ANNUAL REPORT 2020 Spreading hope, pioneering vaccines MANAGEMENT FINANCIAL COMMENTARY STATEMENTS Introduction Corporate information Consolidated financial statements 4 From research to real-life value 42 The Bavarian Nordic share 67 Consolidated Income Statements 6 Our vaccines 44 Sustainability 67 Consolidated Statements of Comprehensive Income 10 2020 achievements 46 Corporate governance 68 Consolidated Statements of Cash Flow 12 Letter to the stakeholders 48 Risk management 69 Consolidated Statements of Financial Position – Assets 14 Group Key Figures 2016–2020 52 Management of Bavarian Nordic 70 Consolidated Statements of Financial Position 15 Outlook for 2021 58 Financial review 2020 – Equity and Liabilities 18 Sales performance and market trends 71 Consolidated Statements of Changes in Equity 73 Notes Our strategy and business 22 Our strategy Financial statements of the parent company 24 Built on science, driven by people 120 Income Statements 28 Developing innovative life-saving 121 Statements of Financial Position – Assets vaccines 122 Statements of Financial Position – Equity and Liabilities 34 Driven by commercial excellence 123 Statements of Changes in Equity 38 Best in class vaccine manufacturing 124 Notes 139 Statement by Management on the Annual Report 141 Independent Auditor’s Reports CONTENTS 4 FROM RESEARCH Lowering the Annual Report 2020 Annual Report TO REAL-LIFE VALUE risk of infectious We are committed to developing and disease for the manufacturing life-saving vaccines greater good of our global community PIONEERING BEST IN DRIVEN BY RESEARCH AND CLASS VACCINE COMMERCIAL DEVELOPMENT MANUFACTURING EXCELLENCE We have a strong heritage in vaccine We are experts in live virus vaccine We have established a commercial development and with a proven technology, manufacturing and with the recent addition infrastructure with presence in key markets in we continue to make innovations to help of fill and finish capabilities we have enabled Europe and the USA to drive profitable growth fight existing and emerging diseases. end-to-end commercial-scale manufacturing. of our expanding portfolio of vaccines. 5 REVENUE 2020 Annual Report 2020 Annual Report 1, 852 mDKK EBITDA 2020 740 mDKK EMPLOYEES AT BAVARIAN NORDIC 700+ 40% employees by end of growth in employees 2020 0 100 200 300 400 500 600 700 since 2019 6 Annual Report 2020 Annual Report OUR VACCINES The ongoing COVID-19 pandemic is an unfortunate reminder of the vulnerability of our population, despite major scientific and medical advances over the past century. While new treatments have significantly improved our lives, the prevention of infectious diseases remains a complex matter in an ever more globalized society, particularly as the reservoir for these diseases are often animals, which we are poorly able to control, and mutations of the viruses present continuous challenges in our efforts to minimize the impact of emerging diseases. 7 Our vaccines are yet a small contribution to improving public health Annual Report 2020 Annual Report around the globe, but our commitment to saving and improving lives by unlocking the power of the immune system is strong, and our accomplishments in 2020 clearly demonstrate our ability to transform our knowledge, expertise and capabilities into life-saving vaccines. Rabies Tick-borne encephalitis Left untreated, rabies is almost invariably fatal and causes nearly Tick-borne encephalitis (TBE) is a viral infectious disease transmitted 60,000 deaths worldwide every year. While most of these incidents to humans by the bite of an infected tick. Although rare, TBE is a occur in developing countries, rabies remains a threat in the wildlife serious condition affecting the central nervous system that can lead in Western countries and may be transmitted to humans via bites or to death or long-term neurological sequelae after recovery from scratches mainly from bats, raccoons, skunks, and foxes. Rabies is infection. TBE is prevalent in central, eastern and northern Europe 100% preventable with post-exposure prophylaxis, i.e. wound care and the geographic range of the virus appears to have expanded and vaccination as soon as possible after being bitten and before the to new areas, likely due to a complex combination of changes in onset of symptoms. It is estimated that every 10 minutes, a person diagnosis and surveillance, human activities and socioeconomic in the US is vaccinated after potential exposure to rabies. Pre-ex- factors, and ecology and climate. TBE is a preventable disease and posure prophylaxis are often recommended for travelers visiting vaccination is recommended for people who live in TBE risk areas or countries and regions with high incidence of rabies and to animal who frequently visit forests and grasslands in TBE risk areas. handlers in some Western countries. 8 Ebola Smallpox / Monkeypox Ebola virus disease causes severe hemorrhagic fever in humans, While smallpox was eradicated worldwide by 1980 as a result of Annual Report 2020 Annual Report often leading to death. In average, the mortality rate is around 50%, an unprecedented global immunization campaign, it remains one although mortality rates in historical outbreaks have ranged from of most dangerous infectious diseases in the history of mankind, 25% to 90%. The virus is transmitted to people from wild animals having killed an estimated 300 million people in the 20th centu- and then spreads in the human population through direct contact ry. Smallpox has been investigated as a biological weapon and in with the bodily fluids of infected people. Sporadic outbreaks have combination with fears over the risk of reoccurrence of the disease, occurred in West Africa since the virus was discovered in the 1970’s, either via synthesis or natural mutations, the US, as well as other but it was not until the large outbreak in 2014-2016, which killed countries have prioritized countermeasures against the virus and more than 11,000 people, that the development of an effective maintain a stockpile of smallpox vaccines. Our vaccine has been de- vaccine was expedited, leading to an unprecedented global effort veloped to mitigate the risks associated with the traditional, replicat- by governments and the pharmaceutical industry. Bavarian Nor- ing vaccines that were used during the eradication of smallpox, and dic’s MVA-BN-based Ebola vaccine candidate, which was originally which are not recommended for people with compromised immune developed in collaboration with the US government, was licensed by systems. Janssen in 2014 for use in a prime-boost vaccine regimen together with their adenovirus–based vaccine candidate. Following an exten- Monkeypox is a viral zoonosis (a virus transmitted to humans from sive development program, the vaccine regimen was approved by animals) occurring in Central and West Africa with symptoms similar the European Commission in 2020. to those seen in the past in smallpox patients, although it is clini- cally less severe. With the eradication of smallpox and subsequent cessation of smallpox vaccination, it has emerged as the most important orthopoxvirus and is considered the deadliest existing orthopoxvirus in humans with a mortality rate estimated at up to 10%. The FDA approval of our smallpox vaccine in 2019 also in- cluded approval for monkeypox and offers a new opportunity for the protection of those at high risk for exposure to this emerging infectious disease. 9 Annual Report 2020 Annual Report 10 Annual Report 2020 Annual Report 2020 marked year one in the commercial COMMERCIAL transformation of INTEGRATION Bavarian Nordic and the MOVING FORWARD accomplishment of several Following the acquisition of Rabipur/RabAvert and Encepur from GSK, a full global commercial organization has been established to support important milestones the integration of the products. during the year were Local core sales and marketing teams have been organized in Europe and the US, ensuring comprehensive commercial presence and infra- pivotal in the continued structure. The transfer of marketing and distribution of the acquired products were completed in several countries, including key markets journey to become one of such as Germany and the US. Building on these important advances in the commercial transformation of Bavarian Nordic, the remaining the world’s largest pure markets will be taken over during 2021. 2020 ACHIEVEMENTS play vaccine companies. 11 Our longstanding partnership with the US government was again In July, the European Commission granted confirmed with the award of a new smallpox vaccine contract. The marketing authorization for MVABEA® for the USD 202 million contract not only covers the supply of up to 1.4 prevention of Ebola. The approval, which was Annual Report 2020 Annual Report million doses of the FDA-approved liquid-frozen JYNNEOS, which the second EU approval of a product based will ensure the availability of the vaccine in the U.S. Strategic on our MVA-BN platform technology, marks National Stockpile for potential use by first-line responders, but also a significant advance in the fight against the manufacturing of additional bulk vaccine for future supply of an Ebola and an important milestone in our improved, freeze-dried version of the vaccine. CONTINUED partnership with Janssen, who has licensed the commercial rights to the vaccine. In ADVANCES IN connection with the approval, Bavarian Nordic received a milestone payment of USD 10 VACCINE million from Janssen. MANUFACTURING EXPANSION After successful completion of the construction