Bavarian Nordic A/S – Interim Report for the period 1 January to 30 June 2010
31 August 2010
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In the first half of 2010 Bavarian Nordic generated revenue
of DKK 175 million and recorded a loss before tax of DKK 179
million. Revenue is primarily derived from the deliveries of
IMVAMUNE® to the U.S. Strategic National Stockpile under the
RFP-3 contract. As of 30 June 2010 the Group's cash preparedness
was DKK 219 million. After close of the period, the cash
preparedness was significantly strengthened and amounts to approx.
DKK 460 million by the reporting date.
Bavarian Nordic's financial expectations for the full year
2010 were primarily based on the delivery of 4-5 million doses of
IMVAMUNE® to the U.S. In order to achieve this, the company
began upscaling of the production capacity upon the delivery
allowance from the FDA earlier this year. However, technical issues
have caused a temporary postponement in the upscaling, thereby
delaying the planned production volume in 2010. As a consequence,
Bavarian Nordic will now deliver 2 million doses in 2010.
Delivery of the remaining 18 million doses under the RFP-3
contract will occur from 2011 through 2013. The source of the
problem has been identified and Bavarian Nordic has taken
corrective actions to address the issues, whereupon the upscaling
will be resumed.
As a consequence, the expectations for the financial result
for the full year 2010 have been adjusted. Expected revenues are
lowered from DKK 475 million to the level of DKK 325 million, and
the result before tax is lowered from a loss of DKK 250 million to
a loss in the level of DKK 450 million. The cash
preparedness at year-end is expected to be in the level of DKK 250
million, which is in line with the previously guided range of DKK
225 million to DKK 275 million.
Highlights from the period
- PROSTVAC™ regulatory path outlined, Fast Track
granted by the FDA
During first half of 2010, the regulatory path for
PROSTVAC™ was outlined as Bavarian Nordic in March concluded
the Scientific Advice from the European Medicines Agency and the
End of Phase II meeting with the FDA. In May, PROSTVAC™ was
granted Fast Track status by the FDA.
- IMVAMUNE® deliveries to the U.S. Strategic National
Stockpile initiated
In May, Bavarian Nordic initiated the delivery of
IMVAMUNE® smallpox vaccine to the U.S. Strategic National
Stockpile. Under the RFP-3 contract with BARDA, Bavarian Nordic
will deliver 20 million doses of IMVAMUNE®. To date, more than
1.4 million doses have been delivered, of which approximately 1.2
million doses were delivered and invoiced as of 30 June
2010.
Important events after the period
- PROSTVAC™ Phase III clinical trial protocol
submitted to the Special Protocol Assessment process
As planned, Bavarian Nordic has submitted the
PROSTVAC™ Phase III clinical trial protocol to the Special
Protocol Assessment (SPA) process with the FDA. Feedback is
expected in second half of 2010.
- The PROSTVAC™ production process is in place and
technology transfer is being completed
Release of clinical trial material for the Phase III study
is expected to occur during 2011, and this does not change the
overall clinical trial and regulatory filing timeline.
- Bavarian Nordic has received milestone payment of USD
25 million under the RFP-3 contract
The last milestone payment under the RFP-3 contract was
received earlier than previously expected after completion of
certain important milestones related to the development and
deliveries of IMVAMUNE®. The payment of USD 25 million will be
recognised as revenue in the financial statements upon completion
of the contract.
- Cash preparedness significantly strengthened
Along with the milestone payment of USD 25 million,
Bavarian Nordic's cash preparedness was further strengthened with
the obtaining of a credit facility of DKK 100 million.
Additionally, a financial covenant has been eliminated, adding
further to the company's financial flexibility.
Anders Hedegaard, President & CEO commented on the interim
report: "The delivery allowance from the FDA and the subsequent
initiation of deliveries of IMVAMUNE® smallpox vaccine to the
U.S. Strategic National Stockpile under the contract with
Biomedical Advanced Research and Development Authority (BARDA) in
first half of 2010 represents a landmark event for Bavarian Nordic.
The initiation of deliveries along with solid progress in the
development of IMVAMUNE® triggered the next milestone payment
of USD 25 million under the contract, which was received earlier
than expected.
We also made important advancements in the preparations for
Phase III studies with PROSTVAC™, most recently with the
submission of the clinical trial protocol to the Special Protocol
Assessment process with the FDA. We see a still increasing interest
for PROSTVAC™ amongst healthcare professionals, patients,
investors and potential partners and we are working dedicated
towards licensing of PROSTVAC™, which holds the potential to
fulfil an unmet medical need for patients, who are currently left
with very limited treatment options."
Conference call
The company will host a conference call today, Tuesday,
August 31 at 2. p. m. CET. President and CEO, Anders Hedegaard will
present the interim results followed by a Q&A session. Also
attending are Reiner Laus, Executive Vice President & CEO of BN
ImmunoTherapeutics, Ole Larsen, Executive Vice President & CFO
and Rolf Sass Sørensen, Vice President Investor Relations
& Communications. Dial-in numbers for the conference call are:
Denmark: +45 3271 4607, UK: +44 (0)20 7162 0077, US: +1 334 323
6201. The accompanying presentation is available on the company's
website: www.bavarian-nordic.com.
Management's
review
Pipeline
PIPELINE
|
Programme
|
Status
|
Next milestone
|
Cancer
|
PROSTVAC™
|
Phase II
|
Phase III (2011)
|
Breast Cancer
(MVA-BN®-HER2)
|
Phase I/II
|
Complete enrolment and initial immune
data (2011)
|
Prostate Cancer (MVA-BN®
PRO)
|
Phase I/II
|
Complete treatment period (2010), final
data (2011)
|
Biodefence
|
Smallpox (IMVAMUNE®)
|
Phase II
|
Initiate Phase III (2010/2011)
|
Anthrax
|
Preclinical
|
Phase I (2011)
|
Infectious
diseases
|
HIV multiantigen
|
Phase I/II
|
Identify partner for full Phase II
|
Measles and RSV
|
Phase I
|
Phase I data (H2, 2010)
|
Cancer
PROSTVAC™ - prostate cancer vaccine
candidate
Regulatory pathway outlined. SPA submitted to the
FDA
During first half of 2010, the regulatory path for
PROSTVAC™ was outlined as Bavarian Nordic in March concluded
the Scientific Advice from the European Medicines Agency and the
end of Phase II meeting with the FDA for the PROSTVAC™
programme. Both agencies expressed general agreement with the
proposed Phase cllinical programme of PROSTVAC™. Based
on the consolidated feedback Bavarian Nordic has assembled a
clinical trial protocol which was recently submitted to the Special
Protocol Assessment (SPA) process with the FDA. Feedback from FDA
is expected in second half of 2010.
Bavarian Nordic is planning to achieve marketing approval
for PROSTVAC™ via a single global, strongly powered clinical
trial that is expected to enrol about 1,200 patients. The study
will be placebo-controlled and enrol patients with asymptomatic or
minimally symptomatic, metastatic castration-resistant prostate
cancer (mCRPC).
PROSTVAC™ granted Fast Track status
In May PROSTVAC™ was granted Fast Track designation by
the FDA for its proposed use in the treatment of men with
asymptomatic or minimally symptomatic mCRPC.
The FDA determined that PROSTVAC™ meets the criteria for
Fast Track designation as it has demonstrated a potential survival
benefit and an excellent safety profile in the intended patient
population of men with asymptomatic or minimally symptomatic mCRPC.
The potential of PROSTVAC™ to provide a survival benefit with
minimal toxicity was based on results from the double-blind,
randomized, placebo controlled Phase II trial in which 122 men with
mCRPC were enrolled and evaluated.
The Fast Track programme of the FDA is designed to facilitate
the development and expedite the review of new drugs that are
intended to treat serious or life-threatening conditions and that
demonstrate the potential to address unmet medical needs. Under
Fast Track, Bavarian Nordic would also be eligible to submit a
biologics license application (BLA) on a rolling basis. This
permits the FDA to review sections of the BLA in advance of
receiving the complete submission.
Phase III preparations
In preparation of phase III, Bavarian Nordic has signed an
agreement with the company Pharmaceutical Product Development, Inc.
(PPD), a leading global contract research organization for the
management of the PROSTVAC™ Phase III study. Preparations for
the trial are ongoing. Clinical trial centres are now being
selected with first patients expected to be enrolled following
final regulatory approvals and product availability during 2011.
Key regulatory elements such as the SPA are expected to be
finalised during 2010 whereas the final release of clinical trial
material for the Phase III study is expected to occur during 2011.
The overall clinical trial and regulatory filing timeline remains
unchanged.
The production process is in place and the transfer of
production technology is about to be finalised. The manufacturing
will be based on the same technology used for production of
clinical trial material for the Phase I and Phase II trials.
Partner for Phase III development and
commercialisation
Bavarian Nordic is in ongoing discussions with a number of
potential licensing partners for PROSTVAC™ and these are
progressing according to plan.
Ongoing PROSTVAC™ studies
To date PROSTVAC™ has been tested on more than 570
patients in 18 clinical studies 13 of which have been completed,
and 5, which are still in progress. The ongoing studies, all of
which are conducted and sponsored by the National Cancer Institute,
include:
- A Phase II study comparing the radioactive drug samarium with
or without PROSTVAC™ therapy in 70 patients with metastatic
prostate cancer. Clinical endpoint: 4 month progression free
survival
Enrolment is ongoing, with expected results in 2012.
- A Phase II study comparing antihormone therapy (flutamide) with
or without PROSTVAC™ therapy in 70 patients with
non-metastatic prostate cancer. Clinical endpoint: time to
progression. Enrolment is ongoing, with expected results in
2012.
- A Phase II study investigating PROSTVAC™ in 50 patients
with PSA progress after local therapy (surgery and/or radiation).
Clinical endpoint: PSA progression at 6 months / PSA velocity.
Second stage of trial that combines PROSTVAC with androgen ablation
therapy is ongoing with results expected in the second half of
2010
- A Phase I dose-escalation, combination study with
PROSTVAC™ and MDX-010 (CTLA-4 antibody) in 30 patients with
metastatic prostate cancer. Clinical endpoint: Safety, PSA
response, CT response. Enrolment has been completed with results
expected in the second half of 2010.
- Phase I study investigating PROSTVAC™ by intra-prostatic
injection in 20 patients with progressive or locally recurrent
prostate cancer. Clinical endpoint: Safety, PSA response, immune
response Enrolment has been completed with results expected in the
second half of 2010.
MVA-BN®-HER2 breast cancer vaccine
candidate
As planned, Bavarian Nordic has initiated a new Phase I/II study
in the US with its breast cancer vaccine candidate,
MVA-BN®-HER2. The study, which is currently recruiting, will
evaluate the safety and immunological efficacy of the improved
version of the vaccine in an adjuvant therapy setting in patients
with HER2 positive breast cancer. Initial immune data from the
study will be available during 2011.
Biodefence
IMVAMUNE® - smallpox vaccine candidate
To-date, more than 3,200 individuals have been vaccinated with
IMVAMUNE®, demonstrating a favourable safety profile including
in individuals with compromised immune systems who are currently
not eligible for conventional smallpox vaccines.
Deliveries to the U.S. Strategic National Stockpile
initiated
In May, Bavarian Nordic initiated the delivery of
IMVAMUNE® smallpox vaccine to the U.S. Strategic National
Stockpile under the RFP-3 contract with BARDA to deliver 20 million
doses of IMVAMUNE®. Deliveries were initiated upon notification
from the FDA that all actions taken by the company to address the
observations made during the inspection of the manufacturing
facilities in 2009 had been accepted. Approximately 2 million doses
of IMVAMUNE® were produced in advance of the delivery
allowance. These were accepted for delivery and will be delivered
during 2010. To date, more than 1.4 million doses have been
delivered, of which approximately 1.2 million doses were delivered
and invoiced as of 30 June 2010.
Change in delivery schedule
Upon the delivery allowance, Bavarian Nordic initiated a
scale-up of the production in order to increase the production
volume. However, technical issues in the initial upscaling process
caused a temporary postponement in the production. The source of
the problem has been identified and Bavarian Nordic has taken
corrective actions to address the issues, whereupon the upscaling
will be resumed. Additional workforce will be taken on and trained,
whereupon the production volume gradually will increase.
This has caused a delay in the planned production of
IMVAMUNE® in 2010, and Bavarian Nordic will deliver 2 million
doses in 2010. As a consequence, the last deliveries under the base
contract will take place in 2013.
The bulk vaccine produced during the initial scale up does not
meet all the predefined specifications. As the vaccine does not
qualify for delivery to the U.S. Strategic National Stockpile, the
company has written off the inventory, amounted to DKK 39 million.
The write-off, which has been done after the close of the period,
is included in the adjusted financial guidance.
Performance-based milestone payment of USD 25 million
received
The last milestone payment under the RFP-3 contract was
received earlier than previously expected after completion of
certain important milestones related to the development and
deliveries of IMVAMUNE®. The payment will be recognised as
revenue in the financial statements upon completion of the
contract.
A contract modification which includes additional work has added
USD 5 million to the total contract value, thus totalling USD 505
million of which USD 50 million is due upon licensure of the
IMVAMUNE® and USD 150 million were already received in advance
and milestone payments. USD 300 million is being invoiced pro rata
with the vaccine deliveries.
Phase III protocols submitted to the FDA awaiting
review
Based on the successful end of Phase II meeting for
IMVAMUNE®, Bavarian Nordic has now, according to plan,
submitted the final clinical and preclinical protocols for Phase
III to the FDA. Once the protocols have been reviewed, a Vaccines
Related Biological Product Advisory Committee (VRBPAC) will be
scheduled by the FDA to ratify the license strategy. Upon their
ratification, the Phase III trials can be initiated.
Supportive data published in scientific journals
IMVAMUNE® will be licensed under the animal rule (i.e.
animal data to support the efficacy in humans), which requires
investigations into the mechanism of action of the product. To this
end, two papers have been published in 2010 that provide further
data supporting the mechanisms of how IMVAMUNE® induces a
post-exposure protection from a lethal infection with mouse pox
(Lauterbach et al., 2010) and the underlying genetics of the
attenuation properties of MVA-BN® (Meisinger-Henschel et al.,
2010). A third manuscript (Baur et al., 2010) that has recently
been published in the Journal of Virology has demonstrated that by
using a new promoter to drive the expression of a gene inserted
into MVA-BN®, this recombinant MVA-BN®-based vaccine could
induce stronger immune responses to the encoded antigen than to MVA
itself, following repeated vaccinations with the vaccine. This has
clearly demonstrated that even in the presence of strong immune
responses to MVA a recombinant MVA-BN®-based vaccine can
stimulate stronger immune responses to a encoded gene, which
obviously demonstrates the many advantages and future utility of
MVA-BN® based vaccines for infectious diseases and cancer.
Baur K, Brinkmann K, Schweneker M, Pätzold J,
Meisinger-Henschel C, Hermann J, Steigerwald R, Chaplin P, Suter M,
Hausmann J. Immediate-Early Expression of a Recombinant Antigen by
Modified Vaccinia Virus Ankara Breaks the Immunodominance of Strong
Vector-Specific B8R Antigen in Acute and Memory CD8 T-Cell
Responses. J Virol. 2010 84(17):8743-52.
Lauterbach H, Kassub R, Pätzold J, Körner J,
Brückel M, Verschoor A, Chaplin P, Suter M, Hochrein H. Immune
requirements of post-exposure immunization with modified vaccinia
Ankara of lethally infected mice. PLoS One. 2010.
11;5(3):e9659.
Meisinger-Henschel C, Späth M, Lukassen S,
Wolferstätter M, Kachelrieß H, Baur K, Dirmeier U,
Wagner M, Chaplin P, Suter M, Hausmann J. Introduction of the six
major genomic deletions of modified vaccinia virus Ankara (MVA)
into the parental vaccinia virus is not sufficient to reproduce an
MVA-like phenotype in cell culture and in mice. J Virol. 2010 Jul
28.
MVA-BN® Anthrax
The development of an MVA-BN® based anthrax vaccine is
proceeding satisfactorily with Phase I studies expected to commence
in 2011.
Other issues
Bavarian Nordic awards warrants to certain
employees
The Board of Directors in Bavarian Nordic A/S has today decided
to award warrants to certain 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 5b of the Articles of Association and the Company's
guidelines regarding incentive programs. The award 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 35,000 warrants are awarded for subscription of up to
35,000 shares of a nominal value of DKK 10 at an exercise price of
DKK 259 per share. The exercise price is established as 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 259
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 Half
Year Report for 2013, from the day of publication of the Company's
Annual Report for 2013, from the day of publication of the
Company's Half Year Report for 2014 and/or in a period of 14 days
commencing from the day of publication of the Company's Annual
Report for 2014.
The value of each warrant equals DKK 76 and is calculated on the
Black-Scholes model with a risk-free interest rate of 0.8 per cent
and on the historical volatility of the shares. The calculation is
based on a market value of the share of DKK 223 per share.
The award of warrants will incur
consequential amendments to the Articles of Association.
Financial statement for the period (1 January - 30 June
2010, un-audited)
The comparison figures for the same period 2009 are stated
in parenthesis.
Revenue in the period totalled DKK 175 million (DKK 33 million).
The revenue derives mainly from the sale of IMVAMUNE® under the
RFP-3 contract, DKK 116 million; reimbursement of security costs
under RFP-3, DKK 29 million; revenue from the RFP-2 contract, DKK
26 million and revenue from the IMVAMUNE® freeze-dried
contract, DKK 4 million.
The production costs totalled DKK 212 million (DKK 96 million).
The production costs are higher due to cost of goods sold, DKK 67
million (DKK 0 million); costs due to contract work, DKK 40 million
(DKK 23 million) and other production costs of DKK 105 million (DKK
73 million).
The Group's research and development costs totalled DKK 92
million (DKK 75 million) excluding development costs from the
RFP-1, RFP-2 and freeze-dried contracts of DKK 21 million which are
part of the contract work as classified under production costs.
Distribution costs totalled DKK 14 million (DKK 9 million) and
administrative costs totalled DKK 46 million (DKK 48
million).
Income before tax is a deficit of DKK 179 million (deficit of
DKK 188 million).
Net result in the first half of 2010 is a deficit of DKK 148
million (deficit DKK 149 million).
The IMVAMUNE® inventory totalled DKK 204 million (DKK 135
million). The write down of inventory as of 30 June 2010 is lower
than compared to same period last year due to change in assessment
of write down of stock at year end 2009. The IMVAMUNE®
inventory is reduced by DKK 43 million compared to year end 2009.
This is due to sales of goods, DKK 67 million and production output
discarded in 2010, DKK 54 million.
As of 30 June 2010 the Group's cash preparedness is DKK 219
million (DKK 509 million). Cash flow from operations is negative
with DKK 246 million (DKK -262 million). Cash flow from investment
activities is negative with DKK 16 million (DKK 28 million) and
cash flow from financing activities is DKK 283 million (DKK
‑7 million). The net change in cash and cash equivalents is
positive with DKK 21 million (DKK -242 million).
A milestone payment under the RFP-3 contract of USD 25 million
was invoiced at the end of May 2010. As of 30 June 2010 the payment
is recognized fully as prepayments. Payment of the receivable has
been received in the beginning of July.
The Group's equity as of 30 June 2010 is DKK 822 million (DKK
848 million). The right issue in first quarter 2010 increased the
equity by DKK 302 million net after related costs.
Financial expectations
Due to the timing difference in deliveries under the RFP-3
contract, part of the expected revenue will be received later.
However, the lower revenue in 2010 will be partly offset by higher
revenue from other ongoing contracts.
For the full year 2010, expected revenues are lowered from DKK
475 million to the level of DKK 325 million, and the result before
tax is lowered from a loss of DKK 250 million to a loss in the
level of DKK 450 million. This includes all discarded batches.
Revenue will primarily be generated from the delivery of 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
the RFP contract for freeze-dried IMVAMUNE®.
The cash preparedness at year-end is in line with previous
guidance and is expected to be in the level of DKK 250 million,
based on the recently received milestone payment of USD 25 million
and the recent obtaining of a credit facility of DKK 100 million.
Additionally, the financial flexibility has increased due the
elimination of a financial covenant.
Contact:
Anders Hedegaard, President & CEO.
Phone: +45 23 20 30 64