Good day, and welcome to the first quarterly report Q1 for the three-month period ended the 31st of March 2018 conference call. Today's conference is being recorded. At this time, I'd like to turn the call over to your host today, Mr. Seth Lewis. Please go ahead, sir.
Thank you, operator. Welcome everyone, to the Bavarian Nordic Q1 2018 results call. My name is Seth Lewis, Vice President of Investor Relations and Communications, and I'm joined this morning by Paul Chaplin, President and CEO of Bavarian Nordic. Before we begin, I would like to remind everyone that this presentation includes forward-looking statements that involve risks and uncertainties and other factors, many of which are outside of our control, that could cause the actual results to differ materially from the results discussed in the forward-looking statements. All such forward-looking statements are expressly qualified, any other cautionary statements which may accompany these forward-looking 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 that, I will hand the call over to Dr. Chaplin.
Thanks, Seth, and welcome everyone to our Q1 call. Q1 has been a very strong quarter of news flow, and we've seen great progression, not only in the announcement of very strong clinical results, expansion of partnerships, but actually new R&D contracts. On slide three, we just go through the recent highlights. We began the year with the report of a very strongly positive phase III trial for Imvamune, which is the last piece of clinical data the FDA requires for licensure. We will be filing for licensure with the FDA later this year, and as I'm sure you all remember, approval of Imvamune is associated with the award of a priority review voucher, which are going openly in the market for more than $100 million.
RSV vaccine goes from strength to strength. Last year, we reported very strong phase II clinical data, and that was updated with the announcement that we could detect protective antibodies in the mucosal earlier this year. I'll come more to RSV in the coming slides. With CV301, we expanded our industry partnerships. We'll be initiating four additional phase II studies of combinations of various checkpoint inhibitors with CV301. Brachyury, as the phase I progresses, we've been given an Orphan Drug Designation from the FDA for chordoma. A pivotal chordoma phase II trial will be initiated later this year.
We were awarded a new R&D contract with the U.S. government, with DOD, the Department of Defense, which is again, another highlight of the importance of our platform, which is highly regarded with various agencies within the U.S. government. In the coming slides, I want to talk about how some of these events impact our ongoing activities in our various programs. On slide four, we are this year guiding a fairly significant loss, and that's mainly due, as you'll see on this slide, that the revenues in 2018 are temporarily lower than we've previously been recorded of more than DKK 1 billion or more. This year, we're only guiding for revenues of DKK 500 million, primarily driven by our new Imvamune order.
I'll come back to how the revenue flow from that new contract will be seen in the coming years. Basically, because of the dip in revenues and our intention to keep the foot very firmly on our R&D spend and maintaining that at the historical levels, we are gonna be recording or reporting a loss this year. The reason we have basically kept the R&D spend at the same, is obviously our pipeline development is where the true value, or we believe the true value or future value is in Bavarian Nordic. However, given the events of last year and the PROSPECT failure, we haven't gone blindly ahead, and we have modified our spend and tried to reduce our risk profile in our various programs.
On slide five, you'll see the breakdown in our R&D spend in 2018, and you'll see that the vast majority of that spend is in infectious diseases, primarily our RSV program and also in our partnered R&D, both with Janssen and also with the U.S. government. However, we are still investing 26% of our R&D in immuno-oncology, as we still believe there is very strong scientific rationale to do so. However, we have modified the way we're spending and our strategy in this area. I've already told you, we plan to initiate four additional studies with CV301 in combination. However, two of these are basically paid for by others in investigator-led studies, and our main contribution is in supplying drug.
You will see in the coming slides, we've also modified many of the trial designs in a two-step process, where we are enrolling a much smaller number of patients looking for clear signal and efficacy. If we don't see that signal, we'll kill those studies. While we've kept the activities in immuno-oncology essentially the same, we have significantly reduced our investment and risk. Going to slide six, just talk a little bit more about CV301. We have an ongoing clinical study in non-small cell lung cancer with CV301 in combination with Keytruda. The phase I safety running of that is almost complete, and we'll be initiating the phase II components. We will be starting a bladder study with CV301 in combination with Roche's Tecentriq.
Although it says we'll be enrolling 60 patients, we'll only initially enroll 30 patients, looking for an early signal of objective responses, and if we don't see those, we will obviously cancel that study. Then there are two investigational studies in colorectal cancer with CV301, either with Durva, which is AstraZeneca's checkpoint inhibitor, or Nivo, which is BMS's checkpoint inhibitor, which, as I've just said, are investigator-led, and a very small investment from our side. The strategy for CV301 remains the same. We wanna look at the efficacy of the combination approach of CV301 with multiple checkpoint inhibitors, either in indications like lung or bladder, where these drugs are already approved, but also in other indications, such as colorectal, where up to now, checkpoint inhibitors as a monotherapy have had disappointing results. Slide seven.
On Brachyury, we have a phase I study that's ongoing. This is on the back of a previous phase I study looking at the MVA Brachyury vaccine. This phase I study is now looking at the combination of the MVA plus the FOLFOX booster, both encoding Brachyury. The study began enrolling at beginning of the year. Four patients are enrolled. Two, interestingly, are patients with chordoma. We expect the full enrollment to be completed by June, which is gonna be necessary to initiate our own initiated study in chordoma later this year. Slide eight talks about a phase II study with our MVA, with our BN-Brachyury vaccine, which is an NCI-sponsored study. It's called QuEST, Quick Efficacy Seeking Trial. It's actually a very exciting design. It's a collaboration of four companies working together with the NCI.
That's EMD Serono, Altor BioScience, Incyte, and BN. This is in metastatic castration-resistant prostate cancer. If you look at the Part A side, it will be initiated first with our vaccine, together with a combined anti-PD-L1, anti-TGF beta product, both of which is blocking some of the inhibitory mechanisms seen in tumors. If there is sufficient safety, they will then add the IL-15 superagonist, which is a potent stimulator of both T cells and NK cells and could be the perfect adjuvant for a cancer vaccine. Again, based on a solid safety signal, they'll then add Incyte's IDO inhibitor, which blocks Treg cells or the inhibitory environment that's sometimes stimulated in the tumor.
If any positive signals are seen in any of those arms, they'll go on in this two-step design into Part B and enroll an additional number of patients. Again, this is an exciting study. It shows that there is great interest in the combination approach from across the industry, and the basis of all the combinations is our BN-Brachyury vaccine. Again, our contribution here is the supply of drug that we. We're very excited to see the results from this study in the future year ahead. On slide nine, one study that BN will be initiating is a phase II study in chordoma. Chordoma is an ultra-rare indication. As I said, we do have the Orphan Drug Designation. It's a rare cancer of the spine and base of skull.
We believe there is solid scientific evidence that the combination of a vaccine together with radiation therapy could be effective. As I said, it will be a two-stage design. We'll initially only enroll 12 patients looking for objective responses. If we see two objective responses, we'll enroll an additional 13 patients, with the overall objective of seeing an objective response rate of 20%, which we believe would lead to the product being approved. This is a very small investment. It's in an exciting area, could lead to a very first approval in immuno-oncology in a very short period of time. As I said, it's a great exciting study that will be initiated in the middle of this year.
On slide 10, last week, we announced some of the abstracts that have been accepted for ASCO. I just wanna talk about some of the data that will be presented in much more detail at the ASCO event. There is a podium presentation talking about the PROSPECT phase III study, which, as I've said, unfortunately, was stopped last year for futility. While there are no surprises in terms of the data, in terms of the effect of PROSTVAC, I think the phase III data is causing a great deal of interest within the community because we can illustrate the improvement in standard of care, which is 12 months grade in terms of the average overall survival, compared to previous studies.
However, there is some other early data which is quite exciting, because not only from failure, you can also learn a lot about the products and how to proceed in other areas. One study, which will be published, is a monotherapy of PROSTVAC in earlier stage disease. This was in the patients who were scheduled to have surgery and were treated with PROSTVAC. The data is showing, which is shown in the two graphs at the base of the slide, is there was a twofold increase in the infiltrating T cells in the tumor, which is quite exciting to show that we can actually stimulate a T cell effect.
Interestingly, those T cells were on the periphery of the tumor and didn't seem capable of infiltrating the tumor, which suggests there may be some inhibitory mechanisms preventing that T cell infiltration. That leads very nicely to another poster, where we actually want to, in the same setting, look at the combination of PROSTVAC with Opdivo to see whether we can enhance the, both the magnitude and also the infiltration of these TILs in this early disease setting. The second poster will talk about the safety of the combination of Opdivo and PROSTVAC in later stage setting, which now allows us to move into this earlier neoadjuvant stage setting in the coming months. Go to slide 11, and changing gears from immuno- oncology to infectious diseases. 2018 is gonna be an extremely exciting year for our RSV vaccine.
Last year, we reported very solid and strong phase II immunogenicity data. If you remember, our vaccine is completely differentiated from all other failed attempts at developing a prophylactic vaccine. We're essentially trying to mimic what a natural RSV infection does in terms of stimulating a protective response. We wanna see a broad T cell response, we wanna see an antibody response, and importantly, we wanna see this specialized antibody in the nasal mucosa, which is the site of infection. As I said already, we've reported very solid data from our phase II. Moving forward this year, we're trying to develop a human challenge model. There does exist a human challenge model already.
However, very few of the volunteers that are infected actually develop symptoms, which makes the existing model very difficult to measure the efficacy or the effectiveness of a vaccine. We're coupled or partnered with a company called SGS, where we believe we can develop a more virulent model, where the vast majority of the volunteers that are infected will have mild symptoms. That study will be initiated mid of this year, and we will have results in Q3. If it's as positive as we believe, the next step, obviously, is to challenge vaccinated subjects and actually gain some initial vaccine efficacy still by year-end. In parallel to that, of course, we're gearing up to initiate a phase III in terms of having the dialogue with the various stakeholders, such as the FDA, and that study is planned to start in 2020.
On slide 12, one other piece of exciting data that will be reported in the coming weeks is we re-enrolled some of the subjects from the phase II data, phase II study, and we gave them another booster at the end of last year. This is essentially mimicking what we believe will be the approved product, that it will be an annual booster vaccine, and we're very excited to see the immunogenicity data one year later. As I said, that data will be reported in the coming weeks. On slide 13, we have a very strong partnership with Janssen. It all began with Ebola, which unfortunately has turned around to becoming hot news again.
We also have license agreements for HPV, HIV, and HBV, and the therapeutic approaches for HPV and HIV will be entering phase I later this year. This has been a highly successful collaboration. We've received more than $700 million in upfront milestone payments and deliveries of our Ebola vaccine, yet there is still $1 billion in future milestones and royalties to come. On slide 14, I'll talk a little bit about Imvamune and our contract that was awarded last year. This is a contract for the acquisition of a new formulation of Imvamune called freeze-dried, it represents the single largest order we've ever received for Imvamune. Of the $500+ million, $400 million was to acquire approximately 13 million doses of freeze-dried.
That's broken up into a number of different components that I'll try to explain. On the left-hand side, you'll see that in 2016 and 2017, we received revenues of DKK 233 million as we manufactured bulk from previous orders. The initial order under the new contract is for an additional $100 million worth of bulk, which we're manufacturing in 2018 and 2019, and half of that $100 million, the DKK 350 million, is part of the revenues we're guiding in 2018. In parallel to manufacturing this bulk, we've initiated the expansion of our manufacturing facility to build our own fill finish plant to the tune of a $75 million investment.
This plant will come online in 2021, where we'll start converting that bulk into freeze-dried doses. This is the remaining part of the $299 million as part of that initial order. In addition to purchasing vaccine, the contract has an additional $140 million for clinical and regulatory activities, and $37 million of that has already been awarded late last year to support the initiation of a phase III, which will start in the first quarter of 2019. In addition to all this is a 10-year contract, and this is the initial order.
We also have agreed pricing for additional bulk and additional doses. If you go back to 2017, when we also received, not 2017, 2007, when we received our first order, that was also for $500 million. At the end of the contract, which was in 2017, the value of that contract had almost doubled to just under $1 billion. There is precedent to expect that additional doses, either of bulk or of final doses, will come from the U.S. government. There is great business in the short term and really great business in the long term, and we have been encouraged by the U.S. government to build this fill-finish plant, not for these initial orders, but for the future orders to come. On slide 15 is the financial results for Q1.
As I've said in several interviews today, this is no drama event. The numbers are the numbers. Our burn rate is as expected, and our revenues are as expected. As we've already guided, the vast majority of the guided revenues, the DKK 350 million for Imvamune, will only be invoiced primarily in Q4, and the other DKK 150 million in revenues relates to R&D contracts, which you'll see being invoiced equally over the various quarters. We remain completely on track for our guidance for 2018. Slide 16. We are very well funded for a company our size. We have a very strong cash position. We have DKK 3.2 billion in future Imvamune orders that are already signed and in the books.
We have $200 million of R&D contracts. We have, obviously, other potential income from our Janssen collaboration and partnership and the sale of our priority review voucher. As we've said numerous times, there's absolutely no need and no plans for a capital raise in 2018. The only way I could foresee that we would issue new shares in BN, would be if there was an M&A opportunity or a partnering license opportunity, as we've done in previous years. Our pipeline slide always looks extremely busy and always is scary at times because you imagine that we're investing a huge amount in R&D. A lot of these activities are funded by others, either through our partnerships with Janssen or the NCI.
However, we are planning to initiate six different studies this year, and we'll be seeing some exciting results from the ongoing studies in RSV and CV301 later in the year. On slide 18, Imvamune, a lot of activities. We've already reported very strong phase III results. We'll be filing for a BLA. We anticipate the approval of Imvamune in the old formulation of liquid frozen in 2019, with the issuance of a priority review voucher, and we'll be initiating the fully funded phase III freeze-dried study in the first half of 2019. RSV is a very rich news flow in 2018.
Some booster data, which is really gonna dictate whether this vaccine is an annual booster or not, and of course, some potential very exciting and pivotal efficacy data from a human challenge model. Janssen is moving their programs into phase I for HPV and HIV. We'll be initiating four additional studies in CV301, albeit that half of those are fully funded by others. With brachyury, the phase I study will be completed, and we'll be initiating a pivotal chordoma study, which could be a very early approved product for us at Bavarian Nordic. A great Q1, an exciting year ahead, and with that, I'll open up the call for Q&A. Operator, I'll hand back to you. Thank you.
Certainly. Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press star one on your telephone keypad. If you find your question has been answered, you may remove yourself from the queue by pressing star two. Once again, ladies and gentlemen, to ask a question, please press star one. We'll now pause for just a moment to assemble the queue. We have a question now from Peter Welford of Jefferies. Please go ahead. Your line is open.
Hi. Thanks for taking my questions. Just a couple of admin, really. Firstly, just on the financials, were any of the Imvamune revenues in the first quarter, were they all from the U.S. government, or did they relate to shipments to rest of world contracts? Secondly, just on the Imvamune filing with U.S. FDA, are there any more steps that need to be done after the completion of the second phase III, or is the data all in hand now, and it's just a case of putting together the dossier for the filing?
Then thirdly, just on Ebola, wondering whether there has been any request that you're aware of to J&J, the use of its stockpile that you've already provided, for the current crisis in Africa, and whether or not there's been any yet suggestion from J&J or plans to either seek emergency use authorization or alternatively, to request from you additional manufacturing of your part of that vaccine? Thank you.
Thanks, Peter. A very minor part of the revenues in Q1 was related to a rest of world delivery of Imvamune, but none to the U.S. government. All the U.S. government deliveries or invoicing will occur later in the year. In terms of the BLA, all the data is set and completed. We've already had discussions with the FDA last year, in terms of, you know, some of the datasets and the like. We're currently planning to have two more meetings with the FDA to clarify some of the CMC or manufacturing, and some of the clinical issues, so we don't hit any roadblocks when we file. From our side, everything is a green light, and we will be filing in the second half of this year.
In terms of Ebola, you know, we're in very close dialogue with Janssen, and there has been obviously dialogue with the WHO. If you remember, we had submitted, or I should say, Johnson & Johnson had submitted, a dossier to the WHO to support the emergency use of our combined vaccine. There is dialogue with the WHO on potentially using a combined vaccine for healthcare workers. There are doses already on stock, but again, we'll have to see how the current situation develops, whether that's going to affect anything in terms of our guidance or some of the other activities that we're doing.
That's great. Thank you.
Thank you. We'll now move to our next question from Boris Peaker of Cowen. Please go ahead.
Great. My first question is on Imvamune. I'm just curious, how would the formal approval of Imvamune impact your future government contracts?
The way we're going for approval is we're obviously going for initially approval of the liquid frozen formulation. Currently, the U.S. government has made it very clear that their intent for stockpiling will be the freeze-dried version. However, in an emergency setting, the freeze-dried version takes much longer to manufacture, and they would be requesting the liquid frozen. It's at the encouragement of the U.S. government that they're asking us to go ahead and get and approve the liquid frozen. In the sense of how will it impact future contracts, the contract we already have, where we have an initial order for these 13 million doses of freeze-dried, includes additional bulk, it includes additional freeze-dried doses, and in fact, it includes additional liquid frozen doses as well.
I think, it's going to give many more options to the U.S. government in terms of how they'll purchase Imvamune. Of course, an approved product, will give a great deal more confidence in purchasing larger doses, than they have, or larger volumes than they have in the past.
What is your estimated timeline for getting the freeze-dried approved then?
We'll be initiating the phase III lot consistency study in the first half of 2019. We believe we'll be in a position to add a supplement to hopefully the approval for liquid frozen in 2021.
Gotcha. Okay, 2021. For the RSV program, I just want to clarify, are you still planning to find a partner for the phase III program, or are you starting to think of doing it on your own?
Well, I think what we've always said along the road is that we need a partner to commercialize the product, that is still very much the case, there are discussions ongoing with various potential partners. Whether a partner comes on board before a phase III, during the phase III, remains to be seen. Again, there are many elements in that. How big is the phase III? What's the investment? All of which is currently unknown. However, what I will say is that we will not overexpose Bavarian Nordic to any one single asset. Again, if the study is very large and gonna be very expensive, we will obviously need a partner.
Great. Thank you very much for taking my questions.
Thank you. Once again, ladies and gentlemen, should you have a question, please press star one on your telephone keypad. We'll now move to our next question from Chad Messer of Needham. Please go ahead.
Great, good morning, and thanks for taking my questions. A couple, if I may, on the RSV program. Starting with this booster data that's upcoming, can you maybe frame for us, what you're hoping to see, what a good result would look for? Are there sort of quantitative cutoffs for the long-term durability, that you're hoping to see? You know, also for the amount of boosting of activity, that you'd hope to see to make this a two-dose product.
Yeah. I guess there are two things that we're really looking for. One, using a viral vector like MVA. There is theoretical concerns, at least, that immunity to the vector could prevent multiple vaccinations using the same viral vector. What I would like to see is a similar boost effect as we saw in the original phase II study. We already know from the longevity of the response at six months, that the responses are declining, albeit they still remain elevated from their pre-vaccination status. While I have not seen any data, I would anticipate that at 1 year out, those responses have dropped down to what you could call baseline, pre-vaccination levels. What I'm hoping to see is a strong boost response, similar to how we've already reported the data last year.
I think that would be seen as a very successful outcome to the booster study.
Okay, thank you. Actually, that's very helpful in framing what to look for. Then just on the challenge study you're hoping to determine the feasibility of. I know we've talked in the past a couple of times about the inadequacy of existing challenge models. When you say you're gonna decide the feasibility, you know, again, is that just the number of patients that get infected, or the level to which they're showing responses? Are there quantitative cutoffs? Who's kind of deciding feasibility? Is that you guys looking at the data? Are you gonna bring in any experts? Are you gonna talk to any regulatory people? Just wondering how you're gonna determine whether that model is adequate.
I mean, who's gonna determine it? It will ultimately be us. You know, we've done all of the above that you just said. We've had discussions with regulatory authorities and, obviously, key opinion leaders in this space. I think the current consensus, and of course, it's always best to set what the threshold is before you get the data. The current consensus is that we want to see at least 70% of the volunteers that get in get challenged, actually, show mild symptoms. We think at that level, you would have sufficient power to hopefully show some sort of efficacy with the vaccine, with a moderate size in terms of the challenge.
All right. Again, thanks. Very helpful.
Thank you. We have no further questions, I'd like to turn the call back over to you, Paul, for any additional or closing remarks. Thank you.
Well, thanks everyone for taking the time, and thanks for the questions and the input, and have a great day.
Thank you, sir. Ladies and gentlemen, that concludes today's call. Thank you for your participation. You may now disconnect.