Valneva SE (VALN) 2018 Q2 法說會逐字稿

Good day, and welcome to the Valneva presents H1 2018 financial results. Today's conference is being recorded. At this time, I would like to turn the conference over to CEO, Thomas Lingelbach. Please go ahead, sir.

Thank you so much. Welcome, good day, to today's analyst call. It's a pleasure for us to present you, our H1 2018 financials and some key operational updates.

Yes, when you turn to Page 4 of the presentation, you see that the first half of 2018 has been quite an eventful, first half of the year. We have delivered according to our promises. We have delivered according to our guidance. And we have delivered against our own internal additional objectives. You see that we had 2 Stage-Gate entries in our R&D in the first quarter, mainly Chikungunya and Zika, both Phase I in the United States where initiated. We reported Lyme data in the first quarter and again, we're going to talk more about Lyme as part of the -- of this call's update. And we basically provided additional financial performance and reports throughout the entire second quarter. And then very early in the third quarter, we announced the positive outcome of our end of Phase I process on Lyme with the FDA. Again, something I'm going to report more about as part of this call.

On Page 5, you see the summary of our key performances that we have delivered against. Again, the numbers will be presented in detail by our CFO, but we are quite proud about the performance that our commercial team is delivering. We see a tremendous growth in product sales, also with some caveats on supply constraints and FX rates, again something that we're going to report on. And we feel good about our decision to open up our own commercial infrastructure in the United States, as evident by the first half-year numbers in the U.S. private sector. And you know now, with 3 clinical stage R&D assets we see also that our investing field in R&D around bacteria transmitted diseases, around rare diseases is progressing very, very nicely and according to our expectations.

With this introduction, I would like to hand over to our CFO to provide you with our financial report.

Thank you, Thomas, and if I could ask, we move on to Slide 7. So good day, everyone. And I've got some enormous pleasure to introduce the financial results for the first half for Valneva. And just to echo what Thomas said, it is great to be here reporting top line growth both on actual exchange rates and constant exchange rate basis. And that is something that some other companies would be jealous of.

So the highlights here are that product sales were EUR 53.5 million for half 1, 2018 compared to EUR 48.1 million in H1 2017. And that represents over a 11% in year-on-year growth on actual exchange rates. And on a constant exchange rate basis, this would have been 19%. I don't need to explain geopolitics, I'm sure, but the -- that both the Canadian and the U.S. dollar and -- were weak for us in the half. And I think as many of you will know, the U.S. and Canada are indeed our -- Valneva's largest revenue contributors with over 60% of IXIARO sales coming from North America and over 60% of DUKORAL sales coming from Canada. So that explains the difference between the AER and CER performance.

And the other key point in this slide, as Thomas mentioned, we are very pleased with the decision that we made in United States on the implementation of the subsequent execution plan. Direct sales now make up more than 80% of our total, and we'll come back to that and the outstanding IXIARO performance a little bit later.

If I could move on to the next slide, please. So noting that product sales growth was driven by excellent sales in the U.S. and Canada, and despite the adverse currency effects, I'm also pleased to report improvement in the gross margin in the same period for first half of 2018 over 2017. The gross margin in half 1 was 59.3% with the IXIARO gross margin over 63% and the DUKORAL margin is now over 50%. So we're tracking for 60% or better for the year, notwithstanding currency movements.

And this compares -- the overall margin of 59.3% compares to 54.6% in the first half of 2017. We generated almost EUR 14 million in cash from operating activities. And as previously discussed and mentioned by Thomas, Valneva plans to invest in the development of its valuable R&D assets and does plan to increase R&D investment from our guidance for 2018.

So when we look at the profit and loss on Page 8, you can see the R&D expenses, for example, moved up to almost EUR 13 million in first half of 2018 compared to just under EUR 10 million for 2017. Thomas will come back and talk about Lyme specifically, later.

Marketing and distribution expenses, and again, it's very clear here, we're investing in the U.S. private efforts. So this is entirely in keeping with what we expected. So the main increase was driven by the U.S. operations that we announced in late 2017, where we took direct control of sales and marketing. And again, we'll come back to talk about the growth in U.S. private sales and IXIARO in a moment.

And G&A expenses also rose and the main driver there was actually the implementation of a new share option scheme, which we didn't have in the first half of 2017. And clearly, our share prices evolved quite nicely this year. So we recognize that cost and it largely comes through the G&A line.

Amortization and impairment charges fell to EUR 1.6 million in the first half of '18 compared to EUR 3.6 million in the first half of '17. And that's all driven by the previously announced IXIARO patent extension that was granted and announced earlier this year. So we have a longer period, over which to amortize is a key point there.

So that all resulted in an operating profit for the half of EUR 2.3 million compared to EUR 1.8 million in H1 2017. And EBITDA at EUR 5.8 million was driven by the increased sales, gross margin as well as obviously, the planned investments in R&D and increasing our sales and marketing expenditure. So the net result was a loss of EUR 0.2 million, almost breakeven on that line.

In terms of cash, the half 1 possession of around EUR 38 million is pretty much the same as it was at the end of 2017. And it's noteworthy that the net cash generated, which was just under EUR 14 million as I mentioned, allowed for over EUR 10 million of debt repayments without drawing down further on the EIB facility in half 1, which of course, helps save any associated interest charges.

So slide -- next slide please, which is Slide 9. So I think, as I've said in the couple of previous calls, we've committed to providing enhanced transparency in line with reporting requirements and our commitment to make our -- make our numbers clear to everyone.

Slide 9 is the first example of that, and we've got a couple of more to help, make this all nice and clean. So Slide 9 basically shows the tremendous performance by our sales teams and also by some of our partners regarding IXIARO. Half 1 sales in 2018 were 4x the same period as 5 years ago. And our management board and commercial teams continue to deliver the numbers according to the commercial strategy that we have embarked upon, which is to take over, in the right circumstances and with the right business cases, our own sales and marketing operations.

Our sales growth objectives are now complemented with margin optimization, including the ongoing development of our own commercial network, including the U.S. that was implemented this year for the private market. And these efforts resulted in Valneva having most of the value chain within our own control, which in turn supports appropriate investment and the building of valuable brands. And as mentioned, just a moment ago, that includes investment in IP, such as getting the IXIARO patent extension.

Slide 10, please, next slide. So this is another slide that we've developed in response to request for an understanding of IXIARO breakdown and what happens when we take control of markets. And here we want to show you that the top line growth in IXIARO year-on-year is not just revenue recognition. The main driver here was the volume growth, as you can see and there are other changes. Indeed, the revenue recognition effect was relatively immaterial and so this is our good way for (inaudible) to represent and show you what we can do when we take care of our own sales and marketing efforts and put investment behind the brand.

And then the final Slide on revenue and sales. This comes back to our decision that we announced at the half year -- the full year results for 2017, to basically reclassify grants and R&D tax credits. So this slide very much shows you what the like-for-like would be and puts in the context of the guidance that we gave. So what you can see here is that total revenues in the first half of the year were EUR 59 million and indeed, just under EUR 61 million if we include R&D tax credits. So when we look at the guidance that we gave of sales -- product sales revenues to be over a EUR 100 million, you can see that in context. And the EUR 110 million to EUR 120 million of guidance for total revenues and grants, you can see that it clearly in this context as well.

And just one final comment. As our R&D expenditure picks up, we will start to draw down further from the EIB facility. And we are continuing to work hard on managing the cost of debt.

The other key line item that I just like to mention before I hand back to Thomas, is that the net finance costs are much reduced between 2017 and '18 for the half in the comparative period. And that's really driven by some significant work that's been taking place in my team, for which I am very grateful around mitigation matters, noting that we had significant adverse finance cost last year.

So all in all, a very strong performance, one of which the whole management board is very proud. And on that note, I'd like to hand back to Thomas who is going to talk about our Lyme program. Thank you.

Thanks a lot, David. Yes, we have decided to focus today on the Lyme update because as mentioned earlier, we had our 2 Stage-Gate entries for Zika and Chik in the first quarter of this year. The recruitment has been completed for both programs, and we are now heading towards the finalization of the respective trials with data expected by the end of the year or early next year. And again, David is going to summarize that as part of the catalysts when we close out the call later.

So let's try to focus and stick to Lyme. We, as Valneva and its key management teams and shareholders, are strong believers in Lyme. We see our Lyme disease vaccine candidate, which by the way, is the only 1 clinical development worldwide, as one of the key value drivers for our R&D upside. Always on top of our commercial business that we feel very proud of, as David mentioned earlier. You know that Lyme disease is transmitted by ticks. It is the most common vector-borne illness in the Northern hemisphere, and we see a tremendous increase in Lyme cases. And I'm sure, you all follow different publications and articles around cost of Lyme, treatments and Lyme diagnostics and Lyme disease as a whole.

I mentioned already that our approach is a prophylactic approach. So what we try to do is to develop a vaccine that is multivalent, meaning covering all the different prevalent serotypes of Lyme borreliosis in the Northern hemisphere. It targets the outer surface of protein A, so-called OspA of Borrelia. This kind of anti-OspA antibody-mediated immunity is something that has been proven as a principal mode of action in the past. Also, the prior vaccine that's based on OspA, which was a single monovalent vaccine covering only 1 strain, technologically, [not] technologically but also clinically very different to what we are doing here because we have a very modern subunit base vaccine with those different serotypes and 3 protein (inaudible) aluminum hydroxide then forming the final vaccine candidate. You may recall that we reported positive Phase I results. The Phase I results ticked all boxes on safety. And you know that safety is the primary endpoint for any Phase I, and especially for vaccines, and especially here for a candidate that is brand-new in terms of its structure, to state this has a very favorable and clean safety profile that we also compares to other, so-called lipidated-protein base vaccine, very, very good to us and that's why we are looking into the next steps of the development. The immunogenicity in the Phase I was good as well, but also showed room for improvement, because across the different serotypes, when a range of 0 conversion rates, which is basically IgG antibodies increase against the fourfold rise from baseline that range from over 70% all the way up to almost a 100%. So in terms of general antibody response, this is a (inaudible) key target for our Phase II to optimize this further and make it more balanced. We received the--because of: A, due to medical need, but also the possibility to have really a prophylactic solution, we received FDA Fast Track designation already last year.

And then as usual, we ran through an end of Phase I process with the FDA and as part of that we concluded, of course, that program is ready to go into Phase II. And we aligned with the FDA Phase II strategy as a whole. Of course, we still need to submit the final study protocol and the final study protocol will be subject to respective approvals. But it is also important and this summary is shown on Page 14. As some of you have seen this already on [clinical trials.gov], we decided to expand the Phase I with the so-called study extension for Booster. The decision to do that was based on the fact that: A, it would not delay any entry into the Phase II; but B, we would get earlier than initially planned Booster information because initially, we had the idea to look for Booster information only as part of the Phase II. Now we took around 60 subjects from the Phase I [file], the one zero(inaudible) simple. And of course, the readout will be safety and immunogenicity that 6 months after the Booster, which roughly comes a year than after the primary immunization. And we expect the respective data in H1 2019. Again, this will be supportive data and accelerated information with regards to general Booster Immunogenicity and safety profile for the vaccine.

And, of course, not unexpectedly, we continue also applying chain CMC development for further industrialization. As we progress to the clinical chain, we of course, develop also on the CMC side. And we are working towards final scale, final course of validation and other kind of things. And of course, overall, as David mentioned already, we will further increase our investment in our capabilities and capacities to support the ongoing process.

Now let's talk a little bit about the Phase II in general. What are the key objectives of the Phase II. Of course, dose optimizations because the objective of the Phase II, as for most of the Phase IIs in vaccines, is to determine the final dosage, and we have decided with concurrent from the FDA that we will attempt higher -- 2 higher doses of the ones(inaudible) that we had already in Phase I as well as the first Phase I dose itself. And we will also try a clinical schedule -- you know that we are currently working on a 3-dose primary immunization schedule, 0, 1, 2 months. So -- and we will also try to extend the schedule a little bit. This will give us 2 pieces of information; 1, is to see the key metrics of the immune response to current serotype; and the second, we will also know, do we really need 3 doses, and what does it mean in terms of antibody uptake. If we (inaudible) top of the doses (inaudible). So these are the 2 or 3 objectives of the Phase II. Primary endpoint will of course, be immunogenicity now, not safety as for the Phase I. Safety is of course, always an endpoint. We have a method of GMTs, geometric mean titers for IgG against OspA serotype 1 to 6. So we will measure the antibody responses for each serotype specifically, similar to the Phase I, 1 month after primary immunization. And this will then be, of course, dataset that we're going to use for the end of Phase II meeting. Very similarly to what we're seeing right now end of Phase I, we used the day 84 data to go into the end of Phase I meeting and similar with Phase II, we go to the second meeting. We expect that we're going to include around 800 subjects in the Phase II. And as I mentioned already, the protocol development is ongoing and details are being finalized. It will be conducted in the U.S. and Europe. We are currently fine-tuning the splits. We will definitely be more than 10 study sites, some of them in endemic areas, and we will include a representative number of serotypes -- of seropositive subjects. We have also extended the age range compared to the Phase I because it will give us additional information once we stratify the respective data in the H2 of '18 to 70 years of age.

As mentioned already in the beginning, we intend to initiate Phase II by the end of this year and the total duration of the Phase II will be round about 2 years or so. So this means we are guiding, and you can see this on the next page, Page 15 of the presentation. We are guiding for Phase II data in the second half of 2020.

So next, let's talk a little bit about the development outlook, and you know the question that we are being asked, especially recently, very, very often. And we would like to share with you some of our Phase III working hypothesis on the development. So why am I saying(inaudible) working hypothesis? We have not yet had any detailed discussions with regulatory authorities about the details of the Phase III. Of course, general discussions take always place but nothing specific so. Please bear this in mind, these are -- Valneva's current working hypothesis.

We assume that we will do a pivotal double blinded, placebo-controlled field efficacy study in endemic countries. So head-to-head testing placebo against their final vaccine candidates at final dose and final schedule. And the efficacy will be measured against Lyme disease all serotypes. So not a serotype-specific efficacy, it will be Lyme disease in general. We will start with adults 18 to 70 years old. We will try if possible to include a younger age group already in this field efficacy trial going all the way down to potentially 12 years of age. We currently calculate we've approximately 16,000 subjects, again in U.S. and Europe, possibly also Canada, and currently working on that. The study sites will be in high-risk, endemic areas in order to get high attack rates. High attack rates means [strong people](inaudible) with higher confidence interval.

We're currently planning for 2 tick seasons, but we will aim for incidence-driven interim analysis after the first tick season or maybe to get already enough cases and enough subjects into the first tick season so that we have already sufficient efficacy data for licensure. But you know, for planning purposes, of course, we need to consider that we probably need 2 seasons.

Provided that the data from 1 tick season will be sufficient, we believe that we can submit our file for like for licensure in 2023, which is the famous 5-year to licensure that I have mentioned many, many times at different locations, including at the World Vaccine Conference in Washington earlier this year. So this is the -- this gives you a flavor of Lyme. We talked about the progress thus far, and we are very, very much looking forward in developing the product further and to enter Phase II by the end of the year. With this update on Lyme, I would like to hand back to David for the outlook and the summary of the key financials.

Thank you very much, Thomas. So if can move to Slide 17, please. And this is the same slide that we issued earlier in the year regarding our outlook. So we continue to guide for double-digit product sales growth and at every conference that we meet and in fact we affirm our guidance to break a EUR 100 million, which is an achievement and a milestone that we will be very proud of.

We've talked about the R&D investment, and Thomas has just explained in detail of the significant effort that's going into our Lyme program, but clearly, we're also investing in Chikungunya and Zika this year. So we guided -- we have guided EUR 30 million to EUR 35 million for R&D investment, and we confirm that guidance as well at this stage, which isn't keeping with the increase in R&D expenditure as everything moves from left to right.

And EBITDA, although we've reported EUR 5.8 million already for the year, and as I've just mentioned and, again, as Thomas has mentioned, we plan to invest and make every effort to develop a positive package for Lyme. And, therefore, we continue with our EBITDA guidance of EUR 5 million to EUR 10 million.

And if I go on to the next slide, I also want to point out that we have got some ongoing news flow expected for the second half of the year. These are the ones that we feel that we know about and, hopefully, we may be able to augment these PRs with others. So we'll report more on product sales growth during the year and although we haven't mentioned DUKORAL, we've said in our PR that DUKORAL will grow. In the second half of the year, it will be increased compared to the first half of the year, which is slightly different to the phasing of last year. And we are expectant and we're confident that we're going to get a New IXIARO supply contract with the Department of Defense later in the year. We've talked about Lyme, and we have them ongoing and work with Chikungunya and Zika. So no new news on those today, but as we progress through the year, we look forward to announcing the data from those. So we expect there'll be good news flow in the second half of the year, and there'll be potentially other news to augment this.

And on that point, I would like to thank you for listening, and turn over to the facilitator for Q&A. Thank you.

(Operator Instructions) We will now take our first question from Joseph Hedden of Rx Securities.

Just on DUKORAL, I was wondering if you can give any more detail on the supply issues and remedies. And also on that, do you still expect growth for the full year -- over full year 2017?

Yes. So, thanks a lot for this question. So indeed, we have been, to a certain extent, victims of our own success. You know that DUKORAL has a very, very long manufacturing lead time. We have been ramping up the manufacturing capacity starting approximately 2 years ago. But the ramp up has not been fast enough. And in addition, we did not have the -- let's say, the best success rates that we were expecting, which has to do with quite old manufacturing process and, of course, quite an old manufacturing site. Having said that, we have addressed all those points and also we have not been able to deliver against, I would say, 5%, maybe 10% in terms of volume compared to what we could have done. Our commercial team has done an excellent job in directing and maximizing their respective supplies and since we will -- are based on the visibility that we have with supplies for the remainder of the year, we've had confidence to give the guidance that the second half year phase will be [above] the first half year phase. And that's where we are. I hope, this answers your question.

Okay, thanks for that. And just on IXIARO, obviously, you're doing very well in the private market. I was wondering if you could just give us a number on private sales of the half.

David, you want to answer?

Just, yes, so...

All right.

So we haven't -- although, Joseph, I mean, it's a very fair question. I think, we have committed to the transparency that I mentioned earlier. And IFRS reporting does good only to come to as is required and that's not a number that we are currently comfortable to spit out, but it is one that we'll consider for the future.

We will now take our next question from Simon Scholes of First Berlin.

I gathered that in the past, you've considered doing a head-to-head trial in Lyme against LYMErix. I was wondering if that still features in your plans?

No. I think, there might have been, I would say, a misunderstanding here. You know, LYMErix is not an available product anymore. It is not licensed anymore. There's no product available. So a head-to-head trial against LYMErix is technically not possible. The misunderstanding here may come from the fact that we initially said that we will try to potentially use the protective thresholds that was recorded for LYMErix as a sort of an indicator for efficacy. Not a hard part correlate, but an indicator for efficacy. So basically, that was one of the things that we considered, but from -- based on this technical feasibility assessment, we have concluded that this won't work and anyhow, from a regulatory standpoint, the requirements have been extremely clear, namely, field efficacy trial, so this means any other data could only be considered as supportive, but not indicative or neither disastrous.

We can now take our next question from Max Herrmann of Stifel.

A couple of questions. Firstly, Thomas, on IXIARO, obviously, the U.S. private market has provided a very nice opportunity to expand your sort of ownership of the full value chain of the product and drive growth. I wonder whether there were any other opportunities available in the future that could enable either on IXIARO or DUKORAL that could allow you to expand sales into different geographies?

Yes.

Takes fuller value of this value chain?

No, I think, first of all, Max, it's an excellent question. And of course, it's one of the key questions that we are asking ourselves almost on a daily basis, right? You know, when you -- it's not a secret that you have the same as top 5 European markets that deliver classical [Pareto] more than 80% of the sales in travel vaccines or almost vaccines as a whole, but let's say, travel vaccines in particular. And when you take those 5 markets, there are clearly 2 that we are not covering right now. We are not covering France, Benelux. We are not covering Germany. And of course, it's a market that come both with very, very, I would say, defined challenges. They are very particular, have a lot of requirements associated with it. But we are looking into that and one thing is clear, it all provided that we see the possibility to technically and practically do it. We will do it on the back of positive financial analysis, of course. And we are looking into additional markets outside of Europe and U.S. as well, and you may recall that France reported a couple of times about territory expansion. We didn't want to update anything specifically today, because we are still in the process of evaluating that, but you should assume that further territories will come over time.

And then second question this time on VLA15 on the Lyme program. You're, obviously, talking about Phase III study with 16,000 potential patients or subjects. What sort of infection rate are you anticipating there? So how many -- what's the end number going to be of the actual infected patients anticipated from Lyme?

Yes, that's a very, very good question. So roughly around 2% to see attack rate, 1.5% to 2% of the attack rate that we are assuming in the trial, which is maybe on the more conservative side, but when you asked about what are the key kind of parameters, how do we reach those numbers? We are considering about 70% peak efficiency, and we are working with an 80% to 90% conditional power. And when you then pair this up with the attack rate, you reach round about those numbers.

We can now take our next question from Thomas Guillot of Kepler Cheuvreux.

I have a couple. First, on the G&A, it seems like you have a strong increase in the Q2. Just wondering why. Second question on gross margin. Can we have any update on the guidance looking forward for DUKORAL, because for the H1, you had the 59% gross margin and your guidance was 55% by 2020? Second question on gross margin for IXIARO this time. Shall we expect an improvement in the gross margin for IXIARO in the H2? Regarding that in the H1, your gross margin was lower than the full year 2017. That was my first question. I have some more.

Okay, I think, these are all questions for David.

Thanks, Thomas. Yes, so let me do with the margin questions first. So the 59.3% is the margin across the 2 products. So the DUKORAL margin was 54%-ish, 54.6%, I think to be exact. So just to be clear that we have seen an

(technical difficulty)

yes, so we guided to beat 60% across the products and we're at 59.3% and DUKORAL is now above 50%, at 54.6%. So we're making a nice tracking there. Regarding IXIARO, yes, again that's a good question. And there is one point here that's what's exposing. I can't give you the detailed numbers, but there's a requirement in these days, called serialization. And this requirement is now in place for the U.S. and it will come in to force in Europe next year. Serialization has required us to add some procedures and information into our supply chain for IXIARO already. And so that has actually contributed to, shall we say, reduced growth in our margin. And so our margin is growing, and it would have been growing faster had it been for serialization and that's the mix component there. So -- but we still believe we're going to be 60% by the end of the year and for the full year. So I think those are the GM questions mainly. And for G&A, yes, so the point here is the -- in 2017, for the comparative quarter and indeed for the first half of the year, we didn't have a share options scheme in place, which is known place and we implemented that just at the end of last year in December. So any costs that relate to share options are now being reported and there was nothing in the comparative numbers last year. So that's the point. Okay?

Okay. Regarding your Lymes vaccine program, could you give us some insight on your strategy to form the Phase III, although the number of patients, you mentioned 16,000? When you look at back at LYMErix, they're more like 10,000 of patients. Just wondering why you added 6,000 to incremental patients? And last question on your long-term guidance, you realized an update beginning of 2017, if I'm correct. You mentioned -- before you mentioned 2020, EUR 250 million of cess and revenues for 2020 and now for 2022, you mentioned EUR 200,000 millions of revenues in 2022. Just wondering why you made this change and what changed your views?

Okay. Yes, a lot of good questions. Let me start and try -- we'll try to address one-by-one. So first of all, the -- let's talk about LYMErix and the total sample size that's reported in Phase III compared to VLA15. So of course, remember that the post product -- or LYMErix was also approved based on a pivotal field efficacy trial, but in a distinct area and measuring one distinct serotype. So now, we do a universal vaccine so we -- which means we need to prove field efficacy in many parts of the world. Not only in parts where your attack rate is 3% or 3.5%, like in Northern Connecticut. So which means, we have -- we will need to have a mixture of higher and lower attack rate countries in order to prove efficacy against Lyme as a whole. And this is the reason why is the -- you need a higher sample. So it's just statistic and the fact that you want to show protection against all cause Lyme, meaning all serotype Lyme, yes. So then that's important to us and then the other point is where you questioned about strategy. And you are right, and you're careful of these process, the changes and let me try to be a bit more general and holistic. From the beginning, when basically Franck and I created Valneva, we said that we want to focus on bringing additional commercial product into the company and to grow our kind of organic commercial business by strategic growth, meaning product acquisition. We have been successful with one acquisition, namely, DUKORAL and these 2 products allowed us to kind of open up our own base infrastructure. It's allowed us to work with leverage. And we have always said, those 2 products will -- meaning, our current commercial portfolio will be able in the mid-short term, mid term and we always use this 5-year horizon will grow double digit, yes. And we have said, we will -- we have given some specific guidance. We have said for DUKORAL, 5% to 10% year-on-year growth. We have said for Gyro, about 10% year-on-year growth. We had a few other components that Gyros are doing a bit better. And overall, we have said, we feel comfortable about growing with a double-digit CAGR in the 3-, 4-, 5-year horizon. But we have also said, our strategic ambition is to have and you can do your own math of where this is sort of bring us in terms of baseline, when you start from last year around EUR 90 million total product base. So then you calculated all the way up, and when we say EUR 90 million proprietary, I mean, own product, not third party. Then we add the strategic growth, and we have different components and it is right, then it's a bit of a moving target, what should we assume? I mean, right now, I mean, it's a key strategic objective to go after additional commercial vaccine, either acquiring them as a whole or entering into large marketing and distribution agreements, as such, recognize in the top line. It's a bit difficult to say and we -- and you're right that we have been dancing back and forth a little bit, but this has nothing to do with the fact that we do not believe in the strategy. It has more to do with the fact that we cannot predict which vaccine we may be able to acquire. And the assumptions around, let's call it, [hot] candidates sort of change periodically and this is maybe the reason why you see this change, which is not a change in the fundamental basic strategy at all.

Okay. And just has a question on your funding of the Phase III of Lyme vaccine. Do you have any -- have you engaged discussion with your partner GSK under the project?

Well, I mean, it's -- you know that GSK, or this program is a program under the strategic alliance agreement, which both companies inherited. It was originally strategic in R&D strategic alliance agreement in between Intercell and Novartis vaccine, now GSK inherits it from Novartis, Valneva inherited it from Intercell. And under this agreement, there is -- GSK have an option right and obtain so a right to the program post Phase II. Of course, this strategic alliance exits and discovers a few other areas, and we have a periodic, meaning a quarterly business review through a so-called Joint Steering Committee that oversees the strategic alliance. And of course, we talk. We present the update, we present where we are, not all the alignment of (inaudible) in general, and we have a lot of very, very good cash. It is fair to say that GSK are very, very interested in the Lyme program and in the medical needs, and they are confirming the medical need and the potential of such a vaccine in the marketplace, and we will try to gather everything to accelerate license during development path as good as we can and this may mean that we're going to enter, I don't know, in the next 12, 18 months long before we finalize the Phase II into an earlier agreement with GSK than what the current contract provides for. In any case, you know the -- it gives us the opportunity to go for a co-development, meaning cost share of the expense in Phase III, if you like. And the rest of the Phase III costs, we would need to kind of generate ourselves and as you can see, I mean, Phase III in Lyme, I mean, David reported there's a number of around USD 360 million for the entire Phase III development, which includes clinical, nonclinical and so on. So basically, if you take the 50% of that, you deduct the little bit that we can generate ourselves through our own cash generation. You see that we may need to find a EUR 100 million and this is something that we will most likely to [ask that time] through a respective capital increase. And this will be reviewed as part of our overall financing strategy, including our respective listing strategies.

(Operator Instructions) There are no additional questions at this time. So I would like to turn the conference back over for any additional or closing remarks.

This brings us to the end of today's call. Thanks a lot for following Valneva. Thanks a lot for your trust and confidence in the management and in our ability to deliver again a very exciting strategy. And with that, I would like to wish you also a very nice day. Good afternoon.