Valneva SE (VALN) 2021 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Valneva Presents its Audited Full Year 2021 Financial Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to our first speaker today, Thomas Lingelbach. Please go ahead.

Welcome, and good day to our quarter 1 analyst call where we will report our full year 2021 results and provide corporate updates. So if you move to the Slide 2, please and acknowledge the disclaimer.

We go on to Slide 4 of the presentation. Yes, 2021 has been an exceptional year for Valneva. And we have been able to make excellent progress in all of our clinical programs. For Lyme disease, we reported further positive Phase II results, including booster data. We determined finally the final Phase III dose and vaccination schedule.

For our COVID-19 vaccine, we reported positive Phase III results, obtained a first emergency use authorization from Bahrain and are in ongoing rolling reviews for conditional approval with EMA and MHRA.

For Chikungunya, we reported final positive Phase III results and top line lot-to-lot data and initiated the adolescent Phase III activities.

As you will see in the financial report, we have also been able to report a strong full year 2021 revenues and cash position. Our total revenues are EUR 348 million, roughly, in 2021 compared to around EUR 110 million in 2020, an increase of 216%. Our cash position is strong with EUR 346.7 million as of end of December. We are very proud that we have achieved a successful NASDAQ initial public offering, European placement, and follow-on offerings.

With that, let me take you a little bit through the different clinical programs. Slide 6. First of all, VLA15, our multivalent Lyme disease vaccine candidate. As you know, this is the only Lyme disease program in advanced clinical development today worldwide. We got FDA Fast-Track designation granted. We have an exclusive worldwide partnership with Pfizer. I'm going to report more about the Phase II data and the booster response as well as the Phase III schedule and dose that we finally selected. And of course, we are also waiting for further Phase II data which are expected to come in the second quarter 2022.

As a way of reminder, the multivalent vaccine candidate contains 6 serotypes which cover the most prevalent serotypes in the Northern Hemisphere. And the vaccine candidate follows a validated mode of action for other Lyme disease vaccines that were on the market many, many years ago.

In terms of results, we reported positive results from 2 initial studies, VLA201 and 202 initiated a study VLA15-221, in which we recruited 625 participants, 5 to 65 years of age. We confirmed as part of that study, where we compared also head-to-head 3-dose versus a 2-dose schedule, that the 3-dose schedule is going to be the one to be used for Phase III. And we reported those results in a subanalysis in February this year.

We expect further data from the pediatric and adolescent population soon in the second quarter of 2022. And of course, we have also seen from our study 202 strong top line booster results. VLA15 was immunogenic across all dose groups and elicited high antibody responses across all serotypes 1 month after primary vaccination and the booster dose 1 year following the 6-month dose elicited strong anamnestic response.

With that, and on the basis of this data, we plan to initiate the pivotal efficacy trial in the third quarter this year. And of course, the clinical readout as reported many times in the past, is expected to cover tick season 2023 and hence, readout is expected early 2024. The EUR 25 million milestone payment is due to Valneva upon trial initiation.

VLA1553 is our single-shot Chikungunya vaccine candidate. It is the most advanced Chikungunya vaccine program worldwide today. It is the only program that reported final positive pivotal Phase III results, and we couple this with top line lot-to-lot data. And as mentioned at the beginning, we also initiated the adolescent Phase III trial in January 2022. Also, the pediatric label extension is expected post marketing. We got FDA breakthrough therapy, fast-track, EMA PRIME designations. And by way of reminder, the first one to receive BLA approval will be eligible for priority review voucher. We expect to initiate the FDA presubmission process in the second quarter of this year.

Chikungunya vaccine candidate VLA1553 is a single shot, live-attenuated prophylactic vaccine that targets the Chikungunya virus neutralization, and we expect very long protection after a single shot. In order to make the product accessible to LMIC countries, we partnered with CEPI and Instituto Butantan and CEPI has been granted -- granting EUR 23.4 million in support of this program.

Chikungunya will provide an excellent fit with our existing commercial and manufacturing capabilities. We expect the global market, including endemic regions, to exceed EUR 0.5 billion annually by 2032.

In terms of development outlook, I mentioned already that we expect the FDA presubmission process to commence in the next quarter. And a little bit about the data and the Phase III. So we completed the 6-month follow-up period. All Phase III immunogenicity and safety endpoints were met. And even after 6 months, we saw seroprotection in 98.9% of participants after 1 month and 96.3% after 6 months. And the good safety and tolerability profile was confirmed. The positive top line lot-to-lot consistency trial for which we reported data earlier this year, clearly confirmed the consistency of 3 lots manufactured. Final data is expected in quarter 2, 2022.

The antibody persistence follow-up trial is ongoing. And up to 375 volunteers from the 301 study will be followed annually for 5 years. The adolescent Phase III trial was initiated in January 2022 to support potential label expansion, as I mentioned earlier, post initial licensure in adults, and it's funded by CEPI. The presubmission process with FDA is expected to commence. And again, the sponsor of the first Chikungunya vaccine proof in the U.S. will be eligible to receive a priority review voucher.

VLA2001, Page 10, our inactivated whole virus COVID-19 vaccine candidate is the only inactivated COVID-19 vaccine program in the clinics in Europe today. It builds on our Valneva's IXIARO manufacturing technology, combined with Dynavax's CpG 1018 adjuvant. I mentioned earlier that the Bahrain NHRA provided us with an emergency use authorization in March this year. And EMA and U.K. MHRA rolling reviews are ongoing. We have achieved last year an advanced purchase agreement for up to 60 million doses with the European Commission and for up to 1 million doses with Bahrain.

The pivotal Phase III data showed superiority versus AstraZeneca's Vaxzevria and significantly more favorable tolerability. We also obtained positive top line homologous booster data, and we showed in lab experiments, neutralization against Omicron and Delta variants. The ongoing clinical trials aiming to gradually expand the target product profile as well as the geographical reach. As you know, we are leveraging Valneva's manufacturing sites in Scotland and Sweden, coupled with our existing CMO partners. And this all will target an installed capacity of more than 100 million doses per annum.

Coming back to the data and especially the key data stemming from our Cov-Compare study. On immunogenicity, we met, of course, our co-primary endpoints. We showed superiority in terms of geometric mean titer for neutralizing antibodies, which are still today seen as the most relevant correlate for protection. And the GMT ratio that we observed was 1.39. And we showed noninferiority in terms of seroconversion rates. We could also observe quite interesting and broad antigen-specific T cell activity, not only against the S protein, but also against the N and the M protein.

In terms of safety and tolerability, VLA2001 was generally well tolerated, significantly more favorable profile compared to the AZD comparator. And we show significantly fewer solicited adverse events, including injection site reactions and systemic reactions, which is, of course, something that is particularly important for that product and confirms what we have seen in the world of vaccinology previously for inactivated vaccines.

Yes. We also saw COVID cases in this study. As you may recall, in the occurrent COVID cases were similar between the treatment groups. The complete absence of any severe COVID cases could suggest that both vaccines used in the study prevented severe COVID-19 caused by the circulating variant at the time, predominantly Delta.

Slide 12 summarizes the current purchase agreements and grants that we have received in connection with VLA2001 to date. Up to 60 million doses from the European Commission to be supplied in 2022 and 2023, of which 24.3 million doses are expected to be supplied in the second and third quarter of 2022. And EC has the option to increase its initial purchase, the remainder of which would be delivered in 2023. With Bahrain, we have 1 million doses to be supplied in 2022 and 2023 and the NHRA emergency use authorization which we received allows us first deliveries at the end of this month.

We also received a grant from Scottish Enterprise to advanced vaccine development. This grant is totaling up to GBP 20 million expected to be received over the next 3 years commencing already this month. The first grant up to GBP 12.5 million will support R&D related to VLA2001 manufacturing. The second grant up to GBP 7.5 million will support R&D connected to manufacturing of Valneva's other vaccine candidates in Scotland.

In terms of expected label extensions, as I mentioned earlier, we expect a gradual extension of the label for VLA2001. We start with primary immunization in the 18 to 55 years old, then expand those in the elderly 55-plus. We are currently generating a lot of additional booster data, including mix/match, so-called heterologous booster data that we would like to generate. And then of course, the different developments under the pediatric investigational plan, adolescents 12 to 17 years of age as well as children 2 to 11 years of age.

Let me now hand over to Peter, our new CFO, for whom it is today his first earnings call with Valneva, to provide the financial report.

Thank you, Thomas, and good morning or good afternoon, everyone. As Thomas just said, this is my first earnings call as Valneva's CFO. In the 3 months that I have been with the company, I met with a large number of colleagues to get familiar with the organization and its processes, but also with a number of investors and the external partners. I'm excited to be part of Valneva and to contribute to our journey to become a highly valued internationally known specialty vaccine company.

The year 2021 was a truly exceptional year for Valneva. We invested more than ever in the history of the company in our development programs and in our infrastructure and the advancement of our pipeline is a testament of our consistently excellent execution.

The impact of the global pandemic on the travel industry adversely influenced Valneva's top line over the last 2 years. At the same time, the company reacted by leveraging its expertise to develop the only inactivated whole virus COVID-19 vaccine in Europe. The related contracts first with the U.K. government and then with the European Union and Kingdom of Bahrain generated substantial cash flows. During this call, I will further elaborate how the investment in our pipeline and the government contracts impacted our financials.

With this, let's move on to Slide 15, a look at our fiscal 2021 revenues. Total revenues for the year reached EUR 348.1 million compared to EUR 110.3 million in the prior year, which represents an increase of 215.5%. This increase is driven by other revenues and primarily by revenues related to the COVID-19 supply and clinical trial agreements with the U.K. government. In relation with these contracts, we recognized EUR 253 million of revenues in 2021. Revenues from technologies and services are also included in other revenues and more than doubled compared to prior year to reach EUR 28.5 million. Product sales slightly decreased compared to prior year and reached EUR 63 million. This decrease is a reflection of a still weak travel market. Foreign currency fluctuation had no impact on growth rates versus prior year.

On the right side of the slide, you see the composition of our product sales with IXIARO/JESPECT generating more than 70% of total sales. IXIARO sales to the U.S. military were EUR 38 million, driven by the new supply contract signed in September of last year. The vast majority of our sales in 2021 was made through our direct sales channels.

Moving on to Slide 16, where you will see a year-on-year product sales comparison. Third-party products grew by 271% over prior year, driven to a large extent by the sales of Rabipur and Encepur. These products are covered by distribution agreement between Valneva and Bavarian Nordic and sales in certain geographies started in 2021.

IXIARO/JESPECT sales decreased by 6.9% versus prior year while DUKORAL decreased by 81% versus prior year. This adverse performance is, as already mentioned, caused by the still very heavily impact of the pandemic on the global travel industry.

Moving on to our income statement on Slide 17. We already covered the revenue part on the previous slide. So let's just focus on cost. Cost of goods and services increased significantly compared to 2020 and reached EUR 187.9 million. The main driver for this increase were cost of goods related to our COVID-19 vaccine candidate. COVID-related cost of goods include inventory write-offs, cost for sales manufacturing batches as well as advanced payment for key raw materials. These advanced payments were recorded as period costs in our 2021 income statement.

Investments in R&D more than doubled compared to prior year and reached EUR 173.3 million. This increase reflects the significant investment in our clinical pipeline and most importantly, of course, the advancement of our COVID-19 vaccine candidate. Our R&D investment into our other clinical candidates slightly decreased versus prior year, which is in line with the planned progression of our pipeline.

Marketing and selling costs increased as we invest in prelaunch activities of our Chikungunya program. G&A costs saw a significant increase of EUR 20 million to reach EUR 47.6 million, and this increase was driven by several factors. Our U.S. IPO generated additional costs compared to prior year asset investment in support of our COVID program and increased noncash effects related to our share-based compensation and related social security.

Overall, our employee-related expense increased by more than 50%, a reflection of increased staff to support our development programs and ramp up of our manufacturing capacity, plus again increased costs related to our share-based compensation.

Other income increased from EUR 19.1 million to EUR 23 million, driven by an R&D tax credit increase from EUR 10 million to EUR 22 million due to our heavy investment in our COVID-vaccine program. At the same time, revenues related to grants decreased from EUR 7.7 million in 2020 to EUR 1.7 million in 2021.

Finally, total financial income and expense plus income tax increased by roughly EUR 3 million. This increase was primarily driven by higher financial expense in relation to our refund liabilities and increased income tax charges. These increased expenses were partially offset by a favorable foreign exchange gain of EUR 8 million. As a result, we record a loss of EUR 73.4 million for fiscal year 2021 compared with a loss of EUR 64.4 million in prior year. The EBITDA of negative EUR 47.1 million slightly deteriorated versus the year 2020.

Slide 18 illustrates an analysis of the group P&L for COVID versus the rest of the business. As you can see, the COVID business generated a positive EBITDA for the year 2021. At the same time, our business, excluding COVID, generated a negative EBITDA as we continue to invest substantially to advance our pipeline. Our non-COVID R&D expense were at the low end of the guidance for the year of EUR 60 million to EUR 70 million.

Moving on to the balance sheet on Slide 19. As already mentioned, in 2021, we invested substantially in our infrastructure, primarily driven by investments in our COVID-19 manufacturing and fill finishing sites in Scotland and Sweden. Overall, we invested EUR 95.8 million in property, plant, and equipment. At the same time, our inventories increased by EUR 97 million to EUR 124.1 million due to stock of raw materials and work in progress related to our COVID-19 vaccine.

Trade receivables increased from EUR 77 million to EUR 115 million, primarily driven by receivables from member states of the European Union in relation to the advanced purchase agreement for our COVID-19 vaccine candidate. To date, the mass majority of the trade receivables at December 31 have been paid.

Our cash and cash equivalents increased significantly from EUR 204 million to EUR 346.7 million. This increase is a result of significant cash inflows from the contracts with the U.K. government, the advanced purchase agreement with the European community and the U.S. IPO and follow-on offering. With the strongest cash position in the history of the company, Valneva has the financial flexibility to execute on its plans and further advance its clinical pipeline.

Moving to Slide 20. Our total equity increased by roughly EUR 100 million compared to December 31, 2020, driven by our U.S. IPO and follow-on offering. Total liabilities increased significantly and mainly related to contract and refund liabilities. Contract liabilities increased by approximately EUR 35 million. This increase was driven by payments received from member states of the European Union as well as the Kingdom of Bahrain in relation to the anticipated supply of VLA2001.

At the same time, we recognized a total revenue of EUR 87 million related to the U.K. supply agreement that were recorded under contract liabilities at the end of fiscal year 2020. Total refund liabilities increased by about EUR 143 million, driven by payments received from the U.K. government. Slide 21 outlines the main impact of the U.K. supply agreement and clinical trial agreements on our 2021 financials.

In 2020 and 2021, we received total contributions of EUR 420 million. In 2021, EUR 253 million were recognized as revenues, while EUR 167 million remain on our balance sheet and are reflected on the refund liabilities. According to the supply agreement with the U.K. government, the company is required to pay to the U.K. government a low single-digit royalty on its sales of VLA2001 to customers outside the United Kingdom. EUR 85 million of the remaining refund liability is set aside to cover the maximum royalty obligation. The remaining EUR 80 million represents a potential refund liability related to advanced payments received for our new manufacturing site in Scotland. We expect to recognize this amount as revenues in the future.

This concludes the review of our financial statements. Now let's move to Slide 23 to look at our guidance for the financial year 2022. As already disclosed at the beginning of February, we expect total revenues to be between EUR 430 million and EUR 590 million, whereby EUR 350 million to EUR 500 million are expected to be for our COVID-19 vaccine. EUR 60 million to EUR 7 (sic) [70] million are expected for other vaccines. This range takes into account existing purchase agreements, but also anticipate additional contracts to be concluded over the next few months. Revenues from collaboration, license and services are expected to reach approximately EUR 20 million.

R&D investments are expected to reach between EUR 160 million and EUR 200 million. This range covers the advancement of our pipeline, and the range depends on the execution of planned as well as potential new clinical trials related to our COVID-19 vaccine.

This concludes the finance section. And with this, I would like to hand back to Thomas to provide an update on the expected newsflow.

Thank you so much, Peter. Yes, let me conclude with Page 25 of the presentation and summarize the key upcoming catalysts and newsflow. For Lyme, we mentioned it already first pediatric data to be expected next quarter. And the Phase III initiation thereafter expected in the third quarter of 2022. So probably the most relevant milestones and catalysts for Lyme.

For Chikungunya, as disclosed at the beginning of the presentation, we expect to commence the presubmission process with the FDA in the next quarter. And alongside with that, also the final lot-to-lot Phase III data. You know that outside of the world of COVID, you are required to have 6-month follow-up for the respective clinical studies.

And yes, for our COVID-19 vaccine candidate VLA2001, we'd been discussing a lot about it, of course, we hope for our regulatory approvals in Europe through EMA and MHRA and then followed by supplies and hopefully further purchase agreements. And since we are still in clinical development, have a lot of studies ongoing and still to commence. We expect further clinical trials and data.

Yes. With that, let me conclude our presentation and open it up for your questions. Back to the operator.

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

Congrats on the progress. I wanted to check on the potential EMA and MHRA regulatory approvals and see if there's anything additional that's gating for those approvals, besides what's mentioned in the press release? And can you talk more about specific next steps for label expansions in elderly and with boosting.

So happy to take your answer. I mean, as you know, we are in rolling review processes. We have gone through different rounds of questions, both with EMA as well as with MHRA. We have now responded to their questions. And of course, subject to the CHMP's acceptance of Valneva's responses. Valneva now anticipates receiving a positive CHMP recommendation for conditional approval of VLA2001 for primary immunization in adults 18 to 55 in April. And that follows then, as you know, respective start of deliveries into the European countries in the second quarter. This is where we are with the regulatory authorities.

Back to your question about the label extensions. We have -- you saw the slides in our deck on page -- what is the page number, let me go back and check the page number. So Page #13 of the presentation illustrates how we look at the different label extension time lines. Of course, you know that we -- and we reported this in the past. We conducted a study in the elderly in New Zealand, but we have also experienced a significant backlog in testing at Public Health England for binding neutralizing -- antibody binding and neutralizing antibodies. And hence, we need -- we are at this point in time not able to report a precise timeline by when we're going to get the data.

On the booster extensions, we have, of course, reported homologous booster data from our Phase I/II study. And we have submitted this data as supportive data as part of our regulatory processes. We have now the homologous/heterologous booster extension ongoing for the 301 study, with boosters' people who have either been primed with Valneva or the AZ vaccine. So this data would provide a first glance on heterologous booster and that this data is expected in the next quarter. And we will start, have yet not started, but will start another booster study where we will boost our people primed with mRNA. The adolescents and children's activities have commenced in the 12- to 17-year-olds, not yet in the 2- to 11-year-olds. Of course, we are facing difficulties in recruitment, and hence, we need to also extend the trial into different geographies. And this is where we are at this point in time. So for some like the initial booster data, we can provide already precise timelines; for others, we unfortunately cannot at this point in time yet.

Got it. Okay. That's a really helpful perspective. And then I also had a question on COVID manufacturing. You said you're targeting greater than 100 million annual dose manufacturing capacity. Can you say where you're at currently and when you could reach that capacity goal?

Yes. I mentioned earlier that we are targeting an installed capacity. So capacity in manufacturing is always driven by, a, the technically installed capacity and then the operational capacity, which is linked to the level that you operate under from a staffing perspective and so on and so forth.

We have the manufacturing facility in Scotland, the new one now under validation, and we expect to be completed with that task over the summer and then be ready for commercial manufacturing in the fourth quarter. We have, thus far, manufactured in the existing facility in Livingston, as we reported previously. And we are working right now and manufacturing as we speak at our partner, IDT, in Germany. So right now, it -- we are probably, in terms of operational capacity at half of what we may target, but our capacity and supplies are, of course, matching with the anticipated revenues for this year, meaning the business that we see for the year 2022.

The next question comes from the line of Seamus Fernandez from Guggenheim Securities.

So just a couple of quick ones. On the plans for the pediatric opportunity. Thomas, I was just hoping that you might be able to contextualize some of the updates that we've had on the mRNA vaccines recently, sort of mixed results in the pediatric patient population. How do you see your own programs advancing there just as a starting point?

Yes. Excellent question, of course. We see VLA2001 as a perfectly suited vaccine for children. Why is that? We know that a vast majority of childhood vaccines are based on inactivated technologies. Inactivated technologies are clearly characterized by very good safety and tolerability profiles and inactivated vaccines in other indications have shown to work extremely well in children.

So therefore, we see really significant opportunity for our vaccines in adolescents and children. And this is why we are trying everything to progress the respective studies as quickly as we can. In a quite difficult environment, at least when it comes to Europe, given ongoing vaccinations, and of course, we need to show first vaccine primary vaccination in children. And that's the reason why we are extending now the clinical operations also into outside Europe.

Great. And as we think about the evolution of your own vaccination series and the boosters, is the need for an additional variance something that you're focused on? When might we see a little bit more information, whether it be related to manufacturing updates in that regard become a little bit more evident? It seems like an inactivated vaccine would be perfectly positioned to deliver a multi-variance COVID vaccine as the pandemic evolves to an endemic setting?

Yes. I would say another excellent strategic question, of course. I mean as previously communicated, Valneva's inactivated technology platform is adaptable for new variants if required, right? I mean we have shown this for Alfa, for Beta, for Delta. We are -- we have clearly a process that can be used. It is a well-known, I would say, set up that we all understand from the world of influenza. Now the question is what is the ideal vaccine composition? And you know that some leaders in the field are targeting bivalent vaccine compositions with Wuhan and Omicron. We are conducting a lot of KOL processes at this point in time. And of course, we need to firm up an opinion on what is the best possible setup for a second-generation vaccine, if required. And you know that there are also mixed views on that. And we are trying to get prepared.

So we are currently in the process of preparing more research virus seeds and manufacturing virus seeds for different variants of concern. And we could initiate then respective large-scale manufacturing relatively soon. But at this point in time, we have neither taken a decision to proceed into the second-generation vaccine development nor have we finally concluded on the best possible vaccine composition from a medical needs' perspective.

Understood. And then just one final question. I know that you guys have limited control over progress in the Lyme disease with the Lyme disease vaccine. But just wondering if you might be able to help us understand the kind of preparation that you think is necessary as a Phase III approach is? I think the timing is now early 2024 versus the prior 2023. Just wanted to get your thoughts along those lines.

Yes. Maybe let me start off with a clarification. I think the -- first of all, we are talking here about a tick-transmitted disease. And as you know, the outbreaks have a certain seasonal pattern. So you have high incidents during the tick season. So hence, if you want to show efficacy in a placebo-controlled field efficacy study, you need to get people vaccinated prior to the tick season starting. So that's why the Phase III is expected to commence in the third quarter of this year. And this means that the first efficacy readout can occur in -- during the tick season 2023. This then means in turn that you have the final data of the study probably early 2024. And this is the current timeline that has only marginally changed from where we started. We had always foreseen the 2023 tick season as the, let's say, the core season to evaluate efficacy.

And yes, we are working very closely with Pfizer who, of course, are in the lead for this Phase III study. And in between now and the Phase III start, as reported in the presentation, we have, of course, the readout in the pediatric/adolescent population from the Phase II study VLA15-221 as well as the final preparations for Phase III including things like end of Phase II.

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

Thomas, Peter. I've got a couple of questions, one on the guidance and then just one on Chikungunya. Thomas, you talked about presubmission in the statement. I was just wondering when do you expect to complete submission for the Chikungunya vaccine?

As usual, Samir, you listened very, very carefully. So I would say the reason why we have been a bit vague on the description of the submission process is because we don't know at this point in time which submission route we're going to take. Whether we're going to take a rolling review process or whether we're going to take a full standard "old fashioned" review process. And this will, of course, determine then the overall submission strategy. But certainly, we expect to complete this year.

Okay. That's great. And then just -- Peter, just on the guidance. I've got a few questions just on the guidance. Is your guidance assuming the $25 million Pfizer milestone, obviously, we're looking for at the end of this year?

And then just on R&D, could you just give us a sense of how much of the R&D guidance relates purely to VLA2001? And then just finally, could you give us some guidance on CapEx for this year as well?

Yes. Thank you for those questions. So on the Pfizer, so we do expect indeed to get to $25 million as we initiate -- or as Pfizer initiates the Phase III, but this will have no impact on our revenues because it will go straight to our balance sheet to cover for future obligations we have under this contract for the -- basically, this is our share of the cost.

On R&D, I mean, of course, the R&D guidance is, to a large extent, driven by COVID, as you would expect. Now we haven't given the numbers separately this year because we just think the way we look now at our business is basically we have a full envelope for R&D, and we're not going into the details in our guidance what is COVID versus non-COVID.

And then finally, on CapEx, we have not given guidance on CapEx. I mean there is a -- still a relatively significant CapEx spend expected to finalize our manufacturing facilities, but we have not guided at this stage on CapEx. It will be -- just to add, maybe it will be significantly lower than it was in 2021, of course.

Okay. That's helpful. And then just maybe one on DUKORAL. Obviously, the cost of goods, you're reporting is at about EUR 8 million. At what point do you stop selling DUKORAL?

So basically, it is very clear from the numbers that at this point in time due to the pandemic, DUKORAL is a loss-making product. At the same time, we see a significant strategic value in the travel vaccine bundle with IXIARO. And we have, in the past, been able to generate profit with DUKORAL prepandemic. So now the year 2022 will certainly be a decisive year for DUKORAL because we cannot continue like that if we are not seeing a rebound of the DUKORAL sales in a new 2022 environment, and we will certainly review the product and its future very, very carefully.

(Operator Instructions) The next question comes from the line of Max Herrmann from Stifel.

Congratulations on progress that you've been making in the last 12 months. Primarily, question is on the margin, the gross margin for '22. Obviously, we've seen quite a fluctuation in the margins. So it would be good to get some sort of guidance on how we should look at it in terms of COGS for 2022, whether that should be going up or down from where we were in '21? And what sort of drivers should we be considering?

Yes. Thanks for that question. Actually, when you look at the margin of our product-on-product sales for 2021, it was relatively stable versus the prior year. You will be able to see that in our detailed financials. Now when we look at 2022, with COVID sales kicking in, we would expect to see this margin to somewhat improve. And while we haven't given the guidance, I think it is fair to assume it will be in the range of 40% to 50%.

Great. And then just a follow-up on sort of future opportunities for VLA2001 and potentially future variance. How are you viewing the sort of longer-term potential for perhaps an annual flu COVID combination? Is that something you're thinking about ways to develop something in that regard?

So Max, good question. I mean first of all, I think there is more and more evolving consensus around the fact that there might be a need for an annual COVID vaccination. At the same time, there is also more and more evolving understanding that it needs to -- or it requires modified vaccines. It requires vaccines that have an antibody persistence and longevity of an immune response that clearly protects you for a year. And so hence, the vaccination against COVID may indeed follow a flu-like pattern in the years to come with all the caveats that we all understand these days, including what is the best vaccine composition? Is there a need to adjust vaccines on an annualized basis, yes, or no? I mean these are all questions that, at this point in time, certainly, no one is able to answer.

When it comes to the combination, there are -- we can all see in the market today that different companies in COVID take different stance on the potential flu-COVID combo. There are certainly reasons that speak for a combination vaccine, but there are also reasons that speak against it. What, from a Valneva perspective and from VLA2001 perspective, we take it very opportunistically. An inactivated whole virus vaccine can be from a technological perspective and most of you know that I'm an old CMC guy. From a technological perspective, the combination of our vaccine with influenza in coformulation in situ is technically feasible. And whether it makes sense from a medical standpoint and whether it makes sense from a business standpoint, we have to see, but we try everything to be prepared for that. And that's currently our position. We will certainly not, as Valneva, develop an own flu-COVID combo. We have no access to an influenza vaccine, but we are open to any kind of collaboration in this regards.

(Operator Instructions) Dear speakers, there are no further questions at this time.

Okay. Thank you so much. This concludes today's analyst call, and we look forward to following up with many of you in due course. Have a good day. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.