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Bavarian Nordic publishes its annual report 2008

Today Bavarian Nordic published the company's Annual Report 2008. The report is available on the company's website. Below is an extract of the most significant matters in the report as well as important events after the balance sheet date.
Bavarian Nordic's revenue for the year 2008 was DKK 209 million with a loss before tax of DKK 183 million, which was in line with the Company's latest guidance. At year-end 2008, net free cash and cash equivalents stood at DKK 796 million. For 2009, Bavarian Nordic expects revenue in the region of DKK 375 million, and a pre-tax loss in the region of DKK 225 million. Revenue will primarily be generated from the delivery of IMVAMUNE® to the United States under the RFP-3 contract and billing of the continuation of the RFP-2 contract and contracts for smallpox vaccines already entered with other countries.
For 2009, the Company will make extraordinarily large drawings on cash as a result of increased costs for scaling up production, the continuing build-up of stockpiles of vaccine, preparation of the Phase III study of PROSTVAC™ and increased costs of Phase II and the preparation of Phase III studies of IMVAMUNE®. It is expected that drawings on cash in the current year will be at the level of DKK 400 million. Accordingly, the Company's net free liquidity is expected to be at the level of DKK 400 million at the end of the year. The expectations regarding the liquidity are based on a dollar exchange rate of approx. 6 DKK/USD. Bavarian Nordic expects to strengthen its net free liquidity in 2010 and in the years ahead via the delivery of already entered IMVAMUNE®contracts. Thus, at the end of 2012, Bavarian Nordic's net free liquidity is expected to be in level with 2008.
2008 highlights

  • Strong progress in the pipeline with two new programmes added and two other programmes entered clinical trials:
    • PROSTVAC™, a late-stage vaccine candidate for the treatment of advanced prostate cancer, was acquired as part of the partnership that was entered with the National Cancer Institute. Very promising data were reported, showing prolonged survival combined with a favourable safety profile. Phase III studies expected to be initiated in 2010.
    • MVA-BN® Anthrax, a new preclinical programme for an anthrax vaccine, is expected to enter clinical trials in 2010.
    • MVA-BN® HIV multiantigen, in development as prophylactic and therapeutic vaccine against HIV, initiated clinical Phase I/II trials.
    • The company's MVA-BN® based prostate cancer vaccine also entered clinical Phase I/II trials.
  • A milestone payment of USD 25 million was received after submission of important IMVAMUNE® data.
  • The data that were generated from a larger Phase II study with IMVAMUNE® was submitted to the US health authorities for evaluation whether they can potentially support the use of IMVAMUNE® in a declared emergency.
  • More than 2,400 subjects have now been vaccinated with IMVAMUNE®
  • The first IMVAMUNE® contracts outside USA were signed with Canada and an Asian country.

Anders Hedegaard, President & CEO of Bavarian Nordic, said: "2008 was a successful year for Bavarian Nordic where all our primary goals were achieved. We implemented a new strategy, and this has already borne fruit. Our increased focus on cancer therapies which through to the partnership with the NCI led to the acquisition of PROSTVAC™ has strengthened our pipeline and we feel very optimistic about our cancer vaccines in the future. At the end of the year, we submitted the important safety data for IMVAMUNE® to the US health authorities and are now awaiting just one approval in order to initiate the delivery of the 20 million doses under the RFP-3 contract. In 2009 we will have a continued strong focus on fulfilling this contract as well as a strong focus on preparing for the Phase III studies that we expect to initiate with both IMVAMUNE® and PROSTVAC™ in 2010."
Strong foundation for future growth and earnings Despite the financial crisis and an economic slowdown, Bavarian Nordic recorded a positive development in 2008, and has laid a strong foundation for further value creation in 2009 and the years ahead. The expected positive development is based on the following elements:

  • Two vaccines moving into Phase III trials
  • Strong financial position
  • Profitable ongoing development and procurement contracts with a value of more than DKK 3.5 billion
  • Expectations to the US government's exercise of the contract option for additional development and procurement, worth more than DKK 6 billion
  • Ongoing contracts with countries outside USA
  • Partnership with the NCI, a world leading cancer research organisation
  • Strong patent portfolio
  • Pipeline with promising results
  • Future licensing agreement for PROSTVAC™
  • The world's only manufacturing facility dedicated to the commercial-scale production of MVA based vaccines

Financial Review 2008 A pre-tax loss of DKK 183 million (2007: loss of DKK 50 million) was recorded for the year, which was in line with our guidance in our announcement dated 16 December 2008.
Bavarian Nordic generated revenue of DKK 209 million in 2008 (2007: DKK 332 million). The revenue was primarily composed of revenue from the ongoing contracts with the US health authorities (development contracts RFP-1 and RFP-2) and a milestone payment under the RFP-3 contract. The lower revenue compared to 2007 is due to obtaining two milestone payments in 2007, each worth USD 25 million.
As at 31 December 2008, net free cash and cash equivalents stood at DKK 796 million (2007: DKK 834 million).
Equity was DKK 1,015 million at 31 December 2008 (2007: DKK 1,128 million).
Outlook for 2009 For 2009, Bavarian Nordic expects revenue in the region of DKK 375 million and a pre-tax loss in the region of DKK 225 million.
Revenue will primarily be generated from the supply of approximately 2 million doses of IMVAMUNE® to the United States under the RFP-3 contract and billing of the continuation of the RFP-2 contract and contracts for smallpox vaccines for other countries. The outlook for 2009 is solely based on revenue from existing contracts.
Research and development costs are expected to total approximately DKK 240 million in 2009 including further development of IMVAMUNE® under the RFP-3 contract, of which approximately DKK 40 million is expected to be capitalised in the balance sheet under intangible assets.
For 2009, the Company will make extraordinarily large drawings on cash as a result of increased costs for scaling up production, the continuing build-up of stockpiles of vaccine, preparation of the Phase III study of PROSTVAC™ and increased costs of Phase II and the preparation of Phase III studies of IMVAMUNE®. It is expected that drawings on cash in the current year will be at the level of DKK 400 million. Accordingly, the Company's net free liquidity is expected to be at the level of DKK 400 million at the end of the year. Bavarian Nordic expects to strengthen its net free liquidity in 2010 and in the years ahead via the delivery of already entered IMVAMUNE® contracts. Thus, at the end of 2012, Bavarian Nordic's net free liquidity is expected to be in level with 2008.
Important events after the balance sheet date

IMVAMUNE® - end-of-Phase II meeting held with the FDA After concluding the Phase II development of IMVAMUNE®, Bavarian Nordic held an end-of-Phase-II meeting with the US health authorities (FDA) in the beginning of 2009 in order to discuss the Phase III study design. The meeting was a success and there was an open and highly constructive discussion with the FDA. Based on the meeting, Phase III studies are expected to be initiated in 2010.
The outcome of the meeting has no impact on the delivery of vaccines to the Strategic National Stockpile (SNS) under the RFP-3 contract with the US government, which is still expected to be initiated in 2009.
PROSTVAC™ - further data presented In February 2009, the first detailed data on PROSTVAC™ were presented at the international cancer congress, 2009 Genitourinary Cancers Symposium in Orlando, Florida.
The data from three different studies once again confirms the excellent safety and efficacy results previously reported, and they support the further investigation of the vaccine in patients suffering from advanced prostate cancer. The data also indicates that PROSTVAC™ may be used in a larger patient group.
MVA-BN®-HER2 - data from ongoing studies reported. New studies to be initiated. In February 2009, Bavarian Nordic reported data from its Phase I/II studies with the therapeutic breast cancer vaccine candidate, MVA-BN®-HER2. The data showed that the study met its primary endpoint with regards to safety and by showing an immune response.
Oxford BioMedica - patent infringement suit continues The patent infringement suit that was filed against Oxford BioMedica in 2008 continues. In January 2009, Bavarian Nordic filed a new complaint after that the Judge, for procedural reasons, dismissed the first complaint. If the court eventually should decide to dismiss the suit this decision will bear no influence on the substance of the patent case. It only influences the timing of the start of the infringement case.
Changes in management Executive Vice President, Commercial Affairs, Nicolai Buhl Andersen has chosen to resign from his position in Bavarian Nordic as of 1 May 2009 to work at Coloplast where he also worked previously. Steen Vangsgaard has been appointed as his successor as from 27 March 2009. Steen Vangsgaard holds an MBA from London Business School. He previously held the position as Vice President Commercial Operations in Actavis A/S.
Bavarian Nordic awards warrants The Board of Directors in Bavarian Nordic A/S has today decided to award warrants to a member of executive management and employees in the Company and its subsidiaries. The Board decision is made in accordance with the shareholder authorisation for the Board of Directors adopted as Article 5f of the Articles of Association and the Company's guidelines regarding incentive programs. The award is made by the Board of Directors and exercise is limited by and governed by the Danish Act on Options for Employees (the Stock Option Act/aktieoptionsloven) regarding termination of employment prior to exercise of warrants.
A total of 25,000 warrants are awarded for subscription of up to 25,000 shares of a nominal value of DKK 10 at an exercise price of DKK 124 per share. The exercise price has been established on the basis of the average share price ("closing price") for the Company's share in a period of 15 business days prior to this day added a 15 % premium. However, the exercise price must at least be equal to the Company's average exchange-listed price today. In the event that the average exchange-listed price on the Company's shares today exceeds DKK 124 the exercise price shall be increased accordingly. If this becomes relevant the Company will make a separate announcement to NASDAQ OMX.
The warrants can be exercised wholly or partly in a period of 14 days commencing from the day of publication of the Company's Annual Report for 2011, from the day of publication of the Company's Half Yearly Interim Results for 2012, from the day of publication of the Company's Annual Report for 2012 and in a period of 14 days commencing from the day of publication of the Company's Half Yearly Interim Results for 2013.
Referring to the Danish Securities Act, Section 28a it is announced that Steen Vangsgaard, who is a member of executive management and obliged to notify the Company of transactions involving Bavarian Nordic securities is awarded 5,000 warrants under the abovementioned award of warrants.
The value of each warrant equals DKK 39 and is calculated on the Black-Scholes model with a risk-free interest rate of 2.5 per cent and on the historical volatility of the shares. The calculation is based on a market value of the share of DKK 103 per share.
The award of warrants will incur consequential amendments to the Articles of Association.
Important events after the balance sheet date