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Edited Transcript of BAVA.CO earnings conference call or presentation 15-Mar-17 1:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Bavarian Nordic A/S Earnings Call

Kvistgaard Mar 15, 2017 (Thomson StreetEvents) -- Edited Transcript of Bavarian Nordic A/S earnings conference call or presentation Wednesday, March 15, 2017 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Seth Lewis

Bavarian Nordic A/S - VP, IR and Communications

* Ole Larsen

Bavarian Nordic A/S - EVP and CFO

* Paul Chaplin

Bavarian Nordic A/S - President and CEO

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Conference Call Participants

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* Yan Li

Citi - Analyst

* Michael Novod

Nordea - Analyst

* Thomas Bowers

Danske Bank - Analyst

* Peter Welford

Jefferies - Analyst

* Steven Breazzano

Piper Jaffray - Analyst

* Jason McCarthy

Maxim Group - Analyst

* Chad Messer

Needham & Company - Analyst

* Peter Sehested

Handelsbanken - Analyst

* Joseph Lawler

JFL Capital Management - Analyst

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Presentation

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Operator [1]

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Good day and welcome to the Bavarian Nordic 2016 annual results. This conference is being recorded. At this time, I would like to turn the conference over to Seth Lewis. Please go ahead, sir.

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Seth Lewis, Bavarian Nordic A/S - VP, IR and Communications [2]

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Thank you, Irene, and thank you all for joining us today on the Bavarian Nordic 2016 annual results conference call. My name is Seth Lewis, Vice President of Investor Relations and Communications, and I am joined on the call today by Paul Chaplin, President and CEO, and Ole Larsen, Executive Vice President and Chief Financial Officer.

Before we begin, I would like to remind you that this presentation includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statement. Forward-looking statements include statements regarding our short-term objectives and opportunities, financial expectations for the full year and financial preparedness as of year end, as well as statements concerning our plans, objectives, goals, future events, performance and other information that is not historical information.

All such forward-looking statements are expressly qualified by these cautionary statements and other cautionary statements which may accompany the forward-looking statement. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law.

For those of you listening to this on replay, this call was recorded on March 15, 2017. With that, I will turn the call over to Ole Larsen, our Chief Financial Officer.

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Ole Larsen, Bavarian Nordic A/S - EVP and CFO [3]

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Thank you all for joining our call today. I am happy to report another good year for Bavarian Nordic, not only operationally which Paul will take you through, but also from a financial perspective. If you look at slide 4 and the bar chart on the left, you will see that 2016 was the fifth consecutive year where we have generated more than DKK1 billion in revenues. 2016 was also the fifth year in a row where we, despite R&D investments of approximately 50% of our revenues, were able to do a breakeven result.

In 2016, we also strengthened our cash position through a capital raise in which we secured $100 million in proceeds. I was very pleased with the transaction as it shows significant interest from investors in a year where the biotech capital markets were very difficult.

The graph on the right shows that since 2013, we have been able to develop and diversify our pipeline and at the same time triple our cash position to the current DKK2.3 billion.

On slide 5 you can see the breakdown of the 2016 revenue on your left, which primarily consisted of deliveries of IMVAMUNE. The remaining revenue was the final part of the holdback from the 2007 BARDA contract and R&D contracts. The outlook for 2017 on your right shows revenue of DKK1.3 billion.

DKK400 million is the revenue recognition of the upfront payment we received from Bristol-Myers back in 2015. The upfront payment will be revenue recognized when we have topline data from the PROSTVAC Phase 3 trial later this year.

DKK800 million in revenue will arrive from IMVAMUNE sales, primarily delivery of bulk to the US Government. The majority of the IMVAMUNE revenue will happen in first half of 2017.

Last but not least, DKK100 million in revenue will come from R&D contracts with the US Government and Janssen. We expect an operating result or EBIT of DKK350 million in 2017, and expect our cash preparedness to increase by DKK100 million and by the end of 2017, amount to DKK2.4 billion.

That covers my financial remarks, and now I will turn the call over to Paul Chaplin, our President and CEO.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [4]

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Thank you, Ole, and once again, welcome to everyone who has joined the call today. If we go to slide 7 as Ole has already mentioned, we had a very solid performance in 2016 from a financial point of view. But we basically also lived up to all of our expectations in terms of moving forward with the pipeline. And obviously, 2017 has been a tremendously good start as well.

And what I will do in the next few slides is walk you through some of the key highlights from last year and what these mean for the Company moving forward before I open for Q&A.

So if we go to slide 8 and we talk a little bit about IMVAMUNE, last year, obviously, we received a $100 million order which brings the total amount of bulk orders to date at $233 million. And of course, this is partly driving the revenues that we are guiding for in 2017. Last year we also finalized the enrollment in the last remaining Phase 3 trial for IMVAMUNE, which we anticipate will read out in the second half of this year.

And as we've mentioned before, late last year under the American Cures Act, there was a provision that allows products like IMVAMUNE to be awarded a priority review voucher upon award. So that if our Phase 3 is positive, which we anticipate later this year, we will be filing the BLA for approval in the US in Q2 next year, meaning that we should get approval of IMVAMUNE late 2018, early 2019. And, of course, these priority review vouchers as I'm sure everyone is aware is being sold in the open market anywhere between $100 million and $300 million.

But, of course, the big event for this year will be what is the government going to do with the bulk that we are currently manufacturing. And I believe this year you will see the RFP being published and a contrast being awarded that will be securing the future revenue in the years ahead, as the government transitions to stockpiling up to 20 million doses of freeze-dried.

Slide 9 gives a summary of where we are with PROSTVAC and, of course, everyone is eagerly anticipating the Phase 3 readout. The third interim, the third and final interim, is still anticipated for mid of this year. But as we have been guiding for some time now, we do anticipate we will have to wait until final readout to get the positive result from this trial, which we believe will be happening toward the end of the year. And as Ole has mentioned, based on that we are revenue recognizing in the guidance the $60 million upfront payment we have received from BMS.

But it is not all about the Phase 3 and if you go to the next slide, slide 10, this is a familiar slide for many of you who have been following the Company. This shows the landscape of prostate cancer disease in men, and the orange boxes highlight the 10 ongoing Phase 2 clinical studies for PROSTVAC. And these include combination studies with enzalutamide, both in late and early stage, also with chemotherapy as a first-line treatment with combination with PROSTVAC in men with metastatic disease. And we obviously have monotherapy and also combination studies with checkpoint inhibitors in the neoadjuvant setting, as well as a Phase 2 trial in men who have just been diagnosed.

The importance of these trials really shouldn't be underestimated, because these trials are going to build on the data that has already been generated showing that PROSTVAC is safe to be combined with these other agents, potentially synergistic as well. But that will pave the way once PROSTVAC is approved for PROSTVAC to be rapidly used as the drug of choice in men with metastatic prostate cancer disease.

Slide 11, we are moving, changing gears to RSV. We have reported exceptionally good data, Phase 1 data last year and updated data as I will come to in the coming slides, the six-month follow-up. The Phase 2 study is fully enrolled at the end of last year, and we expect data readout mid of this year. And that data is going to be the immune responses based on looking at different doses and regimes.

But just to remind you, one of the strong advantages of our vaccine platform, MVA-BN, is that we can encode a large amount of foreign DNA or foreign proteins. So unlike most of the competitors, many of which have failed with their RSV approach, we are not focusing on a single surface protein of RSV called F. We have F in our vaccine, but you can see on this slide we also have G, another surface protein, and two highly conserved T cell antigens.

Our concept has always been that if we are infected with RSV in one season, you are generally protected the following season. That means that RSV itself is inducing a protective immune response that at least lasts for one year. In animal models, we have shown that if we can mimic what an infection induces, we can also induce protection in animals. And that whole concept is that we want to do the same thing in people.

If you go to slide 12, some of this data we have already reported. It is broad T cell responses that we see. This has been updated very recently with T cell responses to two new antigens, the M2 and the G from the RSV subtype B.

But basically, what we are showing you now is that we get exceptionally strong T cell responses to all antigens encoded in our vaccine, and this is obviously almost equal for all of the different antigens. You get a very strong, broad T cell response, which is exactly what you see in natural RSV infection inducing.

Slide 13 gives you the follow-up data for antibodies. The top graph is the IgA in the blood. If I remind you, IgA is a specialized subtype of antibody that is transported to the mucosal surfaces, such as the lung, which is a natural route of infection of RSV. And many people believe IgA is an extremely important protective mechanism against RSV.

You can see here we essentially, in this elderly population in the Phase 1. have a flat line in terms of the IgA response for six months. Similarly, if you look at the neutralizing antibodies in the lower graph against the A strain, it is essentially a flat line for six months. So we get long-lived humoral immune responses including IgA in the blood, which is implying that we get long-lived mucosal responses as well.

So extremely encouraging data and we are highly anticipating, if we move to slide 14, the readout from our ongoing Phase 2. Here we are looking at the low dose, is actually the dose we evaluated in the elderly population in Phase 1. And the high is a 5 times higher dose of that, and we are looking at whether we need one or two vaccinations.

As I said, this data will read out mid of the year and we will be reporting on all of the parameters that were reported in the Phase 1, in terms of antibodies in T cells. And hopefully, that will allow was to identify the optimal group that we need to move forward with in future trials.

The volunteers from the optimal group will be called back in later this year to receive a booster vaccination late this year, starting in December, so that we can collect annual booster data, again with that data being reported out mid of 2018. And that will be important for us to decide to whether this is an annual booster vaccination as many believe, or whether there is a longer-lived immune response that could protect over multiple seasons.

Moving to slide 15 and talking about CV301. CV301, if you look at the lower box of that slide, has been specifically designed to be able to potentially treat multiple tumor types because it is a vaccine that now encodes CEA and MUC-1, using MVA-BN as a primary vaccination followed by multiple fowlpox boosters, both encoding CEA, MUC-1 and also TRICOM.

Some time ago, we actually identified the strategy moving forward with CV301, in that we wanted to collaborate with a number of different companies and look at CV301 in combination with a number of different drugs. And we wanted to show proof of concept to CV301 in a number of different indications.

One key part of that strategy is that while we wanted and needed to collaborate with others, we wanted to make sure CV301 remained a free asset that was in the control of Bavarian Nordic. Obviously, the first collaboration came with BMS, which is our lung Phase 2 trial which started last year. You would have seen last week, I think it was, we announced the collaboration with Roche to move into bladder. And we are still exploring discussion with others in other indications, but colorectal still remains an interesting indication for us moving forward.

On slide 16 gives you an overview of the ongoing CV301 plus Nivo Phase 2 proof-of-concept study in non-small cell lung cancer. The Phase 1 component is nearing finalization, and obviously the Phase 2 will start later this year where 60 patients will be randomized into each arm, looking at CV301 plus Nivo versus Nivo alone.

We are looking at OS as the primary endpoint, but also looking at PFS and objective response rates which may be earlier readouts, which could also start as early as next year.

Slide 17 gives you the current thoughts and agreement that we have with Roche on combining CV301 with atezo, which is their anti-PD-L1 drug that is approved for bladder cancer. It will be a single arm study enrolling up to 60 patients, and obviously combining CV301 with atezo.

The reason we have gone for single arm is that the patients respond very predictably with this drug. and we believe we will be able to get an earlier readout and compare that to historic controls and as I said, get proof of concept that CV301 hopefully can enhance the efficacy of atezo in bladder cancer.

Slide 18, Janssen. Only yesterday, we updated the market with a publication in JAMA on the long-term immune responses to Ebola, and we will come to that in the next slide. So the Ebola collaboration is going from strength to strength; HPV where both companies are currently making product to move into Phase 1. And, of course, Janssen still have rights to two more targets, both of which something should happen if anything is going to happen in the next 12 months.

If we go to slide 19, this is the data that was published yesterday. And obviously, it shows that we get long-lived antibody responses for a year post vaccination, which is exceptional not only for Ebola; but I think it shows, again, the real strength of the combination of the two platforms, which is why we remain upbeat and confident that this collaboration, very successful collaboration we have with Janssen, will continue to go from strength to strength, and will expand in the months and years ahead.

Slide 20 is our pipeline, and rather than go through all of the various things in our pipeline, I will just highlight that our pipeline will expand this year with trials of CV301 in bladder and potentially in other indications. And with brachyury you will be seeing multiple studies starting in the second half of this year.

RSV, we will move into the booster study which will be important for establishing how that vaccine will be situated in that setting. So again, another year of growth and differentiation of the pipeline.

Slide 21, some of our anticipated milestones. For IMVAMUNE, we do anticipate the RFP to be published and already awarded a contracts later this year, which will be secure in revenues as we move to a freeze-dried formulation. We will get the top line of the Phase 3 data and move towards filing a BLA with the approval and the subsequent priority review voucher.

RSV, a very important year for RSV Phase 2 readout mid of this year, moving into a boosters study. PROSTVAC, of course we have the Phase 3 readout but also readout from ongoing Phase 2 studies, hopefully positioning PROSTVAC in that setting once it is approved.

CV301, the lung study will continue. We will start the bladder study as part of a collaboration with Roche and probably start additional CV301 studies in other indications. With brachyury, you will be seeing multiple studies starting together with the NCI in the second half of this year.

Just before I move to Q&A, I just want to highlight that we are planning a capital markets day later this year in New York on September 21, and I just hope you can all start booking that date. So that was September 21, 2017. It will be in New York where we will hopefully be highlighting some of the progress that we have already made in 2017, and the path forward for the Company.

So with that, I will ask the operator hand over to Q&A and we can start answering any questions you have.

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Questions and Answers

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Operator [1]

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(Operator Instructions)Yan Li, Citi.

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Yan Li, Citi - Analyst [2]

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I have two questions, please, one on the RSV vaccine and one on PROSTVAC. So for the RSV vaccine, once and if we get the positive Phase 2 data, what are the options for this asset moving forward? I think we now all agree that the Novavax Phase 3 trial was underpowered with 12,000 patients. Does Bavarian have the capacity to conduct a similar or larger Phase 3 RSV efficacy study?

Separately on PROSTVAC, you mentioned that we may get some data before the final Phase 3 readout from the NCI-sponsored studies. Could you just elaborate which ones we may hear from? I am particularly interested in the two now fully-enrolled randomized [X and B] combinations of these, and whether we can hear from these. Thank you.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [3]

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Yes, sure. Thanks. In terms of RSV, the original strategy that we have outlined was that we would move into a Phase 2b field efficacy. You have probably seen that we are a bit silent on that and exactly how we are moving forward.

The reasons for that is that we are taking stock of lessons learned from what happened with Novavax, and also talking to other experts in the field on whether it is worth moving into a Phase 2b and/or whether you don't really get much data from a Phase 2b versus moving into a Phase 3.

I certainly agree with you and I think I was also vocal of the fact that we never understood how you could get an efficacy readout from 12,000 volunteers. So we certainly believe a Phase 3 needs to be larger. Do we have the capacity? I guess you are really asking, do we have the money to move into a Phase 3, because I think we have the capacity. But, of course, finances and capital is always a tricky question and, of course, it depends what happens in the coming 12 months exactly on where we are as a company.

Having said that, as strategy for RSV has always been clear, we have always said we would need a partner. And again, do you partner before Phase 3, during Phase 3 or when? And again, that all ties into do we have the capacity as a company once we finalize that strategy or not.

In terms of PROSTVAC, the two studies that we are referring to that are likely to read out later this year is the monotherapy PROSTVAC in the neoadjuvant setting, which will be extremely valuable mode of action data; do we get T cell infiltrate into the solid tumor upregulation of certain marker.

And then the other one is actually likely the enzalutamide/PROSTVAC combination in the earlier disease setting. As you said, that is fully enrolled. NCI is likely to be reporting on that trial in the next 12 months.

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Yan Li, Citi - Analyst [4]

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Great, thank you very much.

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Operator [5]

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Michael Novod, Nordea.

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Michael Novod, Nordea - Analyst [6]

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Michael Novod, Nordea in Copenhagen. A few questions. You talked about the very successful collaboration with Janssen. Looking into -- you have Ebola now, you have HPV, maybe others. Are there any, say, ambitions of trying to broadening this collaboration even further with Janssen? Because it really seems there are good combination effects of combining your different technologies.

Then the second thing regarding CV301, just curious whether any of the data with these [OB] early studies could potentially be pivotal.

And then a last question on a potential priority review voucher. If you get such a voucher and if you sell it, would it then be considered in your numbers as a taxable capital gain or how would this potentially be booked? Just some early thoughts for us. Thank you very much.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [7]

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Well, I will take the first two while Ole thinks about the last one. So the Janssen broadening the collaboration beyond the potentially two other targets, I think was the question. How to answer that. So I think one of the slides, again, shows the data, the clinical data showing the real value of combining the two assets.

With adenovirus, you don't get long-lived immune responses; that's clear. And in certain situations, MVA is not powerful enough to generate their protective immune response. So it seems obvious to me and probably also to you, Michael, that there would be value in a broader collaboration, but we will have to wait and see on that one.

We have a very, very successful collaboration right now. Both companies are pretty busy with their own pipelines, but I think there is value in what you are suggesting.

CV301, the question was, could any of the studies we are doing right now end up being pivotal. And, of course, the answer to that is it really depends on the data. I know that is a cop-out really, but if we get outstanding objective response rates, for example, in the lung trial, it could be that you could get accelerated approval on that with the commitment to Phase 3. That is not really how the trial is designed, but these things could happen. It all depends on how exceptionally good is the data and do we really see that synergistic effect between the vaccine and the checkpoint inhibitor.

Then on the priority review voucher, I am very happy I can hand over to Ole.

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Ole Larsen, Bavarian Nordic A/S - EVP and CFO [8]

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Hi, Michael. The priority review voucher is actually an asset that you would be able to sell. And as you are selling a tangible asset, all other equal, you would actually book it as revenue without very high margin.

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Michael Novod, Nordea - Analyst [9]

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Okay, and then get it taxed?

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Ole Larsen, Bavarian Nordic A/S - EVP and CFO [10]

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Of course it would be taxed.

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Michael Novod, Nordea - Analyst [11]

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Yes, sure, of course. That's all I wanted to know.

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Operator [12]

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Thomas Bowers, Danske Bank.

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Thomas Bowers, Danske Bank - Analyst [13]

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Yes, thank you. A couple of questions from me here. Just, first of all, regarding IMVAMUNE and given your long-term relationship with the US Government, what should make us believe in longer-term contracts instead of these one, two-year contracts? I am looking at registration and then the move from BARDA to CDC, or alternately to make some changes in production, supply chain? I mean, for example, the fill-in campaigns that you need to book at IDT.

And then my second question on PROSPECT, of course. We are now closing on the third interim. I would just like if you maybe could add some color on how to interpret a recommendation for continuation of the trial from the monitoring committee. I mean in order to pass the futility analysis at this late stage, 80% evidence passed, can we make some sort of conclusions that this analysis at least to a certain point demonstrate a trend to (inaudible) survival benefits?

And then my last question, maybe just in connection with all the stuff regarding the Zika virus last year, I understand that you submitted a suggestion to the CDC or I can't remember whether it was the WHO; but regarding a broader program to cover a number of these biologic threats in order for you and the whole industry to act more quickly.

So I just wanted to get your comment on this dialogue and the feedback you maybe have received or any potential broadening of the collaboration with the US Government. I think I will stop myself here. Thanks.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [14]

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Yes, thanks. The first question was about IMVAMUNE, and I think it was about could we anticipate a longer-term contract. I think the issue that you are seeing from the original contract that we were awarded in 2007, through some of the later contracts in terms of the bulk orders and the like, is the transition from the fact that under the new authorization, BARDA is only funded annually. So they are only looking at annual awards.

There may be commitments beyond that that they are actually only awarding base contracts or subsequent options each year, and that unfortunately is a constraint that they have to work under and we have to try and comply with. So that is the big difference why you are seeing smaller orders year after year -- or actually not that small, but you are seeing orders year after year rather than 20 million doses in one go.

So unfortunately, no, you are not going to see a change in that unless there is a change in the law in the US.

Regarding how it is going to move and proceed as it stands right now for acquiring nonapproved products, once they become approved then the authorization moves to the CDC, as you indicated, who would then be responsible for procuring additional product.

In terms of any additional things that we need to do in terms of manufacturing or whatever, no. The manufacturing is in place and we are anticipating, as I keep saying, that they are going to transition the bulk we have here and/or possibly additional bulk into freeze-dried to build up that 20 million doses. Freeze-dried will be approved, and then under the current authorizations funding will move to CDC.

I think the next question was regarding PROSTVAC interim 3 and whatever else we could read into that if it is a continuation. Again, I have to be careful here and not get drawn too much into speculation, but from my perspective the continuation interim 3 would be extremely good news. It would also be the likely outcome we are anticipating. Because as we have said before, most of the power is kept for the final analysis.

Then your last --.

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Thomas Bowers, Danske Bank - Analyst [15]

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Paul, could I just ask -- so if they recommend a continuation, are we then certain that there is a trend towards a benefit? Whether it is 5%, 8%, 20% or 30% reduction of risk, I don't care, but you can at least assume that we are seeing some sort of a trend?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [16]

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I don't think I can confirm that now.

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Thomas Bowers, Danske Bank - Analyst [17]

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Okay.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [18]

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Then the last question, (inaudible) you are right, we did submit a broader proposal to CDC on how MVA could be used as a broad vaccine platform -- not CDC, it was WHO, sorry. So WHO, BARDA and other agencies are all talking about from the broad platforms and things that would be beneficial to public health.

What has really slowed down anything with WHO is the whole formation of this new organization called CEPI and their funding, and CEPI also is talking about funding platforms for emerging diseases. So nothing has really progressed, but there are just talks going on, albeit with a different agency and the like.

Regarding should you anticipate anything else happening with the US Government, well, the US Government is very familiar with MVA. They like MVA, they have a good relationship with Bavarian Nordic. We are frequently asked to look at certain different diseases and aspects, so I wouldn't rule out future R&D contracts moving forward.

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Thomas Bowers, Danske Bank - Analyst [19]

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Great, thank you.

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Operator [20]

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Peter Welford, Jefferies.

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Peter Welford, Jefferies - Analyst [21]

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Hi, thanks for taking my questions. (inaudible) Firstly, just on the IMVAMUNE, are you seeking at all an emergency use authorization for the freeze-dried form, or is the plan to file in that 2Q 2018 BLA for both the freeze-dried and the liquid formulations of IMVAMUNE?

Secondly then on RSV, is the plan to wait for the booster data which I think you said would be in the optimal dose cohort that you would give the booster to, before you then initiate a Phase 3 or the field study?

Thirdly then on PROSTVAC, could you just help us to understand the event rates here? I guess just a bit confused, but the second interim was obviously in last July. Roughly a year later, we're now getting the third interim 100 events later, and then another 100 events are going to occur in less than six months if you like. I guess trying to understand how that event rate do you think is sort of occurring.

And then finally on the financials, the 10% you owe back of the money from BMS to the NCI, I understand that 10% levy is payable on the $60 million and the $80 million. Is the 10% also payable on that flexible milestone depending on the benefit, or is the milestone only subject to a 3% normal levy? Thank you.

Paul Chaplin

Thanks, Peter. So freeze-dried IMVAMUNE, yes, we are seeking an emergency use authorization for the freeze-dried, and that will actually be made this year. At the end of Phase 2 meeting that we had regarding IMVAMUNE freeze-dried last year with the FDA, they made it clear that they want to see an additional Phase 3 safety lot consistency of freeze-dried.

So the path forward is that we are submitting or requesting in the EUA for freeze-dried IMVAMUNE this year. Based on the Phase 3 readout, we will be submitting a BLA next year for the liquid frozen.

And under any new contracts, whether it is in the base or an option, the government will be funding for the new Phase 3 for freeze-dried. So the freeze-dried approval will come either as a completely separate BLA or a supplement to an existing approval, depending on however the FDA want it. So it will be coming at a later time point.

The next question was about RSV and the booster and are we going to await the results from the booster study before moving forward. Yes, we will, because I think it is important data to understand how the RSV vaccine would be used, either annually or biannually or whatever it will be, and that is certainly the data I believe the authorities will also want to see.

In addition to that, of course, we have to have discussions with the authorities about the trial design of any pivotal study. So the answer is yes.

And on PROSTVAC and what the event rate is and an explanation, I mean, so there was great speculation that the third interim would occur late last year, the turn of this year. And obviously that didn't occur, and we came out and we informed the market that the latest estimates with that would be middle of the year.

That simply means that the event rate is obviously slowing down compared to how many people we're predicting. At the moment, the event rate is as stable as it was when we came out and informed the market that it was slowing down compared to those original. I think that is all I can really say.

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Ole Larsen, Bavarian Nordic A/S - EVP and CFO [22]

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Hi, Peter, it is Ole. The last question regarding the 10% payment to NCI on the milestones; it is so that NCI will receive 10% of the upfront, the $60 million upfront. And on the milestone of $80 million, they will also receive 10%, and that is it. They will not receive any payments on the performance milestones.

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Peter Welford, Jefferies - Analyst [23]

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Okay, thanks. Sorry, just returning to the event rate, so can you just confirm this? Since the end of the year, the event rate, it slowed obviously relative to -- or before the end of the year, rather, the event rate slowed versus your prior expectation; hence the delayed, if you like, interim analysis into the mid part of this year. But the event rate then hasn't changed since that initial, if you like, look at the rate prior to the end of last year. Is that correct?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [24]

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Well, one clarification. We never communicated when interim 3 would occur, so the speculation was the analysts and other people who were speculating. Once we realized that the interim could not occur at the point where most people were speculating it would occur, we came out and said it is obviously occurring mid of the year.

The only thing that I would say on top of that is it hasn't slowed down any more, but it is slower compared to what we had anticipated it would be at this stage.

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Peter Welford, Jefferies - Analyst [25]

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That is great. Thank you.

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Operator [26]

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Steven Breazzano, Piper Jaffray.

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Steven Breazzano, Piper Jaffray - Analyst [27]

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Hi, guys. Thanks for taking my question. On the IO side, a couple of studies now underway in combination with the checkpoint. When do you think the first data, either kind of clinical or biomarker, when do you think the first data we could see from those studies? Do you think that is 2017 or is that more in 2018? Thanks.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [28]

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So from our ongoing studies it will be -- we should start seeing some of the early objective response rates in 2018 in the lung trial. So we won't be seeing any data this year.

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Steven Breazzano, Piper Jaffray - Analyst [29]

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Got it, thanks.

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Operator [30]

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(Operator Instructions) Boris Peaker, Cowen and Company.

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Unidentified Participant [31]

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Good morning. This is Justin on for Boris. Thanks for taking my questions. Could you tell us a little bit more about what the RFP means for your company and some of the details that would be included in it? And just to confirm the timing, I believe you said late this year. And when you actually do have it, would you disclose additional details?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [32]

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Yes. So difficult to answer because, obviously, I am not in control of the RFP. So normally an RFP is published so everyone is aware of it, and they are written in a very open manner. However, it could well be, and I am speculating, that this could be a sole source RFP as we are really the only company capable of delivering.

In such a scenario, it may not actually be public, but it could also be public. It depends on what the (inaudible) is doing. And the detail that it is going to disclose, as I said, they are normally pretty broadly written, but I have no clue.

So would we disclose anything? Normally not. Normally, the government actually does not like any disclosures from companies unless you formally enter into negotiations. And even then, they are not keen on companies making that announcement, which we haven't done in the past.

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Unidentified Participant [33]

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Okay. And then the timing, you are thinking late this year?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [34]

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So the timing of the RFP coming out if it gets published, I have given up predicting, to be honest. (technical difficulty) I have moved to, I am confident an award will be made this year.

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Unidentified Participant [35]

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Okay. And then just a last question. When it comes to how your customer works here with the different agencies and who you need to have a good relationship with. Beyond the 20 million doses that are expiring, if you want to tap into the 66 million doses where ACAM is more contraindicated, is that going to be the CDC who you need to convince?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [36]

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Yes, CDC will be a big driver, but there is a whole group of agencies under the umbrella called [FEMSE],which is BARDA, NIH, DOD, Department of Homeland Security and including CDC, and all of those are important to have relationships with.

The good thing for us is that we have had contracts with Department of Homeland Security, DOD, NIH, BARDA and, in fact, we have a very good relationship with CDC. They are currently running an INVAMUNE clinical study in the Congo to see if IMVAMUNE protects against healthcare workers against monkeypox.

So actually, we have very good relationships with all of these relevant agencies. So I'm not saying it is not going to be a challenge moving from that transition, but we have been working on that for multiple years.

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Unidentified Participant [37]

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Great, sounds good. Thank you.

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Operator [38]

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Jason McCarthy, Maxim Group.

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Jason McCarthy, Maxim Group - Analyst [39]

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Just a question on PROSTVAC. I know the data that everybody is waiting for is coming in the second half of this year. You are going to recognize an upfront payment from Bristol. Can you walk us through some of the deal terms on that data readout? I know if the data hits a certain mark and change in overall survival, it will trigger other additional payments, and then Bristol will have some time to opt in completely. Can you just walk us through what you think those events could be?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [40]

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Sure. So under the terms that we have agreed, upon exercise from BMS, it is $80 million. And then there is a number of different payments, a sliding scale payment, depending on what the final OS is, and that range is up to $230 million depending on, as I said, the final OS.

So if we mimic what we saw in Phase 2, it is $230 million. If we see the minimum threshold that would be required for filing positive data, it would be $50 million, and there is everything in between depending on variation.

The timing for BMS, once we have topline data and a clear indication from the authorities that that is sufficient to file, the clock officially starts for BMS. BMS, of course, can opt in any time they want. They could do it right after this call if they wanted, or tomorrow or whenever, but under the situation that data readout occurs, there is a clock that ticks once there is go-ahead from the FDA that there is sufficient data.

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Jason McCarthy, Maxim Group - Analyst [41]

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How long does BMS have to opt in or review the data?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [42]

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That we haven't revealed. The clock starts, but we would not hold back filing a BLA, so if you want to read what you want into that. So there is a clock, but we would be able to file the BLA if they are still thinking.

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Jason McCarthy, Maxim Group - Analyst [43]

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Okay. Thank you very much for taking the questions, Paul.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [44]

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No worries.

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Operator [45]

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Chad Messer, Needham & Company.

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Chad Messer, Needham & Company - Analyst [46]

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Great, thanks. For INVAMUNE, I was just wondering if there are updates on any discussions with government outside of the US, Europe, Canada; any other place?

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [47]

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There are discussions, but none that I can disclose or talk about. Canada, we remain very positive about developments in the future in Canada. Obviously, they have made a number of different orders in the past. The things outside of Canada and the US are slow, but there are still activities. But yes, we can't really talk about them.

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Operator [48]

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Peter Sehested, Handelsbanken.

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Peter Sehested, Handelsbanken - Analyst [49]

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It's Peter Sehested from Handelsbanken. Thank you for taking my question, which actually also revolves around the PROSPECT and the potential readout. I wondered if you could provide some comments regarding the enrollment pattern into PROSPECT. Are we seeing a homogeneous sort of linear involvement pattern, or [just lost art] accelerating at the end a reverse; just some flavor on that?

And secondly, in terms of the backgrounds, are there differences in background therapy between the Phase 2 study and the ongoing Phase 3 study? Could you shed some light on the differences in background therapy, what you are seeing there, and also in terms of crossover between the control and treatment arms? Thank you very much.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [50]

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Good. So actual facts, in our annual report on page 19 is a copy of the recruitment, so that was page 19. But basically, like any trial, the recruitment is back-end loaded. So it starts slower and as you get more and more sites, recruitment increases. So certainly it is back-end loaded for the majority of subjects enrolling late 2013, 2014.

Trying to remember all your other questions. Then there was a question about background treatment coming into the trial compared to Phase 2. Basically, nothing has really changed for treatment prior to entering be metastatic setting since Phase 2 and the Phase 3. All of the recent approvals, Xtandi, Zytiga, they basically are for late-stage metastatic disease. So they would be either a competitor these days for patients enrolling or they would be getting that treatment after PROSTVAC.

So those treatments were approved right at the end -- towards the end of the study in the US. So there was no real complication with Zytiga and Xtandi competing as a prior treatment.

Subsequent treatments, obviously, once patients finish the course of PROSTVAC, they can go on anything, any standard of care which, as I've said, has changed since Phase 2. And, of course, that we are monitoring what patients are getting in the various different areas.

The other question related to crossover between placebo and PROSTVAC, and there is no crossover.

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Peter Sehested, Handelsbanken - Analyst [51]

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Okay. Much appreciated, and thanks for the heads-up on page 19. It looks very nice. Thank you.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [52]

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No problem.

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Operator [53]

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Joseph Lawler, JFL Capital Management.

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Joseph Lawler, JFL Capital Management - Analyst [54]

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Good morning, gentlemen. My question is regarding PROSTVAC. Can you name a single study that has passed three interim looks -- in oncology studies specifically -- that has passed three interim looks and hasn't stopped for efficacy but does stop, but at the final in point is successful? And also, can you please specify what the futility stopping boundary is at the third interim look? Thank you.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [55]

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So one study off the top of my head would be -- is the Phase 3 for Xtandi, yes, Xtandi Phase 3. It stopped early for interim 2, I think, for PFS. But for OS, which is the endpoint, they had to go the full readout before they could get the power to see the separation of the curves. Subsequently, if you look now, obviously after the trial has been published, you can see the curves were separating and there was a nice clearance difference between the curves at the interim 2 and subsequent interim 3, but there wasn't sufficient power for statistically ending the study. So that would be one example.

Regarding the limits and everything else in terms of the analysis, we haven't given them out.

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Operator [56]

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There's currently no more questions at this time. I would like to hand the call back to Mr. Paul Chaplin for any additional or closing remarks.

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Paul Chaplin, Bavarian Nordic A/S - President and CEO [57]

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Once again, thanks everyone for joining the call and for all of the tough questions you have given us today. Don't forget the capital markets day date of September 21 and, as I said, thanks very much for attending.

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Operator [58]

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Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.