Bavarian Nordic A/S

CSE:BAVA

Earnings Call Transcript 2020-Q3

[Operator]

Thank you, ladies and gentlemen, and thank you for standing, and welcome to the third quarterly report Q3 for the 9-month period ended 30 September 2020 conference call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, 11th of November 2020.I would now like to hand the conference over to your first speaker today, Rolf Sass. Thank you. Please go ahead.

[Rolf Sass Sørensen]

Yes. Thank you, operator, and good afternoon and good morning to some of you, and welcome to our Q3 call. With me -- my name is Rolf Sørensen, Investor Relations. And with me in this conference room I have President and CEO, Paul Chaplin; and EVP, CFO, Henrik Juuel.And before I hand over to the first speaker, Paul Chaplin, I will just quickly read through these cautionary statements. This presentation includes forward-looking statements that involve risks, uncertainties and other factors, many of which are outside of our control that cause actual results to differ from the results discussed. Forward-looking statements include statements regarding our short-term objectives and opportunities; financial expectations for the full year and financial preparedness as of year-end; as well as statements concerning plans, objectives, goals, future events, performance; and other information that is not historical information. All such forward-looking statements are expressly qualified by these cautionary 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.And with this, I will hand over to the first speaker, Paul Chaplin.

[Paul Chaplin, CEO & President]

Thank you, Rolf, and welcome, everyone, to our Q3 update. If you turn to Slide 3, I just want to give you a strategic overview of where we believe we're going at Bavarian Nordic. So within the next 5 years, we aspire to be one of the largest pure play vaccine companies. However, this year is very much a transitional year as we integrate our 4 commercial assets against rabies, tick-borne encephalitis, smallpox, monkeypox and Ebola. To do this, we've had a huge task ahead of us in building up a commercial infrastructure. And as I walk you through the future slides, you'll see that we've been extremely successful. We now are responsible for the distribution and sale of our 2 assets of rabies and TBE in 6 markets, representing more than 80% of the projected revenues. And we've achieved that within the first 9 months, which is an outstanding record for any company.To do this, we've expanded the total number of employees to 650, which is a 30% increase in all our various sites, whether it's Denmark, Germany, Switzerland or in the U.S. So a true global force. We also, to support our commercial journey, have to expand our manufacturing capabilities to really build a center of excellence for the production of live viral vaccines, which we have a proven track record for. Again, in the coming slides, you'll see that we've made huge progress, almost completing our ambition to build a commercial fill and finish facility where we're already transferring our first product. And earlier this year, we started the further expansion of our bulk facility, allowing us to take in Rabipur and Encepur by 2024, really building up a true center of excellence. We're going to continue to build on our proven ability to develop vaccines and our pipeline. And we already have a late-stage asset in terms of RSV in a blockbuster indication. And all of this is an activity to drive our continued profitable growth on our journey to become the largest pure play vaccine company by 2025.If you turn to the next slide, Slide 4, we've had an extremely strong first 9 months. When we finalized the acquisition of our 2 new assets, Rabipur/RabAvert and Encepur from GSK, a lot of the questions we got at the time, which were valid, was could Bavarian Nordic really integrate these 2 new assets in a company that had no proven track record of worldwide commercialization and no real commercial organization? Well, here we sit 9 months later and we've been extremely successful in that transition. We have built up a commercial organization. We've taken over 6 of the key markets already for those 2 products, representing more than 85% of the revenue in what I would say is a record time. And we're really seeing strong growth in the areas where we have full control. So we're either seeing a maintenance of the market in areas where historically we've lost market share, or as in the case of RabAvert in the U.S., we've actually seen an increase in the market share once we've taken control. Which is in line with what we said was the attractiveness of these 2 assets in that we believed we have a stronger focus and a stronger desire, we could actually increase market share and increase growth for these 2 assets.So we've seen, obviously, all our sales of TBE and rabies have been affected by the worldwide pandemic of COVID, as we've described in previous calls. However, in Q3, for TBE at least, we've started to see what we consider to be a rebound in that we've seen an increase in the market -- in the revenue growth by 14%. And I'll come back more on that in the later slides.With rabies, it's really a tale of two stories. In Europe, rabies is all about a travel vaccine, which has been hit extremely hard like all travel vaccines have. Whereas in the U.S., we've actually seen a growth in a declining market, which is an outstanding opportunity for a company that's in the early stages of its commercial journey. And again, together with our smallpox business where we saw a larger than anticipated order earlier in the year, we maintain our top line of revenue of $1.9 billion, which again is an outstanding result, given that many other vaccine companies have had to downgrade their revenues due to COVID 19.Due to savings in the operations, as you'll hear from Henrik later, we're also upgrading our EBITDA and cash positions by the end of the year. And this is primarily, but not completely, but primarily due to the decision to delay our entry into Phase III for RSV next year. I'll come back to the main reasons, but again, unfortunately, that's primarily driven by COVID-19. However, we are going to be doing a human challenge study with first efficacy results already available next year.On our COVID-19 program, which we licensed from AdaptVac, we've actually got some exciting new data, preclinical data, which supports the notion that this is a very strong platform and one which is ideally suited for pandemics such as COVID-19.So if you go to the next slide, Slide 5, let's talk a little bit more about the integration. As I said, we had ambitions to build up the commercial infrastructure and take over distribution. As I said, we're well on our way in that journey with 6 markets that we've already completed. And this will be completed in terms of all -- the distribution of all markets for Rabipur and Encepur by the end of next year.In terms of manufacturing, this is a three-stage process where we'll initially take over the packaging, which is a bottleneck for the products from GSK. Then we'll take over fill and finish, either using our own new plants or contract manufacturers. And then finally by 2024, we'll have completed the takeover of the bulk drug substance, taken over the complete manufacturing process for these 2 new products. This remains completely on course. This has been complete -- has not been affected by the other events that are occurring this year. And as I said, this is a great credit to the management of Bavarian Nordic and our employees that we remain on track on what many investors thought was a huge task ahead of us.On the next slide, Slide 6, as I said, one of our key strengths over the last few years has been our proven ability to manufacture live viruses, live viral vaccines such as JYNNEOS, where we've been highly successful and have produced more than 28 million doses uninterrupted. Based on this, we took a decision several years ago to expand our capabilities to bring fill and finish at a commercial scale in-house, that facility is essentially already now online, and we've begun to transfer our first product to that line, which is our liquid-frozen JYNNEOS, which is approved in the U.S., Canada and Europe. And that we will begin commercial manufacturing next year. And this is a facility where we will tech transfer, next year we'll begin the freeze-dried version of the smallpox vaccine and Rabipur/RabAvert.In addition, we wanted to expand our bulk manufacturing which we initiated earlier this year. This would allow us to take in the bulk manufacturing for Rabipur and Encepur, but also when complete, allow us to manufacture other products such as JYNNEOS or our Ebola vaccine in parallel, really increasing our capacity and flexibility and really creating a center of excellence for the production of live viral vaccines, which is a key strategic pillar in our ambition to be one of the largest pure play vaccine companies by 2025.If we go to Slide 7, as we've indicated in several months leading up to this, we've been keeping our eye on the impact of COVID-19 on other respiratory diseases. What we've seen and what has been reported by others is that due to the measures that are being taken worldwide to combat COVID-19, the rates of other infectious diseases, respiratory diseases in particular, such as flu and RSV, have declined greatly. Therefore, we see it as a too large a risk to start the Phase III next year and measure the efficacy of our candidate vaccine over 2021/2022 as we'd originally planned, because if COVID-19 and the restrictions continue, the rates of RSV could be so low that we wouldn't be unable to measure the efficacy of our vaccine. So I think prudently and probably correctly, we have decided to postpone the initiation of that Phase III until 2022 when hopefully the restrictions around COVID have been alleviated.In the meantime, we've relooked at the possibility of doing the human challenge against RSV. For those of you who follow Bavarian Nordic, we have a few years ago dismissed this as a way of really measuring the efficacy because our scientists believe that the model would not allow a true measure against the efficacy of a vaccine. However, sometimes you have to admit you're wrong. And obviously J&J, or Janssen, have actually shown some really good data for their adeno Ad26 RSV vaccine candidate in the same human challenge. And therefore we believe by doing a human challenge, we can obviously generate efficacy data for a vaccine candidate before we go into Phase III. It may allow us to also modify the current Phase III design, which is designed over 2 seasons. But it will give us some key data within the next 9 to 10 months that will allow us to evaluate whether it's prudent to move forward with Phase III. So while it's a setback, it's unfortunately something out of our control due to a worldwide pandemic. But at the same time, we will be generating some pivotal key data during the next 12 months that will allow us to move this program forward.On the next slide, our COVID-19 program, which we licensed from AdaptVac. Just to remind you of the platform and why we were so excited. This is a viral-like particle vaccine which is made up of 2 components. One is a viral capsid which is universal; universal for any vaccine that we would develop using this platform. You then add an antigen or a protein from the disease that you're trying to target, in this case a form of the surface protein of SARS-CoV-2, which forms a viral-like particle. Therefore, if the coronavirus or SARS was to mutate, as has been a hot topic lately, particularly in Denmark, we would be able to simply just change the surface protein. And if there was large quantities of the capsid already produced, you could very rapidly produce new vaccines against mutated strains, whether that's flu, whether it's SARS or other infectious diseases. And that's one of the main reasons we were attracted to this platform.AdaptVac had already generated data, which has now been published showing that a single vaccination was highly potent at inducing neutralizing antibodies. And if you look at the graph at the bottom of this current slide, you'll see that this is now monkey data that we've generated at BN. And what you're seeing is that whether we use a high or a low dose as a single vaccination in primates, we get the same strong immune response with a single vaccination. And this single vaccination induces the same level of neutralizing antibodies as a convalescent sera from patients who have high titers who have recovered from CoV-2. Now, at a time when others are talking about clinical efficacy data with COVID vaccine, this may seem a bit straight. But this is some of the best non-human primate data that has currently been published, and this is with a single vaccination, really endorsing our belief in the platform and this concept that a single vaccination could be highly effective. And as I said, flexible enough to really be able to adapt to mutating strains.Now with that back, we'll move forward through the Horizon EU grant with the Phase I later this year with clinical data available during Q1 when we'll also be publishing the efficacy data from the ongoing non-human primate study. However, to move this program and to accelerate it with the plans that we have, we are still looking for external funding or additional partnerships, whether they'd be also with other companies as well.Moving to the next slide, let's talk a little bit about the end market data for rabies. And as I said at the beginning, this is almost a tale of two stories. If you look at the graph on the right-hand side, you can see the depressing story that we're seeing here in Germany. So rabies vaccines in Germany are purely used as a prophylactic vaccines or pre-exposure vaccine for people traveling to endemic areas. Now obviously during COVID-19, international travel has almost come to a halt. And you can see the massive decline in sale of rabies vaccines for the whole market in Germany, which has declined compared to last year by 92%. And there is very little our new sales force can really do about this. And this is a situation that will exist until the restrictions on travel are loosened as solutions for COVID-19 take an impact.If, however, you look at the left-hand side of the graph, you can see that this is slightly more encouraging, which is the market conditions in the U.S. Now in the U.S., the market is split between travelers, which has obviously been impacted, but is also mainly driven by post exposure for people who have been exposed to rabid animals. And you can see that market is still holding relatively strong with a much smaller decline in the overall market. And as I said, we've seen an actual growth in the total market and an increase in the market share. So again, tale of two stories. One that I believe we can do little about in terms of the travel, but in terms of the post exposure, this is continuing to be a profitable market for us and one where we're increasing market share, which will drive a continuing revenue growth in the year to come.If you go to the next slide, TBE, again, this is a slightly different story in that if you look, we saw a decline in the market for TBE in Q2 by 22% compared to the prior year. And this was due to limited access to GPs during the lockdown procedures around the various parts of the globe where people couldn't really get access. We anticipated that there may be some sort of a rebound already later this year as people who really wanted to be vaccinated against TBE sought their GP. You can see that in the first 2 months of the third quarter, we've seen basically a return to the same growth level as we saw last year. So really indications that the TBE market is recovering as people have access, or better access I should say, to their GPs, which bodes well for the year to come, where although we are seeing local lockdowns and national lockdowns, that these are in most cases being stressed that people still need to have access to their GPs both for vaccinations and illnesses.So we really believe this is an indication that maybe the TBE market for the next 12 months could be returning to something more like normal levels than what we've seen in prior years. And as I said for TBE, where we've taken over the market in Germany, we've seen a maintenance of our market share, where historically we've seen that slip and drop with GSK, which is testament to our strategy that with a new focus and a new desire, that we can actually maintain and grow our market share in the areas that we have control.So with that, I would like to thank you for your attention and hand over the presentation to Henrik Juuel.

[Henrik Juuel, CFO & Executive VP]

Thank you very much, Paul. So let's turn to Slide #11, and let's have a look at how we have performed in -- under those market conditions that Paul just alluded to.So if we start with our rabies business where we have Rabipur and RabAvert, I think first of all, we can see on this slide here that we saw a negative growth of 27% in quarter 3 compared to prior year. And as Paul said, this is really a tale with two stories. I think in Europe, obviously we have been hit extremely hard. The market went down by 92%, and there is not much left of the market really, and that is simply the case and a matter of fact that we will have to accept until travel starts resuming back again. The other story to tell, I think that is regarding the U.S. market where, first of all, we do see a lower decline. It is a more resilient market. However, it is still declining by 14% in the third quarter compared to last year. A large chunk of that market is post exposure, and that of course makes it more resilient.But in that declining market, we actually managed to grow our revenue by more than 30% versus last year. And this was, of course, done by a significant market share gain. We basically, since the first quarter of 2019, we have moved the value share from 61% to 79% and really managed to more than offset the negative decline we saw in the third quarter here. So really a good start for our commercial organization in the U.S., absolutely.So, but with all of this combined together, we're also looking at a situation where today, more than 80% -- if we just look at September, the current run rate of our business -- more than 80% of our rabies business comes from the U.S. And given what we would have expected pre-COVID will probably be a more sort of 50/50 split between Europe and the U.S. But that's the situation right now. I think Paul said it very well that I think in the areas where we have control, we are actually performing extremely well and delivering an extreme growth in the U.S. that is even declining slightly. So, strong performance on RabAvert in the U.S.Let's turn to Encepur, our TBE business, where we, as Paul also alluded to, we are right now seeing some of the signs of the market coming back as we had expected. We saw a minus 22% decline in Q2 versus prior year. Q3 it was down to minus 1%, so a slight decline. Which actually below those numbers we saw actually positive market growth in July, but across July and August, which are the numbers we have access to today, it was a slight decline. We have managed this situation to maintain our market share around the 30%, which remember, this is in contrast to the historical market share losses that Encepur has suffered in the past. So again, really good start for our business and also a good promise for the future. I think we have all the time said that as long as the markets are not going back into total lockdowns and as long as the patients can get access to physicians, this market should come back. The underlying demand in Europe is definitely there.So we have good hopes for the TBE business next year. And you might ask how come that we can have a -- we can grow 14% in a declining market. Slightly declining, though, but with stable market share. And of course, that has to do with the fact that there is not 100% correlation between our sales numbers with our ex-factory and the end market data that you see. There can be fluctuations between months and quarters due to inventory movements at wholesaler levels.So let's turn to the next slide, #13, which is our full profit and loss. And as you will notice on this one here, we have actually redesigned our -- all our financial statements, allowing -- you can see more detailed discussions and presentations of the financial results, which we find relevant now that we are a commercial stage company. So if we start from the top, focusing on the 9 months, we delivered total revenue of DKK 1.623 billion. And to the right, you can see the donut chart showing that we, right now, we actually have 3 very solid revenue legs to stand on, our rabies business being the largest with DKK 548 million of revenue after 9 months despite the hit in Europe. Then next is our smallpox vaccine, DKK 480 million, driven by the contract we secured earlier in this year for 2020 and 2021. And then finally, the third leg is our Encepur business, delivering revenue of DKK 406 million. And on top of that, we still have contract work. Most of that is today related to our BARDA relationship. And then we also earned a milestone in connection with the approval of our Ebola vaccine earlier this year.If we turn to our OpEx costs, you will see that the research and development costs reached a level of DKK 226 million. So that is lower than the level last year, which was DKK 288 million, primarily explained by the fact that we spent more cost on RSV next year when we worked on the formulation of the RSV candidates.On R&D, that is also one of the areas where we expect to see savings this year compared to what we assumed in our earlier guidance. Like the other lines here, it's impacted by COVID-19, so some savings related to that. But we're also seeing a net saving due to the fact that we are postponing the Phase III to a start in 2022 instead of 2021. That will mean less cost this year in terms of preparing for that Phase III.If you look at the SG&A costs, DKK 423 million, significantly up from the 2019 million level and obviously driven by the whole commercialization of the business. This amount beyond the cost to drive the commercial organization also includes significant fees to GSK for the various services they provide for us in the interim period, including, for instance, cost of distribution until we take over distribution.Further down the P&L, you see the positive EBIT of DKK 734 million. That includes the income from the sale of the Priority Review Voucher of DKK 628 million realized earlier this year. And all the way to the bottom, you see an EBITDA just 1 million north of DKK 1 billion. So, a very nice and attractive result for the first 9 months.Let's turn to next slide. I will elaborate a little on the cash flow for the first 9 months. First of all, we saw very positive contribution from the operating activities, DKK 988 million, of course driven by the positive EBIT, including the sale of the Priority Review Voucher.Cash flow from investment activities, negative by approximately DKK 2 billion. This includes a net investment in securities as we have placed some of the money we got from the rights offering we have placed in Danish government bonds until we actually need them. But that amount also includes investments in fixed assets primarily related to the finalization of the fill and finish plant, but also the initiation of the expansion of the bulk facility is also included in the DKK 2 million.Cash flow from financing activities, this is the net impact from the financing exercise we conducted earlier this year where we raised approximately DKK 2.8 billion and paid back a bridge loan we had from our banks.To the right, we have some selective balance sheet figures. You see we have now a total asset base of approximately DKK 9.5 billion. Intangible assets, that has increased quite significantly. And that reflects the value of the acquired 2 vaccines that we carry on the balance sheet. Equity is up substantially from end of last year and is now at DKK 5.3 billion, approximately, and of course to a large extent driven by the proceeds from the right offering.Then we can look at the small table below the selected balance sheet figures, which basically shows our current cash position. Close to DKK 2.6 billion is what we have in cash and invested in securities at the moment, so a very strong financial position. We still have some debt close to DKK 400 million outstanding, which gives us a net cash of approximately DKK 2.2 billion. In this number, we have not included the deferred consideration through GSK, but we do still hold the approximately DKK 3.2 billion. We have not included an existing and committed unutilized credit facility of ERU 50 million is not included in that overview as well. But a very strong financial position with DKK 2.5 billion DKK.Let's turn to the final slide, where over to the left we have our current outlook. So as Paul alluded to earlier, we are actually maintaining our revenue guidance of DKK 1.9 billion. This guidance we issued before we knew about COVID-19, but we are very happy that we are actually managed to maintain this outlook despite the impact on certain pockets of our business. In particularly, of course, we are proud that we have managed to maintain and secure the TBE business, but also grow our business strongly in the U.S. And then I think we are very happy that we actually got an order from our smallpox business that was larger than we had originally anticipated. So this altogether allows us to maintain the revenue guidance for this year of DKK 1.9 billion.EBITDA, we are increasing our guidance from the previous DKK 675 million to DKK 725 million, simply due to expected savings or already realized savings. As I mentioned previously, I think we do see savings across the entire organization. Some of them are driven by COVID-19. We have less traveling, certain activities are not going ahead, et cetera. Nothing that is delaying you can see our projects or anything, but still you can see measurable savings. And then on top of that, I think a net positive impact on our R&D spend due to the decision to defer the initiation of the RSV Phase III study.The cash position, we're also upgrading that from DKK 1.5 billion to DKK 1.6 billion, and that is simply due to the higher EBITDA guidance and some changes in the working capital assumptions. So you might now ask how we can go from -- first of all, I have to say that the DKK 1.6 billion, this actually includes the committed but currently undrawn facility that we have of EUR 50 million. The reason that we have all the time included that in our guidance is that we have expectations to make a drawdown on this before the end of the year, so it would become cash. Whether this will happen or not, we'll see during the fourth quarter. We have now upgraded our position, so it might mean that we will actually defer that drawdown, of course, to save interest payments on an additional loan. But if you include those numbers, you will see that we will actually go from DKK 2.6 billion in cash to DKK 1.6 billion, including this. So a very significant expected cash spend in the fourth quarter.And that is not a mistake. It is correct. We do expect to spend a lot of money and a lot of cash during the fourth quarter. First of all, we have 2 milestones coming up to GSK, altogether representing EUR 50 million or DKK 375 million. We are expecting negative EBITDA contribution in the fourth quarter. If you look at our revenue guidance, there's relatively, compared to the other quarters, little revenue left for the year. Our 2 acquired products, TBE, the Encepur and Rabipur/RabAvert, they are seasonal products, in particular TBE. So there will be less, much less in the fourth quarter. And we have always delivered most of the revenue related to the contract with BARDA as well. So relatively little revenue in the fourth quarter, and therefore in terms of cash, also a negative contribution from EBITDA.We're also going to continue the investments in our manufacturing. We expect to invest between DKK 130 million and DKK 160 million during the fourth quarter. And that will be in the expansion of our bulk facilities and in the tech transfer projects.Finally, as we take over distribution, we also acquired inventories, local inventories of finished products from GSK. And as soon as that has been done, future orders goes from GSK directly to our inventories. So we are starting to see a buildup of finished good inventories, and we expect that to increase during the fourth quarter between DKK 300 million and DKK 350 million.You can expect to see working capital fluctuations between the quarters going forward, and in particularly, as long as GSK are manufacturing for us, typically their manufacturing will take place in campaigns, meaning that we will have large orders and then we will, you can say, eat from those inventory levels and get new large orders again. So some fluctuations can be expected. So all in all, an outlook that we are very pleased with and particularly under the circumstances with the COVID-19.To the right, we have our usual news flow for this year. I will not walk you through all of these, but just highlight the ones that are still outstanding. Within our strategic pillar commercial, we have one that we haven't met yet, and that is to -- we had an objective to increase the awareness and establish new market for our monkeypox indication. We have to be honest and say that we have made very little progress here due to COVID 19. It is extremely hard to get attention when it comes to anything else than COVID-19, basically.Within R&D, we still have a -- we are coming out, showing the results from our ongoing Phase III -- sorry, Phase II trial in BN-Brachyury in chordoma. So we expect to come out and report the results in December. Finally, on the manufacturing, I think we have nearly met all the objectives. Just put a small bracket around the qualification and validation of our fill and finish facility. This is ongoing. We are nearly done, and we expect to be home safe on this one as well before year end.So all in all, I think very well on track in terms of our plans and targets, and I think we are very pleased with the financial results for the quarter. So with that, I will hand the word back to the operator and ask for Q&As.

[Operator]

[Operator Instructions] Your first question comes from line of Chad Messer from Needham & Company. Your line is open. You may ask your question.

[Chad Jason Messer, Senior Analyst]

Terribly sorry. On mute there. Thanks for taking my questions and congratulations on some significant progress during extremely challenging times. Paul, I did want to just drill down a little bit more on the change in strategy on RSV. I certainly appreciate the prudence of not taking on an expensive trial when you're at risk of not getting a good answer from that trial for your investments. But as you mentioned, this was a challenged trial you previously thought wasn't worth doing. You mentioned that J&J's had some success with this challenge study. Maybe you could comment on that a little more and that you may be able to help design or inform the Phase III with this. I'm just wondering if you could comment on what kind of information you might gain there. And then finally, and I appreciate most difficultly, but as best as you can, I know you'd like to ultimately attract a partner for this RSV program. Just wondering how the challenge study may help you there.

[Paul Chaplin, CEO & President]

Yes. Thanks, Chad. So, yes. So with the human challenge study, the primary readout is to look for a reduction in viral load in the blood post challenge. And as you said, historically, when we looked at that model, we thought that the window of opportunity to really see a decline was too stringent for a vaccine in that you only have a few days post challenge to really see an effect over and above placebo-treated volunteers. But as I said in the presentation, sometimes you have to put your hands up and say you're wrong, because J&J came out and published results of their human challenge study at a Congress, I think it was last year, where they showed that their Ad26 candidate did significantly reduce the viral load in the blood. Another secondary measure is to measure the score of symptoms, and there they also saw a significant impact. So I guess all the other vaccines that have been tested before, it wasn't really the model that was at fault. It was the vaccine. And now we're seeing a vaccine that's actually been able to show an effect in that model. So I think it's a stringent test, I would say, because as I said, it's a very short window of opportunity to have an effect on the virus. But nonetheless, we can see that a competitive vaccine seemed to have an effect. So I think we do anticipate to get hopefully similar or better results, which would help us really position our vaccine with regard to Janssen as a competitor, but also maybe to have a better assessment of what level of efficacy we believe we're looking for in the Phase III, which at the moment we're simply I wouldn't say guessing, but we're simply determining based on what we think is a commercially viable efficacy for RSV.

[Chad Jason Messer, Senior Analyst]

Okay. Great. I appreciate that.

[Paul Chaplin, CEO & President]

Sorry, the other part -- sorry, Chad. The other part of your question I forgot was what could that do potentially for partnering. Obviously, the more data you have, the easier it is to partner. I think that's the best way of saying it. And if you can derisk the Phase III investment with some excellent efficacy data, it will help partner.

[Chad Jason Messer, Senior Analyst]

Yes. No, that makes sense. And maybe just a couple on the COVID-19 program. You mentioned you're looking for external funding potentially to run the Phase III. Just wondering what you think the current environment for that is now. Obviously a lot of money has been put out on vaccines. I don't know if you feel there's significantly more, I guess, maybe for the right vaccine if your Phase I data looks good. And then maybe just to remind us, I know this is a single shot vaccine, which is an advantage over certain others. But what about its storage conditions? So for example, one sort of detriment to the Pfizer vaccine is its necessity to stay at minus 70. What's the status with this Adaptimmune platform?

[Paul Chaplin, CEO & President]

Yes. So the funding situation with COVID is one that's changing I guess as the whole COVID situation is changing. I think it's no surprise, and I'm as relieved as everyone that Pfizer is reporting good data. And I think we, as well as many of the funding bodies anticipated more recently that there would be 1 to 3 vaccines coming through early next year for approval. Again, I don't want to talk about the various candidates or whatever, but the first vaccines across the line may not necessarily be the best vaccines across the line. And there may be certain populations that need new improved vaccines. You mentioned the storage conditions of some vaccines that make it quite difficult to distribute. Again, one of the reasons we like this platform, not only the flexibility in being able to address mutations, the one shot aspect which seems to be bearing out at least in preclinical studies, but the other one is its storage is anticipated to be at 2 to 8 degree Celsius, or refrigerated conditions, which offers a huge benefit. In terms of the funding situation, I think, let's be honest; I think by the time we closed the license deal with AdaptVac, a lot of the funding opportunities had already closed. That was the case for the U.S. where we have obviously close ties. They'd gone and closed the Warp Speed project. So we'll see. As I said, what we're committed to do is support AdaptVac with their Phase I, finalize the monkey efficacy, which I've today published some of the early results. I would also flag that where we're starting to get also interested from other companies, the production of certain live viruses as candidates is becoming clear is difficult for certain territories. So other companies are looking for simpler products to produce and distribute and sell. So there are still opportunities, but again, we'll have to see how the coming months develop as more candidate vaccines hopefully cross the line and get approved.

[Chad Jason Messer, Senior Analyst]

All right. Great. I'll get back in the queue, but congrats on progress. These are challenging times, and you guys are moving a lot ahead.

[Operator]

Next question comes from the line of Michael Novod from Nordea.

[Unknown Analyst]

It's [ Michael Lewis ] from Nordea Markets. First of all, on the recent ACIP meeting in late October, it was almost the full day dedicated discussing orthopox or monkeypox, discussing TBE and also discussing rabies. There was also a conclusion that Pfizer would move forward trying to get registration of their TBE vaccine in the U.S. This is another market that's really existing now, but potentially could be a market longer term. So maybe you could give an update on what the ACIP meeting led you to sort of think about both regarding monkeypox and TBE going into 2021 and beyond. And then secondly, on the cost side for 2021, I know you haven't guided it, but obviously since you will not start your Phase III trial within RSV but run a human challenge trial, maybe you could just help us sort of just conceptually think around how we should predict your cost side going into 2021. And then lastly, on the German rabies market, would you expect as soon as sort of traveling resumes, I don't know, take 2022, that you just see a full recovery of that market? Or do you fear that there could be changes to the overall market structure within rabies vaccination in countries that's been hard hit by the travel restrictions?

[Paul Chaplin, CEO & President]

Okay. Yes. Thanks, Michael. Let me take a couple of those, and then I'll hand over the cost side, the more tricky question to Henrik. So on ACIP, yes, you're right. There was an ACIP meeting recently, which was almost dedicated entirely to all the different vaccines that we currently have in our commercial portfolio. The discussion around smallpox, monkeypox was directed JYNNEOS as obviously that has been approved. And typically, just for everyone who's listening, ACIP is typically a lengthy process where you normally have 3 different meetings with ACIP to discuss the various aspects of a vaccine. There's a working group set up from the CDC that looks into the details and they present to ACIP at least 3 times before a recommendation on the last meeting is made. This is the first meeting for the smallpox and was really talking about what the requirements could be in a pre-event, as they call it, which is before an outbreak of smallpox. And interestingly there, they were talking about healthcare workers and the like. There was also a discussion about monkeypox, which was presented by CDC, the working group, which is more about the exposure of lab workers which is their primary focus in this round. As I said, I hope that leads to some sort of recommendation next year to -- for JYNNEOS in a pre-event scenario. Regarding TBE, yes, there was a discussion about the need for TBE vaccination, particularly for DoD personnel being deployed in certain areas such as Germany. Pfizer presented their vaccine. And of course, if there is an opportunity to gain licensure for a TBE vaccine in the U.S., it's one that we will be exploring and potentially following. And on rabies, it was more about the discussion in a pre-exposure, whether to reduce the number of vaccinations and let's see. This was one of the early discussions where that goes, but we're following those discussions closely. The other question you mentioned was how do we see the German rabies market returning. I think, obviously, we need international travel to return, and I guess everyone has an opinion how fast that will return. I believe the rabies vaccination or the rabies market in Germany will follow the international travel recovery. And as I said, we can all debate whether we believe that will be overnight, rapid or will be progressive over some time. And at the moment, I would hate to speculate on that. I think we are probably unfortunately looking more at a 2022 than an early 2021 event. But I think it will go. I think if I was to speculate, and now I will, I think a lot of people were fed up in restricted in their movements of what they can and can't do. And I think when the gates are open, I think people will look to take travel, and with travel comes travel vaccination. So hopefully that's answered the two questions, 1and then I'll hand over to Henrik on the cost side.

[Henrik Juuel, CFO & Executive VP]

Thanks for the question, Michael. I think the -- as you rightfully said, we have not guided for next year. But let me try to help you to understand the moving parts when it comes to RSV. If we compare our current outlook for RSV versus our previous plans, then it will mean in terms of our R&D spend next year a net reduction. But it's relatively small. One might think that it would be larger, but what is really happening is that we had a plan to go ahead next year, but that will be with the vaccination season in the autumn next year. So we would not have that many trial costs in 2021. 2022 would actually be a very expensive year because you would finalize Season 1 and start Season 2. But we are definitely moving those out of 2021 that we had in. On the other hand, we have our human challenge started. It is not that expensive. It's a single in the million dollar amount we're going to pay for that. But of course, it still consumes some of the savings. And then finally, I think next year we need to manufacture the clinical material that we need for both seasons. We had expected a little of that this year, but that moves into next year. But to sum up, yes, there will be a net reduction in R&D spend on the RSV line in isolation, but it's not going to be a very significant one.

[Operator]

Our next question comes from the line of Boris Peaker.

[Boris Peaker, MD & Senior Research Analyst]

Two questions here. First, on JYNNEOS, I believe you were planning to meet with the U.S. military to see if the liquid-frozen could become the standard of care for soldier immunization. Just curious if you have any updates on that? And second question is on the Brachyury in chordoma. If you could just remind us how many patients' worth of data will we get, and what do we really need to see in this data set to justify further development?

[Paul Chaplin, CEO & President]

Yes. Thanks, Boris. So regarding JYNNEOS, so earlier this year we received an order from BARDA both on the bulk manufacturing, but also to manufacture 1.4 million liquid-frozen doses, which we're currently partially manufacturing this year and we'll be completing next year on our new line. And that will be delivered to the SNS with the intention that it will be used for people in the U.S., either whether it's CDC laboratory workers or military. The process for military to switch over to a different vaccine I am learning is quite a lengthy and difficult one. And I think that whole process, to be frank, may have been delayed due to the ongoing COVID situation. But as I said, the doses have already been ordered and will be being manufactured in the coming months and will be available to the SNS upon request. So that's that one. And then I think the other question related to BN-Brachyury in chordoma. It's 29 patients that have been treated, and we're looking for 4 objective responses, meaning that we're looking obviously at objective responses where you see the shrinkage of the tumor according to the RECIST criteria. We've announced that 1 patient, in fact, one of the very first patients responded. And we announced that because it triggered the expansion of the study, we haven't since announced anything else. The patients will complete the treatment course in the coming weeks, which will allow us to communicate that. So we are looking for 4 patients to respond out of 29, which we think would be an amazing result to move forward. So we'll see in the coming weeks where we are on that.

[Operator]

Next question comes from the line of Lucy Codrington from Jefferies.

[Lucy-Emma Mary Sarah Codrington-Bartlett]

Just a couple left for me. Just regarding the R&D spend in the third quarter that was higher, is that -- could you explain just why it was -- there was a big jump up in 3Q? And also whether the overall R&D spend to 2020 is still targeted to be DKK 500 million, or are we expecting a reduction in that? Secondly, is the 100 million D&A run rate in 3Q a reasonable run rate to use 4Q, or were there some one-off impairments this quarter? And then finally, on the COVID vaccine, is there a time frame in which the funding needs to be secured, or is it open-ended?

[Henrik Juuel, CFO & Executive VP]

Thanks. Let me start with the question to the R&D. Yes, it was -- I think the R&D, that's DKK 102 million for the quarter, basically, is higher than last year. And I think the R&D spend I think is very sort of sensitive to when we actually manufacture clinical material, et cetera, and when we do ask our production facilities to work on upscaling, et cetera. So there has been some activities in the third quarter, primarily driven by -- there has been some on the non-human primate study on COVID-19, as Paul alluded to. And then it has been the RSV project, mainly, that has been the big consumers here. So for the full year, I can't give any more precise guidance for the full year, except that this is R&D is one of the lines where we expect a savings enable us to deliver on the increased EBITDA guidance primarily due to the postponement of the Phase III study for RSV. And I think the other question was on SG&A, as I recall it, the run rate. I think the run rate that we have seen for Q3 is, I think, pretty must reflecting the current run rate and the workloads, the fees that we pay to GSK, et cetera, for the third quarter. So I think that's probably the closest I can get to guide you on this one here.

[Lucy-Emma Mary Sarah Codrington-Bartlett]

Sorry. I actually meant depreciation and amortization. I wasn't clear.

[Henrik Juuel, CFO & Executive VP]

Sorry. Depreciations and amortizations, we don't expect that to change significantly between the third and fourth quarter. I think it will -- it's mainly impacted by the amortization of the intangible rights related to these products here, so it should be relatively stable between the quarters. Until we really start using the fill and finish facility, but that will be from early next year, then we will start the depreciation on that one as well. But for the fourth quarter, it will be relatively stable compared to Q3.

[Paul Chaplin, CEO & President]

Yes. And then the -- if I take the last one, it was regarding timing of funding and is that going to influence anything. So, yes, if there's a deadline and we stop talking about COVID at some point. Obviously, as I mentioned before, the whole COVID situation is fluid. It's moving. It's changing daily. As I said, I'm very, very hopeful that a number of vaccines will come through during Q1 for approval. Whether they're sufficient or not, time will tell. I would say the biggest part of the discussions that we have right now are not really with the classic funding agencies that you may imagine. It's more on the commercial side with other companies who are looking for a COVID vaccine for their own territory or for combination with other vaccines. So that tends to be where most of our time is taken right now. So I wouldn't give it a deadline. What I would repeat is that we're supporting AdaptVac moving through Phase I. We will have more data, both clinical and preclinical early next year, but we will not move it forward without funding.

[Operator]

There are no further questions at this time. Please continue.

[Paul Chaplin, CEO & President]

Okay. Well, thank you, everyone, for your time and for your questions, and have a great day, and we'll talk soon. Thank you.

[Operator]

That does conclude our conference today. Thank you all for participating. You may all disconnect.