On 21 February 2007, Bavarian Nordic A/S will publish a prospectus for a rights
issue. The company's shareholders have pre-emption rights to subscribe new
shares at the ratio of 1:5 at DKK 365 per share of DKK 10. Gross proceeds from
the rights issue are expected to amount to approximately DKK 465 million.
Background
Management expects that the company will be awarded the RFP-3 order for the
supply of an expected 20 million doses of IMVAMUNE® smallpox vaccines with a
contractual value of up to DKK 3 billion from the US authorities during the
period from the beginning of March until the end of the first half of 2007. This
will make Bavarian Nordic a fully established biopharmaceutical development and
production business. Bavarian Nordic commands an integrated research and
development organisation, a strong patent portfolio based on the MVA technology,
the only dedicated MVA production facility in the world and own marketing of the
IMVAMUNE® smallpox vaccine in a number of countries as a development-stage
product. By having ownership of these links in the value chain, Bavarian Nordic
retains most of the value creation within the company.
Management expects that IMVAMUNE® will be the best smallpox vaccine in the
market, also to secure first line responders, i.e. healthcare staff, police
officers, military personnel, infrastructure employees and political
decision-makers, who are identified as groups with a special need for
protection. Bavarian Nordic commands a strong global position after Acambis, the
only competitor in the field, was excluded from the RFP-3 process in November
2006. Consequently, management believes that authorities interested in gradually
replacing emergency stocks of old smallpox vaccines will give high priority to
IMVAMUNE®.
Management believes that the expected award of the RFP-3 order combined with the
results of all the studies conducted with IMVAMUNE® under the RFP-1 and RFP-2
contracts play a key role in the validation of the commercial potential for the
group's MVA technology. The large volume of safety data generated in the
clinical trials with IMVAMUNE® allows Bavarian Nordic to utilise the MVA
platform quickly and at relatively low costs in a number of other development
projects.
Use of proceeds
Bavarian Nordic's cash preparedness totalled DKK 238 million at 31 December
2006. Assuming the expected award of the RFP-3 order in the period from the
beginning of March until the end of the first half of 2007, Bavarian Nordic has
a total financing requirement of DKK 750 million until the end of 2008.
Management expects that the net proceeds from the rights issue of DKK 443
million combined with expected advance payments from the US authorities, debt
financing, proceeds from the exercise of an existing employee warrant programme
and the group's current cash preparedness will be sufficient to fund operations
until the end of 2008, after which Bavarian Nordic expects to generate a cash
inflow from operating activities.
The Group's financing requirement is partly due to the requirement for working
capital to manufacture IMVAMUNE® vaccines until expected payments are received
under the RFP-3 order, and partly due to the requirement for funding of the
group's other activities in the fields of HIV, cancer, measles, Respiratory
Syncytial Virus and immunotherapy. Overall, the RFP-3 order is expected to
result in a cash outflow of DKK 325 million during the period until the end of
2008. Management expects that an Emergency Use Authorisation (“EUA”) will be
granted in mid-2008, after which delivery of vaccines can begin, and operations
will contribute a cash inflow from late 2008. It is expected that the order will
generate revenues to Bavarian Nordic of up to DKK 3 billion. The group's other
activities are expected to generate a cash outflow totalling DKK 425 million
during the period from the beginning of 2007 until the end of 2008. This does
not include funding of the group's Phase III clinical trials in the MVA nef
programme. The group currently intends to seek external funding of the MVA nef
programme through a collaborative partner. However, the final decision in this
respect will depend on the conditions made by any such collaborative partners.
Outlook
For 2006, management expects revenue of DKK 175 million, and a pre-tax loss of
DKK 204 million.
For 2006, research and development costs are expected to amount to DKK 120
million.
For 2007, management expects revenue of approximately DKK 130 million, and a
pre-tax loss of approximately DKK 350 million. The loss is primarily due to the
fact that the company does not expect to recognise income for 2007 relating to
the expected RFP-3 order as the income recognition requirements of IAS 18 will
not be met until the EUA has been granted.
For 2007, research and development costs are expected to amount to DKK 230
million.
Rights issue
The rights issue comprises 1,275,236 new shares with a nominal value of DKK 10
each with pre-emption rights to the company's shareholders.
On 20 February 2007, the board of directors resolved to exercise the
authorisation contained in the company's articles of association to increase the
company's share capital by DKK 12,752,360 nominal value, corresponding to
1,275,236 shares, each with a nominal value of DKK 10.
Subscription price
The subscription price of the new shares is DKK 365 per share of DKK 10, free of
brokerage.
Subscription ratio
The company's shareholders have pre-emption rights to the new shares at the
ratio of 1:5 to the effect that shareholders will be entitled to subscribe for
one new share of DKK 10 for each 5 existing shares of DKK 10 held.
Subscription period
The subscription period for the new shares commences on 10 March 2007 and closes
on 23 March 2007, inclusive. It is expected that the new shares will be listed
on the OMX Copenhagen Stock Exchange on 29 March 2007.
Trading in subscription rights
The subscription rights will be traded in the period from 7 March 2007 to 20
March 2007, inclusive.
Allocation of subscription rights
Subscription rights will be allocated to shareholders who are registered with VP
Securities Services on 9 March 2007 at 12.30 noon (Copenhagen time) as
shareholders of Bavarian Nordic A/S. Five subscription rights are required for
each new share of DKK 10 nominal value.
Underwriting
In connection with the offering, FIH ERHVERVSBANK A/S and Nordea Bank Danmark
A/S (the “Joint Underwriters”) have signed an agreement with the company, under
which they undertake to subscribe a total of 1,275,236 new shares, thereby
underwriting all new shares in the rights issue and gross proceeds from the
rights issue of DKK 465 million, subject to certain conditions. The Joint
Underwriters have underwritten the rights issue equally and pro rata. The Joint
Underwriters have received binding advance commitments from A.J. Aamund A/S, PKA
A/S and Fåmandsforeningen LD that they will subscribe for 221,891, 69,000 and
37,562 new shares respectively by exercising all their respective subscription
rights. The advance commitments are subject, inter alia, to the underwriting
agreement not being terminated before the expiry of the subscription period.
Managers
The rights issue is planned and managed by FIH PARTNERS A/S and Nordea Corporate
Finance as joint lead managers.
Publication and distribution of prospectus
The prospectus prepared in connection with the rights issue in Bavarian Nordic
A/S will be published via the Copenhagen Stock Exchange on Wednesday, 21
February 2007.
The prospectus will be available for inspection at Bavarian Nordic A/S' office
at Bøgeskovvej 9, DK-3490 Kvistgård, Denmark. The prospectus will be sent to all
registered shareholders. The prospectus is furthermore available on the website
- except to persons subject to legislation prohibiting this - at
www.bavarian-nordic.com, and will be available from
FIH PARTNERS A/S
Langelinie Allé 43
DK-2100 Copenhagen Ø
Denmark
Tel:+45 72 22 47 00
Nordea Bank Danmark A/S
Hermes Hus
Helgeshøj Allé 33
DK-2630 Taastrup
Denmark
Tel: +45 33 33 50 92
email: corpact@nordea.com
Important information for U.S. residents
The rights issue contemplated by the prospectus is made to persons resident in
the United States only to the extent such persons are holders of existing shares
in Bavarian Nordic A/S, whether directly or through a nominee.
This rights issue will not be, and is not required to be, registered with the US
Securities and Exchange Commission under the US Securities Act of 1933 as
amended (the "Securities Act"), in reliance upon the exemption from the
registration requirements of the Securities Act provided by rule 801 promulgated
thereunder for rights offerings. Any resale or transfer of subscription rights
by or on behalf of persons resident in the United States is not permitted except
outside the United States pursuant to Regulation S of the Securities Act.
This rights issue is made for the securities of a company organised in Denmark.
The offer is subject to Danish disclosure requirements, which are different from
those of the United States. Financial statements included in the document, if
any, have been prepared in accordance with International Financial Reporting
Standards, which may not be comparable to the financial statements of United
States companies.
It may be difficult for you to enforce your rights and any claim you may have
arising under the federal securities laws, since Bavarian Nordic A/S is located
in Denmark and some or all of its officers and directors may be residents of
Denmark. You may not be able to sue a non-US company or its officers or
directors in a non-US court for the violations of the US securities laws. It may
be difficult to compel a non-US company and its affiliates to subject themselves
to a US court's judgement.
Revision of financial calendar
As a result of the rights issue, the company's announcement of financial results
for the financial year 2006 will not be released until Friday, 30 March 2007.
Kvistgård, 20 February 2007
Asger Aamund
Chairman
