Valneva SE

Good day and thank you for standing by. Welcome to the Valneva's Full Year 2023 Results and Business Update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1, 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 1, 1 again. Please be advised that today's conference is being recorded. I would now like to hand over to the speaker today, Joshua Drum, VP Global Investor Relations. Please go ahead.

Thank you. Hello, and thank you for joining us to discuss Velnymo's full year 2023 results and corporate updates. 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 12 months ended December 31st, 2023, which were published earlier today, available within the financial report section on our investor website. I'm joined by Valneva CEO, Thomas Lingelbach, and our CFO, Peter Buehler, who will provide an overview and update on our business, as well as our key financial results for 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, March 20th, 2024, 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, Josh, and welcome to today's call. Yeah, the year 2023 was not a year without challenges. but also a year with many achievements we are proud of. We made excellent progress across our R&D pipeline, and of course, 2023 was our chikungunya year. We got FDA approval for the world's only and first, you know, chikungunya vaccine, and very recently, ACRP recommendation and respective adoptions. We enrolled the phase three study with Pfizer online completely. And we are just about to re-entering phase one with the second generation Zika vaccine. And I'm going to go into more details on all of those programs. We have seen significant growth of our commercial business products that surpassed pre-pandemic phase by 12%. and 2022 sales by 26%. Both Xiaro and Zucoral, our proprietary brand, grew more than 70% respectively versus 2022. And overall product sales grew 63% versus 2022, excluding the COVID-19 sales, and Peter will go into much more detail. We are solidly funded with a strong mid-term financial outlook. We had more than 120 million euros catch at year end. We augmented that with close to 100 million net proceeds from our P&V sale early this year. And very recently, we extended the repayment of our interest-only period of the assisting loan facility which, of course, results in a significantly lower cash burn for the company. The operational business is, therefore, considered sufficiently funded, excluding debt repayment, of course, at a certain point in time, until the line commercial revenues enable a sustained profitability . When we look at the business in more detail, I would like to start this time with our strategy. Where do we see this company going? And as we have said already more than 10 years ago when we created Valneva, our strategy is to become a globally recognized vaccine company, fully integrated, focused on the development, manufacturing, and commercialization of vaccines in areas of unmet medical needs, contributing to our vision to a world where no one dies or suffers from a vaccine-preventable disease. We see our strategy in three key pillars. Number one, a driving commercial growth. With the recent approval of Ixtchik in the United States and our expected forthcoming approvals in other territories, we see really the opportunity to unlock Ixtchik value by building awareness and markets and growing things. We hereby capitalize on the bundle effect within our existing travel business. We will further expand global reach more addressing low-medium income countries through partnerships. And with a change in the overall setting and the portfolio and more focus on proprietary products, we see really cash flow positivity from the commercial business 2025 onwards. The second pillar is to capture our R&D upside. We will continue investing in new vaccines that address high unmet medical needs. And we will leverage our proven R&D engine and strategic partnerships. And we believe we are well positioned to do that, having developed three vaccines in the meantime, from early discovery to licensure. We will continue focusing on vaccines that can make a difference. First, only best. and we will generate meaningful catalysts for our investors targeting the next phase three entry post-life. We will maximize our integrated business model. We believe we are one of the very few companies left in the proof-by-vaccine space that can really build on an integrated model, which means we will build continual value from the end commercial execution We will support the timely approvals of our Lyme vaccine, which we continue to see as the single largest catalyst going forward. And by doing so, we see the possibility to achieve sustained profitability with potential successful commercialization and revenues online from our partner, Pfizer. When we look at Ixchic, the world's first and only chikungunya vaccine, It's FDA-approved in adults. More additional regulatory approvals are expected this year. It's a live attenuated vaccine that offers strong and long-lasting protection from a single shot, and we target a minimum of five years here. The FDA approval triggered also the PRV, which we sold, as I mentioned earlier, and the ACRP recommended the vaccine for certain travelers and laboratory workers. The U.S. launch is well underway, and we are selling through our existing and proven commercial infrastructure. Going forward, we see three key segments in terms of market opportunity. One, of course, travelers. military but also an opportunity for stockpiles given that chikungunya is on the list of potential outbreak preparedness diseases. We will continue leveraging partnerships for Latin America and other LMICs and with more visibility on the travel sector, the awareness around chikungunya, the market opportunity around chikungunya, we clearly see that the global market for chikungunya vaccine will exceed half a billion, with probably 300 to 400 million represented alone by the segment I was talking about earlier. In terms of upcoming milestones, I mentioned the additional anticipated approvals, EMA, Health Canada, and then MISA in Brazil. And we will, of course, also initiate the regulatory process in the UK. Towards the latter part of this year, we will, you know, further go through the clinical development, mainly the Phase IV clinical program, but also other clinical activities, e.g., in the pediatric field. And as we generate more and more data, we will undergo filing for potential label expansion. I mentioned already that our CHIK vaccine has a very differentiated target profile. It shows a rapid and long-lasting immunity across all age groups tested. And here, I would like to specifically point out that the vaccine has very, very high zero protection levels, including the most vulnerable population, namely elderly above 65 years of age, which has been specifically mentioned in the CDC adopted ACIP recommendation. We have close to 100% zero response rates after the single vaccination, and it has been maintained at a very high level over time. We got data already up to two years. We will generate data up to three years. And on safety, the vaccine is generally well-tolerated. Of course, it is a life-attenuated vaccine. Life-attenuated vaccines have the advantage that with a single shot, you have a very long protection. But there is a certain level ofogenicity. But this is absolutely in line with other well-established life-attenuated vaccines in the market. We reported adolescent trial data and this data suggests a favorable safety profile regardless of previous chickpea infection. Turning to our Lyme disease vaccine candidate VLA15. It is today the world's leading vaccine candidate against Lyme disease. It's the only program in advanced clinical development today. By way of reminder, it is a multivalent recombinant protein-based vaccine that targets the six most prevalent serotypes of Lyme borreliosis in the Northern Hemisphere. It follows a proven, established, and validated mode of action. It got U.S. FDA PASDA designation. And as I mentioned at the beginning, the Phase III Pivotal Efficacy Study is now fully enrolled. The program is partnered with Pfizer They have an exclusive worldwide right to commercialize the product, and we anticipate the market opportunity to be north of $1 billion. We have already received under the partnership with Pfizer certain milestone payments, but overall we are eligible for milestones up to $408 million. And upon successful commercialization, tiered royalties from 14 to 22%. When we look at the upcoming milestones, which are in the short term, all execution related, of course, we will, and this is an important point when we talk later about the financials, complete our financial contributions to Pfizer in the first half this year. Then on the execution side, we expect a complete full vaccination for the cohort one and the primary vaccination for the cohort two, meaning the cohort one will have received three doses priming plus a dose booster. We will later in the year see the two-year antibody persistent and booster results, which will give us a better indication as to whether this vaccine will require an annual booster later or not. And as guided many, many times, we expect efficacy results from the phase three trial at the end of 2025, which, and if successful, will support regulatory filings which we currently foresee in parallel in the United States and Europe in 2026. Slide 12 of the presentation shows one more time the Phase III efficacy study design. You remember that following initial operational issues, we split it in two cores within one study. Roughly 50-50, we have now enrolled more than 9,000 participants. The study is randomized one-to-one vaccine against placebo, two-to-one North America versus EU. And the primary endpoint is the rate of confirmed Lyme disease cases after two consecutive tick seasons. And when I mentioned earlier, full vaccination to be expected for cohort one is imminent. And then, of course, for cohort two, the booster vaccination will come next year. Turning to Zika, I mentioned at the beginning that we have decided to re-enter clinical development of Zika vaccine. We are leveraging what we call our optimized second-generation platform, which is a platform that originates from our Japanese best-for-life vaccine, Xero. got further than extended and optimized for our COVID vaccine VLA 2001. And we believe that this second generation activated, inactivated whole virus vaccine platform is perfectly suited for Zika. And so Zika is, as many of you know, also transmitted by Aedes mosquitoes. We all have experienced and have seen the devastating impact that Zika infections can cause. And today, there are no vaccines or specific treatments available. It is a PRV-eligible disease, and there is potential funding from public institutions. And we see there are really opportunities given the emerging epidemiology around Zika. In terms of next milestones, we will execute the phase one clinical trials with the enhanced process and optimized vaccine formulation, and then we will decide on the further development strategy, considering the results, of course, more insights around the market opportunities and external non-diluted funding. With this update on the business, I would like to hand over to Peter to provide us with the financial report.

Thank you, Thomas. Good morning or good afternoon to all of you. Now let's look at the financial review of our fiscal year 2023. Total product sales surpassed pre-pandemic levels by 12%, reaching 144.6 million euros, towards the upper range of our sales guidance. This represents an increase of 26% versus prior year. 2023 product sales included 5.7 million euros in sales of our COVID-19 vaccine VLA2001, which was discontinued in 2022. We do not expect further COVID sales from 2024 onwards. Product sales excluding VLA2001 reached 138.9 million euros, an increase of 63%. This increase was driven primarily by substantial growth of our proprietary travel vaccines. Looking in more detail, XERA sales reached 73.5 million euros, an increase of 78% versus prior year, primarily the result of the continued travel market recovery, as well as price increases. As at the end of September 2023, we signed a new one-year contract with the U.S. Department of Defense worth a minimum of 32 million dollars, of which a bit more than half is included in our 2023 sales. Ducoral sales reached €29.8 million, compared to €17.3 million in 2022, an increase of 72%. Similar to HTRO, Ducoral benefited from significant recovery in the private travel market, particularly in Canada, where there is a strong overlap between travelers to regions of high ETAP prevalence and the vaccine-approved indication in this country. Third-party product sales increased by 34% to reach 35.7 million euros for the fiscal year 2023, which was mainly driven by sales under our distribution agreement with Bavarian Nordic. The very positive sales performance continues to be, as already mentioned, related to the recovery of global travel markets, several of which have reached or even exceeded pre-COVID levels, and we expect this trend to continue. Moving on to slide 17, looking at the P&L. We already covered product sales. Other revenues, including revenues from collaborations, licensing and services, have now returned to their historic levels at 9.1 million euros, compared to 2022, which, as you can see, included substantial one-off, non-cash revenues related to COVID. Looking at expense, we observed a significant decrease in cost of goods, and this is again mainly the result of one-off effects related to the wind-down of our COVID-19 program. Research and development expenses decreased sharply from 104.9 million euros in 2022 to 59.9 million euros in 2023, which was driven solely by the lower spend on Valneva's COVID-19 vaccine. 2023 expenses were just below our guidance range of 60 to 7 million euros. At the same time, costs related to the Zika vaccine candidates increased as the company plans to re-initiate clinical development imminently. As we ramped up our preparations for XTRIC, our marketing and distribution expense increased from €23.5 million in 2022 to €48.8 million in 2023, of which €20.7 million were associated with large preparations, versus only €7.3 million in 2022. G&A expense increased from €34.1 million in 2022 to €47.8 million in 2023. In 2022, all expense lines benefited from a substantial non-cash adjustment related to the positive effect of the cost related to the company's share-based compensation due to the share price performance. Our G&A costs were also unfavorably impacted by a higher compliance cost related to our U.S. listing and one-off recruiting costs. Other income increased to €21.5 million in 2023 from €12.2 million in the prior year, primarily due to grant income received from Scottish Enterprise and the gain from supplements with the supplier related to low COVID activities. In 2023, Valneva substantially reduced its operating losses to €82.1 million compared to €113.4 million in 2022, which again was negatively impacted by non-recurring expenses related to the wind down of our COVID program. Adjusted EBIT dollars was nearly unchanged year over year at 65.2 million euros versus 69.2 million euros in 2022. Now moving on to financial outlook in slide 19. With the addition of XCHIC to our travel vaccine portfolio and with the continued growth we anticipate from our existing products, we expect our commercial business to deliver substantial growth over the mid-term. Based on current assumptions, we are targeting an approximately 2x sales growth in the next three years. This will be driven by a differentiated and highly competitive product, iXIARA, which is the only Japanese entepalitis vaccine approved in the U.S. and Europe, and the mandatory vaccine for U.S. troops deployed to Asia. iXCHIC, the first and only approved chikungunya vaccine, And Ducoral, the only cholera vaccine with an additional approval for ETEC in key markets. Next slide, please. We have raised our 2024 product sales guidance since our February announcement, now estimating between 160 to 180 million euros in product sales versus previously 150 to 180 million euros. This revised estimate takes into account an improved outlook regarding anticipated Xero supply constraints. and still assumes approximately 20 to 30% reduction in third-party sales this year, driven by external supply constraints. This brings us to a total revenue estimate of 170 to 190 million euros in 2024. We now expect higher other income compared to our announcement in February, moving from 95 to 105 million euros to 100 to 110 million euros, largely reflecting the 95 million euros in proceeds from the sale of the Chikungunya PRV. We also lowered and narrowed our research and development expense guidance from between 65 and 90 million to between 60 and 7,500 euros. This was based on additional visibility for our Chikungunya and Zika-related expenses, as well as an expected non-dilutive contribution from institutions in connection with Chikungunya activities and the product tech transfers to Valneva's new Almeda manufacturing facility in Scotland. As Thomas mentioned, we ended the year with 126.1 million euros in cash, which was further augmented by 95 million euros in proceeds from the PRV sale. This puts us in a very strong position as we expect to burn significantly less cash in 2024. This is driven by a few factors, primarily the fact that we expect to complete our contribution to the ongoing Phase III study for BLA15 in the first half of this year. Secondly, with continued revenue growth for XCR and Ducoril and improved efficiency in our manufacturing processes, we expect our commercial business, including XCHIC, to be cash-positive this year as it has been pre-pandemic. And we anticipate significant further growth going forward. I'm now handing back to Thomas to complete the mid-year outlook. Thank you so much, Peter.

Yeah, so it is important that we address also many, many questions that we have received in the market about the more mid-term prospects of our business and where we see this business going, which is also why I started the presentation by reminding everyone of the Balneva strategy. When we look this more concretely into a mid-term outlook, Peter mentioned that the proprietary business excluding Xshake will already be cash flow positive this year. Including Xshake, we expect the commercial business to contribute cash and help financing our R&D from 2025 onwards. It is driven by continued travel sales growth for Xtiaro and Ducoral, and we see, especially for ICIARO, a double-digit year-on-year CAGR for at least the next three years. We expect XGIC sales to exceed 100 million euros in year three of launch, and this even assumes competitive product entry. We will stay focused and strategic with regards to our investments in R&D, and our objective is clearly to provide our shareholders, and everyone who can benefit from novel, innovative vaccines with a new program to enter phase three once Lyme has completed its phase three. We see substantial cross-margin improvement as we are focusing on proprietary phase. You know, the majority of our third-party products fail, especially the collaboration with VN.

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We expect cross-margin improvements significantly, as I said, as we are focusing on proprietary sales. And we are improving substantially our manufacturing efficiency by leveraging our new facilities and predominantly the facility in Scotland, Almeda. And as Peter mentioned, especially for Chikungunya, but also for others, we expect sizable non-dilutive funding helping us to finance the R&D. When we look at the upcoming catalysts and news flows in the short term, on Chikungunya, we expect to initiate a phase three in immunocompromised individuals still in the first half of this year. We talked in length about the upcoming potential approvals by EMA, Health Canada, and Visa. We will file for potential label extension as we generate more data. We have a reminder we generated already data for the 12- to 18-year-olds in Brazil, and we will initiate our Phase IV clinical process. With regards to Lyme, as I mentioned earlier, on the Valor trial, we expect to complete the booster vaccination for cohort one in the second quarter, then the initial three-dose primary vaccination for the core two as well in the first part of this year. And then, as Peter mentioned, we complete our financial contributions two Pfizer phase three tricots in the first half of this year. And then later this year, the phase two year antibody persistence and booster results data, which will help us, you know, getting a better understanding about the necessity for potential annual boosters for this vaccine once implemented. With regards to additional news flow, we to expect a new U.S. Department of Defense supply contract in the second half of this year. And we will give more clarity on our R&D pipeline as we go along in 2024. With that, I would like to hand back to the operator to take your questions.

Thank you. As a reminder, if you would like to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. We will now take our first question. Please stand by. Please stand by. And the first question comes from the line of Max Herman from Stifel. Please go ahead, your line is now open.

Great, thanks very much for taking my questions and congratulations on the milestones achieved during 2023 as well as obviously the CHIC momentous approval. Three questions, if I may. Firstly, just in terms of getting back to the normal traveller's market. In terms of revenues, Duke Roll is pretty much back to where it was pre-COVID, but still significantly below Onyx Yaro. And I wondered how much further catch-up there is in volume terms for both products. That's question one. Secondly, it's just in your kind of guidance overall, you talked about bringing another phase three asset into development in the sort of mid-term phase. Obviously, I assume that's not the Zika program, particularly given Moderna's recent announcement that they were halting development of that without further external sources of funding post-Phase 2. And then just wanted to know, finally, just on XCHIC, when do you think you will have durability data of five years or more? Thank you.

Okay, yeah. Hi, Max. Very good question. So basically, you're absolutely right that we have not, in all markets, reached volume-wise pre-COVID levels. In some markets, we are back to pre-COVID volume levels. In other markets, not yet. However, we expect to be back or better in terms of volume this year compared to pre-COVID. And everything that we are seeing right now points in this direction. And this is specifically true for ICSIARO and ICSIARO-US. And I think that's a very important point. When it comes to phase three, we have intentionally not specified at this point in time which program we will bring into phase three. We are looking at a number of internal opportunities, but also external opportunities, all just to avoid misunderstanding within our R&D budget. And this is why I said on the news flow, we will provide further clarity on the pipeline development in the latter part of this year. When it comes to the antibody persistence data, we have the antibody persistence study for chikungunya is ongoing. We reported the two-year data last December. Obviously, this means that we're going to report the three-year data this December. And the trial will continue up to five years, which means every year in December we will report one year more in terms of persistence data. I hope this answers your questions.

Great. Yeah, thank you very much, Thomas.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Maury Raycroft from Jefferies. Please go ahead. Your line is now open.

Hi. Congrats on the progress, and thanks for taking my questions. I was going to ask one on XCHIC for exceeding 100 million for XCHIC by year three post-launch. Can you talk about the assumptions that goes into that? Can we assume that the 100 million is part of the 300 to 400 million market opportunity for travelers? as well as military, and should we extrapolate growth trajectory based on these numbers?

No.

Travel vaccines historically have shown an S-curve in the ramp-up, right? So there is a – this means you cannot just automatically extrapolate that because we – expect the year three to be the first year of the period where it really goes deep up. And what we have assumed here is indeed the, let's say, travel and military segment. We have excluded for the time being any potential stockpiling opportunity. We have excluded any potential and meaningful sales and LMICs and we have used in terms of modeling the IATA data the experience that we have from ICSIARO with regards to adoption rate in travelers and the most recent communicated price point for in the United States, and on which basis we are also extrapolating the other price points and market opportunities in the travel segment. I hope this answers your question.

Yes, definitely helpful. And Thomas, right at the beginning of your response, it broke out a little bit, and it came back in when you mentioned S-curve for the military segment.

Sorry. Can you repeat? Let me just do it one more time. So I just said that all travel vaccines show from an uptake perspective an S-curve historically, and this will certainly be also true for X-shaped. So we expect the year three, which is why we have guided year three as the first year where we see the program going into the deeper part of the S-curve. And the 100 million or the greater than 100 million include travel and military.

Got it. Okay. Makes sense. And for that 100 million, exceeding 100 million, So that includes presumably a U.S. military contract in there. Is there anything more you can say about that and just the progress in those communications with the military and when that could be announced?

Yeah. So this is, of course, a good question. So we are, you know, following approval and following recommendation. We are now in active dialogue with the US military, but also with other public institutions and governments with regards to potential government contracts, which include potentially even stockpiles. So those discussions are ongoing, but please keep in mind that we got the ACIP recommendation very, very recently. And also for Xero, it took a certain period after the ACIP recommendation before we got into the first contract. And this is what we are currently assuming as well.

Got it. That's helpful. And maybe one more question just following the ACIP recommendation. Um, maybe if you can talk about, um, what your Salesforce is emphasizing for the, as it relates to the extric data with payers and providers and, um, uh, is it the strong data in subject 65 and up? Um, I guess just what are some of the key points that they're emphasizing and then how are you addressing the onset of immunogenicity?

So basically, let's start from the very end of your series of different questions. So the product got approved by way of accelerated approval pathway, like many other vaccines did, by the way. So this means that the immunogenicity level or seroprotective thresholds are predictive and considered predictive for efficacy. And we are, of course, emphasizing our very strong data here that we are close to 100% and that this includes elderly, where we see also a major differentiation against potential other vaccines that may enter. And the second point is, of course, The unique setting that you have, you know, with a single shot, a very, very long protection, which of course means that this is an important feature when people think about chikungunya vaccination. The travelers that go there are very, very often travelers who go multiple times. And there's a lot of IATA data that supports that. And therefore we emphasize this. And of course we pay, we focus specifically the travelers 65 and above, but we promote according to what we are allowed to promote, meaning the label of the product as approved.

Okay, that's helpful. Thanks for taking my questions. I'll hop back in the queue.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Evan Wang from Guggenheim Securities. Please go ahead. Your line is now open.

Hey, guys. Thanks for taking the question. You know, I just had to uh first on the midterm outlook and some of the you know updated chicken gunya market opportunity assumptions seems like the total market is consistent with what you guys have said prior while the share of travelers has increased x travelers so you help us walk us through some of the updated assumptions here is that really driven by the acp recommendation you know higher travelers rates you know or initial reception of the ship price and then conversely uh in terms of the you know, reduce stockpiling or endemic opportunity. And then secondly, you know, as we're looking at the first year launch, know it'll be, you know, a ramp in the S-curve that you described. If you could help us understand any of the stockpiling or seasonality since we're so early on. Thanks.

Yeah. So a couple of different questions. So first of all, market opportunity, as I said, we have taken a couple of key data points into consideration. You have all seen the CDC map that defines the areas where chikungunya and chikungunya transmission represents a major risk. This is the basis. Then we use the other data with travelers going through this area, meaning the total population that we are targeting and focusing on. We are also using, of course, market data from the acceptance or expected acceptance for the vaccine, you know, preliminary data showed that especially the longevity of immune response and the high levels of protection are especially appreciated by potential customers and prescribers. And then, of course, we take adoption rates, and those adoption rates are, you know, really educated also based on our own experience from the travel vaccine sector and all that together has led us to you know further fine-tuning the opportunity for the vaccine in the travel segment as I mentioned earlier and this is including as I mentioned the price point or the different price points in the different countries Now, what is important is we have not included any potential stockpiling opportunity at this point in time because we don't think that it's prudent to do that in the absence of really knowing whether there is a commercial opportunity around stockpiling business. We have not necessarily decreased the LMIC opportunity, but we have not yet a clear feel for the lmse opportunity and we will further develop that so that's why we have focused our guidance right now on the um on the travel seconds thank you we will now take our next question please stand by

And the next question comes from the line of Ed White from HC Weinreich. Please go ahead. Your line is now open.

Good morning. Thanks for taking my questions. So first, I just wanted to ask you about the third-party sales and moving to a proprietary platform. You had stated that this is going to improve gross margins. but will there be any impact on your SG&A efforts?

Yeah. Hey, this is Peter. So, you know, the third-party business was really a way for us to bridge revenues during the COVID years. We have not really added, I mean, we added a couple of people here and there, but really not significant numbers. So the focus on our proprietary products will not have a dramatic impact on our SG&A cost. It's really cross-margin improvement that will be driven by that because our proprietary products have obviously much better cross-margin.

Okay. Thanks, Peter. And my other question was just regarding potential strategic transactions. You've mentioned it before. And I'm just wondering, you know, what is your strategy there? Maybe give us your thoughts on what makes for a good acquisition or what makes for a good target.

Yeah. So basically, we will target a next phase three program, as I mentioned, at the time when the Pfizer Lyme phase three trial will be completed. And we have a couple of interesting internal programs we are currently working on that could be advanced and accelerated to match this timeline. And we put it in direct competition to a couple of external opportunities that we are evaluating. When it comes to the criteria that we're going to use, we have, in the past, always focus our R&D pipeline development on trying to build vaccines and develop vaccine solutions in areas of unmet medical needs and where we can have a differentiated position first best only and basically this is what we're going to do going forward and as mentioned earlier as part of the news flow update, we hope to present a more detailed pipeline strategy in the latter part of this year.

Okay, great. Thank you for taking my questions. You're more than welcome.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Nick Hullett from Goldman Sachs. Please go ahead. Your line is now open.

Oh, hi there. Thank you for taking my questions. Just coming back to the Chikungunya programme if I could. On their phase four trial costs, how should we be thinking about phasing of these costs? And how significant are the non-dilutive contributions you're expecting towards those costs? And then a second, if I may, on financing. If we assume that there's no impact from potential business development deals in the near term, should we assume that you won't be required to raise equity until at least post a potential launch in line? Thank you.

So let me start with the first part, and then I'll let Peter develop a little bit this cash outlook. So basically, when we look at the pipeline development you are absolutely right so we are not expecting pipeline or any potential pipeline injection to negatively influence you know our cash runway that we have projected before when it comes to the phase four activities for chikungunya as part of our approval and we have disclosed this earlier Those phase four programs go over a long period of time. We have roughly four to five years to complete the two phase four studies. We had included this in our company deck, and it's still included, I think, in the company deck with regard to the timeline. So there is not necessarily an equal spread when it comes to spending, but it's many, many years of phase four spending. We have said earlier that we are expecting approximately 30% of our contributions to those costs, and that's part of our planning going forward. Peter, on the cash runway?

Yeah, I think as Thomas alluded to, so we said we were sufficiently financed for our operating business. I think debt repayment is a different story. And for this, I'm sure we will find a solution. And so that's sufficiently financed for our operating business would include, as Thomas said, a potential injection. So we could still cover that. And so right now, we do not have any plans to raise further equities.

That's great, thank you both.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Sameer Devani from RX Securities. Please go ahead, your line is now open.

Hi guys, thanks for taking my questions. I think I've got two or three. To kick off with Ixiaro, You mentioned getting back to pre-COVID levels. I think pre-COVID, XCRO had a margin of nearly 70%. And it seems quite a bit of a jump from the 52-odd that we've seen this year or 2023. So perhaps maybe a bit of commentary on how you expect the margin to evolve in line of that growth. And then just on XCHIC, again, on margins and I guess price as well, we can see it's been listed at $350 I'm just trying to work out what that would mean in terms of a net price to you guys. So if you can help on either of those, that'd be great. Thanks.

You want to say something? Yeah, I can start with Sixyaro. And hey, Samir, by the way. So yes, you're right. So pre-COVID, I think the margins we had published were in the 60s. And, yeah, I think close to 70. And we do not see any reason why we would not get back to this range again. And then I think on XCHIC, though it's public, so the wholesaler acquisition price is $275. So that's basically what we get for it in the United States.

Okay, that's great. Thanks very much.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Suzanne Van Fortuzen from Van Landschot Kempen. Please go ahead, your line is now open.

Hi, hello, this is Chiara on behalf of Suzanne. Thanks a lot for taking my question. I was wondering what was the trigger to put out a midterm outlook and if you could confirm whether the midterm outlook is also including or excluding any potential milestones from Pfizer. Thank you.

Yeah, so basically we have received a lot of feedback with regard to how we see the commercial business going especially for a new indication and a new product for which no benchmarks and no real data exist. And therefore we thought it is prudent to provide further clarity, point number one, on the on the future of the commercial business and how we see the ramp up in the launch years. The second part is, of course, we have received many questions around cash and cash necessities, given that we have clearly articulated that we would put own pipeline development in direct competition to potential external pipeline injection. We wanted to make sure that people do not interpret this as external means, you know, financing needs or an imminent financing need. When it comes to the Lyme payments, the Lyme payments come at the point where we actually commercialize the vaccine or where Pfizer is going to commercialize the vaccine. So, and they will be part of the influx that we expect the business to turn into sustained profitability.

Okay, great. Thank you.

Welcome.

Thank you. As a reminder, if you would like to ask a question, you will need to press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. As a reminder, to ask a question, you'll need to press star 1, 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, 1 again. As there are no further questions, I would now like to hand back to the speakers for closing remarks.

Thank you so much for your time. Thank you for your support and the excellent questions today and wish you a good remainder of the day. All the best.

This concludes today's conference call. Thank you for participating. You may now disconnect.