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TABLE OF CONTENTS
BAVARIAN NORDIC A/S INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on January 4, 2016

Registration No. 333-                  


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Bavarian Nordic A/S
(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant's name into English)

The Kingdom of Denmark
(State or other jurisdiction of
incorporation or organization)
  2836
(Primary Standard Industrial
Classification Code Number)
  NOT APPLICABLE
(I.R.S. Employer
Identification Number)

Hejreskovvej 10A
DK-3490 Kvistgaard
Denmark
+45 33 26 83 83

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)



Seth Lewis
Bavarian Nordic Inc.
595 Penobscot Drive
Redwood City, CA 94063
(978) 341-5271

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Divakar Gupta
Joshua A. Kaufman
John Wilkinson
Cooley LLP
The Grace Building
1114 Avenue of the Americas
New York, NY 10036
Telephone: (212) 479-6000
Facsimile: (212) 479-6275

 

Jonathan L. Kravetz
Brian P. Keane
John T. Rudy
Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 542-6000
Facsimile: (617) 542-2241



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o



CALCULATION OF REGISTRATION FEE

       
 
Title of each class of securities
to be registered

  Proposed maximum
aggregate offering
price(1)

  Amount of
registration fee(2)

 

Shares, DKK 10 nominal value per share(3)

  $86,250,000   $8,685.38

 

(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rules 457(o) under the Securities Act of 1933, as amended. Includes the American Depositary Shares that the underwriters have the option to purchase to cover over allotments, if any.
(2)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
(3)
Each ADS represents             of a share. ADSs issuable upon deposit of the shares registered hereby have been registered pursuant to a separate registration statement on Form F-6.

           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any U.S. state or other jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)   Dated January 4, 2016

American Depositary Shares
Representing            Shares

LOGO

Bavarian Nordic A/S


This is an initial public offering of                  American Depositary Shares, or ADSs, representing                  shares of Bavarian Nordic A/S. Each ADS represents           of a share of Bavarian Nordic A/S of nominal value Danish kroner, or DKK, 10. We anticipate the initial public offering price of our ADSs will be between $              and $             per ADS.

Currently, our shares are traded on Nasdaq Copenhagen A/S ("Nasdaq Copenhagen") under the symbol "BAVA" and our ADSs are traded on the over-the-counter market in the United States under the symbol "BVNRY." The closing price of our shares on Nasdaq Copenhagen on                , 2016 was DKK             per share, which equals a price of $             per ADS based on the U.S. dollar/DKK exchange rate as of                  , 2015 and an ADS-to-share ratio of          . We have applied to list the ADSs on The NASDAQ Global Select Market under the symbol "BAVN."

We are an "emerging growth company" as defined by the Jumpstart Our Business Startups Act of 2012 and as such, will be subject to reduced public company reporting requirements for this prospectus and future filings.

Investing in the ADSs involves risks that are described in the "Risk Factors" section beginning on page 14 of this prospectus.

None of the Securities and Exchange Commission, any U.S. state securities commission, the Danish Financial Supervisory Authority, or any other foreign securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


 
  Per ADS   Total  

Price to the public

  $                $               

Underwriting commission(1)

  $                $               

Proceeds, before expenses, to us

  $                $               

(1)
We have agreed to reimburse the underwriters for certain expenses. See "Underwriting" beginning on page 185 of this prospectus for additional information.

The underwriters may also exercise their option to purchase up to an additional           ADSs from us, at the same price per ADS as paid for the ADSs offered hereby, for 30 days after the date of this prospectus.

The ADSs will be ready for delivery through the facilities of The Depository Trust Company on or about                  , 2016.


Cowen and Company   Piper Jaffray
Nomura

   

                           , 2016


LOGO



TABLE OF CONTENTS

 
  Page  

Presentation of Financial Information

    ii  

Presentation of Share Information

    ii  

Prospectus Summary

    1  

Risk Factors

    14  

Special Note Regarding Forward-Looking Statements

    46  

Market, Industry and Other Data

    48  

Use of Proceeds

    49  

Dividend Policy

    50  

Capitalization

    51  

Dilution

    52  

Exchange Rate Information

    54  

Selected Consolidated Financial Data

    55  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    57  

Business

    77  

Management

    132  

Certain Relationships and Related Party Transactions

    144  

Principal Shareholders

    145  

Description of Share Capital

    147  

Description of American Depositary Shares

    162  

Shares and ADSs Eligible for Future Sale

    173  

Certain Material U.S. Federal Income Tax Considerations

    175  

Certain Material Danish Income Tax Considerations

    181  

Underwriting

    185  

Expenses of This Offering

    194  

Legal Matters

    194  

Experts

    194  

Enforcement of Civil Liabilities

    195  

Where You Can Find More Information

    195  

Index to Consolidated Financial Statements

    F-1  

        Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell ADSs and seeking offers to purchase ADSs only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of ADSs.

        Until                           , 2016 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        For investors outside of the United States: Neither we nor any of the underwriters have taken any action to permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

        Bavarian Nordic, PROSTVAC and IMVAMUNE/IMVANEX are trademarks of ours that we use in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to our trademark and tradenames.

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PRESENTATION OF FINANCIAL INFORMATION

        We maintain our books and records in Danish kroner, or DKK, and report under International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. None of the consolidated financial statements in this prospectus were prepared in accordance with accounting principles generally accepted in the United States. Except with respect to U.S. dollar amounts presented as contractual terms, all amounts that are presented in U.S. dollars herein have been translated into DKK solely for convenience at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate as of September 30, 2015, as reported by Danmarks Nationalbank. We use the symbol "$" to refer to the U.S. dollar herein.


PRESENTATION OF SHARE INFORMATION

        All references to "shares" in this prospectus refer to shares of Bavarian Nordic A/S of nominal value DKK 10 per share.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding to invest in the ADSs, you should read this entire prospectus carefully, including the sections of this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements contained elsewhere in this prospectus. Unless the context otherwise requires, references in this prospectus to the "company," "Bavarian Nordic," "we," "us" and "our" refer to Bavarian Nordic A/S and its subsidiaries. In this prospectus, references to "DKK" are to Danish kroner, the lawful currency of the Kingdom of Denmark.

Overview

        We are a fully integrated biotechnology company developing, manufacturing and commercializing novel vaccines for the prevention of life-threatening infectious diseases and the treatment of cancer. We focus on diseases for which the unmet medical need is high and for which we can harness the power of the immune system to induce a response. Our live virus vaccine platform employs poxviruses in a modular approach to create our vaccines. This platform has generated one commercial product for smallpox, one Phase 3 immunotherapy candidate for prostate cancer, one Phase 3 candidate for Ebola and several other clinical programs in the areas of infectious disease and oncology. We recognized revenue of $182 million in 2013 and $183 million in 2014 primarily from sales of our commercial smallpox vaccine, IMVAMUNE/IMVANEX. This revenue has enabled us to invest significant capital into research and development activities, the expansion of our production infrastructure and the advancement of our clinical pipeline.

        Our poxvirus vaccines are designed to enhance the immune system through the production of antibodies and the stimulation of T-cells. The poxvirus family consists of viruses with larger DNA genomes than other viruses. The large genome of poxviruses allows for insertion of genetic material encoding for multiple and relatively large antigens, which are toxins or foreign substances that induce an immune response. This enables us to create vaccines for a wide variety of diseases. It also permits us to target multiple antigens for a single disease, which we believe leads to a more robust vaccine. There are three types of poxviruses that we may employ to achieve a desired effect: Modified Vaccinia Ankara, or MVA, vaccinia and Fowlpox. We optimize these poxviruses with our proprietary technology to incorporate an antigen in order to create recombinant viral vaccines. We employ these viruses in various combinations for both the initial vaccination, or primer, and subsequent vaccination(s), or booster(s).

        Our vaccine expertise has led to a 10+ year relationship with the U.S. government, pursuant to which we have been awarded approximately $1.2 billion in contracts. To date, we have recognized more than $900 million of revenue from these contracts. We believe that we are well positioned to generate additional revenue from such contracts due to our track record of success, relationships with U.S. governmental agencies and the quality of our live virus vaccines. More recently, we believe our platform has been validated by commercial relationships with two large pharmaceutical companies, Bristol-Myers Squibb, or BMS, for PROSTVAC, our Phase 3 cancer immunotherapy candidate, and the Janssen Pharmaceutical Companies of Johnson & Johnson, or Janssen, for our Ebola vaccine candidate and additional infectious disease targets. We also work closely with the National Cancer Institute, or NCI, and the National Institutes of Health, or the NIH, towards the development of key technologies underlying our product candidates.

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        The chart below summarizes our active clinical development programs:

GRAPHIC

        In addition to our clinical pipeline, we have multiple ongoing preclinical programs. These include multiple contracts with U.S. government agencies, including the NCI and the Biomedical Advanced Research and Development Authority, or BARDA. Through the Janssen collaboration, we are also exploring additional diseases and targets; specifically, MVA-BN is being evaluated in preclinical stages for the early treatment and prevention of human papillomavirus, or HPV, induced cancers as well as in two undisclosed infectious disease targets for the potential expansion of the agreement. We and Janssen are also developing the MVA-BN vaccine to target Marburg virus. We also continue to collaborate with the NCI and to develop our own proprietary immunotherapy programs.

        We own and operate a fully integrated, highly scalable current Good Manufacturing Practices, or cGMP, commercial scale vaccine production facility in Kvistgaard, Denmark, which we believe reduces our dependency on sub-contractors. This facility has been inspected by the European Medicine Agency, or EMA, and the U.S. Food and Drug Administration, or FDA, without notice of any material deficiency. Our filling and finishing capabilities at this facility were established to support the commercial launch of PROSTVAC. Our ability to manufacture our live virus vaccines has been demonstrated by our production of 28 million doses of IMVAMUNE/IMVANEX for smallpox and more than 2 million doses of our MVA-BN Filo product candidate for Ebola to date.

        We have built an extensive patent portfolio comprised of more than 740 granted/issued patents and more than 240 pending patent applications.

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Our Infectious Disease Portfolio

IMVAMUNE/IMVANEX—Smallpox Vaccine

        Smallpox is a contagious, disfiguring and often deadly disease. The Department of Homeland Security has declared smallpox to be a material threat to national security, and the U.S. Centers for Disease Control and Prevention classifies smallpox as a Category A bioterror agent. No cure or treatment for smallpox exists. The only existing vaccine approved for use in the United States to prevent smallpox is ACAM2000, a live replicating virus. ACAM2000 has several important drawbacks, including known cardiac toxicity with suspected cases of myocarditis and pericarditis observed in 5.7 per 1,000 individuals vaccinated. Additionally, the administration of the vaccine is contraindicated for certain individuals in the United States, including those with severe immunodeficiency. In the United States, this translates into a population of over 66 million people.

        IMVAMUNE, which is also marketed under the trade name IMVANEX in Europe, is a non-replicating smallpox vaccine that is suitable for use in people for whom replicating smallpox vaccines are contraindicated. The vaccine is currently commercialized in a liquid frozen formulation. The vaccine is the only non-replicating smallpox vaccine approved in Europe for use in the general adult population. Although not yet approved in the United States, we have also supplied 28 million doses of IMVAMUNE/IMVANEX to the U.S. government. The U.S. government stockpiles IMVAMUNE/IMVANEX, which it would be able to distribute under an emergency use authorization, or EUA, in the event of an emergency outbreak of smallpox. IMVAMUNE is currently being evaluated in a Phase 3 program to support U.S. approval by the FDA for the entire population. We recognized revenue of DKK 839 million ($126 million) and DKK 1,024 million ($154 million) in 2013 and 2014, respectively, from sales of IMVAMUNE/IMVANEX.

        We are also developing a freeze dried formulation of IMVAMUNE/IMVANEX under a contract with the U.S. government to replace the current liquid frozen version. Due to a potential shelf life of approximately 10 or more years, we believe that our freeze dried formulation is well positioned to fulfill the U.S. government's long-term requirements for a smallpox vaccine. In May 2015, we reported data from a pivotal Phase 2 randomized, double-blind trial that enrolled 650 vaccinia-naïve healthy subjects to compare the safety and immunogenicity of our freeze dried and liquid frozen formulations of IMVAMUNE/IMVANEX. The antibody response induced by the freeze dried vaccine was equivalent to the antibody response induced by the liquid frozen formulation, meeting the primary endpoint of the trial. These results provided the final clinical data required to support stockpiling of this next generation of the vaccine and the validation of the production process remains the final step towards meeting the overall requirements for the stockpiling of the vaccine by BARDA.

MVA-BN RSV—Respiratory Syncytial Virus Vaccine Candidate

        Respiratory syncytial virus, or RSV, is the most common cause of lower respiratory tract infection in infants and children worldwide, resulting in a high number of hospitalizations. RSV infections are responsible each year for a similar number of deaths as the flu in children up to age 14, as well as in the elderly population. While numerous efforts have been made to develop a prophylactic vaccine, there is currently no approved vaccine against RSV.

        Our product candidate, MVA-BN RSV, has been shown to be highly efficacious in preclinical models, demonstrating both an antibody and a T-cell response from the immune system. Published data have shown that both responses are required to prevent an RSV infection. In addition to antibodies in the blood, the presence of antibodies in the mucous membranes is an important barrier to infection by RSV. Preclinical studies and clinical trials have shown that MVA-BN RSV brings about such an antibody response in the mucosa. Following a pre-investigational new drug application, or IND, meeting with the FDA, a Phase 1 trial in healthy adults was initiated in August 2015. This

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Phase 1 trial, which is being conducted in the United States, is evaluating the safety, tolerability and immunogenicity of our recombinant MVA-BN-based RSV vaccine in 63 healthy adults, ages 18 to 65. The trial is now fully enrolled and we anticipate results will be reported in the first half of 2016. If the Phase 1 trial is successful, we intend to rapidly progress our RSV vaccine candidate into multiple Phase 1 and Phase 2 trials in elderly and adult at-risk populations, as well as the pediatric population.

MVA-BN Filo—Ebola Vaccine Candidate and Agreement with Janssen

        In 2014, in response to the crisis in West Africa, we accelerated the development and production of MVA-BN Filo, a new Ebola vaccine candidate that may eventually be deployed in a campaign to help stem a future outbreak of Ebola. This important development was possible because we recognized the public health dangers of Ebola and initiated a filovirus vaccine program in 2010. In October 2014, we entered into an agreement pursuant to which we granted Janssen an exclusive license for our MVA-BN Filo vaccine candidate. We received an upfront payment of $25 million and are entitled to receive up to $20 million in milestone payments. We are also entitled to royalties from sales outside of Africa. In consideration of the recent outbreak of Ebola in Africa, we have elected not to receive royalties from sales of MVA-BN Filo vaccine in Africa. We have also entered into a supply agreement with Janssen under which we will produce and deliver bulk material for a total value of $99 million. Furthermore, Johnson & Johnson Development Corporation made a $43 million equity investment in our company.

        MVA-BN Filo is a prime-boost regimen consisting of a primer, Ad26.ZEBOV, which Janssen developed, and a boost, MVA-BN Filo, which we developed. Backed by worldwide health authorities, Janssen is fast-tracking the clinical development of this prime-boost vaccine regimen. Janssen presented preliminary results from a Phase 1 trial in May 2015, which showed that the prime-boost vaccine regimen was immunogenic. A multicenter Phase 2 clinical trial was initiated by Janssen in the United Kingdom and France in July 2015. A second Phase 2 trial with an expected enrollment of approximately 1,188 subjects and a Phase 3 trial with an expected enrollment of approximately 440 subjects have also been initiated in Africa. Data from the Phase 3 clinical trial in Africa are expected in 2016.

        Following the Ebola vaccine agreement, in December 2015, we entered into a collaboration and license agreement with Janssen. Pursuant to the agreement, Janssen will acquire exclusive rights to our MVA-BN technology for use in a prime-boost vaccine regimen together with Janssen's adenovirus vector based technology. The goal is to develop a vaccine to treat chronic HPV infections as well as prevent precancerous stages of HPV-induced cancer. HPV is known to be the primary cause of cervical cancer and certain types of head and neck cancer, in addition to a number of more rare cancers. Janssen continues to retain an exclusive option to license MVA-BN for two additional infectious disease targets. Given the clinical efficacy seen in the reported Ebola prime-boost vaccine regimen, we believe that this prime-boost approach warrants additional investigation in several infectious diseases.

Our Cancer Immunotherapy Portfolio

        Immunotherapy is part of a growing field in cancer research and treatment. Our product candidates have been designed to enhance a specific T-cell response against a tumor target. By eliciting a strong T-cell immune response, immunotherapies may slow the progress of the disease and increase overall survival, or OS, with an improved safety profile compared to many traditional chemotherapies and hormone treatments. Another benefit of the enhanced T-cell response is that the tumor is subsequently more immunogenic and sensitive to additional targeted therapies. Based on trials conducted to date, we believe that the favorable side effect profile of our product candidates may allow them to be combined with other cancer therapies and to be used at earlier stages of

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disease. We are developing our immunotherapy product candidates to be used both in monotherapy and in combination regimens.

PROSTVAC for the Treatment of Prostate Cancer

        According to the CDC, prostate cancer is the most common cancer in U.S. men. The American Cancer Society estimates that in 2015, approximately 220,800 new cases of prostate cancer will be diagnosed and approximately 27,540 deaths will occur. While there has been meaningful progress in the treatment of prostate cancer, including approvals of new drugs by the FDA, we believe that combination therapy holds great potential to provide a clinically meaningful advance.

        PROSTVAC is a prostate-specific antigen targeted immunotherapy candidate currently in Phase 3 development for the treatment of patients with asymptomatic or minimally symptomatic metastatic castration-resistant prostate cancer, or mCRPC. PROSTVAC has been administered to more than 1,500 patients in more than 14 ongoing or completed Phase 1, Phase 2 and Phase 3 clinical trials. In several of these trials, the administration of PROSTVAC has resulted in a robust T-cell response and promising evidence of safety and efficacy, including a survival benefit, both as monotherapy and when dosed in combination with other therapies, including checkpoint inhibitors, a class of drugs that may enhance the anti-tumor T-cell response.

        In March 2015, we entered into an option agreement with BMS granting BMS an option to license and commercialize PROSTVAC that included a $60 million upfront payment. If BMS exercises the option and the license goes into effect, we would be entitled to milestone payments up to an aggregate of $915 million, as well as royalty payments on the development and commercialization of PROSTVAC. See the section of this Prospectus entitled "Business—Our Partnerships—Agreement with BMS Regarding PROSTVAC." We believe that BMS's strong presence in cancer immunotherapy makes them an ideal partner to maximize the potential of PROSTVAC.

        PROSTVAC has been the subject of multiple Phase 2 clinical trials. In these trials, PROSTVAC used as monotherapy or in combination therapy, has consistently shown an OS benefit compared to either median predicted survival, based on historical data, or placebo-controls. The largest and most robust of these Phase 2 trials was a multicenter, double-blind, placebo-controlled trial enrolling 125 mCRPC patients randomized 2:1 in favor of PROSTVAC. Patients receiving PROSTVAC also received granulocyte macrophage colony-stimulating factor, or GM-CSF, in order to stimulate the production of white blood cells. Placebo patients did not receive GM-CSF. Data showed the PROSTVAC and GM-CSF combination was well-tolerated and associated with a 44% reduction in the death rate, and an 8.5-month improvement in median OS.

        We are currently evaluating PROSTVAC in a Phase 3 clinical trial, which is known as PROSPECT. PROSPECT is a global randomized, double-blind, placebo-controlled trial in patients with asymptomatic or minimally symptomatic mCRPC. The primary objective of the trial is to determine whether the OS of patients receiving PROSTVAC, with or without the addition of GM-CSF, is superior to that of patients receiving placebo. While the placebo-controlled Phase 2 trial included the use of GM-CSF, additional clinical work has shown that the administration of GM-CSF with PROSTVAC may not be required. The PROSPECT trial was designed to potentially rule out the need for GM-CSF.

        The enrollment criteria for the PROSPECT trial was designed to enroll patients who we believe would benefit most from PROSTVAC. We believe that immunotherapy takes time to demonstrate its beneficial effects, and we therefore seek to select patients who we believe have a sufficient life expectancy to benefit from PROSTVAC. Using the randomized Phase 2 trial as a guide, certain

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entry criteria were amended to better identify patients who we believe have a better chance of benefiting from PROSTVAC. Although the trial is powered to detect a difference in survival between active treatment and placebo at final analysis, three pre-specified interim analyses of data have been integrated into the statistical plan to evaluate whether the trial should continue as planned or potentially be stopped early for efficacy or futility. While PROSPECT is event driven, the trial met its target enrollment as of December 2014 and was fully enrolled as of January 2015, and we anticipate reporting top-line data in 2017.

        We also believe that PROSTVAC has significant potential in combination therapy. Among the ongoing clinical trials of PROSTVAC that we are conducting are five Phase 2 clinical trials sponsored by the NCI, evaluating PROSTVAC in earlier prostate cancer disease settings and/or in combination with several other therapies, including checkpoint inhibitors. Following long-term survival data from a combination trial of PROSTVAC and ipilimumab, which indicated potential synergy, we have also agreed with BMS to perform a trial evaluating the combination of PROSTVAC with one of BMS's checkpoint inhibitors, which is expected to be initiated by early 2016.

CV 301 for the Treatment of Multiple Solid Tumors

        CV 301 is a cancer immunotherapy candidate that targets two tumor-associated antigens, CEA and MUC-1, that are over-expressed in major cancer types, including lung, bladder and colorectal cancer. CV 301 and its precursors have been tested in 6 ongoing or completed NCI-sponsored clinical trials in various cancers, and more than 300 patients have been treated with the product candidate. One trial, which investigated the effects of CV 301 in 74 patients with resected metastatic colorectal cancer, showed a significant survival benefit over a set of matched, controlled patients who were treated at Duke University. These matched, controlled patients were not enrolled in the trial, but were colorectal cancer patients undergoing approved therapies, and each group was evaluated to compare how OS differed. While CV 301 is currently being evaluated in a Phase 2 clinical trial as monotherapy for the treatment of bladder cancer at the NCI, we are also developing an improved construct of CV 301 and expect to initiate production of new clinical trial material in the coming months in bladder and colorectal indications, among others.

        Combination treatments continue to play an important role in the rapidly changing cancer treatment paradigm. Our strategy is to develop CV 301 for use in combination with checkpoint inhibitors, as there have been promising preclinical data in this area. While we have rights to multiple indications for CV 301, the initial target will be non-small cell lung cancer, or NSCLC. We expect to initiate a Phase 2 clinical trial in the second half 2016 for the treatment of NSCLC. While NSCLC represents the first clinical target in a combination regimen we plan to initiate no less than three separate randomized, placebo-controlled Phase 2 trials in NSCLC, bladder cancer and colorectal cancer, in combination with assorted checkpoint inhibitors. These trials will evaluate the efficacy of the individual components, as well as the combination of the vaccine and checkpoint inhibitor to determine what, if any, synergy can be seen in combination.

MVA-BN Brachyury for the Treatment of Metastatic Cancer and Chordoma

        MVA-BN Brachyury is a cancer immunotherapy developed using our live virus platform. It is designed to induce a robust T-cell immune response against brachyury, a tumor-associated antigen that is overexpressed in major solid tumor indications. Brachyury is reported to play a key role in the metastasis and progression of tumors. Tumors that overexpress brachyury are believed to be highly resistant to current therapies and are associated with decreased survival rates.

        In November 2015, we released the results of an NCI-sponsored Phase 1 trial of MVA-BN Brachyury in patients with metastatic cancer or chordoma, an ultra-orphan, or extremely rare, brachyury-expressing cancer of the skull and spine. The trial was an open-label, Phase 1 trial and

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enrolled 38 patients with metastatic cancer or chordoma. The objective of the trial was to determine the safety and tolerability of escalating doses of MVA-BN Brachyury and to evaluate immunologic responses as measured by an increase in brachyury-specific T-cells. Data from this trial demonstrated for the first time that an MVA-BN based vaccine targeting brachyury can induce brachyury-specific T-cell immune responses in advanced cancer patients. MVA-BN Brachyury was well-tolerated with no dose limiting toxicities. The maximum tolerated dose was not reached and no serious adverse vaccine-related events were observed. We intend to continue to work with the NCI to evaluate MVA-BN Brachyury in multiple solid tumors. We retain exclusive rights to this program and will determine if and when a corporate partnership is appropriate.

Competitive Advantages

        We are a fully integrated biotechnology company, and we believe that we have several key competitive advantages in developing, producing and commercializing live virus vaccines:

    §
    Existing revenue generation supports current development pipeline.  Our existing revenue generation from our government contracts and from our commercial partnerships can be used to invest in the advancement of our development pipeline.

    §
    Modular and proprietary vaccine technology.  Our poxvirus-based vaccine platform takes a modular approach to live virus vaccine development, which we believe allows us to develop effective vaccines with a favorable safety profile that can be used across a variety of indications in infectious diseases and cancer.

    §
    Fully operational, commercial scale cGMP production facility.  Our ability to effectively and efficiently produce our live virus vaccines has been demonstrated by our production of 28 million doses of IMVAMUNE/IMVANEX and more than 2 million doses of MVA-BN Filo to date.

    §
    Ongoing relationships with government agencies.  The process for entering into government contracts is often time-consuming and complicated. We have entered into contracts with the U.S. government worth approximately $1.2 billion, of which we have recognized over $900 million in revenue to date.

    §
    Validating collaborations with BMS and Janssen.  We have entered into an agreement granting BMS an option to commercialize PROSTVAC on a global basis and partnerships with Janssen for the development of MVA-BN Filo and a preclinical program.

    §
    Broad intellectual property estate.  We own a broad patent portfolio of more than 740 patents and more than 240 patent applications related to our vaccine technology.

    §
    Experienced management team.  We have a strong management team with broad expertise in the development of vaccine technologies.

Our Strategy

        We have developed our live virus vaccine platform over more than 20 years with the goal of protecting the world's general and at-risk populations by providing highly immunogenic and differentiated technologies with a favorable safety profile. Our strategy includes the following elements:

    §
    Maintain the global leadership of our IMVAMUNE/IMVANEX franchise.

    §
    Maximize PROSTVAC's commercial potential as monotherapy and in combination regimens.

    §
    Rapidly advance our pipeline of infectious disease programs.

    §
    Establish a broad and deep cancer immunotherapy franchise.

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    §
    Continue to evaluate value-maximizing collaborations.


Risks Associated with Our Business

        Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include the following:

    §
    For certain clinical development programs, we depend on collaboration partners to develop and conduct clinical trials with, obtain regulatory approvals for, and market and sell our product candidates. If such collaboration partners fail to perform as expected, the potential for us to generate future revenue from such product candidates would be significantly reduced and our business would be significantly harmed.

    §
    Our product candidates will need to undergo clinical trials that are time-consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the EMA, FDA and other similar regulators, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of these product candidates.

    §
    Most of our immediately foreseeable future revenues are contingent upon grants and contracts from agencies of the U.S. government. We also contract with other governments and public authorities, and there is a risk that political factors may have a material adverse effect on existing orders and our ability to enter into contracts and on the terms and conditions of such contracts.

    §
    We manufacture clinical and commercial supplies or our product candidates at a single location. Any disruption at this facility could adversely affect our business and results of operations.

    §
    Our product candidates are complex to manufacture, and we may encounter difficulties in production that could have a material adverse effect on our business and financial results.

    §
    If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our market.


Corporate Information

        Our company was incorporated on July 1, 1992 as a private limited liability company (in Danish: Anpartsselskab, or ApS) under Danish law and is registered with the Danish Business Authority (in Danish: Erhvervsstyrelsen) in Copenhagen, Denmark under registration number (CVR) no. 16271187. On September 3, 1994, our company was converted into a public limited liability company (in Danish: Aktieselskab, or A/S). Our company's headquarters and registered office is Hejreskovvej 10A, DK-3490 Kvistgaard, Denmark and our telephone number is +45 33 26 83 83. Our website address is www.bavarian-nordic.com. The information on, or that can be accessed through, our website is not incorporated by reference into this prospectus. We have included our website address as an inactive textual reference only.


Implications of Being an "Emerging Growth Company" and a Foreign Private Issuer

        As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the

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JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

    §
    a requirement to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure; and

    §
    an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act.

        We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, have more than $700 million in market value of the equity securities held by non-affiliates, or issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens, and therefore the information that we provide holders of shares and ADSs may be different than the information you might receive from other public companies in which you hold equity. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies. We currently prepare our consolidated financial statements in accordance with IFRS, as issued by the IASB, which do not have separate provisions for publicly traded and private companies. However, in the event that we convert to accounting principles generally accepted in the United States (which we do not currently intend to do) while we remain an emerging growth company, we have irrevocably elected to opt out of such extended transition period.

        Upon consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

    §
    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

    §
    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

    §
    the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or SEC, of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.

        Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.

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THE OFFERING

American Depositary Shares (ADSs) offered by us

               ADSs

ADSs

 

Each ADS represents             of a share. As an ADS holder, you will not be treated as one of our shareholders, you will not have shareholder rights, and you may not be able to exercise your right to vote the shares underlying your ADSs. You will have the contractual rights of an ADS holder as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time. ADS holders may only exercise voting rights with respect to the shares underlying the ADSs in accordance with the provisions of the deposit agreement, which provides that a holder may vote the shares underlying any ADSs for any particular matter to be voted on by our shareholders either by withdrawing the shares underlying the ADSs or, to the extent permitted by applicable law and as permitted by the depositary, by requesting a temporary registration as shareholder and authorizing the depositary to act as proxy. At our 2016 annual general meeting, we intend to propose that our articles of association be amended to permit pass-through voting by ADS holders, who, assuming the success of such proposal, would thereafter be permitted to indicate their voting preference to the depositary in accordance with and subject to the depositary's procedures. The depositary will try, as far as practical, to vote the shares underlying the ADSs as instructed by ADS holders. To better understand the terms of the ADSs, see the sections of this Prospectus entitled "Description of American Depositary Shares" and "Risk Factors—Risks Related to this Offering." We also encourage you to read the deposit agreement, which is filed as an exhibit to the registration statement of which this prospectus forms a part.

Shares to be outstanding after this offering

 

             shares (including             shares underlying the             ADSs issued in this offering), provided the option granted to the underwriters to purchase up to             additional ADSs is not exercised. If the underwriters exercise the option to purchase additional ADSs in full, the shares outstanding after this offering will be             shares. See the calculation of our shares to be outstanding after this offering on page 11 of this prospectus.

Option to purchase additional ADSs

 

We have granted the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to             additional ADSs representing             shares.

Depositary

 

Deutsche Bank Trust Company Americas

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Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $             million, or approximately $             million if the underwriters exercise their option to purchase additional ADSs in full after deducting the underwriting commission and estimated offering expenses payable by us, based on an assumed initial public offering price of $             per ADS, which is the midpoint of the price range set forth on the cover of this prospectus. We expect to use the net proceeds from this offering to advance our infectious disease and cancer immunotherapy portfolios, to build line extensions to our existing manufacturing capabilities and to fund working capital and for general corporate purposes.

 

See "Use of Proceeds" for a more complete description of the intended use of proceeds from this offering.

Risk factors

 

See "Risk Factors" and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in the ADSs.

Proposed symbol on The NASDAQ Global Select Market

 

"BAVN"

The number of shares to be outstanding after this offering is based on 27,834,374 shares outstanding as of September 30, 2015, and excludes (i) 149,797 shares issued upon the exercise of outstanding warrants on November 16, 2015 at an exercise price of DKK 59.1 per share, (ii) 35,500 shares issued upon the exercise of outstanding warrants on November 16, 2015 at an exercise price of DKK 54.1 per share and (iii) up to 1,624,605 shares that may be issued upon the exercise of outstanding warrants at a weighted average exercise price of DKK 148.33 per share. Unless otherwise indicated, the number of shares described assumes no exercise of the underwriters' option to purchase up to                  additional ADSs.

We currently maintain a Level 1 American Depositary Receipt program in the United States sponsored by the depositary, through which our outstanding ADSs are traded over-the-counter in the United States under the symbol "BVNRY." As of December 30, 2015, the depositary has informed us that there were 31,417 ADSs outstanding. Upon approval (if granted) of our application to list the ADSs offered hereby on The NASDAQ Global Select Market, the outstanding ADSs will also be uplisted to The NASDAQ Global Select Market, and will thereafter trade alongside the ADSs offered hereby under the symbol "BAVN" upon commencement of trading on The NASDAQ Global Select Market, which is anticipated to commence at the opening of such exchange immediately following the pricing of this offering.

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SUMMARY CONSOLIDATED FINANCIAL DATA

        The following tables present summary consolidated financial data for our business.

        We derived the summary consolidated income statements data for the years ended December 31, 2014 and 2013 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the summary consolidated income statements data for the nine months ended September 30, 2015 and 2014 and the summary consolidated statement of financial position data as of September 30, 2015 from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus. The pro forma data included in the summary consolidated statement of financial position data is unaudited.

        We maintain our books and records in DKK, and prepare our audited consolidated financial statements in accordance with IFRS as issued by the IASB and our unaudited condensed consolidated interim financial statements in accordance with IAS 34 Interim Financial Reporting as issued by the IASB.

        You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the captions "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period.


Consolidated Income Statements Data:

 
  Year Ended December 31,   Nine Months Ended
September 30,
 
 
  2014   2014   2013   2015   2015   2014  
(in millions, except per share amounts)
  $(1)   DKK   DKK   $(1)   DKK   DKK  

Revenue

  $ 182.7     1,216.8     1,212.5   $ 105.6     703.0     675.6  

Production costs

    74.4     495.1     484.7     36.9     245.7     328.1  

Gross profit

    108.3     721.7     727.8     68.7     457.3     347.5  

Research and development costs

    71.9     478.9     496.6     44.5     296.8     313.5  

Distribution costs

    6.8     45.1     40.8     5.0     33.0     34.4  

Administrative costs

    27.1     181.0     157.0     18.8     125.3     120.9  

Total operating costs

    105.8     705.0     694.4     68.3     455.1     468.8  

Income (loss) before interest and tax (EBIT)

    2.5     16.7     33.4     0.4     2.2     (121.3 )

Financial income

    8.6     57.3     6.6     11.8     78.9     40.0  

Financial expenses

    1.5     9.7     33.8     3.1     20.6     3.2  

Income (loss) before company tax

    9.6     64.3     6.2     9.1     60.5     (84.5 )

Tax (benefit) on income (loss) for the year

    5.7     38.4     52.9     0.5     3.4     (12.5 )

Net profit (loss) for the year

  $ 3.9     25.9     (46.7 ) $ 8.6     57.1     (72.0 )

Earnings per share (EPS)

                                     

Basic earnings per share

  $ 0.15     1.0     (1.8 ) $ 0.32     2.1     (2.8 )

Diluted earnings per share

  $ 0.15     1.0     (1.8 ) $ 0.32     2.1     (2.8 )

(1)
Translated solely for convenience into U.S. dollars at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.

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Consolidated Statement of Financial Position Data:

        The table below presents our unaudited condensed consolidated statement of financial position data as of September 30, 2015:

    §
    on an actual basis; and

    §
    on a pro forma basis to give further effect to the sale of                   ADSs representing                  shares in this offering at an assumed initial public offering price of $             per ADS, which is the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting commission and estimated offering expenses payable by us and provided the underwriters do not exercise the option to purchase additional ADSs.

 
  As of September 30, 2015  
 
  Actual   Pro Forma(1)  
(in millions)
  $(2)   DKK   $(2)   DKK  

Securities, cash and cash equivalents

  $ 185.3     1,233.9   $          

Total assets

  $ 321.2     2,139.1   $          

Retained earnings

  $ 158.0     1,052.1   $          

Equity

  $ 195.6     1,302.7   $          

Non-current debt to credit institutions

  $ 4.7     31.8   $          

Current debt to credit institutions

  $ 0.3     2.0   $          

Total liabilities

  $ 125.6     836.4   $          

(1)
Each $             (DKK                  ) increase or decrease in the assumed initial public offering price of $             per ADS (DKK                   ), which is the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease, respectively, the amount of securities, cash and cash equivalents, total assets and equity by $             (DKK                  ), assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting commission and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering. An increase or decrease of                  in the number of ADSs we are offering would increase or decrease, respectively, the amount of securities, cash and cash equivalents, total assets and equity by $              (DKK                  ), assuming the assumed initial public offering price per ADS, as set forth on the cover page of this prospectus, remains the same. The pro forma information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.
(2)
Translated solely for convenience into U.S. dollars at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.

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RISK FACTORS

        Investing in the ADSs involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding whether to invest in the ADSs. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event, the market price of the ADSs could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We may not be able to sustain our limited profitability.

        We recognized limited profits in 2014 and the first nine months of 2015. Our ability to generate revenue from product sales and sustain our limited profitability depends on our ability to continue to successfully commercialize IMVAMUNE/IMVANEX and the ability of us and our collaboration partners to successfully complete the development of our product candidates and obtain the regulatory and marketing approvals necessary to commercialize one or more of our product candidates. Our ability and our collaborators' ability to generate future revenue from product sales or pursuant to milestone payments depend heavily on many factors, including, but not limited to:

    §
    completing research activities and preclinical and clinical development of our product candidates;

    §
    continuing sales of IMVAMUNE/IMVANEX to the United States and other governments;

    §
    successfully completing the Phase 3 trial of PROSTVAC as monotherapy or alternate trials of PROSTVAC as part of combination therapy;

    §
    on our own or, together with our strategic collaboration partners, obtaining regulatory approvals for our product candidates;

    §
    negotiating favorable terms of and entering into collaboration, licensing or other arrangements;

    §
    the ability of our collaboration partners to successfully commercialize and/or our ability to commercialize or co-promote our product candidates;

    §
    obtaining market acceptance of our product candidates, if approved;

    §
    addressing any competing technological and/or market developments;

    §
    identifying, assessing, acquiring, in-licensing and/or developing new product candidates;

    §
    maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how, and our ability to develop, manufacture and commercialize our product candidates and products without infringing intellectual property rights of others; and

    §
    attracting, hiring, and retaining qualified personnel.

        A substantial portion of our revenues are attributable to government contracts and substantial delays in purchase decisions by governmental entities, governments' decisions on when and if to exercise certain options under their contracts with us, and the timing of when we achieve certain milestones that would entitle us to payment could cause our revenues and income to drop substantially or to fluctuate significantly between fiscal periods.

        In cases where we, or our collaboration partners, are successful in obtaining regulatory approvals to market one or more of our product candidates, our revenue will be dependent, in part,

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upon the size of the markets in the territories for which regulatory approval is granted, the price or prices at which we are able to sell such products and our ability to get paid or reimbursed for our products at such prices. If the number of individuals suitable for our product candidates is not as significant as we estimate, the indications approved by regulatory authorities are narrower than we expect or the reasonably accepted population for vaccination is narrowed by competition, physician choice or vaccination guidelines, we may not generate significant revenue from the sale of such products, even if approved. Our failure to generate revenue from sales of one or more of our product candidates or pursuant to upfront or milestone payments could have a material adverse effect on our business and financial results.

For certain clinical development programs, we depend on collaboration partners to develop and conduct clinical trials with, obtain regulatory approvals for, and market and sell our product candidates. If such collaboration partners fail to perform as expected, the potential for us to generate future revenue from such product candidates would be significantly reduced and our business would be significantly harmed.

        For certain programs, we may rely on our collaboration partners to develop, conduct clinical trials of, and commercialize our product candidates. We have existing collaborations with the United States Public Health Service, or PHS, the NIH, BMS and Janssen. We may also enter into collaboration agreements with other parties in the future relating to our other product candidates. Ultimately, if such product candidates are advanced through clinical trials and receive marketing approval from the EMA, the FDA or similar regulatory authorities, certain of our collaboration partners may be responsible for commercialization of these collaboration products. The potential for us to obtain future development milestone payments and, ultimately, generate revenue from royalties on sales of such collaboration products depends on the successful development, regulatory approval, marketing and commercialization by our collaboration partners. If our collaboration partners do not perform in the manner we expect or fail to fulfill their responsibilities in a timely manner, or at all, if our agreements with them terminate or if the quality or accuracy of the clinical data they obtain is compromised, the clinical development, regulatory approval and commercialization efforts related to our product candidates could be delayed or terminated and it could become necessary for us to assume the responsibility at our own expense for the clinical development of such product candidates. In that event, we would likely be required to limit the size and scope of efforts for the development and commercialization of such product candidate; we would likely be required to seek additional financing to fund further development or identify alternative strategic collaboration partners; our potential to generate future revenue from royalties and milestone payments from such product candidates would be significantly reduced or delayed; and it could have a material adverse effect on our business and financial results.

        In addition, certain collaboration agreements provide our collaboration partners with rights to terminate such agreements and licenses under various conditions, which, if exercised, would adversely affect our product development efforts, could make it difficult for us to attract new partners and adversely affect our reputation. Our collaboration partners may have the right to terminate their respective collaboration agreements with us in the event of one or more of the following reasons: our uncured material breach of the agreement for convenience or our failure, or our product candidates' failure to meet certain specified milestones. For example, under our license agreements with PHS, which provide us with the right to use certain intellectual property related to our cancer immunotherapy product candidates, PHS has the right to terminate these license agreements if we fail to execute our development plan or reach certain milestones by certain dates. Furthermore, under our agreement with BMS, BMS may choose not to exercise its option to take a license to PROSTVAC.

        The timing and amount of any milestone and royalty payments we may receive under our agreements with our collaboration partners will depend on, among other things, the efforts, allocation

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of resources, and successful development and commercialization of our product candidates. We cannot be certain that any of the development and regulatory milestones will be achieved or that we will receive any future milestone payments under these agreements. In addition, in certain circumstances we may believe that we have achieved a particular milestone and the applicable collaboration partner may disagree with our belief. In that case, receipt of that milestone payment may be delayed or may never be received, which may require us to adjust our operating plans.

Risks Related to Our Products and Product Candidates

Our product candidates will need to undergo clinical trials that are time-consuming and expensive, the outcomes of which are unpredictable, and for which there is a high risk of failure. If clinical trials of our product candidates fail to satisfactorily demonstrate safety and efficacy to the EMA, FDA and other similar regulators, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of these product candidates.

        The European Commission (following review by the EMA) in Europe, the FDA in the United States and comparable regulatory authorities in other jurisdictions must approve new drug or biologic candidates before they can be marketed, promoted or sold in those territories. We must provide these regulatory authorities with data from nonclinical studies and clinical trials that demonstrate that our product candidates are safe and effective for a specific indication before they can be approved for commercial distribution. Our smallpox vaccine, marketed under the trade names IMVAMUNE and IMVANEX in Canada and the European Union, respectively, is our only approved product, and is not yet approved in the United States. Although not yet approved in the United States, we have also supplied 28 million doses of IMVAMUNE/IMVANEX to the U.S. government. The U.S. government stockpiles IMVAMUNE/IMVANEX in the event of an emergency outbreak of smallpox, which it would be able to distribute in such event under an EUA. We cannot assure you that our Phase 3 trials of IMVAMUNE/IMVANEX or PROSTVAC will be successful or that IMVAMUNE/IMVANEX will receive approval from the FDA or that any of our other product candidates will receive approval from the EMA or FDA or any other comparable regulatory authority.

        Preclinical testing and clinical trials are long, expensive and unpredictable processes that can be subject to extensive delays. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. For example, our ongoing Phase 3 trial of IMVAMUNE/IMVANEX is currently being conducted in collaboration with the U.S. government. The FDA has substantial control over the enrollment and other decisions regarding this trial and these decisions may cause delays or impact our ability to complete this trial to the satisfaction of the FDA or other regulatory authorities. The primary endpoint of the ongoing Phase 3 trial of PROSTVAC is event driven and it is therefore difficult to predict when OS data will be available to report. It may take several years to complete the preclinical testing and clinical development necessary to commercialize a product candidate, and delays or failure can occur at any stage. Interim results of clinical trials do not necessarily predict final results, and success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical, biopharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials even after promising results in earlier trials, and we cannot be certain that we will not face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. An unfavorable outcome in one or more trials would be a major setback for our product candidates and for us. An unfavorable outcome in one or more trials may require us to delay, reduce the scope of or eliminate one or more product development programs, which could have a material adverse effect on our business and financial results.

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        In connection with clinical testing and trials, we face a number of risks, including risks that:

    §
    a product candidate is ineffective, inferior to existing approved products for the same indications, unacceptably toxic or has unacceptable side effects;

    §
    patients may die or suffer other adverse effects for reasons that may or may not be related to the product candidate being tested;

    §
    extension studies on long-term tolerance could invalidate the use of our product;

    §
    the results may not confirm the positive results of earlier testing or trials;

    §
    the results may not meet the level of statistical significance required by the EMA, FDA or other regulatory agencies to establish the safety and efficacy of our product candidates for continued trial or marketing approval; and

    §
    our collaborators or contract research organizations, or CROs, are unable or unwilling to perform under their contracts.

        The results of preclinical studies do not necessarily predict clinical success, and larger and later-stage clinical trials may not produce the same results as earlier-stage clinical trials. Our and our collaborators' clinical trials of our product candidates conducted to date have generated favorable safety and efficacy data. However, we may have different enrollment criteria in our future clinical trials. As a result, we may not observe a similarly favorable safety or efficacy profile as in our prior clinical trials. For example, while the results of the Phase 2 trials for PROSTVAC showed potential efficacy and acceptable safety results, our Phase 3 trials may fail to produce similar results. Additionally, our Phase 3 trial of IMVAMUNE/IMVANEX may fail to show positive safety and efficacy and we may not be successful in commercializing the vaccine in the United States. It is also possible that PROSTVAC may not demonstrate any clinical benefits either as monotherapy or in combination with other therapies. In addition, we cannot assure you that in the course of potential widespread use of any of our product candidates in future, we will not suffer setbacks in maintaining production quality or stability. In addition, clinical trials of potential products often reveal that it is not possible or practical to continue development efforts for these product candidates. If we do not successfully complete preclinical and clinical development, we will be unable to market and sell our product candidates and generate additional revenue. Even if we successfully complete clinical trials, those results are not necessarily predictive of results of additional trials that may be needed before marketing applications may be submitted to the EMA or FDA, as applicable.

        Furthermore, we sometimes estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of marketing approval or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions, which may cause the timing of achievement of the milestones to vary considerably from our estimates. If we fail to achieve announced milestones in the timeframes we expect, the commercialization of our product candidates may be delayed, we may not be entitled to receive certain contractual payments and it could have a material adverse effect on our business and financial results.

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IMVAMUNE/IMVANEX, approved for sale in the European Union and Canada, has not yet been approved by the FDA and is supplied to the U.S. Strategic National Stockpile, or the SNS, as having fulfilled the requirements for the potential use following an EUA. There is no guarantee our Phase 3 trial of IMVAMUNE/IMVANEX will be successful or that the FDA will approve the vaccine for marketing.

        IMVAMUNE/IMVANEX is currently approved for sale only in the European Union and Canada. IMVAMUNE/IMVANEX may never receive approval from the FDA. There are several factors that may impact our ability to continue to sell IMVAMUNE/IMVANEX to the U.S. government and in other jurisdictions where it is approved for sale or obtain regulatory approval from the FDA or other regulatory authorities. These factors include our ability to successfully complete the Phase 3 trial currently being conducted at a U.S. military garrison in South Korea and the successful development of the freeze dried formulation of IMVAMUNE/IMVANEX. Our failure to successfully complete the Phase 3 trial or successfully develop the freeze dried formulation may prevent us from achieving certain milestones and receiving certain milestone payments under our contracts with BARDA and may result in a decline in orders of IMVAMUNE/IMVANEX from the U.S. and other governments.

IMVAMUNE/IMVANEX or any of our product candidates for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to substantial penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products following approval.

        IMVAMUNE/IMVANEX or any of our product candidates for which we obtain marketing approval, as well as the manufacturing processes, post-approval studies and measures, labeling, advertising and promotional activities for such products, among other things, will be subject to continual requirements of and review by the EMA, FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the FDA requirement to implement a Risk Evaluation and Mitigation Strategy, if applicable, to ensure that the benefits of a drug or biological product outweigh its risks.

        The EMA and FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product, such as long term observational studies on natural exposure. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The EMA and FDA impose stringent restrictions on manufacturers' communications regarding off-label use and if we do not market any of our product candidates for which we receive marketing approval for only their approved indications, we may be subject to warnings or enforcement action for off-label marketing. Violation of the Federal Food Drug and Cosmetic Act, and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and state health care fraud and abuse laws and state consumer protection laws.

Although we obtained a special protocol assessment from the FDA for our ongoing Phase 3 trial of PROSTVAC, a special protocol assessment does not guarantee any particular outcome from regulatory review, including any regulatory approval.

        We have obtained an agreement with the FDA, following a special protocol assessment, or SPA, for the Phase 3 trial of PROSTVAC as monotherapy and in combination with GM-CSF for the

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treatment of asymptomatic or minimally symptomatic mCRPC. The SPA process allows for FDA evaluation of a clinical trial protocol intended to form the primary basis of an efficacy claim in support of a Biologics License Application, or BLA. This provides a product sponsor with an agreement confirming that the design and size of a trial will be appropriate to form the primary basis of an efficacy claim for a BLA if the trial is performed according to the SPA and no substantial scientific issues essential to determining the safety or efficacy of the drug are identified after the testing has begun. Even if we believe that the data from a clinical trial are supportive, an SPA is not a guarantee of approval, and we cannot be certain that the design of, or data collected from, a trial will be adequate to demonstrate safety and efficacy, or otherwise be sufficient to support regulatory approval. There can be no assurance that the terms of an SPA will ultimately be binding on the FDA, and the FDA is not obligated to approve a BLA, even if the clinical outcome is positive. We can give no assurance that as clinical trials proceed or as part of a BLA review process, if any, the FDA will determine that a previously approved SPA is still valid.

        Additionally, an SPA may be changed only with written agreement of the FDA and sponsor, and any further changes we may propose to the protocol will remain subject to the FDA's approval. The FDA may not agree to any such amendment and, even if they agree, they may request other amendments to the trial design that could require additional cost and time, as well as increase the degree of difficulty in reaching clinical endpoints. As a result, even with an SPA, we cannot be certain that the trial results will be found to be adequate to support an efficacy claim and product approval.

We selectively rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays that prevent us from successfully commercializing our product candidates.

        We currently, and expect to continue to, selectively rely on public and private research institutions, medical institutions, clinical investigators, CROs, contract laboratories and collaborators to conduct some of our early stage product development activities, perform data collection and analysis and to carry out our clinical trials. Our development activities or clinical trials conducted in reliance on third parties may be delayed, suspended or terminated if:

    §
    the third parties do not devote a sufficient amount of time or effort to our activities or otherwise fail to successfully carry out their contractual duties or to meet regulatory obligations or expected deadlines;

    §
    we replace a third party; or

    §
    the quality or accuracy of the data obtained by third parties is compromised due to their failure to adhere to clinical protocols, regulatory requirements or for other reasons.

        We generally do not have the ability to control the performance of third parties in their conduct of development activities. Third party performance failures may increase our development costs, delay our ability to obtain regulatory approval and delay or prevent the commercialization of our product candidates. While we believe that there are alternative sources to provide these services, in the event that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional costs.

We face substantial competition from companies with considerably more resources and experience than we have, which may result in others discovering, developing, receiving approval for or commercializing products before or more successfully than us.

        The pharmaceutical and biotechnology industries are highly competitive. Numerous laboratories, companies, institutions, universities and other research entities are actively involved in the discovery, research, development and marketing of vaccines to prevent infectious diseases and therapeutics to

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treat cancer, making them highly competitive fields. We have competitors in each of the industry verticals in which we compete, many of which have substantially greater name recognition, commercial infrastructure and financial, technical and personnel resources than we have. Smaller or early stage companies may also prove to be significant competitors, particulary through collaborative arrangements with larger and established companies.

        We compete in the areas of biodefense, commercial vaccines and treatments for infectious disease indications and immunotherapies for the treatment of cancer. Our vaccines and vaccine candidates are protected by intellectual property agreements that we own or license from third parties, and therefore are protected from competition as to the particular vaccines that we produce for the applicable indications that we target for the life of the applicable patent. However, many companies offer pharmaceutical products that may address one or more indications that our vaccines target. Other companies that compete for government contracts to develop, manufacture and commercialize vaccines for potential bioterror threats include, but are not limited to, AstraZeneca plc, Emergent BioSolutions, Inc., GlaxoSmithKline plc, Merck & Co., Inc., Pfenex Inc. and SIGA Technologies, Inc. Other companies that compete to develop, manufacture and commercialize vaccines for the prevention and treatment of infectious diseases include, but are not limited to, Johnson & Johnson, Dynavax Technologies Corporation, GenVec, Inc., Genocea Biosciences, Inc., Inovio Pharmaceuticals, Inc., Merck & Co. Inc., Novartis Pharma AG, Novavax, Inc. and Sanofi. Other companies that compete to develop, manufacture and commercialize immunotherapies for the treatment of cancer include, but are not limited to, Advaxis, Inc., Aduro Biotech, Inc., BMS, Celldex Therapeutics, Inc., Inovio Pharmaceuticals, Inc., Juno Therapeutics, Inc., Merck & Co. Inc., NEON Therapeutics, Novartis AG, Replimune Ltd and Transgene SA.

        Competitors may develop novel vaccines or other technologies that could make our product candidates obsolete or uneconomical. Any of our product candidates that competes with an approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to be commercially successful. Any of our product candidates that are approved could also face other competitive factors in the future, including biosimilar competition, which could force us to lower prices or could result in reduced sales. Any failure to compete effectively against our current and future competitors could have a material adverse effect on our business and financial results.

Risk Related to Our Business with the U.S. Government

Most of our immediately foreseeable future revenues are contingent upon grants and contracts from agencies of the U.S. government. We also contract with other governments and public authorities and there is a risk that political factors may have a material adverse effect on existing orders and our ability to enter into contracts and on the terms and conditions of such contracts.

        Our contracts with the U.S. government are crucial to our earnings. In 2013 and 2014, revenue from agencies of the U.S. government accounted for 99.9% and 99.5%, respectively, of our total revenue, but accounted for 19.1% of our revenue for the first nine months of 2015. There is no guarantee that we will be able to enter into new agreements with the U.S. government or its agencies, or maintain existing agreements with the U.S. government or its agencies. Furthermore, our ability to maintain profitability under certain of our government contracts requires us to predict in advance the costs of development and supply of certain of our products and product candidates. For example, one of our contracts with BARDA is a cost-plus-fixed-fee contract that only reimburses certain specified activities that have been previously authorized by BARDA. There is no guarantee that additional activities will not be needed and, if so, that BARDA will reimburse us for these activities. Additionally, there are significant requirements associated with operating as a federal government contractor, which includes having appropriate accounting, project tracking and earned-

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value management systems implemented and operational, and we may not be able to consistently meet these requirements. Performance under a BARDA contract requires that we comply with applicable regulations and operational mandates, which, among other things, requires us to engage internal and external expertise for compliance. Our ability to be regularly and fully reimbursed for our activities will depend on our ability to comply and demonstrate compliance with such requirements. A failure to renew or termination of our contracts with the U.S. government or its agencies would have a material adverse effect on our business and financial results.

        In addition to our contracts with the U.S. government and its agencies, our contracting parties in a number of negotiations and agreements concerning IMVAMUNE/IMVANEX are other governments and public authorities. The supply of smallpox vaccines is considered by many governments to be a matter of national interest. As a result, we are subject to substantial political risks, partly in respect of the final decision as to the conclusion of agreements and partly in respect of the terms and conditions of such agreements. We seek to constantly keep in close contact, either through in-house or third-party representatives, with the governments and public authorities with which negotiations are taking place in order to gain better insight into decision-making patterns. However, changes in political dynamics in the United States or elsewhere could have a material adverse effect on our business and financial results.

All of our immediately foreseeable future revenues to support the development of IMVAMUNE/IMVANEX for the vaccination against smallpox are dependent upon our contracts with BARDA and other governmental agencies. Negotiation of such contracts and execution thereof are subject to numerous complexities and contingencies, the adverse outcome of which could harm our business and financial results.

        Substantially all of our revenues that support the development of IMVAMUNE/IMVANEX for vaccination against smallpox have been derived from prior government grants and our current contracts with BARDA. Our contracts with BARDA are for the development of IMVAMUNE/IMVANEX for vaccination against smallpox in multiple forms. There can be no assurance that the FDA will ultimately accept in support of a BLA the experiments that we perform or agree that the results of these experiments support approval of IMVAMUNE/IMVANEX for vaccination against smallpox. There can be no assurances that this contract will continue, that BARDA will continue to purchase IMVAMUNE/IMVANEX under extensions of this contract, that any such extension would be on favorable terms, or that we will be able to enter into new contracts with the U.S. government to support our smallpox program. Changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the development of IMVAMUNE/IMVANEX for vaccination against smallpox, which could negatively impact the revenues that may be generated from supplying our freeze dried formulation. In such event, BARDA is not required to continue funding for or to extend our existing contract. Any such reduction in our revenues from BARDA or any other government contract could materially adversely affect our financial condition and results of operations.

        Additionally, U.S. government contracts typically contain provisions favorable to the government and are subject to periodic audit and modification by the government at its sole discretion, which will subject us to additional risks. For example, under our contracts with BARDA, the U.S. government has the power to unilaterally:

    §
    audit and object to any BARDA contract-related costs and fees on grounds that they are not allowable under the Federal Acquisition Regulation, or FAR, and require us to reimburse all such costs and fees;

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    suspend or prevent us for a set period of time from receiving new contracts or extending our existing contract based on violations or suspected violations of laws or regulations;

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    §
    claim nonexclusive, nontransferable rights to product manufactured and intellectual property developed under the BARDA contract and may, under certain circumstances, such as circumstances involving public health and safety, license such inventions to third parties without our consent;

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    cancel, terminate or suspend our BARDA contract based on violations or suspected violations of laws or regulations;

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    terminate our BARDA contract in whole or in part for the convenience of the government for any reason or no reason, including if funds become unavailable to the applicable governmental agency;

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    reduce the scope and value of our BARDA contract;

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    decline to exercise an option to continue the BARDA contract;

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    direct the course of a development program in a manner not chosen by the government contractor;

    §
    require us to continue to sell IMVAMUNE/IMVANEX to BARDA under the provisions of our contracts even if doing so may cause us to forego or delay the pursuit of other opportunities with greater commercial potential;

    §
    take actions that result in a longer development timeline than expected; and

    §
    change certain terms and conditions in our BARDA contract.

        The U.S. government also has the right to terminate the BARDA contract if termination is in the government's interest, or if we default by failing to perform in accordance with the milestones set forth in the contract. Termination-for-convenience provisions generally enable us to recover only our costs incurred or committed (plus a portion of the agreed fee) and settlement expenses on the work completed prior to termination. Except for the amount of services received by the government, termination-for-default provisions do not permit recovery of fees. In addition, we must comply with numerous laws and regulations that affect how we conduct business with the U.S. government. Among the most significant government contracting regulations that affect our business are:

    §
    FAR, and agency-specific regulations supplements to the FAR, which comprehensively regulate the procurement, formation, administration and performance of government contracts and implement federal procurement policy in numerous areas, such as employment practices, protection of the environment, accuracy and retention periods of records, recording and charging of costs, treatment of laboratory animals and human subject research;

    §
    business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and incorporate other requirements such as the Anti-Kickback Act and the Foreign Corrupt Practices Act;

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    export and import control laws and regulations; and

    §
    laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

        Therefore, negotiating and entering into arrangements with the U.S. government can be complex and time-consuming and may delay or alter our business development plans with respect to any specific products or product candidates.

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        Furthermore, we may be required to enter into agreements and subcontracts with third parties, including suppliers, consultants and other third-party contractors, in order to satisfy our contractual obligations pursuant to our agreements with the U.S. government. Negotiating and entering into such arrangements can be time-consuming and we may not be able to reach agreement with such third parties. Any such agreement must also be compliant with the terms of our government contract. Any delay or inability to enter into such arrangements or entering into such arrangements in a manner that is non-compliant with the terms of our contract, may result in violations of our contract. As a result of these provisions, we must undertake significant compliance activities. The diversion of resources from commercial programs to these compliance activities, as well as the exercise by the U.S. government of any rights under these provisions, could have a material adverse effect on our business and financial results.

Our business is subject to periodic audit by the U.S. government, including under our contracts with BARDA, and a negative audit could adversely affect our business.

        U.S. government agencies, such as the Department of Health and Human Services, or HHS, routinely audit and investigate government contractors and recipients of federal grants, including our contracts with BARDA. These agencies review a contractor's performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.

        The HHS can also review the adequacy of, and a contractor's compliance with, its internal control systems and policies, including the contractor's purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:

    §
    termination of contracts;

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    forfeiture of profits;

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    suspension of payments;

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    fines; and

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    suspension or prohibition from conducting business with the U.S. government.

        In addition, we could suffer serious reputational harm if allegations of impropriety were made against us by the U.S. government, which could have a material adverse effect on our business and financial results.

Our research and development plans regarding PROSTVAC and our other cancer immunotherapy product candidates are to a large extent dependent upon our Cooperative Research and Development Agreements.

        We conduct a large portion of our research and development for PROSTVAC and our other cancer immunotherapy product candidates under two Cooperative Research and Development Agreements, or CRADAs, we entered into with the NCI. We are obligated to make annual payments under each CRADA. In addition, although the CRADAs have five year terms, and our CRADA relating to the development of PROSTVAC has been extended for an additional five year term through August 2018, either party to the CRADAs has the right to terminate the CRADAs upon 60 days' notice to the other party. As a result, no assurance can be given that the NCI will not terminate either CRADA in the future and that the CRADAs will, therefore, remain in effect until we complete our desired research thereunder.

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Risks Related to Manufacturing

We manufacture clinical and commercial supplies or our product candidates at a single location. Any disruption at this facility could adversely affect our business and results of operations.

        We own and operate a vaccine manufacturing facility in Kvistgaard, Denmark. We rely on this facility for the manufacture of clinical and commercial supply of all of our product candidates. If our facility were damaged or destroyed, or otherwise subject to disruption, it would require substantial lead-time to replace our manufacturing capabilities. In such event, we would be forced to identify and rely entirely on third-party contract manufacturers for an indefinite period of time. Any disruptions or delays at our facility or its failure to meet regulatory compliance would impair our ability to develop and commercialize our product candidates, which would adversely affect our business and results of operations.

Our product candidates are complex to manufacture, and we may encounter difficulties in production that could have a material adverse effect on our business and financial results.

        Our products must be made consistently and in compliance with a clearly defined manufacturing process. Accordingly, it is essential to be able to validate and control the manufacturing process to assure that it is reproducible. Slight deviations anywhere in the manufacturing process, including obtaining materials, filling, labelling, packaging, storage and shipping and quality control and testing, some of which all pharmaceutical companies, including us, experience from time to time, may result in batch failures, delay in the release of batches, product recalls or spoilage. If microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Further, as product candidates are developed through preclinical to late stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods, are altered along the way in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives, and any of these changes could cause our product candidates to perform differently and affect the results of ongoing clinical trials or other future clinical trials. Any failure to manufacture products up to regulatory standards could lead to increased costs due to duplicative or replacement manufacturing, product recalls or a loss of reputation.

        Our product candidates approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMP regulations. These regulations govern manufacturing processes and procedures, including record keeping and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. We and our collaborators must supply all necessary documentation in support of a new drug application or foreign equivalent on a timely basis and must adhere to cGMP requirements enforced by the EMA, the FDA and other regulatory agencies. If we or our collaborators fail to comply with cGMP, we could experience a disruption in the supply of our product candidates, which could delay or prevent regulatory approval or commercial launch of such candidates, which could have a material adverse effect on our business and financial results.

        In addition, we may not be able to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If we are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development and testing of that product candidate and regulatory approval or commercial launch of any resulting product may be delayed, which could have a material adverse effect on our business and financial results.

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We rely on IDT Biologika to fill, finish and package IMVAMUNE/IMVANEX, and if IDT Biologika should fail to perform, our commercialization and development efforts for IMVAMUNE/IMVANEX could be delayed or stopped.

        We rely on IDT Biologika to fill, finish and package IMVAMUNE/IMVANEX in the liquid frozen formulation prior to its distribution. Additionally, the freeze dried formulation of IMVAMUNE/IMVANEX is currently being developed and it is uncertain whether IDT Biologika will be willing to provide this service of producing this formulation in the quantities required or that IDT Biologika will be willing to provide this service on terms that are acceptable to us. If IDT Biologika is not capable or is unwilling to provide these services and we are unable to locate third parties to perform these functions on terms that are acceptable to us on a timely basis or at all, or if the third parties we identify fail to perform their obligations up to expected standards or at all, the progress of our clinical trials could be delayed or even suspended and the commercialization of IMVAMUNE/IMVANEX could be delayed or prevented, either of which would have a material adverse effect on our business and financial results.

Any changes in our suppliers' positions and their ability to supply the raw materials required by us may have an impact on our ability to fulfill customer contracts. There is a risk that our raw material suppliers may not always be able to deliver the raw materials used in our planned production.

        A number of raw materials and sterile single-use devices are used to manufacture our product candidates. Some of the raw materials are general purpose materials used by other pharmaceutical manufacturers, while others are manufactured specifically for use by us, either because of special quality requirements, including in particular the specific pathogen-free eggs, or SPF eggs, used in production, or the packaging in which they are supplied, and certain products manufactured by Invitrogen Corporation. The sterile single-use devices are predominantly custom-made for the production of our product candidates.

        To the extent possible, we aim to have at least two suppliers of critical raw materials. When this has not been possible, the aim is for the raw materials to be manufactured by an alternative supplier, at some delay, if the primary supplier should fail to deliver. If a primary supplier fails to deliver or delivers less of a critical raw material than agreed, it may take three to six months, or more, before an alternative supplier will be able to supply raw materials of the same quality. There is a risk that the required number of SPF eggs of the required quality may not always be available to meet our needs. Our supply of SPF eggs is more susceptible to disruption than the other consumables required for the production of our product candidates in that they cannot be stored to any significant extent. Additionally, certain of the supplies manufactured by Invitrogen Corporation are not currently available from other suppliers.

        Consequently, supplier failure may cause production delays of three to six months, or more. Where possible, we seek to safeguard against this risk by maintaining large raw material inventories. However, there is still the risk that we will not be able to source important raw materials required for the production of our product candidates, which could have a material adverse effect on our business and financial results.

Risks Related to Our Operations

There is a risk that our products may have major side effects that may give rise to substantial liability claims.

        As a biopharmaceutical company producing vaccines, we operate in a market that is subject to risk of liability. We may be subject to future liability claims alleging adverse effects from clinical trials

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of our products. This risk of liability claims is significantly increased by concluding agreements for the supply of smallpox vaccines that remain to be completed or approved for use in humans. Any liability claims could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

There is a risk that we may not be able to maintain insurance coverage, and that existing or any future insurance policies or our own resources will not sufficiently cover claims for damages that may be received in the future.

        Our business exposes us to potential product liability and other liability risks that are inherent in clinical development, manufacturing, marketing and use of human therapeutic products. It is generally necessary for us to secure certain levels of insurance as a condition for the conduct of clinical trials and any sale or use of our products. We have taken out product liability insurance with respect to all clinical trials and ongoing trials performed to date for which we were responsible.

        We may seek to expand our insurance coverage if the sales of IMVAMUNE/IMVANEX increase significantly, if we obtain marketing approval for any of the product candidates or if other risks related to our business increase. We may not be able to obtain or maintain adequate protection against potential liabilities at acceptable cost. If we are unable to obtain insurance or other protection against potential product liability claims, we could be exposed to significant liabilities, which may materially and adversely affect our business and financial position. These liabilities could prevent or interfere with our product development and commercialization efforts. If we are sued for any injury caused by our products or processes, our liability could exceed our product liability insurance coverage and our own financial resources, and consequently could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

Our future success depends on our ability to retain our management team and key employees.

        We are highly dependent on the management, development, clinical, financial and business development expertise of our management team and key employees. Recruiting and retaining qualified scientific and clinical personnel will also be critical to our success. The loss of the services of any of the members of our management team or key employees could impede the achievement of our development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing any of the members of our management team or key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval for and commercialize drugs. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate the members of our management team or key employees on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. If we are unable to continue to attract and retain high quality management and employees, our ability to pursue our growth strategy will be limited.

Risks Related to Government Regulation

Government restrictions on pricing and reimbursement, as well as other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues.

        Sales of certain of our product candidates, if and when approved for marketing, will depend, in part, on the extent to which our products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-

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party payors are increasingly reducing reimbursements for medical products, drugs and services. Because coverage and reimbursement determinations are made on a payer-by-payer basis, obtaining coverage and adequate reimbursement from one payor does not guarantee that we will obtain similar coverage or reimbursement from another payor. In addition, government and other authorities have continued implementing cost containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of generic products and/or biosimilars. Adoption of price controls and cost containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our product candidates or a decision by a third-party payor not to cover our product candidates or provide only limited reimbursement for our product candidates could reduce physician usage of our products once approved and have a material adverse effect on our sales, results of operations and financial condition. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product.

We are subject to healthcare laws and regulations, which may require substantial compliance efforts and could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings, among other penalties.

        Healthcare providers, such as physicians and others, will play a primary role in the recommendation and prescription of our products, if approved. Our arrangements with such persons and third-party payors and our general business operations will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute our products, if we obtain marketing approval. Restrictions under applicable U.S. federal, state and non-U.S. healthcare laws and regulations include, but are not limited to, the following:

    §
    the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, including any kickback, bribe or rebate, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase or lease, order or recommendation of, any item, good, facility or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;

    §
    U.S. federal civil and criminal false claims laws and civil monetary penalties laws, including the civil False Claims Act, which impose criminal and civil penalties, including those from civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

    §
    the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that impose criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or knowingly and willingly falsifying, concealing or covering up a material fact or making false statements relating to healthcare matters;

    §
    HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which impose certain requirements on covered entities and their business associates, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

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    §
    U.S. federal transparency requirements under the Physician Payments Sunshine Act, enacted as part of the Patient Protection and Affordable Care Act that require applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program, with specific exceptions, to track and annually report to the Centers for Medicare & Medicaid Services, or CMMS, payments and other transfers of value provided to physicians and teaching hospitals, and certain ownership and investment interests held by physicians or their immediate family members;

    §
    analogous state or non-U.S. laws and regulations, such as state anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state marketing and/or transparency laws applicable to manufacturers that may be broader in scope than the federal requirements, state laws that require biopharmaceutical companies to comply with the biopharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect as HIPAA, thus complicating compliance efforts; and

    §
    rules/legislation covering more or less the same subject matter are found in numerous other countries, including in Denmark, which sometimes result in lower exposures, sometimes higher exposures in those countries than in the United States.

        Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Our employees and collaborators may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

        We are exposed to the risk of employee fraud or other misconduct and the fraud and misconduct of our collaborators. Misconduct by our employees or our collaborators could include intentional failures to comply with legal requirements or the requirements of CMMS, the EMA, the FDA and other government regulators, provide accurate information to applicable government authorities, comply with fraud and abuse and other healthcare laws and regulations in the United States, or similar laws in Denmark and elsewhere, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee or collaborator misconduct could also involve the improper use of, including trading on, information obtained in the

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course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Changes in Danish, U.S. or other foreign tax laws or compliance requirements, or the practical interpretation and administration thereof, could have a material adverse effect on our business, financial condition and results of operations.

        We are affected by various Danish, U.S. and foreign taxes, including direct and indirect taxes imposed on our global activities, such as corporate income, withholding, customs, excise/energy, value added, environmental and other taxes. Significant judgment is required in determining our provisions for taxes and there are many transactions and calculations where the ultimate tax determination is uncertain.

        In particular, we are contemplating seeking an advance pricing agreement procedure between Danish and U.S. tax authorities concerning the tax treatment of potential future revenue from PROSTVAC in order to establish a pre-agreed split of income thereon to be taxed in Denmark and the United States, respectively. Depending on whether we obtain an advance pricing agreement and depending on the split of income between Denmark and the United States determined therein, we could potentially face double taxation of our profits or a higher effective tax rate than expected.

        Further, we also engage in a number of intra-group transactions between legal entities in different jurisdictions and, although we believe that we follow generally accepted transfer pricing practices, our interpretation may be challenged.

        Should any of the risks described above materialize as a result of changes in Danish or foreign direct or indirect tax laws or compliance requirements, the practical interpretation and administration thereof, including in respect to market practices, or otherwise, it could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our market.

        We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our products and product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or in-license may fail to result in issued patents with claims that cover the products in the United States or in other countries. If this were to occur, early biosimilar competition could be expected against IMVAMUNE/IMVANEX, PROSTVAC and other product candidates in development. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found and cited in every patent office, which can invalidate a patent, prevent a patent from issuing based on a pending patent application, or limit our ability to assert a patent in the event of potential infringement by a third party. Even if patents do successfully issue, third parties may challenge their validity, enforceability, scope or ownership, which may result in such patents, or our rights to such patents, being narrowed or invalidated. Furthermore, even if they are unchallenged, our patents and patent applications may

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not adequately protect our intellectual property or prevent others from designing around our claims. If the patent applications we hold or license with respect to IMVAMUNE/IMVANEX and PROSTVAC fail to issue or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our products. We cannot offer any assurances about which, if any, patents will issue or whether any issued patents will be found not invalid and not unenforceable, will go unthreatened by third parties or will adequately protect our products and product candidates. Further, if we encounter delays in regulatory approvals, the period of time during which we could market IMVAMUNE/IMVANEX and PROSTVAC under patent protection could be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to IMVAMUNE/IMVANEX, PROSTVAC or our other product candidates. Furthermore, if third parties have filed such patent applications, an interference proceeding in the United States can be provoked by a third party or instituted by us to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license it from the prevailing party, which may not be possible.

        In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and other elements of our drug discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. Although we expect all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, that such agreements provide adequate protection and will not be breached, that our trade secrets and other confidential proprietary information will not otherwise be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

        Further, the laws of some countries do not protect patents and other proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property abroad. We may also fail to pursue or obtain patents and other intellectual property protection relating to our products and product candidates in all countries.

        Finally, certain of our activities and our licensors' activities have been funded, and may in the future be funded, by the U.S. federal government. When new technologies are developed with U.S. federal government funding, the government obtains certain rights in any resulting patents, including a nonexclusive license authorizing the government to use the invention for non-commercial purposes. These rights may permit the government to disclose our confidential information to third parties and to exercise "march-in" rights to use or allow third parties to use our patented technology. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the

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government, U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the United States.

Our ability to compete may decline if we do not adequately protect our proprietary rights.

        Our commercial success depends on obtaining and maintaining proprietary rights to our product candidates and defending these rights against third-party challenges. We will only be able to protect our product candidates and their uses from unauthorized use by third parties to the extent that valid and enforceable patents, or effectively protected trade secrets, cover them. Our ability to obtain patent protection for our product candidates is uncertain due to a number of factors, including, but not limited to:

    §
    we or our licensors may not have been the first to make the inventions covered by pending patent applications or issued patents;

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    we or our licensors may not have been the first to file patent applications for our product candidates or the compositions we developed or for their uses;

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    others may independently develop identical, similar or alternative products or compositions and uses thereof;

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    our or our licensors' disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;

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    any or all of our or our licensors' pending patent applications may not result in issued patents;

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    we or our licensors may not seek or obtain patent protection in countries that may eventually provide us with a significant business opportunity;

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    any patents issued to us or our licensors may not provide a basis for commercially viable products, may not provide any competitive advantages, or may be successfully challenged by third parties;

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    our or our licensors' compositions and methods may not be patentable;

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    others may design around our patent claims to produce competitive products which fall outside of the scope of our patents; or

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    others may identify prior art or other bases which could invalidate our or our licensors' patents.

        Even if we have or obtain patents covering our product candidates or compositions, we may still be barred from making, using and selling our product candidates or technologies because of the patent rights of others. Others may have filed, and in the future may file, patent applications covering compositions or products that are similar or identical to ours. There are many issued U.S., European and other national patents relating to vaccine and cancer immunotherapy products, and some of these relate to product candidates we intend to commercialize. Numerous U.S., European and other national issued patents and pending patent applications owned by others exist in the cancer treatment field in which we are developing products. These could materially affect our ability to develop our product candidates or sell our products if approved. Because patent applications can take many years to issue, there may be currently pending applications unknown to us that may later result in issued patents that our product candidates or compositions may infringe. These patent applications may have priority over patent applications filed by us.

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        Obtaining and maintaining a patent portfolio entails significant expense and resources. Part of the expense includes periodic maintenance fees, renewal fees, annuity fees, various other governmental fees on patents and/or applications due in several stages over the lifetime of patents and/or applications, as well as the cost associated with complying with numerous procedural provisions during the patent application process. We may not choose to pursue or maintain protection for particular inventions. In addition, there are situations in which failure to make certain payments or noncompliance with certain requirements in the patent process can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we choose to forego patent protection or allow a patent application or patent to lapse purposefully or inadvertently, our competitive position could suffer.

        Legal actions to enforce our patent rights can be expensive and may involve the diversion of significant management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation of our patents or a finding that they are unenforceable. We may or may not choose to pursue litigation or other actions against those that have infringed on our patents, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.

        If we initiate legal proceedings against a third party to enforce a patent covering our product candidate or technology, the defendant could counterclaim that the patent covering our product candidate or technology is invalid or unenforceable. In patent litigation in the United States, and in many other countries, defendant counterclaims alleging invalidity and unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any of several statutory requirements, including lack of novelty, obviousness (lack of inventive step) or non-enablement. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld relevant information from the U.S. Patent and Trademark Office, or USPTO, as well as with the European Patent Office, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review and/or inter partes review and equivalent proceedings in non-U.S. jurisdictions, and opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover our product candidates or competitive products. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we or the patent examiner were unaware during prosecution. Further, we cannot be certain that all of the potentially relevant art relating to our patents and patent applications has been cited in every patent office. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates.

Biopharmaceutical patents and patent applications involve highly complex legal and factual questions, which, if determined adversely to us, could negatively impact our patent position.

        The patent positions of biopharmaceutical companies can be highly uncertain and involve complex legal and factual questions. The interpretation and breadth of claims allowed in some patents covering biopharmaceutical compositions may be uncertain and difficult to determine, and are often affected materially by the facts and circumstances that pertain to the patented compositions and the related patent claims. The standards of the USPTO are evolving and could

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change in the future. Consequently, we cannot predict the issuance and scope of patents with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings, and U.S. patents may be subject to reexamination proceedings, post-grant review and/or inter partes review in the USPTO. Non-U.S. patents may also be subject to opposition or comparable proceedings in the corresponding patent office, which could result in either loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination, post-grant review, inter partes review and opposition proceedings may be costly. Accordingly, rights under any issued patents may not provide us with sufficient protection against competitive products or processes.

        In addition, changes in or different interpretations of patent laws in the United States and other countries may permit others to use our or our licensors' discoveries or to develop and commercialize our technology and products without providing any compensation to us, or may limit the number of patents or claims we can obtain. The laws of some countries do not protect intellectual property rights to the same extent as U.S. laws and those countries may lack adequate rules and procedures for defending our intellectual property rights.

        If we fail to obtain and maintain patent protection and trade secret protection for our product candidates, we could lose our competitive advantage and competition we face would increase, reducing any potential revenues and adversely affecting our ability to attain or maintain profitability.

Developments in patent law could have a negative impact on our business.

        From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress, the USPTO or similar authorities in other countries may change the standards of patentability and any such changes could have a negative impact on our business. In addition, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law. These changes include a transition from a "first-to-invent" system to a "first inventor to file" system, changes to the way in which issued patents are challenged, and changes to the way in which patent applications are disputed during the examination process. These changes may favor larger and more established companies that have greater resources to devote to patent application filing and prosecution. The USPTO has developed new regulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, and, in particular, the first inventor to file provisions, became effective on March 16, 2013. Substantive changes to patent law associated with the America Invents Act, or any subsequent U.S. legislation regarding patents, may affect our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the cost of prosecuting our U.S. patent applications, our ability to obtain U.S. patents based on our discoveries and our ability to enforce or defend any patents that may issue from our patent applications, all of which could have a material adverse effect on our business.

If we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation for extending the term of patents covering each of our product candidates, our business may be materially harmed.

        Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved

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product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced, possibly materially.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

        In addition to patent protection, because we operate in the highly technical field of development of therapies, we rely in part on trade secret protection in order to protect our proprietary technology and processes. However, trade secrets are difficult to protect. We have entered into confidentiality and intellectual property assignment agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party's relationship with us. These agreements also generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us.

        In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures. Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Trade secrets may be independently developed by others in a manner that could prevent legal recourse by us. If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.

We will not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

        Filing, prosecuting and defending patents on our product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States, assuming that rights are obtained in the United States. Competitors may use our technologies in jurisdictions where we do not pursue and obtain patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Even if we pursue and obtain issued patents in particular jurisdictions, our patent claims or other intellectual property rights may not be effective or sufficient to prevent third parties from so competing.

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        In addition, the laws of some non-U.S. countries do not protect intellectual property rights to the same extent as the federal and state laws in the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain non-U.S. jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to biopharmaceuticals or biotechnologies. This could make it difficult for us to stop the infringement of our patents, if obtained, or the misappropriation of our other intellectual property rights. For example, many countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

        Proceedings to enforce our patent rights in non-U.S. jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, changes in the law and legal decisions by courts in the United States and other countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Third parties may assert ownership or commercial rights to inventions we develop.

        Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. We have written agreements with collaborators that provide for the ownership of intellectual property arising from our collaborations. These agreements provide that we must negotiate certain commercial rights with collaborators with respect to joint inventions or inventions made by our collaborators that arise from the results of the collaboration. In some instances, there may not be adequate written provisions to address clearly the resolution of intellectual property rights that may arise from collaboration. If we cannot successfully negotiate sufficient ownership and commercial rights to the inventions that result from our use of a third-party collaborator's materials where required, or if disputes otherwise arise with respect to the intellectual property developed with the use of a collaborator's samples, we may be limited in our ability to capitalize on the market potential of these inventions. In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectual property to us are ineffective, or in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputes regarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such inventions. Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, or may lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business.

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If we fail to comply with our obligations under license or technology agreements with third parties, or if our rights to develop and commercialize our product candidates are limited under license or technology agreements with third parties, we could lose license rights that are critical to our business.

        We license intellectual property that is critical to our business, including licenses underlying the technology in our vaccine and cancer immunotherapy product candidates, and in the future we may enter into additional agreements that provide us with licenses to valuable intellectual property or technology. These licenses impose various royalty payments, milestones and other obligations on us. If we fail to comply with any of these obligations, the licensor may have the right to terminate the license. Termination by the licensor would cause us to lose valuable rights, and could prevent us from distributing our current tests, or inhibit our ability to commercialize future test candidates. Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.

Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

        We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, and no such claims against us are currently pending, we may be subject to claims that we or our employees, consultants or independent contractors have used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

        In addition, the research resulting in certain of our licensed patent rights and technology has been, and may in the future be, funded by the U.S. government. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents and inventions, including a non-exclusive license to practice or have practiced on behalf of the U.S. government such patents and inventions. These rights may further permit the U.S. government to disclose our confidential information to third parties and to exercise march-in rights to allow third parties to use our licensed technology. The U.S. government can exercise its march-in rights if it determines that action is necessary because we or our licensors fail to achieve practical application of the U.S. government-funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the U.S. government of such rights could harm our business, financial condition, results of operations and future growth prospects.

A dispute concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time-consuming and costly, and an unfavorable outcome could harm our business.

        There is significant litigation in the biopharmaceutical industry regarding patent and other intellectual property rights. While we are not currently subject to any pending intellectual property

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litigation, and are not aware of any such threatened litigation, we may be exposed to future litigation by third parties based on claims that our product candidates, technologies or activities infringe the intellectual property rights of others. If our development activities are found to infringe any such patents, we may have to pay significant damages or seek licenses to such patents. A patentee could prevent us from using the patented drugs or compositions. We may need to resort to litigation to enforce a patent issued to us, to protect our trade secrets, or to determine the scope and validity of third-party proprietary rights. From time to time, we may hire scientific personnel or consultants formerly employed by other companies involved in one or more areas similar to the activities conducted by us. Either we or these individuals may be subject to allegations of trade secret misappropriation or other similar claims as a result of prior affiliations. If we become involved in litigation, it could consume a substantial portion of our managerial and financial resources, regardless of whether we win or lose. We may not be able to afford the costs of litigation. Any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a negative impact on our cash position. Any legal action against us or our collaborators could lead to:

    §
    payment of damages, potentially treble damages, if we are found to have willfully infringed a party's patent rights;

    §
    injunctive or other equitable relief that may effectively block our ability to further develop, commercialize and sell products; or

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    us or our collaborators having to enter into license arrangements that may not be available on commercially acceptable terms, if at all.

        Any of these outcomes could hurt our cash position and financial condition and our ability to develop and commercialize our product candidates.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest.

        Our registered trademarks, including IMVAMUNE/IMVANEX, PROSTVAC and MVA-BN or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we will need to build name recognition by potential partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively.

Risks Related to this Offering

You will not be directly holding our shares.

        As a holder of our ADSs, you will not be treated as one of our shareholders and you will not have shareholder rights. Our depositary, Deutsche Bank Trust Company Americas, will be the holder of the shares underlying your ADSs. As a holder of ADSs, you will have contractual ADS holder rights. The deposit agreement among us, the depositary and you, as an ADS holder, and all other persons directly and indirectly holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. ADS holders may only exercise voting rights with respect to the shares represented by the underlying ADSs in accordance with the provisions of the deposit agreement, which provides that you may vote the shares underlying the ADSs for any particular matter to be voted on by our shareholders either by withdrawing the shares underlying the ADSs or, to the extent permitted by applicable law and as permitted by the depositary, by requesting a temporary registration as shareholder in our shares and authorizing the depositary to act as proxy. At our 2016

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annual general meeting, we intend to propose that our articles of association be amended to permit pass-through voting by ADS holders, who, assuming the success of such proposal, would thereafter be permitted to indicate their voting preference to the depositary in accordance with and subject to the depositary's procedures. Even if you are able to instruct the depositary to vote the shares underlying your ADSs, we cannot guarantee you that the depositary will vote in accordance with your instructions. Please see the risk factor entitled "You may not be able to exercise your right to vote the shares underlying the ADSs."

There has been no prior market for the ADSs on a U.S. national securities exchange and an active and liquid market for our securities may fail to develop, which could harm the market price of the ADSs.

        Prior to this offering, while our shares have been traded on Nasdaq Copenhagen since November 1998 and we have ADSs that trade on the U.S. over-the-counter market, there has been no public market on a U.S. national securities exchange for our ADSs or our shares. Although we have applied to list our ADSs on The NASDAQ Global Select Market, an active trading market for our ADSs may never develop or be sustained following this offering. The offering price of our ADSs will be based on the market price for our shares on Nasdaq Copenhagen at the time of this offering. This offering price may not be indicative of the market price of our ADSs or shares after this offering. In the absence of an active trading market for our ADSs or shares, investors may not be able to sell their ADSs at or above the offering price or at the time that they would like to sell.

The trading price of our equity securities may be volatile, and purchasers of our ADSs could incur substantial losses.

        The market prices of our ADSs and shares may be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their ADSs or shares at or above the price originally paid for the security. The market price for our ADSs and shares may be influenced by many factors, including, but not limited to:

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    actual or anticipated fluctuations in our financial condition and operating results;

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    the release of new data from the clinical trials of our product candidates;

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    actual or anticipated changes in our growth rate relative to our competitors;

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    competition from existing products or new products that may emerge;

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    announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

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    failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;

    §
    issuance of new or updated research or reports by securities analysts;

    §
    fluctuations in the valuation of companies perceived by investors to be comparable to us;

    §
    share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

    §
    additions or departures of key management or scientific personnel;

    §
    disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

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    §
    changes to coverage policies or reimbursement levels by commercial third-party payors and government payors and any announcements relating to coverage policies or reimbursement levels;

    §
    announcement or expectation of additional debt or equity financing efforts;

    §
    issuances or sales of our shares or ADSs by us, our insiders or our other shareholders; and

    §
    general economic and market conditions.

        These and other market and industry factors may cause the market price and demand for our ADSs to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their shares or ADSs and may otherwise negatively affect the liquidity of the trading market for ADSs.

We have broad discretion over the use of the net proceeds from this offering and may use them in ways with which you do not agree and in ways that may not increase the value of your investment.

        Our board of directors and management will have broad discretion over the application of the net proceeds that we receive from this offering. We may spend or invest these proceeds in a way with which our shareholders and holders of ADSs disagree. Failure by our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of the ADSs and their trading volume could decline.

        The trading market for the ADSs and shares depends in part on the research and reports that securities or industry analysts publish about us or our business. If no or few securities or industry analysts cover our company, the trading price for the ADSs would be negatively impacted. If one or more of the analysts who covers us downgrades our equity securities or publishes inaccurate or unfavorable research about our business, the price of ADSs would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, or downgrades our securities, demand for ADSs could decrease, which could cause the price of the ADSs or their trading volume to decline.

We intend to retain all available funds and any future earnings and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the ADSs.

        We have never declared or paid any cash dividends on our shares, and we intend to retain all available funds and any future earnings to fund the development and expansion of our business. Therefore, you are not likely to receive any dividends on your ADSs for the foreseeable future and the success of an investment in ADSs will depend upon any future appreciation in its value. Consequently, investors may need to sell all or part of their holdings of ADSs after price appreciation, which may never occur, as the only way to realize any future gains on their investment. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which our shareholders have purchased them. Investors seeking cash dividends should not purchase the ADSs or shares.

        In addition, exchange rate fluctuations may affect the amount of DKK that we are able to distribute, and the amount in U.S. dollars that our shareholders receive upon the payment of cash

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dividends or other distributions we declare and pay in DKK, if any. Additionally, dividends will generally be subject to Danish withholding tax. See the section of this prospectus titled "Certain Material Danish Income Tax Consequences" for a more detailed description of Danish taxes on dividends. These factors could harm the value of the ADSs.

        ADS investors may also not realize all of the benefits of being a shareholder in our company. For instance, the votes of ADS holders will not be represented directly on the books of the company, but only through a vote by the depositary of the underlying shares, which vote will reflect the ADS majority's election on the vote of all such shares. Please see the risk factor entitled "You may not be able to exercise your right to vote the shares underlying the ADSs." Separately, the Company may elect to offer subscription rights to its shareholders without offering such rights to ADS holders. Please see the risk factor entitled "Holders of our ADSs may not be able to exercise the pre-emptive subscription rights related to the shares that they represent, and may suffer dilution of their equity holding in the event of future issuances of our shares."

Investors in this offering will experience immediate and substantial dilution in the book value of their investment.

        The initial public offering price of the ADSs is substantially higher than the pro forma net tangible book value per ADS before giving effect to this offering. Accordingly, if you invest in the ADSs in this offering, you will incur immediate substantial dilution of approximately DKK             per ADS ($             ) (based on the net tangible book value per share underlying the ADSs), based on an assumed initial public offering price of $             per ADS (DKK             ), and our pro forma net tangible book value as of September 30, 2015. In addition, following this offering, investors in this offering will have contributed approximately         % of the total gross consideration paid by shareholders to purchase our outstanding shares and ADSs, but will only own ADSs representing approximately         % of our shares and ADSs outstanding after this offering. Furthermore, if the underwriters exercise their option to purchase additional ADSs, if board authorizations to issue additional shares, or ADSs or outstanding warrants or convertible securities are issued and subsequently exercised, you could experience further dilution. For a further description of the dilution that you will experience immediately after this offering, see the section of this prospectus titled "Dilution."

Investors should be aware that the rights provided to our shareholders and holders of ADSs under Danish corporate law and our articles of association differ in certain respects from the rights that you would typically enjoy as a shareholder of a U.S. company under applicable U.S. federal and state laws.

        Under Danish corporate law, except in certain limited circumstances, which require at a minimum that a proposal for inspection has been supported by a minimum of 25% of the shareholders voting and being present at a general meeting, our shareholders may not ask for an inspection of our corporate records, while under Delaware corporate law any shareholder, irrespective of the size of such shareholder's shareholdings, may do so. Shareholders of a Danish limited liability company are also unable to initiate a derivative action, a remedy typically available to shareholders of U.S. companies, in order to enforce a right of our company, in case we fail to enforce such right ourselves, other than in certain cases of board member/management liability under limited circumstances. In addition, a majority of our shareholders may release a member of our board of directors or our executive management from any claim of liability we may have, including if such board member or manager has acted in bad faith or has breached his or her duty of loyalty. However, a shareholder may bring a derivative action on behalf of our Company against, among other persons, a member of our board of directors or our executive management, provided that the circumstances of the act or omission giving rise to the claim of liability were not known to

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the shareholders at the time of such shareholder resolution, or if shareholders representing at least 10% of the share capital represented at the relevant general meeting has opposed such shareholder resolution. In contrast, most U.S. federal and state laws prohibit a company or its shareholders from releasing a board member from liability altogether if such board member has acted in bad faith or has breached such board member's duty of loyalty to our company. Additionally, distribution of dividends from Danish companies to foreign companies and individuals can be subject to non-refundable withholding tax, and not all receiving countries allow for deduction. See the section of this prospectus titled "Certain Material Danish Income Tax Consequences" for a more detailed description of the withholding tax. Also, the rights as a creditor may not be as strong under Danish insolvency law as under U.S. law or other insolvency law, and consequently creditors may recover less in the event our company is subject to insolvency compared to a similar case including a U.S. debtor. In addition, the use of the tax asset consisting of the accumulated tax losses requires that we are able to generate positive taxable income and the use of tax losses carried forward to offset against future income is subject to certain restrictions and can be restricted further by future amendments to Danish tax law. Finally, Danish corporate law may not provide appraisal rights in the case of a business combination equivalent to those generally afforded a shareholder of a U.S. company under applicable U.S. laws. For additional information on these and other aspects of Danish corporate law and our articles of association, see the section herein entitled "Description of Share Capital." As a result of these differences between Danish corporate law and our articles of association, on the one hand, and U.S. federal and state laws, on the other hand, in certain instances, you could receive less protection as an equity holder of our company than you would as a shareholder of a U.S. company.

You may not be able to exercise your right to vote the shares underlying your ADSs.

        ADS holders may only exercise voting rights with respect to the shares represented by the ADSs in accordance with the provisions of the deposit agreement, which provides that a holder may vote the shares underlying any ADSs for any particular matter to be voted on by our shareholders either by withdrawing the shares underlying the ADSs or, to the extent permitted by applicable law and as permitted by the depositary, by requesting a temporary registration as shareholder and authorizing the depositary to act as proxy. However, you may not know about the meeting far enough in advance to withdraw those shares, and after such a withdrawal you would no longer hold ADSs, but rather you would directly hold the underlying shares. You also may not know about the meeting far enough in advance to request a temporary registration.

        Absent said withdrawal or, to the extent permitted by applicable law and as permitted by the depositary, temporary registration and proxy, Danish law prevents the depositary from differentiated voting at our general meetings unless our articles of association specifically allow for this, which is currently not the case, meaning that all votes on the shares held by the depositary, including those underlying the ADSs issued in this offering, would need to be cast either in favor or against any proposal at our general meetings, if such shares were voted at all. Our board of directors is committed to using reasonable efforts to work towards removing this restriction at our 2016 annual general meeting. If this restriction is removed, the depositary would be able to vote the shares registered in its name that underlie the ADSs to more closely reflect the preferences of the ADS holders, thereby effectively permitting pass-through voting by ADS holders who indicate their preference to the depositary in accordance with and subject to the depositary's procedures.

        In such an instance, if we ask for your instructions, the depositary, upon timely notice from us, will notify you of the upcoming vote and arrange to deliver our voting materials to you. We cannot guarantee that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares or to withdraw your shares so that you can vote them yourself. If the

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depositary does not receive timely voting instructions from you, it may give a proxy to a person designated by us to vote the shares underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise any right to vote that you may have with respect to the underlying shares, and there may be nothing you can do if the shares underlying your ADSs are not voted as you requested. In addition, the depositary is only required to notify you of any particular vote if it receives notice from us at least 30 days in advance of the scheduled meeting. Our charter permits, in the case of general meetings, and requires, in the case of extraordinary meetings, notice to be delivered within a shorter time span, in which case the depositary would not be required to provide you with notice of and access to such vote.

You may be subject to limitations on the transfer of your ADSs and the withdrawal of the underlying shares.

        Your ADSs, which may be evidenced by ADRs, are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the deposit agreement, or for any other reason subject to your right to cancel your ADSs and withdraw the underlying shares. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of shares is blocked to permit voting at a shareholders' meeting or we are paying a dividend on our shares. In addition, you may not be able to cancel your ADSs and withdraw the underlying shares when you owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities. See the section of this prospectus titled "Description of American Depositary Shares."

Claims of U.S. civil liabilities may not be enforceable against us.

        We are incorporated under the laws of Denmark. Substantially all of our assets are located outside of the United States. The majority of our board members and employees reside outside of the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against them or us in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. securities laws.

        The United States and Denmark currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment given by a U.S. court, whether or not predicated solely upon U.S. securities laws, would not be enforceable in Denmark.

        In order to obtain a judgment that is enforceable in Denmark, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim again with a court of competent jurisdiction in Denmark. The Danish court will not be bound by the judgment by the U.S. court, but the judgement may be submitted as evidence. It is up to the Danish court to assess the judgment by the U.S. court and decide if and to what extent the judgment should be followed.

        Danish courts are likely to deny claims for punitive damages and may grant a reduced amount of damages compared to U.S. courts.

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        Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against us or members of our board of directors or our executive management, or certain experts named herein who are residents of Denmark or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of ADSs.

        We are a foreign private issuer, as defined in the SEC's rules and regulations, and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, our officers and directors are exempt from the reporting and "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we currently publish annual and quarterly reports on our website pursuant to the rules of Nasdaq Copenhagen and expect to file such financial reports on an annual and quarterly basis with the SEC, we will not be required to file such reports with the SEC as frequently or as promptly as U.S. public companies and will not be required to file quarterly reports on Form 10-Q or current reports on Form 8-K that a domestic company would be required to file under the Exchange Act. Accordingly, there may be less publicly available information concerning our company than there would be if we were not a foreign private issuer.

As a foreign private issuer and as permitted by the listing requirements of The NASDAQ Global Select Market, we will rely on certain home country corporate governance practices rather than the corporate governance requirements of The NASDAQ Global Select Market.

        We qualify as a foreign private issuer. As a result, in accordance with the listing requirements of The NASDAQ Global Select Market, we will rely on home country governance requirements and certain exemptions thereunder rather than relying on the corporate governance requirements of The NASDAQ Global Select Market. For instance, the Listing Rules for the NASDAQ Stock Market, or the NASDAQ Listing Rules, for domestic U.S. issuers require listed companies to have, among other things, a majority of their board members be independent, and to have independent director oversight of executive compensation, nomination of board members and corporate governance matters. However, as a foreign private issuer, while we intend to comply with these requirements, we are permitted to follow home country practice in lieu of the above requirements. Danish law does not require that a majority of our board consist of independent directors or the implementation of a nominating and corporate governance committee, and our board may thus in the future not include, or include fewer, independent directors than would be required if we were subject to the NASDAQ Listing Rules, or they may decide that it is in our interest not to have a compensation committee or nominating and corporate governance committee, or have such committees governed by practices that would not comply with the NASDAQ Listing Rules. We intend to follow home country practice with regard to, among other things, quorum requirements generally applicable to general meetings of shareholders. Danish law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not a generally accepted business practice in Denmark, thus our practice will vary from the requirement of NASDAQ Listing Rule 5620(b). In addition, our shareholders have authorized our board of directors to issue securities, including in connection with certain events such as the acquisition of shares or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, rights issues at or below market price, certain

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private placements, directed issues at or above market price, and issuance of convertible notes. To this extent, our practice varies from the requirements of NASDAQ Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events. For an overview of our corporate governance principles, see "Description of Share Capital." Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to these NASDAQ requirements.

U.S. holders of ADSs may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

        Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, U.S. holders of the ADSs may suffer adverse tax consequences, including having gains realized on the sale of the ADSs treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on the ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of sales of the ADSs. See "Certain Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Considerations."

        Our status as a PFIC will depend on the composition of our income and the composition and value of our assets, which may be determined in large part by reference to the market value of the ADSs and our shares, which may be volatile, from time to time. Our status may also depend, in part, on how quickly we utilize the cash proceeds from this offering in our business. Based on certain estimates of our gross income and assets, and on the nature of our business, we do not expect to be characterized as a PFIC for our taxable year ending December 31, 2015. However, there can be no assurance that we will not be considered a PFIC for any taxable year.

We must maintain effective internal control over financial reporting, and if we are unable to do so, the accuracy and timeliness of our financial reporting may be adversely affected, which could hurt our business, lessen investor confidence and depress the market price of our securities.

        We must maintain effective internal control over financial reporting in order to accurately and timely report our results of operations and financial condition. In addition, as a public company listed in the United States, the Sarbanes-Oxley Act will require, among other things, that we assess the effectiveness of our internal control over financial reporting at the end of each fiscal year. We anticipate being first required to issue management's annual report on internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, in connection with issuing our consolidated financial statements as of and for the year ending December 31, 2016.

        The rules governing the standards that must be met for our management to assess our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act are complex and require significant documentation, testing and possible remediation. These stringent standards require that our audit committee be advised and regularly updated regarding management's review of internal control over financial reporting. We have started the process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation. This process is time-consuming, costly and complicated. In addition, our independent registered public

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accounting firm will be required to attest to the effectiveness of our internal controls over financial reporting beginning with our annual report following the date on which we are no longer an "emerging growth company," which may be up to five fiscal years following the date of this offering. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company listed in the United States. If we fail to staff our accounting and finance function adequately or maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company listed in the United States, our business and reputation may be harmed and the price of our ADSs may decline. Furthermore, investor perceptions of us may be adversely affected, which could cause a decline in the market price of our securities.

Holders of our ADSs will not be able to exercise the pre-emptive subscription rights related to the shares that they represent, and may suffer dilution of their equity holding in the event of future issuances of our shares.

        Under the Danish Companies Act, our shareholders benefit from a pre-emptive subscription right on the issuance of shares for cash consideration only and not in the event of issuance of shares against non-cash contribution or debt conversion. Shareholders' pre-emptive subscription rights, in the event of issuances of shares against cash payment, may be disapplied by a resolution of the shareholders at a general meeting of our shareholders and/or the shares may be issued on the basis of an authorization granted to the board of directors pursuant to which the board may disapply the shareholders' pre-emptive subscription rights. Such shares may be issued at or above market value or below market value in the case of rights issues or pursuant to a resolution of the shareholders. The absence of pre-emptive rights for existing equity holders may cause dilution to such holders.

        Furthermore, our ADS holders would not be entitled, even if such rights accrued to our shareholders in any given instance, to receive such pre-emptive subscription rights related to the shares that they represent. Rather, the depositary is required to endeavor to sell any such subscription rights that may accrue to the shares underlying the ADSs and to remit the net proceeds therefrom to the ADS holders pro rata. In addition, if the depositary is unable to sell rights, the depositary will allow the rights to lapse, in which case you will receive no value for these rights. Further, if we offer holders of our shares the option to receive dividends in either cash or shares, under the deposit agreement, ADS holders will not be permitted to elect to receive dividends in shares or cash, but will receive whichever option we provide as a default to shareholders who fail to make such an election.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "contemplate," "continue," "could," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "predict," "potential," "positioned," "seek," "should," "target," "will," "would," and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

    §
    the timing of data from our ongoing PROSPECT Phase 3 Trial of PROSTVAC and the ongoing Phase 3 trial of IMVAMUNE/IMVANEX;

    §
    the timing of data for the Phase 2 trials of PROSTVAC as well as data for our other trials;

    §
    our receipt of future milestone payments from our collaboration partners, and the expected timing of such payments;

    §
    our expectations regarding the potential market size and the size of the patient populations for our product candidates, if approved for commercial use;

    §
    our expectations regarding the potential advantages of our product candidates over existing vaccines or immunotherapies;

    §
    our potential to enter into new collaborations;

    §
    our expectations with regard to the ability to develop additional product candidates using our live virus vaccine platform and file INDs for such product candidates;

    §
    our expectations with regard to our current and future collaboration partners to pursue the development of our product candidates;

    §
    our development plans with respect to our product candidates;

    §
    our ability to develop, acquire and advance product candidates into, and successfully complete, clinical trials;

    §
    the timing or likelihood of regulatory filings and approvals for our product candidates;

    §
    the commercialization of our product candidates;

    §
    our commercialization, marketing and manufacturing capabilities;

    §
    the implementation of our business model and strategic plans for our business, product candidates and technology platform;

    §
    the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

    §
    estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;

    §
    our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

    §
    our use of proceeds from this offering;

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    §
    our financial performance; and

    §
    developments and projections relating to our competitors and our industry.

        These forward-looking statements are based on management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management's beliefs and assumptions, and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under "Risk Factors" and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See "Where You Can Find More Information."

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MARKET, INDUSTRY AND OTHER DATA

        This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our product and product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

        In addition, assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause our future performance to differ materially from our assumptions and estimates. See "Special Note Regarding Forward-Looking Statements."

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USE OF PROCEEDS

        We estimate that the net proceeds from the sale of             ADSs in this offering will be approximately $             (DKK         ), after deducting the underwriting commission and estimated offering expenses payable by us, based on an assumed initial public offering price of $              per ADS (DKK         ), which is the midpoint of the price range set forth on the cover of this prospectus. If the underwriters exercise their option to purchase additional ADSs in full, we estimate that the net proceeds to us from this offering will be approximately $             (DKK         ), after deducting the underwriting commission and estimated offering expenses payable by us. Each $             (DKK         ) increase (decrease) in the assumed initial public offering price of $             per ADS (DKK         ), would increase (decrease) the net proceeds to us from this offering, after deducting the underwriting commission and estimated offering expenses payable by us, by $              (DKK         ), assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of ADSs we are offering. An increase (decrease) of             in the number of ADSs we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the underwriting commission and estimated offering expenses payable by us, by $             (DKK         ), assuming the assumed initial public offering price stays the same.

        We intend to use the net proceeds from this offering, together with our existing cash resources, to accelerate our commercial vaccine pipeline as it relates to infectious disease and cancer immunotherapy, including specifically:

    §
    approximately $             to advance our infectious disease portfolio, including MVA-BN RSV and our preclinical programs;

    §
    approximately $             to advance our cancer immunotherapy portfolio, including CV 301, MVA-BN Brachyury and our preclinical programs;

    §
    approximately $             to build line extensions to our existing manufacturing capabilities, including additional filling and packing capacities; and

    §
    the remainder to fund working capital and for general corporate purposes which may include funding for new research and development activities, the hiring of additional personnel, capital expenditures and the costs of operating as a public company.

By applying the net proceeds of this offering in the manner set forth above, we believe that we will be able to advance our clinical testing of MVA-BN RSV through                           ; advance our clinical testing of CV 301 through                           and of MVA-BN Brachyury through                           ; and advance certain other preclinical programs in our infectious disease and cancer immunotherapy portfolio through Phase 1 clinical trials. Due to the uncertainties inherent in the clinical development and regulatory approval process, it is difficult to estimate with certainty the exact amounts of the net proceeds from this offering that may be used for any of the above purposes on a stand-alone basis. See "Risk Factors—We have broad discretion in the use of the net proceeds from this offering and may use them in ways with which you do not agree and in ways that may not increase the value of your investment."

        Pending our application of the net proceeds from this offering, we plan to invest such proceeds in bank accounts and/or securities of limited duration.

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DIVIDEND POLICY

        We have never declared or paid cash dividends on our share capital. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination related to dividend policy will be made at the discretion of our board of directors. To understand how any future determination by our company as to our dividend policy would affect you as a holder of ADSs, please see the section of this Prospectus entitled "Description of American Depositary Shares—Dividends and Other Distributions."

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CAPITALIZATION

        The following table sets forth our capitalization and cash and cash equivalents as of September 30, 2015:

    §
    on an actual basis; and

    §
    on a pro forma basis to give effect to the issuance of             ADSs, representing             shares, in this offering at an assumed initial public offering price of $             per ADS, which is the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting commission and estimated offering expenses payable by us (excluding the potential exercise by the underwriters of their overallotment option).

        Actual data as of September 30, 2015 in the table below is derived from our unaudited condensed consolidated interim financial statements. The pro forma data included in the table below is also unaudited. You should read this information together with our unaudited condensed consolidated interim financial statements appearing elsewhere in this prospectus and the information set forth under the headings "Selected Consolidated Financial Data," "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of September 30, 2015  
 
  Actual   Pro Forma(1)  
(in millions)
  $(2)   DKK   $(2)   DKK  

Cash and cash equivalents

  $ 69.4     462.0   $          

Debt

                         

Credit institutions

  $ 5.1     33.8   $          

Total debt

    5.1     33.8   $          

Equity

   
 
   
 
   
 
   
 
 

Share capital(3)

    41.8     278.3              

Retained earnings

    158.0     1,052.1              

Other reserves

    (4.2 )   (27.7 )            

Total equity

    195.6     1,302.7              

Total capitalization

  $ 200.7     1,336.4              

(1)
Each $             (DKK             ) increase or decrease in the assumed initial public offering price of $             per ADS (DKK              ), which is the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease, respectively, the amount of cash and cash equivalents, total equity and total capitalization by $             (DKK             ), assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting commission, and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering. An increase or decrease of             in the number of ADSs we are offering would increase or decrease, respectively, the amount of cash and cash equivalents, total equity and total capitalization by $              (DKK             ), assuming the assumed initial public offering price per ADS, as set forth on the cover page of this prospectus, remains the same. The pro forma information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.
(2)
Translated solely for convenience into U.S. dollars at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.
(3)
This excludes 185,297 shares issued upon the exercise of outstanding warrants on November 16, 2015 with gross proceeds to our Company amounting to DKK 10.75 million.

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DILUTION

        If you invest in the ADSs in this offering, your interest will be immediately diluted to the extent of the difference between the initial public offering price per ADS in this offering and the net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ADS is substantially in excess of the net tangible book value per ADS. As of September 30, 2015, we had a historical net tangible book value per ADS of $              (DKK              ), or DKK              per share ($              ). Our net tangible book value per share represents total consolidated tangible assets less total consolidated liabilities, all divided by the number of shares outstanding on September 30, 2015.

        After giving effect to the sale of ADSs in this offering at an assumed initial public offering price of $             per ADS (DKK             ), which is the midpoint of the price range set forth on the cover of this prospectus, and after deducting the underwriting commission and estimated offering expenses, our pro forma net tangible book value at September 30, 2015 would have been $             (DKK             ) per share, or $             per ADS (DKK              ). This represents an immediate increase in pro forma net tangible book value of $             (DKK              ) per share to existing shareholders and an immediate dilution of $             per ADS (DKK              ) to new investors. The following table illustrates this dilution per ADS:

Assumed initial public offering price per ADS(1)

                $            

Historical net tangible book value per ADS as of September 30, 2015(2)

                             

Increase in pro forma net tangible book value per ADS attributable to new investors

                             

Pro forma net tangible book value per ADS after this offering

                             

Dilution per ADS to new investors participating in this offering

                $            

(1)
Translated solely for convenience into U.S. dollars at an exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.
(2)
Based on the historic net tangible book value per share as of such date.

        A $             increase (DKK             ) (decrease) in the assumed initial public offering price of $             per ADS (DKK             ), which is the midpoint of the price range set forth on the cover of this prospectus, would increase (decrease) our pro forma net tangible book value as of September 30, 2015 after this offering by approximately DKK              per share ($             ), or $             per ADS (DKK             ), and would increase (decrease) dilution to investors in this offering by $             per ADS (DKK              ), assuming that the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting commission and estimated offering expenses payable by us. We may also increase or decrease the number of ADSs we are offering. An increase (decrease) of             in the number of ADSs we are offering would increase (decrease) our pro forma net tangible book value as of September 30, 2015 after this offering by approximately DKK             per share ($             ), or approximately $             per ADS (DKK             ), and would decrease (increase) dilution to investors in this offering by approximately $             per ADS (DKK             ), assuming the assumed initial public offering price per ADS remains the same, after deducting the underwriting commission and estimated offering expenses payable by us. The pro forma information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. If the underwriters fully exercise their option to purchase additional ADSs, pro forma net tangible book value after this offering would increase to approximately $             per ADS

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(DKK             ), and there would be an immediate dilution of approximately $             per ADS (DKK              ) to new investors.

        We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our equity holders.

        The following table shows, as of September 30, 2015, on a pro forma basis, the number of ADSs purchased from us, the total consideration paid to us and the average price paid per share by existing shareholders and by new investors purchasing ADSs in this offering at an assumed initial public offering price of $             per ADS (DKK             ), which is the midpoint of the price range set forth on the cover of this prospectus, before deducting the underwriting commission and estimated offering expenses payable by us (in thousands, except share and per share amounts and percentages):

 
  Shares or Share
Equivalents(1)
Subscribed For/
Purchased
   
   
   
 
 
   
   
  Average
Price Per
Share
or Share
Equivalents
 
 
  Total Consideration  
 
  Number   Percent   Amount   Percent  

Existing shareholders

                        % $                                 % $                

Investors participating in this offering

                        % $                                 % $                

Total

                        % $                                 % $                

(1)
Each ADS represents             of a share.

        The number of shares and ADSs to be outstanding after this offering is based on the number of shares outstanding as of September 30, 2015, and excludes (i) 149,797 shares issued upon the exercise of outstanding warrants on November 16, 2015 at an exercise price of DKK 59.1 per share, (ii) 35,500 shares issued upon the exercise of outstanding warrants on November 16, 2015 at an exercise price of DKK 54.1 per share, and (iii) up to 1,624,605 shares that may be issued upon the exercise of outstanding warrants, and assumes no exercise of the underwriters' option to purchase up to       additional ADSs.

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EXCHANGE RATE INFORMATION

        Our business is primarily conducted in Denmark, and we maintain our books and records in Danish kroner. We have presented results of operations in Danish kroner. We have also presented select financial information in U.S. dollars for your convenience in the sections entitled "Summary Consolidated Financial Data," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Results of Operations" and in certain other sections of this prospectus. On September 30, 2015, the exchange rate was DKK 6.66 per 1.00 U.S. dollar. On December 31, 2015, the exchange rate was DKK 6.8300 per 1.00 U.S. dollar. For the convenience of the reader, this prospectus also includes other translations from DKK to U.S. dollars and U.S. dollars to DKK. Unless specified as of a specific date, or otherwise indicated, translations from DKK to U.S. dollars and from U.S. dollars to DKK were made at the rate of DKK 6.66 per 1.00 U.S. dollar, the official exchange rate quoted as of September 30, 2015 by Danmarks Nationalbank. Such U.S. dollar amounts are not necessarily indicative of the amounts of U.S. dollars that could actually have been purchased upon exchange of DKK at the dates indicated. The rates set forth below are provided solely for your convenience and may differ from the actual rates used in the preparation of our consolidated financial statements and other financial data included in this prospectus.

        The following table presents information on the exchange rates between the DKK and the U.S. dollar for the periods indicated, as published by Danmarks Nationalbank:

 
  Period-end   Average for
period
  Low   High  
 
  (DKK per U.S. dollar)
 

Year Ended December 31:

                         

2013

    5.4127     5.6160     5.4002     5.8371  

2014

    6.1214     5.6190     5.3492     6.1214  

2015

    6.8300     6.7269     6.1807     7.0806  

Nine Months Ended:

                         

September 30, 2014

    5.9152     5.5085     5.3492     5.9152  

September 30, 2015

    6.6588     6.6973     6.1807     7.0806  

Month Ended:

                         

July 31, 2015

    6.8036     6.7836     6.6721     6.8757  

August 31, 2015

    6.6544     6.7013     6.4866     6.8563  

September 30, 2015

    6.6588     6.6493     6.5340     6.6982  

October 31, 2015

    6.7694     6.6411     6.5226     6.8231  

November 30, 2015

    7.0521     6.9497     6.7608     7.0521  

December 31, 2015

    6.8300     6.8627     6.7893     7.0379  

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables present selected consolidated financial data for our business.

        We derived the selected consolidated income statements data for the years ended December 31, 2014 and 2013 and the selected consolidated statement of financial position data as of December 31, 2014 from our audited consolidated financial statements included elsewhere in this prospectus. We derived the selected consolidated income statements data for the nine months ended September 30, 2015 and 2014 and the selected consolidated statement of financial position data as of September 30, 2015 from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus.

        We maintain our books and records in DKK, and prepare our audited consolidated financial statements in accordance with IFRS as issued by the IASB and our unaudited condensed consolidated interim financial statements in accordance with IAS 34 Interim Financial Reporting as issued by the IASB.

        You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the captions "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results, and our interim period results are not necessarily indicative of results to be expected for a full year or any other interim period.


Consolidated Income Statements Data:

 
  Year Ended December 31,   Nine months ended
September 30,
 
 
  2014   2014   2013   2015   2015   2014  
(in millions, except per share amounts)
  $(1)   DKK   DKK   $(1)   DKK   DKK  

Revenue

  $ 182.7     1,216.8     1,212.5   $ 105.6     703.0     675.6  

Production costs

    74.4     495.1     484.7     36.9     245.7     328.1  

Gross profit

    108.3     721.7     727.8     68.7     457.3     347.5  

Research and development costs

    71.9     478.9     496.6     44.5     296.8     313.5  

Distribution costs

    6.8     45.1     40.8     5.0     33.0     34.4  

Administrative costs

    27.1     181.0     157.0     18.8     125.3     120.9  

Total operating costs

    105.8     705.0     694.4     68.3     455.1     468.8  

Income (loss) before interest and tax (EBIT)

    2.5     16.7     33.4     0.4     2.2     (121.3 )

Financial income

    8.6     57.3     6.6     11.8     78.9     40.0  

Financial expenses

    1.5     9.7     33.8     3.1     20.6     3.2  

Income (loss) before company tax

    9.6     64.3     6.2     9.1     60.5     (84.5 )

Tax (benefit) on income (loss) for the year

    5.7     38.4     52.9     0.5     3.4     (12.5 )

Net profit (loss) for the year

  $ 3.9     25.9     (46.7 ) $ 8.6     57.1     (72.0 )

Earnings per share (EPS)

                                     

Basic earnings per share

  $ 0.15     1.0     (1.8 ) $ 0.32     2.1     (2.8 )

Diluted earnings per share

  $ 0.15     1.0     (1.8 ) $ 0.32     2.1     (2.8 )

(1)
Translated solely for convenience into U.S. dollars at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.

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Consolidated Statement of Financial Position Data:

 
  As of
September 30,
2015
  As of
December 31,
2014
 
(in millions)
  $(1)   DKK   $(1)   DKK  

Securities, cash and cash equivalents

  $ 185.3     1,233.9   $ 147.1     979.7  

Total assets

  $ 321.2     2,139.1   $ 283.4     1,887.3  

Retained earnings

  $ 158.0     1,052.1   $ 146.0     972.3  

Equity

  $ 195.6     1,302.7   $ 188.0     1,252.1  

Non-current debt to credit institutions

  $ 4.7     31.8   $ 4.9     33.3  

Current debt to credit institutions

  $ 0.3     2.0   $ 0.3     1.9  

Total liabilities

  $ 125.6     836.4   $ 95.4     635.2  

(1)
Translated solely for convenience into U.S. dollars at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. The following discussion is based on our financial information prepared in accordance with IFRS as issued by the IASB, which might differ in material respects from accounting principles generally accepted in other jurisdictions, including accounting principles generally accepted in the United States. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All currency translations are provided solely for convenience into U.S. dollars at an assumed exchange rate of DKK 6.66 per 1.00 U.S. dollar, which was the exchange rate of such currencies as of September 30, 2015.

Overview

        We are a fully integrated biotechnology company developing, manufacturing and commercializing novel vaccines for the prevention of life-threatening infectious diseases and the treatment of cancer. We focus on diseases for which the unmet medical need is high and for which we can harness the power of the immune system to induce a response. Our live virus vaccine platform has generated one commercial product for smallpox, one Phase 3 immunotherapy candidate for prostate cancer, one Phase 3 candidate for Ebola and several other clinical programs in the areas of infectious disease and oncology. We recognized revenue of $182 million in 2013 (DKK 1,213 million) and $183 million in 2014 (DKK 1,217 million) primarily from sales of our commercial smallpox vaccine, IMVAMUNE/IMVANEX. This revenue has enabled us to invest significant capital into research and development activities, the expansion of our production infrastructure and the advancement of our clinical pipeline.

        Our expertise in vaccine design and production has led to a 10+ year relationship with the U.S. government pursuant to which we have been awarded approximately $1.2 billion in contracts. To date, we have recognized more than $900 million of revenue from these contracts. We have also established commercial relationships with Bristol-Myers Squibb, BMS, for the commercialization of PROSTVAC our Phase 3 cancer immunotherapy candidate, and with the Janssen Pharmaceutical Companies of Johnson & Johnson, or Janssen, for our Ebola vaccine candidate and additional infectious disease targets, including human papillomavirus. Our numerous contracts with governmental entities and pharmaceutical companies may generally be classified as either:

    §
    supply agreements, such as those with the Biomedical Advanced Research and Development Authority, or BARDA, and Janssen, pursuant to which we earn revenue upon delivery of specified products; or

    §
    research and development agreements, such as those with BARDA and BMS, pursuant to which we earn revenue upon achievement of specified milestones.

        In 2014, we generated revenues of DKK 1,217 million ($183 million) and earnings before interest and taxes, or EBIT, of DKK 17 million ($3 million). 2014 represented the third year in a row with revenues in excess of DKK 1,000 million ($150 million) and the second year in a row with positive EBIT. In the first nine months of 2015, we generated DKK 703 million ($106 million) in

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revenues and EBIT of DKK 2 million ($0.3 million). As of September 30, 2015, we had cash and cash equivalents of DKK 462 million ($69 million). In addition, we held investments in securities of DKK 772 million ($116 million). We also maintained credit lines of DKK 393 million ($59 million) as of such date, of which DKK 384 million ($58 million) was undrawn.

Financial Operations Overview

Revenue

        Revenue comprises the fair value of the consideration received or receivable for sales of goods and income derived from development services, including sale of delivered development services under the IMVAMUNE/IMVANEX development project with BARDA. Revenue is measured net of value added tax, duties, etc. collected on behalf of a third party and discounts. The revenue is recognized when it is probable that future economic benefits will flow to us and these benefits can be measured reliably, and when any significant risks and rewards of ownership of the goods or right to the services are transferred and we no longer retain managerial responsibility for, or control of, the goods or services sold.

        Agreements with commercial partners generally include non-refundable upfront license and collaboration fees, milestone payments, the receipt of which is dependent upon the achievement of certain clinical, regulatory or commercial milestones, as well as royalties on product sales of licensed products, if and when such product sales occur, and revenue from the supply of products. For these agreements that include multiple elements, total contract consideration is attributed to separately identifiable components on a reliable basis that reasonably reflects the selling prices that might be expected to be achieved in stand-alone transactions, provided that each component has value to the partner on a stand-alone basis. The allocated consideration is recognized as revenue in accordance with the principles described above.

        Sales of goods and licenses that transfer the rights associated with ownership of an intangible asset are recognized at a point in time when control is transferred. Revenue from development services and licenses that do not transfer the right of ownership to an intangible asset are recognized over time in line with the execution and delivery of the work.

        If multiple components are not separable, they are combined into a single component and recognized over the period during which we are actively involved in development and deliver significant services to the collaboration partner.

        Since 2007, we have been awarded four significant supply contracts with a total value of more than $950 million. Two contracts in 2007 and 2013 were awarded by BARDA for the delivery of 28 million doses of liquid frozen IMVAMUNE/IMVANEX to the U.S. Strategic National Stockpile, or SNS. A third contract from BARDA was awarded in July 2015 under which we intend to produce and deliver IMVAMUNE/IMVANEX bulk product. The fourth significant supply contract is with Janssen for the delivery of MVA-BN Filo bulk product equivalent of approximately 2 million doses of our Ebola vaccine.

IMVAMUNE/IMVANEX Agreements

        Prior to 2015, we have generated substantially all of our revenue from sales of IMVAMUNE/IMVANEX and the remainder from development contracts with the U.S. government. Revenue associated with the delivery of 28 million doses of liquid frozen IMVAMUNE/IMVANEX was recognized as revenue from 2010 through January 2015.

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        In 2014, our revenue from sales of IMVAMUNE/IMVANEX was DKK 1,024 million ($154 million). In January 2015, we completed the delivery of the 8 million doses of IMVAMUNE/IMVANEX to the U.S. government, pursuant to which we recognized the final tranche of revenue under the contract for liquid frozen IMVAMUNE/IMVANEX.

        For the nine months ended September 30, 2015, we generated revenue of DKK 78 million ($12 million) from sales of IMVAMUNE/IMVANEX. Decreased sales of IMVAMUNE/IMVANEX in the nine months ended September 30, 2015 versus the same period in 2014 reflects the transition of IMVAMUNE/IMVANEX from a liquid frozen formulation to a freeze dried formulation. Currently, we are finalizing the validation of the freeze drying production of IMVAMUNE/IMVANEX. In 2016, we expect IMVAMUNE/IMVANEX revenue to increase over 2015 as we expect to initiate bulk production of IMVAMUNE/IMVANEX that could transition into the freeze dried formulation. The IMVAMUNE/IMVANEX bulk product contract is expected to be recognized as revenue in 2016 and the beginning of 2017 as the bulk product is delivered.

MVA-BN Filo Agreements

        In October 2014, we entered into an arrangement with Janssen with respect to the MVA-BN Filo vaccine. The Janssen arrangement consisted of a license contract valued at $45 million, a supply contract valued at $99 million and a $43 million equity investment by Johnson & Johnson Development Corporation. The increase of our share capital and proceeds from the equity investment with Johnson & Johnson Development Corporation were reflected in our consolidated statement of financial position as of December 31, 2014.

        Under the license arrangement, we received $25 million as an upfront payment, which was recognized as a prepayment from customers in our statement of financial position as of December 31, 2014 and, of which $23 million will be recognized as revenue on a pro rata basis as we deliver the MVA-BN Filo bulk product and $2 million will be recognized as project income. The remaining $20 million will be paid based on the achievement of certain milestones. These milestone payments will be recognized as revenue when milestones are achieved.

        Under the supply agreement, we received a prepayment of $35 million, which was recognized as a prepayment from customers in the statement of financial position as of December 31, 2014. In January 2015, we received another prepayment of $36 million from customers. The two prepayments will be recognized as revenue on a pro rata basis as we deliver MVA-BN Filo bulk product. The remaining $28 million under the supply contract will be invoiced and revenue recognized pro rata as we deliver MVA-BN Filo bulk product.

        All deliveries of MVA-BN Filo to Janssen under the current supply contract are expected to be completed in 2015, pursuant to which we expect to recognize all of the related revenue under the contract for MVA-BN Filo. Therefore, our revenue in 2015 has been and will be driven by the reduced delivery of IMVAMUNE/IMVANEX to the U.S. government and increased delivery of MVA-BN Filo to Janssen.

        For the nine months ended September 30, 2015, we generated revenue of DKK 519 million ($78 million) from sales of MVA-BN Filo bulk product.

        In September 2015, we announced the award of a subcontract from Janssen, valued at $9 million. This is part of a contract awarded to Janssen by BARDA to support the advanced development and production of the Ebola prime-boost vaccine regimen. The five-year base subcontract covers studies to improve the production process and establish long-term storage of the MVA-BN Filo bulk vaccine. The contract also includes options for an additional $24 million to

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implement process development activities for the formulation of a final drug product with a longer shelf life.

        In December 2015, we entered into an additional licensing and collaboration agreement with Janssen. Pursuant to the agreement, we will receive an initial upfront payment of $9 million as well as potential future payments upon reaching development and commercial milestones, together with the upfront payment, totaling up to $171 million. We are also eligible to receive single-digit tiered royalties on future product sales. The initial upfront payment under this agreement is expected to be received and revenue recognized in 2016.

PROSTVAC Agreements

        In March 2015, we entered into an Option and License Agreement with BMS under which we can receive up to $975 million in upfront and milestone payments. The agreement includes the following payments:

    §
    upfront option grant payment of $60 million;

    §
    option exercise and license payment of $80 million; and subject to the exercise of the option, payments of:

    §
    additional incremental payments starting at $50 million, but with a potential to exceed $230 million should the median overall survival benefit of PROSTVAC exceed the efficacy seen in Phase 2 results;

    §
    regulatory milestones of up to $110 million receivable upon grant of final regulatory approval on pre-specified major markets; and

    §
    sales milestones of up to $495 million.

        We received the upfront option grant payment of $60 million, which was recognized as a prepayment from customers in our statement of financial position as of September 30, 2015 and will be recognized as revenue if and when BMS exercises the option (or if the option expires unexercised). Upon any such exercise of the option by BMS, the PROSTVAC license and any associated trial information to date will effectively transfer to BMS without any restrictions. Accordingly, we will recognize as revenue the option exercise and license payments. As BMS and we have agreed that we will complete the PROSPECT trial, a portion of the payment will be allocated to the completion of the PROSPECT trial if BMS exercises its option before the PROSPECT trial is completed. Upon completion of the PROSPECT trial, we will recognize as revenue the Phase 3 completion milestone payments. Regulatory and sales milestone payments will be recognized as revenue when relevant milestones are achieved.

        The National Cancer Institute (NCI) has rights to 10% of the upfront option payment of $60 million, which has been paid as of September 30, 2015, as well as 10% of the option exercise and license payment of $80 million, if and when BMS exercises the option.

        If our ongoing development efforts are successful, we would expect to generate revenue from sales of additional products and milestone payments, development payments and royalties on sales of products that we license to third parties.

Production Costs

        We maintain a production facility in Kvistgaard, Denmark. During the nine months ended September 30, 2015, we produced at such facility IMVAMUNE/IMVANEX, Ebola vaccines, clinical batches to support future trials and collaborations, while also preparing the PROSTVAC production

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process for commercial launch. Production costs consist of costs incurred in generating the revenue for the year. Costs for raw materials, consumables, production staff and a proportion of production overhead, including maintenance, depreciation and impairment of tangible assets used in production as well as operation, administration and management of the production facility are recognized as production costs. In addition, the costs related to excess capacity and write-down to net realizable value of goods on stock are recognized.

        The primary production costs that we incur are cost of goods sold for IMVAMUNE/IMVANEX and MVA-BN Filo and costs related to sale of contract work.

Research and Development Costs

        Research and development costs include salaries and costs directly attributable to our research and development projects, less government grants. Furthermore, salaries and costs supporting direct research and development, including costs of patents, rent, leasing and depreciation attributable to laboratories, and external scientific consultancy services, are recognized under research and development costs. Contract research costs incurred to achieve revenue are recognized under production costs. Research costs are expensed in the year they occur.

        Development costs are generally expensed in the year they occur. Capitalization of development costs does not begin until it is deemed realistic that the product can be completed and marketed, and it is highly likely that a marketing authorization will be received. In addition, there must be sufficient certainty that the future earnings to us will cover not only production costs, direct distribution and administrative costs, but also the development costs.

        However, we have met the criteria to capitalize the development costs attributable to the development of IMVAMUNE/IMVANEX, as the IMVAMUNE/IMVANEX contract with the U.S. government initially comprised the delivery of 20 million doses and an option to buy additional doses. For this reason, capitalization of the development costs attributable to this development project began at the date of regulatory approval of the clinical trial.

        Capitalized development costs regarding the registration of IMVAMUNE/IMVANEX contract with the U.S. government are expensed (amortized) and recognized in the income statement under research and development costs when the related income on delivery of the development results have been earned and recognized as revenue. When the development has been completed and IMVAMUNE/IMVANEX has been approved by the U.S. Food and Drug Administration, or the FDA, the remaining carrying amount will be amortized in concurrence with the delivery of doses over the expected economic life of the asset.

        Grants that compensate us for research and development expenses incurred, which are recognized directly in the income statement, are set off against the costs of research and development at the time when a final and binding right to the grant has been obtained.

        The above stated accounting policies require that we split our research and development spending into three categories:

    §
    Contract research costs incurred to achieve revenue are recognized under production costs. This constitutes the research and development contracts we have been awarded by the U.S. government under which we perform research and development activities, including, for example, the contract for freeze dried IMVAMUNE/IMVANEX with BARDA.

    §
    Development costs regarding the registration of IMVAMUNE/IMVANEX under our contract with the U.S. government, awarded to us in June 2007 by BARDA, are capitalized and

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      shown under intangible assets as IMVAMUNE/IMVANEX development project. The asset is amortized and recognized in the income statement under research and development costs when the related income on delivery of the development results have been earned and recognized as revenue.

    §
    All research and development costs excluding the contract research costs and development costs regarding the registration of IMVAMUNE/IMVANEX are shown as research and development costs under the total operating costs in the income statement.

        The successful development of our product candidates is highly uncertain. We believe that significant investment in product development is a competitive necessity and plan to continue these investments in order to be in a position to realize the potential of our product candidates. We cannot reasonably estimate or know the nature, timing and projected costs of the efforts that will be necessary to complete the remainder of the development of, or the period, if any, in which material net cash flows may commence from any of our product candidates in development. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

    §
    the scope, rate of progress and expense of our clinical trials and other research and development activities;

    §
    our ability to obtain adequate supplies of our product candidates required for later stage clinical trials, including from third party manufacturers;

    §
    the potential benefits of our product candidates over other products;

    §
    our ability to market, commercialize and achieve market acceptance for any of our product candidates that we are developing or may develop in the future;

    §
    future clinical trial results;

    §
    the terms and timing of regulatory approvals; and

    §
    the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

        A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

        We expect that the magnitude of any increase in our research and development spending will be dependent upon such factors as the results from our ongoing preclinical studies and clinical trials, the size, structure and duration of any follow on clinical program that we may initiate, and the cost associated with producing our product candidates on a large scale basis for later stage clinical trials. Furthermore, if the FDA, the European Medicine Agency or other regulatory authority were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of the clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

        Our total annual research and development spending, including amounts that have been capitalized, was DKK 556 million in 2013 and DKK 572 million ($86 million) in 2014. During 2013 and 2014, we were conducting three Phase 3 trials: two regarding IMVAMUNE/IMVANEX for U.S. approval and one regarding PROSTVAC for U.S. and EU approval. We are currently experiencing declining costs for these three Phase 3 trials. However, we expect to continue to invest in developing our pipeline. In the coming years, we expect that the majority of our research and

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development spending will be related to our other earlier stage candidates, CV 301 and MVA-BN RSV.

Distribution Costs

        Distribution costs include costs incurred for distribution of goods sold and sales campaigns, including costs for sales and distribution personnel, advertising costs and depreciation and amortization of property, plant and equipment and intangible assets used in the distribution process. We expect that our distribution costs will increase as we add personnel to support the increased scale of our operations.

Administrative Costs

        Administrative costs include costs of company management, staff functions, administrative personnel, office costs, rent, lease payments and depreciation not relating specifically to production, research and development activities or distribution costs. We expect that our administrative costs will increase as we add personnel to support the increased scale of our operations and become subject to certain reporting obligations under the U.S. securities laws.

Financial Income and Financial Expenses

        Financial income includes interest income from bank and deposit contracts, interest income and positive fair value adjustments of financial instruments and securities, and net foreign exchange gains (including foreign exchange differences arising from intercompany balances). Financial expenses includes interest expenses on debt, net negative value adjustments of financial instruments and securities, net foreign exchange losses (including foreign exchange differences arising from intercompany balances), and adjustments of the net present value of provisions.

Financial Results for the Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

 
  Nine months ended
September 30,
   
   
 
 
  2015   2015   2014   Change  
(in millions)
  $   DKK   DKK   DKK   %  

Revenue

  $ 105.6     703.0     675.6     27.4     4%  

Production costs

    36.9     245.7     328.1     (82.4 )   (25% )

Gross profit

    68.7     457.3     347.5     109.8     32%  

Research and development costs

    44.5     296.8     313.5     (16.7 )   (5% )

Distribution costs

    5.0     33.0     34.4     (1.4 )   (4% )

Administrative costs

    18.8     125.3     120.9     4.4     4%  

Total operating costs

    68.3     455.1     468.8     (13.7 )   (3% )

Income (loss) before interest and tax

    0.4     2.2     (121.3 )   123.5     —      

Financial income

    11.8     78.9     40.0     38.9     97%  

Financial expenses

    3.1     20.6     3.2     17.4     544%  

Income (loss) before company tax

    9.1     60.5     (84.5 )   145.0     —      

Tax (benefit) on income (loss) for the year

    0.5     3.4     (12.5 )   15.9     —      

Net profit (loss) for the year

  $ 8.6     57.1     (72.0 )   129.1     —      

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Revenue

        Revenue generated for the nine months ended September 30, 2015 was DKK 703 million ($106 million) compared to DKK 676 million for the nine months ended September 30, 2014. This increase was due to increased revenue from product sales, which totalled DKK 597 million ($90 million) for the nine months ended September 30, 2015 compared to DKK 576 million for the nine months ended September 30, 2014, and higher revenue from contract work in the amount of DKK 107 million ($16 million) for the nine months ended September 30, 2015 compared to DKK 99 million for the nine months ended September 30, 2014.

        Revenue from product sales of DKK 597 million ($90 million) for the nine months ended September 30, 2015 was generated from the sale of MVA-BN Filo Bulk Drug Substance to Janssen in the amount of DKK 519 million ($78 million), the sale of the last 276,000 doses of IMVAMUNE/IMVANEX under the 8 million dose order from the U.S. government in the amount of DKK 49 million ($7 million), and the sale of IMVAMUNE/IMVANEX to other customers in the amount of DKK 29 million ($4 million). Revenue from product sale of DKK 576 million for the nine months ended September 30, 2014 was generated from the sale of 3.7 million doses of IMVAMUNE/IMVANEX under the 8 million dose order from U.S. government.

Production Costs

        Production costs for the nine months ended September 30, 2015 were DKK 246 million ($37 million) compared to DKK 328 million for the nine months ended September 30, 2014. Costs related directly to revenue for the nine months ended September 30, 2015 were DKK 199 million ($30 million) compared to DKK 322 million for the nine months ended September 30, 2014. In 2014 we produced and sold final drug product (in vials), whereas in 2015, we produced and sold bulk drug substance, which generated fewer costs. Other production costs for the nine months ended September 30, 2015 were DKK 47 million ($7 million) compared to DKK 6 million for the nine months ended September 30, 2014. This increase was primarily due to a higher scrap, or unusable materials, related to the production of bulk material.

Research and Development Costs

        The research and development spending is separated into three different categories. Research and development costs related to the development of IMVAMUNE/IMVANEX for regulatory approval in the United States is capitalized. Research and development costs performed as part of revenue generating contracts with the U.S. government is shown under production costs as contract costs. All other research and development costs are shown as research and development costs.

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        The research and development spending for the nine months ended September 30, 2015 and 2014 are shown in the table below:

 
  Nine months ended
September 30,
   
   
 
 
  2015   2015   2014   Change  
(in millions)
  $   DKK   DKK   DKK   %  

Research and development costs incurred in the period of which:

    54.8     365.0     378.9     (13.9 )   (4% )

Contract costs recognized as production costs

    (8.4 )   (55.7 )   (51.4 )   (4.3 )   8%  

Capitalized development costs

    (2.3 )   (15.2 )   (39.4 )   24.2     (61% )

Expensing (amortization) of prior-year costs attributable to the IMVAMUNE/IMVANEX development project

    0.4     2.7     25.4     (22.7 )   (89% )

Total

    44.5     296.8     313.5     (16.7 )   (5% )

IMVAMUNE, liquid-frozen

   
2.4
   
16.3
   
57.2
   
(40.9

)
 
(72%

)

IMVAMUNE, freeze-dried

    6.5     43.1     23.4     19.7     84%  

Ebola/Marburg

    3.2     21.3     7.6     13.7     180%  

MVA-RSV

    1.7     11.2     0.9     10.3     1144%  

PROSTVAC

    21.1     140.7     180.8     (40.1 )   (22% )

CV-301

    1.2     8.2     2.3     5.9     257%  

MVA-BN Brachyury

    0.8     5.5     0.2     5.3     2650%  

MVA Support

    2.4     16.1     20.1     (4.0 )   (20% )

Preclinical and hibernated projects

    2.3     15.0     15.3     (0.3 )   (2% )

Total project costs(1)

    41.6     277.4     307.8     (30.4 )   (10% )

Staff costs(2)

   
10.7
   
70.8
   
59.8
   
11.0
   
18%
 

Patent expenses

    0.7     4.9     3.6     1.3     36%  

Consultants

    0.5     3.4     1.8     1.6     89%  

Travel expenses

    0.2     1.5     1.0     0.5     50%  

Rented premises/maintenance/leasing equipment

    0.3     2.3     2.2     0.1     5%  

Depreciation

    0.3     2.1     2.2     (0.1 )   (5% )

Other costs

    0.5     2.6     0.5     2.1     420%  

Unallocated internal research and development costs

    13.2     87.6     71.1     16.5     23%  

Research and development costs incurred in the period

    54.8     365.0     378.9     (13.9 )   (4% )

(1)
The direct project costs consist of staff costs in Bavarian Nordic A/S and Bavarian Nordic GmbH only. These costs are allocated to the projects based on employee time sheets. In addition to staff costs, external costs such as, CRO, consultancy and travel related to the individual projects, are included in the table. These costs are incurred in Bavarian Nordic A/S, Bavarian Nordic GmbH and Bavarian Nordic Inc.
(2)
In Bavarian Nordic, Inc. the employees do not prepare time sheets and therefore none of the Bavarian Nordic, Inc.'s staff costs are allocated to the projects specified above. For the nine months ended September 30, 2015 the staff costs in Bavarian Nordic, Inc. amounted to DKK 47 million (DKK 42 million). It is estimated that 70-80% of Bavarian Nordic Inc. staff costs are directly related to projects, but since employees do not prepare time sheets, allocation of the staff costs to the individual projects are not possible.

        The total research and development spending for the nine months ended September 30, 2015 was DKK 297 million ($45 million) compared to DKK 314 million for the nine months ended

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September 30, 2014. As part of our growth strategy, research and development functions were centralized during the first half of 2015 and, as a result, headcount has been reduced by approximately 40 employees.

        Research and development costs shown under production costs were DKK 56 million ($8 million) for the nine months ended September 30, 2015, which were broadly in line with the DKK 51 million for the nine months ended September 30, 2014. The capitalized development costs related to IMVAMUNE/IMVANEX for regulatory approval in the United States were relatively high during the nine months ended September 30, 2014 since the Company enrolled for the Phase 3 trial during 2014. The expensing (amortization) of costs attributable to the IMVAMUNE/IMVANEX development project was relatively low during the nine months ended September 30, 2015 as only 276,000 doses were delivered to the U.S. Government compared to 3.7 million doses during the nine months ended September 30, 2014.

Distribution Costs

        Distribution costs amounted to DKK 33 million ($5 million) for the nine months ended September 30, 2015, which were in line with the DKK 34 million for the nine months ended September 30, 2014.

Administrative Costs

        Administrative costs totalled DKK 125 million ($19 million) for the nine months ended September 30, 2015, which were in line with the DKK 121 million for the nine months ended September 30, 2014.

Financial Income and Financial Expenses

        Financial income for the nine months ended September 30, 2015 was DKK 79 million ($12 million) compared to DKK 40 million for the nine months ended September 30, 2014. The increase was due to gains on foreign exchange primarily related to an intercompany loan in U.S. dollars from our parent company to our U.S. subsidiary in California. An increase in the U.S. dollars/DKK rate will result in an unrealized foreign exchange gain as our parent company will have a larger outstanding receivable from the loan when converted to DKK while our U.S. subsidiary will have an unchanged debt in U.S. dollars.

        Financial expenses totalled DKK 21 million ($3 million) for the nine months ended September 30, 2015 compared to DKK 3 million for the nine months ended September 30, 2014. The increase was due to unrealized revaluation losses on our securities of DKK 19 million ($3 million).

Tax on Income for the Period

        Tax for the nine months ended September 30, 2015 was DKK 3 million ($1 million) corresponding to an effective tax rate of 5.6%. The low effective tax rate was primarily due to an intercompany transaction that results in a tax deductible expenditure for Bavarian Nordic A/S and is taxable income in Bavarian Nordic, Inc. But since the taxable income in Bavarian Nordic, Inc. can be offset with previously non-recognized tax losses carry forward, the net impact at the group level is a tax income leading to a low effective tax rate for the nine month period ended September 30, 2015.

        Tax for the nine months ended September 30, 2014 was a benefit of DKK 13 million corresponding to an effective tax rate of 15%. The low rate was due to non-recognized deferred tax asset on the period's loss in Bavarian Nordic, Inc. Inclusion of Bavarian Nordic, Inc.'s loss would have increased the negative tax amount and raised the effective tax rate.

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Financial Results for the Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013

 
  Year Ended December 31,    
   
 
 
  2014   2013   Change  
(in millions)
  $   DKK   DKK   DKK   %  

Revenue

  $ 182.7     1,216.8     1,212.5     4.3     0%  

Production costs

    74.4     495.1     484.7     10.4     2%  

Gross profit

    108.3     721.7     727.8     (6.1 )   (1% )

Research and development costs

    71.9     478.9     496.6     (17.7 )   (4% )

Distribution costs

    6.8     45.1     40.8     4.3     11%  

Administrative costs

    27.1     181.0     157.0     24.0     15%  

Income before interest and tax (EBIT)

    2.5     16.7     33.4     (16.7 )   (50% )

Financial income

    8.6     57.3     6.6     50.7     768%  

Financial expenses

    1.5     9.7     33.8     (24.1 )   (71% )

Income before company tax

    9.6     64.3     6.2     58.1     937%  

Tax on income for the year

    5.7     38.4     52.9     (14.5 )   (27% )

Net profit (loss) for the period

  $ 3.9     25.9     (46.7 )   72.6     —%  

Revenue

        Revenue for the year ended December 31, 2014 was DKK 1,217 million ($183 million) compared to revenue of DKK 1,213 million for the year ended December 31, 2013. The revenue in 2014 was comprised of deliveries of IMVAMUNE/IMVANEX to the SNS in the amount of DKK 1,018 million, revenue from our ongoing development contract with the U.S. government in the amount of DKK 193 million and sales of IMVAMUNE/IMVANEX to other customers in the amount of DKK 6 million. The revenue in 2013 was comprised of revenue from IMVAMUNE/IMVANEX delivered to the SNS of DKK 839 million and revenue related to contract work, including sale of development results, of DKK 373 million.

Production Costs

        Production costs amounted to DKK 495 million ($74 million) for the year ended December 31, 2014 compared to DKK 485 million for the year ended December 31, 2013. Costs related directly to revenue for the year ended December 31, 2014 amounted to DKK 503 million ($76 million) compared to DKK 433 million for the year ended December 31, 2013. This increase is related to the higher product sale. Other production costs totaled DKK (8) million ($ (1) million) for the year ended December 31, 2014 compared to DKK 51 million for the year ended December 31, 2013. This decrease in other production costs was due to a very successful production performance with reversal of write-downs of DKK 12 million ($2 million) in 2014, and a provision made for scrap of products in 2013, which did not materialize in 2014.

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Research and Development Costs

        Our principal research and development costs for the years ended December 31, 2014 and 2013 are shown in the following table:

 
  Year Ended December 31,    
   
 
 
  2014   2014   2013   Change  
(in millions)
  $   DKK   DKK   DKK   %  

Research and development costs incurred in the period of which:

    85.9     572.0     556.1     15.9     3%  

Contract costs recognized as production costs

    (13.8 )   (91.7 )   (105.2 )   13.5     (13% )

Capitalized development costs

    (7.0 )   (46.9 )   (102.3 )   55.4     (54% )

Expensing (amortization) of prior-year costs attributable to the IMVAMUNE/IMVANEX development project

    6.8     45.5     148.0     (102.5 )   (69% )

Total

    71.9     478.9     496.6     (17.7 )   (4% )

IMVAMUNE, liquid-frozen

   
10.2
   
68.0
   
154.2
   
(86.2

)
 
(56%

)

IMVAMUNE, freeze-dried

    8.8     58.3     49.6     8.7     18%  

Ebola/Marburg

    1.7     11.2     6.6     4.6     70%  

MVA-RSV

    0.2     1.4     3.1     (1.7 )   (55% )

PROSTVAC

    41.8     278.5     180.7     97.8     54%  

CV-301

    0.4     2.8     1.1     1.7     155%  

MVA-BN Brachyury

    0.1     0.4     0.2     0.2     100%  

MVA Support

    4.2     28.2     28.0     0.2     1%  

Preclinical and hibernated projects

    3.2     21.1     20.1     1.0     5%  

Total project costs(1)

    70.6     469.9     443.6     26.3     6%  

Staff costs(2)

   
12.5
   
83.0
   
84.1
   
(1.1

)
 
(1%

)

Patent expenses

    0.8     5.1     7.0     (1.9 )   (27% )

Consultants

    0.4     2.7     2.9     (0.2 )   (7% )

Travel expenses

    0.3     2.0     1.4     0.6     43%  

Rented premises/maintenance/leasing equipment

    0.5     3.0     2.2     0.8     36%  

Depreciation

    0.4     2.9     6.3     (3.4 )   (54% )

Other costs

    0.4     3.4     8.6     (5.2 )   (60% )

Unallocated internal research and development costs

    15.3     102.1     112.5     (10.4 )   (9% )

Research and development costs incurred in the period

    85.9     572.0     556.1     15.9     3%  

(1)
The direct project costs consist of staff costs in Bavarian Nordic A/S and Bavarian Nordic GmbH only. These costs are allocated to the projects based on employee time sheets. In addition to staff costs, external costs such as, CRO, consultancy and travel related to the individual projects, are included in the table. These costs are incurred in Bavarian Nordic A/S, Bavarian Nordic GmbH and Bavarian Nordic Inc.
(2)
In Bavarian Nordic, Inc. the employees do not prepare time sheets and therefore none of the Bavarian Nordic, Inc.'s staff costs are allocated to the projects specified above. In 2014 the staff costs in Bavarian Nordic, Inc. amounted to DKK 55 million (DKK 54 million). It is estimated that 70-80% of Bavarian Nordic Inc. staff costs are directly related to projects, but since employees do not prepare time sheets, allocation of the staff costs to the individual projects are not possible.

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        The total research and development spending for the year ended December 31, 2014 was DKK 572 million ($86 million), including contract costs recognized as production costs as well as capitalized development costs, compared to research and development costs of DKK 556 million for the year ended December 31, 2013. The increase was primarily related to the development of PROSTVAC. Costs related to the development of PROSTVAC for the year ended December 31, 2014 were DKK 279 million ($42 million) compared to costs of DKK 181 million for the year ended December 31, 2013. We amortized DKK 46 million ($7 million) related to the ongoing IMVAMUNE/IMVANEX development project for the year ended December 31, 2014 compared to DKK 148 million for the year ended December 31, 2013. The decrease is explained below.

        Research and development costs shown under production costs were DKK 92 million ($14 million) for the year ended December 31, 2014 compared to DKK 105 million for the year ended December 31, 2013.

        Our capitalized research and development costs related to IMVAMUNE/IMVANEX for regulatory approval in the United States were DKK 47 million ($7 million) for the year ended December 31, 2014 compared to DKK 102 million for the year ended December 31, 2013. This decrease was due to the 4,000 subject Phase 3 trial for IMVAMUNE/IMVANEX, which was enrolled in 2013 and as to which we incurred most of the cost in 2013 as compared to 2014. The amortized research and development costs related to IMVAMUNE/IMVANEX for regulatory approval in the United States decreased by DKK 103 million ($15 million). This decrease was due to the amortization in 2013, during which all doses delivered to the U.S. government to that date were amortized. The amortization was linked to the number of doses delivered annually. However, when the amortization started—upon award of the 8 million dose order—all doses delivered under the 20 million dose order were amortized.

Distribution Costs

        The distribution costs were DKK 45 million ($7 million) for the year ended December 31, 2014 compared to DKK 41 million for the year ended December 31, 2013. The increase was due to increased commercial activities after the approval of IMVAMUNE/IMVANEX in the European Union and Canada.

Administrative Costs

        Administrative costs were DKK 181 million ($27 million) for the year ended December 31, 2014 compared to DKK 157 million for the year ended December 31, 2013. This increase was due to increased costs for consultants and lawyers.

Financial Income and Financial Expenses

        Financial income for the year ended December 31, 2014 was DKK 57 million ($9 million), compared to DKK 7 million for the year ended December 31, 2013. This increase was primarily attributable to an increased U.S. dollar/DKK exchange rate for the year ended December 31, 2014, resulting in an unrealized net foreign exchange gain related to the intercompany loan between our parent company and our U.S. subsidiary, of DKK 38 million ($6 million). Financial expenses for the year ended December 31, 2014 was DKK 10 million ($1 million) compared to DKK 34 million for the year ended December 31, 2013. This decrease was primarily attributable to unrealized net foreign exchange losses of DKK 22 million in 2013.

Tax on Income for the Year

        Tax on the income for the year ended December 31, 2014 was DKK 38 million ($6 million) corresponding to an effective tax rate of 60%. The effective tax rate was above the Danish Company

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tax rate of 24.5% due to non-recognized deferred tax asset on the period's loss in Bavarian Nordic, Inc. and adjustments of deferred tax due to change in tax rates.

        Tax on the income for the year ended December 31, 2013 was DKK 53 million corresponding to an effective tax rate of 853%, primarily due to a DKK 38 million tax expense related to adjustment of the deferred tax asset due to changed tax rates (from 25% to 22% in 2016).

Liquidity and Capital Resources

        As of September 30, 2015, we had cash and cash equivalents of DKK 462 million ($69 million). In addition, we held investments in securities of DKK 772 million ($116 million). We also maintained credit lines of DKK 393 million ($59 million) as of such date, of which DKK 384 million ($58 million) was undrawn.

        We require cash to meet our operating expenses and capital expenditures. We have funded our cash requirements from inception through September 30, 2015 principally with a combination of revenue from product sales, including contract work for the U.S. government, debt financings, revenue under our collaboration agreement with Janssen, development funding from government entities and, to a lesser extent, from the sale of our common stock.

Cash Flows

        The following table provides information regarding our cash flows for the years ended December 31, 2014 and 2013 and the nine months ended September 30, 2015 and 2014.

 
  Nine months ended
September 30,
  Year Ended
December 31,
 
(in millions)
  2015   2015   2014   2014   2014   2013  
 
  $
  DKK
  DKK
  $
  DKK
  DKK
 

Net cash provided by (used in):

                                     

Operating activities

  $ 40.5     270.0     (209.7 )   50.9     338.7     147.1  

Investing activities

    (35.7 )   (238.5 )   13.0     (75.7 )   (503.6 )   (146.5 )

Financing activities

    2.4     16.3     (4.2 )   32.5     216.2     (7.1 )

Total net cash provided (used)

  $ 7.2     47.8     (200.9 )   7.7     51.3     (6.5 )

        Net cash provided by operating activities totalled DKK 339 million ($51 million) for the year ended December 31, 2014 compared to DKK 147 million for the year ended December 31, 2013. The increase was primarily due to the prepayments received from the agreement with Janssen in October 2014 in the amount of $60 million.

        Net cash provided by operating activities for the nine months ended September 30, 2015 was DKK 270 million ($41 million) compared to net cash used in operating activities of DKK 210 million for the nine months ended September 30, 2014. This increase was primarily due to the second upfront payment under the development supply agreement with Janssen in the amount of $36 million and the upfront payment from the license agreement with BMS for PROSTVAC in the amount of $60 million.

        Net cash used in investing activities was DKK 504 million ($76 million) for the year ended December 31, 2014 compared to DKK 147 million for the year ended December 31, 2013. This increase was primarily due to investment in securities in the amount of DKK 398 million ($60 million), which was partly offset by a decrease in investment in intangible assets in the amount of DKK 57 million ($9 million).

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        Net cash used in investing activities for the nine months ended September 30, 2015 was DKK 239 million ($36 million) compared to net cash provided by investing activities of DKK 13 million for the nine months ended September 30, 2014. The cash used in the nine months ended September 30, 2015 was primarily related to net investment in securities in the amount of DKK 209 million ($31 million). Investment in property, plant and equipment and intangible assets amounted to DKK 30 million ($5 million) compared to DKK 83 million in the nine months ended September 30, 2014. During the nine months ended September 30, 2014, we spent DKK 43 million in intangible investments of which DKK 39 million was related to the IMVAMUNE/IMVANEX development project and DKK 40 million in tangible investments of which DKK 23 million was related to the expansion of the Kvistgaard facility. In the same period, we had a net disposal of securities in the amount of DKK 96 million.

        Net cash provided by financing activities totalled DKK 216 million ($32 million) for the year ended December 31, 2014 compared to net cash used in financing activities of DKK 7 million for the year ended December 31, 2013. The increase was primarily due to proceeds from Johnson & Johnson Development Corporation's equity investment of $43 million and proceeds from our warrant program in the amount of DKK 14 million ($2 million), which was partly offset by a higher repayment on our mortgage and construction loan in the amount of DKK 42 million ($6 million).

        Net cash provided by financing activities for the nine months ended September 30, 2015 was DKK 16 million ($2 million) compared to net cash used in financing activities of DKK 4 million for the nine months ended September 30, 2014. The increase was primarily due to higher proceeds from exercise of our warrant programs in the amount of DKK 16 million ($2 million).

        The net increase in cash and cash equivalents for the nine months ended September 30, 2015 was DKK 48 million ($7 million).

Contractual Obligations

        The following tables summarize our contractual obligations at December 31, 2014.

 
  Payments due by period  
(DKK in millions)
  2015   2016   2017   2018   2019   After 2019   Total  

Contractual obligations:

                                           

Short and long-term debt(1)

    3.5     3.5     3.5     3.5     3.5     32.9     50.4  

Operating lease obligations

    20.7     20.6     8.2     6.2             55.7  

Collaborative agreements

    13.4     14.1     38.6         3.1     12.2     81.4  

Other contractual obligations

    27.5     0.2                     27.7  

Total contractual obligations

    65.1     38.4     50.3     9.7     6.6     45.1     215.2  

(1)
Includes scheduled interest payments.

 
  Payments due by period  
($ in millions)
  2015   2016   2017   2018   2019   After 2019   Total  

Contractual obligations:

                                           

Short and long-term debt(1)

  $ 0.5   $ 0.5   $ 0.5   $ 0.5   $ 0.5   $ 4.9   $ 7.4  

Operating lease obligations

    3.2     3.2     1.3     0.9             8.6  

Collaborative agreements

    2.0     2.1     5.8         0.5     1.8     12.2  

Other contractual obligations

    4.1                         4.1  

Total contractual obligations

  $ 9.8   $ 5.8   $ 7.6   $ 1.4   $ 1.0   $ 6.7   $ 32.3  

(1)
Includes scheduled interest payments.

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        As of September 30, 2015, our principal amount of debt outstanding to credit institutions, undrawn credit facilities and guarantees received was comprised primarily of the following:

    §
    DKK 34 million ($5 million) debt outstanding relates to a mortgage loan with Realkredit Danmark regarding our headquarters located in Kvistgaard, Denmark. It consists of two loans. One loan of DKK 14 million ($2 million), which terminates in 2024 and bears annual interest of 4.5352%, and a second loan of DKK 20 million ($3 million), which terminates in 2035 and bears annual interest of 4.1684%. The mortgage debt with Realkredit Danmark is secured solely by real property located in Kvistgaard, Denmark;

    §
    an overdraft facility with Nordea Bank of DKK 20 million ($3 million), which primarily is used for guarantees. As of September 30, 2015, we had issued guarantees under the facility in the amount of DKK 9 million ($1 million). With Nordea Bank, we also have an OTC-line for foreign exchange with a nominal amount cap of DKK 50 million ($7 million) enabling us to hedge our U.S. dollar exposure. Liens, securing the Nordea Bank facilities, are a first priority registered pledge of a DKK 150 million ($23 million) floating charge deed (in Danish: virksomhedsejerpantebrev). The charge deed relates to unsecured claims arising from the sale of goods and services, and stocks of raw materials, semi-manufactured goods and finished goods; and

    §
    an undrawn loan of EUR 50 million ($56 million) by the European Investment Bank, granted in May 2015. The loan is currently undrawn. We have until November 2016 to decide if and how much of the loan we want to draw in tranches of a minimum of EUR 15 million ($17 million). The loan is a 3 to 5 year loan with variable interest, including a margin of 3.26% over EURIBOR. The loan is unsecured.

        As of December 31, 2014 our operating lease obligations were comprised primarily of the following:

    §
    car leasing and lease of office equipment in the amount of DKK 4 million ($1 million); and

    §
    rent obligations in the amount of DKK 52 million ($8 million).

        As of December 31, 2014 our contractual obligations under collaborative agreements were comprised primarily of a commitment for a filling campaign in March 2015, future NCI CRADA payments for PROSTVAC and CV 301 and potential NIH milestone payments for PROSTVAC.

Funding Requirements

        We believe that the net proceeds from this offering, together with our existing securities, cash and cash equivalents, revenue from IMVAMUNE/IMVANEX and MVA-BN Filo product sales, milestones from collaborations and other committed sources of funds, will be sufficient to enable us to fund our anticipated operating expenses, capital expenditure and debt service requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong. We expect to continue to fund a significant portion of our development and commercialization costs for our product candidates with internally generated funds from sales of IMVAMUNE/IMVANEX and MVA-BN Filo. There are numerous risks and uncertainties associated with IMVAMUNE/IMVANEX and MVA-BN Filo product sales, and with the development and commercialization of our product candidates. In addition, our ability to borrow additional amounts under our loan agreements is subject to our satisfaction of specified conditions.

        Our future capital requirements will depend on many factors, including:

    §
    the level and timing of IMVAMUNE/IMVANEX and MVA-BN Filo product sales and production costs;

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    §
    the scope, progress, results and costs of our preclinical and clinical development activities;

    §
    the costs, timing and outcome of regulatory review of our product candidates;

    §
    the number of, and development requirements for, other product candidates that we may pursue;

    §
    the costs of commercialization activities, including product marketing, sales and distribution;

    §
    the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs, including litigation costs and the results of such litigation;

    §
    the extent to which we acquire or invest in businesses, products and technologies;

    §
    our ability to obtain development funding from government entities and non-government organizations; and

    §
    our ability to establish and maintain collaborations, such as our collaborations with Janssen and BMS.

        We may require additional sources of funds for future acquisitions that we may make or, depending on the size of the obligation, to meet balloon payments upon maturity of our current borrowings. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity offerings, debt financings, or corporate collaboration and licensing arrangements.

        Additional equity or debt financing, grants, or corporate collaboration and licensing arrangements, may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs or reduce our planned commercialization efforts. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, that are not favorable to us or our shareholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that may not be favorable to us.

Off-Balance Sheet Arrangements

        We have not entered into any off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risk

        Our activities primarily expose us to the financial risks of changes in foreign currency exchange rates. We have from time to time purchased or sold foreign exchange options to manage our currency exposure to such risks.

Foreign Currency Risk

        Our parent company's functional currency is DKK, although our U.S. subsidiaries use the U.S. dollar for their functional currency. Our production site is in Denmark and the related cost base is mainly determined in DKK. Our consolidated presentation currency for our consolidated financial statements is DKK. Currencies other than DKK are considered a foreign currency.

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        We have the highest exposure for exchange rate risks in U.S. dollar. A substantial part of our revenue and cost base arises from U.S. dollar contracts. However, the annual net exposure in U.S. dollar (positive cash flow) has still been more than $100 million the last couple of years, meaning that we have a material exposure towards the development in the U.S. dollar exchange rates.

        Our foreign exchange policy is as follows: Generally, we seek to minimize exchange rate risk on cash flows in foreign currencies by natural hedging through matching of income and expenses in U.S. dollars. At a minimum, twice per year, when preparing our annual forecast and budget, we calculate our net exposure in U.S. dollars for the coming 12 months. Based on such calculations, it is decided whether to hedge our net exposure by entering foreign exchange contracts or options. The net exposure only includes committed sales contracts, meaning that non-committed sales contracts are excluded although included as revenue in the budget.

        We have an intercompany loan in U.S. dollars from our parent company in Denmark (Bavarian Nordic A/S) to our U.S. subsidiary in California. This loan cannot be hedged. This means that an increase in the U.S. dollar/DKK exchange rate will result in a non-cash foreign exchange gain as our parent company will have a larger outstanding receivable from the loan when converted to DKK, while our U.S. subsidiary will have an unchanged debt in U.S. dollars. A decrease in the U.S. dollar/DKK rate will result in a non-cash foreign exchange loss as the parent company will have a smaller outstanding receivable from the loan when converted to DKK, while our U.S. subsidiary will have an unchanged debt in U.S. dollar. As of September 30, 2015 the loan amounted to $51 million.

        We perform an analysis and report on our foreign currency exposure on an annual basis. At September 30, 2015, the carrying amount of our foreign currency denominated monetary assets (including our intercompany loan) was $114 million, of which we held $51 million denominated in U.S. dollars and our foreign currency denominated monetary liabilities was $1 million. The net proceeds from this offering in U.S. dollars may be partially held in U.S. dollars and partially converted to our functional currency.

        A sensitivity analysis of our exposure to the U.S. dollar based on outstanding foreign currency denominated monetary items as of September 30, 2015 shows that a strengthening of U.S. dollar against DKK by 10% would increase net profit or loss and equity by DKK 76 million ($11 million). A 10% weakening of the U.S. dollar against DKK would decrease profit or loss and equity by a similar amount.

Credit Risk

        We consider all of our material counterparties, including the U.S. government, the European Union, BMS and Janssen to be creditworthy. Our trade receivables consist of a small number of large transactions with our collaboration partners and other biopharmaceutical companies. This may lead to a significant concentration of credit risk, but we consider the credit risk for each of our collaboration partners, and other customers with whom we conduct business, to be low. We limit our credit risk on securities, cash and cash equivalents by depositing our cash reserves with banks that maintain high credit ratings assigned by international credit rating agencies.

Liquidity Risk

        We manage our liquidity risk by maintaining adequate cash reserves at banks, and by continuously monitoring our cash forecasts, our actual cash flows and by matching the maturity profiles of financial assets and liabilities. We believe that our existing securities, cash and cash equivalents as of September 30, 2015, along with the proceeds from this offering, will be sufficient to meet our projected cash requirements for at least the 12 months from the date of this prospectus.

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Effects of Inflation

        Our most liquid assets are securities, cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. We have intangible and tangible assets in the value of our intellectual property. Because we intend to retain and continue to use our intangible assets and property, plant and equipment, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.

Significant Accounting Policies

        Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. A description of our significant accounting policies is provided in our audited consolidated financial statements as of and for the years ended December 31, 2014 and 2013 included elsewhere in this prospectus.

Implementation of New and Revised Standards and Interpretations

        The IASB has issued new standards and revisions to existing standards and new interpretations, which are mandatory for accounting periods commencing on or after January 1, 2014. The implementation of new or revised standards and interpretations that are in force have not changed the accounting policies and thus have not affected net profit for the year or the financial position.

        At the date of publication of the consolidated financial statements, a number of new and amended standards and interpretations have not yet entered into force. Therefore, they are not incorporated in the consolidated financial statements.

        IASB has issued IFRS 9 "Financial Instruments," with an effective date of January 1, 2018. However, it has not yet been implemented. IFRS 9 "Financial Instruments" is part of IASB's project to replace IAS 39 "Financial Instruments: Recognition and Measurement," and the new standard will change the classification, presentation and measurement of financial instruments and hedging requirements. We are assessing the impact of the standard, but it is not expected to have any material impact on future consolidated financial statements.

        IFRS 15 "Revenue from Contracts with Customers" is effective for annual periods beginning on or after January 1, 2018. However, it has not yet been implemented. Entities will apply a five-step model to determine when, how and at what amount revenue is to be recognized depending on whether certain criteria are met. Before implementation of the standard, we will assess whether IFRS 15 "Revenue from Contracts with Customers" has an impact on current and new significant agreements. The new standard is not expected to have any material impact on future consolidated financial statements.

Significant Accounting Estimates, Assumptions and Uncertainties

        In the preparation of the consolidated financial statements, management makes a number of accounting estimates that form the basis for the presentation, recognition and measurement of our assets and liabilities.

        The recognition and measurement of assets and liabilities often depends on future events that are somewhat uncertain. In that respect, it is necessary to assume a course of events that reflects management's assessment of the most probable course of events.

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        In connection with the preparation of the consolidated financial statements, management has made a number of estimates and assumptions concerning carrying amounts. Management has made the following accounting judgments, which significantly affect the amounts recognized in the consolidated financial statements:

    §
    Revenue recognition

    §
    Deferred tax asset

    §
    Capitalization of development costs

    §
    Useful lives of property, plant and equipment

    §
    Inventories, including impairment and production overheads

    §
    Provisions

        Please refer to the notes to our audited consolidated financial statements included elsewhere in this prospectus for further description of the significant accounting estimates and assumptions used.

Implications of Being an "Emerging Growth Company" and a Foreign Private Issuer

        As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

    §
    a requirement to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure; and

    §
    an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002.

        We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, have more than $700 million in market value of the equity securities held by non-affiliates, or issue more than $1 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens, and therefore the information that we provide holders of shares and ADSs may be different than the information you might receive from other public companies in which you hold equity. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies. We currently prepare our consolidated financial statements in accordance with IFRS, as issued by the IASB, which do not have separate provisions for publicly traded and private companies. However, in the event that we convert to accounting principles generally accepted in the United States (which we do not currently intend to do) while we remain an emerging growth company, we have irrevocably elected to opt out of such extended transition period.

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BUSINESS

Overview

        We are a fully integrated biotechnology company developing, manufacturing and commercializing novel vaccines for the prevention of life-threatening infectious diseases and the treatment of cancer. We focus on diseases for which the unmet medical need is high and for which we can harness the power of the immune system to induce a response. Our live virus vaccine platform employs poxviruses in a modular approach to create our vaccines. This platform has generated one commercial product for smallpox, one Phase 3 immunotherapy candidate for prostate cancer, one Phase 3 candidate for Ebola and several other clinical programs in the areas of infectious disease and oncology. We recognized revenue of $182 million in each of 2013 and 2014, primarily from sales of our commercial smallpox vaccine, IMVAMUNE/IMVANEX. This revenue has enabled us to invest significant capital into research and development activities, the expansion of our production infrastructure and the advancement of our clinical pipeline.

        Our poxviruses are designed to enhance the immune system through the production of antibodies and the stimulation of T-cells. The poxvirus family consists of viruses with larger DNA genomes than other viruses. The large genome of poxviruses allows for insertion of genetic material encoding for multiple and relatively large antigens, which are toxins or foreign substances that induce an immune response. This enables us to create vaccines for a wide variety of diseases. It also permits us to target multiple antigens for a single disease which we believe leads to a more robust vaccine. Our modular approach has three core components, which can be combined in a prime-boost regimen in various formulations. There are three types of poxviruses that we may employ to achieve a desired effect: Modified Vaccinia Ankara, or MVA, vaccinia and Fowlpox. We optimize these poxviruses with our proprietary technology to incorporate an antigen in order to create recombinant viral vaccines. We employ these viruses in various combinations for both the initial vaccination, or primer, and subsequent vaccination(s), or booster(s).

        Our expertise in this field has led to a 10+ year long relationship with the U.S. government, pursuant to which we have been awarded approximately $1.2 billion in contracts. To date, we have recognized more than $900 million of revenue from these contracts. We believe that we are well positioned to generate additional revenue from such contracts due to our track record of success, relationships with U.S. governmental agencies and the quality of our live virus vaccines. More recently, we believe our platform has been validated by commercial relationships with two large pharmaceutical companies, Bristol-Myers Squibb, or BMS, for PROSTVAC, our Phase 3 cancer immunotherapy candidate, and the Janssen Pharmaceutical Companies of Johnson & Johnson, or Janssen, for our Ebola vaccine candidate and additional infectious disease targets, including human papillomavirus, or HPV.

        Our vaccine portfolio consists of two product categories: infectious disease vaccines and cancer immunotherapies. Our infectious disease portfolio includes the following:

    §
    IMVAMUNE/IMVANEX is a smallpox vaccine approved and marketed in Canada and the European Union, which has been used in more than 7,600 patients. Although not yet approved in the United States, we have also supplied 28 million doses of IMVAMUNE/IMVANEX to the U.S. government. The U.S. government stockpiles IMVAMUNE/IMVANEX in the event of an emergency outbreak of smallpox, which it would be able to distribute in such event under an emergency use authorization. IMVAMUNE/IMVANEX is currently being evaluated in a Phase 3 program to support U.S. approval by the U.S. Food and Drug Administration, or FDA. We are also developing a freeze dried formulation of IMVAMUNE/IMVANEX under a contract with the U.S. government to replace the current liquid frozen version. Due to a potential shelf life of approximately 10 or more years, we believe that our

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      freeze dried formulation is well positioned to fulfill the U.S. government's long-term requirements for a smallpox vaccine. We recognized revenue of $126 million and $154 million in 2013 and 2014, respectively, from sales of IMVAMUNE/IMVANEX.

    §
    MVA-BN RSV is being developed as a vaccine for respiratory syncytial virus, or RSV. RSV is the most common cause of lower respiratory tract infection in children worldwide and a cause of death in the elderly population comparable in numbers to influenza. We have developed MVA-BN RSV to elicit both an antibody and T-cell response in order to provide optimal protection against RSV. We initiated a Phase 1 trial in healthy adults in August 2015.

    §
    MVA-BN Filo is being developed as an Ebola vaccine in partnership with Janssen. Janssen presented preliminary results from an initial Phase 1 trial in May 2015 demonstrating that administration of MVA-BN Filo resulted in a robust T-cell response. A multicenter Phase 2 clinical trial was initiated in the United Kingdom and France in July 2015, and a second Phase 2 trial and a Phase 3 trial were initiated in Africa in October 2015. We and Janssen are also developing the MVA-BN Filo vaccine to target Marburg virus disease, a related hemorrhagic fever. Through the Janssen collaboration, we are also exploring additional diseases and targets; specifically, MVA-BN is being evaluated in preclinical stages for the early treatment and prevention of HPV-induced cancers as well as in two undisclosed infectious disease targets for the potential expansion of the agreement.

        We are also developing a pipeline of cancer immunotherapy product candidates to harness the power of the immune system to fight cancer. Our product candidates have been designed to enhance a specific T-cell response against a tumor target. In addition, this targeted T-cell response also inflames the tumor, thereby making it more sensitive to additional targeted therapies.

        Our cancer immunotherapy portfolio contains the following product candidates:

    §
    PROSTVAC is a prostate-specific antigen, or PSA, targeted immunotherapy candidate currently in Phase 3 development for the treatment of patients with asymptomatic or minimally symptomatic metastatic castration-resistant prostate cancer, or mCRPC. PROSTVAC has been administered to more than 1,500 patients in more than 14 ongoing or completed Phase 1, Phase 2 and Phase 3 clinical trials. In several of these trials, the administration of PROSTVAC has resulted in an apparent survival benefit, a robust T-cell response and promising evidence of safety and efficacy both as monotherapy and when dosed in combination with other therapies, including checkpoint inhibitors, a class of drugs that may enhance the anti-tumor T-cell response. In March 2015, we entered into an option agreement with BMS that included a $60 million upfront payment and subsequent milestone payments up to an aggregate of $915 million, as well as royalty payments, granting BMS commercialization rights to PROSTVAC. See the section of this Prospectus entitled "Business—Our Partnerships—Agreement with BMS Regarding PROSTVAC." Among the ongoing clinical trials are five Phase 2 clinical trials sponsored by the National Cancer Institute, or NCI, evaluating PROSTVAC in earlier prostate cancer disease settings and/or in combination with several other therapies, including checkpoint inhibitors.

    §
    CV 301 is a novel immunotherapy candidate that targets two tumor-associated antigens, CEA and MUC-1, which are over-expressed in major cancer types. CV 301 and its precursors have been tested in 6 ongoing or completed NCI-sponsored clinical trials in various cancers, and more than 300 patients have been treated with the product candidate. CV 301 is currently being evaluated in an NCI-sponsored Phase 2 clinical trial for bladder cancer, and we expect to initiate three Phase 2 clinical trials in combination with checkpoint inhibitors, beginning with non-small cell lung cancer, or NSCLC, in 2016.

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    §
    MVA-BN Brachyury is a novel immunotherapy candidate designed to induce a robust T-cell immune response against brachyury, a tumor-associated antigen that is overexpressed in major solid tumor indications. Tumors that overexpress brachyury are believed to be highly resistant to current therapies and are associated with decreased survival rates. We completed an NCI-sponsored Phase 1 trial of MVA-BN Brachyury in patients with metastatic cancer or chordoma, an ultra-orphan, or extremely rare, brachyury-expressing cancer of the skull and spine, and we reported data from the trial in November 2015. Data from this trial demonstrated for the first time that an MVA-BN based vaccine targeting brachyury can induce brachyury-specific T-cell immune responses in advanced cancer patients. MVA-BN Brachyury was well-tolerated with no dose limiting toxicities. The maximum tolerated dose was not reached and no serious adverse vaccine-related events were observed.

        In order to advance our pipeline, we have established and will continue to assess collaborations with third parties. We work closely with the NCI, and other institutes and centers of the National Institutes of Health, or NIH, towards the development of key technologies underlying our product candidates. We have established relationships with the U.S. Public Health Emergency Medical Countermeasures Enterprise, or PHEMCE, as well as its member organizations, including the Biomedical Advanced Research and Development Authority, or BARDA, the Department of Defense, or DOD, and the Department of Homeland Security, or DHS. To advance PROSTVAC and MVA-BN Filo, we have established collaborations with BMS and Janssen, respectively. We currently retain worldwide commercial rights to MVA-BN RSV, MVA-BN Brachyury and CV 301 for multiple solid tumor indications.

        We own and operate a fully integrated, highly scalable current Good Manufacturing Practices, or cGMP, commercial scale vaccine production facility in Kvistgaard, Denmark. This facility has been inspected by the European Medicine Agency, or EMA, and the FDA without notice of any material deficiency. As part of the contract to supply 28 million doses of IMVAMUNE/IMVANEX to the U.S. government, we have had numerous successful inspections by the NIH and BARDA. We have built an extensive patent portfolio comprised of more than 740 granted/issued patents and more than 240 pending patent applications. Our ability to manufacture our live virus vaccines has been demonstrated by our production of 28 million doses of IMVAMUNE/IMVANEX to date and more than 2 million doses of our MVA-BN Filo product candidate for Ebola.

Our Vaccine Pipeline

        We have leveraged our live virus vaccine platform to generate one commercial vaccine that is part of seven clinical programs in our focus areas of infectious diseases and cancer immunotherapy. The chart below summarizes the stage of each of our active clinical development programs. Please

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also see a description of certain supply and research and development agreements, pursuant to which we are developing certain of these products under the caption "—Our Partnerships."

GRAPHIC

        In addition to our clinical pipeline, we have multiple ongoing preclinical programs. These include multiple contracts with U.S. government agencies, including the NCI and BARDA. Through the Janssen collaboration, we are also exploring additional diseases and targets; specifically, MVA-BN is being evaluated in preclinical stages for the early treatment and prevention of HPV-induced cancers as well as in two undisclosed infectious disease targets for the potential expansion of the ag