Good day, thank you for standing by. Welcome to Bavarian Nordic Half Year Report second quarter for the six-month period ended the June 30th, 2022 conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be the question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Rolf Sass. Please go ahead.
Thank you, operator, and good morning to some, and good afternoon to the rest of you. Welcome to this Q2 quarter from Bavarian Nordic. I can honestly say that this is maybe the busiest, most exciting, surprising, and most decisive quarter we have seen in a very, very long time here in Bavarian Nordic. May I just remind you that the purpose of this call is to answer the most questions we can within the time frame to analysts and investors. In the room, we have, as usual, our President and CEO, Paul Chaplin, and Executive Vice President, Henrik Juuel, that will walk through the presentation, and afterwards, we have the Q&A session.
Before we run through the presentation, I will just briefly go through this forward-looking statement that this presentation includes forward-looking statements that involve risks, uncertainties, and other factors, many of which are outside our control, but could cause actual results to differ materially from the results discussed. Forward-looking statements include statements regarding our short-term objectives, opportunities, financial expectations, and cash position. They are expressly qualified by these cautionary statements. 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. With this, I will hand over the presentation to you, Paul.
Thanks, Rolf, and welcome everyone to our Q2 update. If you move to slide 3, I just wanna make a few opening statements before I walk through some of the key events of the first half of 2022. This year was always going to be extremely challenging. We knew most likely we would continue to face COVID headwinds on our sales of our rabies and TBE. It's also a year of very strong investment. We were investing in our manufacturing infrastructure, expanding our bulk manufacturing to allow us to bring our two new vaccines, rabies and TBE, while after that investment, we would then be able to also produce our smallpox, monkeypox, and other vaccines in parallel. We were engaging in two tech transfers, internally on our new fill and finish line, one for freeze-dried JYNNEOS, and the other also for rabies.
In parallel, we were doing a tech transfer for the fill finish of Encepur. On top of that, we were planning and are investing DKK 2 billion in R&D, the single largest investment in R&D in our history, and that was to bring RSV and ABNCoV2 into phase III. Two very exciting assets that could potentially meet huge unmet medical need and would add to the future growth opportunities of the company and align us with our vision of becoming one of the largest pure-play vaccine companies in the world. As I'll show you in the coming slides, we've made fantastic progress on most of those activities. Of course, everything that we're gonna talk about today has been overshadowed by monkeypox, which emerged with an extraordinary international outbreak since May.
I have to say I'm extremely proud of all the employees who have really rallied and have gone more than the extra mile to try and ensure that they deliver our vaccine, which is the vaccine that everyone wants, to all countries that need this vaccine to address the current international outbreak. With that, let's move to the next slide four, and let's just talk about some of the key highlights in the first half of the year. If we take RSV, we've made great progress on this program. We have both prime status and breakthrough therapy designation in Europe and with the FDA. We've done a license agreement with Nuance Pharma for China and selected Asian markets, already gearing up and preparing for the successful launch of this product.
We've initiated phase III, and we remain on track to enroll the 20,000 subjects by year-end. On our COVID-19 candidate, ABNCoV2. As you know, we had to change gears a little bit in terms of how we were gonna approach the registration due to the regulatory landscape. I think we've managed to navigate that extremely well. We now have all the regulatory approvals in place, and we're still in line to start the phase III trial later this month. On rabies and TBE, we've really seen a tremendous turnaround in the first half of this year. On rabies, I think the rebound of rabies has gone much faster than we had originally anticipated. In the U.S., we're already ahead of pre-COVID levels. In Germany, we're seeing a strong rebound.
On TBE, despite the disappointing start to the year, in Q2, we have seen positive growth numbers and really the first signs that we're coming out of the COVID cloud. I'll allow Henrik Juuel to talk more about these two markets. As I said, on top of what was gonna be a challenging and busy year, monkeypox came along. We'll talk more about that in the coming slides, but we have completely changed gears within the company in terms of what we're doing in manufacturing. Since May until the end of next year, and probably going into the best part of next year, we're only gonna be manufacturing JYNNEOS Imvanex. We've scaled up and we're looking to expand capacity by working with others. If you go to the next slide 5. The monkeypox outbreak is in Canada.
Before this year, cases of monkeypox have been recorded in the U.K., U.S., Israel, and I think it's Singapore from travelers. Isolated incidents that were quickly controlled through public health measures and the use of actually Imvanex in certain instances. This is an unprecedented case in that we've got more than 40,000 cases spanning 96 countries, which has never been seen before outside of the endemic areas in Africa. WHO on the twenty-third of July declared this as an outbreak, a public health emergency, and the U.S. in early August declared it a national emergency, just highlighting the seriousness of the current outbreak. We're beginning to see some slight differences.
In the United Kingdom, which is one of the first countries to notify cases early in May, we're beginning to see a decline in the number of new cases, which is extremely encouraging. However, in other parts of the world, we're seeing a growth of cases. If we take Brazil since the last update, it's more than doubled the number of cases. Unfortunately, in Brazil, 77 infected children have been confirmed between the ages of 0 and 17. I think that gives you a picture that in many parts of the world it's rapidly growing. However, in some of the countries which recorded the earliest infections, due to various reasons, it looks as if the number of cases are in decline, which is extremely encouraging. If you go to the next slide.
We've had an extremely busy summer on some of the regulatory issues. If you go to the bottom right-hand corner of the slide, I'll talk a little bit about manufacturing. Our Bulk facility has been approved by both the FDA and EMA since 2010, and those approvals still remain in place. In terms of fill finish, we transferred the fill finish activities from a contract manufacturer in Germany last year to our new fill finish line in Denmark. That line was inspected and approved by the Danish Medicines Agency last year, but we're still awaiting FDA inspection and approval and the final approval from EMA.
In early May, when the first cases appeared and we opened contract negotiations with various governments, the early doses that we supplied were made based on, in Europe at least, batch exemptions, where countries accepted the exemptions to the various batches. Since the summer, our facility is now approved both by the U.S. and the E.U., so we're good to go. In terms of the various approvals, Imvanex was approved in 2013, but only for the smallpox indication. That's now been expanded since the summer to include monkeypox. Similarly, in Canada, where it's under the trade name Imvamune, it was approved in 2013 for smallpox, but this was already expanded in 2020 to include monkeypox. As I'm sure you know, JYNNEOS, which was approved in the U.S. in 2019, already had the monkeypox indication along with smallpox.
With all these regulatory advances, which happened in almost record time, I would say, we now have full approvals for manufacturing and the full approvals for the indication for both smallpox and monkeypox in all major jurisdictions. If we go to the next slide, to talk a little bit about supply. As I said, we have done everything in our power to ensure that the limited supplies we had on stock, we were able to meet the demand that we received from all around the world. In meeting that demand, the way we've achieved that is by offering a certain amount of doses in the near term and then fulfilling the demand over the coming months as we ramp up production.
We have been able to ensure access of JYNNEOS, Imvanex to more than 70 countries across America, Europe, Asia, and Oceania. With agreements with PAHO and HERA, we are giving access to a very broad range of countries in Europe, Latin America, and the Caribbean. It is also clear, however, that while we're doing an awful lot in terms of manufacturing, and I'll come back to that in the coming slide, we need more capacity. The only way that we can achieve that in the short term is through partnerships and licenses. I'll come back to that in some of the future slides. Of course, we always get a lot of questions on how many doses and what have you delivered.
I think to give some guidance on that, we have secured orders for around 9 million doses, and some of that is split between 2022 and already in 2023, with a skew more towards 2023. Most of those orders are for what I call the here and now, doses that people desperately need to control the current outbreak situation that the world is facing. However, there are indications with certain countries that the discussion is also moving to larger quantities, which are clearly for stockpiling. We've already made the announcement of a relatively large order in the EU. This is basically the largest order that we've ever received for Imvanex outside of the U.S.
That gives you indications that there is a growing demand, and we would expect probably more orders to be fulfilled by the time we come out with guidance for 2023. If we go to the next slide, this is a fairly busy table, but it's just trying to give you an overview of the current recommendations in various countries of the vaccines that they're recommending. I would say everyone is recommending MVA, which is our vaccine. A few territories are also recommending second-generation vaccine, such as ACAM2000. Again, pretty much across the board, the vaccine is being recommended for close contacts, but also in a prophylactic setting, the so-called PrEP indication for healthcare workers, but also high-risk individuals. Various dose-sparing strategies have been employed around the globe.
While Bavarian Nordic does not set policy, we are here to support our customers with the data that we have. For example, in the U.K., they very rapidly moved to a single vaccination. Others such as France and Canada and Germany are delaying the booster vaccination. You know, in early August, the U.S. decided to go a different track, which was to try and extract five doses from one vial and administer a much smaller volume intradermally, which is under the skin. This is based on relatively limited data, but nonetheless, it's being rolled out.
In Europe, last week, I believe it was, there was also a draft that came out suggesting that this could be a suitable approach in a temporary measure as vaccine supplies are low, but also highlighted that there was very little data to support the stability of smaller volumes in a vial, extracting the five doses and the like. That is an overview of how the vaccines are currently being utilized around the world. If we go to the next slide and talk a little bit about manufacturing. One of the questions that I'm always getting is, how can it take so long to manufacture a vaccine?
Just at the bottom of this slide, obviously, you have to produce the bulk vaccine, and then you need to convert that by filling into glass vials, packaging, and in both cases, you need to ensure the quality of the vaccine by doing an array of so-called release tests or quality tests. You can see the process from the beginning to the end takes approximately 6 months, which is a long time. To try and explain that, for the bulk vaccine, there is in excess of 30 individual tests that have to be performed on the vaccine. One of those tests takes approximately 80 days. If that test fails, for whatever reason, you need a repeat. You can do the math yourself. That takes a long time.
It's really on ensuring the quality of the product that takes so long before we can analyze the manufacturing. In addition to this manufacturing, when it comes to scale-up, it can take 12 months before you start manufacturing to secure the raw materials. If you are planning to be operating at one batch a week, and then there is a national emergency in terms of the monkeypox outbreak, and you want to scale up to four batches a week, you are scrambling to make sure that you've got the raw materials to do that in a relatively short period of time. Having said all that, these are challenges that we're very familiar with, have overcome in the past. As I said, what we've managed to do since May is we were operating at one batch a week in terms of fill-finish.
We've doubled that capacity. We've partnered with Grand River, a contract manufacturer in the U.S., which will initially double our manufacturing capacity and could potentially further increase that once the tech transfer is complete. We're scaling up on the bulk production, again, doubling our capacity, going from two batches to four batches a week, which will be in place by the end of this year. We're not finished yet. It's clear that we need even more capacity to meet the demand moving forward into 2023. We are looking to expand both bulk manufacturing and fill finish capacity by partnering and talking to others. On slide 10, on ABNCoV2, I mean, the only thing I really want to say here is obviously the regulatory environment changed.
We had to change our phase III design in record time, I would say. We have all the regulatory approvals in place, and we do plan to start this study, which will be comparing the safety and immunogenicity of ABNCoV2 to an approved COVID vaccine, and that enrollment will start this month, and we're still on track to have the readouts by year-end. Similarly, on the next slide, on RSV, we've initiated the study. Enrollment is proceeding according to plan. We're on track to complete the 20,000 subjects enrolled and vaccinated before year-end. As you know, we'll have a readout in the first half of next year, and we're on track for that, and we remain extremely excited about the opportunity of our RSV candidate.
As I said, time is coming that we'll find out whether this differentiated approach works next year. With that, I will hand over the presentation to Henrik Juuel.
Thank you very much, Paul. So let's jump directly into an update on our commercial and our financial performance for the second quarter and the first six months of this year. We start on slide number 13, where we have the breakdown of our revenue second quarter. Paul already alluded to the strong performance of the rabies markets that we have seen during the second quarter. Extremely strong market development that actually led us to a growth of our revenue by 85% compared to last year. Very strong growth in the U.S. market that means that we are already now seeing a U.S. rabies market that is at a slightly higher level than what we saw back in the second quarter of 2019 pre-COVID.
We've also seen an extremely strong development in the European rabies market, strong, very strong growth that I will come back to. We are not yet at the pre-COVID level, but I think we are seeing a very strong growth there as well. The TBE or Encepur revenue for the second quarter ended at DKK 144 million, so slightly below last year's level. The very positive thing here is that we are seeing momentum coming back. We have seen a quarter with positive growth in the market following several quarters of decline. Again, also very positive trend on the TBE market. Then, of course, driven by monkeypox, we have recognized DKK 117 million in revenue from the sale of smallpox, monkeypox vaccines.
That is revenue all recognized in June, and it's really just the first part of, you can say, executing on all the other orders we have secured during this monkeypox outbreak. Remember the outbreak started in May, so we are actually extremely proud that we managed to already ship out doses in the months of June. All together for the quarter, that gives a revenue of DKK 537 million, so 45% higher than the second quarter of last year. For the first half, it is DKK 857 million, slightly below the level of first six months last year, all explained by a different phasing of our smallpox vaccine in 2021, and something that we will definitely catch up with during the second half of this year.
Turning to the next slide. Here we are looking at the rabies business, and again, the upper left corner here shows the development, the market development in the U.S. Market. As you can see here, up 26%, year-over-year, so very strong performance, and we are actually now at a level higher than what we saw in 2019 prior to the COVID-19 outbreak. Very strong, the market performance in the U.S. In Germany, which is our other big market, Rabipur market, we have seen extremely strong growth, more than 400% growth year-over-year. Of course, this is a pure travelers vaccine market. It was also extremely hard hit by the COVID situation, and we are still approximately 40% below the pre-COVID market size level.
More than 400% growth in a market where we are the clear market leader with approximately 95% market share. This also has a significant impact on our business. I think, generally speaking on the Rabipur market, we are seeing travel picking up faster than what we had originally anticipated, and that of course has a very positive impact in particular on our Rabipur business. To the right, DKK 234 million, as we said, 85% up, driven by strong market performance. We have kept our market share at around 65% in the US, which is pretty much in line with the level that we saw prior to the competition facing a stock-out situation.
I also have to, of course, say here that we have also had some positive impact by the very strong dollar development. Approximately $20 million of the growth in the first half year, we can subscribe to a stronger dollar this year compared to last year. Next slide. We're looking at the TBE markets, and that's a pure European market. That's the only place it is endemic at the moment, and we are using Germany as the proxy for the development in Europe. Here we also, as I said earlier, have seen a very strong market development, actually 38% up compared to the second quarter of 2021. An extremely strong performance following several quarters where we saw the market decline.
This growth was actually strong enough to bring the first half year into a positive growth territory, growing by 13%. Very strong growth and a good signal that we are also getting out of this COVID situation for the TBE business as well. Still some way to go, approximately 20%-25% below the full pre-COVID levels. The numbers to the right, slightly below last year's level with DKK 144 million in revenue. This is despite the positive market development and is caused by inventory movements at wholesalers but also at partner levels. This is typically what happens when demand surges so quickly. That means that the wholesalers are basically emptying their inventories and will need to replenish that in some of the following quarters.
Our markets here in the key market of Germany remained stable around 30%. Next slide, just a few words on our in-license products, where we have three. We have the recently launched HEPLISAV-B. It's a hepatitis B vaccine that we have in-licensed for the German market from the U.S. company Dynavax. It was launched in May, and we have seen good revenue already during the second quarter. That is, of course, mainly to fill up the whole supply chain. It's a little too early to say how we are doing from a commercial perspective. Definitely from a logistic perspective, I think we have had a good start. We have the two products in-licensed from Valneva.
We have the Dukoral cholera vaccine, and we have IXIARO, Japanese encephalitis vaccine, that are in-licensed for both the German and the Swiss market. Here, I think we have in particular for the IXIARO, we have seen a very strong development these first six months. Again, a traveler's vaccine that has been positively impacted by the picking up of traveling that we see in the markets. Strong performance and together across these three products here we have recognized more than DKK 50 million in revenue for the first six months. Also a nice additional contribution.
Remember, I think this is, you can say, being launched without any material significant additional resources as we are basically using the commercial setup that we have in place in both Germany and in Switzerland. On the next slides, we have a full P&L, total DKK 985 million. We already talked about the reasons for that one. Production costs for the first half year of DKK 723 million, driven by of course the revenue, but again also impacted to some extent by the planned shutdown of our Bulk facility, which has now reopened again. R&D development costs DKK 290 million, so significantly up compared to last year and explained by the ongoing RSV phase III trial that is of course consuming some cash.
On SG&A, DKK 253 million, in line with the level we saw last year as well. At the bottom of this table, you see an EBITDA showing a loss of DKK 212 million. On the next slide. Let's see here. In terms of our cash flow for the period, I'm now talking to the table to the upper left. The net cash flow for the period was a negative of DKK 307 million, driven by negative cash flow from operating activities to some extent, offset by improved working capital position. We saw a negative impact from investment activities, and this includes investments in the expansion of our bulk facilities so we can manufacture Encepur, Rabipur in the future on our site in Kvistgaard.
It also includes the money that we invest behind the tech transfer of these two products as well. Cash flow from financing activities, a positive contribution of DKK 301 million, and mainly explained by support from the Danish Ministry of Health to our ABNCoV2 project. To the right, I don't want to take you through all those details on the balance sheet, but just highlight here that by the end of June, we had securities, cash and cash equivalents of nearly DKK 3.3 billion. If we deduct all the debt that we have, that gives us a net cash position of DKK 2.4 billion. If we add back the real debts, not our repo positions, I think this brings us or gives us a cash availability of DKK 2.8 billion.
Really strong cash position that enables us to continue investing as we planned for this year. My final slide. This is one I have been really looking forward to share with you. Of course, we have, I think, on the guidance side, been quite busy over the summer here as well. As we have closed more and more orders related to the monkeypox situation, we have also adjusted our guidance 6x actually over the last couple of months. Remember, the original guidance that we issued in March reflected the investment year that Paul talked to in his introduction. We spent nearly DKK 2 billion in R&D this year, and we also were challenged a little by the fact that we had to shut down the bulk facility to do the expansion work in Kvistgaard.
That facility has now reopened, but that these things together really meant that we came out with a guidance of relatively low revenue levels and a loss of more than DKK 1 billion. Now we have adjusted 6x , as I said, and we are guiding today expected revenue between DKK 2.7 billion and DKK 2.9 billion and EBITDA getting closer to a break-even between DKK 100 million-DKK 300 million and a cash position better than DKK 1.7 billion. While the monkeypox orders clearly have had a huge impact on these guidance, I also have to say that the current performance of our commercial business, in particular the GSP, but also the first signs of the GBE business gaining momentum again, has also contributed to our adjustment of the guidance.
With this guidance, I think we are extremely excited about the first half of this year. It is a fantastic opportunity for Bavarian Nordic at the moment to really make a difference, show what we mean by our vision, but also take advantage, of course, of the commercial opportunities and the financial opportunities that we see in the market today. With that, we will open up for questions and answers session.
Thank you. As a reminder to ask a question, you will need to press star one one on your telephone and wait for a name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. Now we're going to take the first question. Please stand by. The first question comes from the line of Thomas Bowers from Danske Bank. Your line is open. Please ask your question.
Great. Thank you very much. A couple of questions here. Firstly, just on the monkeypox vaccine. Can you maybe comment a little bit on how the dose order backlog looks like for 2023 now in total with all also combined small orders that you haven't announced? Second question, just on Encepur, Rabipur. How do current inventory levels at wholesalers and pharmacies look like right now compared to what you saw in, you would say pre-COVID levels? Can you maybe add a bit of color on how you see the sales development going in here to the first part of the third quarter?
Thirdly, just on your 2022 guidance just to clarify the exchange rate that you use, is that still 6.95? How much of the monkeypox revenue in H2 is actually going to be paid in U.S. dollars? Maybe just if I can squeeze in a last question just on dose sparing. You could say, once the inventory levels of the vaccine, monkeypox vaccine starts to sort of improve here during the next couple of months, maybe year into. Do you actually expect the EUA to actually be removed immediately? Or is there sort of a risk that this will continue? Thank you.
Hi, Thomas Bowers, this is Henrik Juuel. Thanks for the questions. I think of the dose order backlog, I think that the closest we can get to give you an answer, it's actually what Paul Chaplin said earlier in his presentation here. I think if you look at the orders that we have closed today, that is, we are talking approximately 9 million doses, going across 2022 and 2023. If you look at the expected delivery times, they are skewed somewhat towards 2023, which basically I think you can interpret as, we have actually now secured more business already here in August for next year than what we have used to upgrade our guidance this year. I have to say though, that the exact split between 2022 and 2023 is extremely sensitive to the final delivery schedules.
We could have some orders that we are planning to deliver in November, December, that could happen in January, February, or the other way around. The good thing of course is that we are not talking about any lost business. It's simply a matter of logistics. The sort of split between 2022 and 2023 extremely sensitive to these things here. On your other question, the Encepur and Rabipur wholesale inventory levels. We do not have a, you can say, full insight into the exact inventory levels that they hold. There are many wholesalers out there, but it is clear, and particularly with a product like Rabipur, that when you have a sudden uptake like this, it will eat into the inventory levels at the wholesalers. My expectation is that they are running at low inventory levels right now.
It takes typically some quarters for the wholesalers to adjust, and then they will start adjusting their own forecast. We are running I think at relatively low inventory levels with the wholesalers. That is our best estimate at the moment. The U.S. dollar in our guidance is reflected in the current levels of the U.S. dollar. We have seen in the first half year the only real income we have had there in U.S. dollar is the
Okay. By defining the emergencies, that's also due to the lack of vaccines or is it also due to general emergency as we see now on, right now with the outbreaks?
No, it's due to the emergency, not necessarily caused by the lack of vaccines, by the number of cases of monkeypox.
Okay. Got it. Great. Thank you very much.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from the line of Gil Blum from Needham & Company. Please ask your question.
Good afternoon everyone, and thank you for taking our questions. Maybe an organizational question first. Will recognition of previously contracted JYNNEOS be delayed because the bulk that's currently, that was produced for those doses is now being used for near term orders?
Yeah, I can take that. Just so that we're all on the same page there is a substantial amount of bulk inventory that the U.S. has purchased over the last few years. That equates to approximately 15 million liquid doses or around about 13 million freeze-dried doses. We're already eating into that inventory with the 5.5 million liquid doses that's already been placed. That bulk would need to be replaced to fulfill the options that already began to be awarded earlier this year, which is to create a stockpile of 13 million freeze-dried doses.
Yeah, it will impact the timing maybe of the freeze-dried, depending on what additional orders we receive from the U.S. But as I said, the option to start manufacturing freeze-dried was $119 million that was awarded, if I remember rightly, in early June. That had not been touched, and it's still sitting there, and that is part of the larger option of $299 million. The exact timing of right now is a little unsure because, of course, we've also pushed out the tech transfer, the freeze capabilities as we're manufacturing JYNNEOS Liquid. We do anticipate that any bulk that is utilized in the current manufacturing of liquid will be replaced, and that we will, at some point, revert with the manufacturing of freeze-dried.
Okay. That's very helpful. Can you provide any commentary on any differences for per-dose pricing across company contracts? Are there differences?
Pricing. Well, first of all, I would say no because we use the same approach for everyone. There are, however, differences in price based on the volume that's being ordered and/or potentially the longer-term commitments that governments are showing. Those are the two factors that could create a discount, so to speak, on price. The same mechanisms are used for all customers.
All right. Maybe a longer view question. In our discussions with KOLs, it seemed that due to the unprecedented size of this outbreak, monkeypox might be something that that's gonna stick around with us at maybe into the future. Is the company also viewing this current outbreak in those terms?
I missed the last part of the question, sorry.
I was asking if Bavarian Nordic is also viewing monkeypox as something that's gonna be long-term, you know, with us similar to how COVID's probably gonna be long-term?
I mean, that is one scenario, of course, that it will remain at a certain level within the community. I would say even if it doesn't remain at a certain level, I think this is yet again another wake-up call to the worldwide community that you can't simply ignore an infectious disease in one part of the world because it will eventually cross borders. Kind of, as I said, there's been warning signals for the last four years with travelers returning from Nigeria that this was on the cards. I think even if through vaccination, public health measures, and all the rest of it, we as a society get on top of the outbreak, it's just a matter of time until it returns.
Great. Maybe a last one on COVID. There's been a lot in the news recently that potential, you know, filings for approval of Omicron-specific and other variant-specific vaccinations by the fall. Could that potentially affect enrollment in your phase III study? Thank you.
Yeah, it's a good question. You know, the early indications are from the sites that we've contracted, we don't believe so. You know, as I mentioned in the presentation, you know, it's not the first time we've been hit with challenges in the regulatory landscape. It's something that we certainly keep an eye on. At the moment, we don't believe so because as you may have seen, we will be recruiting fairly rapidly to get to the endpoint of the study. It is a concern that you raise and flag, and it's one that we'll keep an eye on.
All right. Excellent. Thank you for taking all of our questions.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from the line of Peter Verdult from Citi. Your line is open. Please ask your question.
Thanks. First, just high-level management bandwidth. I mean, monkeypox, I'm sure is keeping the team extremely busy on too many other programs. Just making sure that there is enough bandwidth to execute, and onto just on supply, when we last talked to supply 15-20 million doses next year.
Yes, Pete?
Let's talk to the capacity.
Yeah, I think you broke up a little bit there, Pete, but I think I heard the gist. If I don't, then you can come back and correct me. One, I think, was related to the bandwidth. I think you're completely right when you say that we're extremely busy, and I mentioned that in the presentation. I think the areas that have really been impacted by monkeypox, obviously, is in manufacturing, where we've had to short-notice change all our plans, to regear to manufacture JYNNEOS. However, they had a busy year, and instead of being busy on other things, they're now extremely busy on one product, which is JYNNEOS in the mix. I think we can, and we will manage, with the caveat, as I said, we do need to expand our capacity through partnerships.
I think the good thing is that in terms of the R&D, the clinical development, our two phase III programs, while the folks there are also extremely busy, they have not really been impacted by monkeypox. It's almost like we can compartmentalize the two activities and forge ahead with all the different programs. We remain confident that we can live up to all our plans. I think the second part of your question related to capacity. I think I heard you mention 15, 20 million doses next year. As I said, that number really comes from scale-up in drug substance, the Bulk, where we'll be at four batches a week.
where we will be up to four batches a week with the current capacity that we're anticipating in terms of fill-finish with the partnerships that we've already announced.
Dear speakers, please be advised, Peter's line has been disconnected.
Yeah.
Okay.
Now we're going.
I could.
Are you happy to take another question?
Yes.
Yes, please.
Thank you very much. Now we're going to take the next question. The next question comes to line of Boris Peaker from Cowen. Your line is open. Please ask your question.
Yeah, good morning. My first question on JYNNEOS. Can you tell us what are the raw materials, and I guess more importantly, if you were to run your manufacturing facility at capacity for, let's say, the next year or two, do you have the raw material supply to support that, or is that a limiting factor?
Yeah. Thanks, Boris. You know, one of the raw materials, it's an egg-based production. Of course, if you're gonna go and double your capacity, you're gonna be using a hell of a lot more eggs. There's lead time to get the flocks up and running. The good thing is, as I said on that one, we obviously had been planning to be operating at two batches a week next year, and we've already been in dialogue about scaling up our capacity and things like that. I think we can manage. Some of the other raw materials are single-use plastic items, which are like gold dust in the industry. Again, I think through our network and support from certain governments, we will also be okay on that.
We may not have secured everything, but we are confident that we can be operating at four batches a week by the turn of the year.
I'm just curious, how many eggs are required to make a single dose of JYNNEOS?
A single dose or a batch?
Whichever way you want to count it.
So, a batch.
Yeah.
Yeah, no, a batch is. It's not like flu, so I think, and I'm probably gonna be wrong whatever I say, but I would have a stab at 5,000 eggs a batch.
How many? 1,000?
5,000.
5,000. Got it. Great. My last question is on financials. You reported some sales of third-party products. What is your arrangements for these third-party products, and how should we think about their margin?
Yeah. Thanks, Boris. Yes, we have recognized DKK 53 million for the first six months. The way it works with these is that we have the rights to promote these products in two of them, in both Switzerland and Germany, and the HEPLISAV-B product in Germany only. We basically buy the products from the manufacturer, and then we earn a certain margin. I cannot be specific on the margin as per agreement with our partners. It is obviously lower than the margin that we earn on the other products. The good thing is that we are here leveraging synergies in our organization as we can carry these products through the existing commercial organization.
For instance, in Germany, it means that we are now going to the doctors with actually with five vaccines in the bag, which also has that added benefit that our sales organization, they have something new to talk about all the time, and they have a good excuse to go into the clinic and meet our customers. It is a good business. It's DKK 53 million. I think we're off to a good start. We are seeing in particular IXIARO benefiting from traveling picking up again, just like we see in our rabies business as well.
Great. Thank you very much for taking my question.
Thank you. Now we're going to take the next participant. Please stand by. The question comes from the line of Peter Verdult from Citi. Peter, your line is open.
Hi, it's Pete here again. Sorry about before. I think I got disconnected. If it happens again, we'll give up. Paul, I heard your answer to the first question. My remaining questions, and I apologize if one or both of them have been asked already while I was off the call. When we last sat down together, Paul, I think you intimated that if you executed to your plans, you might be in a position to supply 15-20 million doses from your Danish plant next year. Any update on that number? Is that still sort of the aspiration? Then secondly, just on stockpiling and preparedness, you know, the U.S. has got up to 200 million doses of ACAM2000 that they're not using.
Are you sensing that there's a willingness to replace or create a separate stockpile there? I realize you can't name countries, but can you at least give an indication of how many other major countries would you feel are thinking about monkeypox, not just here and now, but in terms of long-term preparedness and potentially stockpiling? Thank you.
Yeah. The second part of your question. Is it our aspiration? Yes, certainly. 15-20 million is what we can manufacture. Of course, we need to secure orders for that before we would do it. That's certainly what we believe we can squeeze out of our facility next year. The question about ACAM and the U.S. government, I mean, I think, you know, again, this is me speculating because it's not on the basis of any contract, any confirmed or firm discussions. I believe whenever you're facing an outbreak like we are with monkeypox, it does make people rethink about their requirements. Now, the U.S. has been clear for decades on having a smallpox stockpile requirement.
I think the current outbreak, in my opinion, has highlighted that they don't have enough JYNNEOS, and that I think it will lead to a rethink of how many doses of JYNNEOS they really want, both as a smallpox stockpile, but also, you know, to, for the continued control and/or preparation for the reemergence of monkeypox. I would say the majority of discussions that we have right now are still of what I would call the here and now, which is doses that we currently need. There are a handful of governments, I would say, that are showing indications that they're thinking in terms of moving beyond the here and now to, "Okay, we better be better prepared," because it's been clear within the community that those governments that had doses on stock have been better prepared than those governments who've been scrambling to get doses.
Yeah, we've seen a shift, but I would say it's a handful of countries right now.
Thank you.
Thank you. Now we're going to take our next question. Please stand by. The next question comes from the line of Michael Novod from Nordea. Your line is open. Please ask a question.
Thank you very much. Just a few follow-up questions. First of all, to a potential bulk manufacturing partner, can you talk about which kind of structure you're looking for? Would that be sort of traditional CMO or larger pharma company? Given the complexity of doing tech transfer on bulk, how fast do you think that could be done if you sign such a deal during next couple of months? Secondly, to the third party revenues for IXIARO, Dukoral and HEPLISAV-B, what kind of levels should we sort of be looking at just for sort of housekeeping to the modeling for the full year of 2022?
Is that a sort of a mid-single digit growth area going forward? Is it a high single digit? Is it a high double digit? What is sort of the benchmark rate which is used for growth going forward? Thanks.
Thanks, Michael. I'll take the first one. That was related to, you know, what sort of partnerships are we looking for. I think as I said, there are two things that we need. One, in the short term, we definitely need a higher capacity, particularly on fill and finish. That's because, you know, certain governments already have a large stockpile of drug substance, and we will be creating quite a large amount of drug substance over the coming months. The immediate need, I think, is on fill finish, and we are in discussions with both traditional CMOs, but also vaccine manufacturers, whether that's large pharma or not. In terms of bulk, there are some discussions about transferring bulk, and to your point, that is not gonna be as easy as fill and finish.
Not that fill and finish is easy, but it will be harder. I think that falls into the next bracket of do we need to consider medium, longer term solutions for drug substance. I don't think that is a short-term fix.
Could it be something that you would be doing sort of near term in order to be sure that when and if there's need for more bulk capacity, then you can also respond to that?
There are discussions on drug substance, yes. We're not ruling it out, but I think we're just aware, and you raised it yourself, that the complexity of the drug substance with an egg-based process is gonna take a bit more time. But to your point, the sooner you start, the sooner you're finished, right? We are in discussions both on filling and drug substance.
Okay.
Yeah, okay. Hi Michael, this is Henrik Juuel. For your questions here, let me try to answer your question on the partner segment. As you know, it's just we're talking about three products here, and I think if we were to also give you some input on the growth potential, I think we have to take them one by one, basically. If we take the small one first, Dukoral, I think first half year is approximately a single-digit million DKK, so not a huge income from Dukoral. The growth on that one is probably also limited.
If we then take HEPLISAV-B, which was launched here in May, I think it's still a little too early, and what we see in the numbers right now is mainly pipeline filling. Of course, we have expectations that this product, which is superior to the competing product in the market as it's a one dose only. Oh, sorry, it's a two dose versus three dose. Isn't it? I think yes. Yep.
Yeah.
We have high expectations that we will take market share, but it's a little too early because what we see right now is mainly just filling up the supply chain. We have IXIARO, which is more than half of the revenue we have recognized this year, and which has really benefited from sales or traveling picking up again. I think without having all the insight into this product here, as it's a partner product, I think just benchmarking it to our Encepur business in Germany, which has its own similar strong growth, that business is still sort of 40% below the pre-COVID level. I do believe that there are still a good growth potential in IXIARO.
Of course, that assumes that the travel will continue to pick up and grow even beyond what we see today. There should be a good growth potential from IXIARO and also HEPLISAV-B once we start seeing the in-market data and that we can demonstrate that we can actually take market share.
Okay. Thanks a lot.
Thank you. Dear speakers, there are no further questions. I would now like to hand the conference over to our speakers for closing remarks.
Yes. Thank you. Thank you everyone for your time and attention and the questions and have a great day. Thank you.
That concludes our conference for today. Thank you. Thank you for participating. May you all just have a nice day. The conference will begin shortly. To raise your hand during Q&A, you can dial star one one.