Valneva SE (VLA) Earnings Call Transcript & Summary

Hello, and welcome to the Valneva analyst call to discuss the strategic partnership with LimmaTech. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand over to Joshua Drumm, VP of Global Investor Relations. Please go ahead.

Thank you, operator. Hello, and thank you for joining us to discuss our strategic partnership with LimmaTech. It's my pleasure to welcome you today. In addition to our press release this morning, you can also find today's analyst presentation on our investor website. I'm joined today by Valneva's CEO, Thomas Lingelbach; our CFO, Peter Buhler; and our Chief Medical Officer, Juan Carlos Jaramillo, who will provide an overview of the Shigella vaccine program and partnership. There will be an analyst Q&A session after the prepared remarks. Before we begin, I'd like to remind listeners that during this presentation, we will be making forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French market authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, August 1, 2024, and Valneva undertakes no obligation to revise or update forward-looking statements, except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation.

Thank you so much, Josh. Good day, everyone. We are very pleased to be able to present to you today that Valneva and LimmaTech entered into a strategic partnership to accelerate the development of the world's most clinically advanced tetravalent Shigella vaccine candidate called S4V under the terminology of LimmaTech. It is certainly a fantastic vaccine development opportunity for a potential first-in-class vaccine for a life-threatening disease. We expect that this pipeline injection into Valneva's future R&D pipeline may provide near-term R&D upside for our investors with a very appealing risk-benefit profile that we're going to explain later during the course of this presentation. This partnership and the injection of this asset into the future pipeline of Valneva aligns perfectly with our vision, with our mission and also with our corporate strategy as presented to you and to all shareholders at Valneva at multiple occasions. When we look at the vision, we are clear on our vision in that we would like to provide vaccine solutions that can make a change to people's life and that can really avoid people suffering from vaccine-preventable diseases. As such, addressing a significant unmet medical need like shigellosis is definitely ticking that box. It is an important public health goal. And again, Juan Carlos will give -- provide more details around this. And it also contributes positively to the rising antimicrobial resistant enteric bacteria topics. When we look at the vision, we have always tried to focus on differentiated assets. And this is a differentiated asset in many respects, including that it may become a first-in-class vaccine solution. It clearly augments our clinical stage pipeline, and it fills a pipeline gap that we had, namely earlier to mid-stage clinical assets with an asset that may give us the opportunity to be in Phase III upon and post hopefully positive Lyme data and approval of our Lyme vaccine [ patents ] with Pfizer. It is also representing a fantastic plug and play opportunity given the future customer segments and consumer segments that we see for that vaccine, namely travel, military, and people living in low-medium income countries. When we look at our corporate strategy, it is certainly providing quite a number of near-term R&D upsides and clear points where you have also go/no-go decisions and where you are increasing consistently the POS of the vaccine candidate. It aligns with our midterm R&D capital allocation strategy and guidance. And as I mentioned, due to the nature of the development plan that Juan Carlos will further explain, we see also quite a substantial level of risk mitigation throughout this program development. With that, let me hand over to Page 4 of the presentation to give you a little bit more background about LimmaTech and also the vaccine candidate S4V. As mentioned in the introduction, we will gain exclusive worldwide rights to this world's most clinically advanced tetravalent Shigella program. LimmaTech is a clinical stage biotech company with decades of experience in vaccine technology and disease-specific vaccine development approaches. It's backed by specialist health care investors, and it expanded a pipeline focused on innovative vaccine candidates against antimicrobial resistant pathogens. Their lead technology, which is based around bioconjugation, which originates from GlycoVaxyn at the time is already in a number of different vaccine candidates, most advanced the E. coli vaccine candidates developed with Pfizer, which got acquired by Sanofi and is now in Phase III. And LimmaTech has a fantastic track record and long-term partnerships with different pharma companies and NGOs. When we look at the vaccine candidate S4V, it's a tetravalent bioconjugate vaccine for the prevention of disease caused by Shigella bacteria, targeting the O-antigens of Shigella flexneri 2a, 3a, 6 and S. sonnei. It was developed following positive proof-of-concept clinical data with a monovalent candidate, which demonstrated promising efficacy in a challenge model. LimmaTech reported recently positive Phase I/II clinical data on S4V, so the tetravalent candidate, including robust immunogenicity against all strains, also indicating and showing a favorable safety and tolerability profile. With that, let me hand over to Juan Carlos to take you through the medical need.

Thank you, Thomas, and hello to all. I will now provide some background information for shigellosis as a critical unmet medical need. Currently, there is no vaccine approved for this debilitating disease. Shigella has a significant global impact as a high morbidity and high mortality disease. It's the second leading cause of fatal diarrhea illnesses, responsible for up to 165 million cases and 600,000 deaths annually, with children in LMIC countries being the most affected. It's highly contagious as it transmits easily through person-to-person contact, contaminated materials, food and water. The symptoms onset and durations appear around 1 or 2 days after exposure, which includes diarrhea, fever, stomach cramps and other symptoms lasting approximately 5 to 7 days. There are long-term consequences that can lead to growth faltering and stunting in children and arthritis in adults. Focusing on public health priorities, there is a strong emphasis on reducing all-cause diarrhea and achieving herd immunity. The importance of developing a vaccine for this purpose is a key public health goal and a priority for WHO. Rising antibiotic resistance in Shigella further highlights the urgent need for vaccine development to combat AMR. Thomas?

No, go on to Slide 7, and then we can go back to Slide 6.

Perfect. So with that, it is my pleasure to present here our risk mitigation strategy and our staggered clinical development plan. This plan ensures that we efficiently allocate capital in alignment with our midterm guidance while systematically reducing risk at each phase of the development. Our anticipated clinical development program consists of 3 Phase II trials and 3 Phase III trials. Phase II clinical trials. The first ones will be led and conducted by LimmaTech, the first one being a human challenge or controlled human infection model that will look at a dose confirmation and efficacy in adults, where we challenge with the S. sonnei strain. The second phase trial, looking into a pediatric population for dose confirmation and immunogenicity. Both of these will start in the second half of 2024 with expected readouts in second half of 2025. The third Phase II trial, which will be led by Valneva, a second human challenge trial in adults where we also look at dose confirmation and efficacy against a different strain, the S. flexneri 2a. Now let's focus on the non -- on the Phase III clinical trials, which will be led by Valneva. We are going to be conducting a Phase III efficacy trial in adults, again, using a human challenge or CHIM in adults. This trial will be initiating starting in 2027, and we are expecting to have an efficacy and safety data readout in the second half of 2029. We then will also in parallel run a field efficacy trial in pediatric population and 1 additional pivotal trial where we look at safety, immunogenicity and a lot-to-lot consistency study. The primary readouts of the Phase III programs are expected by second half of 2029, followed by a potential first regulatory approvals in the latter part of 2030. The clinical plan allows us to focus on the right access and recommendations for both travelers and endemic regions. Throughout this development plan, we have multiple catalysts and decision points that will allow us to make informed adjustments and ensure that we stay on track to meet our objectives. By adopting this risk-mitigated clinical strategy, we're not only optimizing our resource allocation, but also enhancing the likelihood of our success and the specific trial outcomes. Thomas?

Thank you so much, JC. Yes, let's go back to Page 6 of the presentation and talk a little bit about how we see the market, how we see the commercial opportunity. So first of all, we believe that the global market for a potential Shigella vaccine is definitely north of $0.5 billion. And what is really important from a commercialization perspective is that this program would really commit us to providing equitable access to novel vaccines across the globe, given that we have a strong LMIC component as well as a high-income component with travelers and military. The 4-valent Shigella bioconjugate vaccine is expected to prevent shigellosis caused by the vaccine strains and shigellosis defined as severe or moderate diarrhea. And so it is basically not preventing infection, but preventing disease. We expect a standard formulation with 2 to 8 degrees in shelf life north of 2 years. IM injection, 1 or 2 doses, depending on the target population and depending also on the outcome of ongoing and future clinical studies. We have then the 2 target populations in key market segments. On the one hand side, travelers traveling to endemic areas, very similar and highly complementary to our existing travel vaccine portfolio, which consists out of cholera, stroke, ETEC, Japanese encephalitis and chikungunya. Here, we see the regulatory path based on CHIM results. And CHIM, in this case, really human challenge against 2 of the 4 serotypes with immuno-bridging in between the first 2 and the other 2. And we clearly see the opportunity for FDA and EMA accelerated approval pathway, initially 18-plus years at launch and later on, down to 1 year of age. From an LMIC perspective, the most vulnerable population, as Juan Carlos just alluded to, are children below 5 years of age living in endemic areas. We expect here to collaborate as we are doing and we continue to do for our other vaccines and vaccine candidates with global health partners to make sure that products are available to nonprofit and public sector purchases as well. And we consider really the applicability for private LMIC markets, either directly or by our partners. And clearly, this routes from a regulatory perspective, targets the WHO prequalification. So in essence, we see a very attractive market opportunity, but also here the possibility to really support our key strategic objectives around ESG, namely to commit to providing equitable access to novel vaccines to everyone. With that, let me turn over to the key terms of the partnership. So I mentioned already a couple of times, we received a global exclusive license to develop, manufacture and commercialize. The parties will collaborate. There is a tremendous know-how on the LimmaTech side. LimmaTech will receive an upfront payment. They will receive subject to development, regulatory and sales successes, different additional milestone payments, then later on, upon successful commercialization, low double-digit royalties on net sales in travel and additional payments and single-digit royalties based on commercialization in LMICs. As I said already, there will be, of course, throughout the entire program, a good collaboration in between the parties. We're going to leverage the decades of know-how that also LimmaTech generated, especially around the bioconjugation technology. And as Juan Carlos presented, we have agreed a little bit who is in charge of which study and who is going to execute the study and pay for it. So LimmaTech to conduct the first Phase II challenge as well as the pediatric immunogenicity study in LMICs. And then we will take the second human challenge study and all further studies. There will also be a tech transfer done by LimmaTech to Valneva, and we expect the transfer of the IND once all Phase II studies are fully enrolled. This will provide us the most efficient and fastest development route. So now looking and wrapping up in the product context, Page 9. Our commercial and R&D portfolio with our 3 commercial products, IXIARO, the first vaccine that the company in its history developed from bench to market, very nicely established in the field; DUKORAL, an extremely well-used and established vaccine that is in the market for many, many years; and our new and the world's first and only approved chikungunya vaccine that by now got approval in the United States, Europe and Canada. And there is still a typo in the presentation because it says review ongoing in Europe. But as you noticed, we got in the meantime, our approval in Europe through the MAA. So when you then look at the pipeline itself, the picture, including the new Shigella program looks quite comprehensive, but also quite coherent. Lyme is progressing very, very nicely. You know that the total enrollment of the primary vaccination has been completed. The vaccinations have been completed. The essential part of the first booster has been completed, and we are working towards an endpoint readout for the primary endpoint towards the end of next year. So this program that will hopefully be successful in terms of licensure will then, from a Phase III perspective, be replaced by the Shigella program in 2027 with all the different staggered development steps and it's different go/no-go milestones and derisking milestones that Juan Carlos presented. You know that Zika is currently our early clinical stage asset, and we are putting a lot of emphasis and focus into also organically building clinical stage assets with our 2 main focus areas in preclinical right now, namely EBV and different enteric diseases, which could also very nicely complement than DUKORAL on the one hand side and Shigella on the other hand. With that, let me conclude to say that we are really excited that we have been able to enter into this partnership with LimmaTech. It has been one of our strategic objectives to augment our pipeline with something that fits, with something that fulfills our key criteria when it comes to unmet medical needs, high degree of differentiation and the opportunity and possibility to have a plug and play within our existing commercial and industrial footprint. As such, we see this as a wonderful opportunity, and we are looking forward to working together with LimmaTech on this exciting program. With that, I would like to hand back to the operator to take your questions.

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

This is James on for Maury. Congrats on the update. So we have 2 questions. First one, what's the best vaccine proxy for shigellosis in terms of market opportunity for travelers and military personnel? How should we be thinking about the opportunity relative to IXIARO? And last part of that is, how will the royalty be paid to Lima for potential military contracts if you receive them?

So let me start with this first part. So first of all, we are not yet entirely clear about the split in between LMIC and travelers segment. We see the overall opportunity a little bit north of chikungunya just to provide a little bit of analogy, given the level of or the split and the relationship in between mortality and morbidity, and also the total target population, be it people traveling to areas where you have a high risk, but also people living in the area. Now we have done quite a substantial amount of work ourselves, but we will continue working on further detailing the market as we are going along and have a better view on the fine-tuning of the target product profile because some of it, we will only learn through development. And as we are going through that, we will be able to further specify also the opportunity in between the 2 segments. But in terms of analogy, I would say, at the level of Chikungunya or slightly north of it.

And just one more quick follow-up. Were there any signs of [Technical Difficulty]

Apologies Maury, we lost you on the call there. [Operator Instructions] We have another question, while we're waiting, from Rajan Sharma at Goldman Sachs.

Just kind of following up a little bit on the potential market size here. So do you have a sense of what the key regions or countries are for -- in terms of endemic. So what are the key kind of endemic areas? And then on that topic, do you have a sense of what annual traveler numbers are to those regions, particularly from the U.S. and Europe? And then just I noticed only slide, you said that you'd be 1 or 2 doses depending on the target population. Can you just provide some more color on that? What patient or target population may require 2 doses versus 1? And then just one on the financials. Maybe, Peter, if you could just kind of comment on current cash runway and whether there's any impact to your projections on profitability from this deal?

Okay. So quite a number of questions. So first of all, we are addressing here a diarrheal disease with Shigella. And basically, you have all countries where you have risk around -- or increased risk around diarrhea cost by primarily food and water or other contaminated materials. As such, you have the vast majority of the LMIC countries in Asia, South America. And therefore, you are with regards to the number of travelers, this is why we made reference to also our existing travel vaccines. You're probably somewhere in between the number of travelers that we are seeing in Chikungunya and Japanese encephalitis. And that's certainly a piece that is of very, very importance. As I said, we are -- there are country-by-country specific risk considerations. And it depends heavily as we all know, on the -- when it comes to vaccinations on risk benefit. So therefore, my comment earlier that the final target product profile that will be fine-tuned as we go along with the development will also help us to further identify exactly where and which countries are more or less important for travel vaccination. From a U.S. military, I'm absolutely convinced that this will be a very important vaccine for DoD and other militaries across the globe, given -- also, again, analogy to JE, but also Chikungunya. The number of troops that are deployed to areas where you have certainly high diarrheal risk situation. To your question around the 1 dose versus 2 doses, you have seen what the database at this point really is. There has been a first human challenge in an adult population. There has been a Phase I/II study in children. And now the -- we have also explained that the final dose confirmation is still the objective for the Phase II studies to come. And one may think about a certain dose, a certain schedule in children versus adults, but this is something that is not confirmed yet at this point and cannot be confirmed at this point of development. But I would say probably different doses, different schedule in between children and adults may be likely. And cash?

So yes, Rajan on your question on cash runway and profitability. You will certainly remember that at the end of March, we reported EUR 176 million of cash, which we consider as a very strong cash position. As you know also, we did say in the past that our spending profile in the second part of 2024 will be more favorable because we're done paying for our contribution on the Lyme Phase III trial. And when you look at the design of the Shigella program that we explained in the presentation, you see that actually the majority of our spending on the program will be for Phase III, of course, and that will actually occur post-Lyme approval. And at which point we have communicated in the past, we expect to be sustainable and profitable, and that does not change with this program.

Please stand by for the next question. We have, I believe, you said James from Jefferies, is back.

This is James again on for Maury. So just to go on that. Were there any -- our second question, were there any signs of vaccine efficacy in the 472 infants in the full data that you saw? Are these antibodies neutralizing? And I think you had also just mentioned there was also an adult study that was done as well. Can you talk about that?

So basically, the -- there was -- as I mentioned at the beginning of the presentation. So first of all, the Phase I/II study was an immunogenicity study. So no efficacy end point in children. But clearly, what LimmaTech saw and reported was a very good and strong immunological profile. So immunogenicity against all 4 serotypes which is looking quite promising. The -- when I talked earlier about the initial signs of efficacy, there is in the presentation a reference to the initial monovalent, so this wasn't the tetravalent. This was the monovalent version of the vaccine. And there was -- in the monovalent, there was an efficacy shown in a challenge -- in a human challenge model and also reported and published by LimmaTech.

Please stand by for the next question. Next question comes from Samir Devani of Rx Securities.

Congrats on the deal, it looks strategically very sensible. I just wanted to come back to the Phase I/II 472 data that's referenced in the press release. Has that data being published, Thomas, because I can't seem to find it anywhere. And I think it's been fully completed now. So I guess that's the first question.

So I mean, of course, we have seen the final report as part of the diligence process. But I'm not sure that the final data has been published yet. But I would check the actual status, Samir and get back to you.

Okay. And then maybe if you've seen it, can you just comment -- my understanding is that the key, I guess, risk going forward is maybe not the immunogenicity, is maybe more to do with the tolerability. And maybe you can -- maybe comment on what you saw in terms of the tolerability of the vaccine in that study.

Yes. So I think we -- the LimmaTech basically reported with regards to the safety and tolerability that they saw, and I quote, "A favorable safety and tolerability profile." I would say based on everything that we have seen, I would concur with this statement. And -- but of course, the coming studies will need to solidify that. And -- but we are, based on what we have seen, quite optimistic with regards to the safety and tolerability profile.

That's great. And then my final question, just on competition. I appreciate this is the most advanced tetravalent, but there are a couple of other vaccines in development, I think a bivalent is in Phase III in China and an Austrian company has got ShigETEC in Phase II. I'm wondering whether you reviewed data from those 2 products? Or was there any reason that you decided to go with the tetravalent as opposed to perhaps partnering 1 of those other 2?

Yes. Excellent question, Samir. So first of all, we -- I mean you know that Valneva takes -- and has always taken a technology-agnostic approach. We always start with the indication in the disease. So we identified Shigella as a target already quite a while ago because of all the strategic fit that you have mentioned also in your note. And because we believe it is really an area of significant unmet medical need with the potential to see also an increasing need in the context of AMR. And so the -- what we have seen though is that the 4-valent approach has really a significant advantage when it comes to the predicted evolution of the [ epidemiology ] in the years to come, because we need to project ourselves literally many years ahead. And in this enteric disease field, there has been quite a substantial evolution already. And this is why we felt that providing the broadest coverage could be a clear differentiation factor and could clearly be advantageous. Now there is a reason why we are challenging, especially or why the development plan is foreseeing a challenge against only 2 again of the 4, which has exactly to do also with the background you just mentioned. And so therefore, that's basically the background to our decision to go for this approach and this program. And on top of that, we have been really very positively impressed by the bioconjugation technology and by the way the LimmaTech colleagues have really developed not only the technology over many years, but also the specific program up to here.

That's great. Maybe, sorry, if I can just sneak in one more. Just in terms of -- you mentioned potential for accelerated development. But I'm trying to sort of marry that with the fact that you're clearly going to need quite a long field -- a long and large field study in Phase III. So perhaps you can just talk to us a little bit about what you -- I know, it's difficult to sort of work out your trial size at this point, but how much are you sort of allocating for Phase III development cost-wise?

Yes. So there are a couple of points. It's again a very, very good question. So why are we referring to accelerate it? There is a Shigella paper from the FDA that basically opens the route for accelerated approval based on a controlled human infection model. So this means that the -- that based on the current position paper from FDA, there is an anticipated route to licensure in the -- and I'm not talking LMIC now, outside of the LMIC environment through a route excluding placebo-controlled field efficacy. And this could be seen then in combination, but not as a condition precedent for licensure with a placebo-controlled field efficacy study in children. And because one, is primarily targeting the adult population. The other one is addressing the -- mainly the below 5 years of age. And that's the reason why we are referencing the acceleration. The placebo-controlled field efficacy. There is a clear opportunity here when it comes to a substantial funding support. You know that Shigella is one of the top 5 on the priority list of WHO. And LimmaTech has already worked quite substantially with global health partners, and we will work with global health partners going forward. And we believe that there is a substantial opportunity for funding through those global health partners when it comes to the specific routes to licensure in LMIC.

We have one question remaining. [Operator Instructions] And your final question comes from Evan Wang at Guggenheim Securities.

Great to see the deal. Just had a follow-up on some of the competitive dynamics here. I believe there's a Glaxo program in Phase II development. Can you comment on, I guess, what you think profile will look like versus their program in development? Second, in terms of establishing potential correlate here in Shigella, is that something you hope to achieve the with the field efficacy here? I'm just wondering how to maybe expand this to the military and other travelers population beyond pediatrics? And then third, can you comment on some of the -- on the process here? Was this a competitive process? Or are there other [ bidders? ] Appreciate it.

So I'll start with the last part of your question, no, we are not able to comment on that one. On the other 2, of course -- so basically, as I mentioned earlier, there is a very nice position paper by the FDA, where Shigella -- a potential route to licensure for Shigella vaccine is described. One of the lead authors is the Head of CBER. And so here, it is clearly the combination of the human infection model, which is really a human challenge with the relevant bacteria and bacterial strain. And the other one is really the immunogenicity data, not an immunological surrogate per se. Just to clarify that, whether in the field efficacy study, you will be able to determine an immunological threshold or not. It's something that no one can predict at this point in time. But we don't consider this as a necessity for licensure. And I think that's maybe an important background information. When it comes to the competitive landscape, I mean, Samir mentioned already earlier, there are quite a number of Shigella activities out there, not surprising because, as we said, Shigella represents a very significant unmet medical need. We also said that the -- when you look at both mortality as well as mobility, there's absolutely a vaccine need, especially if you add also the AMR component to it. I think, I will refer to the publicly disclosed information. To our knowledge, GSK is -- has their Shigella activities in their special vehicle in their special not-for-profit vehicle. And as such, our key hypothesis at this point in time is that they're developing their development targets, LMIC. So -- but I would then refer to GSK in case you have their -- further questions.

There are no further questions, so back to you for closing remarks.

Yes. Thank you so much for your excellent questions today. It's been a pleasure to present this case to you. I hope you can share and appreciate our level of excitement. And with that, I wish you a good remainder of the day. All the best.

That concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.