Good day, thank you for standing by. Welcome to the Valneva Report 9-Month 2022 Results and Provides Corporate Updates call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Thomas Lingelbach, CEO. Please go ahead.
Thank you. Very good day, everyone. Pleasure to welcome you to our nine months results and update call. Yeah, the nine months have again been marked with quite a potential number of key achievements. We stand today at the nine months revenue level of about EUR 250 million at a level of 3.5 times peak compared to 2021. We have a very strong cash position with more than EUR 260 million at the end of September, which excludes the proceeds from the recent global offering. Our chikungunya vaccine candidate progresses very nicely towards licensure. The rolling submission for BLA with US FDA is ongoing and expected to complete by the end of 2022.
On our Lyme disease candidate, again, great progress with the phase III enrollment, going to plan and expected to complete, you know, in the first half of next year. As we are moving our leading clinical assets, we are, of course, working hard on backfilling our pipeline. We are progressing some of our preclinical assets, and we are trying to explore also options to inject other, you know, clinical-stage assets into our pipeline. We have communicated in the past about our reshaped strategy. Of course, reshaped means for us a refocus on our key assets, winding down COVID, shifting focus away from COVID, with a strong emphasis on our core assets, Lyme check, the commercial products, but also rebuilding the pipeline. It comes with also a resizing of the organization.
This is a process that we have been planning for quite a while. We have been going through the necessary processes with works council representatives. As you have seen, we are targeting a 20%-25% reduction, which will in turn result in around EUR 12 million operating cost savings on an annualized basis. Peter will develop those things more carefully and more in detail during the later part of the presentation. If we look at the pipeline, which is shown on page 6 of the presentation. By way of reminder, you know, chikungunya, as I said, our program right now on its way towards first licensure with the BLA submission expected to be completed before the end of the year.
You know that the first company that will receive BLA approval might be eligible to a priority review voucher, which in turn we want to, of course, expect to monetize. Lyme phase III enrollment well underway with the next milestone expected earlier next year. Partnered with Pfizer, and again, we're gonna come back to those points in detail. You see here on the slide also two assets that are marked in light blue. Many people ask us about where we stand on those. You know, C. diff, our candidate that we progressed all the way to end of phase II. We put this asset on hold, you know, when Sanofi's data on C. diff came out and now we have, you know, following Pfizer's data on C.
diff, we have decided to explore, you know, partnering for this asset, meaning out-licensing for this asset. On Zika, we conducted a phase I study successfully and now that Zika got a little break from WHO and the target product profile prioritizes inactivated vaccines, we are currently considering reactivating that program. We have here as an example put forward two of our preclinical assets which at this point in time are being prioritized by Valneva.
One is hMPV, clearly an interesting candidate, pre-fusion subunit base that will approach its preclinical proof of concept by the end of this year and might be also an interesting candidate in a combination with RSV, and our EBV candidate still earlier in the preclinical pipeline, but clearly a very interesting indication that we have prioritized at this point in time. At the bottom of the slide, you see our three commercial assets, IXIARO, our Japanese encephalitis vaccine, DUKORAL, our cholera vaccine, and of course our COVID vaccine VLA2001. Talking a little bit about Lyme, you are all well aware of the program, only one in clinical development against Lyme disease today.
The phase III followed three successful phase II studies, including in pediatrics. The program has an exclusive worldwide partnership with Pfizer based on a recombinant protein subunit approach with 6 serotypes in order to ensure that the product can be used for people living or going to both sides of the Atlantic. It follows a well-proven mode of action that was validated through the placebo-controlled field efficacy studies back in the 1990s, and the program is under Fast Track designation. The phase III that is currently ongoing is again illustrated on page 8 of the presentation. Right now we are conducting a randomized placebo-controlled phase III study called VALOR. Around 6,000 participants, everyone about 5 years of age, currently being enrolled in the study.
Of course, we are running this study in high-risk areas, both in U.S. as well as in Europe. Randomization U.S., Europe, 2 to 1, verum versus placebo, 1 to 1. Basically the primary endpoint is the rate of confirmed Lyme disease cases after the second season. The secondary endpoint includes the rate of confirmed Lyme disease cases after the first season. We are testing in one study already the booster that is expected to be needed after the first primary series. Of course, subject to and pending successful completion of the phase III study, Pfizer could potentially submit a biological license application to the FDA and the MAA application to the European agencies in 2025.
When we look at chik, our program is still the most clinically advanced chikungunya vaccine program in the world. We are well into our MAA submission process, following successful pivotal clinical studies that met all endpoints. The program has FDA's Breakthrough Therapy Designation, Fast Track, EMA PRIME, and I mentioned already the potential eligibility for the priority review voucher. By way of reminder, it's a single shot, live-attenuated vaccine. We expect that after a single shot, there will be a very long protection. We are currently studying it. It's part of different antibody persistence studies for up to five years of duration. We have also a partnership on this program, through CEPI with Instituto Butantan, where we are currently conducting an adolescent phase III.
The data from those studies are expected to extend the label, you know, post-licensure and to add to further regulatory submissions for both adolescents and adults in other territories outside of the United States. We mentioned before that it is our intention to commercialize this product ourselves because there's an excellent fit and a significant synergy within our commercial and industrial footprint. You know, when talking about market size and of course as we are going closer to launch, this becomes of course a very important question. We have reiterated at this point in time that we estimate the market to exceed EUR 500 million annually by 2032, which is the point where we expect a decent penetration of this vaccine.
The clinical data highlights are again summarized in this presentation. The key ones are really that we saw very high seroresponse rates. You know that the basis for licensure is the so-called accelerated approval pathway. There is an immunological surrogate to determine effectiveness of the vaccine. This seroresponse rate shown to be at 98.9% after a single vaccination. The immunogenicity profile is maintained over time, even at day 180, you see still, you know, 96.3%. Interesting and very good of course, older adults, similar levels of seroresponse rates, neutralizing antibody titers, as younger adults. Then, you know, seroconversion of course extremely high at 100%, that is not possible.
From a safety perspective, overall, well-tolerated, and a profile in terms of safety and tolerability that you would expect for this class of vaccine. What is also worth noting is we recently added a few data points to the VLA1553-301 BLA, and this has to do with additional data in elderly 65 years plus, where we showed in the meantime also through an additional cohort an additional readout that the sero response rates are at similar high levels. When we then come to the program progression towards FDA filing, you know, we presented the program at the CDC's October ACIP meeting. The rolling submission got initiated, as I mentioned earlier.
You see here the next steps with the Breakthrough Therapy Designation, priority review, the completion of the BLA submission by the end of 2022, and of course, the eligibility of the PRV. We presented an overview of BLA 1553 at the ACIP meeting. You know that no chik vaccine has been previously licensed. There are therefore no existing ACIP recommendation at this point in time. The Chikungunya working group provided a preliminary review and timetable towards ACIP's recommendation decision. Ahead of the anticipated February 2024 ACIP vote, the working plans to present further on chik traveler epidemiology and disease burden, more comprehensive review of immunogenicity and safety data, as well as the so-called GRADE assessment, and longer-term additional data in younger age groups.
When we then look at the outlook, what has still to come or what will still come on our program, VLA1553, the ongoing clinical trials that supports further regulatory submissions, of course, namely the antibody persistence study. I mentioned that this is a study that is of course a follow-on from the previous studies that have already been initiated and we expect to follow respective volunteers for at least five years. The 12-month data are expected later this year. The adolescents clinical study, I mentioned already 750 volunteers aged 12 to 17 years of age, 12 months follow-up, and data expected in first half next year.
We may, you know, add additional studies to support future commercialization of the product, including co-vaccination, special populations, and then of course, the phase IV observation and effectiveness study. When we look at our commercial product portfolio, you see of course here that we have strong sales of our commercial products in the first nine months. The product sales outside of COVID grew by 11.2% versus prior period. We see a significant recovery in the travel markets, with Japanese encephalitis in the travel segment increased significantly. We see product sales of cholera vaccine increased at similar level. The third-party products make a significant contribution to our business.
They increased to EUR 18.4 million from EUR 11.2 million in the comparable period in 2021. This is of course related to one of our key distribution agreements, namely with Bavarian Nordic. Of course, we also sold COVID-19 vaccines as part of our EC. We generated EUR 23.9 million in sales. All the deliveries to EU member states have been conducted. There are still some supplies to Bahrain outstanding. Overall, this is where we stand on COVID. You know that we are still planning to seek potential opportunities outside of Europe and outside of the current licensed area. Talking about COVID, the only, you know, inactivated whole virus COVID-19 vaccine approved in Europe.
We were the first ones to get an ordinary marketing authorization in Europe for this vaccine that is based on a more traditional conventional technology, coupled with a modern adjuvant, CpG 1018 that gives a bias towards Th1. We are still expecting a few more data points on COVID which may help us to sell the remaining inventory that we have, specifically in international markets. You know that we got already positive heterologous booster data following primary immunization with AstraZeneca's vaccine. We will expect some data also from people who got either primed with mRNA and/or a natural infection. All of that is expected to conclude by the end of this year.
As we are moving along with this program, we are also extending the shelf life and stability data become available, and right now we are at 18 months or at 15 months, submitting for 18 months. Of course, we'll follow this through, because inactivated vaccines have typically at least 24 months shelf life, if not longer. When we look at our revising to the fact to reflect the evolution of the COVID-19 program, we have stated this at many different locations. In light of our reduced order volumes from the EU member states, we suspended our internal manufacturing as well as the external manufacturing. We entered into settlement agreement with our external partner, IDT, for example. We retained our inventory for additional supplies. We are trying to deploy our inventory.
We mentioned previously in between 8-10 million doses. Yes, of course, we ramped up the organization quite substantially in response to the anticipated COVID demand and specifically the significant COVID manufacturing quantities. We are now reducing our workforce globally by approximately 20-25%, which still means that we will land at a level of 25% above headcount wise compared to pre-COVID. This is, of course, allowing us to retain talent and expertise that we built throughout the COVID period and also to allow full focus on one of our key strategic pillars, namely our R&D progression. Not only our late-stage programs, but also the earlier stage pipeline development and potentially even injection of additional pipeline programs.
With this, I would like to hand over to Peter to start off with the financial report.
Thank you, Thomas, and good morning or good afternoon to all of you. Now let's discuss our first nine months financials. Total revenues reached EUR 249.9 million, an increase of 258% compared to the first nine months of 2021. This increase is largely driven by other revenues, and I will comment on that later. Product sales reached EUR 74.4 million, an increase of 64% versus prior year. This increase is to a large extent driven by shipments of VLA 2001, our COVID vaccine, to European member states. At the same time, it also reflects the continued recovery of the travel market that leads to an increased demand in travel vaccines. Shipments to the US Department of Defense continue to remain low, and this was anticipated based on this year's delivery schedule.
The chart on the right side illustrates the composition of total revenues. The significant increase in revenues is to a large extent driven by other revenues that reach EUR 175.5 million on a year-to-date basis. These other revenues comprise a release of refund liabilities that were previously reported on our balance sheet. Earlier in the year, we recognized EUR 89.4 million other revenues related to payments from the UK government for our VLA2001 program. In Q3, we released EUR 110.8 million advanced payments from European member states related to VLA2001 orders that were subsequently canceled. Other revenues also include negative revenues recognized in the second quarter related to the price or contract revision. Moving on to slide 19 to look at the details of our product sales.
Sales of IXIARO decreased versus prior year, which is a result of the scheduled shipments to the US Department of Defense. As indicated at the bottom of the table, IXIARO sales to the private market increased from EUR 4.6 million in the first nine months of 2021 to EUR 19.4 million in the current year, an increase of 267% at constant currency. DUKORAL sales reached EUR 9.2 million in the nine months of 2022, a dramatic increase compared to the EUR 500,000 reached in the prior year. Third-party products also had a solid performance and reached EUR 18.4 million compared to EUR 11.2 million in the first nine months of 2021.
Finally, COVID-19 vaccine sales increased from EUR 3.8 million at the end of June to EUR 23.9 million in September year to date, driven by shipments to European member states in Q3, as mentioned by Thomas earlier. Now moving on to slide 20, looking at the P&L. We already covered revenues and the significant increase to EUR 249.9 million. Cost of goods and services also increased significantly over the prior year, and this is of course, mainly driven by VLA 2001-related costs. As explained in our first half-year financials, we recognize significant inventory write-down in the second quarter of the current fiscal year.
Research and development expenses decreased from EUR 117.2 million in the first nine months of last year to EUR 75.4 million in the first half of 2022. This decrease is driven by lower spend on clinical trials as our chikungunya vaccine progresses towards licensure, combined with a reduced spend on our COVID-19 vaccine candidate, VLA2001. Marketing and distribution expense, as well as general and administrative expenses decreased compared to prior year, which is largely driven by a release of provisions for share-based compensation and the related Social Security cost.
The cost of phantom share programs for certain employees, as well as the cost of Social Security on our equity plans, depend on the development of Valneva's share price. In total, we had a release of EUR 30.6 million in the first nine months of 2022, compared to cost of EUR 13.7 million in the same period of last year, i.e. a difference of over EUR 40 million that positively affected all expense lines in our P&L and in particular, our G&A expenses. As outlined in this morning's press release, the marketing and distribution line includes launch preparation costs for our chikungunya vaccine candidate of EUR 4.3 million compared to EUR 2.8 million in the prior year.
Other income, net of other expenses is reported at EUR 7.5 million compared to EUR 16 million in the first nine months of 2021. That decrease is primarily driven by lower R&D tax credits as a direct result of the lower R&D spend. Other expenses include a small increase in the provision for the ongoing Vivalis/Intercell litigation proceedings. Operating loss for the first nine months is reported at EUR 75.1 million compared to EUR 237.6 million for the same period in 2021. Financial expense and income tax reached EUR 42 million compared to an expense of EUR 8.3 million in the prior year. The difference is primarily due to significant unrealized foreign exchange losses driven by US dollar-denominated liabilities. Interest expense increased in line with the increased loan.
The total loss for the period, which is EUR 99.1 million, versus EUR 245.9 million in the first nine months of 2021. Next slide, please. Looking at our COVID business, we see total revenues of EUR 224.1 million and an operating loss of EUR 14.2 million compared to an operating loss of nearly EUR 200 million in the first nine months of 2021. The P&L outside of COVID business shows product sales of EUR 50.6 million and negative other revenues. As previously explained, the negative revenues are driven by the Pfizer agreement revision in Q2 with an adjusted cost sharing. Cost of goods and services systematically improved compared to last year, driven by lower cost of services related to Pfizer and the CTM unit in Sweden.
In addition, the 2021 numbers was impacted by inventory write-offs and idle capacity cost. The level of operating expenses is, as already mentioned, favorably impacted by an effect related to the company's share plan. R&D costs are significantly lower than in prior year. This is a direct consequence of our chikungunya vaccine moving towards licensure. The costs related to our pre-clinical programs are naturally lower, but will increase as these move into the clinical phase. The adjusted EBITA of our non-COVID business reported for the first nine months reached negative EUR 38.6 million, which is comparable to last year. Before moving to guidance, let's go to slide 23 to look at our value proposition and how we expect to deliver on it. The first pillar talks about progression of our late-stage clinical pipeline programs.
We initiated the FDA submission of our chikungunya vaccine candidate and are preparing for the potential launch in the United States and later in Europe. At the same time, we continue our excellent collaboration with Pfizer on the Lyme program, and as mentioned by Thomas earlier, patient recruiting for phase III trial is still ongoing. The second pillar is about progressing new vaccine candidates from pre-clinical to the clinical stage. This is clearly a priority as we are committed to refill our early-stage clinical pipeline. For now, the focus is on HMPV and EBV program, as mentioned by Thomas earlier in this call. At the same time, we put in place a small, dedicated team that is continuously screening the market to look for potential in-licensing opportunities to complement our clinical pipeline. The third pillar is about maximizing our commercial products.
We want to benefit from the recovering travel market and make sure our travel vaccines grow at least in line with the travel market. We are very encouraged by the growth we were able to realize with our distribution partnerships, and the recently agreed deal with VBI is an illustration of our focus to complement our commercial proposition where it makes sense. Finally, as announced previously, we are aiming at selling additional doses of COVID-19 vaccines outside of Europe. This is an effort that will continue in 2023. Last column, we are in the process of resizing our operations. We initiated a program to reduce our workforce by 20%-25% due to the discontinuation of our COVID program. The reduction in workforce is expected to result in annual savings of approximately EUR 12 million and will be achieved through a combination of natural attrition and layoffs.
These savings are to a large extent expected in our manufacturing operations. The resizing of our organization will not impact our development projects, as we are clearly committed to invest in what is required to bring forward our R&D pipeline. Before moving to guidance, let me briefly comment on our cash situation. Our balance sheet at September 30th, released this morning, shows total cash and cash equivalents of EUR 261 million. While this is still a high level of cash, we consumed a significant amount during the third quarter. As a company, we believe it is important to be sufficiently financed to invest in our clinical and pre-clinical pipeline. We therefore decided to proceed with an equity offering at the end of September and in a difficult market, managed to raise over EUR 100 million.
The proceeds of this offering are not yet reflected in the September accounts and further strengthen our cash position. With this, the company is well positioned to deliver on our existing programs. Now let's move to the fiscal year 2022 guidance on slide 24. We reiterate our total revenue guidance of EUR 340 million-EUR 360 million, including EUR 30 million-EUR 40 million of COVID vaccine and EUR 70 million-EUR 80 million other vaccine sales. As a reminder, we had increased the guidance for other vaccine sales at half year. Other revenues are anticipated at approximately EUR 240 million, mainly based on revenues recognized from EC and UK COVID-19 contracts, meaning that these revenues will have no additional cash impact in Q4.
We expect R&D expenses to be between EUR 95 million and EUR 110 million, quite a bit lower than previously announced. This decrease is related to some phasing of clinical trial expenses and the wind down of our VLA2001 activities. This concludes the finance section of this call, and I would like to hand back to Thomas for the upcoming catalysts.
Thank you so much, Peter. Yeah, let me summarize what we have already mentioned at different points in this presentation. What are the clear near-term catalysts for Valneva on Lyme? It is of course extremely important that we complete the enrollment on time, given the seasonality of Lyme disease and the respective progression of the trials, of the trial over two seasons. We are also expecting some follow-up data from existing studies, which we have not specifically mentioned here on the key catalysts.
On Chikungunya, very clearly the completion of the BLA submission before the end of the year, of course, also supportive data like the antibody persistence data later this year or the adolescent data then in the earlier part of next year, which will be important to complement the label and support submissions in other territories. On COVID-19, we expect further data till the end of the year, as I mentioned this before. Of course we are, as we have clearly articulated in the past, in touch with a few international markets, meaning countries in Middle East, Asia, for example, where we are trying to A, seek regulatory approval and B, potential sales of our existing COVID-19 vaccine VLA2001 and respective inventory.
This all of course to maximize the value from the existing assets. These are the key catalysts that we see. Still, you know, very, very important anticipated news flow in news growth in the short term. With that, I would like to hand back to the operator to take the questions.
Thank you. As a reminder to ask a question, you need to press star one one on your telephone. Please stand by. We'll go by the Q&A roster. Our first question comes from the line of Maury Raycroft from Jefferies. Your line is open.
Hi, congrats on the progress and thanks for taking my questions. I'm gonna start off with the preclinical assets. You mentioned that the VLA1554 and VLA2112 are currently being prioritized. Can you talk about how much investment do you plan on putting into these programs, and where will you report the preclinical VLA1554 proof of concept data by year-end? Is there anything additional you can say about the timeline to moving these programs into the clinic?
Okay, good. Maury, right now we have not split the R&D investments by program or by activities as you know. We have gone back to pre-COVID investment levels in the non-COVID arena. I think this is the only thing that I can say to that. With regards to hMPV, preclinical work, of course, we are talking here about the classical preclinical work that you would anticipate for a vaccine candidate, meaning in vivo and in vitro. We are anticipating that this data will be published. We cannot say how long it will take to get those published, but we clearly will try everything to do this as quickly as possible.
Of course, with regards to hMPV, the company will evaluate clearly the clinical entry for hMPV. We have started preparing respective plans. In parallel, we will also look into potential combination settings. You know that hMPV might be a very interesting asset for people working in RSV, given that the RSV hMPV combo is expected to add significant value in terms of medical benefit, addressing a huge unmet medical need. EBV will take a little bit longer for us to progress at this point in time.
Got it. Makes sense. I was gonna ask one other question on fifteen fifty-three for the antibody persistence in adolescent studies. Can you remind what expectations are and what would be considered good or bad data? I guess for the antibody persistence data specifically, is there a certain threshold for antibody persistence that matters?
Well, by the end of the day, the important thing, Maury, is that you still see effectiveness of the vaccine. You know that we are working on a surrogate marker that was derived through passive transfer in non-human primates accepted by the authorities, and basically then translated into a sero-protection level, meaning percentage of people above the respective protective threshold. You know that there is no regulatory requirement to say what is good or what is bad. I mean, of course, you would expect, you know, above 80% being an excellent result in the world of vaccines, or in terms of long-term, you know, antibody persistence levels.
Yeah, that's maybe as much as I can say to 15+ .
Okay. That's helpful. I'll stop there and hop back in the queue. Thank you for taking my questions.
You're welcome, Maury.
Thank you. One moment for our next question. Our next question comes from the line of Samir Devani from Rx Securities. Your line is open.
Hi, everyone. Thanks for taking my questions. I've got a couple. First one's on sort of VLA15 and your contribution to the Pfizer clinical trial cost. The press release talks about 40% over 2022 and 2023. I just wanted to clarify with you. Are you not expecting to contribute to the end of the study? Because that's obviously in 2025. That's the first question. Then the second question is just on the COVID-19 vaccine. You obviously had some good sales in the quarter. I think previously you told us that you had 8-10 million doses in the inventory.
Perhaps you could just update us with where the inventory stands and whether you could just clarify whether you have any confirmed orders for 2023, or should we be looking for new announcements for those orders? Thanks very much.
Hi, Samir. Let me start with the COVID question, and then I will give the floor to Peter, who can explain again how our payment with regard to Lyme, to our Lyme share to the phase III works following the last amendment that we did with Pfizer. On the inventory, yes, you're absolutely right. We previously confirmed 8-10 million doses. This is absolutely correct. We have this inventory in our warehouses, and we have, at this point in time, no confirmed orders above and beyond the EC and the existing Bahrain, you know, orders.
As I said, we are active right now in seeking regulatory approvals in territories where we feel that there is a demand, and where we have ongoing discussions with regards to potentially deploying that inventory. We will, of course, as something like that materializes, immediately inform the markets. With that, Peter, you may wanna explain how our, you know, Lyme cost contributions work and why it's 2022, 2023.
Yes, of course. Thanks. Hey, Samir. Basically the way the Pfizer amendment works is that we pay 40% of the total cost, but our 40% are front-loaded, so essentially almost all our contribution will be paid during 2022 and 2023. There might be a small residual amount kicking in later, but basically after the end of 2023, it will be Pfizer covering their 60% of the total cost, and we will not have any further cash out. That's how it works. I just also take the advantage to remind you that what we pay to Pfizer is basically going against our balance sheet. So it goes out against our contract liability and not through the P&L.
Okay. That's very helpful. Maybe I just want one clarification. The EC contract and the Bahrain contract, is there any sales anticipated from either of those contracts in 2023?
There might be a small amount, related to the Bahrain contract, but not to the EC contract.
Okay. That's very helpful. Thanks very much.
Thank you. One moment for our next question. Our next question comes from the line of Evan Wang from Guggenheim Partners. Your line is open.
Hi. Thanks for taking my question. First question I have is on one five five three. Can you help understand some of the additional trials or analysis that could open additional opportunities, I guess, in settings like military pediatrics, off-time opportunities? Are there additional trials you need to kind of conduct and any kind of timelines or expectations we can think there? I have a follow-up.
Okay, good. Yeah. Let me remind you about the overall, you know, development program for chikungunya. We conducted 2 pivotal phase III trials, the phase III immunogenicity trial to determine safety and effectiveness of the vaccine, in adults above 18 years of age. And alongside with that, a clinical lot-to-lot consistency study also needed for licensure. With these 2 studies, we expect the vaccine to be approved, in the United States for everyone above 18 years of age. There is no additional study required, to support the market launch, in all the segments that you have mentioned, from a U.S. perspective. Of course, you know, we want this vaccine to be available for everyone above probably 2 years of age.
Which means we will and are conducting studies in additional younger age groups. This is one of the very important studies is the study that we are currently conducting in Brazil through our partner, Butantan. This data is expected to complement and change or adjust the label from a U.S. perspective. We also expect that this data that we generate in Brazil will be filed together with the existing package so that we may have broader labels right from the start in terms of age group. All the other studies that I mentioned on the slide, you know, for example, co-vaccination studies or and the like, are voluntary studies.
These are studies that are not required from a regulatory perspective, but may provide us with additional data to potentially further differentiate and further increase potential uptake of the vaccine in the future. Those are, for example, co-vaccination studies. Of course, you have, for every vaccine, you know, we have the typical post-licensure phase IV commitments. In our case, an in-field effectiveness study that is of course a regulatory requirement post-licensure, which will be conducted.
Great. Can you talk about some of the competitive dynamics in the market? I think there are other trials ongoing. I think that's expected first half of next year. I guess in terms of the 2024 ACIP, are you expecting multiple vaccines to be discussed at this point? Can you talk about how you're thinking about kind of competitive dynamics? Thanks.
Yeah. Very good question. Let me start with the latter part first. We do not expect that at the ACIP meeting other chikungunya vaccines will be ready for discussion. At this point in time, as you know, there is only one additional program in phase III in the quote-unquote Western world. This program is in two phase III studies to our knowledge. One study that for which you know enrollment completion was just recently announced and another study to complement the upper age range for which to our knowledge recruitment is still ongoing. We expect with regards to competition, with regards to licensure, to be well ahead of any competition.
Great. Thanks, Guys.
Thank you. One moment for our next question. Our next question will come from the line of Max Herrmann from Stifel. Your line is open.
Hi, it's Max Herrmann here from Stifel. Thanks very much for taking my questions. A few if I may. Firstly, just wanted to understand a little bit about comment about completion of recruitment of the VLA fifteen study, the VALOR study in the Q2. If you're recruiting or completing recruitment at that stage, will that enable you to recruit all the patients in time for the season, for the 2023 Lyme disease season? That's my first question.
Basically, Max, first of all, hi, and very good question. You know that the season starts in March, April, and goes all the way until September, depending on the area, September, October. Of course, the second quarter is long, right? It doesn't necessarily say that we are recruiting till the end of the second quarter. Basically, of course, we are anticipating that we are doing the enrollment as quickly as possible so that we can get the 100% of the anticipated people into the first season.
Okay. Because obviously you've got a six-month period, vaccination period to get the three-
Absolutely.
3 doses in. Even if you start in April, you'll only just be finishing those patients that will finally be in April or in October.
You will have a number of patients that you will only catch toward the end of the season.
Yeah. Okay. My next questions are more financial. So, I'll put them on. In terms of COVID inventory, I know you say you have 8-10 million doses on hand. I was wondering if you could give us a bit of a view of what proportion of your inventory levels are represented by that actual COVID stock. Second question is just the margin in the fourth quarter. You obviously, the gross margin, that is, you obviously had a relatively low margin in the third quarter, I assume primarily related to the collaboration and license revenue, which I guess is margin without margin. Just trying to understand how we should view the margin development going forward.
Just in terms of R&D, very interesting comment about, and I wasn't aware that the Pfizer R&D spend or the VALOR spend that you make will go against the balance sheet. So just giving us a feel, do you expect R&D in 2023, therefore, to be lower than you expect it to be in 2022? Thank you.
Peter.
Yes. Sorry, I wasn't muted. First question, Max, on COVID inventory. We have not given in the Q3 the details of inventories. You can assume that actually there is a fair portion of the inventories that we reported in our balance sheet related to COVID. It is safe to assume that it's approximately half of it. Most of it, of course, finished product or semi-finished and finished product. As we said, these are the doses that we are aiming at selling in markets outside of Europe. Gross margin in Q4. Again, here, we have not given guidance on gross margin. Over time, I wouldn't specifically comment maybe about on Q4.
I think overall speaking, we clearly look at our gross margin on our travel vaccines improving significantly as we increase volumes. We do expect that in 2023, we'll probably be close to where we used to be pre-COVID. Remember, we were at top of my head 64%, I believe, roughly. That's clearly the objective to get into this range as far as cost of goods on travel vaccine is concerned. You're absolutely right, of course, the margin does get diluted a bit, depending on what contracts we have with third parties in our CTM facility in Sweden. Finally, your question on R&D. Yes, the whatever we pay to Pfizer goes against our liabilities.
The spend that we have on VLA15 goes into R&D spend. It's primarily people cost, of course, but that goes into R&D spend. You know, we have not yet provided guidance for 2023. I think the question was on 2023, right? We have not provided R&D guidance on that yet, but we'll do that, of course, once we do publish our full year results.
Sorry, maybe just pushing back a little bit on the R&D guidance for 2023. I mean, I was just trying to understand, I mean, next year, the Pfizer trial costs are gonna be the big significant part. If that's not going through your R&D spend and you're not spending on the COVID vaccine anymore, and the chikungunya vaccine, most of the registration studies have been completed, then that would suggest quite a significant reduction in R&D spend.
Yes.
for next year.
Yeah, that's correct.
Is that the right way to think about it?
Well, yes, our R&D spend will for sure go down. It will of course, you know, include some post-marketing commitments for our chikungunya vaccine, and of course, you know, progressing our pre-clinical pipeline. It's absolutely fair to assume that our R&D cost in 2023 will be significantly lower than in 2022, yes. Correct.
Thank you very much.
Thank you. One moment for next question. Our next question comes from the line of Arsène Guekam from Kepler Cheuvreux. Your line is open.
Hello, gentlemen. Thank you for taking my question. First of all, a follow-up question on R&D expenses. R&D costs are likely to go back from pre-COVID level, but do you expect any additional cost related to COVID-19 vaccine in 2023? The second question is on your manufacturing site. You stopped the manufacturing site of VLA2001, but are there some additional costs related to the maintenance of this site? The last one is on the chikungunya vaccine. How are you going to commercialize this vaccine by your own, or are you looking for a partnership? Because there is no real synergy with the travel vaccine, and you will need to build your own sales force.
Let me probably start by your last question and your last comment. Please keep in mind that chikungunya
Chikungunya is targeting four segments. One is travel, so which means these are people traveling to tropical, subtropical areas, people who live in North America, in Europe, in Australia. And here we have a huge synergy with our existing commercial infrastructure. We are covering with our existing commercial infrastructure, which includes teams in North America, meaning U.S., Canada. In Europe, we have the U.K., we have France, we have Austria, we have the Nordics. And with that we cover, you know, 80%+ of the necessary travel markets with the existing teams and the existing infrastructure. The second part is related to stockpiling and endemic and potential outbreak preparedness. Also here, of course, we will need to add resources, but we expect that overall we are well positioned within our existing infrastructure.
We have, of course, a potential segment in, you know, institutions like military. Again, here we have existing and well-established channels and infrastructure. When it comes to endemic countries, yes, of course, for endemic countries, we have a partnership, an existing partnership with Instituto Butantan, who have the rights to endemic LMIC countries, so low- and middle-income countries. This is a partnership that we entered into and we announced already, so we will not commercialize the product ourselves in LMIC territories. Maybe the maintenance. Yes, of course, we have a dedicated factory in Scotland for COVID-19. At this point in time, we have not decided what we're gonna do with this factory. Hence we will keep the factory in a so-called warm stage.
This warm stage comes at a cost, which we have not disclosed and cannot disclose at this point in time, but it's not, as I said, a keeping warm cost base, so probably not material in the overall setting. With that, I give the floor to Peter for the other financial questions on COVID.
Yeah. It was about R&D expense expected in 2023. There will be some residual R&D expense related to COVID as we are, you know, continuing or finalizing the last clinical trials that are running right now, and it will still continue into 2023. It will of course be much lower than what we spent in 2022 or 2021.
Mm-hmm.
Thanks.
All right. Thank you. One moment for our next question. Our next question comes from the line of Olga Smolentseva from Bryan Garnier. Your line is open.
Good afternoon, many congratulations on the progress, and thank you for taking my question. My first one on the recent ACIP meeting seems that vaccine efficacy in specifically elderly population was sort of was of importance. Could you maybe reiterate that data in this age group, which is about 100 participants currently, would be sufficient, and especially in the light that Emergent study is recruiting about 400 participants of this age group? Maybe the second question is it basically asked work group to more clearly define at-risk populations. I'm just curious if you have any insights on how these more specific risk-based groups could look like. Thank you.
Hi, Olga. Are you referring on your second question to Chik or to Lyme?
To chikungunya.
Okay.
At first.
First of all, let me start with your first question. Yes, you have seen that at the ACIP meeting, we presented additional data, additional readout from our elderly cohort. We consider based on all interactions that we had to date that our database with about 100 people in the above 65 years of age, combined with the fact that we do not see any age dependence on our sero protection level levels to be sufficient for the full label. This is our current hypothesis, and this is based on all interactions to date, as I said, driven by two aspects, namely number one, that we have not seen an age dependence on our serological and immunological profile for the vaccine.
That we have you know 100 people with some being really old in this cohort. Second, when we talk about risk, yeah, this is of course I mean this is an excellent question. On the one hand side we consider of course people who are going to areas where there is a high risk exposure to Chikungunya infection. These are areas where you have either already existing outbreaks or a high risk for outbreaks. These are primarily the tropical subtropical areas. This will be you know as part of the health economics analysis this is of course will be further detailed and characterized and precise as part of the ACIP process.
It's clear. Thank you.
You're more than welcome, Olga.
Thank you. One moment for next question. Our next question comes from the line of Nick Hallatt from Goldman Sachs. Your line is open.
Hi there. Nick on for Keyur here. Thank you for taking my questions. Just a couple more on chikungunya. What's your updated thoughts on potential PRV monetization there? If you could give us an idea of pricing and potential benchmarks we should be thinking about. If I may, a financial question, your EUR 12 million annual savings from the restructuring, where should we be thinking about their impact on the P&L? Would that be largely on SG&A? Thank you.
Okay. Peter, do you want to start?
Yeah, I can start on the savings out of the resizing of the organization. Nick, essentially, you know, I would say the vast majority of the reduction is going to be in the manufacturing space, but because that's where we clearly see the more significant reduction in workload as we stop COVID-19. That's where I think most of it will go.
Yeah. Of course, on the PRV, coming back to your question around the PRV, you know, there is a process around the PRV with a respective application that we will do as part of the total completion of the submission for the BLA. You know, once we have the confirmed eligibility, we will get the PRV with the BLA approval, and of course, the company will start marketing this PRV as soon as we are getting closer to the PRV. You know, many or most companies in the past have had their PRV deals in the pocket before they actually got the PRV.
This is of course something that we will do and we try to do in a similar way, provided that everything goes according to plan. You know that we have set out under the Fast Track and provided that all Fast Track conditions are being confirmed, we expect to produce our data in the second half next year. Which will tell you a little bit also the timeline of a potential PRV.
That's great. Thank you.
On pricing. Yeah. You mentioned pricing. I mean, as I told you already when we met, we are in the middle of the process around health economic analysis, pricing, et cetera. So we do not want to interfere with this process. Therefore, we are currently not in a position to comment on pricing.
Okay. That's it. Thank you very much.
You're welcome.
Thank you. I'm not showing any further questions in the queue. I'll return the call back over to Thomas for any closing remarks.
Thank you so much for your time today. Excellent questions as usual, and thanks for following up on Valneva, for supporting us, and we are looking forward to keep you updated on the exciting process and exciting progresses that we have ahead of us. Thank you so much. Have a good day.
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.