a fantastic vaccine that has, in part, reduced the number of mpox cases globally. It hasn't gone. It's still present, but the number of cases has declined. So we were never going to be able to maintain those high surge orders. However, what you're seeing at the back end of that mpox outbreak is that we have a new norm Instead of being a DKK 2 billion revenue company, we're now guiding this year DKK 5 billion revenue company. And that is on the basis of a renewed interest in our public preparedness business, due to mpox, but also in discussions with smallpox, and you'll hear more about that from JC. It's due to the resurgence in travel, allowing our portfolio, which is the largest of travel vaccine portfolio to really take advantage of that return, and that is the new norm. So we've come an awful long way. So what is the road forward? Well, we want to build and become a real pioneering force in vaccines. And we want to do that by expanding our reach or access to our life-saving vaccines and solutions. Big words, but how are we going to achieve that? Well, as I said, we've set a really good foundation and we have 2 strategic streams, which hopefully will allow us to grow that business. One of them is to deliver continued growth. We want to build on both the travel health business and on the public preparedness. On public preparedness, we have a higher level of customers coming out of the mpox outbreak than we did going in. but I will leave that more for JC to talk about how we actually are going to grow those 2 arms of those business. In addition to organic growth, we also have an ambition to add to the commercial portfolio through synergistic and strategic M&A. That is the reason why we are here today is that we've had 2 successful acquisitions, one in 2020 with the rabies and TBE and on last year from the travel franchise from Emergent. If there are similar assets or opportunities we want to go after those to add to the top line and the profitability of the company. The other strategic stream is to bring innovative solutions. You'll hear from Russell later that making vaccines is really complicated. And it's damn hard. And you have to have a real focus on a reliable supply. It needs significant investment, it needs focus and it needs skilled personnel. And you'll hear from Russell how we've been successful, the complications that we're facing and how we hope to address those as we move forward that we can really have the products coming through reliably that will allow us on this growth journey. The other area of innovative solutions is in terms of R&D. Now R&D is about bringing novel ideas and new products through into our pipeline but it's also about looking after our commercial assets. When you have a commercial asset, many people think that's it. All you've got to do now is sell and that will be the end of that. But in fact, you need to look after that commercial asset. You need to look at whether you can expand the indications. You need to look at whether you can improve the manufacturing process that not only adds to the sustainability, the efficiency of production, it will improve margins. So there's many, many activities in terms of life cycle management looking after our commercial assets as we move forward. And underpinning everything that we want to achieve and how we're going to achieve it is our commitment to provide sustainable impact not only to society, but most importantly, to the people and the patients that receive our life-saving vaccines, but also obviously, to our employees. So you heard from Luc the impact of vaccines. And it should be obvious to all of you that vaccines are 1 of the reasons we all live longer because it protects us from infectious diseases. And one of the great things about working in the vaccine industry is that everything I do, everything that the management does and everything that the employees do at Bavarian Nordic is to improve and save lives. That's either through developing, manufacturing, distributing, selling or getting our life-saving vaccines to the people that need them. Now we have a growth ambition, and that is primarily driven by trying to improve the access. Our focus over the last couple of years has really been on the developed markets, and we now need to turn our attention not only to expanding and intensifying our commercial activities in those markets, but also expand maybe through partnerships to improve the access around the globe even in endemic regions where these vaccines are needed. Now of course, with this growth strategy, we're going to have to make more vaccines. And with that, we have to do it in a careful way where we're looking after the planet and the environment, and we are committed to a net 0 emissions by 2050. And to do that, we need to come up with good plans of how we're going to achieve that. One that we're constantly doing is looking at manufacturing improvements that will make the manufacturing more efficient using less energy, but also improving the profitability and our ability to improve access. In terms of governance, we've always had high ethical standards. And we will maintain those and ensure that all our contractors and partners are held to the same accountabilities. The fact that we are one of the main trusted partners with governments around the globe is a testimony to our ethical standards of how we conduct business at Bavarian Nordic. So how are we going to deliver growth? As I said, I don't want to take the thunder from JC who is going to really go into a lot more details. But it depends on which products we're talking about. If you're talking about rabies and TBE we want to continue the fantastic brand performance that we've seen over the last couple of years, and obviously take advantage of the fact that travel is really returning with an abundance. We will be expanding and intensifying our commercial activities into new territories in the coming years. In terms of Vivotif and Vaxchora, the 2 new assets that we purchased last year, these are very much unloved assets. Their previous owners didn't follow the same strategy. They were removed from the market during COVID and we need to relaunch those assets. In terms of Chikungunya, we're super excited about this asset. It's obviously meeting a huge unmet medical need. We'll be filing for approval later this year. We'll be launching next year with what we consider the best-in-class vaccine. And that's because we have advantages in terms of the safety profile, but also the speed in which the vaccine protects. And that's actually also recently been recognized. As you saw last week, we announced that the European Medicines Agency has granted accelerated review for our file. That's typically only done if there's an unmet medical need, which there is despite the fact there's already a vaccine already approved. So we will be growing this business, double-digit growth over the coming years between now and '27. And as I said, I'll pass the buck there, and I'll let JC talk a lot more about the details of how we're going to achieve that. In terms of public preparedness, as you know, this is the basis of how Bavarian Nordic was created. Developing JYNNEOS together with funding from the U.S. government has really allowed us to build much of the infrastructure that allowed us to build our commercial entity that we have today. As I said, the big thing that's happened recently is the outbreak of mpox. Most of you have probably never even heard of Monkeypox before '22. I unfortunately had. And when we developed JYNNEOS, we included the mpox indication in the approval in the U.S. And we were actually warning governments that this was an emerging disease. It was endemic in regions in Western Africa, and it could spread. And that, unfortunately, is exactly what happened in '22, an unprecedented spread of mpox around the globe. We're the only company with an mpox vaccine, and of course, we were inundated with a surge of orders. We were able to meet all those orders and all those requests. And I have to say, I'm extremely proud as the CEO of what we achieved in '22 and '23. We supplied this vaccine to more than 70 countries around the globe. And it is no coincidence that the use of JYNNEOS coincided with a reduction in the cases of mpox and real-world efficacy data is shown in our vaccine has up to 80% with a single shot efficacy and much higher with 2 shots. So a very effective vaccine. Now as I said in the introduction, we can't maintain the surge of orders because the mpox cases has declined. But when we went into this outbreak, we had 2 main customers, the U.S. and Canada. They have now increased their orders. We have $300 million of an order with the U.S. that still needs to come through in the coming years between '24, '26. We have a similar order from Canada over the next few years. But in addition to that, we've increased our order base. We now have HERA, which is the European BARDA contract, and we're in discussions with other governments, which again I will allow JC to get back to. So we now believe we're coming out of the outbreak scenario with a base business in public preparedness of DKK 1.5 billion to DKK 2 billion a year. Now this will still be on top of that base business, a lumpy business. We will have one-off orders from other governments coming that we're working on that will see a spike in revenues. There will unfortunately be another outbreak of mpox. There's currently an outbreak of mpox in the DRC in Africa. There are real concerns that could again spread. And monkeypox hasn't gone away. There are still cases here in Europe. There are still cases in the U.S. It is at a lower level, but it's only a matter of time most experts believe until there's another flare up. That will also mean there will be another surge in orders coming. So from time to time, probably more frequently than we would wish, from a public health point of view, we will see spikes in revenue that will allow us to return to the sort of revenue that we reported last year. So another part of our growth story is continued M&A. Now often, when I talk about M&A, the first question I get is what is your firepower. And there are 2 things with firepower when it comes to M&A. But where the question originates is do you have enough cash to go after M&A. So let's talk about cash. We now have successfully integrated the first assets we bought in 2020. We've sold more doses than anyone else, endorsing our strategy. We now have bolt-on acquisition last year from Emergent that is really generating a highly profitable business. We're a cash flow positive company. We have milestones still to pay in the short term in the region of DKK 2.6 billion. We have sufficient cash and cash generation in the coming years to pay those bills. That probably means we have more limited firepower in the short term because of those milestone payments. However, we're very much more a bankable business today. So there are other ways of funding M&A through debt financing. Once we've paid those milestones, we have no debt, we will be still generating a very strong cash position. We can look at ways of investing that cash back into the business, maybe through M&A or potentially if there are excess cash available looking at returning money to the investors. The other thing about firepower is your credibility. When we sat and negotiated with GSK for the rabies and TBE, those assets originally weren't for sale. And we knocked on the door of big pharma, and we said we're really interested in those 2 assets, and we would like to buy them. And the biggest discussion we had at the beginning was, well, can you convince us that you are a reliable partner who can take over these products and deliver these life-saving vaccines. We were fortunate that we convinced GSK that the fact that we really didn't have a very solid manufacturing base, to do rabies and TBE, the fact that we didn't have a commercial infrastructure that we could do it. Today, that credibility is completely different. We have succeeded. We have a manufacturing base that is a lot more flexible today. So we have a lot more credibility when we knock on the door and say that we want Asset A or Asset B. So we have credibility. We have the financial firepower. Short term, maybe a bit more restricted due to the milestone payments. But in the medium term, we believe there's lots of opportunities to add to the top line and the profitability of BN. So what about our R&D? So before I talk about the road ahead, again, I need to give a little explanation about what's happened in R&D spend over the last few years. Historically, there's 2 things about the Bavarian Nordic's R&D spend. It was relatively limited from my perspective around the DKK 600 million mark. The other thing that we've been extremely successful of at Bavarian Nordic is getting a lot of our R&D funded. So all the development of JYNNEOS was completely funded. We've had other programs that have been funded. And currently today, we have a Phase II asset that's fully funded by DoD. Now in '22, '23, we had an unprecedented situation that we found ourselves with 3 Phase III programs. Now in terms of R&D, as you get later in the development, the costs really go up. And that's where you see the ramp-up in costs to DKK 1 billion or DKK 2 billion last year in terms of R&D because we had these 3 late-stage programs. They are all over. So we now will see a decline in R&D spend simply because we don't have these late-stage programs. And you can see that we're guiding for about DKK 850 million in R&D this year, and most of that is related to the Chikungunya asset. And as I mentioned before, R&D is split between really what many people think R&D is, which is bringing new assets through and developing them through the clinic, but it's also looking after your commercial assets. And the big part of the spend this year is on Chikungunya. Yes, we're filing for registration, but we already have commitments with the regulators. We have to set up an efficacy study that will be a post-market commitment. We're committed to a pediatric study and other studies that we will have to be doing to protect that asset even though we're only filing for approval this year. Now of course, the mix between life cycle management and what we call R&D will change from year to year as assets come through. But we will not be seeing the return to those high R&D costs until we're much later in the development cycle of new assets, so for many years to come. So in terms of preclinical or early research, we are looking at new disease assets. We haven't announced any today. We're not ready to do so, but we do intend to bring new assets through into the clinic in the next 18 months. We are looking at new platforms in our research centers around the globe, and we have been for a number of years. And believe me, we're quite excited about some of the things that we're developing and we'll be able to announce in due course as assets come through. And as I said, a big part of what we're doing in research is also looking at ways of improving our manufacturing process -- processes, I should say. We've made significant improvements in Chikungunya, in JYNNEOS and others. But again, I will allow Russell to talk more to those. In terms of the pipeline focus, we announced last week, we are focusing on infectious diseases moving forward. So our oncology asset has been closed. And in terms of life cycle, these are just some of the programs that we're looking at. As I said, life cycle, what is that you have to look after your commercial assets to maintain the competitiveness of those assets. In terms of Chikungunya, we have label expansions, as I mentioned. We'll have efficacy studies, pediatric studies. We'll be expanding the approvals in different countries. Shelf life extensions. The best example of that is the freeze-dried activity that we have with the U.S. government that is fully funded. So a lot of these activities are ongoing in parallel to working on new assets. So again, I will touch on the guidance and the finances, but again, I will leave the details to Henrik, who will be following me. So last week, we guided for this year between DKK 5 billion DKK and 5.3 billion revenue. I know often we're criticized or it's commented that we're often cautious on our guidance. I would say this guidance does include uncontracted sales in public preparedness, which is unusual. But I think that just shows you the confidence that we have in that new base business. Not all orders are in the book, so to speak, but we do expect to close those during the year. We are also guiding for an EBITDA of DKK 1,1 billion to DKK 1.4 billion, and that's in line really with our ambition to have an EBITDA margin of 25% to 30% moving forward. As I said, we've got a highly profitable business that is growing, double-digit growth in terms of travel health, a very healthy public prepared base business that will have spikes in the coming years as we receive lumpy orders and/or unfortunately, additional mpox outbreaks. That cash we can use to invest back into the business, bolt-on synergistic M&As or alternatively, if there's excess cash. For the first time, I would say, in our history, really look at the possibility of returning cash to the investors. So we've come a long way. And I know today isn't about where we've come from. It's more about where we're headed. But we have a lot of credibility in the industry in the short road that we've been on in the last 3 years and that we've really created one of the largest pure play vaccine companies which has an underlying attractive market growth. In terms of our organic growth, we see double-digit growth in our travel health business. We have lots of opportunities in public preparedness and as I said, you'll be hearing more about that from JC. We have a focused R&D strategy, really looking at infectious diseases, both looking after commercial assets but also looking after the pipeline in a prudent fashion. And there are opportunities to solidify our profitability. As I said, we have the ambition and have demonstrated the capability of having EBITDA margins of 25% to 30%. And there are a number of activities in the short term that we can use to address that. Economies of scale in production, improving manufacturing process and yields, finalizing the tech transfer of rabies and TBE all will have margin improvements in the short term. So we have a solid financial position, solid cash flow generation moving forward that's really going to give us many opportunities to grow this business beyond where we are today. So with that, I can hand over to JC.

Thank you, Paul. Good morning again. It's really a great pleasure for me to share with you our plan to grow -- continue to grow the business that we have with our commercial assets, whether it is with the Travel Health segment or the public preparedness segment. So obviously, I can say continue to grow because since the commercial journey began in 2020, we have shown year-after-year strong performance with the best results ever for the company in 2023. And these results are coming from a few things. One, love and care. Paul mentioned it, these assets that we have now in our hands, we really put a lot of resources, love and care behind. Two, a clear commercial strategy; three, laser focus on strategic priorities and execution. And four, a team, a team of individuals with years of experience, whether it is in the U.S., in Europe or in a global setting. And all these elements are going to remain or even been strengthened in the years to come, which give us the full confidence in our ability to continue to deliver the growth and the ambition that BN has with this portfolio. So I will run through the strategic initiative that we have within the 2 buckets of 2 segments of our business. Travel Health. We will look at the supportive market conditions that we see with the travel market returning back to its pre-COVID level in this year and continue to grow at a 6% average level year-on-year moving forward. We will continue to focus on our key markets, U.S. and Germany, but as Paul also mentioned, we now have the power to extend into the next layer of key travel health markets. Three, we will replicate what has been done with Rabipur/RabAvert and Encepur and relaunched and launched Vivotif and Vaxchora in our key markets, and deliver also very strong performance there. And obviously, our CHIKV VLP asset, which is an asset for which we're all very excited about with a quite a unique profile, which will -- we will launch in 2025 with the ambition to make it the leading brand in the global CHIK market. In the public preparedness segment, as Paul mentioned, we have a lot of credibility and a lot of great relationships with key stakeholders. We want to continue to support these key stakeholders in their plan to address the threat that represents smallpox and mpox and make sure that they have everything they need to be ready in case these things happen. And last but not least, we want to expand the access to the JYNNEOS [indiscernible] franchise in private markets, with the most significant one being the launch that we will do this year in the U.S. So focusing on travel health. As Paul mentioned, we are -- we're taking a lot of pride of what this organization has delivered since taking over RabAvert in the U.S., where we have sold more doses than anyone else in 2022, and we still see a very strong momentum in 2023. Now looking forward, a few points I'd like to highlight here. One, it's very reassuring to see that the spend share of wallet in tourism is back to the level of 2019 around 8% and doesn't seem to be impacted by the overall economic situation that we see in the world. The other key element is on the graph at the bottom right. We see the number of travel coming back to the 2019 pre-COVID level this year, and it's planned or forecasted to continue to grow at a 6% year-on-year rate moving forward. The other interesting element is the destinations of travel seem to shift and change from pretty comfortable, safe destination to more adventurous destinations, which obviously will trigger more need for vaccinations. Now, we want to build on this market growth and continue to have a very disciplined commercial execution to make the most of the existing underlying growth in the market. So we will do that by, as I said, focusing on U.S. and Germany, which are and will remain our 2 key markets. But this year, we're expanding our footprint into the next layer, starting with U.K. and Canada, and we plan to expand even further from next year onward in other markets like France, the Benelux and Austria. We have organized ourselves in 3 separate divisions: one being North America, second one being DASH, Germany, Austria and Switzerland, and the third one being the rest of the world. These 3 segments are more or less balanced in terms of revenues, whether you look at it from a travel health perspective, public preparedness or the overall commercial revenues. Each one of these regions is as a setup that is aligned with the market characteristics. So in some places, we have a key account management model with contracting and pricing. In some other markets, we have a classic sales reps model. And in others, we have partnership with different partners across the world. Now zooming in into the U.S. We have, and we do see a large growth potential for our Travel Health business in that market. First, we have now a very broad portfolio, and I will come back to that because we believe that it is something we will be able to leverage and take the most value out of this extended portfolio. But even looking at the assets individually, RabAvert already mentioned, right? But in '23, we see that we are 30% above what the level was in 2019. So we've already delivered pretty significant growth in that business. However, we still believe that there is more room for growth with this asset in the U.S. by raising the awareness about the disease and the value of pre-exposure vaccination, recognizing that less than 1% of the individuals traveling to a country where there is a risk of rabies got a pre-exposure vaccination. Second asset, Vivotif is a challenger in the typhoid vaccine business in the U.S., 20% market share. And here, we want to really position this new vaccine force as the optimal choice for individuals who prefer an oral medication. And we have a lot of data showing that people when they have their choice, would rather prefer an oral medication versus an injectable. So clearly, there is a nice opportunity there to grow and gain market share in that business. Third one, Vaxchora. It's the only cholera vaccine approved in the U.S., and we know that cholera is an ongoing upsurge. WHO just published that there is a 25% increase in the number of countries that have reported cholera cases moving from 35 to 44 markets that have reported cholera cases. That means that there is more countries for which travelers should be vaccinated to protect them against cholera. And of course, last but not least, our fourth asset that we plan to file for registration this year and launch next year. It's going to be a fantastic asset for which we are very excited about the profile. As Paul said, we see and we believe it's the best in class with a very well-differentiated profile based on convenience, fast protection and safety profile. Now why are we so confident about our ability to drive continued growth and perform in the U.S. market. There is a lot of information in that slide, but I would like to highlight a few things. One, we have assembled in the U.S. a team of people with years of experience in the Vaccines business, either in small, mid or large vaccines company. This team has delivered, as I said, already strong performance year-on-year with the only asset that we had so far in the U.S., RabAvert, but we also have a very clear focus on customer satisfaction and operational excellence. It's all about making sure we meet the customer needs and deliver exceptionally operationally day after day. With that in mind and this customer focus that the organization has, we have developed sales, marketing and contracting initiatives to respond and differentiate Bavarian Nordic versus the competition with that laser focus I mentioned. Since we took over Vivotif and Vaxchora mid last year, we've already aligned these 2 assets to our strategic account selling model. We've also added Vivotif and Vaxchora to many of our existing contracts that we have in the U.S. with the different key stakeholders. And we start seeing already a shift and growth of Vivotif performance, which ended up 2023 at 20% market share where in 2022 it was at 15%. So we are very confident that with the foundation that we have put in place, we will be able to continue to deliver significant growth with the existing and new coming assets in the travel health portfolio in the U.S. Talking about new assets. Our CHIK (sic) [ CHIKV ] VLP definitely believe has everything it takes to be the leader in the CHIKV business and we have the ambition to launch it in 2025 and make it the leading global brand in the CHIKV business. So the CHIKV business is a significant opportunity, estimated to be around USD 500 million for travelers business. But this market has to be built on. There is no market today and it will take some time to raise awareness and educate HCP and travelers about this business. We will come right after the competition and are gearing up with a team, again, of very experienced individuals in launches either at the local, at the regional or at the global level to be ready to launch again in 2025. Our mission and what this team is really focused on -- focusing on right now is to make sure that we understand the customer needs, whether it's customer needs prelaunch and after launch. We've run many market research. We've got a lot of insights, 2 of which I'd like to share. One is, clearly, there is absolutely very little awareness about the Chikungunya disease even within the Travel Health HCPs. Now if you will show them and educate them about the disease and its characteristics, they immediately see that this disease is as severe as typhoid or cholera, and they immediately recognize the value of vaccination for addressing that disease. The other insight is that they're really interested in like our VLP platform as they know it from other vaccines currently commercialized and they have a lot of faith in the attributes of the VLP mostly around its safety and efficacy. The other thing that the team is doing is to really build confidence and educate our key stakeholders and recommending bodies by sharing with them in time, all the data that we have on this asset, all the differentiating elements of this asset. So that at the time these stakeholders and recommending bodies will come with their decisions, they have all the right information. Our medical team is already in contact with ACIP experts. Some meetings are planned, where these data will be shared and discussed in detail. We also built a brand, and we were looking to be able to have a global brand, and it's the case now because the brand that we have is approved by the European authorities and the American authorities setting up us for success on a very strong global brand. And of course, last but not least, working with my colleague, Russell's organization, setting up and building up the inventory that would allow us to be ready for launch in 2025. So now moving to the public preparedness segment. Paul mentioned it, and I think it's been very clear over the years, Bavarian Nordic has a very strong reputation of a trusted partner with the key stakeholders whether they were building stockpile inventories or in 2022 when the Mpox outbreak came that Bavarian Nordic was able to respond -- step up and respond and deliver to more than 70 countries around the globe, doses of JYNNEOS/Imvanex/Imvamune to help them mitigate this outbreak. So today, smallpox is still a top threat whether from a biotical defense perspective, but also because of, as Luke mentioned as well, the geopolitical tensions, the advancements in technology that make smallpox high on the agenda of many governments as a point of real concern. Mpox also mentioned by Paul, is still circulating across the globe. We still have cases every month in many different countries. So it's not going away. And there is a lot of uncertainty around future outbreaks making it as well a top public health threat for the world. Based on these 2, we work very closely with many government and supra-governmental entities to make sure we can respond to their needs. One government with which, we already mentioned, we are in discussions today is France. France has changed their recommendation, and they are working on building a stockpile that would allow them to respond to potential future outbreaks, but they also consider vaccinating their health care professional and first time responder even if there is not an ongoing threat in the market. So this is just one example of the country with which we are in close discussion and work with them on making them able to execute on their strategy. Last but not least, as I said, we want to make this Mpox, smallpox vaccine available also from a private market perspective. We have a pilot ongoing in Germany and the next launch that we plan to execute is in the U.S. with launching Jynneos in the managed care market in the U.S. It is a very sizable opportunity. There was approximately 2 million of individuals at risk. These are MSM, men having sex with men, with a high-risk behavior. So it's 35% of the overall MSM community that we're talking about. 25% of these 2 millions received Jynneos in the previous year. But so there is still 75% of them out there that have not been vaccinated. This is the population that we want to help protect with this entry in the managed care market. In this population, we have market research showing that they are extremely interested in the vaccination and willing to get vaccinated. The other interesting part of launching JYNNEOS in this managed market is that it is a step for Bavarian Nordic in an enormous market. 95% of the vaccines business in the U.S. is within that managed market segment. So we will build the team to be able to launch in this market and acquire all the skills and expertise in that market. We have a very good momentum in our plan to launch in the first half of this year, JYNNEOS in the U.S. Of course, we had this ACIP unanimous recommendation and positive vote for JYNNEOS. Some technical stuff, but important to get access to the U.S. market, a CPT code has been established. We have our pricing compendia notification that has been completed. We have CDC solicitation for VFC that is published to which we responded. And we have some of our key payers in the U.S. already agreeing to put JYNNEOS on the list of their contracted assets. Just to mention a few, UnitedHealthcare, Aetna, and so on and so forth. We also have and building a strong team to make sure we leverage the retail market, which is going to be a key driver for the success of JYNNEOS in the U.S. And we have established also contracts with some, CVS is one of them that is already executed. So all in all, a good range of strategic initiatives to grow our business, whether it is in the travel health segment or in the public health segment with key components that we will continue to leverage. One is a clear strategy, focus on strategic priorities and a very strong and experienced team that has demonstrated it can deliver and continue to deliver that growth that we all expect for this portfolio. Thank you.

So we're going to open up for a Q&A session before the break. So as I said, we'll try and govern this if you ask direct the question to me, and then I'll try and make sure the right person, Michael. Sorry.

Thomas from Danske Bank. Just a couple of questions on manufacturing. So on Chikungunya, I understand you have a lot of work pending to optimize manufacturing of the commercial launch. So what is actually needed here? And should we see this as a low-margin product, the first couple of years, disregarding scale effects, of course? Or will you have these optimization steps already -- ready before the 2025 launch? And then just a general question again on manufacturing and optimization steps. I guess, moving away from egg-based vaccine production would sort of make sense, at least to me. So maybe can you quantify the level of investments needed and potentially any regulatory requirements, if you, for example, move into bioreactors at some point and maybe also quantify a little bit on what sort of margin improvements you're looking at here, if that was the case?

You're up Russell.

So let's start with Chikungunya. So we've got the manufacturing process now set up. The main part of the drug substance manufacturing company in Switzerland. Then we have the drug product part set up in the U.S. The volumes will drive the profitability of the product. And there are opportunities that we have with the manufacturing process to significantly drive yield. As we've taken over this product from Emergent, there had been very little investment in the manufacturing process itself. So we're seeing pretty low levels of productivity in the first batches that we produced. We have more than sufficient capacity to support the first couple of years we launched, but we're investing heavily to drive that yield improvement for being able to expand the reach of the product and significantly improve the costs. So all of that work is underway, and I think we're making some great progress. We've actually just finished some studies with the technical team, where we've been able to drive a 400% yield improvement on the Chikungunya [ virus ] only 6 months. So that's really exciting progress, and I think there's more to come in that space. When it comes to egg-based manufacturing technologies, yes, it's clearly a little bit archaic when you look at it from the outside. I think the things to remember about egg-based manufacturing technology is it's proven. It's pretty reliable. It is flexible, right? You can scale it up and down. Changing it involves significant investments because you have to be able to demonstrate that the product you manufacture on a cell culture-based manufacturing system. I mean, it's relatively straightforward to make that technical transition, but you have to be able to demonstrate to the regulator 100% of the product is exactly the same and has exactly the same risk profile. And that often involves either very expensive physiochemical comparability testing or even clinical comparability. So you have to ask yourself, is this going to make good business sense to make this transition? Am I going to get -- what am I going to get, if I make all these investments? If what I'm trying to do is drive volume, it might make sense, right, because I can scale up the manufacturing process more easily, and I can pay for the investments I need to do to make the transition. If the only thing that I'm going to do is have a different manufacturing cost base, it's a lot more difficult to justify making that transition because the cost saving -- the product cost saving is going to be maybe 10% to 15% of your cost, right? Not 80% to 90% of your cost. The only thing about vaccine manufacturing is most of the cost is actually in the back end of the manufacturing. It's the box, it's the container. That's what drives a lot of the manufacturing costs actually, not so much the manufacturing of the drug substance. So I hope that gives you feel.

Michael Novod from Nordea. A couple of questions. So first of all, on the tech transfer, completing with GSK. So when that is done, can you tell in detail what kind of sort of ramp up and supply are you able to see because, of course, there are some constraints in 2024 around what you sort of ordered with GSK. Just to get an understanding in terms of the next 2, 3 years, what kind of ramp in supply are we actually seeing. In that respect also, maybe if you could talk a bit about the actual margin improvements on the rabies and TBE business when all this is completed, how this will progress also over the next couple of years? And then lastly, on the commercial side. Also how do we sort of foresee progress in the launch of JYNNEOS in the U.S. private market? Is it sort of a key event, marketing event, campaigns that will drive uptake near to midterm?

So do you want to take the first part manufacturing and margins and then JC you take the...

So rabies and TBE tech transfer is ongoing -- is ongoing to plan. I'll talk more about it a little bit later. The absolute key benefit of actually getting all of this manufacturing in-house is, as you say, allows us to drive additional volume. And we've got a manufacturing -- we've built a manufacturing capacity, which allows us to build or supply roughly double what we're selling today, right? So that's the opportunity that we have in front of us. We're not necessarily going to do that, just straight off the bat because we're working very closely with JC and the team to try and project how that ramp-up is going to happen. But the technical capability we've put that in place. We are going to see significant improvement in the profitability of both rabies and TBE as a result of the tech transfer. The reason for that, of course, is that we have all the costs in the business for manufacturing rabies and TBE today, but we're not absorbing it into the product sales because we're still supplying out of the GSK supply chain. So we're going to have a huge impact there. It's going to impact rabies, I think, more dramatically than it is going to impact TB just because of the respective yields of the different manufacturing processes.

And I will actually share some of the details on that in my presentation later today.

With regards to the launch of JYNNEOS in the U.S. Yes, we do have a pretty aggressive launch plan with marketing activities. One element that is really important to know is it is a special population that we will have to bring in front of the vaccine. Population that has not been fully aware or was aware, but didn't want to go into the previous setting for vaccination where they had to fill 5 pages questionnaire about all their identity behaviors and so on and so forth. So we will work very closely with a lot of associations, LGBT Associations, Black Patients Association because we see that is also an underserved population that didn't really get the full vaccination. So that is one element that the team is going to work on is to activate campaigns through these associations. We also work closely with some of the CDC centers in some of the states because the underserved population will still have access to the vaccine through CDC centers. And the last thing we do, we have, in the U.S., they have data on everything. And we almost know the exact number of individuals per state that are at risk and that have not been vaccinated. So we will absolutely prioritize. We have a fourth year segmentation of the different states, and we have a clear focus on the Tier 1 and Tier 2 where there is the highest number of individuals eligible, but not vaccinated. And the last piece is a strong partnership with retailers, where most of the vaccination, we think, will, take place, and they also have a lot of interest in having this additional source of revenues in these retailers. So we do have plans to do activities together.

Peter from Citi. Three buckets of questions, please. Firstly, maybe for JC, just on pricing on the travel vaccines portfolio. Can I push you and could you give us some sense of what you're seeing in the U.S. and European markets across the portfolio and your expectations going forward? . For Henrik or Paul, in terms of shareholder returns, are you agnostic as to whether it's dividends or buybacks? Or do you have a particular preference when we get to that point? And then lastly, we need to raise unloved assets. I realize this is not the forum where you start detailing to us all the unloved assets you see in big pharma, but you use the rabies and TBE vaccine as a good case example -- case study. But are there really a good number of other unloved assets out there that allow you to replicate that success. Just wanted to get a sense of how many real opportunities there you think there are?

JC.

Yes, so pricing of travel related vaccines. Clearly, in Europe, there is a difference between Europe and U.S. Interestingly, in the U.S., we see pretty significant prices for the vaccines. GE for example, is around $300 dose and Valneva just announced their price for the -- their CHIK vaccine being around $270 a dose. So we see this travel health segment in the U.S. to be pretty high priced versus, for example, pediatric vaccines, which have pretty lower price. In Europe, it's a different scale of magnitude, of course, but we also see an increase in the average selling price of the travel health vaccine. And payers -- first of all, most of it is out of pocket, right? So individuals they have to, most of the time, pay for themselves. So of course, we do pricing sensitivity analysis, especially with our CHIK VLP future launch to understand what is the sweet spot in terms of price acceptance. But we are confident that it could be a pretty high priced versus other prices of some vaccines in Europe, which remain relatively low.

Do you want to take that?

Yes, I'm sure. On the return to shareholders, as Paul said, I think once we have completed the milestone payments to GSK and Emergent, we will be in a totally different situation. 1.5 years down the road, we will be generating positive cash flow. We will be debt-free basically, which also means we will have a much more expanded financial flexibility allowing us, of course, to continue investing in the business, but also to explore more M&A opportunities and eventually return money to shareholders. And whether it will be through dividends or share buybacks is, of course, a discussion that will depend on the situation and that we will have with the Board of Directors. Personally, I would think it will be very logical to start with the share buyback. And once you have proven that you're actually as a company, in a situation where on a sustainable basis, you can return money, you can be talking about dividends, but that's the discussion that needs to be had with the Board of Directors.

And then in terms of love-unloved assets. Well, I mean, the list is maybe as extensive as we would like, but there certainly are a number of assets similar to rabies and TBE sitting with pharma that I think would be better in our hands. And in fact, the more blockbusters that pharma gets, the more opportunities there are for Bavarian Nordic because sort of products that are generating the sort of revenues that we're seeing simply don't give their focus, and they want to simplify their supply chain, their manufacturing. So that's definitely one area that we will be trying to identify and exploit. The other area is obviously for companies that are subscale that don't have enough scale in terms of assets. You can argue that may have been an Emergent situation in terms of air travel health, but there are opportunities there as well. So 2 buckets of opportunities that I would say. And as I said, I really wouldn't underestimate the credibility angle that Bavarian Nordic has. It is a little different today to knocking on GSK store than it was back in 2019 and in fact, people are actually coming to us now, which didn't happen before 2020.

Jesper from Carnegie. A couple of questions on the new ambitions for '27. So firstly, just on the EBITDA margin. When you look at pharma companies and the vaccine divisions in big pharma, they are running at greater EBIT and EBITDA margins that you guide. So can you perhaps just give some ideas as to why it's only 25% to 30% in your company, also considering that you can actually grow in scale over the coming years. And then secondly, on travel health. Just curious what you have included just top line on Chikungunya because if you just look at the actual targets you provide, it's slightly below what we expect in the market, but that may be due to you guys just simply assuming a slower ramp of Chikungunya to have some consideration, how you have to include Chikungunya and other assets in that guidance?

Henrik, do you want to take that one?

Which one of them? The EBITDA margin. Let's start with the EBITDA margin, right? I think we are guiding now 25% to 30% EBITDA margin in the period up until '27. We have a growth strategy and the whole point of us growing the company, I think, is to build scale so that we can deliver competitive profitability rates and take care of our own business without coming back to you guys asking for more money. So we can basically pay for our own development, continuous investment into the business and then deliver a competitive profitability level. Will we deliver more than that after '27, maybe, but it's all a matter of building the right scale. We have -- I've heard several examples of where that is happening right now with the acquisition from Emergent, JC can move into new territories. [ Russell ] will get opportunities to improve the utilization of manufacturing, all the components and elements that will help us drive profitability. So we take it one step at a time. But so far, we have the ambition to deliver 25% to 30%. We've also seen that we can do better. Paul said, we delivered 37% in '23. That is, of course, due to the Mpox outbreak and you can say, extraordinary high revenue we saw in '23. But I think 25% to 30%, I think, is a very good place to start. JC, do you want to take?

Yes. So of course, we don't give specific numbers for the different assets. But of course, CHIK is in our ambition numbers. But as I said, it will take some time to build this business, which for -- there is very little to no awareness. So we're happy that someone will start making and raising the awareness for the disease for us so that when we come awareness might be a bit higher. Nevertheless, it will take some time before the awareness get there and we can fully leverage the potential, but we have to think Rabipur/RabAvert is a 30-plus years asset. So it's a very long lifeline like also our Chairman mentioned, that we definitely see a massive opportunity, not super short term, but definitely once the business is growing.

Any other questions?

When you consider the climate change is that a risk for the company's turnover in the future? Or is it a possibility? I mean I'm trying to explain that climate change could carry on that while we have seen for the last few years and where I have traveled, we have to look more forward to see we have to be prepared. In other areas, I would never have a vaccine anymore.

Do you want to take that, JC?

Yes. I think we believe it's a positive trend for the business we're in. If you think, for example, Chikungunya, we have seen some cases even in Italy. And we see the spread of mosquitoes really developing up north and making this disease that are seen as disease from remote faraway countries might come much closer to where we are today. We see also cases in South of the United States coming up from Mexico. So the spread of mosquito is one element. Not talked a lot about TBE, but the spread of ticks and the expansion of the epidemiology of tick-borne encephalitis is really spreading massively across different countries in Europe. So I don't know, my daughter would kill me if I would say I see global warming as a positive trend, of course. But from a pure business perspective, I think it will represent an opportunity.

Just one more question, then we'll go for a break.

Thomas from Danske. Just a clarification. You guide for DKK 1.5 billion to DKK 2 billion annually on public preparedness. So just to clarify here, the private Mpox market that you are looking at, is that within that range? Because I remember you previously have guided USD 50 million once you got the Mpox label that was before the 2022 outbreak. So what's included here?

The DKK 1.5 billion to DKK 2 billion, that is pure, what we call, existing base business. So the private market in the U.S. is not included in that number. And there, I think you might have seen it on one of the slides there, we actually -- we are -- our ambition is to take approximately USD 250 million over the next 4 years in that market. It's a special segment that is sort of a backlog of people that needs to be vaccinated. About USD 250 million over the 4 years, gross revenue is what we expect. Okay. We'll take a short break. [Break]

So I'm going to talk to you a little bit about how we are building a reliable and sustainable supply of vaccines at Bavarian Nordic. And we've heard a little bit this morning how difficult that can be. The Chairman, Paul sort of made reference to the barriers to entry and the difficulty of actually making a vaccine. That has got -- there's multiple reasons, it's complicated. I mean part of it is the manufacturing technology itself. We use biologics, manufacturing, we use sterile manufacturing. In the pharma sector, these are probably 2 of the most capital intensive types of manufacturing process that you can establish. But it's not just having the money to build the factories. It's also the length of the supply chain is involved. A typical vaccine from the point of its earliest inception to its delivery to customer can be almost 18 months. And that's not because the manufacturing process takes 18 months. It's because there are very complex raw materials that take a long time to source. There is the manufacturing process itself, but there's also the testing and quality assurance that we have for vaccines that is extensive. Every single vaccine that we make undergoes hundreds of separate quality control tests and in many countries, all of those tests are then repeated by the local regulators. So the extent -- the length of the supply chain is significant, and that drives inventory costs, right? I mean you've got a lot of cost in your supply chain for many, many months before you can get the product to the customer. So these also play into this complexity that we have in vaccine manufacturing. And I think the third part -- the third complexity that we have is difficult to predict. And we've heard a little bit about this. The diseases that pop out if nowhere, but another thing that makes vaccine supply difficult to predict is the industry is actually not very good at it. I mean -- and I'm not talking just about any specific company, but if you look vaccine supply in all countries across the world, you will see routinely vaccines being stocked out and not available. And that's not because these companies are stupid, right? It's not because they don't know what they're doing. It's hard. It's hard to predict, and it's hard to balance the uncertainties of demand and supply. So that's the challenge that we're trying to conquer here at the Bavarian Nordic. And we've built a quite extensive supply chain for our vaccines -- for our 6 life-saving vaccines. And that spans 3 internal locations, but also a whole list of contract manufacturers that perform different parts of our manufacturing operation it's an extensive list. It's a necessary list for their flexibility and manufacturing that we want to have and also because of the variety of vaccines that we produce. So I'll focus a little bit on our 2 main internal manufacturing locations, one here in Denmark, the other one in Switzerland. These facilities are state-of-the-art manufacturing facilities. So these are manufacturing facilities and capabilities that are comparable to what you'll see in the biggest and most professional vaccine manufacturing out there. We operate these facilities to the highest levels of quality and compliance as you would expect, right? We're putting vaccines into healthy people. And that high quality and compliance level is absolutely key. And that standard that we've introduced has allowed us to license these products in all the major markets that we operate, which include the most stringent regulatory requirements in the industry, I mean, the U.S., Canada and Europe have the highest levels of quality and compliance requirements for the vaccine manufacturing. And we've gone through all of those inspections. Over the last 3 years, we've had over 15 separate inspections from all of the major regulators, and we've passed those with flying colors. And that is a testament to the strength of the organization that we've built at Bavarian Nordic. And it's not just about the fact we spent a lot of money on those factories. It's also because we've built the quality and supply systems and processes that support that operation and allow us to build and deliver vaccines reliably to our customers. The technologies that we've invested in are not technologies which are unique to specific vaccines. They are platform technologies, which we can use for producing other vaccines. So vaccines above and beyond the 6 that we manufacture today. So that leads to some opportunities for us down the road to internalize more vaccine manufacturing, different vaccines in the future. I'm going to talk a little bit about the whole monkeypox story. We've touched on it a number of times today already. It was a bit of an interesting introduction for me as Bavarian Nordic because I've been there I think, about a week or 2 before the whole thing kicked off. But we sort of stood up to the challenge. And over the last couple of years, we've been able to scale small pox and monkey pox production capacity fourfold. And throughout that time, we have never said no to a customer, and we've never failed to deliver our commitments to customers. And something that I think we're all at Bavarian Nordic are incredibly proud of. But again, I think, speaks to the strength of the supply capabilities that we've built. When it comes to monkeypox and smallpox, we now have sufficient capacity in place to meet what we expect as being the demand in the years to come. But just to be sure, we've also made sure that we have got third-party supply capabilities should surges in demand happen, so that we can address public health needs should the need arise. But we're not sitting on our laurels with smallpox and monkey pox. We want to maintain this product as the standard of care. We want it to be the leading vaccine in its field. So we continue to invest on making it better, making sure that the presentations are suitable for the private markets in which we now begin to enter working on the shelf life of the product, which gives us improved manufacturing flexibility and of course, working on the process productivity and making it more cost effective, which is a continuous journey, which never ends, but one which we make great progress on. When we look to the rest of our vaccines beyond small pox and monkeypox, we got a huge amount going on. I love this graph to the right here because it shows how we've expanded our internal manufacturing capabilities over the last 4 years. That's a tenfold increase in output that we've been able to deliver. It's rare that you see organization scaling at that level, increasing that manufacturing output by tenfold over a 4-year period. And there's a number of things that are driving that increase in internal manufacturing output. I mean, of course, the monkeypox and small pox stockpiling increases have played into it. As has the internalization of some of the steps of the GSK, rabies and TBE product, we've started to produce in-house. The Emergent business has also added to that growth rate. And finally, this year, we start the manufacturing processes for Chikungunya to make sure that we're ready for launch in 2025. Now that scale of growth isn't just all about manufacturing and getting batches and doses out of the door. It's also systems that need to be put in place to get all of these products to customers. It's pointless making a vaccine if you can't vaccinate with it. And that back end of building the distribution and supply chain to instead of just 1 or 2 customers, which is what we've done historically at Bavarian Nordic, but hundreds and thousands of customers is a big piece of work, which we're making great progress on. With rabies and TBE as I said, we've got the manufacturing processes being set up. Now for rabies, the heavy lifting is all done, the commercial manufacturing has started. We're waiting for the final approval from the regulators to sell the product, the tech transfer is effectively done at this point. For TBE manufacturing, the heavy lifting is ongoing. We're actually producing our first batches of TBE vaccine in the factory in Denmark as we speak. So an exciting time. But we expect to have that tech transfer completed by the end of this year and the entire rabies and TBE supply chain will be under our control for 2025. For cholera and typhoid, we have significant manufacturing capability in-house and ability to grow. And as Chikungunya, we are in the process of getting that manufacturing process scaled up and also working on that process, productivity and performance to make it -- well, to allow us to deliver the long-term growth, but also to improve the cost outlook for the product. You can see here a little bit more of the detail on the rabies and TBE tech transfers, the different steps that we've got. I mean it's been a long story. It's 5 years. It's taken us to internalize this manufacturing. It took us that time because we had to start by actually building a factory, right? So you have to build a factory, you have to put the process and then you need to get it licensed, but why is this such a pivotal point for Bavarian? I think, firstly, when we got these assets in-house, we will have the manufacturing capacity in place to grow these products. We've seen great performance from the commercial team in many geographies and we know we can replicate that in other markets once we've got the supply in place. So that's the first thing that's super important. The second piece, of course, is the impact it's going to have on the profitability of our business. Today, what we are doing as we sell through maybe some TBEs. We're absorbing GSK's manufacturing costs. As of this year and next year, we'll start to absorb our own manufacturing costs and all of those costs are actually in place already, right? So we're spending the money today and we'll start to see the benefit of that starting next year. So I think really excited to see the progress that we're making with rabies and TBE. And I think another reason we're very proud of what we're building at Bavarian Nordic is our ability to tech transfer probably 2 of the most complicated vaccines from a manufacturing perspective to plan and to budget. It's really quite a significant achievement. I've spent my career in vaccine manufacturing. I think I made every vaccine out there over the years. So I can tell you, these 2 are not easy. They are complex products to make. But our technical focus isn't just our moving products one place to another. It's also about making the products better and investing in them. We've spoken a number of times today about why these assets are best placed with Bavarian Nordic because we can give them the love and care that they need to be successful for the longer term. For JYNNEOS, we've invested in together with BARDA in establishing a freezed-dried formulation for the product. I'm personally very excited about the opportunity that brings us the refrigerator stable presentation, which will be much easier to distribute, and I think we'll open up a number of opportunities for us further down the road. With our Vaxchora asset, which we acquired last year, you may know that there is actually a global shortage today of cholera vaccine. And we've heard earlier about how that disease is becoming more of a challenge in many geographies. We also have an absolutely enormous manufacturing capability that we've required for cholera. Now a lot of the demand for cholera vaccine is in emerging markets is in endemic markets. So we are working hard to develop a presentation which can be competitive in those markets, and we're excited about what that can mean for an improved supply of cholera vaccine around the world, but also a significant impact on public health. Finally, we work on shelf life extension and we might not be sound exciting, but it is really exciting because what we've heard a lot about vaccines is this unpredictability in the demand there's seasonality in the demand. And what that volatility sometimes drives is wastage, right? You make a vaccine that expires before it can be used. That's not good. It's not good for sustainability and it's certainly not good for profitability. So we're investing and making sure that we can get improved shelf life of our products, and as a result reduce waste and improve our flexibility to supply. So that's another area where we're working hard. So just to sort of wrap up a little bit, what we're trying to do with our reliable and sustainable vaccine supply chain at the Bavarian Nordic. I mean, it all starts with absolute integration of our demand and supply situation. It's a difficult space to manage. Together with JC and the team, we've made great progress in establishing world-class and integrated sales and operational planning. And then we are going after the cost opportunities that we have. We have significant opportunities in sourcing and distribution as a result of the acquisition we've made with the emerging business, but we also have a lot of technical opportunities of continuously improving the products to improve their cost performance and the profitability. And that's because we care about these assets, right? It's not as though these were things that only we could have done. The previous owners could have done these things, too, but it was never on their top things to do this and so it never got done. And I think that, again, speaks to why these assets are in the best place now with Bavarian Nordic. But at Bavarian Nordic, we also try and do these things in the right way. So we make the right choices about setting up our manufacturing from environmental sustainability standpoint. And we also make sure that we always keep in mind the criticality of having the highest quality products on the market and the trust that stems from that. It's an absolute requirement of a vaccine manufacturer, and that's certainly how we do things at Bavarian Nordic. I hope that gave you a bit of an introduction to our reliable and sustainable supply chain. I think we now go to a break. [Break]

Welcome back from the break. So now it's my turn to speak and take you through some of the financials. First of all, looking a little back on the years we have behind us and particularly our '23 results, but then start talking a little about what are our ambitions short and medium term. So last week, we went out and we preannounced preliminary '23 results so that we could really elaborate on that today as well. So as you know, we delivered revenue just above DKK 7 billion. Of course, sparked by the Mpox outbreak and all the contracts we secured during '22 and executed upon during '23, but also due to extremely good performance on the Travel Health business. We actually managed to grow that part of the business by 49%. Obviously, supported -- to some extent, by the 2 products we acquired from Emergent, VEEV, Vaxchora, which we have included for 7.5 months, but the growth primarily came from 40% growth on our TBE business, and 32% growth in our rabies business. So as both JC and Russell has alluded to, has been a busy year, and we have sort of been running on the edge of keeping up the demand in terms of manufacturing, but a fantastic good year. We sold more of these products than any other previous owners have done. Again, a testimony to the fact that our investment philosophy worked. We delivered an EBITDA of DKK 2.6 billion, corresponding to a margin of 37%. This is an extraordinarily high margin, I would say, of course, driven by the Mpox revenue we have. Remember, the Mpox business, as it was driven by the outbreak, there was not a lot of push from our side really. We had a very, very slim commercial organization and JC's team -- that supported the handling of these orders during the outbreak. We also ended the year with a good strong cash position, close to DKK 1.9 billion is what we have in our cash by the end of '23. So a good cash position. What we are guiding now for '24 is a revenue between DKK 5 billion and DKK 5.3 billion. And that consists of approximately DKK 2.1 billion within the Travel Health business, which corresponds to a 12% growth over 23%. And then we are guiding between DKK 2.7 billion and DKK 3 billion within our Public Preparedness business. As Paul said in his presentation, this is actually the first time that we guide beyond secured orders. And we can do that because we have managed to increase the base business, the number of customers, we are not relying only on the U.S. government to buy our vaccines. Within that guidance, DKK 2.7 billion to DKK 3 billion, approximately DKK 1.6 billion consists of secured orders. And that comes from the U.S. government. It's our free stride contract. It's our 10-year contract with the Canadian authorities. It's the 2 contracts we have disclosed with HERA in Europe, and it's a number of smaller contracts as well. But that means the rest we have to go out and secure during the year. And we are guiding this way, again, as we are confident that we will close more details based on the ongoing discussions we have with a number of customers. EBITDA will guide a range between DKK 1.1 billion and close to DKK 1.4 billion. That in itself corresponds to a margin of 22% to 25%. However, what's included in these numbers are the manufacturing costs of Chikungunya vaccines that can eventually be sold. That is approximately DKK 240 million we will expense in the year. And once we have an approved vaccine, that will be reversed and put into the inventory. So if we had adjusted for that this year, we were actually delivering a margin between 27% and 30% EBITDA margin in '24, so living up to our ambition. R&D investments coming down. Paul showed you the slide coming down from more than DKK 2 billion in '23 due to the -- of the 3 Phase III trials we had running in parallel. It will come down to a level of approximately DKK 850 million in '24. Nearly half of that is driven by the Chikungunya development, and it includes not only the development itself, it also includes some of the manufacturing processes that we are developing prior to loans. So I think what we are really proud of is that this revenue here, DKK 5 billion to DKK 5.3 billion, we're actually delivering it what I would call more normalized year. There is not an outbreak we are delivering to at the moment. Mpox is still out there, but there's not a huge outbreak like we had saw in '22 and partly '23. So we are today a DKK 5 billion business delivering also healthy EBITDA margins. If we then look a little bit beyond '24 -- into the '24 to '27 time frame, then we are anticipating to grow the Travel Health business on an average by 10% to 12% in that period. JC talked to some of the important growth drivers there. It is, of course, continued growth driven by Travel. It's also the launch of Chikungunya eventually that will drive the Travel Health business. On the Public Preparedness side, we have increased the base business, and we do believe that currently it's probably in the range of DKK 1.5 billion to DKK 2 billion that comes from regular customers who are either stockpiling or building up inventories to deal with Mpox outbreaks. And on top of that, we do anticipate there will be spikes like we have seen in '22 and '23. We don't know when, but there will most likely be another outbreak. There might also be the ought government who decides to place a larger order to replenish their stockpiles. The numbers you see to the right here, this is with our current business only. So it doesn't assume anything acquired or anything added on top here. And we did talk about it already during Russell's presentation. Once we have completed the tech transfer, we will get a significant positive contribution to our profit margins. And I will jump to the next slide to elaborate a little on that. As you know, we have been through this tech transfer process since we acquired the products from GSK back in 2020. We are getting close to complete. Actually, we are expecting the rabies product to get full license this year and the TBE product, as Russell said, slightly a little later into '25. The graph to the left illustrates what kind of cost savings we are anticipating with this. We're gradually going to save money as we take over the different steps in the manufacturing. And the big contributor will really be now when we take over manufacturing of the drug substance. So we are anticipating to be able to reduce on average the COGS by 30%. So far, we have been buying finished products or semifinished products from GSK with a margin obviously to GSK. So that's gone that margin. Plus when we take over the manufacturing, we will get a manufacturing in place that will help us absorb the indirect cost we have in Kvistgaard and all the investments we have done to build up the manufacturing capabilities of these products. So these savings here, they will result in a profit margin, gross margin improvements for these products of around 15 to 20 percentage point for these 2 products. And just to put it into perspective, we had access to those kind of COGS in '23, our EBITDA would have been DKK 250 million to DKK 300 million higher. So it is a significant impact that we are expecting from this. The effect, unfortunately, we have to wait a little to see the full effect in the P&L. First of all, we need to complete the tech transfer. And what we have done during the last couple of years, is also building up significant inventories. We need to make sure that there is a very safe handover from GSK manufacturer products to our own manufactured products. So therefore, we have quite a significant inventory that we need to consume before we can start consuming our own produced products. But we are expecting the effect to start really in 2016 and with a full 12 months impact in 2017. We have been on this journey to become one of the largest pure player -- sorry, vaccine companies. And to do that, we have actually made a lot of investments. Both Luc and Russell talked about how complicated the vaccine industry is and how you need to invest also in very bespoke manufacturing sites. We are past most of these investments, and I'll just take them one by one. First of all, the inventories we talked about it. You can see on graph #1 there, how we have built up inventories and that has consumed cash outside of the P&L for the last couple of years. We will still do that in '24, but this is the last year where you will see a significant ramp-up in inventories. Right now our inventory value is around DKK 1.6 billion, that's an asset we can sell, which we will go out and sell. Close to DKK 1 billion of that is related to the Encepur, that is our TBE and our rabies vaccines where we need to secure this safe handover to own manufacturing. We will continue building up inventory this year with approximately DKK 1 billion. I do expect that net working capital impact will be slightly less as receivables and payables will offset some of this. But it is the last year. After that, we will see inventories stabilizing, and we will actually, over time, expect to see a decrease, not that we have fewer vaccines on inventory, but they will be capitalized on the balance sheet at a lower manufacturing costs as we just talked about. Number two graph talks to all the CapEx investment we have done. We have built a brand new fill and finish facility in Kvistgaard and we have built a facility that can today manufacture both rabies and TBE vaccines. Again, as Russell said, right now, they're really busy manufacturing the TBE vaccine. These investments will also tailor off. So we anticipate this year to spend approximately DKK 300 million, some in maintenance, some in smaller projects, some in the Chikungunya manufacturing that we are building up. But a lot of the investees investments are behind us, and we have really created an end-to-end manufacturing site in Kvistgaard. Graph #3 also shows another area where we have invested. That means basically consuming cash that you didn't see on our P&L. The whole tech transfer process has over the years been capitalized, that's how you do it, then you put it on the balance sheet and you start amortizing it once you sell the product, and it becomes part of your future cost of goods sold. We are right now manufacturing in these sites, so we are not capitalizing any longer. So you will see that is actually going to 0 in '24. The last one, that is all our payments to the sellers of the business we have acquired, GSK, and Emergent BioSolutions. We also paid some smaller amounts to adapt back for the in-licensing of the COVID-19 vaccine. So you'll see on this one here, we have spent quite a lot of cash in the previous years. That is also coming to an end. We are with the completion of the tech transfer and will the -- submission plans for Chikungunya and expected approval, we're actually anticipating that over the next 5 or 6 quarters, we will be paying back DKK 2.6 billion to GSK and Emergent. And at that point in time, have no further financial obligations to these companies, bringing us in a totally different position. So it's DKK 2.6 billion approximately that we own these companies. We have in our assumptions to the guidance that we expect DKK 1.8 billion of those to be paid this year and the rest first half of '25 actually. The graph here shows DKK 1.5 billion, and that's really -- it will be between DKK 1.5 billion and DKK 1.8 billion. There are a couple of the milestones that can either be Q4 or Q1. But these are the assumptions we work on. So all of this basically means that our cash flow will be significantly improved going forward. And as we will be debt-free, we will also have much greater financial flexibility. And I think that was recently also, I think, witnessed by the revolving credit facility that we managed to establish with Nordea and Danske Bank. So we actually have -- beyond the cash we have, we have DKK 1 billion credit facility that we have access to should we need it. And being in that situation, much improved cash flow, no debt. That will also enable us to more aggressively look at M&A, as Paul said and also look at how to apply excess cash and consider returning back to the shareholders. Either through share buybacks, which most likely it would be short, medium term or eventually down the road dividends. So strong performance. We have some series obligations of DKK 2.6 billion, but we are in a good position to pay that back with a strong cash position we have and with the anticipated cash flow that will come into the business. But we have often got the question, why don't you pay back to the shareholders already now. And there, I must admit, I'm probably just say, I would say, a prudent humble CFO who likes to make sure the money is on the bank when they are due to be paid to GSK and Emergent. So being a little cautious, we have -- you can say we can see the light 1.5 years, it's all paid back, and it's our business. And maybe even more importantly, the manufacturing is under our control so that we can respond much faster to the changes in demand in the market. So these were actually the few slides that I had on the financials, and now I will invite my colleagues up here to the stage, so we will take another Q&A session.

Michael from Nordea. So with regards to the margin, Henrik, when you look at -- when you do the adjustment this -- if you did the adjustment this year, 27% to 30% EBITDA margin, you see a 15 to 20 percentage point improvement when you do the tech transfer fully of the GSK products. So I know, of course, the company guides for what we believe is realistic, but still -- so the margin guidance, when you bear that in mind, looks a bit on the conservative side unless you suddenly see that you will be sort of expanding your cost base again towards the end of this '26, '27 periods. Maybe a bit of more flavor on that, please?

You're right that there are upsides to our margin. I think we want to take a step at a time and demonstrate that we can actually deliver in the 25% to 30% range. I think we are also going to invest in some areas to secure more longer-term return. JC mentioned a couple of areas. We finally gained the scale in some markets so that we can expand geographically. So U.K., Canada will be the first ones. And of course, once you move into these markets, maybe they are not the highest profitable ones. So we are going to invest in some areas. We're also going to invest to drive the [ veterinary ] launch in the private market in the U.S. That will be at a different market than -- margin than the Mpox business that we have seen previously. So -- but yes, there could be upside, but I think we want to demonstrate that we can stable in the 25% to 30% band the next few years, first.

Thomas from Danske Bank. So a quick question on shareholder returns. Could that potentially happen already in 2025 or at least within the 2027 period? And then A question on working capital. I understand that part of the continued increase also reflects some better preparedness for Mpox. So my question is just -- is this sort of a reflection also of governments, maybe not taking the bait in order to build the stockpiles, so you feel that you internally need more preparedness? And maybe also could you address what would sort of the internal capacity of that Mpox preparedness be given you are building up a lot of inventories.

Yes. So the first 1 was on shareholder return. I think, first of all, we need to have paid all the money back to GSK and Emergent. So I think the first time it can be discussed, that is mid '25. But at that time, we have just had a cash outflow of DKK 2.6 billion. So I would assume we need to build up some -- a good cash position first again. And then, of course, at that point in time, as we have laid out in our capital allocation is, do we have good opportunities in terms of M&As? Or do we have an opportunity to distribute back to the shareholders. I want to say, we are no bank, so we're not going to sit on the money, obviously. And they will be returned if we don't see a good use of them. But I think it can't happen until we have paid back all our financial obligations to Emergent and GSK. And the other one, Thomas that was on the inventory. I think the major part of that inventory, you see buildup of DKK 1 billion approximately is actually to continue building on the TBE and rabies products. There's a little on MVA as well. I think we are producing a manufacturing plant where we are not letting the [ kettles ] stand idle basically. So if we can manufacture some MVA to inventory, we'll do it in bulk. When we had the outbreak in '22, I think we were so lucky that we had access to an inventory of bulk. So I think I'm pretty sure that in Russell's team, there will be no idle time in the manufacturing in '24.

We all were pretty surprised when we saw the COVID coming in. And I love to hear that the Bavarian Nordic is very proud telling where we are heading. And can we count that you are not getting new fancy ideas if something new is coming up, popping up suddenly in the coming 2 years? And are we going to consider Bavarian Nordic as a company very much outlined according to what you have told us today? Or are you ready to fight against a new kind of COVID whatever it's called when it comes up.

Maybe I'll answer the first part, but then maybe Laurence, you can take the pipeline. So I think COVID was a very unique situation. In that, we found ourselves going into a worldwide pandemic. And as a vaccine company, there were many actually in this room that we're also putting Bavarian Nordic under pressure to do something about COVID. And we entered that space with our eyes wide open, knowing that it was a risky area to get into, but it was the right thing to do from a public health perspective. And that's the reason we laid out that we really needed public funding as I should say, as nearly every COVID company received who developed successfully or unsuccessfully a COVID vaccine. So I think COVID aside, that's a bit of a unique situation. And I think if we found ourselves in another global pandemic, we would also be under pressure from the authorities and as I said, from investors to do something. But that's very unique. And hopefully, some of that is not going to happen too frequently. But in terms of what our pipeline ambitions are, I think I would divert that response to you, Laurence.

So in research, we are working on several platforms because we strongly believe that one platform doesn't fit all. You've seen other companies focusing, for example, on mRNA. We strongly believe that each infectious disease, because now we are fully focused on infectious disease, needs a different platform to address and stimulate the immune system according to the disease. So we are working on several platforms. We are also doing an exercise where we prioritize infectious disease based on medical need. But also on strategic fit to our portfolio and the feasibility of the development, you've seen the Chikungunya presentation. It's a surrogate that is used to license and this is making the development much easier. So we are really focusing and trying to prioritize infectious disease of the future. And we are -- we will make a decision to bring one of these assets in the clinic in the following 18 months.

[ Peter Verdult ], please. Three questions. Just on the Chikungunya slide, upon Emergent, there was 4 companies listed, we all know about [indiscernible] and Bavarian, but the other 2, are they many years behind or fast followers, that's question one. Number two, just for anyone of management. Just your assessment of the competitive landscape in Mpox. I think there's mRNA efforts and others. Just what are you seeing? What are you hearing? And then lastly, you've given us your guardrails of your financial targets and your commercial aspirations. If you really execute well, I mean, this is for Russell, just the current manufacturing network, I mean, how much -- I think you probably want to talk about what utilization is right now, but how much sort of room is there to sort of capacity to grow and support stronger-than-expected growth that you've laid out in terms of your targets? Basically, are we going to get -- something find out for you down the line, the big CapEx cycle, we need to build a new plant.

So on the competitive side of Chik and Mpox, Laurence, do you want to take that? And obviously, Russell, gear up for the last part.

So for Chikungunya, the other players are really far behind in Phase I, Phase II. There was -- Merck was also in the race, but they just give up. So there are really 2 stronger vaccine manufacturer that are advanced, and we are one of them. I think you've heard the potential differentiators and I don't know if you have any other questions about that. Now for Mpox, we know that the mRNA vaccine company, so Moderna and BioNTech are developing Mpox vaccines, but they are in Phase I. We also know that the regulatory pathway is different now, and the regulatory bar is quite high to have this vaccine license. Our vaccine has really shown very good real-world effectiveness. So there has been 13 different studies in various settings and countries all showing a very high efficacy from 60% to 90% after one dose and even higher after 2 doses. So I really believe that we have shown effectiveness and are the market leader to address Mpox.

So on the manufacturing capacity side of things, I think we have a lot of opportunities to actually drive manufacturing process productivity. And that should eliminate the need for large additional factory level investments to support the growth, at least in the medium term. We do want to continue to invest in our manufacturing footprint. I think there are a number of opportunities for us to internalize activities that we've currently got outsourced. That would further improve margin and flexibility from our manufacturing supply chain. So that's the type of investments that we're looking at, at least in the short, medium term.

Can you just briefly discuss real-world durability of your Mpox vaccine?

So durability, we don't have a lot of data yet because the outbreak was in 2022. So it's really something we are going to watch us and others in public health organizations are having these real-world effectiveness study. So we will gather more data as we go along. But for now, no breakthrough except that it's not 100% efficacious, but we don't see a waning of the efficacy so far.

Three questions. Firstly, back in the Q3 roadshow, you talked a lot about the upcoming potential orders with JYNNEOS. You had China, you had France, Henrik, you also discussed a bit that U.S. may order a few more JYNNEOS to replenish the stockpile. Can you just provide an update on that situation? And then a couple of financials. So just help us understand sort of how to bridge the inventory levels in the coming 2 years because I understand that at some point you reach a steady state. But right now, you're building up inventory, then it will go down, but how much just to help us in a model there. And then lastly, also at the Q3 roadshow, you sounded quite bullish on you being able to potentially hit the rabies sales target that would pay out $25 million to GSK. When I try to reconcile that with sort of your initial guidance for '23 on travel health, it seems like you are low boiling us a bit. So can you just try to reconcile those 2 comments 3 months ago to now?

So maybe on the JYNNEOS orders, J.C., do you want to take those?

Yes. No, it's true. We mentioned these things in Q3, and we're still working on them. But as you know, never takes exactly the amount of time that you initially thought. So on China, we've made some progress in consulting the authorities on the registerability of our dose, et cetera. This is a process that is ongoing, but the situation and the momentum around Mpox in China has cooled down a little bit, and they had other priorities that they've been working on. It doesn't mean that we've stopped, we continue. But that sense of urgency is not completely there anymore, but we still work on that possibility. France, I mentioned it, it's an ongoing discussion. It's also dealing with governments, sense of urgency and timing is not always the same as what we have in private organizations. But it's still there, and it's still something that we actively work on. So nothing really changed versus what we said apart maybe from timing, yes.

Still on the inventory part, yes, we're adding DKK 1 billion to the inventory this year. That is the last year, as I said before, we can start actually selling our own products. I think what you can expect, probably, just to give you a little guidance is stabilization in '25. And then you will start to see the impact of the lower COGS, 30% reduction in COGS. You cannot hold, translate it all to a 30% reduction in inventory, but maybe 20%. It depends on the portfolio of products on inventory. But then you should start to see the inventory level coming down. Everything of course, subject to the revenue level. The more we sell, the more safety inventory we will need as well. And you had 1 question more, Jesper.

Yes, that was just on the...

Yes, I think we -- it can still happen. But I think we also have to be honest that we are running very, very close, and we only have the products that we have as we are still -- they are all sourced from GSK, again showing how important it is to take control of the manufacturing. So it could happen. When you see our annual report coming out next week with all the details, you'll see we have not included it. We have never included it so far as a liable payment on our balance sheet. But we are running very close. And we will know within a few months, whether we hit that or not. If we do, then it's USD 25 million payment to GSK and if we do, we will be happy because it means that we're actually selling more than we had anticipated, which we already are with the level we are pushing just that line at the moment.

Just 2 short follow-ups. So can you talk a bit about the $100 million in Vivotif and Vaxchora. Just sort of how you're getting there to that estimate? It seems like you're always getting into GPOs, et cetera. So just more details on that. And maybe for Paul, on sort of the earlier stage R&D, what kind of area should we sort of be looking for with an infectious disease? Is it still niche travel? What are you looking for?

The potential on Vivotif and Vaxchora and this DKK 100 million that we said at peak, that will come from growth of the markets. As I said, the cholera market will grow. We see an expansion of the disease and we see more future demand because more people traveling to these countries with adventurous type of vacation. And we have to invest ourselves in raising the awareness, raising the awareness in HCP and in travelers, so that they really see the importance of being vaccinated. And on Vivotif, it's also a combination of awareness, but also, as I said, in the U.S., but also in other markets, one of which is the U.K., for example, where -- it's a significant business typhoid and Vivotif is almost nowhere. So with the investment that we're making in the U.K. we believe that we can take a fair share of that U.K. business as we will do in the U.S. with the ambition to grow our market share as well there because as I said, you ask anyone if you'd rather get a shot or an oral product and most people would go for the oral. These 2 vaccines are oral. So we do believe that there is absolutely an opportunity there to grow. So it's U.S., but it's also U.K. and other markets that we believe Vivotif has not been properly launched, positioned, supported, and there is a fair opportunity to gain there.

Yes. And on the early research, so clearly, we're focusing on infectious diseases. I think it's fair to say that the indications that we're working on and have been actually for the last year or 2 would be synergistic to how we're commercially set up today. So that would be travel or niche markets that we're looking at.

Just one for you, Paul. I'm going to have asked this before to you, but I mean you talked about being an R&D company, but the way that you presented today, it sounds like it's search and development, not R&D. And you're going to probably push back on me. But if I look at the numbers, $10 million on research, maybe a preclinical asset 18 months from now. Is that really -- is that really an R&D sort of model? Or is it fair that your assertion development model going forward?

Yes. So I think both statements are probably correct. I think where we are R&D-wise is that, obviously, we were investing a lot in those 3 Phase III programs. We knew that, that was going to cause a void in the pipeline, but we simply didn't have the opportunity to invest and bring things through. So the areas that we have been investing in R&D, it is probably still 18 months because Russell still needs to manufacture them to -- and that's no blame. They still needs to manufacture them to bring them through. So we are in this lag phase in terms of R&D. Our clear focus in the coming years is really on the commercial execution because that is going to drive the profitability that will allow us to invest in R&D. But as I said in my talk, that mixture of R&D that we're spending between life cycle management and new assets coming through, that will vary from time to time as obviously we bring assets through into the pipeline. But let's be clear, you cannot be one of the largest pure play vaccine companies without a healthy R&D and the ambition to bring products through while you're also looking after your commercial assets. So I think with the stage we're at, clearly, commercial execution in the coming years, but we have to bring pipeline assets through in a focused way.

Thomas from Danske. Just a few follow-ups. So JC, you mentioned earlier on your expansion of the global footprint. So I'm just wondering how should we think about the commercial collaboration with Valneva. Of course, there's some collision also with -- when you bought the EMS vaccine. So a bit of update there, please. And then on VEEV, you haven't really mentioned that one. So I'm just wondering if you're still planning for Phase II starts with BARDA here in 2024? And then just lastly, a follow-up on China, just on the Mpox. So is this primarily pricing related? Or how should we think about China? Maybe a little bit more color on that.

Do you want to take the 2 commercial questions. JC, I think that's...

So Valneva we've had a great partnership with them, and we were very pleased that we could join forces in the different territories that they had and we had in the different assets. Of course, with the acquisition of the Emergent portfolio and the Chik coming up launch, we have discussed with them on how to evolve that partnership, and it will come to an end. And that's why we're ramping up because U.K. and Canada territories, for example, were part of the partnership we had with Valneva. And later on also France, Benelux and Austria were also part of that partnership. So as you see that we are implementing ourselves and expanding our footprint this year and next year. Then you can imagine that by the end of 2026, we will be fully out of that partnership. China. So I think China -- so we have a partner there that we're working with. And there is -- the focus for now is to really understand where the authorities -- the Chinese authorities stand with regards to Mpox. So there is the regulatory approval aspect, but there is also the recommendation aspect by the authorities. So we keep on working on these 2 fronts. As I said, we didn't get a clear feedback yet on both these topics, but we keep focusing on it and working on it through the partner. So it's not so much BN resources that are involved in that task, even if there are some support from Laurence's team on the regulatory front. But I think the driver here will mostly be the evolution of the epidemiology in China. So there are cases, but less lately than in the previous months. And they have other priorities that they've seen a surge in some PCV situation.

And Laurence?

Yes. So we are working on starting the Phase II for VEEV. We already had interactions with the FDA on the study design and the overall development, and it's fully funded by the Department of Defense, as you know. So we are working diligently on that.

Sorry, Paul 1 more, I can't help myself. So in terms of the freeze dried JYNNEOS that's coming into the U.S. market, how much of a game changer is that number one? And then the reason I'm asking the question is I always ask this every year to you. You've got this stockpile of first-generation smallpox vaccine that doesn't -- didn't get used during Mpox last year. And the big sort of part at the end of the rainbow would be the U.S. deciding to, should we say, update that stockpile with potentially JYNNEOS. Is freeze-dried enough for a game change? Or is there anything that gives you confidence that, that scenario is on the table? Or is it just visual thinking?

Yes. so I mean, freeze-dried is an interesting 1 because after when it comes up and you explain that it's going to have a longer shelf life than the liquid, everyone assumes that that's killing the market. The actual opposite is true. What freeze-dried is doing is giving the opportunity for the U.S. government to stock pile more. Because if you have a limited shelf life, you can never get to the sort of levels that the U.S. government has previously communicated that they want. So freeze-dried is the game changer. It's the door that will open to larger stockpiling, and it's the only thing the U.S. government is interested in. Now I know we did some recent orders of liquid, but that was during the Mpox outbreak. All future orders, I believe, based on all the discussions that we're having will be on freeze-dried. And it does open the door. Now I'm not going to speculate whether that opens the door to replacing the entire stockpile but it certainly allows them to get to larger stockpiles that they haven't previously been able to do. Any other questions? Okay. Then thanks, everyone. I think I have a summary slide, which is always the -- so it's the most tricky 1 because it's just before lunch, and everyone is sick and tired of hearing this all talk. But I will try and sum up. And this is the slide that you've already seen. And I'm not going to spend too much about the journey we've come from. I started today talking about that. But quite frankly, there are a few companies that I know of that within 3 years have completely transformed the face of a company. We've gone from R&D, breakeven, loss-making, however, you want to describe it, to a highly profitable business. You've heard from my colleagues from JC and Russell, and you've got the details of the financials from Henrik, that really we have an attractive business split between Travel Health and Public Preparedness, where we really have a new level. We're a DKK 5 billion revenue company with profit margins, EBITDA margins at least between 25% and 30%. You've heard the details about our organic growth. Brand performance that's on the basis of rabies and TBE, we've sold more than anyone else. That's not a by mistake, that's by skill and talent and having great products. We're going to continue. Travel Health. Travel is rebounding, so that will allow us to expand. You've heard about we're expanding and intensifying our commercial operations into new areas. We're relaunching the unloved assets we purchased last year to give them a new lease of life. And with Chikungunya, I keep saying it, and I know I'll probably get a letter from Valneva, we have the best-in-class Chikungunya product. And honestly, with the talent that you've heard from JC and the team that we've built up, that will become the #1 brand. There are also short-term opportunities to solidify the profitability of this company. We have a lot of manufacturing capacity that we can optimize and use better. We can improve processes to tech transfer alone, you've heard of the profit margins or the gross margins that we can improve. So we've really now created a very attractive commercial business that's highly profitable, generating significant positive cash flows. You've heard that our ambition is to inject that cash back into the business. Our M&A, which has been so profitable for us in the 2 transactions we've done. We want to build on that to increase the top line and the profitability. But for the first time in our history, we're actually putting on the table paying back money to investors. And that just shows you how far we truly have come. I said at the beginning, I was born at the very Nordic and when I joined, we were 30 people, a little R&D lab in Martin to read no manufacturing. Today, we're 1,400 people with a global presence and a true commercial entity. That is a journey that I'm glad many of you who have been on with us, but the future for Bavarian Nordic looks extremely bright. And I hope today this little session that we've had has given you that clarity. Thus we're going to break now for lunch, I believe, and please use the opportunity to approach all of us here that are representing Bavarian Nordic. We're here to answer and interact with all of you to answer any questions that you have. I do hope it's been helpful. I personally think it's been a great session. But thank you for your attendance and your patience today. And as I said, I hope you'll be staying for the lunch. So thank you.