0Good day, and thank you for standing by. Welcome to the Valneva Full-Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Vice President of Global Investor Relations, Joshua Drumm. Please go ahead.

Hello and thank you for joining us to discuss Valneva's full-year 2022 consolidated financial results, which were published today and are available on our Web site. It's my pleasure to welcome you today. I'm joined by Valneva's CEO, Tomas Lingelbach; and CFO, Peter Buhler, who will provide a brief overview of our business and our financial results for the period, as well as updated financial guidance and a summary of anticipated upcoming milestones. 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 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 also listed on our company Web site, www.valneva.com. Please note that today's presentation includes information provided as of today, March 23, 2023, and Valneva undertakes no obligation to revise or update forward-looking statements except as required by applicable securities laws. And with that, it is my pleasure to introduce Thomas to begin today's presentation.

Thank you, Josh, and good afternoon, good day to all of you. Well, 2022 was a year marked by our ability to adapt to a changing environment, and showed our resilience. We achieved several key milestones that underpin our unique value proposition. We made continued progress across the R&D pipeline with our chikungunya vaccine now under BLA review. On Lyme disease, we started the Phase 3 pivotal efficacy study, VALOR, together with Pfizer. On COVID-19, we were the first company to achieve a full marketing authorization by EMA. However, given the changing environment around COVID and the prospect of that vaccine, we decided to not further invest in development and stop manufacturing the COVID. We accelerated our preclinical activities with the aim to build a new exciting R&D pipeline, up and beyond Lyme and chikungunya. We have seen a significant rebound of the commercial business, and we clearly capitalized on the strong recovery in travel segment. And we complimented our commercial portfolio with additional third-party product sales. We have reported strong full-year 2022 revenues and cash position with reviews about €360 million, and product sales year-on-year increase well above 80%. Our cash position at the end of 2022 was close to €290 million. We also strengthened our shareholder base with a successful upsized follow-on offering which included now also our new major long-term shareholders and Pfizer. With that, let me go straight into our programs and into the business update, and I will start with chikungunya, page six of the presentation. By way of reminder, our chikungunya program is the most advanced chikungunya program in development worldwide. It is a live-attenuated vaccine candidate targeting long-lasting high sero-response after a single shot. Basically, the Phase 3 study met all primary endpoints in terms of sero-response rate, but also in terms of…

Thank you, Thomas, and good morning or good afternoon to all of you. Let's look at the financial review of our fiscal year 2022. Total revenue grew by 3.8%, which is fiscal year 2021 driven by a strong product sales growth. Total product sales reached €114.8 million, an increase of 82.3% versus prior year or 66.7% in constant currency. 2022 product sales include €29.6 million of VLA2001, our COVID-19 vaccine. Product sales excluding our VLA2001 sales reached €85.2 million exceeding our guidance of €70 million to €80 million. Moving on to slide 14 looking at product sales details, IXIARO sales reached €41.3 million, a decrease of minus 8.4% versus prior year as a result of fewer shipments for U.S. military. A decrease in sales to U.S. military was partially offset by significant increase of sales in the travel market of 300%. DUKORAL sales reached €17.3 million compared to €2.4 million in 2022, an increase of more than 600% once again driven by the recovery of the travel market. Third part product sales increased by 72% to reach €26.5 million for the fiscal year 2022, this represents a record level of this product segment as Valneva managed to increase third party product sales consistently over the last two years. The very positive sales performance in our travel vaccine is as already mentioned related to travel market recovery faster than expected. Finally, as already mentioned we shipped COVID-19 vaccine for an amount of €29.6 million to certain member states of the European Union as well as to the Kingdom of Bahrain. Moving on to slide 15, looking at the P&L. We already covered product sales. Other revenues reached €246.5 million. And primarily consist of one-off revenues derived from the advanced purchase agreements with European Commission and the United Kingdom. The cash related…

Thank you so much, Peter. Yes, so we see for the year 2023 quite significant number of catalysts and interesting news flow. As mentioned earlier on chikungunya is of course the adolescent study results that would come mid of the year. Please keep in mind that that we expect to extend the label in the United States Post licensure and probably include the data directly for the initial filing in other markets. Of course, then it's all about our launch here, so the potential BLA approval and the launch, and upon successful approval the PRV and the potential PRV sale that Peter mentioned earlier. And we try to accelerate bringing this novel and unique vaccine to many markets as quickly as we can. And hence, you should expect additional ex-U.S. regulatory submissions in the second-half of this year. On Lyme, of course, we all understand that it is important that we get clarity on our Phase 3 clinical study plans. We need to have this as quickly as we can so that we can restart enrolling people in time. And, of course, as we are running the antibody persistence studies on an ongoing way, we will also expect additional antibody persistence results in the second-half of this year. Then on IXIARO and military, we expect a potential new DoD contract, still towards the later part of H1, the progression of the selected preclinical programs towards clinical entry, so we will take a clear decision which one, and by when. And as we reported earlier, we are reviewing and evaluating to potentially augmenting our clinical pipeline through a program acquisition or partnering in the R&D environment. When you look at our strategy and how we see the company evolving over time, we prepared slide 23. And you see that our value proposition will gradually be extended. The additional potential growth drivers include the continued recovery of the travel market to pre-COVID levels, and beyond; new U.S. DoD contract for IXIARO; further expansion of our third-party distribution segment; and potential in-licensing or acquisition of additional clinical and/or commercial-stage products. With that, we conclude our presentation, and we hand back to the operator to take your questions.

Thank you. [Operator Instructions] We will now take the first question; it comes from the line of Maury Raycroft from Jefferies. Please go ahead, your line is open.

Hi. Congrats on the progress, and thanks for taking my questions. I was going to ask one about the Lyme disease program. So, for the Phase 3 Lyme proposed protocol modifications that would allow Pfizer and Valneva to remain on track for a 2025 filing, I'm guessing you can't provide too much into exact interactions with FDA. But can you talk about some of the scenarios or moving parts involved with being able to maintain that, the timelines?

So, Maury, hi, good day. It's of course an excellent question. You would certainly understand that, as you rightly pointed out, there is very little we can say at this point in time. And we don't want to disturb this ongoing process. It is very clear that, as we discussed previously, of course we did lose a significant number of people in the season 2023. Of course, given the seasonality, you have only a certain window where you can recruit people. And of course one scenario is just to add another season. And this is the obvious one that you already figured out yourself, and just restarting again this summer or the next tick season, 2024. And there are other, what I would call, more creative scenarios that may potentially allow still a filing, but those are in the make right now or in the discussions, and we can't comment on those.

Got it, understood. And for CHIKV, I'm wondering if there's been any new correspondence with FDA related to potential foreign advisory committee meeting? And, in looking ahead, how are you preparing for the February 2024 ACIP vote and maybe talk about how outcomes from that vote could impact your launch strategy?

An excellent question, so, first of all, we are making progress in the ongoing review process. At this point in time, there is nothing that has come up in an unexpected way. Otherwise, of course, we would have reported it. As far as the [work pack] (ph) is concerned, no decision has been taken yet as to whether a dedicated work pack for this program will be needed or not. It goes without saying that we are preparing at full speed, at full steam for such a work pack. Our teams are well-prepared, and we are putting everything together to enable a very positive work pack, should it be required. With regards to the ACIP, I mean you know that the ACIP process has been very clearly outlined. We had already a number of presentations on the program. We will continue following the path as we are being invited to present. And, of course, we do hope and do assume a positive vote as part of our launch plans for the United States.

Got it. Okay, thanks so much for taking my questions.

Thank you. We will now take the next question. It comes from the line of Evan Wang from Guggenheim Securities. Please go ahead, your line is open.

Hey, guys, thanks for taking the question. Following up on Lyme, just as you guys are having these discussions, just wondering have you seen this kind of situation before? Have FDA or EMA provided any kind of commentary or is there any precedent that gives confidence that a modification could be reached? And then I have a follow-up after.

I would say the situation with Lyme; it's in a way unprecedented because of the seasonality of the disease. Under normal circumstances, if you did not have a seasonality to be considered, you lose, for whatever reason, people in your clinical study, and then you just continue recruiting, and the recruitment takes longer. Here, we have of course the situation where you need to recognize the seasonality because otherwise you don't get the necessary case count in a placebo-controlled [field] (ph) efficacy setting. And as such, there is probably not any precedent to such a specific situation. Now, the discussion with FDA on primary endpoints, secondary endpoints, co-primary endpoints, parallel endpoints; these are discussions that I have been through in my more than 30 years of vaccine development many, many times, and this is certainly nothing unusual, and these are things that need to be based on different statistical modeling. And this is clearly something that is not new to any regulatory authority. But by the end of the day, it is always a matter of risk, benefit, and judgment. And that's all I can say at this point in time.

Got it. And I have a follow-up on chikungunya. Can you expand a little bit more on your travel commercial infrastructure? And in particular, how it compares to that of Bavarian Nordic?

So, first of all, we do have own commercial operating entities and organizations in the U.S., in Canada, in the U.K., in France, the Nordics, and Austria. And we are working with Bavarian Nordic under a commercial agreement where, in some of the markets where we have our own infrastructure, we sell Bavarian Nordic products. And in other markets where Bavarian have an infrastructure, they sell our products. As we've said previously, of course this whole collaboration is going to be under review. But for now, both parties have made a clear commitment to respect their respective contractual obligations going forward.

Great. And I had one last one on hMPV. It seems like maybe there's more emphasis on partnering. Am I interpreting that right or is there still plans to bring that into clinical-stage development?

So I would say, right now, so basically we have, as I mentioned earlier, we've reached the point of preclinical PoC completion. So, this means we need to take a clinical entry decision on this asset. But the point is that we are talking here about a pre-fusion candidate that requires an [adjuvant] (ph). And standalone hMPV does not really make sense from a product development perspective. And the first trial in men is certainly very valuable. But whoever would then later combine this asset with an RSV vaccine would need to go largely back to the drawing board because of the specifics around adjuventation. Therefore, we have said we've given it a slight pause and look whether it would not be more valuable to bring this asset, at this point already, into a partnership model with one of the RSV candidates, and therefore have a more efficient development route. Should this not be seen as a viable and value generating option, then we will certainly consider taking it into the clinic in order to increase the asset's value.

Great. Thanks, guys.

Thank you. We will now take the next question; it comes from the line of Max Herrmann from Stifel. Please go ahead, your line is open.

Hi. Thanks very much for taking my questions; three, if I may. Firstly just some financial clarity just on the COVID vaccine inventory write-off in the fourth quarter, was interested to find out what that was? Secondly, on the Epstein-Barr virus candidate, how do you view the field given the mRNA vaccines ahead of you in the clinical ready? And then just a little bit more clarity on the refund liabilities at €136 million, what do they actually -- is that to do with the Pfizer funding or what's within that, if we could get a bit more clarity on that? Thank you very much.

Max, so let me start with the non-finance question first about EBV. As you know, Valneva's strategy is certainly based, and Valneva's R&D pipeline strategy is basically based on our clear idea to have assets where we can play a differentiating role; first-in-class, best-in-class, only-in-class. So, if we entered into a space where others are more advanced. And, we will see whether we can play a differentiation game. And, you are absolutely right. There is one program in clinic development I think. But, we will evaluate our candidate. And then, take a decision before we enter the clinic of course.

Okay, understood. Thank you.

Thank you.

It brings up to the finance question.

Yes. Thanks, Max, for the question. So, first question on the COVID inventory write-off. So, basically the approach we took and we communicated previously that we have 8 to 10 million inventory of COVID -- dose -- 8 to 10 million doses of COVID vaccines in our inventory. So, the approach we took at the end of 2022 is basically take a full write-down on semi-finished finished products but also on specific raw material related to the COVID vaccine. We, of course, continue our efforts try and sell these products in the market. But, given where we are today we decided that this will be a prudent approach to wholly write-down those inventories.

With regard to your second question, refund liabilities, which is by and large Pfizer-related. There is a small historic remaining part that relates to an old used case, contract or refund liability which is related to the cost of that we did last year, but basically, the large majority of the refund liabilities is related to Pfizer.

And just on my inventory write…

Sorry, yes.

Inventory write-off, are you able to quantify it, because it's quite odd to not leasing, so I'm unclear about what the actual amount was. I mean does that mean that you have written-off the product you -- all your inventory now? or, the stuff that you plan to ship to Bahrain that you have kept a cost? Just trying and understand the implications.

Yes, so your assumption is absolutely correct. We basically rolled off everything except the remaining shipments for Bahrain. So, that will still be included in our inventory. And that's a relatively small amount. But, overall, you can assume a write off in the financial year 2022 of roughly €130 million. That goes into our cost of goods.

Okay, great. Thank you.

Thank you. We will now take the next question. It comes from the line of Rajan Sharma from Goldman Sachs. Please go ahead. Your line is open.

Hi, thanks for taking my questions. Just on the market of travel vaccine. So if you could just kind of help us understand what proportion of the revenue growth in 2022 was driven by volume versus price? And, how we should think about this dynamic into '23 and into the mid-term? And then, secondly just again kind of the commercial vaccine business. There are some additional detail in today's release which was helpful on growth margins. I am just wondering how we should think about this into 2023. Is it safe to assume that it's kind of up '22 levels? And what would be the pushes and pulls to this? And then just one follow-up on Lyme, in kind of a scenario where there is additional trials required, I just wanted to clarify if your potential contribution to those costs are capped at a certain level? Thanks.

So, let me start with the Lyme section. And then, this gives the finance team bit more time to dig the numbers up. And so, I would say on Lyme -- so first, you used the term addition studies. No, the study is ongoing. So, this means we have to study why it's not stopped. So which means that there is -- it's only a matter of when do you recruit the necessary additional people into the study because you lost some of them. And the second part is, of course, related then to what kind of -- do you keep a readout, and when do you do the readout. And this is always in relation to readout after primary immunization versus readout after priming class. So, that's more from the clinical development point of view. On the cost side of things, we have not had any discussion yet about any potential incremental costs, and this is something that will be discussed as soon as we have an agreed development plan going forward.

Yes. And then, with regards to your volume versus price question, so when we look at the IXIARO as you can see on the slide, at constant exchange rate, we look at a downside of about 18.6% versus prior year. We are looking here the upside rate to price of a plus 10%, so, the differences of course, then volume-driven. When we look at DUKORAL, we have volume upside versus the prior year of roughly 400% and then the distance to the total 600% of services per year would be price-related. And I think you had a second question, but if you could just repeat that one.

Yes, sure. It's just on the gross margin on the travel vaccines; you have some additional information in the release today. And I was wondering whether those '22 levels are kind of a fair assumption for margins going forward?

Yes, so we look at a much stronger gross margin than for IXIARO then for DUKORAL in 2022. And, as you can see, the gross margin improved significantly versus prior year. And we would expect this improvement also to continue as we continue to increase volumes.

Okay, that's fair, that's very helpful. Thank you.

Thank you. We'll now take the next question. It comes from the line of Samir Devani from Rx Securities. Please go ahead. Your line is open.

Hi, guys. Thanks for taking my questions. I think I've got three, mainly finance-related. So, the first one just on the guidance, other income €90 million to €110 million, I just wanted to confirm that that's essentially non-cash revenue recognition. So, that's the first question. And then, in terms of the Pfizer Phase 3, I want you to -- I was wondering whether you have made a cash contribution to that in 2022 and if so, maybe you can just explain, I think he previously talked about that not going through the P&L, but if you could have maybe explained where that's coming out in the cash flow. And then, the final question is just on your distribution of marketing expenses, we saw a little bit of a bump in Q4, is Q4 a good run rate, quarterly run rate going into this year. Thanks.

So, I start with the first point on guidance. So, other income as we surface is related to the PRV we expect to receive upon approval of our Chikungunya vaccine candidate, and as we expect to sell this PRV with you, it will be cash-related, because we will recognize that other income as we get to cash and just also to be very clear, we expect this to go not into other revenues with other income i.e. further down in the P&L. With regards to the Pfizer Phase 3, cash, I mean the way the agreement works is that we basically pay every quarter our share to the trial, and indeed to your point that does not go into the P&L but it would go on the against the balance sheet against the refund liability which is talked about previously in Max's question. Then distribution and marketing expense, so, what you see in Q4 is an increase in yield versus prior year's previous quarters which is primarily driven Of course as we get ready with our, we get prepared, we prepare for chikungunya I think candidate launch. Also of course, related to overall, commercial activities ramping up as the markets come back, and it's safe to assume that you could see further increases there as we get ready with our commercial infrastructure in our strengthening the commercial infrastructure in view of the new launch.

Okay, that's great. Thanks very much.

Thank you. We will now take the next question. It comes from the line of Suzanne Van Voorthuizen from VLK. Please go ahead. Your line is open.

Hi, thanks. Yes, it's [Rohan] (ph) calling in for Suzanne. I just have one confirmatory question, so since you've mentioned that you've written off all COVID-19 inventory in 2022, if I understand correctly that we will see no financial impact for the current year?

I mean we will continue to have some R&D expense as we continue to finalize certain clinical trials that we have had started in the past, we will not initiate new clinical programs, of course, but we do need to ramp up the clinical trials at that cost is included in our R&D expense. We do not expect further inventory write-offs to that point. Of course, we mentioned also the final shipments to Bahrain. So, that was of course drive revenues. So, that's basically what we expect for 2023 in terms of COVID hitting there.

Okay, thanks. And then, one final question. So, last year's R&D day, you presented on various preclinical programs, such as Zika, hMPV, and UBC, which we expect in terms of updates on these programs during this year? Thanks.

Your line is on mute, please.

Our objective is to have a clinical entry by the end of this year, very, very early next year, but it's one programs or two programs. It's still something that we're going to decide out of our own pipeline, but we will definitely informed markets, which program is we are expecting to enter into clinics. So, this would certainly be a new for this year. And then, we have this ongoing point about reviewing potential additional external opportunities to inject in our clinical pipeline since we have clinically relevant capacity and capability. And that's certainly an ongoing process as reported in the expected news flow and catalyst section.

Thank you. [Operator Instructions] We will now take the next question. It comes from the line of Rajan Sharma from Goldman Sachs. Please go ahead. Your line is open.

Hi, thanks for taking my additional questions. I just wanted to follow-up on the BD M&A piece or the external kind of sources of innovation. Would your preference on that be kind of a knowledge platform that you potentially don't have in house right now, or would you be looking at specific assets? And then, just secondly, just to follow-up again, on my initial question on kind of volume versus price, so I was just wondering, I guess I could ask in a different way, were you able to kind of take price increases on DUKORAL third-party products on IXIARO in 2022, and do you expect to be able to do that in 2023? Thank you.

Yes, thanks, Rajan. Let me start with your second question. So, yes, we did increase pricing across the board for basically most -- IXIARO -- those are some of our third-party products. And we of course are also looking at continuous electric price increases in certain countries going forward.

Can you repeat your first question, please?

Also, just in terms of kind of external sources of --

Okay, the external influx in that, so basically I mean you know that Valneva is technology agnostic company, right. So, we are not a technology company we have, we go by indication, we go by indication where we are looking into indications where we can still play a pioneering role I mentioned earlier, first only bet. Valneva has historically worked with literally all vaccine technologies out there except mRNA. Of course, we will also be open to work on a specific indication on mRNA, but it's not our interest to acquire a technology company or a technology platform or going back or becoming all of a sudden a technology company. So, we will go by a specific indication and by specific assets.

Okay, that makes sense. Thank you.

Thank you. There are no further questions at this time. I would like to hand back over to Thomas Lingelbach, CEO for final remarks.

This one I hand over to my friend, Josh.

Yes. All right, well, thank you, everybody for your time and participation today. Please note, an archived version of today's webcast will be made available later today. And a PDF of the slides presented during today's call is already accessible on the company's Web site. We look forward to a productive 2023 and with welcoming you back for our next conference call in the not so distant future. Thank you and enjoy the rest of your day.

That does conclude our conference for today. Thank you for participating. You may all disconnect.