Valneva SE

Hello, and thank you for joining us to discuss Valneva's full year 2022 consolidated financial results, which were published today and are available on our website. It's my pleasure to welcome you today. I'm joined by Valneva's CEO, Thomas Lingelbach, and CFO, Peter Buehler, who will provide a brief overview of our business and our financial results for the period, as well as updated financial guidance and a summary of anticipated upcoming milestones. There will be an analyst Q&A session at the conclusion of the prepared remarks. 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 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 also listed on our company website, www.balneva.com. Please note that today's presentation includes information provided as of today, March 23rd, 2023, and Valneva undertakes no obligation to revise or update forward looking statements, except as required by applicable securities laws. And with that, it is my pleasure to introduce Thomas to begin today's presentation.

Thank you, Josh. Good afternoon. Good day to all of you. Well, 2022 was a year marked our ability to adopt to a changing environment. and showed our resilience. We achieved several key milestones that underpin our unique value proposition. We made continued progress across the R&D pipeline with our chikungunya vaccine now under VLA review. On Lyme disease, we started the phase three pivotal efficacy study Valor together with Pfizer. On COVID-19, we were the first company to achieve a full marketing authorization by EMA. However, given the changing environment around COVID and the prospect of that vaccine, we decided to not further invest in development and stock manufacturing for COVID. We accelerated our preclinical activities with the aim to build a new exciting R&D pipeline nothing beyond lime and chicken gunja. We have seen a significant rebound of the commercial business and we clearly capitalized on the strong recovery in the travel segment and we complemented our commercial portfolio with additional third-party product sales. We have reported strong full-year 2022 revenues and cash position with revenues above €360 million and product sales year-on-year increased well above 80%. Our cash position at the end of 2022 was close to 290 million. We also strengthened our shareholder base with a successful upside follow-on offering, which included now also our new major long-term shareholders and Pfizer. With that, let me go straight into our programs and into the business update. And I will start with Chikungunya, page six of the presentation. By way of reminder, our Chikungunya program is the most advanced Chikungunya program in development worldwide. It is a live attenuated vaccine candidate targeting long lasting high zero response after a single shot. Basically the phase three Phase 3 study met all primary endpoints in terms of zero response rate, but also in terms of lock-to-lock consistency. We reported positive 12-month antibody persistence data and the long-term persistence trial that will measure the zero response rate over time, targeting at least five years. The adolescence trial is fully enrolled by now, and we expect first data mid-2023. We are under priority review for the BLA. A PDUFA action date has currently been assigned for end August 2023, and we expect to commence other regulatory processes in the second half of this year, including EMA. The program got also granted FDA fast track and breakthrough and EMA prime designation, as you know. In terms of target population and overall geographic reach, we have explained before that we see of course the non-endemic countries and here primarily travelers, military, but also the possibility for outbreak preparedness and stockpiling. And on the other hand, the endemic use, where we have a partnership agreement with CEPI and Instituto Butantan. From there, let me turn over to the key data for Chikungunya. Serial response, 99% after a single vaccination. This immunogenicity profile has been sustained even after 12 months. And we have seen the similar zero response rate in elderly, which is particularly encouraging. And of course, on the basis of that high zero response rate, we see also 100% zero conversion. With regards to safety data, VLA1553 was generally well tolerated. We had, of course, as expected for a vaccine of that class, solicited systemic adverse events, but the majority of solicited adverse events were mild or moderate, and only 2% of study participants reported severe solicited adverse events, most commonly fever. In terms of the future commercialization, as we repeatedly communicated, VLA 1553 fits perfectly within our existing commercial infrastructure. And we have a high caliber team with significant experience in the vaccine space. And we are currently adding a significant amount of talent and people as we are preparing for the commercial launch and market access for this brand new vaccine in a brand new indication. And we are all extremely excited about the prospect of being in a position to launch such a product. Let's go to Lyme. It is, again, following our pipeline differentiation around first, only, or best in class, the only Lyme disease vaccine in advanced clinical development today. It is a multivalent recombinant protein-based vaccine. covering the six main serotypes of Lyme borreliosis prevalent in the Northern Hemisphere. We initiated the phase three study on the back of positive results for three phase two studies, including a pediatric population. You know that as part of the ongoing phase three study, there were GTP issues observed that let the study sponsor and our partner Pfizer to actually stop a significant part of the study subjects that were included in the study. Given the seasonality around Lyme development, we have currently a review of the trial design and the associated timelines ongoing. And this is, of course, a process that will still take a bit of time. I think by way of reminder with regards to the data that have always been extremely strong for Lyme, and of course, also the GMP issues, GCP issues that we have been facing now as part of the phase three conduct do not change the picture on the underlying signs. and value of this program. All three phase two studies showed strong immunogenicity. The product has been in more than a thousand people, and as I said, including pediatric population. And we have seen, as part of the booster studies, a very strong anamnestic response, which is of utmost importance for a product that is expected to be boosted When we look at our pipeline, you basically see that we are currently reviewing most of our, some of our preclinical and previous clinical candidates with regards to next clinical entry. We have a CICA candidate for which we conducted a phase one study. We did not progress that further because of the work that we commenced on COVID. However, we are currently evaluating a potential clinical reentry at the end of this year or very, very early next year. Given that we could leverage one of our existing platforms, And given that WHO made a clear recommendation for Zika vaccines to be based on inactivated whole virus technologies. HMPV, Human Immersive Pneumovirus, is a program that we developed throughout the preclinical phase. It has reached the end of the preclinical phase with the initial preclinical proof of concept being completed. But given that the market is shifting in the development arena towards combination vaccines, RSV, HMPV, we've decided to evaluate a potential partnering before taking it potentially into a first trial in humans. Our lead program in our preclinical shop today is Epsom bar virus. And we target the completion of the antigen identification for such a quite complex development in an area of a very high unmet medical needs by the end of 2023. The two other programs that we have in early R&D are Campylobacter and Parvovirus. And we are still evaluating whether we put them into the preclinical R&D and development as of now or not, but this is something that we will decide over the course of this summer. With that, I would like to hand over to Peter to provide us the financial report.

Thank you, Thomas, and good morning or good afternoon to all of you. Let's look at the financial review of our fiscal year 2022. Total revenues grew by 3.8% versus fiscal year 2021, driven by a strong product sales growth. Total product sales reached 114.8 million euros, an increase of 82.3% versus prior year, or 66.7% in constant currency. 2022 product sales include 29.6 million euros of VLA 2001, our COVID-19 vaccine. Product sales, excluding our VLA 2001 sales, reached 85.2 million euros, exceeding our guidance of 70 to 80 million euros. Moving on to slide 14, looking at product sales details. Ikeara sales reached 41.3 million euros, a decrease of minus 8.4% versus Taiye, as a result of fewer shipments to U.S. military. The decrease in sales to U.S. military was partially offset by significant increase of sales in the travel market, of 300%. DoCoral sales reached 17.3 million euros compared to 2.4 million euros in 2022, an increase of more than 600%, once again driven by the recovery of the travel market. Third-party product sales increased by 72% to reach 26.5 million euros for the fiscal year 2022. This represents a record level of this product segment, as well, and they have managed to increase third-party product sales consistently over the last few years. The very positive sales performance in our travel vaccine is, as already mentioned, related to a travel market recovering faster than expected. Finally, as already mentioned, we shipped COVID-19 vaccines for an amount of 29.6 million euros to certain member states of the European Union, as well as to the Kingdom of Bahrain. Moving on to slide 15, looking at the P&L. We already covered product sales. Other revenues reached €246.5 million and primarily consist of one-off revenues derived from the advanced purchase agreements with the European Commission and the United Kingdom. The cash related to these revenues were received in 2021 and early 2022. Also included in the other revenue line is the adverse impact related to amendments of the VLA15 agreement with Pfizer and updated cost sharing. Further details will be included in our universal registration document in 20F that we plan to publish next week. Total revenues reached €361.3 million, slightly exceeding our guidance of €340 million to €360 million. Looking at expenses, we observed a significant increase in cost of goods, and this is mainly a result of one-off items related to the wind-down of our COVID-19 program, following reduced market demand. Research and development expense decreased from 173 million euros in 2021 to 104.9 million euros in the fiscal year 2022, and stayed well within the revised guidance of 95 to 110 million euros communicated during our nine-month results release. The decrease compared to prior year is mainly driven by lower spend on our VLA2001 program, but also by decreased spend on clinical trials of the chikungunya vaccine, as the program advances towards licensure. Marketing and distribution expense remained stable compared to prior year at 23.5 million euros and contained 7.3 million euros of cost for our chikungunya vaccine candidate, twice the amount spent a year ago as we prepared for a potential launch. G&A expense decreased significantly from 47.6 million euros in 2021 to 34.1 million euros in 2022. All expense lines benefited from a substantial non-cash adjustment related to the positive effect on the cost related to the company's share based compensation due to the share price performance in 2022. Overall, an upside of 25 million euros resulted in 2022 compared to a total cost of 37 million euros in 2021. Other income of €12.2 million mainly consists of R&D tax credit and other expense related to the provision for the ongoing revised inter-cell merchant litigation procedures. Total other income decreased compared to prior year due to the lower R&D spend and the related decrease of R&D tax credit. In 2022, Valneva generated an operating loss of €113.4 million compared to €61.4 million in prior year, and an adjusted EBITDA of negative 69.2 million euros versus minus 47.1 million euros in the prime year. Next slide, please. Looking at our COVID business segment, we see total revenues of 309.6 million euros with a total cost of goods and services of 267.1 million euros. COVID cost of goods includes significant costs related to the wind-down of the COVID program. The company recognized major costs related to a write-down of all COVID-related inventories and onerous agreements, in particular the discontinuation of a third-party manufacturing contract. The operating loss for the COVID segment in 2022 reached minus 42.8 million euros. The business outside COVID generated a total revenue of 51.7 million euros. As already mentioned, the negative other revenues were driven by the revised LIME agreement. Cost of goods and services reached 57.3 million euros and consists of 9.2 million euros cost of technologies and services, 3.3 million euros for vaccine candidates, and 41.8 million euros of commercialized products. Gross margin of product sales reached 45.5% compared to 36.5% in 2021. Cost of goods of commercialized products also include impairment charges related to Ducorol. Total operating loss for the business outside COVID was 70.6 million euros compared to an operating loss of 65.3 million euros in 2021. The increased operating loss is driven by the negative revenues related to the Pfizer agreement. Moving on to slide 17 and looking at our balance sheet. Total assets decreased from 817 million euros at the end of 2021 to 621 million euros at December 31st, 2022. The main decrease in assets relate to a sharp decrease in inventories, primarily related to the full write-down of all COVID-19-related inventories. Cash and cash occurrences at the end of 2022 were at €289.4 million, compared to €346.7 million at the end of the prior year. Next slide. Well-needed equity was strengthened in 2022 through a global offering of €102 million at the end of the third quarter, as well as prices investment in Valeva shares for a total value of 90 million euros. At the same time, total liabilities decreased by 245 million euros, in particular driven by a decrease of contract and refund liabilities, driven by the revenue recognition of deferred revenues related to the COVID-19 agreement. Borrowings and other non-current liabilities remained stable, while total borrowings increased due to an increase in the Dealfield and OrbiMed loan, these liabilities decreased due to amortization and the foreign exchange impact. Provisions decreased due to lower cost of share-based compensation driven by the decrease in Balneva share price. Overall, Balneva significantly improved its debt-to-equity ratio in 2022. Now, moving on to the financial outlook on slide 20. we expect product sales to reach 130 to 150 million euros and this includes marginal remaining vla 2001 sales under the bahrain supply agreement further 90 to 100 million euros of other income are expected in relation to the sale of the prv expected upon potential approval or jikungunya vaccine candidate investments into research and development are anticipated to reach between 70 and 80 million euros This concludes the finance section of this call, and I would like to hand back to Thomas for the news flow.