My name is Peter Welford. I'm one of the European Pharma and Biotech Analysts at Jefferies in London. It's my great pleasure to be introducing the next company in this track, which is Bavarian Nordic. And it's our pleasure to have here with us today, Paul Chaplin, the CEO, on stage with me. Actually, we've also got a Henrik Juuel, CFO, raising his hand up, but we've got IR as well, Rolf. It's a fireside chat. If anyone does have any questions in the audience, please feel free to raise your hand. We can get a mic out to you, and happy to have any questions. But with that, I guess, Paul, let's kick off. I mean, we've got to start, obviously, talking about the recent Mpox outbreak, obviously, and the subsequent classification by the WHO as an emergency, which obviously catalyzed a lot of orders for you.
Can you just talk about the current situation as you see it, both in terms of orders and in terms of what the potential demand could be, and how we should think about your ability to supply JYNNEOS for the Mpox outbreak?
Yes, certainly. So when the outbreak or when the public health emergency was declared in August, we had to change track in terms of everything we were doing in terms of our manufacturing strategy. But we said that we could actually manufacture 2 million doses by the end of this year, and we have roughly about 13 million doses next year that we could manufacture. And that ties in very nicely, actually, with the demand that both UNICEF and the Africa CDC are talking about. They're talking about anywhere between 10 and 15 million doses are going to be required to get on top of the current outbreak. Those 2 million doses that we pledged, we've actually sold. Last week, we came out of our Q3 numbers. We're guiding for DKK 3 billion-DKK 3.4 billion kroner in terms of public preparedness.
That range, still late in the year, is due to the one million dose UNICEF order that they placed. And that's simply, we don't know how many of those doses we're actually going to ship this year. But that's not lost revenue. That will just be revenue that transfers into next year. And what we announced last year is we already have 2.4 billion kroner in orders for our public preparedness for next year. And just to remind you, we've said our base business in public preparedness is 1.5- 2. So we're already above. And any miss on the guidance this year, meaning if we don't hit the upper range, that is just going to move into next year. So it's 2.4 in guaranteed contracts, going up to maybe 2.8 if we miss some of the doses this year. We are manufacturing at full scale still.
We plan to manufacture at full scale next year. The reason is that the UNICEF tender, which is public, originally said there would be stage one where they wanted up to five million doses. The one million they've ordered, there's also two million doses that have been donated. So they have three million doses in total of MVA. However, that falls short of what they need in terms of 10- 15. So we do anticipate larger orders on top of what we've been just talking about.
Just in terms of the capacity, in terms of what you can actually do at the moment, can you just talk a little bit about the efforts you've had to do to expand the capacity to where we are today, and I guess how we can think about the potential levers you can pull with regarding MVA-BN, the vaccine, to potentially increase that in the future?
So with the first outbreak in 2022-2023, when I say outbreak, the outbreak that was in the U.S. and Europe, we ramped up production in terms of the bulk manufacturing to four batches a week. And we've maintained it at that level because typically for this product, we produce to order. But after 2022 and 2023, we realized we needed to build up an inventory to deal with these outbreaks. It's come a little bit earlier than we were anticipating. So we had vaccine on stock that we could quickly move into. Also, in 2022-2023, we expanded our fill/finish capacity, bringing in a contract manufacturer in the U.S. So as I said, we have around about 15 million dose capacity right now. That seems to be sufficient. However, we're also in discussions with other manufacturers in other parts of the world.
It's on record that we're also willing to move fill/finish to Africa if the demand needs. So essentially, what I've told the stakeholders is we'll manufacture whatever is needed. We're also moving to a potential new process, which we could accelerate. And so quite easily, we could go from 15-50 million doses. And so basically, the message is we will deliver whatever you need.
I guess just on that, you talk about going from 15- 50. I mean, it suggests, therefore, that the limiting factor here at the moment is, to some extent, the fill/finish, the processing, not the actual making the vaccine. Because it seems like you're saying you have the capacity to actually make the raw material, if you like, of the vaccine.
Yeah, yeah. And fill/finish, to be honest, all manufacturing is tricky, but the fill/finish component is the easiest part. And we can easily expand fill/finish by working with other contract manufacturers.
Can we just talk a little bit about the expanded use of the vaccine, both, I guess, in terms of age, where I think we're going for infants and adolescents, but I guess also in terms of the different formulations, because I think there's also a freeze-dried formulation. Perhaps you can just talk a little bit about that as well.
Yeah. So going into this outbreak, we had the label and the indication for adults, all adults, no matter whether you're immune compromised or not, which is a huge advantage. Unfortunately, in Africa right now, the majority of the cases are in people under 18. The good news is that we, together with NIH, have generated data in adolescents, so 12 years and older. And that has been included in the label, both here in Europe, but also under the pre-qualification with the WHO. We've started a pediatric study together with CEPI funding in Africa. It's going incredibly well. So that, hopefully, in the months ahead, will expand the label for also children. We're also supporting a study that will start next year in children under the age of two and in pregnant women, which, again, hopefully, will expand the label there as well.
In terms of children under the emergency use authorizations that have been issued, you can use MVA in children under off-label use currently because it's being used in children as an Ebola vaccine, so there is some safety data already, so very shortly, I would say in months under the emergency scenario, or maybe in the next 18 months, we'll have a label most likely for the entire population, which is great news because, obviously, we want to make sure everyone who needs it can get access to the MVA. In terms of freeze-dried, that's a program that we've been working on now for many, many years with the U.S. government. The freeze-dried advantage is it has a longer shelf life and the shipment is easy. You can do it two to eight. That development is complete. We've completed all the clinical studies. We've filed for approval with the FDA.
We expect that approval end of March next year. And that will be approved only in the U.S. initially. And that will allow us to extend our current contracts with the U.S. government.
Perhaps, I mean, I guess related to that, can you talk a little bit about how you see the opportunity for long-term stockpiling of the vaccine? I mean, it's something that's been talked about for a long time. I think really only the U.S. government has ever showed any real significant desire to build stockpiles of biodefense vaccines, but given what we've seen now, the second sort of outbreak that now has gone to Europe, how do you, I guess, view the current climate for potential stockpiles once the emergency, I guess, has been met with demand?
You're right. Historically, when we've looked at this area, we've really only had two main customers. That's been the U.S., which is 90% of all the revenues, and Canada. After 2022-2023, we've come through, and we now have probably up to five different customers. We have the European Commission. We have a contract with HERA. There are other governments now in Europe that are sustained customers who have seen the need to start stockpiling MVA. That's the reason that earlier this year we said our base business in public preparedness is anywhere between DKK 1.5 billion and DKK 2 billion annually, and that we will then see these continued spikes with outbreaks. I fully envisage, let's see how we go, but when we come through this outbreak, we will have even more customers. I believe UNICEF, Gavi, Africa CDC will be another long-term customer.
We're already seeing that governments who have donated doses are backfilling those donations, and that's leading to interest within Europe of more governments looking at sustained stockpiling. So I really think, unfortunately, it takes these outbreaks to remind everyone of the devastation of this disease and that you can't just ignore a disease that's somewhere else because it will soon come to your borders, and I think that reality is beginning to grow. So when we come through this outbreak, let's see, but it may well be that we have to increase our base business from that 1.5- 2 to something a little bit higher because I do anticipate more customers.
Maybe it's just spending a moment just explaining because, obviously, the U.S. already has a stockpile of a dose for every American of smallpox vaccine in theory. Maybe it's just worth explaining a minute what the advantage of your vaccine is and why there is still a need for additional smallpox doses.
This product was originally developed in collaboration with the U.S. government because, as you said, they have a stockpile of a smallpox, Mpox vaccine for the entire U.S. population based on what we call second-generation smallpox vaccine, which is like the historical vaccine that eradicated smallpox. It's applied to the skin. It's fully replication-competent. And while it's highly efficacious, it has some nasty side effects, the worst of which is death. The government at that time thought, "Okay, we need to develop a safer alternative for people that are immunocompromised who really, under any circumstances, shouldn't receive this other style of vaccine." That was their thought process even going into 2022, that we would need a limited stock of MVA to complement the larger stock for the whole population for people who really shouldn't receive the old style vaccine.
What happened in 2022 is when the outbreak occurred with Mpox, no one wanted to use ACAM. No one wanted it from a patient point of view. No healthcare professional wanted to administer it. And everyone wanted MVA. And that's the reality. If you've got a safer alternative vaccine that is suitable for people with HIV and is suitable for people with CD4 counts as low as 200, why on earth would you take a vaccine that has the potential to kill you? And that's the reality that's hit home with the U.S. government. They have a stockpile for more than the U.S. population, but no one will ever want to use it. So the opportunity for MVA is really bringing that realization home and saying, "Well, you've got a better alternative. You know you have a better alternative. Why is it only for people that are immune compromised?
Everyone wants it.
I was going to say, except the military, who I think already do it. But I guess you don't have a choice there.
Yeah, and the military have swapped over. They've stopped using ACAM2000, and they're using MVA-BN.
There we go. Even the military. Okay. Perhaps then, if we do think about the private market segment, finally, just finishing off, Jynneos, because I think you've also got approval to launch it as a travel vaccine. Now, I appreciate, obviously, that's not the current focus. But can you just talk a little bit about the opportunity there? And I guess that then leads us into your travel vaccine franchise and how it fits.
Yeah, so the risk of Mpox in the U.S. is primarily in a population that's at high risk, which is men who have sex with men. And ACIP made a recommendation that MVA should be offered to that population, and we launched earlier this year. The main reason we were encouraged to do that is the U.S. government really wants to continue focusing MVA for smallpox and building up that stockpile and want Bavarian Nordic to take over the Mpox indication through the private channels. It's a launch year. It was going relatively slow because we were competing with free doses. So before we launched, the U.S. government had been supplying doses that we'd sold to the SNS free of charge into the channels. So it is always challenging when your competition is your own vaccine, which is also free. So it took a while.
Those free doses have been flushed out of the system. The U.S. government no longer supplies free doses, and so the only way you can get MVA in the U.S. now is through our channels. And obviously, with the outbreak, we've seen a surge in demand, so much so that we've borrowed 200,000 doses from the U.S. government so that we can resupply the U.S. private market while we focus on the outbreak in Africa as well. So it's going extremely well. It's still early days, and we'll have to see how it develops. But there's also a recommendation in Germany similarly. And we're also supplying through private channels in Germany with MVA as well.
Perhaps, I guess, so we talked about travel vaccines. That brings us on to perhaps we can start off talking about the original sort of commercial business you acquired, Rabipur for rabies and TBE vaccine and Encepur. Can you just talk a little bit about how you've grown those vaccines after, I guess, many, many, many years on the market and sort of you've returned them to growth from here?
Yeah, so I'll use a phrase here when I refer to the assets that we've purchased over the last couple of years as unloved assets, assets that were stagnant in their previous homes, that weren't getting a lot of attention in terms of marketing. They were just there, and they were generating revenue. You mentioned rabies and TBE. They've been losing market share year on year under the previous owner's hands. We thought they would be ideal assets because with the focus that we would be able to give them, we could give them a new lease of life. We could make sure that we could guarantee supply with our focus. And that's essentially what we've done. We had to come through a bumpy little road called COVID, which obviously had an impact on travel, but we've persevered.
We've now sold more doses of rabies than anyone else. We're on track to sell more doses of TBE than anyone else. We've stopped a slide in market share, and we've actually gained market share of TBE with a market leader with rabies. It's been a huge success story and an endorsement of the strategy. We've taken unloved assets. We've given them a bit of love, and we've turned them around. The other thing that we went when we bought those assets in 2020, we had to transfer the manufacturing. We said that would take four or five years. There were two reactions to that. There were reactions from maybe some people in this room who thought that that was an incredibly long amount of time and why the hell would it take five years, four or five years.
And then there were others in the industry, including GSK, who said, "You're crazy. You'll never get it done in that time." Rabies is one of the most complicated vaccines to produce and release, more than 150 individual tests to release the product. I'm pleased to say that in four years, on time, on budget, we've transferred that manufacturing. That manufacturing is now in our hands. That means that the supply is really in our hands. And we will make sure we guarantee supply. In terms of Encepur, that tech transfer is almost complete, but regulatory approvals will be coming in next year. And that will be completed on time and on budget.
It's been a hugely successful story, both from the tech transfer point of view that will lead to an improvement in the gross margin, from a sales and marketing point of view where we've sold more life-saving vaccines than anyone else in this area. It's set up a beautiful commercial platform where we can go and look at new or additional commercial assets as a bolt-on. That's exactly what we did with the Emergent travel franchise last year.
You mentioned that. Let's talk a little bit about that. Aside from the pipeline asset, can you just talk a little bit about the other facility? Sorry, both the facility, but also as well the vaccines that you bought with the Emergent deal that are commercial at the moment?
Yeah. So as I said, we're always on the lookout for unloved assets. And we bought a vaccine for typhoid called Vivotif and a vaccine for cholera called Vaxchora. They, unfortunately, had been removed from the market during COVID. So while we persevered during COVID, Emergent took another strategy, and they removed the products. So they've been off the market for three years. They essentially need to be relaunched. They're great assets. They're well established. However, as I said, they've been off the market. So we need to relaunch. We need to remind people of the value of these assets. We believe combined, we can recover these assets back to $100 million annually in the coming years. And we're on track. It's going to take time. It also came with a manufacturing facility in Switzerland, which is great. So there's no tech transfer with these assets.
The facility was up and running. It's very successful. It's got all the approvals. We've just taken over, and it actually offers a new opportunity. It's underutilized, and it has a lot more capacity. That's great. It's bad in some ways when you look at the short term because it's a cost, but it's a great opportunity because, again, if we look for additional assets or even internal assets, we have spare capacity and know-how now in Bern that we can plug and play new assets, so we see it really as a strength. And yeah, those assets, we're relaunching. We're turning them around. It will take a little longer, but with our track record of rabies and TBE, we will do the same with Vivotif and Vaxchora.
I guess that then brings us to Chikungunya, the ChikV vaccine that you've now, I think, filed with regulators in both the U.S. and Europe to launch next year. I guess, can you talk a little bit about this opportunity and this market? But importantly as well, how obviously there is already a vaccine of Chikungunya recently launched. How would you compare and contrast the two?
Yeah. So first of all, I should just remind everyone what Chikungunya is because not many people have heard about it. And I always think it sounds like a Mexican takeaway. But it is actually quite a devastating disease. It's spread by mosquitoes. It causes severe joint pain. And when I say severe joint pain, let's not exaggerate what I'm saying. You cannot use your hands or parts of your joints that become infected. It can last weeks. It can last months. It can last years. So it's a devastating impact. You go on holiday. You get bit by a mosquito. You come back. You won't be working for three years. It has a big impact on people. And currently, there's now one vaccine. There's no real treatment. So there's a huge unmet medical need. The mosquitoes that transmit Chikungunya are already present in southern Europe.
They're already present in parts of the U.S. The only thing they're missing is the virus. And with global warming, it's probably only a matter of time before Chikungunya becomes a little bit more of something that all of you worry about. We bought a phase III asset as part of the acquisition. We were very excited. It hadn't read out yet in phase III, but we saw that it was differentiated potentially. The phase III readout really confirmed what we believed we'd bought: a superior safety profile. The current vaccine that was approved here in Europe and also in the U.S., 12% of everyone that will be vaccinated will get Chikungunya-like symptoms. To remind you what Chikungunya is: severe joint pain, high fever.
If you take the current vaccine because you're going on holiday in Asia, you've got a 12% chance of getting Chikungunya before you go on holiday. That's not great, in my opinion. We don't see any of those adverse reactions at all in our phase III study. Let's see what our label says when the approvals come through. We also have a faster onset of protection, meaning that you're protected within one or two weeks of receiving the vaccine. That's great for travel because most of us never plan that well. And it's always last minute. We have differentiated vaccine. And it's not just us who believe so. We have accelerated review both in Europe and FDA. And you only get that if the regulators agree there's an unmet medical need. There's an unmet medical need because of the safety concerns.
There's an unmet medical need because we're also including 12-year-olds and older in our file. So the approval date for the US: 14th of February. It's a Valentine's gift to Bavarian Nordic. Europe will be a little bit later, but we'll be launching in the first half of next year, and we're pretty excited about the opportunity.
And I guess then in the last couple of minutes, maybe we can talk a bit about strategy. So first of all, what is your sort of capital allocation strategy now looking forward? And how does the company envisage, I guess, the free cash flow after the current year of pretty big payouts, I guess, to trend in the future?
Yeah. So we're going to be generating cash. Our ambition and our mandate is that we're looking at an EBITDA margin of 25%-30%, not only this year, but moving forward. So we're going to be generating cash. We have some debt to pay off between now and next summer. We're still paying for the assets from GSK and Emergent. We have cash in hand to pay for those assets. But as of the mid of next year, we are a debt-free company, cash-generating. I think what we've said is that we need to look after the business. We need to invest where it's needed. We need to look at M&A opportunities. We've been very, very successful. Just been talking about it the last 20 minutes or so.
However, if we're not a bank and if we're generating too much cash, we'll be looking at allocating that cash back to the investors.
When you talk about investing in assets, I mean, how should we think about this now? I mean, is this likely to be? It sounds like more commercial or perhaps very late-stage assets. Should we be thinking more along the lines of travel vaccines or other sort of? I guess, what's the sort of framework we should be thinking about when we consider deals you might do?
I think our near-term focus is definitely commercial assets. The reason for that is you need a certain scale to be moving forward, and I still feel that we want to increase the top line while maintaining the profitability of the company, so we're looking for commercial assets. The ideal commercial asset is one that has a plug-and-play in the systems that we have, so in our commercial setup, so that's travel niche. That doesn't mean that we're put off from other assets. It just means that we would have to look carefully at what that commercial setup would be, but certainly, any asset that we bring in needs to be immediately profitable. Otherwise, it will be diluting the profits we already have, so it needs to be profitable. Ideally, it's a plug-and-play, and it would increase the scale of BN.
That's great. Thank you all very much for your attention. Thank you very much, obviously, mostly Paul, for the time here today. With that, we'll close the session. If anyone does have anything else, please reach out to Paul directly. But with that, thank you very much.