The deal will give Bavarian Nordic the global rights to Encepur and Rabipur, also known as RabAvert, in most territories. Only the rights to Rabipur in certain Asian, African and Latin American markets are excluded.
In return, Bavarian Nordic has committed to pay GSK up to €796m ($884m). Bavarian Nordic expects to hand over the €495m in milestones tied to the deal from 2020 to 2025, with most of the payments coming after 2022.
The deal is a major undertaking for Bavarian Nordic. In 2019, Bavarian Nordic expects its pre-deal operation to generate revenues of $92m. The two GSK vaccines are forecast to deliver annual sales of €175m.
Bavarian Nordic plans to raise money to fund the deal, as well using around €80m of its existing cash, but analysts can see the wisdom in doing so.
In a note to investors, analysts at Jefferies wrote, “We see a strategic rationale for the acquisition of two vaccines from GSK for up to €796m, transforming [Bavarian Nordic] into a commercial company with a likely path to sustainable profitability from 2021E and better leveraging its manufacturing capacity.”
Bavarian Nordic thinks the improved capacity utilisation enabled by the integration of the vaccines into its production and fill-and-finish facilities will create the potential for future cost reductions.
It will take time to achieve that outcome, though. Bavarian Nordic expects the transfer of production from GSK’s sites to its facilities to take up to 2025, a timeline the Jefferies analysts attribute to “the complexities and highly regulated nature of vaccine production.” In the meantime, Bavarian Nordic will purchase inventory from GSK.
Encepur and Rabipur will slot into Bavarian Nordic’s nascent portfolio of commercialised vaccines manufactured using an egg-based method. Bavarian Nordic won approval for Jynneos in smallpox and monkeypox last month.
The addition of the two new vaccines will give Bavarian Nordic a portfolio big enough to support a full commercial operation in selected markets.
By expanding use of the GSK vaccines and reducing supply shortages, the Jefferies analysts think Bavarian Nordic can grow combined sales of Encepur and Rabipur to €300m. GSK’s list of UK supply disruptions shows Rabipur will only be intermittently available until November.