Valneva Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 13, 2026

Key Takeaways

  • Positive Sentiment: Lyme vaccine regulatory progress advanced: Pfizer has filed the candidate with the European Medicines Agency and is working with the FDA toward a planned BLA submission, with regulatory decisions expected within the next 12 months. Valneva highlighted efficacy above 70%, though the initial analysis missed the lower bound of its confidence interval.
  • Positive Sentiment: Valneva ended the first half with €121.5 million in cash and reaffirmed 2026 product-sales guidance of €135 million–€150 million and total-revenue guidance of €145 million–€160 million. Restructuring and cost-saving measures are expected to improve cash flow and earnings in the second half and beyond.
  • Negative Sentiment: First-half product sales fell to €64 million from €91 million, while total revenue declined to €65.8 million from €97.6 million. The operating loss widened to €49.9 million and adjusted EBITDA loss to €40.1 million, partly due to lower sales and one-time IXCHIQ manufacturing cancellation fees and inventory impairment.
  • Neutral Sentiment: IXCHIQ travel-market uptake remains slow, prompting Valneva to evaluate a greater focus on endemic markets. Brazil has approved Butantan’s locally manufactured version, and a government pilot campaign has vaccinated more than 50,000 people, with a target of at least 100,000.
  • Neutral Sentiment: Results from the shigella vaccine’s infant immunogenicity/safety study and adult human-challenge study are expected in the coming months. Valneva will use the data to determine whether to advance or optimize the program’s dose, schedule, or formulation.
AI Generated. May Contain Errors.
Earnings Conference Call
Valneva Q2 2026
00:00 / 00:00

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Operator

Good day, and thank you for standing by. Valneva presents its half year 2026 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Joshua Drumm, VP of Investor Relations. Please go ahead.

Joshua Drumm
Joshua Drumm
VP of Investor Relations at Valneva

Hello, and thank you for joining us to discuss Valneva's financial results for the first half 2026 and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the six months ended June 30, 2026, which were published earlier today, available within the financial report section on our investor website. I am joined today by Valneva CEO, Thomas Lingelbach, and our CFO, Peter Bühler, who will provide an overview and update on our business as well as our financial results. There will be an analyst Q&A session at the conclusion of the prepared remarks.

Joshua Drumm
Joshua Drumm
VP of Investor Relations at Valneva

Before we begin, I would 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 information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, August 13, 2026, and Valneva undertakes no obligation to revise or update forward-looking statements except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Thank you so much, Josh. Good day, everyone. Let me start off with a couple of introductory remarks. The first half of 2026 has certainly been marked on our effort to focus on enhancing our financial position, especially after the initial Lyme phase III VALOR results and the resulting uncertainty. We have been able to generate a strong cash position with more than EUR 120 million in cash. This is a result of our disciplined cash management and the proceeds from the recent offering. We also included a broad restructuring program, and we expect the positive P&L and cash flow impacts in the second half of this year and of course, beyond. This included a reduction in our workforce, a reprioritization of projects, activities, and a focus on our core operational business.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

When we look at our general commercial business performance, we generated more than EUR 60 million in total product sales. We have reaffirmed the guidance because the half year sales performance is in line with our anticipated pacing of product sales throughout the year 2026. We have had a number of adverse EBIT impacts in the first half of the year. Peter will explain those in greater detail. Most of them are really one-off effects, and are non-recurring. But the most important thing and the most exciting thing is that Pfizer continues to be very positive about the prospect of the Lyme disease vaccine. They recently announced during their earnings that they expect regulatory decisions for the Lyme disease vaccine candidate in the next 12 months, which is really great news. Now turning to our general business update, I would like to start with Lyme.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

You know that the vaccine showed a very strong point efficacy, greater than 70%, a very good safety profile. As we discussed multiple times, we had a miss on the lower bound of the 95% confidence interval. However, we have to note that we see here with this product candidate, a very significant, meaningful efficacy. We had also 95% confidence interval lower bound greater than 20% in the second pre-specified analysis. All of that in combination with the huge unmet medical need, the totality of clinical evidence, and the fact that we really expect a positive health economical benefit for a potential prophylactic solution, increases our confidence in the future prospect of a potential Lyme vaccine. There is a huge unmet medical need. We have discussed this many times in the past.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

The annual burden of disease is increasing. We have been noting recently close to 500,000 cases in the U.S. Europe, numbers are still significantly underreported because not all countries have respective surveillance systems, but certainly north of 100,000 cases every year. Some of them come along with very severe manifestations, in the order of 10%-30%, carditis, neuroborreliosis, arthritis. Unfortunately, 5%-10% of cases continue to have persistent symptoms even following treatment. As such, we really believe that LB6V, how it is called now, is a compelling opportunity in a highly underserved market. We could really leverage a first-mover advantage. The perception around a need for Lyme vaccination is high. We have the only Lyme disease vaccine candidate in late-stage clinical development, and it could become, if licensed, the first potential Lyme vaccine in nearly 30 years.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

The vaccine is based on a proven mode of action. We cover the six key serotypes prevalent in the Northern Hemisphere. The technology is based on modern state-of-the-art recombinant protein technology. We have a broad addressable population. At this point in time, we showed in the study results for people above five years of age. I mentioned already that we see a growing disease burden. With global warming, the tick population across all the high-risk areas of Lyme disease are steadily increasing. We have an excellent partner. There is a huge strategic fit with Pfizer's vaccine franchise. Hence, we anticipate a very attractive commercial prospect and dynamic. All in all, we share Pfizer's positivity on the prospects of that vaccine. We really hope that we can get this vaccine to licensure on both sides of the Atlantic.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

On IXCHIQ, as part of our overall restructuring process, and also reprioritization of our key strategic focus area, we shift more and more towards the IXCHIQ access in countries where there is highest risk for chikungunya infection, meaning primarily low and medium income countries. We are currently executing on a significant number of post-marketing activities, all supported by our great partner, Takeda. We have a pilot vaccination campaign ongoing in Brazil. We have more than 50,000 people already vaccinated today. These are adults 18-59 years of age. We have a study ongoing to confirm effectiveness and optimize description of the safety profile, which of course, over time could potentially even lift the highly restrictive warnings, precautions, and other indications we have right now in our label for travel.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

All of that, of course, to ensure greater access, and we are focusing a lot right now on expanding our network of manufacturing distribution partners in low and middle income countries. We hope that we will be able to even announce something towards the latter part of the year. The locally manufactured vaccine in Brazil by our partner, Butantan, has now been approved, and is expected to be incorporated into Brazil's public health system in the near future. We in-licensed an interesting candidate against shigellosis. It's the most clinically advanced tetravalent shigella vaccine candidate. Right now, we are running two studies, one in infants, the other one in adults. One is an immunogenicity and safety study, the other one is a controlled human infection model study, so pilot efficacy through human challenge. We expect for both studies results in the coming months.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Based on the results, we will decide on the next development steps for that vaccine. Of course, there is still a significant market opportunity for shigellosis, especially given that it's the second leading cause of fatal diarrheal disease, and estimated with 165 million cases and 600 deaths annually. Mostly, of course, in children in LMIC countries. There is also a very interesting opportunity to either in a standalone setting or in a combination vaccine setting to work towards a product covering diarrheal vaccine for travelers. With this short update on our core R&D activities and general business development, I would like to hand over to Peter to provide you with the financial report.

Peter Bühler
Peter Bühler
CFO at Valneva

Thank you, Thomas. First looking at product sales. Product sales reached EUR 64 million compared to EUR 91 million in the first half of 2025. Sales excluding third-party products decreased by -18.3%, which is prior year at constant currency. This decrease was primarily due to product-specific effects, which I will discuss shortly. IXIARO sales reached EUR 44 million compared to EUR 54.7 million in the prior year's first half. The year-over-year decrease primarily reflects the transition to a new distributor in Germany in January 2026, as well as product sales phasing, notably the timing of deliverables to the U.S. Department of Defense. Shipments to the U.S. Department of Defense in the first half of 2026 continued under the one-year contract signed in January 2025.

Peter Bühler
Peter Bühler
CFO at Valneva

We expect to sign a new contract in the coming months and begin recording sales under this new contract in the second half of the current fiscal year. Foreign currency fluctuation also had an adverse impact of EUR 1.5 million on IXIARO sales during the first half of 2026. DUKORAL sales reached EUR 14.7 million compared to EUR 17.4 million in the first half of 2025. Prior year sales benefited from one-time sales associated with the supply of DUKORAL doses to Mayotte in response to a cholera outbreak. In addition, sales in the first half of 2026 were adversely affected by the distributor transition in Germany in January 2026. Similar to the first quarter, existing inventory transferred from the previous distributor were sufficient to meet market demand during the period. Furthermore, there was a slight weakening of the travel market in certain geographies due to geopolitical factors.

Peter Bühler
Peter Bühler
CFO at Valneva

IXCHIQ sales reached EUR 4.4 million compared to EUR 7.5 million in the first half of 2025. While current year sales include the first shipment of drug substance to our Brazilian partner, Instituto Butantan, the prior year benefited from 40,000 doses sold to French island La Réunion in response to a major chikungunya outbreak, as well as travel sales in the United States. In light of the slow product uptake in travel, the company is currently evaluating its future commercial strategy for IXCHIQ, including a potential focus on the endemic markets. Third-party products decreased substantially from EUR 11.4 million in the first half of 2025 to EUR 1 million in the first six months of 2026. This planned reduction is the result of the key third-party distribution agreements that ended in December 2025 without renewal. Moving on to the income statement on the next slide.

Peter Bühler
Peter Bühler
CFO at Valneva

Total revenues reached EUR 65.8 million versus EUR 97.6 million in the first half year of 2025. The decrease is mostly related to the lower product sales. Last year's other revenues also included a one-off upfront payment related to the licensing agreement with the Serum Institute of India for our single-shot chikungunya vaccines. Looking at expenses, cost of goods and services for the first half of 2026 reached EUR 59.5 million compared to EUR 47.2 million during the same period last year. Cost of goods in the first half of 2026 were impacted by a number of non-recurring and exceptional effects. In particular, a provision of EUR 9.7 million in cancellation fees related to external manufacturing commitments for IXCHIQ and a EUR 4.5 million non-cash impairment of excess IXCHIQ inventory resulting from lower than anticipated sales.

Peter Bühler
Peter Bühler
CFO at Valneva

In addition, cost of goods were adversely impacted by changes in manufacturing schedule and volumes and related adverse variances, as well as higher idle costs following the transfer of manufacturing to our Almeida facility. IXIARO gross margin reached 56.4% compared to 65.5% in the prior year. The decrease is mainly related to lower volumes and an unfavorable change in the manufacturing schedule. Last year's IXIARO gross margin was exceptionally high due to high manufacturing volumes and related favorable overhead absorption. DUKORAL generated a gross margin of 24.7% compared to 52.9% in the first half of 2025. The gross margin of DUKORAL in the first half of 2026 was adversely impacted by higher than usual failed batch costs and inventory revaluation. In contrast, the prior year gross margin benefited from a favorable overhead absorption due to manufacturing timing and higher volumes.

Peter Bühler
Peter Bühler
CFO at Valneva

The IXCHIQ gross margin was negative due to the one-time cancellation fees provisioned in the second quarter, as well as the inventory write-down mentioned previously, which importantly had no cash impact. Research and development expense decreased from EUR 32.4 million in the first half of 2025 to EUR 30.2 million in the first half of 2026. That decrease is mainly a result of reprioritization and rescheduling of R&D activities. Marketing and distribution expenses decreased significantly from EUR 20.3 million in the prior year to EUR 13.5 million in the first half of 2026. The decrease is related to a planned reduction in advertising and promotion related to IXCHIQ, as well as reduced personnel, warehousing, and distribution cost. G&A expenses decreased to EUR 15.4 million compared to EUR 19 million in the first half of 2025.

Peter Bühler
Peter Bühler
CFO at Valneva

The reduction was a result of lower personnel cost and savings in advisory and professional fee services. The company implemented the restructuring program in June 2026, and operating expenses in the first half year include a one-time cost of EUR 3.2 million related to that program. Savings are expected in the second half year and beyond. In the first half of 2026, Valneva reported an operating loss of EUR 49.9 million compared to EUR 16.8 million in the prior year. Adjusted EBITDA loss in the first half of 2026 reached EUR 40.1 million compared to EUR 6 million in the prior year. Before moving to the outlook and guidance, a word on cash. As mentioned by Thomas at the beginning of the call, cash at June 30th was EUR 121.5 million compared to EUR 109.6 million at the end of fiscal year 2025.

Peter Bühler
Peter Bühler
CFO at Valneva

Cash used in operations in the first half of 2026 was EUR 13.7 million compared to EUR 10.9 million in the first half of the prior year. Now moving to the next slide, to slide 18. We confirm our financial guidance for the fiscal year 2026 with product sales of EUR 135 million-EUR 150 million and total revenues of EUR 145 million-EUR 160 million. We expect the signing of a new contract with the U.S. Department of Defense for the supply of IXIARO in the coming months. We expect our commercial business to continue generating positive cash flow and the restructuring program implemented in June will have a positive impact on the P&L and cash flow in the second half of the current fiscal year and beyond. We expect product-related gross margin to improve in the second half following the non-recurrent effect in the first half of the year.

Peter Bühler
Peter Bühler
CFO at Valneva

We continue to see potential to become financially self-sustainable starting in 2026, pending successful regulatory approval of the Lyme disease vaccine and subsequent commercialization by Pfizer. With this, I hand the call back to Thomas.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Thank you so much, Peter. Peter said 2026, we mean 2027, of course. Also it would be nice to be already in 2026 financially self-sustainable. Let me close by giving a little bit prospects on how we see the future of Valneva. Of course, provided and subject to Lyme success. Going forward, we would really like to leverage the company's core strengths in vaccine development to deliver greater long-term value. We would like to build scale in the R&D pipeline, once Lyme has been out of pipeline and hopefully successfully brought to market. We see here a clear opportunity for strategic in-licensing to augment our clinical stage pipeline. And what we would like to do is really to create a risk-balanced portfolio of innovative specialty lifecycle and high-value vaccine assets, which are attractive and go very much beyond our prior focus on vector-borne diseases.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

We are working with a team to target new assets based on defined criteria and new targeted disease areas. In parallel, we are advancing our internal earlier stage candidates, such as EBV or ETEC, a broader enteric disease covering candidate program. We would like to put also emphasis on focusing on reducing antimicrobial resistance targets. All of that will be flanked by further optimizing our integrated operations. We have kicked off a number of initiatives already as part of our restructuring program this year. This mainly focuses on adapting and adjusting our value chains of custody, make versus buy, external manufacturing partners, but also a continuous focus on optimizing our commercial models. All of that with one clear objective, namely to maximize cash from our integrated operations and commercial business in particular. All in all, we see a very nice prospect for Valneva going forward.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

But for now, it's all about Lyme and we have to wait until we hopefully see further positive developments on the Lyme vaccine candidate while executing thoroughly on our base business and continue our focus on strong cash management and disciplined cash management. With that, I would like to conclude the presentation and hand back to the operator to take your questions.

Operator

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and again. One moment for our first question. This question comes from Tara Bancroft from TD Cowen. Please go ahead.

Tara Bancroft
Tara Bancroft
Analyst at TD Cowen

Hi. Good morning, everyone. Thanks for hosting this call and taking our questions. I was hoping maybe you could give us any more detail or thoughts or feelings that you have on a regulatory update. I know Pfizer still sounds optimistic about it and a decision in the near to midterm over the next 12 months, but is there anything else that you can add to the discourse that you've had with Pfizer and/or regulators? That would be really appreciated. Thanks.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Pfizer are making very good progress with the regulatory agencies, and we hope that we will be able to announce next steps soon. That is all we can say at this moment in time specifically.

Tara Bancroft
Tara Bancroft
Analyst at TD Cowen

I see. Okay. Totally understood on that kind of commentary. Maybe then I can ask a little bit more detail about some of the scenarios that could possibly come up. One in particular that might be really helpful to get your thoughts on is the potential for you and Pfizer to maybe run another phase III program or even a post-marketing surveillance study. What I am hoping you can help us understand is maybe the economics of those avenues, like what you would be responsible for, and how does that factor into your capital allocation plans? Thanks.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah. It is a good question, Tara. The existing agreement with Pfizer includes that Valneva is sharing development costs to licensure. Everything that comes beyond licensure is currently not part of the contractual agreement with Pfizer. Whether or not we will further invest in Lyme on the points you mentioned is something that may be discussed at a later point in time, but definitely not before we see the product hopefully being licensed in the respective jurisdictions.

Tara Bancroft
Tara Bancroft
Analyst at TD Cowen

Great. Thanks so much.

Operator

Thank you. We are now going to take our next question, and this one comes from Maury Raycroft from Jefferies. Please go ahead.

Maury Raycroft
Maury Raycroft
Analyst at Jefferies

Hi. Congrats on the progress, and thanks for taking my questions. I was going to ask one on shigella. Wondering if you can provide more color on what is gating the update. Is it operational related to the clinical study or data analysis, or are you awaiting additional regulatory clarity on the potential development path? When the data are disclosed, should we also expect clarity on the path forward? What are the latest scenarios that you're considering there?

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah. Thanks for your question, Maury. First of all, we've had a few delays on the program. You know that the studies are still conducted by LimmaTech. LimmaTech recently got acquired by ViiV Healthcare. There are couple of key cleanup steps right now, but we are in the last and final steps on data validation and putting the conclusions together, final analysis, et cetera. This is not going to take a long time until we will be able to disclose. Now, what do we expect? Please remember what we said at the very beginning. We like the fact that we run a controlled human infection model, meaning a human challenge, and the human challenge will give us a very clear understanding about the efficacy of the vaccine. Of course, it cannot be decisive or conclusive, but it's highly indicative.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

It will also provide us with a view on what is the immunological threshold that we need to achieve to see a level of protection and at which level of protection. The flanking immunogenicity study in children will clearly provide us, A, with safety, which is very important, and it will also give us a first feel for how is the immunological profile in children as compared to adults. Of course, although it's not a direct head-to-head comparison possible, it will also provide us with a good indication. We will take those two data packages together, and then we will see whether this is already good enough to proceed to the next development stage or if there is a need to optimize. This could be an optimization on dose, schedule, formulation.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Our objective is to announce the next development steps, either with the data or very shortly thereafter. Hope this answers your question.

Maury Raycroft
Maury Raycroft
Analyst at Jefferies

Yeah, that's helpful. Do you need some regulatory feedback to do that then, or?

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Say it again.

Maury Raycroft
Maury Raycroft
Analyst at Jefferies

Do you need some regulatory feedback to?

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah, we have a group of regulatory advisors with whom we are working. We are currently not expecting to seek a direct regulatory advice from the relevant regulatory bodies, because we had prior discussions, and I think for us it's pretty clear what the potential expectations would look like.

Maury Raycroft
Maury Raycroft
Analyst at Jefferies

Got it. Okay. Maybe just one quick one for Lyme. I know you can't say a whole lot about where Pfizer's at with the process, but I'm just wondering for the U.S. regulatory path versus the European regulatory path, can you say if those are both moving in parallel or is it more sequential where you want some clarity from the U.S. before you can do an update for European status?

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

I think both activities are progressing very nicely. These are two independent processes, and there is, at this moment in time, I would assume that Europe probably goes first. But Pfizer is working closely with the FDA in support of its planned BLA submission for the Lyme disease vaccine candidate.

Maury Raycroft
Maury Raycroft
Analyst at Jefferies

Got it. Okay. Thank you for taking my questions.

Operator

Thank you. We are now going to move to our next question. This question comes from the line of Vamil Divan from Guggenheim Securities. Please go ahead.

Analyst at Guggenheim Securities

Hey, guys. Good morning. This is Edward on for Vamil. Just maybe a couple more questions online, if I may. First, it sounds like Pfizer has told us that they have filed in Europe, but not yet with the FDA. They are still in conversation. So I am wondering if you can share any details on your learnings or on why they decided to proceed that way. Then the second question is, are there any differences in how the European agency and the FDA look at vaccine data in general and VLA15 specifically that you can highlight for us that would be pertinent here? Then maybe to what extent the European filing do you think that would de-risk the FDA filing? Thanks.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah. First of all, yes, we can confirm that Pfizer filed with the European Medicines Agency. They disclosed that with two analysts after their last earnings. As such, we are, of course, very happy about this step. As I mentioned, following the data, they have clearly advanced the regulatory processes. As I mentioned earlier, these are two independent agencies. Also, we know from the past and our own history that there are, of course, close interactions and communications in between those agencies. I would not speculate right now about why one earlier, the other later. I would say let us celebrate this progress. As we said in the past many times, there is a huge medical need on both sides of the Atlantic. There is a significant commercial opportunity on both sides of the Atlantic.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

In one of the recent analyst reports, it was clearly articulated that the market is expected to be probably the same size, which is what we have been stating for years as it being the Valneva expectation. As such, we are quite pleased about progress. As I said, we are looking forward to how Pfizer are going to conclude with the FDA in support of their planned BLA submission for the Lyme disease vaccine candidate.

Analyst at Guggenheim Securities

Okay, thanks. Maybe just on how your understanding of how European versus FDA regulators look at sort of the vaccine data and maybe VLA15, if there is anything we should be aware of in just how these two different agencies approach the data and what the bar is, how they think about the efficacy safety bar there?

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

I do not know specifically whether there are any differences in how they are going to look at the data. I mean, the data are what the data are, right? We have safety data, we have efficacy data, we have immunogenicity data, and the data are the same. Of course, all agencies, and this is not Lyme specific, and I say this as someone who has been now in vaccine development for more than 30 years, they all look at the same. They look at the totality of clinical evidence. They look at risk benefits, health economical benefits, underlying mode of action, scientific fundament. So I am not necessarily assuming that they look differently at the data. There are nuances, and we know it from, for example, our tick vaccine, which was the last vaccine that we brought from bench to licensure.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

That, of course, when it comes to details on statistical analysis, to details on potential post-marketing commitments or post-marketing pediatric development routes, there are slight differences here and there. But I have never seen in my history that there were material differences in how the two regulatory bodies you cited were handling applications.

Analyst at Guggenheim Securities

Great. Thank you so much.

Operator

Thank you. We are now going to take our next question, and this one comes from Suzanne van Voorthuizen from Kempen. Please go ahead.

Suzanne van Voorthuizen
Analyst at Kempen

Hi, team. This is Suzanne. Thanks for taking my questions. I have one on the Valneva ambition from here. It seems like you are gravitating to a more R&D or biotech-driven identity rather than a commercial focus. Can you elaborate to what extent this strategic direction depends on Lyme being successful? Or phrased differently, how do you envision to walk this future path independent of the fate of the Lyme program? Then I have a small question on the sale of the site in France next to the EUR 6 million in proceeds. Does this also bring an ongoing cost reduction of a certain degree? Thank you.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah. Hi, Suzanne. You are absolutely right. We have always seen, and we see our commercial business in a way being a top skate, right? It is important to have a fully integrated model because the capabilities that we have on the commercial side, on the industrial side, are clearly beneficial for the vaccine development. As such, we see a value in staying fully integrated. But at the same time, the key purpose of our commercial business is not to focus on top-line growth or augmenting strategically. By the end of the day, we would like to take the cash out of our commercial business and reinvest it in R&D. Therefore, our focus will be really to maximize cash generation from the commercial business going forward.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

We believe we are one of the very, very few remaining pure-play vaccine companies that have a proven expertise in bringing novel vaccines from bench to licensure, and we would leverage that. Now, the capacity, I would say, we have to invest, of course, depends heavily on Lyme success. Because you know that the economics from the deal with Pfizer are favorable. You know that besides milestones, the royalties from Lyme would, of course, go straight down to the bottom line, and as such, could allow us to invest significantly in enhancing our pipeline, both organically as well as strategically, while even potentially being completely financially self-sustainable. We believe that this is a very appealing strategy. It's a very appealing strategic outlook. But as you know that many, many times, it's all about Lyme.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

And of course, it depends on the Lyme licensure, be it Europe, U.S., both or just one, and the commercial success of this vaccine then later on. But we believe overall, strategically, yes, there is a benefit. Coming to your question on Nantes, yes, as part of our restructuring program that Peter mentioned earlier, and I mentioned it too, we have also consolidated all of our R&D operations into Vienna, which means that all R&D is now centralized in Vienna, and we shut down the R&D operations we had in Nantes. This consolidation brings efficiency and cost reduction. This is something that, of course, we don't see immediately because it comes over time. We had significant redundancy costs and restructuring costs.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

But this is certainly something where we see a significant benefit in the future to come, besides the fact that we disclosed in the half-year report that, of course, we get also some proceeds from the sale of the building that we are now executing on.

Operator

Thank you. We are now going to move to our next question. This question comes from Shyam Kotadia from Goldman Sachs. Please go ahead.

Shyam Kotadia
Shyam Kotadia
Analyst at Goldman Sachs

Hi there. Thank you for taking my questions. Two on the modeling side of things. You mentioned your ongoing restructuring program. I just wanted to check, how should we be thinking about SG&A and R&D for the remainder of the year, especially noting the SGA came in lower than expectations? I can see that linked to that, you no longer call out the 25%-35% reduction in OpEx versus 2025 that you did in your priority. Does that hold? That is the first question. Then the second question is on what is the realistic expectation for gross margin in second half 2026? I realize you are not guiding on it specifically, but could you help us understand how it could compare to last year, given that you are mentioning an uptick there? Thank you.

Peter Bühler
Peter Bühler
CFO at Valneva

Yeah. Hey, thanks for the question. Let me first get into your questions on the restructuring and the impact on R&D and SG&A. You saw on SG&A the particular trend that started already last year when we did some efficiency improvements. It continues this year, and we expect clearly continued efficiency in SG&A spend. I think what you see in the first half year is in a way what we will continue to see in the future. As I said, there were some also one-off costs in there that we will, of course, not have anymore. We eliminated a number of positions. Of course, in H1, you do not see an impact of that, and you will see that going forward. I think similarly on R&D, we would expect to see in the second half year the decrease in cost.

Peter Bühler
Peter Bühler
CFO at Valneva

To your point, yes, we did provide a guidance in the last press release about over rough guides on where we see costs going versus last year, and that still holds true. We have not confirmed it. We have also not revised it, which means it still holds true. On gross margin, yeah, as you understood, there was a lot of one-off events and also some non-cash effect in the first half year. In the second half year, we clearly expect a much better gross margin than in the first half year. I would say overall for the year, we will probably not get exactly to where we were last year, but we will get certainly much closer to the full-year gross margin we recorded last year. Then I would also expect positive trends getting into 2027.

Shyam Kotadia
Shyam Kotadia
Analyst at Goldman Sachs

Thank you.

Operator

Thank you. We are now going to take our next question, and this one comes from Simon Scholes from First Berlin. Please go ahead.

Simon Scholes
Analyst at First Berlin

Yes, good afternoon. Just got a question on IXCHIQ. The local version of the IXCHIQ vaccine has now been approved in Brazil. I was wondering if you could give us some indication of how long it might be before the start of commercial sales of the vaccine in Brazil.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah. So basically, our partner, Butantan, are currently in the midst of the launch planning. Therefore, I would consider it a bit too early to really talk about, I would say, commercial prospects. There is a clear desire to include chikungunya vaccine into the healthcare system. There is a significant opportunity, both public as well as private markets in Brazil. You know that when we look at the demand that we have seen or we are seeing from our drug substance supplies to Butantan, and we recorded in the first half the first revenues from drug substance sales, because remember, the locally produced product means we are shipping drug substance, and they turn it into drug product and final product.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Just by the way of what we see there, we really expect this to become a very significant opportunity. But it's too early and I don't want to throw out numbers here without having a clear confirmation from our partner.

Simon Scholes
Analyst at First Berlin

Okay. That's very helpful. Just a supplementary on the pilot vaccination program. I think you've vaccinated 50,000 persons so far. How long do you expect this pilot vaccination program to continue for?

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Yeah, good question. Remember, this is a program that is owned by the Ministry of Health, so by the government. The government objective is to have a minimum of 100,000 people vaccinated because what we are generating there is also a so-called active pharmacovigilance, especially given that chikungunya is a live attenuated vaccine, as we have been discussing in the past all the issues that arose from that. It is important that before they include it in a very broad public vaccination schedule, they need to see active pharmacovigilance. They need to see how this all works out. That's why their internal target has been a minimum of 100,000 doses vaccinated, which could be reached, I think, by the latter part of the year. That's all I can say to that.

Simon Scholes
Analyst at First Berlin

Okay, thanks very much. That's very helpful.

Operator

Thank you. There are no further questions for today. I will now hand the call back to Thomas Lingelbach for closing remarks.

Thomas Lingelbach
Thomas Lingelbach
CEO at Valneva

Thank you so much for your questions today. Thank you so much for following Valneva so closely and of course, Lyme in particular right now. As I said, we share the positivity that you could see across Pfizer's different communications. We are very happy about the progress that is currently being made, and we are optimistic that we're going to see approvals for the vaccine in the next 12 months. As such, enabling a nice strategic prospect as I've responded to following Suzanne's question earlier. With that, thanks again and have a good remainder of the day. Goodbye.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Executives
    • Joshua Drumm
      Joshua Drumm
      VP of Investor Relations
    • Thomas Lingelbach
      Thomas Lingelbach
      CEO
    • Peter Bühler
      Peter Bühler
      CFO
Analysts
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