Earnings Release • Aug 16, 2018
Earnings Release
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Company Announcement
COPENHAGEN, Denmark, August 16, 2018 – Bavarian Nordic A/S (OMX: BAVA, OTC: BVNRY) announced today its interim financial results and business progress for the first half of 2018 and releases its financial calendar for 2019.
"During first half of 2018, we have made important progress supporting the future growth of Bavarian Nordic. Several new studies have been initiated for our cancer vaccine candidates in collaboration with investigators and industry; but I am particularly excited to announce a broadening of our oncology strategy based on compelling new research data. The positive IMVAMUNE Phase 3 results have paved the way for a BLA submission later this year, and our recent RSV data have confirmed our strong position as a leading company in this field. We remain on track with the construction of a new fill/finish facility, which is key for our future revenue generation, and with the recent loan agreement from the European Investment Bank, backing this large investment, we maintain a strong financial flexibility" said Paul Chaplin, President & Chief Executive Officer of Bavarian Nordic.
Financial results for the first half year were in line with our expectations.
Bavarian Nordic maintains its financial expectations for 2018 as announced on March 12, 2018 with revenues of approximately DKK 500 million/USD 78 million for the full year and a loss before interest and tax (EBIT) of approximately DKK 385 million/USD 60 million. The majority of the 2018 revenues are related to the production and release of IMVAMUNE vaccine for the U.S. Government, which will occur in the second half of 2018. The expected cash preparedness at year-end was recently upgraded from approximately DKK 1,850 million/USD 289 million to approximately DKK 2,100 million/USD 329 million after being granted an unsecured loan facility of EUR 30 million from the European Investment Bank. This loan will support the Company's investments into a new fillfinish manufacturing facility, which is currently under construction and on track.
Danish kroner (DKK) is the Company's functional currency. Solely for information purposes, figures above have also been converted into USD using an assumed exchange rate of DKK 6.39 per 1.00 USD, which was the exchange rate as of June 30, 2018. The financial expectations are based on an exchange rate of DKK 6.60 per 1.00 USD.
* Janssen is responsible for the clinical development
The management of Bavarian Nordic will host a conference call today at 2 pm CEST (8 am EST) to present the interim results followed by a Q&A session. A live and recorded webcast of the presentation can be accessed via http://www.bavarian-nordic.com/investor/events.aspx?event=5284. To join the Q&A session, use one of the following dial-in numbers: Denmark: +45 35 15 81 21, UK: +44 (0) 330 336 9411, USA: +1 323-794-2551. Participant code is 8332812.
Rolf Sass Sørensen Vice President Investor Relations (EU) Tel: +45 61 77 47 43
Graham Morrell Paddock Circle Advisors (US) [email protected] Tel: +1 781 686 9600
Company Announcement no. 19 / 2018
Bavarian Nordic is a fully integrated biotechnology company focused on the development of innovative and safe therapies against cancer and infectious diseases. Using our live virus vaccine platform technology, MVA-BN®, we have created a diverse portfolio of proprietary and partnered product candidates intended to improve the health and quality of life for children and adults. We supply our IMVAMUNE® non-replicating smallpox vaccine to the U.S. Strategic National Stockpile and other government stockpiles. The vaccine is approved in the European Union (under the trade name IMVANEX®) and in Canada. Registration studies are currently underway in the U.S. In addition to our long-standing collaboration with the U.S. government on the development of IMVAMUNE® and other medical countermeasures, our infectious disease pipeline comprises a proprietary RSV program as well as vaccine candidates for Ebola, HPV, HBV and HIV, which are developed through a strategic partnership with Janssen. Additionally, in collaboration with the National Cancer Institute, we have developed a portfolio of active cancer immunotherapies, designed to alter the disease course by eliciting a robust and broad anti-cancer immune response while maintaining a favorable risk-benefit profile. Through multiple industry collaborations, we seek to explore the potential synergies of combining our immunotherapies with other immune-modulating agents, e.g. checkpoint inhibitors. For more information visit www.bavarian-nordic.com or follow us on Twitter @bavariannordic.
This announcement includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, future events, performance and/or other information that is not historical information. All such forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law.
Our pipeline comprises multiple product candidates that are subject to more than 20 ongoing clinical studies in infectious diseases and cancer. Most of our programs are supported by external funding through either corporate or governmental partnerships. Detailed information on our pipeline programs is available in Bavarian Nordic's annual report or on the Company's website: www.bavarian-nordic.com.
| Product | Indication | Status | Collaborator |
|---|---|---|---|
| INFECTIOUS DISEASES | |||
| IMVAMUNE liquid-frozen * | Smallpox | Approved/Phase 3 | BARDA |
| IMVAMUNE freeze-dried | Smallpox | Phase 2 | BARDA |
| MVA-BN RSV | Respiratory Syncytial Virus | Phase 2 | |
| MVA-BN Filo monovalent ** | Ebola | Phase 3 | Janssen |
| MVA-BN Filo multivalent ** | Ebola/Marburg | Phase 2 | Janssen |
| MVA-BN HPV + AdVac ** | Chronic HPV infection | Phase 1 planned in 2018 | Janssen |
| MVA-BN HIV + AdVac ** | HIV-1 | Phase 1 planned in 2018 | Janssen |
| MVA-BN HBV + AdVac ** | Hepatitis B | Preclinical | Janssen |
| CANCER IMMUNOTHERAPY | |||
| CV301 + nivolumab/pembrolizumab | Non-small cell lung cancer | Phase 1 | |
| CV301 + nivolumab | Microsatellite stable oligometastatic resectable colorectal cancer |
Phase 2 | Bristol-Myers Squibb |
| CV301 + atezolizumab | Metastatic Bladder cancer | Phase 2 planned in 2018 | Genentech |
| CV301 + durvalumab | Advanced Metastatic Microsatellite Stable Colorectal cancer |
Phase 2 planned in 2018 | AstraZeneca |
| BN-Brachyury | Chordoma | Phase 2 planned in 2018 | |
| BN-Brachyury | Advanced Solid tumors | Phase 1 | NCI |
| PROSTVAC combinations | Prostate cancer | Phase 2 | NCI |
* Approved in Canada and the European Union (marketed as IMVANEX® in the EU). Phase 3 completed in the U.S.
** Licensed by Janssen, who is responsible for the clinical development
IMVAMUNE is the only non-replicating smallpox vaccine approved in Europe for use in the general adult population (marketed under the trade name IMVANEX®) and in Canada for use in a public health emergency for adults who are contraindicated to replicating smallpox vaccines. As part of our partnership with the U.S. Government, we are currently working towards the approval of IMVAMUNE in the U.S. The second and final Phase 3 study to support FDA approval of IMVAMUNE as a liquid frozen formulation was successfully completed in February 2018. This randomized, open-label study in 440 volunteers, revealed the peak neutralizing antibodies induced by IMVAMUNE were shown to be 2-fold higher than those stimulated by ACAM2000. This met the co-primary endpoint of non-inferiority and was even shown to be a statistically superior immune response. Importantly, vaccination with IMVAMUNE resulted in a highly-attenuated take (reduction in lesion size), and in fact prevented the vaccine take in most of subjects re-vaccinated with ACAM2000, thereby also successfully meeting the second co-primary endpoint of the study. The Company is currently preparing the submission of a BLA in the second half of 2018. If approved, the Company would also be eligible to receive a Priority Review Voucher.
In parallel with the development of liquid-frozen IMVAMUNE, efforts to provide a long-term storage solution for IMVAMUNE have been ongoing since 2009, resulting in the development of a freeze-dried formulation of the vaccine, which offers a longer shelf life. Several activities to support the final development, future production and stockpiling of the new formulation are now in their completion phase.
To replenish and replace the existing stockpile of IMVAMUNE at the U.S. Strategic National Stockpile (SNS), the Company was awarded a new contract from BARDA in September 2017, initially valued at up to USD 539 million for the supply of freeze-dried IMVAMUNE. This represented the single largest order for IMVAMUNE and included an additional vaccine bulk order of USD 100 million and options valued at USD 439 million. The options included USD 140 million to support additional clinical activities and the transfer of the freeze-dried manufacturing process to Bavarian Nordic's new facility. An additional option of USD 299 million is related to the filling and freeze drying of all the vaccine bulk from the current contract (USD 100 million) and previous options from the IMVAMUNE liquid frozen contract (USD 233 million) that represents approximately 13 million freeze-dried IMVAMUNE doses. The ten-year contract also includes pricing for additional orders of vaccine bulk and vaccine doses of either liquid frozen or freeze dried IMVAMUNE. So, the company expects additional orders over time, initially to replace the expired 20 million doses of liquid-frozen IMVAMUNE in the SNS, and over time to fulfill
Company Announcement no. 19 / 2018
the stated goal of sufficient non-replicating smallpox vaccine to protect 66 million people, corresponding to 132 million doses.
Three months post the initial contract award, the first option of USD 37 million was exercised (December 2017). This option will fund a Phase 3 safety lot consistency study in 1,110 healthy volunteers that will be initiated in H1 2019 and support the regulatory activities to gain approval of the freeze-dried formulation. The majority of this first option will be revenue recognized during 2019 and 2020 while conducting the Phase 3 study.
We have already produced and revenue recognized bulk vaccine worth of USD 233 million from orders received in 2015 and 2016, and during 2018 and 2019, we will produce and revenue recognize the additional USD 100 million vaccine bulk order received in 2017.
The construction of a new fill/finish facility at our existing manufacturing site in Denmark is progressing as planned. The production of freeze dried IMVAMUNE will be initiated in 2021 triggering the options of USD 299 million under the contract and it is projected that the production of the 13 million IMVAMUNE doses will be finalized in 2023.
MVA-BN RSV is our product candidate for the prevention of respiratory syncytial virus (RSV). The vaccine has been designed to target five different RSV proteins to ensure a broad immune response against both RSV subtypes (A & B). The vaccine candidate has been designed to mimic the immune response observed following a natural response to an RSV infection that is believed to induce protection for at least a year.
In 2017, the Company reported data from a Phase 2 study that investigated various schedules and doses of the MVA-BN RSV vaccine in 421 subjects aged 55 and older. This study demonstrated that the vaccine induced robust antibody and T cell responses against RSV with only a single booster vaccination and these responses remained elevated for an entire RSV season (6 months post vaccination).
As per the original design, the study was extended with 88 subjects being re-enrolled one year later, after having received a single vaccination with either a low or high dose of the vaccine in the Phase 2 study. These subjects were further boosted with the same vaccine dose; mimicking an annual booster regime.
The extension study demonstrated that in at least 60% of the subjects the broad antibody responses against RSV were durable and remained elevated compared to baseline, one year after receiving a single booster vaccination. Similarly, the T cell responses against RSV also remained elevated one year post vaccination in half of the subjects re-enrolled, depending on which of the RSV proteins encoded in the vaccine were evaluated (ranging from 27% to 72% of the subjects). Following a further annual booster with MVA-BN RSV, there was a rapid and significant increase in serum antibody responses, including neutralizing antibodies against both RSV subtypes (A & B) and total IgG and IgA antibodies against RSV. This effect was most notable in subjects with the weakest immunity at the baseline (week 56) prior to the second vaccination. Compared to pre-vaccination levels one year before, the boost effect was in the range of a 1.5 to 3-fold increase depending upon the antibody parameter, however the increases were in the range of 1.3 to 2-fold when compared to the week 56 levels (baseline for the annual boost), as the antibody responses remained elevated one year post the first vaccination. These were also supported by a significant boost in the mucosal IgA responses measured from nasal swabs that has been reported to be an important correlate of protection against RSV. The T cell responses against all five RSV encoded proteins were also significantly boosted following the annual vaccination, but again was most prevalent in subjects with the weakest immunity prior to the second vaccination.
These findings support an annual vaccination strategy with MVA-BN RSV and will be key in discussing the design of the Phase 3 study with the FDA later in 2018.
In parallel to the current clinical development, we are exploring the feasibility of a novel placebo-controlled human challenge study. We have partnered with a global contract research organization to develop a new and differentiated approach to the human RSV challenge model that will potentially allow us to more accurately assess the protective benefits of the vaccine. The RSV strain is currently being characterized with the aim to determine the feasibility of conducting a human challenge trial later in 2018.
CV301 is an active immunotherapy candidate that targets two tumor-associated antigens, CEA and MUC-1, long known to be overexpressed in most solid tumors. Preclinical data shows that antigen specific vaccination results in T cell infiltration into areas of antigen expression and upregulation of PD-L1 on antigen expressing tumor cells. The upregulation of PD-L1 is a marker indicating the tumor is under attack from T-cells, presenting an opportunity for a greater response in patients who might otherwise not benefit from treatment with a checkpoint inhibitor alone.
CV301 is in the unique position to potentially demonstrate a broad proof of concept not only in settings where checkpoints have set a new standard of survival, but also in cancers, such as micro-satellite stable colorectal, where checkpoint inhibitors have yet to demonstrate single-agent activity and may require combinations with other agents. The CV301 strategy has been adapted during 2018 focusing our resources on smaller studies, some with adaptive designs, where there remain options to demonstrate rapid proof of concept of the combination with checkpoint inhibition.
The first of these studies, an investigator-led Phase 2 study of CV301, was recently initiated in patients with metastatic colorectal cancer. The study is evaluating the combination therapy of CV301 and Bristol Myers Squibb's checkpoint inhibitor, nivolumab (OPDIVO®). This study will enroll 78 patients with resectable oligometastatic microsatellite stable disease, providing an excellent opportunity to evaluate both clinical endpoints and biologic impact of standard perioperative chemotherapy, plus vaccine and checkpoint inhibition. The study will evaluate multiple short-term endpoints, including Overall Response Rate (ORR) and Progression-Free Survival (PFS).
A second investigator-led combination study of CV301 and durvalumab (IMFINZI®) from AstraZeneca is planned for initiation later in 2018 in colorectal and pancreatic cancer. In each disease setting, the study will enroll 26 patients with metastatic disease who have had stable disease, or on frontline chemotherapy and are transitioning to "maintenance chemotherapy". In addition to that maintenance therapy, they will also receive vaccine plus checkpoint inhibitor. This study will also evaluate multiple endpoints, including ORR and PFS.
The third study is Bavarian Nordic sponsored, and will evaluate the combination of CV301 and atezolizumab (TECENTRIQ®) from Roche in metastatic bladder cancer. The study will initially enroll 26 patients in two cohorts evaluating the combination therapy in either platinum-eligible, or platinum-refractory patients. This study was amended to include multiple efficacy thresholds, and will not enroll additional patients without early indications of activity (ORR and PFS).
In line with the revised CV301 strategy, the Company will not initiate a Phase 2 combination study of CV301 and pembrolizumab (KEYTRUDA®) in non-small cell lung cancer (NSCLC) as planned and will stop the Phase 1/1b study later this year after safety has been established. NSCLC is a highly competitive indication, in which the standard of care has changed every 3-6 months over the last 2 years. The competition in this population of patients makes recruitment in the trial difficult, and the rapidly changing standard of care likely impacts the trial readout, resulting in an uncertain pathway to approval. The results of the Phase 1 (12 patients) with CV301 and the Phase 1b combination (12-14 patients) with combination with nivolumab (OPDIVO®) or pembrolizumab (KEYTRUDA®) will be reported later this year.
BN-Brachyury is a novel cancer immunotherapy candidate with potential to treat chordoma (a rare tumor in the bones of the skull base and spine, which is unique in that it universally expresses brachyury) as well as other metastatic cancers, including triple negative breast cancer, small-cell lung cancer, and NSCLC that are known to have high expression levels of brachyury. Brachyury is a transcription factor that is reported to play a key role in the metastasis and progression of tumors. Tumors that overexpress brachyury are believed to be highly resistant to standard therapies, including radiation and chemotherapy, and are associated with decreased survival rates.
A first-in-human study of an MVA-BN®-based brachyury vaccine in 38 patients, including 13 with chordoma, demonstrated the ability to generate brachyury specific CD4 and CD8 T-cells in the vast majority of the patients.
Currently, a Phase 1 open-label trial is ongoing in patients with metastatic or unresectable, locally advanced malignant solid tumors. Patients will receive two prime doses of MVA-BN Brachyury, followed by multiple booster doses with a brachyury encoded fowlpox-vaccine, collectively known as BN-Brachyury. The primary endpoint of the study is safety and tolerability, and secondary endpoints include immunological responses as measured by an increase in brachyury-specific T-cells and other tumor-associated antigens, as well as evidence of clinical benefit such as PFS and ORR.
Later in 2018, the Company plans to initiate a Phase 2 study that combines BN-Brachyury with radiation in patients with advanced chordoma. This study will be conducted in a two-stage design where early signals of efficacy (ORR) will be required prior to expanding enrollment. BN-Brachyury has obtained orphan drug status from the FDA for the treatment of chordoma. Orphan designation is granted to products in clinical development for use in rare diseases or conditions where no current therapy exists.
Additionally, through a multi-company collaboration agreement, a Phase 1/2 study combining BN-Brachyury with multiple combinations of experimental immune modulating candidates was initiated by the NCI in April 2018. The study, named QuEST (a Quick Efficacy Seeking Trial), will utilize sequential arms of combinations of immunotherapy, to offer a means to identify signals of activity, initially in patients with multiple solid tumors and expanding into men with metastatic castrate-resistant prostate cancer (mCRPC). The objective of the study will be to determine if there is clinical benefit to any of a set of 3 possible treatments for patients with mCRPC:
Immunotherapy and the emergence of checkpoint inhibition has revolutionized cancer treatment and proven that immune cells, such as killer T cells, play an important and lifesaving role in battling cancer. While checkpoint inhibition blocks one of the mechanisms employed by tumors to evade the body's immune system, there are many other mechanisms utilized by tumors to create an immune suppressive microenvironment. This requires alternative and complementary approaches to improve the efficacy of cancer immunotherapy.
Our previously communicated immunotherapy strategy relies on a vaccine platform to stimulate killer T cells against tumor associated antigens supported by checkpoint inhibition. To gain potential proof of concept, three Phase 2 studies evaluating this approach have, or will be initiated, with CV301 later this year in colorectal, pancreatic and bladder cancer.
However, new research from the Company supports additional approaches that in preclinical studies have shown to be even more potent at inducing killer T cells, or other arms of the immune system and/or change the suppressive microenvironment of tumors creating a more inflamed tumor.
Cytokines, Toll-like receptor (TLR) agonists, and Stimulator of interferon genes (STING) agonists are being actively investigated as agents to alter the immune-suppressive environment created within solid tumors. Our research has shown that direct intra-tumoral injection with MVA-BN based vaccines confers similar types of effects in the tumor microenvironment. To further investigate these exciting preclinical findings the Company plans to file an IND later this year and initiate a clinical study during first half of 2019 using CV301 in patients with solid tumors. This study will evaluate the safety and certain immune parameters of intra-tumoral vaccination, and together with additional preclinical activities, will inform the further development of the intratumoral vaccine platform, including the potential for next-generation constructs with improved activity.
As recently presented at the 2018 Annual Meeting of the American Association for Cancer Research (AACR), the Company has shown that intravenous administration of an MVA-BN based vaccine induced larger numbers of killer T cells with heightened killer activity against cancer cells, compared to our standard vaccination route. Another significant finding was that intravenous administration also induced immune stimulatory cytokines and activated another type of anti-tumor killer cells, the natural killer (NK) cells. NK cells are employed by the immune system to recognize and destroy virus infected, as well as tumor cells, especially if tumor cells are trying to escape the attack of the killer T cells. Thus, the two killer cell types, killer T cells and NK cells, work hand in hand in attacking and eradicating tumors. The responses were enhanced when the MVA-BN based vaccine also encoded the co-stimulatory molecule CD40 Ligand (L). During first half of 2019 the Company plans to initiate a clinical study to evaluate the safety and certain immune parameters following the intravenous application of BN-Brachyury in cancer patients. This initial study will inform the development of a novel MVA-BN based cancer vaccine that also encodes CD40L targeting breast cancer.
In May, the Company announced the appointment of Henrik Juuel as Executive Vice President and Chief Financial Officer (CFO). Mr. Juuel will join Bavarian Nordic in the fourth quarter 2018 from Orexo AB, where he is currently the CFO. Prior to his tenure at Orexo, Mr. Juuel held senior positions at several large and diverse organizations including Group CFO of Virgin Mobile (Central and Eastern Europe), CFO of GN ReSound, and CFO of NNE Pharmaplan. Mr. Juuel began his career at Novo Nordisk in 1992, and during his 15-year tenure with the company held several senior finance positions in Denmark and abroad. Mr. Juuel succeeds Ole Larsen, who departed the Company in May.
The 2019 dates for announcement of the Company's financial reports and the annual general meeting have now been determined, and planned future reporting date are as follows:
| November 9, 2018 | Third quarterly report (Q3) for the nine-month period ended September 30, 2018 |
|---|---|
| March 21, 2019 | 2018 Annual Report |
| April 24, 2019 | Annual General Meeting * |
| May 22, 2019 | First quarterly report (Q1) for the three-month period ended 31 March 2019 |
| August 15, 2019 | Half-year report (Q2) for the six-month period ended 30 June 2019 |
| November 7, 2019 | Third quarterly report (Q3) for the nine-month period ended 30 September 2019 |
* Pursuant to Article 12 of the Articles of Association, shareholders who wish to submit a request for proposals for consideration at the annual general meeting must lodge this with the Company no later than Thursday, March 14, 2019.
| DKK thousand | 1/4 - 30/6 2018 1/4 - 30/6 2017 1/1 - 30/6 2018 1/1 - 30/6 2017 1/1-31/12 2017 | ||||
|---|---|---|---|---|---|
| Income statements | |||||
| Revenue | 86,340 | 397,276 | 97,634 | 594,972 | 1,370,151 |
| Production costs | 45,655 | 127,072 | 64,761 | 177,207 | 290,617 |
| Research and development costs | 88,099 | 111,578 | 204,733 | 211,877 | 518,405 |
| Distribution costs | 8,965 | 11,220 | 18,472 | 19,906 | 39,878 |
| Administrative costs | 50,640 | 45,057 | 89,558 | 86,752 | 168,057 |
| Income before interest and taxes (EBIT) | (107,019) | 102,349 | (279,890) | 99,230 | 353,194 |
| Financial items, net | (2,169) | (43,855) | (10,983) | (46,988) | (50,914) |
| Income before company tax | (109,188) | 58,494 | (290,873) | 52,242 | 302,280 |
| Net profit for the period | (109,814) | 46,293 | (292,259) | 40,242 | 181,343 |
| Balance sheet | |||||
| Total non-current assets | 445,467 | 508,209 | 382,186 | ||
| Total current assets | 2,710,095 | 2,559,990 | 2,770,485 | ||
| Total assets | 3,155,562 | 3,068,199 | 3,152,671 | ||
| Equity | 2,249,831 | 2,122,605 | 2,506,297 | ||
| Non-current liabilities | 398,685 | 53,599 | 399,760 | ||
| Current liabilities | 507,046 | 891,995 | 246,614 | ||
| Cash flow statements | |||||
| Securities, cash and cash equivalents | 2,479,785 | 2,312,465 | 2,583,718 | ||
| Cash flow from operating activities | (311,438) | 468,275 | 216,065 | ||
| Cash flow from investment activities | (89,911) | (933,058) | (1,345,209) | ||
| - Investment in intangible assets | (2,729) | (11,296) | (22,341) | ||
| - Investment in property, plant and equipment | (80,304) | (8,103) | (56,357) | ||
| - Net investment in securities | (6,748) | (913,489) | (1,266,598) | ||
| Cash flow from financing activities | 292,644 | 4,460 | 613,441 | ||
| Financial Ratios (DKK) 1) | |||||
| Earnings (basic) per share of DKK 10 | (9.1) | 1.3 | 5.7 | ||
| Net asset value per share | 69.8 | 67.5 | 77.7 | ||
| Share price at period-end | 188 | 384 | 224 | ||
| Share price/Net asset value per share | 2.7 | 5.7 | 2.9 | ||
| Number of outstanding shares at period-end | 32,245 | 31,469 | 32,245 | ||
| Equity share | 71% | 69% | 79% | ||
| Number of employees, converted to full-time, at period-end | 428 | 445 | 420 |
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.
(stated in the end of this document):
Financial statements are un-audited. Comparison figures for the same period 2017 are stated in parentheses.
Revenue generated for the six months ending June 30, 2018 was DKK 98 million (DKK 595 million). Revenue was composed of DKK 37 million (DKK 31 million) from the sale of IMVAMUNE final drug product and DKK 61 million (DKK 42 million) from contract work. In first half year of 2017 revenue from the sale of IMVAMUNE bulk drug substance to U.S. Government amounted to DKK 522 million. Revenue reported for the three months ended June 30, 2018 was DKK 86 million (DKK 397 million).
The production costs totaled DKK 65 million (DKK 177 million). Costs related directly to revenue amounted to DKK 47 million (DKK 160 million). Other production costs totaled DKK 18 million (DKK 17 million). In the second quarter of 2018, production costs were DKK 46 million (DKK 127 million).
Research and development costs totaled DKK 205 million (DKK 212 million). As the IMVAMUNE development asset was fully amortized in 2017, no prior-year IMVAMUNE development costs have been expensed in the first six months of 2018. In the first six months of 2017 expensing of prior-year IMVAMUNE development costs amounted to DKK 43 million.
Distribution costs totaled DKK 18 million (DKK 20 million) and administrative costs totaled DKK 90 million (DKK 87 million).
The income before interest and tax (EBIT) was a loss of DKK 280 million (profit of DKK 99 million).
Financial items totaled a net expense of DKK 11 million (net expense of DKK 47 million). Net income from securities amounted to DKK 3 million (DKK 4 million), net loss on derivative financial instruments amounted to DKK 2 million (net gain of DKK 13 million), interest expenses on debt amounted to DKK 7 million (DKK 2 million) and negative exchange rate adjustments amounted to DKK 5 million (DKK 62 million).
Income before company tax was a loss of DKK 291 million (profit of DKK 52 million).
Tax on income was DKK 1 million (DKK 12 million). The Danish tax loss carry forward related to the result for the first six months of 2018 has been fully written-down. The deferred tax asset remains at DKK 0 million. The Company retains the right to use the tax loss carry forward (tax value DKK 290 million) and the other tax assets (tax value DKK 40 million) that has been written-down. The development in the deferred tax asset is shown in note 13.
The Danish tax authority ("SKAT") has notified the Company that SKAT is proposing an adjustment of the allocation of the PROSTVAC development costs between Bavarian Nordic A/S and its U.S. subsidiary, Bavarian Nordic, Inc. between 2012-2016. The Company is in dialogue with SKAT regarding the proposal.
For the first six months of 2018, Bavarian Nordic reported a net loss of DKK 292 million (net profit of DKK 40 million).
Securities, cash and cash equivalents decreased by DKK 104 million compared to December 31, 2017. During the first six months of 2018 DKK 80 million was spent on investments in property, plant and equipment, mainly related to the construction of the new fill/finish manufacturing line in Kvistgaard.
The Company has entered into transactions that transfer ownership of securities to a counterparty, while the Company retains the risks associated with the holding of the securities (repo transactions). The securities remain in the balance sheet, and the security lending is accounted for as loans received against collateral and recognized as debt to credit institutions. As per June 30, 2018 that security lending amounts to DKK 288 million. See further details in note 14.
As of June 30, 2018, the Group's cash preparedness was DKK 2,211 million (DKK 2,604 million as of December 31, 2017):
Bavarian Nordic Announces First Half 2018 Results Page 12 of 24
| DKK million | 30/6 2018 | 30/6 2017 | 31/12 2017 |
|---|---|---|---|
| Securities | 2,300 | 1,954 | 2,301 |
| Cash and cash equivalents | 180 | 358 | 283 |
| Securites, cash and cash equivalents | 2,480 | 2,312 | 2,584 |
| Unutilized credit facility | 20 | 391 | 20 |
| Repo transactions loan | (288) | - | - |
| Cash preparedness | 2,211 | 2,703 | 2,604 |
| European Investment Bank (bullet loan with expiry in 2022) | 372 | - | 372 |
Cash flow spend on operating activities was DKK 311 million (contribution of DKK 468 million), mainly driven by the net loss of DKK 292 million (net gain of DKK 40 million). Cash flow spend on investment activities was DKK 90 million (DKK 933 million), mainly for the construction of the new fill/finish manufacturing line. In the first six months of 2017 DKK 913 million was spend on investment in securities. Cash flow from financing activities contributed with DKK 293 million (DKK 4 million) primarily from the concluded repo transactions. The net change in cash and cash equivalents was DKK -109 million (DKK -460 million).
The Group's equity as of June 30, 2018 stood at DKK 2,250 million (DKK 2,506 million as of December 31, 2017).
Bavarian Nordic maintains its financial expectations for 2018 as announced March 12, 2018. The Company still expects revenues of approximately DKK 500 million for the full year and a loss before interest and tax (EBIT) of approximately DKK 385 million- The expected cash preparedness at year-end was recently upgraded from approximately DKK 1,850 million to approximately DKK 2,100 million after obtaining an unsecured loan facility of EUR 30 million from the European Investment Bank.
The financial expectations are based on an exchange rate of DKK 6.60 per 1.00 USD.
Bavarian Nordic faces a number of risks and uncertainties, common for the biotech industry. These relate to operations, research and development, manufacturing, commercial and financial activities. For further information about risks and uncertainties which Bavarian Nordic faces, refer to page 48 "Risk Management" in the 2017 annual report.
Since the publication of the 2017 annual report, the overall risk profile of the Company remains largely unchanged.
The Board of Directors and Corporate Management have, today reviewed and approved the Bavarian Nordic A/S interim report for the period January 1 to June 30, 2018.
The interim report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies, including those of Nasdaq Copenhagen.
In our opinion, the interim report gives a true and fair view of the group's assets and liabilities and financial position as of June 30, 2018, and the results of the group's activities and cash flows for the period January 1 to June 30, 2018.
In our opinion, the management's review provides a true and fair description of the development in the group's activities and financial affairs, the results for the period and the group's financial position as a whole as well as a description of the most important risks and uncertainty factors faced by the group.
Kvistgaard, August 16, 2018
Corporate Management:
Paul John Chaplin President and CEO
Board of Directors:
| Gerard W.M. van Odijk Chairman of the Board |
Anders Gersel Pedersen Deputy Chairman |
Erik Gregers Hansen |
|---|---|---|
| Peter H. Kürstein-Jensen | Frank A.G.M. Verwiel | Elizabeth McKee Anderson |
| DKK thousand | Note | 1/4 - 30/6 2018 1/4 - 30/6 2017 1/1 - 30/6 2018 1/1 - 30/6 2017 1/1-31/12 2017 | ||||
|---|---|---|---|---|---|---|
| Revenue | 3 | 86,340 | 397,276 | 97,634 | 594,972 | 1,370,151 |
| Production costs | 4 | 45,655 | 127,072 | 64,761 | 177,207 | 290,617 |
| Gross profit | 40,685 | 270,204 | 32,873 | 417,765 | 1,079,534 | |
| Research and development costs | 5 | 88,099 | 111,578 | 204,733 | 211,877 | 518,405 |
| Distribution costs | 8,965 | 11,220 | 18,472 | 19,906 | 39,878 | |
| Administrative costs | 50,640 | 45,057 | 89,558 | 86,752 | 168,057 | |
| Total operating costs | 147,704 | 167,855 | 312,763 | 318,535 | 726,340 | |
| Income before interest and tax (EBIT) | (107,019) | 102,349 | (279,890) | 99,230 | 353,194 | |
| Financial income | 6 | 5,428 | 7,746 | 11,022 | 21,923 | 56,426 |
| Financial expenses | 7 | 7,597 | 51,601 | 22,005 | 68,911 | 107,340 |
| Income before company tax | (109,188) | 58,494 | (290,873) | 52,242 | 302,280 | |
| Tax on income for the period | 626 | 12,201 | 1,386 | 12,000 | 120,937 | |
| Net profit for the period | (109,814) | 46,293 | (292,259) | 40,242 | 181,343 | |
| Earnings per share (EPS) - DKK | ||||||
| Basic earnings per share of DKK 10 | (3.4) | 1.5 | (9.1) | 1.3 | 5.7 | |
| Diluted earnings per share of DKK 10 | (3.4) | 1.5 | (9.1) | 1.3 | 5.7 |
| DKK thousand | 1/4 - 30/6 2018 1/4 - 30/6 2017 1/1 - 30/6 2018 1/1 - 30/6 2017 1/1-31/12 2017 | ||||
|---|---|---|---|---|---|
| Net profit for the period | (109,814) | 46,293 | (292,259) | 40,242 | 181,343 |
| Items that might be reclassified to the income statement: Exchange rate adjustments on translating foreign operations |
12,058 | 26,309 | 12,128 | 32,020 | 50,896 |
| Fair value of financial instruments entered into to hedge future cash flows |
(255) | - | (111) | 370 | 130 |
| Tax on other comprehensive income | - | (41) | - | (81) | (57) |
| Other comprehensive income after tax | 11,803 | 26,268 | 12,017 | 32,309 | 50,969 |
| Total comprehensive income | (98,011) | 72,561 | (280,242) | 72,551 | 232,312 |
| DKK thousand | Note | 30/6 2018 | 30/6 2017 | 31/12 2017 |
|---|---|---|---|---|
| Assets | ||||
| Software | 26,190 | 8,433 | 27,288 | |
| IMVAMUNE development project | - | 21,842 | - | |
| Intangible assets in progress | 3,910 | 19,625 | 5,704 | |
| Intangible assets | 30,100 | 49,900 | 32,992 | |
| Land and buildings | 187,518 | 201,153 | 194,155 | |
| Leasehold improvements | 1,245 | 1,197 | 1,329 | |
| Plant and machinery | 58,081 | 54,607 | 56,986 | |
| Fixtures and fittings, other plant and equipment | 20,529 | 22,280 | 20,531 | |
| Assets under construction | 146,648 | 35,436 | 74,977 | |
| Property, plant and equipment | 414,021 | 314,673 | 347,978 | |
| Other receivables | 1,346 | 1,473 | 1,216 | |
| Financial assets | 1,346 | 1,473 | 1,216 | |
| Deferred tax assets | 13 | - | 142,163 | - |
| Total non-current assets | 445,467 | 508,209 | 382,186 | |
| Development projects for sale | 22,200 | 70,069 | 22,200 | |
| Inventories | 8 | 139,777 | 152,632 | 111,847 |
| Trade receivables | 30,883 | 4,411 | 19,396 | |
| Tax receivables | 5,396 | - | 5,396 | |
| Other receivables | 9 | 19,961 | 15,421 | 22,916 |
| Prepayments | 12,093 | 4,992 | 5,012 | |
| Receivables | 68,333 | 24,824 | 52,720 | |
| Securities | 2,300,234 | 1,954,331 | 2,301,197 | |
| Cash and cash equivalents | 179,551 | 358,134 | 282,521 | |
| Securites, cash and cash equivalents | 2,479,785 | 2,312,465 | 2,583,718 | |
| Total current assets | 2,710,095 | 2,559,990 | 2,770,485 | |
| Total assets | 3,155,562 | 3,068,199 | 3,152,671 | |
| DKK thousand | Note | 30/6 2018 | 30/6 2017 | 31/12 2017 |
|---|---|---|---|---|
| Equity and liabilities | ||||
| Share capital | 323,106 | 314,693 | 322,451 | |
| Treasury shares | (233) | (233) | (233) | |
| Retained earnings | 1,870,591 | 1,778,833 | 2,156,883 | |
| Other reserves | 56,367 | 29,312 | 27,196 | |
| Equity | 2,249,831 | 2,122,605 | 2,506,297 | |
| Provisions | - | 24,949 | - | |
| Debt to credit institutions | 10 | 398,685 | 28,650 | 399,760 |
| Non-current liabilities | 398,685 | 53,599 | 399,760 | |
| Debt to credit institutions | 10 | 290,481 | 2,136 | 2,152 |
| Prepayment from customers | 11 | 63,854 | 736,194 | 79,617 |
| Trade payables | 71,545 | 34,322 | 82,901 | |
| Company tax | 82 | 2,723 | 139 | |
| Other liabilities | 12 | 81,084 | 116,620 | 81,805 |
| Current liabilities | 507,046 | 891,995 | 246,614 | |
| Total liabilities | 905,731 | 945,594 | 646,374 | |
| Total equity and liabilities | 3,155,562 | 3,068,199 | 3,152,671 |
| DKK thousand | 1/1 - 30/6 2018 1/1 - 30/6 2017 1/1-31/12 2017 | ||
|---|---|---|---|
| Net profit for the period | (292,259) | 40,242 | 181,343 |
| Adjustment for non-cash items: | |||
| Financial income | (11,022) | (21,923) | (56,426) |
| Financial expenses | 22,005 | 68,911 | 107,340 |
| Tax on income for the period | 1,386 | 12,000 | 120,937 |
| Depreciation, amortization and impairment losses | 19,879 | 19,841 | 37,529 |
| Expensing (amortization) of IMVAMUNE development project | - | 43,255 | 69,515 |
| Share-based payment | 18,559 | 29,246 | 26,797 |
| Adjustment for other non-cash items | - | - | 45,164 |
| Changes in inventories | (27,930) | (5,649) | 35,136 |
| Changes in receivables | (20,222) | 134,403 | 114,088 |
| Changes in current liabilities | (28,008) | 167,126 | (462,262) |
| Cash flow from operations (operating activities) | (317,612) | 487,452 | 219,161 |
| Received financial income | 15,204 | 9,852 | 19,707 |
| Paid financial expenses | (7,586) | (24,797) | (16,498) |
| Paid company taxes | (1,444) | (4,232) | (6,305) |
| Cash flow from operating activities | (311,438) | 468,275 | 216,065 |
| Investments in and additions to intangible assets | (2,729) | (11,296) | (22,341) |
| Investments in property, plant and equipment | (80,304) | (8,103) | (56,357) |
| Investments in/disposal of financial assets | (130) | (170) | 87 |
| Investments in securities | (790,356) | (1,154,058) | (2,162,790) |
| Disposal of securities | 783,608 | 240,569 | 896,192 |
| Cash flow from investment activities | (89,911) | (933,058) | (1,345,209) |
| Payment on loans | (1,075) | (1,064) | (2,133) |
| Proceeds from loans | 288,329 | - | 372,195 |
| Proceeds from warrant programs exercised | 5,415 | 9,838 | 40,858 |
| Proceeds from private placement | - | - | 207,482 |
| Cost related to issue of new shares | (25) | (60) | (707) |
| Purchase of treasury shares | - | (4,254) | (4,254) |
| Cash flow from financing activities | 292,644 | 4,460 | 613,441 |
| Cash flow of the period | (108,705) | (460,323) | (515,703) |
| Cash as of 1 January | 282,521 | 853,596 | 853,596 |
| Currency adjustments 1 January | 5,735 | (35,139) | (55,372) |
| Cash end of period | 179,551 | 358,134 | 282,521 |
| Reserves for | |||||||
|---|---|---|---|---|---|---|---|
| Reserves for | fair value of | ||||||
| Share | Treasury | Retained | currency | financial | Share-based | ||
| DKK thousand | capital | shares | earnings | adjustment | instruments | payment | Equity |
| Equity as of January 1, 2018 | 322,451 | (233) 2,156,883 | (37,502) | (129) | 64,827 | 2,506,297 | |
| Comprehensive income for the period |
|||||||
| Net profit | - | - | (292,259) | - | - | - | (292,259) |
| Other comprehensive income | |||||||
| Exchange rate adjustments on | |||||||
| translating foreign operations | - | - | - | 12,128 | - | - | 12,128 |
| Fair value of financial instruments | - | - | - | - | (111) | - | (111) |
| Total comprehensive income for | |||||||
| the period | - | - | (292,259) | 12,128 | (111) | - | (280,242) |
| Transactions with owners | |||||||
| Share-based payment | - | - | - | - | - | 18,386 | 18,386 |
| Warrant program exercised | 655 | - | 5,945 | - | - | (1,185) | 5,415 |
| Warrant program expired | - | - | 47 | - | - | (47) | - |
| Cost related to issue of new shares | - | - | (25) | - | - | - | (25) |
| Total transactions with owners | 655 | - | 5,967 | - | - | 17,154 | 23,776 |
| Equity as of June 30, 2018 | 323,106 | (233) 1,870,591 | (25,374) | (240) | 81,981 | 2,249,831 |
| Reserves for | |||||||
|---|---|---|---|---|---|---|---|
| Reserves for | fair value of | ||||||
| Share | Treasury | Retained | currency | financial | Share-based | ||
| DKK thousand | capital | shares | earnings | adjustment | instruments | payment | Equity |
| Equity as of January 1, 2017 | 313,539 | (111) 1,731,898 | (88,398) | (202) | 60,511 | 2,017,237 | |
| Comprehensive income for the | |||||||
| period | |||||||
| Net profit | - | - | 40,242 | - | - | - | 40,242 |
| Other comprehensive income | |||||||
| Exchange rate adjustments on | |||||||
| translating foreign operations | - | - | - | 32,020 | - | - | 32,020 |
| Fair value of financial instruments | - | - | - | - | 289 | - | 289 |
| Total comprehensive income for | |||||||
| the period | - | - | 40,242 | 32,020 | 289 | - | 72,551 |
| Transactions with owners | |||||||
| Share-based payment | - | - | - | - | - | 13,394 | 13,394 |
| Warrant program exercised | 1,154 | - | 10,565 | - | - | (1,881) | 9,838 |
| Warrant program expired | - | - | 320 | - | - | (320) | - |
| Cost related to issue of new shares | - | - | (60) | - | - | - | (60) |
| Purchase of treasury shares | - | (122) | (4,132) | - | - | - | (4,254) |
| Tax related to items recognized | |||||||
| directly in equity | - | - | - | - | - | 13,899 | 13,899 |
| Total transactions with owners | 1,154 | (122) | 6,693 | - | - | 25,092 | 32,817 |
| Equity as of June 30, 2017 | 314,693 | (233) 1,778,833 | (56,378) | 8 7 |
85,603 | 2,122,605 |
The interim financial statements are prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by EU and the additional Danish requirements for submission of interim reports for companies listed on Nasdaq Copenhagen. The interim report has not been audited or reviewed by the Company's auditors.
The interim financial statements are presented in Danish Kroner (DKK), which is considered the primary currency of the Group's activities and the functional currency of the parent company.
The accounting policies used in the interim financial statements are consistent with those used in the consolidated financial statements for 2017 and in accordance with the recognition and measurement policies in the International Financial Reporting Standards (IFRS) as adopted by EU.
The implementation of IFRS 9 "Financial Instruments" has not changed the classification and measurement of financial instruments and IFRS 15 "Revenue from Contracts with Customers" has not changed revenue recognition; see the detailed description in the consolidated financial statements for 2017 note 1.
In the preparation of the interim financial statements according to IAS 34, Interim Financial Reporting, as adopted by the EU, Management is required to make certain estimates as many financial statement items cannot be reliably measured, but must be estimated. Such estimates comprise judgments made on the basis of the most recent information available at the reporting date. It may be necessary to change previous estimates as a result of changes to the assumptions on which the estimates were based or due to supplementary information, additional experience or subsequent events.
Similarly, the value of assets and liabilities often depends on future events that are somewhat uncertain. In that connection, it is necessary to set out e.g. a course of events that reflects Management's assessment of the most probable course of events.
Further to the significant accounting estimates, assumptions and uncertainties, which are stated in the Annual Report 2017, the Management has not changed significant estimates and judgments regarding recognition and measurement, except that Management do not expect Bavarian Nordic, Inc. to be able to repay the intercompany loan in the foreseeable future. The loan is fully written-down in 2017 and from January 1, 2018 the loan is seen as part of the net investment in the US subsidiary. Changes in exchange rates related to the intercompany loan since January 1, 2018 are therefore recognized in other comprehensive income.
| DKK thousand | 1/4 - 30/6 2018 1/4 - 30/6 2017 1/1 - 30/6 2018 1/1 - 30/6 2017 1/1-31/12 2017 | ||||
|---|---|---|---|---|---|
| 3. Revenue | |||||
| IMVAMUNE sale | 32,545 | 368,042 | 36,925 | 553,391 | 874,307 |
| Sale of goods | 32,545 | 368,042 | 36,925 | 553,391 | 874,307 |
| Upfront payment, PROSTVAC Contract work |
- 53,795 |
- 29,234 |
- 60,709 |
- 41,581 |
398,538 97,306 |
| Sale of services | 53,795 | 29,234 | 60,709 | 41,581 | 495,844 |
| Revenue | 86,340 | 397,276 | 97,634 | 594,972 | 1,370,151 |
| 4. Production costs | |||||
| Cost of goods sold, IMVAMUNE sale | 7,252 | 93,742 | 7,419 | 136,253 | 221,210 |
| Contract costs | 34,491 | 17,229 | 39,021 | 24,016 | 61,772 |
| Other production costs | 3,912 | 16,101 | 18,321 | 16,938 | 7,635 |
| Production costs | 45,655 | 127,072 | 64,761 | 177,207 | 290,617 |
| 5. Research and development costs | |||||
| Research and development costs occured in | |||||
| the period | 122,590 | 103,035 | 243,754 | 196,784 | 519,226 |
| Of which: | |||||
| Contract costs recognized as production | |||||
| costs | (34,491) | (17,229) | (39,021) | (24,016) | (61,772) |
| Capitalized development costs | - | (2,429) | - | (4,146) | (8,564) |
| 88,099 | 83,377 | 204,733 | 168,622 | 448,890 | |
| Expensing (amortization) of prior-year | |||||
| costs attributable to the IMVAMUNE | |||||
| development project | - | 28,201 | - | 43,255 | 69,515 |
| Research and development costs | 88,099 | 111,578 | 204,733 | 211,877 | 518,405 |
| 6. Financial income | |||||
| Financial income from bank and deposit | |||||
| contracts | 210 | 24 | 335 | 53 | 644 |
| Interest income from financial assets not | |||||
| measured at fair value through the income | |||||
| statement | 210 | 24 | 335 | 53 | 644 |
| Financial income from securities | 5,218 | 4,883 | 10,687 | 9,150 | 20,817 |
| Adjustment of net present value of | |||||
| provisions | - | - | - | - | 22,245 |
| Net gains on derivative financial | |||||
| instruments at fair value through the | |||||
| income statement (held for trading) | - | 2,839 | - | 12,720 | 12,720 |
| Financial income | 5,428 | 7,746 | 11,022 | 21,923 | 56,426 |
| DKK thousand | 1/4 - 30/6 2018 1/4 - 30/6 2017 1/1 - 30/6 2018 1/1 - 30/6 2017 1/1-31/12 2017 | ||||
|---|---|---|---|---|---|
| 7. Financial expenses | |||||
| Interest expenses on debt | 3.377 | 887 | 7.054 | 1.707 | 5.678 |
| Interest expenses on financial liabilities not | |||||
| measured at fair value through the income | |||||
| statement | 3.377 | 887 | 7.054 | 1.707 | 5.678 |
| Fair value adjustments on securities | 2.389 | 3.480 | 8.308 | 5.723 | 12.319 |
| Net loss on derivative financial instruments | |||||
| at fair value through the income statement | 314 | - | 1.825 | - | - |
| Net foreign exchange losses | 1.517 | 47.234 | 4.818 | 61.481 | 89.343 |
| Financial expenses | 7.597 | 51.601 | 22.005 | 68.911 | 107.340 |
| DKK thousand | 30/6 2018 | 30/6 2017 | 31/12 2017 | ||
| 8. Inventories | |||||
| Raw materials and supply materials | 30.363 | 32.695 | 31.805 | ||
| Work in progress | 172.523 | 250.651 | 129.607 | ||
| Manufactured goods and commodities | 1.797 | 10.477 | 3.140 | ||
| Write-down on inventory | (64.906) | (141.191) | (52.705) | ||
| Inventories | 139.777 | 152.632 | 111.847 | ||
| Write-down on inventory 1 January | (52.705) | (110.697) | (110.697) | ||
| Write-down during the period | (12.201) | (30.494) | (23.199) | ||
| Use of write-down | - | - | 81.191 | ||
| Write-down end of period | (64.906) | (141.191) | (52.705) | ||
| 9. Other receivables | |||||
| Receivable VAT and duties | 12.231 | 3.986 | 10.715 | ||
| Financial instruments at fair value | 74 | 112 | - | ||
| Accrued interest | 7.656 | 11.323 | 12.201 | ||
| Other receivables | 19.961 | 15.421 | 22.916 | ||
| 10. Debt to credit institutions | |||||
| Mortgage | 28.642 | 30.786 | 29.717 | ||
| European Investment Bank (loan in DKK) | 372.195 | - | 372.195 | ||
| Security lending (repo transactions) | 288.329 | - | - | ||
| Debt to credit institutions | 689.166 | 30.786 | 401.912 | ||
| 11. Prepayment from customers | |||||
| Prepayments from customers as of January 1 | 79.617 | 530.645 | 530.645 | ||
| Prepayments received during the period | 14.411 | 637.566 | 704.813 | ||
| Recognized as income during the period | (30.174) | (432.017) | (1.155.841) | ||
| Prepayments from customers end of period | 63.854 | 736.194 | 79.617 | ||
| 12. Other liabilities | |||||
| Financial instruments at fair value | 269 | - | 129 | ||
| Liability relating to phantom shares | 1.607 | 18.107 | 2.723 | ||
| Payable salaries, holiday accrual etc. | 59.185 | 55.442 | 59.960 | ||
| Deposit and prepaid rent from sub-tenants | 1.777 | - | 1.640 | ||
| Other accrued costs | 18.246 | 43.071 | 17.353 | ||
| Other liabilities | 81.084 | 116.620 | 81.805 |
| Recognized in | ||||
|---|---|---|---|---|
| January 1, | the income | Recognized in | ||
| DKK thousand | 2018 | statement | equity | June 30, 2018 |
| Intangible assets | 5,366 | (831) | - | 4,535 |
| Property, plant and equipment | 6,602 | 4,939 | - | 11,541 |
| Development projects for sale | 17,420 | - | - | 17,420 |
| Financial instruments | 28 | - | 24 | 52 |
| Share-based payment | 10,441 | 1,888 | (6,159) | 6,170 |
| Tax losses carried forward | 241,859 | 48,187 | - | 290,046 |
| Write down - tax losses carried forward | (281,716) | (54,183) | 6,135 | (329,764) |
| Recognized deferred tax assets | - | - | - | - |
The Company has entered into transactions that transfer ownership of securities to a counterparty, while the Company retains the risks associated with the holding of the securities. If the Company retains all risks, the securities remain in the balance sheet, and the transactions are accounted for as loans received against collateral. Such transactions are repo transactions and securities lending. The transactions involve selling the securities to be repurchased at a fixed price at a later date. Counterparties are entitled to sell the securities or deposit them as collateral for loans.
| DKK thousand | 30/6 2018 | 30/6 2017 | 31/12 2017 |
|---|---|---|---|
| Carrying amount of transferred securities | 288,205 | - | - |
| Carrying amount of associated liabilities (repo transactions) | (288,329) | - | - |
| Net position | (124) | - | - |
The Group has financial instruments measured at fair value at level 1 and level 2.
The portfolio of publicly traded government bonds and publicly traded mortgage bonds is valued at listed prices and price quotas.
Currency forward contracts, currency option contracts and currency swap contracts are valued according to generally accepted valuation methods based on relevant observable swap curves and exchange rates.
Fair value hierarchy for financial instruments measured at fair value
| DKK thousand | Level 1 | Level 2 | Total |
|---|---|---|---|
| Securities | 2,300,234 | - | 2,300,234 |
| Derivative financial instruments at fair value through the income statement | - | 74 | 74 |
| Financial assets measured at fair value through the income statement | 2,300,234 | 7 4 |
2,300,308 |
| Derivative financial instruments to hedge future cash flow (interest) | - | (240) | (240) |
| Financial assets/liabilities used as hedging instruments | - | (240) | (240) |
| Derivative financial instruments at fair value through the income statement | - | (29) | (29) |
| Security lending (repo transactions) | (288,329) | - | (288,329) |
| Liability relating to phantom shares | - | (1,607) | (1,607) |
| Financial liabilities measured at fair value through the income statement | (288,329) | (1,636) | (289,965) |
| DKK thousand | Level 1 | Level 2 | Total |
|---|---|---|---|
| Securities | 2,301,197 | - | 2,301,197 |
| Financial assets measured at fair value through the income statement | 2,301,197 | - | 2,301,197 |
| Derivative financial instruments to hedge future cash flow (interest) | - | (129) | (129) |
| Financial assets/liabilities used as hedging instruments | - | (129) | (129) |
| Liability relating to phantom shares | - | (2,723) | (2,723) |
| Financial liabilities measured at fair value through the income statement | - | (2,723) | (2,723) |
Outstanding warrants as of June 30, 2018
| Outstanding | Addition | ||||||
|---|---|---|---|---|---|---|---|
| as of | during | Options | Trans | Outstanding | |||
| January 1 | the period | exercised | Annulled Terminated | ferred | as of June 30 | ||
| Board of Directors | 20,000 | - | (20,000) | - | - | - | - |
| Corporate Management | 375,770 | - | (30,000) | (29,610) | - | (111,319) | 204,841 |
| Other Group Management | 103,877 | - | - | - | - | - | 103,877 |
| Other employees | 842,572 | - | (4,500) | (12,706) | - | (26,470) | 798,896 |
| Retired employees | 117,463 | - | (11,000) | - | (2,900) | 137,789 | 241,352 |
| Total | 1,459,682 | - | (65,500) | (42,316) | (2,900) | - | 1,348,966 |
| Weighted average exercise | |||||||
| price | 266 | - | 8 3 |
287 | 7 4 |
- | 275 |
| Weighted average share price | |||||||
| at exercise | - | - | 200 | - | - | - | - |
| Numbers of warrants which can be exercised as of June 30, 2018 | 250,000 | ||||||
| at a weighted average exercise price of DKK | 131 |
The total recognized cost of the warrant programs was DKK 16.1 million in the first six months of 2018 (DKK 10.1 million).
| Dec | Aug | Dec | Dec | Jul | Nov | |
|---|---|---|---|---|---|---|
| DKK | 2013 | 2014 | 2015 | 2016 | 2017 | 2017 |
| Average share price | 82.00 | 117.50 | 334.00 | 222.50 | 383.50 | 259.50 |
| Average exercise price at grant | 96.50 | 131.40 | 366.85 | 260.20 | 430.45 | 303.03 |
| Expected volatility rate | 35.4% | 39.7% | 53.8% | 44.6% | 44.1% | 52.4% |
| Expected life (years) | 3.3 | 3.3 | 3.3 | 3.0 | 3.0 | 3.0 |
| Expected dividend per share | - | - | - | - | - | - |
| Risk-free interest rate p.a. | 0.74% | 0.63% | 0.25% | -0.48% | -0.46% | -0.55% |
| Fair value at grant 1 ) |
17 | 29 | 115 | 54 | 98 | 80 |
The expected volatility is based on the historical volatility.
1 ) Fair value of each warrant at grant applying the Black-Scholes model.
No significant changes in contingent liabilities and other contractual obligations have occurred since December 31, 2017 except for the Danish tax audit regarding allocation of the PROSTVAC development costs between Bavarian Nordic A/S and its U.S. subsidiary, Bavarian Nordic, Inc. between 2012-2016. The Company is in dialogue with the Danish tax authority ("SKAT") regarding the proposal.
On August 9, 2018, the Company announced the securing of a loan facility of EUR 30 million from the European Investment Bank (EIB), the long-term lending institution of the European Union owned by its Member States. The loan facility will support Company's investments into the new fill-finish manufacturing facility, which is currently under construction, and which is expected to be operational in 2021.
On August 8, 2018, the Company announced positive data from the extension study of its Phase 2 study investigating the safety and immune responses of its universal RSV vaccine, MVA-BN® RSV in an older adult population.
Except as noted above, there have been no significant events between June 30, 2018 and the date of approval of the Interim Results for the first half year of 2018.
The unaudited condensed consolidated interim financial statements were approved by the Board of Directors and Corporate Management and authorized for issue on August 16, 2018.
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