Bavarian Nordic A/S

CSE:BAVA

Earnings Call Analysis

Robust Growth and Steady Guidance

The quarterly performance displayed a striking 37% increase in revenue to nearly DKK 1.4 billion. The Travel Health sector, with a suite of vaccinations including those for Rabies and Encepur, soared by 55%, while the Public Preparedness division, covering Mpox and smallpox, expanded by 23%. The cumulative revenue for the 9 months hit DKK 4.6 billion, with the Travel Health and Public Preparedness contributing DKK 1.6 million and DKK 2.9 million, respectively. In alignment with these robust figures, the company reaffirms its guidance for the year at DKK 6.9 billion.

A Promising Introduction: The Chikungunya Vaccine Opportunity

The company has successfully completed two Phase 3 studies this year for a promising Chikungunya vaccine candidate. With nearly 100% of vaccinated individuals developing protective antibodies by the second week, it shows a highly immunogenic and fast-acting profile, highlighting significant potential ahead of its expected 2025 launch.

Exploring Market Valuation and Commercial Prospects

The traveler market for the Chikungunya vaccine is estimated to be valued between $400 to $600 million annually, establishing it as a substantial commercial venture upon the vaccine's launch.

Revenue Growth and Guidance: Strong Performance Signals

The company reported a robust third-quarter revenue of close to DKK 1.4 billion, marking a year-over-year growth of 37%. This positive momentum is expected to continue, with the company maintaining its full-year revenue guidance of DKK 6.9 billion, necessitating an active final quarter to meet this target.

Key Growth Drivers: Travel Health and Public Preparedness

Distinct growth has been realized in the travel health business, surging by 55% largely due to the Rabies vaccine sector. Meanwhile, the public preparedness segment also grew by 23%, cumulatively contributing to a total revenue of DKK 4.6 billion for the first nine months of the year.

Market and Sales Expansion: Strengthening Brand Performance

The Rabies vaccine sales in the U.S. have increased significantly, outperforming the market growth. The German TBE vaccine market also expanded post-COVID, evidencing a revival and broader market capture after the pandemic slowdown.

Profitability Perspective: Gross Margins and EBITDA

The company achieved a gross profit of DKK 862 million, corresponding to a gross margin of 63%. Despite a write-down of the COVID-19 projects, the company still reports a strong EBITDA of DKK 380 million for the third quarter, reinforcing its financial stability and capacity to absorb R&D setbacks.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Third Quarterly Report Q3 for the 9-month period ended September 30, 2023 Bavarian Nordic's Q3 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rolf Sass Sørensen. Please go ahead.

[Rolf Sorensen, executive]

Thank you, operator, and welcome, everyone. Good morning to some of you. Good afternoon to the rest of you, and welcome to Bavarian Nordic's Q3 present taken. My name is Rolf Sorensen, VP Investor Relations and with me, I have President and CEO, Paul Chaplin; and Executive Vice President, CFO, Henrik Juuel. And yet again, we've had a quarter of strong operational performance and to talk to you about that. We will go through the slides and after that Q&A. Before I hand over the presentation, I just briefly will walk 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, goals, future events, performance, and other information that is not historical information. We undertake no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law. So with this, I will hand the presentation over to you, Paul.

[Paul Chaplin, executive]

Thanks, Rolf, and welcome, everyone, to today's company announcement. If you turn to Slide 5, Today, we've announced, once again, record numbers for the first 9 months of the year; DKK 4.6 billion in revenue, which represents almost 150% increase for this time last year, very strong performance on the EBITDA at DKK 1.6 billion, which represents a 34% EBITDA margin. What's really pleasing is obviously all parts of the business are performing extremely well and contributing to these record numbers.On Travel Health, we've seen a strong rebound in the travel business but as we've also seen strong brand performance and portfolio expansion with the new acquisitions. I will leave it up to Henrik to talk a little bit more about the numbers in detail, but -- here we are in mid-November, and we are very firmly standing by our annual guidance. And I'll leave it up to Henrik to explain the moving parts. As I said, we're very confident that we'll meet our annual guidance of DKK 6.9 billion in revenue and DKK 2.3 billion in EBITDA, recording a record financial year for the company. If you go to the next slide, Slide 6. Our commercial portfolio, which is really going from strength to strength, is flip in 2 parts: Travel health, where we really do represent the largest company supply and travel vaccines around the world; and our public preparing part of the business, which is supplying our Mpox and smallpox business around the globe. We go to the next slide.We've seen some recent developments in our public preparedness part of the business. In that we're now seeing, since the outbreak of Mpox which was unprecedented last year, we're now seeing some national recommendations, which is opening up a private market opportunity for us to distribute JYNNEOS or IMVANEX, improving the access of our vaccine to people who are at risk. So recently, ACIP, which is the national body in the U.S. recommended JYNNEOS for the risk population, and this is estimated to be around 2 million individuals. The vast majority of which have not been vaccinated. We plan to launch JYNNEOS next year and improve the access to this risk population and hopefully improve lives. There is also one recent recommendation. We've seen similar recommendations, both in Germany and more recently, the U.K. and the European AIDS clinical society also made a recommendation that everyone with HIV or people on prep treatment for HIV should also be of to JYNNEOS.And as I said, this really represents an opportunity in new emerging market, and I think it represents a couple of things. One, Mpox is here to stay. There is that recognition with these recommendations. Secondly, to prevent or reduce future outbreaks, it's clear that vaccinating risk populations will be key. And thirdly, there is a recognition that JYNNEOS is a highly effective vaccine, preventing Mpox inception in hospitalization, which is supported by the real-world efficacy data has been published by many groups since the outbreak last year. We go to the next slide. So traditionally, our public preparedness business has really been supplying our vaccine at the stockpile vaccine to prevent -- to help prepare governments should smallpox parts be released. And we have had 2 long-term successful contracts, both with the U.S. government and Canada, and that still is true today.In the U.S., we have an order to convert bulk that has previously been ordered over many years into approximately 13 million freeze-dried doses and this order is almost $300 million/ We're currently completing the validation of that manufacturing process this year. And the first part of that order, which was awarded last year, USD 119 million, we will start revenue recognizing next year as we start manufacturing of that order. Now the bulk that I talked about that will be used to convert and produce those 13 million doses was already ordered and revenue recognized. But unfortunately, some of that bulk was used in response to the Mpox outbreak last year, and that needed to be replaced. That has started to be replaced with a recent order for $120 million, which is high for the revenues that will be seen this year, but that only goes some way to replace the bulk. So in addition to the $299 million, which we expect to be seeing over the next couple of years, there is additional bulk orders coming from the U.S. In Canada, we have also a very large order book here with up to $ 290 million to be delivered this year and up to 25% and then future options of $180 million up to 2031. So very long-term commitment. Since Mpox, what we've now seen is an expansion of our customers and the contracts that we have. We have now a framework agreement with HERA, which is part of the EU, for up to 2 million doses. We have already secured orders under another EU funding mechanism, the rescEU, to EUR 21 million next year. And we are in detailed discussions with a number of governments which are looking to place larger orders to improve their stockpile for smallpox. And so we expect the future smallpox business to grow in addition to the new emerging private market for Mpox. If we go to the next slide, Slide 9, talk a little bit about Travel health. Our Travel health franchise began in 2020 when we purchased the Rabies and TBE vaccine. And at that time, we really believe our strategy will be that we could do more with those assets with a key focus that we would be able to give them than the previous ones. And the record numbers that we've been reporting this year and last year is testimony to that strategy that we have sold more rabies doses than anyone else has done before. And again, we've seen strong sales also of Encepur, really endorsing that strategy that we picked up. Out of that strategy was also to undertake a very complicated transfer for both Rabies and TBE from GSK to Bavarian Nordic over the course of 5 years so that by '25, we would have the full manufacturing in-house. I'm very pleased to announce that, that is going very, very successfully. Packaging is the first part that we took over, then we're looking at taking over the filing. We have completed the tech transfer of the Rabies filling in our state-of-the-art facility in Denmark. And that we hope to get regulatory approval next year. The facility has been adapted at BN for the bulk production, and we're currently completing the tech transfer of the bulk production for both of those vaccines. So we remain fully on track to have the tech transfer completed by '25.In addition, we've added to the portfolio with the recent acquisitions from Emergent earlier this year, and here, everything is going according to plan. The integration is done according to plan in terms of the employees and the facilities that we took over both in the U.S. and in Switzerland and the market transfers remain on track to be completed by year-end. If you leave with Encepur and Revitas that we can really do the same thing as we did with Rabies and TBE and really grow those assets to a combined future annual revenue of USD 100 million in the coming years. If you go to the next slide, Slide 10. In addition to the core, the recent acquisition also came with a late-stage program for a vaccine against Chikungunya. Chikungunya is a mosquito-borne viral infection that can cause high fever and severe joint pain and up to 85% of people to get infected. And this can remain prolonged, attractive for a number of months or even years in just over 40% of the people that become infected. Almost 3/4 of the world's population are living in areas where Chikungunya outbreaks occur. Go to the next slide, Slide 11. So the vaccine candidate that we acquired was a virus-like particle vaccine against Chikungunya and 2 Phase 3 have read out successfully during the course of this year. And over those Phase III studies has shown that this vaccine candidate is highly immunogenic. It's the only Chikungunya vaccine on-hand that has demonstrated a fast onset of protection in Phase III. So we already see by within the first week, almost 50% of the people vaccinated generating antibodies that are believed to be protected. By the second week, that's almost 100%, 97% of the population vaccinated and that peaked at day 22, with 98%. We see a similar profile in taking older adults, 65 or older, and this really represents a very fast-acting Chikungunya vaccine, which we think has a very, very competitive profile that we will file next year and hopefully be able to launch in '25. If we go to Slide 12, this market has been estimated. The traveler market alone has been estimated to be valued between USD 400 million to USD 600 million annually. And to explain that number a little bit, you have to understand the epidemiology. So as I said, 3/4 of the population live in the areas where there are outbreaks, but there are certain countries where the outbreak are more frequent; and in many of those countries, it's considered more endemic. There are the medium-risk countries and lower-risk countries. When you're looking at travel, you're really only considering the high-risk countries where there is a higher risk of being expected to Chikungunya. If we go to Slide 13, as I said, the market size has been estimated by others to be between USD 400 million to USD 600 million annually, and this is on the basis of quite a number of conservative assumptions. One is that 50 million people are traveling to these high-risk countries. And it's our experience and the experience of other travel vaccines that offers those number of people, roughly about 8% of those people will get a vaccine, which gets you to that roughly 4 million doses, which is driving that figure of USD 400 million to USD 600 million in valuation for travel alone. The index market, which the vaccine is also being developed for obviously, is a much larger market. We have much more doses between 20 million to 40 million doses annually will be required. And there, we're already in discussions with potential partners who will not only help manufacture but also distribute and sell the vaccine in areas where it's endemic. To which I will hand over the presentation to Henrik Juuel.

[Henrik Juuel, executive]

Yes. Thank you very much, Paul. So I will start in the usual way and take you through the quarterly performance on sales in the 9 months year-to-date.So if we look at Slide #15, you will see we delivered close to DKK 1.4 billion in revenue for the third quarter, which is a significant increase of 37% compared to the same quarter of last year. Again, here, we have divided our business into these 2 pockets. We are talking about the travel health where we have our travel vaccines and the public preparedness business with our Mpox and smallpox business. And if you look at the Travel health business first, you will see we delivered a 55% growth mainly coming from our Rabies business, but also Encepur business, and of course, the expand portfolio Vivotif and Vaxchora. So 55% growth from the Travel Health business. On the public prepared side, 23% growth for the 3 months, and all together, this takes us to DKK 4.6 billion in total revenue for the first 9 months; DKK 1.6 million of that from our travel business, DKK 2.9 million approximately from our public prepared business. So record numbers, as Paul said in the beginning, we have still confirmed our guidance of DKK 6.9 billion for this year, which you can see some tells you that we will have a busy fourth quarter ahead of us as we need to deliver DKK 2.3 billion in revenue for the fourth quarter of this year to reach our guidance, but that's all on track, and we are very confident that we will deliver that. I will come back to more details about the guidance on a later slide.But before we go to the full P&L, let's have a look at what some of the growth drivers for this nice growth that we have seen in the first 9 months of the year. If you look at the quarters in isolation here and on the Rabies side, we are seeing a significant growth compared to last year in terms of the market size. In the U.S., 23% up from the same quarter last year, and actually 63% up compared to the third quarter in 2019, which is sort of our pre-COVID benchmark. So we are right now in the U.S. at Rabies market that is actually significantly larger than it was pre-COVID.In Germany, as our proxy for how the European business is doing, we saw a significant negative impact during the COVID pandemic as it is a pure travelers' vaccine in Europe. So therefore, we're also seeing increases compared to last year, 65%, but we're also seeing the same trend here, maybe not to the same magnitude, but still at the market size of the TBE market in Germany now is actually larger than it was pre-COVID, 6% larger. If we then turn to our own sales, which is, of course, impacted significantly by the market that is growing and fueled by more travelers. We see our Rabies sale going up by 28% compared to the third quarter of last year. And that is more than market growth, but also by our strong brand performance in these markets. We have today approximately 70% of the U.S. market, which is a higher market share than before we took over the vaccine from GSK. And in Germany, we have 94% market share. So clear market leader in 2 very important markets. On the next slide, we're looking at the TBE markets. In Germany, where we see here a growth compared to last year of 33% and again, also significant growth compared to the pre-COVID situation, with 26% -- and some of this we see here is basically higher awareness in Germany. We also -- if we look beyond Germany, we have also seen an endemic expansion in Europe, basically that this disease is spreading to more countries and the whole endemic area will drive future growth for us. Our own sales went up by 44% compared to last year, driven by a nice market growth. We are holding on to 27% of the market in Germany. Still somewhat impacted by a very brief out-of-stock situation we faced in the last autumn, but recovering gradually back to our pre-stock out market share. On the next slide, let's talk about the profit and loss for a moment here. Third quarter revenue, DKK 1.4 billion, as we just talked about, delivering a gross profit of DKK 862 million, which corresponds to a gross margin of 63%. Total operating costs approaching DKK 1.2 billion for the third quarter and obviously significantly impacted by the write-down of our COVID-19 project. You see here that the R&D costs is adding up to DKK 980 million here, and that includes DKK 558 million write-down on our COVID projects. That takes us to a negative EBIT for the quarter of DKK 326 million, but on a 9-month basis, still significantly positive by close to DKK 600 million. EBITDA for the third quarter 2023, DKK 380 million and not impacted by the write-down of our COVID-19 assets. On a 9-month basis, DKK 4.6 billion in revenue and an EBITDA of more than DKK 1.5 billion corresponding to an EBIT of 34%.So just a quick word on the COVID-19 write-down before we move to the next slide. When we announced the final result of the COVID projects, we also announced that we did not see a future commercial opportunity with these assets here. And what has happened during the third quarter here is a simple accounting consequence of that statement earlier. As long as we can see future revenue streams from this asset year, we can't have it on our balance sheet, and we have basically written it down. The write-down includes total cost of approximately DKK 1.4 billion. That is what the total project has cost. We have received support from the Danish Minister of Health, adding up to DKK 800 million, and the rest has been funded by Bavarian Nordic. And that precise number is the DKK 558 million that Bavarian Nordic has invested in this project. Right now, this project, we have an ongoing dialogue with the Danish Minister of Health, the European Medicines Agency and our partner, AdaptVac, on how best to leverage all the learnings we have from the project going forward and in a potential similar pandemic situation in the future. Don't forget that we actually delivered on the Phase III primary endpoint and actually managed to prove that the COVID-19 vaccine was as effective as COMIRNATY from Pfizer in Sweden and the closely related variance. And it further shows good tolerability through a safety study. So there are a lot of learnings that have been captured and we are currently, as I said, having a dialogue with our partners for how best to leverage this going forward. Next slide, which is our cash flow and balance sheet, a positive net cash flow for the period of DKK 455 million, obviously driven by positive cash flow from operating activities, more than DKK 500 million positive despite continued buildup of inventories according to plan. Our cash flow from investment activities impacted by the acquisition, where we during the quarter, we paid USD 274 million to Emergent BioSolutions as the upfront payment for the acquisition.And then we have cash flow from financing activities that are impacted by the capital increase we did. It's impacted by the last milestone funding we got for the COVID project. And finally, we paid back some repo positions we had, but a nice net cash flow positive for the period of DKK 455 million. To the right, I will just highlight that our current cash position is strong. We have improved the cash position over the quarter, and we now have approximately DKK 1.5 billion in securities, and cash and cash equivalents. So a good, strong capital.I would also here like to announce that we have very recently signed a revolving credit facility with our 2 bank partners, Danske Bank and Nordea. It is a revolving credit facility that gives effect in Danish krone, which we can draw upon if and when we need it, pay it back when we don't need it so it gives us a lot of additional financial flexibility. For instance, to absorb fluctuations in working capital, also handle periodic significant milestone payments to GSK or Emergent over the next 2 years. So a very nice addition to our DKK 1.5 billion in cash that gives us a lot of financial flexibility. Short term, we have no need for this, but it gives us, as I said, very good flexibility. And it is a strong recognition that Bavarian Nordic is actually now a real bankable business.Our outlook, as you will have read in our quarterly report, we are maintaining which was increased in August based on additional orders from BARDA, but also other smaller Mpox orders, and that was also the first time that we included the impact from the acquisition. So it now stands at DKK 6.9 billion in expected revenue and an EBITDA of DKK 2.3 billion. We maintain it, but it's very important to say that this guidance here now assumes that some of the previously announced smallpox, Mpox orders will most likely slip into the first half of January. They were originally scheduled, but due to the currently expected delivery schedules, some of these might slip into January. And that has been taken into consideration when we say we maintain the guidance, and we have been able to do that due to the continued very strong performance that we see from our travel health business. We are getting close to the end of the presentation, but I would just like to highlight on this slide here. This is our positioning slide. We still have this bold ambition to become one of the largest pure play vaccine companies. We are already now a leading company within different segments. We are the, well, a large travel vaccine company. We do operate in very attractive underlying segments with growth. We have a strong EBITDA, and we even have good margin expansions. Best example is from our tech transfer project where we anticipate to improve the gross margins for our Encepur and there are Rabipur/RabAvert vaccines by around 10 percentage points. It's a profitable business. We have a strong cash flow generation from the business at the moment. We have a financial position that enable us over the next couple of years to give back the money that we still owe to GSK and to Emergent BioSolutions. And finally, before I hand the word back to the operator, I'm pleased to announce save the dates for our Capital Markets Day that we will conduct late February next year. So the plan is that we start in Copenhagen, Monday, the 26th of February. We will be in London the day after, and in New York on the Wednesday. And here at this Capital Markets Day, our chairman and management will have the opportunity to present and discuss the company's vision and strategy in much greater detail. So with that, I hope many of you, analysts and key investors will save these dates in your calendars. So please, operator, it's time to open up for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Peter Verdult from Citigroup. Please go ahead.

[Peter Verdult, analyst]

Two questions here, both for Paul. Just on the private Mpox vaccine market development efforts that you're going to undertake. I mean how aggressive and quick and quick acting is Bavarian going to be? I suppose what I'm trying to get to is, do you see meaningful revenues from that private market coming as early as next year? Or is this -- do we have to more patient and it's a longer-term process? I just wonder what you're doing following the ACIP meeting to accelerate efforts to develop this private market in the U.S. and anything you're willing to say about pricing or potential pricing in this market would be helpful. And then secondly, maybe for Henrik. You're going to be spending DKK 2 billion in R&D this year. We have that dropping DKK 1 billion next year and then lower thereafter. Is that the right way to think of thinking about it? Or will the step down in R&D being more profound than what we're currently expecting?

[Paul Chaplin, executive]

Yes. Thanks, Peter. So on the Mpox private market in the U.S -- I think that there is a sense of urgency, not only for by the authorities in the U.S., but also by us that we need to act quickly. So typically, when there's a recommendation by ACIP, it can take quite some time before that recommendation is published. The CDC has actually committed to publishing early January next year. And one of the reasons for that is that everyone, including ourselves, would like to improve the access to JYNNEOS before the summer when a lot of the prior events are occurring so that we can protect as many people as possible. So that's the time frame that we're giving up to, which is to launch as early as we can next year. Hopefully, in time to improve access and get people vaccinated for the summer events. The pricing that we indicated to ACIP was up to USD 270 per dose. So that's a typical price, I would say, for commercial vaccines in this space. And in terms of guidance, obviously, we're not guiding for next year. And there's many factors that will affect the number of doses that we will sell. But as it's an emerging market, we will have to see how it goes. But as I said, we've taken it extremely seriously and are gearing up as fast as possible for that launch. Maybe I'll take a stab at the R&D. And then Henrik, if you want to add anything, that's fine. In terms of R&D, again, we're not guiding for next year yet but I think you need to remember that while we've peaked at quite high levels at the last couple of years in terms of R&D, there is a big proportion of R&D that will still be required for chikungunya. So although the Phase IIIs have read out and are being completed, there are new studies that we have already started such as the Booster study, which is a follow-on from the Phase III, and there will be post market commitments most likely that we will have to conduct. So that will have an impact on the R&D level, but we do expect an R&D level to drop compared to what we've been seeing over the last couple of years. Henrik?

[Henrik Juuel, executive]

Yes, Paul, I think you did very well. I think it is -- we will have, of course, the Chikungunya development, and we should definitely see a drop. But in the next couple of years, we still have some significant investments to be done at the Chik side.

[Operator]

Your next question comes from the line of Boris Peaker from TD.

[Boris Peaker, analyst]

I have 2 questions. One on Mpox and the other one on the Chikungunya side. On the Mpox side, you have a freeze-dried formulation that should get approved or at least [indiscernible] year. How do you think that approval in freeze-dried will impact a discussion for any kind of stockpiling procurement or with any country, U.S. or outside the U.S?And in terms of Chikungunya vaccine, obviously, the biggest news in the space is Valneva recently announced approval of their vaccine. Just curious what we could learn from their approval, their post-marketing commitment, and what that implies in terms of what you anticipate for your vaccine.

[Paul Chaplin, executive]

Yes. Thanks, Boris. So on freeze-dried, yes, we're working with BARDA on a freeze-dried formulation. As we said, we're just completing the manufacturing validation in our facility, and then we'll start up manufacturing the order next year. We plan to file the supplemental BLA next year, meaning that we will probably get an approval sometime in '25. Right now, we're only really focusing on an FDA approval for freeze-dried, and currently, we already have an order and more orders could come without the approval being necessary. So I think in terms of future BARDA orders, the FDA approval had little impact. Now we're still in discussions with other governments and freeze-dried is coming up as a potential option, and we'll have to see whether we expand that approval to other territories, such as Europe and Canada. But again, that's more dependent on the ongoing discussions that will happen. So on Chikungunya, yes, the first Chikungunya vaccine has been approved by the FDA. There was nothing really surprising for us in what's come out of either the post-market commitments or in the tailing that is around it. I would say, what it has done is really endorsed our belief that we have a very, very competitive target product profile because one of the things that you'll see, if you read the accrued label is that there's a whole section on Chikungunya-like adverse reactions, which they've seen up to 12% of people vaccinated, and a roughly 2% has severe Chikungunya adverse light reactions. We don't see similar reactions and nor do we expect because out of the viral-like particle. And I think that's a really compelling advantage that we may have when we come to our approval and our launch.

[Operator]

Your next question comes from the line of Michael Novod from Nordea. Please go ahead.

[Michael Novod, analyst]

Couple of questions. First, back to one of the previous questions around the potential in the private market. And obviously, when sort of when you follow Bavarian's, sort of, LinkedIn profile, you sort of seem to be on a hiring spree in the U.S. for PBM people, medical lives, and salespeople, et cetera. Is that only to support JYNNEOS in the private market? Or do you also see sort of other ways where you can, for example, optimize further on your sales efforts and commercial efforts in the Rabies space?Secondly, can you remind us, when you look at the Canadian order and timing, it's from '23 to '25, the initial order, how much is sort of split between '24 and '25? Yes, those 2 questions. I'll go back.

[Paul Chaplin, executive]

Thanks, Michael. So I would say that the -- our expansion and launch preparation for the private Mpox is moving us into new territories in the U.S. and that it's really a fully reimbursed product so into managed market where we need to expand our expertise. So that's primarily where you are probably seeing a lot of the expansion and recruitment activities.In terms of Rabies, we're also obviously expanding because we obviously have Vivotif and Vaxchora coming on board as well. So we have a bigger basket of assets on that one. Your second question related to the split on the Canadian order, and I must admit off the top of my head, I don't have that. Henrik, do you?

[Henrik Juuel, executive]

No, we haven't actually disclosed the split between '24 and '25 years. That have to come together with our guidance later.

[Operator]

Your next question comes from the line of Thomas Bowers from Danske Bank. Please go ahead.

[Thomas Bowers, analyst]

A couple of questions here from my side as well. So maybe just digging a little bit to Mpox and I'm not sure we should call it the directional '24 guidance. So first of all, are you still in advanced talks regarding additional longer-term orders? And how should we think about China still? Or maybe asking in a different way, how comfortable are you actually with the current consensus, which is around DKK 3 billion for '24? And then the second question, just on Rabipur. So originally, you guided for mid-single-digit growth potential that was pre-COVID. And now here still well studies now post-COVID, it seems like you still are seeing extremely strong growth. So is this still, you would say, traveling lagging behind? Or are we actually starting to see some structural changes here with maybe also vaccine awareness post-COVID here? So is there anything in the underlying market growth that should make us maybe think differently about the continued growth over the next couple of years and maybe also the peak market potential here?And then just a final question just on capital allocation. So with the current balance sheet, is that something that you -- well, could you maybe even start to consider share buybacks at some point in time?

[Paul Chaplin, executive]

Thanks, Thomas. Henrik, do you want to take a stab at that?

[Henrik Juuel, executive]

Yes, I can definitely do that. So I think let's start with the Mpox question we had first where you say what our talks going with the various governments. We do have a set of the dialogues ongoing with the government on potential smallpox orders. The ones we have disclosed that's France, who have been out openly with putting their strategy forward to replace the current stockpile, and then, of course, there's China. And how likely is it that these will occur? I think we have continuous dialogue with both governments. It's a good question. How likely are they? I think we are quite confident that some of it will turn into business. But we are dealing here with politicians. We are [indiscernible] buckets, et cetera. So it is things that can take time. But we hope that during next year, we will be able to sort of get something out of these dialogues, whether being France, China, or some of the other dialogues that we have. Do we feel comfortable with the consensus for '22? Obviously, I cannot comment on that one yet. But we will come out with our guidance for '24 in due time. And there was a question to Rabipur. You're right that when we acquired the product, we actually saw the Rabies business as a pretty mature business that would just take over a long with low single-digit growth. We have been very positively surprised I think, first of all, it was -- in particular, the U.S. part of it was pretty resilient during the COVID time due to the post-exposure segment of that business and with travel rebounding back, we have just seen this market growth tremendously. We do believe that, that is driven by maybe a little, you can say, backlog from the COVID days drives a little of it.But to our understanding, it is to a large extent driven by a higher awareness and more people traveling these days. And of course, we like to take some credit for that. We are the market leader, both in the U.S. and in Europe, and driving the market cost as a leader that helps supporting the constant awareness of not being vaccinated. For how long can this continue? I don't think it will continue forever, of course, this kind of growth. the market will be saturated at some point. And then I think we will return to some of the growth level we anticipated when we acquired the product, but it will be at a different base level at that time.Then when it comes to our capital allocation, I think right now, we are a growth business. We want to grow our top line, and we have DKK 1.5 billion available today. So don't forget, over the next 2 years, we need to pay back to GSK, to Emergent, probably to AdaptVac if the milestones are triggered on the COVID project. That means we need to make sure we can pay these payments in all our forecasts we can, but our focus during these 2 years will be to pay back what we so these partners. And then, of course, one day, when we have more money that we feel we need to invest in the business, we will be looking at, obviously, how to make sure the money flows back to the shareholders either in share buybacks, dividends or what have you. But for the moment, we have felt that it's a little too early to do that given the payments we have in front of us.So I hope that answered your question, Thomas.

[Operator]

[Operator Instructions] Your next question comes from the line of Jesper Ilsoe from Carnegie.

[Jesper Ilsoe, analyst]

I just have a couple of questions on the cash flow profile in Bavarian Nordic in the coming years. And I know you're not, of course, guiding for the '24 yet. But just from a high-level perspective, when we, for example, model the GSK milestones next year is a fall to use the deferred consideration for product rights in your 9-month reports. Can you also perhaps remind us about the potential milestones on the COVID program? And then lastly, just net working capital, just how we should think about that going forward?

[Henrik Juuel, executive]

Okay. Thanks, Jesper. I think that's for me. I think on the deferred considerations, I think next year will be one of the years where we will pay some significant milestones to GSK. That's all in the plan, but that will happen during next year. So I think altogether, we have approximately DKK 2.7 billion ahead of us. GSK milestones all linked to the tech transfer of manufacturing, which progress really well and we'll hit some important milestones next year. Then we have approximately DKK 500 million linked to the acquisition we did from Emergent. And here, it's all linked to successful development of Chikungunya vaccine. And finally, we have also in the numbers here, we serve an amount for a potential milestone to AdaptVac once the final study report has been completed on the trial here amounting to DKK 75 million approximately. Working capital, at the moment, we are building up inventories as we're taking over manufacturing. So that is something that will continue into next year, and until we sort of end the tech transfer from GSK. We are basically now building up, starting to build our own manufactured products. And until we are ready to supply the market with these, we still have to buy from GSK. So we had sort of dual supply chains in play during this period of time. But after '24, we will finally start selling the product we have manufactured ourselves at a better margin. So we should see some continued inventory buildup during next year.I hope that answered your question, Jesper.

[Operator]

[Operator Instructions] There seems to be no further questions at this time. Please continue.

[Paul Chaplin, executive]

Okay. Thank you. So thanks, everyone, for attending and for all the questions and your time. Have a great day. Thank you very much.

[Operator]

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