Valneva SE (VLA) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Valneva presents its half year 2024 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 your first speaker today, Joshua Drumm, VP Global Investor Relations. Please go ahead.

Thank you, operator. Hello and thank you for joining us to discuss Valneva's first half 2024 results and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the 6 months ended June 30, 2024, which were published earlier today, available within the Financial Reports section on our Investor website. I'm joined today by Valneva's CEO Thomas Lingelbach; and our CFO Peter Buhler, who will provide an overview and update on our business as well as our key financial results for the first half. There will be an analyst Q&A session at the conclusion of 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 the 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 13, 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, Josh. Good day, everyone. It's a pleasure to present to you, together with my colleagues, the great achievements that we have been able to deliver on in the first half this year, most notably in R&D and strategic development. Peter will develop the financials more in detail, but product sales of EUR 68.3 million included first recognized sales for IXCHIQ and we're overall in line with our anticipated supply and sales phasing. And hence we have reiterated our set of full year financial guidances. The successful sale of our priority review voucher and the deferral of our loan reimbursement in the first quarter allowed us to maintain a solid cash position and now that we completed [Technical Difficulty] for the Lyme disease program, we anticipate a significantly lower cash burn towards the latter part of the year. We achieved major things in R&D, as I mentioned at the beginning and the first one, of course, the new Shigella vaccine. Most recently, we entered into a strategic partnership to accelerate the development of the world's most advanced tetravalent Shigella vaccine. Additional IXCHIQ approvals in Canada and Europe were obtained even slightly ahead of them planning which allows us to launch in first markets in the last quarter of this year and we have pending approvals in the U.K. and Brazil. We are very grateful that we have been able to extend our partnership with CEPI, who awarded us a new more than EUR 40 million grant to support product access, post-marketing and label extension trials for IXCHIQ. We reported positive Phase III IXCHIQ data in adolescents, which will all be used to support our label extension submissions in the second half of this year. We also published 2 year antibody persistence data in Lancet, which are also expected to support further label extensions. And as you know, this study is going on for roughly 5 years. We completed the enrollment in Phase II study of IXCHIQ in children 1 to 11 years of age. Completed the primary vaccination in our Phase III VALOR study for Lyme disease. And hence, we are fully on track for the first readout at the end of 2025. And as you know and as reported already at the last quarter, we initiated the Phase I for our second-generation Zika vaccine candidate with data expected in the first half of this year. Let me draw your attention to Page #6 of the presentation, which is a recap of Valneva's strategy. You know that our aim is to become a globally recognized vaccine company, in line with our vision contributing to a world where no one dies or suffers from a vaccine-preventable disease. Our strategy is based on 3 pillars. On the one hand side, Driving Commercial Growth. Here, we see clearly IXCHIQ and the possibility to unlock the IXCHIQ value by building awareness and market. Capitalizing on the bundling effect with existing travel pass business and expanding globally, reaching more LMIC territories via strategic partnerships. And this commercial business is expected to become cash flow positive from 2025 onwards. The second pillar is our R&D. And here, we would really like to capture R&D upside and provide upside to our investors by leveraging our proven R&D engine and existing strategic partnerships. We continue to focus on vaccines that can make a difference, as you know, technology-agnostic, striving for first only of best-in-class solutions and execute efficiently to general meaningful clinical catalysts. The new example, Shigella is a vaccine where we expect Phase III to enter once Lyme hopefully will be successful. The third pillar is really the maximization of our integrated biotech model. You know we are one of the very few pure play vaccine companies that have a fully integrated model from research to sales and we build on continuing value from R&D and commercial execution. Of course, we support the timely Lyme approvals. And on the back of that, we may achieve sustained profitability with potential VLA15 commercial revenues from our partner, Pfizer. When you look at our pipeline, you see that the introduction of the Shigella program through the strategic alliance with LimmaTech has helped us really to build a very coherent pipeline with strong and advanced clinical candidates. Of course, with Lyme as the #1 in our pipeline and clearly the most attractive value player, then chikungunya with ongoing clinical activity, speed Phase III, speed Phase II pediatric, speed Phase III adolescent and also Phase IV with Shigella, which I'm going to develop more in detail, but with a first Phase II CHIM study, Controlled Human Infection Model and pediatric studies to begin in the second half of this year. And then with Zika, which could be a very nice plug-and-play within our existing travel vaccine portfolio. And as reported in the past, our key focus areas in preclinical are circled around EBV and various enteric disease programs. When we look at IXCHIQ, the world's first and only chikungunya vaccine licensed today, we have really a very unique product here. We expect to benefit by being first to market and we believe we have a differentiated and competitive product characterized by very strong and durable immunological response following a single injection. And very importantly, we have shown that there is no difference in immunogenicity between younger and older adults. The vaccine has been generally well tolerated amongst the more than 3,500 adults and more than 700 adolescents evaluated for safety thus far. When we look at the U.S. launch success and where we are right now, we made some recent achievements. We launched the unbranded traveler campaign to build consumer awareness, the DHA, IHD adopted the CDC recommendations and published the chikungunya virus and vaccine guidances and we are continuously growing our customer base, distributors and customers reordering IXCHIQ already. What's coming up? Of course, this is a quite challenging endeavor because we are talking about a brand new disease, brand new vaccine. So we are investing significantly in building awareness, building recommendations, building adoption. And as next steps, we see really the publication of this chikungunya vaccine recommendations in MMWR, which is still pending, continue working with CDC to raise awareness of global threats, including recent significant cases in Brazil and the ACIP is expected to discuss guidelines for endemic island regions, i.e., Puerto Rico and the review is planned for October this year with a vote in February of 2025. And when we look at the territory expansion, you see already on Slide 11 that we have many boxes ticked. U.S. done, of course, label extension for adolescents, pediatric, but also antibody persistence is coming up. Canada, we got the approval. Also there, label extensions will follow. In Europe, everything so far achieved according to plan, slightly ahead of plan. As I said, MHRA approval still outstanding for the U.K. and then also here as next steps post licensure label extension submissions. We have the Brazilian licensure process ongoing and we are targeting additional markets with established travelers markets, but also additional LMIC territories, including on the basis of WHO prequalification. When we look at the ongoing clinical activities, which, as I mentioned at the beginning are supported by the new more than $40 million CEPI grant, we have the post-marketing effectiveness study, Phase IV, which are in reality 2 studies, one observational effectiveness study in participants greater than 12 years of age in Brazil and so-called pragmatic randomized controlled effectiveness and safety study in adults in an endemic country with roughly 20,000 people. The label extensions I mentioned already, we completed the Phase III successfully for adolescents and the Phase II for children 1 to 11 years of age is already fully enrolled. The ongoing antibody persistence and long-term safety study in adults is a very important study because it will further substantiate our hypothesis that this vaccine after a single shot will protect at least for 5 years. And then we have the -- another study that we have been working on in potentially immunocompromised adults. When we look at Lyme, as I said, we consider Lyme the single largest value driver in Valneva. It's the only Lyme disease program in advanced clinical development today. You have heard it many, many times, but it's a multivalent recombinant protein-based vaccine covering the 6 most prevalent serotypes of Lyme neuroborreliosis in the Northern Hemisphere. It's based on an established mode of action out to surface protein A and antibodies able to basically kill the spherocytes of the tick. And the single largest achievement in the first half of this year has been the completion of the primary vaccination enrollment, great achievement by the joint teams at Pfizer and Valneva. You remember that we have estimated the market to be above EUR 1 billion in sales. And as you also know, Valneva will be eligible for upfront and milestone payments up to more than $400 million, of which we received thus far, $165 million. There is a tiered royalty model in place subject to sales levels with -- in between 14% and 22%. There are a couple of key important milestones coming up. We completed our cost contribution to the Lyme program in the first half of this year, as I mentioned during my introduction and we expect the 2-year antibody persistence and booster results in the third quarter this year. This is just by way of reminder, this is immunogenicity data post-second booster. So it will give us an indication about the necessity for annual boostering. And of course, with all of that, we are on track for the Phase III readout at the end of 2025 with regulatory filings expected in 2026. Page #15 shows again the overall -- the study design of the Phase III efficacy study, which is a placebo-controlled randomized study, one-to-one randomized against placebo, 2-to-one North America versus the European side. And the primary endpoint is the rate of concerned Lyme disease cases after 2 consecutive tick seasons meaning primary immunization plus first booster with a secondary endpoint including the efficacy after the first Lyme season, meaning after the completion of the primary series. So overall, we are very excited about the progress around Lyme and we are very grateful to our partner, Pfizer, that we will be able to manage the study according to our guidance and plan. When we look at Shigella, as I mentioned during my introduction, it is a wonderful opportunity that we have generated here through the strategic partnership with LimmaTech. The product candidate is called S4V and it is really a unique opportunity to develop a first-in-class vaccine for a life-threatening disease. It is the most advanced tetravalent Shigella program in the world. It's based on the so-called bioconjugation technology and has the potential to cover up to 85% of the Shigella infections. The license that we have entered into as part of our strategic partnership with LimmaTech is a global one. And the vaccine candidate is, as I said, 4 valent covering the most pathogenic Shigella bacteria serotypes. LimmaTech already reported positive Phase I/II clinical data, including robust immunogenicity and favorable safety and tolerability data. We estimate the market opportunity for Shigella vaccine to exceed $0.5 billion annually. And it's a wonderful plug-and-play because we are seeing here a very similar commercial footprint, namely travelers and military from high-income countries, but LMICs as well and here specifically children living in endemic countries. It is the second leading cause of fatal diarrheal disease, up to estimated more than 150 million cases and more than 600,000 deaths are attributed annually to Shigella. And therefore, it has been identified as a priority vaccine by WHO. In terms of upcoming milestones, I mentioned at the very beginning of this call, we will soon start the Phase II -- the first Phase II CHIM study. CHIM means Controlled Human Infection Model. So it's a human challenge study in the U.S. in adults and a Phase II pediatric study in LMIC. Both will be led and conducted by LimmaTech before then Valneva will take over further activities. We will start already working on a couple of things immediately, like CMC and regulatory activities. And of course, given the exclusive global license nature, we will be responsible for worldwide commercialization if approved. The Page #18 shows the overall key terms of the strategic partnership with LimmaTech. And here, you see basically how the partnership works. So LimmaTech receives an upfront payment, is eligible for future milestone and royalty payments. The upfront payment is EUR 10 million. And all the further development, regulatory and sales-based milestones will go up to EUR 40 million. There's a low-double-digit royalty on net sales in the travel segment and additional payments and single-digit royalties based on commercialization in LIMCs. As I mentioned, it's a true partnership. So we collaborate through the Phase II. LimmaTech conducts the first Phase II human challenge study, which is a challenge with sonnei, serotype and the pediatric immunogenicity study. Then Valneva will take the lead and initiate a second Phase II CHIM study against the second serotype, namely flexneri 2a. And of course, LimmaTech and Valneva have already started working on tech transfer and the IND will be transferred to Valneva once all Phase II studies are fully enrolled. And then Valneva will lead and manage all future development activities. So overall, we are really excited about this fantastic opportunity. You may recall that augmenting our R&D pipeline has always been one of our strategic objectives. And therefore, we are thrilled that we found an opportunity for a potential first-in-class vaccine for a life-threatening disease, so fully in line with our mission and vision. So when we talk a little bit about Zika, you know that we started a Phase I study with our so-called optimized second-generation vaccine candidate, VLA1601. It should, in reality, call it VLA1601.2 because it's the second generation adjuvanted inactivated whole-virus. We are leveraging here the platform that we originally developed for IXIARO, then further optimized for our COVID vaccine VLA2001 and upscale. So we use a like-for-like technological approach here. And as you know, the Zika virus is coming back. It's reemerging. And it's another mosquito-transmitted disease with devastating clinical effects. And there are no vaccines or specific treatments available. It's also worth noting that Zika is PRV-eligible. And many different organizations are currently discussing potential funding mechanisms around Zika. In terms of upcoming milestones, of course, we are currently executing the Phase I study and subject to data, we will then consider the future development strategy in the first half of next year. With this remarkable progress on our R&D and strategic development front, we come to the financials. And it's a pleasure to hand over to Peter.

Thank you, Thomas, and good morning and good afternoon to all of you. Product sales for the first half year reached EUR 68.3 million and on a comparable basis grew 7% over prior year. Including last year's sales of the COVID-19 vaccine, sales declined by minus 2%. The impact of currency fluctuations is neglectable. Total IXIARO sales reached EUR 41.9 million and increased by 38% over the prior year. The strong year-over-year growth was primarily driven by sales to U.S. military that were low in the first half of 2023. IXIARO sales into the travel market also delivered growth over the first half year despite supply constraints experienced during the first quarter. IXIARO supply constraints were fully resolved in the second quarter. DUKORAL sales declined year-over-year by minus 13% and reached EUR 14.9 million in the first half of 2024. The decrease is mainly related to reduced marketing investments as our new manufacturing site in Sweden underwent regulatory evaluation and approval. In terms of our ongoing launch of our new chikungunya vaccine IXCHIQ, report sales of EUR 1 million by June 30 in the United States. As a reminder, the ACIP recommendation for IXCHIQ was adopted by the CDC in March of this year. In line with our expectations, third-party products declined by minus 37% year-over-year to reach EUR 10.5 million as a result of supply constraints. Moving on to the income statement. Total revenues reached EUR 70.8 million versus EUR 73.7 million in the first half year of 2023. The decrease of 4% is driven by, as already mentioned, last year's revenue related to COVID-19 vaccine and lower revenues recognized from R&D collaborations as well as our prior year revenues related to the divestiture of our clinical trial material manufacturing site in Sweden. Looking at expenses, we observed a significant decrease in cost of goods and services from EUR 53.8 million in the first half of 2023 to EUR 45.6 million in the current first half year. IXIARO gross margin reached 57.5% of IXIARO product sales compared to 40.2% in the first half of 2023. In the prior year, the IXIARO gross margin was adversely impacted by batch write-offs. DUKORAL generated a gross margin of 34.8%, while third-party products yielded a gross margin below 30%. The total gross margin, excluding IXCHIQ, grew to 47.7% from 40% in the first half year of 2023. However, the total gross margin is also adversely affected by IXCHIQ-related overhead costs as well as idle costs related to our new manufacturing sites. In the second half of the year, we expect further gross margin improvements as supply shortages have been resolved. Research and development expenses increased from EUR 26 million in the first half of 2023 to EUR 29.7 million in the first half of fiscal year 2023. That increase mainly related to tech transfer costs for the transfer of our IXIARO and IXCHIQ manufacturing operations to our new Almeida site in Scotland as well as higher R&D spend for IXCHIQ as we continue to execute ongoing studies. Marketing and distribution expense increased by approximately 15% to reach EUR 23.2 million. The increase is related to increased launch costs related to our IXCHIQ vaccine that also include higher people costs as we expanded our commercial team. G&A expense were reported at EUR 22.8 million and remained stable year-over-year. The sale of the PRV generated net other income of EUR 90.8 million, which contributed to an operating profit of EUR 46.7 million versus an operating loss of negative EUR 35 million in the prior year. Adjusted EBITDA improved from minus EUR 28 million to positive EBITDA of EUR 56 million. Now moving to Slide 25. As discussed during our full year 2023 earnings release, we expect revenues to double by the time Lyme is launched. The main driver of this anticipated sales growth is, of course, the addition of sales derived from our IXCHIQ vaccine, but also expected continuous growth of IXIARO. Next slide, please. We confirm our guidance for fiscal year 2024 with product sales of EUR 160 million to EUR 180 million, other income of EUR 100 million to EUR 110 million and R&D expense of EUR 60 million to EUR 75 million. It is to be noted that the addition of the Shigella program does not change our R&D expense guidance for the year. As we completed our contribution to the budgeted Lyme Phase III trial, we expect a significantly lower cash burn in the second part of the year. We also confirm our midterm guidance, including double-digit CAGR growth of IXIARO over the next 3 years and IXCHIQ sales exceeding EUR 100 million in year 3 of launch. With that, I hand the call back to Thomas.

Thank you so much, Peter. Yes, let me conclude our presentation with Slide 28. I mentioned all the key news flow items during my update on the individual programs and activities, but this is the summary of what we have still to expect. On chick, the upcoming potential approvals in Brazil and the U.K. The submission for label extensions related to adolescents, antibody persistence data and the initiation of the Phase IV clinical activities. Lyme. Of course, a very important data set in the third quarter with the Phase II 2-year antibody persistence and booster results. Then, of course, we hope that we will be on time to complete also all booster vaccinations ahead of the tick season 2025. And then the primary data readout at the end of 2025. It says here, study completion, it's not study completion because, of course, study continues for a longer time. But this is the primary endpoint readout and secondary endpoint read out. Then the additional news flow around the Department of Defense, we expect a new supply contract for IXIARO in the last quarter this year. And now with the newly augmented program, the initiation of the Phase II studies, both the first CHIM study as well as the pediatric immunogenicity study in LMIC. And then looking a little bit into the earlier part of next year, the Phase I data for our second-generation Zika vaccine. This concludes the presentation and I would like to hand back to the operator to take your questions.

[Operator Instructions] And the first question comes from the line of Suzanne van Voorthuizen from Van Lanschot Kempen.

Maybe to start off on the IXCHIQ launch. Now with many approvals in the bucket in your first full quarter of sales in, can you walk us through which markets IXCHIQ is available today to the end customer? And can you expand on which territories you expect to be the most important contributors to sales in the future? And yes, providing the [ pos ] to your guidance of over EUR 100 million within 3 years. And then I have a follow-up.

Good. Okay, Suzanne. Let me start off by the -- so basically, right now the vaccine is only available in the United States. We got the approvals in Canada and Europe, as you know, slightly ahead of our own expectation. You may recall that we originally said we would launch ex-U.S. at the very beginning of 2025. We hope that we are now in a position to launch in selected European countries and Canada already in the fourth quarter. So all the preparatory activities are ongoing. You know that there's a lot to be done post-approval, country-specific. And this is currently in the make. So to manage expectations, we expect, of course, sales to be very moderate in the ex-U.S. countries in the fourth quarter because it will be a launch in the fourth quarter. We have not yet finally decided where we are going to launch first in Europe. But this is currently under evaluation. And there are, of course, the typical key travel vaccination countries in Europe. And there are also countries in Europe which have a higher base awareness around chikungunya than others. All of that is currently under consideration. And hopefully, we will be able to communicate around that very soon. When we talk about the sales expectation, we are still very confident about the overall market size and the growth projection that we gave, the midterm growth projection that we gave for IXCHIQ. It is a bit too early to say how it's really going to play out. You may recall, we discussed in the past, all travel vaccines in the past have shown an S curve at the beginning. And so we have to see at which point it's really -- we're really going to see the speed increase. As I mentioned during the presentation, we have still a couple of things outstanding in the United States, MMWR being one, for example, very critical in order to facilitate the IXCHIQ growth from a U.S. perspective. And then, of course, all the respective recommendations for the ex-U.S. countries and then the introduction in the LMS.

Got it. That's very helpful. And then my second question online. I wanted to follow up regarding the Phase II 2-year antibody persistence data that is expected in the next quarter or in this quarter, actually. Can you clarify what data sets we're expecting here? This is a second booster compared to no second booster? Or yes, can you remind us what you expect basically?

Basically, it's the same as we reported after the first booster. So basically you have the vaccination schedule 026. Then you have 1 year later, we measured the immunological response pre- and post-booster. And you may recall that after the first booster, we saw a very, very significant anamnestic response, so the immunological response post the first booster was by a substantial factor higher than the immunogenicity after priming. Now we're going to look at the same situation 1 year later, so which means month 30, which is the second booster, so the immunogenicity data pre-booster and then month 31, the immunogenicity data post the second booster. And here, we will see how the immunological responses look like. We haven't seen the data yet, so it's hard to tell. But as you know, our current working hypothesis is that the Lyme vaccine will require an annual booster shot. And of course, this immunogenicity data will give you a very good hint around this.

And then allow me to squeeze in one more online. Can you remind us on the Phase II data and the Phase III setup, how you expect the immunogenicity to translate into the primary endpoint of presenting cases? And appreciating efficacy rates vary across different types of diseases that are presented by vaccines, what efficacy percentage do you think is good for marketing of Lyme vaccine?

These are 2 very complex and very challenging questions. So let me start with the first one. I mean, unfortunately, there is nothing like an immunologic it correlates at this point in time. So -- but as we reported in the past, we see the immunological results definitely in line with what prior vaccines have shown also there is no direct comparability possible because of different assays, different vaccine constructs, but we feel confident also based on all the published animal data that our immune responses are definitely in line with or even better than what has been shown in the past. I think the other part on the prevention of the disease, we have discussed this a couple of times. We are in the efficacy study. We are measuring Lyme disease cases. Hence, we are measuring against the clinical endpoint. So rates of confirmed Lyme cases in the vaccine group as compared to the placebo group. I mean, what is good, what is the bad efficacy result. I would say any result that would give a strong recommendation, I would consider a success. Don't push me for a percentage number. I'm not allowed to say so.

And the next question comes from the line of Evan Wang from Guggenheim Securities.

Two from me. First on IXCHIQ. Could you provide an update on some of the launch metrics in the U.S.? Just any additional commentary you can provide on the degree of how access and reimbursement progress is going, what we're seeing in terms of some of the initial restocking and active accounts you have? And then on Shigella, appreciate -- or happy to see that licensure. Can you just talk about some of the upcoming trials you have planned? I know I guess, first, with the LimmaTech reported S4V results, when will we see that full data either in publication or [ medical ] conference? And then with your planned Phase II immunogenesis study, can you remind us maybe how should we think about that trial design relative to the results that we saw from Kenya?

So many questions, hopefully, are able to capture these. So I think on IXCHIQ, we are really seeing, as you rightly pointed out that we are having customers reordering IXCHIQ, which is good because it means that slowly, slowly the vaccine is being taken up. I think we -- it's a bit too early to really talk about this in detail. I think we have continued to grow the awareness of chikungunya and IXCHIQ amongst HCPs, we -- who also started to engage with customers. We have now sold dosage across each of our sales channels, including a growing number of reorders, as I mentioned earlier, is the number of customer accounts we are engaging with is growing as well. Additionally, we continue to see travelers proactively asking about chick, which is a fantastic achievement already right now. And across -- and access and coverage of IXCHIQ continues to improve. We had approximately 25% coverage last quarter and now it's over 50%. And I think this is really an important step forward. And as I said, there are a couple of things still outstanding and there are some gating factors worth noting, including the fact that the ACIP recommendations for chikungunya has still not been published in the MMWR, which is important to -- for driving further reimbursement and prescribing of the vaccine by HCPs. So that's a little bit where we are on the IXCHIQ front. When it comes to Shigella, I mean, we are, at this point in time, so I'll start with the latter part of your question. I think the LimmaTech team is preparing for respective application of their data pre-deal, meaning the Phase I/II study. I don't have the details, but you can easily reach out and ask them directly. Then when it comes to the development plan going forward, at this point in time, we have clearly presented with the deal that we expect the 2 Phase II human challenge studies, so the CHIM studies against the 2 most relevant serotypes. The next steps in parallel to the immunogenicity study and safety study in peds in LMIC. And then from there, we have, of course, the first development plan, but we would like to get further validation through the regulatory agencies and therefore, we hope that we will have a more precise potential development plan to licensure at our planned Investor Day in October this year and this is where we plan to present this development plan in detail.

And the next question comes from the line of Oscar Haffen Lamm from Bryan Garnier.

So regarding IXCHIQ, I understand that the current focus and guidance is basically based on the travelers markets. And I was just wondering if we could also expect in the near future some major contracts kick in, similar to what happened to IXIARO years back?

Yes. So I think that's an excellent question. And quite frankly speaking, we are not yet entirely clear how the U.S. Military process is going to work, but most likely not in the same way we used to have it with IXIARO because the military is not doing those kind of contracts anymore. So -- but definitely, the military part and you saw that we had already a good achievement in that DHA department -- the Defense Health Agency adopted the CDC recommendations, which is already a great achievement. And therefore, we expect the U.S. Military to become a major customer for IXCHIQ in the United States.

And the next question comes from the line of Rajan Sharma from Goldman Sachs.

So firstly, just on DUKORAL. I just wanted to clarify the regulatory approvals that you're waiting for. Are they now resolved, so we should expect kind of normal supply of DUKORAL and normal marketing in the second half of the year? And I guess just related to that, do you expect DUKORAL to grow in 2024, given I think sales are down 13% year-to-date? And then I just have a follow-up on IXCHIQ too.

Yes. Maybe I'll take the first part, and then I hand over to Peter to talk a little bit more about DUKORAL performance. Just to avoid misunderstanding here. We had some phasing issues around DUKORAL sales because we were waiting for the approval of the new fill/finish site in Sweden. We built a new field finish site in Sweden on -- as part of our COVID endeavor. And we replaced the old filling site with this brand new filling site and this required certain regulatory approvals in all the markets where DUKORAL has been licensed. Therefore, we were also cautiously investing in marketing, sales and everything around that and we had some phasing issues associated with the sales of DUKORAL. That's just what we are not expecting anything anymore. We got all approvals. Everything is clear. And this will lead us to the full year. Peter, you want to say something about this?

So with pleasure, Thomas. So just to remind you, in Q1, we -- DUKORAL did grow, right? And we did say in the past, we do expect DUKORAL to continue to grow year-over-year. We haven't provided a specific number, but this has not changed given the H1 results. So we do expect growth and to grow up.

Okay. That's clear. And then just going back to IXCHIQ. Just wondering if you could provide a sense of how many doses have been administered to date or kind of how much of that revenue number that you've reported is stocking?

Peter, do we have the number on that? I don't think we can...

So Rajan, so basically the way we account for IXCHIQ for now is we really account for on a sell-through basis. So we only account when sales are happened -- are made to the retailer or to the provider, which means there is little to no stock in the channel. So we do not book as we ship into distributors. We chose that just to avoid potential returns.

[Operator Instructions] And the next question comes from the line of Maurice Raycroft from Jefferies.

Congrats on the progress. For IXCHIQ, I'm wondering if you can talk about any unique strategy for what you're doing during this time to gain advantage or insulate your launch ahead of potential competitor entry? And as a follow-up to an earlier question, do you have any insight into whether Department of Defense would want to contract for 1 or 2 chick vaccines? Or how will that work?

Yes. Well, I mean, that's a good one. I would say, first of all, when it comes to the military, I mean, you will appreciate that this is a different disease than Japanese encephalitis. So it's very difficult to draw a direct comparison. So our goal is to ensure that military has full access to the IXCHIQ vaccine and that they are stocking in preparation for outbreaks. In addition and as I reported earlier, they are evaluating the data and current outback to determine if it fits in their protocol, the way IXIARO does right now. And therefore, we believe that we could play a very important first-mover here, a first-mover advantage. So difficult to say at this point in time. But I would say there's a good chance that we could really play a first-mover game here with the U.S. Military for sure.

Got it. Understood. And anything else you're doing commercially for IXCHIQ just to help insulate your launch ahead of competitor entry? And then I have one follow-up.

Yes. I think nothing on top of what I reported earlier. I think for us, the most important thing is that we get the label extensions done so that we have a product that is licensed for everyone above 12 years of age. We want to make sure that we get the antibody persistence data into the label, that at least the ones that we have reported on thus far. These are all major potential competitive advantages. And that's what we are currently aiming for and this is what we are doing in addition to what I reported earlier on the commercial front and building awareness and getting it into the channel and working with HCPs and so on and forth.

Got it. Makes sense. And for the IXIARO Department of Defense contract in fourth quarter of this year, can you remind me if you're saying what the amount or range of that contract you're expecting?

Peter, I'm not sure what we reported in the past, well...

And it's ongoing discussion. So right now, Maurice, we don't know. I think what -- generally speaking, what we saw last year is that the Department of Defense compared to what the contract in 2019, they're building less stock. So we would -- my best guess right now would be similar -- at a similar level than what we had last year. But again, it's early discussions.

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

It's just a quick follow-up on IXIARO. I was wondering if you could just give us a breakdown of what you're seeing from a travel sales perspective versus military sales perspective in terms of growth rates?

Peter?

Yes. Thanks, Samir. Well, we have not disclosed the details between military and travel. As we said, both segments are growing. Travel sales, we have a relatively small growth. So the majority of the year-over-year growth is really coming from U.S. Military, where, as I said during the call last year in the first half year of 2023, we had very, very low sales. And this year, it was much more substantial, but we have not disclosed the exact data.

Thank you. As there are no further questions, I would like to hand back to Thomas Lingelbach for any closing remarks.

Thanks a lot for your questions. As you have seen, the first half year, especially on the R&D and strategic development front has been quite remarkable and we see really great growth opportunities for Valneva, including that we have reiterated that we see a pathway to sustained profitability upon successful licensure and commercialization of the Lyme vaccine. And therefore, thanks to all of you. Thanks to all shareholders, employees, partners and I wish you a very good remainder of the day.

Thank you.

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