Bavarian Nordic A/S - Interim Report for the period 1 January to 30
September 2009
(Thomson Reuters ONE) - In the first nine months of 2009 Bavarian Nordic generated revenue ofDKK 53 million and recorded a loss before tax of DKK 261 million. Asof 30 September 2009 the Group's net free liquidity was DKK 304million The company maintains its expectations for the financialresult for the full year 2009 with revenues in the range of DKK100-300 million and a pre-tax loss of between DKK 275-325 million. Aprerequisite for maintaining the high end of the guidance is that thecompany will receive delivery allowance from the US authorities nolater than beginning of December, leading to the possible initiationof deliveries of IMVAMUNE® to the US Government before the end of2009. The net free liquidity at year-end is expected to beapproximately DKK 175 million as a potential delivery to the USGovernment by late 2009 will not have a cash effect in 2009.Following the FDA inspection of the IMVAMUNE® manufacturingfacilities in May, Bavarian Nordic has made progress in theimplementation of the corrective actions as required due toobservations made by the FDA. The company expects to finalise itsresponses to the FDA no later than in the beginning of December andsubsequently will await the FDA review and acceptance hereof.Consequently, the company maintains its expectations to initiatedelivery of IMVAMUNE® to the US government before the end of secondquarter of 2010.During the first nine months of 2009, Bavarian Nordic reportedfurther confirmatory data on PROSTVAC(TM), the company's late-stageprostate cancer vaccine candidate. Oral presentations were held atseveral cancer congresses, including ASCO and ECCO annual meetings.Bavarian Nordic expects that an end of phase II meeting with the FDAwill take place during January 2010. While partnership negotiationsare ongoing, the company is in preparations for Phase III and theseare proceeding as planned.Lately, the prostate cancer field has witnessed positive clinicalresults followed by attractive partnership deals. It has provenworthwhile for a number of companies to independently advance theirprojects into Phase III, thus maximising their value before theywould eventually sign a licensing deal. Similarly, Bavarian Nordic isseeking to maximise and retain the value of its cancer portfolio.Consequently, Bavarian Nordic seeks the ability to advancePROSTVAC(TM) into Phase III of its own. In order for Bavarian Nordicto gain the independence to execute its short and long termactivities within biodefence and cancer, the company is exploringavailable options for securing an optimum financial position.Anders Hedegaard, President & CEO of Bavarian Nordic said: "During2009 we have recorded strong progress in our two leading programmes,IMVAMUNE® and PROSTVAC(TM). As the acceptance from FDA to initiatedeliveries of IMVAMUNE® draws closer, we have initiated negotiationswith the US on further development of the vaccine. We have seenpositive developments in the market outside the US with the Canadianorder now being delivered and talks are ongoing with the authoritieson the licensing of the vaccine. We also entered the first IMVAMUNE®contract in the EU during third quarter. Further positivePROSTVAC(TM) data were reported, demonstrating a great potential forthis promising therapeutic approach for the treatment of advancedprostate cancer. With PROSTVAC(TM) moving into Phase III trials weare well underway to establish ourselves as a key player in thecancer therapeutics industry, which is currently attracting a lot ofpositive attention due to promising data and lucrative partnershipdeals. We intend to ride this wave and further advance our cancerportfolio."ContactAnders Hedegaard, President & CEO. Phone +45 23 20 30 64Conference callA conference call will be held today at 11.00 a.m. (CET). Presidentand CEO, Anders Hedegaard will present the interim results followedby a Q&A session. Also attending are Executive Vice President andCSO, Paul Chaplin, Executive Vice President and CEO of BNImmunoTherapeutics, Reiner Laus, Executive Vice President and CFO,Ole Larsen, and Vice President Investor Relations & Communications,Rolf Sass Sørensen. Dial-in numbers for the conference call are:Denmark: +45 3271 4607, UK: +44 (0)20 7162 0077. The accompanyingpresentation is available on the company's website:www.bavarian-nordic.com.Highlights from the period* Bavarian Nordic has signed contract with an EU country for the delivery of IMVAMUNE®In September, Bavarian Nordic signed a contract with the military ofan undisclosed EU country for the delivery of a small order forIMVAMUNE®. The size and value of the contract is undisclosed. Thismarks the first time, Bavarian Nordic enters a contract with an EUcountry for the delivery of IMVAMUNE®, and it demonstrates that thereexists a real demand inside of EU for new and safer smallpox vaccinesfor preparedness stockpiles. The vaccines have been delivered.* Negotiations with the US authorities for the further development of IMVAMUNE®Bavarian Nordic is currently in late-stage negotiations with the USauthorities for a new contract to develop a freeze-dried version ofthe IMVAMUNE® smallpox vaccine. This potential new project will haveno influence on the ongoing RFP-3 contract for the procurement of 20million doses of IMVAMUNE® and the licensure of the currentliquid-frozen formulation, but represents an additional businessopportunity of major strategic importance. The company expects thatthe prospective contract will constitute the gateway towards securingadditional contracts with the US Government and outside the US aswell.* Further detailed PROSTVAC(TM) data presented at the ECCO 15 - 34th ESMO CongressFurther data from the Phase II study with PROSTVAC(TM) were presentedat the European CanCer Organisation (ECCO), ECCO 15 - 34th ESMOCongress in Berlin in September. The data indicate the potential fora broader therapeutic use of PROSTVAC(TM) in metastatic prostatecancerImportant events after the period* Delivery of IMVAMUNE® to Canada completedAs planned, Bavarian Nordic has delivered 20,000 doses of IMVAMUNE®to the Canadian government. A pre-New Drug Submission (NDS) meetingwith Health Canada (National Regulatory Authority) was held inOctober 2009 to discuss the potential to file an NDS in 2010 forIMVAMUNE® as a safer smallpox vaccine under a Notice of Compliancewith Conditions (NOC/C). Conclusions from the meeting have not yetbeen finalised.* Encouraging data for MVA-BN® HIV multiantigen warrant further studiesBavarian Nordic has completed the analysis of the Phase I/II studieswith MVA-BN® HIV multiantigen. The final safety and immunogenicitydata demonstrate that the vaccine induces a broad T cell response inHIV infected subjects. The high number of responders to the vaccineis encouraging and warrant further studies. Thus, in line with itsstrategy, Bavarian Nordic is now looking for a partner in order tosecure the continued development of MVA-BN® HIV multiantigen in afull Phase II.Management's reviewPipeline+-------------------------------------------------------------------+| PIPELINE | Programme | Status | Next milestone ||------------+------------------+-------------+---------------------|| | Smallpox | Phase II | Initiate Phase III || Biodefence | (IMVAMUNE®) | | (2010) || |------------------+-------------+---------------------|| | Anthrax | Preclinical | Phase I (2010) ||------------+------------------+-------------+---------------------|| | PROSTVAC(TM) | Phase II | Phase III (2010) || |------------------+-------------+---------------------|| | Breast Cancer | | Initiate new Phase || Cancer | (MVA-BN®-HER2) | Phase I/II | I/II study || | | | (2009/2010) || |------------------+-------------+---------------------|| | Prostate Cancer | Phase I/II | Phase I/II data || | (MVA-BN® PRO) | | update (Q4,2009) ||------------+------------------+-------------+---------------------|| | HIV multiantigen | Phase I/II | Identify partner || | | | for full Phase II || Infectious |------------------+-------------+---------------------|| diseases | | | Complete || | Measles and RSV | Phase I | recruitment (Q4, || | | | 2009) |+-------------------------------------------------------------------+BiodefenceIMVAMUNE® - third generation smallpox vaccine candidateDeliveries under the RFP-3 contractFollowing the U.S. Food and Drug Administration's (FDA) inspection ofthe IMVAMUNE® manufacturing facilities in May, Bavarian Nordic hasmade progress in the implementation of the corrective actions asrequired due to observations made by the FDA. The company expects tofinalise its responses to the FDA no later than in the beginning ofDecember and subsequently will be awaiting the FDA review andacceptance hereof. Consequently, the company maintains itsexpectations to initiate delivery of IMVAMUNE® to the US governmentbefore the end of second quarter of 2010.Once deliveries of the 20 million doses of IMVAMUNE® to the US begin,Bavarian Nordic will start invoicing the remainder of the RFP-3contract, including payments of USD 375 million.Delivery of IMVAMUNE® to Canada completedAs planned, Bavarian Nordic has delivered 20,000 doses of IMVAMUNE®to the Canadian government. A pre-New Drug Submission (NDS) meetingwith Health Canada (National Regulatory Authority) was held inOctober 2009 to discuss the potential to file an NDS in 2010 forIMVAMUNE® as a safer smallpox vaccine under a Notice of Compliancewith Conditions (NOC/C). Conclusions from the meeting have not yetbeen finalised,Bavarian Nordic delivers a small quantity of IMVAMUNE® to SwitzerlandBavarian Nordic has delivered a small quantity of IMVAMUNE® to theSwiss authorities with the purpose of vaccinating key personnel,including lab workers and potentially also WHO inspectors. Theauthorities have issued a Special Use Authorization, which allows forIMVAMUNE® to be used although the vaccine is still in development.Switzerland has stockpiled the old replicating smallpox vaccine, buthas requested IMVAMUNE® as a safer vaccine for key personnel.Bavarian Nordic in negotiations with the US authorities for thefurther development of IMVAMUNE®Bavarian Nordic is currently in late-stage negotiations with the USauthorities for a new contract to develop a freeze-dried version ofthe IMVAMUNE® smallpox vaccine. This potential new project will haveno influence on the ongoing RFP-3 contract for the procurement of 20million doses of IMVAMUNE® and the licensure of the currentliquid-frozen formulation, but represents an additional businessopportunity of major strategic importance. The company expects thatthe prospective contract will constitute the gateway towards securingadditional contracts with the US Government and outside the US aswell.A freeze-dried formulation of IMVAMUNE® offers various new advantagesin terms of increased shelf-life and improved stability of thevaccine compared to the current liquid-frozen formulation.Additionally, this will improve the cold-chain shipping logistics andstorage. These are all important criteria for governments around theworld that prioritise their bio terror preparedness.The new technology for freeze-drying the vaccine will also beapplicable for other MVA-BN® based vaccines.Ongoing studiesBavarian Nordic has a number of ongoing clinical studies, all ofwhich are funded under the ongoing RFP-2 contract with the USgovernment. These include:* A Phase II study of patients diagnosed with atopic dermatitis (AD)* A Phase II study to demonstrate the effect of IMVAMUNE® when administered as a booster dose* A Phase I study in subjects between 56 and 80 years to generate data on safety and immunogenicity of IMVAMUNE® in an elderly populationCancerPROSTVAC(TM) - therapeutic prostate cancer vaccine candidateThroughout the first nine months of 2009, further confirmatory dataon PROSTVAC(TM) were presented at several international cancercongresses. In February, data indicating that PROSTVAC(TM) can beused in earlier disease settings and thus in a larger patientpopulation were presented at the 2009 Genitourinary CancersSymposium. In May, headline data from the Phase II study withPROSTVAC(TM) were confirmed at the ASCO Annual Meeting and inSeptember, the company participated in the ECCO 15 - 34th ESMOCongress in Berlin, where data indicating the potential for a broadertherapeutic use of PROSTVAC(TM) in metastatic prostate cancer werepresented. Also in September, the company attended the 16th AnnualProstate Cancer Foundation Scientific Retreat at Lake Tahoe, Nevada,where a PROSTVAC(TM) poster was presented.Furthermore, PROSTVAC(TM) abstracts and reviews have been acceptedfor publication in a number of scientific journals. In July 2009, areview on PROSTVAC(TM) from key investigators from the NationalCancer Institute (NCI) was published in the publication "ExpertOpinion on Investigational Drugs", Volume 18, Issue 7 2009. This isthe most comprehensive and updated review on PROSTVAC(TM) so far.The strong data reported further supports Bavarian Nordics decisionto initiate Phase III trials with the vaccine. The company expectsthat an end of phase II meeting with the FDA will take place duringJanuary 2010, leading to the expected initiation of Phase III trialsin late 2010. Meanwhile, the transfer and validation of thePROSTVAC(TM) production process to Bavarian Nordic's manufacturingfacility in Berlin is proceeding as planned.The company is in continued discussions with potential partners onthe Phase III development and commercialisation of PROSTVAC(TM).However, Bavarian Nordic is considering initiating Phase III trialsindependently.Ongoing PROSTVAC(TM) studiesThere are a number of ongoing clinical studies with PROSTVAC(TM) inboth early and late stage prostate cancer, all of which are fundedand conducted by NCI under the ongoing collaboration with BavarianNordic.Ongoing studies with active patient enrolling:* Phase II study comparing the radioactive drug, samarium with or without PROSTVAC(TM) therapy in men with metastatic prostate cancer* Phase II study comparing antihormone therapy (flutamide) with or without PROSTVAC(TM) therapy in men with non-metastatic prostate cancerOngoing studies with enrolment completed:* Phase II study investigating PROSTVAC(TM) in men with PSA progress after local therapy (surgery and/or radiation)* Phase I dose-escalation, combination study with PROSTVAC(TM) and MDX-010 (CTL4-antibody) in men with metastatic prostate cancer* Phase I study investigating PROSTVAC(TM) by intraprostatic injection in patients with progressive or locally recurrent prostate cancerMVA-BN®-HER2 - breast cancerA new, single-site Phase I/II study in the US will be initiated bythe turn of the year 2009/2010 and evaluate 24 patients in bothmetastatic breast cancer as well as in an adjuvant therapy of breastcancer setting.Infectious diseasesMVA-BN® HIV multiantigenBavarian Nordic has completed the analysis of the Phase I/II studieswith MVA-BN® HIV multiantigen, a prophylactic and therapeutic HIVvaccine candidate expressing eight whole or truncated antigens fromHIV. The final safety and immunogenicity data confirms thepreliminary data that were previously reported, demonstrating thatMVA-BN®-HIV multiantigen induces a broad T cell response in HIVinfected subjects.The safety and immunogenicity results from this Phase I/II study in15 HIV infected individuals were presented at the internationalconference, AIDS Vaccine 2009, in Paris. The vaccine was welltolerated and no serious adverse events were recorded, following thethree vaccinations with MVA-BN® HIV multiantigen, confirming thefavourable safety profile of MVA-BN®-based vaccines in this immunecompromised population. Following the vaccination course with MVA-BN®HIV multiantigen; the majority (87%) of the HIV infected subjectsgenerated a T cell response to HIV. This cell mediated response wasdemonstrated to be broad as 67% of the subjects had responses to atleast two HIV antigens, while approximately 50% had generatedresponse to at least three HIV antigens. This study confirms theproof of concept studies performed with MVA HIV nef, as an MVA basedHIV vaccine has again shown to be well tolerated and able to induce abroad T cell response to multiple HIV proteins in HIV infectedsubjects.The high number of responders to the vaccine is encouraging andwarrant further studies. Thus, in line with its strategy, BavarianNordic is now looking for a partner in order to secure the continueddevelopment of MVA-BN® HIV multiantigen in a full Phase II.MVA-BN® MeaslesThe first paediatric clinical trial evaluating the safety andimmunogenicity of MVA-BN® Measles was initiated as planned in thesecond quarter of 2009. Ninety children between the ages on 6 monthsto 6 years will be vaccinated in this Phase I study. The firstchildren have been vaccinated, without any reported safety concernsand enrolment is on track to be completed during this year.Tropical diseasesThe two preclinical projects in tropical diseases; dengue fever andJapanese encephalitis are currently not in development. In line withthe strategy, no resources will be spent on these projects. However,the further development may be reassumed with a potential externalpartner, but currently no discussions are ongoing.Legal mattersBavarian Nordic rejects claim from Helmholtz Zentrum MünchenIn August, Bavarian Nordic was notified by the ICC InternationalCourt of Arbitration that a request for arbitration has been receivedfrom Helmholtz Zentrum München, Deutsches Forschungszentrum fürGesundheit und Umwelt GmbH (formerly also known as GSF).The arbitration request is based on two old agreements with BavarianNordic from 1994 and 1997 regarding a collaboration on certainrecombinant vaccines, which was formally terminated in 2001. Theagreements do not encompass the MVA-BN® patents but provide BavarianNordic with exclusive royalty bearing license to specific patents onrecombinant vaccines and include clauses dealing with transfer ofknow how pertaining thereto. Nevertheless, Helmholtz Zentrum Münchennow in 2009 claims rights to royalties on Bavarian Nordic's MVA-BN®based vaccines, including IMVAMUNE®.Bavarian Nordic views this claim based on the old agreements as beingbaseless and without merit.Patent infringement suit against Oxford BioMedicaThe patent infringement suit filed by Bavarian Nordic against OxfordBioMedica in the United States in 2008 continues. Instead of denyinginfringement, Oxford Biomedica had made a second attempt to dismissthe suit arguing that it was premature because TroVax® was stillevaluated in clinical trials. However, in May 2009, the court ruledagainst Oxford Biomedica and the case will thus continue, based onthe substance of the patents. Oxford BioMedica made yet anotherunsuccessful attempt to get the case dismissed that was struck downby the court in June 2009. Discovery is ongoing and a jury trial isscheduled to commence on December 7, 2010.Bavarian Nordic owns several United States patents relating to anattenuated strain of the company's core technology, MVA-BN®, which isthe basis for its smallpox vaccine, IMVAMUNE®. MVA-BN® also holdspromise as a vector for delivering recombinant vaccines. BavarianNordic has asserted four US patents as a basis for its infringementaction. The claim in this case is that Oxford BioMedica has infringedBavarian Nordic's patents by commercializing the patented technologyin ways that have yielded large payments from Sanofi-Aventis underthe agreement between them for the development and commercializationof TroVax®.Financial statement for the period (1 January - 30 September 2009,un-audited)The comparison figures for the same period 2008 are stated inparenthesis.The revenue totalled DKK 20 million (DKK 22 million) in the thirdquarter. Year to date revenue is DKK 53 million (DKK 45 million). Therevenue derives primarily from sale under the RFP-2 contract with theU.S. health authorities.Production costs totalled DKK 29 million (DKK 62 million) in thethird quarter. Year to date the production costs are DKK 126 million(DKK 101 million). The production costs are higher due to higherbatch production at the Kvistgaard facility.The Group's research and development costs totalled DKK 39 million(DKK 26 million) in the third quarter. Year to date research anddevelopment costs are DKK 114 million (DKK 98 million). The increasein research and development costs is primarily due to increasedactivities in the cancer business area and costs related to expansionof the QA department. Furthermore, development costs from the RFP-3contract totalled DKK 33 million, of which DKK 24 million arecapitalised as intangible assets under construction.Sales costs totalled DKK 4 million (DKK 6 million) in the thirdquarter. Year to date the sales costs are DKK 14 million (DKK 16million).Administrative costs totalled DKK 22 million (DKK 18 million) in thethird quarter. Year to date the administration costs are DKK 69million (DKK 54 million). The increase is partly due to theimplementation of new IT systems, partly to personnel costs connectedto an increase in the number of employees and partly to legal fees.Income before tax is a deficit of DKK 74 million (deficit of DKK 76million) in the third period. Year to date income before tax is adeficit of DKK 261 million (deficit of DKK 195 million).Net result in the third quarter is a deficit of DKK 63 million(deficit DKK 60 million). Year to date the result is a deficit of DKK212 million (deficit of DKK 155 million).The IMVAMUNE® inventory totalled DKK 156 million (DKK 36 million).The company expects that already produced IMVAMUNE® will be deliveredto existing and future customers, including its main customer; the USgovernment, upon the acceptance from the FDA.As of 30 September 2009 the Group's net free liquidity was DKK 304million (DKK 782 million). Cash flow from operations is negative withDKK -416 million (DKK -66 million). Cash flow from investmentactivities is DKK 1 million (DKK -55 million) and cash flow fromfinancing activities is DKK -11 million (DKK -11 million). The netchange in cash and cash equivalents is negative with DKK -428 million(DKK -133 million).The Group's equity as of 30 September 2009 was DKK 793 million (DKK1,027 million). The decrease flows from retained earnings.Financial expectationsAs the company is awaiting the exact timing of the FDA review andfinal acceptance, the timing of the actual initiation of delivery isat present uncertain. In order to reflect this, the expectations forthe financial result for the full year 2009 are at present indicatedas a range.Depending on the timing for initiation of delivery, the revenue isexpected to be in the range of DKK 100-300 million, based on amaximum delivery of 1.5 million doses. The difference of approx. DKK200 million contain the postponed delivery of doses to the USgovernment under the RFP-3 contract, a pro rata revenue recognitionof the up front payment of USD 50 million received in 2007 currentlybooked in the balance sheet as pre-payment from customer andreimbursable costs related to the first delivery.The result before tax is expected to be a loss between DKK 275-325million. The difference of approx. DKK 50 million contain the Cost ofGoods Sold related to the postponed delivery partly reduced by someof the write downs on inventory made in 2008. A prerequisite formaintaining the high end of the guidance is that the company willreceive delivery allowance from the US authorities no later thanbeginning of December 2009.The net free liquidity at year-end is expected to be approximatelyDKK 175 million as a potential delivery to the US Government by late2009 will not have a cash effect in 2009. In order for BavarianNordic to gain the independence to execute its short and long termactivities within biodefence and cancer, the company is exploringavailable options for securing an optimum financial position.Statement from the Board of Directors and Corporate ManagementThe Board of Directors and Corporate Management have, today reviewedand approved Bavarian Nordic A/S' interim report for the period 1January to 30 September 2009.The interim report has been prepared in accordance with IAS 34"Presentation of interim reports" as adopted by the EU and additionalDanish disclosure requirements for interim reports of listedcompanies, including those of NASDAQ OMX Copenhagen. The interimreport has not been audited or reviewed by the Company's auditors.In our opinion, the interim report gives a true and fair view of thegroup's assets and liabilities and financial position as of 30September 2009 and the results of the group's activities and cashflows for the period 1 January to 30 September 2009.In our opinion, the management's review provides a true and fairdescription of the development in the group's activities andfinancial affair, the results for the period and the group'sfinancial position as a whole as well as a description of the mostimportant risks and uncertainty factors faced by the group.Kvistgård, 11 November 2009Corporate Management:Anders HedegaardPresident and CEOBoard of Directors:Asger AamundChairman of the BoardClaus BræstrupErling JohansenGerard van OdijkFlemming Pedersenhttp://hugin.info/100065/R/1354121/328185.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
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