Bavarian Nordic

BAVA - 2023 Bavarian Nordic A/SPhillip Heymans Alle3DK-2900Hellerupwww.bavarian-nordic.com162711872138006JCDVYIN6INP512023-01-012023-12-312022-01-012022-12-311255Regnskabsklasse DSustainability Reports | Bavarian Nordic (bavarian-nordic.com)Sustainability Reports | Bavarian Nordic (bavarian-nordic.com)www.bavarian-nordic.com/corporategovernanceCopenhagen2023-03-06Hellerup2024-03-06

Statement of target figures and policies for the underrepresented gender

Information on equal distribution of women and men [Board of Directors]

Status of achievement of target figure of underrepresented gender [Board of Directors]

Primary actions for fulfillment of target figure of underrepresented gender [Board of Directors]

Reason for not fulfilling the target figure of underrepresented gender [Board of Directors]

Information on equal distribution of women and men [Other management levels]

Information on exempt from providing information on target figures of underrepresented gender for other management levels due to the number of employees

Statement of the policy to increase the percentage of underrepresented gender [Other management levels]

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Annual Report 2023 Protecting our tomorrow Bavarian Nordic A/S Philip Heymans Alle 3, DK-2900 Hellerup, Denmark CVR no: 16 27 11 87 Contents Bavarian Nordic Annual Report 2023 2 Contents Front cover Aedes albopictus - the tiger mosquito, which can transmit the chikungunya and dengue viruses, is widely spread in the tropics, but has also in recent years started to establish itself further north- wards and westwards in Europe as warmer climate, heat waves and floods are making the continent increasingly hospitable. In 2023, the mosquito was established in 13 countries and 337 regions in the EU/EEA. In 2013, these numbers were 8 and 114 respectively1. Introduction Corporate information 33 Governance 4 6 7 8 9 Letter from the Chair and the CEO A pioneering force in vaccines Our successful commercial transformation Bavarian Nordic at a glance 37 Risk management 40 Shareholder information 42 Board of Directors 46 Executive Management Vaccines and climate change 10 2023 highlights Financial statements 48 Financial statements – Group 55 Notes Performance 12 Group key figures 13 Strong performance in 2023 15 Financial review 21 Outlook for 2024 22 Sustainability 110 Financial statements – Parent company 115 Notes 1 European Centre for Disease Prevention and Control: Increasing risk of mosquito-borne diseases in EU/ EEA following spread of Aedes species. June 2023. https://www.ecdc.europa.eu/en/news-events/ increasing-risk-mosquito-borne-diseases-eueea-fol- lowing-spread-aedes-species. 130 Statement by the Board of Directors and Executive Management on the Annual Report 131 Independent auditor’s report 135 Forward-looking statement Strategy and business 25 Our way forward 26 Markets and products 28 Innovation Read our → Annual Report 2023 Read our → Remuneration Report 2023 Read our → Corporate Governance Report 2023 Introduction Bavarian Nordic Annual Report 2023 3 Contents 04 Letter from the Chair and the CEO 06 A pioneering force in vaccines 07 Our successful commercial transformation 08 Bavarian Nordic at a glance 09 Vaccines and climate change 10 2023 highlights Introduction Introduction Bavarian Nordic Annual Report 2023 4 These outstanding results are a resounding endorse- ment of the commercial strategy, which we launched in 2020 with an aim to transform Bavarian Nordic from an R&D-driven company, focused on government contracting with a single product, into one of the largest pure play vaccine companies. An important element of this strategy was the diversification of our commercial products, which has made us more resilient to market challenges and the less predictable government business within public preparedness. Letter from the Chair and the CEO A remarkable year Driven by two strategic acquisitions over the past four years, we have established ourselves as a global leader in travel vaccines – an area where we see multiple drivers of growth. First and foremost, there has been a rebound in international travel which is now looking to surpass the pre-COVID levels. Our prod- ucts Rabipur and Encepur sold more in 2023 than ever before, and with the transfer of manufacturing of both vaccines to our facilities nearing completion in 2025, we will achieve the flexibility and scale that allows us to fulfil the demand and reinforce our competitive position in the market, while contributing to future margin improvements. The two new products, Vivotif and Vaxchora, that were added to our portfolio in 2023, were unfortunately withdrawn from the market during COVID-19 and we are now focused on relaunching both vaccines to maximize their true potential. 2023 was in many ways a remarkable year for Bavarian Nordic. We more than doubled our revenue and delivered the best financial results in our history by protecting more lives through the distribution of our vaccines. The financial result was driven by a 49% increase in our travel health business combined with an extraordinary surge in deliveries of our smallpox/mpox vaccine to governments worldwide following the unprecedented outbreak of mpox. With the resurgence in travel and greater vaccine awareness, we now see that our base commercial business, driven by travel health and public prepar- edness, is expected to be maintained at a new high with an attractive growth potential allowing Bavarian Nordic to drive value to all stakeholders through improving public health. By having a highly effective mpox/smallpox vaccine in our portfolio not only signif- icantly contributes to our base business but allows us to respond to future public preparedness needs, such as a resurgence in mpox cases, that will contribute to more value to stakeholders through protecting addi- tional vulnerable lives. During 2022 and 2023, we saw an extraordinary demand from public health authorities for our smallpox/mpox vaccine, which has helped to protect populations at risk in more than 70 countries globally. Luc Debruyne Chair of the Board of Directors Introduction Bavarian Nordic Annual Report 2023 5 While mpox has not gone away, the global surge demand is decreasing. However, health authorities in several regions have recommended routine use of our vaccine in risk populations and we are planning a commercial launch in the US during the first half of this year. While the US and Canada remain our single largest customers, we have seen an increase in commitment from other countries, including a frame- work agreement with the EU, which has helped to establish a new, higher base business for the mpox/ smallpox franchise. We also continue a close dialogue with the public authorities around the world to ensure we remain prepared in the event of mpox resur- gence, and we continue to support existing and new customers in building and maintaining their smallpox preparedness. Through the acquisition in 2023, we have reinforced our organization and presence globally. In addition to the acquired vaccines, we also took over a manu- facturing facility in Switzerland, an R&D facility in the US and a specialty sales force which comple- mented our existing commercial setup. Nearly 300 employees joined Bavarian Nordic and we are now more than 1,400 employees, whose dedication and expertise have had a huge significance for the strong results delivered in 2023. Our increased global pres- ence has strengthened our access to international talent, enabling us to further grow and diversify our employee base, which we consider an important contribution to the continued success of Bavarian Nordic. The 2023 results and outlook for 2024 and beyond clearly demonstrate our ability to combine our heritage in vaccine development and manufacturing with commercial excellence and create a company uniquely positioned for addressing future healthcare needs. As we continue our growth journey, we would like to extend our thanks to our shareholders for their continued trust and support. Luc Debruyne Chair of the Paul Chaplin President and CEO Board of Directors As we witness the impact our vaccines have on global health, we are reminded of the importance of what we do. Vaccines can truly make a difference, and they remain one of most efficient health interventions globally. This is one of our core contributions to a more sustainable future. We are however also aware that we must take further responsibility as a vaccine manufacturer. That is why we are now increasing our commitment to reduce our climate impact. From 2023, we have started to report on our scope 3 emissions, which will help us to better analyze our impact throughout the entire value chain, and in 2024, we will lay the groundwork for defining a Net Zero target. We have defined further ambitions to support a more sustainable journey, and we invite you to learn more about our performance and initiatives on these matters in our sustainability report. The pipeline activities last year depict the nature of R&D, as we strive to bring new innovative lifesaving vaccines to the market. We experienced both disap- pointment and the closure of the RSV and COVID-19 programs, but also groundbreaking data and the promise of a new vaccine launch for the chikungunya vaccine in 2025. Value-creation through innovation remains a priority for Bavarian Nordic. A clear focus will be to maintain the existing commercial products through life-cycle management, that allows us to stay competitive and build the market-leading positions for our vaccines. We will also develop new assets focusing on infectious diseases which remain core to our commercial business and will discontinue all develop- ments in immuno-oncology. Paul Chaplin President and CEO Introduction Bavarian Nordic Annual Report 2023 6 A pioneering force in vaccines – expanding our reach and impact through life-changing solutions Protecting lives every day is an essential part of our DNA in Bavarian Nordic, and we aspire to develop vaccines that address unmet medical needs for the greater good of the global society. Introduction Bavarian Nordic Annual Report 2023 7 Our successful commercial transformation Building on three decades of excellence in vaccine research, development, and manufacturing, we have accelerated our growth through strategic product acquisitions and expansion of our organization to include a full, global commercial infrastructure. Since 2020, we have successfully transformed Bavarian Nordic into one of the largest pure-play vaccine companies Three decades of excellence in R&D and vaccine manufacturing culminating in a successful transformation over the last five years… …creating a focused and profitable vaccine specialty company with a strong platform for further growth Through this commercial transformation, we have established Bavarian Nordic as one of the largest pure play vaccine companies with a leading global position in travel vaccines, while continuing to strengthen our position as a preferred partner to governments on public preparedness. R&D End-to-end, large-scale vaccine manufacturing Global commercial operations with dedicated salesforce and distribution in strategic markets Leading commer- cialized portfolio of travel vaccines A preferred partner to governments on vaccines for public preparedness Global and diverse organization with 1,400+ employees, skilled in life-sciences Saving and improving lives by unlocking the power of the immune system Introduction Bavarian Nordic Annual Report 2023 8 Bavarian Nordic at a glance We have established a diverse portfolio of in-house developed and acquired products addressing infectious diseases across the globe. Our commercial vaccines are available in more than 30 countries, and through our partnerships with governments and international organizations, we are working to increase the availability of important vaccines to improve public preparedness in even more countries. In recent years, Bavarian Nordic has undergone a huge transformation by expanding our global commercial presence and manufacturing footprint and creating one of the world’s largest pure play vaccine companies. Our vaccines We are a leading supplier of travel vaccines and a preferred partner with governments on vaccines for public preparedness. Disease areas Brand names Public preparedness Smallpox JYNNEOS® / IMVAMUNE® IMVANEX® / Mpox Travel health Rabies Rabipur® / RabAvert® Encepur® Vaxchora® Tick-borne encephalitis Cholera Typhoid Vivotif® Hepatitis B Heplisav-B® Dukoral® Ixiaro® Third-party products marketed and USA Commercial, Research, Canada Commercial Switzerland Commercial, Manufacturing Germany Research, Development Denmark Corporate Headquarters, Manufacturing, Research Italy, Spain Sweden Cholera distributed by Bavarian Nordic Japanese encephalitis Commercial Development Introduction Bavarian Nordic Annual Report 2023 9 Vaccines and climate change Climate change is a reality, and for all of us a wake-up call that something must be done to mitigate the risk and impact for future generations. Our role in this endeavor as a vaccine company is two-fold: We seek to minimize our impact on the climate and the environment through sustainable operations and a commitment to Net Zero emissions by 2050. More than Our focus on sustainability goes hand in hand with our recognition of the critical role that vaccines play in mitigating the adverse effects of climate change on human health. By preventing the spread of infectious diseases, vaccines contribute to healthier populations, reducing the burden on healthcare systems and promoting resilience in the face of environmental challenges. 50% of all infectious diseases are made worse by climate change1 1 Mora, C., McKenzie, T., Gaw, I.M. et al. Over half of known human pathogenic diseases can be aggravated by climate change. Nat. Clim. Chang. 12, 869–875 (2022). Introduction Bavarian Nordic Annual Report 2023 10 2023 highlights Revenue, mDKK EBITDA, mDKK New 7,062 2,615 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Phase 3 • Successful Phase 3 results for chikun- gunya vaccine candidate paves the way for potential commercial launch in 2025 • RSV vaccine development terminated after unsuccessful Phase 3 trial • COVID-19 vaccine development termi- nated as the regulators, EMA and FDA, could not accept a submission for licen- sure, despite successful Phase 3 trial products Three Phase 3 trials concluded: Acquisition of travel health port- folio from Emergent BioSolutions. EBITDA-margin 37% A strategic expansion of our travel health business with complimentary assets and growth potential, that included two commercial products and a late-stage infectious disease vaccine candidate. +124% +697% 8,000 3,000 2,500 2,000 1,500 1,000 500 0 10M 1,400 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 - 500 Delivered more than 10 million vaccine doses. Grew organization by 41%. Public Preparedness Travel Health Other income Our organization continued to grow as result of our acquisition combined with organic growth, and we are now more than 1,400 employees worldwide. We continued to expand our impact on global health by supplying our vaccines to more than 40 countries. Performance Bavarian Nordic Annual Report 2023 11 Performance Contents 12 Group key figures 13 Strong performance in 2023 15 Financial review 21 Outlook for 2024 22 Sustainability Performance Bavarian Nordic Annual Report 2023 12 Group key figures DKK million 2023 2022 2021 2020 2019 DKK million 2023 2022 2021 2020 2019 Income statement Financial Ratios1) Revenue 7,062 2,459 332 3,151 1,450 213 1,898 1,328 192 1,852 1,195 286 341 662 355 EBITDA 2,615 328 75 740 5.1 (271) (10.7) 57.6 171 Production costs Earnings (basic) per share of DKK 10 Net asset value per share Share price at year-end Share price/Net asset value per share 19.2 132.4 177 (4.9) (5.5) Sales and distribution costs Research and development costs Administrative costs 53 101.1 106.3 83.7 187 2.2 2,228 541 1,183 376 399 409 213 2.1 269 2.5 293 278 173 1.3 3.0 Income before interest and tax (EBIT) Financial items, net 1,503 (20) (71) (314) (141) (454) (465) 380 (98) 282 (328) (16) (345) (347) Number of outstanding shares at year-end (thousand units) 78,098 72% 70,735 58% 70,468 61% 58,450 32,389 (261) (332) (347) Equity share 56% 26% Income before company tax Net result for the year 1,483 1,475 Number of employees, converted to full-time, at year-end 278 1,379 975 759 690 491 Balance sheet 1) Earnings per share (EPS) is calculated in accordance with IAS 33 "Earning per share". Other financial ratios have been calculated in accordance with the guidelines from the Danish Society of Financial Analysts. Total non-current assets Total current assets 8,950 5,403 7,907 4,485 12,391 7,150 7,336 4,754 12,089 7,492 6,378 2,381 8,759 4,894 2,912 952 6,392 655 Reconciliation of EBITDA Total assets 14,353 10,340 1,225 7,047 1,865 3,134 2,047 Income before interest and tax (EBIT) Depreciation and amortization (note 9) Impairment losses (note 9) EBITDA 1,503 554 (71) 399 - (314) 388 1 380 344 16 (328) 57 Equity Non-current liabilities Current liabilities 2,954 2,287 2,806 1,909 558 - 2,788 2,615 328 75 740 (271) Cash Flow Statement Securities, cash and cash equivalents Cash flow from operating activities Cash flow from investment activities - Investment in intangible assets - Investment in property, plant and equipment - Acquisition of businesses 1,867 1,119 (946) (835) (143) (1,832) 1,864 736 2,845 220 3,717 (116) (2,877) (575) (483) - 1,670 572 472 (276) (810) (2,311) (360) - (877) (1,020) (361) - (1,912) (484) (223) - - Net investment in securities 674 (1,779) 3,536 (1,202) 1,335 1,861 1,115 Cash flow from financing activities 636 Performance Bavarian Nordic Annual Report 2023 13 Strong performance in 2023 In 2023, Bavarian Nordic generated revenues of DKK 7,062 million (DKK 3,151 million) compared to the latest guidance of DKK 6,900 million. The improved revenue results from mainly better rabies vaccine sales and secondly increased revenue from smallpox/mpox vaccine sales. Travel Health EBITDA was an income of DKK 2,615 million (income of DKK 328 million) compared to latest guidance of DKK 2,300 million. The higher revenue, and a favorable product mix combined with general cost-conscious behavior drove the improved result. Revenue from the Travel Health business increased by 49% to DKK 1,877 million (DKK 1,257 million), driven by organic growth, strong brand performance and expansion of the portfolio through the acquisi- tion completed in May 2023. Comparative figures for 2022 are shown in brackets. Rabipur/RabAvert Revenue from Rabipur/RabAvert increased by 32% to DKK 1,161 million (DKK 879 million), driven by continued and significant market growth in the two largest markets, US and Germany combined with strong brand performance in these markets, where we maintained our leading market positions, with market shares of 70% and 93% over the year respectively. Actual results compared to guidance 2023E 15-Feb 2023E 03-Aug 2023 DKK million Actual1 Revenue EBITDA 6,000 2,200 6,900 2,300 7,062 2,615 1 The actual and audited results were in line with the preliminary results, reported on February 21, 2024 Performance Bavarian Nordic Annual Report 2023 14 Public Preparedness Other revenue Encepur Vaxchora Revenue from Public Preparedness increased by 190% to DKK 5,027 million (DKK 1,730 million), solely ascribed to our smallpox/mpox vaccine, for which demand was extraordinary due to the global mpox outbreak commenced in 2022. Other revenue totaled DKK 158 million (DKK 164 million) solely related to ongoing contracts with the U.S. government. In 2022, other revenue also included an upfront milestone payment of DKK 83 million related to our RSV program and DKK 30 million from the sale of bulk drug substance for the Ebola vaccine to Janssen. Revenue from Encepur increased by 40% to DKK 417 million (DKK 299 million), largely driven by strong growth in the German market, where our market share was maintained at 27% over the year, demonstrating strong recovery after the temporary stock-out situation in fourth quarter 2022. Revenue from sale of Vaxchora was DKK 24 million, covering only the period from May 15, 2023 when the acquisition of the product from its former owner was completed. Third-party products JYNNEOS/IMVAMUNE/IMVANEX Revenue from the sale of third-party products (DUKORAL and IXIARO and HEPLISAV-B) increased by 99% to DKK 157 million (DKK 79 million), partly reflecting the general market growth, but 2023 also represented the first full year of performance, as sale of the products only began over the course of 2022. Revenue from the sale of JYNNEOS/IMVAMUNE/ IMVANEX was DKK 5,027 million (DKK 1,730 million) and included revenues from contracts with the US government, the Canadian government, the European Union as well as contracts entered with various other governments and organizations. Vivotif Revenue from sale of Vivotif was DKK 119 million, covering only the period from May 15, 2023 when the acquisition of the product from its former owner was completed. Revenues by quarter mDKK Q1 2023 Q2 2023 Q3 2023 Q4 2023 FY 2023 FY 2022 YOY change Travel Health Rabipur/RabAvert Encepur 243 87 - 313 211 27 432 89 173 30 1,161 417 879 299 - 32% 40% N/A Vivotif 54 38 119 Vaxchora - 7 12 5 24 - N/A Third-party products Total 43 373 38 52 24 157 79 99% 49% 596 639 269 1,877 1,257 Public Preparedness JYNNEOS/IMVAMUNE/IMVANEX Total 190% 190% 190% 848 1,334 708 2,137 5,027 1,730 848 1,334 708 2,137 5,027 1,730 Other revenue Total 31 56 30 41 158 164 -4% 1,252 1,987 1,376 2,447 7,062 3,151 124% Performance Bavarian Nordic Annual Report 2023 15 Financial review The financial review is based on the Group’s consolidated financial information for the year ended December 31, 2023, with comparative 2022 figures for the Group in brackets. There is no significant difference in the development of the Group and the Parent Company (except if noted specifically below). Impact from the acquisition of travel vaccine portfolio Write-down of ABNCoV2 development program Following the Phase 3 results announced in August, where ABNCoV2 demonstrated a reduced level of neutralizing antibodies against the dominant currently circulating variant, the asset no longer represents a commercial opportunity for Bavarian Nordic as the regulators, EMA and FDA, could not accept a submission for licensure. Therefore Management has decided to fully write-down all assets and liabilities related to the development program. The net write-down amounts to DKK 558 million and has been recognized as an impairment loss and included as part of the research and devel- opment costs. In note 32, a summarized income statement and a summarized financial position highlights how the write-down has impacted the Annual Report. The acquisition from Emergent BioSolutions has been included in the Consolidated Financial Statements of Bavarian Nordic as of the date of completion of the transaction on May 15, 2023. The acquisition includes two marketed travel vaccines, a Phase 3 vaccine candidate for the prevention of chikungunya virus, and four subsidiaries: a Swiss- based biologics manufacturing facility and three small sales entities in southern Europe. US-based sales and research and development activities have been carved-out from Emergent BioSolutions and integrated into the Company’s current U.S. entity. See note 31 “Acquisition of businesses” for further information. Performance Bavarian Nordic Annual Report 2023 16 Income statement Revenue Production costs The product rights to Rabipur/RabAvert and Encepur are amortized over 20 years with an annual amor- tization of DKK 273 million. The product rights for Vivotif and Vaxchora are amortized over 20 years, starting from the acquisition date May 15, 2023. The amortization amounted to DKK 25 million in 2023. Amortization of product rights are recognized as production costs. Revenue for the year was DKK 7,062 million (DKK 3,151 million). Production costs amounted to DKK 2,459 million (DKK 1,450 million). Costs related directly to revenue amounted to DKK 1,735 million (DKK 665 million) of which cost of goods sold totaled DKK 1,608 million (DKK 645 million). In the Parent Company revenue was DKK 130 million (DKK 212 million) lower than in the Group as sale of RabAvert in the US and Rabipur and Encepur in Swit- zerland is handled by the subsidiaries which is also the case for part of the sale of Vivotif and Vaxchora. The internal sale from the Parent Company to the subsidiaries is made under a commissionaire transfer pricing setup. The variance in revenue between Group and Parent Company is influenced by phasing of both external and internal sale. 7,062 mDKK Revenue Other production costs totaled DKK 426 million (DKK 512 million) of which net write-downs of inventory amounted to DKK 40 million compared to DKK 36 million in 2022. The write-down mainly relates to Process Performance Qualification (PPQ) batches for chikungunya. The PPQ batches can be used for future commercial sale and the write-down will be reversed at the time of expected approval of the chikungunya vaccine. Write-down of RSV materials (DKK 35 million) following the discontinuation of the Phase 3 study is recognized as research and development costs. Other production costs for 2023 includes idle capacity at the production site in Bern amounting to approximately DKK 125 million. The bulk manufacturing facility in Kvistgaard was shut down for a year during 2021/2022 due to the expan- sion of the facility for future production of Rabipur/ RabAvert and Encepur. This shutdown resulted in a limited absorption of indirect production costs for the first three quarters of 2022. Sales and distribution costs The sales and distribution costs amounted to DKK 332 million (DKK 213 million) split between costs for distribution of products of DKK 59 million (DKK 37 million) and costs for running the commercial organization and activities of DKK 273 million (DKK 176 million). The increase in distribution costs is linked to the high sale of smallpox/mpox vaccines, whereas the increase in sales costs follows the expansion of our business by the acquisition of activities from Emergent BioSolutions. 2,615 mDKK EBITDA Performance Bavarian Nordic Annual Report 2023 17 Research and development costs EBIT/EBITDA a bridge loan for the Emergent transaction and the revolving credit facility. The total research and development spending was DKK 2,228 million (DKK 1,183 million), adjusted for the impairment losses of DKK 558 million the total costs amounted to DKK 1,670 million. The increase compared to 2022 relates to the Phase 3 study for RSV and the acquired chikungunya Phase 3 study including running cost for the R&D facility in San Diego taken over from Emergent BioSolutions. The amount excludes R&D costs of DKK 127 million (DKK 85 million) recognized as production costs. The impairment losses of DKK 558 million related to ABNCoV2 includes research and development costs of DKK 390 million (DKK 280 million) capitalized during the year. Income before interest and tax (EBIT) was an income of DKK 1,503 million (loss of DKK 71 million). The net value adjustment of deferred consideration was an expense of DKK 86 million (DKK 60 million), consisting of three components: Unwinding of the discount related to deferred consideration, adjust- ment of deferred consideration due to change in estimated timing, and currency adjustments. EBITDA was an income of DKK 2,615 million (income of DKK 328 million). Amortization of product rights amounted to DKK 298 million (DKK 273 million) whereas depreciation on other fixed assets amounted to DKK 256 million (DKK 126 million). Impairment losses related to ABNCoV2 development program amounted to DKK 558 million. 2,228 mDKK Research and development costs For further details on financial income and expenses see note 11 and 12 → Financial income and financial expenses Financial income was DKK 113 million (DKK 79 million) and consisted primarily of income from bank and deposit contracts, DKK 40 million (DKK 0 million) and income from securities, DKK 45 million (DKK 20 million). In the Parent financial statements, the financial income was DKK 160 million (DKK 113 million) and included interests on receivables from subsidiaries of DKK 49 million (DKK 30 million). The financial expenses were DKK 141 million (DKK 341 million) and included interest expense on payables to subsidiaries of DKK 10 million (DKK 3 million). 2,459 mDKK Production costs Administrative costs Administrative costs totaled DKK 541 million (DKK 376 million), an increase of DKK 165 million compared to last year. Transaction costs related to the acquisition from Emergent BioSolutions were expensed by DKK 64 million and the acquisition furthermore added some extra employees in support functions. Cost related to the integration of the new activities amounted to DKK 57 million. Financial expenses were DKK 132 million (DKK 339 million) and consisted of interest expenses on debt, DKK 4 million (DKK 17 million), unwinding of the discount related to deferred consideration DKK 102 million (DKK 103 million), other financial expenses DKK 11 million (DKK 0 million) and net foreign exchange losses DKK 15 million (DKK 0 million). The other financial expenses related mainly to obtaining Income before company tax was an income of DKK 1,483 million (loss of DKK 332 million). * The deferred consideration for product rights is measured at net present value and the difference between the net present value and the amounts due is recognized in the income statement as a financial expense over the period until expected payment date using the effective interest method. Performance Bavarian Nordic Annual Report 2023 18 Tax on income for the year million) and held investments in securities of DKK 390 million (DKK 2,270 million). Year-end 2022 the Company had a repo loan position of DKK 1,104 million, which was settled during 2023. The net securities and cash position amounted to DKK 1,867 million (DKK 1,741 million). million. Milestone payments to GSK and AdaptVac amounted to DKK 298 million (DKK 595 million). Investments in property, plant and equipment totaled DKK 143 million (DKK 361 million). The net divestment of securities contributed positively with DKK 1,902 million (cash contribution of DKK 674 million). Tax on the income for the year was an expense of DKK 8 million (DKK 16 million) and related primarily to taxes paid in Bavarian Nordic GmbH. 1,477 mDKK The parent company had a net profit for the year of DKK 1,441 million (net loss of DKK 342 million), but a taxable income of DKK 83 million after depreciation of tax assets and use of tax losses carried forward. Cash and cash equivalents The Company has obtained a revolving credit facility (RCF) agreement for DKK 1,000 million, the size of the agreement is as per the Company’s request. The facility was undrawn as per December 31, 2023. Cash flow from financing activities was a contribu- tion of DKK 736 million (DKK 636 million), primarily from capital increase with a net proceed of DKK 1,599 million and funding received from the Danish Ministry of Health, DKK 240 million (DKK 400 million), partly offset by repayment of repo position (DKK 1,104 million). Despite the positive result for 2023, management still assess that the remaining deferred tax asset should remain at DKK 0 million on the balance sheet. Cash flows Cash flow from operating activities totaled a net contribution of DKK 1,119 million (net contribution of DKK 220 million) following the positive EBITDA of DKK 2,615 million (DKK 328 million). Net change in working capital was negative by DKK 1,551 million (negative by DKK 149 million) due to inventory build-up and a higher level of trade receivables following the higher sale and partly offset by higher trade payables. Following the tax position in the parent company the effective tax rate for the Group was positive by 0.5% (negative 4.8%). The Company retains the right to use the tax losses carried forward that was written down in prior years. The net cash flow for 2023 was positive by DKK 909 million (negative by DKK 22 million). Net profit The Group reported a net profit for the year of DKK 1,475 million (net loss of DKK 347 million). Investment activities totaled DKK 946 million (DKK 877 million). Cash used for acquisition of business and product rights from Emergent BioSolutions amounted to DKK 1,832 million and investment in ABNCoV2 development asset amounted to DKK 390 Liquidity and capital resources As of December 31, 2023, the Company had cash and cash equivalents of DKK 1,477 million (DKK 575 Performance Bavarian Nordic Annual Report 2023 19 Balance sheet The balance sheet total was DKK 14,353 million as of December 31, 2023 (DKK 12,391 million). 596 million, and capitalization of development costs for running Phase 2 study and Phase 3 study, DKK 774 million. See further in note 32. Assets Intangible assets stood at DKK 6,482 million (DKK 5,943 million) with the main asset being the product rights to Rabipur/RabAvert, Encepur, Vivotif and Vaxchora of DKK 4,791 million (DKK 4,640 million). The acquisition of Vivotif and Vaxchora totaled DKK 450 million at initial recognition. Product rights are amortized on a straight-line basis over their expected useful lives of 10-20 years. Property, plant and equipment stood at DKK 2,328 million (DKK 1,684 million). The acquisition of the manufacturing facility in Bern contributed with an addition of DKK 681 million. Inventories stood at DKK 1,644 million (DKK 919 million), of which the inventory of Rabipur/RabAvert and Encepur products amounted to DKK 948 million (DKK 578 million), mpox vaccines amounted to DKK 287 million, and Vivotif and Vaxchora products amounted to DKK 67 million, as per December 31, 2023. After the write-down of the ABNCoV2 develop- ment program acquired rights and development in progress only consist of the acquired chikungunya Phase 3 study and stood at DKK 1,287 million (DKK 1,013 million). The chikungunya development asset consists of the initial calculated fair value of DKK 1,287 million, including the net present value of probable future development milestones, DKK 499 million. rated banks and in short-term Danish government and mortgage bonds. Deferred consideration The present value of the future milestone payments to GSK for the acquisition of the product rights has been recognized as deferred consideration. Deferred consideration amounted to DKK 1,873 million (DKK 2,021 million). One milestone of DKK 224 million to GSK was recognized during December 2023 with payment in January 2024. The adjustment of the net present value of the deferred consideration, both in terms of change in assumed timing of the future milestone payments and unwinding of the discount, amounted to DKK 72 million (DKK 53 million). Receivables stood at DKK 1,892 million (DKK 720 million), of which trade receivables amounted to DKK 1,778 million (DKK 523 million). The increase in trade receivables compared to year-end 2022 relates to sale of smallpox/mpox vaccines. Equity After the transfer of the result for the year, equity stood at DKK 10,340 million (DKK 7,150 million). In February 2023 an accelerated book-building was completed to partly fund the acquisition from Emer- gent BioSolutions. The net proceeds from the capital increase amounted to DKK 1,599 million. The write-down of the capitalized ABNCoV2 devel- opment program costs amounted to DKK 1,403 million and included the upfront payment to As of December 31, 2023, cash and securities stood at DKK 1,867 million (DKK 2,845 million). AdaptVac of DKK 33 million, the net present value of probable future sales/development milestones, DKK Bavarian Nordic’s cash and cash equivalents are primarily invested in deposit accounts with highly Performance Bavarian Nordic Annual Report 2023 20 The deferred consideration to GSK does not include the sales milestone of EUR 25 million included in the asset purchase agreement with GSK as Management does not assess the sales milestone to be probable as of December 31, 2023. As part of the ABNCoV2 write-down the previous recognized deferred consideration of DKK 596 million was reduced to DKK 74 million, reflecting the most likely milestone scenario. The revalua- tion of the deferred consideration is offsetting the impairment losses on the development asset. A final milestone was paid late 2023 and no deferred consideration remains at year-end 2023. 2023. ABNCoV2 met the primary endpoint in the Phase 3 trial, demonstrating non-inferiority against the mRNA comparator. However, additional tests showed that ABNCoV2 was not providing adequate protection against the latest mutated variants of the virus. After discussions with the European Medicines Agency, it was clear that ABNCoV2 could not be approved as a booster vaccine and that COVID-19 vaccines need to be constantly adapted to latest variants, which is not possible with ABNCoV2. Following this outcome, the obtained funding from the Danish Ministry of Health was reclassified from an obligation to a grant received, as the Compa- ny's vaccine candidate couldn't obtain a marketing authorization by the European Commission. pension plan is part of a collective foundation in which other plans of non-related employers also participate, and the different plans all participate in the various risks relating to the foundation. The pension scheme in Bavarian Nordic Switzerland AG is a fully insured plan and therefore no obligation has been recognized. The Purchase and Sale Agreement concluded with Emergent BioSolutions includes milestone payments totaling USD 80 million related to submission and approval of Biologics License Application (BLA) to FDA and Marketing Authorization Application to EMA for the chikungunya development asset. Prepayment and loan from Government In August 2021, the Company entered a funding agreement with the Danish Ministry of Health to further advance the development of ABNCoV2. The agreement was valued at up to DKK 800 million and aimed to support the completion of the development towards licensure of ABNCoV2 as a booster vaccine. At initial recognition, the net present value of probable future development milestone payments to Emergent BioSolutions amounted to DKK 499 million and was recognized as deferred considera- tion. The net present value as of December 31, 2023, amounted to DKK 504 million. Debt to credit institutions Under the agreement, Bavarian Nordic was entitled to an upfront payment of DKK 80 million, in addition to payments of up to DKK 720 million, which were contingent upon reaching a number of predefined milestones including among others Phase 3 devel- opment milestones and milestones related to devel- opment and upscaling of manufacturing process for commercial production of the vaccine. As of December 31, 2023, debt to credit institutions amounted to DKK 17 million (DKK 1,123 million) and consisted of a mortgage loan. The repo position amounting to DKK 1,104 million as of December 31, 2022, was settled following the capital increase in February 2023. The Purchase and Sale Agreement also includes an earnout payment valued up to USD 30 million. The earnout payment relates to sale of Vivotif and Vaxchora. As per December 31, 2023, Management does not judge the sales milestone to be probable and therefore the earnout payment has not been recognized as deferred consideration. Retirement benefit obligations With the acquisition of the Swiss subsidiary Bavarian Nordic Berna GmbH, the Group has recognized a retirement benefit obligation of DKK 81 million. The The Company received the full funding of DKK 800 million, of which DKK 240 million was received in Performance Bavarian Nordic Annual Report 2023 21 Outlook for 2024 For 2024, Bavarian Nordic expects revenue of DKK 5,000-5,300 million and EBITDA of DKK 1,100-1,350 million. Revenue, mDKK 5,000 – The expected revenue is comprised of DKK 2,700– 3,000 million from Public Preparedness vaccines, of which DKK 1,600 million have already been secured by contracts, approximately DKK 2,100 million from Travel Health vaccines and approximately DKK 200 million from contract work. Travel Health anticipates a 12% growth, driven by a mix of continued market growth and market share gains. implicit 2024 EBITDA margin for this effect would give an EBITDA margin range of 27-30%. Net working capital is expected to increase by approximately DKK 900 million due to final inven- tory build-up before completion of tech-transfer of rabies and TBE manufacturing. Other tangible investments of approximately DKK 300 million are expected. 5,300 EBITDA, mDKK Key assumptions Research and development costs of approximately DKK 850 million are expected, of which the chikun- gunya program represents nearly half. Cash outflow in 2024 further includes milestone payments of DKK 1,800 million to GSK and Emergent BioSolutions. 1,100 – 1,350 Similarly, the chikungunya program will impact manufacturing costs negatively by approximately DKK 240 million due to manufacturing of drug substance batches as part of the preparations for commercial launch in 2025. Pending approval of the vaccine, it is expected that these costs will be reversed and capitalized in 2025. Adjusting the The outlook is based on the following assumptions on currency exchange rates of DKK 6.90 per 1 USD and DKK 7.45 per 1 EUR. Performance Bavarian Nordic Annual Report 2023 22 Sustainability Pioneering vaccines for a sustainable future We recognize that mitigating climate change is not just a moral imper- ative but also a necessity for the sustainability of our planet and the well-being of future generations. That’s why, beyond climate goals, we are continuously investing in sustainable and efficient manufacturing processes to enhance our resource efficiency and minimize our environ- mental footprint. We believe a commitment to developing a fully sustainable business is key to lasting success in global markets. Our quest to improve and protect lives and communities is driven by actions within the ESG framework. The priorities are embedded in our business strategy and plans for the coming years. Our focus on sustainability goes hand in hand with our recognition of the critical role that vaccines play in mitigating the adverse effects of climate change on human health. By preventing the spread of infectious diseases, vaccines contribute to healthier populations, reducing the burden on healthcare systems and promoting resilience in the face of environmental challenges. Define roadmap to achieve Net Zero carbon emission Track the environmental impact across supply chain Further investigate biodiversity and climate impact Scope 1 and emission reductions Environmental Addressing the impact of climate change on people's health Scope 3 baseline is adopted Energy audits conducted Waste recycling focus • Net Zero by latest 2050 • Reduced environmental footprint Development of an Endemic Market strategy Track social impact across supply chain Further implement 'Vision 0' for work- place safety culture Human Rights Policy in place Social Continued focus on retention and a healthy and safe work environment Expanding access to vaccines • Access to vaccines • Positive impact on employees Further enhance and develop supplier and business partner due diligence program Explore alternatives to in-vivo testing Participant of Global UN Compact Governance Joined the Pharmaceutical Supply Chain Initiative (PSCI) Fostering trust among stakeholders • Business ethics compliance • Transparent business conduct Performance Bavarian Nordic Annual Report 2023 23 Sustainability report 2023 Our progress on sustainability is reported in our sustainability report, which covers our reporting obligations cf. sections 99a and 107d of the Danish Financial Statements Act and Article 8 of the EU Taxonomy Regulation. Environmental data1 Unit 2023 2022 2021 2020 2019 CO2e, scope 1 Tonnes Tonnes GJ 4,364 6,3182 1,765 988 1,422 1,085 1,381 1,175 909 1,178 CO2e, scope 2 Energy consumption Water consumption 136,066 33,835 53,325 21,772 42,577 17,023 45,110 19,170 34,137 14,770 m3 Read our Sustainability Report → Social data1 Unit 2023 2022 2021 2020 2019 Full-Time Workforce Gender Diversity3 FTEs % 1,379 56 975 59 759 61 690 61 491 N/A ESG key figures Key figures for selected environmental social and governance areas in the table are provided in accordance with the recommendations set out in “ESG key figures in the annual report” from the Danish Finance Society / CFA Society Denmark, FSR – Danish Auditors, and Nasdaq Copenhagen. Gender Diversity, Management % 47 18 10 55 19 8 56 14 7 56 9 51 10 6 Employee Turnover Ratio Sickness Absence4 % Days per FTE 6 Governance data5 Unit 2023 2022 2021 2020 2019 The data has been subject to an independent auditor’s review in the form of limited assurance. The Independent Auditor’s Assurance Report can be found in our sustainability report. Gender diversity, Board Board meeting attendance rate CEO pay ratio % 29 97 21 20 99 22 29 99 16 29 97 16 29 98 15 % Times 1 Data derived from the Company’s sustainability reports 2019-2023, except for FTEs, which are based on the Group Key Figures on page 12. From 2023, Scope 2 reporting is based on market-based emissions (methodology change). Data not collected before 2020. Sickness absence does not include offices in the USA and staff working remotely in Canada. For the years 2019-2021, the numbers include child sick days. 2 3 4 5 Data derived from the Company’s annual reports 2019-2023, except for CEO pay ratio, which is presented in the 2023 remuneration report. Our progress on sustainability is reported in our sustainability report, which covers our reporting obligations cf. sections 99a and 107d of the Danish Financial Statements Act and Article 8 of the EU Taxonomy Regulation Strategy and business Bavarian Nordic Annual Report 2023 24 Contents 25 Our way forward 26 Markets and products 28 Innovation Strategy and business Strategy and business Bavarian Nordic Annual Report 2023 25 Our way forward Spurred by our ambitious growth strategy the past four years has positioned us favorably to further leverage the strong commercial presence, we have established in key markets. With the recent acquisition from Emergent BioSolutions and the near-term completion of the technology transfer of manufacturing of previously acquired vaccines from GSK, we remain focused on the successful integration of these activities in the short term, but also on executing on our commercial strategy in pursuit of further growth and opportunities. Deliver continued growth Bring innovative solutions Our focus and key growth drivers Drive growth in Travel Health Improve competitiveness of existing product portfolio through life-cycle management Rabies/TBE Continued market growth driven by increased travel. Geographical expansion of own distribution. CHIKV Expected launch of CHIKV vaccine candidate in 2025. Expand base business within Public Preparedness Typhoid/cholera Secure reliable supply Continued strong brand performance through dedication and focus. Relaunch typhoid and cholera vaccines via our existing commercial platform. Mpox Strong focus on organic growth supported by selective and synergistic M&A Commercial launch of the vaccine in the US in 2024. Develop new pipeline programs and platforms Strategy and business Bavarian Nordic Annual Report 2023 26 Deliver continued growth Markets and products A global leader in travel vaccines The travel vaccine market has seen a significant rebound since the dramatic decrease during the COVID-19 pandemic. It is estimated that in 2024, global travel will surpass the pre-COVID level (2019). However, during 2023, we have already seen higher sales of our vaccines in certain areas, exceeding this level. endemic and represents a risk. In the US, which is Typhoid successful Phase 3 results reported in 2023, we plan to submit applications for regulatory approval in the US and Europe in 2024, to support potential launch of the vaccine in 2025 as second to the market, which is expected to reach annual estimated value of USD 500 million in a few years. also the single-largest market, the vaccine is mostly sold for post-exposure use, i.e. for individuals potentially at risk after being bitten or scratched by animals known to carry the disease. Our typhoid vaccine, Vivotif®, was added to our portfolio during 2023 as part of the acquisition from Emergent BioSolutions. We are in the phase of relaunching the product in key markets, focused on establishing the vaccine as the optimal choice for individuals who prefer an oral medication. The uptake of rabies vaccines for travelers to endemic regions remains low and represents a good opportunity for Bavarian Nordic to expand the market through disease awareness campaigns. The continued organic market growth combined with our efforts to build and expand the markets, including the forthcoming anticipated launch of a new vaccine against chikungunya in 2025 are the drivers to support our primary goal to drive growth in our leading position within travel health, where we expect an annual growth rate (CAGR) of 10-12% in the years 2024-2027. Cholera Our cholera vaccine, Vaxchora®, was also added to our portfolio during 2023 as part of the acquisition from Emergent BioSolutions. It is the only FDA-li- censed vaccine for the prevention of cholera and our focus is similar to Vivotif on relaunching the product in key markets (USA) as well as expanding our reach to markets in Europa, where the vaccine is also approved in more than 25 countries. Tick-borne encephalitis (TBE) Our TBE vaccine, Encepur®, is available in 14 Euro- pean countries where we are market challenger in key markets with Germany representing our largest single-market. Tick-borne encephalitis (TBE) is prev- alent in central, eastern and northern Europe and the geographic range of the virus appears to have expanded to new areas, likely due to a complex combination of changes in diagnosis and surveil- lance, human activities and socioeconomic factors, and ecology and climate. Rabies Our rabies vaccine, marketed as Rabipur® or RabAvert®, is market-leading in Western markets, where it is sold in 20 countries. In Europe, it is predominantly a travel vaccine (pre-exposure) for those travelling to countries where rabies is Chikungunya The chikungunya vaccine candidate, CHIKV VLP, represents a significant future asset for Bavarian Nordic’s travel health portfolio. Based upon the Strategy and business Bavarian Nordic Annual Report 2023 27 Deliver continued growth Markets and products A preferred partner to governments on vaccines for public preparedness For more than a decade, we have been a trusted partner to governments on their smallpox prepar- edness with USA and Canada as key customers. Building on the recent mpox outbreak, we continue to expand our partnerships to enable that nations remain prepared in the future against both smallpox and mpox. including countries where the vaccine did not have regulatory approval, but was accepted under national emergency provisions. During the outbreak, the vaccine was provided to at-risk populations via vaccination campaigns facilitated by the public health authorities. While this approach has generally worked well during the outbreak, a significant proportion of the people at risk have not received the vaccine. Smallpox/mpox Our vaccine, JYNNEOS® (also marketed as IMVA- MUNE® and IMVANEX®), is a non-replicating vaccine approved for both smallpox and mpox in the US, Canada and Europe. In October 2023, U.S. CDC Advisory Committee on Immunization Practices (ACIP) recommended the routine use of JYNNEOS® in adults at risk of mpox infection. This has opened for the opportunity to launch the vaccine for the private market, which we intend to do in 2024. Other countries have made similar recommendations, potentially enabling a future commercial market for the vaccine outside USA. We continue to work with not only our key customers, USA and Canada, to supply our vaccine to their national stockpiles under existing contract, but also to expand our customer base, thus adding to the increase base of this business. In response to the global mpox outbreak in 2022, we supplied the vaccine to more than 70 countries, Strategy and business Bavarian Nordic Annual Report 2023 28 Bring innovative solutions Innovation Our focus and key growth drivers Life-cycle management Investments in R&D significantly lowered Defend and build positions for growing commercial portfolio. Innovation remains a cornerstone for Bavarian Nordic’s success. We have a strong heritage in the discovery and development of novel vaccines. However, as part of our commercial transformation, our research and development efforts now go beyond that. Our growing portfolio of commercial vaccines increases the need for staying competitive, complying with regulations and adapting to market dynamics. Hence, a significant part of our resources is dedicated to life-cycle management of the products to ensure sustained profitability. While the planned investments in R&D in 2024 have been significantly lowered, the increased focus on life-cycle management combined with activities to support launch of the chikungunya vaccine will drive a higher R&D base in the short term compared to historical levels. R&D costs in 2022 and 2023 were significantly higher due to running two large Phase 3 trials. Commercial launch of chikungunya vaccine Submission of BLA and MAA in 2024 to support approval and launch in US and Europe in 2025. Early development R&D investments in 2019A – 2024E Disciplined approach to the discovery and early development of new platforms and vaccine candidates. DKK million 2024E 100 950 850 The clinical development of our chikungunya vaccine also remains a high priority to support a successful commercial launch, pending approval in 2025. 2023A 127 2,228 2,355 Allocation of R&D in 2024 70% 10% Research (platforms and new indications) 2022A 20 1,183 1,203 LCM & Commercial support 2021A 22 399 421 Finally, we continue our strong partnership with the US government in the development of the fully funded program for an equine encephalitis vaccine. 104 341 446 2020A DKKm -850 2019A 219 409 628 2024E 20% Development (partly funded) Contract R&D R&D Bavarian Nordic Strategy and business Bavarian Nordic Annual Report 2023 29 Bring innovative solutions Innovation Life-cycle management Current focus for life-cycle management of existing products Until 2020, where we launched our commercial transformation strategy, our smallpox vaccine was the only product in our portfolio and was only sold to a few governments. Now, the portfolio has grown significantly, and we are operating in commercial markets where competitive edge is becoming increasingly important for success. By continuous improvement and differentiation of our products, we retain the ability to defend and increase our market shares. Life-cycle management Shelf-life extension • Smallpox/mpox • Typhoid Geographical expansion • Smallpox/mpox • Chikungunya • TBE Hence, R&D activities to support the life cycle of our products are increasing. In 2024, we are forecasting total R&D costs of DKK 850 million of which approximately 70% are allocated to life-cycle management, which includes activities within areas such as: · Cholera In Vivo to In Vitro potency • Rabies • TBE • Label extensions (e.g. new indication, new population, new data) • New presentation formats • Geographical expansions (approvals in new territories) • Manufacturing process improvements to increase yield and lower cost of goods sold (COGS) Booster projects • Chikungunya • TBE Label expansion • Rabies • TBE • Maintenance of registration in various territories Strategy and business Bavarian Nordic Annual Report 2023 30 Bring innovative solutions Innovation Our R&D facilities Clinical programs Chikungunya Equine encephalitis Positive Phase 3 results reported in 2023, moving forward towards licensure. Based on these promising results, we expect to submit a Biologics License Application (BLA) to the U.S. Food and Drug Administration (FDA) and a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) in 2024 to support potential launch of the vaccine in 2025. A fully funded program leveraging the proven MVA-BN platform technology. Our chikungunya vaccine candidate, CHIKV VLP (PXVX0317), was part of the acquisition in 2023. During the year, we reported positive topline results from two pivotal Phase 3 clinical trials, evaluating the vaccine in more than 3,600 individuals aged 12 years and above. The development program for MVA-BN® WEV, a multi-valent vaccine candidate against the rare, but potentially deadly mosquito-borne equine encephalitis viruses (western, eastern and Venezuelan), is funded by the U.S. Department of Defense (DOD) with contracts awarded to date amounting to nearly USD 120 million. Under these contracts, Bavarian Nordic has completed the Phase 1 clinical development and is plan- ning to initiate a Phase 2 clinical study in 2024. The contract also includes options to support Phase 3 preparations if warranted by the clinical results. Martinsried, Germany In 2023, we also initiated a Phase 3 study to evaluate the long-term safety and immunogenicity of the vaccine candidate as well as responses to a booster vaccination up to five years after the initial vaccination. The study is planned to enroll 800 participants aged 12 to 64 years of age from the previous Phase 3 study. Both studies met their primary endpoints, demon- strating that CHIKV VLP induced high levels of neutralizing antibodies against chikungunya, with antibody titers equal to or above the threshold agreed with authorities as a marker of seropro- tection. The vaccine candidate was well-tolerated across both studies and adverse events were mainly mild or moderate in nature. → Read more about the vaccine candidate → Read more about the vaccine candidate San Diego, CA, USA Strategy and business Bavarian Nordic Annual Report 2023 31 Bring innovative solutions Innovation Our manufacturing facilities Manufacturing In 2024, Bavarian Nordic celebrates its 20th year as a vaccine manufacturer. The Kvistgaard site, which today represents the single-largest site of the Company was taken over in 2004 and completely repurposed for production of our MVA-BN vaccines. We have routinely manufactured smallpox/ mpox vaccines since 2010 and have subsequently expanded the site significantly to handle production of other vaccines and established end-to-end manu- facturing, which has enabled us to bring most of our production needs in-house. Another priority for our Kvistgaard site during 2024 will be the manufacturing of freeze-dried smallpox vaccines under our contract with the US government. The sudden, increase demand for our vaccine during the mpox outbreak has postponed activities related to the approval of the freeze-dried version, but we expect to submit the application for a supplement BLA (Biologics License Application) to the FDA in 2024 and subsequently initiated manu- facturing of the contracted doses. In addition to our own dedicated facilities, we have established a global network of manufac- turing partners to assist us with certain production tasks. Kvistgaard, Denmark Products • JYNNEOS/IMVAMUNE/IMVANEX (smallpox/mpox) • Rabipur/RabAvert (rabies) • Encepur (tick-borne encephalitis) Through our recent acquisition from Emergent BioSolutions, we added more than 60 years of vaccine manufacturing experience as we took over the Thörishaus facility near Bern, Switzerland, where the oral vaccines, Vivotif (typhoid) and Vaxchora (cholera) are manufactured. The facility will also house the manufacturing of the chikungunya vaccine and throughout 2024, preparations will continue to support a successful launch, pending approval in 2025. Most recently, we established an additional manu- facturing line, which will allow us to manufacture Rabipur/RabAvert and Encepur, thus completing the five-year transition plan that was agreed with GSK upon our acquisition of the vaccines in 2020. In 2024, we will perform the last steps of qualification of these processes, allowing for regulatory submis- sions in 2025, upon which we will fully assume the commercial manufacturing of both products. This will provide more flexibility to meet supply demands as well as lower the cost of goods sold for both products. Thörishaus, Switzerland Products • Vivotif (typhoid) • Vaxchora (cholera) • Chikungunya vaccine (not yet approved) Corporate information Bavarian Nordic Annual Report 2023 32 Contents 33 Governance 37 Risk management 40 Shareholder information 42 Board of Directors 46 Executive Management Corporate information Corporate information Bavarian Nordic Annual Report 2023 33 Governance The Board of Directors As of December 31, 2023, the registered Executive Management consisted of Paul Chaplin, President and CEO and Henrik Juuel, Executive Vice President and CFO, both registered with the Danish Business Authority, assisted by four Executive Vice Presi- dents who together with the registered Executive Management are responsible for the day-to-day operations of the Company (collectively the “Execu- tive Management”). Board of Directors Chair: Luc Debruyne Deputy Chair: Anders Gersel Pedersen Bavarian Nordic is managed in a two-tier structure composed of the Board of Directors (“the Board”) and the Executive Management. The Board is responsible for the overall strategic management and the financial and managerial supervision of Bavarian Nordic, as well as for regular evaluation of the work of the Executive Management. In addition, the Board supervises the Company in a general sense and ensures that it is managed in an adequate manner and in accordance with applicable law and the Company’s articles of association. Finance, Risk and Audit Committee Chair: Anne Louise Eberhard Board committees To support the Board in its duties, the Board has established and appointed three subcommittees: a Finance, Risk and Audit Committee, a Nomination and Compensation Committee and a Science, Tech- nology and Investment Committee. The committees, which comprise only shareholder-elected members of the Board are charged with reviewing issues pertaining to their respective fields that are due to be considered at board meetings. More information about the committees, including the terms of refer- ence which specify the tasks and responsibilities for each of the committees are available on the Compa- ny’s website: Nomination and Compensation The Board discharges its duties in accordance with the rules of procedure of the Board, which are reviewed and updated by all members of the Board. Committee Chair: Luc Debruyne The registered Executive Management is appointed by the Board, which lays down their terms and conditions of employment and the framework for their duties. The Executive Management is respon- sible for the day-to-day management of Bavarian Nordic in compliance with the guidelines and direc- tions issued by the Board. The day-to-day operations do not include transactions of an unusual nature or of material importance to the affairs of Bavarian Nordic. Science, Technology and Investment Committee Chair: Heidi Hunter Executive Management Board committees → Corporate information Bavarian Nordic Annual Report 2023 34 Composition of the Board its members. The employee representatives are elected by the employees for a four-year term; the current four-year term expires in 2025. and markets it is operating within and that collec- tively enable the Board to oversee the strategy and development of the Company at any time. Changes to the Board during 2023 The Board consists of eleven members: seven external members and four employee represent- atives. The external members are elected by the shareholders at the annual general meeting for terms of one year; retiring members are eligible for re-election. The Board elects a chair from among At the beginning of 2023, the Board consisted of nine members: five shareholder-elected members and four employee representatives. During 2022, two shareholder-elected board members resigned without the election of new board members. In addition, Gerard van Odijk, member of the Board since 2008 and chair since 2014 stepped down at the annual general meeting in March 2023. Following the annual general meeting in March 2023, with the election of Luc Debruyne as new chair, and Heidi Hunter and Johan van Hoof as new members of the Board, the Board consisted of eleven members: seven shareholder-elected members and four employee representatives. The composition of the Board should reflect a diversity of backgrounds, experiences and expertise relevant to the Company considering the industry For an overview of the specific competencies identi- fied for each of the Board members, see page 45. Meeting Attendance Number of meetings attended by each board member out of the total number of meetings within the member’s term. Finance, Risk, and Audit Nomination and Compensation Committee Science, Technology, and Investment Committee Board of Directors Committee Luc Debruyne1 Anders Gersel Pedersen Peter Kürstein In November, the Board appointed Ms. Montse Montaner Picart as observer with the intent to nomi- nate her for election at the annual general meeting in April 2024. Ms. Picart is former and the first Chief Sustainability Officer of Novartis where she has held various leading positions. She has more than 30 years of industry and executive experience and has received several recognitions for her leadership in driving sustainable organizations. Frank Verwiel Anne Louise Eberhard2 Heidi Hunter2 Johan van Hoof2 Gerard van Odijk3 Linette M. Andersen Thomas A. Bennekov Anja Gjøl An overview of the composition of the Board is found on pages 42-45. Karen M. Jensen 1 Luc Debruyne, Heidi Hunter and Johan van Hoof were elected as new members of the Board in March 2023 2 Anne Louise Eberhard retired from the Science, Technology, and Investment Committee and became member of the Nomination and Compensation Committee in March 2023 3 Gerard van Odijk retired from the Board in March 2023 Meeting attended Meeting not attended Corporate information Bavarian Nordic Annual Report 2023 35 Remuneration policy and report Meeting attendance Board’s work as well as the work in the committees. Introductory training of new board members was identified as a new focus area for 2024, and organ- izational development will continue to be a focus area also in 2024. During 2023 Bavarian Nordic had an equal gender distribution across the Board and other manage- ment levels, thus as in accordance with the guide- lines from the Danish Business Authority, no target figures for the underrepresented gender were set. The overall attendance for the Board at meetings in 2023, including meetings in the subcommittees was 97%. The remuneration of the Board and the Corporate Management is governed by the remuneration policy which was updated in 2023 and subsequently approved by the shareholders at the annual general meeting on March 30, 2023. Evaluation of the Board Board and management gender diversity The Board and its subcommittees conduct every year a self-evaluation of the Board's and subcom- mittee’s work, accomplishments and composition. The chair heads the annual evaluation, which is conducted at least every third year with external assistance. The process, whether it is facilitated internally or by external consultants, evaluates topics such as board dynamics, board agenda, quality of the material that is submitted to the Board, discussions at the Board meetings, the chair’s leadership of the Board, strategy, Board composi- tion and Board competencies. Typically, the process is facilitated by each Board member filling out a detailed questionnaire, and the Board members are asked to score to which extent they agree to the individual questions. The results of the ques- tionnaire are then discussed at a subsequent Board meeting, and the individual comments submitted are used in the planning and handling of future Board meetings. As a company, Bavarian Nordic always strive to attract and engage a highly qualified and diverse group of employees and aim to eliminate biases and create an inclusive atmosphere. In order to achieve these ambitions, the Bavarian Nordic outlined the below specified ambitions and objectives for the work with diversity and inclusion. In accordance with section 139 b in the Danish Companies Act, Bavarian Nordic has prepared a report on the remuneration of the individual members of the Board and Corporate Management in 2023. By December 31, 2023 and also by the reporting date, the Board had a representation of two female and five male members elected by the share- holders, thus the Board had an equal gender distri- bution as in accordance with the guidelines from the Danish Business Authority. Remuneration Policy → Remuneration Report → Bavarian Nordic wish to: Furthermore, by December 31, 2023 the other management levels1 in Bavarian Nordic had a representation of ten female and thirteen male managers, thus the other management levels had an equal gender distribution as in accordance with the guidelines from the Danish Business Authority. • Have a balanced gender distribution in all mana- gerial positions and at all levels in the organiza- tion. Business ethics To ensure corporate oversight of the Company’s global business ethics compliance risks, we have a Business Ethics Compliance Committee who repre- sents Executive Management and relevant business functions and who meets regularly to review and assess risks, training, and the levels of compliance. The Finance, Risk and Audit Committee receives regular updates from the Business Ethics Compliance Committee. The Company has appointed a global Chief Compliance Officer with overall responsibility for the Company’s global compliance program, and the Company has appointed a US Compliance Officer with responsibility for the Company’s US compliance program. • Seek an age-diverse workforce that brings new perspectives, knowledge and experiences. Board of Directors 2023 Total number of members 7 • Develop a workplace that embraces the diverse backgrounds and perspectives stemming from an increasingly global and specialized organization. Underrepresented gender in percent 29% Other management levels Total number of members 21 The 2023 self-evaluation was performed through completion of a detailed questionnaire, facilitated with external assistance. In general, key conclusions were positive with a continued satisfaction with the • Ensure that the compositions of our Board and Executive Management is diverse in terms of experience, competencies and gender. Underrepresented gender in percent 48% *considered an equal gender distribution in accordance with the guidelines from the Danish Business Authority. 1 as defined in accordance with the guidelines from the Danish Business Authority Corporate information Bavarian Nordic Annual Report 2023 36 The data ethics policy is based on 8 principles: 1. Our Executive Management is dedicated to ensuring and maintaining a high standard of data ethics Business ethics is prioritized on all levels in the organization, and all employees are trained annually in our Code of Conduct, which is also available for external stakeholders via our website. Violations of the Code of Conduct may be reported through the Ethics Hotline (whistleblower scheme), which is also accessible on our website. In 2023, the Company received three compliance concerns from all reporting channels, none of which have been substantiated. holders. Regularly and at least once a year, Manage- ment monitors adherence to the recommendations on corporate governance in order to ensure the best possible utilization of and compliance with the recommendations and legislation. Data ethics policy Bavarian Nordic has a data ethics policy to ensure we maintain strong data ethics in our company. The data ethics policy is based on 8 principles and supplements our general proce- dures and policies for processing (personal) data. 2. We ensure accountability for data processing In accordance with Section 107 b of the Danish Financial Statements Act, Bavarian Nordic has published a statutory report on Corporate Govern- ance for the financial year 2023. The report provides a detailed account of the two-tier management structure of Bavarian Nordic, including an overview of the Board and its committees and a review of their activities over the year. The statement also describes key elements of the Company’s internal control and risk management systems related to financial reporting processes. The report is available on the Company’s website: 3. We require an appropriate level of data ethics for processing activities carried out by third parties In 2023, we have carried out initiatives to support the data ethics principles. We have implemented enhancements to our policies and procedures to support the handling and processing of personal data. We have also improved processes on how we use data as well as our records of processing activities. Further, a series of awareness training activities have been carried out for all employees of Bavarian Nordic to make sure that everyone understands how to use data in compliance with our data ethics policy. 4. We ensure that the processing activities carried out provide value to the data subjects, and are transparent and secure Code of Conduct → Ethics Hotline → Corporate governance 5. We train our employees and monitor processing activities Bavarian Nordic remains focused on good corporate governance, having implemented the recommenda- tions from the Committee of Corporate Governance (Komitéen for god Selskabsledelse) for companies listed on the Nasdaq Copenhagen exchange. 6. We maintain an Ethics Hotline, where viola- tions of data protection laws can be reported by internal and external stakeholders Corporate Governance → We continue to actively work with supporting and implementing the data ethics principles into our way of doing business. 7. We identify and monitor the use of new tech- nologies for processing of data Management believes that the Company is operated in compliance with guidelines and recommenda- tions that support the Company’s business model and can create value for Bavarian Nordic’s stake- 8. We carry out internal controls Corporate information Bavarian Nordic Annual Report 2023 37 Risk management Bavarian Nordic’s business model spans the full value chain from research and development, over production to commercialization and rests on the ability to innovate and commercialize new vaccines. The business model covers partnership business, complex governmental sales and direct sales. By the nature of our business, we are exposed to a variety of risks along our value chain. Bavarian Nordic has increased its global presence during 2023 following the acquisition of activi- ties from Emergent BioSolutions which includes commercial products, a late-stage vaccine candidate for chikungunya, a production facility in Switzer- land and expanded R&D facilities and presence in North America, all impacting the risk profile of the company. The Board of Directors receives regular risk updates from FRAC which is taken into consideration in the Board’s overall strategic considerations and deci- sions. The table below summarizes the key risks that are important to Bavarian Nordic’s business including examples of mitigating actions. Risk area Risks Mitigation actions Disruptions to Bavarian Nordic’s supply chain caused by manufacturing issues, internal systems, or supply chain issues, could have a significant impact on the ability to supply products at the right time and could impact both customer relations and financial performance. • • Update and maintain risk assessment for equipment and implement preventive maintenance where necessary. Internal quality audits, including mock inspections. Dual sourcing strategies. Adequate safety inventory for core products. Manufacturing and Supply The formal process ensures both bottom-up and top-down identification and handling of risks. In this process, key risks are first identified through a bottom-up process including description of the risks and mitigating actions taken to reduce either the likelihood of occurrence or the potential impact. Residual risk, after agreed mitigating actions, is further mitigated by insurance where this is relevant and possible. All risks have assigned risk owners, normally at the executive level, and assigned risk-responsible employees who monitors and miti- gates the risks closely. • • Bavarian Nordic is driving the risk management and risk mitigation processes through a structured Enter- prise Risk Management (ERM) process, whereby risks are managed through identification, moni- toring and mitigation. The process is an integrated part of the Company’s operational procedures and the management processes. The Finance, Risk and Audit Committee (FRAC) oversees the process and is closely monitoring the risks on a quarterly basis. Bavarian Nordic utilizes subcontractors and CMOs as part of the supply chain; any disruptions to the planning and execution at CMOs or subcontractors could impact Bavarian Nordic’s ability to supply products timely. • Close supply chain control and direct monitoring of key vendors. Constantly updated disaster recovery plans. Updated and adequate factory IT. Systematic and integrated Sales and Operations Planning model. • • • → Corporate information Bavarian Nordic Annual Report 2023 38 Risk area Risks Mitigation actions Risk area Risks Mitigation actions As Bavarian Nordic is expanding its presence and global supply coverage, inefficient processes or systems, incl. ERP, could restrict the Company’s ability to scale up and deliver on the growth potential across products and markets. • Investments and efforts to secure that Bavarian Nordic uses one ERP system and has a broad covering BI system. Constant standardization of processes and quality systems. Bavarian Nordic is targeting launch of a chikungunya vaccine in 2025 with further market expansion in subsequent years. The compliance with GMP etc. commercial launch requires regulatory steps and approvals. Close dialogue with authorities (e.g., FDA and EMA) to secure optimal path to approval and Systems and Processes Development and approval of pipeline products, incl. life-cycle management activities of the current portfolio • • • Strong quality system in place to ensure compliance with standards agreed with and required by authorities. Employee training. Bavarian Nordic will further develop products in the pipeline, incl. life-cycle management activities for the current portfolio of products. • Communication with experts and regulators, to discuss regulatory strategy and development of recommendation. Shelf-life extension initiatives for products in the current portfolio. Disruptions, including hacking, malware, or other external attempts to disrupt Bavarian Nordic’s ability to operate, could have a significant impact on the Company’s IT infrastructure and systems, from inability to perform operationally to inability to perform commercial sales or perform R&D. • • Internal procedures for security monitoring and vulnerability assessment. Constantly having continuity plans updated, incl. having updated internal processes for data recovery. Plans for micro-segmentation to reduce the impact of attacks. Training and awareness campaigns both inside the IT department and within the business. Externally performed maturity assessments test, incl. gap analysis and gap closure plan identification. Involvement of third-party cybersecurity specialist to ensure a constant overview of threats and preventative measures available. Cyber security • • Any research and development activities can be delayed or even abandoned. The product approval phase can be delayed or even fail. Develop early-stage pipeline of vaccines, or new platforms, to stay competitive. • • All clinical material and production facilities require regulatory approval; such approvals can be delayed or even fail. The impact could influence revenue and/ or costs. • • Delays, failures or paused projects could have an impact on Bavarian Nordic’s future pipeline and hence future profitability. Bavarian Nordic must live up to ESG compliance and reporting requirements. • • • Prepare for CSRD readiness both short and long term. ESG Transparency and Reporting • Perform annual security penetration tests and audits by a third party. Deliver system-based and compliant transparency on main data areas. Set and deliver on targets/selected ESG KPIs that demonstrate Bavarian Nordic’s commitment to drive sustainable business and deliver on ESG. Additional requirements for transparency and reporting from all stakeholders incl. investors, customers, partners and future talents drives needs for data standardization, systems and high employee focus. Insufficient focus on ESG can impact the ability to attract funding, customers, suppliers, or new employees. • Actively communicate results and ambitions to all stakeholders. Corporate information Bavarian Nordic Annual Report 2023 39 Risk area Risks Mitigation actions Risk area Risks Mitigation actions Not complying with laws, incl. anti- corruption laws, regulations or any other compliance requirements could damage the Company’s reputation, result in significant fines and impede the Company’s ability to operate. • • • • • Follow and monitor the established internal compliance structure and governance. Internal and external legal resources available. Monitor development in relevant laws and regulations. Allocation of internal resources to secure adaptation of new rules and regulations. Constant monitoring by the Business Ethics Compliance Committee. Bavarian Nordic is dependent on the ability to attract and retain talents for many func- tions. In times of high competition for the right talents or adverse impact on Bavarian Nordic’s image, it could impact the Compa- ny’s ability to perform at high standards and compete against other companies. • • • • Perform employer branding. Laws, Regulations and Attraction and retention of talent and Provide training and development. Offer competitive remuneration package. Identifying and develop key talents, incl. talent programs. Compliance employees The validity of patents is crucial for the Company to secure future revenues and return on the investments made in development. Patents might be challenged by competitors. • Dedicated and experienced resources involved in the filing of patent applications to minimize vulnerability to future inva- lidity actions, and with ability to defend patents if such actions are filed. Intellectual property rights (IP) Bavarian Nordic is competing in markets where prices may be determined by the local supply/demand, including products from competitors that are significantly larger than Bavarian Nordic. Pressure from local healthcare politics to reduce costs may impact Bavarian Nordic’s pricing or volume. Geopolitical or macroeconomic changes or health crises, e.g., pandemics, could impact demand, pricing and access to vaccinations. Competitors might develop product • • Ensure product availability through meticulous sales and operations planning Secure an engaged and competent sales, marketing and medical affairs organization. Look for and leverage differentiation. Further develop products in the market (life-cycle management) Build strong relations through dedication and focus to achieve preferred supplier status. Commercia- lization and Competition • • Significant fluctuations in the DKK/USD and other currencies which Bavarian Nordic could be exposed to, could impact financial positions. Potential disputes with tax authorities could result in additional tax payments. • • Material net USD exposure is hedged using FX contracts or options. Frequent monitoring of planned cash flows in other currencies allows for hedging when the risk is identified. Taxes are paid where the Company oper- ates. Inter- company transactions are governed by agreements in compliance with OECD’s transfer pricing guidelines. External and internal tax expertise is engaged whenever Bavarian Nordic is exposed to new tax risks to avoid lack of compliance or negative surprises. Currency and tax exposure to risks • candidates with higher potential which could reduce the value of Bavarian Nordic’s pipeline and products. • • Currency risks and additional financial risks are further explained in note 23 in the consolidated financial Partnering with other companies and government bodies in the industry is a central element of the Company’s strategy. Loss of partnerships, e.g., due to collaboration issues, failed projects or similar, could have a significant impact on the Company’s reputation and future performance. • • Frequent interactions with partners to build and maintain common understanding. Processes in place to resolve potential issues. Partnering statements. Corporate information Bavarian Nordic Annual Report 2023 40 Shareholder information Bavarian Nordic has been listed on the Nasdaq Copenhagen exchange since 1998 under the symbol BAVA. The Company is included in the OMXC25 index and the OMXC Large Cap index. Thus, the fully diluted share capital amounted to Distribution of share capital DKK 826,182,550 at year-end, comprising 82,618,255 shares. For further information about outstanding warrants, see note 30 in the consolidated financial statements. 8% 68% Non-registered Denmark For US investors, Bavarian Nordic has a sponsored Level 1 American depositary receipt (ADR) program with Deutsche Bank Trust Company Americas acting as the depositary bank. Three ADRs represent one Bavarian Nordic share and the ADR symbol is BVNRY. 13% Ownership Europe At the end of 2023, Bavarian Nordic had approxi- mately 123,000 registered shareholders owning 92% of the share capital. The remaining 8% were held by non-registered shareholders. Bavarian Nordic held 153,694 shares, corresponding to 0.20% of the share capital as treasury shares, which have been repur- chased to meet future obligations under incentive schemes for the Company's Board and Executive Management. See note 30 in the consolidated finan- cial statements. Share capital The Company’s share capital was DKK 780,978,340 by year-end 2023, comprising 78,097,340 shares with a nominal value of DKK 10 each. Each share carries one vote. 11% North America In March 2023, Bavarian Nordic completed a private placement of 7,046,839 new shares, raising gross proceeds of DKK 1,642 million to be used as partly payment for the assets acquired from Emergent BioSolutions. In addition, 315,619 new shares were issued as a consequence of warrant exercise by employees, raising proceeds of DKK 46 million. The following shareholder had publicly informed Bavarian Nordic that they own five per cent or more of the Company’s shares: ATP Group, Hillerød, Denmark, 10.12% as of December 31, 2023 By December 31, 2023, there were 4,520,915 outstanding warrants, which entitle warrant holders to subscribe for 4,520,915 shares of DKK 10 each. Corporate information Bavarian Nordic Annual Report 2023 41 Capital allocation and return policy Share price development At year-end Bavarian Nordic had a market capitaliza- tion of DKK 13.9 billion. In the short term, Bavarian Nordic’s main priority to use the cash generated to pay the significant mile- stones to GSK and Emergent BioSolutions which are due in 2024 and 2025. In the mid-to long term, the Company expects to increase its financial flexibility through a strong positive cash flow and increased access to debt financing, which it intends to use to invest in growing the existing business, including the pipeline and selective acquisitions as well as return excess cash to its shareholders. Bavarian Nordic’s shares closed the year at DKK 177.45, corresponding to a 17% decrease over the year, compared to an increase of 7% in the OMXC25 index and an increase of 4% in the Nasdaq Biotech- nology (NBI) index. Financial calendar 2024 March 6, 2024 Annual report At year-end Bavarian Nordic had a market capitaliza- tion of DKK 13.9 billion. April 16, 2024 Annual General Meeting Investor relations The year-low was DKK 126.60 on October 25, 2023, and the year-high was DKK 254.50 on January 17, 2023 – based on the daily closing prices of Bavarian Nordic’s shares. Bavarian Nordic maintains an active dialogue with shareholders, analysts, prospective investors and other stakeholders by providing relevant, timely and correct communication about relevant stra- tegic, economic, financial, operational and scientific affairs of the Company. This work is carried out by Management and Investor Relations through frequent interactions with the investor community via participation in investor conferences, meetings and conference calls. May 8, 2024 Three-month interim report (Q1) August 22, 2024 Half-year interim report (Q2) November 15, 2024 Nine-month interim report (Q3) Share price development compared to indices Bavarian Nordic OMX Copenhagen C25 NASDAQ BIOTECH Through our online shareholder portal, registered shareholders can request admission cards and/ or vote by proxy for the general meetings. The shareholder portal can be accessed via our investor relations website, along with financial reports, company announcements, investor presentations, and more. To register shares by name, shareholders must contact their custodian bank. In connection with the publication of financial reports, Management will host a conference call to present the results followed by Q&A for investors and analysts. These events are being webcast live and on-demand through the Company’s website. 120 100 80 Additional information about the annual general meeting will become available on our website no later than 3 weeks before the event. Shareholders who have requested so will receive a notification via e-mail. Investor relations website → 60 Contact our investor relations team: [email protected] → 40 Jan ‘23 Feb ‘23 Mar ‘23 Apr ‘23 May ‘23 Jun ‘23 Jul ‘23 Aug ‘23 Sep ‘23 Oct ‘23 Nov ‘23 Dec ‘23 Corporate information Bavarian Nordic Annual Report 2023 42 Board of Directors Luc Debruyne, Chair of the Board of Directors Anders Gersel Pedersen, MD, PhD, Deputy chair of the Board of Directors Peter Kürstein, MBA Frank Verwiel, MD, MBA Chair of the Nomination and Compensation Committee Member of the Nomination and Compensation Committee Member of the Nomination and Compensation Committee Member of the Science Technology and Investment Committee Member of the Science, Technology and Investment Committee Member of the Finance, Risk and Audit Committee Member of the Science, Technology and Investment Committee Member of the Finance, Risk and Audit Committee Other positions Other positions Chairman of the board of Fund Plus. Member of the board of University Hospitals UZ Leuven. Member of the Institutional Advisory Board at VIB, the Life Sciences Board at Greenlight Biosciences Inc., Chair of the Portfolio Strategy and Management Board of CEPI and Strategy Advisor to the CEO. Professor of Practice at the University of Leuven, Faculty of Medicine, Biomedical Sciences Group. Chairman of the board of Ferrosan Medical Devices Holding A/S. Deputy Chairman of the board of FOSS A/S, Experimentarium and American Chamber of Commerce. Member of the board of N. Foss & Co. A/S and Den Erhvervsdrivende Fond Gl. Strand, Dansk BørneAstma Center and Art 2030. Member of the executive board of Mijamax ApS. Other positions Other positions Chair of the board of Intellia Therapeutics, Inc. Member of the board of Genmab A/S, Hansa Biopharma AB and Bond Avillion 2, an entity of Avillion LLP. Chair of the board of Aelis Farma. Dr. Pedersen is also the CEO in his private holding company Gerselconsult ApS. Corporate information Bavarian Nordic Annual Report 2023 43 Anne Louise Eberhard, LL.M, Graduate Diploma BA Heidi Hunter, MBA Johan van Hoof, MD Chair of the Science, Technology and Investment Committee. Member of the Finance, Risk and Audit Committee Chair of the Finance, Risk and Audit Committee Member of Science, Technology and Investment Committee Member of the Nomination and Compensation Committee Other positions Member of the board of Vicore Pharma Holding AB, IO Biotech, Inc., and Sutro BioPharma, Inc. Other positions Independent advisor for the biotech/vaccine industry and for not-for-profit organizations/academia. Other positions Chair of the board of Finansiel Stabilitet SOV, Money- flow Group A/S and its subsidiary Moneyflow 1 A/S. Member of the board of FLSmidth & Co. A/S and its subsidiary FLSmidth A/S, Simcorp A/S, Den Danske Unicef Fond, Knud Højgaards Fond, and VL 52 ApS. Member of the executive board of EA Advice ApS. Advi- sory Board Member of a Danish ESG initiative by EY and Axcelfuture, and Faculty Member at Copenhagen Busi- ness School, Board Educations. Corporate information Bavarian Nordic Annual Report 2023 44 Linette Munksgaard Andersen Manager, Customer Service, Shipping and Distribution Thomas Alex Bennekov Sr. App. and Integration Analyst Anja Gjøl Scientist Karen Merete Jensen Senior QA Specialist & Coordinator Employee-elected Employee-elected Employee-elected Employee-elected Board overview First elected Term expires Independent Gender Nationality Year of birth Luc Debruyne 2023 2010 2012 2016 2019 2023 2023 2021 2021 2021 2021 2024 2024 2024 2024 2024 2024 2024 2025 2025 2025 2025 Yes No1 Yes Yes Yes Yes Yes No2 No2 No2 No2 Male Male Belgian Danish Danish Dutch 1963 1951 1956 1962 1963 1958 1957 1974 1968 1980 1959 Anders Gersel Pedersen Peter Kürstein Male Frank Verwiel Male For full leadership biographies, visit our website: Board of Directors → Anne Louise Eberhard Heidi Hunter Female Female Male Danish American Belgian Danish Danish Danish Danish Johan van Hoof Linette M. Andersen Thomas A. Bennekov Anja Gjøl Female Male Female Female Karen M. Jensen 1 Anders Gersel Pedersen is not considered independent under the Danish corporate governance recommendations due to being a member of the board for more than 12 years. Employee representatives are not considered independent under the Danish corporate governance recommendations. 2 Corporate information Bavarian Nordic Annual Report 2023 45 Board competencies The Board has identified the core competencies which collectively should be possessed by the shareholder-elected members to perform their duties in supporting the Company’s strategy. To assess whether all core competencies are adequately represented, each member has iden- tified their primary competencies as shown in the table below. The members may also have knowl- edge or experience in areas other than their primary competencies. Employee representatives are not part of the competency self-assessment. The shareholder-elected members of the Board generally possess extensive leadership experience as well as board experience from public or private companies and organizations. In addition, each member brings different experience and skills relevant to their representation on the Board and its subcommittees, which collectively enable the Board to oversee the strategy and development of the Company at any time. Competency overview Product Development and Supply Commercial Strategy, M&A and Business Development Corporate Leadership Life Sciences Finance, Capital and Risk Management People and Culture Technology and Digitalization ESG Luc Debruyne Anders Gersel Pedersen Peter Kürstein Frank Verwiel Anne Louise Eberhard Heidi Hunter Johan van Hoof Linette M. Andersen Thomas A. Bennekov Anja Gjøl Employee representative Employee representative Employee representative Employee representative Karen M. Jensen Corporate information Bavarian Nordic Annual Report 2023 46 Executive Management Paul Chaplin , PhD. President and Chief Executive Officer Henrik Juuel, MSc. Executive Vice President, Chief Financial Officer Jean-Christophe May, PharmD, MBA. Executive Vice President, Chief Commercial Officer Laurence De Moerlooze, PhD. Executive Vice President, Chief Medical Officer Executive management overview Joined Nationality Gender Year of birth Paul Chaplin 1999 2018 2020 2020 2020 2022 British Danish French Belgian Danish British Male Male 1967 1965 1967 1964 1972 1968 Henrik Juuel Jean-Christophe May Laurence De Moerlooze Anu Helena Kerns Russell Thirsk Male Female Female Male Anu Helena Kerns, MSc. Russell Thirsk, MSc. For full leadership biographies, visit our website: Executive management → Executive Vice President, People and Organization Executive Vice President, Chief Operating Officer Financial statements – Group Bavarian Nordic Annual Report 2023 47 Financial statements Contents 48 Financial statements – Group 55 Notes 110 Financial statements – Parent company 115 Notes 130 Statement by the Board of Directors and Executive Management on the Annual Report 131 Independent auditor’s report Financial statements – Group Bavarian Nordic Annual Report 2023 48 Financial statements – Group Contents Financial statements Notes Group key figures 2019-2023 1 Material accounting policies 19 Trade receivables 20 Other receivables 21 Prepayments Consolidated Income Statements 2 3 4 5 6 7 8 9 Key accounting estimates and judgments Revenue Consolidated Statements of Comprehensive Income Consolidated Statements of Cash Flow Production costs 22 Other liabilities Consolidated Statements of Financial Position - Assets Consolidated Statements of Financial Position - Equity and Liabilities Consolidated Statements of Changes in Equity Sales and distribution costs Research and development costs Adminstrative costs 23 Financial risks and financial instruments 24 Deferred consideration 25 Prepayment and loan from Government 26 Debt to credit institutions Staff costs Depreciation, amortization and impairment losses 27 Retirement benefit obligations 28 Lease liabilities 10 Fees to auditor appointed at the annual general meeting 11 Financial income 29 Prepayment from customers 12 Financial expenses 30 Share-based payment 13 Tax for the year 31 Acquisition of businesses 14 Earnings per share (EPS) 15 Intangible assets 32 Impact from write-down of ABNCoV2 33 Contingent liabilities and other contractual obligations 34 Related party transactions 16 Property, plant and equipment 17 Right-of-use-assets 35 Significant events after the balance sheet date 36 Approval of the consolidated financial statements 18 Inventories Financial statements – Group Bavarian Nordic Annual Report 2023 49 Consolidated income statements For the years ended December 31, 2023 and 2022 Consolidated statements of comprehensive income For the years ended December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Note 2023 2022 Revenue 3 7,062,340 2,459,294 4,603,046 3,150,793 1,449,531 1,701,262 Net result for the year 1,475,189 (347,382) Production costs Gross profit 4,8,9 Other comprehensive income Remeasurements of defined benefit plans Income tax 27 (32,555) 4,505 - Sales and distribution costs Research and development costs Administrative costs 5.8 6,8,9 331,579 2,228,080 540,848 212,932 1,183,092 376,023 - - Items that will not be reclassified to the income statement Recycled to financial items (28,050) (31,894) 7,8,9,10 1,351 Total operating costs 3,100,507 1,772,047 Change in fair value of financial instruments entered into to hedge future cash flows 45,887 34,489 48,482 31,894 7,002 Income before interest and tax (EBIT) 1,502,539 (70,785) Exchange rate adjustments on translating foreign operations Items that will be reclassified to the income statement 40,247 Financial income 11 12 112,784 132,380 78,537 339,363 Financial expenses Other comprehensive income after tax Total comprehensive income 20,432 40,247 Income before company tax 1,482,943 (331,611) 1,495,621 (307,135) Tax on income for the year 13 7,754 15,771 Net result for the year 1,475,189 (347,382) Revenue EBIT Earnings per share (EPS) - DKK Basic earnings per share of DKK 10 Diluted earnings per share of DKK 10 DKK million DKK million 14 14 19.2 19.2 (4.9) (4.9) 2023 2022 7,062 3,151 2023 2022 1,503 (71) Financial statements – Group Bavarian Nordic Annual Report 2023 50 Consolidated statements of cash flow For the years ended December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Note 2023 2022 Net result for the year 1,475,189 (347,382) Investments in product rights 15, 24 15 (298,117) (536,763) (142,525) (1,831,573) (38,706) (594,920) (425,411) (361,244) - Investments in other intangible assets Investments in property, plant and equipment Cash used for acquisition of businesses Investments in financial assets Investments in securities Adjustment for non-cash items: Financial income 16 11 12 (112,784) 132,380 7,754 (78,537) 339,363 15,771 31 Financial expenses (169,460) (414,613) 1,088,243 Tax on income for the year Depreciation, amortization and impairment Share-based payment (10,834) 9 1,111,504 55,477 399,247 49,284 Disposal of securities 1,912,954 30 Cash flow from investment activities (945,564) (877,405) Changes in inventories Changes in receivables Changes in provisions (599,015) (1,345,427) 24,744 (439,029) (133,167) - Payment on loans 26 26 28 (1,105,545) 240,000 (34,270) 45,517 (374,339) 1,003,661 (21,981) 37,918 - Proceeds from loans Changes in current liabilities 368,739 423,407 Repayment of lease liabilities Proceeds from warrant programs exercised Proceeds from capital increase Costs related to issue of new shares Purchase of treasury shares Cash flow from operations (operating activities) 1,118,561 228,957 1,641,913 (42,795) (8,988) (111) Received financial income Paid financial expenses Paid company taxes 63,260 (52,412) (10,203) 18,552 (24,244) (3,212) (9,328) Cash flow from financing activities Cash flow of the year 735,832 909,474 635,820 (21,532) Cash flow from operating activities 1,119,206 220,053 Cash and cash equivalents as of January 1 Currency adjustments 575,407 (7,647) 591,820 5,119 Cash and cash equivalents as of December 31 1,477,234 575,407 Financial statements – Group Bavarian Nordic Annual Report 2023 51 Consolidated statements of financial position – Assets December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Note 2023 2022 Non-current assets Current assets Inventories Product rights 4,791,442 1,286,749 12,443 4,639,895 1,013,484 14,768 18 1,643,736 919,072 Acquired rights and development in progress Software Trade receivables Tax receivables Other receivables Prepayments 19 1,778,104 84 523,145 - Intangible assets in progress Intangible assets 391,102 274,490 20 21 95,136 43,263 153,934 720,342 15 6,481,736 5,942,637 18,510 Land and buildings 987,013 25,047 630,138 24,765 Receivables 1,891,834 Leasehold improvements Securities 23 390,247 1,477,234 1,867,481 2,269,759 575,407 Plant and machinery 412,674 696,060 206,721 321,745 511,195 196,130 Cash and cash equivalents Securities, cash and cash equivalents Fixtures and fittings, other plant and equipment Assets under construction 2,845,166 Property, plant and equipment 16 17 2,327,515 1,683,973 Total current assets Total assets 5,403,051 4,484,580 14,353,213 12,391,246 Right-of-use assets 125,170 67,433 Other receivables Prepayments 20 21 11,185 4,556 5,086 207,537 212,623 Financial assets 15,741 Total non-current assets 8,950,162 7,906,666 Financial statements – Group Bavarian Nordic Annual Report 2023 52 Consolidated statements of financial position – Equity and liabilities December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Note 2023 2022 Equity Share capital Treasury shares Retained earnings Other reserves 780,978 (1,537) 707,354 (1,463) Deferred consideration Debt to credit institutions Lease liabilities 24 26 28 29 1,360,133 1,913 287,436 1,105,583 24,487 - 9,330,002 230,489 6,300,575 143,521 44,633 - Prepayment from customers Trade payables 954,142 7,205 605,928 6,337 Equity 10,339,932 7,149,987 Company tax Liabilities Other liabilities 22 419,843 2,787,869 257,569 2,287,340 Deferred consideration Prepayment and loan from Government Debt to credit institutions Retirement benefit obligations Deferred tax liabilites 24 25 26 27 13 28 1,016,856 - 2,324,657 566,420 17,008 - Current liabilities Total liabilities 4,013,281 5,241,259 15,135 80,732 29,068 83,621 1,225,412 Total equity and liabilities 14,353,213 12,391,246 - Lease liabilities 45,834 2,953,919 Non-current liabilities Financial statements – Group Bavarian Nordic Annual Report 2023 53 Consolidated statements of changes in equity December 31, 2023 Reserves for Reserves for currency adjustment fair value Share capital Treasury shares Retained earnings of financial Share-based instruments The share capital comprises a total of 78,097,834 shares of DKK 10 as of December 31, 2023 (70,735,376 shares). The shares are not divided into share classes, and each share carries one vote. DKK thousand payment Equity Equity as of January 1, 2023 707,354 (1,463) 6,300,575 (23,557) 31,894 135,184 7,149,987 Comprehensive income for the year Net result for the year Treasury shares In May 2023, the Board of Directors decided to launch a share buy-back program, under which the Company bought back 43,954 of its own shares (71,562 shares in 2022). The purpose of the share buy-back program was to meet the Company's obligations arising from the share-based incentive program for the Executive Management and the Board of Directors. Under the share-based incentive program, payment of half of the achieved bonus for 2022 for members of the Executive Management are converted to restricted stock units for a value corresponding to half of the achieved bonus. The restricted stock units will be released to the Exec- utive Management 3 years after grant. This to further increase the long-term shared interests between the Executive Management and the Company's share- holders. The Board of Directors is granted restricted stock units corresponding to 50% of the annual fee (excl. committee fee). The vesting period for those restricted stock units is also 3 years. Treasury shares represent 0.16% (0.18%) of the total share capital. For further information about share based payment see note 30. - - - - - - 1,475,189 (28,050) - 34,489 34,489 - 13,993 13,993 - - - 1,475,189 20,432 Other comprehensive income Total comprehensive income for the year 1,447,139 1,495,621 Transactions with owners Share-based payment - - - 54,856 - - - - - - - - - - - - - - - - 58,677 58,677 45,517 - Warrant programs exercised 3,156 - - (12,495) Warrant programs expired - 1,276 (1,276) Capital increase through private placement Costs related to issue of new shares Purchase of treasury shares 70,468 - 1,571,445 (42,795) (8,548) - 1,641,913 (42,795) (8,988) - - - - - - - (440) 366 (74) Transfer regarding restricted stock units Total transactions with owners 6,054 (6,420) 38,486 73,624 1,582,288 1,694,324 Equity as of December 31, 2023 780,978 (1,537) 9,330,002 10,932 45,887 173,670 10,339,932 Financial statements – Group Bavarian Nordic Annual Report 2023 54 Consolidated statements of changes in equity December 31, 2022 Reserves for Reserves for currency adjustment fair value Share capital Treasury shares Retained earnings of financial Share-based instruments The share capital comprises a total of 70,735,376 shares of DKK 10 as of December 31, 2022 (70,468,393 shares). The shares are not divided into share classes, and each share carries one vote. DKK thousand payment Equity Equity as of January 1, 2022 704,684 (1,112) 6,588,908 (30,559) (1,351) 114,097 7,374,667 Comprehensive income for the year Net result for the year Rules on changing Articles of Association Changing the Articles of Association requires that the resolution passes by at least 2/3 of the votes as well as 2/3 of the voting capital represented. - - - - - - (347,382) - - 7,002 7,002 - 33,245 33,245 - - - (347,382) 40,247 Other comprehensive income Total comprehensive income for the year (347,382) (307,135) Transactions with owners Share-based payment - - - 46,145 17,898 - - - - - - - - - - - - - - - - - 53,976 53,976 Warrant programs exercised 2,670 - (10,897) 37,918 Warrant programs expired - - - (17,898) - - Capital increase through private placement Costs related to issue of new shares Purchase of treasury shares - - - - (111) - - (111) (9,328) - - - (716) 365 (351) (8,612) 3,729 59,049 Transfer regarding restricted stock units Total transactions with owners (4,094) 21,087 2,670 82,455 Equity as of December 31, 2022 707,354 (1,463) 6,300,575 (23,557) 31,894 135,184 7,149,987 Transactions on the share capital DKK thousand 2023 2022 2021 2020 2019 Share capital as of January 1 707,354 704,684 584,501 323,891 323,106 Issue of new shares 73,624 2,670 120,183 260,610 785 Share capital as of December 31 780,978 707,354 704,684 584,501 323,891 Financial statements – Group Bavarian Nordic Annual Report 2023 55 Note 1 Material accounting policies Implementation of new and revised standards and interpretations Management has assessed the impact of new or amended and revised accounting standards and interpretations (IFRSs) issued by the IASB and IFRS Accounting Standards endorsed by the European Union effective on or after January 1, 2023. It is assessed that application of amendments effective from January 1, 2023 has not had a material impact on the consolidated financial statements for 2023. Furthermore, Manage- ment does not anticipate any significant impact on future periods from the adoption of these amendments. The specific disclosures required by IFRS Accounting Standards are provided in the Consolidated Financial Statements unless the information is considered imma- terial to the users of the financial statements. Intra-group income and expenses together with all intra-group profits, receivables and payables are eliminated on consolidation. In the preparation of the consolidated financial statements, the book value of shares in subsidiaries held by the parent company is set off against the equity of the subsidiaries. Basis of preparation The consolidated financial statements for Bavarian Nordic have been prepared in accordance with the IFRS Accounting Standards as adopted by the EU and Danish disclosure requirements for the consolidated financial statements of listed companies. Danish disclosure requirements for the presentation of consolidated financial statements are imposed by the Statutory Order on Adoption of IFRS Accounting Standards issued under the Danish Financial Statements Act (Class D). The accounting policies are unchanged from last year except for changes due to implementation of new and revised standards that were effective January 1, 2023. Accounting policies The accounting policies for specific line items are described in the notes to the financial statements. Set out below is a description of the accounting policies for the basis of consolidation, foreign currency translation and the cash flow statement. Foreign currency translation On initial recognition, transactions denominated in currencies other than the Group’s functional currency are translated at the exchange rate ruling at the trans- action date. Receivables, payables and other monetary items denominated in foreign currencies that have not been settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Exchange differences between the exchange rate at the date of the transaction and the exchange rate at the date of payment or the balance sheet date, respec- tively, are recognized in the income statement under financials. Property, plant and equipment and intan- gible assets, inventories and other nonmonetary assets acquired in foreign currency and measured based on historical cost are translated at the exchange rates at the transaction date. On recognition in the consolidated financial state- ments of subsidiaries whose financial statements are presented in a functional currency other than Danish kroner (DKK), the income statements are translated at the average exchange rates of the respective months. Recognition and measurement Income is recognized in the income statement when generated. Assets and liabilities are recognized in the balance sheet when it is probable that any future economic benefit will flow to or from the Group and the value can be reliably measured. On initial recog- nition, assets and liabilities are measured at cost. Subsequently, assets and liabilities are measured as described in the description of the accounting policies in the respective notes to the financial statements. Standards and interpretations not yet in force At the date of publication of the consolidated financial statements, a number of new and amended standards and interpretations have not yet entered into force or have not yet been adopted by the EU. Therefore, they are not incorporated in the consolidated financial state- ments. None of the new or amended standards and interpre- tations are expected to have a material impact on the consolidated financial statements. The consolidated financial statements are presented in Danish kroner (DKK), which is the functional currency of the parent company. The consolidated financial statements are presented on a historical cost basis, apart from derivative financial instruments, securities and liability relating to phantom shares, which are measured at fair value. The accounting policies have been consistently applied for the financial year and for the comparative figures except for implementation of new standards and amendments, see further below. In the narrative sections of the consolidated financial statements comparative figures for 2022 are shown in brackets. Basis of consolidation The consolidated financial statements include Bavarian Nordic A/S and the subsidiaries in which the Group holds more than 50% of the voting rights or otherwise has control. Applying materiality The consolidated financial statements are a result of processing large numbers of transactions and aggre- gating those transactions into classes according to their nature or function. The transactions are presented in classes of similar items in the consolidated financial statements. If a line item is not individually material, it is aggregated with other items of a similar nature in the consolidated financial statements or in the notes. Principles of consolidation The consolidated financial statements are prepared on the basis of the financial statements of the parent company and the individual subsidiaries, and these are prepared in accordance with the Group’s accounting policies and for the same accounting period. Financial statements – Group Bavarian Nordic Annual Report 2023 56 Note 1 Material accounting policies (continued) Balance sheet items are translated at the exchange rates at the balance sheet date. Exchange differences arising on the translation of foreign subsidiaries’ opening balance sheet items to the exchange rates at the balance sheet date and on the translation of the income statements from average exchange rates of the respective months to exchange rates at the balance sheet date are recognized as other comprehensive income. In the cash flows from operating activities, net profit for the year is adjusted for non-cash operating items and changes in working capital. Cash flows from investing activities include cash flows from the purchase and sale of intangible assets, prop- erty, plant and equipment, investments and securities. Cash flows from financing activities include cash flows from the raising and payment of loans and capital increases. Additionally, cash flows from assets held under finance leases are recognized by way of lease payments made. that are considered to match the content of those line items. For line items not considered to be covered by line items defined in the taxonomy, entity-specific extensions to the taxonomy have been incorporated. Except for subtotals, these extensions are anchored to standard elements of the ESEF taxonomy. Consistently with the requirements of the ESEF Regu- lation, the annual report approved by Management is comprised of a ZIP file bava-2023-12-31-en.zip, which includes an XHTML file that may be opened using standard web browsers, and a number of technical XBRL files enabling mechanical retrieval of the XBRL data incorporated. Segment reporting The Group does not prepare segment reporting inter- nally and therefore only reports one operating segment externally. Geographic spilt of revenue and revenue from major customers is disclosed in note 3 to the consolidated financial statements. Geographic location of noncurrent assets is disclosed in note 15 and 16 to the consolidated financial statements. Reporting under the ESEF Regulation The Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) requires the use of a particular electronic reporting format for annual reports of listed companies in the EU. More specifically, the ESEF Regulation requires the annual report to be prepared in XHTML format with iXBRL tagging of the consolidated financial statements including notes. The Company’s iXBRL tagging has been made using the ESEF taxonomy disclosed in the annexes to the ESEF Regulation and developed based on the IFRS Accounting Standards taxonomy published by the IFRS Foundation. The line items in the consolidated financial statements are XBRL-tagged to the elements of the ESEF taxonomy Net asset value per share: Equity Number of shares at year-end Share price/Net asset value per share: Market price per share Net asset value per share Equity share, %: Equity x 100 Total assets Earnings per share and diluted earnings per share are calculated in accordance with IAS 33 “Earnings per share” and specified in note 14. Cash flow statement The cash flow statement is prepared in accordance with the indirect method on the basis of the Group’s net result for the year. The statement shows the Group’s cash flows broken down into operating, investing and financing activities, cash and cash equivalents at year end and the impact of the calculated cash flows on the Group’s cash and cash equivalents. Cash flows in foreign currencies are translated into Danish kroner (DKK) at the exchange rate on the trans- action date. Financial statements – Group Bavarian Nordic Annual Report 2023 57 Note 2 Key accounting estimates and judgments Note 3 Revenue Key accounting estimates In the preparation of the consolidated financial state- ments, Management makes a number of accounting estimates, which form the basis for the presentation, recognition and measurement of the Group's assets and liabilities. The recognition and measurement of assets and liabil- ities often depend on future events that are somewhat uncertain. In that connection, it is necessary to assume a course of events that reflects Management’s assess- ment of the most probable course of events. The key accounting estimates identified are those that have a significant risk of resulting in a material adjust- ment to the measurement of assets and liabilities in the following reporting period. Management bases its estimates on historical experience and various other assumptions that are held to be reasonable under the circumstances. The estimates and underlying assump- Accounting policies Sale of goods Revenue from sale of goods is recognized when Bavarian Nordic has transferred control of products sold to the buyer and it is probable that Bavarian Nordic will collect the consideration to which it is entitled for transferring the products. Control of the products is transferred at a point in time, typically on delivery. The amount of sales to be recognized is based on the consideration Bavarian Nordic expects to receive in exchange for its goods. When sales are recognized, Bavarian Nordic also records estimates for a variety of sales deductions, including product returns as well as rebates and discounts to government agencies, whole- salers, health insurance companies, managed health- care organisations and retail customers. Revenue is measured net of value added tax, duties, etc. collected on behalf of a third party. Where contracts contain customer acceptance criteria, Bavarian Nordic recognizes sales when the acceptance criteria are satisfied. Where absolute amounts are known, the rebates are recognized as other liabilities. Wholesaler charge-backs are netted against trade receivable balances. The pricing mechanisms in the US market and the different kind of rebates are described below. tions are reviewed on an ongoing basis. If necessary, changes are recognised in the period in which the estimate is revised. Management considers the key accounting estimates to be reasonable and appropriate based on currently available information. The actual amounts may differ from the amounts estimated as more detailed information becomes available. When determining the possible impact from climate risks on the financial reporting, management has assessed that the effect of climate related risks do not significantly impact estimates and assumptions. Likewise, it is not estimated to have any significant accounting impact. Management has made the following accounting esti- mates which significantly affect the amounts recog- nized in the consolidated financial statements: customers in the US include private payers, Group Purchasing Organizations (GPOs) and government payers. GPOs play a role in negotiating price conces- sions with drug manufacturers for the commercial channels, and determine which drugs are offered as preferred options on their drug lists. US Medicaid & Medicare rebates Medicaid & Medicare are government insurance programmes. Medicaid and Medicare rebates have been estimated using a combination of historical expe- rience, product and population growth, price increases, and the impact of contracting strategies. The calcula- tion also involves interpretation of relevant regulations that are subject to changes in interpretative guidance from government authorities. Bavarian Nordic adjusts the provision periodically to reflect actual sales perfor- mance. Wholesaler charge-backs Wholesaler charge-backs relate to contractual arrange- ments between Bavarian Nordic and indirect customers whereby products are sold at contract prices lower than the list price originally charged to wholesalers. A wholesaler charge-back represents the difference between the invoice price to the wholesaler and the indirect customer’s contract price. Accruals are calcu- lated for estimated charge-backs using a combination of factors such as historical experience, current whole- saler inventory levels, contract terms and the value of claims received but not yet processed. Accounting policy Key accounting estimates Note Revenue Estimate of US sales deductions and provisions for sales rebates 3 Intangible assets Estimate regarding impairment of assets; assessment whether future sales 15 and development milestones have become probably; assessment whether development costs should be expensed or capitalized Inventories Estimate of indirect production costs capitalized and inventory write-down 18 Acquisition of businesses Estimate of fair value for identifiable net assets for which observable market 32 prices are not available Pricing mechanisms in the US market In the US, sales rebates are paid in connection with government and commercial programmes. Key Financial statements – Group Bavarian Nordic Annual Report 2023 58 Note 3 Revenue (continued) Accounting policies (continued) Key accounting estimates Provisions for sales deductions Sales discounts and rebates are predominantly issued in the US in connection with the US Federal and State Government Healthcare programs, namely Medicare and Medicaid, and commercial rebates. The estimate of sales discounts and rebates is based on a calculation which includes a combination of historical utilization data, combined with expectations in relation to the development in sales and utilization. Further- more, specific circumstances regarding the different programs are considered. The obligations concerning sales discounts and rebates are incurred at the time the sale is recorded. However, the actual discount or rebate related to a specific sale may be invoiced later. Bavarian Nordic considers the provisions established for sales discounts and rebates to be reasonable and appropriate based on currently available information. However, the actual amount of discounts and rebates may differ from the amounts estimated as more detailed information becomes available. Partner contracts Whether a component of a multiple element contract has value to the partner on a stand-alone basis is based on an assessment of specific facts and circumstances and is associated with judgement. This applies also to the assessment of whether a license transfers rights associated with ownership of an intangible asset. Furthermore, allocation of the total consideration of a contract to separately identifiable components requires considerable estimates and judgement to be made by Management. At inception and throughout the life of a contract Management is performing an analysis of the agreement with its partners based on available facts and circumstances at each assessment date such as historical experience and knowledge from the market to the extent obtainable. This includes also an understanding of the purpose of the deliverables under the contract and the negotiation taken place prior to concluding the contract. Other discounts and sales returns Other discounts are provided to wholesalers, hospi- tals, pharmacies, etc. They are usually linked to sales volume or provided as cash discounts. Accruals are calculated based on historical data and recorded as a reduction in gross sales at the time the related sales are recorded. Sales returns are related to damaged or expired products. Agreements with commercial partners generally include non-refundable upfront license and collabora- tion fees, milestone payments, the receipt of which is dependent upon the achievement of certain clinical, regulatory or commercial milestones, as well as royal- ties on product sales of licensed products, if and when such product sales occur, and revenue from the supply of products. For these agreements that include multiple elements, total contract consideration is attributed to separately identifiable components on a reliable basis that reasonably reflects the selling prices that might be expected to be achieved in stand-alone transactions provided that each component has value to the partner on a stand-alone basis. The allocated consideration is recognized as revenue in accordance with the principles described above. Sale of services and licenses Furthermore, revenue comprises the fair value of the consideration received or receivable for income derived from development services where revenue is measured at the expected net sales price. Sales of licences that transfer the rights associated with ownership of intellectual property are recognized at a point in time when control is transferred. Revenue from development services and licences that do not transfer the right of ownership to intellectual property are recognized over time in line with the execution and delivery of the work. Financial statements – Group Bavarian Nordic Annual Report 2023 59 Note 3 Revenue (continued) DKK thousand 2023 2022 Travel health Rabipur/RabAvert 1,161,162 879,341 Encepur 416,756 298,736 Vivotif 118,885 - Vaxchora 23,736 - Other product sale 156,533 78,414 1,877,072 1,256,491 Public preparedness Mpox/smallpox vaccine sale 5,027,001 1,730,472 Sale of goods 6,904,073 2,986,963 Milestone payments - 83,048 Contract work 158,267 80,782 Sale of services 158,267 163,830 Revenue 7,062,340 3,150,793 Total revenue includes: Fair value adjustment concerning financial instruments entered into to hedge revenue 5,016 - DKK thousand 2023 2022 Geographic split of revenue: USA 2,577,081 841,527 Canada 1,556,039 197,283 France 740,256 268,186 Germany 714,136 650,208 Spain 429,664 11,972 Australia 338,076 97,655 Switzerland 107,738 70,986 Sweden 71,966 2,860 Chile 65,188 - Taiwan 53,796 - United Kingdom 44,721 169,203 Hong Kong 13,943 115,599 Saudi Arabia 4,839 100,442 Belgium - 335,399 Other geographic markets 344,897 289,473 Revenue 7,062,340 3,150,793 In 2023 revenue achieved on the Danish market amounted to DKK 18.9 million (DKK 19.3 million). In 2023 the following customers represented more than 10% of total revenue: • Biomedical Advanced Research and Development Authority (BARDA), USA, DKK 1,708.3 million. • Health Canada/PHAC, Department of Health, Canada, DKK 1,534.8 million. • Agence nationale de santé publique FR, France, DKK 729.9 million. In 2022 no customer represented more than 10% of total revenue. Other product sale consists of the following: • Sale of Dukoral and Ixiaro licensed from Valneva • Sale of Heplisav licensed from Dynavax Financial statements – Group Bavarian Nordic Annual Report 2023 60 Note 3 Note 4 Production costs Revenue (continued) Accounting policies Production costs consist of costs incurred in gener- ating the revenue for the year. Costs for raw materials, consumables, production staff and a proportion of production overheads, including maintenance, amorti- zation, depreciation and impairment of intangible and tangible assets used in production as well as operation, Accounting for contract with Biomedical Advanced Research and Development Authority (BARDA) When drug substance batches are invoiced to BARDA the batches remain in the Company's physical posses- sion until filling as final product. The filling takes place either at the Company's facility in Kvistgaard or at CMO's (a bill-and-hold arrangement). Revenue is recog- nized once the BDS are releasable according to contract with BARDA. Payment is due within 30 days after invoicing. administration and management of the production facility are recognized as production costs. Amortization of acquired product rights are recognized as production costs. In addition, the costs related to idle capacity and write-down to net realisable value of goods on stock are recognized. DKK thousand 2023 2022 Cost of goods sold 1,608,263 644,683 Contract costs 126,877 19,889 Other production costs 426,125 512,024 Amortization of product rights 298,029 272,935 Production costs 2,459,294 1,449,531 Other production costs amounted to DKK 426.1 million (DKK 512.0 million), of which net write-downs of inven- tory amounted to DKK 40.3 million compared to DKK 35.5 million in 2022. The write-down mainly relates to Process Performance Qualification (PPQ) batches for chikungunya. The PPQ batches can be used for future commercial sale and the write-down will be reversed at the time of expected approval of the chikungunya vaccine. Write-down of RSV materials (DKK 35.0 million) following the discontinuation of the Phase 3 study is recognized as research and development costs. Devel- opment in write-downs is further described in note 18. Other production costs for 2023 includes idle capacity at the production site in Bern, approx. DKK 125 million. The bulk manufacturing facility was shutdown for a year during 2021/2022 due to the expansion of the facility for future production of Rabipur/RabAvert and Encepur. The shutdown resulted in a limited absorption of indirect production costs for the first 3 quarters of 2022. The product rights to Rabipur/RabAvert and Encepur are amortized over 20 years with an annual amortization of DKK 272.9 million. The product rights for Vivotif and Vaxchora are amortized over 10-20 years, starting from the acquisition date May 15, 2023. The amortization amounted to DKK 25.1 million in 2023. Financial statements – Group Bavarian Nordic Annual Report 2023 61 Note 5 Sales and distribution costs Note 6 Research and development costs Accounting policies Sales and distribution costs comprise costs incurred for the sale and distribution of products sold during the year. This includes costs incurred for sales campaigns, training and administration of the sales force and for direct distribution, marketing and promotion. Also included are salaries and other costs for the sales, distribution and marketing functions, loss allowance for expected credit losses, amortization, depreciation and other indirect costs. Accounting policies Research and development costs include salaries and costs directly attributable to the Group’s research and development projects, less government grants. Further- more, salaries and costs supporting direct research and development, including costs of patents, rent, leasing and depreciation attributable to laboratories, and external scientific consultancy services, are recognized under research and development costs. No indirect or general overhead costs that are not directly attributable to research and development activities are included in the disclosure of research and development expenses recognized in the income statement. Research costs are expensed in the year they occur. Development costs are generally expensed in the year they occur. In line with industry custom, capitaliza- tion of development costs does not begin until it is deemed realistic that the product can be completed and marketed and it is highly likely that a marketing authorization will be received. In addition, there must be sufficient certainty that the future earnings to the Group will cover not only production costs, direct distri- bution and administrative costs, but also the develop- ment costs. Contract research and development costs incurred to achieve revenue are included in "Research and devel- opment costs incurred this year" in the table and then transferred under "Contract costs recognized as produc- tion costs" to be recognized as production costs. Grants that compensate the Group for research and development expenses incurred, which are recognized directly in the income statement, are set off against the costs of research and development at the time when a final and binding right to the grant has been obtained. Financial statements – Group Bavarian Nordic Annual Report 2023 62 Note 6 Note 7 Administrative costs Research and development costs (continued) Following the Phase 3 results announced in August 2023, where ABNCoV2 demonstrated a reduced level of neutralizing antibodies against a circulating variant, the asset no longer represented a commercial opportunity for Bavarian Nordic as the regulators, EMA and FDA, could not accept a submission for licensure. Therefore, Management decided to fully write-down all assets and liabilities related to the development program. The net write-down amounted to DKK 558 million and was recognized as an impairment loss and included as part of the research and development costs. See note 32 for a summarized income statement and a summarized financial position showing how the write- down has impacted the Annual Report. Research and development costs include expenses for external clinical research organizations, or CRO's, of DKK 831.3 million (DKK 874.9 million). See further description in note 15. Accounting policies Administrative costs include costs of Group Manage- ment, staff functions, administrative personnel, office costs, rent, short-term lease payments and depreciation not relating specifically to production, research and development or sales and distribution. DKK thousand 2023 2022 Research and development costs incurred this year 1,797,274 1,202,981 Of which: Contract costs recognized as production costs (note 4) (126,877) (19,889) Impairment loss of ABNCoV2 development program 557,683 - Research and development costs recognized in the income statement 2,228,080 1,183,092 Impairment loss of ABNCoV2 development program Acquired rights and development in progress 1,403,264 - Intangible assets in progress 26,224 - Prepayments 456,551 - Prepayment and loan from Government (806,420) - Deferred consideration (521,936) - Impairment loss of ABNCoV2 development program 557,683 - Fair value adjustment concerning financial instruments entered into to hedge research and development costs - 30,201 ABNCoV2 development program Under the Group’s accounting policies development costs are generally expensed in the year they occur. During the development of ABNCoV2, the Group, however, started capitalizing directly related devel- opment cost as – unlike most other development candidates – the feasibility of developing a final vaccine and obtain regulatory approval was considered likely, because the development of other COVID-19 vaccine candidates based on the same antigen had been successful. Furthermore, the Group had ensured significant finance of the development through the funding obtained from Danish Ministry of Health and a minimum demand agreed in the agreement with the Danish Ministry of Health. Financial statements – Group Bavarian Nordic Annual Report 2023 63 Note 8 Staff costs DKK thousand 2023 2022 Wages and salaries 1,026,464 664,791 Contribution based pension 68,051 52,635 Social security expenses 52,640 24,861 Other staff expenses 68,262 48,373 Share-based payment, see specification in note 30 55,477 49,284 Staff costs 1,270,894 839,944 Staff expenses are distributed as follows: Production costs 545,968 333,547 Sales and distribution costs 148,016 89,304 Research and development costs 333,548 198,838 Administrative costs 209,564 168,259 Capitalized salaries 33,798 49,996 Staff costs 1,270,894 839,944 Average number of employees converted to full-time 1,255 874 Number of employees as of December 31 converted to full-time 1,379 975 The Group has mainly defined contribution plans and pays regular fixed contributions to independent pension funds and insurance companies. Employees in Bavarian Nordic Berna GmbH is covered by a defined benefit plan, see further note 27. DKK thousand 2023 2022 Staff costs include the following costs: Board of Directors: Remuneration 6,345 5,475 Share-based payment 2,070 1,750 Remuneration to Board of Directors 8,415 7,225 Executive Management: Salary 11,330 9,873 Paid bonus 2,484 2,068 Other employee benefits 705 692 Contribution based pension 1,574 1,367 Share-based payment 13,443 13,485 Corporate Management 29,536 27,485 Salary 12,622 11,527 Paid bonus 2,639 2,947 Other employee benefits 1,471 1,362 Contribution based pension 2,228 1,472 Share-based payment 11,999 8,756 Salary and benefits in notice period - 7,851 Other Executive Management 30,959 33,915 Remuneration to Executive Management 60,495 61,400 Total management remuneration 68,910 68,625 Financial statements – Group Bavarian Nordic Annual Report 2023 64 Note 8 Note 9 Depreciation, amortization and impairment losses DKK thousand 2023 2022 Depreciation and amortization included in: Production costs 477,544 352,554 Sales and distribution costs 181 73 Research and development costs 19,631 6,403 Administrative costs 56,465 40,217 Depreciation and amortization 553,821 399,247 Hereof loss from disposed fixed assets 704 1,175 Impairment losses included in: Research and development costs 557,683 - Impairment losses 557,683 - Staff costs (continued) CEO and President of the Company Paul Chaplin and CFO Henrik Juuel constitute the Corporate Management in the Parent Company. COO Russell Thirsk, CPO Anu Kerns, CCO JC May and CMO Laurence De Moerlooze constitute the Other Executive Management. Restricted stock units In March 2023 Corporate Management was granted 10,927 restricted stock units (excl. matching shares) (12,682 restricted stock units) at a value of DKK 2.5 million (DKK 2.1 million) at grant. Other Executive Management was granted 11,502 restricted stock units (excl. matching shares) (9,896 restricted stock units) corresponding to a value of DKK 2.6 million (DKK 1.6 million) at grant. In December 2023 Corporate Management was granted 32,028 performance restricted stock units at a value of DKK 5.3 million at grant. Other Executive Management was granted 29,574 performance restricted stock units at a value of DKK 4.9 million at grant. In March 2023, the members of the Board of Directors were granted in total 10,644 restricted stock units (11,467 restricted stock units) corresponding to 50% of their fixed fee amounting to DKK 2.1 million (DKK 1.8 million). For further description of restricted stock units see note 30. Warrants In December 2023 Corporate Management was granted 83,921 warrants (126,487 warrants) with a fair value of DKK 5.3 million (DKK 9.2 million). Other Executive Management was granted 77,491 warrants (122,300 warrants) with a fair value of DKK 4.9 million (DKK 8.9 million). Fair value calculated based on Black-Scholes, cf. note 30. Incentive programs for the Executive Management and other employees are disclosed in note 30. Members of the Executive Management have contracts of employment containing standard terms for members of the Executive Management of Danish listed compa- nies, including the periods of notice that both parties are required to give and competition clauses. If a contract of employment of a member of the Executive Management is terminated by the Company without misconduct on the part of such member, the member of the Executive Management is entitled to compen- sation, which, depending on the circumstances, may amount to a maximum of 8-18 months' remuneration. In the event of a change of control the compensation may amount to 24 months' remuneration. The product rights to Rabipur/RabAvert and Encepur are amortized over 20 years with an annual amortization of DKK 272.9 million. The product rights were acquired from GSK as per December 31, 2019. 25.1 million in 2023. The product rights were acquired from Emergent BioSolution May 15, 2023. Amortization of product rights is recognized as part of cost of goods sold under production costs. See further description in note 15. The product rights for Vivotif and Vaxchora are amor- tized over 10-20 years, starting from the acquisition date May 15, 2023. The amortization amounted to DKK Financial statements – Group Bavarian Nordic Annual Report 2023 65 Note 10 Fees to auditor appointed at the annual general meeting Note 11 Financial income Accounting policies Interest income is recognized in the income statement at the amounts relating to the financial year. Financial income also includes net positive value adjustments of financial instruments and securities, adjustment of the net present value of provisions and net currency gains. DKK thousand 2023 2022 Audit of financial statements1 3,903 2,208 Other assurance services 268 176 Tax advisory 486 501 Other services 653 143 Fees 5,310 3,028 1 2023 audit of financial statements includes DKK 0.4 million of additional fee related to 2022 primarily due to expansion of sales activities following the mpox outbreak. DKK thousand 2023 2022 Financial income from bank and deposit contracts1 40,214 26 Financial income from securities 14,340 19,543 Fair value adjustments on securities 30,777 - Adjustment of deferred consideration due to change in estimated timing of payments 13,759 54,390 Currency adjustment deferred consideration 2,563 - Net gains on derivative financial instruments at fair value through the income statement 11,131 - Net foreign exchange gains - 4,578 Financial income 112,784 78,537 1 Interest income from financial assets measured at amortized cost The fee for non-audit services provided to the Group by Deloitte Statsautoriseret Revisionspartnerselskab, Denmark, amounted to DKK 0.9 million (DKK 0.3 million) and consisted of assurance work related to the assistance with compliance reviews, and other accounting and tax advisory services. Financial statements – Group Bavarian Nordic Annual Report 2023 66 Note 12 Financial expenses Note 13 Tax for the year Accounting policies Interest expenses are recognized in the income state- ment at the amounts relating to the financial year. Financial expenses also include adjustment of net present value of the deferred consideration, cf. note 24, negative value adjustments of financial instruments and securities and net currency losses. Accounting policies Income tax for the year comprises current tax and deferred tax for the year. The part relating to the profit for the year is recognized in the income statement, and the part attributable to items in the comprehensive income is recognized in the comprehensive income statement. The tax effect of costs that have been recognized directly in equity is recognized in equity under the rele- vant items. Current tax receivable is recognized in the balance sheet under current asset. Current tax payable is recognized in the balance sheet under current liabilities. Deferred tax assets arising from temporary deductible differences and tax losses carried forward are recog- nized when it is probable that they can be realized by offsetting them against taxable temporary differences or future taxable profits. At each balance sheet date, it is assessed whether it is probable that there will be sufficient future taxable income for the deferred tax asset to be utilized. Deferred income tax is provided on temporary taxable differences arising on investments in subsidiaries, unless the parent company is able to control the timing when the deferred tax is to be realized and it is likely that the deferred tax will not be realized within the foreseeable future. Deferred tax is calculated at the tax rates applicable on the balance sheet date for the income years in which the tax asset is expected to be utilized. DKK thousand 2023 2022 Interest expenses on debt1 3,558 16,640 Fair value adjustments on securities - 190,301 Unwinding of the discount related to deferred consideration 101,961 103,049 Currency adjustment deferred consideration - 11,597 Net loss on derivative financial instruments at fair value through the income statement - 17,776 Financial expenses, other 11,469 - Net foreign exchange losses 15,392 - Financial expenses 132,380 339,363 1 Interest expenses on financial liabilities measured at amortized cost Deferred tax is measured using the balance sheet liability method on all temporary differences between accounting values and tax values. Deferred tax liabili- ties arising from temporary tax differences are recog- nized in the balance sheet as a liability. Financial statements – Group Bavarian Nordic Annual Report 2023 67 Note 13 Tax for the year (continued) Tax on income is an expense of DKK 7.8 million (DKK 15.8 million), corresponding to an effective positive tax rate of 0.5% (negative 4.8%). The parent company’s taxable income for 2023 is DKK 0 million after use of tax losses carried forward (DKK 0 million). Current tax and change in deferred tax expensed in 2023 relates mainly to Bavarian Nordic GmbH and Bavarian Nordic Berna GmbH. 'Income()/expenses that are not taxable/deductible for tax purposes' is primarily transaction costs related to 'Acquisition of businesses'. 'Special tax credit' primarily relates to the 8% step up deduction on research and development costs according to Section 8B of the Danish Tax Assessment Act. Current tax on profit for previous years relates primarily to paid out tax credits on previous years losses arisen from research and development activities, according to Section 8X of the Danish Tax Assessment Act.. DKK thousand 2023 2022 Tax recognized in the income statement Current tax on profit for the year 11,493 15,738 Adjustments to current tax for previous years (9,929) 33 Current tax 1,564 15,771 Change in deferred tax 6,190 - Deferred tax 6,190 - Tax for the year recognized in the income statement 7,754 15,771 Tax on income for the year is explained as follows: Income before company tax 1,482,943 (331,611) Calculated tax (22.0%) on income before company tax 326,247 (72,954) Tax effect on: Different tax percentage in foreign subsidiaries (3,308) 572 Non-recognized deferred tax asset on current year losses in foreign subsidiaries (747) (1,953) Income ()/expenses that are not taxable/deductible for tax purposes 16,273 (4,443) Deduction for interest and currency adjustments related to debt forgiveness (60,009) - Special tax credit (32,788) (46,946) Change in unrealized intra-group profits (11,025) (25,099) Change in non-recognized tax asset (216,960) 166,561 Adjustments to current tax for previous years (9,929) 33 Tax on income for the year 7,754 15,771 Tax recognized in other comprehensive income Remeasurements of defined benefit plans 4,505 - Tax recognized in equity Tax on share based payment - - Financial statements – Group Bavarian Nordic Annual Report 2023 68 Note 13 Tax for the year (continued) 2023 Exchange rate adjust- Additions Recognized ments on Adjustment from Acqui- in the translating January 1, to previous sition of income Recognized foreign December DKK thousand 2023 year businessess statement in equity operations 31, 2023 Product rights 62,881 - - (112,955) - - (50,074) Acquired rights and development in progress (2,659) - - (108,445) - - (111,104) Property, plant and equipment 88,124 643 (33,546) (1,223) - (1,933) 52,065 Right-of-use assets 287 - - (104) - - 183 Development projects for sale 32,446 - - (6,502) - - 25,944 Unrealized intra-group profits (21,265) - - 11,025 - 642 (9,598) Receivables 191 - - 27 - - 218 Provisions - - - 1,100 - - 1,100 Defined benefit plans - - 7,732 (1,428) 4,505 364 11,173 Financial instruments (7,017) - - - (3,078) - (10,095) Share-based payment 27,405 - - 8,385 - - 35,790 Tax losses carried forward 470,385 (11,703) - (13,030) - (642) 445,010 Not recognized tax asset (650,778) 11,060 - 216,960 3,078 - (419,680) Recognized deferred tax assets/liabilities - - (25,814) (6,190) 4,505 (1,569) (29,068) 2022 Recognized Adjustment in the January 1, to previous income Recognized December DKK thousand 2022 year statement in equity 31, 2022 Product rights (10,421) - 73,302 - 62,881 Acquired rights and development in progress - - (2,659) - (2,659) Property, plant and equipment 60,500 4,184 23,440 - 88,124 Right-of-use assets 370 - (83) - 287 Development projects for sale 32,446 - - - 32,446 Unrealized intra-group profits - (46,364) 25,099 - (21,265) Receivables 37 - 154 - 191 Financial instruments 297 - - (7,314) (7,017) Share-based payment 27,994 - 5,282 (5,871) 27,405 Tax losses carried forward 361,516 66,843 42,026 - 470,385 Not recognized tax asset (472,739) (24,663) (166,561) 13,185 (650,778) Recognized deferred tax assets - - - - - Financial statements – Group Bavarian Nordic Annual Report 2023 69 Note 13 Note 14 Earnings per share (EPS) Tax for the year (continued) Deferred tax Deferred tax assets relate to temporary differences between the tax base and accounting carrying amount and tax losses carried forward. Deferred tax assets arising from temporary deductible differences and tax losses carried forward are recog- nized to the extent they are expected to be offset against future taxable income. Pillar II The Bavarian Nordic Group is not yet in scope of the Minimum Tax Act (Pillar II), as adopted by the Danish Parliament on December 7, 2023. If the group becomes covered by the Minimum Tax Act, no additional tax costs is expected for the Bavarian Nordic Group, based on the current group structure. It will result in a not insignificant compliance task for the Bavarian Nordic Group if the group is unable to utilize the safe harbour rules. Accounting policies Earnings per share is calculated as the profit or loss for the year compared to the weighted average of the issued shares in the financial year. The basis for the calculation of diluted earnings per share is the weight- ed-average number of ordinary shares in the financial year adjusted for the dilutive effects of warrants. DKK thousand 2023 2022 Net result for the year 1,475,189 (347,382) Earnings per share of DKK 10 19.2 (4.9) Diluted earnings per share of DKK 10 19.2 (4.9) The weighted average number of ordinary shares for the purpose of diluted earning per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of ordinary shares 76,860,003 70,547,859 Weighted average number of treasury shares (149,442) (129,468) Weighted average number of outstanding ordinary shares used in the calculation of basic earnings per share 76,710,561 70,418,391 Weighted average number of outstanding ordinary shares used in the calculation of diluted earnings per share 76,710,561 70,418,391 Outstanding warrants that may have an effect on the calculation of diluted earnings per share in the future. 2023-programs 1,258,558 - 2022-programs 992,310 1,013,923 2021-program 651,074 655,774 2020-programs 1,105,219 1,142,109 2019-program 513,754 599,493 2018-program - 240,708 Outstanding warrants, cf. note 30 4,520,915 3,652,007 Recognized tax losses carried forward relate to Bavarian Nordic A/S and the two Danish subsidiaries Aktieselskabet af 1. juni 2011 I and Aktieselskabet af 1. juni 2011 II regulated within Danish tax jurisdiction. The tax value of non-recognized tax losses carried forward in Bavarian Nordic A/S and the two Danish subsidiaries amounts to DKK 445.0 million (DKK 470.4 million), whereas the tax value of non-recognized temporary deductible differences amounts to DKK 0 million (DKK 180.4 million). Tax rate used for Danish entities is 22%. The recognized deferred tax liability relates to Bavarian Nordic Berna GmbH, regulated within Swiss tax juris- diction. The Company's right to use the tax losses carried forward is not time-limited. Financial statements – Group Bavarian Nordic Annual Report 2023 70 Note 15 Intangible assets Accounting policies Intangible assets are measured at historic cost less accumu- lated amortization and impairment losses. Cost of acquired product rights are measured at cash consideration and present value of any deferred payments for those rights. Furthermore costs of acquired product rights include trans- action costs that are directly attributable to the acqusition. Internal development projects that meet the require- ments for recognition as intangible assets are meas- ured at direct cost relating to the development projects. Amortization is provided on a straight-line basis over the useful economic lives of the assets. The useful lives of acquired product rights are estimated to be 10-20 years and software is estimated to be 3-5 years. Amortization of acquired product rights is recognized as part of cost of goods sold under production costs. Key accounting estimates Product rights When determining the amortization period for acquired product rights, Management need to make an assessment of expected useful economic life. In the assessment Management take among other things the following components into consideration: The maturity of the products acquired, development in the market the acquired products are targeting, the current competitors, clinical development of new competing products and entry barriers to the market due to advanced production technology. Straight-line amortization reflects the use and impairment of the product rights. Management continuously updates the valuation model used when acquiring the product rights from GSK to assess the value creation expected from the acquisi- tion. The latest update of the valuation model shows a value above the net present value of the purchase price, hence there is no indications of impairment. As per December 31, 2022 Management still judge that the sales milestone of EUR 25 million included in Asset Purchase Agreement is not probable and therefore the present value has not been added to the cost of the product rights. Key accounting judgments Management has made the following accounting judg- ments which significantly affect the amounts recog- nized in the consolidated financial statements: Following the Phase 3 results announced in August, where ABNCoV2 demonstrated a reduced level of neutralizing antibodies against a circulating variant, the asset no longer represented a commercial opportunity for Bavarian Nordic as the regulators, EMA and FDA, could not accept a submission for licensure. Therefore, Management decided to fully write-down all assets and liabilities related to the development program. The impact on the financials for 2023 is shown in note 32. Acquired rights and development in progress Under the Group’s accounting policies and in accordance with common industry practice, development costs are generally expensed in the year they occur. During the development of ABNCoV2, the Group has, however, started capitalization of directly related development cost at commencement of the phase 2 and 3 studies as – unlike most other development candidates - the feasibility of developing a final vaccine and obtain regulatory approval is considered highly likely. Impairment The carrying amounts of intangible assets carried at cost or amortized cost are tested at least annually to determine whether there are indications of any impair- ment in excess of that expressed in normal amortiza- tion. If that is the case, the asset is written down to the recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Impairment losses on intangible assets are recognized under the same line item as amortization of the assets. For development projects in progress, the recoverable amount is assessed annually, regardless of whether any indications of impairment have been found. Financial statements – Group Bavarian Nordic Annual Report 2023 71 Note 15 Intangible assets (continued) 2023 Acquired Other rights and intangible Product development assets in DKK thousand rights in progress Software progress Total Costs as of January 1, 2023 5,458,700 1,013,484 106,094 274,490 6,852,768 Additions - 389,751 3,034 143,978 536,758 Transfer - - 2,353 (2,353) - Additions from acquisition of businesses 449,577 1,286,778 4,207 1,212 1,741,779 Disposals - - (1,227) - (1,227) Exchange rate adjustments - - 497 (1) 496 Cost as of December 31, 2023 5,908,277 2,690,013 114,958 417,326 9,130,574 Amortization and impairment losses as of January 1, 2023 818,805 - 91,326 - 910,131 Amortization 298,030 - 12,028 - 310,058 Impairment losses - 1,403,264 - 26,224 1,429,488 Disposals - - (1,111) - (1,111) Exchange rate adjustments - - 272 - 272 Amortization and impairment losses as of December 31, 2023 1,116,835 1,403,264 102,515 26,224 2,648,838 Carrying amount as of December 31, 2023 4,791,442 1,286,749 12,443 391,102 6,481,736 Geographical split of intangible assets – 2023 Denmark 6,475,179 Germany 270 USA 2,005 Switzerland 4,282 Total intangible assets 6,481,736 Product rights December 31, 2019 the Company acquired the product rights to two commercial products owned by GSK – Rabipur/RabAvert and Encepur. The products have been on the market for more than 20 years. There is no need to further develop the prod- ucts. Management assesses that it will require up to 10 years of clinical development for competitors to bring a new competing product to the market likewise the production process required to produce these products is highly complex. Based on these factors Management assesses that the acquired product rights should be amortized over 20 years. The acquisition price for the two product rights consists of the upfront payment and the present value of the milestone payments included in the Asset Purchase Agreement with GSK. The milestone payments relate to transfer and re-registration of marketing authorizations, technology transfer of different steps of the produc- tion and packaging activities as well as a milestone payment when all services agreed to be rendered has been completed. The Asset Purchase Agreement spec- ifies the above milestone payments for each product. In total EUR 470 million. The Asset Purchase Agreement also includes a sales milestone of EUR 25 million. The sales milestone is related to the total revenue of the two products. Management deems it unlikely that the sales milestone will be trickered, hence the sales mile- stone has not been recognized as part of the asset nor the deferred consideration as per December 31, 2021. Financial statements – Group Bavarian Nordic Annual Report 2023 72 Note 15 Intangible assets (continued) Acquired rights and development in progress The Purchase and Sale Agreement concluded with Emergent BioSolutions included acquisition of a late- stage vaccine candidate for chikungunya virus. The initial acquisition price amounted to DKK 788 million. The Company will complete the Phase 3 study and submit for approval. No further cost will be capitalized. The agreement with Emergent BioSolutions also included milestone payments totaling USD 80 million related to submission and approval of Biologics License Application (BLA) to FDA and Marketing Authorization Application to EMA for the chikungunya development asset. At initial recognition the net present value of probable future development milestone payments to Emergent BioSolutions amounted to DKK 499 million and was recognized as deferred consideration (note 24). Intangible assets in progress The as-is technology transfer from GSK to Bavarian Nordic of the manufacturing process for Rabipur/ RabAvert and Encepur is progressing as expected. The transfer has taken place in a staged process, starting with packaging then filling and ending with the transfer of bulk manufacturing. The Company has incurred material costs in terms of internal labour and consul- tancy to handle the technology transfer and has gained crucial knowledge about the manufacturing process. These costs are capitalized as an intangible asset. As per December 31, 2022 the capitalized costs amounts to DKK 255.3 million (DKK 255.3 million), recognized as intangible assets in progress. Other intable assets in progress relates to IT invest- ments. 2023 Carrying amount Remaining DKK thousand Acquistion price December 31, 2023 amortization period Rabipur/RabAvert 3,140,250 2,512,200 16 years Encepur 2,318,450 1,854,760 16 years Vivotif 312,208 291,357 9.5 years Vaxchora 137,369 133,125 19.5 years Total product rights 4,791,442 Deferred consideration for the acquired product rights are described in note 24. In May 2023, the Company concluded a Purchase and Sale Agreement with Emergent BioSolutions. The agreement included acquisition of product rights to two commercial travel vaccines – Vivotif and Vaxchora. Vivotif and Vaxchora were first licensed in the US in 1989 and 2016 respectively. Vaccines have historically shown to have a long lifespan due to stringent regu- latory requirements, high research and development costs and a complex manufacturing process. Vaxchora is targeting a market that has a relatively low market value, which further lowers the chance of competitors entering the market and taking significant market shares. Based on these factors Management assesses that the Vaxchora product right should be amortized over 20 years. Vivotif was developed more than 30 years ago and the market is larger than for Vaxchora. Therefore, the risk of competition is also deemed higher, hence the amorti- zation period is assessed to be 10 years. The acquisition price for the two product rights consists of an upfront payment of DKK 312 million for Vivotif and DKK 137 million for Vaxchora. The Purchase and Sale Agreement also includes an earnout payment starting at USD 30 million. The earnout payment relates to sale of Vivotif and Vaxchora. As per December 31, 2023 Management does not judge the sales milestone to be probable and there- fore the earnout payment has not been recognized as either part of the project rights nor the deferred consid- eration. Write-down of ABNCoV2 development program See note 32 for a summarized income statement and a summarized financial position showing how the write- down has impacted the Annual Report. Financial statements – Group Bavarian Nordic Annual Report 2023 73 Note 15 Intangible assets (continued) 2022 Acquired Other rights and intangible Product development assets in DKK thousand rights in progress Software progress Total Costs as of January 1, 2022 5,458,700 733,770 100,385 134,371 6,427,226 Additions - 279,714 3,006 142,691 425,411 Transfer - - 2,572 (2,572) - Disposals - - - - - Exchange rate adjustments - - 131 - 131 Cost as of December 31, 2022 5,458,700 1,013,484 106,094 274,490 6,852,768 Amortization as of January 1, 2022 545,870 - 77,400 - 623,270 Amortization 272,935 - 13,908 - 286,843 Disposals - - - - - Exchange rate adjustments - - 18 - 18 Amortization as of December 31, 2022 818,805 - 91,326 - 910,131 Carrying amount as of December 31, 2022 4,639,895 1,013,484 14,768 274,490 5,942,637 Geographical split of intangible assets – 2022 Denmark 5,941,664 Germany - USA 973 Total intangible assets 5,942,637 Other intangible assets in progress include investments in software. Financial statements – Group Bavarian Nordic Annual Report 2023 74 Note 16 Property, plant and equipment Accounting policies Property, plant and equipment include land and build- ings, production equipment, leasehold improvements, office and IT equipment and laboratory equipment and is measured at cost less accumulated depreciation and impairment losses. Cost includes the costs directly attributable to the purchase of the asset, until the asset is ready for use. For assets constructed by the Group cost includes mate- rials, components, third-party suppliers and labour. Borrowing costs directly attributable to the construction of property, plant and equipment are included in cost. Other borrowing costs are recognized in the income statement. Depreciation is charged over the expected economic lives of the assets, and the depreciation methods, expected lives and residual values are reassessed indi- vidually for the assets at the end of each financial year. Assets are depreciated on a straightline basis over their estimated useful lives as follows: Buildings 10-20 years Installations 5-15 years Leasehold improvements 5 years Office and IT equipment 3-5 years Laboratory equipment 5-10 years Production equipment 3-15 years Management reviews the estimated useful lives of material property, plant and equipment at the end of each financial year. Impairment The carrying amounts of property, plant and equipment carried at cost or amortized cost are tested annually to determine whether there are indications of any impair- ment in excess of that expressed in normal deprecia- tion. If that is the case, the asset is written down to the recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Impairment losses on property, plant and equipment are recognized under the same line item as depreciation of the assets. Financial statements – Group Bavarian Nordic Annual Report 2023 75 Note 16 Property, plant and equipment (continued) 2023 Other fixtures and fittings, other Land and Leasehold Plant and plant and Assets under DKK thousand buildings improvement machinery equipment construction Total Costs as of January 1, 2023 858,543 40,237 514,369 626,036 196,130 2,235,315 Additions 13,387 2,838 20,600 8,864 96,836 142,525 Transfer 79,712 2,688 43,983 21,797 (148,180) - Additions from acquisition of businesses 300,131 1,234 86,336 234,826 58,926 681,453 Disposals (178) - (27,101) (11,603) - (38,882) Exchange rate adjustments 16,467 39 8,520 9,295 3,009 37,330 Cost as of December 31, 2023 1,268,062 47,036 646,707 889,215 206,721 3,057,741 Depreciation and impairment losses as of January 1,2023 228,405 15,472 192,624 114,841 - 551,342 Depreciation 51,424 6,491 62,552 85,511 - 205,978 Disposals - - (25,277) (8,745) - (34,022) Exchange rate adjustments 1,220 26 4,134 1,548 - 6,928 Depreciation and impairment losses as of December 31, 2023 281,049 21,989 234,033 193,155 - 730,226 Carrying amount as of December 31, 2023 987,013 25,047 412,674 696,060 206,721 2,327,515 The net present value of property, plant and equipment acquired form Emergent BioSolutions amounted to DKK 681 million at the acquisition date and comprised mainly of the production site in Bern. Mortgage loans of DKK 17.0 million are secured by mortgages totaling DKK 50.0 million on the property Bøgeskovvej 9/Hejreskovvej 10A, Kvistgaard. In addi- tion, as of December 31, 2023, mortgage deeds for a total of DKK 75.0 million have been issued. The carrying amount of assets mortgaged in security of mortgage loans is DKK 1,399.7 million (land and buildings: DKK 987.0 million; plant and machinery: DKK 412.7 million). Geographical split of property, plant and equipment – 2023 Denmark 1,615,213 Germany 52,711 USA 40,006 Switzerland 619,587 Total property, plant and equipment 2,327,517 Financial statements – Group Bavarian Nordic Annual Report 2023 76 Note 16 Property, plant and equipment (continued) 2022 Other fixtures and fittings, other Land and Leasehold Plant and plant and Assets under DKK thousand buildings improvement machinery equipment construction Total Costs as of January 1, 2022 546,771 22,288 424,291 312,179 578,707 1,884,236 Additions 73,768 6,147 26,023 146,421 108,885 361,244 Transfer 238,004 11,802 73,919 167,745 (491,470) - Disposals - - (9,864) (428) - (10,292) Exchange rate adjustments - - - 119 8 127 Cost as of December 31, 2022 858,543 40,237 514,369 626,036 196,130 2,235,315 Depreciation and impairment losses as of January 1, 2020 200,818 12,277 169,761 88,712 - 471,568 Depreciation 27,587 3,196 31,061 26,360 - 88,204 Disposals - - (8,198) (301) - (8,499) Exchange rate adjustments - (1) - 70 - 69 Depreciation and impairment losses as of December 31, 2022 228,405 15,472 192,624 114,841 - 551,342 The expansion of the drug substance facility for future production of Rabipur/RabAvert and Encepur completed end of 2022. The Company has not incurred any borrowing costs directly attributable to the construc- tion, hence no borrowing costs have been capitalized. Mortgage loans of DKK 18.9 million are secured by mortgages totaling DKK 50.0 million on the property Bøgeskovvej 9/Hejreskovvej 10A, Kvistgaard. In addi- tion, as of December 31, 2022, mortgage deeds for a total of DKK 75.0 million have been issued. The carrying amount of assets mortgaged in security of mortgage loans is DKK 951.8 million (land and buildings: DKK 630.1 million; plant and machinery: DKK 321.7 million). Carrying amount as of December 31, 2022 630,138 24,765 321,745 511,195 196,130 1,683,973 Geographical split of property, plant and equipment – 2022 Denmark 1,626,673 Germany 56,564 USA 463 Switzerland 273 Total property, plant and equipment 1,683,973 Financial statements – Group Bavarian Nordic Annual Report 2023 77 Note 17 Right-of-use-assets Accounting policies The right-of-use assets comprise the initial measure- ment of the corresponding lease liability. Right-of-use assets are subsequently measured at cost less accumu- lated depreciation and impairment losses. All operating leases with a lease term of more than 12 months are recognized on the balance sheet as right- of-use-assets. For leases with a lease term of less than 12 months the lease payments are recognized as an operating expense on a straight-line basis over the term of the lease. The right-of-use-assets are measured at the present value of all future lease payments. When assessing the lease term, any extension or termination options are included in the assessment. The options are included in determining the lease term, if exercise is reason- ably certain. When determining the discount rates used to calculate the net present value of future lease payments, an incremental country specific borrowing rate is used, based on a government bond plus the Group’s credit margin, ranging from 3.69% to 6.93%. A single discount rate is used for a portfolio of lease assets with reasonable similar characteristics. Initial direct costs are not included in measurement of the right-of-use-assets. Non-lease components are not separated from lease components. 2023 Rent Car DKK thousand facility leasing Equipment Total Right-of-use assets as of January 1, 2023 58,467 8,392 574 67,433 Additions 2,551 8,767 - 11,318 Additions from acquisition of businesses 41,943 - - 41,943 Modifications 47,096 210 993 48,299 Disposals (7,109) (2,216) (409) (9,734) Depreciations (30,862) (5,800) (419) (37,081) Reversal depreciations 675 1,798 409 2,882 Exchange rate adjustments 106 3 1 110 Right-of-use assets as of December 31, 2023 112,867 11,154 1,149 125,170 2022 Rent Car DKK thousand facility leasing Equipment Total Impact from applying IFRS 16 as of January 1, 2022 73,026 1,742 1,075 75,843 Additions 917 8,671 - 9,588 Modifications 5,326 986 - 6,312 Disposals (2,412) - - (2,412) Depreciations (19,475) (3,050) (500) (23,025) Reversal depreciations 909 - - 909 Exchange rate adjustments 176 43 (1) 218 Right-of-use assets as of December 31, 2022 58,467 8,392 574 67,433 A maturity analysis for lease payments is described in note 23. Impact from change in lease terms, lease payments or modification of the lease contract is further described in note 28. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. IAS 36 is applied to determine whether a right-of-use asset is impaired and any iden- tified impariment losses are accounted for as described in note 15. DKK thousand 2023 2022 Amounts included in the income statement Interest expense leases 3,074 1,888 Depreciation recognized on right-of-use assets 37,081 23,025 Cost recognized for short term leases (less than 12 months) - 267 Financial statements – Group Bavarian Nordic Annual Report 2023 78 Note 18 Inventories Accounting policies Inventories except for raw materials are measured at the lower of cost using the weighted average cost formula method less write-downs for obsolescence and net realisable value. Raw materials are measured at cost based on the FIFO method. For raw materials, cost is determined as direct acquisition costs incurred. The cost of finished goods produced in-house and work in progress includes raw materials, consumables, filling cost, QC testing and direct payroll costs plus indirect costs of production. Indirect costs of production include indirect materials and labour as well as maintenance of and depreciation on the machinery used in production processes, factory buildings and equipment used and cost of production administration and management. The net realisable value is the estimated sales price in the ordinary course of business less relevant sales costs determined on the basis of marketability, obsolescence and changes in the expected sales price. DKK thousand 2023 2022 Raw materials and supply materials 317,392 206,211 Work in progress 1,231,858 641,183 Manufactured goods and commodities 319,102 234,097 Write-down on inventory (224,615) (162,419) Inventories 1,643,736 919,072 Write-down on inventory as of January 1 (162,419) (172,941) Additions from acquisition of businesses (14,498) - Write-down for the year (75,300) (78,101) Use of write-down 27,602 46,031 Reversal of write-down - 42,592 Write-down on inventory as of December 31 (224,615) (162,419) Cost of goods sold amounts to, cf. note 4 1,608,263 644,683 Significant accounting estimates Production overheads are measured on the basis of actual costs. The basis of the actual costs is reassessed regularly to ensure that they are adjusted for changes in the utilization of production capacity, production changes and other relevant factors. Biological living material is used, and the measurements and assump- tions for the estimates made may be incomplete or inaccurate, and unexpected events or circumstances may occur, which may cause the actual outcomes to later deviate from these estimates. It may be necessary to change previous estimates as a result of changes in the assumptions on which the estimates were based or due to new information or subsequent events, for which certainty could not be achieved in the earlier estimates. Estimates that are material to the financial reporting are made in the determination of any impairment of inventories as a result of 'out-of-specification' products, expiry of products and sales risk. The inventory value of Encepur and Rabipur/RabAvert products amounted to DKK 947.5 million (DKK 577.9 million), Jynneos/Imvamune/Imvanex amounted to DKK 286,8 million, and Vivotif and Vaxchora amounted to DKK 67,1 million as per December 31, 2023 incl. write- down. Write-down for the year amounted to DKK 75.3 million (DKK 78.1 million) and mainly relates to write down of RSV material due to discontinuation of the RSV program. Use of write-down in 2023 of DKK 27.6 million (DKK 46 million) relates to scrap of old Rabipur and Encepur batches fully written down last year. As of December 31, 2023, the PPQ batches for chikun- gunya has been fully written down. If the PPQ batches can be used for future commercial sale then the write- down will be reversed at the time of expected approval of the chikungunya vaccine. Financial statements – Group Bavarian Nordic Annual Report 2023 79 Note 19 Trade receivables Write-downs are calculated using the ‘full lifetime expected credit losses’ method, whereby the likelihood of non-fulfilment throughout the lifetime of the finan- cial instrument is taken into consideration. A provision account is used for this purpose. The payment conditions for the customers, including credit periods and any payment of interest in case of non-payment, vary, but are always based on industry practice in the relevant market. The average credit period is approximately 30 days for the public prepar- edness business, while the average credit period for the travel health business is 60 days. The table details the risk profile for trade receivables. Accounting policies Receivables are measured at initial recognition at fair value and subsequently at amortized value usually equal to the nominal value, net of impairment based on expected credit losses. Trade receivables Gross carrying Loss Net carrying DKK thousand amount allowance amount 2023 Not past due date 1,730,046 - 1,730,046 Overdue by 0-3 months 39,613 (191) 39,422 Overdue by 3-6 months 8,188 (539) 7,649 Overdue by 6-12 months 2,755 (1,768) 987 Overdue by more than 12 months 729 (729) - Trade receivables 1,781,331 (3,227) 1,778,104 2022 Not past due date 484,110 - 484,110 Overdue by 0-3 months 39,435 (823) 38,612 Overdue by 3-6 months 470 (47) 423 Overdue by 6-12 months - - - Overdue by more than 12 months - - - Trade receivables 524,015 (870) 523,145 DKK thousand 2023 2022 Trade receivables from public preparedness business 1,660,604 329,897 Trade receivables from travel health business 110,832 167,332 Trade receivables from contract work 6,668 25,916 Trade receivables 1,778,104 523,145 Credit risk Bavarian Nordic’s customers are predominantly public authorities and renowned wholesalers and therefore the credit risk is very low. There are overdue receiva- bles as of December 31, 2023 DKK 51 million (DKK 40 million). As of December 31, 2023 a loss allowance of DKK 3 million (DKK 1 million) has been recognized. The Group has applied the simplified approach to measure the expected credit loss and a lifetime expected loss allowance for all trade receivables.The allowance is an estimate based on shared credit risk characteristics and the days past due. At the time of revenue recognition, Bavarian Nordic assesses the full lifetime expected credit losses. In addition, undue and due receivables are analyzed in an ongoing process. Based on the credit assessment, receivables analysis, historical experience and industry experience, it is estimated whether the receivables are recoverable or write-downs are needed. Bavarian Nordic monitor the credit exposure on all customers, both new and existing. Bavarian Nordic recognizes a loss allowance for expected credit losses and writes off trade receivables when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. Subsequent recovery of amounts previously written down is credited against sales and distribution costs. Financial statements – Group Bavarian Nordic Annual Report 2023 80 Note 20 Other receivables Note 21 Prepayments Accounting policies Receivables are measured at initial recognition at fair value and subsequently at amortized value usually equal to the nominal value, net of impairment, to counter the loss after an individual assessment of risk of loss. Accounting policies Prepayments recognized under assets include costs paid in respect of subsequent financial years, including incurred costs related to technology transfer activities at CMO's, where the costs subsequently will be recog- nized as inventory in concurrence with purchase of production services from the CMO's. Prepayments are measured at cost. DKK thousand 2023 2022 Prepayments to CMO's 4,556 351,322 Other prepayments 18,510 10,149 Prepayments 23,066 361,471 Classified as: Non-current assets 4,556 207,537 Current assets 18,510 153,934 Prepayments 23,066 361,471 DKK thousand 2023 2022 Deposits 11,185 5,086 Receivable VAT and duties 46,585 - Derivative financial instruments at fair value 45,887 31,894 Interest receivables 2,664 11,369 Other receivables 106,321 48,349 Classified as: Non-current assets 11,185 5,086 Current assets 95,136 43,263 Other receivables 106,321 48,349 Part of the technology transfer of the production and packaging activities for Encepur and Rabipur/RabAvert takes place at CMO's (filing of Encepur, labelling and packing). Costs related to the technology transfer activ- ities are recognized as prepayments when costs incur and then recognized as inventory in concurrence with purchase of production services from the CMO's. As per December 31, 2023 DKK 4.6 million (DKK 14.9 million) has been recognized as non-current prepayments. As per December 31, 2022 the main part of the prepay- ments to CMO's related to the scale-up activities to prepare for production of drug substance for commer- cial launch of ABNCoV2 incl. commercial batches produced as part of the process qualification process. The prepayments were written-down following the announcement of the Phase 3 results for ABNCoV2, see further see note 32. Financial statements – Group Bavarian Nordic Annual Report 2023 81 Note 22 Other liabilities Accounting policies Derivative financial instruments and liability relating to phantom shares are measured at fair value. For further details regarding measurement of fair value for phantom shares see note 30. Other financial liabilities are measured at initial recognition at fair value less any transaction costs. Subsequent other financial liabilities are measured at amortized cost using the effective interest method, whereby the difference between proceeds and the nominal value is recognized in the income statement as a financial expense over the period. Amortized cost usually equal to the nominal value. DKK thousand 2023 2022 Financial instruments at fair value - 8,302 Liability relating to phantom shares - 11,102 Payable salaries, holiday accrual etc. 212,122 107,952 Gross to net deduction accrual 159,802 97,679 Other accrued costs 47,919 22,319 Payable VAT and duties - 10,215 Other liabilities 419,843 257,569 For a further description of financial instruments see note 23. The phantom share programs are described in note 30. Financial statements – Group Bavarian Nordic Annual Report 2023 82 Note 23 Financial risks and financial instruments Accounting policies Derivative financial instruments On initial recognition, derivative financial instruments are measured at the fair value on the settlement date. Directly attributable costs related to the purchase or issuance of the individual financial instruments (transaction costs) are added to the fair value on initial recognition, unless the financial asset or the financial liability is measured at fair value with recognition of fair value adjustments in the income statement. Subse- quently, they are measured at fair value at the balance sheet date based on the official exchange rates, market interest rates and other market data such as volatility adjusted for the special characteristics of each instru- ment. Changes in the fair value of derivative financial instru- ments designated as and qualifying for recognition as effective hedges of future transactions (cash flow hedges) are recognized as comprehensive income. The ineffective portion is recognized immediately in the income statement. When the hedged transactions are realized, cumulative changes are recognized in the income statement together with the hedged transac- tion or in respect of a non-financial item as part of the cost of the transactions in question. DKK thousand 2023 2022 Categories of financial instruments Trade receivables 1,778,104 523,145 Other receivables 60,434 16,455 Cash and cash equivalents 1,477,234 575,407 Financial assets measured at amortized cost 3,315,772 1,115,007 Securities 390,247 1,184,843 Transferred securities that are not derecognized - 1,084,916 Financial assets measured at fair value through the income statement 390,247 2,269,759 Derivative financial instruments to hedge future cash flows (exchange rate) 44,784 30,025 Derivative financial instruments to hedge future cash flows (interest) 1,103 1,869 Financial assets used as hedging instruments 45,887 31,894 Deferred consideration 2,376,989 2,612,093 Debt to credit institutions 17,048 18,930 Security lending (repo transactions) - 1,103,661 Prepayment and loan from Government - 566,420 Lease liabilities 128,254 70,321 Trade payables 954,142 605,928 Other liabilities 419,843 238,165 Financial liabilities measured at amortized cost 3,896,276 5,215,518 Derivative financial instruments at fair value through the income statement (repo transactions) - 8,302 Liability relating to phantom shares - 11,102 Financial liabilities measured at fair value through the income statement - 19,404 For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recog- nized as financials in the income statement as they occur. The Company has designated certain derivative finan- cial instruments as cash flow hedges as defined under IFRS 9 "Financial Instruments". Hedge accounting is classified as a cash flow hedge when the hedges of a particular risk is associated with the cash flows of highly probable forecast transactions. Securities Securities consist of highly liquid, listed bonds with high credit rating, which are measured at fair value on initial recognition and as of the balance sheet date. The Group’s portfolio of securities is treated as "financial items at fair value through profit or loss", as the port- folio is accounted for and valued on the basis of the fair value in compliance with the Company's investment policy. Both realized and unrealized value adjustments are recognized in the income statement under financials. Financial statements – Group Bavarian Nordic Annual Report 2023 83 Note 23 Financial risks and financial instruments (continued) Policy for managing financial risks Through its operations, investments and financing the Group is exposed to fluctuations in exchange rates and interest rates. These risks are managed centrally in the Parent Company, which manages the Group´s liquidity. The Group pursues a treasury policy approved by the Board of Directors. The policy operates with a low risk profile, so that exchange rate risks, interest rate risks and credit risks arise only in commercial relations. The Group therefore does not undertake any active specula- tion in financial risk. The Group´s capital structure is regularly assessed by the Board of Directors relative to the Group´s cash flow position and cash flow budgets. The interest rate risk involved in placing cash funds and investing in securities is managed on the basis of duration, preferably via a low portfolio duration and pari settlement of securities i order to minimize value adjustment risks. Exchange rate risks on recognized financial assets and liabilities Cash and cash equivalents, Net DKK thousand securities Receivables Liabilities position 2023 EUR 149,934 455,057 (2,679,716) (2,074,725) USD 205,315 1,334,432 (945,701) 594,046 CHF 10,281 4,649 (181,627) (166,697) 2022 EUR 294,207 355,193 (3,156,284) (2,506,884) USD 237,026 148,254 (156,497) 228,783 CHF 2,175 2,692 (39,532) (34,665) Sensitivity analysis on exchange rates Likely change Hypothetical Hypothetical in exchange change in change in DKK thousand rate equity net result 2023 Change if higher USD-rate than actual rate 15% 110,532 118,270 Change if higher EUR-rate than actual rate 1% (19,347) (21,505) Change if higher CHF-rate than actual rate 5% 29,518 (8,117) 2022 Change if higher USD-rate than actual rate 15% 75,638 56,962 Change if higher EUR-rate than actual rate 1% (22,207) (23,911) Change if higher CHF-rate than actual rate 5% (583) (1,004) Exchange rate risks The Group’s exchange rate exposure is primarily to USD and EUR. The exchange rate exposure to USD is hedged to the greatest possible extent by matching incoming and outgoing payments denominated in USD, looking at maximum one year ahead. Regular assessments are made of whether the remaining net position should be hedged by currency forward contracts or currency option contracts. The exposure to EUR is not hedged as management believes that fluctuations in EUR are limited due to the Danish fixed-rate policy which is expected to be maintained. Thus the fluctuations in EUR do not have a significant impact on financial performance. The sensitivity analysis shows the net effect it would have had on equity and profit for the year if the year-end exchange rates of USD, EUR and CHF had been 15%, 1% or 5%, respectively, higher than the actual exchange rates. A corresponding decrease in the actual exchange rates would have had an opposite (positive/ negative) effect on net result and equity. Market risks Market risk is the risk that changes in market prices will affect the Group’s profit or the value of its holdings of financial instruments. Bavarian Nordic is exposed to various market risks with the main risks being exchange rate risks, interest rate risks and cash risks. All market risks are managed in accordance with the treasury policy approved by the Audit Committee. Interest rate risk It is the Group's policy to hedge interest rate risks on loans obtained with floating rate and a maturity of more than five years. Hedging will then consist of interest rate swaps that convert floating rate loans to fixed rate loans. Management determines the economic relationship between the hedged item and the hedging instrument to ensure a high hedge effectiveness. Financial statements – Group Bavarian Nordic Annual Report 2023 84 Note 23 Financial risks and financial instruments (continued) Derivative financial instruments not designated as hedge accounting Currency forward contracts and currency option contracts which are not designated as hedge accounting are classified as financial assets/liabilities measured at fair value with value adjustments recog- nized through the income statement. There were no open currency contracts as of December 31, 2023 or as per December 31, 2022 not designated as hedge accounting. In 2016 the Company refinanced the old mortgage loans (fixed rate) and obtained a new mortgage loan with floating rate. The Company also concluded an interest rate swap to convert the floating rate loan to a fixed rate loan. The interest rate swap has the same maturity date and nominal amount as the mortgage loan to secure high effectiveness of the hedge. Cash flow hedge – forward currency contracts Fair value Contract adjustment amount Fair value recognized in based on as of other compre- DKK thousand Forward price agreed rates December 31 hensive income 2023 Forward currency contracts (USD/DKK) 6.90 - 6.94 1,454,570 39,184 9,159 Forward currency contracts (DKK/EUR) 7.41 - 7.42 2,150,674 5,600 5,600 44,784 14,759 2022 Forward currency contracts (USD/DKK) 543,454 30,025 30,671 30,025 30,671 Cash flow hedge – interest rate swap Fair value Contract adjustment amount Fair value recognized in based on as of other compre- DKK thousand agreed rates December 31 hensive income 2023 Interest rate swap DKK - fixed rate 0.9625% p.a. (expiry 2031) 17,041 1,103 (766) 1,103 (766) 2022 Interest rate swap DKK - fixed rate 0.9625% p.a. (expiry 2031) 19,192 1,869 2,574 1,869 2,574 Cash risks The Group´s bank deposits are placed in deposit accounts without restrictions. The Group's cash and cash equivalents totaled DKK 1,477.2 million as of December 31, 2023 (DKK 575.4 million). The Group's fixed rate bond portfolio expires as shown below. Amounts are stated excluding interest. Hedging of expected future cash flows The Company has concluded currency forward contracts to sell USD 210 million and to buy EUR 290 million (sell USD 75 million) to hedge net cash position during 2024 and 2025. These concluded currency forward contracts are deemed to be effective hedges of future transaction (cash flow hedges) and thus treated as hedge accon- ting. Financial statements – Group Bavarian Nordic Annual Report 2023 85 Note 23 Financial risks and financial instruments (continued) 2023 2022 Fair value as of Effective Fair value as of Effective DKK thousand December 31 interest December 31 interest Bond portfolio Within 0-2 years 230,192 3.6% 1,226,652 3.4% Within 3-5 years - - 492,898 3.5% After 5 years 160,055 3.2% 550,208 3.7% Total 390,247 3.5% 2,269,758 3.5% Fluctuations in interest rate levels affect the Group's bond portfolio. A change in the interest rate level by 1 percentage point relative to the interest rate level on the balance sheet date will have an impact of DKK 13.0 million on the Group´s net result and equity (DKK 73.3 million). The bond position with a duration of more than 5 years is a result of previous year's investment strategy. The Group is in process of adapting the bond portfolio to the amended investment strategy with the aim of reducing the duration of the portfolio. Financial statements – Group Bavarian Nordic Annual Report 2023 86 Note 23 Financial risks and financial instruments (continued) Financial liabilities due within one year DKK 2,824 million (DKK 2,297 million) is expected to be settled with short term assets recognized as of December 31, 2023, consisting of cash and cash equivalents, securities together with trade receivables and other receivables to a total of DKK 3,706 million (DKK 3,385 million). The financial liabilities due after one year, DKK 1,194 million (DKK 3,162 million) is expected to be settled with the excess short-term assets of DKK 882 million (DKK 1,088 million) in conjunction with expected cash flow from future operations. To further mitigate potential liquidity fluctuations, the Group has in 2023 obtained access to a Revolving Credit Facility of DKK 1,000 million. The facility was undrawn as of December 31, 2023. With respect to the Group´s debt to credit institutions, a change in the applicable interest rate by 1 percentage point would have had an impact on the Group's net result and equity of DKK 0.2 million (DKK 0.2 million). During 2023 the Company fulfilled all existing repo loan contracts (security lending) without entering into new contract. The position is therefore reduced to DKK 0 million by the end of 2023 (DKK 1,104 million). Further described below. Debt to credit institutions is a mortgage loan of DKK 17.1 million (DKK 18.9 million), further described in note 26. The Group has a credit facility of DKK 20 million (DKK 20 million) at Nordea. As of December 31, 2023, DKK 0.3 million (DKK 0.2 million) of the credit facility is utilized for bank guarantees. To mitigate potential liquitity fluctuations, the group has in 2023 obtained access to a Revolving Credit Facility of DKK 1,000 million with Nordea and Danske Bank as joint lenders. The facility was undrawn as of December 31, 2023. Maturity of financial liabilities (including interest) 2023 Due within Due between Due after DKK thousand 1 year 1 and 5 years 5 years Total Deferred consideration1 1,394,805 1,082,525 - 2,477,330 Credit institutions 2,720 10,698 7,167 20,586 Prepayment and loan from Government2 - - - - Lease liabilities 45,679 93,568 166 139,413 Trade payables 954,143 - - 954,143 Other liabilities 445,181 - - 445,181 Non-derivative financial liabilities 2,842,528 1,186,791 7,333 4,036,652 2022 Due within Due between Due after DKK thousand 1 year 1 and 5 years 5 years Total Deferred consideration1 297,460 2,506,101 - 2,803,561 Credit institutions 1,103,003 10,355 9,423 1,122,781 Prepayment and loan from Government2 - 519,932 70,503 590,435 Lease liabilities 24,487 45,834 - 70,321 Trade payables 605,928 - - 605,928 Other liabilities 265,775 - - 265,775 Non-derivative financial liabilities 2,296,653 3,082,222 79,926 5,458,801 1 Further explained in note 24. 2 Further explained in note 25. Credit risks The primary credit risk relates to trade receivables. The Company assesses the expected credit losses also considering changes in the macro environment that might impose an increased risk of losses. This is compared to the previous model where indications of credit losses were needed for the Company to recognize an expected loss. The Group´s customers are predominantly public authorities and renowned phar- maceutical companies and wholesalers, and the credit risk on the Group's receivables is therefore considered to be very low. A loss allowance of DKK 3,226 thou- sand (DKK 870 thousand) has been recognized as of December 31, 2023, cf. note 19. To manage credit risk regarding financial counterpar- ties, Bavarian Nordic only enters into derivative finan- cial contracts and money market deposits with financial counterparties possessing a satisfactory long-term credit rating from at least two out of the three selected ratings agencies: Standard and Poor’s, Moody’s and Fitch. Cash and cash equivalents are not deemed to be subject to any special credit risk as they are deposited with Nordea. The bond portfolio is invested in either Financial statements – Group Bavarian Nordic Annual Report 2023 87 Note 23 Financial risks and financial instruments (continued) Danish government bonds, Danish mortgage bonds or bonds issued by Danish banks with high ratings. this goal and to maintain the capital structure, the Group can issue new shares, return capital to share- holders, sell assets to reduce debt or increase the groups debt obligations, including taking on bank debt and by way of deferred consideration, provided finan- cial covenants are respected. Transferred financial assets that are not derecognized DKK thousand 2023 2022 Carrying amount of transferred securities - 1,084,916 Carrying amount of associated liabilities (security lending) - (1,103,661) Net position - (18,745) Fair value hierarchy for financial instruments measured at fair value 2023 DKK thousand Level 1 Level 2 Total Securities 390,247 - 390,247 Financial assets measured at fair value through the income statement 390,247 - 390,247 Derivative financial instruments to hedge future cash flow (currency) - 44,784 44,784 Derivative financial instruments to hedge future cash flow (interest) - 1,103 1,103 Financial assets/liabilities used as hedging instruments - 45,887 45,887 2022 DKK thousand Level 1 Level 2 Total Securities 2,269,759 - 2,269,759 Financial assets measured at fair value through the income statement 2,269,759 - 2,269,759 Derivative financial instruments to hedge future cash flow (currency) - 30,025 30,025 Derivative financial instruments to hedge future cash flow (interest) - 1,869 1,869 Financial assets/liabilities used as hedging instruments - 31,894 31,894 Derivative financial instruments at fair value (repo transactions) - (8,302) (8,302) Liability relating to phantom shares - (11,102) (11,102) Financial liabilities measured at fair value through the income statement - (19,404) (19,404) Managing capital structure In 2023 the Group has expanded its definition of capital from total equity alone to also include net interest-bearing debt. This change accommodates the introduction of external capital as a resource for the Group in accordance with the conclusion of a committed Revolving Credit Facility, see further below. As of December 31, 2023 (December 31, 2022) net inter- est-bearing debt consists of deferred consideration, cf. note 24, prepayment and loan from government, cf. note 25, debt to credit institutions, cf. note 26, lease liabilities, cf. note 28 with subtraction of cash and cash equivalents together with securities, net debt DKK 655 million (DKK 1,526 million). Total equity as of December 31, 2023, amounted to DKK 10,340 million (DKK 7,150 million). Transferred financial assets that are not derecognized In 2022 the Company entered into transactions that transfer ownership of securities to a counterparty, while the Company retains the risks associated with the holding of the securities. As the Company retains all risks, the securities remain in the balance sheet, and the transactions are accounted for as loans received against collateral (repo transactions and security lending). The transactions involve selling the securities to be repurchased at a fixed price at a later date. Coun- terparties are entitled to sell the securities or deposit them as collateral for loans. These agreements has been fulfilled and terminated during 2023, why no such arrangements exists as of December 31, 2023. The Group has in 2023 obtained access to a committed Revolving Credit Facility (RCF) of DKK 1,000 million with Nordea and Danske Bank as joint lenders. The facility was undrawn as of December 31, 2023. As an integrated part of the RCF agreement, the Group is subject to cove- nant requirements consisting of a net interest-bearing debt to EBITDA ratio. The Group regularly secures that compliance with the covenant is met. Management regularly assesses whether the Group´s capital structure best serves the interests of the Group and its shareholders. The overall goal is to ensure that the Group has a capital structure which supports its long-term strategy and growth target. In supporting Securities (level 1) The portfolio of publicly traded government bonds, publicly traded mortgage bonds and bank bonds is valued at listed prices and price quotas. Derivative financial instruments (level 2) Currency forward contracts, currency option contracts and currency swap contracts are valued according to generally accepted valuation methods based on rele- vant observable swap curves and exchange rates. Liability relating to phantom shares is determined using the Black-Scholes. The valuation is based on observable share price, interest rates and volatility rates. Financial statements – Group Bavarian Nordic Annual Report 2023 88 Note 24 Deferred consideration Accounting policies Deferred consideration including contingent milestone payments is recognized when its payment is probable and it can be measured reliably and is at initial recog- nition measured at fair value which equals present value of future deferred payments. Subsequently, the deferred consideration is measured at amortized cost. This means that the difference between the present value of the consideration and the nominal amounts The cash flow from payment of deferred consideration will be recognized as cash flow from investment activ- ities. The Asset Purchase Agreement with GSK also includes a sales milestone of EUR 25 million. As per December 31, 2023 Management does not judge the sales milestone to be probable and therefore the sales milestone has not been recognized as either part of the product rights (note 15) nor the deferred consideration. The carrying amount are measured using a discount rate of 4% per annum. The discount rate was deter- mined at intial recognition based on an interest rate on a similar loan of the same size and maturity as the contingent milestone payments and the Company's credit rating as of December 31, 2019. The fair value of the deferred consideration as per December 31, 2023 amounts to DKK 1,839 million (DKK 1,937 million), measured using the updated discount rate of 6.25% (6.7%). The discount rate has been deter- mined based on the same components as described above. At initial recognition the net present value of probable future development milestone payments to Emergent BioSolutions amounted to DKK 499 million and was recognized as deferred consideration. The cash flow from payment of deferred consideration will be recognized as cash flow from investment activ- ities. The carrying amount are measured using a discount rate of 6% per annum. The discount rate was deter- mined at intial recognition based on an interest rate on a similar loan of the same size and maturity as the contingent milestone payments and the Company's credit rating as of May 15, 2023. The fair value of the deferred consideration as per December 31, 2023 amounts to DKK 502 million, meas- ured using the updated discount rate of 6.25%. The discount rate has been determined based on the same components as described above. The Purchase and Sale Agreement concluded with Emergent BioSolutions in May 2023 includes an earnout payment starting at USD 30 million. The earnout payment relates to sale of Vivotif and Vaxchora. As per December 31, 2023 Management does not judge the sales milestone to be probable and therefore the earnout payment has not been recognized as either part of the project rights (note 15) nor the deferred consideration. due is recognized in the income statement as a finan- cial expense over the period until expected payment date using the effective interest method. The expected phasing of future payments and the probability of contingent payments are assessed on each reporting date and the impact is recognized as a financial item. Due within Due between Due after DKK thousand 1 year 1 and 5 year 5 years Total 2023 Deferred consideration, product rights 1,163,599 709,635 - 1,873,234 Deferred consideration, development project 196,534 307,221 - 503,755 Total 1,360,133 1,016,856 - 2,376,989 2022 Deferred consideration, product rights - 2,020,638 - 2,020,638 Deferred consideration, license agreement 287,436 304,019 - 591,455 Total 287,436 2,324,657 - 2,612,093 Development project The Purchase and Sale Agreement concluded with Emergent BioSolutions includes milestone payments relating to submission and approval of Biologics License Application (BLA) to FDA and Marketing Authorization Application to EMA for the chikungunya development asset. In total USD 80 million. Product rights The Asset Purchase Agreement with GSK includes mile- stone payments relating to transfer and registration of marketing authorizations, technology transfer of different steps of the production and packaging activi- ties as well as a milestone payment when all services agreed to be rendered by GSK has been completed. In total EUR 470 million. During 2023 one milestone was reached and the invoice was received in December 2023 and paid in January 2024, EUR 30 million. The majority of the remaining milestone payments are expected to be payable in 2024. The completion mile- stone is expected to be payable beginning of 2025. Financial statements – Group Bavarian Nordic Annual Report 2023 89 Note 24 Deferred consideration (continued) License agreement Under the terms of the license and collaboration agreement concluded with AdaptVac July 2020, the Company was committed to payment of potential future development and sales milestones and tiered royalties. Following the discontinuation of the ABNCoV2 development program only one milestone of EUR 10 million became payable. The invoice was received in December 2023 and paid in January 2024. The payment is presented as cash flow from investment activities in the cash flow statement. Financial statements – Group Bavarian Nordic Annual Report 2023 90 Note 25 Prepayment and loan from Government Accounting policies Prepayment and loan from Government consists of an upfront payment and additional milestone payments from the Danish Ministry of Health to support the development of ABNCoV2, the Company’s COVID-19 vaccine candidate. All payments are potentially subject to repayment, however only upon successful marketing authorization of the vaccine by the European Medicines Agency (EMA). Initially the payments from the Danish Ministry of Health is measured at the amount received that is The Company received the full funding of DKK 800 million, of which DKK 240 million was received in 2023. ABNCoV2 met the primary endpoint in the phase 3 trial, demonstrating non-inferiority against the mRNA comparator. However, additional tests showed that ABNCoV2 was not providing adequate protection against the latest mutated variants of the virus. After dialogue with EMA it was clear that ABNCoV2 could not be approved as a booster vaccine and that Covid-19 vaccines need to be constantly adapted to latest vari- ants, which is not possible with ABNCoV2. Following this outcome, the obtained funding from the Danish Ministry of Health was reclassified from an obligation to a grant received, as the Company's vaccine candidate couldn't obtain a marketing authorization by EMA. Agreement with Danish Ministry of Health In August 2021, the Company entered a funding agree- ment with the Danish Ministry of Health to further advance the development of ABNCoV2. The agreement was valued at up to DKK 800 million and aimed to support the completion of the devel- opment towards licensure of ABNCoV2 as a booster vaccine. Under the agreement, Bavarian Nordic was entitled to an upfront payment of DKK 80 million, in addition to payments of up to DKK 720 million, which were contingent upon reaching a number of predefined mile- stones including among others Phase 3 development milestones and milestones related to development and upscaling of manufacturing process for commercial production of the vaccine. considered equal to the fair value of the obligation to repay the amount to the Danish Ministry of Health. Subsequently, the financial liability part is measured at amortized cost. The interest rate used that is implicit in the transaction is based on an assessment of the company’s incremental borrowing rate. The amortiza- tions and the implicit interest are presented as amorti- zation expenses under financial expenses. Due within Due between Due after DKK thousand 1 year 1 and 5 year 5 years Total 2023 Prepayment and loan from Government - - - - Total - - - - 2022 Prepayment and loan from Government - 566,420 - 566,420 Total - 566,420 - 566,420 Financial statements – Group Bavarian Nordic Annual Report 2023 91 Note 26 Debt to credit institutions Cash flow from financing activities January Cash Non-cash December DKK thousand 1, 2023 movement movement 31, 2023 2023 Mortgage 18,930 (1,882) - 17,048 Security lending (repo transactions) 1,103,661 (1,103,661) - - Prepayment and loan from Government 566,420 240,000 (806,420) - Lease liabilities 70,321 (34,270) 92,203 128,254 Total liabilities from financing activities 1,759,332 (899,813) (714,217) 145,302 January Cash Non-cash December DKK thousand 1, 2022 movement movement 31, 2022 2022 Mortgage 21,074 (2,144) - 18,930 European Investment Bank (loan in DKK) 372,195 (372,195) - - Security lending (repo transactions) 500,000 603,661 - 1,103,661 Prepayment and loan from Government 160,511 400,000 5,909 566,420 Lease liabilities 78,813 (21,981) 13,489 70,321 Total liabilities from financing activities 1,132,593 607,341 19,398 1,759,332 Accounting policies Loans are measured at the time of borrowing at fair value less any transaction costs. Subsequently, debt is measured at amortized cost. This means that the differ- ence between the proceeds of the loan and the amount to be repaid is recognized in the income statement over the term of the loan as a financial expense using the effective interest method. Due within Due between Due after DKK thousand 1 year 1 and 5 year 5 years Total 2023 Mortgage1 1,913 8,470 6,665 17,048 Total 1,913 8,470 6,665 17,048 2022 Mortgage1 1,922 8,283 8,725 18,930 Security lending (repo transactions) 1,103,661 - - 1,103,661 Total 1,105,583 8,283 8,725 1,122,591 1 Floating interest - swapped to fixed interest of 0.9625% - expiry 2031 The fair value of the debt to credit institutions amounts to DKK 17.0 million (DKK 1,122.6 million). The fair value of mortgage debt is based on the market value of the underlying bonds set by the bank (level 2), whereas the fair value of the security lending is based on a discounted cash analysis flow of future payments of interest and principal by applying a market based discount rate (level 2). The tables detail changes in the Group's liabilities arising from financing activities, both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated statement of cash flow as cash flows from financing activities. Financial statements – Group Bavarian Nordic Annual Report 2023 92 Note 27 Retirement benefit obligations Accounting policies In defined contribution plans, the Group makes regular payments of fixed contributions to independent pension funds and insurance companies. The Group is under no obligation to pay additional contributions. Costs for defined contribution plans are recognized in the income statement as the Group assumes an obliga- tion to make the payment. In defined benefit plans, the Group is under an obliga- tion to pay a defined benefit on retirement. The actuar- ially calculated present value less the fair value of any plan assets is recognised in the balance sheet under retirement benefit obligations. The total service costs of the year plus calculated interest based on actuarial estimates and financial assumptions at the beginning of the year are recognized in the income statement. The difference between the forecast development in plan assets and liabilities and the realized values at the end of the year is called actuarial gains or losses and is recognized in other comprehensive income. In connection with a change in benefits regarding the employees’ employment with the Group to date, there will be a change in the actuarial calculation of the net present value, which is taken directly to the income statement. DKK thousand 2023 2022 Defined contribution plans 66,935 - Defined benefit plans 1,116 - Cost of pension plans recognized in income statement 68,051 - Current service cost 11,817 - Past service cost (12,023) - Administration expenses 298 - Net interest expenses 1,024 - Cost of defined benefit plans recognized in income statement 1,116 - Actuarial gains/losses on pension obligations (34,324) - Actuarial gains/losses on plan assets 1,769 - Actuarial gains/losses on defined benefit plans recognized in other comprehensive income (32,555) - Plan assets as of January 1 - - Additions from acquisition of businesses 206,938 - Exchange adjustments 10,648 - Actual rate of interest 4,542 - Actuarial gains/losses on plan assets 1,769 - Administration expenses paid (298) - Employer contributions 11,808 - Employee contributions 7,117 - Benefit paid out (21,500) - Plan assets as of December 31 221,024 - Defined contribution plans The Group offers pension plans to all employees in Denmark and abroad. Most of the pension plans are defined contribution plans, expect for the pension plan in Bavarian Nordic Berna GmbH, see below. The Group funds the plans through regular payments of premiums to independent insurance companies responsible for the pension obligations towards the beneficiaries. Once the pension contributions for defined contribution plans have been made, the Group has no further obligation towards current or former employees. Contributions to defined contribution plans are recognized in the income statement when paid. Defined benefit plans With the acquisition of the Swiss subsidiary Bavarian Nordic Berna GmbH, the Group has recognized a defined benefit plan obligation of DKK 81 million. The pension plan is part of a collective foundation in which other plans of non-related employers also participate, and the different plans all participate in the various risks relating to the foundation. The pension scheme in Bavarian Nordic Switzerland AG is a fully insured plan and therefore not assessed to be a defined benefit plan. Defined benefit liabilities are recognized in the balance sheet and in the income statement as indicated below. Financial statements – Group Bavarian Nordic Annual Report 2023 93 Note 27 Retirement benefit obligations (continued) DKK thousand 2023 2022 Specification of present value of defined benefit obligation Present value of defined benefit liability as of January 1 - - Additions from acquisition of businesses 262,925 - Exchange adjustments 13,529 - Current service costs 11,817 - Past service costs1 (12,023) - Calculated interest on liability 5,566 - Actuarial gains/losses, financial assumptions 34,186 - Actuarial gains/losses, demographic assumptions (213) - Actuarial gains/losses, experience 352 - Employee contributions 7,117 - Benefit paid out (21,500) - Present value of defined benefit liability as of December 31 301,756 - Fair value of plan assets as of December 31 (221,024) - Net liability of defined benefit plans as of December 31 80,732 - Net liability of defined benefit plans as of January 1 - - Additions from acquisition of businesses 55,987 - Expenditure for the year 1,116 - Actuarial gains/losses on pension obligation 34,325 - Exchange adjustment 2,881 - Actuarial gains/losses on plan assets (1,769) - Payments received (11,808) - Net liability of defined benefit plans as of December 31 80,732 - 1 A reduction in the conversion factors (rate at which the accumulated account balance is converted to an annual pension at retirement) was announced by the Swiss pension provider Servisa in 2023. The impact of this change was calculated as if the change happened as of December 31, 2023, and led to a reduction of CHF 1.5 million in the defined benefit liability. DKK thousand 2023 Percentage of plan assets invested in asset category Equity 31.0% Bonds 28.4% Property 16.0% Other 24.6% Actuarial assumptions applied at the balance sheet date (expressed as an average) Discount rate 1.35% Future rate of salary increases 1.75% Inflation 1.25% The contributions to the plan for 2024 are expected in the same level as in 2023. The sensitivity analysis below shows the change in one of the actuarial assumptions, while other assumptions are kept constant. In practice, this is unlikely to occur as changes in some of the assumptions may be correlated. Percentage increase/decrease in the gross liability resulting from a change in a single actuarial assumption DKK thousand 2023 +0.5%-point -0.5%-point Discount rate -8.2% 9.2% Financial statements – Group Bavarian Nordic Annual Report 2023 94 Note 28 Lease liabilities Accounting policies The lease liability is initially measured at the present value of the future lease payments (see further in note 17), discounted by using an incremental country specific borrowing rate ranging from 3.69% to 6.93% applying only a single discount rate for a portfolio of lease assets with reasonable similar characteristics. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability using the effective interest method and by reducing the carrying amount to reflect the lease payments made. DKK thousand 2023 2022 Non-current 83,621 45,834 Current 44,633 24,487 Lease liabilities 128,254 70,321 Due within Due between Due after DKK thousand 1 year 1 and 5 year 5 years Total 2023 Lease liabilities 44,633 83,621 - 128,254 Total 44,633 83,621 - 128,254 2022 Lease liabilities 24,487 45,834 - 70,321 Total 24,487 45,834 - 70,321 The lease liability is remeasured and corresponding adjustments are made to the related right-of-use-asset whenever: • The lease term has changed, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • The lease payments change due to changes in an index or rate, in which case the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate. • A lease contract is modified and the lease modifi- cation is not accounted for as a seperate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. Financial statements – Group Bavarian Nordic Annual Report 2023 95 Note 29 Prepayment from customers Accounting policies Prepayments are recognized under liabilities and will be recognized in the income statement as the delivery of paid products takes place. DKK thousand 2023 2022 Prepayment from customers as of January 1 - 16,904 Recognized as revenue during the year - (16,904) Prepayment from customers as of December 31 - - The recognition of revenue is described in note 3. Financial statements – Group Bavarian Nordic Annual Report 2023 96 Note 30 Share-based payment Accounting policies Share-based incentive plans in which employees can only opt to buy shares in the Company (warrants) are measured at the equity instruments’ fair value at the grant date and recognized in the income statement over the vesting period. The balancing item is recog- nized directly in equity. The fair value on the date of grant is determined using the Black-Scholes model. Cash-based incentive programs in which employees can have the difference between the agreed exer- cise price and the actual share price settled in cash (phantom shares) are measured at fair value at the date of grant and recognized in the income statement over the period when the final right of cash-settlement is obtained. Granted rights are subsequently re-measured on each balance sheet date and upon final settlement, and any changes in the fair value of the programs are recognized in the income statement. The balancing item is recognized under other liabilities. The fair value of the cash-based incentive programs is determined using the Black-Scholes model. Restricted stock units and performance restricted stock units are measured at fair value at grant date. For Executive Management cash bonus converted to restricted stock units, the number of restricted stock units are calculated by dividing the allocated cash bonus amount by the share price of the Company at grant date. As the cash bonus has already been accrued and expensed in the income statement, the grant of restricted stock units has no additional impact on the income statement. The accrued liability for the converted cash bonus is reclassified to equity. Matching shares are measured at the same fair value as the initial restricted stock units and expensed over the three year vesting period. The balancing item is recog- nized directly in equity. Performance restricted stock units granted to Execu- tive Management as part of their long term incentive scheme are expensed over the three year vesting period with the balancing item recognized directly in equity. Restricted stock units granted as sign-on bonus for members of the Executive Management and restricted stock units granted to the Board of Directors are expensed at grant date with the balancing item recog- nized directly in equity. Warrants The Board of Directors has been granting warrants to the Company´s management and selected employees of the Company and its subsidiaries. The warrants are granted in accordance with the authorizations given to the Board of Directors by the shareholders. The Board of Directors has fixed the terms of and the size of the grants of warrants, taking into account authorizations from the shareholders, the Group's guidelines for incentive pay, an assessment of expectations of the recipient´s work efforts and contri- bution to the Group´s growth, as well as the need to motivate and retain the recipient. Grant takes place on the date of establishment of the program. Exercise of warrants is by default subject to continuing employ- ment with the Group. The warrants granted are subject to the provisions of the Danish Public Companies Act regarding termination of employees prior to their exercise of warrants in the case of recipients who are subject to the act. Incentive plans In order to motivate and retain key employees and encourage the achievement of common goals for employees, management and shareholders, the Company has established incentive plans by way of warrant programs and restricted stock units programs, the latter only for members of the Executive Manage- ment and Board of Directors. Furthermore, the Company has established three-year phantom share programs for all employees of the Group except for Executive Management and other employees receiving warrants. Financial statements – Group Bavarian Nordic Annual Report 2023 97 Note 30 Share-based payment (continued) Outstanding Outstanding Can be Average as of as of exercised as of exercise Warrant overview – 2023 January 1 Additions Exercised Annulled Terminated December 31 December 31 price (DKK) November 2018 240,708 - (209,476) - (31,232) - - 142 November 2019 599,493 - (83,143) (2,596) - 513,754 513,754 146 January 2020 30,039 - (23,000) - - 7,039 7,039 156 November 2020 1,112,070 - - (13,890) - 1,098,180 - 207 November 2021 655,774 - - (4,700) - 651,074 - 353 April 2022 81,872 - - - - 81,872 - 190 December 2022 932,051 - - (21,613) - 910,438 - 225/271 December 2023 - 1,258,558 - - - 1,258,558 - 172/192 Total 3,652,007 1,258,558 (315,619) (42,799) (31,232) 4,520,915 520,793 Outstanding Outstanding as of as of Warrant overview – 2023 January 1 Additions Exercised Annulled Terminated Transferred December 31 Recognized costs in 2023 DKK 48.0 million compared to DKK 42.9 million in 2022. Corporate Management 725,932 83,921 (140,789) - - - 669,064 Other Executive Management 429,550 77,491 (23,000) - - - 484,041 Other employees 1,982,127 1,097,146 (100,020) (42,799) (19,853) - 2,916,601 Resigned employees 514,398 - (51,810) - (11,379) - 451,209 Total 3,652,007 1,258,558 (315,619) (42,799) (31,232) - 4,520,915 Weighted average exercise price (DKK) 231 189 144 252 142 - 226 Weighted average share price at exercise (DKK) 179 Number of warrants which can be exercised as of December 31, 2023 520,793 at a weighted average exercise price of DKK 142 Financial statements – Group Bavarian Nordic Annual Report 2023 98 Note 30 Share-based payment (continued) Outstanding Outstanding as of as of Warrant overview – 2022 January 1 Additions Exercised Annulled Terminated Transferred December 31 Corporate Management 743,346 126,487 - - (143,901) - 725,932 Other Executive Management 418,163 185,457 - - - (174,070) 429,550 Other employees 1,880,363 701,979 (145,833) (151,659) (65,579) (237,144) 1,982,127 Resigned employees 314,612 - (121,150) - (90,278) 411,214 514,398 Total 3,356,484 1,013,923 (266,983) (151,659) (299,758) - 3,652,007 Weighted average exercise price (DKK) 219 253 142 242 242 - 231 Weighted average share price at exercise (DKK) 247 Number of warrants which can be exercised as of December 31, 2022 240,708 at a weighted average exercise price of DKK 142 Specification of parameters for Black-Scholes model Nov. 2019 Jan. 2020 Nov. 2020 Nov. 2021 Apr. 2022 Dec. 20223 Dec. 20233 Average share price 154.05 171.20 179.84 307.20 171.35 224.70 172.40 Average exercise price at grant 185.40 197.00 206.82 353.06 190.11 270.91 191.58 Average exercise price at grant – Executive Management 224.70 172.40 Average exercise price determined at date of rights issue March 30, 2020 146.60 155.80 Applied volatility rate2 52.2% 53.0% 39.8% 41.8% 42.3% 46.6% 53.3% Expected life (years) 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Expected dividend per share - - - - - - - Risk-free interest rate p.a. -0.69% -0.65% -0.66% -0.53% 0.39% 2.04% 2.55% Fair value per share at grant1 45 53 41 76 47 64 62 Fair value per share at grant – Executive Management1 78 68 Recognized costs in 2022 DKK 42.9 million compared to DKK 31.3 million in 2021. Recognized costs in 2022 DKK 42.9 million compared to DKK 31.3 million in 2021. 1 Fair value of each warrant at grant date applying the Black-Scholes model 2 The applied volatility is based on the historical volatility of the Bavarian Nordic share, except for programs issued since November 2020 where the volatility is based on the volatility for a peer group. 3 The December 2022 and December 2023 program have two set of exercise conditions. Executive Management can subscribe future shares at a exercise price of DKK 224.70/172.40 per share equiva- lent to the market price of Bavarian Nordic's shares at the time of grant. Vesting of the warrants is subject to prior fulfilment of KPI's as determined by the Board of Directors. Other employees can subscribe future shares at a exercise price of DKK 270.91/191.58 per share, determined as the average market price (closing price) of the Company's shares on Nasdaq Copenhagen over a period of 15 business days prior to grant plus 15%. Financial statements – Group Bavarian Nordic Annual Report 2023 99 Note 30 Share-based payment (continued) Exercise periods Can be exercised wholly or partly in a period of 14 days commencing from the day of publication of: December 2023 Annual Report 2026 Interim Report Q1 2027 Interim Report Q2 2027 Interim Report Q3 2027 Annual Report 2027 Interim Report Q1 2028 Interim Report Q2 2028 Interim Report Q3 2028 December 2022 Annual Report 2025 Interim Report Q1 2026 Interim Report Q2 2026 Interim Report Q3 2026 Annual Report 2026 Interim Report Q1 2027 Interim Report Q2 2027 Interim Report Q3 2027 April 2022 Interim Report Q2 2025 Interim Report Q3 2025 Annual Report 2025 Interim Report Q1 2026 Interim Report Q2 2026 Interim Report Q3 2026 Annual Report 2026 Interim Report Q1 2027 November 2021 Annual Report 2024 Interim Report Q1 2025 Interim Report Q2 2025 Interim Report Q3 2025 Annual Report 2025 Interim Report Q1 2026 Interim Report Q2 2026 Interim Report Q3 2026 November 2020 Annual Report 2023 Interim Report Q1 2024 Interim Report Q2 2024 Interim Report Q3 2024 Annual Report 2024 Interim Report Q1 2025 Interim Report Q2 2025 Interim Report Q3 2025 January 2020 Annual Report 2022 Interim Report Q1 2023 Interim Report Q2 2023 Interim Report Q3 2023 Annual Report 2023 Interim Report Q1 2024 Interim Report Q2 2024 Interim Report Q3 2024 November 2019 Annual Report 2022 Interim Report Q1 2023 Interim Report Q2 2023 Interim Report Q3 2023 Annual Report 2023 Interim Report Q1 2024 Interim Report Q2 2024 Interim Report Q3 2024 Financial statements – Group Bavarian Nordic Annual Report 2023 100 Note 30 Share-based payment (continued) Phantom shares In 2019, the Company established a three-year phantom share program for all employees of the Group except for management and other employees receiving warrants. The employees receive up to four phantom shares per month free of charge during the period from January 1, 2020 to December 31, 2022. Each employee who is a full-time employee during the entire term of the plan will be eligible to receive a maximum of 144 phantom shares. Following the rights issues in March 2020 the monthly grant increased to five phantom shares for the remaining grant period and the maximum increased to 183 phantom shares. The program exercised in January 2023. In 2020, the Company established a three-year phantom share program for all employees of the Group except for management and other employees receiving warrants. The employees receive up to five phantom shares per month free of charge during the period from January 1, 2021 to December 31, 2023. Each employee who is a full-time employee during the entire term of the plan will be eligible to receive a maximum of 180 phantom shares. Grants are made on a monthly basis during the life of the programs as long as the employee is employed with the Group. On expiry of the programs, the employees may exer- cise the phantom shares granted to them and thus be entitled to a cash bonus calculated on the basis of the increase in the price of the Company´s shares. The exer- cise is conditional on the price of the Company´s shares being at least DKK 5 higher than the exercise price at the time of exercise. On expiry of the programs, former employees are entitled to settlement of the phantom shares granted during their term of employment. Financial statements – Group Bavarian Nordic Annual Report 2023 101 Note 30 Share-based payment (continued) 2021-2023 phantom share program DKK thousand 2023 2022 2021 Outstanding as of January 1 79,132 37,996 - Granted during the year 33,993 41,136 37,996 Outstanding phantom shares as of December 31 113,125 79,132 37,996 Liability in DKK thousand as of December 31 - 3,732 3,589 Specification of parameters for Black-Scholes model Share price December 31 177 213 269 Average share exercise price 203 203 203 Expected volatility rate - 47% 42% Expected life (years) - 1.0 2.0 Expected dividend per share - - - Risk-free interest rate p.a. - 3.46% 0.11% 2020-2022 phantom share program DKK thousand 2023 2022 2021 2020 Outstanding as of January 1 110,500 68,873 30,921 - Granted during the year - 41,627 37,952 29,554 Adjustment following rights issue March 2020 - - - 1,367 Exercised during the year (98,486) - - - Expired during the year (12,014) - - - Outstanding phantom shares as of December 31 - 110,500 68,873 30,921 Liability in DKK thousand as of December 31 - 7,370 8,604 1,864 Specification of parameters for Black-Scholes model Share price December 31 213 269 187 Average share exercise price 147 147 147 Expected volatility rate 47% 42% 40% Expected life (years) - 1.0 2.0 Expected dividend per share - - - Risk-free interest rate p.a. - -0.02% -0.17% The program will exercise mid-January 2024 conditional upon the Company's share price being above 203 DKK, which is deemed unlikely. As of December 31, 2023 the program is out-of-money and have no value. The expected volatility is based on the volatility for a peer group. Phantom shares granted in 2023 provided an expense of DKK 0 million, whereas the revaluation of previously granted phantom shares provided an income of DKK 3.7 million, total net income of DKK 3.7 million (net expense 2022: DKK 0.1 million). The liability is included in other liabilities, cf. note 22. The expected volatility is based on the volatility for a peer group. The 2020-2022 program exercised in January 2023 at a share price of DKK 227.30. Revaluation of granted phantom shares and reversal of not exercised phantom shares provided a net expense of DKK 0.6 million (net income 2022: DKK 1.2 million). The liability is included in other liabilities, cf. note 22. Financial statements – Group Bavarian Nordic Annual Report 2023 102 Note 30 Share-based payment (continued) Restricted stock units In March 2023, the Board of Directors decided to post- pone the payment of half of the achieved cash bonus for members of the Executive Management for 3 years, converting the postponed bonus of DKK 5.1 million into 22,429 unconditional restricted stock units using the share price of the Company at grant date (DKK 227). The Board of Directors decided to grant additional restricted stock units free of charge on expiry of a 3 years period (so-called ""matching shares"") upon the recipient still being employed in March 2026. One matching share is granted for each two acquired restricted stock units. The maximum number of matching shares is 11,213. The initial granted restricted stock units and the potential matching shares total 33,642 shares. At the annual general meeting in March 2023, the Board of Directors were granted a total of 10,640 uncondi- tional restricted stock units corresponding to 50% of the annual fixed fee of DKK 2.1 million (excl. committee fee). The restricted stock units will be delivered after 3 years in March 2026. In May 2023, the Company bought back 43,954 of its own shares to meet the obligation to deliver up to 44,282 shares to the members of the Executive Management and the Board of Directors in March 2026. Financial statements – Group Bavarian Nordic Annual Report 2023 103 Note 30 Share-based payment (continued) The grant of the initial restricted stock units to the Exec- utive Management related to conversion of cash bonus (22,429 shares) had no impact on the income statement for 2023, as the corresponding cash bonus (DKK 5.1 million) was accrued in 2022, though the amount has been reclassified from "Salary and wages" to "Share- based payment" in the staff cost note (note 8). The obligation related to the matching shares amount to DKK 2.5 million measured at the same fair value as the initial restricted stock units (DKK 227). The obligation will be expensed over the three year vesting period. The grant of performance restricted stock units to the Executive Management (61,602 shares) will be expensed over the three year vesting period. During 2023, DKK 8.6 million (DKK 9.2 million) has been expensed and recognized as share-based payment related to Executive Management. The grant of restricted stock units to the Board of Directors (10,640 shares – DKK 2.1 million) were fully expensed at grant. Outstanding restricted stock units 2023 Outstanding Outstanding Granted Released as of Value at grant as of January 1 during the year during the year December 31 date (DKK) Vesting date Executive Management: Performance restricted stock units - 61,602 - 61,602 167 Dec. 2026 Conversion of cash bonus for 2022 - 22,429 - 22,429 227 Mar. 2026 Matching shares – bonus 2022 - 11,213 - 11,213 227 Mar. 2026 Conversion of cash bonus for 2021 22,578 - - 22,578 163 Mar. 2025 Matching shares – bonus 2021 11,288 - - 11,288 163 Mar. 2025 CEO retention plan 17,109 - - 17,109 156 Apr. 2025 Matching shares – CEO retention plan 8,554 - - 8,554 156 Apr. 2025 Sign-on bonus COO 4,446 - - 4,446 165 Apr. 2025 Matching shares – sign-on COO 2,223 - - 2,223 165 Apr. 2025 Conversion of cash bonus for 2020 16,413 - - 16,413 222 Mar. 2024 Matching shares – bonus 2020 8,207 - - 8,207 222 Mar. 2024 Conversion of cash bonus for 2019 11,003 - (11,003) - 240 Mar. 2023 Matching shares – bonus 2019 5,500 - (5,500) - 240 Mar. 2023 Sign-on bonus CMO 8,651 - (8,651) - 149 May 2023 Matching shares – sign-on CMO 4,325 - (4,325) - 149 May 2023 Executive Management 120,297 95,244 (29,479) 186,062 Board of Directors: Fee 2023 - 10,640 - 10,640 153 Apr. 2025 Fee 2022 11,467 - - 11,467 153 Apr. 2025 Fee 2021 7,127 - - 7,127 273 Apr. 2024 Fee 2020 7,111 - (7,111) - 190 Jun. 2023 Board of Directors 25,705 10,640 (7,111) 29,234 Total 146,002 105,884 (36,590) 215,296 Financial statements – Group Bavarian Nordic Annual Report 2023 104 Note 30 Share-based payment (continued) Outstanding restricted stock units 2022 Outstanding Outstanding Granted Released as of Value at grant as of January 1 during the year during the year December 31 date (DKK) Vesting date Executive Management: Conversion of cash bonus for 2021 - 22,578 - 22,578 163 Mar. 2025 Matching shares - bonus 2021 - 11,288 - 11,288 163 Mar. 2025 CEO retention plan - 17,109 - 17,109 156 Apr. 2025 Matching shares - CEO retention plan - 8,554 - 8,554 156 Apr. 2025 Sign-on bonus COO - 4,446 - 4,446 165 Apr. 2025 Matching shares - sign-on COO - 2,223 - 2,223 165 Apr. 2025 Conversion of cash bonus for 2020 16,413 - - 16,413 222 Mar. 2024 Matching shares - bonus 2020 8,207 - - 8,207 222 Mar. 2024 Conversion of cash bonus for 2019 11,003 - - 11,003 240 Mar. 2023 Matching shares - bonus 2019 5,500 - - 5,500 240 Mar. 2023 Sign-on bonus CMO 8,651 - - 8,651 149 May 2023 Matching shares - sign-on CMO 4,325 - - 4,325 149 May 2023 Conversion of cash bonus for 2018 16,080 - (16,080) - 144 Mar. 2022 Matching shares - bonus 2018 8,039 - (8,039) - 144 Mar. 2022 Executive Management 78,218 66,198 (24,119) 120,297 Board of Directors: Fee 2022 - 11,467 - 11,467 153 Apr. 2025 Fee 2021 7,127 - - 7,127 273 Apr. 2024 Fee 2020 7,111 - - 7,111 190 Jun. 2023 Fee 2019 12,340 - (12,340) - 138 Apr. 2022 Board of Directors 26,578 11,467 (12,340) 25,705 Total 104,796 77,665 (36,459) 146,002 Financial statements – Group Bavarian Nordic Annual Report 2023 105 Note 30 Note 31 Acquisition of businesses Share-based payment (continued) Total share-based payments Below a specification of all share-based payments expensed in 2023 and 2022. The amounts reconcile to note 8. DKK thousand 2023 2022 Warrants 47,989 42,937 Restricted stock units 10,653 11,039 Share-based payment recognized directly in equity 58,642 53,976 2021-2023 phantom share program (3,733) 143 2020-2022 phantom share program 568 (1,234) 2019-2021 phantom share program - (3,601) Share-based payment recognized as a liability (change during the year) (3,165) (4,692) Total share-based payment expensed, cf. note 8 55,477 49,284 Restricted stock units converted to cash bonus at exercise - - Non-cash adjustment in cash flow statement 55,477 49,284 On February 15, 2023, Bavarian Nordic A/S entered into an agreement with Emergent BioSolutions. to acquire two marketed travel vaccines, Vivotif® for the preven- tion of typhoid fever and Vaxchora® against cholera as well as a Phase 3 vaccine candidate for the prevention of chikungunya virus. The acquisition further includes a Swiss-based biologics manufacturing facility, US-based research and development facilities related to the development of the chikungunya vaccine, and EU/ US-based commercial operations with a specialty sales- force. The acquisition includes four subsidiaries, the main being the manufacturing facility in Switzerland. The US-based activities are carved-out from Emergent BioSolutions and are integrated into Bavarian Nordic’s current U.S. entity. The transaction closed on May 15, 2023. The consid- eration included an upfront payment of USD 270 million and up to USD 110 million in future conditional milestone payments. Additionally, USD 4 million were added to the cash payment to Emergent BioSolutions which includes estimated adjustments for net working capital, debt, and other customary closing adjustments. The actual working capital adjustment led to a post- closing payment of USD 0.6 million. Details of the acquisition The purchase price has been allocated to the acquired net asset and the allocation is considered final, see further below. The transaction was not subject to recognition of goodwill. Transaction costs of DKK 64 million are included in administration costs in the income statement. Bavarian Nordic is conditioned to pay Emergent BioSolutions upon the achievement of milestones related to the successful development of the chikun- gunya vaccine (USD 80 million) and sales performance of the marketed vaccines (USD 30 million). Based on current regulatory plans and expectations for future submission and approval of applications related to the chikungunya-vaccine all development milestones are assumed probable. The net present value of the probable milestone payments, DKK 499 million, has been recognized as part of the "Acquired rights and development in progress" (further addition to the asset) and a corresponding liability has been recognized as deferred consideration. The sales milestone of USD 30 million related to future sale of Vivotif® and Vaxchora® is currently not considered probable. The acquisition in total contributed with DKK 142.6 million to revenue and a negative EBITDA of DKK 399 million. Financial statements – Group Bavarian Nordic Annual Report 2023 106 Note 31 Acquisition of businesses (continued) Accounting policies The purchase price for the acquisition comprises of identifiable assets and liabilities and contingent liabil- ities assumed measured at fair value at the date of acquisition by applying relevant valuation methods. Acquisition-related costs are expensed as incurred. Cost of acquired product rights are measured at cash consid- eration and present value of any probable deferred milestone payments for those rights. A corresponding deferred consideration is recognized at initial recogni- tion. Subsequently, the deferred consideration is meas- ured at amortized cost. The acquisition has been included in the Consolidated Financial Statements of Bavarian Nordic as of the date of acquisition May 15, 2023. Bavarian Nordic has made the following final calculation of the fair value of the acquired net assets at the time of the acquisition: DKK thousand Total acquisition Product rights 449,577 Development asset 1,286,778 Other intangible assets 5,419 Property, plant and equipment 681,453 Right-of-use assets 41,943 Inventories 126,933 Receivables 20,503 Prepayments 39,899 Cash 66,531 Deferred tax assets (liabilities), net (25,814) Retirement benefit obligations (55,988) Trade payables (136,686) Leasing liabilities (41,943) Other payables (61,189) Total acquisition price 2,397,416 Contingent consideration (499,312) Consideration transferred 1,898,104 Cash acquired (66,531) Cash used for acquisition of business 1,831,573 Number of employees 280 Financial statements – Group Bavarian Nordic Annual Report 2023 107 Note 32 Impact from write-down of ABNCoV2 Following the Phase 3 results announced in August, where ABNCoV2 demonstrated a reduced level of neutralizing antibodies against a circulating variant, the asset no longer represented a commercial opportunity for Bavarian Nordic and therefore Management decided to fully write-down all assets and liabilities related to the development program. Financial Financial position position including ABNCoV2 excluding DKK thousand write-down write-down write-down Intangible assets 6,481,736 1,429,488 7,911,224 Property, plant and equipment 2,327,515 - 2,327,515 Right-of-use assets 125,170 - 125,170 Financial assets 15,741 235,711 251,452 Total non-current assets 8,950,162 1,665,199 10,615,361 Inventories 1,643,736 - 1,643,736 Receivables 1,891,834 220,840 2,112,674 Securities, cash and cash equivalents 1,867,481 - 1,867,481 Total current assets 5,403,051 220,840 5,623,891 Total assets 14,353,213 1,886,039 16,239,252 Equity 10,339,932 557,683 10,897,615 Deferred consideration 2,376,989 521,936 2,898,925 Other non-current liabilities 208,556 806,420 1,014,976 Other current liabilities 1,427,736 - 1,427,736 Total equity and liabilities 14,353,213 1,886,039 16,239,252 Income Income statement statement including ABNCoV2 excluding DKK thousand write-down write-down write-down Revenue 7,062,340 - 7,062,340 Production costs 2,459,294 - 2,459,294 Gross Profit 4,603,046 - 4,603,046 - Sales and distribution costs 331,579 - 331,579 - Research and development costs 2,228,080 557,683 1,670,397 - Administrative costs 540,848 - 540,848 Total operating costs 3,100,507 557,683 2,542,824 Income before interest and tax (EBIT) 1,502,539 (557,683) 2,060,222 EBITDA 2,614,543 - 2,614,543 Net result for the year 1,475,189 (557,683) 2,032,872 Financial statements – Group Bavarian Nordic Annual Report 2023 108 Note 32 Note 33 Contingent liabilities and other contractual obligations Impact from write-down of ABNCoV2 (continued) Write-down of ABNCoV2 development program The net write-down of ABNCoV2 development program amounted to DKK 558 million and consisted of the following components: • Intangible assets DKK 1,429 million: Included the upfront payment to AdaptVac of DKK 33 million, the net present value of probable future sales/devel- opment milestones DKK 596 million, capitalized development costs for running Phase 2 study and Phase 3 study DKK 774 million and DKK 26 million in capitalized scale-up activities in Kvistgaard. • Financial assets DKK 236 million: Incurred cost for scale-up activities at the CMO for preparation for commercial launch. • Receivables DKK 221 million: Commercial batches produced at CMO as part of the process qualification process. • Deferred consideration DKK 522 million: As part of the ABNCoV2 write-down the previous recog- nized deferred consideration of DKK 596 million was reduced to DKK 74 million, reflecting the most likely milestone scenario. • Other non-current liabilities DKK 806 million: The obtained funding from Danish Ministry of Health was reclassified from an obligation to a grant received. The amount included DKK 6 million in amortized cost. DKK thousand 2023 2022 Collaborative agreements Contractual obligations with research (CRO) and manufacturing (CMO) partners. - Due within 1 year 44,080 260,082 Sales milestone to GSK The Asset Purchase Agreement with GSK regarding the acquisition of the product rights to Rabipur/RabAvert and Encepur includes a sales milestone of EUR 25 million. As per December 31, 2023 Management does not judge the sales milestone to be probable and therefore the sales milestone has not been recognized as either part of the product rights (note 15) nor the deferred consideration for product rights (note 24). tively. The agreements include contingent liabilities for the Group to pay performance-based royalties, if and when certain milestone events are achieved. Further, the agreements include potential contingent liabilities for the Group to pay additional sublicensing royalties on the fair market value of consideration received, if and when the Group grants such sublicenses. Payments considered remote are not included in the amounts above. Earnout to Emergent The Purchase and Sale Agreement concluded with Emergent BioSolutions in May 2023 includes an earnout payment starting at USD 30 million. The earnout payment relates to sale of Vivotif and Vaxchora. As per December 31, 2023 Management does not judge the sales milestone to be probable and therefore the earnout payment has not been recognized as either part of the project rights (note 15) nor the deferred consideration (note 24). Company mortgage The Company has by letter of indemnity granted Nordea a floating charge on unsecured claims arising from the sale of goods and services and stocks of raw materials, intermediate products and finished products, DKK 150 million (DKK 150 million). The floating charge secures the operating credit line of DKK 20 million and the line for trading in financial instruments, DKK 50 million (DKK 50 million). Lawsuits Based on management's assessment the Group is not involved in any lawsuits or arbitration cases which could have a material impact on the Group's financial position or results of operations. License agreements National Cancer Institute The Group has license agreements with the National Cancer Institute (NCI) and Public Health Service (PHS) in the U.S. for PROSTVAC, CV301 and BN-Brachyury, respec- Financial statements – Group Bavarian Nordic Annual Report 2023 109 Note 34 Related party transactions Note 35 Significant events after the balance sheet date The Group Management and Board of Directors of Bavarian Nordic A/S are considered related parties. Besides the remuneration of the Board of Directors and the Executive Management, cf. note 8, and the share- based payments, cf. note 30, there are no transactions with related parties. Transactions with subsidiaries are eliminated in the consolidated financial statements, in accordance with the accounting policies. On February 23, 2024, the Company announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) has granted accelerated assessment for the upcoming Marketing Authorisation Application (MAA) for CHIKV VLP, the Company’s investigational chikungunya vaccine. Except as noted above, there have been no significant events between December 31, 2023 and the date of approval of these financial statements that would require a change to or additional disclosure in the financial statements. Note 36 Approval of the consolidated financial statements The consolidated financial statements were approved by the Board of Directors and Corporate Management and authorized for issue on March 6, 2024. Financial statements – Parent company Bavarian Nordic Annual Report 2023 110 Financial statements – Parent company Contents Financial statements Notes Income Statements 1 Material accounting policies and key accounting estimates and judgments 12 Right-of-use-assets 13 Investment in subsidiaries 14 Inventories Statements of Financial Position - Assets Statements of Financial Position - Equity and Liabilities Statements of Changes in Equity 2 3 4 5 6 7 8 9 Revenue Research and development costs Staff costs 15 Lease liabilities 16 Prepayment from customers 17 Other liabilities Depreciation, amortization and impairment losses Fees to auditor appointed at the annual general meeting Financial income 18 Contingent liabilities and other contractual obligations 19 Mortgages and collateral Financial expenses 20 Related party transactions Tax for the year 21 Proposed appropriation of net profit/(loss) 22 Significant events after the balance sheet date 10 Intangible assets 11 Property, plant and equipment Financial statements – Parent company Bavarian Nordic Annual Report 2023 111 Income statements For the years ended December 31, 2023 and 2022 DKK thousand Note 2023 2022 Note Notes with reference to the consolidated financial statements Revenue 2 6,932,388 2,473,002 4,459,386 2,939,164 1,401,431 1,537,733 Revenue 3 6 8 4 5 7 Production costs Gross profit 4,5 Research and development costs Staff costs Sales and distribution costs Research and development costs Administrative costs 4 3,4,5 4,5,6 295,202 2,286,844 550,961 182,880 1,206,121 386,992 Production costs Sales and distribution costs Administrative costs Total operating costs 3,133,007 1,775,993 Income before interest and tax (EBIT) 1,326,379 (238,260) Income from investments in subsidiaries Financial income 13 7 84,703 159,998 124,551 112,534 Financial expenses 8 141,415 341,274 Income before company tax 1,429,665 (342,449) Tax on income for the year 9 (10,972) 28 Net result for the year 21 1,440,637 (342,477) Financial statements – Parent company Bavarian Nordic Annual Report 2023 112 Statements of financial position – Assets December 31, 2023 and 2022 DKK thousand Note 2023 2022 DKK thousand Note 2023 2022 Non-current assets Current assets Inventories Product rights 4,791,442 1,286,782 7,881 4,639,895 1,013,484 13,795 14 1,527,397 881,346 Acquired rights and development in progress Software Trade receivables Receivables from subsidiaries Other receivables Prepayments 1,699,601 89,779 399,936 56,561 Other intangible assets in progress Intangible assets 389,073 274,490 92,817 51,462 10 6,475,178 5,941,664 11,437 343,492 851,451 Land and buildings 664,357 1,316 629,829 1,428 Receivables 1,893,634 Leasehold improvements Securities 390,247 2,269,759 563,812 Plant and machinery 324,881 452,163 172,496 321,589 489,558 184,280 Cash and cash equivalents Securities, cash and cash equivalents 1,421,677 Other fixtures and fittings, other plant and equipment Assets under construction 1,811,924 2,833,571 5,232,955 4,566,368 14,228,815 12,383,424 Property, plant and equipment 11 12 13 1,615,213 1,626,684 Total current assets Total assets Right-of-use assets 55,791 18,953 Investments in subsidiaries Other receivables 841,145 512 210,422 14,878 4,455 Other financial non-current assets Financial assets 8,021 849,678 229,755 Total non-current assets 8,995,860 7,817,056 Financial statements – Parent company Bavarian Nordic Annual Report 2023 113 Statements of financial position – Equity and liabilities December 31, 2023 and 2022 DKK thousand Note 2023 2022 Note Equity Notes with reference to the consolidated financial statements Trade receivables Share capital 780,978 (1,537) 707,354 (1,463) 19 21 23 24 25 26 29 30 Treasury shares Retained earnings Reserve for development costs Other reserves Equity Prepayments 9,351,470 6,491 5,901,429 395,015 Financial risks and financial instruments Deferred consideration for product rights Prepayment and loan from Government Debt to credit institutions 202,266 149,787 10,339,668 7,152,122 Prepayment from customers Liabilities Share-based payment Deferred consideration Prepayment and loan from Government Credit institutions 1,016,856 - 2,324,657 566,420 17,008 15,135 43,167 1,075,158 Lease liabilities 15 7,732 Non-current liabilities 2,915,817 Deferred consideration Credit institutions Lease liabilities 1,360,133 1,913 287,436 1,105,583 12,526 15 17 13,455 Trade payables 829,059 357,713 251,716 584,731 153,788 171,421 Payables to subsidiaries Other liabilities Current liabilities 2,813,989 2,315,485 3,889,147 5,231,302 14,228,815 12,383,424 Total liabilities Total equity and liabilities Financial statements – Parent company Bavarian Nordic Annual Report 2023 114 Statements of changes in equity December 31, 2023 Reserve for Share capital Treasury shares Retained development Other reserves DKK thousand earnings costs Equity Equity as of January 1, 2023 707,354 (1,463) 5,901,429 395,015 149,787 7,152,122 Net result for the year - - - - 1,440,637 35,195 - - - - 1,440,637 35,195 Exchange rate adjustments Change in fair value of financial instruments entered into to hedge future cash flows - - - - 13,993 13,993 Share-based payment - - - 54,856 - 58,677 58,677 45,517 3,397 Warrant program exercised 3,156 - - (12,495) Warrant recharged - - 3,397 - - Warrant program expired - - 1,276 - (1,276) - Capital increase through private placement Costs related to issue of new shares Purchase of treasury shares 70,468 - - 1,571,445 (42,795) (8,548) 6,054 - - 1,641,913 (42,795) (8,988) - - - - - (440) 366 - - - (6,420) - Transfer regarding restricted stock units Reserve for development costs Equity as of December 31, 2023 - - - 388,524 9,351,470 (388,524) 6,491 - 780,978 (1,537) 202,266 10,339,668 Transactions on the share capital and rules on changing Articles of Associations, see statement of changes in Group equity. Other reserves consist of costs for share-based payments and hedging reserves. Financial statements – Parent company Bavarian Nordic Annual Report 2023 115 Note 1 Note 2 Material accounting policies and key accounting estimates and judgments Revenue Accounting policies Accounting policies and significant accounting estimates See consolidated financial statements note 3. The financial statements of the Parent Company Bavarian Nordic A/S have been prepared in accordance with the Danish Financial Statements Act (Class D). statement of comprehensive income in the consol- idated financial statements are recognized directly in the statement of changes in equity in the Parent Company’s financial statements. DKK thousand 2023 2022 The financial statements are presented in Danish kroner (DKK), which also is the functional currency of the Parent Company. The accounting policies are unchanged from previous year. Warrant recharged to subsidiaries is treated as the Parent Company’s issuance of equity in exchange for cash. Travel health Rabipur/RabAvert Encepur 993,714 417,371 669,061 301,100 - Changes in accounting policies The accounting policies are unchanged from last year. The recharge is subsequently recognized in the income statement under the cost plus agreements with the subsidiaries. Income tax effects relating to warrant recharged is recognized in the income statement. Vivotif 147,542 38,537 Vaxchora - Other product sale 149,736 1,746,900 105,139 1,075,300 Supplementary accounting policies for the Parent Company Accounting policies for investments in subsidiaries are described in note 13. As allowed under section 86 (4) of the Danish Finan- cial Statements Act, no cash flow statement has been prepared for the Parent Company, as it is included in the consolidated cash flow statement. Public preparedness MVA-BN smallpox vaccine sale Sale of goods 5,027,009 1,730,447 Pursuant to the schedule requirements of the Danish Financial Statements Act, entries recognized in the 6,773,909 2,805,747 Milestone Payments Contract work - 158,479 158,479 83,048 50,369 Sale of services 133,417 Revenue 6,932,388 2,939,164 Total revenue includes: Fair value adjustment concerning financial instruments entered into to hedge revenue 5,016 - For further disclosures see the consolidated financial statements note 3. Financial statements – Parent company Bavarian Nordic Annual Report 2023 116 Note 3 Note 4 Research and development costs Staff costs Accounting policies See consolidated financial statements note 6. Accounting policies See consolidated financial statements note 8. DKK thousand 2023 2022 DKK thousand 2023 2022 Research and development costs incurred this year 1,856,001 1,226,008 Wages and salaries Contribution based pension Social security expenses Other staff expenses Share-based payment Staff costs 580,149 49,897 5,942 458,504 38,552 3,749 Of which: Contract costs recognized as production costs Impairment loss of ABNCoV2 development program Research and development costs recognized in the income statement (126,840) 557,683 (19,887) - 42,963 55,702 734,653 34,529 49,656 584,990 2,286,844 1,206,121 Impairment loss of ABNCoV2 development program Acquired rights and development in progress Intangible assets in progress Staff expenses are distributed as follows: Production costs 1,403,264 26,224 - - - - - 457,306 17,065 311,474 12,862 Sales and distribution costs Research and development costs Administrative costs Prepayments 456,551 (806,420) (521,936) 557,683 50,315 69,798 Prepayment and loan from Government Deferred consideration 187,423 22,544 734,653 149,025 41,831 Capitalized salaries Impairment loss of ABNCoV2 development program Staff costs 584,990 Fair value adjustment concerning financial instruments entered into to hedge research and development costs Average number of employees converted to full-time 762 815 604 688 - 30,201 Number of employees as of December 31 converted to full-time For impact from write-down of ABNCoV2 see descrip- tion in note 32 in the consolidated financial statements. Financial statements – Parent company Bavarian Nordic Annual Report 2023 117 Note 4 Staff costs (continued) CEO and President of the Company Paul Chaplin and CFO Henrik Juuel constitute the Corporate Management in the Parent Company. The CEO's contract of employment contains standard terms for members of the management of Danish listed companies, including the extended period of notice that both parties are required to give. For the Company, the notice is maximum 18 months. In the event of a change of control, the term of notice for the Company may be extended to maximum 24 months. DKK thousand 2023 2022 Staff costs include the following costs: COO Russell Thirsk and CPO Anu Kerns constitute the Company's member of the Other Executive Manage- ment. Board of Directors: Remuneration 6,345 2,070 8,415 5,475 1,750 7,225 Share-based payment Remuneration to Board of Directors Incentive programs for management and other employees are disclosed in the consolidated financial statements note 30. Executive Management: Salary 11,330 2,484 705 9,873 2,068 692 Paid bonus Other employee benefits Contribution based pension Share-based payment Corporate Management 1,574 1,367 13,485 27,485 13,443 29,536 Salary 5,843 1,074 154 5,211 1,775 163 Paid bonus Other employee benefits Contribution based pension Share-based payment Salary and benefits in notice period Other Executive Management 776 698 5,116 - 3,698 7,851 19,396 12,963 Remuneration to Executive Management Total management remuneration 42,499 50,914 46,881 54,106 Financial statements – Parent company Bavarian Nordic Annual Report 2023 118 Note 5 Note 6 Fees to auditor appointed at the annual general meeting Depreciation, amortization and impairment losses DKK thousand 2023 2022 DKK thousand 2023 2022 Depreciation and amortization included in: Production costs Audit of financials statements Other assurance services Tax advisory 3,616 268 - 1,961 176 426,707 2,442 349,893 2,599 Research and development costs Administrative costs 20 24,444 453,593 27,807 Other services 653 4,537 143 Depreciation and amortization 380,299 Fees 2,300 Hereof profit ()/loss from disposed fixed assets - 1,175 Impairment losses included in: Research and development costs Impairment losses 557,683 - 557,683 - For further disclosures see the consolidated financial statements note 9. Financial statements – Parent company Bavarian Nordic Annual Report 2023 119 Note 7 Note 8 Financial income Financial expenses Accounting policies See consolidated financial statements note 11. Accounting policies See consolidated financial statements note 12. DKK thousand 2023 2022 DKK thousand 2023 2022 Financial income from bank and deposit contracts Financial income from subsidiaries 38,383 49,045 14,340 30,777 13,759 2,563 27 30,256 19,543 - Interest expenses on debt 1,019 10,078 - 15,346 3,205 190,301 103,049 11,597 17,776 - Financial expenses to subsidiaries Financial income from securities Fair value adjustments on securities Unwinding of the discount related to deferred consideration Currency adjustment deferred consideration Net loss on derivative financial instruments at fair value in the income statement Financial expenses, other Fair value adjustments on securities 101,961 - Adjustment of deferred consideration due to change in estimated timing of payments Currency adjustment deferred consideration Net gain on derivative financial instruments at fair value in the income statement Net foreign exchange gains 54,390 - - 11,131 - - 11,469 16,888 141,415 8,318 112,534 Net foreign exchange losses - Financial income 159,998 Financial expenses 341,274 Financial statements – Parent company Bavarian Nordic Annual Report 2023 120 Note 9 Tax for the year 'Income()/expenses that are not taxable/deductible for tax purposes' is primarily transaction costs related to 'Acquisition of businesses'. Current tax on profit for previous years relates primarily to paid out tax credits on previous years losses arisen from reasearch and devolopment activites, according to Section 8X of the Danish Tax Assessment Act. Accounting policies See consolidated financial statements note 13. DKK thousand 2023 2022 'Special tax credit' primarily relates to the 8% step up deduction on research and development costs according to Section 8B of the Danish Tax Assessment Act. Deferred tax Tax recognized in the income statement Recognized deferred tax assets relate to temporary differences between valuations for accounting and taxation purposes and tax losses carried forward. Current tax on profit for previous years (10,972) 28 Currrent tax (10,972) 28 Adjustment Recognized Tax for the year recognized in the income statement (10,972) 28 January 1, to previous in the income Recognized December 31, DKK thousand Product rights 2023 year statement in equity 2023 Tax on income for the year is explained as follows: Income before company tax 1,429,665 314,526 (342,449) (75,339) 62,881 - (112,955) - (50,074) Calculated tax (22.0%) on income before company tax Acquired rights and development in progress (2,659) 88,124 287 - (108,445) 3,540 (104) (6,502) 27 - (111,104) 92,307 183 Tax effect on: Property, plant and equipment Right-of-use-asset 643 - Income from investments in subsidiaries Income()/expenses that are not taxable/deductible for tax purposes Deduction for interest and currency adjustments related to debt foregiveness Special tax credit (18,635) 13,853 (27,401) (16,871) - - Development projects for sale Receivables 32,446 191 - - 25,944 218 (60,009) (32,788) (10,972) (216,947) (10,972) - - (46,946) 28 Provisions - - 1,100 - - 1,100 Current tax on profit for previous years Change in non-recognized tax asset Financial instruments Share-based payment Tax losses carried forward Not recognized tax asset Recognized deferred tax assets (7,017) 27,405 449,015 (650,673) - - (3,078) (10,095) 35,790 435,319 (419,588) - 166,557 28 - (11,703) 11,060 - 8,385 (1,993) 216,947 - - Tax on income for the year - 3,078 - Tax recognized in equity - - - - Tax for the year recognized in equity For further disclosures see the consolidated financial statements note 13. Financial statements – Parent company Bavarian Nordic Annual Report 2023 121 Note 10 Intangible assets Accounting policies See consolidated financial statements note 15. 2023 Acquired rights and Other intangible assets in progress Product development DKK thousand rights in progress Software Total Costs as of January 1, 2023 Additions 5,458,700 1,013,484 389,784 - 101,509 2,048 2,023 - 274,490 142,830 (2,023) - 6,848,183 534,662 - - - Transfer Additions from acquisition of businesses Cost as of December 31, 2023 449,577 5,908,277 1,286,778 2,690,046 1,736,355 9,119,200 105,580 415,297 Amortization as of January 1, 2023 Amortization 818,805 298,030 - - - 87,714 9,985 - - - 906,519 308,015 Impairment losses 1,403,264 1,403,264 26,224 26,224 1,429,488 2,644,022 Amortization as of December 31, 2023 1,116,835 97,699 Carrying amount as of December 31, 2023 Carrying amount as of December 31, 2022 4,791,442 4,639,895 1,286,782 1,013,484 7,881 389,073 274,490 6,475,178 5,941,664 13,795 Financial statements – Parent company Bavarian Nordic Annual Report 2023 122 Note 11 Property, plant and equipment Accounting policies See consolidated financial statements note 16. 2023 Other fixtures and fittings, other plant and Land and Leasehold Plant and machinery Assets under construction DKK thousand buildings improvement equipment Total Costs as of January 1, 2023 Additions 857,365 3,618 4,458 361 514,210 19,963 554,605 4,516 184,280 93,966 2,114,918 122,424 - Transfer 73,928 934,911 - 28,358 3,464 (105,750) 172,496 Cost as of December 31, 2023 4,819 562,531 562,585 2,237,342 Depreciation and impairment losses as of January 1, 2023 Depreciation 227,536 43,018 3,030 473 192,621 45,029 65,047 45,375 - - - 488,234 133,895 622,129 Depreciation and impairment losses as of December 31, 2023 270,554 3,503 237,650 110,422 Carrying amount as of December 31, 2023 Carrying amount as of December 31, 2022 664,357 629,829 1,316 1,428 324,881 321,589 452,163 489,558 172,496 184,280 1,615,213 1,626,684 For collateral see the consolidated financial statements note 16. Financial statements – Parent company Bavarian Nordic Annual Report 2023 123 Note 12 Note 13 Right-of-use-assets Investment in subsidiaries Accounting policies See consolidated financial statements note 17. Accounting policies Investments in subsidiaries are recognized and meas- ured under the equity method. This means that, in the balance sheet, investments are measured at the pro rata share of the subsidiaries' equity plus or less unam- ortized positive, or negative, goodwill and plus or less unrealized intra-group profits or losses. revaluation reserve according to the equity method under equity, if the net revaluation is positive. If the net revaluation is negative, it is recognized in retained earnings in equity. 2023 Car Rent DKK thousand facility leasing Equipment Total Goodwill is calculated as the difference between cost of the investments and the fair value of the assets and liabilities acquired which have been measured at fair value at the date of acquisition. The amortization period for goodwill is usually five years. Right-of-use assets as of January 1, 2023 Additions Modifications Disposals Depreciations 16,587 432 46,484 (90) (10,341) 90 53,162 1,898 402 210 (1,798) (985) 1,798 1,525 468 - 993 (409) (357) 409 18,953 834 47,687 (2,297) (11,683) 2,297 Subsidiaries with a negative equity value are measured at zero value, and any receivables from these subsidi- aries are written down by the Company’s share of such negative equity if it is deemed irrecoverable. If the negative equity exceeds the amount receivable, the remaining amount is recognized under provisions if the Company has a legal or constructive obligation to cover the liabilities of the relevant subsidiary. Reversal depreciations Right-of-use assets as of December 31, 2023 Investments in subsidiaries are written down to the lower of recoverable amount and carrying amount. 1,104 55,791 2022 Car leasing Equipment Income from investments in subsidiaries' contains pro rata share of subsidiaries profits or losses after elimina- tion of unrealized intra-group profits and losses. Rent facility Upon distribution of profit or loss, net revaluation of investments in subsidiaries is transferred to the net DKK thousand Total Impact from applying IFRS 16 as of January 1, 2022 Additions Disposal Modifications Depreciations Reversal depreciations Right-of-use assets as of December 31, 2022 24,428 917 3,290 (2,412) (10,545) 909 536 1,375 1,058 - (1,071) - 907 - - - (439) - 468 25,871 2,292 4,348 (2,412) (12,055) 909 16,587 1,898 18,953 DKK thousand 2023 2022 Amounts included in the income statement Interest expense leases Depreciation recognized on right-of-use assets Cost recognized for short term leases (less than 12 months) 553 11,683 - 598 12,055 145 Financial statements – Parent company Bavarian Nordic Annual Report 2023 124 Note 13 Investment in subsidiaries (continued) Voting rights DKK thousand 2023 Company summary Domicile Ownership Costs as of January 1, 2023 Additions 740,452 670,796 Subsidiaries Bavarian Nordic GmbH Germany USA 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Change in receivables Cost as of December 31, 2023 (159,973) 1,251,275 Bavarian Nordic, Inc. Bavarian Nordic Switzerland AG Bavarian Nordic Berna GmbH Bavarian Nordic Italy S.r.l. Bavarian Nordic Spain SLU Bavarian Nordic Portugal, Lda. Bavarian Nordic Canada Inc. Bavarian Nordic Sweden AB Aktieselskabet af 1. juni 2011 I Aktieselskabet af 1. juni 2011 II Switzerland Switzerland Italy Net revaluation as of January 1, 2023 Net share of profit/loss for the year Change in unrealized intra-group profits Exchange rate adjustments (530,029) 34,778 Spain 49,925 Portugal Canada 35,196 Net revaluation as of December 31, 2023 (410,130) Sweden Denmark Denmark Carrying amount as of December 31, 2023 Carrying amount as of December 31, 2022 841,145 210,422 Non-current receivables from Bavarian Nordic, Inc. is recognized as part of "Investments in subsidiaries". During 2023 the receivables decreased by DKK 160 million, offset in additions in the table. Financial statements – Parent company Bavarian Nordic Annual Report 2023 125 Note 14 Note 15 Inventories Lease liabilities Accounting policies See consolidated financial statements note 28. Accounting policies and significant accounting estimates See consolidated financial statements note 18. DKK thousand 2023 2022 DKK thousand 2023 2022 Non-current Current 43,167 13,455 56,622 7,732 12,526 20,258 Raw materials and supply materials Work in progress 295,918 1,185,796 223,112 198,839 641,182 203,744 (162,419) 881,346 Lease liabilities Manufactured goods and commodities Write-down on inventory Inventories (177,429) 1,527,397 Due within Due between Due after 5 years DKK thousand 1 year 1 and 5 year Total Write-down on inventory as of January 1 Additions from acquisition of businesses Write-down for the year (162,419) (460) (172,941) - 2023 (42,152) 27,602 - (78,101) 46,031 42,592 (162,419) Lease liabilities 13,455 43,167 - 56,622 Use of write-down Reversal of write-down 2022 Write-down on inventory as of December 31 (177,429) Lease liabilities 12,526 7,732 - 20,258 Cost of goods sold amounts to 1,622,326 603,598 For further details regarding development in inventory values see consolidated financial statements note 18. Financial statements – Parent company Bavarian Nordic Annual Report 2023 126 Note 16 Note 17 Prepayment from customers Other liabilities Accounting policies Accounting policies See consolidated financial statements note 29. See consolidated financial statements note 22. DKK thousand 2023 2022 DKK thousand 2023 2022 Prepayment from customers as of January 1 Recognized as income during the year - - - 16,904 (16,904) - Derivative financial instruments at fair value in the income statement Liability relating to phantom shares Payable salaries, holiday accrual etc. Gross to net deduction accrual Other accrued costs - - 8,302 11,142 Prepayment from customers as of December 31 104,632 111,762 35,322 - 75,495 55,387 8,317 Payable VAT and duties 12,778 171,421 Other liabilities 251,716 For further details of derivative financial instruments, see consolidated financial statements note 23. The phantom share programs are disclosed in the consoli- dated financial statements note 30. Financial statements – Parent company Bavarian Nordic Annual Report 2023 127 Note 18 Note 19 Contingent liabilities and other contractual obligations Mortgages and collateral DKK thousand 2023 2022 DKK thousand 2023 2022 Collaborative agreements Guarantees for subsidiaries Contractual obligations with research partners for long-term research projects. - Due within 1 year The Parent Company stands surety for a credit facility to a subsidiary of a maximum of The Parent Company stands surety for letter of credit to subsidiaries of a maximum of 3,651 2,341 3,532 2,335 44,080 260,082 Sales milestone to GSK Joint taxation Mortgages The Asset Purchase Agreement with GSK regarding the acquisition of the product rights to Rabipur/RabAvert and Encepur includes a sales milestone of EUR 25 million. As per December 31, 2022 Management does not judge the sales milestone to be probable and therefore the sales milestone has not been recognized as either part of the product rights nor the deferred consideration for product rights. The Company is jointly taxed with all Danish subsid- iaries. As the administration company the Company stands surety with the other companies in the joint taxation of Danish corporate taxes and also withholding taxes on dividends, interest and royalties. Corpora- tion taxes and withholding taxes payable in the joint taxation pool was DKK 0 as of December 31, 2023. Any adjustments of the taxable joint taxation income or taxes withheld at source may have the effect that the Company's liability increases. See description regarding property, plant and equip- ment in note 16 in the consolidated financial state- ments. Earnout to Emergent The Purchase and Sale Agreement concluded with Emergent BioSolutions. in May 2023 includes an earnout payment starting at USD 30 million. The earnout payment relates to sale of Vivotif and Vaxchora. As per December 31, 2023 Management does not judge the sales milestone to be probable and therefore the earnout payment has not been recognized as either part of the project rights nor the deferred considera- tion. Company mortgage and lawsuits See the consolidated financial statements note 33. Financial statements – Parent company Bavarian Nordic Annual Report 2023 128 Note 20 Related party transactions The Corporate Management and Board of Directors of Bavarian Nordic A/S are considered related parties as they have significant influence over the Company. Bavarian Nordic A/S. This is done under a Distribution Agreement. Bavarian Nordic Italy S.r.l., distributes and sells Vivotif and Vaxchora in Italy on behalf of Bavarian Nordic A/S. This is done under a Distribution Agreement. Bavarian Nordic Switzerland AG provides global commercial services to Bavarian Nordic A/S. Main intercompany transactions: Bavarian Nordic GmbH provides research and develop- ment services to Bavarian Nordic A/S. Bavarian Nordic Portugal, LDA, distributes and sells Vivotif and Vaxchora in Portugal on behalf of Bavarian Nordic A/S. This is done under a Distribution Agree- ment. Bavarian Nordic Sweden AB provides regional commer- cial services to Bavarian Nordic A/S. Bavarian Nordic, Inc. distributes and sells RabAvert in the US on behalf of Bavarian Nordic A/S. This is done under a Distribution Agreement. Bavarian Nordic Canada Inc. provides research and development services to Bavarian Nordic A/S. All services except for the distribution agreements are delivered under cost plus agreements and on arms length conditions. Bavarian Nordic, Inc. provides research and develop- ment services to Bavarian Nordic A/S. Bavarian Nordic Berna GmbH, distributes and sells Vivotif in Switzerland on behalf of Bavarian Nordic A/S. This is done under a Distribution Agreement. The distribution agreements are honored according to OECD's guidelines for a Limited Risk Distributor. Bavarian Nordic, Inc. also provides services to Bavarian Nordic A/S in terms of commercial affair work towards the U.S. Government, with the purpose of ensuring an efficient communication and service to U.S. authorities, in order to maintain existing contracts and explore new product/contract opportunities on the U.S. market. Bavarian Nordic Berna GmbH, Manufactures and sells Vivotif and Vaxchora to Bavarian Nordic A/S. This is done under a Contract Manufacturing Agreement. Apart from intra-group transactions mentioned above and the remuneration of the Board of Directors and Corporate Management, cf. note 8 and note 30 in the consolidated financial statements, there are no transac- tions with related parties. Bavarian Nordic Spain SLU, distributes and sells Vivotif and Vaxchora in Spain on behalf of Bavarian Nordic A/S. This is done under a Distribution Agreement. Bavarian Nordic Switzerland AG distributes and sells Encepur and Rabipur in Switzerland on behalf of Financial statements – Parent company Bavarian Nordic Annual Report 2023 129 Note 21 Note 22 Proposed appropriation of net profit/(loss) Significant events after the balance sheet date See description in note 35 in the consolidated financial statements. DKK thousand 2023 2022 Retained earnings 1,440,637 (342,477) Total 1,440,637 (342,477) Financial statements Bavarian Nordic Annual Report 2023 130 Hellerup, March 6, 2024 Statement by the Board of Directors and Executive Management on the Annual Report Executive Management Paul John Chaplin President and CEO Henrik Juuel Executive Vice President and CFO The Board of Directors and the Executive Manage- ment have today considered and approved the Annual Report of Bavarian Nordic A/S for the finan- cial year January 1, 2023 - December 31, 2023. In our opinion, the management commentary Board of Directors contains a fair review of the development of the Group's and the Parent company’s business and financial matters, the results for the year and of the Parent company’s financial position and the finan- cial position as a whole of the entities included in the consolidated financial statements, together with a description of the principal risks and uncertainties that the Group and the Parent company face. The consolidated financial statements are presented in accordance with IFRS Accounting Standards as endorsed by the EU. The parent financial statements are presented in accordance with the Danish Finan- cial Statements Act. Furthermore, the Annual Report is prepared in accordance with Danish disclosure requirements for listed companies. Luc Debruyne Chairman of the Board Anders Gersel Pedersen Peter H. Kürstein-Jensen Deputy Chairman In our opinion, the Annual Report of Bavarian Nordic A/S for the financial year January 1, 2023 to December 31, 2023 identified as bava-2023-12-31-en. zip is prepared, in all material respects, in accord- ance with the ESEF Regulation. Frank A.G.M. Verwiel Anne Louise Eberhard Johan van Hoof Heidi Hunter In our opinion, the consolidated financial statements and the parent financial statements give a true and fair view of the Group’s and the Parent company’s financial position at December 31, 2023, as well as of the results of their operations and cash flows for the financial year January 1, 2023 - December 31, 2023. We recommend the Annual Report for adoption at the Annual General Meeting Thomas Alex Bennekov Employee-elected Anja Gjøl Employee-elected Karen Merete Jensen Employee-elected Linette Munksgaard Andersen Employee-elected Financial statements Bavarian Nordic Annual Report 2023 131 Independent auditor’s report To the shareholders of Bavarian Nordic A/S Report on the Financial Statements Opinion position at 31 December 2023, and of the results of additional requirements applicable in Denmark. Our responsibilities under those standards and require- ments are further described in the Auditor’s respon- sibilities for the audit of the consolidated financial statements and the parent financial statements section of this auditor’s report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements appli- cable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. After Bavarian Nordic A/S was listed on Nasdaq OMX Copenhagen in 1998, we were appointed auditors at the Annual General Meeting held on 27 May 1999 for the financial year 1999. We have been reappointed annually at the Annual General Meeting for a total consecutive engagement period of 25 years up to and including the 2023 financial year. We have audited the consolidated financial state- ments and the parent financial statements of Bavarian Nordic A/S for the financial year 1 January 2023 – 31 December 2023, which comprise the income statement, statements of financial position, statement of changes in equity and notes, including a summary of material accounting policies, for the Group as well as the Parent, and the statement of comprehensive income and the cash flow state- ment of the Group (collectively referred to as the “Financial Statements”). The consolidated financial statements are prepared in accordance with IFRS Accounting Standards as endorsed by the EU and additional requirements of the Danish Financial Statements Act, and the parent financial statements are prepared in accordance with the Danish Financial Statements Act. its operations and cash flows for the financial year 1 January 2023 – 31 December 2023 in accordance with IFRS Accounting Standards as endorsed by the EU and additional requirements under the Danish Financial Statements Act. Further, in our opinion, the parent financial state- ments give a true and fair view of the Parent’s financial position at 31 December 2023, and of the results of its operations for the financial year 1 January 2023 – 31 December 2023 in accordance with the Danish Financial Statements Act. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial state- ments and the parent financial statements for the financial year 1 January 2023 – 31 December 2023. These matters were addressed in the context of our audit of the consolidated financial statements and the parent financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Our opinion is consistent with our Long-form Audi- tor’s report issued to the Audit Committee and the Board of Directors. To the best of our knowledge and belief, we have not provided any prohibited non-audit services as referred to in Article 5(1) of Regulation (EU) No 537/2014. Basis for opinion We conducted our audit in accordance with Inter- national Standards on Auditing (ISAs) and the In our opinion, the consolidated financial statements give a true and fair view of the Group’s financial Financial statements Bavarian Nordic Annual Report 2023 132 Key audit matter How our audit addressed the key audit matter Statement on the management commentary Management is responsible for the management commentary. of the Danish Financial Statements Act and article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regula- tion). We did not identify any material misstatement of the management commentary. Acquisition of travel vaccines portfolio purpose of our audit, the procedures we carried out included the following: On 15 February 2023, the Group entered into an agreement with Emergent BioSolutions Inc. to acquire two marketed travel vaccines Vivotif and Vaxchora and a Phase 3 vaccine candidate for the prevention of chikungunya virus. The acquisition includes a Swiss based biologics manufacturing facility, US based research and development facilities related to the development of the chikungunya vaccine, and EU/US based commercial operations. The transaction closed on 15 May 2023. • We assessed the purchase price allocation made including assessing whether the Our opinion on the consolidated financial state- ments and the parent financial statements does not cover the management commentary, and we do not express any form of assurance conclusion thereon. Management's responsibilities for the Financial Statements assumptions and estimates made by Manage- ment are reasonable and documented. Our assessment has focused on identification and recognition of intangible assets at fair value Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act as well as the preparation of parent financial state- ments that give a true and fair view in accordance with the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error. • • We performed procedures in relation to the opening balance as of 15 May 2023 In connection with our audit of the consolidated financial statements and the parent financial state- ments, our responsibility is to read the management commentary and, in doing so, consider whether the management commentary is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We reconciled the purchase price allocation to supporting documentation, including calcula- tions of fair value of the intangible assets The purchase price allocation is based on a number of Management judgements and esti- mates related to measurement of all acquired net assets at fair value, including intangible assets and land and buildings. Due to the significant impact on the consoli- dated financial statements and management judgements and assumptions, we have considered this as a key audit matter. • • We tested the discounted cash flow forecasts and challenged Management’s significant assumptions and estimates In addition, we assessed the appropriateness of the disclosures; note 31 Acquisition of business. Moreover, it is our responsibility to consider whether the management commentary provides the infor- mation required by the Danish Financial Statements Act and article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group’s and the Parent’s ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements unless Management either intends to liquidate the Reference is made to note 31 in the consoli- dated financial statements. Based on the work we have performed, we conclude that the management commentary is in accordance with the consolidated financial state- ments and the parent financial statements and has been prepared in accordance with the requirements Financial statements Bavarian Nordic Annual Report 2023 133 Group or the Entity or to cease operations, or has no realistic alternative but to do so. • Identify and assess the risks of material misstate- ment of the consolidated financial statements and the parent financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the Parent’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or condi- tions may cause the Group and the Entity to cease to continue as a going concern. • We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Auditor's responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assur- ance about whether the consolidated financial statements and the parent financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audi- tor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements appli- cable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered mate- rial if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and these parent financial statements. We also provide those charged with governance with a statement that we have complied with rele- vant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and, where applicable, safeguards put in place and measures taken to eliminate threats. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circum- stances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent’s internal control. • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures in the notes, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regula- tion precludes public disclosure about the matter or when, in extremely rare circumstances, we deter- mine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. • Evaluate the appropriateness of accounting poli- cies used and the reasonableness of accounting estimates and related disclosures made by Management. • Obtain sufficient appropriate audit evidence regarding the financial information of the enti- ties or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direc- tion, supervision and performance of the group audit. We remain solely responsible for our audit opinion. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Conclude on the appropriateness of Manage- ment’s use of the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, Financial statements Bavarian Nordic Annual Report 2023 134 Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements of Bavarian Nordic A/S, we performed procedures to express an opinion on whether the annual report of Bavarian Nordic A/S for the financial year 1 January 2023 to 31 December 2023 with the file name bava-2023-12-31-en.zip is prepared, in all mate- rial respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation), which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial statements including notes. • Ensuring consistency between iXBRL tagged data and the consolidated financial statements presented in human readable format; and • Evaluating the completeness of the iXBRL tagging of the consolidated financial statements including notes; In our opinion, the annual report of Bavarian Nordic A/S for the financial year 1 January to 31 December 2023 with the file name bava-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. • For such internal control as Management deter- mines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; Copenhagen, 6 March 2024 Our responsibility is to obtain reasonable assur- ance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and Kirsten Aaskov Mikkelsen Eskild Nørregaard Jakobsen State-Authorised Public Accountant State-Authorised Public Accountant • Reconciling the iXBRL tagged data with the audited consolidated financial statements. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: Identification No (MNE) no 21358 Identification No (MNE) no 11681 • The preparing of the annual report in XHTML format; • Testing whether the annual report is prepared in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for financial information required to be tagged using judgement where necessary; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; Financial statements Bavarian Nordic Annual Report 2023 135 Forward-looking statement This annual report contains forward looking state- ments. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions iden- tify forward looking statements. Actual results or performance may differ materially from any future results or performance expressed or implied by such statements. The important factors that could cause our actual results or performance to differ materi- ally include, among others, risks associated with product discovery and development, uncertainties related to the outcome and conduct of clinical trials including unforeseen safety issues, uncertainties related to product manufacturing, the lack of market acceptance of our products, our inability to manage growth, the competitive environment in relation to our business area and markets, our inability to attract and retain suitably qualified personnel, the unenforceability or lack of protection of our patents and proprietary rights, our relationships with affil- iated entities, changes and developments in tech- nology which may render our products obsolete, and other factors. For a further discussion of these risks, please refer to the section “Risk Manage- ment” in this Annual Report. Bavarian Nordic does not undertake any obligation to update or revise forward looking statements in this Annual Report nor to confirm such statements in relation to actual results, unless required by law. RabAvert®, Rabipur®, Encepur®, Vivotif®, Vaxchora®, JYNNEOS®, IMVANEX®, IMVAMUNE® and MVA-BN® are registered trademarks owned by Bavarian Nordic.

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