Valneva Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 20, 2024

There are 11 speakers on the call.

Operator

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 speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand over to the speaker today, Joshua Drumm, VP, Global Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you. Hello, and thank you for joining us to discuss Valneva's full year 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 12 months ended December 31, 2023, which were published earlier today, available within the Financial Reports section on our Investor website. I'm joined by Valneva's 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.

Speaker 1

There will be an analyst Q and 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 20, 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.

Speaker 2

Thank you so much, Josh, and welcome to today's earnings call. Yes, 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 and D pipeline. And of course, 2023 was our chikungunya year. We got FDA approval for the world's only and first chikungunya vaccine and very recently ACIP recommendation and respective adoptions.

Speaker 2

We enrolled the Phase III study with Pfizer online completely, and we are just about to reentering Phase I with the 2nd 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. Our products surpassed pre pandemic sales by 12% and 2022 sales by 26%. Both IXIARO and DUKORAL, our proprietary brands, grew more than 70%, respectively, versus 2022.

Speaker 2

And overall, product sales grew 63% versus 2022, ex excluding the COVID-nineteen sales, and Peter will go into much more detail. We are solidly funded with a strong midterm financial outlook. We had more than EUR 120,000,000 of cash at year end. We augmented that with close to EUR 100,000,000 as proceeds from our PIV sales early this year. And very recently, we extended the repayment of our interest only period of the existing loan facility, which, of course, results in a significantly lower cash burn for the company.

Speaker 2

The operational business is, therefore, considered sufficiently funded, excluding debt repayment, of course, at a certain point in time until the Lime commercial revenues enable a sustained profitability for Wealthiva. 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 but suffers from a vaccine preventable disease. We see our strategy in 3 key pillars: number 1, driving commercial growth.

Speaker 2

With the recent approval of XCheck in the United States and our expected forthcoming approvals in other territories, we see really the opportunity to unlock extra value by building awareness, end markets and growing things. We hereby capitalize on the bundle effect within our existing travel business. We will further expand global reach, more addressing lowmediumincome 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 and D upside.

Speaker 2

We will continue investing in new vaccines that address high unmet medical needs. And we will leverage our proven R and D engine and strategic partnerships, and we believe we are well positioned to do that, having developed 3 vaccines in the meantime from early discovery to licensure. We will continue focusing on vaccines that can make a difference. 1st, only best. And we will generate meaningful catalysts for our investors, targeting the next Phase 3 entry post life.

Speaker 2

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. So which means we will build continual value from R and D and 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.

Speaker 2

When we look at Ixik, the world's 1st and only chikungunya vaccine.

Speaker 3

If FDA approved in

Speaker 2

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 5 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.

Speaker 2

S. Launch is well underway, and we are selling through our existing and proven commercial infrastructure. Going forward, we see 3 key segments in terms of market opportunity. 1, of course, travelers, military, but also an opportunity for stockpile given that chikungunya is on the

Speaker 3

list of potential outbreak of

Speaker 2

carelessness diseases. We will continue leveraging partnerships for Latin America and other MMICs. 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 EUR 500,000,000 with probably EUR 300,000,000 to EUR 400,000,000 represented alone by the segment I was talking about earlier. In terms of ARPA in milestones, I mentioned the additional anticipated approvals, EMA has Canada and then Visa and Brazil. And we will, of course, also initiate the regulatory process in the UK.

Speaker 2

Towards the latter part of this year, we will 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 tick vaccine has a very differentiated target profile. It shows a rapid and long lasting immunity across all age groups tested.

Speaker 2

And here, I would like to specifically point out that the vaccine has very, very high seroprotection 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% seroresponse rates after the single vaccination, and this has been maintained at a very high level over time. We got data already up to 2 years. We will generate data up to 3 years. And on safety, the vaccine is generally well tolerated.

Speaker 2

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 of rigidity, but this is absolutely in line with other well established lipotenoid vaccines in the market. We reported adolescent trial data, and this data suggests a favorable safety profile regardless of previous Turning to our Lyme disease vaccine candidate, VLA15. It is today the world's leading vaccine candidate against Lyme disease.

Speaker 2

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 6 most prevalent serotypes of Lyme borreliosis in the novel hemisphere. It follows a proven, established and validated mode of action. It got U. S.

Speaker 2

FDA pathway 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 this product, and we anticipate the market opportunity to be north of $1,000,000,000 We have already received under the partnership with Pfizer certain milestone payments. But overall, we are eligible for milestone up to $408,000,000 And upon successful commercialization, tiered royalties from 14% to 22%.

Speaker 2

When we look at the upcoming milestones, which are in the short term or 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 1 and the primary vaccination for the Cohort 2, meaning the Cohort 1 will have received 3 doses priming plus a dose booster. We will later in the year see the 2 year antibody persistent booster result, 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 III 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.

Speaker 3

Slide 12 of the

Speaker 2

presentation shows one more time the Phase III efficacy study design. You remember that following initial operational issues, we split it in 2 cohorts within one study, roughly fifty-fifty. We have now enrolled more than 9,000 participants. The study is randomized 1 to 1 vaccine against placebo, 2 to 1 North America versus EU. And the primary endpoint is the rate of confirmed Lyme disease cases after 2 consecutive 6 seasons.

Speaker 2

And when I mentioned earlier, full vaccination to be expected for cohort 1 is imminent. And then, of course, for cohort 2, the booster vaccination will come next year. Turning to Zika. I mentioned at the beginning that we have decided to reenter 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 and for life fact in IXIARO, got further then extended and optimized for our COVID vaccine in BLA-two thousand and one.

Speaker 2

And we believe that this 2nd generation, activated, inactivated whole virus vaccine platform is perfectly suited for Zika. And so tica is, as many of you know, also transmitted by ileus mosquitoes. We all have experienced and have seen the devastating effect 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.

Speaker 2

And we see there clearly opportunities given the emerging epidemiology around Zika. In terms of next milestones, we will execute the Phase I clinical trial with the ENHANZE 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 dilutive funding. With this update on the business, I would like to hand over to Peter to provide us with the financial report.

Speaker 3

Thank you, Thomas. Good morning or good afternoon to all of you. Now let's look at the financial review for our fiscal year 2023. Total product sales surpassed pre pandemic levels by 12%, reaching EUR 144,600,000 towards the upper range of our sales guidance. This represents an increase of 26% versus prior year.

Speaker 3

2023 product sales included €5,700,000 in sales of our COVID-nineteen vaccine, VLA 2001, which was discontinued in 2022. We do not expect further COVID sales from 2024 onwards. Product sales excluding VLA 2001 reached €138,900,000 an increase of 63%. This increase was driven primarily by substantial growth of our proprietary travel vaccines. Looking in more detail, Ixiaro sales reached €73,500,000, an increase of 78% versus prior year, primarily the result of the continued travel market recovery as well as price increases.

Speaker 3

As at the end of September 2023, we signed a new 1 year contract with the U. S. Department of Defense worth a minimum of EUR 32,000,000 of which a bit more than half is included in our 2023 sales. DUKORAL sales reached EUR 29,800,000 compared to EUR 17,300,000 in 2022, an increase of 72%. Similar to IXIARO, DUKORAL 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's approved indication in this country.

Speaker 3

3rd party product sales increased by 34 percent to reach €35,700,000 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 I already mentioned, related to the recovery of global travel markets, several of which have reached our or even exceeded pre COVID levels, and we expect this trend to continue. Moving on to Slide 17, looking at the P and L. We already covered product sales. Other revenues, including revenues from collaborations, licensing and services, have now returned to the historic levels at €9,100,000 compared to 2022, which as you can see included substantial one off non cash revenues related to COVID.

Speaker 3

Looking at expense, we have 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-nineteen program. Research and development expenses decreased sharply from €104,900,000 in 2022 to €59,900,000 in 2023, which was driven solely by the lower spend on Valneva's COVID-nineteen vaccine. 2023 expenses were just below our guidance range of €60,000,000 to €7,000,000 At the same time, costs related to the Zika vaccine candidate increased as the company plans to reinitiate clinical development imminently. As we ramped up our preparations for Ixtrig, our marketing and distribution expense increased from EUR 23,500,000 in 2022 to EUR 48,800,000 in 2023, of which €20,700,000 were associated with large preparations versus only €7,300,000 in 2022. G and A expense increased from €34,100,000 in 2022 to €47,800,000 in 2023.

Speaker 3

In 2022, all expense lines benefited from a substantial non cash adjustment related to the positive effect of the costs related to the company's share based compensation due to the share price performance. Our G and 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 EUR 21,500,000 in 2023 from EUR 12,200,000 in the prior year, primarily due to grant income received from Scottish Enterprise and the gain from supplement with the supplier related to our COVID activities.

Speaker 3

In 2023, Valneva substantially reduced its operating losses to EUR 82,100,000 compared to EUR 113 point 2022, which again was negatively impacted by non reoccurring expenses related to the wind down of our COVID program. Adjusted EBITDA loss was nearly unchanged year over year at €65,200,000 versus €69,200,000 in 2022. Now moving on to financial outlook in Slide 19. With addition of Xtrix 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 midterm. Based on current assumptions, we are targeting an approximately 2x sales growth in the next 3 years.

Speaker 3

This will be driven by our differentiated and highly competitive product, Ixihara, which is the only Japanese enterocolitis vaccine approved in the U. S. And Europe and the mandatory vaccine for U. S. Troops deployed to Asia.

Speaker 3

Ixtrig, the 1st and only approved chikungunya vaccine and DUKORAL, the only cholera vaccine with an additional approval for e tech in key markets. Next slide, please. We have raised our 2024 product sales guidance since our February announcement, now estimated between €160,000,000 to €180,000,000 in product sales versus previously €150,000,000 to €180,000,000 This revised estimate takes into account an improved outlook regarding anticipated IXIARO supply constraints and still assumes approximately 20% to 30% reduction in 3rd party sales this year driven by external supply constraints. This brings us to a total revenue estimate of €170,000,000 to €190,000,000 in 2024. We now expect higher other income compared to our announcement in February, moving from €95,000,000 to €105,000,000 to €100,000,000 to €110,000,000 largely reflecting the €95,000,000 in proceeds from the sale of the chikungunya PRV.

Speaker 3

We also lowered and narrowed our research and development expense guidance from between €65,000,000 90,000,000 to between €60,000,000 €75,000 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 EUR 126,100,000 in cash, which was further augmented by €95,000,000 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 3 study for BLA-fifteen in the first half of this year. Secondly, with continued revenue growth for IXIAR and DUCROAL and improved efficiency in our manufacturing processes, we expect our commercial business, including Xtrig, to be cash positive this year as it has been pre pandemic.

Speaker 3

And we anticipate significant further growth going forward. I'm now handing back to Thomas to complete the midyear outlook.

Speaker 2

Thank you so much, Peter. Yes, so it is important that we address also many, many questions that we have received in the market about the more midterm prospect of our business and where we see this business going, which is also why I started the presentation by reminding everyone of the Valneva strategy. When we look at this more concretely into a midterm outlook, Peter mentioned that the proprietary business excluding XCheck, will already be cash flow positive this year. Including XCheck, we expect the commercial business to contribute cash and help financing our R and D from 2025 onwards. This is driven by continued travel sales growth for IXIARO and DUKORAL.

Speaker 2

And we see especially for IXIARO a double digit year on year CAGR for at least next 3 years. We expect IXXYX sales to exceed EUR 100,000,000 in year 3 of launch, and this even assumes a competitive product entry. We will stay focused and strategic with regards to our investments in R and 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 III once Lyme has completed its Phase III. We see substantial gross margin improvement as we are focusing on proprietary sales. The majority of our 3rd party product sales, especially the collaboration with BN.

Speaker 2

Hello, can you hear us?

Operator

We can hear you. Go ahead.

Speaker 2

We expect gross 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 CRE. When we look at the upcoming catalysts and news flows in the short term, on chikungunya, we expect to initiate a Phase III 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.

Speaker 2

We will file for potential label extension as we generate more data. We have to remind that we generated already data for the 12 to 18 year olds in Brazil. And we will initiate our Phase 4 clinical program. With regards to Lyme, as I mentioned earlier, on the VALOR trial, we expect to complete the booster vaccination for Cohort 1 in the second quarter. Then the initial 3 dose primary vaccination for CLICORE-two as well in the 1st part of this year.

Speaker 2

And then as Peter mentioned, we complete our financial contributions to Pfizer's Phase III trial cost in the first half of this year. And then later this year, the Phase II year antibody persistence and booster results data, which will help us getting a better understanding about the necessity for potential annual boosters for this vaccine once implemented. With regards to additional news flow, we do expect a new U. S. Department of Defense supply contract in the second half of this year.

Speaker 2

And we will give more clarity on our R and D pipelines as we go along in 2024. With that, I would like to hand back to the operator to take your questions.

Operator

Thank And the first question comes from the line of Max Herman from Stifel. Please go ahead. Your line is now open.

Speaker 4

Great. Thanks very much for taking my questions and congratulations on the milestones achieved during 2023 as well as obviously the Czech Momentous approval. Three questions, if I may. Firstly, just in terms of getting back to the normal travelers market. In terms of revenues, DUCRO is pretty much back to where it was pre COVID, but still significantly below on IXIARO.

Speaker 4

And I wondered how much further catch up there is in volume terms for both products? That's question 1. Secondly, it's just on in your kind of guidance overall, you talked about bringing another Phase III asset into development in the sort of midterm. Obviously, 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 XCheck, when do you think you will have durability data of 5 years or more?

Speaker 4

Thank you.

Speaker 2

Okay. Yes. Hi, Max. Very good questions. So basically, you're absolutely right that we have not in all markets reached volume wise pre COVID levels.

Speaker 2

In some markets, we are back to pre COVID volume levels. In other markets, not yet. However, we expect to be back to 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 IXIARO and IXIARO U.

Speaker 2

S. And I think that's a very important point. When it comes to Phase III, we have intentionally not specified at this point in time, which program we will bring into Phase 3. We are looking at a number of internal opportunities, but also external opportunities, all just to avoid misunderstanding within our R and D budget. And so 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.

Speaker 2

When it comes to the antibody persistence data, we have the antibody persistence study for chikungunya is ongoing. We reported the 2 year data last September last December, sorry. So obviously, this means that we're going to report the 3 year data this December and the trial will continue up to 5 years, so which means every year in December, we will report 1 year more in terms of persistence data. I hope this answers your questions, Lars.

Speaker 4

Great. Yes, thank you very much, Thomas.

Operator

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.

Operator

Your line is now open. Hi.

Speaker 5

Congrats on the progress and thanks for taking my questions. I was going to ask one on Ixchek for exceeding $100,000,000 for Xchek by year 3 post launch. Can you talk about the assumptions that goes into that? Can we assume that the $100,000,000 is part of the $300,000,000 to $400,000,000 market opportunity for travelers, as well as military? And should we extrapolate growth trajectory based on these numbers?

Speaker 2

Travel vaccines historically have shown a net curve in the ramp up, right? So there is a this means you cannot just automatically extrapolate that because we expect the year 3 to be the 1st year of the period where it really goes steep 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 at LMICs.

Speaker 2

And we have used in terms of modeling the Yata data, the experience that we have from IXIARO with regards to adoption rate in Travelers and the most recent communicated price point for egg shake in the United States and on which basis we are also extrapolating the other price points and market opportunities into travel segments. I hope this answers your question.

Speaker 5

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 escrow for the military segment. Sorry, can you repeat?

Speaker 2

Let me just do it one more time. So I just said that all travel vaccines show from an uptick perspective an S curve and historically and this will certainly be also true for X3. So we expect the year 3, which is why we have guided year 3 as the 1st year where we see the program going into the steeper curve or the steeper part of the S curve. And the SEK 100,000,000 that we or the greater than SEK 100,000,000 include travel and military.

Speaker 5

Got it. Okay. Makes sense. And for that $100,000,000 exceeding 100,000,000 dollars so that includes presumably a U. S.

Speaker 5

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?

Speaker 2

Yes. So this is, of course, a good question. So we are following approval and following recommendations. We have are now in active dialogue with the U. S.

Speaker 2

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 IXIARO, 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.

Speaker 5

Got it. That's helpful. And maybe one more question, just following the ACIP recommendation, maybe if you can talk about what your sales force is emphasizing for the as it relates to the extract data with payers and providers? And is it the strong data in subjects 65 and up? I guess just what are some of the key points that they're emphasizing?

Speaker 5

And then how are you addressing the onset of immunogenicity? So basically,

Speaker 2

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 with a single shot, a very, very long protection and which of course means that this is an important feature when people think about chikungunya vaccination.

Speaker 2

The travelers that go there are very, very often travelers who go multiple times. And there's a lot of Yatra data that supports that. And therefore, we emphasize this. And of course, we focus specifically the travelers €65,000,000 and above, but we promote according to what we are allowed to promote, meaning the label of the product as approved.

Speaker 5

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

Operator

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.

Operator

Your line is now open.

Speaker 6

Hey, guys. Thanks for taking the question. Just had 2, first on the midterm outlook and some of the updated chikungunya market opportunity assumptions. It seems like the total market is consistent with what you guys have said prior, while the share of travelers has increased ex travelers. So help us walk us through some of the updated assumptions here.

Speaker 6

Is that really driven by the ACIP recommendation, higher travelers rates or initial reception of the price? And then conversely, in terms of the reduced stockpiling or endemic opportunity? And then secondly, as we're looking at the 1st year launch, no, it'll be a ramp in the S curve that you described. If you could help us understand any, say, stockpiling or seasonality since we're still early on? Thanks.

Speaker 2

Yes. 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's behind the areas where chikungunya and chikungunya transmission represents a major risk, this is the basis. Then we use the ATA data with travelers going to this area, meaning the total population that we are targeting and focusing on.

Speaker 2

We are also using, of course, market data from the acceptance or expected acceptance for the vaccine. Preliminary data show 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 really educated also based on our own experience from the travel vaccine sector. And all that together has led us to 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.

Speaker 2

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 stock product business. We have not necessarily decreased the LMIC opportunity. We but we have not yet a clear feel for the LMIC opportunity and we will further develop that. So that's why we have focused our guidance right now on the travel segment.

Operator

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Ed White from H. C.

Operator

Wainwright. Please go ahead. Your line is now open.

Speaker 7

Good morning. Thanks for taking my questions. So first, I just wanted to ask you about the 3rd 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 and A efforts?

Speaker 3

Yes. Hey, Ed. This is Peter. So the 3rd 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.

Speaker 3

So to focus on our proprietary products will not have a dramatic impact on our SG and A cost. It's really gross margin improvement that will be driven by that because our proprietary products have obviously much better gross margin.

Speaker 7

Okay. Thanks, Peter. And my other question was just regarding potential strategic transactions. You've mentioned it before. And I'm just wondering, what is your strategy there?

Speaker 7

Maybe give us your thoughts on what makes for a good acquisition or what makes for a good target?

Speaker 2

Yes. So basically, we will target a next Phase III program, as I mentioned, at the time when the Pfizer Lyme Phase III 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 focused our deep pipeline development on trying to build vaccines and develop vaccine solutions in areas of unmet medical need and where we can have a differentiated position, 1st best only. And basically, this is what we're going to do going forward.

Speaker 2

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.

Speaker 7

Okay, great. Thank you for taking my questions.

Speaker 3

You're more than welcome.

Operator

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.

Operator

Your line is now open.

Speaker 8

Hi there. Thank you for taking my questions. Just coming back to the chikungunya program, if I could. On the Phase IV 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?

Speaker 8

And then 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 XT until at least post a potential launch in line? Thank you.

Speaker 2

So let me start with the first part and then I'll let Peter develop a little bit this cash

Speaker 3

outlook.

Speaker 2

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 our cash runway that we have projected before. When it comes to the Phase IV activities for chikungunya, As part of our approval and we have disclosed this earlier, those Phase IV programs go over a long period of time. We have roughly 4 to 5 years to complete the 2 Phase 4 studies. We had included this in our company deck and it's still included I think in the company deck with regards to the timeline.

Speaker 2

So there is not necessarily an equal spread over the when it comes to spending, but it's many, many years of Phase IV 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 discussion?

Speaker 3

Yes. I think as Thomas alluded to, so we like 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, potential injection, so we could still cover that.

Speaker 3

And so right now, we do not have any plans to raise further equity.

Speaker 8

Okay. Thank you, Mike.

Operator

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Samir Devani from Rx Securities. Please go ahead.

Operator

Your line is now open.

Speaker 9

Hi, guys. Thanks for taking my questions. I think I've got 2 or 3. Just to kick off with IXIARO, you mentioned getting back to pre COVID levels. I think pre COVID, IXIARO had a margin of nearly 70%.

Speaker 9

It seems quite a bit of a jump from 52 odd that we've seen this year or 2023. So could perhaps maybe a bit of commentary on how you expect the margin to evolve in line of that growth? And then just on Ixchek, again, on margins and I guess price as well, we can see it's being listed at $3.50 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 would be great. Thanks.

Speaker 3

You want to take? Yes. I can start with 6 Yaro and hey, Sameer, by the way. So yes, you're right. So pre COVID, I think the margins we had published were in the 60s.

Speaker 3

And yes, I think close to 70. And we do not see any reason why we would not get back towards this range again. And then I think on Ixchek, though it's public, so the wholesaler acquisition price is $2.75 So that's basically what we get from the United States.

Operator

We will now take our next question. Please stand by. And the next question comes from the line of Susanne Van Voorheesen from Van Landshut Kempen. Please go ahead. Your line is now open.

Speaker 10

Hi, hello. This is Clara on behalf of Susana. Thanks a lot for taking my question. So 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?

Speaker 10

Thank you.

Speaker 2

Yes. So basically, we have received a lot of feedback with regards 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 1, on the, let's say, 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 financing needs or an imminent financing need.

Speaker 2

When it comes to the Lime 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 when of the influx that we expect to the business to turn into sustained profitability.

Speaker 10

Okay, great. Thank you.

Speaker 3

Welcome.

Operator

Thank As there are no further questions, I would now like to hand back to the speakers for closing remarks.

Speaker 2

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.

Operator

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

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Earnings Conference Call
Valneva Q4 2023
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