Earnings Call Transcript - VALN Q3 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the Valneva 9 Months 2025 Financial Results Conference Call and Webcast. Please note that today's conference is being recorded. I would now like to turn the conference over to your first speaker, Josh Drumm. Please go ahead.

Joshua Drumm, Investor Relations

Thank you. Hello, and thank you for joining us to discuss Valneva's financial results for the first 9 months of 2025 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 9 months ended September 30, 2025, published earlier today, available within the Financial Reports section of 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 of our business as well as our financial results. 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, November 20, 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 so much, Josh. Good day, everyone. Welcome to our 9 months call. So before we go into the business highlights, and also, Peter will provide a very detailed financial report, I would like to start off by providing a couple of key financial management highlights. Total revenues reached EUR 127 million at the 9-month time point, which is a substantial growth of almost 9% despite some headwinds, be it from a geopolitical perspective, but also from an IXCHIQ perspective in particular. And we are very glad that we have been able to deliver on that growth year-to-date. We have also been able to significantly reduce our operating cash burn, which has been one of our key objectives in continuously improving efficiency of our operations. This resulted in a cash position of more than EUR 140 million, which includes also the net proceeds from different ATM transactions, Peter will further detail. And most importantly, we successfully completed our debt refinancing, which, of course, enhances substantially our financial flexibility, and we are very glad that we have found in Pharmakon a new partner to support Valneva in the years to come. Recapping a little bit on the first 9 months key business highlights. Around IXCHIQ, we responded to significant unmet medical needs on La Réunion and Mayotte, the respective outbreaks. We also responded to a cholera outbreak in Mayotte by supplying doses of DUKORAL. And we finalized the new IXIARO U.S. Department of Defense contract, all of that supporting our mission in targeting unmet medical needs. On the regulatory and commercial side of things, we secured additional marketing authorizations for IXCHIQ in the U.K. and Brazil, label extensions for adolescents, 12 years of age and older in Europe and Canada. We announced an exclusive vaccine marketing and distribution agreement for Germany with CSL Seqirus replacing Bavarian Nordic by the end of this year for our established brands, and they already started distributing IXCHIQ in Germany. Of course, on the clinical side, it's all about Lyme right now, and we completed all vaccinations in the VALOR Phase III study according to plan. We also reported further positive safety and immunogenicity data following the third annual booster as part of our Phase III follow-up study, VLA15-221. On IXCHIQ, the vaccine profile got further substantiated with the antibody persistence data, now after 4 years, still showing the 95% response rate after a single shot, which is the key differentiation for this live-attenuated single-shot vaccine. We further reported immune response in adolescents and positive pediatric safety and immunogenicity data. Last, but not least, we also reported positive Phase I results from our second-generation Zika vaccine candidate, VLA1601. Going a little bit into the details of the individual programs, I would like to start off with Lyme. We've been talking a lot about Lyme, and we will be talking a lot about Lyme. Lyme continues representing a major unmet medical need, enhanced market opportunity, close to 0.5 million cases every year confirmed in the United States, probably now in Europe, the same order of magnitude. There are limited reporting systems available. You remember that we have about 90 million U.S. citizens living in high-risk areas of Lyme disease, and in Europe, more than 200 million in those endemic regions. Most importantly, the health economic benefit for a potential vaccination against Lyme disease is considered extremely favorable because you have very severe manifestations in connection with Lyme disease. 10% to 30% of people develop either carditis, neuroborreliosis or arthritis, and 5% to 10% have persistent symptoms even following treatment with respective antibiotics. By way of reminder around the Phase III study that is currently ongoing, Pfizer reconfirmed that they're going to submit regulatory applications in the U.S. and Europe in 2026. The VALOR study has been executed according to plan. The study is now going through its follow-up period since the official case counts ended at the end of October. We run the normal process through case adjudications, further testing activities, database cleanings and all of that before the results are announced in the first half of next year. Most importantly, the time point for which we expect the product to be launched hasn't changed. It is important for us and our Pfizer colleagues that the product can be launched in the autumn of 2027, well ahead of the 2028 tick season. It is important to get really people protected for the tick season 2028. As such, we are very much looking forward to the data, which hopefully are going to be positive, and hence, provide a pathway for a vaccine that could really address a huge unmet medical need. Turning to our highly differentiated, single-shot chikungunya vaccine, VLA1553 or IXCHIQ. Where are we at this point in time? Of course, we have, on the regulatory side, still the situation that the product is suspended in the United States. We are still awaiting further information from the FDA, which we haven't received at all at this moment in time. In all the other countries, we are working on the basis of updated Prescribing Information or SmPCs. We are seeing that the product is being administered, and we are trying to focus substantially on the expansion into LMIC territories and working with existing and hopefully future partners in this regard. The most imminent point now to consider in this program that is supported by CEPI are our post-marketing effectiveness studies, the Phase IVs, which are about to commence with an observational effectiveness study in Brazil with pragmatic randomized controlled effectiveness safety studies in adolescents and adults, including elderly in various endemic countries, and then later, a prospective safety cohort study and surveillance in Brazil as well. Of course, I mentioned already the label extensions and the report on the positive data, which we will further submit and hopefully be granted in the different product labels. We see clearly the product differentiation for IXCHIQ, which is super important for a potential outbreak disease and for people planning multiple trips into areas where there is a high risk of a potential outbreak. Shigella, you may recall that we in-licensed the vaccine through a partnership with LimmaTech. The program called S4V2 is the world's most clinically advanced tetravalent Shigella vaccine candidate, addressing the 4 most common serotypes of the Shigella bacteria. The program reported earlier positive I/II clinical data in different age groups. In terms of medical need, Shigella represents the second leading cause of fatal diarrhea, especially in infants below 5 years of age. The global market is expected on the one hand side in LMICs, particularly the target population I just mentioned, but it also represents significant opportunity for travelers and military. Given the overall medical need, and also, the diarrheal diseases to be seen in the context of antibiotic resistance, the Shigella development or vaccine development against Shigellosis has been identified as a priority by WHO. We have currently a couple of studies ongoing. We have the Phase II in infants, for which we expect results still this year. We have the Phase IIb controlled human infection model study in adults, where we changed some of the data time points and clinical design to extend the period of immunogenicity, where we had the opportunity to optimize dose and schedule. We expect the pilot efficacy data next year with immunogenicity data coming in earlier upon success. Please remember that we have intentionally set up the clinical design and the clinical pathway in a way that the program is highly de-risked from a capital allocation perspective. Based on positive data, based on our respective go decisions, we will assume full accountability for the program following those 2 studies, which are still sponsored by LimmaTech. Yes, or just update on our operational business and R&D, in particular. I would like to hand over to Peter to provide you the financial report for the 9-month period.

Peter Buhler, CFO

Thank you, Thomas. Product sales reached EUR 119.4 million compared to EUR 112 million in the 9 months of 2024, an increase of 6.2%. Foreign currency fluctuations had an adverse impact of EUR 1.3 million. IXIARO sales reached EUR 74.3 million, increasing 12.5% over the prior year. The year-over-year growth was driven by sales to the U.S. Department of Defense as well as increased sales in some European countries. Foreign currency fluctuations adversely impacted IXIARO sales during the first 9 months by EUR 800,000. DUKORAL sales decreased from EUR 22.3 million in the first 9 months of 2024 to EUR 21.5 million in the same period of 2025. Sales were EUR 400,000 adversely impacted by foreign currency fluctuations, mainly resulting from a weakening Canadian dollar and also lower sales to our German partner, as we are transitioning from our current distributor to CSL Seqirus. IXCHIQ's sales reached EUR 7.6 million compared to EUR 1.8 million in the 9 months of 2024. While IXCHIQ sales included the supply of 40,000 doses to combat the major chikungunya outbreak on the French Island of La Réunion, the temporary restriction and U.S. license suspension significantly adversely impacted sales in the Travel segment, leading to an adjustment of our sales guidance. Third-party products decreased by 28.5% year-over-year to EUR 16.1 million. This decrease is a result of the anticipated discontinuation of certain third-party distribution agreements. As mentioned in our previous calls, we expect third-party product sales over time to account for less than 5% of total product sales. Now, moving on to the income statement. Total revenues reached EUR 127 million versus EUR 112.5 million in the first 9 months of 2024. The increase of 9% is driven by higher product sales and an increase in other revenues related to revenue recognition from partnerships. Looking at expenses, cost of goods and services for the 9 months of 2025 reached EUR 71.1 million compared to EUR 71.3 million during the same period last year. The gross margin on commercial products, excluding IXCHIQ, reached 57.2% in the first 6 months of 2025 compared to 48.6% in the prior year. The improvement in gross margin was driven by better manufacturing performance and favorable product mix. IXIARO gross margin reached 63.2% compared to 58.8% in the first 9 months of '24, and DUKORAL generated a gross margin of 52.3% compared to 34.8% in the prior year. Cost of goods related to IXCHIQ amounts to EUR 8.6 million and include provisions to recognize lower IXCHIQ demand. Cost of goods also includes EUR 8.2 million of idle capacity costs. Research and development expense increased from EUR 48.6 million in the 9 months of 2024 to EUR 59.7 million in the same period of 2025. That increase is driven by costs related to the Shigella vaccine candidate following the R&D collaboration with LimmaTech Biologics and costs related to the IXCHIQ Phase IV post-marketing commitment. Marketing and distribution expenses decreased from EUR 35.7 million in the prior year to EUR 28.6 million in the 9 months of 2025. The decrease is related to a planned reduction in advertising and promotion spend related to IXCHIQ following the launch in early 2024. G&A expense reached EUR 29.5 million in the first 9 months of 2025 compared to EUR 32.6 million in the same period of last year. This decrease results from a program to increase operational efficiency across the company that we ran at the end of 2024. In the 9 months of 2025, Valneva reported an operating loss of EUR 53.9 million compared to an operating profit of EUR 34.2 million in the prior year. Last year's operating profit was the result of a sale of a Priority Review Voucher for a total net proceed of EUR 90.8 million. Adjusted EBITDA in the first half of 2025 reached a negative EUR 37.7 million compared to a positive EBITDA of EUR 48.6 million, impacted by the sale of the PRV. Before moving to the outlook and guidance, a word on cash. As mentioned by Thomas at the beginning of the call, cash at September 30 was reported at EUR 143.5 million compared to EUR 168.4 million at the end of 2024. The cash at the end of September includes a total of 3 ATM transactions for a value of EUR 26 million net of transaction costs. Cash used in operating activities was reported at EUR 28.4 million compared to EUR 76.7 million in the first 9 months of 2024. Now moving to Slide 19. We confirm our financial guidance for the fiscal year of 2025 with product sales of EUR 155 million to EUR 170 million and total revenues of EUR 165 million to EUR 180 million. We continue to project R&D expense of EUR 80 million to EUR 90 million, and the R&D expenses will partially be offset by grant funding and the anticipated R&D tax credit. As confirmed in the results at the end of September, we expect significantly lower cash use in operations. Cash will remain a key focus to ensure sufficient runway to reach key inflection points. In the midterm, we expect continued growth in our product sales, focused and strategic investments in R&D and continued 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.

Thomas Lingelbach, CEO

Thank you so much, Peter. At this moment, I would like to turn to our key growth drivers for the remainder of the year, but also, most importantly, beyond the end of 2025. We have built Valneva now on a very solid foundation. Lyme is certainly going to be the single largest growth driver for the company in the years to come and the single largest near-term catalyst for the company and its shareholders, but also for people who may benefit from a vaccination against Lyme disease. The VLA15 success, which is hoped for in the first half of next year, may drive the company upon successful approval and commercialization into sustained profitability driven by substantial milestones and later royalties starting in the latter part of 2027. Of course, for this year, and despite having adjusted our guidance on product sales, we hope that we will be able to continue our growth trajectory for our established brands, IXIARO and DUKORAL. We are working hard in gaining and regaining global traction on IXCHIQ, and in particular, leveraging LMIC opportunities and new territories where a product like IXCHIQ with its highly differentiated product profile could be perfectly suited. There is more that Valneva has to offer in its pipeline above and beyond Lyme. Lyme is, of course, very dominant and rightly so. We are advancing a number of quite promising internal candidates. We are identifying new opportunities, both in-house and through external potential partnering opportunities with the aim to build a coherent R&D pipeline with an attractive next Phase III program upon successful VLA15 commercialization, making us a leading vaccine biotech in the world. As such, we see substantial growth and substantial upside. And with that, I would like to hand back to the operator to take your questions.

Operator, Operator

We are now going to proceed with our first question. The questions come from Vamil Divan from Guggenheim Partners.

Vamil Divan, Analyst

I have a couple of questions. First, regarding the Lyme data, which is a significant upcoming event. On IXCHIQ, you mentioned you're waiting to hear from the FDA. Can you provide any timelines or guidance on when you might receive a response from them? Secondly, about DUKORAL, you indicated that there were a few factors this quarter, including currency fluctuations and a distributor shift in Germany. Could you quantify the impact of the distributor change in particular? Additionally, how do you view growth for that asset moving forward, and what are your expectations for its recovery?

Thomas Lingelbach, CEO

Okay. Let me start with the IXCHIQ question and the FDA. Unfortunately, there is no predefined process because a similar suspension has not occurred before to our knowledge. Therefore, there is no precedent. Additionally, we are not aware of any required procedures that need to be followed regarding timing. We are hoping for a collaborative interaction with the FDA, which has been delayed due to the government lockdown, but we are optimistic about beginning a dialogue with them this year. I'll let Peter answer your question about DUKORAL.

Peter Buhler, CFO

Yes. I think I commented on the currency impact during the call. With regard to Germany, we have not disclosed the number, and we never disclose numbers on individual countries. All I'll say is the third quarter of last year saw a particularly strong quarter for Germany. As we transition to our new distribution partner in Germany, there are just not purchases made by the existing one because they're using up the stock they have before we ship products to the new one. It's basically a technical delay. Regarding your question on looking forward, I mean, we have not yet provided guidance for 2026, but it's safe to assume that we will continue to expect the continued growth of the DUKORAL brand.

Operator, Operator

We are now going to proceed with our next question. And the questions come from the line of Maury Raycroft from Jefferies.

Maurice Raycroft, Analyst

Congrats on the progress. For the Lyme Phase III readout, Pfizer has to complete 3 months of safety follow-up after the end of the tick season in October, which implies to us that the readout could come as early as mid-1Q '26, just based on the additional time required for database lock and analysis. If the readout happens later into the second quarter of 2026, would that imply that analyses of the results are just taking longer? Or what are some of the reasons that could push the timing to later in the second quarter?

Thomas Lingelbach, CEO

Maury, yes, good question. Basically, Pfizer is in control of this process. All I can say is we have seen that Pfizer is taking every single step in a very professional and accelerated way. At the same time, they will not take any regulatory risk understandably in the current environment. Therefore, I'm assuming they will be as early as possible. I cannot see at this point in time any major delays compared to the timelines you just alluded to. My colleagues mentioned this during the fireside chat. We are also hoping for as early as possible readout of the topline data.

Vamil Divan, Analyst

Got it. Okay. Makes sense. And maybe one other question just for the IXCHIQ VLA suspension. Can you comment on what you proposed in your response to FDA as a remedy? Are there some contingency options that you have in place that could get this back on track in the United States?

Thomas Lingelbach, CEO

So basically, our response has solely been focused on the real medical evidence. Our response has been focusing on the individual case analysis and case assessments, both by Valneva and others, including other regulatory agencies, and reiterating on a positive health economic benefit, so-called positive risk-benefit ratio as articulated by CDC and others. Our response and clarification vis-a-vis the FDA has been centered around these points.

Operator, Operator

We are now going to proceed with our next question. The next questions come from the line of Romy O'Connor from VLK.

Romy O'Connor, Analyst

Two, if I may. The first one, with this talk about possibility of VLA15 being maybe earlier than expected, do you think you're going to be able to launch on time then for the 2027 tick season? And on IXCHIQ, I was just wondering how sales are expected to grow going forward from here and what the future drivers are?

Thomas Lingelbach, CEO

Yes. So first of all, on the timeline for VLA15, Pfizer reconfirmed the regulatory submission timeline for next year. The regulatory submission timeline next year is the very pivotal and important underlying hypothesis for launch in the latter part of 2027 because the program is under accelerated approval pathway, fast track, etc. All of that is important in order to meet the timeline of a launch in the autumn of 2027 because remember, the vaccine needs 3 shots for priming, so if you want to have people protected for the Lyme season in 2028, you've got to start vaccinating at the latter part of 2027. Currently, all timelines communicated by Pfizer do support that notion and that timeline. Regarding the IXCHIQ situation, it's, of course, not an easy question to answer as we see major growth opportunities for IXCHIQ in the travel sector, but also in the countries where the chik virus is endemic, given that the single-shot live-attenuated approach has particular importance for countries with recurrent outbreaks. We are working with many different countries right now to ensure access to the vaccine in those territories. It's a bit too early to discuss expansion activities and what it will really mean in terms of commercial opportunities. We have 2 existing partners with Butantan for Brazil and South America and the Serum Institute of India for Asia, but there are more countries we are currently in dialogue with. We are trying everything to accelerate market access in those countries. How long it will take to establish vaccination against chikungunya in the world of travel vaccinations has to be seen. Its history has shown that predicting growth trajectory for travel vaccines is complex. I think we hope to provide further guidance as part of our 2026 outlook early next year.

Operator, Operator

We are now going to proceed with our next question. The questions come from the line of Theodora Robigl from Goldman Sachs.

Unknown Analyst, Analyst

Just one from me. In today's release, you referred to uncertainty around private and public funding opportunities being a consideration for moving forward with your Zika vaccine candidate. I was just wondering if you could share more detail regarding the factors you're weighing up and some sort of level of funding you need to see to take the candidate forward? Any further details would be appreciated.

Thomas Lingelbach, CEO

Yes. We announced that statement as part of our Zika release that we announced 2 weeks ago. We only repeated it in today's earnings release. On one hand, we are super happy with the data generated. We have shown very good immunogenicity data and excellent safety data for a vaccine that would also target pregnant women. At the same time, there is significant uncertainty around the potential regulatory pathway to licensure because it's an outbreak disease; a classical placebo-controlled efficacy study would probably not be deemed feasible. At the same time, there are major regulatory headwinds against accelerated approval pathways currently. Major NGOs and public health agencies have deprioritized Zika given the epidemiological situation. The return on investment for further development is not clear-cut. Certainly, in the absence of those clarifications, it would not be prudent for Valneva to invest in this program going forward. At the same time, if a substantial funding is provided by respective institutions, public or private, we would be very keen to proceed similarly to how we developed our chikungunya vaccine, for example, with substantial support from CEPI. For now, we keep the options open, but we must be mindful of capital allocation and investment returns, even if there is an exciting product candidate and medical opportunity.

Operator, Operator

We have no further questions at this time. I will now hand back to you for closing remarks.

Thomas Lingelbach, CEO

Yes. Thank you, everyone, for taking the time today. We are very thankful for your support. We look forward to delivering on our expectations for the remainder of the year and to the next big and biggest catalyst for Valneva in its history with Lyme data coming in next year. Thanks so much, and have a good remainder of the day. Bye-bye.