First Berlin – Valneva SE Research Update (25/06/2019)

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 5.50 price target.

GlaxoSmithKline (GSK) and Valneva have mutually agreed that GSK will not exercise its option to participate in phase III development of Valneva's Lyme disease vaccine candidate, VLA15. In our view GSK's decision is not surprising given that it previously waived options to take part in Valneva's C. difficile and Zika development programmes and also in view of its current policy to allocate capital to fewer areas. The consequence of GSK's decision regarding VLA15 is a mutual agreement between the two companies to terminate their Strategic Alliance Agreement (SAA). Although the termination of the SAA will have a net negative 2019 P&L impact of €5m, management is leaving 2019 guidance for total revenues and EBITDA unchanged at €125-135m and €5-10m respectively. This suggests that product sales are developing well. Given that the VLA15 phase III trial will cost ca. USD350m, we continue to expect that Valneva will look for a partner to co-finance it. We are leaving our forecasts unchanged and maintain our Buy recommendation and price target of €5.50.