Earnings call transcript: Bavarian Nordic Q3 2025 sees stock dip amid revenue guidance

Bavarian Nordic's Q3 2025 earnings call revealed a notable 32% year-over-year increase in total revenues, reaching 4.8 billion DKK. Despite these gains, the company's stock price fell by 7.19% following the announcement, closing at 173.6 DKK. The decline in stock value may be attributed to investor reactions to the company's full-year revenue guidance and market conditions.

Key Takeaways

• Bavarian Nordic reported a 32% increase in total revenues year-over-year.
• Stock price dropped by 7.19% after the earnings call.
• Full-year revenue guidance set at 6 billion DKK.
• Successful launch of the Vincunia vaccine in 10 countries.
• EBITDA margin guidance for 2025 is between 26-27%.

Company Performance

Bavarian Nordic demonstrated robust performance in Q3 2025, with revenues reaching 1.8 billion DKK for the quarter and a gross margin of 50%, up from 43% the previous year. The company's strategic initiatives, including the launch of the Vincunia chikungunya vaccine and expansion into new markets, have contributed to its revenue growth. However, the stock market reaction was negative, possibly due to investor concerns over future guidance and market conditions.

Financial Highlights

• Total revenues: 4.8 billion DKK (32% YoY increase)
• Q3 revenue: 1.8 billion DKK
• EBITDA margin: 31%
• Gross margin: 50% (up from 43% last year)
• Cash position: Nearly 3 billion DKK

Market Reaction

Bavarian Nordic's stock experienced a significant decline of 7.19%, with the price dropping from 187.1 DKK to 173.6 DKK after the earnings announcement. This movement places the stock closer to its 52-week low of 123.3 DKK, contrasting with its 52-week high of 244.8 DKK. The negative sentiment may reflect investor caution regarding future revenue projections and broader market volatility.

Outlook & Guidance

The company maintains its full-year revenue guidance at 6 billion DKK, with specific targets of 2.75 billion DKK for travel health and 3.1 billion DKK for public preparedness revenue. Bavarian Nordic's order book for 2026 stands at 1.1 billion DKK, with an EBITDA margin guidance of 26-27%. These projections highlight the company's strategic focus on expanding its market presence and optimizing operational efficiencies.

Executive Commentary

CEO Paul Chaplin emphasized the company's strategic acquisitions and transformation into a profitable vaccine enterprise, stating, "We have transformed from a loss-making R&D-focused company to a profitable vaccine company." CFO Henrik Juuel addressed capital allocation strategies, noting, "We are not a bank, and we are constantly evaluating our capital allocation."

Risks and Challenges

• Market volatility could impact investor confidence and stock performance.
• Uncertainties in public preparedness contracts may affect revenue stability.
• Competition in the vaccine market poses a challenge for market share growth.
• Potential supply chain disruptions could affect product availability.
• Regulatory hurdles in expanding vaccine labels may slow growth.

Q&A

During the earnings call, analysts inquired about the impact of the MMWR publication on the US launch of the chikungunya vaccine and the continuation of Bavarian Nordic's M&A strategy. Executives clarified uncertainties surrounding public preparedness contracts and highlighted ongoing efforts to refine manufacturing processes and integrate acquired vaccine assets.

Full transcript - Bavarian Nordic (BAVA) Q3 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Bavarian Nordic third quarterly report for the nine-month period ended 30th of September 2025 conference call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, please press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please note that today's conference is being recorded. I will now lecture the conference over to your speaker, Mr. Paul Chaplin, CEO. Please go ahead.

Paul Chaplin, CEO, Bavarian Nordic: Thank you, and hello and welcome everyone to Bavarian Nordic's Q3 results. Before I start, I just want to make sure you've seen our forward-looking statements on slide two. On slide three, on today's call, you have myself, Paul Chaplin, and I will walk through the key highlights of the first nine months and talk a little bit about the excellent progress that we've made. I will hand over to Henrik Juuel, the CFO, who will walk you through the commercial performance and the financials. If you go to slide four, it really has been a fantastic first nine months of the year.

We've recorded close to DKK 4.8 billion in total revenues, which is a 32% increase compared to this time last year, which is a fantastic result and one that is really due to a strong performance across the whole portfolio, both travel health and public preparedness. That has resulted in an EBITDA margin of 31%. We've had probably the strongest quarter for our travel health business, which is an endorsement of our strategy. As I'm sure we have many new investors on today's call, I want to just take a few minutes walking you through the graph on the bottom right-hand corner of slide four. This shows the financial performance over the last five years. Before 2020, Bavarian Nordic was really an R&D-focused company. We had our government business, which we now call public preparedness, and I'll talk more about that.

Essentially, we were a loss-making company coming to our shareholders frequently for capital raises. In 2020, we took the bold step on our growth journey to commercialize the business, and we bought two assets, our rabies and tick-borne encephalitis vaccines, which started our commercial journey. Despite COVID, which obviously had an impact on travel and travel vaccines, we were able to grow that business. In 2022, we sold more doses of rabies and TBE than any other previous owner. That is exactly the strategy that we implemented. We thought that we could purchase what I call unloved assets that were not performing well in previous owners' hands. With our dedication and focus, we could turn them around. That is exactly what we have done with rabies and TBE, and that actually are the golden jewels that are really driving the performance for travel health that we have today.

In 2023, we also added three more assets from another company which complemented our travel health portfolio. One of those was a chikungunya vaccine in phase three, which is now approved as Vincunia, which we are launching this year and is also adding not only to the performance in the first nine months of this year, but is a key driver for the future growth. On top of this, we also had our public preparedness business, and I will talk more about that in the coming slides. Basically, what we have seen over the last five years is a complete transformation of Bavarian Nordic from a loss-making R&D-focused company to a profitable vaccine company that is having a huge impact on the global stage in terms of public health.

Before I move on, I also want to take notes, and I'll leave more of the details in terms of the guidance to Henrik later. We have refined our guidance today, and I just want to address one comment that I've already read, that this is a lowering of our guidance. This is actually not a fact. Because at the beginning of the year, when we provided the guidance, we had a range for both revenue and EBITDA. This was related to our public preparedness business. I'll come back to why there's a range, but essentially, this is government contract business where you either get a contract or you don't. Therefore, we had a range.

We refined that range during the year, and today, we are recognizing that with one and a half months left, we have secured the business that we have secured, which is DKK 3.1 billion, which means together with travel health and other income, we are at the DKK 6 billion range. While that is at the lower end of the guidance, it is still within guidance. I would say DKK 3.1 billion in terms of public preparedness, I have to remind you, is DKK 1 billion above our normal annual base business of DKK 1.5-2 billion. It is an exceptional year in terms of public preparedness, and we are still standing by our revised and high increased guidance for travel health of DKK 2.75 billion. A very strong first nine months, and I want to actually take this opportunity to thank all the employees for a tremendous effort.

It's really down to their focus and dedication that time and time again, I'm allowed to talk on a quarterly basis of our strong financial performance. Go to slide five. On travel health, as I said, it's probably the strongest quarter since we've built up this portfolio. We've seen a 23% increase in sales compared to this time last year. And our two flagships, rabies and TBE, as I said, these were purchased back in 2020. We've really turned them around. Rabies has gone from strength to strength. We've seen both an improvement in the growth in the market, but also in terms of market share. In the US, we've seen a 4% improvement in market share compared to this time last year.

In Germany, we're really seeing strong growth, a 53% growth in the first nine months of this year compared to last, which is an outstanding performance. On TBE, again, we have stopped the decline in market share in key markets like Germany since we've bought these assets. We're actually beginning to now see an improvement in market share, particularly in Germany. We're incredibly happy with the performance that we're seeing in terms of travel health, and we believe there is future growth in the months and years to come. If you go to slide six, within our portfolio of travel health, we have a vaccine against chikungunya. Chikungunya is a mosquito-transmitted disease, and until very recently, there were no vaccines or treatments available. Our vaccine was part of an acquisition that we acquired in 2023 and was approved earlier this year.

Subsequently, we've launched our chikungunya vaccine, Vincunia, in 10 different countries. We have had an aggressive launch plan, and we've stuck to that schedule. We're beginning to see an uptake in the sales of the vaccine, which is great to see. We're on target to meet the DKK 75 million in the first launch year, which is a very strong performance in our first launch year. We've filed for further approvals in Canada and with Swissmedic in Switzerland, and we expect those approvals to be coming next year. We've already begun some of the post-marketing commitments for expanding the label, and we have a pediatric study and an efficacy study all in progress, which, as I said, are commitments that we've made to the different regulators in the US and Europe. Chikungunya or Vincunia really represents a future growth potential.

Yes, we have to educate and prepare the market, but we believe that this market has the potential to grow to $500 million annually within the next few years, and that's for travel alone. A great future business opportunity. We turn to the next slide on public preparedness, and I want to spend a little bit of time talking about public preparedness and what it actually is and why it is different to travel health. The best way of walking you through that is to talk about the revenue graph that's again on the bottom right-hand corner of this slide. Public preparedness is actually one vaccine. It's based on a vaccine against smallpox. Smallpox is a disease that has been eradicated, but unfortunately, there are concerns by many governments that smallpox could either reemerge through deliberate release in a bioterrorism attack.

It is also closely related to another emerging disease called mpox, formerly known as monkeypox. We have had a long-standing collaboration with the U.S. government in the development of our vaccine, which is now approved in many countries around the world. If you look at the graph at the bottom right-hand corner, in 2020, we really had two customers. One major customer, which was the U.S. government, where we have secured more than DKK 2 billion in both development and acquisitions over the years, and Canada. We had two customers. This changed in 2022 when there was the first outbreak of mpox. Here we really saw, and you can see a spike in activity in 2022 and 2023, where we supplied more than 15 million doses of our smallpox mpox vaccine. Coming through that first outbreak, we were left with more customers.

We now had the EU, both HERA, which was a new organization, but also other funding mechanisms in the EU, such as RESCEU. We had other EU nations like France. Going from two customers to a handful of customers, at that point, we said our base business moving forward would be DKK 1.5 billion-DKK 2 billion annually. We would see these spikes from time to time in revenue due to either future outbreaks of mpox or one-off large orders from different governments. In 2024, we also had another outbreak or a larger sustained outbreak of mpox in Africa, and that also led to a continued spike, which has flowed over into 2025. In this year, we are guiding to secure DKK 3.1 billion in revenue, which is, as I said, about a billion higher than our base business of DKK 1.5 billion-DKK 2 billion.

With public preparedness, it is not as easy to guide accurately in terms of growth or the future revenues, simply because it's all down to government contracts. Some government contracts can take many years to negotiate. Unfortunately, I've been involved in government contracts which we thought were coming through that fell down at the very last minute. It is a little bit more unpredictable than traditional vaccine sales like with travel health. As I've said, we have since 2022 been guiding with a base business of DKK 1.5 billion-DKK 2 billion. Obviously, since 2022, we've been recording revenues much higher due to the two spikes that I've explained. In terms of where we are, we have obviously secured contracts of DKK 3.1 billion already this year. We're well on our road to securing.

In terms of the first nine months this year, we've exceeded the DKK 2 billion already in the first nine months, and we're well on track to secure the guidance for the rest of the year. We have secured contracts for next year for a total of DKK 1.1 billion. So we're well on our way to securing our base business of DKK 1.5-2 billion moving forward. We have ongoing clinical studies that are funded through a collaboration with CEPI, both in a pediatric study, which will hopefully support a label extension to include children in addition to the adolescents and adults that we already have. If we move on to slide eight, just to talk a little bit about the pipeline. One area is what we call NVA Cell Line.

This is actually a trial that was initiated a few weeks ago, and this is moving away from the egg-based production that we currently have to a proprietary cell line that we've developed. The trial that has started is comparing the safety and immunogenicity of the vaccine produced in the different processes. This is really an initiative that we've taken, which will greatly improve our manufacturing capacity so that not only could we deal with an mpox outbreak as we have since 2022, we would, with partnerships, also be able to deal with a much larger global outbreak, either of mpox or, God forbid, even smallpox. It also makes us much more robust for any competition that may come later down the road. Other activities in the pipeline relate to chikungunya.

These are post-marketing commitments that we have with the regulators, pediatric study, expanding the label, and also an efficacy study. Other activities are either funded through DOD or are early stage, such as Lyme and EBV, which is still preclinical. With that, I will hand over the presentation to Henrik Juuel. Thank you very much, Paul. On slide number nine, just a few more words on the commercial performance for the period. We delivered for the three quarters in Q3 here, we delivered close to DKK 1.8 billion, and that corresponded to an overall revenue growth of 32%. Very significant growth supported by both our business legs, 50% growth on our public preparedness business and 22% on our travel health business. If you take the public preparedness business, Paul already alluded in detail to this one here.

That has really been about, first of all, securing orders and executing on these orders this year, targeting the DKK 3.1 billion for the full year. Strong growth on that front for the first nine months as well compared to prior year. On travel health, it is really our rabies and our TBE business that has been driving the strong growth we have seen both for the quarter but also for nine months, 22% overall growth, 23% from our rabies business, 18% from Ensipur. I think for both products, I think we can say here it's driven by both strong market growth, but also strong brand performance and actually market share gains for both products. Very strong performance. Vincunia, our new vaccine against chikungunya, as we launched earlier this year. We are so far very pleased with the performance.

We have in very short time managed to launch in 10 countries after the Q3 in the Nordic countries, Italy and Spain as well. We have in record time, I would say we have actually made quite a wide launch possible. From the start of the year, we guided on Vincunia, 50-100 million, and we are now refining that to the midpoint. That's 75 million, and we have so far delivered 42 after nine months. Going very well and in accordance with our expectations. Vivotif, our typhoid vaccine, we are on nine-month basis, we are seeing a positive growth. We have been struggling somewhat with this product, but we are finally starting to see positive growth, and it's being driven by initiatives taken to gain market share.

Unfortunately, the typhoid market has been down by approximately 7% these nine months compared to prior year, but we have actually year-to-date managed to compensate for that market decline by gaining market shares. Third-party products at the end, these are the main driver of that one is our Japanese encephalitis product that we have a partnership with Verniva that comes to an end by the end of this year. And our partnership on hepatitis B vaccine, Hepisav-B with Dinavex, comes to an end as agreed April next year. All in all, very strong growth on both parts of our business, 32% for the quarter and actually the same for the full nine months. Performance that we are very pleased with. On the next slide, we are looking at the full P&L, where we start with the revenue. We just talked about DKK 1.8 billion for the quarter.

We have a gross margin of 50%, which is significantly up compared to the same quarter of last year. This is driven by volume, obviously. The higher volume, the more busy we are in the production area, the more efficient we can be and the easier it is to absorb all the costs to the products being manufactured. It is also explained by what we call other production costs, which is typically cost. It could be cost of idle capacity. It could be cost of scrap. It could be cost by less efficient yield coming out of manufacturing. We have been successful on all these parameters, and therefore we are seeing a gross margin of the 50% versus 43% last year. R&D cost varies a little from quarter to quarter.

You will see that we are actually spending less than last year, both for the quarter and for the nine months. This is mainly due to timing of some of the committed studies we have on chikungunya that is progressing. On SG&A, you see quite a substantial increase. It is mainly or very largely explained by the launch efforts we are putting behind Vincunia, the chikungunya vaccine, and also by Bavarian Nordic entering into new markets. We have, during the last 12 months, established ourselves a commercial presence in a number of countries, including Canada, the U.K., and France, which, of course, will give us further opportunities to drive growth going forward. If you look further down the P&L, that gives an EBIT of DKK 1.2 billion nearly.

We have included in that one other operating income of DKK 810 million, which comes from the sale of the priority review voucher that was recognized in the third quarter. Further below, you can see the EBITDA margin excluding the other operating income. That is DKK 515 million, which corresponds to an EBITDA margin before special license of 29%. On a nine-month basis, that takes us to an EBITDA excluding other operating income of nearly DKK 1.5 billion or an EBITDA margin of 31%. Again, strong performance, all in line with what we have communicated previously and in line with our expectations. On the next slide, quick overview of the cash flow and balance sheet.

We saw positive cash flow from operating activities for the nine months, driven, of course, by the positive profit that the business delivered, but also impacted by the proceeds or the income we earned from the sale of the priority review voucher. Cash flow from investment activities, here we recognized actually the last milestones that we paid to Emergent BioSolutions and GSK for the acquisitions we did previously. They were recognized here. Not all of them paid yet, though. Finally, cash flow from financing activities is the sum of the share buyback we did previously in the year and then employee warrant exercise that was executed as well. All in all, net positive cash flow for the period of DKK 500 million approximately, which obviously improves our cash position, which you can see on the table to the right.

We do today have a cash position of close to DKK 3 billion. I have to say here, though, that our accounts payable are somewhat inflated at the moment as we still owe DKK 70 million to GSK, and we also owe royalties on the voucher we sold to NIH and taxes incurred in connection with the voucher. A strong cash position of close to DKK 3 billion. One slide on our outlook here. As we talked about already, we have refined our outlook. We have confirmed the outlook within the range that was previously communicated. Right now, we are looking at a guidance without an interval. As we are so close to the year-end, we do not operate in an interval for the public preparedness business any longer, but are expecting DKK 3.1 billion.

We confirm the upgraded guidance that we issued in connection with Q2 for the travel health business. That is now DKK 2,750,000,000. Then we have some other income adding up to a total of DKK 6,000,000,000. A confirmation of all previous guidance, but a refinement now being so close to year-end. We are anticipating an EBITDA margin for the full year, excluding the impact from the voucher, of 26%, and including the voucher, it will be approximately 40%. The 26% is sensitive to how the last two months here pans out when it comes to the R&D projects running at the moment. Depending on how they end, there is an upside here that it could be closer to 27%. Given the current plans, I think we are guiding 26%, and that's most likely where we will end.

We have not guided for 2026, obviously, but what we have stated here is that we have previously announced an order to Varda of $143 million. Most of that goes into 2026. We also announced recently the HERA framework agreement where there is a commitment of 1.1 million doses, whereof 750,000 is impacting next year. If we add the commitments we have so far, we right now have an order book worth DKK 1.1 billion for 2026. We will, of course, keep communicating to the market when there are material orders being added to this order book. The next slide is simply just a slide we brought to sort of round off the process that we have just been through.

I don't want to read up every word here, but basically, it has been a longer process with the takeover attempt on Bavarian Nordic, and we just feel it's important to understand that the company was not for sale. We were approached with an offer which the board of directors rejected to start with. Later in the process, there was an offer where the board basically judged that now it is at a level where we have to ask the shareholders. The shareholders have voted. The offer did not succeed. That is the situation, and we, of course, acknowledge that and we respect that decision by the shareholders, and we remain an independent listed company, and we continue to execute on the growth strategy that was in place even before this process started.

I think we are very pleased today to be able to report these numbers here, and we are very grateful to our organization who have actually demonstrated that they have maintained a focus on the business while this process has been running. That has been extremely important to us. We have even seen in our engagement surveys that the company or the employees have really stayed engaged in the company. Thanks to the organization for that. Without that, we wouldn't have been able to deliver these fantastic results that we're seeing here today. In order to make sure that the market is well informed about the strategy that we talk about, we have called for, and we call it an investor information meeting on December 11th during the morning. More detail will be announced. It will be in Copenhagen.

There will be a possibility to attend in person, but it will also be live-streamed and recorded. Yeah, basically, the agenda will be about giving an update on the business and a recap of our growth strategy. As I said, more details will follow. We will issue a press release once we have the details in place. With that, I will give the word back to the operator and open up for Q&As. Thank you. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you.

We are now going to proceed with our first question. The questions come from the line of Romy O'Connor from VLK. Please ask a question. Your line is opened.

Hi. Thanks for taking my questions. I have two, if I may. The first being on your thinking about reaching the DKK 75 million for Vincunia. I'm just wondering what steps you're now taking, given that there's only one and a half months left in the year, and also maybe a bit on the launch steps of getting into Canada. Secondly, just maybe a little bit of color on the bid outcome. I'm just wondering what your thinking is behind future business development or M&A, and yeah, what's your thinking now in terms of focus on value creation into the coming months. Thanks.

Unidentified Respondent, Bavarian Nordic: Yeah. Thank you for the questions. The first one related to Vincunia and the projection to $75 million. It's true there's only one and a half months left of the year, but we only reported to the first nine months, so we haven't reported some of the months that have already gone. We have launched according to plan. We are seeing good traction in a number of countries, slower in others due to some of the national recommendations, but we are confident that with the launches that we've made and the traction that we're seeing, we will be able to meet that target. I think your second question related to the bid outcome and our future growth strategy. I think it's clear it's important to stress again that our strategy that we put in place back in 2020 was a growth strategy.

It was to grow the portfolio of the assets that we purchased over a number of years, to grow public preparedness, but it also included additional M&A. I think in my introduction to the presentation today, I try to highlight the successful history that we've had of not only acquiring assets but turning these, what I call, unloved assets around and also bringing in manufacturing. It's a capability that very few others have demonstrated, and I think it's a key strength. I think what we want to do is when the opportunity arises is to continue that M&A journey and bring more commercial assets on board. That's a strategy that we've had in place since 2020. We've been successful at it, and we will continue to execute on it.

Paul Chaplin, CEO, Bavarian Nordic: Thank you. Thank you. We are now going to proceed with our next question. The questions come from the line of Thomas Bowers from SEB. Please ask your question.

Thomas Bowers, Analyst, SEB: Yes. Thank you very much, Acapulco, for the question. Firstly, just on shareholder return, can you give us any color on the current plans for any share buyback now that we are out of this M&A process? I think that you were talking a little bit about share buyback of exec cash, so anything that could sort of reflect the PIV sale you did here in the summer. Second question just on Imvanex. Just wondering, the delta between the previous guidance range, looking at that DKK 3.7 billion at the high end of the range, we have around DKK 600 million delta compared to the DKK 3.1 billion guidance. I'm just curious, normally you only guide for something that you are sort of where you are in negotiations with governments or potential customers.

Those $600 million, is that something that we should expect could potentially or likely move into 2026? Of course, that is part of that $1.1 billion, or is there something else that we need to be aware of in terms of that delta? Maybe just a question on travel health, super, super strong momentum surprises me every time. Now looking at your guidance for 2025, you are sticking to that $2.75 billion, I'll say, as you hiccup with some of the PEX vaccines. You are now $400 million short of reaching that $2.75 billion. Looking at the numbers, you are sort of implying that Ravipoor and Institute should be flat or even slightly decreasing for the remainder of the year.

Is there anything here that I'm sort of not seeing, or are you just maybe a little bit conservative given it's normally a weak quarter, of course? Maybe if we squeeze in number four here, just on the anti-facing, can you provide any color on the scenarios from Vincunia? We know that this outbreak trial in Thailand is pending or potentially ongoing. Is there anything that indicates that this should shift into 2026, and what could be the anti-spend cost reduction range, so to say, for 2025? You're guiding still for DKK 900 million, so I'm just interested in whether it's going to save you DKK 100 million or where we are here. Yes, I'll stick to that. Thank you.

Unidentified Respondent, Bavarian Nordic: Thanks. I can repeat if necessary.

Paul Chaplin, CEO, Bavarian Nordic: Some of them. Let me take Jornell's guidance, and then maybe Henrik, I'll let you take the other one.

Unidentified Respondent, Bavarian Nordic: I can do that, yeah.

Paul Chaplin, CEO, Bavarian Nordic: On Jynneos guidance, a few years ago, we would only really guide on public preparedness on contracts that we had in hand, and that reflected the fact that we had very few customers. We did not have the confidence a few years ago to guide broader. I would say that that has changed over the last number of years that we are guiding, obviously, with contracts that we know we have in hand, plus what we also think that we can secure within the next 12 months. It is not actually only things that we are negotiating; it is things that we believe that we can secure. I mentioned in the presentation that sometimes, unfortunately, part of the unpredictability of part of this business is that it is with governments, right?

Even though you can be very—one day you're incredibly confident that you're going to secure a contract, there may be a change in a political leader or the government may change, and it completely stops overnight. It is unpredictable. What I would say is where we guided is where we thought the range would be. That's why we gave a range. Already in Q2, we stressed that DKK 3.1 billion was secure, but that we thought we could secure more. You've seen that we've announced an agreement with HERA that could have come earlier in the year, potentially, that could have led to more revenues this year, but it's now pushed into next year. Obviously, that doesn't account for the whole DKK 600 million that you're referring to.

I would say what the guidance reflects is that some contracts came later than we anticipated, and some contracts we're still unsure whether we can secure. I hope that answers that question. Henrik, maybe.

Thomas Bowers, Analyst, SEB: Yes, thank you.

Unidentified Respondent, Bavarian Nordic: Yeah, let me try the other three, Thomas. I think first of all, on the share buyback thing, I think what we have communicated previously is that our capital allocation policy, priority number one there is to pay back the milestone payments to GSK and Emergent. That is soon behind us. It is not yet, though. We still owe EUR 70 million to GSK, which we expect to be paid early Q1. Number two priority, of course, is to invest in the business, and that means R&D. It also means sales and marketing to grow the top line. I think third priority would be to look into our M&A strategy and eventually consider returning money to the shareholders.

It's very clear we're not a bank, and we are constantly evaluating that situation to see what is the current need, what do we have on the balance sheet, is that appropriate for the plans we have. If not, then we will return money to the shareholders at this point in time. As this is a continuous evaluation, I cannot give you any more update right now, but of course, we evaluate the situation constantly. On travel health for the fourth quarter and our outlook, we're still guiding the DKK 2.75 billion. Here, I think you need to remember that some of our travel vaccines are seasonal vaccines. We sell in all quarters, but some quarters are better than others. Typically, the fourth quarter is not the strongest quarter. We are still targeting the DKK 2.75 billion for the full year.

On the R&D facing, we are still targeting the DKK 900 million in R&D for the full year, to a large extent driven by the Vincunia committed trials that we have to do. I'm just alluding to that there could be some of it phased into next year. Typically, with clinical trials, I think a lot of the steps you go through there, the timing can change. Some of it could slip into next year of the R&D spend. If that happens, of course, it could impact our EBITDA margin positively this year. Let's see. The plan is still DKK 900 million, and we're only raising this. It's a little out of control with these exactly at what pace these trials they run.

Thomas Bowers, Analyst, SEB: Okay, great. Thank you very much.

Paul Chaplin, CEO, Bavarian Nordic: Thank you. As a final reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to proceed with our next question. The questions come from Lana Luisi Codrington from Jefferies. Please ask your question.

Hi. Thank you for taking my questions. Just regarding chikungunya then, in terms of the US launch, I was wondering how important is the MMWR publication when it comes to launching in the US? Maybe a bit niche, but in similar lines, have you thought about the potential substitute that the New England Journal of Medicine and Public Health Group have talked about replacing the MMWR? Any thoughts on that at all? Thank you.

Yeah, thank you. Yeah, so this is a tricky one. Yes, in the US, post-approval from the FDA, you need an ACIP recommendation, which we're very fortunate that we have for Chikungunya. That recommendation, as you then say, is then published in the MMWR, which is a publication from CDC. Many of the distributors actually want to see the publication, even though it's recommended and it's posted on the website, before they will start to purchase. Obviously, the situation where we're in is the MMWR has not been published, and it has, as we said, has slowed down the traction, I would say. The one thing I would also give as another example is that when we launched Jynneos in the private market in the US, the same situation.

We had a recommendation from ACIP, but in actual fact, the MMWR was only published earlier this year. What we did in that situation was that we were able to convince the distributors that they could start to acquire the product before the publication, and that was successful. I would say we're in that phase right now. We've convinced some already to go ahead with Chikungunya, and we're still convincing others. It has certainly slowed down the traction, but it's something that we've already had experience of with Jynneos. One of the main arguments for that is there's always been sometimes a lengthy delay between the recommendation and the publication, and right now, it's very uncertain with ACIP and CDC what the time will be.

As you say, that is leading to many others talking about alternatives and whatever, but we'll have to just see how that develops.

Perfect. Thank you.

Thank you. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to proceed with our next question. The questions come from the line of Thomas Bowers from SEB. Please ask your question.

Thomas Bowers, Analyst, SEB: Thank you. Yeah, just a quick follow-up here from me. Just on the sales and marketing costs, like you can say here in the third quarter, related to mostly Vincunia, of course. Should we see this as sort of a new baseline going forward, or is there some one-off expenses here in that Q3 SMM number that we should be aware of, just to sort of have an indication on how we should model, at least going forward?

Paul Chaplin, CEO, Bavarian Nordic: I think that there's certainly an element of one-off in there because typically when you launch a new product, you will be in a launch phase that will require promotional costs for a period of time. It is for a period of time, but such a launch can easily stretch over, let's say, two years perhaps, and then you will see at least the promotional spend part of it normalize again. Right now, I think we are spending money establishing the awareness of chikungunya and Vincunia in particular in the markets. It is a non-existing market in most places we go into, so therefore there is a need to build the awareness. It will normalize after a couple of years where you can no longer argue you are in a launch phase.

Thomas Bowers, Analyst, SEB: Okay, got it. Thank you.

Paul Chaplin, CEO, Bavarian Nordic: Thank you. That does conclude the question and answer session. I will now hand back to Mr. Paul Chaplin for closing remarks.

Thank you, and thanks everyone for joining the call and for your interest in the questions. Thanks, and have a great day and a good weekend.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you and have a good day.

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