Ladies and gentlemen, thank you for standing by, and welcome to the annual report 2019 conference call. At this time, all participants are in a listen-only mode. After this speaker presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Thursday, 28th of February , 2020. I would now like to hand the conference over to your first speaker today, Rolf Sørensen. Thank you. Please go ahead.
Thank you. My name is Rolf Sørensen, Investor Relations, with me today, here I have the CFO, Henrik Juuel, as well as President and CEO, Paul Chaplin. Before we begin the presentation, I will read the following statements. 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. 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, that is not historical information. Forward-looking statements 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 the line over to President and CEO, Paul Chaplin.
Thank you, Rolf, welcome everyone to our annual results call. 2019, if you go to, actually, the first Slide 3. 2019 was a highly successful year that will always be remembered as the year we took the decision to transform the company and add a commercial arm on top of our manufacturing and R&D expertise. I'll walk through some of the key events of last year. One of the major events was the approval of JYNNEOS, a long-standing partnership with the U.S. government that was finally approved last year by the FDA, not only for smallpox in the general adult population, but also for monkeypox, which is a serious emerging disease and opens up a whole new commercial opportunity for Bavarian Nordic in the years to come.
Of course, 2019 will be remembered for the bold decision to acquire two assets, two established commercial assets from GSK, Rabipur, a vaccine against rabies, and Encepur, a vaccine to protect against tick-borne encephalitis. Our fill-and-finish facility was finalized in terms of the construction, and this year we'll be qualifying the facility and start already production at year-end, where we will be manufacturing not only JYNNEOS, but we'll be transferring in the years to come, Rabipur, in that facility. We've strengthened our executive management with two appointments, a Chief Commercial Officer and our Chief Medical Officer, who will help in the years ahead in the integration of our two new assets and in the marketing of our niche commercial assets. Our Ebola vaccine, in partnership with Janssen, is being deployed in Central Africa to contain the current outbreak.
Importantly, we filed together with our partner for approval in Europe. Our RSV vaccine, which is a very exciting asset that will be entering Phase 3 next year, we finalized the design with the FDA. As I said, this year, we're in preparation to start the study in 2021. Finally, through a DoD collaboration, we entered into a Phase 1 study for equine encephalitis, which again, is another deadly emerging disease and could offer a very exciting new commercial opportunity in the years to come. Truly a highly successful year with a lot of exciting events. If you go to the next slide, where are we going? In the next five years, we aspire to be one of the largest pure-play vaccine companies, improving and saving lives by excelling in R&D, innovation, manufacturing and commercialization.
Maybe a lofty ambition, but it's one we truly believe that we can create. We'll do that through three strategic pillars. One, is building a company driven by commercial excellence. The second, is to continue to develop innovative life-saving vaccines. Lastly, build a company with the best-in-class vaccine manufacturer. If you go to the next Slide 5, our commercial strategy is to establish a full-scale commercial operation to expand the business and drive profitable growth. The long-term goals here is to secure a profitable growth of our commercial business. You'll hear later from Henrik Juuel on our guidance already for this year. We want to establish JYNNEOS as a global leader, not only in the prevention of smallpox, but also monkeypox. We want to become a preferred partner for healthcare professionals for all our commercial assets.
Lastly, we're not done here. We want to expand our commercial assets, either through the natural organic growth of our exciting pipeline, or when the timing is right, through future acquisitions of interesting synergistic assets. Slide 6 talks about our R&D strategy, which is to expand and advance our portfolio of pipeline projects. You can see to the right of the slide, our existing pipeline. In the years to come, we'll secure the approval of three further vaccines. One will be the freeze-dried version of our smallpox vaccine. As you will remember, we have an existing order, which will, once the approval is in place, unlock another $300 million in the existing order for freeze-dried. The RSV vaccine, which will be starting next year, we will launch together with a partner.
With Janssen, we've already filed for approval in Europe for our Ebola vaccine, which you'll hear, comes with a $10 million milestone payment already this year. We want to secure proof of concept in the next five years of our immunotherapy approaches. Already this year, we're anticipating a readout of our BN-B rachyury vaccine in chordoma, and we'll be starting some of our new exciting approaches in immunotherapy. Lastly, we want to introduce at least one more infectious disease program to our pipeline, which will be coming out of our R&D facility in Munich. Turn to Page or Slide 7. On manufacturing, we have established ourselves as a world-leading vaccine manufacturer, and it's one of those reasons that we were able to successfully acquire the two commercial assets from GSK.
In the future, we want to expand our manufacturing expertise and capacity. To do this, we need to finish the fill-and-finish facility to allow us to fill both liquid and freeze-dried, and as I said, that's going extremely well. The facility is currently being qualified as I speak, and we'll start manufacturing by year-end. In addition, we want to expand our current bulk manufacturing facility to allow us to produce more than one product in parallel, and we are currently in the conceptual design, working with engineering firms. Lastly, obviously, in the next five years, we have to successfully transfer the production of Rabipur and Encepur from GSK to ensure that we get the thorough synergies that we believe are embedded in the investment case that we made for these two assets.
As I said, extremely successful 2019, and then a very exciting future lies ahead of us. With that, I'll hand over the call to Henrik Juuel.
Thank you, Paul, and welcome to everyone on the call here. As Paul said, it has truly been a successful year in 2019 for the company, and that goes as well for, on the financial metrics. We basically met or exceeded the guidance for 2019. On the financial slide, that is Slide number 11 in the presentation, you will see that we delivered total revenue for the full year of DKK 662 million, which was DKK 62 million higher than what we guided previously, driven primarily by driven primarily by contract work, more specifically from higher revenue related to the qualification and the CMC work related to the fill-and-finish facility, as supported by the U.S. government.
On an EBIT level, we delivered a loss of DKK 328 million, which is DKK 32 million better than guided previously, and again, primarily driven by the higher revenue, but also to some extent, lower than anticipated costs. We ended the year with a cash preparedness of DKK 760 million against the latest guidance of DKK 700 million. Remember that the guided cash preparedness was adjusted in December to reflect the acquisition and the bridge loan we took with Citi and Nordea in order to pay the upfront payment of the acquisition of the two products from GSK. On the next slide, I don't want to spend much time on that, but it's simply just the usual breakdown of our cash preparedness.
DKK 760 million by the end of the year, broken down by DKK 472 million in cash and cash equivalents, and then an unutilized credit line with a EIB of EUR 30 million, or DKK 244 million. On the lower part of the table here, you will see a breakout of the total debt, where you will find the bridge loan, EUR 185 million, that we took out with Citi and Nordea, as I said, to pay the upfront payment to GSK. On the next slide, before we go to the guidance for 2020, just want to tie the story back to what we communicated originally for the two acquired products, Rabipur/ RabAvert, and Encepur, that you will find on the left-hand side of the graph.
I think when we did the acquisition and announced it, we communicated that we estimated total combined revenue of these two products of EUR 175 million. We also communicated our expected future growth rates and even the EBITDA margins below. 2019 ended better than the EUR 175 million. It ended at EUR 200 million, all explained by better performance of the Rabipur/ RabAvert, primarily in the U.S., but also to some extent in Germany. These additional sales of the rabies product was driven by a stock absence situation by the competitor in the market in U.S., but also to some extent, replenishment of inventory, low inventory levels due to stockouts from GSK in prior periods.
All in all, we do not anticipate the additional revenue as a sustainable market driven revenue, but more as one-off impact in the fourth quarter. For that reason, when we guide for 2020, we base the growth rates we expect on the EUR 175 million market or product revenue size in 2019. However, with that said, we do take it as a very positive confirmation that these kind of stockouts, they basically signal that there is the opportunity that we had highlighted when we did the acquisition. Once we are able to provide a safe and secure supply to the market, there's additional market shares to go for. On the next slide, we are sharing the guidance for 2020.
Here we are guiding revenue of DKK 1.9 billion, and that consists of combined sales of the two new acquired vaccines, expected to grow low to mid-single digits. The growth rates from the 2019 level, which is EUR 175 million, as just explained. It also includes income from our smallpox business. Here, it includes a continuation of the Phase 3 study and the FnF validation work that is sponsored and supported by BARDA, but it also includes expected, but not yet committed by contract, additional revenue from either bulk or liquid frozen freeze-dried doses to the U.S. government as well. It also includes an expected milestone payment from Janssen related to expected approval of the Ebola vaccine in Europe of $10 million.
We are guiding an EBITDA of DKK 675 million, and included here is the net proceeds from the sale of the priority review voucher transaction that was closed finally in January, and the money was received in January as well. The net proceeds was DKK 620 million after expenses related to this, and that will be recognized in the P&L as other operating income, meaning that it's not included in the revenue guidance of DKK 1.9 billion. What we have also included in the EBITDA number is expected non-recurring transitioning costs of approximately DKK 75 million related to the acquisition, and primarily reflecting non-recurring expenses when we build up the organization, preparing to take over more and more tasks from GSK.
There will be a period of time where we will run, you can say, our investments and organization in parallel with the supply of services from GSK. Finally, we are guiding that by the end of 2020, we will have a cash and cash equivalent position of approximately DKK 1.35 billion . The assumptions behind this is, of course, the cash expected to be generated by operations. It's also assuming a rights issue to be conducted in the first half year of this year, targeting net proceeds of approximately DKK 2.6 billion .
It assumes an immediate repayment of the bridge loan, the EUR 185 million, and it assumes payment of approximately milestones worth approximately EUR 50 million to GSK that are related to taking over the marketing authorizations in key markets, expected to happen second half of this year. Finally, the cash position by the end of the year also assumes investments to the magnitude of approximately DKK 300 million in 2020, where of more than half of this is directly related to the necessary adaptation of the manufacturing facilities and the start of the expansion work that we are embarking on to create more flexibility and more capacity within manufacturing.
All in all, an outlook for 2020, that when comparing to 2019, I think very clearly demonstrates the significant impact of this, the acquisition and the transformation that we are going through as a company. On the next slide, just want to quickly take you through some of the priorities or our key priorities for 2020. They are all structured in line with the strategy that Paul introduced you to. We have a strategy that is carried by the three strategic pillars.
If we start with the first one, addressing the commercial part of the organization, we have already now assumed responsibility for the sales and marketing for Rabipur/ RabAvert, and Encepur, that we've acquired from GSK, which means that we are already now extremely busy and focused on establishing full commercial organization to support continued growth from these products, but also to take advantage of the recent JYNNEOS approval in the U.S. and the additional indication monkeypox that we got. Focus within the commercial part of it this year will also be on to take over physical distribution for the acquired vaccines. This is expected to happen for a few key markets, dates, this year.
Finally, I think one of the key focus areas for the commercial organization will also be to build up the awareness and really establish the market for the monkeypox indication. Within our R&D, a part of the organization, here, the focus is about continue preparing us for the initiation of the Phase 3 study. Next year, we will continue and advance the Phase 3 trial of the smallpox freeze-dried formulation. We expect that together with Janssen, we will get an approval of the Ebola vaccine in Europe, which will trigger a $10 million milestone payment. We hope that we'll read out from our Phase 2 chordoma study that we made up this year, will have established proof of concept. Finally, we are already now initiating exploring new administration routes intratumoral intravenous within immunotherapy.
When it comes to manufacturing, I think here the focus areas will really be to complete the qualification and validation of the newly built fill-and-finish facility so that we can commence manufacturing already late this year. It will also be on initiating the investment in the expansion of the bulk manufacturing and the, you can say, the adaptation of that so that it, in the future, can accommodate the acquired vaccines. We will already this year also start working on the technology transfer from GSK to us. That is a process that will take several years, it starts already now. Finally, not directly linked to the strategic pillars, we are embarking on a rights issue, targeting net proceeds of approximately DKK 2.6 billion, that is planned to be conducted during the first half of this year.
To conclude on this very successful 2019, with some events that have truly transformed the company and some very exciting plans and activities going to happen in 2020. With that, I will just hand the word back to Paul.
Thank you. I think now we'll open up the session for Q&A. I'll hand the call back to the operator.
All right. Ladies and gentlemen, we will now begin the question- and- answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Once again, star one for questions. Your first question comes from the line of Chad Messer. Please ask your question.
Great. Thank you, and congrats on a extremely productive year in 2019. I wanted to start with RSV. You say that you've now kind of worked out with regulators the plan for the Phase III, and that'll start in 2021. Can you go through any of the details of that? I believe that's an advancement from when we checked in with you last quarter when you were still discussing things with regulators. What are sort of the highlights? I know you had some idea what the trial would be like. Just wondering how things got finalized.
Yeah. Thanks, Chad. Yes, the Phase 3 will be a two seasonal study, starting recruitment in 2021. We will, in season one, enroll 6,000 subjects. These are obviously elderly subjects, 60 years and older. After season one, we'll have an initial readout in 2022, where we'll be looking for efficacy signals and/or power adjustments. If some of our assumptions, such as the incidence of RSV, is lower than anticipated, we have a way of adjusting the design to then eventually enroll either another 6,000 or up to 8,000 subjects in season two. The futility analysis after season one is pretty stringent, and if we pass that futility analysis and enter season two, we would have a 70% or greater chance of a successful readout of that trial.
It's a two-season study, first readout in 2022, and the final readout, if we proceed, in 2023.
Great. That, that sounds good. Thanks for those details. I also wanted to check in on a couple of the cancer vaccine programs. In your slide, you talk about a proof- of- concept for chordoma. Just wondering, I know in the past we thought that if you could get, you know, a basically four responses or a 14% response rate, that that might be sufficient for a regulatory submission. Just wondering if that's still your thinking.
In the chordoma trial, we enrolled an initial 10 subjects last year, and to proceed, we were looking for one objective response, which we saw. That triggered the enrollment of the second part of the study, which is an additional 19 subjects, so now we have obviously 29 subjects. You're correct, the overall success of that study would be if we were to see at least four objective responses. Due to the treatment of radiation, you know, it's a one-year follow-up from when they're enrolled, so we will have a readout from that study, positive or negative, later this year. There has been dialogue with the regulators on what they may or may not want to see. However, of course, the final decision, that really depends on the data.
Could be that we need to do a confirmatory trial, but again, as I said, it really does depend on the actual data that we see.
All right, great. Well, good luck with that, and again, congrats on the progress.
Thank you.
All right, our next question comes from the line of Michael Novod from Nordea. Please ask your question.
Thanks a lot. It's Michael from Nordea in Copenhagen. A range of questions, starting with, maybe you could describe sort of the initial traction after taking over the, at least the booking of sales, et cetera, for the GSK vaccines, just to get a feeling for how traction is going, whether there's been any interruptions in the process, et cetera. That'd be nice to know about that. Secondly, on the long term margin comment/ commitment, you make in your report around having a margin on par with relevant vaccine peers. Could you try to elaborate a bit on how you define these vaccine peers?
When we're looking at Sanofi and GSK, we can see their vaccine businesses are generating EBIT margins around the 40% level. Then, lastly, you could comment on whether you have anything included on the monkeypox vaccine sales for 2020, or whether that's not until 2021. Thanks a lot.
Okay. I'll take a couple of those, and then I'll let Henrik talk about the margin. The first one was related to how is it going with GSK and the transition. It's early days, obviously, but I would say from our perspective, it's going extremely well. We're making great progress on all fronts, to be honest, both on the tech transfer, mapping out and planning to taking over distribution, which will already start this year. I would say it's going well, and we're on course to deliver along the plan that we've outlined since the announcement. In terms of 2020 and monkeypox, we actually don't have any monkeypox revenue in 2020.
We are planning to develop that market, raise awareness, this year, and hopefully you'll be seeing revenues being incorporated in 2021 and onwards. Henrik?
Yeah, sure. Let me try to answer the question regarding the margin. Michael, it's a good question. I think what we want to make clear with this statement is that we want to regard ourselves as a profitable company on a sustainable basis, and therefore we have put in this sentence to make that clear. Secondly, that is going to happen from 2025, not only at a sustainable level, but also at a competitive level. Then you can rightfully ask, what is that peer group that we want to compare us to? We do have a vision where we want to be one of the largest or the largest pure play vaccine company.
If you go that way, there's not that many to compare us against, of course. I'm probably, it's not appropriate to compare us to the big pharma who have vaccine business as well. I can't be much more specific, but I would just say that if you, no matter which peer group you make, it's all north of 25%. I think 25%-30%, 40% is not unlikely, but we are not putting any specific number to that.
Great. Thanks a lot. Good to hear.
Your next question comes from the line of [audio distortion] from Jefferies. Please ask your question.
Hi there. Just a couple quick questions on your 2020 guidance. Firstly, could you provide a little bit more clarity on how much you're expecting the distribution and marketing costs to be for Rabipur and Encepur in 2020, and how we might expect these to evolve in the midterm as you transition these in-house? To follow up, could you clarify what you expect the depreciation and amortization to be this year? I know you've guided for that you're gonna be doing the GSK assets over 20 years in a straight line, but is there anything else we should be aware of?
Okay. Thanks for the question. The first one was related to, what was the first one? Marketing costs. Yes. We are not guiding on those specific costs yet, for a good reason. That is that we are building the organization right now, and we are considering couple of different options in a couple of markets. But you can say a part of the additional non-recurring costs that we are guiding for this year, the EUR 75 million, is directly related to the sales and marketing organization, where we will need to build up our own organization in parallel to services supplied and paid for to GSK. I think it's a little too early to be more specific on our sales and marketing costs. The next question was related to depreciations.
I think what you can expect for 2020 is that we have the usual depreciations that we have seen for 2019, and add on top of that, we are going to depreciate the intangible assets created by the acquisition over 20 years, which will mean approximately in Danish kroner, DKK 290 million per year we can add on top. Once the fill- and- finish plant is up and running, but that's not until later this year, so that means into next year you will see depreciation going slightly up again due to that we take the manufacturing into play. However, that will mainly hit the cost of goods sold.
DKK 290 million, comes on top of current depreciations from the amortization of the intangible assets from the acquisition.
Excellent. Cheers. Thank you for that.
All right, your next question comes from the line of Boris Peaker from Cowen. Please ask your question.
Good afternoon. This is John Scott on for Boris. Can you comment a little bit on what percentage of the fill-and-finish facility you anticipate is going to be utilized by JYNNEOS and Rabipur, especially given the uptake you're expecting from monkeypox? If there is extra capacity, how are you thinking about additional business development activity to try to increase the operating leverage there? Thanks.
Yeah. Thanks, John. I think I'll answer that by just telling you what the potential capacity of the new facility is. When up and running, we would have the capacity to fill 8 million freeze-dried doses based on the JYNNEOS process, and we would have up to a capacity of 40 million liquid-filled vaccine vials. The facility that we have certainly has sufficient capacity for the current commercial assets that we have. We've already announced that we would be potentially interested in filling up excess capacity for other customers. We're currently exploring that as we speak.
Okay, thanks.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. Please continue.
Okay. Well, thank you everyone for your time and for the questions, and wish you all a great day. Thank you.