Valneva SE (VALN) 2011 Q2 法說會逐字稿

Good morning and good afternoon, ladies and gentlemen, and welcome to the Intercell analyst call. At this time, all participants are in listen-only mode until we conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions). And just to remind you, this conference call is being recorded. I'd now like to hand over to your chairperson Thomas Lingelbach, CEO of Intercell AG. Please begin your meeting, and I will be standing by.

Hello, good morning, good afternoon. Welcome to Intercell's report on quarter two and half-year 2011. I'm on this call with my colleagues Reinhard Kandera, Chief Financial Officer, and Staph Bakali, Chief Business Officer.

Before I begin the formal presentation, I would like to reflect just briefly on my first 100 days as CEO and leader of the new management team of Intercell. I would like to think that you have been able to perceive that my key objective has been to ACT, by which I mean to, A, acknowledge the need for change at the Company regarding its strategy and with respect to shareholder relationships; C, coordinate the leadership of the response to this need for change; and T, take responsibility for successfully implementing the change. We are committed to remaining focused on these objectives. And I believe that with it, the renewal of the Company will be achieved.

The recent economic and market crisis has hit Intercell and its shareholders hard, too. But we are glad to see a certain rebound in the last days. And we will present to you at today's call that our strategic execution is showing clear first results and that those will hopefully support the positive valuation trend to continue.

As part of our short to midterm renewal strategy, we presented four key elements of our strategy, shown on page number four. With regards to revenue growth, our JEV sales ramped up 85% compared to the half-year results 2010. We expect the sales growth trend to continue by this confirmatory results and our guidance remains around 60% to 70% growth for the full year.

With regards to our second key strategic element, namely operational and financial discipline, we have been able to reduce our net loss for the second quarter to EUR1.6m. We have made significant progress in cost cutting across all areas of our operations, significantly above and beyond the first restructuring wave we implemented shortly after our TD discontinuation decision.

We have consolidated our operations globally and are now focusing on our US side as a commercial hub for our Japanese encephalitis team and the Vienna site as the key R&D center, supported, obviously, by Livingston, our key core asset for the manufacturing of our first approved product against Japanese encephalitis.

In terms of capital efficient pipeline investments, the third element of our strategy, we have been able to reduce our R&D costs by roughly 58%. We have put a revised research strategy in place, and we have refocused our pipeline in the development arena with clear priorities without losing our innovative and powerful progressing of the pipeline projects.

In terms of the fourth element, leverage partnerships, we are glad that our relationship and our strategic alliance with Merck continues, that we received our $6m milestone for a successful interim analysis. Also, the trial got discontinued, and we have very promising ongoing discussions with potential new partners in, A, around the technology platforms we have in place and where we have still potential unlocked potential for future partnering, but also in terms of more strategic measures.

With that, I would like to hand over to our CFO, Reinhard Kandera, to give you our financial reporting.

Thank you, Thomas. Ladies and gentlemen, I am happy to present to you a financial result, which we think is a very good result, showing progress in various ways after the recent setbacks that we as the management, that Intercell as a Company, and that you as shareholders of the Company have faced recently.

Let me start with an overview on page six of your presentations. The big picture of our second-quarter result shows growth in revenues. Revenues are up more than 30% compared to the second quarter of 2010. It shows significant progress in cutting costs and adjusting our organizational and cost structures according to the new strategy of Intercell. R&D costs were reduced by approximately 60% compared to the second quarter of 2010. But also, general and administrative costs were reduced significantly. And even cost of goods were lower despite higher sales.

As a result, our net loss was significantly reduced compared to previous quarters and compared to Q2 2010. Also, very important, we made good progress in conserving our cash position. We have also significantly reduced the cash outflow of the Company.

With this, let me go into some more detail, shown on page seven of your presentation. Our revenues for the second quarter 2011 were EUR12.7m, which compares to EUR9.7m in 2010. For the first half, it was EUR18.4m compared to EUR14.4m for the first half of 2010.

As I have already said, significant cost cutting was achieved on the R&D expense side, despite our commitment to grow the Company through innovation. Our second quarter R&D expenses were EUR6.8m, which compares to EUR16.9m in Q2 2010. In terms of net loss, we could reduce the loss to EUR1.6m compared to EUR8.3m in 2010. For the first half of the year, our loss was EUR12.9m compared to EUR23m in the first half of 2010.

Our net operating cash outflow was reduced to EUR5.5m in Q2 2011. This compares to EUR11m in Q2 2010. But just to give you another comparison, in the first quarter of 2011, the operating cash outflow was still EUR23.5m, reflecting a spending level of Q4 2010. And you can see clearly that in the second quarter with some time lagging behind, we have made significant progress in reducing the net operating cash outflow. As a consequence, our cash balance at the end of Q2 was EUR79.6m. And this compares to EUR87.7m at the end of the first quarter 2011.

Let me continue with giving you some more background on some of our numbers. And this is on page eight of your presentation. As I said, EUR18.4m revenues in the first half of 2011 was driven by strong growth in IXIARO/JESPECT sales, where we could achieve EUR7m in the second quarter, marking the best quarterly sales result since the launch of the product in 2009. Despite this increase in product sales, our cost of goods did not increase. And we could show a positive margin development for the product.

R&D expenses were reduced by more than EUR10m year on year, which represents almost 60% reduction. Still, we remain fully committed to progress our focused pipeline and to generate shareholder value through innovation.

On the SG&A side, costs were reduced by almost 40% in Q2. Still, we also booked some restructuring costs of about EUR1m to complete the consolidation strategy, which was announced at the end of June 2011.

The finance expenses in Q2 helped us in achieving our results and our reduced net loss. In Q2, we had the positive finance result. And let me briefly explain the background. You know that we issued a convertible bond in the first quarter of 2011. This bond includes an option element that needs to be valued at fair value. And since unfortunately, our share price went down since the first quarter, on the other hand, we faced a valuation gain on this option element of about EUR2.3m, which gave us an unexpected finance gain.

As I said already, the net loss for the quarter was EUR1.6m, representing an 80% reduction for the second quarter. And it was EUR12.9m in the first half, still representing 44% reduction compared to 2010.

With that, I want to come to the outlook for the rest of 2011, summarized on page nine. On the revenue side, we expect the positive sales trend for IXIARO to continue. And we still expect at least 60% to 70% growth rate compared to 2010. We also see further upside from partnering and grant income.

On the cost of goods side, we expect improving margins, as you have already seen in this quarter, due to higher sales and higher capacity utilization. On the R&D side, we expect to continue our strategy of focused and substantially reduced spending. However, you may see a slight increase in R&D expenses in the second half of the year compared to this quarter, as our advanced product candidates are moving forward.

On the SG&A side, we expect to maintain tight cost controls in general and administrative spending. And we expect slightly increasing selling expenses as our sales to the US military and the private US travelers market grow. We maintain our net loss guidance for the full year 2011 of between EUR30m and EUR40m.

With that, I want to hand over to our Chief Business Officer, Staph Bakali, to give you some more insight into the development of IXIARO.

Thank you, Reinhard. Good afternoon, ladies and gentlemen, and good morning to our friends in -- over the pond. As both Thomas and Reinhard have already stated, we are very pleased to announce continued strong growth for IXIARO with quarter two sales of EUR7m, representing the best quarterly sales since launch, and year-on-year growth of some 85% for the first half of 2011.

The quarter two sales have been primarily driven by strong growth in both the military sector and key travel markets, especially the UK and the United States. Based on this solid performance, we believe that we are on track to achieve our expected full-year growth of at least 60% to 70%.

We, together with our sales and marketing distribution partners, will continue to focus our activities on increasing disease and risk awareness amongst both travelers and healthcare professionals and continue to increase the adoption of vaccine recommendations in the travel and military sectors.

On page 12, I want to turn our attention to the midterm, which is the next three to four years. As we have previously stated, JEV growth and profitability are key elements of our renewal strategy over this period. In terms of revenue growth, we have three major pillars. First, in the travel sector, our goal is to achieve 50% of peak penetration, which you see on the graph below is at 5%, which when compared to established travel vaccines is, we believe, a realistic target.

Secondly, in the military sector, our goal is to continue to increase vaccination uptake in the four deployed personnel and to leverage two key advantages, the first being that we are in a unique position currently as the sole supplier for the military. And secondly, through the improved product safety profile versus the old vaccine, we aim to continue the confidence in vaccinating these for deployed personnel.

The final pillar is the launch in the endemic market. And I will speak about that in a second. But we're very much on track to doing that in 2012 in India.

With regards to margin improvement, we have a target of achieving greater than 50% gross margin, which we expect to be achieved through greater volumes and therefore increased capacity utilizations and increased manufacturing efficiency.

Turning to page 13, our growth strategy is also supported by a number of lifecycle management initiatives, primary ones being, one, the continued geographical and global expansion outside of Europe and the United States, for example, in Asia in the travel markets, and where we already have approvals in Hong Kong and Singapore, and in Latin America, where we've already made our first submissions in some of the major markets.

The second is to obtain a label expansion in the pediatric segment for young travelers. And we are expecting approval for this indication by the end of 2012.

Finally, as I mentioned, a key element is to launch an endemic market. And we are very much on track to launch in a major market in 2012 in India, where the current trials are on track. And we expect submission before the end of the year and approval during the course of 2012 with our partner Biological E.

With that, I would like to hand back to Thomas, who will give you an R&D progress update.

Thank you, Staph. Before I turn to R&D, I would like to draw your attention on page 14. We have been receiving multiple questions in connection with our first product recall. And we have tried to summarize in a very transparent way what the status is. Obviously, it goes without saying that the Company is handling the follow-up actions resulting from IXIARO's first recall diligently and most proactively.

We are under a so-called Article 20 procedure in Europe following an out-of-specification result for potency of IXIARO at a routine stability time point. This voluntary recall was conducted in Canada, Europe, and Australia. And revaccinations were followed according to a dear-doctor-letter procedure.

We are currently in comprehensive investigation and root cause analysis, put action plans and preventive measures in place, and test clinical implications of vaccination with a potential sub-potent lot. Intercell and the authorities are working closely together to execute against the Article 20 requirements preventing further and future recurrence.

When it comes to the R&D pipeline, shown on page number 16, you can see that it's quite remarkable that a company of our size has seven active development programs in execution, of which four are conducted in house, three are conducted by and paid by partners, and more than 50% of the overall development costs of this pipeline are basically carried by partners in terms of cash needs.

We mentioned already Japanese encephalitis and all the activities, be it the pediatric label extension, be it the pediatric licensure in India. Those activities are fully on track. We will talk today a little bit more about Pseudomonas, our pandemic influenza program, and C. diff. Also, those programs are nicely on track according to previously communicated scopes and objectives.

With regard to hepatitis C, we partnered with Romark, allowing Romark to use our IC41 HCV therapeutic vaccine candidate in a combination trial. Unfortunately, in this trial, we are experiencing some potential delays due to regulatory approvals that have still not been obtained by our partner Romark.

With regards to tuberculosis, where our IC31 is being used, we still expect the Phase II start in 2011. And with our partner Novartis, IC31 is being tested in different products. Also, those activities are nicely on track.

With regards to Pseudomonas, let me summarize our state of play on page number 18. This is our lead vaccine candidate, progressing towards a Phase II/III pivotal efficacy trial. In terms of background, let me remind you that we successfully conducted Phase I and Phase II programs in more than 500 ventilated ICU patients.

The latest Phase II trial revealed encouraging clinical findings, e.g. strong immunogenicity after the second vaccination on day 14, a significantly reduced mortality in the vaccine group, and reduced mortality in vaccinated patients with infections. Based on those clinical findings, Novartis and Intercell decided to co-finance this pivotal efficacy trial now about to commence.

On the right-hand side, you can see the status. This trial will enroll more than 800 subjects. We will conduct an interim fertility analysis after 400 subjects. And the trial will be performed by Intercell targeting a primary endpoint day 28 mortality. It goes without saying that if this trial was to be successful, then we would see here a major breakthrough and shift in paradigm of treatment in the ICU.

Some selected key milestones, we expect the trial initiation in the first half of 2012, since we are now in the final process of getting regulatory clearance for this trial. Interim data are expected in 2013 and final data in 2014/'15.

When it comes to our next clinical candidate, our pandemic influenza program, where we test the vaccine enhancement patch in a confirmatory mode-of-action trial, combining it with an injectable off-the-shelf GSK H5N1 antigen, it's not only the combination that is being tested with regards to pandemic influenza, but also the general idea of external adjuvantation, a very interesting field, given the high regulatory hurdles that have restricted the number of adjuvanted flu products and other products on the market. So also here, if the vaccine enhancement patch worked as an external, potentially even universal adjuvant, it could shift the paradigm of adjuvants.

Where are we on pandemic influenza and the VEP trial? In terms of background, we have investigated previously in different trials, Phase I and Phase II trials, combinations with the vaccine enhancement patch. We had some positive but also less positive results in those previous trials. But Intercell and GSK decided to pursue a confirmatory trial with GSK's H5N1 antigens to test the general external adjuvantation as well as the potential single application combining an injected vaccine and putting the patch on top of the injection site.

The study enrollment of the current Phase I trial is ongoing. The safety [cards] have successfully been completed. The trial includes around 300 subjects. And we use 15 and 30 microgram of H5N1 including an active comparator arm with GSK licensed vaccine.

Our primary objective is to evaluate the adjunctivicity of a 50-microgram vaccine enhancement patch with two doses of H5N1 antigens. And as secondary objective, we look into safety and in the single application combination to meet or exceed the European criteria for licensure. We initiated the trial in quarter one this year. We did our safety review with the first [ESMB] in the second quarter. And we expect final data towards mid-2012.

Our third program in the clinical arena is a very promising candidate against Clostridium difficile, the leading cause of nosocomial diarrhea. It is an in-house developed program, where we saw very nice preclinical data showing 100% protection in the so-called hamster challenge model, as outlined on page 22 of your presentation.

The successful clinical execution of a toxoid-based approach is already in Phase II by sanofi-aventis. And hence, we are following diligently the development path validated there.

Our Phase I was initiated in quarter four 2010, an open-label randomized trial with five dose groups, age groups in between 18 and 65 years of age. And we are about to transition into the part B, directly into elderly, above 65 years of age, around the September timeframe. And this time point will mark the first time point to present interim data before we then will see final data in 2012.

We have mentioned already that we received the milestone for the Staph aureus trial based on the non-fertility criterium at interim analysis met. Partner Merck decided to continue the Phase II/III clinical trial of the investigation of Staph aureus vaccine candidate based on the recommendation of the external data monitoring committee.

However, Intercell and Merck maintain its strategic collaboration, including Staph aureus vaccines, different antigens, and antibodies. And Intercell and Merck are evaluating potential future projects in the [feat] of Staph aureus mutually and in the best interest of both parties.

I mentioned already during my introduction that we essentially set up a new research strategy for Intercell. And on page 24, you can see the new research strategy outlined in a simplified way and focused on technologies and programs with significant potential for value creation, mostly in the unpartnered fields, on the one hand side, the patch technology, where we work with GSK on some GSK antigens but where we try to explore the new fields of partnering, e.g. in the field of allergies.

On the second -- on the right-hand side, the MAB technology. And we acquired the mAb technology from Cytos. And we have now achieved very interesting first results and are about to progress towards the first meaningful preclinical proof of concept. This has also encouraged us to open the business up for screening services of this high throughput platform.

With regards to our AIP-derived internal candidates, we have prioritized a lead candidate now in the field of Lyme borreliosis. And we are progressing those diligently towards clinical entry.

In summary, let me turn to page 26. We have seen strong revenues driven by 85% growth in JEV sales, a significant reduction of net loss, tight cost management, and restructuring to conserve the cash position, a development progress on track to next key milestones. And we have shown to you the potential upsides from ongoing and future partnering activities. So we feel that with the implementation of our renewal strategy, we are nicely on target to regain trust, confidence, and lastly shareholder value creation for Intercell.

In terms of outlook, as Reinhard pointed already out, we maintain our expectation around EUR30m to EUR40m net loss full year. We maintain our JEV sales growth 60% to 70% compared to 2010. We maintain our commitment to manage a focused pipeline according to plan. And we maintain our commitment to evaluate further income opportunities, be it with current partners, be it with new partners.

Since I have already mentioned the key short-term value inflection points on the programs, I'm not going to go into the detail of page 27 because, here, you can really see, the programs also progressing towards the next couple of years and the respective inflection points also for 2012, '13, and '14.

With that part, we conclude our presentation. And we're happy to take your questions. And I would like to hand back to the operator.

Thank you very much. (Operator Instructions). Our first question comes from the line of Guillaume van Renterghem from UBS. Your line is open.

Yes, hello. I have two questions. The first one is with regard to draft recommendations for vaccination for JE-Vax vaccination in Germany and France. You mentioned a few weeks ago that you drafted recommendations for France and Germany and that you were expecting the recommendation to be approved in Germany in Q3 2011. I'm wondering if that is still the case, if you're on track for that and whether you have more visibility on when it could be approved in France. As well, can you tell us roughly what proportion of travelers market France and Germany would account for?

And my second question is on C. difficile. I'm just wondering when Novartis is the most likely to obtain or not. And if they were not to obtain and to do what they did for Pseudomonas aeruginosa, what would be the financial implication in term of Phase III cost for you? Thank you.

Okay. Thank you, Guillaume. So let me start to answer your questions around JEV. We are on track with regard to further recommendations. We do not have a detailed date yet. But we are in close discussions with the authorities. And we have no reason to believe that there will be further delays.

With regard to the travel markets, it goes without saying that Germany belongs to the top market. So does France. We are doing extremely well in Germany, as we have stated many times. And we are, for example, in Germany already at a vaccination rate and a penetration rate that is even slightly above the number that we have given the product as a full potential.

With regard to France, France is a very interesting and a very significant travelers market. However, our partners Novartis are just in the process of setting up the respective infrastructure to leverage this potential.

With regards to C. diff, C. diff as you can see on the last page of the presentation, according to the current plan, we expect a Phase II trial for C. diff to start in 2013, so which means that we would not see final data on the Phase II before end 2014, beginning 2015, at which point, we would need to jointly decide how to progress this program.

Since the development strategy is still, I would say, in shape of getting adapted according to the regulatory requirements, it is hard to predict right now how a Phase III trial would be designed, look like, or even what it would cost. And -- but for the time being, and I think this is the key message, we have gone through a prioritization exercise with Novartis. We have reviewed the programs, the pipeline programs out of the strategic alliance. And there is full commitment by Novartis in supporting us to bring this program towards the opt-in time point.

The next question comes from the line of Brigitte de Lima from Bank of America. Your line is open.

Good afternoon. A few questions, first one on IXIARO. I'm assuming that you're implementing very similar measures across the different markets. So is there anything you can highlight specifically that drove the stronger growth in the US and UK, anything particular you did in those countries that seemed to have driven this growth?

And then the second question on the recall, can you confirm that this was definitely a one-off event that only affected one specific batch? Have you tested any other batches to figure out if there's any other batches that have been affected by this issue?

Third question's on the grant income. You had very, very little income the second quarter. Should we assume that there is no income either expected in the next few quarters? And could you just remind me of what grants are still alive? Is it only the one with the HHS and pandemic flu? Or are there any other grants, any significant ones we should be aware of?

And then finally, on operating expenses, back in June, you said that you intended to cut the costs by roughly 50% versus 2010. You seem to have come a long time since then. Do you believe that you can deliver on this target as early as 2011? Thank you.

Thanks, Brigitte. Let me start with IXIARO. I think the key markets, US and UK, Staph used as an example are markets where, obviously, in terms of general infrastructure but also in terms of creating the right level of awareness and creating the right adaptations of the recommendations took a bit longer than, for example, in countries like Germany, where the markets are well educated and in terms of those vaccinations.

You know that we have entered into a sort of a co-promotion in the United States with Novartis. We are working together. We are leveraging our military sales force there, for example, contacting and working directly with large institutions. And in the UK, we have supported the general awareness and recommendation by a very strong marketing across the entire country.

So in terms of the recall, the recall has been limited to a specific lot. The Article 20 procedure is a procedure to evaluate as to whether there might be an implication into other lots. We cannot exclude that other lots might be affected. But at this point in time, we are still under investigation with the authorities. And we will -- we do expect, obviously, to get some result out of that towards the latter part of the autumn because the procedure will formally conclude by the end of the year. And Intercell is obviously highly committed to support the countries with the safest and most efficacious product available.

With regard to grants and operating expenses, I hand over to Reinhard to give you a very short answer to that one.

Thank you. Brigitte, you're right on grant income. Grant income was exceptionally low in the second quarter. We expect grant income to be somewhat higher in the second half of the year than it was in the second quarter. However, we do not expect significant HHS funding through the rest of the year going forward in our pandemic flu program. We would obviously only continue spending if it is fully funded.

Our main source of grant income is currently from local R&D funding and from R&D funding on European lever and some income from organizations dedicated to give support for third-world country vaccines.

In terms of cost cutting, we are very well on track to meet our goal of about 50% reduction in our operating cost base. We still remain a bit cautious. We are currently implementing huge changes in our organization. We are also in a transitional phase in a couple of important projects, most importantly the Pseudomonas study that we don't have the full visibility on the timing of our spending. So we remain a bit cautious.

But what we can certainly state is that we are well on track to meet our previously communicated savings targets. But at this point, we do not give an updated or improved guidance. We may do so in the future if we see and get confirmation that things are progressing even better than anticipated.

Very well. Thank you.

The next question comes from the line of Peter Welford from Jefferies. Your line is open.

Hello. I've got three questions, please. Firstly, let me come back to the HHS funding, if you don't mind. I guess I'm just trying to understand. The HHS funding is limited, but there's obviously a fairly extensive Phase I study going on with Glaxo. Should we understand, therefore, at the moment, you're paying for that study without HHS providing the support for it? Or alternatively, are Glaxo [not]largely funding that study? I guess I'm just trying to understand why there's an imbalance between that study and the R&D costs and the granting, which we've normally seen.

Second question then is you mentioned that sanofi is currently executing a toxoid-based approach for C. diff. Is this the undisclosed bacterial vaccine you've talked about in the past? Or is this some other project that sanofi is working with you or independently?

And then thirdly, just on Novartis, you mentioned that they're working for an adjuvant with your vaccine. Is there -- I presume this is not the flu vaccine that they've worked with in the past, and this is another vaccine that they're working with you using the adjuvant. Thank you.

Peter, as usual, very good questions. So let me start with the first one, HHS funding. You're absolutely right. Since HHS has funded this program, the Phase I as well as the Phase II, following sort of inconclusive result of the Phase II, we decided with a new partner, GSK, to take a step back and to go into a confirmatory Phase I trial, adding a second objective to the trial above and beyond the pandemic influenza, namely the general principle of external adjuvantation.

By doing so, we have to carry the cost for this confirmatory Phase I trial. It will be partially carried by certain services and activities by GSK. And there is, obviously, and there will be the option to even retrospectively get funding by HHS for the activities, subject to results, subject to discussion with FDA -- with HHS, sorry, once the data will be finally concluded.

The toxoid-based approach by sanofi has nothing to do with Intercell. They run their own activities. We have not been involved in that at all. Our approach is a fusion toxin IP wise distinct. And we are for the very first time running here as sort of a me-too because we are the second one in this area in clinical development and which has also certain advantages because we can learn from the activities conducted by sanofi, especially when it comes to biomarkers or correlates.

In terms of the Novartis adjuvants, yes, you're right. The undisclosed indication where IC31 is currently being clinically investigated by Novartis is a very important one. But as I said, it's undisclosed and needs to remain undisclosed for the time being.

That's great. Thank you.

Your next question comes from the line of Gunnar Romer from Deutsche Bank. Your line is open.

Yes, good afternoon, everyone. I have three questions, if I may. Firstly, if you could give us an idea where you see your net cash position or your liquid funds position by the end of the year.

Then secondly, I was wondering whether you could give us an idea of the contribution of military sales in the second quarter. Shall we think about this business as being more lumpy? As you continue to stick to your 60% to 70% growth guidance for the year, I would assume that Q2 might've been a bit stronger also in terms of military sales.

And then lastly, could you give us an idea of what is the biggest swing sector still to your guidance now that you've been half -- through half the year? Your net loss guidance is -- the corridor is still EUR10m, where you'd see the biggest risk here? Thank you.

Yes, let me start with your first question, cash position by the end of the year. Our goal is to have at least EUR50m in cash at the end of this year. In terms of net loss guidance, at this stage, there are a couple of factors where we do not have the visibility and the full visibility yet. Sales are certainly one of those factors, partnering revenue potential, new collaborations would be another one.

So therefore, there are a couple of factors that have an influence on our net loss. We do not see a single risk factor that per se would be the decisive element here. But it's more an addition of various effects that we still may see in the second half of the year.

And for your third question on IXIARO, I hand over to Thomas.

So the IXIARO sales in the second quarter with regard to the military business, yes, obviously, the military is now nicely taking up the product. There is a seasonality not only in the travel markets, but there is also a seasonality in terms of the military business because they order, then they use, they order, they use, and build a parallel -- a certain stockpile.

But it's the picture so that the second quarter is typically the strongest quarter in a travel vaccine sales profile is not unusual. Is it over represented by military and not representative for the entire full-year profile? The answer is no, Gunnar.

Thank you very much.

You're welcome.

(Operator Instructions). Our next question comes from the line of Mark Pospisilik from Kempen & Co. Your line is open.

Hi. Thank you for taking my questions. Three questions related to IXIARO, one for the Hong Kong and Singapore. I was wondering if you could give us any comments or detail on how -- whether -- I assume it will be an -- is an endemic market versus travelers or your estimates on how you're pushing in terms of market size and penetration there and how it compares to the other markets you are in.

On the timeline development for the endemic Japanese encephalitis vaccine, just because it seems to progress so rapidly in the trial in India to regulatory approval, I was wondering if you could just give us a little detail there on how the -- how you will see the process going and maybe where the potential bottlenecks might be.

And then thirdly, also on the vaccine in the endemic market, is there any indication you can give us of expected pricing or price range for the product and/or how that may vary from jurisdiction to jurisdiction. Thanks.

Okay, Mark. So let me start with Hong Kong and Singapore. Here, we are targeting -- these are the -- at least partially, these are markets where you can see different judgments as to whether or not they are endemic or not endemic. We see our market segment here in the private traveler's field. We are not talking large volumes here but very high prices, so which means we are not talking about the 100,000 doses but maybe the 10,000 or 15,000 or 20,000 doses in those markets, but with a significant high price compared to Europe and the United States.

In terms of the endemic markets and the timelines, India, yes, we are very pleased with the progress by our partner Biological E. The first regulatory approval will be obtained for India and the Indian subcontinent. We -- our partner Biological E. will develop this program or are developing this product, both for use in the private segment, so high-priced segment, but maybe also partially in support of the public tenders and the public activities that are essentially going on. So we expect there a very interesting business in India because of the fact that there are many rich people also in India, and they are clearly looking for a significant and differentiated product in Asia.

From there, roughly one year later, one year post the Indian approval, we expect WHO prequalification which would then open the door into certain other markets outside of India but with the product manufactured by Biological E. in India.

What are typical pricings for highly priced vaccines in India, and we have not made yet any decision on the pricing for this product. But if you looked it up, you would see that pricing is in the range of $10, $15 per dose for highly priced vaccines in those segments, partially even going a little bit above that. But this is the order of magnitude you will find.

Great. Thank you. If I could just permit one follow up with -- for the US military, are you seeing any pricing pressure from the US military then on the IXIARO in light of budget and the fiscal discussions in the US?

No, we have a contract with the US military in place. The pricing for the product into the US military is fixed. It's got to be 24% below the best market price, which is the private price in the US. Will we be able to do something above and beyond and are subject to -- I don't know -- large orders or whatsoever? Possible, but at this point in time not under discussion.

Great. Thank you very much.

Next question comes from the line of Peter Welford from Jefferies. Your line is open again.

Hi. Sorry, just a quick follow-up question. Did I hear right that Reinhard said there's a goal of EUR50m cash at year end because you -- and I guess the follow on then is, if that was right, because you had EUR80m I think at June 30, is -- what's the significant cash outlay potentially in the second half of the year? Thank you.

Yes, you are right, Peter. It's at least EUR50m that we are targeting. And obviously, there is a cash outflow from operations planned in the half year. On top of that, there are still some investments in intangible assets relating to Japanese encephalitis for post-licensure obligations, labor expansion activities into (inaudible) that gets capitalized.

And as you know, we have also an element of amortizable debt from our convert that we have issued this year, where we also expect some cash outflow in the order of magnitude of EUR5m to EUR6m for the second half of the year.

Okay. Thank you.

There are currently no further questions registered. I'll hand the conference back to you.

Okay. Ladies and gentlemen, many thanks for joining this call today. We are very excited that we have been able to show strong strategic execution and clear results marking the turnaround and the regaining of a strong momentum and growth momentum at Intercell. So thanks a lot for your attention. And have a good day.

Ladies and gentlemen, thank you for your participation today. This concludes today's conference. You may now disconnect your lines. Thank you and goodbye.