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Participant list
Anders Hedegaard, President and CEO, Bavarian Nordic
Michael Novod, Handelsbanken, Copenhagen
Mattias Häggblom, Danske Market Equities, Stockholm
Peter Sehested, SEB Copenhagen
Frank Andersen, Jyske Bank Silkeborg
This conference call followed a webcast presentation held by Anders Hedegaard, President & CEO of Bavarian Nordic in connection with the release of the Company’s 2007 results on Monday, 31 March 2008. The webcast can be accessed via www.bavarian-nordic.comuntil 1 July 2008.
Michael Novod, Handelsbanken
Anders, can you perhaps comment on, you said, M&A or in-licensing, in the range of what size do you actually look for? What is your upper limit? You have by the end of ’08 around 500 million kroner in cash, what are the, say, the targets that you’re looking for in terms of value, in terms of both companies and also in-licensing, if you’re looking into especially the, the cancer area, of course? And then, secondly, can you say anything on the progress on part of discussions especially for the infectious disease area? Are you talking to anyone? What is the status, what is the most likely outcome? Did you find a partner that you close the down projects or what do you have a thought there? And then, lastly, perhaps I missed it but can you say something about the progress on the options part of the, of the US contract? When should we learn more about this? Is there any type of deadline for the US Government to act on this?
Anders Hedegaard
Let me start with the answers to the questions about partnerships. Allow me to separate those answers into the three areas because we have partner strategies in each area. For bio-defence I think it’s just early days. We are just saying with bio-defence that we will look into the area. We do want to be broad in our portfolio so it’s very early days, and we just want to a signal here that IMVAMUNE was not enough, we wanted also an anthrax and let’s now look into whether there are other opportunities, but it’s very, very early days. There’s nothing just about to pop up, so that is pretty clear.
When it comes to cancer we are looking at scientific partnerships and we’re looking at potential in-licensing opportunities. We are also a little bit firmer here saying that before the year end we do expect to announce activities. I am not able to guide you further in that regard, but it is a question of looking into how can we expand our knowledge base in the area, and that’s what I can say in that regard. We have moved far here in order to say that we are looking into areas to expand and we are also putting a timeline on, and I need to leave it there.
When it comes to infectious diseases we were already, when we announced the HIV strategy in November, we did say that down the road partnerships would be relevant. So, we have initiated talks in that area but nothing is ready to be announced. We have also now added the portfolio slightly more with the childhood strategies and the Dengue and Japanese encephalitis. We are looking into that and I think my, certainly my personal experience tells me not to be too specific before we have something to tell. What we are doing here is saying this is what we will work on, but have in mind that in the infectious diseases we will do the initiation of the HIV multiantigen study. Parallel with that we will seek partnerships, so our deadline, if you will, is not before those data is available. I think that’s very important to have in mind, and that’s, of course, in order to ensure that we get the maximum value out of a very attractive portfolio we have around HIV.
With regard to the option part, we are constantly in dialogue with the US Government. The Government has an option to exercise. What we need to do is continue as we are doing, deliver according to their expectations. For every time we deliver according to expectation we increase the likelihood of them doing a broader partnership. I think it will take some time before they will exercise, or may exercise it. I cannot put further timing on. I just need to let you know and the rest of your colleagues that we do have this as a high priority. We are working on it from all different kind of angles in order to optimise our position.
Michael Novod, Handelsbanken
Okay, perfect, thank you very much.
Mattias Häggblom, Danske Market Equities
Two questions please; firstly, if we could maybe get some more background on the anthrax vaccine, whether or not that was based on internal efforts or if there’s been some kind of external networking as well, and whether or not the development plan will include a, so to say, mono vaccine initially and then a combination product will be something that you will discuss with the regulatories later on. What exactly will the development plan include all of that is early days. Secondly, on your expectations on deliveries, you say in the report that you expect deliveries to the US Government evenly distributed over the period of 2009 and 2011. I recall that the capacity was something around 40 million doses per year and if we then just talk about this 20 million doses initially, why would you need those three years? Is it you or is it the, sort of, demand from the US Government that leads you to state evenly distributed over those three years? Thank you.
Anders Hedegaard
Maybe I should take the last question first, the supply. What we have stated there is what we are in dialogue with the Americans about, and it’s also a question of gearing up the production in a smart way where you gradually build up expertise and capacity, because it’s obvious that if you man up to the full capacity from day 1, you also increase the risk profile. It is a biological production that sometimes a batch doesn’t come out as expected and you need to do it again, and therefore it makes sense, technically, to gradually build up your capacity and your expertise. It’s a new production, it’s a new way of producing a smallpox vaccine, so the risk profile clearly indicates this is the right thing to do, and the supply schedule has also been confirmed, the first discussions with the US, so that makes sense to do it like that in order, so that’s a combination of biological possibilities, technical possibilities and what makes sense. You of course also want to make sure that you also have spare capacity to supply when other orders come in. So, it’s a combined, but, you know, I hope that answers your question.
With regard to anthrax, the first question was a result of lobbying. I think that you really cannot say it like that. It is obvious that, with our technology and with our ability where we have a strong foothold into the bio-defence area, we have a production facility and we have all the contacts with the US and with the right people in other countries. Technically we have the right platform, we have the production and we have the customer relations, so it makes sense to move into a broader part of products. We do expect the US and other countries to be delighted with this news, but, you know, see that materialised in something more precise and concrete actions is too early for me to say. So, we do expect our partners to be pleased with this.
With the development plan, there it’s important to, first and foremost, the first product in anthrax will be a combined product, the reason being that the simple nature of MVA with an anthrax antigen incorporated, then it is a combined smallpox and anthrax vaccine. So, it’s a biological nature of,the product that it’s combined. Then, the anthrax market out there is faced with technical issues around stability, safety and also number of injections, and with an MVA technology like ours, we are able to address those things in our product. But a more specific product profile is too early to comment on, so this will be part of our development plan, to address those things.
Mattias Häggblom, Danske Market Equities
Okay, just a quick follow up on the supply question. I think previous management in certain presentations opted for some kind of contract manufacturing business model. Is it right to assume then that you, Anders, are not including that as part of your business model going forward?
Anders Hedegaard
The straight answer is correct. Contract manufacturing, per se, does not have a place in our strategy, but what has a place in our strategy is that we do want to leverage values on our IP position. We want to make sure that potential companies, moving into MVA, that they do not infringe our patent position, and if they do, that we enter into partnership deals with those, and there contract manufacturing could be part of it, but contract manufacturing, as a separate business unit, will not take place. It will be part of a strategic decision.
Mattias Häggblom, Danske Market Equities
Okay, brilliant. Thank you so much.
Peter Sehested, SEB
Shortly on the cancer strategy, if you may, firstly, will it be the () that you want to venture into and, secondly, as far as I can remember Bavarian Nordic has been more or less an MVA company apart from the next generation, so, I mean, what can you contribute in that area? You said that you want to expand your knowledge base within cancer, but what exactly is your knowledge base and so what will be the optimal, kind of, products for you to in-license given your so-called knowledge base?
Anders Hedegaard
I think that what we bring to the table of cancer is an experienced cancer team and especially experienced in cancer vaccine. So, let me be clear here, we’re talking about how do we expand our cancer vaccine approach. What we have besides an experienced team in cancer vaccines, we, of course, have the MVA technology and a production facility that allows us to play a dominant role when it comes to cancer vaccines with MVA, but it could also be vaccines that are not necessarily based on MVA. But, I think what we should do is to await our steps and considerations and, as we have outlined, we hope to be more specific later this year.
Peter Sehested, SEB
Okay. That’s it, thank you.
Frank Andersen, Jyske Bank
I have two questions. First of all, could you elaborate a little bit for us why you have delayed the initiation of Phase III for IMVAMUNE to 2009 from 2008 and, second, I don’t see any comments about Imvaboost. Is that put to rest or are there no expectations there?
Anders Hedegaard
What we have done now is that in order to start the Phase III of IMVAMUNE we need to have an end of Phase II meeting with FDA. As soon as we have had that meeting we can initiate our Phase III. Looking realistically at the timelines it is not expected to be before the beginning of 2009. We do expect to finalise the Phase II, that’s part of this Q4 milestone and then we have the end of Phase II meeting with FDA so it’s just a cautious and realistic view into the timelines. I hope that answered your question.
With regard to Imvaboost, it’s correct that it was not part of my presentation but in our annual report, just announced today, there is a paragraph about Imvaboost. Imvaboost was previously launched by the company by an immune stimulating agent, and that was based on the early data we had on the first HIV study where we saw a T-cell boost after the MVA-BN injection, and we also saw from the first preliminary results of the latest Nef study a confirmation of that, but when we did finalise the latest data we could not see a confirmation of this boost in the T-cell response, and then we added it into the strategy process and had to conclude that Imvaboost, as it was launched, does not have enough scientific proof to justify further investments. So, it’s stated in the annual report that there will not be further investments into Imvaboost.
Frank Andersen, Jyske Bank
Okay, thank you.
Michael Novod, Handelsbanken
I just wanted to know, do you have any information on any ongoing process in the US whether an anthrax programme or RFP is, is ongoing. We all know the phase of the programme when it was awarded to Vaxgen, what happened thereafter and, and what is the current status on anthrax in a US Government perspective?
Anders Hedegaard
The US Government do want to keep on with the focus on anthrax. It has a high priority for the US. There is now and then different RFP’s being issued by the US Government, among others one at the moment. To what extent we will join into those is not at this time for me to elaborate further on. It’s obvious that we will seek opportunities of how to co-finance our projects, but I cannot elaborate further on our potential participation in any RFP’s at the moment, but it is an ongoing issue and the Americans more or less have a view that they do need up to 75 million doses of a product available.
Michael Novod, Handelsbanken
But what should be the rationale of not bidding into the RFP’s? What should be the drawback of bidding for an RFP?
Anders Hedegaard
I’m not saying whether we are doing it or not doing it. I’m saying that at this stage our project is pre-clinical. It’s an early project. We have set out some commercial direction and technical direction and it’s now time for us to look into to the different opportunities and see what is strategically the right timing for us to step into, to any tender processes. I think it requires a detailed review and we are just initiating our activities in this field so it would be too early for me to, in a broader sense, elaborate on it, but it will of course have our utmost attention, what is going on in the area.
Michael Novod, Handelsbanken
Thanks.
CLOSING COMMENTS
Anders Hedegaard
I would just like to thank you for the many and very interesting questions. I hope you were satisfied with the answers. At least from here we think we can conclude so far with the result of 2007, that was according to expectations and we delivered according to what we promised in 2008 where we have been specific on what we can achieve, and then a strategy plan that clearly gives us a road map for building a profitable biotech company. So, with that I would just like to thank everybody for participation and attention to the company. Thank you.
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