Valneva SE (VALN) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by, and now Valneva presents its Half Year 2021 financial results call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your host today, CEO of Valneva Thomas Lingelbach. Please go ahead.

Good day, everyone. Welcome to our report on H1 '21 financials and general business update. While the first half of 2021 has been marked by tremendous success on our R&D side of the business, we have nicely delivered against our key major R&D objectives, and of course, the most recent news flow, probably at this moment in time, the most important one is related to our chikungunya vaccine. We are very proud to be the first company in the world that has successfully delivered a Phase III for a chikungunya vaccine, which continues to be a significant unmet medical need.

We made excellent progress on our other clinical assets on Lyme. We successfully recruited the additional Phase II study, called VLA15-221, which includes also now the full pediatric target group, which is a key prerequisite for having the entire target population taking part of the future field efficacy study. And for our COVID-19 vaccine VLA2001, we have successfully completed the enrollment and are now proceeding with this testing.

Despite of our commercial travel vaccine still being heavily adversely affected by the ongoing pandemic, we have a strong financial position and platform. We successfully conducted our U.S. IPO according to plan with net proceeds of more than $100 million, and we have cash and cash equivalents today of more than EUR 300 million. And this is something that will be further detailed as part of the financial report.

Let me first talk about chikungunya. The primary endpoint of our study VLA1553-301 was to measure seroprotection. Seroprotection is the amount of study participants that showed protective neutralizing antibody titers. We have agreed on a surrogate of protection. The surrogate protection was developed together with the agencies and based on a passive transfer study in nonhuman primates and a few others supporting nonclinical experiments. We have shown 98.5% of subjects reaching those protective levels after a single shot. And this has been even better than one could have hoped in this regard. And it's really remarkable for such a type of vaccine.

It is also important to note that we have seen a similar level of seroprotection in the elderly, not only in the younger adults, which, again, is a great result. It is also important to note on this slide, which is Slide #6, that with 98.5%, we are well, well above the FDA nonacceptance margin, which was set at 70%. When you look at Slide 7 of the presentation, you see that our vaccine induces very high neutralizing antibody titers. We see a fantastic immunological profile across all age groups, including the elderly.

Safety. With regards to safety, our vaccine shows a safety profile that is absolutely in line with what one would expect for such a type of vaccine. We evaluated safety in more than 3,000 participants who received the vaccine. We had an Independent Data Safety Monitoring Board continuously monitoring the study, and they identified no safety concerns. The safety profile that we have seen in the Phase III is consistent with what we have seen in the Phase I.

The majority of the limited adverse events were mild or moderate and resolved within 3 days. Around 1.6% reported severe adverse events, mostly commonly fever. Approximately 50% of the study participants experienced a listed systemic adverse events, most commonly headache, fatigue and myalgia. Approximately 15% of the participants experienced a listed local adverse events. So overall, a good safety profile and also a very good safety profile in elderly.

And of course, we need to follow the study subjects now for a further 6 months. And that's why the final analysis of the study will only be ready once this follow-up period has been completed. With regards to next steps, of course, we are working now towards the final analysis, which is expected within the next 6 months, as I just mentioned. You also know that we have, in parallel, a lot-to-lot consistency study running. This study is fully recruited, and the data is expected later in the year.

The antibody persistence follow-up trial, VLA1553-303, is ongoing. And they will be followed up us annually for 5 years after a single immunization because our hope is that with a single shot, this vaccine may protect for a long time, even up to 5 years, which, of course, would be tremendous. And we are now in active discussions with the agencies, primarily the FDA, to bring VLA1553 to a potential licensure as soon as possible.

So overall, very, very pleased with these outstanding results in an area not only of high unmet medical need but also by way of reminder, a disease area that allows the first one to achieve BLA approval to access a priority review voucher, which is probably the single largest short-term commercial return for this product candidate.

Talking about Lyme. We are still the only company that has an active Lyme disease vaccine program in advanced clinical development worldwide. The program got FDA Fast Track Designation granted. We reported good results from the Phase III trials to determine dose and schedule. As I mentioned earlier, we have completed recruitment for the Phase II study, VLA15-221, including the (inaudible) and above. And this marks then the total target population that we're going to include in the pivotal field efficacy trial, which is about to commence next year.

The vaccine contains 6 serotypes to protect against the most common serotypes of Lyme borreliosis in the Northern Hemisphere and follows a proven mode of action for Lyme disease vaccines. And as you know, we have an excellent partnership with Pfizer with whom we are progressing this development forward.

The details around the current state of play, the recruitment for the study, VLA15-221, which was recently completed, included 625 participants, 5 to 65 years of age. The trial triggered the milestone payment from Pfizer of about $10 million. The top line results are expected in the first half of 2022. And we will also investigate a booster dose administered 1 year following the 6 months dose.

We expect the Phase III pivotal efficacy trial to commence, of course, pending positive readout from the Phase II study in 2022. And the clinical readout based on 1 peak season is projected by the end of 2023. And this will then allow for an initial submission for regulatory approval anticipated in H2 2024 assuming, of course, positive data.

Let's move on to our COVID vaccine, VLA2001, which is the only inactivated vaccine in clinical development in Europe today. You know that we have a partnership with the U.K. government. The U.K. government has ordered approximately 100 million of the vaccine doses. And the government is supporting us with the development and manufacturing funding, and we continue to have an ongoing dialogue with the European Commission for European supplies.

The program acceleration enabled us basically to go based on our platform that we have established in Scotland with our IXIARO vaccine, and the commercial manufacturing commenced in January 2021. Our vaccine differentiates from other inactivated COVID vaccines in development, for example, those in China or India, because we combined our vaccine with a modern adjuvant, Dynavax's CpG 1018, which is a toll-like agonist, supposed to increase T cell immunity by shifting the immune response towards TH1.

We have reported good Phase I/II clinical results and are now in the middle of our Phase III. As I mentioned, recruitment completed of our study COV-Compare and now in clinical serology testing. The regulatory submission to MHRA is still planned in the autumn. So in the last quarter of this year. And then subject to data approvals and so on, we will be able to commence deliveries thereafter.

The current study called COV-Compare, VLA2001-301, is a randomized, observer-blind controlled comparative emergency trial in over 4,000 adults. We are the only company that targets to show effectiveness of the vaccine by immunological comparison against a licensed vaccine. And this approach is expected to reasonably predict the vaccine efficacy. We do this by way of testing superiority of VLA2001 in a 2-dose immunization schedule with in vivo 28. And we measure the GMT ratios in between the active comparator and our vaccine at 2 weeks after the second vaccination.

The study is conducted in the U.K., supported by with testing being conducted at PHE. The protocol has been agreed with MHRA, and we have advanced discussions with other regulatory bodies on a similar approach. Top line data are expected early in the fourth quarter, and we expect to commence rolling submission with the MHRA in the coming weeks. And subject to the Phase III data, we believe that the initial approval may be granted by the end of the year.

We are also participating in the world's first COVID-19 vaccine booster trial in the U.K., where our vaccine is being used to booster people with a third dose who have been trialed with other vaccines. And this could become a very interesting target product profile for our vaccine going forward. And additional studies are also planned, including reduced booster dose, but also studies, for example, in elderly. And we are also studying other variants in order to be in a position to manufacture variant-based vaccines because you may know that especially for whole virus inactivated platforms, there are a lot of examples how strain or variant shifts can be addressed, e.g., in the world of influenza.

And with this update on our R&D activities, I would like to hand over to David.

Thank you, Thomas. So just to move on to Slide 15 for those of you who are searching. And good morning to those of you in the U.S., and good afternoon to those of you in Europe. Just before I hand over to Manfred to go through the financial results, as is unusual this year, I'd like to say a few words regarding the broader business dynamics and indeed future guidance.

First of all, I'm at our Livingston site today. And many of you will know that the team here is working hard to produce our inactivated COVID vaccine and working around the clock to complete the new plant, which is just across the road from where I'm sitting right now.

We've strengthened our teams globally. And in the context of today's call, I'd also like to mention that Josh recently joined us as VP of Investor Relations. And Thomas and I will introduce Josh to many of you in the coming weeks and months, including hopefully, some of those meetings in person.

So while today it's very much about our chikungunya data, we have several strings to our bow, as you all know. We're reconfirming our core guidance which is testament to the ongoing excellent execution and control of our R&D programs, combined with mitigating the effects of COVID on our travel and vaccine business. And we've always been clear that we plan to invest fully in our unique and R&D assets. So the level of R&D investment is consistent with that in.

So we would have been pleased to provide guidance on our COVID program, but that's still difficult for a couple of reasons that I would just explain just now. Firstly, as Thomas has alluded to our Phase III trial recruited on time, and the execution of that trial itself has been managed extremely well. So we're just waiting for the output of the serological testing and the subsequent data analysis. And clearly, that data forms part of the rolling submission HRA that Thomas also mentioned.

We've said before, the phasing of the 60 million dose orders to the U.K. government will move across also into 2022. And what we want to be able to do is to get meaningful guidance. We've also got ongoing discussions with EEC, as most of you will know, and therefore, for now, we're not giving guidance that includes COVID. Rest assured, we'll do that as soon as we have sufficiently robust information, and we hope that's not too far away.

I think what's most important regarding COVID and indeed the other programs that are executing very well is the fantastic work that many people are still doing to provide solutions to the ongoing challenges that COVID-19 presents with and that includes the execution of non-COVID R&D programs. R&D will contribute to the COVID challenge, and we'll give you more economic insight into that as soon as we can. And with that, I'd like to hand back to Manfred. Thank you.

Yes. Thanks a lot, David. I want to continue the finance section providing more details on the product sales generated during the first 6 months of 2021, which in total amounted to EUR 31.8 million. Sales of third-party products further gained momentum and was driven by both Encepur and Rabipur contributed a total of EUR 5.9 million to our H1 product sales. IXIARO sale's previous inventory was still related to the base year of the contract signed back in September 2020 and delivered about EUR 22.3 million of sales during the first half of 2021.

As we continued seeing the travel industry being impacted by COVID-19-related restrictions, sales of DUKORAL and IXIARO during the first 6 months still quite compressed and in combination added about EUR 3.5 million to our H1 top line. As you can see on the right slide, Slide #16, the overall product sales were quarter-over-quarter down by about 19% at constant exchange rates and almost all of our sales were delivered through our own commercial infrastructure.

Our gross margins on product sales ended up at 39.2%, impacted by compressed product sales, some idle capacity costs and also continued need for write-offs of aging inventories.

Next slide, please. On the next slide, I want to walk you through the H1 profit and loss statements. Here I would first want to draw your attention to the total revenues, which remains only 1% below the first 6 months of 2020, with the reduction in product sales almost completely offset by our other revenues, which more than doubled from about EUR 7 million in H1 2020 to about EUR 15.7 million in the first 6 months of 2021, which is mainly a consequence of revenues added from the Pfizer collaboration for Lyme, higher revenues in the CTM unit in Sweden and some incremental revenues related to the chikungunya program for LMIC countries, together with Instituto Butantan.

Overall COGS increased from previous year as a result of idle capacity costs as well as inventory write-offs, while cost of services increased in line with the increase in our other revenues. Our R&D investments continued growing significantly and again, more than doubled during the first 6 months of 2021, in line with our R&D portfolio progressing into later-stage clinical development, but primarily impacted by incremental COVID-19-related R&D spend amounted to EUR 46 million during the first 6 months of 2021.

Marketing and distribution expenses declined moderately compared to the first 6 months of 2020. However, investments into launch, preparation and market access related to our nicely progressing chikungunya program, which has added EUR 2 million of incremental sales and marketing spends in 2021. So excluding these additional expenses for chikungunya, our marketing and distribution spends reduced by about 25%.

G&A spend continued increasing materially, mainly driven by nonoperational costs, mostly related to corporate projects such as the U.S. IPO preparation, combined with investments in support of our COVID program as well as included some noncash effects related to the company's stock option program.

Finally, a few more words around the finance results, including taxes. This continued being positively impacted by foreign currency valuation gains, primarily related to the British pound-denominated cash and balance sheet position, which almost offset the increased interest charges related to our debt financing agreement with OrbiMed and Deerfield as well as other interest charges related to our refund liabilities. And finally, EBITDA showed a total loss of EUR 80.1 million, mostly driven by strong increased R&D investments in the first half.

Next slide, so this additional slide shows the impact of the COVID activities on the company's income statements, also showing that a considerable part of the EBITDA of the first 6 months is attributable to the COVID-19-related investment in R&D. From the total EBITDA of EUR 80.1 million, about EUR 53 million related to the COVID business, leaving about EUR 27 million attributable to the net of core business, excluding COVID, and also the core business shows significant R&D spend of around EUR 32.6 million, mainly driven by investment into the Phase III of our chikungunya program.

Also important to note that still no COVID revenue has been recognized for the period ending June 30. And then finally, on the next slide, at last quarter, we thought it would also be helpful to, again, give a few comments on the balance sheet statement for June 30, given some material movements continue impacting our balance sheet.

So firstly, we see our fixed assets are taking a step up in meanwhile amounts to almost EUR 75 million, which you can see on the property, plant and equipment line. Inventories keep on increasing. And meanwhile, we hold about EUR 125 million of inventories, which largely are COVID specific.

As expected, we saw our cash position further increase, driven by both the proceeds generated through the global offering of new shares as well as further prepayments received from the U.K. government, our cash position further increased and amounted to almost EUR 330 million by the end of June 30, 2021. And on the liability side, I again want to highlight the continued increase in the contract liabilities, which related to further cash considerations received from the U.K. government during the second quarter related to the COVID supply agreement.

If you start supplying COVID vaccines to the U.K. government, we will gradually see the contract liabilities moving into the P&L. With this, I want to conclude the finance section and hand back to Thomas to give us an update on the expected news flow. Thank you very much.

Thank you, David. Thank you, Manfred, for the comprehensive financial report. Page 21 of the presentation summarizes the key upcoming catalysts and potential value inflection points that we see ahead of us. So for chikungunya, the final Phase III trial results, which includes the 6-month follow-up period, including the lot consistency Phase III study that we expect later this year. Those 2 studies form the basis for licensure. So these are the pivotal studies and are part of the submission that we expect to do with the agencies.

Then, of course, for the Lyme disease vaccine candidate, VLA15, we continue, of course, execution on the study, VLA15-221, and we expect some minor follow-up readouts of the Phase II studies, which are primarily follow-up time points that will come over the course of the next month.

And on COVID, of course, this is the next very important readout that we are expecting. And here, the clinical results on our study 301, the COV-Compare, but also the study that is being conducted in South Hampton where we are part of the different booster strategies called COV-Boost.

And then, of course, later in the year, the first initial potential licensure, we expect to initiate and execute additional clinical activities on COVID, as mentioned earlier, to complement the U.K. trials, primarily to increase label over time, not necessarily for initial licensure. These are the key points. And I think with that, I would like to hand back to the operator to take your questions.

(Operator Instructions) And the first question comes from the line of Maury Raycroft at Jefferies.

Congrats on the chikungunya-based results. First question on chikungunya, just wondering if you can provide any more specifics on what the regulatory time line could look like? And is there anything you're going to be looking for in the longer-term safety follow-up?

So Maury, so let -- first of all, the 6-month safety follow-up is a prerequisite for licensure, I mean, in the non-COVID vaccine world, I would say. And we are basically reviewing the same that we have been reviewing already during the ongoing Phase III study, and there would be no additional readouts. So we will measure the same parameters and continue to watch the same parameters as we did for the ongoing study and the top line results. We do not expect any changes to this profile overall.

With regards to the submission, of course, we are preparing our different pieces here according to the regulatory dossier, different modules, CMC clinical, nonclinical. And as soon as we have our clinical lot-to-lot consistency data and the 6-month follow-up data, we will start the submission process. This -- right now, I would say, to predict time lines with regards to submission to approval for non-COVID-related vaccine development activities is difficult. Authorities are allowed and give priority to COVID-related vaccine development. And hence, we are careful in providing any further detailed guidance on potential approval at this point in time.

Okay. That makes sense. That's helpful. And then for the second COVID Phase III, looking at the -- looking at 2101 in variants, what could time lines look like for that one? Is there anything else you can say on how 2101 will fit into your strategy?

You are referring to which study, Maury?

This is the study in COVID variants?

You talk about the study that is on trials.gov 304?

I -- that sounds right. I think it's the 304. So we can follow up off-line.

Yes. No, no, no, I can answer the question. It's not a problem at all. I was just -- I just want to make sure since we have a lot of COVID studies ongoing or in the plan. I thought it's important that we align. So we are planning a further study called VLA2001-304. And this study will include elderly. And this is a study that is designed to allow for a potential variant bridge. And the study is about to commence. This is also why you find already the study description on trials.gov.

Okay. Got it. And for that one, I -- is there any more specifics on how that could fit into launch strategy for COVID?

We do not expect that this study will be needed for initial licensure, but it is a study that is expected to support a broader age range claims. And of course, as I mentioned, is also expected to provide a platform that we can use for a potential clinical bridge into new variants. And I think we -- you will see a respective announcement upon initiation of the study. And it's fair to say that this is imminent.

Got it. Okay. That's helpful. And then last question is, if you think the COVID discussion with the EC will materialize or get finalized after the Phase III COVID results are disclosed? Or how should we think about timing for an EC decision?

Well, I would say -- we hope to be earlier, but we are in active discussions with the EC for a long time. And so -- and this is all we can say at this point in time.

And your next question comes from the line of Seamus Fernandez at Guggenheim.

So just a couple of quick ones. Just wanted to get a sense of the timing of the initial sort of COVID trial data set. I believe that you had announced that patient enrollment had completed towards the beginning of 2021. And I guess the structural sort of time line would be 6 weeks plus from the timing. So could you just give us a sense of the timing updates? And if additional data points are actually required to measure the sustainability of the antibody boost benefit?

So are you -- is it requiring kind of evaluation of multiple time points just to see the durability of effect? Or is it just structural to the trial from a time line perspective? And then in terms of the evolution from a manufacturing perspective towards the variance capabilities, what would it take to kind of move towards an inactivated variant vaccine that's, let's say, oriented either towards Delta or Beta and how quickly can that be incorporated into your existing process should the initial and central effort be successful?

Good question. So let me start with the time line -- to repeat the time lines on our current study 301, right? So we have the 301 study is the COV-Compare study. This study compares our vaccine head-to-head against the AstraZeneca vaccine. So AstraZeneca is an active arm. In this AstraZeneca, vaccinated people are present in an active arm in the study. We have completed the enrollment. So this means that people got then the 2 shots. And thereafter, serological testing starts. And our primary endpoint is 2 weeks after completion of the primary immunization series.

And as we announced, we expect this top line data early fourth quarter. And so we are not entirely in control of our own destiny here. We collaborate with the U.K. government. And the serological testing is being done at Public Health England, as we mentioned at one of our previous calls already. And from there, we expect that this primary endpoint data will form the basis for the initial licensure. We will, in parallel, continue follow-up time points to observe antibody persistence. But this is currently not expected to be the basis for the initial conditional licensure, but will be part of the, I would say, the ordinary, if I may say so, process later on.

The same is true for the COV-Boost study, Here, of course, it's also a primary endpoint that would be measured. And at a later point in time, there will be follow-up time points to observe antibody persistence.

When it comes to the manufacturing part of your question, so whole viruses require, of course, that you isolate the virus. And then you create respective virus load that you can use to generate a virus feedback. And from the initial, we call it research feedback to the master virus feedback that you can plug into production, you need to assume roughly 8 to 10 weeks. And this is something that -- this is a -- time line that is well known from the world of influenza. And that will allow them to commence manufacturing and it is expected that the manufacturing process will be identical.

So no change to manufacturing process overall. However, again, as per influenza, there are existing guidelines in the meanwhile also published that will apply for COVID variant vaccines or potential COVID variant vaccine, which are also based on a mono comparability.

These are not big studies, but a few hundreds of people where you need to show in a head-to-head comparison against surrogate, which will be neutralizing antibody titers.

And this, coming back to Maury's question earlier, therefore, we have also created the platform around our study VLA201-304, where we have designed the protocol in a way that we can add whenever we have a potential vaccine ready and add this comparability arm to an ongoing study.

Your next question comes from the line of Samir Devani at Rx Securities.

Just let me add my congrats on the chikungunya data. Very pleasing to see that. Just on COV-Boost, Thomas. I'm just wondering, is it your expectation that you need to do a company-sponsored study to get the booster label added? Or do you think the data from that study will be sufficient?

Well, this is a good question, Samir. So basically, by the end of the day, the decision around booster is a JCVI decision in the U.K. And so whether the -- this -- the data that we generate there will be sufficient or not is a discussion that we got to have with the MHRA once we have the data at hand, right?

It's -- there are certainly multiple possibilities, including that we don't need it for the -- that we don't need an additional study. But nevertheless, we have, as you may recall, already announced during the last analyst call that we amended the current protocol for Phase I/II to add a booster arm just to also include company-sponsored booster data in case we're going to need it. And the same will be true, by the way, for study 301, where we'll also add on a booster arm.

That's great. And just can you remind me, I know the COV-Boost is looking at a full dose and a half dose 2001 boosting. In your additional arms, in your studies, are you using the full dose or half dose?

Full dose.

And your next question comes from the line of Jacob at Kempen.

So my question is regarding the upcoming readout for the COVID-19 vaccine. I'm just curious if there are any factors that would give comfort for the expected readout?

Well, so basically, we are measuring GMT ratio, neutralizing antibody titers against And the level of comfort that we do have, and this is the reason why we entered positively in this endeavor is, of course, that there are reported neutralizing antibody titers from the (inaudible) vaccine in the U.K. from their Phase I/II study and there is -- and from our Phase I/II study. And those neutralizing antibody titers were generated at the same labs with the same assays by the same people. And those numbers are published, both ours as well as theirs.

And this ratio, if I may say so, or the order of magnitude of those neutralizing antibody titers give us the level of confidence that we have right now. Of course, we are in the world of vaccine development. And by the end of the day, we are in the world of biology and only the study readout itself will tell.

There are currently no further questions. (Operator Instructions) I do have another question on the line. It comes from the line of Simon Scholes at First Berlin.

I just have one question. And I was just wondering if the slightly later timing of the expected release of the Phase III results is going to have any impact? Or you expect it to have any impact on the availability of your results from COV-Boost?

We are not the sponsor of COV-Boost. So there are, from our perspective, no interlinks to that, that we are currently envisaging. We are, indeed, a few weeks, just a few weeks behind the original expectation, probably 2% to 3%. As I said earlier, we are not entirely mastering the process here within the partnership that we have with the U.K. government, but it is not expected to have a knock-on effect on COV-Boost, no.

I do have a follow-up question from the line of Samir Devani of Rx Securities.

It's really just a question for David and Manfred. I appreciate you don't want to give too much COVID-related guidance. But I'm just wondering in light of the R&D spend in Q2, is that a reasonable run rate to assume going into Q3 as well?

Let me take the question. This is Manfred speaking. I think -- so where we are sitting today, I think this would be a reasonable assumption to assume a continuation of the same level.

There are currently no further questions on this line -- on the line, please continue.

Right. So many thanks for your time today. Many thanks for your excellent questions. Many thanks also for sharing our level of excitement around chikungunya, and this is really unprecedented achievement. It was in the middle of a COVID pandemic, which is not to be underestimated. And of course, we are looking forward to talking again once we're hopefully going to report good COVID data. Have a nice day. Bye-bye.