Valneva SE

Welcome and good day to our quarter one analyst call where we will report our full year 2021 results and provide corporate updates. So if you move to the slide two, please, and acknowledge the disclaimer, we go on to slide four of the presentation. Yeah, 2021. has been an exceptional year for Valneva, and we have been able to make excellent progress in all of our clinical programs. For Lyme disease, we reported further positive phase two results, including booster data. We determined finally the final phase three dose and vaccination schedule. For our COVID-19 vaccine, we reported positive phase three results, obtained a first emergency use authorization from Bahrain and are in ongoing rolling reviews for conditional approval with EMA and MHRA. For Chikungunya, we reported final positive phase three results and top-line lot-to-lot data and initiated the adolescent phase three activities. As you will see in the financial report, We have also been able to report strong full year 2021 revenues and cash position. Our total revenues are 348 million roughly in 2021 compared to around 110 in 2020, an increase of 216%. Our cash position is strong with 346.7 million as of end of December. We are very proud that we have achieved a successful NASDAQ initial public offering, European placement, and follow-on offerings. With that, let me take you a little bit through the different clinical programs. Slide six. First of all, VLA15, our multivalent Lyme disease vaccine candidate. As you know, this is the only Lyme disease program in advanced clinical development today worldwide. We got FDA fast track designation granted. We have an exclusive worldwide partnership with Pfizer. I'm going to report more about the phase two data and the booster response, as well as the phase three schedule and those that we finally selected. And of course, we are also waiting for further phase two data, which are expected to come in the second quarter 2022. By way of reminder, the multivalent vaccine candidate contains six serotypes, which cover the most prevalent serotypes in the northern hemisphere. And the vaccine candidate follows a validated mode of action for other Lyme disease vaccines that were on the market many, many years ago. In terms of results, we reported positive results from two initial studies, VLA 201 and 202 initiated a study VLA 15-221 in which we recruited 625 participants 5 to 65 years of age. We confirmed as part of that study where we compared also head-to-head a three-dose versus a two-dose schedule that the three-dose schedule is going to be the one to be used for phase three. and we reported those results in a sub-analysis in February this year. We expect further data from the pediatric and adolescent population soon in the second quarter of 2022. And of course, we have also seen from our study 202 strong top-line booster results. VLA 15 was immunogenic across all dose groups and elicited high antibody responses across all serotypes one month after primary vaccination. And the booster dose, one year following the six-month dose, elicited strong immunistic response. With that and on the basis of this data, we plan to initiate the pivotal efficacy trial in the third quarter this year. And of course, the clinical readout, as reported many times in the past, is expected to cover tick season 2023, and hence, readout is expected early 2024. The 25 million milestone payment is due to Vannevar upon trial initiation. BLA1553 is our single-shot chikungunya vaccine candidate. It is the most advanced chikungunya vaccine program worldwide today. It is the only program that reported final positive pivotal phase three results. And we coupled this with top line lot-to-lot data. And as mentioned at the beginning, we also initiated the adolescence phase three trial in January 2022. Also, the pediatric label extension is expected post-marketing. We got FDA Brexit therapy, fast track, EMA prime designations, and by way of reminder, the first one to receive BLA approval will be eligible for priority review voucher. We expect to initiate the FDA pre-submission process in the second quarter of this year. Chikungunya vaccine candidate BLA-1553 is a single-shot, live attenuated prophylactic vaccine that targets the chikungunya virus neutralization, and we expect very long protection after a single shot. In order to make the product accessible to LMIC countries, we partnered with CEPI and Instituto Potantan, and CEPI has been granted 23.4 million in support of this program. Chikungunya will provide an excellent fit with our existing commercial and manufacturing capabilities. We expect the global market, including endemic regions, to exceed half a billion annually by 2032. In terms of development outlook, I mentioned already that we expect the FDA pre-submission process to commence in the next quarter. And a little bit about the data and the phase three. So we completed the six-month follow-up period. All phase three immunogenicity and safety endpoints were met. And even after six months, we saw zero protection in 98.9% of participants after one month and 96.3% after six months. And the good safety and tolerability profile was confirmed. The positive top-line not-a-lot consistency trial for which we reported data earlier this year clearly confirmed the consistency of three lots manufactured. Final data is expected in quarter two 2022. The antibody persistence follow-up trial is ongoing and up to 375 volunteers from the 301 study will be followed annually for five years. The adolescent phase three trial was initiated in January 2022 to support potential label expansion, as I mentioned earlier, post-initial licensure in adults, and it's funded by CIPI. The pre-submission process with FDA is expected to commence, and again, the sponsor of the first chikungunya vaccine approved in the U.S. will be eligible to receive a priority review voucher. VLA 2001, page 10, our inactivated whole-virus COVID-19 vaccine candidate is the only inactivated COVID-19 vaccine program in the clinics in Europe today. It builds on our Valneva Ixiaro manufacturing technology combined with Dynavax's CPG1018 adjuvants. I mentioned earlier that the Bahrainian NHRR provided us with an emergency use authorization in March this year, and EMA and UK MHRA rolling reviews are ongoing. We have achieved last year an advanced purchase agreement for up to 60 million doses with the European Commission and for up to 1 million doses with Bahrain. The pivotal phase three data showed superiority versus AstraZeneca and significantly more favorable tolerability. We also obtained positive top-line homologous booster data, and we showed in lab experiments neutralization against Omicron and Delta variants. The ongoing clinical trials intracranially expand the target product profile as well as the geographical reach As you know, we are leveraging Valneva's manufacturing sites in Scotland and Sweden, coupled with our existing CMO partners. And this all will target an installed capacity of more than 100 million doses per annum. Coming back to the data, and especially the key data stemming from our CovCompare study, on immunogenicity, we met, of course, our co-primary endpoints. We showed superiority in terms of geometric mean titers for neutralizing antibodies, which are still today seen as the most relevant correlate for protection. And the GMT ratio that we observed was 1.39. And we showed non-inferiority in terms of zero conversion rates. We could also observe a quite interesting and broad antigen-specific T cell reactivity, not only against the S protein, but also against the N and the M proteins. In terms of safety and tolerability, VLA-2001 was generally well-tolerated, significantly more favorable profile compared to the AZ comparator, and we showed significantly fewer solicited adverse events, including injection site reactions and systemic reactions, which is, of course, something that is particularly important for that product and confirms what we have seen in the world of vaccinology previously for inactivated vaccines. Yeah, we also saw COVID cases in this study, as you may recall, and the occurrence of COVID cases was similar between the treatment groups. The complete absence of any severe COVID cases could suggest that both vaccines used in the study prevented severe COVID-19 caused by the circulating variant at the time predominantly Delta. Slide 12 summarizes the current purchase agreements and grants that we have received in connection with VLA 2001 to date. Up to 60 million doses from the European Commission to be supplied in 2022 and 2023. of which 24.3 million doses are expected to be supplied in the second and third quarter of 2022. And EC has the option to increase its initial purchase, the remainder of which would be delivered in 2023. With Bahrain, we have one million doses to be supplied in 2022 and 2023. And the NIHR emergency use authorization, which we received, allows us first deliveries at the end of this month. We also received a grant from Scottish Enterprise to advance vaccine development. This grant is totaling up to 20 million pounds expected to be received over the next three years, commencing already this month. The first grant up to 12.5 million pounds will support R&D related to VLA 2001 manufacturing. The second grant, up to 7.5 million pounds, will support R&D connected to manufacturing of Valneva's other vaccine candidates in Scotland. In terms of expected label extensions, as I mentioned earlier, we expect a gradual extension of the label for VLA 2001. We start with primary immunization in the 18 to 55 years old, then expand those in the elderly, 55 plus. We are currently generating a lot of additional booster data, including mix match, so-called heterologous booster data that we would like to generate. And then, of course, the different developments under the pediatric investigational plan adolescents 12 to 17 years of age, as well as children 2 to 11 years of age. Let me now hand over to Peter, our new CFO, for whom it is today his first earnings call with Valneva, to provide the financial report.

Thank you, Thomas, and good morning or good afternoon, everyone. As Thomas just said, this is my first earnings call as Valneva CFO. In the three months that I have been with the company, I met with a large number of colleagues to get familiar with the organization and its processes, but also with a number of investors and external partners. I'm excited to be part of Valneva and to contribute to our journey to become a highly valued internationally known specialty vaccine company. The year 2021 was a truly exceptional year for Valneva. We invested more than ever in the history of the company in our development programs and in our infrastructure, and the advancement of our pipeline is a testament of our consistently excellent execution. The impact of the global pandemic on the travel industry adversely influenced Berliners' top line over the last two years. At the same time, the company reacted by leveraging its expertise to develop the only inactivated whole virus COVID-19 vaccine in Europe. The related contract, first with the UK government and then with the European Union and Kingdom of Bahrain, generated substantial cash flows. During this call, I will further elaborate how the investment in our pipeline and the government contract impacted our financials. With this, let's move on to slide 15, look at our fiscal 2021 revenues. Total revenues for the year reached €348.1 million, compared to €110.3 million in the prior year, which represents an increase of 215.5%. This increase is driven by other revenues and primarily by revenues related to the COVID-19 supply and clinical trial agreements with the UK government. In relation with these contracts, we recognized 253 million euros as revenues in 2021. Revenues from technologies and services are also included in other revenues and more than doubled compared to prior year to reach 28.5 million euros. Product sales slightly decreased compared to prior year and reached 63 million euros. This decrease is a reflection of a still weak travel market. Foreign currency fluctuation had no impact on growth rates with this prior year. On the right side of the slide, you see the composition of our product sales with Xero just back generating more than 70% of total sales. Xero sales to the US military were 38 million, driven by the new supply contract signed in September of last year. The vast majority of our sales in 2021 was made through our direct sales channels. Moving on to slide 16, where you will see a year-on-year product sales comparison. Third-party products grew by 271% over prior year, driven to a large extent by the sales of Rabipur and Entepur. These products are covered by a distribution agreement between Valneva and Bavarian Nordic, and sales in certain geographies started in 2021. Ixiaro dress-backed sales decreased by 6.9% versus prior year, while Ducorals decreased by 81%, versus prior year. This adverse performance is, as already mentioned, caused by the still very heavy impact of the pandemic on the global travel industry. Moving on to our income statement on slide 17. We already covered the revenue part on the previous slide, so let's just focus on cost. Cost of goods and services increased significantly compared to 2020 and reached 187.9 million euros. The main driver for this increase were costs of goods related to our COVID-19 vaccine candidate. COVID-related costs of goods include inventory write-offs, cost for failed manufacturing batches, as well as advance payment for key raw materials. These advance payments were recorded as period costs in our 2021 income statement. Investments in R&D more than doubled compared to prior year and reached 173.3 million. This increase reflects the significant investment in our clinical pipeline, and most importantly, of course, the advancement of our COVID-19 vaccine candidate. Our R&D investment into our other clinical candidates slightly decreased versus prior year, which is in line with the planned progression of our pipeline. Marketing and selling costs increase as we invest in pre-launch activities of our Chikungunya program. G&A costs saw a significant increase of 20 million to reach 47.6 million euros, and this increase was driven by several factors. Our US IPO generated additional costs compared to prior year, asset investment in support of our COVID program, an increased non-cash effect related to our share-based compensation and related social security. Overall, our employee-related expense increased by more than 50%, a reflection of increased staff to support our development programs and ramp up of our manufacturing capacity, plus again increased costs related to our share-based compensation. Other income increased from 19.1 million to 23 million euros, driven by an R&D tax credit increase from 10 to 22 million euros due to our heavy investment in our COVID vaccine program. At the same time, revenues related to grants decreased from 7.7 million in 2020 to 1.7 million euros in 2021. Finally, total financial income and expense plus income tax increased by roughly 3 million. This increase was primarily driven by higher financial expense in relation to our refund liabilities and increased income tax charges. These increased expenses were partially offset by a favorable foreign exchange gain of 8 million euros. As a result, we record a loss of 73.4 million euros for fiscal year 2021 compared with a loss of 64.4 million euros in prior year. The EBITDA of negative 47.1 million euros slightly deteriorated versus the year 2020. Slide 18 illustrates an analysis of the group P&L for COVID versus the rest of the business. As you can see, the COVID business generated a positive EBITDA for the year 2021. At the same time, our business excluding COVID generated a negative EBITDA as we continue to invest substantially to advance our pipeline. Our non-COVID R&D expense were at the low end of the guidance for the year of 60 to 70 million euros. Moving on to the balance sheet in slide 19. As already mentioned, in 2021, we invested substantially in our infrastructure, primarily driven by investment in our COVID-19 manufacturing and fill finishing sites in Scotland and Sweden. Overall, we invested 95.8 million euros in property, plant, and equipment. At the same time, Our inventories increased by 97 million euros to 124.1 million euros due to stock of raw materials and work in progress related to our COVID-19 vaccine. Trade receivables increased from 77 million to 115 million euros, primarily driven by receivables from member states of the European Union in relation to the advanced purchase agreement for our COVID-19 vaccine candidate. To date, the mass majority of the trade receivables at December 31st have been paid. Our cash and cash equivalents increased significantly from 204 million to 346.7 million euros. This increase is a result of significant cash inflows from the contract with the UK government, the advanced purchase agreement with the European community, and the US IPO and follow-on offering. With the strongest cash position in the history of the company, Valneva has the financial flexibility to execute on its plans and further advance its clinical pipeline. Moving to slide 20, our total equity increased by roughly 100 million compared to December 31, 2020, driven by our US IPO and follow-on offering. Total liabilities increased significantly and mainly related to contract and refund liabilities. Contract liabilities increased by approximately 35 million euros. This increase was driven by payments received from member states of the European Union, as well as the Kingdom of Bahrain, in relation to the anticipated supply of VLA 2001. At the same time, we recognize the total revenue of 87 million related to the UK supply agreement that were recorded under contract liabilities at the end of fiscal year 2020. Total refund liabilities increased by about 143 million euros driven by payments received from the UK government. Slide 21. outlines the main impact of the UK Supply Agreement and clinical trial agreements on our 2021 financials. In 2020 and 2021, we received total contributions of 420 million euros. In 2021, 253 million euros were recognized as revenues, while 167 million euros remain on our balance sheet and are reflected on the refund liabilities. According to the supply agreement with the UK government, The company is required to pay to the UK government a low single-digit royalty on its sales of VLA 2001 to customers outside the United Kingdom. 85 million euros of the remaining refund liability is set aside to cover the maximum royalty obligation. The remaining 80 million represents a potential refund liability related to advance payments received for our new manufacturing site in Scotland. We expect to recognize this amount as revenues in the future. This concludes the review of our financial statements. Now let's move to slide 23 to look at our guidance for the financial year 2022. As already disclosed at the beginning of February, we expect total revenues to be between 430 and 590 million euros, whereby 350 to 500 million are expected to be for our COVID-19 vaccine. 60 to 7 million euros are expected for other vaccines. This range takes into account existing purchase agreements, but also anticipates additional contracts to be concluded over the next few months. Revenues from collaboration licenses and services are expected to reach approximately 20 million euros. R&D investments are expected to reach between 160 and 200 million euros. This range covers the advancement of our pipeline, and the range depends on the execution of plans, as well as potential new clinical trials related to our COVID-19 vaccine. This concludes the finance section, and with this, I would like to hand back to Thomas to provide an update on the expected news flow.

Thank you so much, Peter. Yeah, let me conclude with page 25 of the presentation and summarize the key upcoming catalysts and news flow. For Lyme, we mentioned it already, first pediatric data to be expected next quarter. and the phase three initiation thereafter expected in the third quarter of 2022. They're probably the most relevant milestones and catalysts for Lyme. For chikungunya, as disclosed at the beginning of the presentation, we expect to commence the pre-submission process with the FDA in the next quarter. And alongside with that, also the final lot-to-lot phase three data, you know that outside of the world of COVID, you know, you are required to have six months follow-up for the respective clinical studies. And yeah, for our COVID-19 vaccine candidate VLA 2001, we've been discussing a lot about it. You know, of course, we hope for our regulatory approvals in Europe. through EMA and MHRA, and then followed by supplies and hopefully further purchase agreements. And since we are still in clinical development, have a lot of studies ongoing and still to commence, we expect further clinical trials and data. Yeah, with that, let me conclude our presentation and open it up for your questions. Thank you.