Hi, everyone. My name is Maury Raycroft, and I'm one of the biotech analysts at Jefferies. It's with great pleasure that I'd like to welcome the CEO of Valneva, Thomas Lingelbach. Thanks so much for joining us today, Thomas.
It's a pleasure as usual, Maury. Thank you so much for welcoming us.
We're going to do a fireside chat format.
Yes, please.
Maybe for those who are new to the story, if you can give a one-minute intro to Valneva?
Valneva is a fully integrated specialty vaccine company. We are developing, manufacturing, and commercializing vaccines in areas of high unmet medical need, with an established travel vaccine business that we commercialize successfully. With a couple of quite interesting R&D assets. Of course, the most important one and the potentially biggest upside is associated with the Lyme program partnered with Pfizer. We have other interesting activities in R&D, such as, for example, Shigella or earlier-stage programs in the field of EBV and ETEC.
Got it. Yeah, it's a great overview. For your Lyme program, there's been a lot of interest there. Program's partnered with Pfizer, and you guys had a phase III readout. You showed greater than 70% vaccine efficacy in the phase III top line, but the trial narrowly missed on the per-protocol primary endpoint. Maybe talk about that and just where the program's at right now.
We basically concluded the phase III study, called VALOR, in more than 9,000 people. It was a study, one-to-one randomized vaccine against placebo, and supposed to show efficacy of the Lyme vaccine after 3 + 1 doses. Why three plus one? Because this was the efficacy after the first booster dose. Given that the vaccine is anticipated to require annual booster shots, it's of course most relevant to show the efficacy for every single season and after that. As you rightly pointed out, Maury, point efficacy was good. It was in line with what we and our partner had anticipated it to be. It's also in line with all the commercial modeling that has been done prior to the outcome, unfortunately, a miss because of lower than anticipated final adjudicated cases. We still do not really understand why we got fewer cases adjudicated overall.
We are still looking into season-to-season variabilities, also geographical differences. I think, as you rightly pointed out, in the primary endpoint analysis, we missed the lower bound of greater than 20% confidence. In a second pre-specified analysis where we count the cases not only after day 28 following completion of the series, but right after completion of the series, the lower bound was met. This puts us together with the situation that Lyme represents a huge unmet medical need. Cost of treating Lyme, very high. Safety looking very good. This puts us into a potential very attractive risk-benefit. Therefore, our partner who are in charge, and according to the agreement now, post the completion of the study, fully in charge of the regulatory processes to, of course, interact with the regulatory agencies.
What we can say is those pre-submission meetings are taking place now, which is already a good step. You know that Pfizer publicly announced their intent to submit. Now it will all depend on the outcome of those pre-submission meetings with the two most relevant agencies, namely EMA and FDA. Those pre-submission meetings, as you all know, will be indicative. They will not be definitive. Therefore, we expect the next "disclosed public" or publicly disclosed news flow, the acceptance of the filing-
Okay.
Which we anticipate for autumn.
Okay. Sometime this fall there could be filing acceptance. Okay, that's really helpful. It sounds like the meetings are ongoing. There's some back and forth with the regulators right now.
This is also why I mentioned already during the analyst call that from a Valneva standpoint, especially since we are not the sponsors, and since there is a clear agreement in place, there is very little that we can say about its content.
Right.
Yeah.
Okay, makes sense. For the BLA acceptance, we think that's going to be an important event for your stock.
You said your working hypothesis is that Pfizer's going to disclose an update on this. Sounds like that's going to be in this fall. What are next steps going to be then at that point, and how involved is Valneva going to be?
Valneva has been involved in the preparatory work for the submission packages, be it MAA or BLA. We anticipate that there won't be major changes to previously contemplated timelines. Basically, you know that we have all different kind of regulatory goodies for this program, like accelerated approval pathways, fast tracks, all of that. We anticipate that the approval could still come in time to start potential launches of the vaccine in the autumn of 2027. This is Valneva's working hypothesis. Of course, we are all crossing fingers that this process is going to land in a happy end by the end of the day.
Got it. Is there more perspective you can provide on just Pfizer's confidence in filing the BLA? Presumably, if they thought that it wasn't going to get accepted, they probably wouldn't file it.
Yeah. Of course, you raised two different points in your question. I think, first of all, Pfizer publicly announced that they are confident based on the data, and we are confident. To be clear, the market is not . The market has entirely written off the asset in a way. Our working hypothesis, and again, I do not want to speculate about Pfizer's behavior, but from Valneva's perspective, our hypothesis is very clear. If there was a significant pushback from the agencies, we anticipate that Pfizer would not submit.
Got it. Okay. Yeah, that makes sense. Maybe talk just more about the engagement with Pfizer through the mechanism that you have in place, which is this existing steering committee structure. How's that dialogue been since the top-line update?
Yeah. We have an existing agreement with Pfizer. The agreement specifies very clearly the entire development period up to the readout or the end of the VALOR study. During this period, there have been very close interactions in between both companies. Since that time, the interactions are more now at a formal level.
Meaning, reducing it to the quarterly, basically, joint steering meetings. We have some level of insight, but we are not involved in the regulatory tactics and strategy per se, which by contract is a Pfizer accountability. Given the sensitivities around this program, we can probably appreciate why Pfizer take a more or a different approach now on this end.
Got it. Okay. On the first quarter analyst call, it was disclosed that Pfizer plans to present the full data at a forthcoming conference, but the venue hasn't been confirmed.
Do you think this is going to be a second half 2026 disclosure, or more likely 2027? What are your expectations for what they could report?
Yeah. Basically, the reason why they kept the point open was because there was still an ongoing discussion about which kind of regulatory meetings will take place, the format, what kind of setup. I think the more this gets clarity and the more there is a clarity on the filing date, the more clarity they have, of course, to identify which conference they're going to use. Our current hypothesis, and this is based on our understanding, is they will use the first possible conference following the acceptance of the file.
Got it.
I think they will probably wait until the file has been accepted, and then they will use the next conference, which we anticipate to be a 2026 event.
Okay, sometime before the end of the year.
Yeah.
Yeah.
Yeah.
Okay. Anything more you can share on just what they could show? We're wondering for tick season one, the vaccine efficacy from that, we should probably anticipate that in some sort of a more detailed update.
I am assuming that the presentation will include everything that is included in the primary and secondary endpoints.
This means it will include serotype-specific efficacies, seasonality, but also immunogenicity data which has been generated quite comprehensively and stratified across different age groups.
Got it. Is there a publication in the works, too?
They work in parallel on a publication, yes.
Okay. For the phase III study, the case count came in lower than Pfizer's epidemiology models predicted, which could potentially be attributed to the more stringent case definition you used versus the LYMErix definition. About 20% of the Lyme cases present with the bullseye rash. Are there sensitivity analyses planned under broader case definitions that would capture the bullseye-negative cases? Do you expect these analyses could strengthen the totality of evidence?
It's a very good point that you are raising, and I personally concur with your direction of travel, but I can't comment to it.
Got it. Okay. Basically, the bottom line is that there could be a lot of cases that just weren't counted in this study, which you could potentially still identify based on the data you have, theoretically. Okay. Talking about the European path, EMA's bar for the lower bound of the 95% confidence interval is greater than 0% for field efficacy studies, which is lower compared to the FDA bar of greater than 20%. How should we think about the E.U. regulatory path in this respect?
First of all, we have been operating under one clinical trial protocol. Therefore, also the lower bound of 20% from pure formalistic standpoint, is also relevant for the European path, where you rightly mentioned that the EMA on other vaccine programs have applied the greater than zero as lower bound. I think like the FDA, the EMA will need to look at the totality of clinical evidence. Also, given that the, let's say, the total number of Lyme cases in Europe is significantly above, not the reported one, but the reality, is above what we see in the United States. There is a very big unmet medical need in Europe. We anticipate that there will be a similar dialogue like the one with the FDA.
Got it. For the phase III study, you're going to have lower case counts for serotypes 2 through 6, which are the E.U.-dominant serotypes, just inherently from the study because it's a 2:1 randomization for North America versus E.U. I guess, how do you think that could factor into the E.U. path? Then do you have internal passive immunization data that supports vaccine efficacy for these serotypes 2 through 6?
Of course, we have immunological models, and we have also published preclinical models around the serotypes 2 - 6. I believe that there are very few, but also some serotype 1s that you observe in Europe. You know that under the protocol, we are only stratifying for serotype-specific efficacy against serotype 1. For the rest is we are targeting prevention of the disease, which is the totality of all serotypes taken together.
Got it. Okay. In the United States, we've got the ACIP organization. In Europe, from our understanding, it's more fragmented across the national immunization technical advisory groups. What are you focused on for this process in the E.U., and are there any risks or confidence points that investors should know?
Yeah, I think it's a good question. First of all, I think Pfizer started already the engagement work and the so-called access work a while ago, which is an activity driven by their respective medical teams. They've been working with all the European countries already as part of the EP work that they did, some of which has already been published for some of the countries. We are assuming that they're going to focus on the high-priority countries, which means countries with highest incidence, you know, e.g., Germany, just to use one example, and the respective recommendation bodies there and dialogues have already been initiated.
Got it. Okay. Both you and Pfizer continued to size the market opportunity as $1+ billion . Can you go into more granularity in how you see geographic penetration, and based on the increasing Lyme presence, do you see upside here?
When talking about Lyme disease, we need to look at where are the high-risk areas because it is a tick-transmitted disease, so you need to focus on where the risk exposure is highest. We have about 80 million-90 million people in the United States living in high-risk areas of Lyme disease. We have more than 200 million people living in Europe in high-incidence areas of Lyme disease. In many countries, we see a huge spread of the vector, namely the tick. Unfortunately, many countries in Europe do not have a CDC-grade surveillance system. Many countries are in the process of establishing it. We certainly do believe that there is a substantial upside, especially ex-U.S., with regards to growing and faster-growing incidences. Recent publications from France, for example, where they show how the Lyme incidences are at a rise.
We have publications seen from the Czech Republic, for example, a country that believes that it has the highest Lyme disease burden across Europe. We certainly do believe that the initial commercial model was based on really starting doing a classical, I would say, filter approach, channel approach, where you really start by saying, what is the total eligible population? What is the anticipated recommendation? Meaning risk-based, people living in high-risk areas. You go down and what is the percentage of people who actually go and see it, what is reimbursement, all of that. This was a very classical model that was built and, as I said, we remain very confident in this prospect from a commercial perspective, and see upside ex-U.S.
Got it. Okay. That upside could come from ex-U.S., so upside to the $1+ billion .
Potentially. Okay. Going back to the ACIP recommendation, which difficult to predict how this could work in the U.S. and just in general, for LYMErix, they received the should be considered recommendation. How do you think about that? Do you think you could end up with that or would it be a clear recommends from ACIP?
My personal expectation and Valneva's expectation is certainly that provided approval, provided that the agencies concur with a clear risk-benefit. The health economical analysis for potential vaccination against Lyme disease is today very favorable because the size of the problem is very different as compared to the old LYMErix days. We really expect a recommended for people living in high-risk areas of Lyme disease.
Got it. Okay. Let's shift gears to IXIARO, your vaccine for Japanese encephalitis virus.
On your fourth quarter call, you mentioned a new Department of Defense contract was expected to be awarded in 2026.
Yes
With that volume already baked into guidance while shipments continue under the January 2025 contract. Where does the new contract stand today, and are there any more specifics you can share on what stage of the procurement process you're at?
I would say we are in the ordinary course of business here. You know that under the old contract. First of all, the Department of Defense business year and fiscal year is different to ours, therefore, you have always this phasing effect, them ordering product under the old terms and conditions. We anticipate a contract to be signed over the summer, which is again in line with prior year practices. I think we do not see any changes in demand. Of course, we have this topic at every and any analyst call. A year-to-year comparison on DoD sales is very difficult because their order patterns are very different. They play a little bit with safety stock. Sometimes they keep more, sometimes they keep less, which of course affects our sales pattern.
We do not see any material differences in consumption, and we get retrospective data on consumption at the DoD, though we don't see any material changes or issues over there.
Got it. Okay. For IXIARO's gross margin, it was 50.8% in first quarter 2026 compared to 72.6%.
Yeah.
First quarter 2025, what needs to happen and when do you expect IXIARO margins to normalize back toward the 2025 full year?
The gross margin for IXIARO was heavily impacted by one-off effects. We have a couple of things that we had to take into consideration, including the fact that we have been having dual production activities or parallel production activities, significant idle costs for the new facility we are currently transferring IXIARO to. On the one hand side it's great because we have a wonderful new facility that we built as part of COVID, the transfer results in increased idle capacities in reality across both facilities. We had also to write off a couple of batches that we used for the comparability testing and all of that. All of that has impacted the gross margin.
We believe that in the second half of the year we will already see the gross margin going back to more levels that we had in prior years. Not yet where we want to be, to be very clear, because it's going to take probably another few months into next year until we will have fully gone back to where we used to be. By that time, we anticipate the old facility to be shut down and in the ideal world, even sold, so that we don't have any remnant costs associated with the old facility.
Got it. Okay. That makes sense. Wanted to ask on competitors, so Emergent BioSolutions and Substipharm announced a partnership in April to manufacture IMOJEV with EBS getting exclusive U.S. government distribution rights pending FDA approval. How are you thinking about this risk to your DoD franchise? How do you think about it, this program?
Look, first of all, IMOJEV has been in some markets together with IXIARO for quite a while. Australia, to use a country, Israel, to use another one. I think we have a little bit like the reverse on chikungunya. We have a quite a known situation. You have a live attenuated single shot against a full liquid two-shot inactivated. I think we are not worried about that at all. By the end of the day, whether there will be a moment where both products will be in the DoD or only one product will be in the DoD, we have to see. From a more strategic standpoint, as I said, we are in the process of concluding the government contract, let's see where we're going to stand in one and a half years down the road when the contract will be up for renewal.
If Valneva will still depend on that contract in one and a half years down the road, then strategically, I think we have done something wrong.
Got it. Yeah, that makes sense, and that's helpful. Let's shift gears to Shigella.
Which you're guiding to two readouts with LimmaTech's tetravalent Shigella vaccine.
This is going to be a controlled human infection model readout in adults, and then the infant immunogenicity study. What would be a win for the CHIM study, and is there a published immunological threshold from prior Shigella vaccine work that you're benchmarking against?
Yeah. Let me start with the latter part of your question. There were some publications associated with quote unquote "indicative protective thresholds" but we are not using those for purposes of our own program. What we are using is, we hope to see in the controlled human infection model in adults that people above a certain immunological titer are being protected and others not. That would be an ideal indication. Of course, to extrapolate that or bridge that into a pediatric population is not so easy. It can give you some indications and there are prior data from others who showed that bridging that or crossing that bridge is not so easy.
For us, it would be a clear win if we saw clear protection above a certain immunologic threshold in adults and if we saw immunogenicity data in children above a certain level as bridged from other studies.
Got it. For specific numbers, I guess what responder rate would you want to see?
Well, I would say, in other enteric disease programs, people call it a great success if they saw greater than 50%.
Yeah.
Which of course in an enteric disease environment is a scientific success.
We will certainly apply those rules. We would take a decision based on data, and we don't have the data right now. Yeah?
Yeah.
As soon as we have the data. The data will come in the coming months. I think we have always said data would come over the summer, and this is certainly something that we are doing.
Got it. Would you announce a go, no-go decision concurrently with the data disclosure, or do you need to first align on regulatory path?
I think it will be the latter. I think I'm not anticipating right now that we will take a final decision immediately once we have the data. I think it will take a bit of time. We want to discuss this with also many of the funding institutions, the Wellcome, the Gates of the world. We have a partner, LimmaTech, now owned by Lilly. There's also a process there, right?
Yeah.
I think the future, let's say this path forward and next development steps will probably take a bit longer than the data itself.
Got it. You mentioned Eli Lilly, which acquired LimmaTech and two other companies, too. It's kind of an interesting acquisition. I guess, what does that mean for this space and for Valneva?
First of all, I see it as a positive that the single largest pharma company is going back into infectious diseases, and they are specifically into prevention. I see this as a clear validation of prevention is cheaper than therapy, and prevention is an area we should all focus on. The second thing is, I think the fact that they take it from the bottom up, meaning buying relatively early-stage technologies and programs and trying to really build a pipeline talks about the seriousness and the long-term strategic prospect rather than a short-term, maybe acquiring just a bit of revenue in vaccines or so.
The third thing is the programs that they, in reality, picked and the strategic focus, namely, viruses that have also impacts on other potential diseases like EBV and indications in the AMR field are exactly what Valneva has been articulating as its future strategic direction a while ago. In a way, it's also a justification and a validation for us that our strategic or long-term strategic thinking can't be that wrong.
Got it. Makes sense. We're out of time, but maybe in closing, if you want to highlight key catalysts ahead for Valneva.
Yeah. Let us close here. Of course, we spent two-thirds of the time today on Lyme, and it's about Lyme. Let's not forget that the market has written off the Lyme asset, but we are confident we see a huge prospect. I think any publicly announced progress towards licensure will certainly be the single largest catalyst for the company. DoD contract over the summer, Shigella readout in the third quarter. These are, for me, the key catalysts for this year.
Got it. Thanks so much for joining us today, Thomas.
Thank you so much, Maury.
Thank you.