First Berlin Equity Research has published a research update on Valneva SE (ISIN: FR0004056851). Analyst Simon Scholes upgraded the stock to BUY but decreased the price target from EUR 12.00 to EUR 8.90.

2023 guidance for revenue and other income of €220-260m is below the equivalent 2022 figure of €373.5m. However, over €200m of last year’s number was non-cash, mainly related to the COVID-19 vaccine agreements with the UK and the EU. 2023 guidance is all-cash. Disruption to the phase 3 trial of the Lyme disease vaccine candidate VLA15 has created uncertainty whether Pfizer can keep to the original schedule of regulatory submissions to the FDA and EMA in 2025 and also whether Valneva will face any additional financial obligations. However, we think the exact timing of submissions is secondary in comparison with VLA15’s overall prospects for success. These remain very good. VLA15 demonstrated strong immunogenicity in both adults and pediatric patients at the phase 2 stage and is the only Lyme disease vaccine candidate currently in clinical development. Pfizer and Valneva also look set to avoid the pitfalls which led to the 2002 withdrawal of GSK’s LYMErix, the only previously commercially available Lyme disease vaccine. The Lyme disease vaccine market is expected to be worth USD1bn by 2030. Meanwhile, we expect FDA approval of VLA1553 by the end of August this year. VLA1553 is so far the only chikungunya vaccine candidate to have met its phase 3 trial endpoint. The value of the chikungunya vaccine market is put at USD500m by 2032 (not including potential government stockpiling for outbreak preparedness). 2022 cashflow from operations of €-245.3m was heavily influenced by spending on the now halted manufacturing of the VLA2001 COVID-19 vaccine. YE/22 cash was €289.4m. Assuming no additional VLA15 phase 3 trial obligations and excluding pipeline acquisitions, we expect reduced cash consumption going forward. With these caveats, management believes the current cash position is sufficient to fund operations through at least the end of 2024. We raise our recommendation from Add to Buy but lower the price target from €12.00 to €8.90 to reflect the rise in interest rates since our last study of 18 August 2022, a higher share count, the company’s lower net cash position as well as the uncertainty surrounding VLA15 phase 3 disruption.