Valneva SE (VLA) Earnings Call Transcript & Summary

My name is Maury Raycroft, and I'm one of the biotech analysts at Jefferies. I'd like to welcome the CEO of Valneva, Thomas Lingelbach. Thanks for joining us today, Thomas.

Pleasure. Thank you.

And we're going to do a fireside chat format. So maybe to start off, for those who are new to the story, if you can provide a 1-minute intro highlighting your main products and key catalysts ahead.

Yes. So Valneva is a specialty vaccine company, focusing on the commercialization and development of vaccines in areas of high unmet medical need. We have commercial products in the field of travel vaccines. And we have 3 major advanced clinical stage assets, all of them highly differentiated. We have the only Lyme vaccine in clinical development on the planet today, partnered with Pfizer and about to enter Phase III. We have the only chikungunya program in the world that has successfully completed its pivotal Phase III studies, and we'll move into BLA submission as a next key milestone. And we have an opportunistic play in the field of COVID, where we have been able to successfully develop the only conventional, inactivated whole virus-based vaccine to first conditional marketing authorizations.

Great. Yes, I think that's a really good intro. And maybe starting off with COVID, definitely an opportunistic play. And with some of the recent updates you're currently guiding to potential CHMP recommendation in Europe this month, you're also in negotiations based on the original advanced purchase agreement with the European Commission, which may get terminated due to the unforeseen length of the European approval process. Can you tell us where you're at in both of these regulatory and negotiation processes and what the potential scenarios for what a deal with the EC or member states could look like?

Yes, of course. So we have been able to successfully develop the program to conditional marketing authorization by the MHRA by Bahrain and UAE, and we have been facing slight delays in the approval with EMA, but we are currently expecting a positive CHMP opinion at the forthcoming CHMP meeting in June. This delay has resulted in the European Commission having an opportunity to terminate the advanced purchase agreement, which included for this year, a bit more than 24 million doses of supply. They send us a respective notice, and we are currently discussing with the central procurement office about potential modifications, reduced orders, delayed orders, all of that. Of course, there will be a point where we will reach a viability limit for this product given that up to now, we have received the money that we invested in COVID, and this is why Maury called it also our opportunistic play. We have received the money that we have invested. But now we have -- we are approaching a point where to complete the development and especially the post marketing development, we will need to significantly invest own money. And we have to see how this process is going to develop further. Up to now, we haven't got the necessary clarity of what it's going to be, but it will certainly determine the future development route and the key question as to whether we will be able to turn the development success into a commercial success.

Makes sense. It makes sense. And when do you plan on providing an update, given the 30-day extension should be up the middle of this month, right before the CHMP meeting and before an opinion?

Of course, as soon as we will get any formal answer to our proposed remedies, we will have to disclose it, and we will disclose it by way of press release.

Got it. And maybe talk a little bit about what you've shown in COVID and the approvals in -- with the MHRA and also Bahrain?

Yes. So Valneva is the only company in the "western world" that had been able to show the effectiveness of the vaccine by way of immuno comparability. We bridged the vaccine in a fully randomized planned trial against the approved vaccine from AstraZeneca. We were able to show superiority in terms of the relevant neutralizing and binding antibody titers. And we were able to show also an improved -- statistically significantly improved safety and tolerability profile.

Got it. And when will we see more results in elderly patients? And how would you go about expanding the label after these data come out?

Yes. So we conducted a dedicated study in New Zealand. Due to testing delays, and we have been using the state-owned laboratories in the U.K. for serological testing, we have been facing delays in the availability of the necessary data. We have guided the market towards the data to be in our hands in the third quarter and right now, we are on track. We have further data points coming in the third quarter, which include also the heterologous booster data. Heterologous against AstraZeneca first because these are people from our 301 study, so from the pivotal study who will -- who have been boostered with our vaccine, whether they were primed with AZ or whether they were primed with Valneva's vaccine on top of that. We have initiated a study called 307, where we also give our vaccine to people in different real-life settings. So mRNA prime naturally infected or the combination thereof in order to see how our vaccine performs in such a real-life booster setting. All that is expected to come in the third quarter.

Got it. And we're wondering has the lack of elderly inclusion in the original application been an issue for some supply agreements? And is it currently part of your negotiations given the June 30 date in your 20-F to have broad approval for 18 plus?

No, at this point in time, I wouldn't say that the lack of the older age data has been a rate-limiting step because we got the initial approvals for primary immunization. And we all know that the non-vaccinated people are largely to be found in the 18- to 50-year age group. And therefore, with regards to primary vaccination, not. But of course, once we go into the world of boostering and using the vaccine for booster the elderly data, including booster in elderly will be absolutely critical and pivotal.

Got it. Makes sense. And you've mentioned some monies already received, and you've received some funds from the EC. I believe you said approximately 30% of the first year supply agreement. Can you speak more to that? And if the deal is canceled, can you confirm whether or not you get to keep the money and also the supply of vaccine?

So should the deal get canceled with the European Commission and given that we have invested the prepaid 30% already, there is no obligation for the company to pay this money back.

Got it. Okay. And -- can you talk about the booster data expected in the third quarter for subjects with the previous mRNA or natural infection? What's the design of that study, the key endpoints and patient numbers? And what data are you going to report when you do this update in the third quarter?

So it's a study with many different groups. Currently, the study protocol is undergoing a major maintenance in order to reflect real-time setting. So we are expecting around 25 to 30 people per group. It may go all the way up to 500 people to be included in the study but as I said, the initial study design can be found on trials.gov. And as I said, we are currently amending the protocol because we see permanently new real-life settings, right? So -- and this includes also people who have been in the so-called hybrid immunity group, right? So naturally infected and vaccinated either one way or the other way around. So this is what we are doing right now.

Got it. And can you talk about next steps after you get those data in third quarter? How will that affect potential future purchase agreements or commercial appeal for this program?

Of course, as soon as we're going to have the data and provided the data is positive, we will present this data to, a, the regulators; and b, to the key decision-makers, meaning those stakeholders who determine vaccination strategies in the ministries of health, and this will be the key next step.

Got it. And can you talk about your plans outside of Europe, both regulatory and potential supply agreements? And what other countries have you had conversations with about 2001?

Yes. So we are in active discussions with countries in Asia and outside of Europe and North America, especially those countries who had a very high vaccination rate with either the Chinese inactivated vaccine or with AstraZeneca's vaccine because this is, of course, the setting where we are able to provide fastest data. We have already shown very positive homologous booster data, and of course, giving our vaccine as a booster following the Chinese inactivated vaccine mimics the homologous setting. Also, our vaccine, as you know, is differentiated in that we have added to the conventional inactivated whole virus approach, modern adjuvants to improve the T cell immunity. It's a toll-like agonist that shifts the immune system toward -- immune response towards Th1 CpG 1018 from Dynavax.

Got it. And another question related to that. So you said you would seek regulatory approval with the WHO. Where are you with this process? And how many countries could be included in that approval with potential supply agreements?

So we have initiated the process for WHO prequalification on the back of the MHRA approval. This process has been initiated. We haven't got a timetable yet. And therefore, it's difficult to talk about the prospect of how many countries could really leverage that. Of course, in theory, all countries where the WHO prequalification counts. But at this moment in time, it's too early.

Got it. Okay. Well, I look forward to the COVID updates third quarter. And for chikungunya, let's move on to that program. So you started the pre-submission process second quarter '22 and plan to file in the second half of this year. What are the advantages of the presubmission process and what are gating factors for filing in the second half?

Yes. So the important thing is that, of course, we are here in a non-COVID environment. So it's important that we align with the regulators, how we submit what we submit. So rolling versus non-rolling submission and align with the module lead reviewers at the agency about the format of the data that we have to submit because we want to be as efficient as possible. This is a process that is currently ongoing. It's approaching its end, I would say. So we have gotten not 100% clarity, but a lot of clarity about the way of submission. Data-wise, everything that we could generate in terms of data has been generated. Format-wise, there might be the one or the other thing that we still need to update. And then we will start the submission process as planned.

Got it. And -- can you talk about what you see the potential market is for chikungunya. You've cited $500 million plus in sales by 2032. Can you break that down into buckets with government or military contracts, travel, sales and maybe endemic sales? And how does each one of these contribute to the market size?

It's an excellent question, but very difficult to answer. So let us go a little bit by segment. So first of all, chikungunya is an outbreak disease. It's prevalent in tropical and subtropical regions. And of course, therefore, it is, on the one hand side, a traveler's vaccine, so it's a vaccine that should be given to travelers based on respective recommendations. Second, it is a vaccine that will certainly also be used by the militaries with -- for forward-deployed troops in the respective areas like our Japanese encephalitis vaccine where, for example, the U.S. military is our single largest customer. And the third segment is the, I would say, outbreak preparedness segment, which originally was more seen in the low medium income countries, in the endemic countries, but we see now more and more that we are being approached by, I would say, countries in the northern hemisphere, where you see tropical, subtropical climates where smaller outbreaks have been observed in the past and there will certainly be a stockpiling, public kind of business to be expected, especially now that the awareness around outbreak diseases has gone so much up with very recently monkeypox again. So -- and how to quantify all of that into commercial prospects is very, very difficult. So we guided a couple of years ago towards this $0.5 billion sales figure on the basis of commercial marketing studies that were done for us at the time. This, for example, this number at the time, split roughly in between half of it endemic, meaning primarily LMIC countries, half of it travel, including military, but it did, for example, at the time, not include the stockpiling opportunity in, I would say, developed countries. And this is something that we see clearly as a commercial upside.

Got it. And you recently had an expert event, which went in depth on chikungunya. I think for U.S. investors, they probably don't appreciate, they may not fully understand this chikungunya disease, which I didn't initially, too, but I think that was a great event. Maybe talk about some of the key takeaways from that.

Well, I mean, so first of all, I would like to thank everyone who made this event happen. I would like to thank our KOL who, I think, did a great job in positioning the medical need. So I would say, what are the key takeaways? The key takeaways are that chikungunya is clearly a disease that can cause quite significant health impairments. It is, of course, the mortality rate is low. But as I said, different medical manifestations can lead into very severe health issues. And there are many different clinical manifestations in consequence of an infection with chikungunya. I think this was the #1 key takeaway on the -- from a medical perspective and then, of course, the effectiveness of a vaccination was clearly pointed out, especially for a vaccine like ours, which is a single shot, live-attenuated viral vaccine that targets a protection for minimum 3, if not 5 years. And therefore, the health economical benefit for vaccination against chikungunya was clearly, I would say, confirmed also at the meeting. This, I would say, were the key highlights.

Got it. Very good. And you started an adolescent Phase III in -- study in January 2022 to support eventual label expansion. Can you talk about this study and how important this is to label expansion in the chikungunya market size?

Yes. So the initial -- so all clinical studies that we have conducted thus far aim for the initial approval in the 18-plus age group with no upper age limit. So we had already included elderly in our pivotal Phase III study. And of course, like for all vaccines, you need to agree with the authorities, pediatric investigational plan. You need to make sure that this product will be available to everyone who needs it, and this includes adolescents, it includes children. The -- we have been able to partner with CEPI and Instituto Butantan in Brazil in order to conduct those necessary studies in an endemic area to also allow us to generate data in so-called seropositive populations who had prior infections with chikungunya. And this study is being conducted under IND. So this means it will support, subject to positive data, of course, the label extension gradually, down to probably 5 years -- 3 to 5 years of age.

Got it. Makes sense. And maybe moving on to Lyme disease. You recently reported positive Phase II results from this program, including your first pediatric data and booster response data and selected Phase III dosing schedule. Can you briefly summarize the data, the Phase III design, time line to data and eventually a time line to file for approval?

Of course. So our Lyme vaccine candidate, which is the only one in clinical development worldwide, as I mentioned during the intro, had undergone, in total, 3 Phase II studies. So the vaccine has been in many, many people already. And we have, of course, optimized the immunological response across the 6 different serotypes. It's a multivalent vaccine. So because the 6 serotypes cause more than 98% of the epidemiology in the northern hemisphere. So the objective has always been to optimize the immune response, having a balanced immune response across the 6 different serotypes and to monitor, of course, the safety profile closely in the respective setting. This is extremely important. Then, of course, with our partner, Pfizer, we decided to bring in the pediatric development -- or the pediatric population early because a very significant number of the Lyme cases are being observed in the under 18 year olds. And we wanted to make sure that we have the full target population, meaning 5-plus years of age in the pivotal placebo-controlled field efficacy study. That's why we conducted the most recent Phase II study, which confirmed in a very nice way that the vaccine works very well in the younger population, too. It also showed that in theory, you probably would not need the 3-dose priming for children, but at the same time, the 3-dose priming would allow a similar setting in the field efficacy study. But for later, it might become an interesting commercial upside that you have children already protected after 2 doses. So we saw very high and very comparable immune response without adversely affecting the safety profile, which, of course, was a very important result out of this study. With regards to Phase III, we have guided the markets that we expect to commence Phase III in the third quarter this year. You know that we have given the wheel to Pfizer. They are leading the Phase III activities. We have been leading all the Phase II studies thus far in our joint development setting. And the study will be a placebo-controlled field efficacy study. We haven't disclosed yet the final sample size, but we will do this shortly because we have been in final alignment steps with the agencies until very, very recently. And -- but it will be a multisite, multicenter study with study sites in North America and Europe. And that's an important study that will read out efficacy at, of course, also including efficacy after a first booster because right now, the working hypothesis is that for Lyme, at least for the initial years, one would most likely need an annual booster in order to have a very high immune response necessary to deliver against the mode of action.

Got it. Makes sense. And what is your strategy for getting geographic recommendations for Lyme vaccination? And how much do you think the ultimate market size depends on these recommendations?

Well, first of all, it is something that will be entirely under Pfizer's control and our contract also provides for them to take the necessary steps for a successful commercialization. Our expectation from a Valneva perspective, is that Pfizer will be able to reach a risk-based recommendation, meaning a recommendation for everyone living in an endemic area or potentially going to an endemic area on both sides of the Atlantic.

Got it. And it's an interesting time right now for business development in biotech. How do you think about potentially adding new assets to your portfolio? And how are you thinking about business development this year?

Yes. I very much appreciate this question. I mean, we have proven that we are able to bring products from bench to licensure. This is something only 5% of the biotech companies can say. And we believe in our capabilities. You know that we are technology agnostic. So we have been working, with exception of mRNA, we have always gone by indication and picked the best suitable technology. And of course, we have now very late-stage assets. We have a whole bunch of early-stage preclinical assets, which we haven't positioned and presented yet. But certainly, we have capacity for the injection of earlier stage clinical stage assets. And this is a focus of our BD right now to look whether we find partners willing to work with us on the -- on earlier-stage clinical assets, leveraging our development engine. Of course, the criteria for us need to be met, which means that we want to continue focusing on prophylactic vaccines. We want to be in areas of high unmet medical need, not me-too. And in indications where Valneva in a way, could play a pioneering role as we have been doing so for Lyme, chik and COVID.

Got it. Well, we're pretty much out of time. But Thomas, if you want to just highlight key catalyst ahead investors should be focused on.

Okay. Yes. So let me summarize the key catalysts coming up. So first of all, let me start with Lyme. The Phase III initiation is a super important milestone on the way to bring, hopefully, a very good vaccine solution in the third quarter, submission strategy and submission of the BLA for chikungunya is very critical because we are right now in the pole position to be the first company to get BLA approval for chikungunya, which in turn means that we will be eligible to a priority review voucher, which we could monetize, so which represent a very important short-term commercial upside for this program. And of course, on COVID, it's all about certainty, right? I mean the -- we should expect EC feedback, which will determine the commercial future of this product and its potential revenue contributions to the company, but also importantly, the data points coming up in the third quarter for COVID are probably the most relevant near-term catalysts that I see for Valneva and our investors for this year.

Great. Well, Thomas, thanks so much for joining us today. Great having you.

Pleasure. Thank you.