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

Good day, and thank you for standing by. Welcome to the Bavarian Nordic Q2 and Half Year Report for the 6 Months Period Ended 30th of June 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, CEO, Paul Chaplin. Please go ahead.

Thank you, and welcome, everyone, to our half year conference call. Today, we've announced our Q2 results. And before I go into them, and then hand over the call to Henrik Juuel, the CFO, obviously, we've announced tremendous results today driven by very strong growth across the whole commercial portfolio. And before I get into those numbers, I just want to say these sort of numbers don't happen by chance. It's an endorsement of our strategy, but more importantly, it's an endorsement of our employees and their hard work and dedication, but also our partners around the world and our healthcare professionals who work together with Bavarian Nordic to really ensure that we improve the access to our life-saving vaccines. So for the first half year, we have reported just over DKK 3 billion in revenue and an EBITDA margin of 35%. As I said, this really equates to a tremendous result. On Travel Health, we've seen a tremendous growth of 26% for the first 6 months compared to this time last year and actually 45% for the second quarter. And that's driven for the whole portfolio, but primarily driven by rabies and TBE, the first assets we acquired back in 2020, but also by a very successful launch for our chikungunya vaccine, Vimkunya. We have received additional approvals in both Switzerland and Canada for Vimkunya, and we have continued to launch in different countries and now have 15 countries where we've launched the product, and that launch plan will continue into the second half of this year. And I would say it's going faster than the original plan that we set out last year. Importantly, these numbers are also contributed by our Public Preparedness business, which is exceeding our base business of DKK 1.5 billion to DKK 2 billion, and we already have contracts worth DKK 2.3 billion in the books for this year. And this strong performance that we've seen in the first 6 months is leading to an upgrade in our guidance, which Henrik will talk more about in the coming slides, but essentially, we're confirming the approximate upper range of DKK 5.7 billion in revenue and an EBITDA margin of around 30%. We are also coming off the back end of a very strong cash position. And because of that, we have decided to launch another share buyback program up to DKK 750 million. So as I said, very, very strong financial numbers, driven by very strong commercial performance across the board, and that is translating into improved access for people who want to receive our life-saving vaccines. Turn to the next slide, Slide 6. So as I said, on Travel Health, we're really seeing a strong performance, 26% growth compared to this time last year, the first half of the year. And if we look at rabies, we are really seeing a strong growth, 40% growth for rabies. If we look at both U.S. and Germany, our key 2 markets, these are both above 20%, and we have very strong market share and maintaining that strong market share in both those key markets. But also there is outstanding growth in other markets, in Europe, with a 91% improvement compared to last year. And this, I have to say, comes down to strong brand performance and an endorsement of our strategy of turning these assets around. We are also obviously seeing continued outbreaks of rabies in the U.S., but I would say we're now moving into the fact that travelers are really much more aware of the devastating effect of rabies, and rabies is becoming one of the standard choices of Travel Health vaccines. On TBE, we're also seeing strong growth compared to this time last year, and we're seeing a slight improvement in our market share in the key market in Germany. And importantly, and we've talked about this in previous quarters, we have extended the shelf life now to 24 months based on the latest data, and we believe that will have improvements moving forward in terms of our sales. While I'm focusing on this slide to really only talk about rabies and TBE, we shouldn't forget that we are also seeing performance with [indiscernible], our other assets within the Travel Health portfolio. Turn to the next slide, Slide 7. On Vimkunya, we are still very much in the launch phase. And we, obviously, as I already mentioned in the first slide, we've seen additional approvals in both Switzerland, Canada. Switzerland, we've already launched, bringing the total number of countries where we currently launched to 15. And Canada, hopefully, we'll be launching later this year. We've also submitted a dossier with our partner, Eurofarma, in Brazil, which is the first stage, obviously, of bringing this product to endemic markets. We are in the guidance readjusting the Vimkunya sale guidance down to DKK 200 million for this year. And while we are seeing encouraging demand in Europe, particularly in Germany, with some other markets that we've launched, such as the U.K. In the U.S., we are seeing headwinds due to the lack of the publication of the ACIP recommendation. This we've talked about before, and unfortunately, while we were hoping that would be already published, it is delayed, and this is causing, as I said, slight headwinds in terms of convincing certain distributors and wholesalers to buy the product. But as I said, encouraging sales in Europe and other territories, and we really believe Vimkunya will be a future growth story as part of our Travel Health portfolio. Public Preparedness on the next slide. A number of years ago, we guided the market to say that our base business, the Public Preparedness, would be somewhere between DKK 1.5 billion to DKK 2 billion each and every year. And that was based on the 5 to 6 recurring customers or governments that we have around the world. And I must say, since we have guided on that range, we have exceeded the DKK 2 billion range every year. Now that is primarily because we've gone through a number of different mpox outbreaks, which have obviously impacted [indiscernible]. And this year, the original guidance was DKK 1.8 billion to DKK 2 billion, again, based on the customer base that we've built up. And we have recently announced a number of new contracts, one was with the U.S. government, another was with an undisclosed EU government. And that's meant that this year, we've already secured DKK 2.3 billion in contracts. And today, we're confirming the upper end of the range, the revised range of DKK 2.5 billion. And this really is an endorsement that we are seeing repeat business from the customer base. And I think really, we should be anticipating that our base business is more around the DKK 2 billion moving forward. We've also seen some regulatory improvements. The EU has approved the younger indication. So MVA is now approved for 2 years old, 2 years-plus. And this is important because children are the main targets in Africa where the disease is endemic and for future [indiscernible] orders. And of course, it now means that MVA in Europe and hopefully, we'll expand that to the U.S. and other territories. It will be approved for 2-plus. And there are ongoing studies looking at breast-feeding women and in younger children, that could potentially support an indication for the whole population. This is not only important for access, ensuring that everyone who needs this vaccine can get access to the vaccine, it also improves the indication of MVA and obviously makes it harder should there be any competition arising in the near term. If you go to the next slide, just a few words on the pipeline. We have a lot of life cycle management activities. These are activities that we invest in to support our commercial portfolio. A large part of the R&D budget for '26 is to support our Vimkunya, not only the approvals, but the regulatory requirements. So we have a number of ongoing studies in children, also an efficacy study, which is taking a significant part of the R&D budget. We also have an ongoing study where we're trying to improve the manufacturing process for our MVA smallpox mpox vaccine. This will actually read out preliminary results later this year. We have a study funded by DOD for equine encephalitis, which is currently in Phase I, and we have submitted a proposal for additional funding to move into Phase III, and those discussions are ongoing with DOD. And we have 2 other assets that are in preclinical. One is for Lyme and one is for EBV. And today, we're actually announcing that EBV, we'll actually be initiating the Phase I study later this year. We had originally said that, that study would start in '27, but we're bringing that forward. And on Lyme, we have further work on our Lyme candidate and have an improved candidate vaccine that will now go into clinical development in '28. Lastly, I want to spend just a couple of slides talking about Lyme, because we are actually incredibly excited about the new candidate that we've developed. So if you go to the next slide, Slide 10. A little bit about Lyme. The number of cases of Lyme disease are increasing both in the U.S. and Europe. It is a tick-borne disease caused by bacteria. And in the middle part of the slide, you can see the endemic regions in the U.S. and Europe. And this is caused by a bacteria that has 6 different strains. And we've been working on a Lyme vaccine for a number of years now, and we have refined our candidate. That will now protect based on preclinical data against the 6 main strains that we see in Europe and the U.S., and it's based on a new vaccine platform that was developed which we're referring to as the self-assembling antigen particle, or SAP platform. It's a protein-based nonviral particular vaccine that is designed specifically to stimulate very high immune responses in people, and high immune responses translates into better protection. So go to the next slide, Slide 11. If you look at the left-hand side, what we're looking at here is a positive control Lyme vaccine. This is based on a technology that's currently being developed in the clinic by others. And here, you can see what we're looking at is the ability of the vaccine to stimulate immune responses that kill the bacteria that cause Lyme. And with the positive control, there's no protection or activity after 2 vaccinations. And you can see, you actually need 3 vaccinations to see bacterial killing, and this is at a level that is protected. The second part of that graph is our vaccine candidate. And you can see that with 1 vaccination, you get bacterial kill at a level that is protective. That's equivalent to 3 vaccinations of the positive control. And if you give 2 vaccinations, you're now in a completely different league in terms of the immune responses in the bacterial killing. And then on the right-hand side, this is a mouse model where you challenge with infected ticks to the 3 different strains of Lyme. And with the negative control, there's no protection, you can [indiscernible] bacteria. And with 2 shots of that vaccine, you get complete protection against all the 3 different strains that are evaluated in this study. So we have a vaccine candidate that, in preclinical models, is better than the current vaccines that are being developed, whether they're based on RNA or based on other technologies. And that I'm showing you in this data, this data is actually highly durable, long-lasting, in the mouse model, which is something that's also a weakness of the current vaccines that are being developed. So we're extremely excited about our Lyme candidate. In animal models, it certainly looks better than what's being currently developed by others. We will spend most of next year manufacturing the material and having discussions with regulators and then move into the clinic in '28. And with that, I will hand over the presentation to Henrik Juuel.

Thank you very much, Paul. So let's turn to Slide #13, where we start looking into some of the numbers. First slide here is about the commercial performance for the second quarter and the first half year of this year. So second quarter, we delivered very strong revenue performance DKK 2.034 billion, more or less equally split between our Public Preparedness business and our Travel Health business, and that took us to nearly DKK 3.1 billion for the first 6 months. So very strong performance during the second quarter. And if we just talk about the individual business next year, Public Preparedness first, DKK 975 million for the quarter, very, very strong performance. Supply to different customers but with the U.S. government and here, the EU, our EU partner, being the biggest receivers of product in this quarter here. That takes us on a half year basis to nearly DKK 1.3 billion, and we are well on track to deliver on the DKK 2.3 billion that we have secured for the full year. And confident we can deliver on our upgraded guidance of DKK 2.5 billion for the Public Preparedness business. If we then turn to our Travel Health business, very, very strong performance. We delivered 45% growth in the second quarter and 26% for the first half year. With these products, one have to be a little careful looking at individual quarters, so I prefer talking to the half year in this case here as products are, some of them and to a varying degree, they are seasonal, but the seasonal pattern does not always remain the same year-over-year. If we start with our rabies business, very, very strong growth of 40% after 6 months, and I think mainly driven by significant increased demand both in Europe and in U.S. driven by these outbreaks, we have seen impacts from rabies, both in Europe but also from travelers coming back to Europe. So very strong demand. U.S. and Germany basically grew by 20-plus percent. And at the same time, we managed to maintain or gain market share in this business here. So a very strong performance. Our Encepur business, we delivered 17% growth, which we are very pleased with. We came out of the first quarter actually with negative growth, but that was based on a very strong first quarter last year. So we are very pleased with the 17% growth in our TBE business. As some of you will recall from our last earnings call, we have been struggling a little with shorter [indiscernible] risk for shelf life on our TBE product, and that has meant that we had to work, I think, very intensively with the wholesalers and distributors in the market. And we are very happy that we can sit here today and our commercial team have done a fantastic job in maintaining our market share during this position and growing the business, the revenue by 17%. And as we have said previously, the current 24 months shelf life is an improvement over the initial 18 months we got at the end of last year, and we are very confident that we will work our way back to the 36 months shelf life, most likely during next year. So very strong performance by the 2 products we acquired from GSK back in 2020. Vimkunya, we delivered significant growth, obviously, on an easy background as we only launched April last year, DKK 78 million for the first 6 months. And as Paul already alluded to, we have taken down our assumption for Vimkunya, and we are now expecting approximately DKK 200 million in revenue and not the DKK 250 million we guided for previously. And this is all explained by the short-term headwinds that we see in the U.S. due to the lack of the MMWR publication. Other markets are doing as expected or even better. Vivotif also showing strong growth. That's our typhoid vaccine, 19% growth. And this is an area where we have started to see some of the measures we took by employing an external sales force to help us drive demand in new channels has worked out, and we are starting to see this product actually growing in the market. So all in all, DKK 3.92 billion revenue delivered for the first half year. So very strong and satisfactory results on the top line. So let's turn to the next page, which is our profit and loss. And here, looking at the quarter, again, DKK 2 billion in revenue, a very strong gross margin of 61%, driven by a favorable product mix, half Public Preparedness, half Travel Health, a lot in the high-priced markets. So that is impacting our gross margin positively. But on top of that, we have also seen continued very strong performance by our operations team, meaning high success rates in our production, fewer batches being scrapped, et cetera. So very strong performance leading to a high gross margin. Total operating costs, so that's DKK 482 million. It's lower than what we saw last year for the quarter. But for the half year, it's spot on at the same level we saw in previous years. Lower R&D costs simply due to the timing, primarily of our chikungunya trials. And then we see the SG&A costs being higher, mainly explained by some of the expansions we have done within the commercial area, taking business back from our previous partner and building up our presence in new markets. But on a total level, total operating costs unchanged. So for the quarter, turning down to the bottom line EBITDA margin of 45%, very, very strong profit margin, far beyond, we can say, our full year expectations, but of course, also driven, first of all, by the high level of revenue, which is diluting the OpEx impact and the strong gross margins as well. So 45% and on a half year basis, taking us also to a very strong EBITDA margin of 35%. So let's turn to the next slide, where I just want to talk a little about our cash flow and our cash position. So if we first look at the cash flow from operating activities first half year, negative by approximately DKK 400 million. But here, you have to remember that, that is impacted by the very final milestone we paid to GSK early in the year, DKK 70 million. And you will see that in the second quarter, we had none of that, and we are generating in that quarter alone positive cash flow from operating activities of DKK 351 million. I just want to comment also on the cash flow from financing activities, where you will see for the half year, negative by DKK 464 million. And please remember that, that includes our share buyback where the majority of the previous DKK 500 million program was executed during the first half year. So for the quarter, net positive cash flow for the period, negative for the first half year, but I have mentioned the 2 big reasons for that. The underlying business is generating good nice cash flow. And that's cash flow leads us to a very strong cash position currently of DKK 2.3 billion, allowing us to launch another share buyback program of up to DKK 750 million while still maintaining our financial flexibility to pursue our M&A strategy. The next slide is elaborating a little further on this. And in principle, nothing new on this one. Just wanted to remind everyone about our capital allocation policy. First priority is, of course, that we invest in our current business and our pipeline in all the organic growth that we can secure. Secondly, we work to generate an expanded financial flexibility. And that second element used to include prioritization of payments back to GSK and Emergent BioSolutions. They are all behind us now, we owe nothing to the sellers of these products. And then thirdly, the cash we might have at that point in time, we are prioritizing for synergistic M&A opportunities and returning money to shareholders. So we will, at any given time, we will try to balance our cash position with the expected cash flow generation in the future, taking the maturity of our business development pipeline into consideration. And based on all of that, we will evaluate how much cash we need. And at the moment, that balance has led us to initiating the DKK 750 million share buyback program. And our target with all of these initiatives is really to optimize our capital structure, including a suitable leverage of the company in the future. Let's turn to my final slide here, which is just to talk about the outlook. So based on our performance year-to-date, we are upgrading our financial expectations to the year. Our previous guidance at DKK 5.5 billion to DKK 5.7 billion. But with the current order book on our Public Preparedness business, we are upgrading that to approximately DKK 2.5 billion, which gives a total revenue of DKK 5.7 billion. We keep the Travel Health guidance for the full year unchanged at approximately DKK 3 billion. And then our EBITDA margin, we have increased from approximately 28% to expected approximately 30%, driven, of course, by the upgrade on our expectations to the top line, but also by the very strong first 6 months and the very strong gross margin we have seen first half of the year. So with that, I will give the word back to the operator and ask to open up for questions.

[Operator Instructions] We will now take our first question from the line of Thomas Bowers from SEB.

Just kicking off with the Travel Health. So you stick to the around DKK 3 billion in your full year guidance. So implied second half year-over-year growth is now minus 20%, or you can say minus 10% when you adjust for the partner sales. So my question is, is this mainly lack of transparency? Or are you maybe facing some capacity issues here in the second half? Then second question on the EBITDA margin, you lift that by 2 percentage points since the last upgrade and only a very small JYNNEOS lift here in the numbers. So does this actually imply that you see a structurally better gross margin improvement from the tech transfer now? And if I may add to that. So if we were to assume that JYNNEOS were around those sort of midpoint of your long-term target of DKK 1.7 billion, DKK 1.8 billion, how should we think about implied EBITDA margin for 2026? And then just finally, just in regards to the share buyback. You plan to start here in Q3, but can you maybe just elaborate a little bit on when you expect the program to be completed?

Do you want to take them?

Yes. Thomas, thanks for the question. So on Travel Health, I think what we need to remember there is that, as I also said in my presentation here, that these products are, to vary degree, seasonal. And the seasons are not necessarily repeated year-over-year. I think, let's take TBE as an example. If you look at TBE last year, 45% of the revenue of first half came in Q1. This year, we actually saw, sorry, in the, of Q2, 45% of the revenue first half year came in Q2. This time, it's 60%, more than 60%. So there is often a shift between the quarters over the years. I think what we can say on our Travel Health is that we are extremely pleased with the current performance. And I think we have taken it as far as saying that if the current trend continues, we will exceed the DKK 3 billion, but we feel it's prudent to see how the third quarter pans out before we do anything further on the Travel Health business. We should also remember here that we have supply products, TBE products, our product into the market with relatively low shelf life, and there is a risk that some of that will come back. We don't know that until they actually expire in the autumn. So there's a slight risk there, nothing to be concerned about, but something we are managing. But it's, of course, all baked into our guidance for the full year. But of course, if current trend continues, we will exceed the DKK 3 billion. On the EBITDA margin is what we are seeing now a structural improvement. I think that is a little too early to say. And I think here, we need to remember that we are now running TBE and rabies in campaign. We have been running our TBE manufacturing the first half of this year. And we, or our team, they have been extremely efficient. The success rate has been higher than what we anticipated, which means that you can actually absorb more costs into your production. Now we are shifting to rabies for the second half. So we can't just copy what we saw in Q1 and pace that into the second half of this year. I think what we can hope for is that the whole concept of campaign manufacturing is paying off so that you manufacture the same product for a longer period of time, but that is too early to say. And that's why I don't think we can say yet that the good performance is a structural sustainable improvement. And on the share buyback, when are we going to launch that? I think it can be, it can happen any time basically. We have no reason to postpone this. There are just some practical things, and we need to agree with the Board the exact date, et cetera, and with the banks and everything, but that is going to happen very soon.

Yes. Sorry, it was, yes, I can see it's Q3, but I was asking when it can be completed. Is that just going to be before the AGM?

Yes. I think that's a good question. It really depends, of course, under the safe harbor rules, there's a limit to how much you can actually buy in the market. The last one, DKK 500 million took approximately 6 months to complete. We have seen today there's extremely good liquidity. Hopefully, the recent news will create some more liquidity in this year, but I would say around 6 months, 6, 7 months, it will probably take. So we anticipate that it will be completed before our AGM. And as we have announced, we are intending to cancel those shares, but that will require an AGM authorization as well. So the timing would fit pretty well with that.

We will now take our next question from the line of Hakon Hemme from Danske Bank.

First, can you provide some color on the TBE market? You grew 17% and your competitor, Ticovac, grew with similar rates in H1, while you state that the German market only grew 3%. So what other countries are driving this market growth? And on Vimkunya, can you, your revenue declined in Q2 compared to Q1 during this launch phase. So is the downgrade of the full year sales only due to the delay of the CDC ACIP recommendation? Or have any of your launches in Europe not delivered as expected?

Henrik, can you take TBE?

Yes. Yes. So let me, thanks, Hakon, for the question here. I think on TBE, you're right, when you look at the market growth and our market share, we're growing faster than the market, significantly faster with the 17%. And then you would argue, okay, then you should be gaining more share. We are gaining share in the market. There are also other markets in Germany where we don't have all the market details, they're also contributing. And one thing to be aware of with this market data is that it's not perfect. It gives a good indication about in which direction the market is moving. It's typically lacking in terms of time compared to the revenue we are recognizing. Remember, our revenue, we recognize that when we sell into the wholesalers. So that means probably the last couple of months in the second quarter, it's not even included in the market, because it's sitting with whole data still. And the in-market data is based on really consumption, pharmacies and other dispensing units. So I think we should be a little careful looking too much of that. But of course, they give a good idea about the trend is the market growing, to what extent approximately and how the market is doing. And then there was one on Vimkunya. Paul, do you want to take that one?

Yes. So on Vimkunya, I mean there's always a few dynamics when you're in launch phase, but essentially, we are seeing good demand in the EU, where we've launched. Germany was one of the first countries where we launched in the EU, and we're seeing strong growth and other countries where we're also launching. So really the change in the guidance is primarily due to the headwinds that we're seeing in the U.S. So I am confirming it is mainly the U.S. where we're seeing the headwinds due to the lack of publication. And while we have been successful in encouraging some distributors and wholesalers to purchase, we haven't been successful with everyone where they have very strict policies that they are awaiting the publication.

We will now take the next question from the line of Romy O'Connor from Kempen.

I have 3 questions. The first on Rabipur. So we saw quite some strong growth this quarter. And while you highlight the underlying market growth in the U.S. and Germany, can you help us bridge that difference? So how much is coming from underlying volumes or geographic contributions, et cetera? And thinking about the next half of this year, how much of the underlying rabies market growth do you consider is driven by the structural demand? Or do you think it's something that we can expect to normalize? And lastly, on the share buyback announced, how can we now interpret this in the context of continued M&A ambitions?