Bavarian Nordic, the Danish vaccine maker known for its successful smallpox and mpox vaccine Jynneos, reported its Q1 2024 earnings, highlighting strong travel health demand and continued public preparedness orders. But beneath the surface of these seemingly straightforward results lies a fascinating strategy, one that may have significant long-term implications for the company and the global mpox landscape.

Bavarian Nordic appears to be quietly stockpiling Jynneos, even in the face of declining mpox cases and unconfirmed government orders. This strategic maneuver, seemingly overlooked by other analysts, suggests a bold bet on the future of mpox and Bavarian Nordic's dominant role within it.

During the Q1 2024 earnings call [1], CEO Paul Chaplin expressed unwavering confidence in securing the uncontracted portion of their public preparedness revenue guidance, a significant portion of which relies on large Jynneos orders. This confidence, even in the absence of firm commitments, stems from Bavarian Nordic's proactive decision to build Jynneos inventory throughout 2024.

This is a departure from their usual practice. Historically, Bavarian Nordic operated on a made-to-order basis for Jynneos, filling orders as they were received due to the product's long manufacturing lead time and relatively short shelf life. The current strategy of building uncontracted inventory is particularly notable for the final fill vials, which have a more limited shelf life compared to bulk drug product.

Why is Bavarian Nordic Stockpiling Jynneos?

Why would Bavarian Nordic take such a risk, potentially ending up with expiring doses if those anticipated orders don't materialize? The answer may lie in a combination of factors:

**Forecasting Future Demand:** Bavarian Nordic's decision to build inventory suggests their internal projections forecast a sustained need for Jynneos, potentially exceeding current government stockpiling plans. While mpox cases are currently declining, this could be a temporary lull. The virus has demonstrated its ability to adapt and spread, particularly among specific risk populations.

**Strengthening Negotiation Power:** By preemptively building inventory, Bavarian Nordic gains a distinct advantage in negotiations with governments. They can offer immediate delivery of large quantities, a compelling proposition in the event of a resurgence or a newly identified mpox threat. This gives them leverage to potentially secure more favorable pricing and terms.

**Establishing Market Dominance:** The deliberate accumulation of Jynneos inventory, coupled with the recent reduction in Emergent BioSolutions' mpox/smallpox vaccine contract with the US government, paints a clear picture: Bavarian Nordic is positioning itself as the preeminent supplier of mpox vaccines globally.

Implications of Bavarian Nordic's Strategy

This strategy has significant implications. If their bet pays off, Bavarian Nordic could become the primary, and perhaps even sole, source of mpox vaccines in the future. This would cement their market dominance and give them considerable influence over pricing and supply, potentially leading to a "mpox monopoly."

The financial implications of this strategy are significant. Bavarian Nordic is guiding for between DKK 2.7 billion and DKK 3 billion in public preparedness revenue in 2024, with DKK 1.6 billion already secured. The remaining uncontracted portion, potentially driven by Jynneos stockpiling, could have a substantial impact on profitability, particularly if they achieve favorable pricing due to their strategic inventory advantage.

"Public Preparedness Revenue Projections for 2024 Reference: [1]"

Risks Associated with the Stockpiling Strategy

However, this strategy is not without risks. If demand doesn't materialize as projected, Bavarian Nordic could be left with a large stockpile of expiring Jynneos doses, leading to significant write-offs and impacting future profitability.

Conclusion

This bold strategy, hidden beneath the surface of the Q1 earnings, reveals a company playing a long game, betting on their own expertise and the enduring threat of mpox. Whether their gamble pays off remains to be seen, but one thing is certain: Bavarian Nordic is poised to be a defining force in the fight against mpox, potentially shaping the global vaccine market in the process.

"Fun Fact Did you know that Bavarian Nordic, despite its relatively small size, supplied Jynneos to over 70 countries during the 2022 mpox outbreak, demonstrating their global reach and ability to respond rapidly to emerging health crises? This track record of success and their commitment to vaccine innovation underscores their potential to be a dominant player in the global vaccine market."