Earnings Call Transcript - VALN Q2 2025

Operator, Operator

Thank you, operator. Hello, and thank you for joining us to discuss Valneva's first half 2025 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 6 months ended June 30, 2025, which were published earlier today available within the Financial Reports section on our Investor website. I'm joined today by Valneva's CEO, Thomas Lingelbach; and our CFO, Peter Buhler, who will provide an overview and update on our business as well as our key financial results for the first half. There will be an analyst Q&A session at the conclusion of the prepared remarks. Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, August 12, 2025, 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.

Thomas Lingelbach, CEO

Thank you, Josh. Good day, everyone. I am pleased to share our financial results and key business highlights for the first half of 2025. This period has been quite eventful and characterized by excellent execution. We achieved total revenues approximately EUR 100 million, reflecting significant year-over-year growth, and our cash position is over EUR 160 million. This demonstrates a strong cash influx through ATM transactions and a considerable reduction in operating cash burn, emphasizing our focus on investing wisely while maintaining a robust cash position ahead of the Lyme data readout. We also made progress with our pipeline and regulatory efforts around Lyme, IXCHIQ, and Shigella, which I will detail shortly. On Page 5, we spotlight our key highlights. Aligned with our mission, we addressed unmet medical needs in the first half of the year. We finalized a new supply agreement for IXIARO with the U.S. Department of Defense and responded to the French government’s request for IXCHIQ during the chikungunya outbreak in La Réunion and Mayotte. Additionally, we supplied doses of DUKORAL in response to the cholera outbreak in Mayotte, showing our commitment to positively impacting lives. In terms of regulatory and commercial achievements, we secured additional marketing authorizations for IXCHIQ in the United Kingdom and Brazil, as well as label extensions in Europe for adolescents aged 12 and over. We also announced an exclusive marketing and distribution agreement in Germany with CSL Seqirus, which we are delighted about. Following a comprehensive safety assessment with the FDA and EMA regarding IXCHIQ safety signals observed during the vaccination campaign in La Réunion, we successfully lifted temporary age-related restrictions. Regarding Lyme, we are pleased to see that the VALOR study is on track. Recently, Pfizer announced the completion of vaccinations in the current VALOR Phase III study. For IXCHIQ, we observed a high, sustained immune response in adolescents, confirming our findings in adults regarding long-term antibody persistence and protection. We achieved positive Phase III pediatric safety and immunogenicity results for IXCHIQ as well. For Shigella, we are progressing in our first controlled human infection model study and initiated vaccinations in a dedicated Phase II infant study. Starting with our Lyme disease vaccine candidate, we are addressing a significant medical need, as there is currently no vaccine available to prevent Lyme disease in humans, and treatment options are limited. The annual burden of disease is increasing, with the latest figures indicating we are nearing 1 million cases annually in the Northern Hemisphere, many of which can lead to severe health issues. This highlights the necessity for an effective and safe preventative solution. The ongoing Phase III study has been segmented into two cohorts for operational reasons, spanning three tick seasons: 2023, 2024, and 2025. More than 9,000 participants aged 12 years and older are included, with a 1:1 randomization of the vaccine against placebo, and a 2:1 split between North America and Europe. Our primary objective is disease prevention, with the confirmed Lyme cases after two tick seasons as the primary endpoint. Secondary endpoints will include Lyme disease cases and efficacy after the first tick season, along with various immunological metrics. As shown on Page 9, there has been promising progress, and Pfizer has reaffirmed plans to submit regulatory applications in the United States and Europe in 2026, with an anticipated launch in fall 2027, subject to positive data, allowing protection for the 2028 tick season. We will monitor Lyme cases until the end of October, marking the season's close, after which Pfizer will conduct case adjudication and data management. Everything is proceeding as planned, and we look forward to the data, hoping for an effective and safe vaccine that could greatly impact lives and serve as a significant catalyst for Valneva. Turning to chikungunya, our single-shot vaccine IXCHIQ or VLA1553 has had temporary use restrictions for the elderly lifted by the FDA and EMA. These restrictions were due to reports of serious adverse events among frail elderly individuals during vaccination campaigns in La Réunion related to a severe chikungunya outbreak. Now updated, the conditions of use and safety information have been refined in the United States and Europe. This reinforces our belief in the advantages of a live-attenuated vaccine for unpredictable outbreak diseases, as it offers prolonged antibody persistence and protection. IXCHIQ remains recommended for individuals aged 18 and older in the U.S. and 12 and older in Europe who have a high risk of exposure. We continue to focus on expanding access and the overall product profile for IXCHIQ, supported by over $40 million in funding from CEPI. The Phase IV study aims to confirm effectiveness and is a critical post-marketing requirement linked to our initial approval. This will include observational effectiveness studies in Brazil and a randomized controlled study in other endemic countries, augmented by prospective safety cohort studies. In terms of label extension, we aim to broaden access for all age groups, and on the product profile, we are confirming the long-term durability of the immune response achieved with a single shot. The ongoing antibody persistence study will monitor participants for up to 10 years, with positive 3-month results reported, and 4-year results due later this year. Now, regarding Shigella, we are working on the world's most advanced tetravalent vaccine candidate targeting four serotypes, potentially covering up to 85% of shigellosis infections, which are particularly life-threatening for young children and have been identified as a priority by the WHO. We plan to develop the vaccine for children in low- and middle-income countries, along with travelers at risk. LimmaTech, our partner, has reported positive Phase I data, and we launched a Phase II infant study, with data expected later this year. The Phase IIb controlled human infection model study is ongoing, and efficacy data is anticipated early next year, led by LimmaTech, while Valneva will handle future regulatory and commercialization efforts. We are also optimizing a new Zika virus candidate, building on our knowledge from our previous candidate and leveraging our inactivated whole-virus platform enhanced during our COVID work. Initial results showed promising safety and immunogenicity, and this Phase I study will further assess these components with an improved formulation. A vaccine against this flavivirus, spread by Aedes mosquitoes, is crucial due to the severe consequences of the infections. We will evaluate future development strategies based on Phase I results, available funding, and market potential as we approach the data readout. With this overview of our key R&D programs, I will now turn it over to Peter for the financial report.

Peter Buhler, CFO

Thank you, Thomas, and good morning and good afternoon to all of you. Now moving to the financials of the first half of 2025. Product sales reached EUR 91 million compared to EUR 68.3 million in the first half of 2024, an increase of 33.3%. Foreign currency fluctuation had an adverse impact of EUR 500,000. IXIARO sales reached EUR 54.7 million, increasing 30.6% over prior year. The strong year-over-year growth was equally driven by sales to travelers and to the Department of Defense. IXIARO sales during the first quarter of 2024 were adversely impacted by supply constraints. DUKORAL sales grew year-over-year by 16.4% and reached EUR 17.4 million in the first half of 2025. The growth in DUKORAL sales was supported by a EUR 1.1 million sales to the French island of Mayotte to combat a local cholera outbreak. IXCHIQ sales reached EUR 7.5 million compared to EUR 1 million in the first half of 2024 when the product was launched in the United States. IXCHIQ sales in the first half of 2025 benefited from a supply of 40,000 doses to the French island La Réunion as the island experienced a major chikungunya outbreak. Third-party products increased by 8.8% year-over-year to reach EUR 11.4 million. This increase is primarily a result of supply constraints in the first half of the prior year, and we continue to expect a gradual decrease of third-party products. Moving onto the income statement. Total revenues reached EUR 97.6 million versus EUR 70.8 million in the first half year of 2024. The increase of 37.8% is driven by higher product sales and an increase in other revenues related to the licensing agreement with the Serum Institute of India for Valneva single-shot chikungunya vaccine. Looking at expenses. Cost of goods and services for the first half of 2025 reached EUR 47.2 million compared to EUR 45.6 million during the same period last year. The gross margin on commercial products, excluding IXCHIQ reached 59.2% in the first half of 2025 compared to 47.7% in the prior year. The improvement in gross margin was driven by better manufacturing performance. IXIARO gross margin reached 65.5% compared to 57.5% in the first half of 2024, and DUKORAL generated a gross margin of 52.9% compared to 34.8% last year. Cost of goods related to IXCHIQ amounted to EUR 2.5 million or a gross margin of 66%. Cost of goods also includes a EUR 5.9 million idle capacity cost. Research and development expense increased from EUR 29.7 million in the first half of 2024 to EUR 32.4 million in the first half of 2025. That increase is driven by costs related to the Shigella vaccine candidate following the R&D collaboration with LimmaTech Biologics. We expect another acceleration of our R&D costs in the second half of 2025, in particular driven by the IXCHIQ Phase IV program. Marketing and distribution expense decreased from EUR 23.2 million in the prior year to EUR 20.3 million in the first half of 2025. The decrease is related to a planned reduction in the advertising and promotion spend related to IXCHIQ following the launch in early 2024. The decrease was partially offset by higher costs related to warehousing and distribution. G&A expense decreased to EUR 19 million compared to EUR 22.8 million in the first half of 2024. At the end of 2024, the company ran a program to increase operational efficiency and the reduction in G&A spend is a direct result of this initiative. In the first half of 2025, Valneva reported an operating loss of EUR 16.8 million compared to an operating profit of EUR 46.7 million last year. Last year's operating profit was the result of the sale of a priority review voucher for a total net proceeds of EUR 90.8 million. Adjusted EBITDA in the first half of 2025 reached minus EUR 6.8 million compared to a positive EBITDA of EUR 56.2 million last year. Excluding the one-off PRV sale in the prior year, adjusted EBITDA improved by 80% year-over-year. Before moving to the outlook and guidance, a word on cash. As mentioned by Thomas at the beginning of the call, cash at June 30 was reported at EUR 161.3 million compared to EUR 168.4 million at the end of 2024. Cash used in operations was reported at EUR 10.9 million compared to EUR 66.3 million in the first half of 2024. Now moving to Slide 21. We confirm our financial guidance for the fiscal year 2025 with product sales of EUR 170 million to EUR 180 million and total revenues of EUR 180 million to EUR 190 million. We continue to project R&D expenses of EUR 90 million to EUR 100 million. The R&D expenses will be partially offset by grant funding and anticipated R&D tax credits. As confirmed in the first half year results, we expect a significantly lower use of cash in operations, targeting a year-over-year reduction of more than 50%. Cash will remain a key focus in order to ensure sufficient runway to reach key inflection points. In the midterm, we expect continuous growth in our product sales, focus on strategic investments into R&D and continuous improvement in gross margin. We continue to expect Valneva to be sustainably profitable post successful approval and commercialization of the Lyme disease vaccine. With this, I hand the call back to Thomas for the outlook.

Thomas Lingelbach, CEO

Thank you, Peter. Yes, when we look at the 2025 guidance, of course, it is important that we look at the growth drivers and the growth drivers primarily are, as Peter mentioned last. I think the VLA15 program or the Lyme disease program with Pfizer is not only the single largest catalyst for the company and its future development and strategic optionality, but it's also the vaccine that could make the single largest impact to people's lives. As such, it is very highly matching with our purpose, our vision and mission. Of course, in the near term, as Peter said, we will focus on growing commercial revenues, and we will reposition IXCHIQ as the right vaccine against chikungunya for the right setting and the right population and the right geographical areas. With regard to future pipeline, we have our two early-stage or mid-stage clinical assets, Shigella and Zika. And our goal is to not only progress those programs, but possibly even further augment our pipeline post Phase III successful line. As such, we have really a great opportunity to become on the back of a positive Lyme outcome, the leading vaccine biotech in the world. And with that, I would like to hand back to the operator to take the questions.

Operator, Operator

We are now going to proceed with our first question. The questions come from Maury Raycroft from Jefferies.

Mohamad Amin Makarem, Analyst

This is Amin on for Maury. Congrats on the progress. A couple of questions from us. Regarding the 40,000 doses you sold to the French government, should we expect any additional revenue recognition in Q3? Also, could you share your perspective on demand scenarios for IXCHIQ through year-end, considering the evolving CHIKV outbreak in Indian Ocean and now it looks like China?

Thomas Lingelbach, CEO

Yes. So let me start with the second part of your question, and then I hand over to Peter to take the first part of your question. So you're absolutely right. I mean we are seeing right now a very critical and devastating epidemiological dynamics around chikungunya. We are in contact with all the respective governments where currently outbreaks are occurring. As I mentioned earlier, we believe that especially for those countries, our vaccine proposition represents a very good vaccine solution. It's too early to state at this point in time where and how we will be able to respond. We have no supply constraints. We have sufficient material available for addressing those potential response strategies. But we also would like to make sure that we stay in control over those vaccination or potential vaccination campaigns given the experience that we had with La Réunion. So therefore, bear with us that at this point in time, we don't want to promise anything other than we will be utmost responsive. Peter?

Peter Buhler, CFO

Yes. So on the 40,000 doses, they were all shipped in the first half year, and the revenue was fully recognized in the first half year. So nothing related to that 40,000 to come in the second half.

Operator, Operator

We are now going to proceed with our next question. And the questions come from the line of Sebastiaan van der Schoot from Van Lanschot Kempen.

Sebastiaan van der Schoot, Analyst

I am on for Suzanne. And for the Lyme vaccine, could you maybe provide some insight on how the reporting of the data readouts will transpire at year-end? Will the disclosure only report top line data? Or can we also expect some detailed results? And then maybe would you be able to position the vaccine in terms of immunogenicity towards vaccines of the past?

Thomas Lingelbach, CEO

We couldn't hear the second part of your question. You were breaking up for most of it, and I'm sorry about that.

Sebastiaan van der Schoot, Analyst

Sure. It's about the immunogenicity profile of the vaccine compared to Lyme vaccines from the 1990s.

Thomas Lingelbach, CEO

Yes. Let me first address the initial part of your question. The responsibility for reporting the Phase III results rests solely with Pfizer. We anticipate that the data will be released in two phases: initially, a report on the top-line data, which will mainly include efficacy figures, followed by a more comprehensive communication on all other endpoints. As you're aware, the study encompasses numerous endpoints, including primary, secondary, and exploratory ones, all of which will need to be reported. Previously, we mentioned and many of you have noted in your reports that we expect all data to be available by the end of the first quarter, certainly in time to support the expected regulatory submissions around mid-next year. Regarding the immunological profile, it is challenging to compare observations from past vaccines like LYMErix or ImuLyme, as they had different schedules, formulations, antigen constructs, and assays. We have attempted to compare the previous full-length serotype 1 antigen to our latest recombinant subunit and multivalent fusion protein VLA15 in various animal models. We published results showing a direct comparison to what we consider a full-length serotype 1 biosimilar, and we noted that we could identify noninferiority or even superiority in many instances. Any other comparisons at this time wouldn’t be scientifically sound. Ultimately, the efficacy readout will provide clarity, Sebastiaan.

Operator, Operator

We are now going to proceed with our next question. And the questions come from the line of Damien Choplain from Stifel.

Damien Choplain, Analyst

Congrats on the good publication. I have first one on IXCHIQ. So could you please elaborate a bit on what might trigger an acceleration in sales uptake within the traveler market? And are you still in discussion with the states in the U.S. for potential stockpiling? And my second question is on distribution agreements with CSL. What should we expect in terms of financial impact on top line and potentially EBITDA?

Thomas Lingelbach, CEO

Yes. So let me start with the second part of your question first. We have been collaborating with Bavarian Nordic for a number of years now in Germany and for reasons that we all understand. We have to change, and we have been extremely pleased that we were able to find with CSL from our perspective, an excellent partner with an excellent state infrastructure in Germany. The commercial terms under the agreement are very similar to what we used to have. And therefore, we do not expect an immediate difference in the prospects around Germany in the mid- to long term as CSL gears further up in Germany, we may even see a potential upside. When it comes to IXCHIQ and future market access, you would certainly appreciate that the uncertainty that we have experienced and had to experience following all those safety investigations has an impact on the market uptake for that vaccine. At the same time, we know that the vaccine profile and especially the profile of a live-attenuated single-shot vaccine has distinct advantages when it comes to future outbreak preparedness. And therefore, we are expecting that now that all those restrictions got lifted, the investigations got concluded, the that prescribing information and SmPC got updated, we will see a new momentum. And we expect, as I mentioned earlier, hopefully, to be able to respond to some of the emerging outbreaks across the globe right now. And all the other discussions will hopefully resume now in the latter part of this year.

Operator, Operator

We are now going to proceed with our next question from Rajan Sharma at Goldman Sachs.

Rajan Sharma, Analyst

So a couple on Lyme and VALOR trial. So on clinicaltrials.gov, the entry suggests that the primary completion date of the trial is 26th of December. So I just wanted to double check your confidence that, that Phase III headline data will be coming in, in 2025? Or is there a potential that this could spill into 2026? And then just on the trial specifically, what do you consider to be the bar for success here? And I know you kind of talked about the inability to kind of do cross-trial comparisons with the previous sets of vaccines that were approved, but I think LYMErix demonstrated a 49% efficacy rate after two priming doses. And I think you've talked previously about potentially showing better efficacy. So is that what you're looking for? And if you have any color, it would be helpful to understand what the FDA's bar for approvability is as well.

Thomas Lingelbach, CEO

Let me start with the second part of your question first. You correctly pointed out that comparing our vaccine to LYMErix and ImuLyme is quite challenging due to differing schedules and efficacy outcomes. LYMErix had an efficacy just below 50% after two doses, while ImuLyme exceeded 60%. Both saw a significant increase in efficacy after three doses. Our current setup differs, as we have a regimen of 0 to 2 doses followed by a booster after one year, which leads to a distinct immunological profile. Consequently, we anticipate a different efficacy profile compared to those earlier vaccines. There is a rationale behind our agreement with authorities to establish the primary endpoint after three doses plus one booster. As previously mentioned, all models conducted and published in animals suggest non-inferiority or superiority following the final dose, which is what we are expecting and hoping for. Although there are no specific communicated standards for approval from the FDA or the European Medicines Agency, certain efficacy levels have set precedents that can be referenced. However, I prefer not to specify any numbers here. Regarding data readouts, clinicaltrials.gov always includes a safety follow-up period. This is reflected in the notifications on the site, which clearly state that case counts must be completed by the end of October. Following that, as I noted earlier, Pfizer will conduct their case adjudication and database cleaning, taking as long as necessary. Our main concern is that Pfizer reaffirms their submission timelines. Whether we receive the top-line data a month sooner or later is beyond our control and not significant to us. Therefore, I will not comment on or impose execution timelines on Pfizer at this time, as it would be inappropriate.

Operator, Operator

We have no further questions at this time. So I'll hand back to you for closing remarks. Thank you.

Thomas Lingelbach, CEO

Yes. Thank you so much for your attendance today for your good questions and for following Valneva. I hope you share with us the exciting prospects that we see in the company, in our business, in our mission and vision. Thank you so much, and have a great day.

Operator, Operator

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.