UPDATE 1-Bavarian says FDA OK's Imvamune production in U.S.

* Says FDA OKs its U.S. production unit after adjustments

* Sees U.S. Imvamune contract fulfilled according to plan

* Repeats expects to start deliveries in H1 2010

* Shares rise 13 pct on index up 1 pct

By Anna Ringstrom

COPENHAGEN, March 18 (Reuters) - Danish biotech company Bavarian Nordic (BAVA.CO) said the U.S. health body had decided it met all requirements to deliver its smallpox vaccine to the U.S. government, sending its shares higher on Thursday.

Bavarian's top executive said the news meant the firm expects a contract to supply 20 million doses of Imvamune to the U.S. government to be fulfilled according to plan.

"What remains are some administrative procedures that need to get in place. Our firm expectation is that we will start deliveries on this order in the first half of 2010," Chief Executive Officer Anders Hedegaard told Reuters.

Delivery, which the Danish firm had hoped to begin by end-2009, was delayed after the U.S. Food and Drug Administration (FDA) required Bavarian to make adjustments to its production facilities.

Bavarian said in a statement the FDA had accepted its actions to address the observations.

"This was the last step along with the clinical and preclinical data that will be used to potentially support the use of Imvamune following a declared emergency," Bavarian said.

"Subsequently, the company will scale-up the production as planned ... so the 20 million doses will be produced and delivered according to the contract," it said.

A trader said the news was not entirely unexpected, but had removed some uncertainty.

Shares in Bavarian jumped as much as 22 percent to their highest level since January 2008 and traded 13 percent up at 247 Danish crowns at 0923 GMT. The MSCI European pharma, biotech and life sciences index .MIEU0PB00PEU and the Stoxx 600 Europe healthcare sector index .SXDP were both up near 1 percent.

"The firm passed a milestone when it ... finally got approval from U.S. health authorities to deliver its first doses of the smallpox vaccine Imvamune," Nordea said in a note to clients.

"This is something we have been expecting, but it's still positive," it said.

Bavarian stood by its full-year outlook, given earlier this month when it also said it expected to begin shipping under the U.S. contract in the first half of this year.[ID:nLDE62807L]

Bavarian has said it aims to deliver 4 million-5 million doses of Imvamune to the U.S. authorities this year, which would be the main source of revenues. (Additional reporting by Ole Mikkelsen, editing by Will Waterman and Rupert Winchester)