Valneva SE

Hello and thank you for joining us to discuss Valneva's first half 2023 results and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the six months ended June 30th, 2023, which were published earlier today, available within the financial reports section on our investor website. As always, I'm joined today by Valneva CEO Thomas Lingelbach and CFO Peter Buehler, who will provide an overview and update of our business, as well as our key financial results for the first half of the year. 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'll 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. Please note that today's presentation includes information provided as of today, September 21st, 2023, and Valneva undertakes no obligation to revise or update forward-looking statements, except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation.

Thank you so much, Jos. Very good day, everyone. Pleasure for me to report our half year one achievement. When we look at R&D, we made substantial progress towards the potential FDA approval of the world's first chikungunya vaccine. We have online now the cohort one of the phase three Valor study. completing its first tick season, and the core two is currently enrolling, and I will provide more details around that. We decided to reinitiate our Zika vaccine development with an expected clinical trial start early next year. Again, I will provide more details around this. When we look at the commercial business, we are very pleased with the commercial performance. Our product sales of almost 70 million euros have more than doubled as compared to prior year, excluding all the COVID sales, of course. And hence, we are on track to meet our 2023 sales guidance of 130 to 150 million euros. We had a strong cash position at the end of June with more than 200 million euros. And very recently, further strengthened it by an up to $100 million new supplementary debt facility. When we look at the business in detail, let me start with our chikungunya vaccine, which is a live attenuated vaccine candidate currently under FDA priority review. It is the first chikungunya vaccine candidate in the world that reported positive phase 3 data with all trial endpoint meds. It's the first chikungunya candidate that has an ongoing BLA application with potential approval and the filing accepted by Health Canada. By way of reminder, our live attenuated approach was chosen because we wanted to go for a single shot vaccine that was particularly well suited to target a long lasting protection compared to other chikungunya as it's currently being evaluated in clinical trials. Our results have demonstrated that our initial development hypothesis holds true and we have excellent data year to date on that vaccine, which I'm going to present a bit more in detail. From a strategic point of view, VLA 1553 fits perfectly within Valneva's existing commercial infrastructure, augmenting our existing travel vaccine portfolio. With regards to target population and geographical reach, you know that we have on the one hand side the travel business, but also an endemic need, a significant medical need in NMIC countries. where we have partnered with CIPI and Instituto Butantan, including certain local manufacturing activities. To remind everyone about the key features and timelines, current FDA PDUFA date, end of November, extended by one quarter due to ongoing discussions around phase four obligations. We have also the adolescent trial ongoing where we reported positive initial safety and immunogenicity data would come in November 2023. And we expect additional regulatory processes to commence, including the EMA later this year. Let me turn to page seven of the presentation. Since we got many questions about onset of immunity, we would like to present a little bit where we are on our vaccine today. You know, we have data that all got published in different journals, including the Lancet. We have the phase three data. We have also the phase one data. And we have done a number of post hoc analysis on the back of this data. What we can see here on this slide is that we have a very nice onset of immunity already at day 15. So you see the day 15 data shows data from our phase one cohort. And you see that even at a lower dose, which is not the phase three dose and the final dose, we are well, well above the zero response threshold. already on day 15, which means that in between day 8 and day 15, we will surpass the zero response threshold, which is identified by PRNT 50 greater or equal than 150. And hence, this titer level is reasonably likely to predict protection. Now, slide 8 shows you also a little bit where we are on zero response. And the zero response is sustained at highest levels up to month 12. At this point in time, we're going to read out month 24 in the not too distant future. And what is also important is the graph to the right, where you basically see that there are absolutely comparable titles in younger and older adults. So basically we see no difference across the different data points that we have clinically generated. And more importantly, we also, our vaccine has fast onset of immunity. And I think that's important to note. It will be further substantiated as part of further studies that we have planned or that are already ongoing. We recently reported positive initial safety results in adolescents and pre-exposed participants. This study was conducted in partnership with Instituto Butantanua. It's being conducted and funded by CEPI. We had more than 700 adolescents randomized against placebo. And for the first time, we looked at the vaccine in participants with prior exposure to the Chikungunya virus. Importantly, and this is a very meaningful finding, the vaccine continues to be generally well tolerated, including in individuals previously infected with chikungunya virus. The AE profile is consistent with adults, and the initial data suggests that we see even a more favorable safety profile in seropositive patients or participants, which is in line with what we published around our phase one data, where we basically described our so-called revaccination challenge, where people were, in parentheses, over-vaccinated with the vaccine itself. And of course, as we have done for the entire study, the independent DSMB has not identified any safety concerns associated with this vaccine. So now looking forward, the phase four alignment is of course currently the number one topic that we are dealing with. It is the reason for why we got a postponement on the PDUFA date in the first place. We are working very collaboratively with the FDA to align on post-approval phase four requirements. And this is not an easy endeavor for both parties. because this phase four alignment and the design of the phase four activities is likely to set future standards for outbreak disease indications under FDA accelerated approval pathways. Nothing exists today in this regard, and therefore we are breaking new grounds here. We have additional studies ongoing, antibody persistence study. You know that we are following the cohort here for five years. because we want to show that after a single shot, there's long protection. We reported the 12-month data in December, and the 24-month data I expected logically by the end of this year. Adolescence phase three trial, I mentioned already that this trial is important to support potential label expansion and licensure in Brazil. It's funded by CIPI and also an important part of the data needs to be included and will be included in the AMR submission. With regards to anticipated future trials, we are planning for co-vaccination, pediatric special populations, and then, of course, execution on the Phase IV program and Phase IV effectiveness in endemic settings. So when we look at the market, page 11 of the presentation, I mentioned it briefly, we have the travelers from non-endemic regions. High complementary, highly complementary with our existing travel portfolio. Significant need as we see more and more outbreaks including Europe and the Americas. We see a military opportunity here as well for troops stationed in areas with risk of chikungunya and of course in areas where we need to prepare for potential outbreaks or get already responses during outbreak situations. We are working, as mentioned before, with CEPI and Instituto Butantan. I'm very happy with this collaboration overall. So, in a nutshell, we continue to be absolutely excited about this first chikungunya vaccine that hopefully is going to make it to market, and we are looking forward to our and the approval of this vaccine in the United States first, and then in other countries thereafter. Yeah, when we look at our Lyme disease program, our program VLA15 is the only Lyme disease program in advanced clinical development today. We had multiple, you know, phase two studies, as you know, including first pediatric and adolescent data, We have currently the phase three ongoing called Study Valor. And we have partnered here with Pfizer. And this partnership with Pfizer is a very fruitful, very constructive partnership that has continued now for a number of years. And we have disclosed at multiple occasions the terms under which this exclusive worldwide partnership with Pfizer operates. By way of reminder, with regards to this vaccine, it's a recombinant protein vaccine candidate, multivalent, targeting the six most prevalent serotypes causing Lyme disease in the United States and Europe, because we wanted to make sure that we have a vaccine for people living and going to both sides of the Atlantic. It is targeting the altered surface protein A of Lyme borreliosis and hence follows an established mechanism of action for Lyme disease vaccine and therefore has also a high degree of de-risking associated with that effect. The program operates under fast vaccination granted by the US FDA in July 2017. As mentioned before, we have demonstrated strong immunogenicity results across three different phase two studies, which included also pediatric data. Overall, we see very strong data here. And I think that's something, especially the strong anamnestic response and strong booster response for a vaccine that might need a booster either annually or at a longer cadence remains a very important result. And this is another key step towards a potential vaccine solution in this field of high, high unmet medical need. On the phase three efficacy study itself, We are receiving many questions around the study, so therefore let me repeat again the key cornerstones of this study. Around 9,000 participants create at five years of age, so literally we cover the vast majority of the target population, and we are including people at high risk of Lyme disease by residents and or occupational or recreational activities in the US, in Canada, and in Europe. We are randomizing one-to-one against placebo and two-to-one US versus non-US. With regards to the primary endpoint, primary endpoint is the rate of confirmed Lyme disease cases after two consecutive tick seasons, meaning after completion of the full primary season, primary series, sorry, meaning three doses plus the booster dose. And as part of the secondary endpoints, we of course look at the efficacy after priming with three doses amongst other secondary endpoints as defined in the phase three protocol. Following the discontinuation last year for one, part of the study, one cohort of the study that was run through a specific set of study centers. We have now split into two cohorts still under the roof of one study. You see the enrolled participant cohort one in blue. Here you see the three doses given at month zero, two, and six. the booster in uh after 18 months so basically this cohort has been completely enrolled um we are now completing the tick season uh 2023 and uh and will be given the booster shot uh next year um and the core two is rolling um and you see um zero two six and then the booster in tick season 2025. Pfizer aims to submit the regulatory applications in the US and Europe in 2026, subject to positive data, which we hope to see at the end of 2025 after the completion of the 2025 tick season. Let me turn over to Zika. You know that Valneva has a Zika vaccine in its R&D portfolio for a number of years. We paused the development program when we refocused our resources towards the COVID vaccine development. Now that the COVID development or COVID vaccine development is behind us, we have reactivated our Zika program because we believe that there is a significant unmet medical need. And basically what we see here is also a highly complementary potential asset when it comes to leveraging our existing inactivated whole virus platform that we initially developed for Japanese encephalitis and then further enhanced and modified for our COVID vaccine BLA 2001. So it can be a very nice plug and play onto our existing platforms. At the same time, this is a vaccine candidate that would also fall under an accelerated approval pathway for which we are now with the help of our CHIC development generating a lot of expertise and capabilities. So that's the reason number two. Reason number three is actually that we meet the desired target product profile as articulated by WHO. All of that led us to our decision to continue or restart with our Zika development with TriStart as early as probably next year. When you look at our portfolio, we are working on a number of things in the preclinical arena. I would like to point out HMPV, for which we completed our preclinical proof of concept successfully, given that the vaccine development environment is transitioning towards an RSV-HMPV combination vaccine. We have initiated partnering discussions, and those discussions are currently underway, and partnering is under evaluation. Our lead candidate in the preclinic arena remains EBV, Epstein-Barr virus. We are currently in the final antigen identification phase and hope to have a final product candidate designed by the end of this year. Of course, we are working on a number of other things in the preclinical shop, but we are giving, of course, priority and focus. And I would like to remind you that our overall R&D portfolio management always strikes towards delivering highly differentiated assets, first in class, best in class or only in class. And with that, I would like to hand over to Peter to provide us the financial report and take us through the rest of the presentation. Thank you.

Thank you, Thomas, and good morning and good afternoon to all of you. Now let's look at the financial review of the first half of fiscal year 2023. Product sales reached 69.7 million euros and grew 109% over prior year. At constant currency, product sales grew 113.6%. The strong growth is driven by all product lines, with Ixiara growing at 150% at constant currency, Ducoral at 213% and third-party product at 46.8%. This excellent sales performance is primarily driven by the recovery of the private travel market, but also by price increases across the board. In the first half year, we also still recorded residual COVID-19 vaccine sales, related to a pre-existing contract with the Kingdom of Bahrain. Moving on to the income statement. Total revenues reached 73.7 million euros versus 93.2 million euros in the first half year of 2022, a decrease of 20.9%. In the prior year, Balnevo had recognized other revenues related to its COVID program, which explains this decrease. Looking at expense, we observe a significant decrease in cost of goods and services from €171.5 million in the first half of 2022 to €53.8 million in the current fiscal first half year. Prior years' cost of goods and services were heavily impacted by one-off items related to the wind-down of our COVID-19 program. The gross margin of both Dixiaro and Doucoural is still below pre-COVID levels and is amongst others adversely impacted by Ixiaro batch write-offs in our Scottish manufacturing site and high sales volumes in indirect markets where our average selling price is lower than indirect markets. In the first half year, we also recognized initial cost of goods related to the launch preparation of our chikungunya vaccine candidate. Research and development expense decreased from 51.9 million euros in 2022 to 26 million euros in the first half year of fiscal year 2023. That decrease is again driven by the lower spend on Valneva COVID vaccine programs and at the same time the cost related to the Zika vaccine candidate increased as the company has been working towards a re-initiation of our clinical development program. Marketing and distribution expense increased significantly year over year from 7.8 million euros to 20 million euros. The increase is related to higher pre-launch costs for our chikungunya vaccine candidates that more than tripled versus prior year. In addition, PIEC spend has had a positive impact related to our employee share-based compensation. G&A expense increased from 16 million euros in 2022 to 22.9 million euros in 2023. In the prior year, all expense lines had a favorable effect for a total of 19.5 million euros related to employee share-based compensation due to the share price development. The increase in other income from 3.6 million euros to 14 million euros is mainly related to the recognition of a grant received from Scottish Enterprise. Overall, the company records an operating loss of negative 35 million euros versus 150.4 million euros in the prior year. Adjusted EBITDA improved from 136 million euros to 28 million euros negative. Finally, we reported a cash and cash equivalent at June 30th, 2023 of 204.4 million euros compared to 289.4 million euros at the end of December 2022. This position, as mentioned, does not include the increased debt facility of 100 million dollars, of which 50 million dollars were drawn down in the third quarter of 2023. Now moving to slide 21 to review our guidance for the fiscal year. We reiterate our guidance for revenues and other income communicated earlier this year. We expect product sales to reach between 130 and 150 million euros and other income to reach 90 to 110 million euros. We also reiterate our guidance on R&D investment expected between 70 and 90 million euros. This concludes the finance section of this call. And now let's move to slide 23, looking at upcoming catalysts and news flow. On our VLA 1553 program, we still anticipate the PDUFA action date and the potential VLA approval at the end of November. We also expect to release adolescent immunogenicity results in November 2023 and progress to it and submit actually email regulatory submission in Q4. Also in Q4, we'll report additional 24-month antibody persistence data, and we expect the ASIP recommendation for Q1 in 2024. On VLA15, we expect the trial execution to continue with the recruitment of the cohort 2 in advance of the 2024 tick seasons, as explained by Thomas earlier during this call. Additional news flow, we expect imminently to announce a new DOD contract for ICSIARO, and then potential granting of an FDI priority review voucher as we obtain the BLA 1553 BLA approval. Also, as already mentioned, we expect initiation of our phase one clinical trial of Zika in our in-queue in the first quarter of 2024, and the advancement of selected preclinical programs mentioned just before by Thomas. With this, we really see Valneva poised for substantial growth, primarily led by new product launches. We see in the next six to 12 months, of course, VLA 1553 reaching the market, and then longer-term VLA 15 reaching the market, and for Valneva to actually be able to record significant milestones and revenues. Additional growth drivers, Of course, the continuous recovery of the travel market that will be reflected in substantial growth still in ICSIARO and Ducoral. As mentioned, the DoD contract for ICSIARO and then potential label expansion for VLA 15153 after the initial approval in adults. And then, of course, longer term in licensing or acquisition of additional clinical candidates and then potential market launch, of course, of these in licensed programs. So this concludes this part of the call. I would now like to hand back to Razia to open the Q&A session.