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 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:

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



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



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



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



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



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



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obtaining market acceptance of our product candidates, if approved;



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addressing any competing technological and/or market developments;



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



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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



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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:

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



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



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



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



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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



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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:

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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;



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we replace a third party; or



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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 2014 and 2015, revenue from agencies of the U.S. government accounted for 99.5% and 19.5%, respectively, of our total revenue. 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-value management systems implemented and operational, and we may not be

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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:

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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

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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;



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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;



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



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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:

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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;



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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



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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:

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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:

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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;



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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;



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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;



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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;



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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



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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:

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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:

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



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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 underlying their respective 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. Voting instructions may be

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given only in respect of a number of ADSs representing an integral number of shares or other deposited securities. 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. 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;



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



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



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



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additions or departures of key management or scientific personnel;



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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;



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announcement or expectation of additional debt or equity financing efforts;



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



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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 December 31, 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 underlying their respective 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. Voting instructions may be given only in respect of a number of ADSs representing an integral number of shares or other deposited securities. 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 articles of association 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.

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

        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

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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 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, 2016. However, there can be no assurance that we will not be considered a PFIC for any taxable year.

As a result of becoming a public company, we will become subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act, and if we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

        As a public company listed on The NASDAQ Global Select Market, 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 assessment of internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act in connection with issuing our consolidated financial statements as of and for the year ending December 31, 2017.

        We have started the process of designing, implementing and testing our internal control over financial reporting required to comply with Section 404(a) of the Sarbanes-Oxley Act. This process is time-consuming, costly and complicated. 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 on The NASDAQ

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Global Select Market. If we fail to 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, the accuracy and timeliness of our financial reporting may be adversely affected, and the price of our shares and ADSs may decline.

        In addition, our independent registered public 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 we anticipate to be December 31, 2017, but which may be up to five fiscal years following the date of this offering.

We have identified material weaknesses in our internal control over financial reporting as of December 31, 2015 and December 31, 2014. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect our business, investor confidence in our company and the market price of our shares and ADSs.

        In connection with our financial statement preparation process for the years ended December 31, 2015 and 2014, we identified material weaknesses in the design and operating effectiveness of our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, that creates a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified by us relate to our existing processes to assess risk and to design and implement effective control activities over financial reporting. In particular, we do not have formalized risk assessment, oversight and compliance processes or formalized control descriptions for all of our key controls. Where control descriptions do exist, they do not necessarily include all relevant information to enable the operating effectiveness of such controls. It is not clear whether adequate controls are performed in all areas. Where control activities are dependent on certain information, which is referred to as our Information Used in a Control or IUC, we currently do not perform or document controls to assess the completeness and accuracy of such information. We do not currently monitor control activities and identified control deficiencies; thus, we are unable to evaluate whether other deficiencies, individually and in combination, result in a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

        Although we are working to remediate the material weaknesses described above and we plan to take additional steps to remediate the underlying causes thereof, we cannot at this time estimate how long it will take to do so and our initiatives may not prove to be successful in addressing such material weaknesses at or prior to the date on which we are required to have such processes and procedures in place in order to comply with applicable internal control requirements.

        We may also discover future deficiencies in our internal controls over financial reporting, including those identified through testing conducted by us pursuant to Section 404(a) of the Sarbanes-Oxley Act or subsequent testing by our independent registered public accounting firm. Such deficiencies may be deemed to be significant deficiencies or material weaknesses and may require changes to our consolidated financial statements or identify other areas for further attention or improvement.

        Even if we are able to report our financial statements accurately and in a timely manner, if we do not make all necessary improvements to address any outstanding material weaknesses, continued disclosure of such material weaknesses may be required in future filings with the SEC,

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which may adversely affect our business, investor confidence in our company and the market price of our shares and ADSs.

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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