First Berlin Equity Research has published a research update on Valneva SE (ISIN: FR0004056851). Analyst Simon Scholes upgraded the stock to BUY and increased the price target from EUR 12.00 to EUR 12.50.
Last week Valneva announced that EU member states will purchase 1.25 million doses of its COVID-19 vaccine VLA2001 in 2022, with the option to purchase an equivalent quantity later this year also for delivery in 2022. Valneva will retain inventory for potential additional supply to EU member states should demand increase. We believe that the volume stipulated by the amended purchase agreement is close to the preliminary indication from the European Commission in June. The original November 2021 Advance Purchase Agreement between Valneva and the European Commission stipulated firm delivery of ca. 24.3m doses and an option on a further ca. 35.7m doses. Valneva has announced that in the light of the low order volume, it is evaluating whether to continue development of its COVID-19 programme and associated operations. Management has stated that the company will invest in further development of the current or second-generation COVID-19 vaccine only if it reaches agreement with additional customers and receives the necessary funding over the summer. The low uptake of VLA2001 to date suggests to us that sufficient additional orders will not be forthcoming and that the programme will be terminated. We now model aggregate deliveries during 2022 and 2023 of 11.5m doses (previously: 13m doses). However, we now expect over half of these doses (previously: 0 doses) to be delivered to less developed markets at a lower average price than to developed markets. Despite the low VLA2001 order volume from the EU, management still see 2022 revenue reaching the lower end of the €430m – €590m guidance given with the full year results at the end of March. This expectation is based in part on revenue recognition of sums linked to the EC and UK VLA2001 supply contracts and currently booked as contract and refund liabilities. We have revised down revenue forecasts for VLA2001, but this is outweighed in our valuation model by lower R&D costs in connection with the halting of the VLA2001 programme. We now see fair value for the Valneva share at €12.50 (previously: €12.00). We raise the recommendation from Add to Buy.