The Board of Directors of Bavarian Nordic A/S approved today the company's annual report for the period of 1 January to 31 December, 2006. Bavarian Nordic's revenue for the year ended 31 December 2006 was DKK 175.3 million with a loss before tax of DKK 204.8 million. In 2007 the company expects revenue of around DKK 130 million, and a loss before tax of around DKK 350 million. Bavarian Nordic expects that the award of an RFP-3 order for an expected 20 million doses of IMVAMUNE® will occur in the first half of 2007. The order is expected to generate revenues of up to DKK 3 billion. The company expects to initiate clinical trials in 2007 in its breast cancer, prostate cancer and measles programmes. 2006 Highlights • In 2006 and 2007, Bavarian Nordic has been in negotiations with the U.S. authorities. It is expected that an award of an RFP-3 contract will be made in the first half of 2007. • Bavarian Nordic supplied half a million doses of IMVAMUNE® to the National Institutes of Health (NIH), as agreed under the current RFP-2 contract. • Bavarian Nordic is the only company to-date having clinically tested an MVA-based smallpox vaccine in subjects who are contra-indicated to traditional smallpox vaccines, such as DryVax®. Results showed that IMVAMUNE® was safe and well-tolerated in HIV-infected patients and patients with atopic dermatitis. • Interim positive data were reported from a Phase II study with MVA HIV nef designed to investigate the vaccine's potential efficacy to control HIV replication. 37 of 77 subjects volunteered to interrupt their antiretroviral therapy (HAART) after vaccination with MVA HIV nef. Among these there was a clear dose dependent related trend that those subjects vaccinated with MVA nef had a lower HIV count compared to the subjects vaccinated with IMVAMUNE® (used in the control group). • Clinical studies were initiated with the company's vaccine candidate MVA-BN® HIV polytope. • Bavarian Nordic's U.S.-based subsidiary, BN ImmunoTherapeutics, received approval from the U.S. Food and Drug Administration to initiate clinical trials with the breast cancer vaccine candidate, MVA-BN®-HER-2. • In February 2006, Bavarian Nordic filed a patent infringement action against Acambis at the Commercial Court in Vienna, Austria. • In September 2006, the administrative law judge at ITC rendered his initial determination concluding that Acambis infringes two of Bavarian Nordic's patents, but assessed that the patents are invalid. Subsequently Bavarian Nordic filed a petition to have the full Commission review the finding of invalidity. • The Kvistgård production facility was approved by the Danish Medicines Agency. The approval applies to the manufacturing, analysis and release of sterile vaccines for use in clinical trials and emergency situations. Thus it covers Bavarian Nordic's need for manufacturing of smallpox vaccine for the expected RFP-3 order • The Berlin facility released three batches of vaccines for clinical trials; MVA-BN® HIV polytope, MVA-BN®-HER-2 (for use against breast cancer) and MVA-BN® Measles vaccine. • In March 2006, Bavarian Nordic successfully completed a capital increase, obtaining net proceeds of DKK 230 million. • Bavarian Nordic established a new company, Bavarian Nordic Inc., in Washington DC, USA, in order to expand and strengthen company activities in the United States, with particular focus on providing efficient service to the U.S. authorities and for developing the market for Bavarian Nordic's vaccines in the United States. Events after the balance sheet date ITC On 21 February 2007 the ITC issued an order vacating the initial determination, including its assessment of patent invalidity. The entire investigation will be heard again before the Administrative Law Judge with a new target completion date of 19 October 2007. New patent In March 2007, the United States Patent and Trademark Office (USPTO) issued a new patent on MVA to the company, thereby finally approving the patent application for which a notice of allowance was issued to the Bavarian Nordic in December 2006. For more information see stock exchange announcement no. 26-06, dated 18 December 2006. Collaboration with GlaxoSmithKline terminated In February 2007, Bavarian Nordic A/S announced that it agreed with GlaxoSmithKline (GSK) not to pursue a collaboration for the production and marketing of IMVAMUNE®, as contemplated in a Memorandum of Understanding signed by the two companies in 2004. The Memorandum was signed to ensure sufficient production capacity from several facilities, and distribution of IMVAMUNE® to various international markets at a time where Bavarian Nordic's own state-of-the-art production facility was not established. Now Bavarian Nordic has the capacity to produce the expected RFP-3 order. Termination of the agreement will not have any negative financial consequences for Bavarian Nordic. Testing of new production technology As part of the development of a next generation virus manufacturing method, Bavarian Nordic has in March 2007 entered into an alliance with the French company Vivalis regarding testing of new avian cell cultures for growth of virus. Bavarian Nordic's virus vaccines are today manufactured based on cell cultures from fertilized chicken eggs. Bavarian Nordic is leading within this technology, which among other things is used for manufacturing of the company's smallpox vaccine. However, Bavarian Nordic judges that it would be possible within a couple of years to potentially develop a new manufacturing method, which technically and economically is superior to the technology used today. Bavarian Nordic intends to test the new technology for manufacturing of future vaccines under development. Capital increase In March 2007 the company succesfully completed a rights issue increasing the equity and cash preparedness with DKK 443 million. The new shares were offered with pre-emption rights to the existing shareholders at the ratio of 1:5 with a subscription price of DKK 365 per share. The rights issue added 1,275,236 new shares to the share capital, which now comprises of 7,651,416 shares with a nominal value of DKK 10. Financial development Bavarian Nordic recorded a loss before tax of DKK 204.8 million (2005: loss of DKK 116.4 million). The fall compared to 2005 was due to a lower gross profit as a result of lower revenue and increased costs incurred to start up the production facility at Kvistgård. Furthermore, sales costs and administrative expenses rose as a result of higher costs of legal advice in connection with pending litigation and patents. Bavarian Nordic generated revenue of DKK 175.3 million in 2006 (DKK 247.6 million). This revenue was primarily generated from current contracts with the U.S. health authorities (development contracts RFP-1 and RFP-2). In March 2006, the company made a successful issue of shares, and the company's equity was increased by the net proceeds of DKK 230 million. The complete Management Report and details on the research programmes can be found in the full Annual Report which is available for download on the company's website: www.bavarian-nordic.com. Outlook for 2007 FINANCIAL FORECASTS Bavarian Nordic expects revenue in 2007 of approximately DKK 130 million, and a pre-tax loss of approximately DKK 350 million. The projected loss is attributed to that the company does not expect to recognise income for 2007 relating to the expected RFP-3 order. Income recognition requirements of IAS 18 will not be met until an Emergency Use Authorization (EUA) has been granted. Bavarian Nordic expects that the award of RFP-3 order for 20 million doses of IMVAMUNE® will occur in the first half of 2007. It is expected that the order will generate revenues of up to DKK 3 billion. The company expects that an EUA will be granted in mid-2008 whereby delivery of vaccines can begin and operations are expected to contribute to a cash in-flow from late-2008. In addition, it is the company's goal to achieve a substantial part of the maintenance contract associated with RFP-3 valued at up to approximately USD 1 billion in the period after delivery to replace existing vaccine stockpiles with IMVAMUNE®. RESEARCH AND DEVELOPMENT - OUTLOOK IMVAMUNE® - third-generation smallpox vaccine Based on upcoming results from the current Phase II studies with IMVAMUNE®, the company plans to discuss the design of Phase III studies and the terms and conditions for registration of the vaccine with the U.S. Food & Drug Administration (FDA). On this background, the company expects to initiate Phase III registration studies in 2008. In addition, Bavarian Nordic expects to have generated the clinical data to support an EUA for IMVAMUNE® in the USA in 2008 and to begin to file an application for registration in the United States in 2009. HIV MVA HIV nef Bavarian Nordic expects to start Phase II/III clinical trials with the MVA HIV nef vaccine in 2008. MVA-BN® HIV polytope Bavarian Nordic expects in late 2007 the first results from the recently-initiated Phase I/II trials with MVA-BN® HIV polytope. Furthermore, the company expects to start an additional Phase I trial with MVA-BN® HIV polytope in 2007 in the USA. MVA-BN® HIV multiantigen Bavarian Nordic expects to release the vaccine from the Berlin facility in 2007 and to start Phase I trials in 2008. Cancer Immunotherapy Based on FDA-approval of an Investigational New Drug (IND) application on the company's vaccine candidate against breast cancer, MVA-BN®-HER-2, Bavarian Nordic expects to start Phase I/II clinical trials in early 2007. Bavarian Nordic expects to start up Phase I clinical trials with the company's vaccine candidate against prostate cancer in late 2007. Other development programmes Measles Bavarian Nordic expects to start Phase I clinical trials with its vaccine candidate against measles in late 2007. RSV Preclinical safety and efficacy studies are expected to be completed in 2007. The vaccine is expected to be released for clinical trials to start in 2008. Revised financial calendar The company has changed the date for the release of the first quarterly report 2007 to Thursday 26 April 2007 before the Annual General Meeting is held. Board decision and Proposals for the Annual General Meeting The annual general meeting, at which the Annual Report 2006 will be reviewed, will be held on 26 April 2007 at Radisson SAS Scandinavia Hotel, Amagerboulevard 70, DK-2300 Copenhagen. The Board of Directors is proposing the following significant amendment to the articles of association: Stock Split (Section 4) The Board of Directors proposes a split of the share to a nominal value less than DKK 10 per share. Article 4 of the Company's Articles of Association is proposed amended to establish that the Company's share capital shall be DKK 76.514.160 divided in to shares of a nominal value of DKK 1 and multiples thereof. Authorisation to Increase of the Company's Share Capital (Section 5a) The Board of Directors proposes that the Board is authorised for the period ending on 30 June 2008 to increase the Company's share capital a total of nominally DKK 20,000,000 (20,000,000 shares of DKK 1). Authorization for issuing Warrants for Employees (Section 5b) The Board of Directors proposes that the Board is authorised for a period ending on 1 May 2010 to issue 2,000,000 warrants to employees and management of the Company. Annual Report The full 2006 annual report will be published today, Friday 30 March 2007 via the Copenhagen Stock Exchange. The report can also be downloaded at the company's website: www.bavarian-nordic.com. In the first week of April, all registered shareholders will receive the printed report. Webcast In connection with the release of the 2006 Annual Results, a pre-recorded webcast presentation will be held. President & CEO Peter Wulff will present. The webcast will be held in English, and can be viewed at: www.bavarian-nordic.com/webcast. Statement from the Board of Directors and Corporate Management The Board of Directors and Corporate Management have, as of today, reviewed and approved Bavarian Nordic A/S‘ Annual Report for the period 1 January - 31 December, 2006. The audited Annual Report has been prepared in accordance with the International Financial Reporting Standards (IFRS) approved by the EU, as well as additional Danish reporting requirements for annual reports and publicly-traded companies. We consider that the chosen accounting policies is appropriate. It is our opinion, that the Annual Report gives a true and fair view of the Group's assets, liabilities, financial position, results, and cash flow. Kvistgård, 30 March 2007 Corporate Management: Peter S. Wulff President & CEO Board of Directors: Asger Aamund Eigil Bjerl Nielsen Erling Johansen Flemming Pedersen Chairman