Earnings Call Transcript - VALN Q4 2024

Operator, Operator

Thank you. Hello, and thank you for joining us to discuss Valneva’s Full Year 2024 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, 2024, 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 CFO, Peter Bühler, who will provide an overview and update on our business as well as our key financial results for 2024. 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 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, 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 to everyone. Yes, Valneva had another successful year in 2024, thanks to no small part to the dedication and skill of our in-house teams and legal partners. When we look at the key highlights of the year, we achieved our targeted double-digit year-on-year sales growth with sales above €160 million, aligned with our 2024 guidance. We managed to have a very solid cash position at year-end, close to €170 million, with a significantly lower operating cash burn. And of course, all augmented by our successful placement of almost €60 million and the sale of our priority review voucher. Peter is going to provide more details, of course, on all the financial performance indicators. We had a very strong regulatory execution with three additional IXCHIQ approvals and a very significant number of upcoming label extensions around IXCHIQ. And of course, we achieved one of our strategic objectives to augment our pipeline with a leading Phase 2 Shigella program. When we really look at what we have achieved and what we are expecting for 2025, this is all shown on Page 5 of the presentation. As I mentioned, substantial clinical and regulatory progress as well as financial strength are really the headlines for 2024. When we look at 2025 ahead, we expect multiple data readouts. We expect product approvals, we expect label extensions. So when we look at this a little bit more in detail, we expanded access to IXCHIQ. We have launches underway in Canada, Europe, and the United Kingdom. And we entered into a new Asian partnership for key endemic markets. Especially the low- and medium-income countries are very important for this product. We reported further key clinical findings that supported the label extensions for IXCHIQ into adolescents. We have clearly, with this product, again, confirmed its product differentiation, primarily when it comes to antibody persistence. We have the BLA product profile confirmed through additional key news flows and the results that we reported in 2024, primarily the Phase 2 booster results that we reported. As mentioned earlier, we have a strong financial position, which allows us to continue R&D investments. We showed solid cash, continuous double-digit revenue growth, and we received additional grant funding that supports our key IXCHIQ R&D activities. Looking ahead, we see, of course, the transformative potential for the Lyme vaccine candidate, VLA15, which is currently in the Phase 3 study. We are on track for the study with a first data readout expected by the end of the year. This will then result in regulatory filings anticipated for 2026 and hopefully, if everything goes well, first approvals in 2027. So we have further expanded and will further expand access to IXCHIQ. We expect product approval in Brazil, which will be our very first endemic market for this product. I mentioned already the adolescent label extensions in key markets. And of course, we are still waiting for a number of national vaccination recommendations outside of the United States, which hopefully will support the uptake of the vaccine in the respective markets. We have further meaningful clinical milestones that we anticipate for 2025, including the results from the Phase 2 studies for Shigella as well as the Phase 1 results for our novel Zika vaccine candidate. What are the key growth drivers for 2025 and beyond? Of course, the most important one is VLA15, our Lyme vaccine candidate, and we have clearly articulated many times that if successful, meaning successful data, successful regulatory approvals, successful commercialization, this product will have the potential to drive Valneva into sustained profitability, driven by milestone payments and royalties expected to start in the success case towards the latter part of 2027. In the meantime, we will continue to grow our commercial revenues. In the near-term, we will continue the growth trajectory for IXIARO and DUKORAL, augmented by further growth of IXCHIQ, which gains more global traction. When we look at the future pipeline value, it’s Shigella and Zika that are the next clinical assets in the pipeline. Our goal, as articulated in the past, is to have the next Phase 3 program ready to go into Phase 3 post-Lyme success. The Lyme disease candidate represents a major medical need and hence, a market opportunity. There’s currently no vaccine available to prevent Lyme disease in humans, and the annual disease burden is substantially on the rise. The CDC reported almost 500,000 cases in the United States, and in Europe, given that there is not a comprehensive reporting system, confirmed cases are about 130,000. The clinical manifestation of Lyme disease is severe, with 10% to 30% of people developing significant symptoms, including Lyme carditis or Lyme arthritis. 5% to 10% of those individuals could have long-term effects. Therefore, a preventative solution would have significant health-economic benefits. There are around 80 million people in the United States living in Lyme endemic regions and about 200 million in Europe. Our current guidance, agreed with Pfizer, expects the market to exceed $1 billion at peak. The Phase 3 study called VALOR has been spanning over three tick seasons. We are about to enter tick season three or just about to begin season 2025. We reported last year the completion of the primary vaccination series, and we still have the booster vaccination for the second cohort to be completed. We have about 9,000 participants in the study aged five years and older. The study is placebo-controlled, randomized at a 1:1 ratio of vaccine versus placebo, and a 2:1 ratio for North America versus Europe. The primary endpoint of the study is the rate of confirmed Lyme disease cases after the respective primary series plus booster. Secondary endpoints include other rates of Lyme disease cases after the primary series. We anticipate the right level of cases and the right level of efficacy will be shown once we have the final data readout for prevention, expected towards the end of 2025. Regarding chikungunya, we believe that our product is a highly differentiated vaccine. It is the first vaccine licensed for chikungunya, providing a strong immune response with only one dose. We have shown almost 100% seroresponse, with a sustained response monitored for three years. An antibody persistence study will monitor effectiveness for up to 10 years. Additionally, we see a similar level of seroresponse across all age groups tested thus far, and it is a true one-shot vaccine. There are key R&D activities associated with IXCHIQ focused on expanding access, label extensions, and confirmatory studies to assess the product's effectiveness in real life. This program is supported by a new grant of more than $40 million from CEPI, extending our existing partnership with CEPI. We have the post-marketing effectiveness study, the Phase 4 study, to confirm efficacy post-licensure, which is an observational effectiveness study in Brazil. Our Phase 3 randomized controlled study for adolescents is ongoing, and we expect to enter Phase 3 for children below 11 years by the last quarter of this year, pending positive results. Regarding Shigella, we are engaged with the world's most advanced tetravalent Shigella vaccine candidate called S4V2, licensed exclusively from LimmaTech. The ongoing Phase 2 studies are expected to show the significant need for this product in low- to medium-income countries, especially among children, as it is the second-leading cause of fatal diarrheal disease, leading to approximately 600,000 deaths annually. Therefore, it was prioritized by the World Health Organization. We expect the Phase 1 results for our Zika virus candidate, VLA1601, by the end of this year. The leading adjuvanted inactivated whole-virus vaccine is built on the platform developed for our COVID vaccine, VLA2001. Zika virus infections can be devastating, and there are currently no vaccines or specific treatments available. With that, I would like to hand over to Peter.

Peter Bühler, CFO

Thank you, Thomas, and good morning or good afternoon to all of you. Moving on to the financial review, starting with details on our top line. Total product sales reached €163.3 million in line with our guidance and growing 13% over 2023. Excluding COVID-19 vaccine sales in 2023, product sales grew by 18% year-over-year. IXIARO sales reached €94.1 million compared to €73.5 million in 2023, representing a growth of 28%. Sales to travelers grew 19% year-over-year, and sales to the U.S. military also recorded strong growth as the Department of Defense opted to purchase additional doses under the September 2023 contract. As a reminder, in January 2025, we announced a new one-year contract with the U.S. Department of Defense. DUKORAL sales reached €32.3 million compared to €29.8 million in the previous year, an increase of 8%. The main driver for this growth came from Canada and from indirect markets where improved availability of products drove stock replenishments. IXCHIQ was launched in 2024 in the United States and at the end of the year in Canada and France, and we recognized initial sales for the financial year 2024 of €3.7 million. Finally, third-party sales decreased year-over-year by €2.5 million to €33.2 million due to supply constraints in the first half of the year. As discussed in the past, we expect these third-party sales to continue to decline as we focus on our proprietary products. This decrease of third-party products will support our goal to improve our overall gross margin. Looking at our P&L, other revenues decreased from €9.1 million to €6.3 million. The decrease is primarily related to lower revenues recognized from our chikungunya collaboration with CEPI and Butantan. In 2023, other revenues also included residual revenues related to our COVID-19 vaccine program. We reduced our cost of goods by €2.4 million, with a decrease in both cost of goods and cost of services. The overall gross margin of commercial products, excluding IXCHIQ, reached 50.6% compared to 46% in 2023. This improvement is primarily due to better manufacturing performance, including improved yields at our Scottish manufacturing site. Our gross margin is adversely impacted by idle costs in our new manufacturing sites in Scotland and Sweden. IXIARO reached a gross margin of 61% compared to 52.3% in 2023. DUKORAL’s gross margin was lower than IXIARO and reached 38.7% compared to 42.4% in the prior year. Third-party sales reached a gross margin of 32.8%, while IXCHIQ’s cost of goods were €7.2 million, exceeding sales driven by manufacturing overhead. Research and development expenses increased from €59.9 million in 2023 to €74.1 million in 2024. This increase of 24% is in line with our guidance and is driven by the tech transfer of IXIARO and IXCHIQ production to our new facility in Scotland, as well as our new in-licensed Phase 2 vaccine candidate for Shigella. Furthermore, we increased our investment in preclinical activities. R&D investments in our chikungunya vaccine were stable year-over-year, as we execute further clinical studies, particularly in pediatrics, and began preparing for our mandatory Phase 4 activities. In 2024, we strengthened our R&D team in line with our focus on innovation. Marketing and distribution expenses were reported at €52.4 million compared to €48.8 million in 2023. This increase is primarily due to higher staff costs, as we enhanced our commercial organization to support sales growth, including the launch of IXCHIQ. General and administrative expenses decreased from €47.8 million in 2023 to €42.8 million in 2024. This decrease is related to lower external spend and structural changes to our G&A organization. In 2024, Valneva sold a priority review voucher obtained with the approval of IXCHIQ in the United States. The voucher was sold for US$103 million, which, net of expenses related to the sale, resulted in net proceeds of €90.8 million. Other income and expenses remained stable versus the prior year at €20.7 million and mainly consist of grants and tax credits related to R&D activities in Austria and France. In 2024, Valneva reported an operating profit of €20.7 million compared with an operating loss of €82.1 million in the prior year, substantially driven by the non-recurring income related to the sale of the priority review voucher. After financial expense and income taxes, Valneva’s loss for the period reached minus €12.2 million, while adjusted EBITDA is reported at plus €32.9 million. Moving on to the financial outlook. In 2025, we expect total product sales to reach €170 million to €180 million and total revenues to €180 million to €190 million. We expect the growth in product sales to primarily come from increased sales of IXCHIQ driven by the United States, as well as expansion into additional new territories. We expect IXIARO and DUKORAL to continue to grow while we anticipate third-party sales to continue to decrease significantly. We expect our investment in R&D to reach between €90 million and €100 million as we continue to advance our clinical and preclinical assets. These investments into R&D are supported by external grant funding, as well as R&D-related tax credits, which will be recorded in other income. As mentioned by Thomas, we report a solid cash basis at the end of 2024 with €168 million in cash and cash equivalents, and we expect to reduce our operational cash burn by more than 50%, from over €60 million in 2024 to around €30 million in 2025. We will continue to manage our cash carefully to have sufficient runway to reach key inflection points. We will continue to grow our commercial revenues and focus on strategic R&D investments. We’re targeting one clinical program to enter Phase 3 post-Lyme data, and we will look for additional non-dilutive funding for our clinical programs. As mentioned in the past, we expect to continue improving our gross margin as we focus on our proprietary products and finalize the tech transfer into our new manufacturing site in Scotland. From successful Lyme disease vaccine approval and commercialization, we have the opportunity to become sustainably profitable. With that, I hand the call back to Thomas to look at our future value drivers.

Thomas Lingelbach, CEO

Many thanks, Peter, for this comprehensive financial report for the full year 2024. Let me remind you one more time where we see the growth drivers for 2025 and a little beyond. It’s about Lyme. As we mentioned in this presentation, it is certainly a very, very important asset for the company and with an expected first readout by the end of the year. This is going to have an enormous impact on future development and prospects of the company. We have our commercial business, which has delivered quite nicely over the past years and we see this really continuing. As Peter mentioned, the shift from lower third-party product sales primarily, given that our commercialization partnerships with BN will come to an end, and more focus on our proprietary vaccines will substantially increase our margin. Hence, the overall commercial business is expected to be cash generative already this year and will continue to provide cash that we can reinvest in R&D. We have very nice R&D assets that we would like to progress, and we expect some meaningful clinical data readouts this year, especially around Shigella and Zika. With that, I would like to hand back to the operator to take your questions.

Operator, Operator

And now we’re going to take our first question from Suzanne Van Voorthuizen from Van Lanschot Kempen. Your line is open. Please ask your question.

Suzanne Van Voorthuizen, Analyst

Hi, this is Suzanne from Kempen. Thanks for taking my question. Peter, can you elaborate a bit on the cash burn guidance? The debt is going down by over 50%. What are the main drivers behind this? And with that, can you also give some context to the R&D expenses going up for the coming year? And then another question for Thomas, more of a vaccine sentiment question. What risks or opportunities do you see stemming from RFK’s role now in the administration? We’ve seen some changes implemented at the CDC and the ACIP. But on the other hand, he also specifically mentioned his experience with Lyme. Can you elaborate on this please? Thank you.

Peter Bühler, CFO

Yes. So I can start with the cash burn. Suzanne, by the way, thanks for the question. I will start with your question on cash. There are various reasons for this, and you saw, of course, with the sales growth that will contribute. We will also focus on cost containment in 2025. Additionally, we will work on our working capital. We expect to have R&D tax credits collected this year; due to the end of our COVID program, the collection took longer. In 2025, we anticipate having the exceptional year where we will collect two years’ worth of R&D tax credits. All these reasons contribute to seeing a much lower cash burn. As Thomas mentioned, the commercial business returning to profitability will help our cash flow as well.

Suzanne Van Voorthuizen, Analyst

Yes, for sure. But maybe in R&D going up, can you also elaborate on that?

Peter Bühler, CFO

Yes. So R&D going up; a significant contribution is from the chikungunya Phase 4 trial, the mandatory trials we need under the approval we have in the U.S. Those costs will ramp up in 2025, along with the rest of our pipeline and the acceleration of our new Shigella program that adds to the R&D activities.

Thomas Lingelbach, CEO

Good. And it is worth mentioning, Suzanne, that the Phase 4 program will also be augmented by the Phase 3 initiation in pediatrics, which is also a mandatory post-licensure activity. All this will peak in the latter part of this year. This is why you see this relatively high R&D cost. However, as Peter said, this will be substantially offset through the CEPI grant as well as the R&D tax credit mentioned.

Suzanne Van Voorthuizen, Analyst

Got it. Thank you very much.

Operator, Operator

Thank you. Now we’re going to take our next question, and the question comes from the line of Samir Devani from Rx Securities. Your line is open. Please ask your question.

Samir Devani, Analyst

Hi guys. Thanks for taking my questions. Let me just kick off perhaps with some number questions. Can you just confirm whether you took any price increases on IXIARO and DUKORAL in the beginning of this year? I guess that’s question one. And then I guess the only other one on the numbers is – maybe two on the numbers. There was an intangible spend up to the end of September about €10 million. And it seems to have gone down to €2.5 million in cash. I was just wondering what happened in the last quarter to do that. You mentioned about the R&D tax credits that you’re expecting. Could you just maybe quantify that for us? Thanks very much.

Thomas Lingelbach, CEO

So I start with the first part of your question – Hi, Samir, by the way. We had no material price increases in 2024 for any of our products. So you have almost a like-for-like volume comparison.

Samir Devani, Analyst

Actually, Thomas, it was about 2025 rather than 2024; at the beginning of the year you’ve taken it...

Thomas Lingelbach, CEO

No, it is 2025, sorry, Samir. This is what I meant.

Samir Devani, Analyst

Yes. Okay.

Peter Bühler, CFO

Yes. So regarding the intangible, that was an upfront payment we had made for the in-licensing of the Shigella program. As LimmaTech executes some of the R&D work, we moved some of those expenses from intangibles.

Samir Devani, Analyst

Okay. Makes sense. Yes. Okay. Makes sense. And then just the one on the R&D tax credits, Peter, that you mentioned. What sort of quantity is that if you maybe can tell us that?

Peter Bühler, CFO

Well, yes, we do not provide guidance on the R&D tax credit. However, out of the €20 million in other income, about half of it is R&D tax credit and the other half is grant. So that gives you a rough idea of what the tax credit was that we collected in 2024. For 2025, we have not given detailed guidance.

Samir Devani, Analyst

Okay. And then just maybe if I could sneak one final one in; just on the application for approval of IXCHIQ in Brazil. Is there any update as to when we might see that? Thanks very much.

Thomas Lingelbach, CEO

Yes. So on Brazil, we anticipated the approval in Brazil in the first quarter. We have seen some delays in the process. We haven’t received any further list of questions, which means the review process is very close to its end. Our partner, Butantan, is pushing hard on ANVISA right now. Although other steps like pre-approval inspections have been successfully completed, the approval is not on the critical path. We still hope to get the approval very soon since we need this to start the pilot vaccination program.

Samir Devani, Analyst

Right. Thanks very much.

Operator, Operator

Thank you. Now we’re going to take our next question. Just give us a moment. The question comes from the line of Rajan Sharma from Goldman Sachs. Your line is open. Please ask your question.

Rajan Sharma, Analyst

Hi. Thanks for taking my questions. Just relating to IXCHIQ and maybe just following up on that policy question from earlier. Do you think the postponement of the February ACIP meeting could actually be beneficial for you near term, given there was supposed to be a vote on your competitors’ chikungunya vaccine as well, I believe? Secondly, just again, following up on IXCHIQ. Could you just talk to the market dynamics that you’re seeing so far? I appreciate it’s still early, but in terms of the revenues that you have generated and the traction that the vaccine has received, where is that coming from based on what you’re able to see? Thank you.

Thomas Lingelbach, CEO

Let me start with the latter part because there’s not a lot I can say to the first part of your question. But let’s talk a little about IXCHIQ dynamics. We are convinced that the IXCHIQ market will develop over time. We discussed it in the past; we were initially a bit too optimistic regarding the ramp-up, but we firmly believe that this product will lead to a good commercial opportunity. Chikungunya is a severe disease, and as we see more clinical manifestations, awareness grows that chikungunya is not just flu-like symptoms, it comes with significant long-term health impairments. Moreover, there is more awareness around chikungunya. We are observing substantial outbreaks, such as those in La Réunion, which recently reported over 2,000 cases in a single week. We published a healthcare economic analysis indicating that the cost situation for chikungunya vaccination is favorable. Overall, we are witnessing growing disease awareness, which is fostering demand. Our partners signaled substantial initial demand for the launch year. In the United States, we await MMWR approval, and the ACIP update is essential for access to the retail channel. The initial situation we observe in Europe post-launch in France and Canada looks encouraging, and everyone can see how this plays into our sales guidance.

Rajan Sharma, Analyst

Okay. Thank you.

Operator, Operator

Thank you. Now we’re going to take our next question. Just give us a moment. The question comes from the line of Oscar Haffen Lamm from Bryan, Garnier. Your line is open. Please ask your question.

Oscar Haffen Lamm, Analyst

Hi team. Oscar here from BG. I believe most of my questions have been answered, but maybe on Zika. I’m curious about your view on the evolution of the epidemiology and how this may affect the potential continuation of the program into Phase 2. When would you expect the Phase 2 to start and your estimated cost of that one? Thank you.

Thomas Lingelbach, CEO

On Zika, we are currently in Phase 1 and have a first data readout expected by the end of the year. This will be followed by an antibody persistence period; we want to understand this since it has been an issue in the past. After that, we will engage with authorities about the clinical development pathway. The earliest we could start a Phase 2 study would probably be at the end of 2026 or early 2027.

Operator, Operator

Thank you. Now we’re going to take our next question. The question comes from the line of Vamil Divan from Guggenheim Securities. Your line is open. Please ask your question.

Vamil Divan, Analyst

Great. Thanks for hosting the call and taking my question. So a couple, I apologize if I missed this, but on IXCHIQ, just the – you’ve talked previously about your midterm guidance and kind of being relooked at. I’m wondering just given all the dynamics, when you think it’s an appropriate time for us to expect that to be announced? Then secondly, on Lyme, I know Pfizer aims to submit the application next year, assuming positive data. I’m just trying to clarify the exact timing for the data readout because Pfizer doesn’t currently list it as a key event on their catalyst page for this year. I know you guys expect the data this year. So I’m trying to clarify if you expect a data readout at the end of this year or if the actual readout itself may go into next year. Just how should we think about that?

Peter Bühler, CFO

Yes, thanks for the questions. On IXCHIQ, we did provide midterm guidance in the past and indicated it might need revision. We believe that we will need some more time and data to confirm our guidance on sales, given the ramp-up has been slower than we initially anticipated. We still believe in its potential, but we need better predictions, which will take time.

Thomas Lingelbach, CEO

Yes. Regarding the timing of the data readout for Lyme, we expect the first data readout at the end of 2025. This will be followed by further analysis and secondary endpoint readouts in early 2026. Pfizer indicated they would submit regulatory submissions in 2026 and aimed for market introduction, ideally before the 2028 tick season.

Operator, Operator

And now we’re going to take our next question. The question comes from Maury Raycroft from Jefferies. Your line is open. Please ask your question.

Maury Raycroft, Analyst

Hi, congrats on the progress, and thanks for taking my questions. I was just going to ask one on chikungunya. With Bavarian Nordic recently approved, could you just discuss how you plan to leverage your first-mover advantage and accelerate the launch in 2025? Additionally, do you still expect the CDC to publish the MMWR this year around July, and how should we think about that as well?

Thomas Lingelbach, CEO

We are cautious in predicting timelines regarding CDC processes. Our internal planning assumes an MMWR release this year. Regarding Bavarian Nordic, we’re focused on increasing disease awareness, which is key for chikungunya, and believe that more awareness will only help our cause.

Maury Raycroft, Analyst

Understood. That makes sense. Also, if you could provide any perspective related to the vaccinated subjects hospitalized after receiving IXCHIQ and what your expectations are for the upcoming ACIP meeting?

Thomas Lingelbach, CEO

What we are seeing is a normal process. Cases were reported under the VAERS system, and the causality of those cases is being assessed. We have provided all necessary information to ACIP, the CDC, and FDA. We’re careful not to speculate on the causality outcome but are committed to following the process.

Maury Raycroft, Analyst

Makes sense. Okay. Thanks for taking my questions.

Thomas Lingelbach, CEO

You are welcome, Maury.

Operator, Operator

Thank you. There are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Thomas Lingelbach, CEO

Thanks a lot for your attendance today. Thank you for your great questions as usual. We are looking ahead with confidence into a great 2025, knowing that it is a transitional year for the company as we move towards Lyme data, which will be very critical for the strategic development of the company. We are looking forward to some interesting readouts this year, as mentioned. Thank you so much for your attention and support of the company, wishing you all the best for the rest of the day.