Bavarian Nordic A/S - Half Year Interim Report 2009

KVISTGAARD, Denmark - Today Bavarian Nordic published the company’s half-year interim report 2009. The full financial statements are available on the company’s website: www.bavarian-nordic.com. Below is an extract of the most significant matters in the report as well as events after the balance sheet date.

In the first half of 2009 Bavarian Nordic generated revenue of DKK 33 million and recorded a loss before tax of DKK 188 million. As of 30 June 2009 the Group’s net free liquidity was DKK 489 million.

Bavarian Nordic’s new prostate cancer vaccine - PROSTVAC(TM) has been further validated and shows blockbuster potential. Bavarian Nordic is progressing the development and Phase III preparations of PROSTVAC(TM):

- End of phase II meeting with the FDA in Q4, 2009 and expected initiation of Phase III in 2010 - Five ongoing clinical Phase I and II studies in different patient populations - Preparing the production for Phase III studies - Scientific publication of data - Ongoing discussions with prospective licensing partners

The U.S. Food and Drug Administration (FDA) has performed a GMP inspection of the IMVAMUNE(R) manufacturing facilities. These GMP inspections occurred at both Bavarian Nordic’s Kvistgaard facility and at IDT in May 2009. The management of Bavarian Nordic consider these inspections to be successfully completed, and the corrective actions triggered by the inspections will be implemented within short time, causing no further investments. Bavarian Nordic has an ongoing and positive dialogue with FDA which confirms the expectations to start deliveries of IMVAMUNE(R) under the RFP-3 contract following the satisfactory implementation of the corrective actions. On this background the company expects delivery of IMVAMUNE(R) to the US government to be initiated during the period between fourth quarter of 2009 and the end of second quarter 2010.

As the company is awaiting the exact timing of the FDA review and final acceptance the timing of the actual initiation of delivery is at present uncertain. In order to reflect this, the expectations for the financial result for the full year 2009 are at present indicated as a range. The expected revenue of DKK 375 million was based on the delivery of 2 million doses of IMVAMUNE(R) in 2009. Depending on the timing for initiation of delivery, the revenue is now expected to be in the range of DKK 100-300 million, based on a maximum delivery of 1.5 million doses. The result before tax is expected to be a loss between DKK 275-325 million (previously DKK 225 million). The net free liquidity at year-end is expected to be in the range between DKK 175-350 million (previously DKK 400 million). Bavarian Nordic maintains its long-term expectations to the net free liquidity to be around DKK 800 million by year-end 2012.

In order for the company to maintain a solid cash position, the company has implemented a number of operational activities, thus postponing certain costs and investments until deliveries under RFP-3 can begin.

IMVAMUNE(R) - third generation smallpox vaccine candidate

Deliveries under the RFP-3 contract

In order to initiate the delivery of the 20 million doses of IMVAMUNE(R) to the US under the RFP-3 contract, Bavarian Nordic has to fulfil certain requirements set by the U.S. Food and Drug Administration (FDA) to potentially support the use of IMVAMUNE(R) following a declared emergency. These requirements include animal efficacy data, clinical safety data and the demonstration that the manufacturing of IMVAMUNE(R) is in accordance with industry standards associated with a marketed product.

Bavarian Nordic has successfully completed a number of data submissions to the FDA in this regard the latest in November 2008.

Bavarian Nordic’s published timelines for initiating delivery in 2009 was based on an assumption of the timely review and acceptance of Bavarian Nordic’s last summary data submission made in November 2008. This data submission triggered a USD 25 million milestone payment and represented the successful completion of a major milestone of the RFP-3 contract. The completion of the milestone from BARDA followed by an FDA review of the data was expected to be the last hurdle before deliveries under the RFP-3 contract could start. However, by the spring this year, the FDA responded to this submission with the notice that, as a final step before deliveries, they would perform a Good Manufacturing Practice (GMP) inspection of the IMVAMUNE(R) manufacturing facilities. These GMP inspections were carried out at both Bavarian Nordic’s Kvistgaard facility and IDT (the company’s contract filling partner, already GMP approved by the European authorities) in May 2009.

While the FDA did not raise any concerns regarding the facilities or the IMVAMUNE(R) validated manufacturing process, a number of observations were noted, requiring corrective actions. This is usual following an inspection by regulatory authorities. The company has already initiated its responses to these observations but the corrective actions and FDA review and acceptance will take additional months. Implementation of the corrective actions will cause no further investments.

While this represents a delay in the planned delivery of IMVAMUNE(R), following review of the data, the FDA have not raised any concerns regarding the animal, clinical or manufacturing data that has been submitted to support the use of IMVAMUNE(R) in a declared emergency. Thus satisfactory implementation of the corrective actions following the FDA inspection should trigger the start of IMVAMUNE(R) delivery.

Therefore the company expects delivery of IMVAMUNE(R) to the US government to be initiated during the period between fourth quarter of 2009 and before the end of second quarter 2010.

Negotiations with the US authorities for the further development of IMVAMUNE(R)

The US authorities have initiated negotiations with Bavarian Nordic for a new contract to develop a freeze-dried version of the IMVAMUNE(R) smallpox vaccine. This potential new project will have no influence on the ongoing RFP-3 contract for the procurement of 20 million doses of IMVAMUNE(R) and the licensure of the current liquid-frozen formulation, but represents an additional business opportunity.

Earlier this year BARDA published a Broad Agency Announcement (BAA) soliciting proposals for the advanced development of medical countermeasures against chemical, biological, radiological and nuclear (CBERN) threats. In June, Bavarian Nordic submitted a proposal for the development of a freeze-dried formulation of the MVA-based smallpox vaccine, IMVAMUNE(R). The proposal included the validation of the production process and the preclinical and clinical development to support the use of the new freeze-dried formulation of IMVAMUNE(R) following a declared emergency.

A freeze-dried formulation of IMVAMUNE(R) offers various new advantages in terms of increased shelf-life and improved stability of the vaccine compared to the current liquid-frozen formulation. Additionally, this will improve the cold-chain shipping logistics and storage. These are all important criteria for governments around the world that prioritise their bio terror preparedness.

The new technology for freeze-drying the vaccine will also be applicable for other MVA-BN(R) based vaccines.

PROSTVAC(TM) - therapeutic prostate cancer vaccine candidate

In February 2009 PROSTVAC(TM) data were presented at the 2009 Genitourinary Cancers Symposium in Orlando, Florida.

The data, collected from three different studies confirm the excellent safety and efficacy results previously reported, and they support the further investigation in patients suffering from advanced prostate cancer. Also, the data indicate that PROSTVAC(TM) can be used in earlier disease settings and thus in a larger patient population.

In May 2009 detailed PROSTVAC(TM) data were presented at the 2009 ASCO Annual Meeting in Orlando, Florida. The presentation was made by Philip Kantoff MD, Professor of Medicine, Harvard Medical School, and the Dana-Farber Cancer Institute who is also the principal investigator of the study.

The more detailed analysis supports the headline data that were reported in October 2008. In the Phase 2 double-blind, prospective randomized placebo-controlled study of 125 patients with metastatic prostate cancer, patients in the PROSTVAC(TM) group had a significantly longer median overall survival by 8.5 months compared to the control group. The hazard ratio estimate for overall survival from the study is 0.56 (95% CI 0.37-0.85).

The statistical significance in the final data set is (p=0.006). These data were improved compared to the headline data presented in the fall in connection with the first announcement.

PROSTVAC(TM) immunotherapy was well tolerated, with some patients having injection site reactions (40-60%), and brief systemic symptoms of fatigue, fevers, and chills (10-30%) reported.

In July 2009, a review on PROSTVAC(TM) from key investigators from the National Cancer Institute (NCI) was published in the publication “Expert Opinion on Investigational Drugs”, Volume 18, Issue 7 2009. This is the most comprehensive and updated review on PROSTVAC(TM) so far.

Quote from the article: “Preliminary clinical trials have indicated negligible toxicity, and Phase II trials have suggested a survival benefit after treatment with PROSTVAC(TM), especially in patients with indolent disease characteristics.”

A PROSTVAC(TM) abstract has been accepted for an oral presentation at the European CanCer Organisation (ECCO), ECCO 15 - 34th ESMO Congress, taking place in Berlin September 20-24 2009.

Ongoing PROSTVAC(TM) studies

There are a number of ongoing clinical studies with PROSTVAC(TM) in both early and late stage prostate cancer, all of which are funded and conducted by NCI under the ongoing collaboration with Bavarian Nordic.

Ongoing studies with active patient enrolling: - Phase II study comparing the radioactive drug, samarium with or without PROSTVAC(TM) therapy in men with metastatic prostate cancer - Phase II study comparing antihormone therapy (flutamide) with or without PROSTVAC(TM) therapy in men with non-metastatic prostate cancer Ongoing studies with enrolment completed: - Phase II study investigating PROSTVAC(TM) in men with PSA progress after local therapy (surgery and/or radiation) - Phase I dose-escalation, combination study with PROSTVAC(TM) and MDX-010 (CTL4-antibody) in men with metastatic prostate cancer - Phase I study investigating PROSTVAC(TM) by intraprostatic injection in patients with progressive or locally recurrent prostate cancer

Forward-looking statements

This announcement includes “forward-looking statements” that involve risks, uncertainties and other factors, many of which are outside of our control that could cause actual results to differ materially from the results discussed in the forward-looking statements. Forward-looking statements include statements concerning our plans, objectives, goals, future events, performance and/or other information that is not historical information. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent events or circumstances after the date made, except as required by law.

About Bavarian Nordic

Bavarian Nordic A/S is a leading industrial biotechnology company developing and producing novel vaccines for the treatment and prevention of life-threatening diseases with a large unmet medical need. The company’s pipeline is focused in the three areas; biodefence, cancer and infectious diseases, and includes seven development programmes. Two programmes are ready for Phase III: IMVAMUNE(R), a third-generation smallpox vaccine is being developed under a contract with the US government, and PROSTVAC(TM), a therapeutic vaccine for advanced prostate cancer is being developed under a collaboration agreement with the National Cancer Institute.

Bavarian Nordic is listed on NASDAQ OMX Copenhagen under the symbol BAVA.

For more information please visit www.bavarian-nordic.com

Source: Bavarian Nordic A/S

Contact: Anders Hedegaard, President & CEO, Bavarian Nordic, +45-23-20-30-64