• Bavarian Nordic holds contracts totaling approximately $340 million for 2025, driven by vaccine demand and global health policies.
• Its diversified vaccine portfolio targets smallpox, mpox, rabies, tick-borne encephalitis, and investigational areas like chikungunya.
• BVNKF collaborates with international health organizations, adding both revenue opportunities and dependency risks.
• Regulatory events in 2025, especially for the chikungunya vaccine, are critical to Bavarian Nordic’s near-term revenue growth.
• Despite potential regulatory uncertainties, BVNKF trades at a discount relative to peers, with favorable growth prospects and margins, making it a speculative “Buy.”.

Bavarian Nordic A/S (OTCPK:BVNKF) is a Danish biotech focusing on vaccines for smallpox, mpox, rabies, tick-borne encephalitis [TBE], and ebola immunizations. The company has secured substantial contracts worth roughly $340 million for 2025. These contracts are related to prophylactic government policies to fight against resurgent health threats such as the mpox outbreak in Africa. However, vaccine stocks now have some added uncertainty due to the potential designation of Robert F. Kennedy Jr. as the head of the US Department of Health and Human Services. Nevertheless, I think BVNKF already trades at a discount relative to its peers, plus it has favorable growth prospects and margins into 2025. So, ultimately, I lean towards a speculative “Buy” rating for investors who understand its embedded biotech and regulatory risks.

Vaccine Play: Business Overview

Bavarian Nordic is a Danish biotechnology company that develops vaccines for infectious illnesses. Founded in 1992 and headquartered in Hellerup, Denmark, the company also has research and office facilities in Switzerland, Germany, and the United States. The company’s portfolio includes approved vaccines, such as a non-replicating vaccine for smallpox and mpox, previously known as monkeypox. These are commercialized under Imvamune in Canada, Imvanex in Europe, and Jynneos in the US. Similarly, RabAvert is distributed in the US and Rabipur in Europe to prevent human rabies and prophylaxis after exposure. Also, Encepur is approved in Europe for immunization against tick-borne encephalitis [TBE].

Furthermore, on September 20, 2024, BVNKF’s mpox vaccine received a label extension to include adolescents aged 12 to 17 in the EU. This was based on the European Medicines Agency [EMA] ‘s recommendation. Also, the World Health Organization [WHO] approved this vaccine for adolescents to enhance protection for this vulnerable group. Additionally, the company is preparing a 2025 relaunch of Vivotif for typhoid and Vaxchora for cholera.

Moreover, BVNKF’s pipeline includes investigational vaccines like CHIKV, a virus-like particle [VLP]-based candidate indicated for Chikungunya prevention. Its BLA submission was completed in June 2024, with the PDUFA date set for February 14, 2025. Also, the Marketing Authorisation Application (MAA) with the European Medicines Agency (EMA) received filing acceptance and validation on July 18, 2024. The launch is expected in 1H2025. Another vaccine candidate is MVA-BN WEV for equine encephalitis immunization. This latter IP was developed with US Department of Defense funding, and its Phase 2 trials are planned for later this year.

BVNKF is also working to extend the global reach of its vaccines, collaborating with health organizations to address emerging infectious threats. The WHO has prequalified BVNKF’s mpox vaccine, which should facilitate its worldwide distribution. Moreover, the company is working with Africa Centres for Disease Control and Prevention [Africa CDC] to increase the production of the mpox vaccine to ensure equitable immunization access in this continent using local capacities. BVNKF has also partnered with Gavi, the Vaccine Alliance, to improve immunization coverage, especially in low-income countries.

Overall, I think this shows that collaborating with NGOs and other international health organizations is a key aspect of BVNKF’s strategic priorities. These collaborations undoubtedly facilitate its revenue growth, making it a key value driver to consider. However, it’s also a potential risk because BVNKF’s revenue prospects would decline significantly if these collaborations ceased.

Mpox Outbreaks and Regulatory Events

Nevertheless, so far, BVNKF has secured orders totaling around $340 million for 2025 for its mpox and smallpox vaccines. This substantial revenue is partially driven by the WHO’s decision to declare mpox a global health emergency for the second time due to the appearance of a new variant of the virus called “Clade lb” in the Democratic Republic of Congo. Since this announcement, 15 African countries have presented more than 29,000 mpox cases in 2024, resulting in 738 fatalities. The outbreak underscores the urgent need for immunizations and the important role of BVNKF in alleviating this crisis.

BVNKF’s 2025 revenue contracts include agreements with the US government and Germany. In fact, these governments have already placed orders totaling over 220 million to be fulfilled across several years for smallpox and mpox vaccines. Essentially, this is a prophylactic move on their part in case of any serious outbreaks. This is a lucky tailwind for BVNKF, and I think it should persist into 2025 and maybe 2026. Additionally, more than 100,000 doses will be sold in the US private market.

Likewise, Hera requested 175,420 doses of mpox vaccine for donation to the Africa CDC, and UNICEF ordered 1 million mpox vaccine doses to support developing countries. So, there’s undoubtedly a strong demand for these smallpox and mpox vaccines. It’s challenging to anticipate how long this trend will persist. This is especially true since these organizations could quickly change their healthcare priorities. Nevertheless, BVNKF has a commanding position in this vaccine niche market for now.

Aside from its mpox and smallpox vaccine businesses, BVNKF also reported promising growth in its Travel Health segment. This revenue vertical presented 21% growth in Q3 and 18% over the first nine months of 2024. For context, this segment includes products for TBE, rabies, cholera, and typhoid, which are immunizations required before regional trips.

However, despite these achievements, on November 15, 2024, BVNKF stock declined alongside other vaccine manufacturers. This is likely due to concerns related to Robert F. Kennedy Jr.’s designation as the head of the US Department of Health and Human Services, which manages the FDA and CDC. RFK Jr. has been a critic of big pharma and the vaccine industry, so this might create a temporary headwind for companies like BVNKF until we get more clarity on actual healthcare regulatory policies.

Relatively Cheap: Valuation Analysis

From a valuation perspective, BVNKF trades at a $1.9 billion market cap, making it already a midsized biotech in its sector. Its balance sheet holds $279.6 million in cash and short-term investments against $2.3 million in financial debt. However, it has $487.4 million in total liabilities, mostly from regular operating liabilities. Its book value stands at $1.6 billion, indicating a P/B of 1.2, which seems reasonable. For comparison, its sector’s median P/B is 2.3, so it appears to trade at a discount relative to peers. Moreover, according to Seeking Alpha’s dashboard on BVNKF, the company is projected to generate almost $1.0 billion in revenues by 2025. This would imply a forward P/S of 1.9, which is again lower than its sector’s median forward P/S of 3.7.

I also estimate the company’s latest quarterly cash burn was $70.3 million by adding its CFOs and Net CAPEX (including intangible asset purchases). This suggests a cash runway of approximately one year, which, I think, is BVNKF’s main drawback. This is a concerningly short runway and suggests the company might have to do an equity raise in the next year or so. Thus, I think this is the company’s main headwind in the near term, which ultimately nudges me towards a more cautious rating. Still, it’s another risk layer that investors must consider because if margins deteriorate in 2025, it could actually mean its cash runway might be even shorter than my estimate. If that happened, it could override BVNKF’s whole investment thesis as it nears the end of its cash runway.

Nevertheless, the company is forecasted to increase its 2025 revenues by about $176.0 million YoY, which could reduce its cash burn significantly. After all, its latest quarterly TTM EBIT margins were 19.8%, which could imply a positive EBIT delta in 2025 of about $34.8 million. While this wouldn’t be enough to nudge it into positive cash flow territory, it could reduce its cash burn significantly and extend its runway. Nonetheless, my view is that margins are likely to improve due to the transfer completion of BVNKF’s rabies vaccine from GSK. Also, the Chikungunya vaccine should contribute positively to margins as well going forward.

So, considering those two variables and its cash runway, I see a “Buy” rating as fair for BVNKF at these levels. In my view, its valuation doesn’t seem to fully account for its promising growth prospects and positive drivers for margin improvement.

Investment Caveats: Risk Analysis

Naturally, this investment does have some key risks to consider. In particular, its Chikungunya vaccine will have FDA and EMA reviews by mid-2025. If either of these regulatory entities rejects or asks for additional data, it could deal a major blow at BVNKF’s investment thesis. This key revenue stream should prompt the market to focus on BVNKF’s narrowing cash runway if it’s eliminated or postponed meaningfully.

Similarly, potential logistical issues, particularly in Africa, could hit the company’s revenue cadence and translate into margin headwinds. Logistical issues could also endanger the company’s reputation with UNICEF or other organizations, creating some additional headline risk for investors. Lastly, it’s also true that BVNKF’s market is inherently competitive, and big pharma is actively developing and commercializing other competing vaccines. Moreover, if better vaccines are developed, it could essentially derail its revenue streams, leading to substantial downside risk. If this bearish scenario played out, I would argue the shares might face significant downside.

Yet, overall, I still think the bull case is more compelling at this juncture. The risks mentioned above seem somewhat low-probability, so I lean towards a “Buy” rating for investors who understand the risks.

Speculative “Buy”: Conclusion

Overall, I see some pros and cons with BVNKF. I ultimately lean towards a “Buy” rating mainly because its revenues are expected to grow into 2025, and margins should also improve. These key value drivers don’t seem to be fully accounted for in its current valuation multiples. In fact, BVNKF trades at a clear discount relative to its peers. So, even if this bullish outlook is speculative, it seems offset by its valuation discount at these levels. Thus, I think taking a bullish stance on BVNKF is worth rating it a “Buy” for investors who understand its embedded biotech risks.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Bullish On Bavarian Nordic’s Vaccine Portfolio And Revenue Potential In 2025 appeared first on Up2info.com.

• Bavarian Nordic’s mpox vaccine sales have declined post-outbreak, causing reduced revenue and highlighting its reliance on outbreak-driven demand.
• The company’s Travel Health segment demonstrated strength, driven by rabies and tick-borne encephalitis vaccine sales, with a 21% revenue increase YoY.
• Bavarian is pursuing diversification, including the chikungunya vaccine launch, which targets a growing $500 million market by 2032.
• Financially, Bavarian maintains adequate liquidity with $262 million in cash and minimal long-term debt, balancing short-term liabilities well.
• Despite volatility, Bavarian’s diversification strategy and global health positioning support a continued “buy” recommendation for long-term investors.

My last assessment on Bavarian Nordic (OTCPK:BVNRY), a Danish-based company, followed the World Health Organization [WHO] declaring the mpox outbreaks in Africa a “global emergency.” I posited that Bavarian, with the only FDA-approved vaccine for both smallpox and mpox, Jynneos, would be poised to benefit. Indeed, the company has since secured large U.S. and international contracts, but the outbreak has been somewhat muted (as evidenced by the CDC’s U.S. case trends). I pointed to this possibility earlier.

Whether or not anything major will come from this remains quite uncertain (e.g., how widespread the disease will become and how governments will respond to it). In addition, EU authorities see mpox as having “low impact if precautions are taken.” This is because mpox is typically transmitted via close physical contact.

Bavarian Nordic Balances Geopolitical Risks and Vaccine Market Volatility

Now that the mpox hype has settled a bit, it’s back to fundamentals, right? Wrong. It has been reported that “vaccine stocks,” like BVNRY, were particularly affected in a negative way by the news that President-elect Trump selected Robert F. Kennedy Jr. to head the U.S. Department of Health and Human Services. Mr. Kennedy is on the record as expressing anti-vaccine sentiments. For example, he promoted discredited theories linking vaccines to autism and other health issues. On the other hand, Mr. Kennedy has since taken a more mellowed stance, stating that his kids were vaccinated, and he wants vaccines to be safer. However, this does not discredit his “long record of promoting anti-vaccine views,” per the Associated Press. Subsequently, many vaccine stocks were down Friday. In fact, BVNRY closed down nearly 15%. Whether or not Mr. Kennedy, and his past anti-vaccine sentiments, will be confirmed remains to be seen. Additionally, no one knows how any of this will play out if he is confirmed. We do know that this unorthodox appointment by Mr. Trump is causing a lot of uncertainty in biotechnology and healthcare stocks. Uncertainty increases risk. Risk increases the required rate of return, resulting in a lower present value of future cash flows and decreased stock prices.

Bavarian: Transitioning Amid Declining Mpox Demand and Strategic Expansion

BVNRY may have been red Friday for other reasons as well. Bavarian reported Q3 earnings that day. Total revenue was ~$191 million (1 DKK = 0.14 USD), a 1% YoY decrease. In the first nine months of 2024, total revenue was ~$507 million, down 22% YoY due to reduced demand for mpox vaccines post-pandemic peak. Bavarian’s Travel Health segment was strong, seeing Q3 revenue increase 21% to ~$108 million. Q3 EBITDA was ~$35 million. In the last nine months, Bavarian reported an operating cash flow of ~$139 million. So, Q3 marked a transitionary period for Bavarian, characterized by strategic shifts and preparations for upcoming launches. As management elaborated:

(…) after nine months, DKK3.6 billion in revenue, 43% gross margin, total operating costs of DKK1.3 billion, R&D costs, obviously, impacted by the development of the chikungunya vaccine that we are anticipating to launch next year and SG&A costs impacted by, first of all, the acquisition from Emergent, where we took over some sales and marketing expenses, but also expansion into a few new markets, as Paul alluded to, where we are establishing ourselves this year in France and in the U.K. and Canada, we have done as well, both to take back the business we partner with Valneva, but also to prepare us for the chikungunya launch next year.

These numbers shouldn’t come as a surprise; Bavarian’s revenue is historically volatile and relies on outbreak-driven demand, which is inherently unpredictable. The company’s efforts towards enhancing manufacturing in Africa bode well for long-term demand for mpox vaccines. However, as the demand has waned, these capital investments weigh heavily on Bavarian’s ability to generate cash in the short term.

Importantly, the company has been pursuing diversification for years to mitigate reliance on outbreak-driven revenues. Take for instance, their acquisition of Rabipur/RabAvert (rabies) and Encepur (tick-borne encephalitis) vaccines from GlaxoSmithKline (GSK) in 2019. Their Travel Health segment’s encouraging performance was predominately driven by these two vaccines. The company is in the process of transferring the manufacturing of these vaccines to its own facilities. This should enable increased scale and margin improvements. Bavarian plans to launch a chikungunya vaccine candidate next year. It is currently being reviewed by authorities for approvals in the U.S. (February 14 PDUFA date) and Europe. In November 2023, Valneva’s Ixchiq became the first approved chikungunya vaccine by the U.S. FDA. This market is estimated to reach $500 million annually by 2032. Bavarian’s increased production capabilities and distribution networks could favor them in the long run to meet this demand and ensure vaccine accessibility.

Financial Health

As of September 30, Bavarian reported ~$262 million in cash, cash equivalents, and securities. Total current assets were $726 million, while total current liabilities were $431 million. Subsequently, Bavarian sports a current ratio just under 2. While not ideal, this does imply they can reasonably cover short-term obligations. Bavarian lacks significant long-term debts.

BVNRY Stock: Diversification Balances Outbreak Volatility Amid Policy Uncertainty

In conclusion, mpox has not been the tailwind that investors anticipated just a few months ago. Bavarian’s ability to generate cash is still primarily dependent on outbreak-driven demand. The company has made significant efforts to diversify its revenue by including assets with more stable demand (e.g., Rabipur/RabAvert). Furthermore, their investments in manufacturing and geographical expansion are expected to yield long-term rewards.

Given the nature of its business, Bavarian is particularly sensitive to geopolitical risks, as its portfolio heavily relies on vaccines addressing public health emergencies. The appointment of Mr. Kennedy could negatively influence public discourse and policymaking around vaccines, ultimately impacting Bavarian’s business. Shifts in public health strategies could alter the landscape for Bavarian’s government contracts and partnerships. The unorthodox Kennedy appointment is a prime example of the variety of risks involved in investing. Kennedy’s well-documented anti-vaccine stance and his appointment are “known unknown” risks because their specific impact on his role and influence on vaccine funding remain uncertain. In fact, Bavarian was asked directly about the Kennedy appointment potential risk to the vaccine market during their earnings call.

Well, the first thing I would say is that during the first turn, that Trump was President, it was — we saw the Biodefense business being heavily supported. So, I look forward again to working with the new administration. (…) And regarding vaccines in general, I mean we need to deal with that. So, I think it’s better to just wait and see what really happens with the appointment and what the policies will be.

In conclusion, I do not see any compelling reason to change my rating from “buy” despite recent stock underperformance and geopolitic uncertainty. Importantly, this recommendation is made within the context of a diversified, barbell portfolio.

I believe Bavarian is well-positioned for global health emergencies, and their diversification efforts should lead to a more stable business.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article is intended to provide informational content and should not be viewed as an exhaustive analysis of the featured company. It should not be interpreted as personalized investment advice with regard to "Buy/Sell/Hold/Short/Long" recommendations. The predictions and opinions presented are based on the author's analysis and reflect a probabilistic approach, not absolute certainty. Efforts have been made to ensure the information's accuracy, but inadvertent errors may occur. Readers are advised to independently verify the information and conduct their own research. Investing in stocks involves inherent volatility, risk, and speculative elements. Before making any investment decisions, it is crucial for readers to conduct thorough research and assess their financial circumstances. The author is not liable for any financial losses incurred as a result of using or relying on the content of this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post Bavarian Nordic’s Mpox Moment Fades, But Diversification Shines appeared first on Up2info.com.

• WHO has declared a public health emergency due to an upsurge of mpox in Africa, leading to a coordinated international response.
• Biotech companies working on mpox solutions have seen substantial gains in share prices following the announcement.
• Companies like Bavarian Nordic and Emergent BioSolutions are leading the way in developing and distributing vaccines for mpox, with potential for value realisation.
• Multiple other microcap stocks have experienced surges in valuation, but the reality may be that, unlike during the pandemic era, fortunes cannot be won backing mpox stocks. The situation is barely comparable with the pandemic.

Investment Overview

Last week, on August 14, the World Health Organisation (“WHO”) declared a public health emergency in relation to an “upsurge of mpox in the Democratic Republic of the Congo (DRC) and a growing number of countries in Africa”.

WHO Director-General Dr Tedros Adhanom Ghebreyesus was quoted stating:

The emergence of a new clade of mpox, its rapid spread in eastern DRC, and the reporting of cases in several neighbouring countries are very worrying. On top of outbreaks of other mpox clades in DRC and other countries in Africa, it’s clear that a coordinated international response is needed to stop these outbreaks and save lives.

Professor Dimie Ogoina, Chair of the International Health Regulations (“IHR”) Committee that helped determine the ruling, was quoted as follows:

The current upsurge of mpox in parts of Africa, along with the spread of a new sexually transmissible strain of the monkeypox virus, is an emergency, not only for Africa, but for the entire globe. Mpox, originating in Africa, was neglected there, and later caused a global outbreak in 2022. It is time to act decisively to prevent history from repeating itself.

The previous outbreak in 2022 – also declared a public health emergency – was declared over in May 2023, and the strain identified – Clade II – was less severe than the latest strain identified, Clade Ib, which carries a much greater risk of death. Outside of Africa, a single case of Clade Ib mpox has been identified in Sweden, thus far.

The WHO says that it has now:

… triggered the process for Emergency Use Listing for mpox vaccines, which will accelerate vaccine access for lower-income countries which have not yet issued their own national regulatory approval. Emergency Use Listing also enables partners including Gavi and UNICEF to procure vaccines for distribution.

There are a number of listed biotech companies working on mpox vaccine solutions, antivirals, or diagnostics kits, and unsurprisingly, last week’s news, and the necessity to find effective solutions quickly, has triggered substantial gains in many of these companies share prices.

For example, at the time of writing:

• Emergent BioSolutions (NYSE:EBS) stock is up over 50% across the past 5 days. Current market cap is $542m.
• Bavarian Nordic (BVNRY) stock is up over 20% on a 5-day basis, and nearly 50% on a 1-month basis, giving the company a market cap valuation of $3.13bn.
• Co-Diagnostics (NASDAQ:CODX) shares are trading up over 30% on a 5-day basis with a market cap valuation of $48m.
• Tonix Pharmaceuticals (NASDAQ:TNXP) shares leaped in value last week from a price of $0.44, to a high of $0.73, although the gains have since been given back.
• GeoVax Labs (NASDAQ:GOVX) shares are up over 115%, giving the company a market cap valuation of ~$30m
• Applied DNA Sciences (NASDAQ:APDN) stock has risen in value by over 300% across the past 5 days, and its market cap has risen to $14.6m
• Virax Biolabs (NASDAQ:VRAX) shares are up over 190% on a 5-day basis, valuing the company at $9m

Searching For Value Among Mpox Rally – Caution Is Paramount

The first thing to note about market rallies triggered by outbreaks of disease is that they may not last long.

For example, in 2022, shortly after the health emergency was declared, Bavarian Nordic stock jumped from a price of ~$11 in May, to over $18 per share in August. By the time the emergency was declared over in May 2023, Bavarian Nordic’s stock was trading at ~$10 per share.

The second thing to note is that amongst the rallying stocks, there are many companies of such low market cap valuation that they must be considered amongst the most risky stocks to buy across any area of the stock market. Very small share purchases can send their valuations soaring, while small sales can have the opposite effect.

And a third problem is preparedness – are these companies genuinely capable of making a meaningful contribution to the emergency, through e.g. developing a vaccine, creating a diagnostics tool, assisting with manufacturing or distribution of a vaccine or antiviral?

Virax – Third-Party Test Kit Supplier, A Typical Example

Let’s begin by taking a closer look at Virax, a $9m market cap company which says it has the capability to distribute PCR tests for mpox, amongst other diseases.

In 2022, 36 cases of mpox were identified in the United Kingdom, with the U.S., Canada, Australia, Italy, Spain and Portugal also reporting cases. So far in 2024, cases of Clade 1b have been reported in Burundi, Kenya, Rwanda and Uganda in Africa, and outside of the continent, only in Sweden to date.

As such, the requirement for mass testing would appear to be highly unlikely, although it is worth noting that cases of mpox – any strain – have been identified in the US, China, Russia, Brazil, Australia, and much of Europe and Central America in 2024.

Virax is essentially a third-party delivery company reliant on larger partners for its tests, that scarcely generates any revenues, and has been flirting with delisting from the Nasdaq, completing a 1-10 reverse stock split in December last year in order to maintain compliance with Nasdaq listing laws (shares must trade above $1).

While it isn’t inconceivable that Virax diagnostics kits could be used, were mpox to begin to spread in a similar fashion to COVID in 2020, the chances of that happening are extremely remote, experts have warned, therefore buying stock at the current inflated price would be a hugely risky endeavour.

Tonix – Preclinical Vaccine Candidate In Bavarian Nordic’s Shadow

Tonix, meanwhile, is developing TNX-801 (recombinant horsepox virus), for preventing mpox, however its primary focus is on treating fibromyalgia (a Phase 3 study is underway) and TNX-801 has not yet even entered the clinic for in-human testing.

According to the United Nations website, several vaccines are already approved to treat mpox:

WHO recommends use of MVA-BN or LC16 vaccines, or the ACAM2000 vaccine when the others are not available.

MVA-BN, otherwise known as Jynneos, has been developed and is marketed and sold by Bavarian Nordic, based in Denmark. As mentioned, Bavarian Nordic shares have been rising, and the company has issued several press releases discussing Jynneos.

On August 13, Bavarian Nordic announced that the European Health Emergency Preparedness and Response Authority (“HERA”) had made an order for ~175k doses of Jynneos “for donation to the Africa Centres for Disease Control and Prevention (“CDC”) in support of their strengthened response to the mpox outbreak which is spreading across the African continent.”

In its press release, the company notes that “only two African countries have granted Emergency Use Authorization for the MVA-BN vaccine”, and also states that:

The order from HERA will have no impact on the company’s overall financial guidance for 2024.

Bavarian’s vaccine – approved in the US and Canada as Jynneos and IMVAMUNE respectively, and in the EU/EEA and UK as IMVANEX – was originally developed in collaboration with the U.S. government to ensure the supply of a smallpox vaccine for the entire population.

On August 16, in response to the mpox outbreak, Bavarian Nordic submitted data to the European Medicines Agency (EMA) to attempt to secure approval for use in adolescents. On August 17, the company discussed supply in a separate press release, noting that it:

… supplied more than 15 million doses of the mpox vaccine to more than 76 countries around the World during the mpox PHEIC in 2022/23

The company also noted that it:

… has informed the Africa CDC that it has the capacity to manufacture 10 million doses by the end of 2025, in addition to current orders, and could already supply up to 2 million doses this year.

The LC16 vaccine is produced by the private Japanese pharmaceuticals company KM Biologics Co, part of the candy maker Meiji Holdings Co.

Emergent BioSolutions – Credible Competitor To Bavarian?

Another company with a vaccine developed to treat smallpox that could be adapted to treat mpox is Emergent BioSolutions, a +$500m market cap company, albeit after a 300% share price run up year-to-date.

Emergent’s key product is NARCAN nasal spray, developed to help reduce opioid overdose deaths, while a smallpox and an anthrax antibody and vaccine also contribute to revenues, which were $255m in Q2 2024, with $120m of that figure driven by Narcan, and only $18m by the smallpox products.

In a press release yesterday, Emergent stated it has:

… pledged to donate 50,000 doses of its ACAM2000^®, (Smallpox (Vaccinia) Vaccine, Live), through Direct Relief, a humanitarian relief organization with a long history of providing vital medicines to the Democratic Republic of the Congo (DRC), as well as the other impacted countries of Burundi, Kenya, Rwanda, and Uganda

Emergent submitted a supplementary New Drug Application (“NDA”) to the FDA last year requesting authorisation to use ACAM2000 to treat mpox, and the company notes the “Africa CDC estimated they will need 10 million doses to control the epidemic in the continent”, meaning more doses of alternative vaccines will be required.

The WHO has invited manufacturers of mpox vaccines to submit an Expression of Interest for the WHO’s assessment as to whether their vaccine may be added as an Emergency Use Listing (“EUL”). At this stage, however, the CDC only recommends vaccination for those who suspect they may have had exposure to mpox, through sex with a partner who has subsequently been diagnosed with mpox.

Essentially, mpox is not as easily transmissible as COVID was, with prolonged contact – usually sexual activity – tending to cause spread of mpox, while COVID was spread via droplets in the air, making it extremely infectious. As such, and as has been stated by the regulatory health authorities, widespread vaccination against mpox remains a distant prospect.

Emergent Biosciences stock clearly seems to have spiked in recent weeks, but its stock is down over 20% in trading so far today (at the time of writing) therefore we may speculate the market is already beginning to refocus on Emergent’s somewhat turbulent day-to-day business operations.

The “Best Of The Rest” – Co-Diagnostics, Geovax, Applied DNA

For those still determined to find some value in companies with mpox capabilities, however obscure, GeoVax has “preclinical research and development programs” that “include preventive vaccines against mpox“, so we are back in Tonix territory – it is hard to imagine the requirement for new mpox vaccines to extend to a $30m valuation microcap not yet in the clinic.

Nevertheless, one bold analyst has set a price target of $22 for the company, whose shares presently trade at $5.80, after a triple-digit percentage run up in its valuation over the past week. GeoVax has announced this week that it will raise $8.5m via an at-the-market fundraising, perhaps taking advantage of an elevated share price, but has not made any communications around mpox, having six other preclinical infectious disease candidates in its pipeline, two cancer therapies in clinical studies, and a COVID vaccine in Phase 2b studies.

Meanwhile, Utah based Co-Diagnostics makes PCR tests for infectious diseases (amongst numerous other projects), although its latest quarterly report (Q2’24) 10Q submission makes no mention of mpox, and the company earned just $161k of product revenues last quarter, as it works towards securing 501K clearance for a COVID-19 test kit. The company has not yet issued any communication relating to the mpox emergency.

Finally, Applied DNA is another PCR test kit maker, and its latest quarterly report makes no mention of mpox, although its website currently carries the following statement:

Applied DNA Clinical Labs, LLC (“ADCL”) has the capability to offer Mpox testing under its Linea™ Mpox Virus 1.0 Assay, a New York State Department of Health-approved laboratory test. The Linea Mpox test is approved only for the detection of Mpox Clade II, which was in multi-country circulation in 2022 and early 2023, and which continues to circulate at low levels.

Intriguing, perhaps, but the fact the test cannot detect the more troublesome Clade Ib strain is problematic, and the possibility of mass testing for mpox seems remote, given it is easier to detect who may be at risk than who may be at risk for e.g. COVID, or other infectious diseases.

Concluding Thoughts – Plenty Of Speculation, But Few – If Any – Stocks Should Be Spiking On Mpox Concerns

Hopefully, this whistle-stop tour of stocks with potential upside related to their mpox treatment or detection qualities has provided a useful guide for readers.

Naturally, investor’s opinions around the latest mpox outbreak and its implications will differ, but some conclusions seem inescapable.

Mpox is an entirely different type of disease to COVID, that is nowhere near as infectious and tends to affect a certain group – men having sex with other men.

While the outbreak is serious and devastating – with ~450 deaths reported in the DRC, thanks to the more deadly strain, regulatory authorities are advising the outbreak may be contained and there is no requirement for mass testing, mass vaccination, lock down or any other COVID era phenomenon.

Few listed companies are in a position to make a meaningful difference to counterract the mpox outbreak, and those that are have issued statements. Arguably, the two companies that realise genuine value from helping treat the outbreak would be Bavarian Nordic or Emergent BioSolutions, although the evidence is beginning to suggest that initial share price spikes are already beginning to slide, and investors may generally be better off investing in these companies on the strength of their day-to-day business operations as opposed to their ability to realise unexpected revenues from mpox.

Essentially, the play on an outbreak such as mpox would be to act decisively and quickly on the earliest of news, and to be prepared to lose large sums of money if investing too late, and potentially even finding it hard to sell stock during a hype-induced rally.

While fortunes were rapidly made and lost during the pandemic era, the requirement for mass vaccinations was immediate and global, with COVID vaccines and antivirals ultimately earning hundreds of billions of dollars, justifying the hype around so many biotechs pivoting to COVID vaccine of antiviral development.

There seems almost no prospect of there being a repeat of such a prolonged period of uncertainty and speculation, but naturally, Wall Street will be monitoring the situation carefully and making speculative buys.

The reality may be that mpox offers few if any chances to realise a rapid gain that is not highly speculative and carries a risk of heavy losses, however, at least at the present time, based on an objective overview of the emergency at this time.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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• Bavarian Nordic specializes in vaccines for infectious diseases and immuno-oncology therapies, with Jynneos being a featured vaccine.
• Jynneos, Bavarian’s vaccine for smallpox and monkeypox, is the only FDA-approved option for both conditions.
• Bavarian Nordic’s 2024 revenue guidance is between $710 million and $750 million, influenced by fluctuating public health demands.
• Bavarian Nordic offers a cautious “buy” opportunity, with risks tied to the uncertain future demand for its Jynneos vaccine.

Bavarian Nordic: Navigating the Complexities of a Vaccine-Driven Market

Bavarian Nordic (OTCPK:BVNRY) (OTCPK:BVNKF) is a Danish biotechnology company specializing in the development, manufacturing, and commercialization of vaccines for infectious diseases and immuno-oncology therapies. Bavarian Nordic’s proprietary MVA-BN technology platform is the key asset that enables vaccine development. A featured vaccine is Jynneos. It is the only FDA-approved vaccine for both smallpox and monkeypox in the U.S., with corresponding approvals in the EU and Canada (Imvanex and Imvamune, respectively). The company also has vaccines approved for rabies (Rabipur) and tick-borne encephalitis (Encepur). MVA-BN RSV is in late-stage clinical trials for RSV, a $5.8 billion market expected to grow at a CAGR of 12.8% over the next few years.

Given the markets in which Bavarian operates, it is unsurprising that revenue fluctuates, though it is noticeably higher now than in previous years. This is largely associated with recent monkeypox outbreaks.

According to Seeking Alpha data, total revenue for 2023 was $1.046 billion. Gross profit was $764.3 million. Bavarian reported an operating income of $323.1 million. Bavarian recognizes revenue from two main segments: public preparedness and travel health. Recall that Bavarian Nordic acquired Emergent BioSolutions’ (EBS) travel vaccine portfolio last year for $274 million. This included Vivotif for the prevention of typhoid fever and Vaxchora for the prevention of cholera. Their public preparedness segment made up the majority of revenues for 2023, coming in at $703.78 million. The two segments were more balanced in Q1 2024 as Jynneos’ revenues waned following the 2022–2023 monkeypox outbreak.

Revenue for 2024 is expected to be between $710 million and $750 million, with EBITDA ranging from $154 million to $189 million. Please keep in mind that these financial numbers have been converted from DKK to USD and may differ from source to source due to exchange rates.

However, there have been significant global developments that may alter their full-year outlook. On Wednesday, the World Health Organization [WHO] declared the monkeypox outbreaks in Africa a “global emergency.” To date, “more than 14,000 cases and 524 people have died,” implying a death rate of up to 4%, or one in every 25. On Thursday, Swedish officials reported the first monkeypox case, similar to the more infectious variants out of Congo. On Friday, it had spread to Pakistan. Bavarian’s vaccine, Jynneos, is approved in the US and Europe for monkeypox. But it is not widely available, especially in places like Africa where access to healthcare is poor, which can result in outbreaks. It is typically reserved for high-risk groups, such as healthcare workers and immunocompromised individuals. Because of the declaration, health authorities may soon launch a campaign to promote monkeypox vaccinations, particularly among high-risk groups. Being that Jynneos is the only vaccine approved for monkeypox, the global emergency could develop into a significant windfall for Bavarian. On Thursday, Bavarian discussed their plans to expand their capacity for Jynneos, aiming to supply up to 2 million shots this year and 10 million by the end of 2025. Depending on the pricing structure, 10 million doses at $100 per dose, for example, could add $1 billion in revenue. Whether or not anything major will come from this remains quite uncertain (e.g., how widespread the disease will become and how governments will respond to it). In addition, EU authorities see monkeypox as having “low impact if precautions are taken.” This is because monkeypox is typically transmitted via close physical contact.

Financial Health

Turning to their balance sheet, as of March 31, Bavarian reported $331.7 in cash and short-term investments. Total current assets were $696.8 million, while total current liabilities were $424.6 million. This implies a current ratio > 1, which suggests the company can reasonably cover any short-term obligations. Bavarian is without significant long-term debts.

As Bavarian reported positive cash flow in 2023, I will not provide an estimate for cash runway. However, it should be noted that, due to the nature of their business, any changes in revenue, which would not be surprising, could significantly alter this outlook.

Risk/Reward Analysis and Investment Recommendation

Bavarian’s stock has risen nearly 50% in the last week. So, I believe investors have already priced in a significant portion of the potential windfall from the emergency declaration. BVNRY is certainly a Quadrant 1 investment (high risk/high reward) but offers less risk compared to peers like Emergent BioSolutions, which has a total debt to equity of 226.96%, and SIGA Technologies (SIGA), which is heavily reliant on one drug and one or two customers.

BVNRY has its place in a barbell portfolio (“buy“), but be aware of the risks here. The demand for Jynneos is heavily dependent on the prevalence and severity of monkeypox outbreaks. Moreover, responses from government agencies can vary significantly. Some may not prioritize large-scale vaccination programs. Importantly, expanding capacity can be a double-edged sword. If the monkeypox outbreak is contained quickly, there may not be enough demand for the vaccine, resulting in significant inventory losses. Governments could also negotiate lower prices from large contracts, limiting profitability. Also, while Jynneos is currently the only FDA-approved vaccine for monkeypox, future competitors or alternative treatments could emerge and threaten Bavarian’s market positioning. Finally, any regulatory delays (e.g., expanded label to include adolescents) or challenges in scaling production could hinder Bavarian’s ability to meet production targets.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article is intended to provide informational content and should not be viewed as an exhaustive analysis of the featured company. It should not be interpreted as personalized investment advice with regard to "Buy/Sell/Hold/Short/Long" recommendations. The predictions and opinions presented are based on the author's analysis and reflect a probabilistic approach, not absolute certainty. Efforts have been made to ensure the information's accuracy, but inadvertent errors may occur. Readers are advised to independently verify the information and conduct their own research. Investing in stocks involves inherent volatility, risk, and speculative elements. Before making any investment decisions, it is crucial for readers to conduct thorough research and assess their financial circumstances. The author is not liable for any financial losses incurred as a result of using or relying on the content of this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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• Bearish sentiment weighed heavily on the biotech industry and Bavarian Nordic A/S.
• There is reason for optimism given the current opportunities offered by Monkeypox, Ebola and Covid-19.
• The company is preparing for a new era of high-risk tropical infections and coronaviruses.
• The stock price is not high and has growth catalysts.

What Bearish Sentiment Currently Does to Biotech industry and Bavarian Nordic A/S (OTCPK:BVNRY)

Aside from companies in the oil and natural gas sector and some utilities, whose stocks have soared on the back of strong stimulus from record fossil fuel price increases in the spot market, all other industrial sectors have collapsed under the pressure of strong market headwinds.

Aggressive interest rate hikes by western central banks, leading to a recession, and the negative impact of the war in Ukraine, with skyrocketing energy bills, have led to widespread negative sentiment in stock markets.

One of the subsectors that have suffered the most from the economic turmoil caused by the above factors is the biotechnology subsector, whose stocks are down an average of 10.9% year-to-date, as shown in the chart below. The iShares Biotechnology ETF (IBB) was used as a measure of industry performance.

Among the biotech stocks that certainly didn’t shine during the period, Bavarian Nordic A/S stands out as its shares fell more than the exchange-traded fund, losing 14.4% in the OTC market under the symbol BVNRY.

In fairness, shares of Bavarian Nordic A/S have also outperformed the benchmark when traded under the symbol (OTCPK:BVNKF) on the OTC market, with a marginal jump of 2.8% this year [at the time of writing this article].

However, while the market for BVNKF shares is not very dynamic with an average trading volume of around 4,830 shares in the last 3 months, the market for BVNRY shares is significantly more active, allowing for comparison with the exchange-traded funds. As of this writing, an average of 253,700 shares have traded under the symbol BVNRY over the last three months, which definitely suggests that Bavaria Nordic A/S stock has disappointed more than its own industry.

However, there is a Reason for Optimism when Analyzing the Chart in Tandem with Today’s Challenges for the Biotech Stock

A closer analysis of the chart for BVNRY stock is pointing to a rebound in the stock price from mid-May, leading to a quarterly uptrend ending around Aug. 17-18. The share price recouped a very good chunk of the previous loss and approached the Aug. 30, 2021 high of $19.25 before falling back to the current $11.23.

Shares most likely rallied after one of US President Joe Biden’s administration chiefs told reporters last May that cases of the monkeypox virus infection could be rising in the United States.

Although this type of infection is hardly dangerous for the general public, the source added, the news has been very well received by the market as Bavarian Nordic is currently working on a medicinal cure for the monkeypox virus.

The monkeypox infection – which is currently being closely monitored by the nation’s healthcare systems and the World Health Organization [WHO] – will most likely continue to drive traders’ interest in Bavarian Nordic shares.

As Bavarian Nordic’s portfolio is currently focused on COVID-19 and the Ebola virus, significant improvements in the respective drug pipelines or updates in the fight against the diseases are likely to result in strong upward pressure on the share price. This is because the coronavirus continues to threaten global health and Ebola continues to cause worrying epidemics in Africa.

Bavarian Nordic A/S’s Role in The Biotechnology Industry

Headquartered in Hellerup, Denmark, Bavarian Nordic commercializes life-saving vaccines against infections that threaten global public health, as well as developing and manufacturing these remedies.

Currently, the Danish biotech markets smallpox vaccines, as it has long been the supplier to the US government, and monkeypox vaccines in the United States, where they have received approval from the US FDA, as well as the respective regulatory bodies for Europe and Canada.

Bavarian Nordic A/S’s commercial product portfolio also includes market-leading vaccines to protect against rabies and tick-borne encephalitis [TBE], as well as the Ebola vaccine licensed to Johnson & Johnson’s (JNJ) Janssen Pharmaceutical Companies and the development of a next-generation vaccine against the COVID-19 virus.

The Portfolio of Products that the Company Markets

In summary, the company markets Rabipur-RabAvert for rabies in 20 countries, Encepur for TBE in 12 countries of the European Union and sells Jynneos-Imvamune-Imvanex [for smallpox and monkeypox] to governments.

Furthermore, it has licensed the Mvabea vaccine [against Ebola] to Janssen, which can supply high-risk areas in West Africa, and it can commercialize the Ixiaro vaccine [against encephalitis] in Germany and Switzerland under license from Valneva SE (VALN).

Bavarian Nordic may market and distribute Dukoral vaccine [against cholera] in Germany and Switzerland under license from Valneva SE and may market and distribute Heplisav-B vaccine [against all known subtypes of hepatitis B virus] in Germany under license from Dynavax Technologies Corporation (DVAX).

Sales and Profitability Declined Recently, but the Company is Preparing for a New Era of High-Risk Tropical Infections and Coronaviruses

In the first six months of the current year, this portfolio of marketed and licensed vaccines had products sold for total revenue of Danish krone [DKK] 857 million [approximately $120.83 million], reflecting a 16.6% year-over-year decline in USD currency.

Rabies and TBE vaccines [up 24.8% yoy] accounted for 65.8% of total revenue, Smallpox/Monkeypox vaccines [down 65.2% yoy] accounted for 13.7% of total revenue and Ebola vaccines [down 66.3% YoY] accounted for 3.5% of total revenue.

The remainder of the total revenue [about 17%] came from milestone payments, sales of third-party products and contract work.

For the first six months of the current year, Bavarian Nordic’s net income was a net loss of DKK 509 million [about $71.76 million], reflecting a deterioration of more than 80% from the corresponding period of 2021.

Bavarian-Nordic’s sales have cooled off somewhat, which combined with pressure from higher research and development costs has resulted in a loss of profitability. But ultimately, the company’s shareholders shouldn’t worry about that.

Ebola, smallpox/monkeypox and cholera will continue to be far from negligible markets for vaccines and preventive medical therapies as these infections pose an ongoing global threat. Due to migratory flows from the third world and developing countries, where people flee from natural disasters, social tensions, civil wars and terrorist attacks, the risk of infections crossing borders and then spreading to developed countries is not at all small.

The recent coronavirus provides evidence of what would happen economically and socially if any of these threats spiraled out of control in a global health emergency.

Some Diseases are Endemic in Third World and Developing Countries and Pose a Constant Threat Even to Industrialized Societies: Some Examples

There is currently a risk in some countries that these diseases could lead to very serious outbreaks of infection, against which the WHO and several UN organizations are doing their utmost to provide not only financial aid but also medicines and water purification kits.

Monsoon floods in Pakistan, which have affected more than 33 million people since early June and caused over 1,200 deaths and multiple damages to homes, health facilities and public infrastructure, are causing cholera infections, diarrhea, high airway infections and some skin diseases.

Cases of Ebola infection are common in the Democratic Republic of the Congo, with the last epidemic ending in early July 2022. But a suspected Ebola case involving a 46-year-old woman who died last Aug. 15 in the country’s eastern region has been under investigation since late last month, and a couple of hundred people have also been identified as contact cases. This reignites fears of a new Ebola epidemic in the African country.

As for monkeypox, the infection, which is common in the middle of nowhere in central and western regions of Africa, does not easily spread among humans. Yet, new cases of people carrying the infection are being reported daily in Europe and America, drawing the attention of the WHO and national health systems.

Not to mention the Covid-19 issue which some might consider as being over and instead the onset of just a very few cases are enough to force millions of people under a new lockdown in the industrial megacities of Shenzhen, Guangzhou, Dalian, Chengdu, Shijiazhuang. This, among other things, creates a new economic standstill risk for the world’s second gross domestic product.

The company’s Full-Year 2022 Revenue Guidance

The full-year 2022 revenue forecast has been raised multiple times over the past few months since the monkeypox outbreak began in May, and currently, this forecast calls for revenues of DKK 2.7 billion [about $362.7 million] to DKK 2.9 billion [about $389.6 million] range versus last year revenue of DKK 1.9 billion [about $289.3 million].

The Financial Condition Looks Robust to Support the Development of the Vaccines

The balance sheet appears robust with nearly $459 million in cash and short-term securities against total debt of about $137 million [including capital leases] as of June 30, 2022, to support the continued development of medical remedies against the above threats.

A freeze-dried version of smallpox and monkeypox Jynneos vaccine with boosted shelf life has been developed and is now awaiting expanded FDA approval.

Bavarian Nordic is currently undergoing the phase 3 of a global clinical trial testing its product – called MVA-BN RSV — in elderly people for respiratory syncytial virus. Key results are expected to be released between June and July 2023.

The company is advancing its COVID-19 vaccine product candidate, called ABNCoV2, which has already shown its potential as a booster vaccine against the various mutations in the original strain. The company is currently undergoing a double-blind, plus controlled Phase 3 of a clinical trial to demonstrate that ABNCoV2 is as effective as Pfizer Inc.’s (PFE) Comirnaty vaccine in terms of an immune response. Initial study results should be released sometime in the last quarter of 2022, seeking watchdogs’ approval in less than a year.

Bavarian Nordic is also working on a tumor antibody-boosted therapeutic vaccine called TAEK-VAC, which is being investigated in an open-label phase 1/2 study in patients with breast and lung cancer.

The Stock Valuation – The Share Price isn’t High and has Growth Catalysts

Shares of Bavarian Nordic A/S under the symbol BVNRY changed hands at $11.23 per unit for a market cap of $2.37 billion and a 52-week range of $5.85 to $19.31 as of this writing. The stock is currently trading slightly above the long-term trend of the 200-day moving average of $11.00.

Shares of Bavarian Nordic A/S under the symbol BVNKF changed hands at $32.67 per unit for a market cap of $2.37 billion and a 52-week range of $16.76 to $58.02 as of this writing. The stock is currently trading slightly above the long-term trend of the 200-day moving average of $33.10.

Given the catalysts outlined above, coupled with a stock price that isn’t significantly higher compared to recent valuations, this stock looks like an opportunity to seize. However, the investment comes with the following risk:

The stock has a 5-year monthly beta of 1.39, which means it is more volatile than the market, so the various catalysts could be wiped out by the current headwinds should they prove particularly persistent.

Conclusion – Strong Bearish Sentiment Dragged this Biotech Stock Lower, but there are some Catalysts for a Nice Comeback

Affected by the strong bearish sentiment, this stock hasn’t performed well this year, as have many other biotech stocks.

Recently the company’s revenue and profitability have declined significantly, but shareholders shouldn’t lose faith in this holding.

Bavarian Nordic A/S plays a strategic role worldwide by preventing threats from pathogens that, like the recent experience with the coronavirus, can cause a global economic and social crisis.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The post Bavarian Nordic A/S Could Post A Strong Comeback appeared first on Up2info.com.

• Bavarian Nordic has projected a strong year-over-year revenue growth for 2017.
• Stockpiling target of the US Government related to non-replicating small pox vaccine is a solid revenue driver for Bavarian Nordic.
• Positive PROSTVAC data readouts will result in robust milestone payments from Bristol-Myers Squibb in 2017.
• Bavarian Nordic is currently trading at discounted forward price-to-earnings multiple as compared to its peers.

Headquartered in Denmark, Bavarian Nordic (OTCPK:BVNRY) is focused on developing vaccines in oncology and infectious diseases segments. While the company currently has only one approved vaccine, Bavarian Nordic is involved in eight other research programs.

In 2016, Bavarian Nordic managed to reach the DKK 1.0 billion milestone for the fifth year in row. Further, despite having invested approximately half of its total revenues in R&D programs, the company did not post a loss for 2016.

At the end of 2016, Bavarian Nordic’s cash preparedness which includes cash and cash equivalents, marketable securities, and undrawn credit lines, amounted to around DKK 2.3 billion or $325 million. The company managed to raise capital worth $100 million in 2016. Despite heavy ongoing R&D investments, Bavarian Nordic expects to increase its cash preparedness to DKK 2.4 billion or $340 million in 2017. This highlights the company’s confidence in its revenue-earning potential in 2017.

I believe that there are multiple short-term drivers capable of propelling Bavarian Nordic’s stock price in 2017. Here, I will present them to explain my rationale for considering the stock as a compelling investment opportunity for 2017.

Bavarian Nordic has given a solid revenue and EBIT guidance for 2017

The first and foremost reason why I believe investors should be picking up Bavarian Nordic is that the company expects a solid revenue and EBIT growth in 2017. The company has projected that its 2017 revenues will be around $183 million, which is 28.7% higher than $143 million revenues earned in 2016. Bavarian Nordic has also projected its 2017 EBIT to be around $50 million, which would be a 900% year-over-year growth for 2017.

In today’s volatile environment when the entire pharmaceutical and biotechnology industry is facing stiff pricing pressures and multiple regulatory constraints, majority of the companies have played safe by projecting flat performance or modest growth for 2017. However, being in the innovative vaccines segment which faces limited competition, Bavarian Nordic can be more confident of its product sales and pricing. Hence, in this context, the company’s financial guidance definitely stands out and makes it a major reason for investors to go for Bavarian Nordic.

In 2016, global sales of IMVAMUNE smallpox vaccine accounted for approximately 92.0% of Bavarian Nordic’s total revenues. This also includes payments pending from 2007. The remaining revenue was attributed to milestone payments earned by the company on account of its collaboration agreements with multiple pharmaceutical players.

IMVAMUNE sales are expected to drop from $131.6 million in 2016 to $115 million in 2017. In 2016, the company received bulk delivery order for IMVAMUNE vaccine from US government worth $100 million. Hence, currently, the company has total bulk orders for the vaccine worth $233 million. A major portion of the vaccine’s 2017 revenues is expected to materialize in 1H 2017 due to scheduled bulk delivery to US government.

Bavarian expects to reduce its reliance on IMVAMUNE vaccine as the company will be able to recognize the upfront payment of around $60 million received from Bristol-Myers Squibb (BMY) in 2015 related to prostate cancer vaccine, PROSTVAC. This revenue could be recognized only after the release of Phase 3 top line data for this investigational drug, scheduled to be released in late 2017.

The company also expects $14.3 million revenues from R&D contracts with Johnson & Johnson (JNJ) and US Government in 2017.

Bavarian Nordic has entered into contracts worth $1.2 billion with US Government

IMVAMUNE is a non-replicating small pox vaccine as is used for people who cannot use replicating small pox vaccines such as those with certain immune-deficiencies or those with HIV infection or dermatitis. Pregnant Currently, IMVAMUNE is also the only non-replicating small pox vaccine approved in European Union while no such approved vaccine exists in US.

While IMVAMUNE is yet to be approved in US, Bavarian Nordic has already entered into supply contracts worth $1.2 billion with US government. This is due to the government’s decision to stockpile 132 million doses of the non-replicating small pox vaccine, capable of protecting 66 million people who may not respond to replicating small pox vaccines. Bavarian Nordic has recognized $1.0 billion worth revenues from US government till date. The company has projected the revenue opportunity from the US government to be around $2.0 billion in future years.

We can see that till year 2013, Bavarian Nordic supplied liquid-frozen formulation of IMVAMUNE to US Government. However, in 2009, the government awarded a contract to Bavarian Nordic for supply of freeze-dried formulation of IMVAMUNE. This seems to a part of the US government’s strategy to replace the liquid-frozen formulation of the vaccine currently stockpiled at U.S. Strategic National Stockpile or SNS.

With shelf life of around 10 years and limited storage requirements, the freeze-dried version is expected to reduce the life cycle management costs currently borne by SNS for liquid formulation of IMVAMUNE.

Besides being a solid revenue opportunity, Bavarian Nordic can greatly benefit from the new formulation of IMVAMUNE as the government is bearing all costs related to ongoing phase 3 trial for the vaccine. In 2016, after the phase 2 meeting with FDA for freeze dried IMVAMUNE, the agency had directed Bavarian Nordic to generate additional Phase 3 safety data for the new formulation. The BLA for freeze dried IMVAMUNE formulation will either be approved as a supplement to existing approval or as a completely new approval.

Once approved, the vaccine will be reviewed by Centers for Disease Control and Prevention or CDC. Bavarian Nordic is confident of securing a larger pie of the 132 million doses target of US government as around 66 million doses are for patients who cannot be administered Sanofi’s (SNY) replicating small pox vaccine, ACAM2000.

Bavarian Nordic has also planned to apply for emergency use authorization for the freeze dried IMVAMUNE formulation in 2017. This will allow the US government to use the drug in case of emergencies even if it is yet to receive FDA approval.

The company is expects that in 2017, US government will be publishing request for proposal or RFP to replace the expiring 20 million doses of non-replicating small pox vaccine at SNS. Bavarian Nordic is confident that this demand will be mostly fulfilled by freeze dried IMVAMUNE formulation.

Further, the company also anticipates data readout from phase 3 trial of next generation liquid IMVAMUNE formulation by late 2017. Based on American Cures Act, IMVAMUNE may also be awarded a priority review voucher, which would cost in the range of $100 million to $300 million in open market. The company expects to file biologics license application or BLA for this new formulation with FDA in 2Q 2018. The company has anticipated approval by late 2018 or early 2019.

Investigational vaccine, Prostvac, has Phase 3 interim and final data readouts scheduled for 2017

On March 04, 2015, Bristol-Myers Squibb entered into an agreement with Bavarian Nordic related to investigational prostate cancer vaccine, PROSTVAC, with upfront payment worth $60 million. The company will also receive payment of $80 million from Bristol-Myers Squibb, if the latter chooses to license and commercialize PROSTVAC in a designated time period. Further, based on the overall survival performance demonstrated by the investigational vaccine in the ongoing Phase 3 trials, Bavarian Nordic is entitled to milestone payments in the range of $50 million to even more than $230 million. Hence, it is imperative to understand that positive data readout will translate into immediate revenue gains for Bavarian Nordic in 2017.

Bavarian Nordic is currently evaluating PROSTVAC monotherapy or in combination with Granulocyte-macrophage colony-stimulating factor or GM-CSF, in phase 3 trial, PROSPECT, comprising of 1,298 patients suffering with metastatic castration resistant prostate cancer or mCRPC across 200 sites. While data from two interim analyses of this phase 3 trial were already released in 2016, the last interim analysis was delayed to mid 2017 due to reduced monthly events such as disease progression requiring more intense radiology, increase in pain, initiation of chemotherapy or death. Final data from this phase 3 trial is expected by end 2017.

The orange boxes indicate the 10 ongoing phase 2 trials in which Bavarian Nordic is exploring PROSTVAC in combination with multiple agents across various stages of prostate cancer. So the vaccine is being combined with enzalutamide for both early and late-stage prostate cancer, with chemotherapy as first line treatment option for metastatic prostate cancer, and with checkpoint inhibitors as neoadjuvant therapy. PROSTVAC is also being explored as monotherapy as well as in patients just diagnosed with the disease. All the data from these trials, which is expected from 2017, can help establish the PROSTVAC’s position as preferred vaccine for prostate cancer patients.

But there are risks investors should keep an eye on while investing in Bavarian Nordic

Till a few years ago, Biomedical Advanced Research and Development Authority or BARDA, a division of the U.S. Department of Health & Human Services, would award long term vaccine contracts to Bavarian Nordic.

However, things seem to have changed since BARDA started receiving funding extending to only one year from the government. Owing to this and other constraints, the agency is only awarding short term contracts to all companies including Bavarian Nordic. There are times when the contract may have options to further extend it for future years. This introduces a significant business risk element, as the US Government is not tied in with Bavarian Nordic and is at liberty to opt for other suppliers in subsequent years.

Further, payment from Bristol-Myers Squibb is also dependent on positive results from Phase 3 trial related to PROSTVAC. Since the company has not released data from previous interim analysis in PROSPECT trial, there is uncertainty related to milestone payments that can be received from Bristol-Myers Squibb.

Low valuation multiples

Currently, Bavarian Nordic is trading at forward price-to-earnings multiple of 7.86x, significantly lower than the expected pharmaceutical industry average of 16.7x. While the company’s revenue exposure to US Government and its reliance on Bristol-Myers Squibb exposes it to higher risk and hence lower valuation multiples, a discount of 53% to industry average is not justified. Hence, on risk-adjusted basis, I believe the company should be trading closer to 9.0x – 11.0x levels.

Bavarian Nordic is expected to report earnings per share or EPS close to DKK 21.20 or $3.0 in 2017. Assuming forward PE multiple of 10.0x, the company should be trading in the range of $27.0 to $33.0 in the next twelve months. This can translate into solid return of around 58% to 94% by end of 2017. Hence, I believe Bavarian may be a solid investment opportunity for retail investors in 2017.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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