Bavarian Nordic A/S - Interim Report for the period 1 January to 30 June 2008

In the first half of 2008 Bavarian Nordic generated revenue of DKK 23
million and recorded a loss before tax of DKK 119 million. The
expectations for the financial result for the full year 2008 are
maintained at revenues in the level of DKK 180 million, and a pre-tax
loss in the level of DKK 225 million. The main part of the revenue
comprises of a milestone payment under the RFP-3 contract, which is
expected in the fourth quarter of 2008. As of 30 June 2008 the
Group's net free liquidity was DKK 882 million. The Company raises
its expectations for the net free liquidity at year-end 2008 from
approx. DKK 500 million to approx. DKK 620 milllion.

Highlights

*         Bavarian Nordic partners with the National Cancer Institute
  in the US
In August, Bavarian Nordic entered into a scientific partnership with
the National Cancer Institute. NCI and Bavarian Nordic will jointly
develop new immunotherapies for the treatment of prostate cancer.
Through the collaboration, the company has obtained rights to
intellectual property rights covering a prostate cancer vaccine
product candidate in late phase II clinical development.

*         Bavarian Nordic has signed contract with Asian country for
  the delivery of IMVAMUNE®
Bavarian Nordic has signed a three-year contract with the government
of an Asian country for the delivery of a small order of IMVAMUNE®
for the country's biodefense programme.

*         More than 1,900 subjects now vaccinated with IMVAMUNE®
To-date, more than 1,900 subjects have been vaccinated with
IMVAMUNE®, of which more than 700 subjects are immune-compromised
(HIV and people diagnosed with Atopic Dermatitis (AD)).

*         Two vaccine candidates enter clinical trials
During first half of 2008, Bavarian Nordic initiated clinical trials
with its prostate cancer vaccine and its HIV multiantigen vaccine.

*         Bavarian Nordic enforces its intellectual property rights
Bavarian Nordic has filed a patent infringement suit against Oxford
BioMedica in the United States. The claim in this case is that Oxford
BioMedica has infringed Bavarian Nordic's patents by commercializing
the patented technology in ways that have yielded large payments from
Sanofi-Aventis under the agreement between them for the development
and commercialization of TroVax®.

*         Cash position to improve with DKK 153 million due to
  realisation of forward rate agreements
After the close of the accounts, Bavarian Nordic has realised forward
exchange contracts of USD 200 million. The improvement of the net
free liquidity during the period until end of March 2009 from this
transaction is DKK 153 million, of which DKK 140 million are payable
in 2009.

Update on U.S. contract activities (RFP-3)
Bavarian Nordic continues on track towards fulfilling the $500m
contract with the U.S. government. Activities to support the
initiation of delivery of the 20 million doses of IMVAMUNE® are
ongoing and include the completion of the Phase II HIV data package,
with outstanding data from a Phase II study in 300 HIV infected
subjects that had no prior smallpox vaccination.

Recruitment in this study was completed in the second quarter of 2008
and the interim safety data will be reported in the second half of
2008. Subsequently, the data package will be submitted to the U.S.
health authorities for evaluation of whether the data can support the
use of IMVAMUNE® in a declared emergency. The completed submission
will trigger a milestone payment of USD 25 million under the RFP-3
contract, which is expected in the fourth quarter of 2008.

An end of Phase II meeting request is expected to be submitted to the
FDA in the second half of 2008 in order to discuss the Phase III
study design and data requirements for a biologic licence application
(BLA) with the FDA. Subsequently, the clinical activities to support
Phase III studies are still expected to start in 2009.

The first deliveries of vaccines are expected in 2009. With a view to
optimising the use of resources at the manufacturing facility at
Kvistgård, Denmark, delivery of vaccines is expected to be
distributed over the period 2009-2011. At the manufacturing facility,
routine production has now been demonstrated over a period of a full
year and Bavarian Nordic is currently in the first phase of
increasing output.

Update on commercial activities
In first half of 2008, Bavarian Nordic signed contract with an Asian
country for the delivery of a small order of IMVAMUNE®. This initial
order was the first since the award of the US contract for 20 million
doses of IMVAMUNE® in 2007. The extent and value of the contract are
undisclosed. Bavarian Nordic will manufacture and deliver IMVAMUNE®
smallpox vaccines for this country before initiating the delivery of
the 20 million doses of IMVAMUNE® for the U.S. government.

The commercial activities in Asia as well as in Europe and the Middle
East have been expanded during the past six months and both Bavarian
Nordic staff, as well as local agents experienced in government
contracting are operating in teams in these three areas. Furthermore,
Bavarian Nordic has engaged highly experienced people with knowledge
within bio-terror and bio-preparedness to support the teams, enabling
them to enter a professional and engaged dialogue with stakeholders
in the various geographical areas.

Currently, Bavarian Nordic is in close dialogue with more than ten
different countries regarding acquisition of IMVAMUNE®. Due to
national security reasons, further details regarding these
negotiations are not to be disclosed. The Company expects that the
negotiations will lead to several contracts. However large orders arenot expected until IMVAMUNE® has been registered.

Strengthening business development activities
Bavarian Nordic continues to reinforce its commercial organisation in
order to support the growing activities within this field. Recently,
the Company appointed Dr. Jürgen Langhärig as Vice President of
Business Development. Dr. Langhärig will join Bavarian Nordic on 1
October 2008.

He currently holds a similar position in Zealand Pharma. Previously
he has worked with international business development in Novo
Nordisk, Sandoz and Nycomed. He holds an MSc and PhD in industrial
microbiology from the University of Tübigen in Germany, and an MBA
from the University of St. Gallen.

With a new head of business development, Bavarian Nordic continues
its efforts to maximise the value of the Company's pipeline by
actively seeking partnerships and licensing agreements in order to
fulfil the goals of the Company's strategy.

Research and development

Biodefense

IMVAMUNE® - third generation smallpox vaccine
To-date, more than 1,900 subjects have been vaccinated with
IMVAMUNE®, of which more than 700 subjects are immune-compromised
(HIV and people diagnosed with Atopic Dermatitis (AD)).

In addition to the 300 HIV infected subjects that have been enrolled
in a Phase II study, an additional arm of a further 100 HIV infected
subjects with a previous exposure to conventional smallpox vaccine
was added to this study during the first half of 2008. This part of
the study was funded by the NIH as part of the additional funds made
available under RFP-2. The enrolment in this arm has also been
completed and safety data from this group will be reported in the
second half of 2009. Together with a previous HIV study, IMVAMUNE®
has now been shown to be safe and well tolerated in almost 600
HIV-infected individuals, a population that is contraindicated for
traditional smallpox vaccines.

The phase II study in patients diagnosed with AD funded under RFP-2
is currently ongoing and recruitment is expected to be completed by
end of 2008. Together with a previous Phase I study, IMVAMUNE® has
been shown to be safe and well tolerated in 120 subject diagnosed
with AD, another population excluded from vaccination with
traditional smallpox vaccines.

In the second half of 2008 Bavarian Nordic expects to initiate two
Phase II studies. The first study is designed to demonstrate the
effect of IMVAMUNE® as a booster vaccination (re-vaccination of
subjects previously vaccinated with IMVAMUNE®) and the second to
investigate the safety and immunogenicity of IMVAMUNE® in an elderly
population.

Anthrax
Preclinical studies are ongoing to evaluate several MVA-BN® based
anthrax vaccine candidates. Originally MVA-BN® encoding the
Protective Antigen of Bacillus anthracis, the bacterium that causes
anthrax, was planned to enter into a Phase I clinical study in late
2008. However, recent evidence suggests that other MVA-BN® anthrax
vaccine candidate's offer added benefits in terms of an improved
efficacy. Therefore, the planned Phase I study has been postponed,
until all Anthrax vaccine candidates have been evaluated in
preclinical studies during 2008.

Cancer immunotherapy
The cancer portfolio, which is currently focused on two projects with
breast and prostate cancer, was strengthened in the first half of
2008 with the initiation of clinical studies the Company's prostate
cancer vaccine candidate. Prostate cancer is, along with breast
cancer, in the top three cancer market, each with more than 500,000
new diagnosed incidents globally per year and only limited treatment
options. In June, Bavarian Nordic reported interim results from the
first clinical studies with its breast cancer vaccine candidate.

Partnership with National Cancer Institute in the US
In August, Bavarian Nordic entered into a scientific partnership with
the National Cancer Institute (NCI) in the United States. Under the
Cooperative Research and Development Agreement (CRADA) the NCI and
Bavarian Nordic will jointly develop new immunotherapies for the
treatment of prostate cancer. Under the CRADA, BN ImmunoTherapeutics
has rights to exclusively license intellectual property that results
from this collaboration.

Bavarian Nordic will in the future explore opportunities for
extending this collaboration to further develop its cancer projects.
By combining Bavarian Nordic's expertise within cancer vaccine
development with one of the world's leading centres of excellence
within cancer research, the company is confident that this
collaboration will result in new and innovative solutions to a
disease area with high unmet medical needs as well as expand and
accelerate Bavarian Nordic's cancer activities.

Through the collaboration and a license agreement with the United
States Public Health Service, the company has obtained rights to
intellectual property rights covering a prostate cancer vaccine
product candidate in late phase II clinical development. Data from
key clinical studies with this vaccine candidate are currently being
evaluated. Later in 2008 the company will inform the market about how
this development project will have a future in the pipeline of
Bavarian Nordic.

Breast cancer
Bavarian Nordic has completed an interim analysis of its first two
clinical studies with MVA-BN®-HER2, a cancer vaccine immunotherapy
for breast cancer patients.

The first study, performed in the U.S., is evaluating MVA-BN®-HER2
treatment following first or second-line chemotherapy (including
Herceptin®). In the second study, performed in Serbia and Poland,
MVA-BN®-HER2 is being evaluated following first or second-line
chemotherapy or in combination with single-agent taxane chemotherapy.
Both studies evaluate treatment of metastatic breast cancer patients,
whose tumors overexpress HER2. Patients are vaccinated 3 times, at 3
week intervals, with the MVA-BN® viral vector which has been
engineered to express the extracellular fragment of human HER2.

By July 2008 enrolment in the studies was completed. No drug-related
severe adverse events have been reported thus far. The vaccine has
been shown to be well tolerated and immunogenic.

Immune evaluation of samples from 18 patients treated with
MVA-BN®-HER2 revealed that 12 patients developed an immune response
(humoral and/or cellular response).

These preliminary data show that MVA-BN®-based; HER2 directed
vaccination is a biologically active treatment for patients with HER2
positive breast cancer. The final study data are expected around the
turn of the year 2008/2009.

Prostate cancer
A Phase I/II, open-label safety and tolerability study in 18 male
patients with non-metastatic hormone-insensitive prostate cancer has
begun enrolment in the U.S. Secondary objectives of the trial include
examining the ability of the vaccine to induce prostate
antigen-specific immune responses, as well as clinical anti-tumor
activity. Preliminary data is expected during second half year 2009.

The therapeutic vaccine, based on the Company's MVA-BN® technology,
is designed to generate cellular and humoral immune responses to PSA
and PAP (prostate specific antigen and prostatic acid phosphatase),
which are both well-known prostate cancer tumor targets.

Infectious diseases

HIV
In first half of 2008, Bavarian Nordic initiated clinical trials its
HIV vaccine candidate: MVA-BN® HIV multiantigen.

A Phase I/II safety and immunogenicity study in 15 HIV-infected
patients (CD4 counts > 350 ul/ml) has begun enrolment in the United
States. The first safety data are expected by the end of 2008, while
the immunogenicity data will be available during first half of 2009.

The MVA-BN® HIV multiantigen vaccine encodes eight genes from HIV,
including Nef and thus represents a more advanced vaccine candidate
compared to Bavarian Nordic's previous MVA-based HIV vaccine
candidates, MVA HIV nef and MVA-BN® HIV polytope. In previous
clinical studies with MVA HIV nef, Bavarian Nordic has demonstrated
proof of concept for the MVA technology's ability to control HIV
replication. Furthermore the vaccine was shown to be immunogenic and
to induce a broad T-cell response to Nef. The MVA-BN® HIV
multiantigen builds on these positive results and thus represents an
excellent opportunity to stimulate a broad immune response to the
majority of the HIV proteins that will likely have important
implications in a prophylactic and therapeutic setting for HIV.

Childhood vaccines (measles and RSV)
Bavarian Nordic has previously shown that IMVAMUNE® and MVA-BN® based
vaccines (including the measles vaccine candidate) are safe and
highly immunogenic in new born animals. These findings offer the
opportunity to develop MVA-BN® as a platform vaccine technology for
childhood vaccines that have the potential to stimulate protective
immune responses in children under the age of 1 year.

The first Phase I study that was initiated late in 2007 evaluated the
safety and immunogenicity of the measles vaccine in 30 healthy adult
subjects. This is the first study to support the development of an
RSV vaccine. The immunogenicity data from this study have revealed
that the vaccine is highly immunogenic. As expected, the majority
(93%) of the enrolled subjects already had measurable antibodies
against measles, due either to prior vaccination or measles
infection. However, following the first vaccination with the MVA-BN®
vaccine the antibody response were significantly boosted in nearly
all subjects. Indeed, the levels of the antibody responses against
measles were approximately 4-fold greater than those previously
recorded in adults boosted with a commercial measles vaccine. These
results confirm animal studies that have also demonstrated that the
MVA-BN® vaccine stimulates significantly higher antibody responses in
adult mice compared to a commercial measles vaccine and these same
levels of immunity are induced in newborn mice by the MVA-BN® measles
vaccine.

Following these encouraging results Bavarian Nordic plans to conduct
a Phase I study in children in the second half of 2008.



+-------------------------------------------------------------------+
| PIPELINE   | Programme       | Status      | Next milestone       |
|------------+-----------------+-------------+----------------------|
| Biodefense | Smallpox        | Phase II    | Initiate Phase III   |
|            | (IMVAMUNE®)     |             | (2009)               |
|            |-----------------+-------------+----------------------|
|            | Anthrax         | Preclinical | Phase I              |
|------------+-----------------+-------------+----------------------|
| Cancer     | Breast Cancer   | Phase I/II  | Final data           |
|            |                 |             | (2008/2009)          |
|            |-----------------+-------------+----------------------|
|            | Prostate Cancer | Phase I/II  | Preliminary data     |
|            |                 |             | (H2, 2009)           |
|------------+-----------------+-------------+----------------------|
| Infectious | HIV             | Phase I/II  | Preliminary safety   |
| diseases   | multiantigen    |             | data (Q4, 2008)      |
|            |-----------------+-------------+----------------------|
|            | Measles and RSV | Phase I     | Initiate Phase I in  |
|            |                 |             | children (H2, 2008)  |
+-------------------------------------------------------------------+



Tropical diseases
For Bavarian Nordic's early-stage projects in tropical diseases,
discussions with a potential external partner regarding out-licensing
are progressing.

Organisational development

New members of the management
Three new members have joined the management of Bavarian Nordic. As
previously announced, Anders Gram was appointed new Executive Vice
President Technical Operations. He took up his position on 1 May
2008. Ole Larsen, new CFO, joined the Company on 1 July 2008. Until
30 September 2008, he will partially be working with Nordisk Film to
complete his tasks. Reiner Laus, President & CEO of Bavarian Nordic's
US subsidiary, BN ImmunoTherapeutics Inc., has also joined the Group
Management.

Changes in the Board of Directors
At the Annual General Meeting, held on 29 April 2008, Claus Bræstrup
and Gerard van Odijk were elected new members of the Board of
Directors.

Claus Bræstrup is former President and CEO of H. Lundbeck A/S. Claus
Bræstrup has a degree of Doctorate of Medicine from the University of
Copenhagen, where he also for a period was Professor in Neuroscience.
Claus Bræstrup is a Member of the Board at the University of
Copenhagen, LifeCycle Pharma (Chairman), Santaris Pharma and he is
also a member of the Danish National Advanced Technology Foundation.

Gerard van Odijk, MD, is President and CEO of Teva Pharmaceutical
Europe B.V. With its Headquarters in Israel Teva Pharmaceutical
Industries has within a short number of years grown into a global
Pharmaceutical company with 26,000 employees and production
facilities in Israel, North America, Europe and Latin America.

Asger J. Aamund, Flemming Pedersen and Erling Johansen were
re-elected to the Board of Directors. Upon his own request Eigil
Bjerl Nielsen, who has been member of the Board of Bavarian Nordic
since 1994, has resigned.

Legal Matters

Bavarian Nordic files patent infringement suit against Oxford
BioMedica
In June, Bavarian Nordic filed a patent infringement suit against
Oxford BioMedica plc, Biomedica, Inc., and Oxford BioMedica Ltd., in
the United States District Court of the Southern District of
California.

Bavarian Nordic owns several United States patents relating to an
attenuated strain of the Company's core technology, MVA-BN®, which is
the basis for its innovative smallpox vaccine, IMVAMUNE®. MVA-BN®
also holds promise as a vector for delivering recombinant vaccines.

The claim in this case is that the defendants have infringed Bavarian
Nordic's patents by commercializing the patented technology in ways
that have yielded large payments from Sanofi-Aventis under the
agreement between them for the development and commercialization of
TroVax®.

Policy for Incentive Remuneration of the Board of Directors and
Management in Bavarian Nordic A/S
In June 2007 the Danish parliament adopted new rules as part of its
efforts to increase transparency in listed companies, which require
the general meeting's approval of guidelines for incentive
remuneration of the Board of Directors and the Management (Article
69b of the Danish Public Companies Act). In accordance with these
rules, the Company prepared a new policy which was approved on the
Annual General Meeting, held on 29 April 2008. The policy is
available on the Company's website or upon request from the Company's
headquarters.
Financial statement for the period (1 January - 30 June 2008,
un-audited)
The comparison figures for the same period 2007 are stated in
parenthesis.

The revenue is DKK 23 million (DKK 51 million). The revenue derives
from sale of IMVAMUNE® and from the RFP-2 contract with the U.S.
health authorities. The activity of this development contract is
lower compared to the same period last year.

Production costs are DKK 39 million (DKK 37 million). The production
costs are higher due to the start-up of routine production at the
Kvistgaard facility which proceeds according to schedule.

The Group's research and development costs are DKK 72 million (DKK
102 million) excluding development costs from the RFP-3 contract of
DKK 24 million, which are capitalised as intangible assets under
construction.

Sales and administrative costs are DKK 47 million (DKK 44 million).

Income before tax is a deficit of DKK 119 million (deficit of DKK 128
million).

Result for the period is a deficit of DKK 96 million (deficit of DKK
117 million)

The production of IMVAMUNE® is progressing according to plans.
Inventory of doses to be delivered in 2009 has increased by DKK 36
million in the first six months of 2008.

As of 30 June 2008 the Group's net free liquidity are DKK 882 million
(DKK 574 million). Cash flow from operations is positive with DKK 12
million (DKK -123 million). Cash flow from investment activities is
DKK -33 million (DKK -105 million) and cash flow from financing
activities is DKK -8 million (DKK 448 million). The Company has
released trusted funds of DKK 80 million to improve the net free
liquidity. Furthermore, there are unused credit facilities of DKK 20
million.

Currency transactions
To improve the liquidity and reduce the working capital investment,
the Company has decided - after the balance day - to realise the fair
value of the USD 200 million forward exchange contracts by closing
the present contracts and enter into new forward exchange contracts.
The improvement of the net free liquidity during the period until end
of March 2009 from this transaction is DKK 153 million.

The transaction itself is a realisation of the fair value of the
contracts, presently recognised on the balance sheet as a receivable
and has no impact on the Income Statement or Equity. The accumulated
gain is according to the Company's hedge accounting policy recognised
directly in equity to be recognised as income with future USD-revenue
under the RFP-3 contract.

The Company has entered into new forward exchange contracts of USD
200 million at the exchange rate of DKK 4.72 to secure USD-revenue.
The future development in fair value of the new forward exchange
contracts will be recognised directly in equity according to present
hedge accounting policy. The cumulative gain or loss will be
recognised on the income statement with future USD-revenue under the
RFP-3 contract.

The Company's hedging policy is hence unchanged to sustain the cash
flow hedge in USD under the RFP-3 contract at the same level as
reported in the 2007 annual report. Thus, the DKK 153 million can be
considered as a pre-payment of an amount, which otherwise would not
be due until invoicing under the RFP-3 contract.

Financial expectations
The 2008 guidance for the financial result is unchanged with revenue
in the level of DKK 180 million, and a pre-tax deficit in the level
of DKK -225 million. The main part of the revenue comprises of a
milestone payment under the RFP-3 contract, which is expected in the
last quarter of 2008. The Company raises its expectations for the net
free liquidity at year-end 2008 from approx. DKK 500 million to
approx. DKK 620 milllion. The increase comprises of DKK 80 million
from released trusted funds and DKK 40 million from realised fair
value of forward rate agreements.


Contact: Anders Hedegaard, President & CEO | +45 23 20 30 64