BVNKF - Bavarian Nordic A/S (BVNKF) Q3 2023 Earnings Call Transcript

2023-11-16 13:13:08 ET

Bavarian Nordic A/S (BVNKF)

Q3 2023 Earnings Call Transcript

November 16, 2023 08:00 AM ET

Company Participants

Rolf Sass Sorensen - Vice President of Investor Relations

Paul Chaplin - President and Chief Executive Officer

Henrik Juuel - Executive Vice President, Chief Financial Officer

Conference Call Participants

Peter Verdult - Citigroup

Boris Peaker - TD Cowen

Michael Novod - Nordea

Thomas Bowers - Danske Bank

Jesper Ilsoe - Carnegie

Presentation

Rolf Sass Sorensen

Good morning to some of you, good afternoon to the rest of you, and welcome to Bavarian Nordic's Q3 Presentation. My name is Rolf Sass 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 have had a quarter of strong operational performance. And to talk to you about that, we will go through 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 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

Thanks, Rolf, and welcome, everyone, to today's company announcement. If you turn to Slide 5, today we have announced once again record numbers for the first nine months of the year, DKK4.6 billion in revenue, which represents almost 150% increase to this time last year, very strong performance on the EBITDA at DKK1.6 billion which represents a 34% EBITDA margin. What's really pleasing is, obviously, that all parts of the business are performing extremely well and contributing to these record numbers.

On travel health, we have seen a strong rebound, not only in the travel business, but we have also seen strong brand performance and portfolio expansion with the new acquisition. 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 will leave it up to Henrik to explain the moving parts. As I said, we are very confident that will meet our annual guidance of DKK6.9 billion in revenue and DKK2.3 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 split in two parts: travel health, where we really do represent the largest company supplying travel vaccines around the world. And our public preparedness part of the business, which is supplying our mpox/smallpox business around the globe.

We will go to the next slide. We have seen some recent developments in our public preparedness part of the business and that would now seen since the operating the -- which unprecedented last year will now seems to have a national recommendation 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.

And we plan to launch JYNNEOS next year and improve the access to this risk population and hopefully improve world's lives. This, however, is only one recent recommendation. We have seen similar recommendations both in Germany and more recently the UK, and the European AIDS Clinical Society also made a recommendation that, everyone with HIV or people on PrEP Treatment for HIV should also be offered to JYNNEOS.

And as I said, this really represents an opportunity, a 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 is clear that vaccinating these populations will be key. And thirdly, there is a recognition that JYNNEOS is a highly effective vaccine, preventing mpox infections and hospitalizations, which is supported by the real-world efficacy data, has been published by many groups since the outbreak last year.

If we go to the next slide, so traditionally, our public preparedness business has really been supplying our vaccine, as a stockpile vaccine to prevent to help prepare governments should smallpox be released. And we have had two 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 -- that has previously been ordered over many years into approximately 13 million free 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, the US$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 produced 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 needs to be replaced. That has started to be replaced with a recent order for US$120 million, which is part of the revenues that we will be seeing 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 the future options of $180 million up to 2031, so very long-term commitment. Since mpox, what we have 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 rest EU of 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 stockpiling 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, to talk a little bit about travel health. Our travel health franchise began in 2020 when we purchased the rabies and TBE vaccines. And at that time, we really believe that 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 owners, and the record numbers that we have 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 have seen strong sales also of Encepur, really endorsing that strategy that we picked up.

Part of that strategy was also to undertake a very complicated tip transfer for both rabies and TBE from GSK to Bavarian Nordic over the course of five years, so that by 2025, we would have the full manufacturing in house. I am very pleased to announce that, that is going very, very successfully. Packaging is the first part that we took over. Then, we are taking over the filling. 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 the end, for the bulk production, and we are currently completing the tech transfer, the bulk production for both of those vaccines.

So, we remain fully on-track to have the tech transfer completed by 2025. In addition, we have 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. We believe with Vaxchora and Vivotif 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 $100 million in the coming years.

If you go to the next slide, Slide 10. In addition to Vaxchora, 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 severe high fever and severe joint pain in up to 85% of people who get infected, and this can remain prolonged attractive for the number of months or even years in just over 40% of the people that become infected. And almost three-quarters of the world's population are living in areas where Chikungunya outbreaks occur.

If we go to the next slide, Slide 11. So, the vaccine candidate that we acquired was a viral like particle vaccine against Chikungunya and two Phase 3s have read out successfully, during the course of this year. And both of those Phase 3 studies have shown that, this vaccine candidate is highly immunogenic. It is the only Chikungunya vaccine candidate that has demonstrated a fast onset of protection in Phase 3.

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 a 100% on 70% of the population vaccinated, and that keeps at day 22 with 98%. We see a similar profile in peak in 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 2025.

So, if you go to the Slide 12. This market has been estimated, the travel market alone has been estimated to be valued between US$400 million to US$600 million annually. And to explain that number a little bit, you have to understand the epidemiology. So, as I said, three-quarters of the population live in areas where there are outbreaks, but there are certain countries where the outbreaks are more frequent. And in many of those countries, it is considered more endemic. There are then medium-risk countries and lower-risk countries. And when you are looking at travel, you are really only considering the high-risk countries, where there is a higher-risk of being exposed to Chikungunya.

So, if we go to Slide 13, as I said, the market size has been estimated by others to be between US$400 million to US$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 is experience of other travel vaccines that of 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 US$400 million to US$600 million in valuation for travel alone.

The index market, for which the vaccine is also being developed for, obviously, is a much larger market where much more doses between 20 million to 40 million doses annually will be required, and they were already in discussions with potential partners, who will not only help to manufacture, but also distribute and sell the vaccine in areas where it is pandemic.

With that, I will hand over the presentation to Henrik Juuel.

Henrik Juuel

Yes. Thank you very much, Paul. So, I will start in the usual way and take you through the quarter and quarterly performance on sales and nine months year-to-date. So, if we look at Slide number 15, you will see we delivered close to DKK1.4 billion in revenue for the third quarter, which is a significant increase of 37% compared to the same quarter last year. Again, here, we have divided our business into these two pockets. We are talking about the Travel, 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 our in-support business and, of course, the expanded portfolio with Vivotif and Vaxchora. So, 55% growth from the Travel Health business. On the Public Preparedness side, 23% growth for the three months. And altogether, this takes us to DKK4.6 billion in total revenue for the first nine months DKK1.6 billion of that from our Travel business, DKK2.9 billion approximately from our Public preparedness business. So, record numbers, as Paul said in the beginning.

We have still confirmed our guidance of DKK6.9 billion for this year, which you can see from the bottom tells you that we will have a busy fourth quarter ahead of us, as we need to deliver DKK2.3 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 from for this nice growth that we have seen in the first nine months of the year. If you look at the quarters in isolation here and on the rabies side, we are seeing 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 benchmark, pre-COVID benchmark. So, we are right now in the U.S. in 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 traveler's vaccine in Europe. So therefore, we are also seeing market decreases compared to last year at 65%, but we are also seeing the same trend here, maybe not to the same magnitude, but still that the market size of the TB 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 sales going up by 28% compared to the third quarter of last year, and that is not in 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 these two very important markets.

On the next slide, we are 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, at 26%. And some of this, we see here it's 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 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 markets here.

On the next slide, let's talk about the profit and loss for a moment here. Third quarter revenue DKK1.4 billion, as we just talked about, delivering a gross profit of DKK862 million, which corresponds to a gross margin of 63%.

Total operating costs approaching 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 cost is adding up to DKK980 million here, that includes DKK558 million write down on our COVID projects. That takes us to a negative EBIT for the quarter of DKK326 million, but on a nine-month basis still significantly positive by close to DKK600 million. EBITDA for the year was DKK80 million and not impacted by the write down of our COVID-19 assets.

On a nine-month basis, DKK4.6 billion in revenue and an EBITDA of more than DKK1.5 billion corresponding to an EBIT margin 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 account in consequence of that statement earlier.

As long as we can't see future revenue streams from this asset here, we can't have it on our balance sheet and we have basically written it down. The write-down includes total cost of approximately DKK1.4 billion, that is what the total project has cost. We have received support from the Danish Minister of Health adding up to DKK800 million and the rest has been funded by Bavarian Nordic. That precise number is the DKK558 million that Bavarian Nordic has invested in this project.

And 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 had from this project going forward and in a potential similar pandemic situation in the future. Don't forget that we actually delivered on the Phase 3 primary endpoint and actually managed to prove that the COVID-19 vaccine was as effective as Cominati from Pfizer against Wuhan and the closely related variants.

And it further shows a 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 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 DKK455 million, obviously, driven by positive cash flow from operating activities, more than DKK500 million positives despite continued buildup of inventories according to plan. Our cash flow from investment activities impacted by the acquisition, where during the quarter, we paid US$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 have. But, nice net cash flow positive for the period of DKK45 million.

To the right, I would just highlight that our current cash position is strong. We have improved the cash position over the quarter, and we now have approximately DKK1.5 billion in securities and cash and cash equivalents, so a good strong cash position. I would also here like to announce that we have very recently signed a revolving credit facility with our two bank partners, Danske Bank and Nordea. It is a revolving credit facility that gives effect DKK1 million, which we can draw upon if and when we need it, payback 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 two years.

So, a very nice addition to our DKK1.5 billion in cash that gives us a lot of financial flexibility. Short-term, we have no need for this, but it gives us, as said, very good flexibility, and it is a strong recognition that the Bavarian Nordic is actually now a real bankable business.

Our outlook, as you will have read in our quarterly report, we are maintaining, this was increased in August based on additional orders from BARDA but also other smaller impacts orders, and that was also the first time that we included the impact from the acquisition. So, it now stands at DKK6.9 billion in expected revenue and an EBITDA of DKK2.3 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 spend half of, but due to the currently expected delivery schedule, 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're already now leading company within different segments, we are the world largest travel vaccines company. We do operate in very attractive underlying segments will grow.

We have a strong EBITDA, and we even have good margin expansions. Best example is from our transfer project where we anticipate to improve the gross margins for our Encepur and Rabipur or RabAvert vaccines by around 10 percentage point. 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 pay 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 am pleased to announce, save the dates for our Capital Markets Day that we will conduct in late February next year. So, the plan is that we start in Copenhagen Monday, 26th 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 is time to open up for questions.

Question-And-Answer Session

Operator

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

Peter Verdult

Thank you. Peter here from Citi. Two questions may be for Paul, both for Paul. Just on the private mpox vaccine market development efforts that you are going to undertake, I mean, how aggressive and quick-acting is Bavarian going to be? I suppose what we are 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 be a little more patient and this is a longer-term process? I was wondering what you are doing following the ACIP meeting to accelerate efforts to develop this private market in the U.S. and anything you are willing to say about pricing or potential pricing in this market would be helpful.

And then secondly, maybe for Henrik, you are going to be spending DKK2 billion on R&D this year. We have that dropping to DKK1 billion next year and then lower thereafter. Is that the right way of thinking about it? Or will the step down in R&D be more profound than what we are currently expecting? Thank you.

Paul Chaplin

Yes. Thanks, Peter. So, on the mpox private market in the U.S. I think that, there is a sense of urgency, not only by the authorities in the U.S. but also by us, that we need to act quickly. So, typically, when there is 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 pride events are occurring, and so that we can protect as many people as possible. So that's the time frame that we are gearing 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 of events.

The pricing that we indicated at the two ACIP was up to US$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 are 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're taking 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 quite high levels 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 3s have read out and are being completed, there are new studies that we will be, we have already started, such as the booster study, which is a follow on from the Phase 3, and there will be post-market commitments most likely and 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.

Peter Verdult

I think it is, we will have, of course, the chikungunya development and you should definitely see a drop. But within the next couple of years, we still have some significant investments to be done. So that's what we can say now.

Operator

We will take our next question. Your next question comes from the line of Boris Peaker from TD Cowen. Please go ahead. Your line is open.

Boris Peaker

I have two 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 we anticipate this year. How do you think that approval in freeze-dried will impact your discussion for any on a stockpiling procurement or with any country, U.S. or outside of U.S. And in terms of chikungunya vaccine, obviously, the biggest news in the space is Velniva 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

So, on freeze-dried, yes, we're working with data on a freeze-dried formulation. As we said, we're just completing the manufacturing validation in that 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 father orders, the FDA approval has little impact. Now we 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 were happening.

So, on chikungunya, yes. The first chikungunya vaccine has been approved by the FDA. I think There was nothing really surprising for us in what's come out of either the post-market commitments, all in the data that is around it. I would say, what it has done is really endorsed I belief that we have a very, very competitive target product profile because one of the things that you'll see if you read the approved 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% had severe chikungunya adverse like reactions.

We don't see similar reactions, and nor do we expect it because as of the borrower like article. And I think that's a really compelling advantage that we may have when we come to our approval on our launch, we'll try.

Operator

We will take our next question. Your next question comes from the line of Michael Novod from Nordea. Please go ahead. Your line is open.

Michael Novod

A couple of questions. First, back to one of the previous questions around the potential in the private market. Obviously, when sort of when you follow the variant sort of LinkedIn profile, you sort of seem to be on a hiring spree in the U.S. for PBM people, Medical liars, 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 timings, is it from '23 to '25, the initial order? How much is sort of split between '24 and '25? Yes, let's start with those two questions, and I'll get back.

Paul Chaplin

Thanks, Michael. So, I would say that our expansion and launch preparation for the private mpox it's 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 will probably be seeing a lot of the expansion and recruitment activities.

In terms of rabies, we're also, obviously, expanding because we obviously have visited and back to core 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 either. Henrik, do you?

Henrik Juuel

No, we haven't actually disclosed the split between '24 and then '25 yet. So that has to come together with our guidance later.

Operator

We will take our next question. Your next question comes from the line of Thomas Bowers from Danske Bank. Please go ahead. Your line is open.

Thomas Bowers

Yes. Thank you very much. A couple of questions here from us as well. So maybe just thinking a little bit to mpox and I am not sure what you 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 DKK3 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, some years 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 could -- you maybe even start to consider share buybacks at some point in time? Thank you.

Paul Chaplin

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

Henrik Juuel

Yes, I can definitely do that something. Let's start with the mpox question we had first where you say, what are our talks going with the various governments? We do have several dialogues ongoing with the governments 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 is 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 [Technical Difficulty] 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 that 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. Then there was a question to Rabipur. You are right that when we acquired the products, we actually saw the rabies business as a pretty mature business that would just tickle along 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 with the U.S. part was pretty resilient during the COVID time due to the post-exposure segment of that business. And will travel rebounding back. We have just seen this market grow tremendously. We do believe that, that is driven by maybe a little. You can say backlog from the COVID days, that 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 as a leader that helps supporting the constant awareness and the need 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 DKK1.5 million available today. Don't forget, so over the next two years, we need to pay back to GSK, to emergent, probably to adapt back if the milestones are triggered on the COVID project. And that means we need to make sure we can pay these payments.

In all our forecast, we can, but our focus during these two years will be to pay back that we owe to 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 the share buybacks, the 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 questions, Thomas.

Operator

[Operator Instructions]. We will take our next question. And your next question comes from the line of Jesper Ilsoe from Carnegie. Please go ahead. Your line is open.

Jesper Ilsoe

I just had 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 some high-level perspective, when we, for example, model the GSK milestones next year, it's fair to use the deferred consideration for product rights in your nine-month reports? And 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? Thank you, so much.

Henrik Juuel

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 DKK207 billion ahead of us. GSK milestones all linked to the tech transfer of manufacturing would progress really well, and we'll hit some important milestones next year.

Then we have approximately DKK500 million linked to the acquisition we did from Emergent, and here, it's all linked to successful development of the chikungunya vaccine. And finally, we have also in the numbers here, reserve an amount for potential milestones to AdaptVac once the final study has been completed on the trial here amounting to DKK75 million approximately.

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-up own manufactured products. And until we are ready to supply the market with these, we still have to buy from GSK. So, we have sort of do all 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.

Operator

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

Rolf Sass Sorensen

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

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Bavarian Nordic A/S (BVNKF) Q3 2023 Earnings Call Transcript