Break even. That’s the target for most biotech companies, but with astronomical research expenses and poor earnings prospects only a few reach that target.

By the end of the year a big round zero before taxes is exactly what Bavarian Nordic expects to achieve – in spite of the fact that the recently published H1 financial report shows a pre-tax deficit of DKK 42.7m (USD 7.65m).

“We expect to break even, and the first six months showing a small deficit is what we anticipated,” Anders Hedegaard, CEO in Bavarian Nordic, tells Medwatch.

Costly research

Bavarian Nordic emerged from the first six months with a turnover of DKK 556.1m (USD 99.7m), 24.9 % higher than the same period last year, when the top line showed DKK 445.4m (USD 79.8m). Production costs have been reduced from DKK 233.4m (USD 41.8m) to DKK 211.7m (USD 38.0m). Meanwhile, R&D expenses have practically doubled from DKK 143.5m (USD 25.7m) to DKK 291.3m (USD 52.2m).

“We have seen a significant increase within research & development, and that adds to the grim image.”

He points to two reasons for the high R&D expenses. First, Bavarian Nordic has initiated two phase III studies, and secondly, a number of accounting specific reprioritizations affect expenses.

“We will have used about DKK 570m (on R&D, ed.) by the end of the year. We are about halfway in terms of turnover and in terms of R&D expenses, which is why we still believe we will achieve our goal,” says Anders Hedegaard.

For the full year, the company expects turnover in the range of DKK 1,100m (USD 197m) and to break even before taxes.

“We have achieved a record-breaking profitability in our deliveries to the US government in this quarter, and we also have very high R&D expenses for the first six months. It is all in line with our objectives. So we are very pleased with the results and maintain our full year guidance,” he says.

- translated by Martin Havtorn Petersen

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