Valneva SE (VALN) 2010 Q1 法說會逐字稿

And welcome to the Intercell conference call. At this time, all participants are in a listen-only mode, until we conduct a question and answer session, and instructions will be given at that time. (Operator instructions) Just to remind you, this conference call is being recorded.

I would like to hand it over to today's chairperson, Gerd Zettlmeissl, CEO. Please begin your meeting, and I'll be standing by.

Hello, everybody. Good morning for participants in the United States. Good afternoon for everybody listening from Europe. It's Gerd Zettlmeissl speaking, CEO of Intercell, and here is my management board colleagues, Thomas Lingelbach, our Chief Operating Officer, and Reinhard Kandera, our Chief Financial Officer.

The presentation we will give you in the next 20 to 25 minutes is in four parts. I will start with some introduction and highlights, then we will talk about our financial performance for quarter one. This will be done by Reinhard, followed by an operational update, including IXIARO, JESPECT, and our advanced clinical programs by Thomas Lingelbach. And I will come back for outlook, next steps, and questions.

Let me start with the highlights, and please go to page number 4. I would like to have a little comment also on our share price development of the last couple of weeks and months. So, obviously, we see here [attendance] which we are not very happy about. Obviously, we take this very serious, what the interests of our shareholders are. You can be assured on that, and we will try to do our best with upcoming data to change this perception.

Having said that, I would like to go into the highlights of the first quarter, and of the recent past. One major point we achieved in the last couple of days is that we expanded our technology platform by the acquisition of an antibody technology. This fits very nicely to our work we are doing in the moment in active vaccination and bacterial vaccines, so we really believe and are convinced that this acquisition will build important and additional pipeline in a very complementary field in infectious diseases.

We have also announced yesterday another expansion of our activities and our technologies into the animal vaccines arena. Again, here we are talking about antigens and vaccine candidates which we derived from our antigen identification platform, which will, in future, with our partner Boehringer, all developed in the animal vaccine field.

Intercell will receive upfront option milestone payments, obviously, in animal vaccines. The financial conditions are, given the size of the market of such products, relatively moderate. But still, we think that this extension, which we intend to do for quite a bit of time with a top partner in this segment, makes a lot of sense, and it will have some mid and long-term value generation for the Company.

If you would move to page 5, please, I would like to say a few words about IXIARO and JESPECT. We had announced already, when we talked about our quarter four numbers, that we don't expect major sales for the product out of Intercell in the first quarter, based on the fact that we had some delays on a batch release with the authorities. All these things are now nicely on track, and we are very happy that we can put into expectation good sales, significant sales for the coming quarter, Q2, and the forthcoming quarters.

The success of the product, certainly in the future, the uptick of the product will heavily depend on a couple of points, and we will come back to this more in detail later. But just as a highlight, certainly, there is an importance of further recommendations to come in. You have seen that last year, we have seen US recommendations being strengthened. Recently, the UK recommendations advance into the same direction, and we expect more to come, mainly in the key European markets.

We have also reported, and now coming in a few words to our pipeline, we have reported also data from our pneumococcus vaccine in the first quarter. We saw good safety and immunogenicity profile for the vaccine, which now can move into further development steps. And we are very happy that we got this result.

The next major points, data points and value points from our pipeline in the next two quarters, are, on the one hand side, data from our Phase II for our investigational single application pandemic influenza vaccine, and then in the -- just in the following quarter, Q3, the Phase II data for our pseudomonas vaccine, where we have already announced interim data, and we are very happy to see that a vaccine was very nicely immunogenic, also, in a difficult patient population, namely, ICU patients, and on this basis, we are confident in moving this product forward.

You have then, on your package on page 6 and 7, for those who have not participated in the extra call we had on the Cytos antibody technology, two slides summarizing the transaction again. I don't want to go into details here, but hand over to Reinhard Kandera on the financials.

Ladies and gentlemen, let me start on page number 9 with a brief overview on our Q1 numbers.

Our revenues were EUR4.8 million, of which about EUR400,000 resulted from products revenues, and EUR4.3 million resulted from core operation, licensing, and grants.

Our loss for the quarter was EUR14.7 million. Our net cash outflow from operations was EUR15.5 million, largely driven by our R&D expenses of EUR17.9 million.

We have a comfortable balance of cash and marketable securities at the end of the first quarter, of more than EUR158 million.

Please turn to page 10, which shows you a quarterly overview of our financial performance over the last couple of quarters.

Looking at our revenue situation, you see that our revenues are highly fluctuating, and we acknowledge that it's very difficult for analysts and investors to base their valuations on our short-term financial performance, to judge the Company on quarterly revenues. We expect the revenue situation to continue to be volatile over the next couple of quarters, since they are driven by collaboration and licensing income based on milestone achievements, based on upfront payments, and they are also driven by the take-up of our Japanese encephalitis vaccine, which in many territories is still in a launch phase.

Our R&D spending has been relatively stable over the last couple of quarters, and we expect R&D spending to be around the same level as in Q1 2010. Revenues and R&D spending will result in a volatile bottom line as well, over the next couple of quarters. Our cash situation is comfortable, and you see that we are making use of our cash balance in progressing our R&D pipeline.

Page 11 shows you the longer term financial position. We still continue to expect a loss for the full year 2010 in the same order of magnitude as we saw in 2009. We base this on a very strong cash balance, and we think that it is justified to invest in our broad, late stage R&D pipeline.

We also think that based on Japanese encephalitis sales uptick over the next couple of quarters, and based on collaboration, licensing and grant income, we can improve our revenues during the year 2010.

Let me come to page 12, and go into some details of our first quarter numbers. On the revenue side, we saw a moderate decrease as compared to the first quarter 2009. From EUR4.8 million in revenues, EUR3 million resulted from collaboration income, EUR1.3 million resulted from grants, and EUR400,000 resulted from Japanese encephalitis sales.

Please keep in mind that we had already announced that Q2 lot release timing, there are no deliveries of product to our distribution partners in the first quarter of 2010, so this EUR400,000 that we booked relate entirely to in-market sales, where we get balance payments from our distribution partners. However, the main part of our product sales revenues is booked when we ship product to our partners, and this is why, in the first quarter, revenues are low. In addition, due to seasonality of (inaudible) vaccines in market sales, of (inaudible) vaccines in the first quarter are generally low.

I already mentioned that our loss was EUR14.7 million. Our cost of goods decreased, and still represent write-offs of unfinished product in the prior quarter in 2009. We faced larger write-offs of already finished product, so cost of goods have decreased.

Our R&D spending of EUR17.9 million is primarily driven by our late stage products, travelers' diarrhea, pseudomonas, and pandemic flu. We saw a moderate increase of our SG&A expenses, to EUR4.3 million, and we try to keep tightest cost control in place in that area.

In the first quarter of 2010, you saw strong other operating income, which resulted mainly from currency effects on our US dollar assets.

Our cash position, as I said, is strong, with EUR158 million in liquid reserve at the end of the quarter. We intend to use some of that cash balance over the remaining year for spending in our R&D expenses, but also, for a complementary acquisition of our antibody technology that we have announced, where we will have a cash outflow of EUR15 million in total.

With that, I want to hand over to Thomas Lingelbach, to give you some more details on our IXIARO situation, and on our pipeline.

Thank you very much, Reinhard. Good morning, respectively, good afternoon, ladies and gentlemen. Let me start with IXIARO.

Where are we right now? I think a lot has already been said. I think we have been facing, on the one hand side, inventories that got sold by our partners in the first quarter, resulting in the EUR0.4 million sales revenues, and we had some delays on lot release timing. This is all resolved. Product is again in continuous supply, and we have this product now licensed and launched in the key markets in Europe and the United States. We are making very good progress on our Asian entry through our partner, Biological E. Remember, we announced in the last quarter that we were facing some issues with the regulatory guidance in India, so that the Phase III start that was originally even foreseen towards the end of last year got postponed, due to a (inaudible) trial that is currently ongoing.

However, we have completed the [tech] transfer, and the product is ready to go for a Phase III start still this year, which would allow, then, licensure in India in the year 2011, and subsequently, WHO prequalification.

The product is nicely being taken up in Australia and the adjacent countries through our partner CSL, and on the military side, we are about to enter into this year's supplies for the military. Also, here, we are facing a significant seasonality effect, but we are expecting the replacement of the existing stocks, the JE-VAX stocks that are still being used by the US military, but which are depleting as we speak right now. So we expect a good year with the military in 2010.

So what are the general next steps? And we have been talking about those already many times. This is primarily a product for which a market has not been existing so far, hence, a market needs to be built, and there are key elements of building a market and making a travel -- especially a travel vaccine a success.

First of all, we already mentioned recommendations, and we are working with all countries, country by country, to build up supportive recommendations for JE vaccination for travelers. This will result, alongside with the solid marketing approach by our partners, in expanded awareness for JE in the target groups. We will continue to expand our licensure process in additional territories and countries, and we'll extend the label for the use in children. Those clinical development activities are also nicely on track.

Let me turn to our leading clinical program right now, travelers' diarrhea vaccine, page number 15. There are two major clinical trials ongoing right now. On the one hand side, our first pivotal efficacy Phase III that started in October 2009. Our recruitment progressing is according to plan, and we expect the first data towards the end of 2010, respectively, early 2011, depending on the final timing of the recruitment and data analysis.

We have a parallel, very interesting study ongoing, which the -- also an efficacy study, but under the Phase II clinical protocol. This study started in 2010 in January, and we will show in this study that the vaccine will work equally good in a different epidemiological setting. This is why we are conducting this study in India. We have finalized the recruitment, and we expect the data still this year.

Just to remind you, this vaccine has shown already, in previous Phase II trials that were also [powered] as part of the efficacy trial, immunogenicity and reduction of clinically relevant diarrheal episodes.

With this trial program and clinical development program, in support of product licensure for this product candidate that will be marketed by our partner GSK, we are nicely on track towards a regulatory filing in 2012.

Let me turn to page number 17, our pandemic influenza vaccine program. This is the combination of an injected H5N1 off the shelf vaccine, with our vaccine enhancement patch put on top of the injection site, and used as a kind of external adjuvant, targeting a possible one dose single application that would clearly justify the use of such a vaccine system to avoid capacity shortages, and, since the vaccine enhancement patch would not be strength-specific, it could also be manufactured well in advance of a pandemic situation -- for example, in a pre-pandemic setting.

We are trying to generate right now Phase II data to basically replicate results we have earlier seen in a Phase I setting, where we could eventually show protection, measured by thorough protection above 70% after a single application, compared to 49% of the vaccine standalone without using the patch.

The Phase II data will come soon. We are right now in the beginning of the data validation process, and have announced the data release in the second quarter of 2010.

With this, we will then move into the next stage of development, subject obviously to respective data, which would allow us to repeat this trial setting, again, under Phase II trial protocol with our partner, GSK, and GSK would use the pandemic influenza vaccine, then afterwards take the next [industrialization] and clinical development that -- towards licensure, which would more or less be in the same range as already indicated before, for our travelers' diarrhea vaccine candidate.

Let me turn to page number 20 and speak a little bit about our hospital-acquired infection franchise. We have two main programs in late or mid stage development, the staph aureus vaccine with our partner Merck, and our pseudomonas vaccine candidate we run in-house.

Let me remind you that staph aureus can cause serious disease with infections that range from localized skin infections to septic shock, and the antigen that we out-licensed to Merck is highly conserved and targets the cell surface protein. The vaccine candidate induced protection, and demonstrated this nicely in preclinical studies, and even a Phase I study showed robust and persistent in wound response, even after a single vaccination.

There is a Phase II/III study right now ongoing in 25 countries, and this study is nicely conducted by Merck, and we expect that the decisive and really conclusive efficacy interim analysis of this Phase II/III study, that is the most meaningful to evaluate the efficacy of this product, may even slip into 2011, because the trial conduct depends heavily on the recruitment and incidence rates.

On the pseudomonas vaccine, and let me turn to page number 22, this study, where Gerd already mentioned that we disclosed the interim analysis early on, has been conducted in 400 ICU patients. The interim analysis showed good safety, good tolerability, and a very robust induction of functional antibodies. Obviously, we will see the data now after final data validation in quarter three, and this data will then trigger the potential Novartis opt-in, and the subsequent initiation of the clinical Phase III program, which then would need to be followed by a pivotal Phase III trial and the typical safety/consistency trials that are needed in the field of vaccine development, preceding, then, the regulatory filing. That could happen towards the 2013 timeframe.

Gerd already discussed briefly during our introductory section our candidate streptococcus pneumoniae right now in Phase I. This Phase I trial was conducted in healthy adults, basically to build the necessary safety database that allows a further development into the two target populations, which are on the one hand side children, and on the other side, the elderly.

On the children side, this program is supported by PATH, and let me remind you that this vaccine candidate is based on three highly conserved surface proteins which we detected out of our proprietary antigen identification platform. As a next step, we expect then the evaluation in the first target population, which we aim in children.

We have a whole variety of attractive strategic partners right now, and we are proud of our alliances with leading industry players in the field, and I don't want to go into all the levels of detail here. I think we have been talking about all those during the course of this presentation, and therefore, I would like to hand over to Gerd to give you an outlook and the conclusion of this quarterly update.

Thank you very much, Thomas. On page 27, you find the summary of the selected next milestones, and the most important next milestones. I just would like to emphasize on the most critical, and also, the most near term activities. On Japanese encephalitis, we obviously will make everything possible to increase the sales of the product, and we expect here increasing sales in the second quarter for this IXIARO, our first product on the market. In addition, our focus will be on starting the Phase III still this year in endemic countries, also open this opportunity for the future.

In the travelers' diarrhea segment, just to repeat, we expect the Phase III data by the end of the year, early 2011, with some Phase II data already coming on the India study by the end of this year.

In staph aureus, we're at the interim analysis of the current Phase II/III trial, is the next milestone. Thomas already mentioned that this might move into 2011 -- there's a possibility on that, and we have to see how further incidence and further recruitment will be. Recruitment is going well, but we already cannot be sure about the ramp up of the incidence rate in the trial before the absolute number of cases in the trial will trigger the analysis.

Phase II pseudomonas is nicely on track for data generation -- also, giving us hopefully some hint on efficacy in the third quarter. For the Phase II in pandemic flu, we will see data in the second quarter, also nicely on track for this one.

I don't want to go in detail on the other points, and leave it here, and open the discussion and the question and answers. Thank you very much.

Thank you. (Operator instructions)