First Berlin – Valneva SE Research Update (09/11/2018)

First Berlin Equity Research has published a research update on Valneva SE (ISIN: FR0004056851). Analyst Simon Scholes reiterated his BUY rating and maintained his EUR 5.40 price target.

Valneva yesterday reported 9M/18 numbers and held a conference call for analysts. Although total revenues were 6.5% below our forecast, lower R&D and marketing and distribution costs than we had modelled meant that EBITDA was 12.4% above our projection. Total revenues climbed 2.6% to €78.3m (9M/17: €76.3m; FBe: €83.8m) while EBITDA came in at €6.1m (9M/17: €12.3m; FBe: €5.4m).The shortfall between our total revenue forecast and the reported revenue number was largely attributable to a larger seasonal decline than we had expected in sales of the Japanese encephalitis vaccine, Ixiaro. However, Ixiaro sales were up 14.3% at constant exchange rates (CER) after nine months and management has reaffirmed its full year double digit sales growth guidance for the product. The company has also reiterated full year group product revenue guidance of >€100m (implies growth of at least 8.0% vs. 2017). Given that the average USDEUR and CADEUR FX rates so far this year are respectively 7% and 5% lower than during the equivalent period during 2017, this implies that, at least in constant currency terms, Valneva will reach its long term target of double digit annual growth in product sales. Full year R&D guidance is now €25-30m (previously: €30-35m) but management emphasises that all clinical programmes are on track and that the reduction in guidance for this figure reflects the phasing of costs relating to external CRO and CMO partners as well as more efficient and focused use of resources. Full year EBITDA guidance is unchanged at €5-10m. Near-term newsflow should be particularly abundant, with the initiation of the phase II trial in Lyme disease and phase I data from the Chikungunya and Zika trials all due before the end of this year. We have made only minor adjustments to our valuation model and post 2018 forecasts and continue to see fair value for the Valneva share at €5.40. We maintain our Buy recommendation.