Q3 2024 Valneva SE Earnings Call

November 7, 2024

presentation, there will be a question and answer session. To ask a telephone question, please press star 11 on your keypad to join the queue. To withdraw your question, press star 11 again.

Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand over to Joshua Drumm, VP, Global Investor Relations. Please go ahead.

Thank you, operator.

Joshua Drumm: Thank you and hello for joining us to discuss WHO's financial results for the first nine months of 2024 and a corporate update. It's my pleasure to welcome you today.

Joshua Drumm: In addition to our press release and analyst presentation, you can find our consolidated financial results for the nine months ended September 30, 2024, which were published earlier today, available within the financial reports section of our investor website.

Joshua Drumm: I'm joined today by Vanneva CEO Thomas Lingelbach and our CFO Peter Buhler, who will provide an overview and update on our business as well as our financial results.

Joshua Drumm: There will be an analyst Q&A session at the conclusion of the prepared remarks.

Joshua Drumm: Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements which are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by these forward-looking statements.

You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website.

Joshua Drumm: Please note that today's presentation includes information provided as of today, November 7, 2024, and Valneva undertakes no obligation to revise or update forward-looking statements, except as required by applicable securities laws.

Speaker Change: With that, it's my pleasure to introduce Thomas to begin today's presentation.

Thomas: Thank you, Josh. It's a pleasure to welcome you all to today's call. Yeah, what are the highlights for the first nine months 2024? Overall, the company's performance is in line with our guidance.

Thomas: When we look at product sales, which landed at a bit more than 110 million euros at the end of the nine-month period,

Thomas: and given the slow uptake of x-chick in the US market we have narrowed our guidance

Thomas: to 160 to 170, and Peter will provide more details on that. With a cash position of more than €150 million, we consider the company well-financed.

Thomas: Of course, most importantly, with LIME going 100% according to plan...

Chick Adolescence

data that came in as expected and on time.

Thomas: pediatric and persistence data for CHIC as well and we presented our long-term R&D strategy at the Investor Day in New York recently. We continue to perform strongly on our scientific positioning but also on the partnering front

many very interesting publications and renowned journals like the Nantes.

our partnership with TIPI

supporting chick development.

and more recently...

the partnership with Simatech on a very exciting Shigella program.

Thomas: Turning to page five of the presentation and looking a little bit into the midterm.

Thomas: of the company. It is fair to say, and Peter noted this in his quote of today's press release, that we are approaching next year really a turning point in Valneva's evolution.

We are targeting sustained profitability from 2027 onwards.

Thomas: driven by success of the Lyme disease vaccine program is successful and approved, of course. As mentioned, we are on track with regards to the phase three study and regulatory filings in 2026 with first approvals in initial phase in 2027.

Thomas: which then would immediately trigger, you know, the development milestone payments and hopefully then later the royalties and the sales milestones.

Thomas: Of course, in the short term, our focus is, besides on R&D execution, to focus on growing our commercial sales.

Thomas: Despite of the slow uptake of X-Trick in the US market, we remain confident in the long-term X-Trick prospects.

Thomas: I believe it's a great product and we, of course, will carefully review the uptake in the coming months.

especially since we will see

the development in the U.S. but also in Canada.

Thomas: first European countries and we will have a better understanding about the demand from existing and expected future LMRC partners where Chikungunya is endemic.

Thomas: We expect that our commercial business overall, with improved margins, will generate cash again from 2025 onwards.

Joshua Drumm: and this will be achieved by combination of top-line growth but also efficiencies on the bottom line.

Joshua Drumm: And, of course, we will continue building for the future by advancing an attractive and differentiated R&D pipeline.

Joshua Drumm: Just by way of reminder, what we discussed also at the R&D or at Investa Day, we have on the one hand side, the mandatory R&D primarily focused around development phase four and phase three pediatric, which is financially supported through the TEPI grant.

We.

would like to advance

Our programs around Shigella and Sika, both programs

Joshua Drumm: are supported by risk-mitigated development strategies and thus allow an efficient capital allocation.

based on very defined

Joshua Drumm: progress data points and as announced we expect next clinical entries mainly from our own proprietary preclinical pipeline post-licensure in 2027.

Joshua Drumm: very interesting and very coherent pipeline all the way from preclinical to late stage clinical development.

Joshua Drumm: targets that you see here, all programs that you see here, are very unique in every single program. We are either most advanced

Hence, first in class.

Joshua Drumm: best in class, or only in class at all. And this makes us proud to contribute to a world in which no one will die or suffer from a vaccine-preventable disease.

Speaker Change: Turning over to Lime, I think the most important thing to note is that

Speaker Change: We updated on page 9 a little bit the medical need and related market opportunity. This is a slide that you saw as part of the investor day.

Joshua Drumm: By way of reminder, there's no vaccine currently available to prevent Lyme disease in humans.

Joshua Drumm: You see the annual burden of disease and these are the most recent numbers for the US and Europe, acknowledging of course that European numbers are probably significantly underreported.

Joshua Drumm: equally true for the U.S., but probably not at the same scale. You know, 10 to 30 percent of cases

Joshua Drumm: develop severe manifestations, you know, be it catitis, neurobiosis, arthritis, and you have another five to ten percent on the persistent symptoms, and those cases continue to have persistent symptoms following even treatment.

Joshua Drumm: And this then turns also in a commercial opportunity if you think about the fact that

Joshua Drumm: More than 80 million U.S. citizens live in areas which are considered endemic and according to CDC those are areas with incidence rates about above 0.5 percent of land cases annually and in Europe even more than 200.

Joshua Drumm: million people. So therefore, we are very confident in our estimation of more than a billion in terms of a potential vaccine market.

Joshua Drumm: I don't need to go again into all the features of our very unique and differentiated Lyme disease.

Joshua Drumm: program. I think the key updates here are that, of course, we have fully recruited the phase two when it comes to primary vaccination. We are still, you know, one last round of

booster vaccinations ahead of the 2025 tick seasons to go.

Joshua Drumm: before we can have the first readout at the end of next year, and we are absolutely on track for the phase 3 trial conclusions.

and of course we mentioned already in prior calls

Joshua Drumm: Cash Burn, and we recently reported the two-year antibody persistence and FUSA results in line with our expectations. Slide 11 shows the VALOR study design.

Joshua Drumm: close to 10,000 people, one-to-one randomized against placebo, two-to-one North America versus EU. Please remember primary endpoint

Joshua Drumm: rate of confirmed Lyme disease cases after two consecutive tick seasons.

Joshua Drumm: And when you look at the charts below, you see the green syringes versus the black syringe. And the black syringe is exactly the last outstanding vaccination.

Joshua Drumm: activity that is needed before then the primary efficacy readout is expected.

towards the tail end of 2025.

Joshua Drumm: So overall, as mentioned, very pleased with the collaboration, very pleased with the program and very confident in the program and its readout and basically everything on track for the end of next year.

Joshua Drumm: Turning to Chikungunya, our famous product X-Shake, the world's first and only Chikungunya vaccine today. It builds on key differentiators

It has shown a very strong

and a very persistent immune response with only one dose.

And here is where this product differentiates.

Joshua Drumm: including the fact that we have also shown very strong immunogenicity in elderly, which, just by way of reminder, is the main target population for this vaccine, according to the ACIP recommendation.

Joshua Drumm: and that's basically the status on the product profile. When we look a little bit into all the milestones that we have achieved

Everything is focused on expanding access globally.

Joshua Drumm: Our phase 3 adolescent trial showed strong safety and immunogenicity profile up to 6 months. Those submissions for label extensions have either been already done or are close to be done.

Joshua Drumm: We have published long-term antibody persistence results up to 24 months already.

Joshua Drumm: And please remember, this study is going on for up to 10 years, so our objective is to monitor antibody persistence to up to 10 years.

Joshua Drumm: We have achieved also already first days in Canada where we had very recently a very nice launch and we are preparing to launch in France as the first European country.

Joshua Drumm: Other upcoming and near-term catalysts include the expected approval for X-Trick in Brazil and the UK.

Joshua Drumm: I mentioned already the label extension activities for which we are really expecting then labels to be updated next year.

Joshua Drumm: We are very close to report the three-year antibody persistence result. Hopefully still this side of Christmas, but could come also very early next year, depending on how fast we're going to be on all the readouts.

Joshua Drumm: and then the phase 2 pediatric trial top line results, same thing, either very late this year or very early next year. And we are still working on getting into a partnership for Asia.

Joshua Drumm: and to augment our existing LMRC partner network that currently consists out of Hutantan for Latin America primarily with a strong partner for Asia.

And there are, of course, major

upcoming and future opportunities to capture and drive greater penetration.

This is, the first point is focused on the U.S.

Joshua Drumm: So we are still waiting for the MMWR publication and we expect this to drive.

primarily retail growth in the U.S.

Joshua Drumm: It's one of the key expected growth drivers to get to an acceptable and promising growth trajectory for the United States.

Joshua Drumm: And then, of course, with the launches in Europe and the expansions in Canada, we expect major growth drivers for next year.

Joshua Drumm: We also expect additional ACFP and European recommendations. There are already some countries in Europe that have

Joshua Drumm: based recommendations, Austria being one example. We further expect travel software protocol updates. I mentioned already the label updates.

Joshua Drumm: for X-Chink, which includes always antibody persistence, but also the age range.

Joshua Drumm: the LMSD approvals, the additional partnerships, and our continuous discussions with the U.S. Department of Defense. All those key opportunities will drive access and penetration, and hence, safe course.

Joshua Drumm: When we look at the Shigella program, as mentioned at the beginning, it is the world's most clinically advanced tetravalent Shigella vaccine today.

Joshua Drumm: and we have exclusively partnered this program with Limatech Biologics. It's a tetravalent bioconjugate vaccine with the potential to cover up to 85% of the shikolosis infections.

Joshua Drumm: And that's a very important one, given that Shigella is really a life-threatening disease.

Joshua Drumm: The global market is expected to exceed half a billion annually and this number has been substantiated through an independent market assessment conducted by L.E.K.

with

ski segments including travelers military but also endemic countries.

Joshua Drumm: And I think that's a very important segment for this vaccine, especially children in LMRC countries, where sugar losis is the second leading cause of fatal diarrhea.

Joshua Drumm: and we see up to, you know, estimated 165 million cases and more than 600,000 deaths annually. Therefore, Shigella has also been identified as a priority vaccine by WHO.

Joshua Drumm: When we look at the development execution and the upcoming milestones, they are very close to initiate the Phase II GEM study.

Joshua Drumm: alongside with the pediatric study under Phase II protocol. Those two studies will be conducted by Limatech and initiation is still expected this side of Christmas.

Joshua Drumm: And Valneva is already in the transition to assume full responsibility.

Joshua Drumm: accountability and responsibility, be it on the R&D, CMC, regulatory side of things. So we are working hand-in-hand with D-MATIC right now. We are very grateful to our colleagues at D-MATIC for the very smooth

Joshua Drumm: and very constructive collaboration and transition. We reported recently that this program achieved FDA's Fast-Track designation.

Clinical Development Strategy, supported by multiple catalysts and decision points.

on the way towards licensure.

Joshua Drumm: is about to start imminently. Then it will be followed by a second phase to a study where we're gonna challenge.

with Flex.

Joshua Drumm: to A, in this case, and those two controlled human infection models would give us a very interesting prospect on the

expected potential efficacy of this vaccine.

Joshua Drumm: while at the same time we run immunogenicity studies in children in LMIC and UCD.

Joshua Drumm: The bar here that shows phase 2 global health, which is the immunogenicity study in children that I was talking about earlier, which will then be followed by a small bridging study in European or U.S. children before we go into a large-scale study.

Joshua Drumm: Phase 3 study in LMICs for children and on the adult side

Joshua Drumm: and all of that if successful and if executed on time and according to plan first approvals could be expected in the 2030-21 horizon.

Joshua Drumm: A couple of key results from the L.E.K. study when it comes to the total vaccine market for a potential Jigella vaccine.

Joshua Drumm: And here you see the three segments that I mentioned before. We have looked at recommendation, acceptance, and vaccination.

And you see the typical waterfall model that we apply

and here you see that

You know, we see a very substantial

you know, segment, also.

Joshua Drumm: only about 23% of the total, you know, estimated market, probably in that area. Then children in endemic, and representing around 76%, and then military, a certain portion.

Joshua Drumm: and that's the current hypothesis that that we have when it comes to

the market opportunity for

Joshua Drumm: You may recall that this is a candidate, we call it internally the LA1601, which is an optimized second generation vaccine candidate against the Zika virus.

Joshua Drumm: And we are well in the phase one, and we are currently, you know, executing the study according to plan.

Speaker Change: . And with that, Iím going to stop this session and try to get the chat in.

is a very interesting candidate because we

Speaker Change: fully comply with one of the desired target product profiles that were published by WHO. It leverages an existing platform that we have, namely a platform that we originally developed for CRO, but then

Joshua Drumm: substantially enhanced and scaled up for our COVID vaccine development, so it's a like-for-like process that we apply here, so therefore it is also suited for large-scale manufacturing.

Joshua Drumm: And, you know, Zika is coming back. It's maybe the simple message here. And we all remember that Zika infections

especially in pregnancy can have very devastating effects.

Joshua Drumm: and there are no vaccines or specific treatments available. To our knowledge we are currently probably the only company with an active clinical development program at this stage.

The Zika vaccine development or the disease area is PRB-eligible.

and we know that there are currently many.

Joshua Drumm: public institutions looking into potential funding mechanisms. We expect in the first half next year

Joshua Drumm: to have Phase 1 results but also a better insight with regards to market opportunities, potential access strategies.

but also some decisions on potential external and non-dilutive funding.

Joshua Drumm: So, in a nutshell, overall, we are very confident in not only our, you know, commercial business, but also in its prospects.

Speaker Change: but also and most importantly on our R&D pipeline and its prospects and its major catalysts, specifically LIME, at the end of next year. And with this business update, I would like to hand over to Peter to provide you with the financial report.

Peter Buhler: Thank you, Thomas, and good morning and good afternoon to all of you. So, moving to the financials of the first nine months of 2024.

Peter Buhler: Product sales reached 112.5 million euros and on a comparable basis grew 12% over prior year. Including last year's sales of the COVID-19 vaccine, sales increased by 6%. The impact of currency fluctuation on a year-on-year basis is negligible.

Peter Buhler: Total XERO sales reached 66 million euros and increased 31% over prior years. The strong year-over-year growth was driven by double-digit year-over-year growth rates in both the travel segment and U.S. military.

Peter Buhler: As discussed in our half-year results release, we had limited Ducroval-related marketing investment at the beginning of the year, as we anticipated supply constraints in our manufacturing facility in Sweden due to regulatory inspections.

Peter Buhler: In terms of our ongoing launch of our new Chikungunya vaccine X-Chik, we report sales of 1.8 million euros by September 30th in the United States.

Speaker Change: The ACIP recommendation for X-Check was adopted by the CDC in March this year, and as Thomas mentioned, we are still awaiting the MMWR publication.

Speaker Change: In line with our expectations, third-party products declined by minus 23% year-over-year to reach 29.1 million euros, primarily as a result of supply constraints.

Moving on to the income statement.

Speaker Change: Total revenues reached 116.6 million euros versus 111.8 million euros in the first nine months of 2023.

Speaker Change: Xero gross margin reached 58.8% of Xero product sales compared to 47.2% one year ago.

Speaker Change: Tukural generated a gross margin of 34.8%, while third-party products yielded a gross margin of 32%.

Peter Buhler: The total gross margin excluding x-trig reached 48.6 percent compared to 43.7 percent in the first nine months of 2023 and 47.7 percent at the end of June.

Peter Buhler: It is important to note that the total gross margin is also adversely affected by X-trick-related overhead costs, as well as idle costs related to our new manufacturing site.

Peter Buhler: Research and development expense increased from 42.2 million euros in the first nine months of 2023 to 48.6 million euros in the current fiscal year.

Peter Buhler: That increase mainly relates to tech transfer costs for the transfer of our Xero and X-Jig manufacturing operations to our new Almeda site in Scotland.

Peter Buhler: In addition, our preclinical spend marginally increased over the prior year.

Peter Buhler: Marketing and distribution expense increased year-over-year by approximately 5% to reach 35.7 million euros. The increase is related to the launch cost related to our X-Trick vaccine that also includes higher people cost as we expanded our commercial team.

Peter Buhler: G&A expense decreased by 7% year-over-year to reach 32.6 million euros.

Peter Buhler: The sale of the PRV generated an income of €90.8 million, while other income reached €14.9 million versus €17 million in the prior year.

Peter Buhler: Other income primarily consists of grant income and R&D tax credit.

Peter Buhler: Operating profit is reported at 34.2 million euros versus an operating loss of minus 57.2 million euros in the prior year. Adjusted EVTA improved from minus 46 million euro to positive EVTA of 48.6 million euros.

Peter Buhler: As mentioned at the beginning of the presentation, our cash position at September 30th is reported at 156.3 million euros and it is worth highlighting that our cash use in operating activities decreased significantly from 136 million euros in the first nine months of 2023 to 76.7 million euros in the current fiscal year.

Now moving to slide 26

Peter Buhler: During our invest today in New York, we provided a view on travelers data traveling to Japanese encephalitis or chikungunya endemic regions.

Peter Buhler: The information on this slide is based on NIATA data from August 2024. As the graph illustrates, we see the number of travelers to Chikungunya endemic countries in 2024 is anticipated to be above the pre-COVID period, while travelers to GE endemic countries are still slightly lower.

Peter Buhler: More importantly, the forecast data shows the number of travelers are expected to grow significantly over the coming years, with an anticipated growth of 22% for travels to GIC-endemic countries by 2030 and nearly 30% for GE-endemic countries.

Peter Buhler: With this, let's move to slide 27 to look at our guidance for the current fiscal year and the outlooks beyond.

Peter Buhler: For the current fiscal year, we narrow our product sales guidance to 160 to 170 million euros and total revenue guidance to 170 to 180 million euros.

Peter Buhler: Other income, including the proceeds from the PRV, is expected to reach between 100 and 110 million euros, and the R&D expenses are expected between 65 and 75 million euros.

Peter Buhler: In the midterm, we continue to expect growth from XDR onto Corral. As for the X-Check sales expectations, we will review our midterm guidance in the coming months, taking into account the sales trend in the United States and early signals from the sales ramp up in Canada and first EU countries.

Speaker Change: With this, I hand the call back to Thomas for the news flow.

Thomas Lingelbach: Thank you so much, Peter. Yeah, wrapping up with the summary of our key upcoming catalysts and news flow. On Chikungunya, we have the upcoming potential approvals by Alisa for Brazil and MHRA for the UK.

As mentioned, the 36-month antibody persistence data.

Peter Buhler: for ICT and the initiation of the Phase 4 clinical program, for which we have now port alignment on its final detailed design and execution considerations.

Peter Buhler: For the Lyme disease vaccine, the final booster dosing, as mentioned earlier, mid-2025, latest to be completed, in line with the Lyme seasonality.

Peter Buhler: Then, you know, of course, we have the continuous monitoring for Lyme disease cases, and we will conclude on all of that towards the end of 2025, which then will enable submissions to the regulatory agencies in 2026.

Peter Buhler: Of course, I've just picked up positive phase 3 data. The initiation of the two phase 2 studies for the Shigella vaccine still this side of Christmas.

Peter Buhler: and the report of the phase one data for our second generation Zika vaccine in the first half of next year. And one thing that we didn't talk about, but I would like to reemphasize here is

Peter Buhler: We continue to see a very good uptake of the CRO in the DoD. We expect the RFP for the next contract to be issued imminently.

and with that, of course, a new contract.

with the DoD.

in the next video.

six months.

Peter Buhler: And with that, let me draw your attention on also the near and mid-term value drivers. I think the most important one is certainly VLA-15, our Lyme disease. It's the major catalyst for Valneva. It is probably the most important.

Peter Buhler: or likely the most important upside that we see for Valneva in the short to mid-term. And on the back, offline,

Peter Buhler: We expect this company to really transition into sustained profitability, initially coming from the early milestones that we expect in 2027, and then followed by the royalties.

Peter Buhler: and of course with that the entire value proposition of Valneva is expected to change in the near term. The commercial revenue growth with a strong focus not only on our existing brands but also on ex-schicksals.

Some prospects for this vaccine.

Peter Buhler: across all the different markets, mainly North America, Europe, and LMRC countries.

Peter Buhler: And we are absolutely excited and thrilled about the potential of our future pipeline programs, including.

Shigella, but also Zika and...

Peter Buhler: the programs that we have currently in preclinical development that are expected to enter the clinic upon successful Lyme execution and approval in 2027.

Speaker Change: And with that, I would like to conclude our report and hand back to the operator to take your questions.

Speaker Change: Thank you. As a reminder if you wish to ask a question please press star 1 1 on your telephone and wait for your name to be announced.

Please stand by while we prepare your first question.

Speaker Change: First question comes from Maui Raycroft at Geoffrey's, your line is open, please go ahead.

Maui Raycroft: Hi, good morning. Congrats on the priors and thanks for taking my questions.

Speaker Change: Maybe, first one, I'll just start with Xero. You mentioned expectations for new orders in 2025.

Speaker Change: and you're seeing good uptake with DOD. Is there anything more you can say about that, including where the orders could be coming from and what the amounts could look like for next year?

Peter Buhler: So basically, Onyx Tiaro, Maury, you know that when we exclude the one year where the military built additional stocks, which was I think 2019,

Peter Buhler: all the other years with the DoD has been pretty stable.

Peter Buhler: And when you calculate, you know, in some years we gave details of the military, in other years we did not. But you know that overall you can calculate the demand of give or take 200,000 doses.

Peter Buhler: And then it depends a little bit on the supply-demand pattern because sometimes they keep higher stocks and lower stocks and

And I think...

At this point in time,

Peter Buhler: noting, of course, that a new government may have different views in terms of military personnel stationed in Southeast Asia.

Peter Buhler: But at this point in time, and given that it is a mandatory vaccine for those parts of the troop, we expect this.

you know, overall demand to be pretty stable.

Peter Buhler: at that level and we expect that the RFP that will be for the next, you know, kind of request will also point in this direction. So that's our expectation right now on Ixiaro and the DoD.

And, of course, we are in.

Peter Buhler: Very active dialogue with the DoD on Chikungunya as well. So.

Peter Buhler: We've seen that they issued a preliminary recommendation for X-Check but we are not yet at the point where they have decided whom to vaccinate, when to vaccinate.

Peter Buhler: and that's something that we certainly expect to come next year.

Speaker Change: Got it. That's helpful. And maybe a question related to ICCHIC. Just wondering if you have a better sense of when the MMWR publication update could occur and if you can remind how the publication will be leveraged with payers and stakeholders and how that could translate for the opportunity.

Speaker Change: Yeah, so we expect the MMWR release is something where, I think timing-wise,

Speaker Change: We don't feel comfortable making any promises. We had hoped to see this already months ago.

Speaker Change: You know, there is when you look historically for other vaccines, how long it took. Sometimes it was very fast. Sometimes it took a long time. We certainly expect the MMWR release to be the major driver to.

allow us accessing the retail channel in the U.S.

the big learnings probably for us.

Speaker Change: We certainly see that retail becomes more and more important in the U.S.

and especially given the.

the very high cost that someone would need to pay through other channels.

Speaker Change: And therefore, you know, this is one of the identified key drivers amongst, of course, a few others that we have identified.

Speaker Change: Got it. And is that something you think could happen in 2025, the publication coming out? Yeah, yeah. So I think, I think, I mean, we...

Speaker Change: We said earlier in one of the prior calls, and if I recall correctly, even in New York, we said that we expect it by year-end, but as I said, you know, it's a little bit out of our control. There is nothing we can do about it.

Speaker Change: But it's certainly one of the pieces, let's say, one of the missing pieces that we are still looking for.

Speaker Change: Understood. Okay, thanks for taking my questions back in the queue.

Please stand by for your next question.

Speaker Change: The next question comes from Susan Van Vorthuizen at Van Lanschot Kempen. Your line is open, please go ahead.

Speaker Change: Hello, this is Chiara Montiloni, I'm on the house of Suzanne.

Speaker Change: Thanks a lot for taking my question and congratulations for the update.

I had one question on xChick. I was wondering if you could give me more color on why the sales have not grown in Q3 compared to Q2 and what could explain that after reporting positive trends on other commercial metrics?

Speaker Change: Yeah, it's a good question. So, basically, partially it has to do with what we have in the channel right now, and so what is actually the product that we have really shipped and sold to distributors.

and this one component to it.

Speaker Change: The second part is that we are really not seeing at this moment in time, let's say, the uptake that we

Speaker Change: Let's see, we didn't see the uptake at the end of the third quarter. I think we are now at the end of November.

The situation has certainly improved.

Speaker Change: And so we are confident that we are now going into a better closed trajectory.

Speaker Change: that we need to monitor very very carefully and it's as I said a couple of times

Speaker Change: It's a bit too early at this point in time to.

Speaker Change: to really draw conclusions on all of that. So we have given ourselves

Speaker Change: until the mid of the year in order to to ensure that that that we get to the to the right to the right level of understanding.

Speaker Change: Okay, thank you so much. So basically you will give guidance, let's say, in six months or more. Yeah, I think, yeah. So basically what I, in other words...

Speaker Change: We have said, you know, we have given a midterm outlook of anticipated hundred million product sales for Xtrick three years after launch.

Speaker Change: We have, you know, the pre-launch period right now, or the initial launch period ongoing in Canada. We expect to launch in France, and we have...

Speaker Change: we will gain very good understanding about the LMRC demand in the first quarter next year. So this will help us to better understand

Speaker Change: and whether our hypothesis on the S-curve, and you may recall that we discussed the S-curve and that all travel vaccine states uptakes in the history have followed a certain S-curve, but we have of course

Speaker Change: have taken certain base assumptions on this S-curve progression, whether they hold still true or whether we need to update our midterm guidance.

At the same time, it is very clear that we continue to see no reason to update or change the long-term prospect of the product.

Speaker Change: Okay, got it. Thank you so much. You're more than welcome.

Please stand by for your next question.

Speaker Change: The next question comes from Ed White at HC Wainwright. Your line is open, please go ahead.

Hi, thanks for taking my question.

I didn't hear any update on...

Speaker Change: VLA 2112 for Epstein-Barr virus. I was just wondering if you can give us an update of where you are in development there and your thoughts moving forward.

Thank you.

Speaker Change: Yeah, so good question. I mean, we provided an update on our EBV activities at the Investor Day in New York.

Speaker Change: It's our leading program in preclinical today. We are currently evaluating in vivo, in vitro, different antigen compositions.

Speaker Change: and we are expecting to conclude on the, let's say, the lead vaccine design.

next year based on all those experiments with the objective

to really build what we call a differentiated EBV vaccine.

Speaker Change: We hope to learn also from others because there are a couple of data readouts expected from other companies working on EBV.

with either a more...

you know, traditional GP350 approach, but also an approach that

includes another antigen.

Speaker Change: And so all of that is working according to plan and going according to plan.

Speaker Change: There's always a point for us to accelerate clinical entry, so we would like to be ready for clinical entry, probably towards the latter part of 2026, mid to end 2026.

Speaker Change: and then decide, you know, subject to capital capacity at the time when actually to start the clinic entry.

Speaker Change: Okay, thank you. And perhaps a question for Peter. You had mentioned that R&D expenses were up due to the transfer costs to Scotland.

Speaker Change: I'm just wondering if these transfer costs will continue into the fourth quarter and into 2025 or if they're behind us now.

Peter: Yeah, this will still continue into 2025, and then basically end early 2026, so we will first transfer the Xtero vaccine over to Almeda, and then followed by Xtriq.

Okay, thanks for taking my questions.

Please stand by for the next question.

Speaker Change: The next question comes from Rajan Sharma at Goldman Sachs. Your line is open, please go ahead.

Rajan Sharma: Hi, thanks for taking my question. I've got a couple, one on margins and one on Ixchik. Just on Ixchik, I know you've kind of discussed it a little bit on the call, but...

Rajan Sharma: Could you just kind of help us understand what's changed from the capital market say in October when you sort of reiterated that midterm guidance. Has there anything kind of materially changed since then or is it just kind of a you know your latest view on on trends particularly in the US?

Speaker Change: I think you said around 59% gross margin on Exario. Do you think that remains stable from here? Thank you.

certain performance indicators that could be predictive for uptake.

Speaker Change: And this includes, you know, order, this includes reorder, but we were expecting, I would say, a steeper uptake towards the latter part of the year as compared to what we are seeing right now.

Speaker Change: And that's probably, and this is indicative, this is not definitive.

And therefore, we have, you know, kind of...

Speaker Change: said at this point in time the uptake is slower than anticipated and that's why we have to continue monitoring the situation throughout the first half of next year and and then only then

Rajan Sharma: We will have an informed basis and can take an informed decision as to whether our midterm expectation from this product is still right at about 100 million or not.

Rajan Sharma: And as I mentioned during the call earlier, we have, you know, the Canada launch that very, very recently started.

Rajan Sharma: We have Europe getting on stream with France as the identified and prioritized first country. And we should not underestimate the significant demand that we are expecting from LMSC countries.

Rajan Sharma: for which we have at this point in time some visibility but still a rather limited visibility and all of that is expected to help us taking an informed decision on midterm guidance for the product around mid next year.

And so, to your question of Ross Martin, Rochon, so...

Rajan Sharma: So first on the Xero Gross Margin, so when you look at our half-year results and you look at our Q3 result now, our year-over-year, our full-year gross margin for Xero improved by more than one percentage point, which shows you the direction this goes into. So we gradually improve the margin every quarter and we continue this trend, we expect this trend to continue. As you know, we experienced some issues in manufacturing and we lost a batch.

Rajan Sharma: in Q1. And so this is now behind us. And what we also see is actually yield is increasing compared to what we saw in prior years.

When we go to idle cost...

Rajan Sharma: You know we have our new beautiful manufacturing site in Scotland, where as we just said before we're gradually transferring over now manufacturing first of Ixiara and then followed by Ixchic. And so we do see idle costs going down over time, of course, as we transfer over to the new site.

Speaker Change: And just maybe to add on and complement what Peter just said, we are, and this goes back to a question that Ed raised earlier, so we expect all those...

Speaker Change: transfer activities and transition activities to continue well over the course of 2025.

Speaker Change: And then when we come into 2026, we will have a situation where everything.

will be in our

brand-new large-scale manufacturing facility.

Speaker Change: and basically the old facility will not be needed anymore at that point in time.

Speaker Change: And that's a unique opportunity for us because then we are really set also from a manufacturing standpoint for the long-term future and in a setting that allows even the cross-margin to further improve.

Speaker Change: Okay thank you and maybe Peter if I could just follow up on that on the one point on Exario so it sounds like you expect kind of continued gross margin increase from here is that fair and in that case is it likely to be linear?

Speaker Change: Well, you know, it will increase, whether it will be totally linear, I can't comment of course. But like we said in the past, we expect the Xero margin to continue to improve and over time to get back to where we were pre-COVID.

All right. Thank you very much.

Please stand by for your next question.

Speaker Change: The next question comes from Samir Devani at RX Securities. Your line is open, please go ahead.

Hi guys, thanks for taking my questions.

Speaker Change: I think I've just got a couple on the numbers. I think you mentioned that you're hoping that the commercial business will be cash generative next year. And I guess I'm trying to...

Speaker Change: understand how much of your GNA spend is attributable to the commercial business? So maybe if you can give us a bit of color on that and then the second question is just on

Speaker Change: you've outlined a plan for the Shigella development and phase three starting in 2027. I was just wondering if you could let us know how much is the cost of that phase three development program? Thanks very much.

Speaker Change: Yes, so let me take the question on, you know, commercial business, cash generative, and then the G&A cost. So, you know, we try to keep it relatively simple and the way we look at our G&A cost is we allocate about 40% on to commercial.

And that's how we determine the profitability then.

And thank you.

Speaker Change: You asked a question about, if I understood you correctly, you are talking about the entire Phase III program for Shigella, correct? So both or all the Phase III programs and trials together. Is this what you had in mind?

in light of that, I guess.

Speaker Change: Absolutely, absolutely. So now, if we look at the, so what is our current working hypothesis?

Our current working hypothesis is that

We will have

The two, phase three.

Speaker Change: a Phase 3 GYM study, a Phase 3 immunogenicity and safety study, and we will have a Phase 3 field efficacy study in infants.

Speaker Change: So, whether they will be initiated, all three in parallel, whether there will be a sequence, whether there will be a staggered approach, it all will depend on the

Speaker Change: I would say the situation coming out of the Phase II GEM studies

Speaker Change: The further assumption that we are currently taking is that the phase 3 study in the field of efficacy study in infants will be fully funded by a public institution.

Speaker Change: and so that we will, as Valneva, pay for the respective phase 3 studies we have at this point in time.

Speaker Change: A rough, rough ballpark estimate, but since we have not agreed the detailed trial design with the authorities, I do not feel comfortable giving a number at this point in time. What I can assure you is

Speaker Change: We will manage and stagger all of those activities in a way that we are fully committing and reconfirming that in the success state of life, this company will be sustainably profitable from 2027 onwards.

Okay, that's great. Thanks very much.

Speaker Change: There are no further questions, so I'll hand back for closing remarks.

Speaker Change: Thank you so much for your great questions, as usual. Thank you for your time. Thank you for following us, and we wish you all a wonderful remainder of the day. Bye.

Speaker Change: That concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.

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