Bavarian Nordic A/S

CSE:BAVA

Earnings Call Transcript 2023-Q1

[Rolf Sorensen, executive]

Welcome to everyone this evening, my name is Rolf Sorensen, VP, Investor Relations. And with me today, I have President and CEO, Paul Chaplin; and Executive Vice President and CFO, Henrik Juuel, that will give a presentation followed by Q&A session. Before we start, I will just briefly run through the disclaimer.

This presentation includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside our control that could cause actual results to differ materially from the results discussed. Forward-looking statements include our short-term objectives and opportunities, financial expectations for the full year as well as statements concerning our plans, objectives, future events, performance and other information that is not historical information.

All such forward-looking statements are expressly qualified by these cautionary statements and 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.

So by this, I will hand the presentation over to you, Paul, just to start.

[Paul Chaplin, executive]

Thanks, Rolf, and a warm welcome to everyone to our first quarter update. If you turn to Slide 3, before I jump into what has been a very impressive first quarter, I just want to remind you all about the company's vision and our underlying strategy. So we do aspire to be one of the largest pure-play vaccine company within the next few years. And to get there, we're relying on a number of strategic elements. The first is to continue to develop innovative, life-saving vaccines by growing our pipeline and bringing more assets through.

Key part of our strategy for a number of years now has been on maintaining our excellence in manufacturing, and we want to further build on that platform.

Obviously, since 2020, we've been building up a commercial presence in some key markets, and that has allowed us to look at opportunities to sell and distribute other people's vaccines as we do for a number of different companies right now, and we're always looking to expand that footprint. Obviously, we're always on the lookout for strategic and selective M&As, and I'll come back to the pending closure of the acquisition of emergent travel vaccines. But maybe the road isn't finished there, where we're always looking for complementary assets that will allow us through our commercial excellence to bring more life-saving vaccines and improve and save people's lives.

Let's go to the next slide, Slide 4. As I said at the beginning, it's been an extremely strong performance in Q1. Outstanding would be the word that I would like to use, impressive growth on all our commercial assets. I will leave Henrik to talk a little bit more about the individual assets and net performance, but we are -- of our commercial assets exceeding or back to pre-COVID levels, which is great to see and really strong growth. The numbers that we're reporting in Q1 are exceptional, more than DKK 1 billion on top line and a strong profit within the first quarter bodes well for the year ahead. And in terms of the number of employees, that is just a measure of the growth that we're seeing. Significant growth in the number of employees since this time last year, and that's just the measure of the expansion that we're through as we continue to expand not only our commercial footprint, but also our manufacturing footprint.

Hopefully, in the coming weeks, we will further expand our abilities with the completion of the acquisition of emergent travel vaccines. This will bring us to become the largest travel vaccine company in the globe and brings many different assets, which I'll talk in the coming slides. And finally, we have a very exciting year ahead in terms of news flow as we have -- we'll have when we closed the deal, three Phase III programs, all of which we'll be reading out later this year. So a great quarter and a very exciting year ahead.

If you turn to Slide 5, just talk a little bit about the deal that we'll be closing, hopefully, in a matter of weeks. We'll be adding two commercial products, Vivotif, a well-established vaccine against typhoid fever. It's an oral vaccine and is approved in more than 35 (sic) [ 25 ] countries around the globe. Vaxchora is another oral vaccine and is the only cholera of vaccine approved in the FDA -- by the FDA. And lastly, a late-stage asset, a Chikungunya vaccine or a vaccine against Chikungunya, which we believe will become the best-in-class, a rapid induction of protective immunity within a single shot. And this is currently in Phase III and we'll be reading out later this year.

However, it's not just products that we will be bringing on board, an additional R&D site and manufacturing site in Switzerland, both of which will bring approximately another 300 highly skilled employees. The R&D site will allow us to keep the momentum of the Chikungunya program, and bring it across the line for launch within a couple of years. In terms of manufacturing, they're obviously manufacturing the two commercial assets, gearing up to produce and launch the Chikungunya vaccine and gives us a huge amount of flexibility moving forward in terms of manufacturing options to bring in some of our products that we outsource back in-house.

Finally, we'll be taking over a small sales team. This will strengthen our abilities in the U.S., but also allow us to expand in some of the territories in Europe where we're currently not active today. So really a great acquisition, really complementary to the strategy and the vision of the Bavarian Nordic, and one that we're really excited to close, hopefully, as I keep saying in a couple of weeks.

So if we move to the next slide, let's change gears and talk a little bit about some of the commercial assets. As you all know, and we all remember, last year was a major event in that we saw an unprecedented outbreak of Mpox or monkeypox as it was used to be called, and we were able to distribute and sell more than 4 million doses and give access to more than 70 countries around the world. We are very proud of that achievement last year, and it's no doubt the use of our vaccine, which from real-world data has shown to be highly effective with a single shot, helped maintain that outbreak.

And as you can see from some of the data, if you just look at the graph on the right-hand side at the bottom, this is data from the WHO. And you can see that the cases from last year have dropped down to quite low numbers. But the interesting thing that we're starting to see in May, again, is an uptick in a number of cases. Again, it's coming from a small base, but we're starting to see an increase in the number of cases. If you look at the bar graph on the right, the latest column here, the latest data, EU is now appearing as having reported cases of Mpox, which is the first time for quite some time.

So -- and we know and we're very aware, a number of governments around the world holding their breath, seeing how Mpox will develop this spring and this summer. But as I said, we're extremely proud of our supply of JYNNEOS and IMVANEX, which we know last year helped contain the outbreak. And we continue to sell and distribute the vaccine to governments around the world.

If we go to Slide 7, so what is the future for Mpox and smallpox and our vaccine? Well, as I said, with we're fortunately seeing a number of smaller sales already this year, over and above what we had planned in our guidance. We continue to be in dialogue, active dialogue with a number of governments. And I've said several times when we entered the Mpox outbreak last year, we really had two main customers for JYNNEOS and IMVANEX, which is Canada and the U.S. We're now coming out of '22 have more customers. We have HERA, which is the equivalent of BARDA in Europe, where we have this framework contracts, allowing EU nations to order more vaccine in the years to come. Canada has expanded their requirement last year, and we're in dialogue with a number of other countries.

U.S. is an interesting one to talk about. As you know, we have an option for freeze-dried version of JYNNEOS worth around about $300 million. That, however, relied on all the bulk that we have built up and converting that to freeze-dried doses, which we plan to initiate this year. Due to the orders, the 5.5 million doses that were ordered last year, we've utilized some of that bulk, a significant amount of that bulk vaccine that was going to be converted for that option. So the U.S. government, if they want to proceed with that freeze-dried option, which is clearly their intent have to order more bulk vaccine just to maintain that initial order of 11 million doses. And those discussions are ongoing.

With France, we see a nice development in terms of their regulators recommending to potentially consider vaccinating first and second-line responders, which is clearly a move away from just stockpiling the vaccine, but actually actively vaccinating first-line responders and key risk personnel. So we really see a bright future regardless of how Mpox further develops this year, really in terms of better preparedness against smallpox and Mpox, but also potentially more usage and vaccination of at-risk personnel.

Going to the next slide, Slide 8. RSV, it was great news last week to hear that the very first prophylactic RSV vaccine has been approved by the FDA. We've been waiting for decades as an industry to develop an effective vaccine. So it's great to see that there is finally an effective vaccine. There's a huge unmet medical need for RSV. It goes unnoticed in many areas but it kills as many people as flu. And people who will get hospitalized with RSV need more interventions typically than people who are hospitalized with flu.

So it's great that the first vaccine has been approved, but there are more coming through. And clearly, we're very confident and excited about the readout of our RSV vaccine candidate. Just to remind you, it's a differentiated approach to the competition.

We're targeting 5 different proteins of RSV, so generating a much broader, hopefully, more effective immune response against the virus. In the human challenge study that we've already reported, we saw an extremely high efficacy, almost at 90%. And -- so we're confident as we gear up to the readout of our Phase III trial, which is still planned for middle of this year, that we will have a positive readout.

And of course, the commercial market, we talked about the unmet medical need. And of course, when there's a huge unmet medical need, there's a huge commercial opportunity. And others have estimated this opportunity to be worth annually anywhere between USD 4 billion and USD 6 billion by '25. So as I said, extremely excited. We are still online for a very exciting readout later this year. And based on the data we've already generated, we still remain highly confident that we're going to have a safe and effective vaccine that will play its own role in combating RSV.

We move to the next slide, Slide 9, and talk a little bit about COVID. The WHO has -- no longer sees COVID-19 as a global health emergency. That doesn't mean that COVID vaccines are no longer needed. It's clear better vaccines with -- that are broader in their protective response and more durable are needed, particularly for the elderly and at-risk adult populations. Clearly, this is the target that we have been trying to develop our candidate, ABNCoV2 from the beginning. It's a viral-like particle-based vaccine candidate, and the data to date suggests it has a favorable safety profile. But in fact, induced exactly what we're all after, which is a broader protective response. That is at least more durable than the current batch of vaccines that were approved.

The Phase III trial is fully enrolled and will again similarly read out later this year. However, the trial is designed as a non-inferiority to a current license vaccine. But as the regulatory environment is changing, and the regulators are really locking towards more bivalent vaccines, which is a combination of the original strain and the current circulating strain. Data that we generate in Phase III, particularly against the current circulating variance of concern will probably be more important than the primary end point of the Phase III. And we'll have to -- once that data is generated, sit down with the regulators and really work out what is the best path moving forward.

So if we turn to my last slide, Slide 10, now once we have closed the pending acquisition of Vivotif, Vaxchora and the Chikungunya program, this will be the overview of our commercial assets. So we will have commercial products covering 7 different indications: Mpox, monkeypox, smallpox, rabies, tick-borne encephalitis, cholera, typhoid and Ebola. So an impressive basket of commercial assets, really addressing niche markets, which have shown we're masters of delivery, but also the travel sector, which is booming based on the last 2 quarters that was reported.

In terms of the pipeline, there's not many companies, including big pharma, who have 3 Phase III assets, all reporting out within the next -- well, less than 12 months actually, in the next 9 months, but we do. So we have an RSV asset, Chikungunya asset and our COVID-19 asset all reading out later this year. And some early stage programs, one of which is fully funded by DoD. So really, as I said, tremendously strong Q1 and an exciting year ahead, not only in terms of the future growth and sales of our products, but also an exciting year ahead in terms of closing the acquisition and really creating the world's largest travel vaccine company.

And with that, I'll hand over to Henrik Juuel.

[Henrik Juuel, executive]

Thank you very much, Paul. And let's turn to Slide #12 and start the presentation of the financial performance for the first quarter. We start with the breakdown of our sales, of the revenue for the first quarter. We saw extremely strong revenue performance, delivering a total of DKK 1.252 billion, obviously to a large extent driven by the execution of the order book we built up in connection with the Mpox outbreak last year, which is going pretty well. We delivered DKK 848 million in revenue from that line of business.

Remember that as part of our DKK 6 billion revenue guidance for this year, we have included DKK 4.4 billion related to our Mpox, smallpox business all secured by orders already.

So you can actually argue that despite this is a very strong quarter, we're actually a little light on the smallpox, Mpox business, and we will have to deliver more in the coming quarters to deliver the DKK 4.4 billion but that's all on track to be delivered, and we stand by that guidance.

What is very positive is that we basically are growing our business across the entire product portfolio. You can see on the slide here, and particularly our rabies business, we are delivering more than 100% growth, DKK 243 million in revenue, driven by strong market growth and us holding on to strong market positions in these markets as well. Even the tick-borne encephalitis business represented by our Encepur product is delivering strong growth, 26%, and our third-party products delivering more than 200% growth. This is primarily driven by the performance of our Japanese encephalitis product we have in-license from Valneva, which is doing extremely well in Germany and also impacted by the increased the level of traveling that we see.

Other revenue is the only element where we are below last year's level. Last year, remember, we included a milestone payment when we signed the RSV agreement with Nuance Pharma for China and other markets. But altogether, very strong revenue performance for the first quarter. Actually, this is a record quarter for Bavarian Nordic in terms of revenue. Never have we delivered revenue at this level for one single quarter.

If we turn to the next slide, just have a quick look at how the rabies market has performed. And to the left, we look at the U.S. market, and you can see the curve represents different years, and you have the dots representing the quarters. And here, you actually see that '23, we are outperforming 2019. 2019 Is sort of our pre-COVID cursor that we are comparing against. So first quarter of '23, we are actually looking at a U.S. market that is 25% above what we call the pre-COVID with the market level. So significant strong performance. And actually, it's a 40% growth versus the same period last year. So very strong market performance.

If we look at the German market, if we then first look at the fourth quarter, you can see the '22 curve. We were not yet at the pre-COVID level, represented by the yellow curve here. But now in the fourth quarter, you will see we are actually now 7% above the pre-COVID-19 level. That has been achieved by 211% growth versus the same period last year. So extremely strong growth also now in the German market. So overall, fantastic market performance within the rabies business.

Slide #14 shows our performance under these market conditions. We delivered DKK 243 million in revenue, which is up more than 100% versus the same quarter last year. And again, obviously driven by extremely strong market performance, but to a large extent, is driven by the travel activity level increasing again. Market shares, we are holding on to very strong positions, and we maintain being the market leader, both in the U.S. and also in Europe, 95% market share in Germany at the moment and 69% in the U.S. market. So strong brand performance as well.

Let's turn to the tick-borne encephalitis market. Here, when you look at the curves, it can be -- they are very close to results. It can be a little hard to keep them apart. But the good story here is actually that we are, now for the first time, we are seeing a quarter where we are actually back above the -- or at the 2019 level. Actually to be specific, 2% above the pre-COVID level. That has been achieved with a 33% market growth versus same period of last year. But I have to say that it is historically, first quarter is a relatively low quarter for tick-borne encephalitis, and the real test of whether we are back to pre-COVID levels will be the second quarter.

But it definitely looks promising that also the TBE market is coming back to pre-COVID levels. Our performance under these market conditions, we delivered DKK 87 million revenue from the Encepur business, which is a 26% growth versus same period last year. It's a growth that is slightly below the market growth simply due to the current market share situation, where we -- as we have disclosed previously, we suffered a temporary stock-out situation in the fourth quarter of '22, which have had a spillover impact into '23 in the first quarter here, but something that we are fighting hard to gain back. But overall, very strong performance again with a 26% growth in revenue year-over-year.

On Slide 17, we have a look at the full profit and loss. Strong revenue growth, more than close to DKK 1.3 billion, if we round it up. Gross profit of DKK 824 million. That's a strong margin improvement. We're actually ending at 66% gross margin against 9% gross margin last year, and I think this really illustrates what it means to operate at more or less full capacity, which we're doing at the moment with the Mpox order book that we are executing on. It leads to a very, very strong gross profit and gross margin.

Research and development, close to DKK 300 million, up significantly from first quarter of last year and of course, explained by the currently running Phase III programs. We have guided DKK 1.6 billion approximately for the full year. So first quarter is actually slightly light on R&D expenses as we are maintaining the full year outlook on R&D, and that is all explained by phasing of the various programs. SG&A costs up compared to last year and all driven by the higher activity level that we see in the business, which drives higher distribution costs, but also with a significantly higher number of employees also drives other types of costs as well.

EBITDA, if you look at the bottom of the table here, close to DKK 0.5 billion in EBITDA. So a fantastic quarter in terms of profitability as well. EBITDA is actually so high that we are this time also talking about net profit for the period, positive by DKK 376 million, so very strong performance. And if it wasn't for a quarter back in 2020, when we sold the [indiscernible], this would also from a profitability perspective to be a record quarter for Bavarian Nordic.

Let's turn to Slide 18, cash flow and balance sheet. For the first 3 months, we delivered a positive free cash flow of DKK 116 million, positively impacted by the positive net profit to some extent, offset by negative working capital developments driven by planned inventory buildups but also by increased receivables driven by the level of revenue that we saw in the quarter. Cash flow from investment activities positive by DKK 331 million and primarily driven by the sale of securities, so basically, cash we have invested in securities and that we have sold during the period.

Net cash flow for the period, positive by DKK 700 million. And beyond what I just explained here is this, driven by positive cash flow from financing activities, which is driven by the accelerated book build, the capital raise we did where we raised gross proceeds of more than DKK 1.6 billion and then, to some extent, offset by the discontinuation of the repo positions that we have secured previously.

To the right, I just want to highlight a couple of numbers from the balance sheet. Our equity increased by approximately DKK 2 billion compared to the end of the year, again driven by the capital increase we did, but also by the positive net profit for the period. Securities, cash and cash equivalents stands now at DKK 2.971 billion, so very close to DKK 3 billion, preparing us for the upfront we need to pay to American BioSolutions once we have closed the transaction fully. So a strong cash position and we are very well prepared to close the transaction with American.

My last slide talking a little about what else to expect in '23. Again, we're looking at a year that is poised to be another exciting and successful year. As Paul mentioned, we have several Phase III programs reading out very, very soon. So it's going to be another exciting year. If we look at our Mpox and smallpox business, we are now executing on the current order book. We have included DKK 4.4 billion in our current guidance from that. And we are also engaged in a number of discussions, dialogues with governments and customers, so we do expect the news flow also to include additional orders to come during the year.

RSV, one of the exciting areas where we are looking forward to communicating our top line results by mid of this year. Our partner, Nuance Pharma, who is responsible for China and a few other Asian markets, are going to progress their development into first Phase I and then later Phase III. And these two together will trigger milestone payments to the Bavarian Nordic amounting to DKK 195 million.

Within our COVID-19 program, we are looking forward to the 12 months durability data from our Phase II program. And then, of course, to the results from the ongoing Phase III program that we are running. Again, this program is expected to read out in mid-2023. And then finally, of course, still pending the final closing of the acquisition from Emergent, but then we are adding another Phase III program to our pipeline with an expected readout in the second half of '23, most likely during the fourth quarter of this year.

And to the right on this slide, I just want to remind you about the -- our current guidance. We are guiding revenue of approximately DKK 6 billion and EBITDA of approximately DKK 2.2 billion. And this guidance excludes financial impact from the pending closing of the acquisition of the travel vaccine portfolio from Emergent BioSolutions.

We have previously provided the market with estimates of what that financial impact could be. And of course, we still stand by that one. And as soon as we have finally closed the transactions, we will come out with a fully consolidated financial guidance for the full year. And our expectation is that, that will happen at the latest in connection with our Q2 report to be announced in August.

So again, we are very, very pleased with the start of the year, a fantastic start of the year. And we are looking forward to another exciting year with interesting, exciting news flow ahead of us. And with that, I will ask the operator to open up for questions.

[Operator]

[Operator Instructions]

Our first question comes from the line of Boris Peaker from TD Cowen.

[Unknown Analyst]

This is Nick on for Boris. Just a couple for me. First, with CHIKV VLP, I know that there are competitors in the market, specifically Valneva's asset, which is slightly ahead of CHIKV VLP. So I was just wondering how you guys see that competition and how you think that CHIKV VLP will outperform this?

[Paul Chaplin, executive]

So yes, you're correct. The competition here is an attenuated live viral candidate from Valneva, which is already filed for approval in the U.S. If you're targeting the travel market, timing to protection is key because people don't often organize themselves in a very efficient manner. So it's all last minute before you travel.

The key thing with -- I'd say our candidate, our soon to be candidate, is that it's a single shot vaccine similar to Valneva's. However, the onset of protection based on the new markets is induced within the first couple of weeks. Whereas with Valneva, you have to wait almost a month before you get the same protective levels.

So in a nutshell, if the Phase II data, which is being published is out to be confirmed in the Phase III, our candidate will induce protection within a couple of within, say, 7 to 14 days, whereas you need a month to be protected with Valneva's vaccine.

The other differentiating factor is typically live attenuated viruses are not recommended for children, and that could be an advantage as we move into the pediatric arena post approval. All in all, it's a faster acting -- probably we'll have an improved safety profile. And that may lead to a wider acceptance of all age groups, but that data will need to be generated, but highly competitive profile.

[Unknown Analyst]

That's very helpful. My second question is on Vivotif and Vaxchora. So I know that UBS has had a little bit of a slower time with both of these because of COVID-19. So I just wanted to know what your strategy was for like the initial commercialization for them? And is it going to be similar to Rabipur and TBE and set for markets? Or what are you guys thinking about that?

[Paul Chaplin, executive]

Yes. So historically, you're completely correct. Vivotif and Vaxchora had sluggish, to say the least, historical sales. Our take on that is that EBS had a completely different strategy when COVID hit, compared to our own. So they closed down basically all production. They had layoffs in their sales division and they essentially sold off stock but closed down all activities.

As you know, you can argue who was right and who is wrong. We struggled through with rabies and TBE through COVID, maintained our manufacturing agreements with GSK and kept those programs active. We're seeing clearly in Q1, and our Q1 numbers, that travel is strongly rebounding and the vaccines that were still being pushed through the distribution channels have seen strong growth.

We believe, in our hands, we can turn Vivotif and Vaxchora around just as we've shown that we could for Rabipur, RabAvert and Encepur. So it's case cells relaunching -- continuing the relaunch of these products, which I know EBS is doing, but really driving these products as we've done with the others, and riding the newfound wave of travel.

[Operator]

[Operator Instructions]

Our next question comes from the line of Suzanne van Voorthuizen from VLK.

[Suzanne van Voorthuizen, analyst]

On RSV, I was just wondering what your current thoughts are on commercializing the vaccine subsequent to the Phase III? What are your latest thoughts on potential partnering? What do you look for in a partner? And what are important considerations from Bavarian Nordic's point of view?

[Paul Chaplin, executive]

Yes. Thanks for the question. So on RSV, on the commercial, I would say we're open -- we continue to explore all avenues and are open to exploring all avenues. Clearly, any partnering discussions at this late stage will await the data.

We, however, have been in close dialogue with a number of companies that we're fully aware are tracking the situation. In parallel to that, we're also looking at what would it take to keep the asset in certain markets. What would we do with the asset, how would we launch and what would our future forecast look like.

So to answer your question, what would we be looking for in a partner, we would be probing that partner to ensure that they could do better, they could do more with the asset than we could possibly do. So those are the caveats really. And I think I've said publicly already, there's clearly a number of potential partners that would not need a lot of convincing that they would have more financial cloud and abilities to launch a product like RSV compared to Bavarian Nordic. But as I said, all options are on the table, and we're considering everything.

[Operator]

Our next question comes from the line of Gil Blum from Needham & Company.

[Gil Blum, analyst]

Congrats on a strong quarter. A couple from us, maybe the first one on RSV. Given there are a few vaccine moving down the pipeline, do you expect to see competition on pricing?

[Paul Chaplin, executive]

Yes, the pricing question always, yes. So I mean, obviously, the first market that is going to set the price, right? And it's clear as more and more companies or competitors enter, there will be pressure on price or wish from the buyers that there will be pressure on price. I would imagine that as GSK sets the price as the first entry, that is the price that most of the other companies will follow.

[Gil Blum, analyst]

Okay. And you mentioned kind of shifting bars for the development of COVID vaccine. Just for us to better understand, would you be considering any additional studies based on the results? Or what you see is what you get and you make a decision based on that?

[Paul Chaplin, executive]

Yes. I mean we have to wait for the data before we can really decide how we're going to move forward if additional studies are really needed. On the slide, we actually indicated that right now, the FDA has made it fairly clear that all future vaccines that they would need to have a bivalent component to them, which clearly our vaccine doesn't.

Now that's their position as of today, right? So data can change people's position. So it really -- my answer really is, again, let's wait for the data. Let's see how strong or how good that data really is and that's taken a dialogue with the regulators.

If for example, the FDA, you have this opinion that you need really a bivalent approach, let's have that dialogue with them based on the data we generate and see where we go.

[Gil Blum, analyst]

All right. And one last one from us. I know it's a little early, but do you think that the level that you're seeing in rabies and TBE suggest a new baseline for the year?

[Paul Chaplin, executive]

You want to take that one?

[Henrik Juuel, executive]

Yes. Thanks, Gil. I think that, that's, of course, a very good question. I think the -- I think it's -- for TBE, it's definitely too early to say anything. This is the first quarter where we are back to pre-COVID level. And we have the last year or so, seen different signals from the TBE is this one quarter has been showing good signs next quarter, not so good signs. So I think that's too early to say.

I think when it comes to the rabies business, and I think, in particular, in the U.S., we have now for 2 consecutive quarters, seen a level above the pre-COVID levels. And we have -- we do take some credit for that ourselves. I think we are the market leader there. We do believe our team has done a very good job in terms of raising the awareness of the need for rabies vaccinations.

So actually, when it comes to the U.S. market, yes, you could be looking at a new baseline for the whole market size. That's definitely what we hope. And we have now seen 2 quarters demonstrating that. Germany, again, a little too early. They have come back extremely fast the last quarters here. But I think it's a little too early to say whether we are going to look at a new baseline, but definitely good progress back to normality.

[Operator]

Our next question comes from the line of Thomas Bowers from Danske Bank.

[Thomas Bowers, analyst]

Great. A couple of questions here from my side. So just kicking off with RSV. So now we have Glaxo and Pfizer with quite strong evidence targeting prefusion F protein. So I'm just wondering a little bit whether you think it's become a little more evident with the prefusion compared to post F given your approach, and of course, combined with the multivalent 5 target approach. So any color here would be appreciated.

And then on COVID-19, just help me understand here in regards to those milestones. So assuming that you see positive Phase III readout, will this evidently trigger around DKK 100 million in milestone payment to your partner? Or is more needed aside from just the top line readout to trigger that milestone?

And maybe, sorry, I was a little bit late to the call, so I may have missed this. But just on Rabipur, of course, extremely strong numbers for the quarter here. And I know you have guided open inputs here on Rabipur, Encepur. So I guess we have to await some guidance upgrade. But can you just elaborate a little bit whether you've seen or had any start outs during the quarter? Or is there any sort of onetime element in those numbers that we need to keep into our minds before we get a little bit too excited for the remainder of the year here?

[Paul Chaplin, executive]

Thanks, Thomas. Let me take the RSV one and then Henrik can take the other two. So yes, you're right. GSK and Pfizer both have a prefusion approach and both have obviously reported out strong data. There are two things to that, that I would point out.

So when you're infected with RSV, there's a native form of S. And in that infected cell, both prefusion and postfusion will be expressed. So the immune system is stimulated by all forms of S. The approach that we've taken is that the -- we're using native F, just like you would -- the RSV virus would. And when you infect cells with our vaccine and you look for pre or post, you see both forms. So it's a misnomer that we don't have prefusion, we do. We have the same amount of prefusion as a natural RSV infection that actually induces protection for a number of years.

The other thing I would relay that still gives us great encouragement is the human challenge study. The human challenge study, as we've talked about before, is you obviously, post vaccination, you challenge with an attenuated RSV and you're really looking for relatively mild symptoms, which are associated with the infection of the upper respiratory tract.

And that is a model that is biased primarily to antibodies. A lot has made as a level of antibodies that are vaccine induces that we've reported and published versus what GSK has seen. And yet, we saw an almost 90% efficacy in the human challenge, which is biased to an antibody response. Which again, as I said, is using a native F with both pre -- which will be expressing both pre and post.

So we're a matter of months away from knowing whether our approach is right or not, but I think the human challenge really gives us great confidence that we're on track.

[Henrik Juuel, executive]

Yes. So Thomas, let me take the two other questions. There was one first related to our COVID-19 program and the potential milestones to our partner at [indiscernible]. It's correct that they will potentially earn milestone payments. And there are three of those potentially short term.

We haven't specifically put any numbers to these. But the first one is associated with the completion of the Phase III. That means once you have the final report assessment that triggers one. And the two other ones are triggered by filing in U.S. and Europe, respectively. So you can say the -- if we are not successful with the data, of course, then we are not filing obviously. So that means we will only pay one of the three milestones included in that number, you will see in our report.

So that's the COVID one. On Rabipur, I think basically the strong start we have had on '23 is driven by, first of all, by extremely strong market growth, both in the U.S. and in Germany. And then, of course, in the U.S., combined with a higher level of market share compared to last year. So 69% really strong performance. We don't see any one-off elements included in our first quarter numbers here. It is basically just good strong performance.

As I'm aware, we are -- Sanofi is not in any stock up situation either at the moment. In Germany, I think we are holding on to our clear market leader position with 95%. So here, it's basically all driven by the market rebounding extremely fast. So very strong performance in the rabies business that we are obviously very pleased about.

[Thomas Bowers, analyst]

And can I just ask one -- just to clarify on the COVID-19 milestone. So that first milestone at a certain number, is that based on the primary endpoint only? Or do you need to meet some secondary endpoints as well?

[Henrik Juuel, executive]

It's actually not related at all to the success or failure of the Phase III. It's solely related to the finalization of the Phase III program. So even if we -- it's basically triggered by the final report that you can create, not related to the results, related are only finding if we are successful.

[Operator]

There are no further questions at this time. So I'll hand the call back to you for closing remarks.

[Paul Chaplin, executive]

Well, thanks, everyone, for your time and joining the call. Appreciate the questions, and have a great day.