Bavarian Nordic A/S ($BAVA)

Good day, and thank you for standing by. Welcome to the Bavarian Nordic 2025 Annual Report. [Operator Instructions] Please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, CEO, Paul Chaplin. Please go ahead.

Thank you, and welcome, everyone, to today's presentation, which is an update on our results for last year, 2025. Today, you'll hear from me a few slides from myself, and then I will hand over to Henrik Juuel, the CFO. So if you turn to Slide 4, we reported very strong results last year, DKK 6.2 billion in revenue with a 28% EBITDA margin. And this is the result of very strong performance of both arms of our commercial business on Travel Health, but also on public preparedness. On Travel Health, we saw a 30% growth last year, which is a very strong performance across the whole portfolio, but also related to the launch of our Chikungunya vaccine. On public preparedness, in '25, we were at the back end of an outbreak of mpox and we saw more than DKK 3.1 billion in revenues, which is approximately DKK 1 billion above the upper end of our normal base business. So as I said, very strong performance from both parts of our commercial business in '25. In addition, we sold the Priority Review Voucher valued at DKK 810 million. And if we included this in the EBITDA, this would bring the EBITDA to a 41% margin. Some events that have happened since -- in this year, which are of noteworthy is we've announced 2 agreements, one with Eurofarma for the distribution of our Chikungunya vaccine in Brazil. And earlier this week, we announced an extension or an expansion of our strategic partnership with the Serum Institute of India to produce our Chikungunya vaccine. And both of these are related to improving the access of Vimkunya in those regions. Today, we also announced the second tranche of our share buyback, and I'm sure Henrik will coming back to more of that in the future slides. And last week, we announced that after a long tenure at Bavarian Nordic, unfortunately, I think it's 27 years, I have decided for different reasons to step down later this year, but have agreed with the Board that I'll be staying until the end of the year or until a replacement has been found. The outlook for '26, Henrik will go into much more detail. But here, we're guiding for total revenue of DKK 5 billion to DKK 5.2 billion with an EBITDA margin of 25%. This is made up of another strong year of growth for Travel Health of DKK 3 billion and public preparedness of DKK 1.8 billion to DKK 2 billion, reflecting coming out of the public health crisis for mpox and reflecting a more normalized year for public preparedness. We turn to the next slide, talk a little bit more about the Travel Health. As I said, last year, we saw a 30% growth. This is primarily due to our rabies and TBE vaccines, where we saw a 34% and a 20% growth, respectively, during the year. We see an outstanding performance of rabies, and I'll come to some of the reasons for that in the next slide. But in the U.S., we saw a double-digit growth and an improvement in the market share up to 78%. In Germany, we saw a remarkable growth of 48% in the market, but also a 6% improvement in the market share to 97%. So strong performance in both of the 2 key markets for rabies. Similarly, for TBE, we saw 20% growth and an improvement in the market share in Germany from 28% to 31%. So really a very strong performance, brand performance for both products, but also a strong market growth in both areas. And moving forward, we still stand by the projection of a 10% to 12% annual growth in Travel Health, but of course, starting from a much higher standpoint than we had originally reported at the Capital Markets Day. If we go to the next slide, why are we seeing such strong growth in rabies? Well, in Europe, we've seen cases, fatal cases, unfortunately, of travelers returning from North Africa to the U.K., France and Spain. And these have obviously hit the media and raised the profile of the dangers of rabies. In the U.S., we're seeing -- or the CDC are tracking what looks like 15 likely outbreaks of rabies in 12 different regions of the U.S. And last year, we saw an increase in the number of deaths in the U.S., which is 6 deaths up until September of last year. So these outbreaks, the unfortunate deaths, which are higher than typically seen has really raised the profile of the importance of or the dangers of rabies, both in the U.S. but also in Europe. And this is one of the underlying reasons we're seeing a very strong growth in the market. And obviously, we are the market leader benefiting most from this increase. So if you turn to Slide 7, last year, we saw the first approvals of Vimkunya, our vaccine against chikungunya, both in the U.S. and in Europe. And that led to an outstanding launch performance in '25. We had launched in the U.S., I think, within 4 weeks of the approval, which is, I would say, a gold standard performance within the industry. And we launched in, I think, almost 14 countries by the end of the year. We exceeded the guidance in terms of revenues for the guidance of DKK 75 million. And in terms of volume, we saw a very successful launch, which is associated in terms of volume greater than some of the recent vaccine launches for travel vaccines. So very happy with the performance in '25. It is setting ourselves up for continued growth in '26, where we are guiding for DKK 250 million, which is a significant growth. We are seeing very strong demand in the markets that we've launched. And Vimkunya, our chikungunya vaccine will be a key driver of future growth within the Travel Health franchise in the coming years. If we turn to the next slide, Slide 8. In public preparedness, as I said, in '25, we were coming on the back end of the public health emergency that was declared by WHO and Africa CDC for the outbreak of mpox in Africa, and we saw stronger demand or as we've often referred to it as spike demand over our base business, seeing more than DKK 3.1 billion in revenues during '25. What we are anticipating in terms of '26 is a more normalized year, guiding for DKK 1.8 billion to DKK 2 billion. And of that, we've already secured DKK 1.4 billion of that revenue to various different contracts that we have in hand. So again, a very strong year is planned for '26. In addition to our activities, we also have a number of ongoing clinical studies which are supported in part by CEPI, both in children, in infants and also in pregnant women. And hopefully, these studies will enable the expansion of the label, which already includes adolescents and adults in certain territories to also include infants and children, which essentially will hopefully lead to an expansion of the label for the entire population. We move to the next slide. So on public preparedness, we often refer to our base business of being DKK 1.5 billion to DKK 2 billion, but we anticipate there will be spikes in that base business from time to time, either associated with outbreaks of mpox or as we've seen historically, one-off larger orders from governments. And on Slide 9, what we're showing you here is a map of the recent cases of mpox. And what we've seen is a 67% increase in the cases of mpox reported already in '26 in Europe. And if you just look at Spain, there are 53 cases in Spain since January '24, but almost 50% of that is in '26. So -- and in France, similarly, 10 cases since '24, but 6 of those are already within this year. And this indicates that mpox has not gone away, while it may not be part of the news flow for good reasons. there are still cases, and there does seem to be an uptake in the number of cases already this year. And of course, we are really the only supplier of an effective safe mpox vaccine globally. If we go to the next slide. In terms of pipeline, we have a number of different trials ongoing for our chikungunya vaccine. These are trials related to commitments that we made to the regulators as part of the approval. So we have an efficacy study ongoing and a study in children. The pediatric study will hopefully lead to a broadening of the indication. We also have a study for MDA, our smallpox, mpox vaccine, where we are moving to making a change in our manufacturing away from eggs into a proprietary cell line. This is a Phase II study that was initiated last year and will be completed or the top line data will be reported later this year. We have an ongoing Phase II study for equine encephalitis, which is a vaccine fully funded by DoD. And we have preclinical assets, both for Lyme disease and Epstein-Barr Virus, which for priority reasons, we now plan to move into the clinic next year. So a lot of ongoing activities in terms of the pipeline, many of which are associated with life cycle changes or supporting the commercial assets. And with that, I will hand over the presentation to Henrik Juuel.

Thank you very much, Paul. So let's start with an overview of the commercial performance for the fourth quarter of '25 and full year '25. So we had a very strong finish of the year with revenue -- total revenue of close to DKK 1.5 billion, comprised of nearly DKK 800 million on public preparedness and more than DKK 600 million from our Travel Health business. So worth noting here is really in particularly the Travel Health business which in the fourth quarter of last year delivered 61% growth. So looking at the full year, let's finish on public preparedness first. We delivered DKK 3.1 billion, exactly what we had guided for in November when we refined our guidance to DKK 3.1 billion. From that business, as Paul explained earlier, this is more than DKK 1 billion above the upper end of our normal base business within public preparedness. Travel Health ended close to DKK 3 billion, 30% up on a full year basis compared to '24 and driven by very strong performance by Rabipur, RabAvert and Encepur. And Paul already talked about the reasons behind that, basically driven by both strong market growth, but also very strong brand performance for both products. So nearly DKK 3 billion on Travel Health, which was above our latest guidance provided in November, where we said DKK 2.85 billion so driven by this very strong finish of the year. It's also worthwhile mentioning Vimkunya here. We delivered DKK 85 million in revenue for the full year against our latest guidance of DKK 75 million. So again, somewhat above the latest guidance and a very good start in a launch year. So DKK 6.2 billion and DKK 44 million total revenue for the full of '25. So let's turn to the next page and look at the full P&L again for the fourth quarter and full year of '25. So if we focus on the full year basis, the 9% growth and the DKK 6.2 billion in revenue we just talked about, production cost of nearly DKK 3.2 billion, leaving us with a gross margin of 49%, somewhat lower than what we saw for the first 9 months, driven by the low gross margin we saw in the fourth quarter, where we delivered 39% and which I think demands a little explanation here. So what we did during the month of December or Q4, we made a provision on our tick-borne encephalitis product Encepur based on the current discussions with the regulators, we got on our own manufactured version of the vaccine, we were -- got 12 months shelf life. With the product we acquired from GSK and that was produced by GSK, we have 36 months shelf life. And of course, we have an anticipation that we can increase the shelf life. We just need to provide the necessary documentation and data points to the authorities. So we've made a provision assuming that we could get the shelf life up to 18 months from the current 12 months. And based on that, you can do a simple calculation and see, okay, some of these vaccines, if we stay with 18 months, we will simply not be able to sell before they run out of shelf life. So a significant provision was made from that in Q4, but we managed to contain it within our current guidance due to the generally very good performance within our manufacturing area for the full year '25. And I would say with that, the -- if we manage to agree on a longer shelf life than 18 months, then obviously, in '25 -- sorry, this year in '26, we will have an upside when we reverse the provisions. On the other hand, if we do not get to 18%, but end with something lower, there's a small downside. We find the downside very unlikely, and it's more likely that we will have an upside during '26 as we anticipate to agree with the regulators to get a longer shelf life approved. So 49% is where we ended the full year on gross margin. R&D costs ended at DKK 780 million. Originally, when we guided for '25 back in February last year, we said we anticipated to spend approximately DKK 900 million. But we also late in last year, alluded to there might be upsides that we could make some savings for different reasons, one of them being that we are awaiting this efficacy trial on Vimkunya to be run in an outbreak session and that outbreak has not happened yet. So DKK 780 million, so we spent less than what we had originally guided. SG&A at DKK 1.275 billion spent last year. So quite a significant increase over '24, driven by deliberate decisions, first of all, to put money behind the launch of Vimkunya, but also to expand our network of sales entities in the process of taking the business back from our partner in Europe, Valneva. And then we also made a decision to expand our sales force in Germany to take advantage of the market growth on tick-borne encephalitis. So with total operating cost of DKK 2.55 billion, we get to an EBIT of DKK 1.8 billion. And that is when we include the income from the voucher, that's the DKK 810 million net income from the sale of the Priority Review Voucher. And then if we convert to EBITDA, which is the measure that we guide on, you will see at the bottom there, DKK 2.5 billion in EBITDA. And if we exclude the voucher, we're talking about DKK 1.7 billion in EBITDA. So very strong financial performance last year. And if we just quickly compare to our latest guidance, we said that we would land approximately at DKK 6 billion. We are delivering more than DKK 6.2 billion. So delivering better than guided on top line. And on the EBITDA margin before the voucher, we guided 26% and delivered 28%. And the difference here is really driven by the lower spend on R&D, but also on the very strong finish of the year, delivering additional revenue. So very strong performance. And I think it's -- if we compare to the original guidance provided in February of last year, we're ending exactly in the midpoint of that guidance, both on revenue but also on the EBITDA margin. If we then turn to the next slide, quickly on our cash flow and on our balance sheet here, strong cash flow, obviously driven by the profit from the business and again, with a good contribution from the sale of the Priority Review Voucher. Investment activities negatively impacted by the milestones we paid back to both Emergent BioSolutions, but also GSK from the acquisitions we did previously. Here, we spent DKK 1.1 billion, and the rest of the impact on investment activities really comes from placement of our cash into securities. Cash flow from financing activities was negative DKK 114 million, and that was impacted by the first tranche of the share buyback we did of DKK 150 million, partly offset by proceeds from a warrant exercise that happened last year. On the right side of this slide here, you see selected balance sheet items. And I would just point to the current cash balance. So cash and cash equivalents of DKK 3.3 billion by the end of December last year. At that time, we had not paid the last milestone to GSK, but that has happened here during Q1. So that means if you -- everything else equal, after that payment, we have approximately DKK 2.8 billion of cash available. We have also this morning announced the second tranche of our share buyback this time, DKK 200 million that we anticipate to complete within the next 1 to 2 months. So again, strong financial position with a good cash position and obviously no debt at the moment. Let's turn to the last slide, elaborating on our outlook for '26. This outlook is unchanged compared to when we announced our preliminary '25 numbers and our outlook as well. So we are for this year guiding revenue between DKK 5 billion and DKK 5.2 billion and an EBITDA margin of approximately 25%. So from Travel Health, we are anticipating approximately DKK 3 billion. And on the surface, that looks very much like what we delivered in '25. But remember here that from 1st of January this year, we do no longer have the partnership with Valneva, meaning that we are not going to record any sale of the Japanese encephalitis vaccine. We are also getting out of the agreement with Dynavax on the hepatitis B vaccine. That agreement will end in April. So if you subtract the partner business that is no longer in place, then actually this guidance here corresponds to a 10% growth. And if you look at it in constant exchange rates, we're actually looking at a guidance that corresponds to 14% growth in '26. So a growth rate in our Travel Health business fully in line with the midterm financial targets that we set at the Capital Markets Day back in '24. On public preparedness, as Paul says, right now, I think '26 looks to be the first normalized year in 5 years. We've had 4 years now impacted by various outbreaks, either in Africa, Europe or U.S. and '26 right now looks to be more of a normalized year. And here, we are guiding, you can, I would say, at the upper end of that normalized year, DKK 1.8 billion to DKK 2 billion in revenue and DKK 1.4 billion of that has been secured already in contracts. So with that, I will give the word back to the operator and ask for questions.

[Operator Instructions] We will now take our first question. This is from Romy O'Connor from Van Lanschot Kempen.

I have 2 questions. The first, maybe more of a clarifying question on the public preparedness outlook. So the base business is now guided for DKK 1.5 billion to DKK 2 billion until 2027. So I just want to know, especially with the increase in reported cases, can we really expect this normalization to happen, especially what we have seen since, I don't know, 2023? And then the second question is, in the annual report, you mentioned strong focus now on organic growth for the year. I just want to understand your capabilities for M&A for the next few months and what your current bandwidth is?

Yes. Thank you for the questions. So your first question related to public preparedness. I think in our guidance, which we have DKK 1.8 billion to DKK 2 billion, it reflects obviously contracts that we've already secured either last year or actually since we've announced the guidance of DKK 1.4 billion and contracts or opportunities that we are working on that we believe will come through, obviously, this year. It obviously doesn't include any so-called spike business that we may see if indeed some of the early indications point to that there may be something brewing in Europe or other territories. It does not include anything of that. So this is a more normalized business, although it's at the upper end of our normalized business, but it does not take into account if there is any additional outbreaks of mpox or if there is a larger order that we're not aware of coming in the next 12 months. The other question related to, I guess, our bandwidth and our appetite maybe on M&A. Our strategy, as you know, is on growth, obviously, to grow both parts of the commercial business, our Travel Health portfolio, but also public preparedness. But it also includes M&A as we obviously have a very successful track record of acquiring assets and turning them around. I would say that part of the strategy is still very much a focus for the management and the Board, and we are searching and looking for assets that we could acquire.

We'll now take our next question. And this is from Thomas Bowers from SEB.

A couple of questions here. So first, just in regards to the shelf life related provision you have. So how should we think about the potential impact or tailwind for '26? Or is this more potential for '27, given that you may have to take a little bit longer to get to that 36 months of shelf life? And maybe also, can you just remind me where are you currently with Rabipur on shelf life compared to the former Glaxo-produced material? And then on Vimkunya. Firstly, what is the exact FDA deadline for initiation of the outbreak trial in Thailand? And assuming that we don't see any outbreaks, what's the, you would say, the waived deadline or for the FDA here? And is the study definitely waived by the FDA if the outbreak happens? And then maybe just quickly also on Vimkunya, maybe the margin focus. So in order to improve margins, so of course, economies of scale here is important. But is there anything in the current setup also with the contract fill/finish that you're using that Vimkunya sort of in the mid to -- or near to midterm will actually be starting to become accretive for your current EBITDA margin level? Or do you need to make decisions, for example, with the fill/finish in order to improve margins significantly above the current level?

Thanks, Thomas. Let me take a stab at these answers and Henrik, please, you can jump in if I don't address it all. So your first question was on the shelf life. So let me take a step back. So in the tech transfer for Encepur, obviously, we had to transfer both the drug substance, the bulk manufacturing, but also the fill/finish. And in that plan, we knew that by the time we filed with the authorities, we would have limited shelf life. And obviously, everything to do with the tech transfer is demonstrating comparability to the product that you're transferring from so to the GSK material. So when we discussed with the authorities late last year, we had limited stability data of the products that we had manufactured at the end. And that led to this limited shelf life recommendation. But obviously, since then and every month, we get more and more data, more batches being manufactured. And we anticipate that, that shelf life will be extended as and when we get more data. Now that doesn't mean to get the 3-year shelf life, we need 3-year data, but because you can do projections. But to do projections, you need more robust number of data points. So we anticipate on the positive side that we will see shelf life extensions during this year and maybe we'll be back to the 36 months maybe in early next year, but that all depends on data. In terms of -- you also asked on Rabipur, there, we have the same shelf life for the BM material as the GSK material, and that just relates to how much data we had at the time when we filed. So I hope that answers those questions. Then on Chikungunya, you asked about the efficacy trial. This is a trial design that was agreed with the regulators as part of the approval process. And here, we have to enroll a number of subjects in a region that may have an outbreak. So it's a design where we enroll subjects in the anticipation that there will be an outbreak in that region. If there is no outbreak in that region, once we've enrolled all the subjects and collected the data, we'll end up with no efficacy data. That's just the way the trial is designed. And in that case, we would then have to open the dialogue again with the regulators on what is then the requirement with the regulators and some of that discussion is already ongoing. Whether that's an additional efficacy study or an effectiveness study, there are different possibilities and dialogues that we're having with the regulators. Then the other question related to margin improvement on Vimkunya. You're right, a big part of how we'll improve the margin on Vimkunya is related to volume. And obviously, when you launch a product and you know you're in this phase where you're raising awareness and all the rest of it, of course, it is an expensive vaccine to produce. So volume will cause a reduction in the margin in the years to come. In addition to that, we are making improvements to the process. We've already made improvements to the process, which we filed with the regulators, which we're hoping for approvals of later this year within the first half of this year. And we continue to look at making further improvements also in both the bulk manufacturing, but also the drug product manufacturing. And they will have margin improvements in the years to come. So Henrik, do you want to add anything?

No, I think that was a good summary. And I think it's continuous work on improving the COGS on Vimkunya. And it's quite normal that you start with a quite immature manufacturing process that more or less comes directly out of the laboratories and then you start working on process improvements. And as the filling part is done with the CMO, it's quite expensive in low volume. So we will drive better margins on Vimkunya through process improvements and volume benefits.

[Operator Instructions] We have a question coming through. And a question from Thomas Bowers, SEB.

That was quick for the follow-up. And I just wanted to talk a little bit about the governance. So what sort of profiles and competencies are you sort of prioritizing when you are looking to expand the Board? And maybe it's not a question for you, but maybe if you can give some color on the thoughts there.

Yes. I think you've answered your own question there, Thomas. I think that's a question maybe for the Board. There is a process ongoing right now to identify some new Board members. And I believe the plan is that those successful candidates will be announced as part of the announcement related to the general assembly.

Okay. Then a question that I hope you can answer then. So just in regards to the ACIP recommendation, which you got almost a year ago. So is there any news on the MMWR publication? And then secondly, just in terms of your prioritization on Lyme and EBV. So should we expect a material step-up in R&D spending from '27, given that you have postponed those into first half -- sorry, into '27? And is there sort of a reason beyond cost saving that you actually are delaying the projects?

Yes. I can answer these questions. So on the ACIP recommendation, there really isn't any news on the publication or the status of the MMWR. And therefore, we are continuing to talk to various different distributors on how to move forward. I think there is a recognition that the world is changing and that we can't simply just wait around for the MMWR. As you know, some suppliers really want to see that publication before they will start buying the vaccine. I think we're seeing movement now that people are recognizing that this may take longer than normal. So we have no real news on where that will be in terms of the publication. In terms of the pipeline assets, you're right, there's a balance here in prioritization and ensuring that we're delivering the EBITDA margins that we have stood by, the minimum 25%. We obviously, right now, have an R&D budget that is securing the activities, the regulatory requirements for chikungunya, but also the trial related to moving away from eggs to our proprietary cell line for MVA. As and when those activities come to an end, it will free up funds that we can then focus our activities into other R&D activities, whether that's Lyme, EBV, but we'll look at it. So really, what I'm trying to say is we are prioritizing our finances based on the promises that we've made to the market in terms of the EBITDA margin, and that will dictate when and how we can move some of the assets into the clinic. I would also say that while we've paused the clinical start of both Lyme and EBV, it does allow us to perform additional preclinical studies in both those areas that may be beneficial when we do decide to move into the clinic.

We will now take the next question. A question from Romy O'Connor, Van Lanschot Kempen.

I'm still here. Just one final question on Vimkunya. So guidance surpassed what we expected for 2025. I just want to maybe get some more color on what we can expect this year. Do we expect the DKK 250 million guidance as purely a base, especially in the light of competitor withdrawals from the market?

Yes. Maybe I can take that one. So yes, we are guiding a significant increase from last year where we ended with DKK 85 million, and now we're guiding DKK 250 million. And that is, of course, it's primarily coming from the countries where we already launched, where we expect to see a continued strong momentum and basically market growth where we are the only player more or less in most markets. But then we're also anticipating launching in more countries. We are awaiting approval in Switzerland. We are waiting an approval in Canada, and we still -- there are still a couple of countries in Europe where we do not have launched yet. So I think this is, as we see it, a typical launch sales profile when you launch into a market that is nonexisting, you will see quite a steep uptick in the beginning. And we are seeing a good demand in the market than DKK 250 million, I think we believe is doable, but also, of course, a very significant growth that we need to deliver upon.

And there are no further questions at this time. So I will now hand back to Paul Chaplin for closing remarks. Thank you.

Thanks, everyone, for joining and your interest and all the questions. Have a great day. Thank you.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Speakers, please stand by.