Valneva SE (VLA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the EC APA Update Conference Call following on from today's press release. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] And I'd now like to hand the conference over to your speaker today, Thomas Lingelbach. Please go ahead.

Thank you. Good day, everyone. Well, I mean you have all seen the news. Actually, we had 2 news this morning. First one, the -- the emergency use authorization in the Emirates, UAE. But of course, the material one, that we have received notice of the European Commission's intent to terminate the COVID-19 vaccine purchase agreement, the so-called APA. And of course, the EC decision is regrettable, especially since we believe in the value of the product that we have developed thus far, the only European-developed and European-manufactured inactivated whole virus vaccine. And in the meantime, got approvals, as I said, by MHRA, by the Bahrainian regulatory agency and now since today or so -- or since Friday or so, from the UAE. Yes, the situation is a situation that got triggered by the fact that we had not received a marketing authorization from the EMA by April 30. And this notice, as it stands right now, triggers actually a remediation phase. So we have 30 days from May 13, so last Friday, to obtain either a marketing authorization or to propose an acceptable remediation plan. And this brings us to the status of the regulatory process with EMA and I think it's important that we all understand where we are from a process perspective. The company announced on April 25 that it has received a further list of questions from CHMP. We submitted our responses on May 2. And we believe at this point in time that what we submitted adequately addresses the remaining objections and questions. Of course, if the CHMP accepts our responses, we are still expecting to receive a positive CHMP opinion at the latest in June 2022. Yes, with that, I think it is important to reiterate that we will, of course, now very actively engage with the member states, especially with the member states who are very willing to still receive our product, with the member states who have clearly articulated that they are looking for a more traditional vaccine solution. And basically, this process is a process that we are now very actively pursuing and -- while we are working on different remedial actions and the remediation plan that we expect to discuss with the European Commission. I think this is the situation where we stand. And of course, we have set up this call to allow questions from you, our analysts and key shareholders. And I think with that, the entire Management Board who's on the call today will be very happy to address your questions. I would like to hand back to the operator to take your questions.

[Operator Instructions] Your first question comes from Maury Raycroft from Jefferies.

Maybe just to start off, if you can talk more about what remediation plans with the EC or individual member states could look like and what's the likelihood of a new plan with EC getting accepted.

So Maury, of course, we cannot talk about the details of a remediation plan because at this point in time, the details of any kind of remediation plan are not clearly specified. But what is very clear is that we will work with EC and more importantly, with the EC member states who participated in the APA to agree on a plan. We are -- yes, we have not received positive CHMP opinion in April. But at the same time, we are well advanced. And as I mentioned earlier, we really hope to get a positive CHMP opinion latest by the June meeting. And that's basically the basis of what we're going to discuss. On the one hand side, by when will we have which products available, how could the product play a benefit in the forthcoming vaccination strategies in the individual countries in response to their different requests and the regulatory time lines. These are the key elements we've got.

Got it. That makes sense. And are there specific member states that you're having more advanced conversations with? I guess, can you talk a little bit more about how you think about EC versus individual countries at this point?

Yes. So we have an ongoing dialogue. And of course, there are a few member states who have specifically addressed already questions for us and interest to us. And amongst those, we have also very big European countries.

Okay. Okay. And then can you provide a status update on marketing authorization applications outside of the EU, including to the WHO? And are any of these contingent on getting EMA authorization first?

So another excellent question. So first one is the WHO prequalification process can formally be triggered on the back of either MHRA approval and/or EMA approval. With the MHRA approval received, we have initiated now the preparatory work for the WHO prequalification process. And this is -- so therefore, it is not -- we don't need to wait for the EU or for the EMA approval in order to get going on the WHO prequalification. And you can also see that with the announcement that we made this morning around UAE emergency use authorization, that we are focusing a lot on additional countries that will hopefully provide us with regulatory approvals. These are countries outside of Europe and -- but still important countries where our vaccine in its current form or future variants thereof could play a major role in the fight against the ongoing pandemic and as the pandemic is transitioning more and more into potentially an endemic phase.

Got it. That makes sense. And for the questions with CHMP, last question from me, you mentioned that you believe they're adequately addressed. Is there anything additional about those questions that they are saying at this point? I guess, any more specifics that you're providing?

No, not more than what we provided last time already.

Your next question comes from Simon Scholes.

So my understanding is that a positive opinion from the CHMP can only come pursuant to one of the CHMP meetings. And I think a meeting -- a CHMP meeting has started today and lasts until Thursday and the next one starts on June 20, which would obviously be beyond the 30-day period that you've mentioned in the press release. I mean so my question is, I mean are there any chances of a positive opinion pursuant to the current meeting?

So first of all, we cannot talk about what the CHMP may or may not discuss in its current CHMP meeting. The agenda is -- got published this morning. As some of you know, whether as part of the standard review processes, also VLA2001 will be discussed or not is not accessible out of the published agenda, but at this point in time, we have to assume that we are getting latest into the June CHMP, which is also why we've provided the guidance accordingly.

Okay. But I mean the June -- I mean you do say that based on the terms of the APA, you've got 30 days from May 13, so the meeting that starts on June 20 will be too late, presumably.

Yes. I mean as we clearly articulated at the beginning and as I said earlier, based on the terms of the APA, Valneva has 30 days from May 13 either to obtain a marketing authorization or to propose an acceptable remediation plan. And so I think that's why we have been focusing earlier in describing also the remediation plan route.

Your next question comes from Samir Devani of Rx Securities.

I guess I got 3 questions. Just on the UAE authorization today, I was just wondering -- my understanding that, that territory is heavily vaccinated already, I think, 99% plus. Do you -- what sort of commercial opportunity do you actually see there? So I guess that's the first question. And then maybe just a couple on the financials. Obviously, you've got an inventory level that's quite -- I think at the end of Q1 was EUR 137 million. Could you just help us understand how much -- I appreciate a lot of that must be the VLA2001, but if you could just maybe talk a little bit about that inventory level. And then in the outcome that you don't get any significant EU orders, can you perhaps just give us a bit of help on your cash reach?

So Samir, you have very good questions, of course, as usual. Let me start -- let me take the first one and I will probably hand over to Peter to take the second and the third question. So on the commercial opportunity, yes, you are right. UAE is a country with a very high vaccination rate. But it's also a country that has a high vaccination rate with another inactivated vaccine. So not only mRNA, for example. And the -- it's also a country that is currently preparing itself for it's next, let's say, for the next fall and winter season and for the next potential wave. And this is the reason for why we have public dialogue with UAE. This is the reason for why they have granted us emergency use authorization. And we are currently in the process of discussing real, I would say, demand and more importantly, more how our product could add value into the different vaccination programs. And we clearly see a place there for VLA2001. And it's too early to specify the business size, will it be another Bahrain size of thing? Or will it be substantially bigger? This is something that our team under the leadership of Franck is currently working on. Peter, inventory?

Thank you, Thomas. Sorry, go on, Samir.

Sorry, if you missed the question, Peter, I was just asking about the...

No, no, I thought you had a follow-up question to Thomas. So on inventory, yes, you're right, we, of course, do have quite a bit of inventory that relates to VLA2001. And as we said, we are in discussion with the EC and with its member states on, first of all the APA but also on orders in general. And so this is why I think it's too early to draw any conclusion with regards to our inventory and what we will do with it, but we still assume that we will be able to place orders to use our inventory. And we will, as we said, once we have more clarity on the APA and on the CHMP process, we will, of course, look at our financial guidance for the year. With regards to cash reach, as we said, we do -- from the way we look at the agreement and from the commitments we made, we will not have to reimburse the prepayments that we received for the EC member states. And as such, we do not expect to run into any immediate cash constraints, but we'll, of course, continue to carefully monitor our cash situation. As you probably saw at the end of March, we still had a very solid cash situation of more than EUR 300 million.

Okay. That's very helpful. Perhaps just a couple of follow-ups on that. Was there any significant revenue received from the EC in Q2 so far? And then also, is the Deerfield OrbiMed financing facility, is that contingent on EC orders? Or is it just purely on European approval?

Yes. So I mean you will appreciate that we have, of course, not published -- we have, of course, not published any numbers with regards to Q2. The way the contract works is there were prepayments, which we, to the largest extent, received in December and then the remainder of the payments will be due when we supply the first products to European member states. With regards to Deerfield and OrbiMed, so the first EUR 20 million tranche was available immediately and we have drawn down on that one in April. And then the second part -- the second tranche of EUR 20 million is contingent on EMA approval.

And your next question comes from the line of Damien Choplain from ODDO.

Yes. I've got 2. First, does the EC provide any reason explaining their intent to terminate the contract? And second, do you have maybe advanced discussion with other countries outside Europe that could, let's say, compensate the contract with EC? And maybe last question. How much do you already receive from the EC commission?

Okay. Damien, so first of all, no, we have not received any other reason than what we have disclosed, of course. The only reason that was provided at this point in time was the fact that according to the agreement, EC has the right to provide the notice if not -- if the CHMP positive opinion/ the approval not achieved prior to 30th of April. So that's all we can say at this point in time. We have not received any further information. And as we said, and I would like to reiterate, that we have now 30 days to either obtain a marketing authorization or pose an acceptable remediation plan, which means that we have this 30-day period and we will work with EC as well as the member states to maintain orders to the largest extent possible. Now with regards to your question about countries outside of Europe, I mean you're seeing that we are constantly discussing and building up relationships with key countries, in parenthesis, also high-priced countries, outside of Europe. Again, as marked this morning also with the UAE emergency use authorization, but also the fact that we are now going the route of WHO prequalification, will allow our product to be used in countries outside of Europe. We are very active in this process right now. We have, of course, prioritized EU. And we are still prioritizing EU at this point in time because we still believe that there will be a substantial demand for Valneva's VLA2001 within Europe. And that, of course, is dependent on each other and that's basically where we are at this point in time.

And your next question comes from the line of Keyur Parekh from Goldman Sachs.

Two questions, please, if I may. The first one is, I would love to hear your thoughts on what is driving your confidence that you've addressed the queries asked by the CHMP adequately and you are confident that whenever the CHMP reviews your responses to the additional questions you are likely to get an approval. So that's kind of question number one. Secondly, just kind of get a better sense for what were the type of questions that the CHMP had asked you? Were they related to manufacturing, were they related to clinical data, were they related to your analysis of certain data sets? So any color you might be able to provide there would be helpful.

Okay. Good. So basically, let's talk a little bit. I think the 2 questions that you raised are in a way interconnected, right? So I mean we have gone through a significant round of list of questions. Of course, we have submitted the same file to both MHRA as well as EU. So which on the basis of the pivotal trial data sets that or pivotal trial design that was pre-agreed with both authorities upfront. So of course, the 2 authorities have taken a different stand on some additional pieces of information that they were looking to see. We have discussed during the last -- and in this call already that 1 example was that we have not, for all sub-analysis and additional data analysis, provided both binding as well as neutralizing antibody titer data because they highly correlate. And I think that was, for example, 1 thing acceptable to 1 authority and not necessarily acceptable to the other. We had also an ongoing CMC discussion in connection with release specifications. I mean this is, of course, also something that has gone back and forth. So where is -- this is just to give you a flavor and I'm referring to things that we have already said during the last call. But this also tells you a little bit where our confidence comes from. So we have submitted our responses as we wrote in the press release on May 2. And based on our understanding with regards to CHMP's expectations and based on where we are in the process, yes, we are confident. Of course, we cannot say more at this point in time because we don't know formally more than what we are currently stating.

And then perhaps I could just have a follow-up there. Can you give us a sense of how much money you've already received from the EC?

Yes. So the EC money question is disclosed. The EC ordered 24.3 million doses in -- for 2022 supply and it is disclosed that there is a 30% prepayment.

[Operator Instructions] And your next question comes from Seamus Fernandez of Guggenheim Securities.

This is Evan Wang on for Seamus. First, on the APA discussions, can you help provide some context on the EC's key talking points in that dialogue? Was it more pricing, the number of doses, the need?

I would say, probably a combination of various things, but we would rather prefer not to give additional color at this point in time on that very topic, as you can, of course, appreciate.

Got it. And with the latest round of the CHMP questions, I noticed there was in addition to the required data they required further justification for authorization. Can you help us understand what that -- the scope of the justification, what that means? And does today's decision impact your confidence in obtaining authorization in Europe?

Yes. We have alluded to that point in one of our previous disclosures and in the different regulatory updates. As you know, we are currently assuming a conditional marketing authorization. So there needs to be, of course, a justification for the conditional marketing authorization. All that is specified in the respective guidelines. And we do believe that we have the necessary grounds to claim the conditional marketing authorization being justified. So that's what we have submitted. And at this point in time, we have not received any objection against this justification.

And I had 1 more question. With approvals in Bahrain and the UAE, can you talk about the process for supplementing those approvals with booster authorizations? What kind of trials are remaining? Or what are the steps there and in addition with the WHO?

Yes, very good question. So first of all, you know that we have 2 sets of important data that we are currently in the process of generating. One is the homologous and partial heterologous follow-up data from our pivotal 301 study. You know that we have boostered people who received in the main pivotal 301 study, either for priming AstraZeneca, 2 priming doses, or VLA2001. So all of them got as a third dose now VLA2001. This will be the first data set and we expect this data in quarter 3. This will be the first data set that will show homologous, especially for the countries that we are discussing, homologous is also important because you see there are many, many people who have been primed with the Chinese vaccines, for example. But we will also see for the first time the mix-and-match booster effect against AstraZeneca in a real-world, real-life setting, meaning with people who were in need of a booster 6, 8 months post priming. So that's the first data set that will be important. The second data set that will be important is the data set from the -- from the study that we have initiated and that we announced, which we call the heterologous VLA307 study. This is a study where we are specifically targeting people who have been mRNA-primed plus/minus naturally infected or only naturally infected, so really testing in different cohorts what -- how our vaccine adds value in those real-life settings. And this is also a data set that we expect in quarter 3. So all in all, we have triggered those studies also to ensure that we have data that will allow the vaccination recommendation bodies to take respective decisions prior to the fall/winter vaccination campaigns.

[Operator Instructions] Your next question comes from the line of Arsene Guekam from Kepler Cheuvreux.

Two questions, if I may. First of all, a quick one. I don't understand the amount that you already received from the European Commission. If you can repeat it, it could be great. The second one is we know that the European Commission and the EMA are independent. However, European Commission has a lot of unused vaccines currently. So against this backdrop, do you really think that the EMA will give you an approval before the deadline? And maybe a following question. What could be the volume of supply we can expect following your discussion with the different state member?

Yes. So we said at the beginning that the -- that under the advance purchase agreement and when you look at what we have received, we are talking roughly about a 30% prepayment. Then the second point is on the EC and EMA independence and in relation to that also the supply topic. So first of all, yes, regulatory authorities have to be independent. And regulatory authorities have to not be influenced by the commercial environment, contractual situation and so on and so forth. And in a way, you can see this with MHRA in the U.K., right? I mean also the U.K. government terminated the contract, MHRA still approved the product. And in a way, we see this really at this point in time being independent and we have no sign whatsoever at this point in time that there is not the absolute integrity by the regulatory authorities being maintained. With regards to supply volumes, we have not at this point in time or we don't feel comfortable at this point in time since we have initiated a discussion to talk about quantities at this point in time. It would just not be helpful in the overall process.

I now have no further questions showing. I'd like to pass back to the speakers for any closing comments. Thank you.

Yes. Thank you so much for your time today. We thought that it would be helpful to address your questions collectively in such a setting. And I think your questions clearly indicated to us that there was a need for this call. I mean bottom line, one more time, reiterating the company's position, we believe that we have a highly differentiated vaccine approach. We believe that this vaccine can still play a role, a very nice complementary role in the fight against the ongoing pandemic, but also as a basis and as a platform for the future endemic phases. As such, we continue working very, very hard to position the vaccine and especially working with those member states who would like to see this vaccine in their portfolio. And with that, it is very clear that we will try everything to come to an agreement with the EC on an acceptable remediation plan, while we continue focusing on the process with EMA and CHMP to get approval as said, later in the June meeting. With that, thank you so much again and we'll keep you posted. We'll keep you updated. Feel free to contact us if needed. And I still wish you a good remaining day. Goodbye.

That concludes our conference for today. Thank you for participating. You may now disconnect.