Valneva, the French vaccine specialist known for its travel vaccines IXIARO and DUKORAL, has been on a rollercoaster ride. The pandemic, initially a blow to its core travel vaccine business, provided a springboard into the lucrative COVID-19 vaccine market with its candidate, VLA2001. However, a closer look at recent transcripts reveals a subtle but significant shift in Valneva's strategy, one that might be flying under the radar of even the most seasoned analysts.

The company’s Q3 2020 earnings call was a symphony of optimism about its pipeline candidates, particularly Lyme disease vaccine VLA15 and chikungunya vaccine VLA1553, both in advanced clinical trials. VLA15, developed in partnership with Pfizer, reported positive Phase II data, while VLA1553 became the first chikungunya vaccine candidate to enter Phase III. The excitement around these promising late-stage assets overshadows a quiet transformation in Valneva’s commercial focus – a potential move away from its traditional travel vaccine market.

The evidence, while subtle, is compelling. First, consider the language used to describe the U.S. Military contract for IXIARO, secured in Q3 2020. While this three-year deal was touted as a "pivotal backbone" for the commercial business, its anticipated supply is heavily weighted towards Q4 2020. This suggests a potential front-loading of deliveries, raising questions about the contract's long-term impact on IXIARO sales.

Second, Valneva emphasizes its commitment to retaining its commercial infrastructure, anticipating a travel market recovery. However, the company also stresses the objective of achieving breakeven for this business segment "until recovery". This careful phrasing hints at a decreased reliance on travel vaccine revenue as a primary growth driver in the near future.

Third, the allocation of manufacturing resources speaks volumes. Valneva has been “gradually transitioning” its manufacturing staff in Scotland and Sweden towards the production of the COVID-19 vaccine. This shift, while understandable in the current climate, could signal a long-term realignment of production capacity, prioritizing newer pipeline candidates over established travel vaccines.

This shift is further supported by the company's financial guidance. While non-COVID-19 revenue guidance for 2021 (€100 million to €115 million) is similar to 2020 actuals, the significant increase in planned capital expenditure (€80 million to €100 million) primarily supports the expansion of COVID-19 vaccine production capacity at the Livingston site. This suggests a more aggressive investment in the COVID-19 vaccine program compared to the travel vaccine business.

Revenue Trends: The Decline of Travel Vaccines

The numbers tell a story of diminishing reliance on travel vaccines. In 2019, before the pandemic hit, IXIARO and DUKORAL combined generated approximately €100 million in revenue. In 2020, this figure plummeted to around €30 million. While the decline is largely attributable to the pandemic's impact on travel, the 2021 non-COVID-19 revenue guidance doesn't reflect a full recovery. This, combined with the aggressive investment in COVID-19 vaccine capacity, suggests that Valneva is preparing for a future where travel vaccines play a less prominent role.

A Bold Pivot Towards Specialty Vaccines?

Here's a possible hypothesis based on the evidence: Valneva, emboldened by its success in securing lucrative partnerships for its pipeline candidates (Pfizer for Lyme, UK government for COVID-19), is strategically pivoting towards a future driven by higher-margin, specialty vaccines. The company might be leveraging its COVID-19 program as a bridge to this new future, capitalizing on the current demand for vaccines while simultaneously building capacity for its pipeline candidates.

This hypothesis, if true, represents a bold move for Valneva, potentially altering the landscape of the vaccine market. It also raises intriguing questions. Will Valneva fully abandon its travel vaccine roots? Or will it seek to maintain a presence in this market while simultaneously pursuing a specialty vaccine strategy? Only time will tell. But one thing is clear: Valneva is on the cusp of a significant transformation, one that investors and industry observers would be wise to watch closely.

"Fun Fact: Did you know that Valneva’s Livingston site in Scotland, currently being expanded for COVID-19 vaccine production, was originally a brewery? It seems the facility has a history of producing potent concoctions!"