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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 13(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ________________
Commission File Number 001-40377
Valneva SE
(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English)
France
(Jurisdiction of incorporation or organization)
6 rue Alain Bombard
44800 Saint-Herblain, France
(Address of principal executive offices)
Thomas Lingelbach
Chief Executive Officer, Valneva SE
6 rue Alain Bombard
44800 Saint-Herblain, France
Tel: +33 2 28 07 37 10
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
American Depositary Shares, each representing two ordinary shares, €0.15 nominal value per shareVALNThe Nasdaq Global Select Market
Ordinary shares, €0.15 nominal value per share*The Nasdaq Global Select Market*
* Not for trading, but only in connection with the registration of the American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act. None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.



Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. Ordinary Shares: 138,912,142 outstanding as of December 31, 2023
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes    ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ☐ Yes    ☒ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    ☒ Yes    ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒ Yes    ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒     Accelerated filer ☐     Non-accelerated filer ☐         Emerging growth company     
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒     Other ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ☐ Item 17     ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐ Yes     No



TABLE OF CONTENTS

ItemPage
4
4
6
PART I
Item 17
Item 27
Item 37
Item 460
Item 4A101
Item 5102
Item 6129
Item 7150
Item 8154
Item 9155
Item 10156
Item 11168
PART II
Item 12169
Item 13172
Item 14172
Item 15174
Item 16178
Item 16A178
Item 16B178
Item 16C178
Item 16D179
Item 16E179
Item 16F179
Item 16G179
Item 16H180
Item 16I180
Item 16J180
Item 16K180
PART III
Item 17181
Item 18181
Item 19182



INTRODUCTION
Unless otherwise indicated in this Annual Report (this “Annual Report”), “Valneva,” “the company,” “our company,” “we,” “us” and “our” refer to Valneva SE and its consolidated subsidiaries.
“Valneva,” the Valneva logo, “IXIARO,” “JESPECT,” “DUKORAL”, “IXCHIQ” and other trademarks or service marks of Valneva SE of any of our business partners appearing in this Annual Report are the property of Valneva, its subsidiaries or its business partners, as applicable. Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report are listed without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their right thereto. All other trademarks, trade names and service marks appearing in this Annual Report are the property of their respective owners. We do not intend to use or display other companies’ trademarks and trade names to imply any relationship with, or endorsement or sponsorship of us by, any other companies.
Our audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our consolidated financial statements are presented in euros, and unless otherwise specified, all monetary amounts are in euros. All references in this Annual Report to “$,” “US$,” “U.S.$,” “U.S. dollars,” “dollars” and “USD” mean U.S. dollars and all references to “€” and “euros” mean euros, unless otherwise noted. Throughout this Annual Report, references to ADSs mean American Depositary Shares or ordinary shares represented by such ADSs, as the case may be.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than present and historical facts and conditions contained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy, plans and our objectives for future operations, are forward-looking statements. When used in this Annual Report, the words “anticipate,” “believe,” “can,” “could,” “estimate,” “expect,” “intend,” “is designed to,” “may,” “might,” “plan,” “potential,” “predict,” “objective,” “should,” or the negative of these and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
timing and expected outcomes of clinical trials and pre-clinical studies, particularly with respect to the Phase 3 clinical trial of our Lyme disease vaccine candidate VLA15 as well as the ongoing Phase 2 and 3 clinical trials and the planned Phase 4 clinical trials of our approved chikungunya vaccine IXCHIQ;
the likelihood, timing, and expected outcomes of regulatory filings and approvals, including, in the short-term, potential approval of the chikungunya vaccine candidate VLA1553 in other markets such as Europe, Canada, and Brazil and in the mid-term, potential filings and approvals of VLA15;
our ability to successfully market IXCHIQ in the United States and other markets where it may be approved;
our expectations and forecasts for sales of our approved products, particularly IXCHIQ, and estimates of market opportunity for our approved products and vaccine candidates;
our ability to expand, develop, and advance our pipeline of product candidates;
our ability to supply a sufficient quantity of our products and product candidates and to safely and effectively scale up our manufacturing capabilities, including at our Almeida manufacturing facility in Scotland;
expected benefits of our approach to vaccine development, particularly with respect to our vaccine candidates in development;
the potential safety and effectiveness of our vaccine candidates in development;
the effects of any pandemics on our sales and operations, including our expectations and assumptions regarding the resumption of travel and the future demand for travel vaccines;
the effectiveness and profitability of our collaborations and partnerships, our ability to maintain our current collaborations and partnerships and our ability to enter into new collaborations and partnerships;
our expectations related to future milestone and royalty payments and other revenue under our collaborations and partnerships;
our ability to meet our obligations under our various collaboration, partnership, and distribution arrangements;
the effects of increased competition as well as innovations by new and existing competitors in our industry;
our ability to obtain, maintain, protect and enforce our intellectual property rights and proprietary technologies and to operate our business without infringing the intellectual property rights and proprietary technology of third parties;
regulatory developments in the United States, Europe, and other countries, including regulatory developments relating to environmental, social, and governance issues;
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statements regarding future revenue, cash situation, hiring plans, expenses, capital expenditures, capital requirements, and stock performance; and
other risks and uncertainties, including those listed in the section of this Annual Report titled “Item 3.D—Risk Factors.”
You should refer to the section of this Annual Report titled “Item 3.D—Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act do not protect any forward-looking statements that we make in connection with this Annual Report.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Annual Report and the documents that we reference in this Annual Report and have filed as exhibits to this Annual Report completely and with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Unless otherwise indicated, information contained in this Annual Report concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size estimates, is based on information from independent industry analysts, third-party sources and management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us based on such data and our knowledge of such industry and market, which we believe to be reasonable. In addition, while we believe the market opportunity information included in this Annual Report is generally reliable and is based on reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the section of this Annual Report titled “Item 3.D—Risk Factors.”
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SUMMARY RISK FACTORS
Our business is subject to a number of risks and uncertainties, including those risks discussed at-length in the section below titled “Risk Factors.” These risks include, among others, the following:
We have incurred and anticipate that we may continue to incur significant operational losses over the next several years and may never achieve or maintain profitability.
Our future success is substantially dependent on the successful clinical development, regulatory approval, and commercialization of our product candidates in a timely manner. This risk is heightened in the short-term given that we have applied for regulatory approval of our chikungunya vaccine candidate VLA1553 in Europe, Canada, and Brazil and our Lyme disease vaccine candidate is undergoing Phase 3 clinical trials. If we are not able to obtain the regulatory approvals we target, whether as a result of clinical trials results or other factors, we will not be able to commercialize our product candidates according to our plans or at all, and our ability to generate product revenue will be adversely affected. Delays in clinical development may also lead to delays in our expected regulatory and commercial timelines, which could materially impact our business plans and our financial projections.
Our products are aimed at diseases that largely threaten travelers. If international travel is substantially disrupted, as it was at the height of the COVID-19 pandemic or may be in future due to a similar event, this will significantly adversely affect the sale of these vaccines. Additionally, future outbreaks of disease, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites, or other business operations, could materially affect our operations globally and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs, or other third parties with whom we conduct business.
We require ongoing funding to finance our operations. If we are unable to raise capital to complement the Company’s cash when needed, we could be forced to delay, reduce, or terminate certain of our planned investments, including in development programs or other parts of our operations.
Our future growth depends on continuing to build our pipeline of product candidates. If we are unable to progress existing clinical-stage and pre-clinical stage product candidates or to initiate new clinical or pre-clinical programs, this could have a material impact on our business plans and financial projections.
We depend upon our existing collaboration partner, Pfizer, and other third parties to advance our business and provide other key services. If we are unable to maintain such existing agreements or enter into additional arrangements as needed, or if such third parties do not provide such services as anticipated, our business could be adversely affected.
We operate in a highly regulated industry and may fail to comply with applicable regulatory obligations, including after product approval is obtained.
If we are unable to obtain and maintain patent protection for our product candidates and technology, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our product candidates and technology may be adversely affected.
We rely primarily on our manufacturing facilities and rely in part on third parties’ manufacturing facilities as the source of manufacturing for our products and for certain of our product candidates.
The terms of our financing arrangements place restrictions on our operating and financial flexibility.
We may face competition, and our competitors may have significantly greater resources and experience, which may negatively impact our commercial opportunities.
We are dependent on single source suppliers for some of the components and materials used in our products.
We may encounter difficulties in managing our growth, which could disrupt our operations.
If we are unable to maintain effective internal controls over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected, which could hurt our business, lessen investor confidence, and depress the market price of our securities.
Our information systems and data, and those of third-parties connected to us, are vulnerable to cyber attacks and security breaches which could have a material impact on our operations, reputation, and/or financial results.
The rights of shareholders in companies subject to French corporate law differ in material respects from the rights of shareholders of corporations incorporated in the United States. As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company.
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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business faces significant risks. You should carefully consider all of the information set forth in this Annual Report and in our other filings with the United States Securities and Exchange Commission, or the SEC, including the following risk factors which we face and which are faced by our industry. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this Annual Report and our other SEC filings. See “Special Note Regarding Forward-Looking Statements” above.
Risks Related to Our Financial Position and Capital Needs
We have incurred and anticipate that we may continue to incur significant operational losses over the next several years and may never achieve or maintain profitability.
We have previously incurred significant net losses. Our net loss was €101.4 million, €143.3 million and €73.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated net loss of €551.7 million. We expect to continue to incur significant expenses and we may incur substantial operating losses over the next several years. Since inception, we have devoted a significant amount of our efforts to identifying, researching and conducting pre-clinical and clinical activities of our product candidates, building our manufacturing capabilities, building our commercial and sales infrastructure, organizing and staffing our company, business planning, raising capital, and establishing our intellectual property portfolio. The net losses we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if, and as, we:
continue the ongoing and planned development of our product candidates, including the Phase 4 clinical trials of our approved product IXCHIQ;
initiate, conduct and complete any ongoing, anticipated, or other future pre-clinical studies and clinical trials, which may be subject to changes in design and cost;
seek marketing approvals for any product candidates that successfully complete clinical trials;
commercialize any current or future product candidate for which we may obtain or have recently obtained marketing approval, particularly IXCHIQ;
invest in our manufacturing facilities;
seek to discover and develop additional product candidates, including via partnerships or asset acquisition;
maintain, protect and expand our intellectual property portfolio;
hire additional sales, clinical, regulatory, administrative, and scientific personnel;
add operational, financial, and management information systems, legal entities, and personnel, including personnel to support our product development and current and future commercialization efforts;
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experience delays or interruptions to pre-clinical studies, clinical trials, our receipt of services from third-party service providers, or our supply chain due to other events, including military conflicts in Ukraine and Israel;
market and distribute vaccines for new third parties;
take steps to comply with new regulatory obligations, including those relating to sustainability such as the European Corporate Sustainability Reporting Directive (CSRD), the European Corporate Sustainability Due Diligence Directive (CSDDD), and the climate disclosure rules adopted by the U.S. Securities and Exchange Commission in March 2024; and
incur ongoing costs associated with operating as a public company on both Euronext Paris and Nasdaq.
Our ability to be profitable in the future will largely depend on our ability to generate sales of our commercial products and to obtain regulatory approval for and commercialize our product candidates. We have historically been substantially dependent on sales of two commercial products, DUKORAL and IXIARO, for revenue. Our chikungunya vaccine IXCHIQ has been approved in the United States but has not yet been approved in Europe or Canada, and we have only recently begun commercial sales of IXCHIQ. We anticipate that if the Phase 3 trial of our Lyme disease vaccine candidate is successful, Pfizer will apply for approval in 2026. Unless and until we obtain the regulatory approvals required to commercialize our product candidates in line with our plans, the likelihood and amount of our future operational losses will depend, in part, on the successful manufacturing and commercialization of our approved products, the pace and amount of our future expenditures, and our ability to obtain funding through milestone or royalty payments under license and collaboration agreements, equity or debt financings, strategic collaborations, and government grants and tax credits. Additionally, our future revenues will depend upon the size of any markets in which our products or product candidates have received approval, and market acceptance, reimbursement from third-party payors, and market share. For example, although we received several regulatory approvals for VLA2001, our vaccine against the SARS-CoV-2 virus causing COVID-19, we were not able to generate sales in our target markets and ultimately discontinued the product. We expect that our main sources of income for the near- and medium-term will be revenue from sales of our approved products and third-party products, revenue from licensing and service agreements, and grants.
Because of the numerous risks and uncertainties associated with biopharmaceutical product development and commercialization, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve or maintain profitability. If we are required by regulatory authorities to perform studies in addition to those expected (for example, the Phase 4 clinical trials of IXCHIQ which were mandated by the FDA in connection with approval of IXCHIQ in the United States), or if there are any delays in the initiation and completion of our clinical trials, particularly the Phase 3 clinical trial for our Lyme disease vaccine candidate, or any delays in the development of any of our product candidates, our expenses could increase.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business, or continue our operations.
We market our products primarily to travelers to regions where the targeted diseases are endemic. If international travel is substantially disrupted, this will significantly adversely affect the sale of these vaccines.
We market IXCHIQ, DUKORAL and IXIARO primarily to travelers to particular regions. During the COVID-19 pandemic, travel significantly decreased worldwide, and sales of DUKORAL and IXIARO decreased significantly in 2020 and 2021, adversely impacting our financial results. While international travel has resumed significantly, if another disruption causes a substantial decrease in international travel, our revenues will be significantly adversely affected, and we may not be able to finance our operations and continue the development of one or more of our vaccine candidates without additional financing.
Sales of DUKORAL and IXIARO and, in the future, IXCHIQ, may also be impacted by competition from other approved vaccines, as described further in these risk factors and in Item 4 of this Annual Report.
We may require additional funding to finance our operations and achieve our strategic ambitions. If we are unable to raise capital when needed, we could be forced to delay, reduce, or terminate certain of our planned investments, including development programs or other parts of our operations.
As of December 31, 2023, we had total assets of €460.1 million, including cash and cash equivalents of €126.1 million. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned. Moreover, it is particularly difficult to estimate with certainty our future expenses given the dynamic and rapidly evolving nature of our business. Investment in product development in the healthcare industry, including of biopharmaceutical products, is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval, and become commercially viable. To date, we have funded a substantial portion of our operations through sales of equity securities, including our U.S. initial public offering and European private placement in May 2021 and our global offerings in November 2021 and October 2022, as well as an equity subscription agreement with Pfizer in June 2022 for €90.5 ($95) million. We have also received substantial funding through upfront payments from collaboration and research agreements and the Financing Agreement with Deerfield and OrbiMed, described further below. Additionally, in February 2024, we sold the Priority Review Voucher received in connection with the approval of IXCHIQ for $103 million. We may need to raise additional capital to complete the development and commercialization of our product candidates and fund certain of our existing manufacturing and other commitments. We
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expect to finance our cash needs through public or private equity or debt financings, third-party (including government) funding, and marketing and distribution arrangements, as well as other collaborations, strategic alliances, and licensing arrangements, or any combination of these approaches. Our future capital requirements will depend on many factors, including:
the timing, progress, and results of our ongoing pre-clinical studies and clinical trials of our product candidates, particularly the Phase 3 clinical trial of our Lyme disease vaccine candidate and the Phase 4 clinical trials of our approved product IXCHIQ;
the costs, timing, and outcome of regulatory review and approval of our product candidates, including the review of VLA1553 by the European Medicines Agency, Health Canada and Anvisa;
the scope, progress, results, and costs of pre-clinical development, laboratory testing, and clinical trials of other product candidates that we may pursue, including the cost of acquiring other product candidates;
our ability to establish and maintain collaboration, license, grant, and other similar arrangements, such as our partnership with Pfizer, and the financial terms of any such arrangements, including timing and amount of any future milestones, royalty, or other payments due thereunder;
the costs and timing of current and future commercialization activities, including product manufacturing, marketing, sales, and distribution, for our current products and any of our product candidates for which we receive marketing approval;
the revenue received from commercial sales of our products and any product candidates for which we receive marketing approval, and the impact of any future disruptor of international travel on such revenues;
the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims;
any expenses needed to attract, hire, and retain skilled personnel;
the costs of operating as a public company in both France and the United States;
the extent to which we acquire or in-license other companies’ product candidates and technologies; and
the rate of inflation or other market factors that impact our costs.
Identifying potential product candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales for our product candidates in development. In addition, our product candidates, if approved, may not achieve commercial success. For example, although we received several regulatory approvals for VLA2001, our vaccine against the SARS-CoV-2 virus causing COVID-19, we were not able to generate sales in our target markets and ultimately discontinued the product. Accordingly, we may need or choose to seek additional financing to achieve our business objectives.
Global financial markets have been negatively impacted as a result of the COVID-19 pandemic and ongoing military conflicts. If these disruptions persist or deepen, or if other global events have a significant impact on the global financial markets, we could experience an inability to access additional capital or an increase in our costs of borrowing, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make other important, opportunistic investments. Adequate additional financing may not be available to us in sufficient amounts or on acceptable terms, or at all. Additionally, investors are increasingly using sustainability and ESG criteria to evaluate possible investments, and we cannot guarantee that we will be able to implement effective sustainable practices that will make us attractive for such investors, in a timely fashion or at all. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or altogether terminate certain of our research and development programs or future commercialization efforts, which may adversely affect our business, financial condition, results of operations, and prospects. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Under French law, our share capital may be increased only with shareholders’ approval at an extraordinary general shareholders’ meeting on the basis of a report from the Board of Directors. In addition, the French Commercial Code imposes certain limitations on our ability to price certain offerings of our share capital without preferential subscription rights (droit préférentiel de souscription), which limitation may prevent us from successfully completing any such offering.
Moreover, the terms of any financing may adversely affect the holdings or the rights of our shareholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our ordinary shares or the ADSs to decline. The sale of additional equity or convertible securities would dilute our shareholders. We may seek funds through arrangements with collaborative partners or otherwise at an earlier stage of product development than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or product candidates at an earlier stage of development or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, prospects, financial condition, and results of operations.
The terms of our financing arrangements place restrictions on our operating and financial flexibility.
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In February 2020, we entered into a debt financing agreement, or the Financing Agreement, with Deerfield and OrbiMed. The loans bear interest at 9.95% that, due to the quarterly interest calculation method applied, results in an aggregate annual interest paid of 10.09%. As of December 31, 2023, we had $200 million (€180.0 million) drawn down in four tranches under the Financing Agreement, including an additional $100 million (€90.0 million) made available to us in an amendment signed in August 2023. This additional loan will mature in the third quarter of 2028, and repayments begin in the first quarter of 2027. The original loan of $100 million will mature in the first quarter of 2027, and repayments begin in the first quarter of 2026.
The Financing Agreement contains covenants for minimum revenue and liquidity which are currently set to €115 million and €35 million, respectively. As a result of deferred recognition of revenues and the effects of COVID-19 on product sales, we were previously at risk of not meeting the minimum revenue covenant and have amended these covenants several times since 2020. If our consolidated net revenues (excluding grants) or our liquidity were to fall below the amounts required, this would constitute an event of default that could trigger various consequences. For example, the interest rate on the loans could increase by up to 10 additional interest points if the duration of the default is longer than 15 days, or we could be required to immediately repay the full principal amount of the loans, including all fees and interest associated with repayment.
Compliance with these covenants under the Financing Agreement may limit our flexibility in operating our business and our ability to take actions that might be advantageous to us and our shareholders. For example, if we fail to meet our minimum liquidity covenants and we are unable to raise additional funds or obtain a waiver or other amendment to the Financing Agreement, we may be required to delay, limit, reduce, or terminate certain of our clinical development efforts. In addition, if we were unable to pay the full amount due in case of certain events of default, our lenders could exercise their rights to take possession and dispose of the collateral, which includes substantially all of our intellectual property, securing the Financing Agreement for their benefit. Our business, financial condition, and results of operations could be substantially harmed if this occurs.
Additionally, we announced in February 2022 that Valneva Scotland had received two grants worth up to £20 million (approximately €23.9 million) from Scottish Enterprise, Scotland’s national economic development agency, to support research and development relating to the manufacturing processes of our COVID-19 vaccine and our other vaccine candidates. Following the termination of our COVID-19 vaccine program, in May 2023 we amended the grant relating to this program to reduce the available funding by £0.7 million and to adjust how the funds will be used. The funds under these grants will be received over three years, beginning in March 2022. Valneva SE has provided a parent guarantee in connection with these grants, and if we fail to comply with the terms of the grants, Scottish Enterprise may stop payments under the grants and require repayment of the funds provided to date. As of the date of this Annual Report, we have received €11.1 million (£9.6 million) of grant funds from Scottish Enterprise.
Risks Related to the Development and Commercialization of Our Product Candidates
Our future success is substantially dependent on the successful clinical development, regulatory approval, and commercialization of our product candidates in a timely manner. If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate product revenue will be adversely affected. Delays in clinical development may also lead to delays in our expected regulatory and commercial timelines, which could materially impact our business plans and our financial projections.
We have invested a significant portion of our time and financial resources in the development of our product candidates. Our business is dependent on our ability to successfully complete development of, obtain regulatory approval for, and, if approved, successfully commercialize our product candidates in a timely manner. We may face unforeseen challenges in our product development strategy, and we can provide no assurances that our product candidates will be successful in clinical trials, will ultimately receive regulatory approval from any or all of the agencies from which we seek such approval, and will be commercially successful in their target markets. Generally, failure to develop a vaccine that we can successfully commercialize could result in the total loss of our investment in its development and consequently could have a significant impact on shareholder value.
Our business is particularly dependent on our ability to obtain additional regulatory approvals for IXCHIQ, our chikungunya vaccine, on the timelines we expect. The FDA approved IXCHIQ on November 9, 2023, and review by Health Canada, the EMA and Anvisa (in Brazil) is ongoing. If the decisions of these agencies regarding the approval of IXCHIQ is delayed beyond our expectations or is negative, it would have a significant impact on our business plans and our results of operations. A delay in additional regulatory approvals could occur if, for example, the EMA revokes the accelerated assessment of VLA1553 as a result of our failure to provide requested information according to the EMA’s timelines or for other reasons. In addition, the U.S. Centers for Disease Control’s Advisory Committee for Immunization Practices, or ACIP, issued recommendations relating to vaccination against chikungunya in February 2024. The scope of the recommendation is narrower than the label for IXCHIQ in the United States. There is a high reliance on shared clinical decision-making for IXCHIQ vaccination, and decisions to vaccinate depend on high awareness of risk factors on both the traveler and healthcare practitioner sides. The ACIP recommendation could decrease the demand relative to a broader recommendation for vaccination and could impact IXCHIQ’s commercial success.
While we have obtained regulatory approval in major markets for four of our products, we may not be able to obtain regulatory approval of the product candidates we are currently developing or may seek to develop in the future, at all, in all of the desired markets, for all of the desired labels, or within the timelines expected. Neither we nor any current or future collaborator is permitted to market any product candidates in any geography until we or our collaborators receive
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regulatory approval from the applicable regulatory agency. The time required to conduct clinical trials and obtain approval or other marketing authorizations from regulatory authorities is unpredictable, typically takes many years, and depends upon numerous factors, including the discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.
Prior to obtaining approval to commercialize any product candidate in a particular geography, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the applicable regulatory authority, that such product candidate is safe and effective for its intended uses. Results from pre-clinical studies and clinical trials can be interpreted in different ways. Even if we believe that the pre-clinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the regulatory authorities. Approval by one regulatory authority does not guarantee approval by another regulatory authority, with the same scope or at all, on the basis of the same data. Additionally, regulatory authorities may also require us to conduct additional pre-clinical studies or clinical trials for our product candidates prior to approval or may object to elements of our clinical development program, requiring their alteration. Furthermore, in some jurisdictions such as the EU, initiating Phase 3 clinical trials and clinical trials in the pediatric population is subject to a requirement to obtain approval or a waiver from the competent authorities of the EU Member States and/or the EMA. If we do not obtain such approval, our ability to conduct clinical trials and obtain marketing authorizations may be impaired, and our business may be adversely impacted.
Of the large number of products in development, only a small percentage successfully complete regulatory authorities’ approval processes and are commercialized. The lengthy approval or marketing authorization process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approvals or marketing authorizations to market our product candidates, which would significantly harm our business, financial condition, results of operations, and prospects.
Even if we eventually complete clinical testing and receive approval of our product candidates, regulatory authorities may grant approval or other marketing authorization contingent on the performance of costly additional clinical trials, including post-market clinical trials. For example, the FDA’s approval of IXCHIQ is conditioned upon our completion of two Phase 4 clinical trials. The timely completion of these trials will require successful coordination with regulatory agencies, who will need to approve the proposed plans, and with local partners. Additionally, execution of the Phase 4 clinical trials will require approval of IXCHIQ in Brazil. Regulatory authorities may also provide approval for a product candidate for a more limited indication or patient population than we originally request and may not approve or authorize the labeling that we believe is necessary or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay, inhibit, or prevent commercialization of that product candidate and would adversely impact our business and prospects.
In addition, regulations and policies may be added or revised in the EU, the U.S., or other jurisdictions, which may prevent or delay approval of our future product candidates under development on a timely basis. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain regulatory approvals, increase the costs of compliance, or restrict our ability to maintain any marketing authorizations we may have obtained.
Successful commercialization of our products depends on numerous factors, some of which may be outside of our control.
Successful commercialization of newly approved products, such as IXCHIQ, will depend on a number of factors, including:
Developing the commercial organization to support commercialization of the product or entering into partnerships for commercialization in certain geographies;
Establishing a commercially viable pricing structure;
Obtaining approval for coverage and adequate reimbursement from third-party and government payors, including government health administration authorities; and
Generating knowledge of and demand for our products.
Successful commercialization of any of our products depends on various factors, including continued demand for the product, the ability of us or our third-party manufacturing partners to manufacture sufficient quantities of the product in response to demand, and the cost of the product. For example, we have experienced shortages of IXIARO and DUKORAL relative to the demand, resulting in losses of potential sales.
Additionally, our current marketing strategy includes partnering with third parties for the commercialization of approved products in certain geographies, and we cannot guarantee that we will be able to enter into or maintain such relationships. For example, our partnership with Bavarian Nordic for the distribution of IXIARO and DUKORAL in Germany, one of our key markets, will terminate at the end of 2025.
If we are unable to successfully commercialize our product candidates, including through contracting with third parties, we may not be able to generate sufficient revenue to continue our business.
Success in pre-clinical studies or earlier clinical trials may not be indicative of results in future clinical trials, and we cannot assure you that any ongoing, planned, or future clinical trials will lead to results sufficient for the necessary regulatory approvals.
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Success in pre-clinical testing and earlier clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Pre-clinical and proof-of-concept studies and Phase 1 clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics, and to understand the side effects of product candidates at various doses and schedules. Success in pre-clinical studies and earlier clinical trials does not ensure that later efficacy trials will be successful, nor does it predict final results of clinical trials and initial or continued regulatory approval. We cannot guarantee that our ongoing clinical trials will produce data consistent with those of prior trials, nor can we guarantee that positive data from the VLA1553-321 clinical trial in adolescents will result in an expansion of IXCHIQ’s approval in the U.S. to allow vaccination of adolescents. There can be significant variability in safety or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other trial protocols, and the rate of dropout among clinical trial participants. Our product candidates may fail to show the desired characteristics in clinical development sufficient to obtain or maintain regulatory approval, despite positive results in pre-clinical studies, successful advancement through earlier clinical trials, or initial data that we may publish, which may materially change as clinical trials progress.
A trial design that is considered appropriate for regulatory approval includes a sufficiently large sample size with appropriate statistical power, as well as proper control of bias, to allow a meaningful interpretation of the results. If we conduct clinical trials with a small number of subjects, we may not achieve a statistically significant result or the same level of statistical significance, if any, that would have been possible to achieve in a larger trial. The preliminary results of trials with smaller sample sizes can be disproportionately influenced by the impact the treatment had on a few individuals, which limits the ability to generalize the results across a broader community, making the trial results less reliable than trials with a larger number of subjects. As a result, there may be less certainty that such product candidates would achieve a statistically significant effect in any future clinical trials.
In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. As an organization, we may be unable to design and execute a clinical trial to support regulatory approval, including conditional approval or emergency use authorization for any given current or future product candidate. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving positive results in pre-clinical testing and earlier clinical trials. Data obtained from pre-clinical and clinical activities are subject to varying interpretations, which may delay, limit, or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including changes in regulatory policy or results of audits of clinical trial partners by regulatory authorities during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations, and prospects.
Clinical product development involves a lengthy and expensive process. We may incur additional costs and encounter substantial delays or difficulties in our clinical trials that could delay or prevent the commercialization of our product candidates.
We may not commercialize, market, promote, or sell any product candidate in any geography without obtaining marketing approval from the relevant regulatory authority, and we may never receive such approvals. The time required to obtain approval by any regulatory authority is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans and will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete pre-clinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, is difficult to design and implement, can take many years to complete, and is uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. For example, following Pfizer’s decision in February 2023 to discontinue approximately half of the participants then enrolled in the Phase 3 trial of our Lyme disease vaccine candidate as a result of violations of Good Clinical Practice, or GCP, at certain trial sites run by a third party, the target for submission of a BLA shifted from 2025 to 2026. Timely completion of the ongoing Phase 3 trial will depend on timely administration of the booster vaccination to participants in the first cohort and of the primary vaccination to participants in the second cohort. Any delays of clinical trials would lead to delays in the regulatory approval process, increase development costs, and could lead to a negative perception of Valneva or the product candidate.
A failure of one or more clinical trials can occur at any stage of testing. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.
We may experience numerous unforeseen events prior to, during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including the following:
inability to generate sufficient pre-clinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;
delays in reaching a consensus with regulatory authorities on the design or implementation of our clinical trials, or any modification thereto;
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regulators or institutional review boards and ethics committees may prevent us or our investigators from commencing a clinical trial or conducting a clinical trial at a prospective trial site;
delays in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites;
delays or failures by us or our manufacturing partners to comply with current GCP, good manufacturing practices, cGMP, or other applicable regulations;
the number of subjects required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or fail to return for follow-up, or we may fail to recruit suitable subjects to participate in a trial;
difficulty collaborating with investigators;
failure by our CROs, partners, other third parties, or us to adhere to clinical trial requirements;
negative or inconclusive results of clinical trials of our product candidates;
imposition of a clinical hold by regulatory authorities, as a result of a serious adverse event or concerns with a class of product candidates, after an inspection of our clinical trial operations, trial sites or manufacturing facilities, after review of an investigational new drug application, or IND, or IND amendment, after an application for the authorization of a clinical trial or related amendment, or equivalent application or amendment, or after the finding that the investigational protocol or plan is clearly deficient to meet its stated objectives;
occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;
decisions made by us or requirements imposed by regulators to conduct additional clinical trials or abandon product development programs; or
disruptions caused by man-made or natural disasters, public health pandemics or epidemics, global instability, or other business interruptions.
In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional testing to bridge our modified product candidate to earlier versions. Clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates, if approved, or allow our competitors to bring competing products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business, financial condition, results of operations, and prospects.
Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our product candidates, we may:
be delayed in obtaining marketing approval, or not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;
be subject to additional post-marketing testing requirements;
be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;
have regulatory authorities withdraw, vary, or suspend their approval of the product or impose restrictions on its distribution in the form of a risk evaluation and mitigation strategy, or REMS, or foreign equivalent;
be subject to the addition of labeling statements, such as warnings or contraindications;
become subject to product liability litigation; or
experience damage to our reputation.
Our product development costs will also increase if we experience delays in testing or obtaining marketing approvals. The risk of increased development costs is more pronounced for our Lyme disease vaccine candidate given that it is currently in Phase 3 clinical trials. We do not know whether any of our pre-clinical studies or clinical trials will begin as planned, need to be restructured, or be completed on schedule, if at all. Any inability to successfully complete pre-clinical and clinical development could result in additional costs to us or impair our ability to generate revenue from future product sales or other sources.
Regulatory authorities have discretion in the approval process and determining when or whether regulatory approval will be obtained for any of our product candidates. Even if we believe the data collected from clinical trials of our product
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candidates are promising, such data may not be sufficient to support approval by any regulatory authority. Further, we or our partners, the competent authorities of individual EEA countries, the FDA or other regulatory authorities, or an institutional review board or ethics committee may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s current GCP regulations or equivalent regulations in the EEA or other foreign countries, that we are exposing participants to unacceptable health risks, or if the relevant authorities find deficiencies in our INDs or our applications for the authorization of clinical trials, respectively, or in the conduct of these trials. Moreover, we may not be able to file INDs or applications for the authorization of clinical trials to commence additional clinical trials on the timelines we expect because our filing schedule is dependent on further pre-clinical and manufacturing progress. Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be negatively impacted, and our ability to generate revenue from our product candidates may be delayed.
Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be delayed, made more difficult, or rendered impossible by multiple factors outside our control.
Identifying and qualifying subjects in a timely manner to participate in our clinical trials is critical to our success. We may encounter difficulties in enrolling subjects in our clinical trials, and such difficulties may delay or prevent development, approval, and commercialization of our product candidates. Even once enrolled, we may be unable to retain a sufficient number of subjects to complete any of our trials. Subject enrollment and retention in clinical trials depends on many factors, including the nature of the trial protocol, the existing body of safety and efficacy data, the number and nature of competing vaccines already in the market, and ongoing clinical trials of competing vaccine candidates for the same indication, the proximity of subjects to clinical sites, and the eligibility criteria for the trial. In addition, enrollment and retention of subjects in clinical trials could be disrupted by man-made or natural disasters, public health events such as pandemics, or other business interruptions. In addition, public perception of a specific clinical trial or of vaccine safety issues may adversely influence willingness of subjects to participate in clinical trials. Additionally, granted emergency use authorizations, or EUAs, may saturate the marketplace prior to our advancement or commercialization, as allowed, for any of the vaccine areas in which we are developing products.
Any negative results we or other study sponsors may report in clinical trials of our product candidates may make it difficult or impossible to recruit and retain subjects in other clinical trials of that same product candidate. Delays or failures in planned subject enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our product candidates or could render further development impossible. In addition, we may rely on CROs and clinical trial sites to ensure proper and timely conduct of our current and future clinical trials and, while we enter into agreements governing their services, we will be limited in our ability to ensure their actual performance, including adherence to GCP, and any issues with their performance could have substantial negative effects on our clinical development programs.
The development of additional product candidates is risky and uncertain, and we can provide no assurances that we will be able to successfully develop additional vaccines for other diseases.
A core element of our business strategy, particularly in 2024, is to expand our product pipeline. Following the FDA’s approval in November 2023 of the BLA for our chikungunya vaccine and given that the Phase 3 clinical trial of our Lyme disease vaccine candidate is ongoing, we are evaluating the possibilities for the other clinical and preclinical candidates in our pipeline as well as the possibilities for acquiring candidates from third parties or partnering with third parties to co-develop candidates. Efforts to identify, acquire or in-license, and then develop product candidates require substantial technical, financial, and human resources, whether or not any product candidates are ultimately identified. Our efforts may initially show promise in identifying potential product candidates yet fail to yield product candidates for clinical development, approved products, or commercial revenue for many reasons, including the following:
the methodology used may not be successful in identifying potential product candidates;
competitors may develop alternatives that render any product candidates we develop obsolete;
a product candidate may be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;
diseases we may target may cease to be a public health concern;
a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
a product candidate may not be accepted as safe and effective by physicians, patients, the medical community, or third-party payors.
We have limited financial, manufacturing, and management resources and, as a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater market potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing, or other royalty arrangements in circumstances under which it would have been more advantageous for us to retain sole development and
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commercialization rights to such product candidate. In addition, we may not be successful in replicating our approach to development for other disease indications. If we are unsuccessful in identifying and developing additional product candidates or are unable to do so, our business and shareholder value may be harmed.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences following any potential marketing approval.
During the conduct of clinical trials, subjects report changes in their health, including illnesses, injuries, and discomforts, to their physician. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. If subjects in our clinical trials experience any side effects, and if regulatory authorities determine that such side effects are being caused by our vaccine candidates, they may require additional testing to confirm these determinations.
In addition, it is possible that as we test our product candidates in larger, longer, and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts, and other adverse events that were not observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects. Many times, side effects are only detectable after investigational products are tested in large-scale pivotal trials or, in some cases, after they are made available to patients on a commercial scale after approval. If additional clinical experience indicates that any of our product candidates have side effects or cause serious or life-threatening side effects, the development of the product candidate may fail or be delayed, or, if the product candidate has received regulatory approval, such approval may be revoked, which would harm our business, financial condition, results of operations, reputation, and prospects.
If the market opportunities for our products and product candidates are smaller than we believe they are or any approval we obtain is based on a narrower definition of the patient population, our business may suffer.
We currently focus our efforts on commercialization of our approved products for prevention of chikungunya, Japanese encephalitis, and cholera. Our estimated market opportunity, pricing estimates, and available coverage and reimbursement may differ significantly from the actual market addressable by our products and product candidates. Our estimates with respect to market opportunity are based on our beliefs, assumptions, and analyses. These estimates have been derived from a variety of sources, including the scientific literature, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of the diseases we are targeting, and the number of patients may turn out to be lower than expected. In addition, the disease for which we are developing a product vaccine may cease to be a public health concern. Likewise, the potentially addressable patient population for each of our products or product candidates may be limited or may not be receptive to receiving our vaccines or vaccine candidates, and new patients may become increasingly difficult to identify or access. This may be due in part to reputational challenges that the vaccine industry is facing related to the growing momentum of the anti-vaccine movement in some regions or to a distrust of vaccines against certain diseases or of the adjuvants contained in our vaccines. For example, there has been some negative public perception of Lyme disease vaccines as a result of the Lyme disease vaccine LYMErix, which was marketed by Smith Kline Beecham Biologicals and discontinued due to lack of market access and safety concerns, although its benefit/risk profile was confirmed by an FDA advisory committee even post-approval. If the market opportunities for our products or product candidates are smaller than we estimate, this could have an adverse effect on our business, financial condition, results of operations, and prospects. Similarly, if the estimates and forecasts of investment analysts regarding the market for one of our product candidates differ significantly from the actual addressable market, there could be an impact on Valneva’s valuation and on the trading price of our ordinary shares and ADSs.
We may face competition, and our competitors may have significantly greater resources and experience, which may negatively impact our commercial opportunities.
The biotechnology and pharmaceutical industries are subject to intense competition and rapid and significant technological change. We have many potential competitors, including major pharmaceutical companies, specialized biotechnology firms, academic institutions, government agencies, and private and public research institutions. Many of our competitors have significantly greater financial and technical resources as well as experience and expertise in:
research and development;
pre-clinical testing;
designing and implementing clinical trials;
regulatory processes and approvals;
production and manufacturing; and
sales and marketing of approved products.
Principal competitive factors in our industry include:
the quality and breadth of an organization’s technology;
management of the organization and the execution of the organization’s strategy;
the skill and experience of an organization’s employees and its ability to recruit and retain skilled and experienced employees;
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an organization’s intellectual property portfolio;
the capabilities of an organization throughout the product pipeline, from target identification and validation to discovery and development to manufacturing and marketing; and
the availability of substantial capital resources to fund discovery, development, and commercialization activities.
Large and established companies, such as Merck & Co., Inc., GlaxoSmithKline plc, CSL Ltd, Sanofi Pasteur, SA, Pfizer Inc. and AstraZeneca, among others, compete in the general vaccine market. In particular, these companies may have greater experience and expertise in: securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale, and marketing approved products. Smaller or early-stage companies and research institutions also may prove to be significant competitors, particularly through collaborative arrangements with large and established pharmaceutical companies. As these companies and research institutions develop their technologies, they may develop proprietary positions, which may prevent or limit our product development and commercialization efforts. If any of our competitors succeed in obtaining approval from regulatory authorities for their products sooner than we do or for products that are more effective or less costly than ours, or if the scope of approval for a competing product is broader than an approval granted for our product, our commercial opportunity could be significantly reduced. Mergers and acquisitions, including of specific assets, in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors and in changes to the competitive landscape in regions where we market and distribute our products.
We are aware of companies with competing products or product candidates for Japanese encephalitis (such as Substipharm’s IMOJEV) and cholera (such as Bavarian Nordic’s Vaxchora, which is currently available in the U.S. and a limited number of European markets), each as described further in Item 4 of this Annual Report. If and as these vaccines become available in the markets in which we compete, sales of our vaccines will be adversely affected. Competition is the primary factor affecting our prices outside the United States. We are also aware of companies with active vaccine development programs for Lyme disease and chikungunya. Even if a manufacturer obtains an EUA or regulatory approval for a vaccine, it is likely that competitors will continue to work on new products that could be more efficacious and/or less expensive. Vaccines under development by competitors, including development programs of which we are not aware, may be more effective or further along in the development and regulatory approval process than our vaccine candidates. Even if our vaccine candidates receive EUA or regulatory approval, they may not achieve or maintain significant sales if other, more effective vaccines under development by our competitors are also approved.
In order to compete effectively, we will have to make substantial investments in development, testing, manufacturing, and sales and marketing or partner with one or more established companies in one or more of these areas. We may not be successful in gaining significant market share for any approved product candidate and may not continue to be successful maintaining or gaining market share for our currently marketed products. Our technologies and vaccines also may be rendered obsolete or non-competitive as a result of products introduced by our competitors to the marketplace more rapidly and at a lower cost.
Even if any product candidates receive marketing approval, they may fail to achieve market acceptance by physicians, patients, third-party payors, government officials, or others in the medical community necessary for commercial success.
Even if any product candidates receive marketing approval, they may fail to gain market acceptance by physicians, patients, third-party payors, government officials, and others in the medical community. For example, our COVID-19 vaccine received four marketing approvals but ultimately was not a commercial success due to lack of interest from potential government purchasers. Further, recommendations from regulatory bodies can affect market acceptance of approved products. For example, in the United States, ACIP develops vaccine recommendations for use, as do comparable agencies around the world. ACIP uses working groups that gather, analyze, and prepare scientific information to develop its recommendations, and vaccines that receive a preferred recommendation from ACIP are widely adopted. In February 2024, ACIP issued recommendations relating to vaccination against chikungunya that included recommendations for the use of IXCHIQ that were narrower than IXCHIQ’s label in the United States. This recommendation may decrease the demand for IXCHIQ and impact its commercialization. If such product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue, which would limit the return on our investment and may prevent us from becoming profitable. The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including but not limited to:
the convenience and ease of administration compared to alternative vaccines and therapies;
the existence of alternative therapies;
the public perception of new therapies and the reputational challenges that the vaccine industry is facing related to the growing momentum of the anti-vaccine movement in some regions;
the prevalence and severity of adverse side effects;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the efficacy, safety profile, and potential advantages compared to alternative vaccines and therapies;
the effectiveness of sales and marketing efforts;
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the cost of the vaccine in relation to alternative vaccines and therapies;
our ability to offer such product for sale at competitive prices;
the strength of marketing and distribution support;
the availability of third-party coverage and adequate reimbursement, and patients’ willingness to pay out-of-pocket in the absence of third-party coverage or adequate reimbursement;
receiving recommendations for use from ACIP and comparable foreign regulatory and advisory bodies;
the prevalence and severity of any side effects; and
any restrictions on the use of the product together with medications.
Our efforts to educate physicians, patients, third-party payors, and others in the medical community on the benefits of our product candidates may require significant resources and may never be successful. Such efforts may require more resources than are typically required due to the complex and distinctive nature of our product candidates. Because we expect sales of our product candidates, if approved, to generate a significant portion of our revenue for the foreseeable future, the failure of our product candidates to find market acceptance would harm our business.
Our current products are, and any future product candidates for which we obtain regulatory approval for will be, subject to ongoing regulatory oversight.
Our currently approved products, and any future products we commercialize, if any, are subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record keeping, applicable product tracking and tracing requirements, and submission of safety and other post-market information. Any regulatory approvals that we receive for our product candidates may also be subject to a REMS or foreign equivalents or contain requirements for potentially costly post-marketing testing, including Phase 4 trials (such as those required for IXCHIQ), and surveillance to monitor the quality, safety, and efficacy of the product. Such regulatory requirements may differ from country to country depending on where we receive regulatory approval. Regulators may also subsequently limit or revise the indicated uses for which the product was originally marketed, which could significantly impact our sales. For example, the agency supervising pharmaceutical products in Canada, which is our principal market for DUKORAL, contacted us in July 2021 to request further information in support of DUKORAL’s indications and labeling. While this matter has been resolved, if DUKORAL’s indications or labeling were to change significantly in Canada or elsewhere in the future, this could have a significant negative impact on our sales which in turn could result in the product no longer being economically viable.
In addition, biopharmaceutical manufacturers and their facilities are subject to ongoing review and periodic inspections by the competent authorities of individual EEA countries, FDA, or other comparable regulatory authorities for compliance with applicable regulatory requirements, including with cGMP requirements and with commitments made in the application for regulatory approval. If we, or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or if a regulatory authority disagrees with the promotion, marketing, or labeling of that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility, or us. These restrictions could include requesting a recall or requiring withdrawal of the product from the market, suspension of manufacturing, or suspension, variation or withdrawal of the related approval.
If we fail or if a third party fails to comply with applicable regulatory requirements for our products or any of our product candidates that receive regulatory approval in the future, a regulatory authority may:
issue an untitled letter or warning letter asserting that we are in violation of the law;
seek an injunction or impose administrative, civil, or criminal penalties or monetary fines;
suspend, vary, or withdraw regulatory approval;
suspend or vary any ongoing clinical trials;
refuse to approve a pending BLA or comparable foreign application for regulatory approval or any supplements thereto submitted by us or our partners;
restrict the labeling, distribution, marketing, or manufacturing of the product or clinical trial material;
seize or detain the product or otherwise require the withdrawal of the product from the market or product recalls;
require conduct of additional post-marketing studies or clinical trials;
refuse to permit the import or export of product candidates; or
refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and harm our business, financial condition, results of operations, and prospects.
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Regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidates. In addition, we cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative or executive action in any geography where we market a product.
It is difficult to predict how these executive actions, including any executive orders, will be implemented and the extent to which they will affect the regulatory authorities’ ability to exercise their authority. If these executive actions impose constraints on the regulatory authorities’ ability to engage in oversight and implementation activities in the normal course, our business, financial condition, results of operations, and prospects may be negatively impacted.
We may be liable if regulatory enforcement agencies determine we engaged in the off-label promotion of our products, pre-approval promotion of our product candidates, or dissemination of false or misleading labeling, advertising, or promotional materials.
Our promotional activities, materials, and training methods must comply with applicable laws and regulations, including laws and regulations prohibiting marketing claims that promote the off-label use of our products or that omit material facts or make false or misleading statements about the safety or efficacy of our products. We are responsible for training our marketing and sales force against promoting our product candidates for off-label use. However, in the United States, the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine. Therefore, physicians may use our products off-label if deemed appropriate in their independent medical judgment. Certain other countries also do not restrict or regulate a physician’s choice of treatment within the practice of medicine. A regulatory agency also could conclude that a claim is misleading if it determines that there are inadequate non-clinical and/or clinical data supporting the claim, or if a claim fails to reveal material facts about the safety or efficacy of our products. Additionally, a regulatory agency could claim that we have engaged in pre-approval promotion of a product candidate. Although our policy is to refrain from statements that could be considered off-label promotion of our products, pre-approval promotion of our product candidates, or false or misleading claims, a regulatory agency could disagree with the manner in which we advertise and promote our products or communicate about our product candidates. If a regulatory agency in the United States or certain other countries determines that our promotional activities or advertising materials promote an off-label use or make false or misleading claims, or that our communications about product candidates constitute pre-approval promotion, it could request that we modify our promotional materials, training content, or other communications or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fines, and criminal penalties. In the case of a claim of pre-approval promotion, these consequences could result in a delay in the review of any dossiers we have submitted for regulatory review and approval. Equivalent limitations and penalties are provided in the EU, both at the EU level and at the national level in individual EU Member States.
In the United States, violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, may also lead to investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws, which may lead to costly penalties and may adversely impact our business. Recent court decisions in the United States have impacted FDA’s enforcement activity regarding off-label promotion in light of First Amendment considerations such that companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling; however, there are still significant risks in this area, in part due to the potential for False Claims Act exposure.
In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could result in substantial damage awards against us and harm our reputation.
If we are unable to maintain and expand our sales and marketing capabilities on our own or with others, we may not be successful in increasing sales of our current products and commercializing future products, if approved.
To increase sales of our current products and third-party products pursuant to distribution agreements, as well as successfully commercialize any product candidate that may result from our development programs, we will need to maintain and continue to build out our sales and marketing capabilities, either on our own or with others. The continued development of our sales and marketing team will be expensive and time-consuming and could delay any product launch. We compete with many companies that currently have extensive, experienced, and well-funded marketing and sales operations to recruit, hire, train, and retain marketing and sales personnel, and will have to compete with those companies to recruit, hire, train, and retain any of our own marketing and sales personnel. If we are unable to sustain and expand our sales and marketing team, we may be unable to compete successfully against these more established companies. Alternatively, if we choose to collaborate, either globally or on a territory-by-territory basis, with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems, we will be required to negotiate and enter into arrangements with such third parties relating to the proposed collaboration. If we are unable to enter into such arrangements when needed, on acceptable terms, or at all, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval or any such commercialization may experience delays or limitations.
Our future growth depends, in part, on our ability to penetrate multiple markets, in which we would be subject to additional regulatory burdens and other risks and uncertainties.
Our future profitability will depend, in part, on our ability to continue to commercialize our products and, if approved, our product candidates in markets in Europe, the United States and other countries where we maintain commercialization rights. As we continue to commercialize our products and begin to commercialize our product candidates, if approved, in multiple markets, we are subject to additional risks and uncertainties, including:
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foreign currency exchange rate fluctuations and currency controls;
economic weakness, including inflation and rising interest rates, or political instability in particular economies and markets;
potentially adverse and/or unexpected tax consequences, including penalties due to the failure of tax planning or due to the challenge by tax authorities on the basis of transfer pricing and liabilities imposed from inconsistent enforcement;
the burden of complying with complex and changing regulatory, tax, accounting. and legal requirements, many of which vary between countries;
different medical practices and customs in multiple countries affecting acceptance of drugs in the marketplace;
differing payor reimbursement regimes, governmental payors. or patient self-pay systems and price controls;
tariffs, trade barriers, import or export licensing requirements. or other restrictive actions;
compliance with tax, employment, immigration. and labor laws for employees living or traveling abroad;
workforce uncertainty in countries where labor unrest is common;
reduction or loss of protection of intellectual property rights in some foreign countries, and related prevalence of generic alternatives to therapeutics; and
becoming subject to the different, complex. and changing laws, regulations, and court systems of multiple jurisdictions and compliance with a wide variety of foreign laws, treaties, and regulations.
In addition, due to the conflict between Russia and Ukraine, the United States, the European Union, and other jurisdictions have imposed various sanctions against Russia and Belarus. The military conflict and the retaliatory measures that have been taken, or could be taken in the future, by the U.S., the European Union, and other jurisdictions against Russia and Belarus have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could adversely affect our business. Other conflicts, such as the ongoing conflict between Israel and Hamas, could cause similar disruption and adversely impact our business. Any or all of these actions, as well as actions such as cyber-attacks by state-sponsored or non-state actors, could disrupt our operations and supply chain and adversely affect our ability to conduct and analyze ongoing and future clinical trials of our product candidates, among other possible consequences. Additionally, concerns about security and any increase in the cost of travel resulting from the rising cost of fuel could impact the travel industry. Any of these results could materially harm our business.
These and other risks associated with international operations may adversely affect our ability to attain or maintain profitable operations. Future sales of our products or our product candidates, if they are approved, will be dependent on purchasing decisions of and reimbursement from government health administration authorities, distributors, and other organizations. As a result of adverse conditions affecting the global economy and credit and financial markets, including disruptions due to political instability, armed conflict, wars, or otherwise, these organizations may defer purchases or may be unable to satisfy their purchasing or reimbursement obligations, which may affect milestone payments or royalties for our products or any of our product candidates that are approved for commercialization in the future. Should any of these risks materialize, this could have a material adverse effect on our business, prospects, financial condition, and results of operations.
Our strategic collaborations may require us to relinquish rights to and control over the development and commercialization of our product candidates or to make payments upon achievement of milestone events.
We have in the past and may in the future enter into agreements or engage in strategic collaborations in order to advance our business strategy. For example, in April 2020 we entered into a research collaboration and license agreement with Pfizer in connection with VLA15, our Lyme disease vaccine candidate. Pursuant to this agreement, Pfizer is leading late-stage development of the vaccine candidate, including conducting the ongoing Phase 3 clinical trial, and will have sole control over its commercialization.
In addition, we may in the future explore strategic collaborations, which may never materialize or may require that we relinquish rights to and control over the development and commercialization of our product candidates. We cannot predict what form such strategic collaborations or licenses might take in the future. If we do seek additional strategic collaborations, we are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations and licenses can be complicated and time-consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any additional strategic collaborations or licenses because of the numerous risks and uncertainties associated with establishing them. Any delays in entering into new strategic collaborations or licenses that we have deemed important for the development and commercialization of any of our product candidates could delay or limit those processes in certain geographies for certain indications, which would harm our business prospects, financial condition, and results of operations.
Our current and future collaborations and licenses could subject us to a number of risks, including the following:
we may be required to undertake the expenditure of substantial operational, financial, and management resources, including expenditure beyond the amount originally agreed;
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we may be required to issue equity securities that would dilute our shareholders’ percentage ownership of our company;
business combinations or significant changes in a strategic collaborator’s business strategy may adversely affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement;
disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development, or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources;
strategic collaborators may delay or encounter unanticipated problems with clinical trials, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new version of a product candidate for clinical testing;
we may be required to assume substantial actual or contingent liabilities;
we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our product candidates;
we may not have the right to control the preparation, filing, prosecution, and maintenance of patents and patent applications covering the technology that we license, and we cannot always be certain that these patents and patent applications will be prepared, filed, prosecuted, and maintained in a manner consistent with the best interests of our business;
strategic collaborators may select indications or design clinical trials in a way that may be less successful than if we were doing so;
strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement or may elect to discontinue research and development programs;
strategic collaborators may not commit adequate resources to the marketing and distribution of our product candidates, limiting our potential revenue from these products;
strategic collaborators may experience financial difficulties;
strategic collaborators may not properly maintain, enforce, or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation;
strategic collaborators could decide to move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and
strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing our product candidates.
Furthermore, license agreements we enter into in the future may not provide exclusive rights to use intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and products. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses.
Even if we successfully commercialize any of our vaccine candidates, either alone or in collaboration, we face uncertainty with respect to pricing, third-party reimbursement, and healthcare reform, all of which could adversely affect any commercial success of our vaccine candidates.
Market acceptance and sales of any vaccine candidates that we commercialize, if approved, will depend in part on the extent to which reimbursement for these products and related treatments will be available from third-party payors, including government health administration authorities, managed care organizations, and other private health insurers. Therefore, our ability to collect revenue from the commercial sale of our vaccines may depend on our ability, and that of any current or potential future collaboration partners or customers, to obtain adequate levels of approval, coverage, and reimbursement for such products from third-party payors such as:
government health administration authorities, such as ACIP;
private health insurers;
managed care organizations;
pharmacy benefit management companies; and
other healthcare related organizations.
Third-party payors decide which therapies they will pay for and establish reimbursement levels. Travel vaccines are rarely reimbursed in Europe and, while no uniform policy for coverage and reimbursement exists in the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for any product candidates that we develop will be made on a payor-by-payor basis. Therefore, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate reimbursement, for the
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product. Additionally, a third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Each payor determines whether or not it will provide coverage for a product, what amount it will pay the manufacturer for the product and on what tier of its formulary it will be placed. The position on a payor’s list of covered drugs, biological, and vaccine products, or formulary, generally determines the co-payment that a patient will need to make to obtain the product and can strongly influence the adoption of such product by patients and physicians. Even if favorable coverage and reimbursement status is attained for one or more product candidates for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future. Patients who are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. In addition, because our product candidates are physician-administered, separate reimbursement for the product itself may or may not be available. Instead, the administering physician may only be reimbursed for providing the treatment or procedure in which our product is used.
Third-party payors are increasingly challenging the prices charged for medical products and may deny coverage or offer inadequate levels of reimbursement if they determine that a prescribed product has not received appropriate clearances from the applicable regulatory authorities, is not used in accordance with cost-effective treatment methods as determined by the third-party payor, or is experimental, unnecessary or inappropriate. Prices could also be driven down by managed care organizations that control or significantly influence utilization of healthcare products. Outside the United States, pricing of competitive products by third parties is the biggest driver of the prices of our products. In the United States, we may be significantly adversely affected if the federal pricing rules change to require a greater discount than the current minimum of 24% compared to non-federal average manufacturer price for products listed on the federal supply schedule.
Third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular product. We cannot be sure that coverage and reimbursement will be available for any vaccine that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Inadequate coverage and reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. If coverage and adequate reimbursement are not available, or are available only at limited levels, we may not be able to successfully commercialize any vaccine candidates that we develop.
In both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the health care system in ways that could affect our ability to sell vaccines and could adversely affect the prices that we receive for our vaccine candidates, if approved. Some of these proposed and implemented reforms could result in reduced pharmaceutical pricing or reimbursement rates for medical products, which could adversely affect our business strategy, operations, and financial results.
For example, in the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, contains several cost containment measures that could adversely affect our future revenue, including, for example, increased drug rebates under Medicaid for brand name prescription drugs, extension of Medicaid rebates to Medicaid managed care organizations, and extension of so-called 340B discounted pricing on pharmaceuticals sold to certain healthcare providers. Additional provisions of various laws, including the ACA, that may negatively affect our future revenue and prospects for profitability include the assessment of an annual fee based on our proportionate share of sales of brand name prescription drugs to certain government programs, including Medicare and Medicaid, as well as mandatory discounts on drugs (including vaccines) sold to certain Medicare Part D beneficiaries in the coverage gap (the so-called “donut hole”).
Other aspects of healthcare reform, such as expanded government enforcement authority and heightened standards that could increase compliance-related costs, could also affect our business in the United States or elsewhere. In addition, we face uncertainties because there are ongoing federal legislative and administrative efforts to repeal, substantially modify, or invalidate some or all of the provisions of the ACA in the United States. We cannot predict the ultimate content, timing, or effect of any healthcare reform legislation or the impact of potential legislation on us. If we are unable to obtain and maintain sufficient third-party coverage and adequate reimbursement, the commercial success of our vaccine products may be greatly hindered, and our financial condition and results of operations may be materially and adversely affected.
Many EU Member States periodically review their reimbursement procedures for medicinal products, which could have an adverse impact on reimbursement status. We expect that legislators, policymakers, and healthcare insurance funds in the EU Member States will continue to propose and implement cost-containing measures, such as lower maximum prices, lower or lack of reimbursement coverage, and incentives to use cheaper, usually generic, products as an alternative to branded products, and/or branded products available through parallel import to keep healthcare costs down. Moreover, in order to obtain reimbursement for our products in some European countries, including some EU Member States, we may be required to compile additional data comparing the cost-effectiveness of our products to other available therapies. Health Technology Assessment, or HTA, of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some EU Member States, including those representing the larger markets. The HTA process is the procedure to assess therapeutic, economic, and societal impact of a given medicinal product in the national healthcare systems of the individual country. The outcome of an HTA will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product currently varies between EU Member States.
In December 2021, Regulation No 2021/2282 on Health Technology Assessment, amending Directive 2011/24/EU, was adopted in the EU. This Regulation, which entered into force in January 2022 and will apply as of January 2025, is
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intended to boost cooperation among EU Member States in assessing health technologies, including new medicinal products, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas. The Regulation foresees a three-year transitional period and will permit EU Member States to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU Member States will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technologies and making decisions on pricing and reimbursement. If we are unable to maintain favorable pricing and reimbursement status in EU Member States for product candidates that we may successfully develop and for which we may obtain regulatory approval, any anticipated revenue from and growth prospects for those products in the EU could be negatively affected.
Legislators, policymakers, and healthcare insurance funds in the EU may continue to propose and implement cost-containing measures to keep healthcare costs down, particularly due to the financial strain that the COVID-19 pandemic placed on national healthcare systems of the EU Member States. These measures could include limitations on the prices we would be able to charge for product candidates that we may successfully develop and for which we may obtain regulatory approval or the level of reimbursement available for these products from governmental authorities or third-party payors. Further, an increasing number of EU and other foreign countries use prices for medicinal products established in other countries as “reference prices” to help determine the price of the product in their own territory. Consequently, a downward trend in prices of medicinal products in some countries could contribute to similar downward trends elsewhere.
Our failure to obtain marketing approval in jurisdictions other than the United States and the European Union would prevent our product candidates from being marketed in these other jurisdictions, and any approval we are granted for our product candidates in the United States and the European Union would not assure approval of product candidates in other jurisdictions.
In order to market and sell our product candidates in jurisdictions other than the United States and the European Union, we must obtain separate marketing approvals in such jurisdictions and comply with numerous and varying regulatory requirements. The approval process varies among countries and can involve additional testing aside from that which is required to obtain such approval in the United States and the European Union. The time required to obtain approval may differ from that required to obtain approval from the FDA or regulatory authorities in the European Union. The regulatory approval process outside the United States and the European Union generally includes all of the risks associated with obtaining FDA approval or approvals from regulatory authorities in the European Union. In addition, some countries outside the United States and the European Union require approval of the sales price of a product before it can be marketed. In many countries, separate procedures must be followed to obtain reimbursement, and a product may not be approved for sale in the country until it is also approved for reimbursement. We may not obtain marketing, pricing, or reimbursement approvals outside the United States and the European Union on a timely basis, if at all. Approval by the FDA or regulatory authorities in the European Union does not ensure approval, with the same scope or at all, by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States and the European Union does not ensure similar approval by regulatory authorities in other countries or jurisdictions or by the FDA or regulatory authorities in the European Union. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. Marketing approvals in countries outside the United States and the European Union do not ensure pricing approvals in those countries or in any other countries where such approvals are required, and marketing approvals and pricing approvals do not ensure that reimbursement will be obtained.
Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities, damage our reputation, and limit commercialization of any product candidate that we may develop as well as continued commercialization of our current products.
We face an inherent risk of product liability exposure related to the sale and use of our products and the testing of our product candidates in clinical trials. Side effects of, or manufacturing defects in, products that we develop could result in injury or even death. For example, our liability could be sought after by subjects participating in the clinical trials in the context of the development of the vaccine candidates tested and unexpected side effects resulting from the administration of these products. Once a product is approved for sale and commercialized, the likelihood of product liability lawsuits increases. Criminal or civil proceedings might be filed against us by subjects, regulatory authorities, biopharmaceutical companies, and any other third party using or marketing our products. These actions could include claims resulting from acts by our partners, licensees, and subcontractors over which we have little or no control. These lawsuits may divert our management from pursuing our business strategy, result in withdrawal of clinical trial participants, result in decreased demand for our products, and may be costly and time-consuming to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities, may be forced to limit or forgo further development or commercialization of the affected products, and may suffer damage to our reputation.
Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our product candidates were to cause adverse side effects during clinical trials or after approval of the product candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our products or our product candidates.
To date, we have obtained product liability insurance with a coverage amount of €35 million per claim per year. Our product liability insurance will need to be adjusted in connection with the commercial sales of our products and our product
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candidates, and may be unavailable in meaningful amounts or at a reasonable cost. Our insurance coverage may not be sufficient to cover any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial. A successful product liability claim, or series of claims, brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
In addition, product liability claims relating to our own or similar products may result in increases in insurance premiums or deductibles that may make insurance coverage more costly or prohibitively expensive. Additionally, insurance providers may refuse to provide coverage for a category of related products if one such product is removed from the market for safety reasons. We cannot guarantee that we will be able to maintain product liability insurance coverage for all of our products. If we are the subject of a successful product liability claim that exceeds the limits of any insurance coverage we obtain, we would incur substantial charges that would adversely affect our earnings and require the commitment of capital resources that might otherwise be available for the development and commercial launch of our product programs. Should any of these risks materialize, this could have a material adverse effect on our business, prospects, financial condition, and results of operations.
Risks Related to Regulatory Compliance
We may fail to obtain regulatory approval for our products on a timely basis or comply with our continuing regulatory obligations after approval is obtained.
Delays in obtaining regulatory approval can be extremely costly in terms of lost sales opportunities, loss of any potential marketing advantage of being early to market, and increased clinical trial costs. The speed with which we begin and complete our pre-clinical studies, clinical trials, and applications for marketing approval will depend on several factors, including the following:
regulatory agency review and approval of proposed clinical trial protocols;
approval of clinical trials protocols and informed consent forms by institutional review boards responsible for overseeing the ethical conduct of the trial, or positive ethics committee opinions, as part of the single decision on the authorization of a clinical trial issued by EU Member States including input from the national competent authorities and ethics committee;
the rate of participant enrollment and retention, which is a function of many factors, including among others the size of the participant population, the proximity of participants to clinical sites, the eligibility criteria for the clinical trial, and the nature of the protocol;
unfavorable test results or side effects experienced by clinical trial participants;
analysis of data obtained from pre-clinical and clinical activities, which are susceptible to varying interpretations and which interpretations could delay, limit, or prevent regulatory approval or delay, limit, prevent, or result in the suspension, variation, or termination of clinical studies;
the availability of skilled and experienced staff to conduct and monitor clinical trials and to prepare the appropriate regulatory applications;
compliance with GCP and other applicable regulations by CROs and personnel conducting a clinical trial; and
changes in the policies of regulatory authorities for drug or vaccine approval during the period of product development.
We may not be permitted to continue or commence additional clinical trials. Regulatory agencies may require us or our collaborators to delay, restrict, or discontinue clinical trials on various grounds, including a finding that the participants are being exposed to an unacceptable health risk or as a result of non-compliance with applicable regulations such as GCP. We also face the risk that the results of our clinical trials may be inconsistent with the results obtained in pre-clinical studies or clinical trials of similar products or that the results obtained in later phases of clinical trials may be inconsistent with those obtained in earlier phases. A number of companies in the biotechnology and product development industry have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in early animal and human testing.
In addition, we or our collaborators may be unable to submit applications to regulatory agencies within the timeframe we currently expect. Once submitted, applications must be approved by various regulatory agencies before we or our collaborators can commercialize the product described in the application.
Further, any future regulatory approvals that we receive may be limited in scope. Such limitations would impact the degree to which we can commercialize a product in the relevant territory and could require additional investments of time and resources if we choose to pursue an expansion of the label and indications beyond what may be initially approved.
All statutes and regulations governing the conduct of clinical trials are subject to change in the future, which could affect the cost of such clinical trials. Any unanticipated costs or delays in our clinical trials could delay our ability to generate revenue and harm our financial condition and results of operations.
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Accelerated regulatory review and approval procedures do not guarantee faster development, review, or approval or that approval will ultimately be granted.
Regulatory agencies such as the EMA and FDA offer various options for accelerated review and approval of product candidates, such as the EMA’s PRIME designation for priority medicines and the FDA’s Fast Track designation and accelerated approval pathway. We seek to take advantage of these opportunities in order to facilitate the development, review, and approval processes for our product candidates.
IXCHIQ, or VLA1553 in jurisdictions where it is subject to ongoing regulatory review, has received PRIME designation from the EMA. The PRIME scheme is intended to encourage drug development in areas of unmet medical need and provides accelerated assessment of products that may offer a major therapeutic advantage over existing treatments or benefit patients without treatment options, reviewed under the centralized procedure. PRIME designation does not change the standards for product approval or ensure that the product will receive marketing approval at all or within any particular timeframe. We may seek PRIME designation for other vaccine candidates in the future. If we do seek PRIME designation for our other vaccine candidates, we may not receive it, and even if we receive PRIME designation, we may not experience a faster development process, review, or approval compared to conventional EMA procedures.
VLA15, our candidate against Lyme disease, received Fast Track designation from the FDA. Fast Track designation may be available to help expedite the development or approval process for a drug that is intended for the treatment of a serious or life-threatening condition and that demonstrates the potential to address an unmet medical need for this condition. Fast Track designation does not change the standards for product approval or ensure that the product will receive marketing approval at all or within any particular timeframe. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures. Thus, although VLA15 has received Fast Track designation, there is no guarantee that this designation will result in a faster or more successful development or review process or in ultimate approval of this product candidate by the FDA. Additionally, we may also seek Fast Track designation for our other vaccine candidates. If we do seek Fast Track designation for our other vaccine candidates, we may not receive it, and even if we receive Fast Track designation, we may not experience a faster development process, review, or approval compared to conventional FDA procedures.
Finally, we received approval for IXCHIQ under the FDA’s accelerated approval pathway and may seek such approval for other vaccine candidates in the future. A product may be eligible for accelerated approval if it treats a serious or life-threatening condition, generally provides a meaningful advantage over available therapies, and demonstrates an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. As a condition of approval, the FDA may require that a sponsor of a product receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials, such as the Phase 4 clinical trials that are required for IXCHIQ. These confirmatory trials must be completed with due diligence. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Even if we do receive accelerated approval for a future product candidate, we may not experience a faster development or regulatory review or approval process, and receiving accelerated approval does not provide assurance of ultimate full FDA approval.
If approved, our investigational products regulated as biologics may face competition from biosimilars approved through an abbreviated regulatory pathway.
The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biologic products that are biosimilar to or interchangeable with an FDA-licensed reference biologic product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a BLA for the competing product containing the sponsor’s own pre-clinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of the other company’s product.
We believe that any of our product candidates approved as a biologic product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our investigational medicines to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once licensed, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biologic products is not yet clear and will depend on a number of marketplace and regulatory factors that are still developing. If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.
The European Union provides opportunities for data and market exclusivity related to marketing authorizations. Upon receiving a marketing authorization, innovative medicinal products are generally entitled to receive eight years of data exclusivity and 10 years of market exclusivity. Data exclusivity, if granted, prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic application or biosimilar application for eight years from the date of authorization of the innovative product, after which a generic or biosimilar marketing authorization application can be submitted, and the innovator’s data may be referenced. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the European Union until 10 years have elapsed from the initial
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marketing authorization of the reference product in the European Union. The overall ten-year period may, occasionally, be extended for a further year to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be a new chemical/biological entity, and products may not qualify for data exclusivity.
In the EU, there is a special regime for biosimilars, or biological medicinal products that are similar to a reference medicinal product but that do not meet the definition of a generic medicinal product. For such products, the results of appropriate preclinical or clinical trials must be provided in support of an application for marketing authorization. Guidelines from the EMA detail the type of quantity of supplementary data to be provided for different types of biological product.
We also believe that our product candidates in the EEA should benefit from this data and market exclusivity. As with the U.S., however, if competitors obtain marketing authorization for their biosimilar products, our products may become subject to competition from these biosimilars, with the attendant competitive pressure and consequences.
Our relationships with customers, healthcare providers, and third-party payors are subject, directly or indirectly, to healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal investigators, consultants, customers, and third-party payors subject us to various fraud and abuse laws and other healthcare laws.
These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell, and distribute our product candidates, if approved. Restrictions under applicable U.S. federal, state, and foreign healthcare laws and regulations include, but are not limited to, the following:
the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item, or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers, on the one hand, and prescribers, purchasers, and formulary managers, on the other. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
the U.S. federal civil and criminal false claims, including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. Pharmaceutical manufacturers can cause false claims to be presented to the U.S. federal government by engaging in impermissible marketing practices, such as the off-label promotion of a product for an indication for which it has not received FDA approval. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy and security of individually identifiable health information of covered entities subject to the rule, such as health plans, healthcare clearinghouses, and certain healthcare providers as well as their business associates, independent contractors of a covered entity that perform certain services involving the use or disclosure of individually identifiable health information on their behalf, and their subcontractors that use, disclose, or otherwise process individually identifiable health information;
the Federal Food Drug and Cosmetic Act, or FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics, and medical devices;
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the U.S. Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; and
similar healthcare laws and regulations in other jurisdictions, such as state anti-kickback and false claims laws, state laws that require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, state laws that require the reporting of information relating to drug and biologic pricing; state and local laws that require the registration of pharmaceutical sales representatives and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect as HIPAA, thus complicating compliance efforts. Outside the United States, interactions between pharmaceutical companies and healthcare professionals are also governed by strict laws, such as national anti-bribery laws of European countries, national sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct. These laws may include the French “Bertrand Law”, French Ordinance n° 2017-49 of January 19, 2017 and Decree No. 2020-730 of June 15, 2020 relating to benefits offered by persons manufacturing or marketing health products or services, and the UK’s Bribery Act 2010, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state marketing, and/or transparency laws applicable to manufacturers or any company providing services related to their products that may be broader in scope than the federal requirements. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.
Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations is and will continue to be costly. It is possible that governmental authorities will conclude that our business practices, including our relationships with physicians and other healthcare providers, may not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, as well as damages, fines, disgorgement, imprisonment, exclusion from participating in U.S. government-funded healthcare programs, such as Medicare and Medicaid, or comparable foreign programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, contractual damages, reputational harm, and the curtailment or restructuring of our operations.
Even if resolved in our favor, litigation or other legal proceedings relating to healthcare laws and regulations may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ordinary shares and ADSs. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, manufacturing, sales, marketing, or distribution activities. Uncertainties resulting from the initiation and continuation of litigation or other proceedings relating to applicable healthcare laws and regulations could have an adverse effect on our ability to compete in the marketplace. Further, if the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant civil, criminal, or administrative sanctions, including exclusions from U.S. government-funded healthcare programs.
Healthcare legislative reform measures may have a negative impact on our business, financial condition, results of operations, and prospects.
In the United States, the European Union and some foreign jurisdictions, there have been, and we expect there will continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the ACA was passed, which substantially changed the way healthcare is financed by both governmental and private payors in the United States. Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include increasing the minimum level of Medicaid rebates payable by manufacturers of brand name drugs; requiring collection of rebates for drugs paid by Medicaid managed care organizations; requiring manufacturers to participate in a coverage gap discount program, under which they must agree to offer point-of-sale discounts (increased to 70 percent, effective as of January 1, 2019) off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; imposing a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs; implementing a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; expanding the types of entities eligible for the 340B drug discount program; expanding eligibility criteria for Medicaid programs; creating a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and establishing a Center for Medicare Innovation at CMS to test
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innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
There have been executive, judicial, and congressional challenges to certain aspects of the ACA. For example, on June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Further, prior to the U.S. Supreme Court ruling, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022, or IRA, into law, which, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program. It is unclear how any such healthcare reform measures of the Biden administration will impact the ACA and our business.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013 and through subsequent legislation will remain in effect through 2032, unless additional Congressional action is taken. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In addition, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, which established a quality payment program, also referred to as the Quality Payment Program. The Quality Payment Program has two tracks, one known as the merit-based incentive payment system for providers in the fee-for service Medicare program, and the advanced alternative payment model for providers in specific care models, such as accountable care organizations. At this time, the full impact to overall physician reimbursement as a result of the introduction of the Medicare Quality Payment Program remains unclear.
Further, in the United States there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries, Presidential executive orders, and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug and biological product pricing, reduce the cost of prescription drugs and biological products under government payor programs, and review the relationship between pricing and manufacturer patient programs. At the federal level, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, the Department of Health and Human Services, or HHS, released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. In addition, the IRA, among other things, (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare, and subjects drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” for such drugs and biologics under the law, and (ii) imposes rebates with respect to certain drugs and biologics covered under Medicare Part B or Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions take effect progressively and began in 2023. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges. It is currently unclear how the IRA will be implemented, but it is likely to have a significant impact on the pharmaceutical industry. In response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the CMS Innovation Center which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future. Further, on December 7, 2023, the Biden administration announced an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act. On December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework. Additionally, on July 9, 2021, President Biden issued an executive order directing the FDA to, among other things, continue to clarify and improve the approval framework for biosimilars, including the standards for interchangeability of biological products, facilitate the development and approval of biosimilar and interchangeable products, clarify existing requirements and procedures related to the review and submission of BLAs, and identify and address any efforts to impede biosimilar competition.
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At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine which drugs, biological products, and suppliers will be included in their healthcare programs. Furthermore, there has been increased interest by third-party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.
We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our current or any future product candidates or additional pricing pressures. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action in the United States or any other jurisdiction. If we or any third parties we may engage are slow or unable to adapt to changes in existing or new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our current or any future product candidates we may develop may lose any regulatory approval that may have been obtained, and we may not achieve or sustain profitability. Further, any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
In some countries, the proposed pricing for a biopharmaceutical product must be approved before it may be lawfully marketed. In addition, in certain foreign markets, the pricing of biopharmaceutical products is subject to government control, and reimbursement may in some cases be unavailable. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its Member States to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. An EU Member State may approve a specific price for the medicinal product, refuse to reimburse a product at the price set by the manufacturer, or adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market.
Moreover, in the EEA some countries require the completion of additional studies that compare the cost-effectiveness of a particular medicinal product candidate to currently available therapies. This Health Technology Assessment, or HTA process, which is currently governed by the national laws of the individual EU Member States, is the procedure according to which the assessment of the public health impact, therapeutic impact, and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States. On January 31, 2018, the European Commission adopted a proposal for a regulation on health technologies assessment. The proposed regulation is intended to boost cooperation among EU Member States in assessing health technologies, including new medicinal products, and providing the basis for cooperation at EU level for joint clinical assessments in these areas. In December 2021, the HTA Regulation was adopted, and it entered into force on January 11, 2022. It will apply from 2025.
There can be no assurance that any country that has price controls or reimbursement limitations for biopharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically, biopharmaceutical products launched in the European Union do not follow price structures of the United States and generally tend to have significantly lower prices.
In addition, the policies of the FDA, the competent authorities of the EU Member States, the EMA, the European Commission, and other comparable regulatory authorities with respect to clinical trials may change and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the EU recently evolved. The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each EU Member State, leading to a single decision for each EU Member State. The assessment procedure for the authorization of clinical trials has been harmonized as well, including a joint assessment by all EU Member States concerned, and a separate assessment by each EU Member State with respect to specific requirements related to its own territory, including ethics rules. Each EU Member State’s decision is communicated to the sponsor via the centralized EU portal. Once the clinical trial is approved, clinical study development may proceed. The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be governed by the CTR varies. For clinical trials in relation to which application for approval was made on the basis of the Clinical Trials Directive before January 31, 2023, the Clinical Trials Directive will continue to apply on a transitional basis, until January 31, 2025. By that date, all ongoing trials will become subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans.
It is currently unclear to what extent the UK will seek to align its regulations with the EU in the future. The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented into UK law, through secondary legislation).
On January 17, 2022, the UK Medicines and Healthcare products Regulatory Agency, or MHRA, launched an eight-week consultation on reframing the UK legislation for clinical trials. The UK Government published its response to the consultation on March 21, 2023 confirming that it would bring forward changes to the legislation. These resulting legislative amendments will determine how closely the UK regulations will align with the CTR. Failure of the UK to closely align its regulations with the EU may have an effect on the cost of conducting clinical trials in the UK as opposed
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to other countries and/or make it harder to seek a marketing authorization for the Company's product candidates on the basis of clinical trials conducted in the United Kingdom.
In addition, on April 26, 2023, the European Commission adopted a proposal for a new Directive and Regulation to revise the existing pharmaceutical legislation. If adopted in the form proposed, the recent European Commission proposals to revise the existing EU laws governing authorization of medicinal products may result in a decrease in data and market exclusivity opportunities for our product candidates in the EU and make them open to generic or biosimilar competition earlier than is currently the case with a related reduction in reimbursement status.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted.
We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws, and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, results of operations, and financial condition.
We are subject to other laws and regulations governing our international operations, including regulations administered by the authorities in the United States, European Union, and United Kingdom, including applicable export control regulations, economic sanctions on countries and persons, and customs requirements and currency exchange regulations, collectively referred to as the trade control laws. Specifically, as a result of the Russian invasion of Ukraine in February 2022, the United States, the European Union, the United Kingdom, and other jurisdictions adopted a series of financial and trade sanctions in relation to Russia and Belarus and Russian and Belarussian listed citizens and entities.
Exports of our products and product candidates must be made in compliance with trade control laws. In some cases, certain licensing, authorization, or reporting requirements may need to be performed. In addition, these laws may restrict or prohibit altogether the supply of certain of our products, product candidates, or services to certain governments, persons, entities, countries, and territories. Changes in our products and product candidates or changes in applicable trade control laws may create delays in the introduction or provision of our products and product candidates in certain jurisdictions, prevent others from using our products and product candidates or, in some cases, prevent the export or import of our products and product candidates to certain countries, governments, or persons altogether. Any limitation on our ability to export or provide our products, product candidates, and services could adversely affect our business, financial condition, and results of operations.
We are also subject to anti-corruption laws of the United States and other applicable jurisdictions. The Foreign Corrupt Practices Act, or FCPA, prohibits companies and their employees, third-party intermediaries, and other associated persons from paying, offering, authorizing payment, or providing anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of a foreign entity in order to obtain or retain business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls.
Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the biopharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.
French anti-corruption laws also prohibit acts of bribery and influence peddling:
Article 433-1-1° of the French Criminal Code (bribery of domestic public officials);
Article 433-1-2° of the French Criminal Code (influence peddling involving domestic public officials);
Article 434-9 of the French Criminal Code (bribery of domestic judicial staff);
Article 434-9-1 of the French Criminal Code (influence peddling involving domestic judicial staff);
Articles 435-1 and 435-3 of the French Criminal Code (bribery of foreign or international public officials);
Articles 435-7 and 435-9 of the French Criminal Code (bribery of foreign or international judicial staff);
Articles 435-2, 435-4, 435-8 and 435-10 of the French Criminal Code (active and passive influence peddling involving foreign or international public officials and foreign or international judicial staff);
Articles 445-1 and 445-2 of the French Criminal Code (bribery of private individuals); and
French Law n°2016-1691 of December 9th, 2016 on Transparency, the Fight Against Corruption and the Modernization of the Economy (Sapin 2 Law), which provides for numerous new obligations for large companies such as the obligation to draw up and adopt a code of conduct defining and illustrating the different types of behavior to be proscribed as being likely to characterize acts of corruption or influence peddling, to set up an internal warning system designed to enable the collections of reports from employees relating to the existence of conduct or situations contrary to the company’s code of conduct, to set up accounting control procedures, whether internal or external, designed to ensure that the books, registers and accounts are not used to conceal acts of
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corruption or influence peddling, to set up a disciplinary system for sanctioning company employees in the event of a breach of the company’s code of conduct or a system for monitoring and evaluating the measures implemented.
We are also subject to the UK Bribery Act 2010, which makes it a criminal offense to:
Offer, promise, or give a financial or other advantage to a person to induce them to perform improperly or reward a person for improper performance (directly or via a third party). A bribe can be of any form, size, or value that would provide the intended recipient with some form of benefit or advantage. Bribes can include money, discounts, vouchers, loans, gifts, hospitality, accommodation, use of assets, preferential treatment, business advantage, and employment opportunities, among others;
Request, agree to receive or accept a financial or other advantage with the intention of or as reward for improper performance (directly or via a third party);
Attempt bribery of a foreign public official in order to obtain or retain business or an advantage in the conduct of business, either directly or via a third party;
As a commercial organization, fail to prevent bribery, as a result of not having adequate procedures in place to prevent a person directly or associated with a company to commit any of the other offenses.
For the purposes of the UK Bribery Act 2010, “foreign public official” means an individual who:
is an official or agent of a public international organization; or
exercises a public function:
for or on behalf of a country or territory outside the Island (or any subdivision of such a country or territory); or
for any public agency or public enterprise of that country or territory (or subdivision).
There is no assurance that we will be effective in ensuring compliance by our employees, representatives, contractors, business partners, and agents with all applicable anti-corruption laws, including the FCPA, the French anti-corruption laws, or other applicable legal requirements, including trade control laws. If we are not in compliance with the FCPA, the French anti-corruption laws, and other anti-corruption laws or trade control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations, and liquidity. Likewise, any investigation of any potential violations of the FCPA, the French anti-corruption laws, other anti-corruption laws or trade control laws by U.S. or other authorities could also have an adverse impact on our reputation, our business, results of operations, and financial condition.
As a publicly listed company in France and the United States, we will be subject, and expect to be subject, to new regulations requiring substantial additional disclosure on sustainability and environmental, social, and governance (ESG) matters, including the EU Corporate Sustainability Reporting Directive, the EU Taxonomy Regulation, the EU Corporate Sustainability Due Diligence Directive, and the SEC’s climate rules adopted on March 6, 2024.
On December 14, 2022, the EU adopted Directive 2022/2464/EU, or the Corporate Sustainability Reporting Directive or CSRD. The CSRD introduces new mandatory reporting obligations that will require the publication of audited sustainability information in our Management Report for the year ended December 31, 2024. This information, addressing environmental, social, and governance, or ESG, matters, is set forth in new mandatory European sustainability reporting standards, or ESRS, that will be adopted by the European Commission through secondary legislation.
The First Set of ESRS applicable to EU reporting entities was formally adopted on July 31, 2023. The First Set of ESRS cover general requirements (ESRS 1), general disclosures (ESRS 2), and the following 10 ESG topics:
E1Climate change
E2Pollution
E3Water and marine resources
E4Biodiversity and ecosystems
E5Resource and circular economy
S1Own workforce
S2Workers in the value chain
S3Affected communities
S4Consumers and end-users
G1Business conduct
The disclosures listed in ESRS 2 are mandatory, even if the entity considers that there are no material impacts, risks, or opportunities. For example, a statement on due diligence, a description of the processes to identify and assess material
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impacts, risks, and opportunities and information about the integration of sustainability-related performance in incentive schemes are always required.
Certain disclosures listed in ESRS 2 are mandatory, even if not material. The other disclosures listed in the 10 topical ESRS (ESRS E1-E5, S1-S4 and G1) are only required if “material” impacts, risks, and/or opportunities are identified. “Materiality” under the CSRD must be assessed following the double materiality principle. Double materiality means that the reporting entity should consider both financial materiality (i.e., sustainability matters which generate risks or opportunities that affect, or could reasonably be expected to affect, the Company’s financial position, financial performance, cash flows, access to finance, or cost of capital over the short, medium, or long term) and impact materiality (i.e., the Company’s material actual or potential, positive or negative impacts on people or the environment over the short-, medium-, and long-term). Impacts, risks, and opportunities are material if they satisfy one or both of these materiality tests.
For each topic identified as material, reporting entities will have to include in their reports material sustainability information concerning:
1.their own operations,
2.the operations of their subsidiaries whether EU or non-EU, and
3.businesses in their value chains (both upstream and downstream).
The disclosure required under the CSRD must be included in a sustainability section of the EU Management Report for EU reporting entities. All EU reporting entities subject to the CSRD must have the sustainability section of their EU Management Report audited by an accredited third-party to confirm that it has been prepared in accordance with the relevant ESRS and Article 8 of Regulation (EU) 2020/852, or the EU Taxonomy Regulation. The assurance opinion must be published alongside the Management Report.
Compliance with the CSRD will require us to set up processes to gather the relevant data, to conduct double materiality assessments, and to substantially revise our existing sustainability report. These activities will require significant time and involvement from employees across the Company and will also incur additional costs beyond the cost of the additional audit required.
The disclosure requirements under the CSRD apply alongside the EU Taxonomy Regulation, which (a) creates a classification system to determine when an economic activity qualifies as “environmentally sustainable” and (b) requires companies in scope of the Non-Financial Reporting Directive, including those brought into scope by the CSRD, to disclose the proportion of turnover, capital, and operational expenditure related to economic activities that qualify as “environmentally sustainable” within the meaning of the EU Taxonomy Regulation and associated delegated acts. This information should be disclosed even if there is no contribution to environmentally sustainable activities.
The disclosures required under the CSRD and the EU Taxonomy Regulation should be also considered together with the proposed EU Directive on Corporate Sustainability Due Diligence, or CSDDD, which, if adopted and if applicable to Valneva, would set new due diligence duties for Valneva.
Assuming that the CSDDD is formally adopted into EU law, it would apply to companies established in the EU that: (1) have an average net worldwide turnover exceeding EUR 450 million in the previous financial year, and (2) over 1000 employees – including part time workers, temporary workers, and workers in non-standard forms of employment.
Currently, the CSDDD would not apply to Valneva. However, if the CSDDD were to become applicable to Valneva due to growth in worldwide turnover and employee numbers, we would be required to identify and, where necessary, prevent, end, or mitigate actual or potential adverse human rights and environmental impacts, such as child labor, exploitation of workers, pollution, and biodiversity loss. More specifically, we would be required to:
Integrate human rights and environmental due diligence into our policies and risk management systems if they are not already integrated;
Identify and assess actual and potential adverse human rights and environmental impacts in our own operations and those of our subsidiaries and upstream and downstream business partners;
Take appropriate measures to prevent or mitigate potential adverse impacts on human rights or the environment;
Bring to an end or minimize any actual adverse impacts on human rights or the environment that materialize and remedy these going forward;
Establish and maintain a notification mechanism and complaints procedure;
Monitor the effectiveness of our due diligence policy and measures; and
Publicly communicate our due diligence procedures, to the extent this is not already covered in our CSRD reporting.
In addition, the CSDDD will require in-scope companies to adopt and put into effect a transition plan for climate change mitigation, which aims to ensure that, through best efforts, their business model and strategy are compatible with the transition to a sustainable economy and with limiting global warming to 1.5°C.
It is estimated that the CSDDD will be formally adopted in the second quarter of 2024, with the new requirements under the CSDDD starting to apply from 2027 for the largest companies and 2029 for other in-scope companies.
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Additionally, we are subject to the rules adopted by the U.S. Securities and Exchange Commission on climate-related disclosure in March 2024. The SEC climate rules are subject to ongoing litigation, which may result in implementation delays and ongoing uncertainty.
Compliance with the CSRD, the EU Taxonomy Regulation, the CSDDD if Valneva is in-scope, and the SEC’s climate disclosure rules will require significant resources, time, and attention from management.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our product candidates and technology, or if the scope of the patent protection obtained is not sufficiently broad or robust, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our product candidates and technology may be adversely affected.
Our success depends, in large part, on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates and our technology. We and our licensors have sought, and intend to seek, to protect our proprietary position by filing patent applications in Europe, the United States and other jurisdictions related to our product candidates and our technology that are important to our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has, in recent years, been the subject of much litigation. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or product candidates or which effectively prevent others from commercializing competitive technologies and product candidates. Because patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file a patent application relating to any particular aspect of a product candidate. Foreign patents may be subject also to opposition or comparable proceedings in the corresponding foreign patent office.
The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
We or our licensors have not pursued or maintained, and may not pursue or maintain in the future, patent protection for our product candidates in every country or territory in which we may sell our products, if approved. In addition, the laws of some countries do not protect intellectual property rights to the same extent as European laws and federal and state laws in the United States. Consequently, we may not be able to prevent third parties from infringing our patents in all countries outside the EEA or the United States, or from selling or importing products that infringe our patents in and into the EEA or the United States or other jurisdictions.
Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if the patent applications we license or own do issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative products in a non-infringing manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in EEA countries, the United States, and other jurisdictions. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products or could limit the duration of the patent protection of our technology and product candidates. For example, one of our patents that relates to VLA84 has been limited in scope in opposition proceedings in Europe. In another case in 2023, we decided to withdraw a patent covering IXIARO and VLA2001 following an opposition proceeding in Europe. More recently, we have also received a further opposition by a third party against a European patent that is directed at IXIARO, VLA2001 and VLA1601. The proceeding started in June 2023, and we will defend our position with one or more submissions. Although we do not expect these developments to have a significant impact on further commercialization of IXIARO, we may face similar proceedings in the future that could have a significant effect on our ability to commercialize our products. We have also recently received an opposition by a third party against a European patent that is directed to our Zika product candidate, VLA1601. The proceeding began in February 2023, and we will defend our position with one or more submissions.
Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. In addition, if the breadth or strength of protection provided by the patents and patent applications we hold with respect to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates.
Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. As a result, such third parties, including governments and non-for-profit organizations, may have certain rights, including “march-in” rights, to such patent rights and technology. When new technologies are developed with such partners, they
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generally obtain certain rights in any resulting patents, including a nonexclusive license authorizing the party to use the invention for noncommercial purposes. These rights may permit the funding partner to disclose our confidential information to third parties and to exercise “march-in” rights to use or allow third parties to use our licensed technology. The funding partner can exercise its “march-in” rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. or other country industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States or other countries. Any exercise by the funding partners of such rights could harm our competitive position, business, financial condition, results of operations, and prospects.
Obtaining and maintaining our patent rights depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. In addition, periodic maintenance fees, renewal fees, annuity fees and various other government fees on patents and/or patent applications will have to be paid to the USPTO and various government patent agencies outside the United States over the lifetime of our owned and licensed patents and/or applications and any patent rights we may own or license in the future. We rely on our service providers or our licensors to pay these fees. We employ reputable law firms and other professionals to help us comply, and we are also dependent on our licensors to take the necessary action to comply with these requirements with respect to our licensed intellectual property. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, nonpayment of fees, and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications covering our product candidates or technologies, we may not be able to use such patents and patent applications or stop a competitor from marketing products that are the same as or similar to our product candidates, which would have an adverse effect on our business. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could harm our business.
In addition, if we fail to apply for applicable patent term extensions or adjustments, we will have a more limited time during which we can enforce our granted patent rights. In addition, if we are responsible for patent prosecution and maintenance of patent rights in-licensed to us, any of the foregoing could expose us to liability to the applicable patent owner.
Patent terms may be inadequate to protect our competitive position on our products and product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its first effective filing date. Although various extensions may be available, the life of a patent and the protection it affords is limited. In addition, although upon issuance in the United States a patent’s life can be increased based on certain delays caused by the USPTO, this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we do not have sufficient patent life to protect our products, our business and results of operations could be adversely affected.
Given the amount of time required for the development, testing, and regulatory review of our product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we have or will obtain patent rights. The Hatch-Waxman Act in the United States, and similar legislation in the European Union, permit a patent term extension of up to five years beyond the normal expiration of the patent, provided that the patent is not enforceable in the U.S. for more than 14 years from the date of drug approval, which is limited to the approved indication (or any additional indications approved during the period of extension). Furthermore, in the United States, only one patent per approved product can be extended and only those claims covering the approved product, a method for using it, or a method for manufacturing it may be extended. In the EEA, supplementary protection certificates, or SPCs, provide protection for the active ingredient of a patented and authorized medicinal product, which may extend for up to five years beyond the normal patent expiry date (providing together with the patent up to 15 years exclusivity from the first EU marketing authorization). In some cases an additional six months of SPC protection may be obtained by performing pediatric trials of the product. The protection afforded by an SPC extends only to the active ingredient of the authorized medicinal product, within the scope of the granted base patent. However, the applicable authorities may not agree with our assessment of whether such extensions are available and may refuse to grant extensions to our patents or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and pre-clinical data and may be able to launch their product earlier than might otherwise be the case.
Third parties may initiate legal proceedings alleging that we are infringing, misappropriating, or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a negative impact on the success of our business.
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Our commercial success depends, in part, upon our ability and the ability of others with whom we may collaborate to develop, manufacture, market, and sell our current and any future product candidates and use our proprietary technologies without infringing, misappropriating, or otherwise violating the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and complex litigation regarding patents and other intellectual property rights. Numerous U.S.- and foreign-issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk may increase that our product candidates may give rise to claims of infringement of the patent rights of others. We may in the future become party to, or be threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our current and any future product candidates and technology, including interference proceedings, post grant review and inter partes review before the USPTO. Foreign patents may be subject also to opposition or comparable proceedings in the corresponding foreign patent office. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us. Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could have a negative impact on our ability to commercialize our current and any future product candidates. In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of validity. As this is a high burden and requires us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. Moreover, given the vast number of patents in our field of technology, we cannot be certain that we do not infringe existing patents or that we will not infringe patents that may be granted in the future. While we have in the past and may in the future decide to initiate proceedings to challenge the validity of these or other patents in the future, we may be unsuccessful, and courts or patent offices in Europe, the United States, and other jurisdictions could uphold the validity of any such patent. Even if we are successful in obtaining a first-instance judgement from a court or patent office that such patents are invalid, such judgements may be subject to appeal procedures which suspend revocation of the patent until a final appeal judgment is reached. This may result in many years of uncertainty and could ultimately lead to reversal of the original judgment and the patent being upheld. Furthermore, because patent applications can take many years to issue and are typically confidential for 18 months or more after filing, and because pending patent claims can be revised before issuance, there may be applications now pending which may later result in issued patents that may be infringed by the manufacture, use, or sale of our product candidates. Regardless of when filed, we may fail to identify relevant third-party patents or patent applications, or we may incorrectly conclude that a third-party patent is invalid or not infringed by our product candidates or activities. If a patent holder believes that our product candidate or technology platform infringes its patent, the patent holder may sue us even if we have received patent protection for our technology. Moreover, we may face patent infringement claims from nonpracticing entities that have no relevant product revenue and against whom our own patent portfolio may thus have no deterrent effect. If a patent infringement suit were threatened or brought against us, we could be forced to stop or delay research, development, manufacturing, or sales of the product or product candidate that is the subject of the actual or threatened suit.
If we are found to infringe a third party’s valid and enforceable intellectual property rights, we could be required to obtain a license from such third party to continue developing, manufacturing, and marketing our product candidate(s) and technology. Under any such license, we would most likely be required to pay various types of fees, milestones, royalties, or other amounts. Moreover, we may not be able to obtain any required license on commercially reasonable terms or at all, and if such an instance arises, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business. Parties making claims against us may also seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates.
The licensing or acquisition of third-party intellectual property rights is a competitive area, and more established companies may also pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or any return on our investment at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have an adverse effect on our business, financial condition, results of operations, and prospects. Furthermore, even if we were able to obtain a license, it could be nonexclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing, manufacturing, and commercializing the infringing technology or product candidate. We may also have to redesign our products, which may not be commercially or technically feasible or may require substantial time and expense. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. We may be required to indemnify collaborators or contractors against such claims. A finding of infringement could prevent us from manufacturing and commercializing our current or any future product candidates or force us to cease some or all of our business operations, which could harm our business. Even if we are successful in defending against such claims, litigation can be expensive and time-consuming and would divert management’s attention from our core business. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of
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hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our ordinary shares and ADSs.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business, financial condition, results of operations, and prospects.
We may be subject to claims asserting that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.
Certain of our employees, consultants, or advisors are currently, or were previously, employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right in our patents or patent applications as a result of the work they performed on our behalf. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Although it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own, and we cannot be certain that our agreements with such parties will be upheld in the face of a potential challenge or that they will not be breached, for which we may not have an adequate remedy. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
In some countries, the national law may stipulate that certain inventions made by an employee belong to the employer or employee and may restrict the ability of employment or other contracts to define which inventions belong ab initio to the employer. Thus in some countries employees could claim ownership of inventions by operation of national law and assignments may not be enforceable. Inventors may also assert additional rights relating to their inventive contribution, without necessarily claiming ownership. For instance, in some countries inventors are entitled to adequate remuneration or other benefit from an invention, even if the invention belongs by law to their employer. In some cases employee-inventors may also be entitled to pursue patent applications that the employer decides to abandon. Inventors claiming such rights may require us to pay additional compensation or might bring claims against us using the patent applications they acquire.
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors, or our other intellectual property rights, which could be expensive, time-consuming, and unsuccessful.
Competitors may infringe, misappropriate, or otherwise violate our patents, the patents of our licensors, or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming and are likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. For example, Takeda has initiated an inter partes review proceeding before the U.S. Patent and Trademark Office on our Zika U.S. PATENT NO. 11,219,681. This proceeding has ended as the Patent Trial and Appeal Board decided to deny Institution for this proceeding following our withdrawal of some of the claims. The remaining claims continue to cover VLA1601.
In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our owned or licensed patents at risk of being invalidated or interpreted narrowly and could put our owned or licensed patent applications at risk of not issuing. The initiation of a claim against a third party might also cause the third party to bring counterclaims against us, such as claims asserting that our patent rights are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO or similar foreign authorities or made a materially misleading statement during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is or will be no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future product candidates. Such a loss of patent protection could harm our business.
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We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license, or if the license offered as a result is not on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail and, even if successful, may result in substantial costs and distract our management and other employees.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon, misappropriating, or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.
Developments in patent law could have a negative impact on our business.
Changes in either the patent laws or interpretation of the patent laws could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. For example, from time to time, the U.S. Congress, the USPTO, or similar foreign authorities may change the standards of patentability, and any such changes could have a negative impact on our business. In addition, the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in September 2011, includes a number of significant changes to U.S. patent law. These changes include a transition from a “first-to-invent” system to a “first-to-file” system, changes to the way issued patents are challenged, and changes to the way patent applications are disputed during the examination process, such as allowing third-party submission of prior art to the USPTO during patent prosecution. These changes may favor larger and more established companies that have greater resources to devote to patent application filing and prosecution. Under a first-to-file system, assuming that other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor made the invention earlier. The USPTO has developed new regulations and procedures to govern the full implementation of the America Invents Act, and many of the substantive changes to patent law associated with the America Invents Act, and, in particular, the first-to-file provisions, became effective in March 2013. Substantive changes to patent law associated with the America Invents Act, or any subsequent U.S. legislation regarding patents, may affect our ability to obtain patents, and if obtained, to enforce or defend them. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the cost of prosecuting our U.S. patent applications, our ability to obtain U.S. patents based on our discoveries, and our ability to enforce or defend any patents that may issue from our patent applications, all of which could have a material adverse effect on our business, prospects, financial condition, and results of operations.
In addition, changes to or different interpretations of patent laws in the United States and other countries may permit others to use our or our partners’ discoveries or to develop and commercialize our technology and product candidates without providing any compensation to us, or may limit the number of patents or claims we can obtain. The patent positions of companies in the biotechnology and pharmaceutical market are particularly uncertain. Recent U.S. Supreme Court rulings have narrowed the scope of U.S. patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In Europe, the Enlarged Board of Appeal of the EPO has recently indicated that it is prepared to apply a “dynamic” interpretation of certain patent law provisions in view of political developments and thus could reverse previously pro-patentee positions relating to biotechnological and pharmaceutical inventions. This combination of events has created uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, the USPTO, and the EPO, as well as similar bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio and our ability to protect and enforce our intellectual property in the future, which could have a material adverse effect on our business, prospects, financial condition, and results of operations.
We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing, prosecuting, and defending patents covering our current and any future product candidates and technology platforms in all countries throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we or our licensors have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents, and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.  
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. For example, such a license may be issued in circumstances where demand for a product cannot be met by the patent holder in cases of a public health emergency, such as the COVID-19 pandemic. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent and trademark protection for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. Because we rely on third parties to help us discover, develop, and manufacture our current and any future product candidates, or if we collaborate with third parties for the development, manufacturing, or commercialization of our current or any future product candidates, we must, at times, share trade secrets with them. We may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements.
We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements, or other similar agreements with our advisors, employees, third-party contractors, and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of these parties to use or disclose our confidential information, including our trade secrets. We also enter into invention or patent assignment agreements with our employees, advisors, and consultants. Despite our efforts to protect our trade secrets, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Moreover, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our confidential information or proprietary technology and processes. Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. If any of the collaborators, scientific advisors, employees, contractors, and consultants who are parties to these agreements breaches or violates the terms of any of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Moreover, if confidential information that is licensed or disclosed to us by our partners, collaborators, or others is inadvertently disclosed or subject to a breach or violation, we may be exposed to liability to the owner of that confidential information. Enforcing a claim that a third party illegally or unlawfully obtained and is using our trade secrets, like patent litigation, is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.  
In addition, our competitors may independently develop knowledge, methods, and know-how equivalent to our trade secrets. Competitors could purchase our products and replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure could have an adverse effect on our business, financial condition, results of operations, and prospects.
We also face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by our collaborators, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. Our collaborators also may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property-related proceedings that could jeopardize our proprietary information or invalidate our intellectual property.
We also seek to preserve the integrity and confidentiality of our data and other confidential information by maintaining physical security of our premises and physical and electronic security of our information technology systems. Security measures may be breached, and detecting the disclosure or misappropriation of confidential information and enforcing a claim that a party illegally disclosed or misappropriated confidential information is difficult, expensive, and time-consuming, and the outcome is unpredictable. Further, we may not be able to obtain adequate remedies for any breach. In addition, our confidential information may otherwise become known or be independently discovered by competitors, in which case we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.
Any trademarks we have and that we may obtain may be infringed or successfully challenged, resulting in harm to our business.
We rely on trademarks as one means to distinguish any of our product candidates that are approved for marketing from the products of our competitors. Third parties may oppose our trademark applications or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate resources to enforce our trademarks. We entered into a co-existence agreement with respect to the VALNEVA trademark. The agreement places restrictions on how we can use this mark and how we can seek trademark protection for this mark.
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In addition, any proprietary name we propose to use with our current or any other product candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable proprietary product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
Intellectual property rights do not necessarily address all potential threats to our business.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. The following examples are illustrative:
others may be able to make compounds or formulations that are similar to our product candidates but that are not covered by the claims of any patents, should they issue, that we own or license;
others may be able to develop technologies that are similar to our technology platforms but that are not covered by the claims of any patents, should they issue, that we own or license;
we or our licensors might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or license;
we or our licensors might not have been the first to file patent applications covering certain of our inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own or license may not provide us with any competitive advantages or may be held invalid or unenforceable as a result of legal challenges;
our competitors might conduct research and development activities in the United States and other countries that are covered by a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable; and
the patents of others may have an adverse effect on our business.
If we breach our license agreements or any of the other agreements under which we acquired, or will acquire, the intellectual property rights to our product candidates, we could lose the ability to continue the development and commercialization of the related product candidates.
We have in-licensing agreements relating to certain of our products and product candidates, including with TechLab for VLA84 (Clostridium difficile) and VaccGen for IXIARO.
If we fail to meet our obligations under these agreements, our licensors may have the right to terminate our licenses. If any of our license agreements are terminated, and we lose our intellectual property rights under such agreements, this may result in a complete termination of our product development and any commercialization efforts for the product candidates which we are developing under such agreements. While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach by us, and otherwise seek to preserve our rights under such agreements, we may not be able to do so in a timely manner, at an acceptable cost or at all.
Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including those related to:
the scope of rights granted under the license agreement and other issues relating to interpretation of the relevant agreement;
whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the license granted to us;
our right to sublicense patent and other rights to third parties under collaborative development relationships;
our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; and
the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors, on the one hand, and us and our sublicensees, on the other hand.
Risks Related to Our Reliance on Third Parties
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We depend upon our existing collaboration partner, Pfizer, and other third parties to advance our business and may in the future depend on additional third parties. If we are unable to maintain our existing agreements or to enter into additional arrangements, our business could be adversely affected.
We have entered into, and in the future may seek to enter into additional, collaborations, partnerships, strategic alliances, and joint ventures, as well as licensing, distribution, or manufacturing arrangements with third parties that we believe will complement or augment our development and commercialization efforts. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders, or disrupt our management and business.
In addition, we face significant competition in seeking appropriate strategic partners, and the negotiation process is time-consuming and complex. We may not be successful in our efforts to establish or maintain a collaboration, strategic partnership, or other alternative arrangements for our products or product candidates.
Further, collaborations and partnerships involving our products or product candidates are subject to numerous risks, which may include the following:
collaborators and partners have significant discretion in determining the efforts and resources that they will apply to a collaboration or partnership;
a collaborator or partner may not pursue development and commercialization of our products or product candidates or may elect not to continue or renew development or commercialization of our products or product candidates based on clinical trial results or delays, changes in their strategic focus, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;
a collaborator or partner may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;
disputes may arise between us and a collaborator or partner that cause the delay or termination of the research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;
a collaborator or partner could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates;
a collaborator or partner with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of the one or more products;
a collaborator or partner may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;
collaborations and partnerships may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates; and
a collaborator or partner may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have any right or the exclusive right to commercialize such intellectual property.
Our strategic partnership with Pfizer to develop and commercialize our Lyme disease vaccine candidate is of critical importance to our business. In accordance with our agreement with Pfizer, we are obligated to provide 40% of the development costs for our Lyme disease vaccine candidate. If we cannot maintain enough cash to comply with this obligation, including any increase in costs as a result of developments with the Phase 3 clinical trial, the development and commercialization of our Lyme disease vaccine candidate could be significantly delayed. Additionally, Pfizer could terminate our existing agreement for a number of reasons, as discussed further under “Item 10.C—Material Contracts—Pfizer License Agreement.” If our partnership with Pfizer fails or is terminated for any reason, we may be unable to find another partner and may not have sufficient financial resources to complete Phase 3 development of our Lyme disease vaccine candidate without a partner.
Our distribution agreements with Bavarian Nordic are also important to our business, both for the sale of our own products IXIARO and DUKORAL and for the revenue we earn from our distribution of Bavarian Nordic’s RABIPUR and ENCEPUR vaccines. In 2023, Bavarian Nordic acquired two of Emergent BioSolutions’ travel vaccines, including the Vaxchora cholera vaccine, which is a competitor of DUKORAL in Europe. As a result of this acquisition, we amended our agreements with Bavarian Nordic with effect in May 2023. The agreements relating to our distribution of Bavarian Nordic’s rabies vaccine in Canada and the United Kingdom will terminate on December 31, 2024, and the remaining distribution agreements between Valneva and Bavarian Nordic will terminate on December 31, 2025. These additional distribution agreements provide for Bavarian Nordic’s distribution of our products in Germany and Switzerland and for our distribution of Bavarian Nordic’s RABIPUR and ENCEPUR vaccines in France, Austria, and the Benelux region. We are now making plans to ensure continued distribution of our products in Germany and Switzerland but cannot guarantee that the termination of these distribution agreements will not have an impact on our sales in these countries. For additional information about the agreements relating to Bavarian Nordic’s distribution of our vaccines, see “Item 10.C—Material Contracts—Bavarian Nordic Distribution Agreements” and Exhibits 4.13, 4.14, and 4.15 of this Annual Report. For
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additional information about our sales of Bavarian Nordic’s vaccines, refer to the Notes to our consolidated financial statements filed together with this Annual Report.
If we enter into collaborations, partnerships, strategic alliances, and joint ventures, as well as licensing, distribution, or manufacturing arrangements with third parties, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our business, which could delay our timelines or otherwise adversely affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the synergies that justify such transaction.
Should any of these risks materialize, this could have a material adverse effect on our business, prospects, financial condition, and results of operations.
We are dependent on single-source suppliers for some of the components and materials used in our products.
In certain cases, we rely on single suppliers for all of our requirements for some of our materials or components. In most cases we do not have long term contracts with these suppliers, and even in the cases where we do the contracts include significant qualifications that would make it extremely difficult for us to force the supplier to provide us with their services, materials, or components should they choose not to do so. We are therefore subject to the risk that these third-party suppliers will not be able or willing to continue to provide us with materials and components that meet our specifications, quality standards, and delivery schedules. Factors that could impact our suppliers’ willingness and ability to continue to provide us with the required materials and components include disruption at or affecting our suppliers’ facilities, such as work stoppages or natural disasters, adverse weather or other conditions that affect their supply, the financial condition of our suppliers, and deterioration in our relationships with these suppliers. In addition, we cannot be sure that we will be able to obtain these materials and components on satisfactory terms. Any increase in material and component costs could reduce our sales and harm our gross margins. In addition, any loss of a material supplier may permanently cause a change in one or more of our products that may not be accepted by our customers or that may cause us to eliminate that product altogether.
For example, we rely on a single-source supplier for fetal bovine serum, a critical and scarce raw material which is only available from our supplier and is used in the manufacturing of IXIARO. We also rely on a single-source supplier for the adjuvant contained in certain vaccine candidates. A loss of the supplier or any shortages of these or other materials for which we rely on a single supplier could adversely affect our ability to manufacture our products and significantly raise our cost of production.
We have not qualified secondary sources for all materials or components that we source through a single supplier, and we cannot assure investors that the qualification of a secondary supplier would prevent future supply issues. Disruption in the supply of materials or components would impair our ability to sell our products and meet customer demand and also could delay the launch of new products, any of which could harm our business and results of operations. If we were to have to change suppliers, the new supplier may not be able to provide us materials or components in a timely manner and in adequate quantities that are consistent with our quality standards and on satisfactory pricing terms. In addition, alternative sources of supply may not be available for materials that are scarce or components for which there are a limited number of suppliers.
If we experience shortages in the supply of our marketed products, our results could be materially impacted.  
The marketing and distribution of our products and the late-stage development of our product candidates may depend on our ability to establish and maintain collaborations with biopharmaceutical companies.
In order to develop and market some of our products and product candidates, we rely on collaboration, research, and license agreements with biopharmaceutical companies to assist us in the marketing and distribution of our products and the development of product candidates and the financing of their development. For example, we entered into agreements with Bavarian Nordic to commercialize our products in Germany and Switzerland. As we continue to commercialize our products and identify new product candidates, we will determine the appropriate strategy for development and marketing, which may result in the need to establish additional collaborations with major biopharmaceutical companies. We may also enter into agreements with institutions and universities to participate in our other research programs and to share intellectual property rights.
We may fail to maintain or find collaboration partners and to sign new agreements for our other product candidates and programs. The competition for partners is intense, and the negotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may not be able to maintain any new collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meet expectations, or the collaborator terminates the collaboration, including because of changes in the collaborator’s business. Any collaboration, or other strategic transaction, may also require us to incur non-recurring or other charges, increase our near- and long-term expenditures, and pose significant integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including:
exposure to unknown liabilities;
disruption of our business;
diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates, or technologies;
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incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs;
higher than expected collaboration, acquisition or integration costs;
write-downs of assets or goodwill or impairment charges;
increased amortization expenses;
difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business;
impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership; and
the inability to retain key employees of any acquired business.
Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material and adverse effect on our business, financial condition, results of operations, and prospects. Conversely, any failure to enter any additional collaboration or other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches market.
We rely on third parties to supply key materials used in our research and development, to manufacture our products and product candidates, to provide services to us, and to assist with clinical trials.
We make considerable use of third-party suppliers for the key materials used in our business, such as the fetal bovine serum used in IXIARO and the adjuvant used in certain vaccine candidates. Additionally, we have outsourced an important step in the manufacturing of IXCHIQ to a third party, IDT Biologika, and Vetter performs the filling process for IXIARO and the filling of IXCHIQ diluent. The failure of third-party suppliers to comply with regulatory standards could result in the imposition of sanctions on us. These sanctions could include fines, injunctions, civil penalties, refusal by regulatory organizations to grant approval to conduct clinical trials or marketing authorization for our products, delays, suspension, variations or withdrawal of approvals, license revocation, seizure or recalls of our products, operating restrictions, and legal proceedings. Furthermore, the presence of non-conformities, as may be detected in regulatory toxicology studies, could result in delays in the development of one or more of our product candidates or in the supply of a commercial product and would require further tests to be financed. Although we are involved in establishing the protocols for the production of these materials, we do not control all the stages of production and cannot guarantee that the third parties will fulfil their contractual and regulatory obligations or that we will be informed in a timely manner of any non-conformities or other failure to comply with obligations. In particular, a partner’s failure to comply with protocols or regulatory constraints, or repeated delays by a partner, could compromise the development or manufacturing of our products. Such events could also inflate the product development or manufacturing costs incurred by us.  
We also use third parties to provide certain services such as scientific, medical, or strategic consultancy services. These service providers are generally selected for their specific expertise, as is the case with the academic partners with whom we collaborate. We face intense competition to build and maintain such a network under acceptable terms. Such external collaborators may terminate their involvement at any time, and we can exert only limited control over their activities. We may not be able to obtain the intellectual property rights to the product candidates or technologies developed under collaboration, research, and license agreements under acceptable terms or at all. Moreover, our scientific collaborators may assert intellectual property rights or other rights beyond the terms of their engagement.
Finally, we use third parties to assist with conducting clinical trials. All clinical trials are subject to strict regulations and quality standards. Should any of these risks materialize, as in the case of the Phase 3 trial of VLA15 involving GCP violations by a third party engaged by Pfizer to conduct certain clinical trial sites, this could have a material adverse effect on our business, prospects, financial condition, and results of operations.
Risks Related to the Manufacture of Our Products and Product Candidates
We may be unable to successfully manufacture our products or product candidates in sufficient quality and quantity, which would impact commercialization of our products and delay development of our product candidates.
We perform most of the manufacturing of our products and our product candidates in-house. Delays in manufacturing or inability to manufacture sufficient doses of a product or product candidate could adversely affect our business, financial condition, prospects, and results of operations. If we, or any third-party manufacturing partners, are unable to manufacture sufficient quantities of any vaccine, we may not be able to meet demand or fulfill our obligations under any agreements, or we may be forced to forego additional partnerships or supply agreements which would be advantageous for our business. We may encounter unexpected challenges relating to manufacturing efficiency, quality control, or stability profile that could impact the quantity of products or product candidates manufactured, the consistency of quantity across batches, or the length of time that manufactured material can be used. These problems could impact our supply of the market and require us to manufacture more than previously expected, leading to delays and added costs. Additionally, any supply shortages due to an inability to manufacture sufficient doses could result in fines.
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We experienced supply shortages for both IXIARO and DUKORAL in 2022 and 2023 due to the faster than expected recovery of the travel market and, in 2023, to delays in internal processes. In February 2024, we announced anticipated difficulties in supplying the market in the beginning of 2024, and these are accounted for in our guidance.
We may be required to increase our manufacturing capacity to meet demand for approved products, and we may be unable to do this in a timely or cost-effective manner, or at all. We do not have experience manufacturing on the scale that would be required for a large-scale commercialization of vaccine candidates that may receive approval in the future. The process of developing additional manufacturing capacity is complex and affected by multiple external factors, many of which are beyond our control.
We, our contract manufacturers, any future collaborators, and their contract manufacturers could be subject to periodic unannounced inspections by the FDA or other comparable regulatory authorities to monitor and ensure compliance with cGMP or other applicable regulations. Despite our efforts to audit and verify regulatory compliance, we or one or more of our third-party manufacturing vendors may be found on regulatory inspection by the authorities to be noncompliant with cGMP or other applicable regulations. This may result in shutdown of the relevant facility or invalidation of drug product lots or processes, as well as delays in clinical development programs which could ultimately negatively impact our regulatory and commercialization timelines and expectations. In some cases, a product recall may be warranted or required, which would materially affect our ability to supply and market our drug products.
We have outsourced an important step in the manufacturing of IXCHIQ to a third party, IDT Biologika, and Vetter performs the filling process for IXIARO and the filling of IXCHIQ diluent. Outsourcing of manufacturing could result in delays, concerns about manufacturing consistency, or other manufacturing failures. Per the standard industry practice, we rather than the third-party provider would bear the risk of such problems, which could result in a material adverse impact on our business, prospects, financial condition, and results of operations.
Any of these factors impacting manufacturing quantity or quality could delay clinical trials, regulatory submissions, and/or commercialization of our products, interfere with current sales, entail higher costs, and result in our inability to effectively sell our products.
We rely primarily on our manufacturing facilities as the source of manufacturing for our products and for certain of our product candidates.
Our manufacturing facility in Livingston, Scotland is the sole source of commercial quantities of drug substance of our Japanese encephalitis vaccine IXIARO and our chikungunya vaccine IXCHIQ. Our manufacturing facility in Solna, Sweden, is the sole source of commercial quantities of DUKORAL. The destruction of either of these facilities by fire or other catastrophic events would prevent us from manufacturing the relevant product and supplying our customers or clinical trial centers, which would result in a material adverse impact on our business, prospects, financial condition, and results of operations.
We rely upon third parties to manufacture and supply components of certain substances necessary to manufacture our products and product candidates.
We currently rely upon several, and in the future may rely on additional, third-party contract manufacturing organizations, or CMOs, for the manufacture and supply of components and substances for all of the product candidates we are developing. In particular, we have outsourced one step in the manufacturing process of IXCHIQ to IDT Biologika. Additionally, certain component materials are currently available from a single supplier, or a small number of suppliers. We cannot be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company that is not interested in continuing to manufacture these materials for us. We cannot assure you that, if required, we will be able to identify alternate sources with the desired scale and capability and establish relationships with such sources. Additionally, in the biopharmaceutical industry, supplier changes require lengthy validation and regulatory approval processes. A loss of any CMO or component supplier and delay in establishing a replacement could delay our clinical development and regulatory approval process and interrupt supply.
Manufacturing facilities and clinical trial sites are subject to significant government regulations and approvals. If we or any third parties fail to comply with these regulations or maintain these approvals, our business could be materially harmed.
Our manufacturing facilities are subject to ongoing regulation and periodic inspection by national authorities, including the competent authorities of EEA countries, the FDA, and other regulatory bodies to ensure compliance with cGMP and other applicable regulations when producing batches of our products and product candidates for clinical trials. CROs and other third-party research organizations must also comply with Good Laboratory Practice, or GLP, when carrying out regulatory toxicology studies. Any failure to follow and document our or their adherence to such cGMP and GLP regulations or other regulatory requirements may lead to significant delays in the availability of products for commercial sale or clinical trials, may result in the termination of or a hold on a clinical trial, may delay or prevent filing or approval of marketing applications for our products, or may cause us to not meet our obligations under our commercial agreements.
Failure to comply with applicable regulations at our manufacturing sites or at clinical trial sites could also result in national authorities, the competent authorities of EEA countries, the FDA, or other applicable regulatory authorities taking various actions, including:
levying fines and other civil penalties;
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imposing consent decrees or injunctions;
requiring us to suspend or put on hold one or more of our clinical trials;
requiring an additional audit or validation of clinical trial data;
suspending, varying, or withdrawing regulatory approvals;
delaying or refusing to approve pending applications or supplements to approved applications;
requiring us to suspend manufacturing activities or product sales, imports, or exports;
requiring us to communicate with physicians and other customers about concerns related to actual or potential safety, efficacy, and other issues involving our products;
mandating product recalls or seizing products;
imposing operating restrictions; and
seeking criminal prosecutions.
Any of the foregoing actions could be detrimental to our reputation, business, financial condition, or operating results. Furthermore, we or our key suppliers and partners may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure to produce our products on a timely basis and in the required quantities, if at all, or in delays to our clinical trials. In addition, before any additional products would be considered for marketing authorization in the EEA, the United States, or other jurisdictions, our suppliers will have to pass an inspection by the applicable regulatory agencies. We are dependent on our suppliers’ cooperation and ability to pass such inspections, and the inspections and any necessary remediation may be costly. Failure to pass such inspections by us or any of our suppliers would adversely affect our ability to commercialize our products or product candidates in the EEA, the United States, or other jurisdictions. Moreover, many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting product development activities that could harm our competitive position. Should any of these risks materialize, this could have a material adverse effect on our business, prospects, financial condition, and results of operations.
Our production costs may be higher than we currently estimate.
Our products and our product candidates are manufactured according to manufacturing best practices applicable to drugs for clinical trials and to specifications approved by the applicable regulatory authorities. If any of our products were found to be non-compliant, we would be required to manufacture the product again, which would entail additional costs and may prevent delivery of the product on time.
Other risks inherent in the production process may have the same effect, such as:
contamination of the controlled atmosphere area;
unusable premises and equipment;
new regulatory requirements requiring a partial and/or extended stop to the production unit to meet the requirements;
unavailable qualified personnel;
power failure of extended duration; and
logistical error.
Additionally, if we externalize any aspect of manufacturing that we have historically performed internally, this could result in an increase in production costs. Should any of these risks materialize, this could have a material adverse effect our business, prospects, financial condition, and results of operations.
We use hazardous chemicals and biological materials in our business and any claims relating to improper handling, storage or disposal of these materials could be time-consuming and costly.
Our research and development and manufacturing processes involve the controlled use of hazardous materials, including chemicals and biological materials. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We also handle genetically recombined material, genetically modified species, and pathological biological samples. Consequently, in France, Sweden, and Scotland where we have production facilities and in the jurisdictions where we conduct clinical trials, we are subject to environment and safety laws and regulations governing the use, storage, handling, discharge, and disposal of hazardous materials, including chemical and biological products. We impose preventive and protective measures for the protection of our workforce and waste control management in accordance with applicable laws, including part four of the French Labor Code, relating to occupational health and safety.
If we fail to comply with applicable regulations, particularly those applicable to all BSL classifications, we could be subject to criminal prosecutions, fines, damages, and the suspension of all or part of our operations. Compliance with environmental, health, and safety regulations involves additional costs, and we may have to incur significant costs to comply with future laws and regulations in relevant jurisdictions. Compliance with environmental laws and regulations could require us to purchase equipment, modify facilities, and undertake considerable expenses. We do not have insurance
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that specifically covers liability relating to hazardous materials and could be liable for any inadvertent contamination, injury, or damage, which could negatively affect our business and engage the civil and/or criminal liability of the Company and/or its representatives.
Risks Related to Our Business Operations, Employee Matters and Managing Growth
We are highly dependent on our key personnel, and if we are not able to retain these members of our management team or recruit and retain additional management, clinical, and scientific personnel, our business will be harmed.
We are highly dependent on our management, scientific, and medical personnel, particularly our Chief Executive Officer Thomas Lingelbach, who we heavily rely on for a variety of matters. Our key personnel may currently terminate their employment with us at any time. The loss of the services of any of these persons could impede the achievement of our research, development, and commercialization objectives. Additionally, we do not currently maintain “key person” life insurance on the lives of our executives, other than Thomas Lingelbach and Juan Carlos Jaramillo, or any of our employees.
Recruiting and retaining other senior executives, qualified scientific and clinical personnel, and commercialization, manufacturing and sales and marketing personnel will be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development, and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of, and commercialize our product candidates. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain, or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high-quality personnel, our ability to pursue our growth strategy will be limited.
Our future performance will also depend, in part, on our ability to successfully integrate newly hired executive officers into our management team and our ability to develop an effective working relationship among senior management, including in the context of our recent change in governance structure, as described in Item 6. Our failure to integrate new individuals and create effective working relationships among members of management could result in inefficiencies in the development and commercialization of our product candidates and other aspects of our business, which could negatively impact our results of operations.
We may encounter difficulties in managing our growth, which could disrupt our operations.
Our strategy involves continuing to grow our business internally. However, we may also grow externally through selective acquisitions of complementary products and technologies, or of companies with such assets, although no such plan is currently contemplated. As our development progresses, we expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of research, drug development, regulatory affairs, and sales, marketing and distribution for our approved products. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities, and recruit and train additional qualified personnel. Due to our limited financial resources and the extent of our anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.
Our management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing internal or external growth. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure and give rise to operational errors, loss of business opportunities, loss of employees, and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of existing and additional product candidates. If our management is unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.
If we were to acquire assets or companies, the success of such an acquisition would depend on our capacity to carry out such acquisitions and to integrate such assets or companies into our existing operations. The implementation of such a strategy could impose significant constraints, including:
human resources: recruiting, integrating, training, managing, motivating, and retaining a growing number of employees;
financial and management system resources: identification and management of appropriate financing and management of our financial reporting systems; and
infrastructure: expansion or transfer of our laboratories or the development of our information technology system.
In addition, an acquisition could result in shareholder litigation, which could be costly and time consuming and divert management’s attention and resources. For example, following the merger between Vivalis SA and Intercell AG in 2013,
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certain former Intercell shareholders initiated legal proceedings to request a revision of either the cash compensation paid to departing shareholders or the exchange ratio between Intercell and Valneva shares used for the non-departing shareholders who received Valneva shares in the merger. On February 8, 2021, the judicial committee in charge of these proceedings appointed an expert and requested that he give an opinion on the exchange ratio applied to this latter group. On October 6, 2021, we received the expert’s opinion. With respect to the exchange ratio, the expert confirmed the prior calculation used but also recommended the calculation of safety margins. Additionally, the expert addressed the cash compensation paid to departing shareholders and recommended an increase in such compensation. If this increase is approved by the court, it would result in a liability lower than our current litigation reserves, which pertain to this plaintiff group specifically. The expert provided a supplemental opinion in April 2022, and the judicial committee in charge of the proceedings gave its opinion to the Vienna commercial court in April 2023. The court has not made a decision yet. The results of this litigation or any other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse and potentially substantial monetary damages, penalties, or injunctive relief against us, which could negatively impact our financial position, cash flows, or results of operations. See Note 5.33.2 to our financial statements for the year ended December 31, 2023 appearing elsewhere in this Annual Report for a discussion of these legal proceedings.
If we are unable to manage internal growth or have difficulty integrating any acquisitions, it could have a material adverse effect on our business, prospects, financial condition, and results of operations.
We will need to hire new employees and expand our use of service providers.
As of December 31, 2023, we had 676 employees. As we continue to commercialize our products and as our development and commercialization plans and strategies develop, we must add a significant number of additional managerial, operational, sales, marketing, financial, and other personnel.
We currently rely, and for the foreseeable future will continue to rely, in part on certain independent organizations, advisors, and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors, and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, if at all.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our products and product candidates and, accordingly, may not achieve our sales, research, development and commercialization goals.
Our business has been and could be materially adversely affected by the effects of health pandemics or epidemics. Future outbreaks of disease, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites, or other business operations, could materially affect our operations globally and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business.
Our business has been and could in the future be materially adversely affected by the effects of pandemics or epidemics, including COVID-19 and future outbreaks of the disease. COVID-19 adversely affected economic activity across virtually all sectors and industries on a local, national, and global scale. We are unable to accurately predict the impact that any future developments of COVID-19 or a similar event would have on our business due to numerous uncertainties, including the duration of the outbreak, the result of vaccination efforts, resurgence of the virus including any new variants, actions that may be taken by governmental authorities, impacts on international travel, the impact on the business of our service providers and partners, and the impact on the global financial markets, which could limit our access to capital and affect our liquidity. These and similar, and perhaps more severe, disruptions in our operations could materially impact our business, operating results and financial condition.
We have engaged and may in the future engage in strategic transactions, such as acquisitions or investments in other companies or technologies, which could divert our management’s attention and in some cases result in dilution to our shareholders and otherwise disrupt our operations and adversely affect our operating results.
We have engaged and may in the future engage in strategic transactions that may divert the attention of management and incur various expenses in identifying, investigating, and pursuing suitable transactions, whether or not they are consummated. For example, we may seek to acquire or invest in additional businesses and/or technologies that we believe complement or expand our product candidates, enhance our technical capabilities, or otherwise offer growth opportunities in the United States and internationally. In 2015 we acquired Crucell Sweden AB and all assets, licenses, and privileges related to DUKORAL. We may also consider divestment of specific assets to support different strategic objectives.
Realizing the benefits of acquisitions depends upon the successful integration of the acquired technology into our existing and future product candidates. Furthermore, we may not be able to integrate the acquired personnel, operations, and technologies successfully, or effectively manage the combined business following the acquisition. We also may not realize the anticipated benefits from any acquired business. The risks we face in connection with acquisitions and investments, whether or not consummated, include:
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unanticipated costs or liabilities associated with the acquisition;
diversion of management’s attention from other business concerns;
adverse effects to our existing strategic collaborations as a result of the acquisition;
assimilation of operations, intellectual property, and products of an acquired company;
the potential loss of key employees;
difficulty integrating the accounting systems, operations, and personnel of the acquired business;
the assumption of additional indebtedness or contingent or unknown liabilities, or adverse tax consequences or unfavorable accounting treatment;
claims and disputes by shareholders and third parties, including intellectual property claims and disputes;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals;
increased operating expenses and cash requirements; and
use of substantial portions of our available cash to consummate the acquisition.
A significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions do not yield expected returns, we may in the future be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our business, financial condition, results of operations, and prospects.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our business, financial condition, results of operations, and prospects may suffer. We cannot assure you that we will be successful in integrating the businesses or technologies we may acquire. The failure to successfully integrate these businesses could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our CMOs, CROs, and other contractors and consultants, could be subject to cybersecurity attacks, earthquakes, power shortages, information technology or telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, armed conflict, wars, public health pandemics or epidemics, and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Our ability to develop and commercialize our product candidates could be disrupted if our operations or those of our suppliers are affected by man-made or natural disasters or other business interruptions.
We may be negatively impacted by volatility in the political and economic environment, including as a result of military conflicts, elections, economic downturns and increases in interest rates, and a period of sustained inflation across the markets in which we operate could result in higher operating costs and may negatively impact our business and financial performance.
Trade, monetary and fiscal policies, and political and economic conditions may substantially change, and credit markets may experience periods of constriction and variability. These conditions may impact our business. Furthermore, rising inflation may negatively impact our business, increase costs, and reduce profitability. While we would take actions, wherever possible, to mitigate the impact of the effects of inflation, in the case of sustained inflation across several of the markets in which we operate, it could become increasingly difficult to effectively mitigate the increases to our costs. If we are unable to take actions to effectively mitigate the effect of the resulting higher costs, our profitability and financial position could be negatively impacted.
The U.S. Federal Reserve and European Central Bank have raised interest rates multiple times in response to concerns about inflation, among other things, and they may raise them again. Higher interest rates, coupled with reduced government spending and volatility in financial markets may increase economic uncertainty. Similarly, the ongoing military conflicts between Russia and Ukraine and between Israel and Hamas have created volatility in the global capital markets and are expected to have further global economic consequences, including ongoing disruptions of the global supply chain and energy markets. Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, including relative to cost or dilution. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs. In addition, higher inflation and macro turmoil and uncertainty could also adversely affect our customers, which could reduce demand for our products.
Our available cash and cash equivalents are held in accounts managed by third party financial institutions in the United States and in Europe and consist of cash in our operating accounts. At any point in time, the funds in our operating
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accounts at U.S. financial institutions may exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail. We can provide no assurances that access to our operating cash or invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
Our IT systems and data, and those of our collaborators, consultants, service providers, and other contractors, are vulnerable to cyberattacks and security breaches, which could significantly disrupt our core operations, product development programs, and overall business and adversely affect our business strategy, financial condition, results of operations, and prospects.
Our computer and information technology systems, networks, infrastructure, hardware, software, and cloud-based computing services, collectively referred to as IT Systems, and those of our current and future collaborators, service providers, and other contractors or consultants are vulnerable to malware (such as ransomware), malicious code (such as computer viruses and worms), data corruption, cyber-based attacks, malfeasance by insiders, human error, natural disasters, public health pandemics or epidemics, terrorism, war, and telecommunication and electrical failures, all of which threaten the confidentiality, integrity, and availability of our IT Systems, key business processes, and intellectual property, proprietary business information, personal information, and other important data we process or maintain, collectively referred to as our Confidential Information.
We and certain of our third-party providers have in the past experienced cyberattacks and other security incidents, and we expect that to continue in varying degrees in the future. While to date no attacks or incidents have had a material impact on our operations or results, we cannot guarantee that material incidents will not occur in the future. We expect cyberattacks to accelerate on a global basis in both frequency and magnitude as threat actors are increasingly sophisticated in using techniques and tools – including artificial intelligence – that can circumvent controls, evade detection, and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate, or recover from future attacks or incidents or to avoid a material adverse impact on our IT Systems, Confidential Information, or business. Cybersecurity threats are increasingly difficult to detect and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, insiders and other personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Remote and hybrid working arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and the security vulnerabilities that are present in many non-corporate and home networks. In addition, we cannot comprehensively identify all misconfigurations, “bugs”, or vulnerabilities in proprietary or third-party systems or software used by our business or guarantee that patches or compensating controls will be applied before vulnerabilities can be exploited by a threat actor. Moreover, any use or integration of generative or other artificial intelligence in our, or any third parties’, operations, products, or services will pose new and/or unknown cybersecurity risks and challenges. There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures, will be fully implemented, complied with, or effective in protecting our IT Systems and Confidential Information. Any significant system failure, accident, attack, or security breach could have a material adverse effect on our business, financial condition, and results of operations. The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs, and security vulnerabilities or to respond to or recover from a cyberattack or security incident could be significant and could result in unexpected interruptions, delays, cessation of service, and other harm to our business and our competitive position, as well as regulatory investigations, litigation (including class action suits), reputational impacts, and the loss of partners, collaborators, and customers. If such an event were to occur and cause interruptions in our operations, it could also result in a disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss or corruption of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, including but not limited to information related to our product candidates, we could incur liability, our competitive and reputational position could be harmed, and the further development and commercialization of our product candidates could be delayed.
In addition, our IT Systems and those of our current and any future collaborators, service providers, and other contractors or consultants are potentially vulnerable to data security breaches, whether by employees, contractors, consultants, malware, phishing attacks, or other cyberattacks, that may expose Confidential Information to unauthorized persons. For example, we have experienced phishing attacks in the past, and we expect to be a target of phishing attacks and other cyberattacks in the future. In addition, our IT Systems include cloud-based applications that are hosted by third-party service providers with security and information technology systems subject to similar risks. Consequently, successful cyberattacks that disrupt or result in unauthorized access to third-party IT Systems can materially impact our operations and financial results. If a data security breach affects our systems, corrupts our data, or results in the unauthorized disclosure or release of personally identifiable information, for example, our reputation could be materially damaged. In addition, such a breach may require notification to governmental agencies, supervisory bodies, credit reporting agencies, the media, or individuals pursuant to various data protection, privacy, and security laws, regulations, and guidelines, as applicable, such as the EU and UK GDPR (as defined below). Accordingly, a data security breach or privacy violation that leads to unauthorized access to, disclosure, or modification of personal information (including protected health information), that prevents access to personal information, or that materially compromises the privacy, security, or confidentiality of the personal information, could result in fines, increased costs, or loss of revenue, and we could incur liability, our competitive position could be harmed, and the further development and commercialization of our product candidates could be delayed.
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Furthermore, laws and regulations around the globe, such as the EU and UK GDPR, can expose us to enforcement actions and investigations by regulatory authorities and potentially result in regulatory penalties and significant legal liability, if our information technology security efforts fail and if we fail to disclose any material cybersecurity incident in an adequate and timely manner. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
We (and our service providers) receive, process, store, and use personal information and other data, which subjects us to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, policies, and other obligations related to data privacy and security. Our (and our service providers’) actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, and otherwise adversely affect our business.
We, and our service providers, receive, process, store, and use personal information and other data about our clinical trial participants, employees, partners, and others. We, and our service providers, must comply with numerous foreign and domestic laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations regarding privacy and the storing, sharing, use, processing, disclosure, security, and protection of personal information and other data, such as information that we collect about patients and healthcare providers in connection with clinical trials in Europe, the United States, and elsewhere. We strive to comply with all applicable requirements and obligations; however, new laws, policies, codes of conduct, and legal obligations may arise, continue to evolve, be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, and conflict with one another. Any failure or perceived failure by us or third parties working on our behalf to comply with applicable laws and regulations, any privacy and data security obligations pursuant to contract or pursuant to our stated privacy or security policies, or obligations to third parties may result in governmental enforcement actions (including fines, penalties, judgments, settlements, imprisonment of company officials and public censure), civil claims (to which we have been subject), litigation, damage to our reputation, and loss of goodwill, any of which could have a material adverse effect on our business, operations, and financial performance. With substantial uncertainty over the interpretation and application of these laws, regulations, and other obligations, we may face challenges in addressing their requirements and making necessary changes to our policies and practices, and may incur significant costs and expenses in our efforts to do so.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., state surveillance and wiretapping laws such as California Invasion of Privacy Act). For example, the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable protected health information. In addition, in the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020, together referred to as the CCPA, applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights, such as those noted below. The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents. Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments further complicate compliance efforts and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers.
The global data protection landscape is rapidly evolving, and we expect that there will continue to be new and proposed laws, regulations, and industry standards concerning privacy, data protection, and information security, and we cannot yet determine the impact that such future laws, regulations, and standards may have on our business. For example, in Canada, the Personal Information Protection and Electronic Documents Act and various related provincial laws, as well as Canada’s Anti-Spam Legislation, apply to our operations. The EU General Data Protection Regulation and United Kingdom’s implementation of the General Data Protection Regulation, known respectively as the EU and UK GDPR, as well as EEA Member States’ and the United Kingdom’s implementing national legislation, apply to the collection and processing of personal data, including health-related information, by companies located in the EEA or the United Kingdom. In certain circumstances, the EU and UK GDPR also apply to companies located outside of the EEA or United Kingdom who are processing personal data of individuals located in the EEA or United Kingdom. The EU and UK GDPR have increased compliance burdens on us, such as requiring the following:
processing personal data only for specified, explicit, and legitimate purposes for which personal data were collected;
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establishing a legal basis for processing personal data and creating obligations for controllers and processors to appoint data protection officers in certain circumstances;
increasing transparency obligations to data subjects for controllers (including presentation of certain information in a concise, intelligible, and easily accessible form about how their personal data is used and their rights vis-à-vis that data and its use);
introducing the obligation to carry out so-called data protection impact assessments in certain circumstances;
establishing limitations on collection and retention of personal data through “data minimization” and “storage limitation” principles;
establishing obligations to implement “privacy by design”;
introducing obligations to honor increased rights for data subjects (such as rights for individuals to be “forgotten,” rights to data portability, and rights to object, etc., in certain circumstances);
formalizing a heightened and codified standard of data subject consent;
establishing obligations to implement certain technical and organizational safeguards to protect the security and confidentiality of personal data;
introducing obligations to agree to certain specific contractual terms and to take certain measures when engaging third party processors and joint controllers;
introducing the obligation to provide notice of certain personal data breaches to the relevant supervisory authority or authorities and affected individuals; and
mandating the appointment representatives in the United Kingdom and/or EEA in certain circumstances.
The processing of sensitive personal data, such as health information, is subject to compliance with specific exceptions under the EU and UK GDPR which may impose heightened compliance burdens and is a topic of active interest among foreign regulators. The EU and UK GDPR increase our obligations with respect to clinical trials conducted in Europe (including the EEA, United Kingdom and Switzerland) by expressly expanding the definition of personal data to include “pseudonymized” or key-coded data and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators.
The EU and UK GDPR also provide for more robust regulatory enforcement and greater penalties for noncompliance than previous data protection laws, including fines of up to 20 million euros under the EU GDPR, 17.5 million pound sterling under the UK GDPR, or in each case, 4% of global annual revenue for the preceding financial year, whichever is higher. In addition to administrative fines, a wide variety of other potential enforcement powers are available to competent supervisory authorities in respect of potential and suspected violations of the EU and UK GDPR, including extensive audit and inspection rights, and powers to order temporary or permanent bans on all or some processing of personal data carried out by non-compliant actors. The EU and UK GDPR also confer a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the EU and UK GDPR.
In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the EEA and the United Kingdom have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanism that may be used to transfer personal data from the EEA and United Kingdom to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.
If there is no lawful manner for us to transfer personal data from the EEA or UK, including, for example, obtaining individuals’ explicit consent to transfer their personal data from the EEA or UK to the United States or other countries, we will face increased exposure to regulatory actions, substantial fines, and injunctions against processing personal data from the EEA or United Kingdom. The inability to transfer personal data from the EEA, United Kingdom, or Switzerland may also restrict our clinical trials activities in such jurisdictions, limit our ability to collaborate with contract research organizations as well as other service providers, contractors and other companies subject to European data protection laws, and require us to increase our data processing capabilities in the EEA, United Kingdom, or Switzerland, likely at significant expense. Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, which could increase the cost and complexity of delivering our services and operating our business. The type of challenges we face in Europe will likely also arise in other jurisdictions that adopt laws similar in construction to the EU and UK GDPR or regulatory frameworks of equivalent complexity.
The EU GDPR provides that EEA countries may make their own further laws and regulations to introduce specific requirements related to the processing of “special categories of personal data,” including personal data related to health,
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biometric data used for unique identification purposes, and genetic information, as well as personal data related to criminal offences or convictions. In the United Kingdom, the United Kingdom Data Protection Act 2018 complements the UK GDPR in this regard. This fact may lead to greater divergence on the law that applies to the processing of such data types across the EEA and/or United Kingdom, compliance with which, as and where applicable, may increase our costs and could increase our overall compliance risk. Such country-specific regulations could also limit our ability to collect, use, and share data in the context of our EEA and/or United Kingdom establishments (regardless of where any processing in question occurs), and/or could cause our compliance costs to increase, ultimately having an adverse impact on our business, and harming our business and financial condition.
For example, in France, the conduct of clinical trials is subject to compliance with specific provisions. The French Law No.78-17 of 6 January 1978 on Information Technology, Data Files and Civil Liberties, as amended, establishes a strict framework applicable to the processing of personal data in the health sector. This framework requires, among others, the filing of compliance undertakings with “reference methodologies” (such as the MR-001) adopted by the French Data Protection Authority, or CNIL, or, if not complying, obtaining an authorization from the CNIL. Failure to comply with the stringent provisions of the reference methodologies or failure to obtain the CNIL’s authorization could expose us to adverse consequences, including the interruption of our clinical trials in France, increased exposure to regulatory actions, or the need to relocate part of or all of our data processing activities to other jurisdictions at significant expense.
It is possible that the EU and UK GDPR or other laws and regulations relating to privacy and data protection may be interpreted and applied in a manner that is inconsistent from jurisdiction to jurisdiction or inconsistent with our current policies and practices, and compliance with such laws and regulations could require us to change our business practices and compliance procedures in a manner adverse to our business. We cannot guarantee that we are in compliance with all such applicable data protection laws and regulations, and we cannot be sure how these regulations will be interpreted, enforced, or applied to our operations. Furthermore, other jurisdictions outside the EEA are similarly introducing or enhancing privacy and data security laws, rules, and regulations, which could increase our compliance costs and the risks associated with noncompliance. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices, and our efforts to comply with the evolving data protection rules may be unsuccessful. We cannot guarantee that we, our third-party collaborators, or our vendors are in compliance with all applicable data protection and privacy laws and regulations as they are enforced now or as they evolve. Further, for example, our privacy policies may be insufficient to protect any personal information we collect, or may not comply with applicable laws. Our non-compliance could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business. In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures, and systems. In addition, if we are unable to properly protect the privacy and security of protected health information, we could be found to have breached our contracts.
In addition to data privacy and security laws, we may be subject to contractual obligations based on industry standards adopted by industry groups, such as best practices governing the conduct of clinical trials, and we are, or may become, subject to such obligations in the future. We are also subject to contractual obligations related to data privacy and security. Our efforts to comply with such obligations may not be successful. For example, certain privacy laws, such as the EU and UK GDPR and CCPA, may require us to impose specific contractual restrictions on certain service providers that have access to personal data, such as clinical trial patient data or personal data of clinical trial site personnel. We publish privacy policies, marketing materials, and other statements regarding data privacy and security on our website. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, or unfair, or to misrepresent our practices, we may be subject to investigation, enforcement actions by regulators (such as the Federal Trade Commission), or other adverse consequences.
Our actual or perceived failure to adequately comply with applicable laws and regulations relating to privacy and data protection, or to protect personal data and other data we process or maintain, could result in regulatory enforcement actions against us, including fines, penalties, orders that require a change in our practices, additional reporting requirements and/or oversight, imprisonment of company officials and public censure, claims for damages by affected individuals, other lawsuits, or reputational damage, all of which could materially affect our business, financial condition, results of operations, and growth prospects.
Our employees, principal investigators, consultants, and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants, and commercial partners. Misconduct by these parties could include intentional failures, reckless and/or negligent conduct, or unauthorized activities that violates (i) the laws and regulations of the EEA countries, FDA, and other regulatory authorities, including those laws requiring the reporting of true, complete, and accurate information to competent regulatory authorities, (ii) manufacturing standards, (iii) federal and state data privacy, security, fraud and abuse, and other healthcare laws and regulations in the EEA, the United States, and elsewhere and (iv) laws that require the true, complete, and accurate reporting of financial information or data. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Such misconduct also could involve the improper use of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, creating fraudulent data in our pre-clinical studies or clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our
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reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in significant civil, criminal, and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participating in government-funded healthcare programs, such as Medicare and Medicaid or comparable foreign programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of noncompliance with these laws, contractual damages, reputational harm, and the curtailment or restructuring of our operations, any of which could have a negative impact on our business, financial condition, results of operations, and prospects.
We benefit from tax credits in Austria and France that could be reduced or eliminated.
As a company with research and development activity, we benefit from certain tax advantages, including the Austrian Research and Development tax credit and the French Research Tax Credit (Crédit Impôt Recherche), which are tax credits aimed at stimulating research and development. Our Austrian Research and Development tax credits were €5.7 million, €13.9 million and €20.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. Our French Research Tax Credits were €1.1 million, €1.5 million, and €1.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Austrian Research and Development tax credit is calculated based on claimed amount of eligible research and development in Austria, while the French Research Tax credit is calculated based on our claimed amount of eligible research and development expenditures in France. The main differences between the Austrian and French research tax credits are the applicable percentage of and the basis for the tax credit. The tax credits are a source of financing to us that could be reduced or eliminated by the Austrian and French tax authorities or by changes in Austrian and French tax law or regulations.
The Austrian Research and Development tax credit is reimbursed to us. While the Austrian Research and Development tax credit is reviewed as a part of the issuance of a certificate by the local auditor and the research and development projects need an approval from the Austrian Research Promotion Agency (FFG), the Austrian tax authority may audit each research and development claim. The Austrian tax authorities may challenge our eligibility for, our calculation of, certain tax reductions in respect of our research and development activities (and therefore the amount of Research and Development Tax Credit claimed). Furthermore, the Austrian Parliament may decide to eliminate, or to reduce the scope or the rate of, the Research Tax Credit benefit, either of which it could decide to do at any time.
The French Research Tax Credit can be offset against French corporate income tax due with respect to the year during which the eligible research and development expenditures have been made. The portion of tax credit in excess which is not being offset, if any, represents a receivable against the French Treasury which can in principle be offset against the French corporate income tax due by the company with respect to the three following years. The remaining portion of tax credit not being offset upon expiry of such a period may then be refunded to the company. The French Research Tax credit is reimbursed within the expiry of a period of three years.
The French tax authorities, with the assistance of the Higher Education and Research Ministry, may audit each research and development program in respect of which a Research Tax Credit benefit has been claimed and assess whether such program qualifies in their view for the Research Tax Credit benefit. The French tax authorities may challenge our eligibility for, or our calculation of, certain tax reductions or deductions in respect of our research and development activities (and therefore the amount of Research Tax Credit claimed). Furthermore, the French Parliament may decide to eliminate, or to reduce the scope or the rate of, the Research Tax Credit benefit, either of which it could decide to do at any time.
If we fail to receive future Research Tax Credit amounts or if our calculations are challenged, even if we comply with the current requirements in terms of documentation and eligibility of its expenditure, our business, prospects, financial condition, and results of operations could be adversely affected.
We may be unable to carry forward existing tax losses.
We have accumulated tax loss carry forwards of €879.1 million, €821.6 million, and €628.3 million for the years ended December 31, 2023, 2022, and 2021, respectively. Applicable French law provides that, for fiscal years ending after December 31, 2012, the use of these tax losses is limited to €1.0 million, plus 50% of the portion of net earnings exceeding this amount. The unused balance of the tax losses in application of such rule can be carried forward to future fiscal years, under the same conditions and without time restriction. There can be no assurance that future changes to applicable tax law and regulation will not eliminate or alter these or other provisions in a manner unfavorable to us, which could have an adverse effect on our business, prospects, financial condition, cash flows or results of operations.
Comprehensive tax reform legislation could adversely affect our business and financial condition.
Corporate tax reform, anti-base-erosion rules and tax transparency continue to be high priorities in many jurisdictions. As a result, policies regarding corporate income and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation has been, and will likely continue to be, proposed or enacted in a number of jurisdictions in which we operate.
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In August 2022, the Inflation Reduction Act was signed into law in the United States incorporating some of the Biden Administration’s proposals for corporate tax reform. Other recently enacted legislation in the United States includes the Tax Act, the Families First Coronavirus Response Act, and the CARES Act. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may have a significant impact on our results of operations in the period issued, including our effective tax rate.  
In addition, many countries are implementing legislation and other guidance to align their international tax rules with those of the Organization for Economic Co-operation and Development, or OECD, whose Base Erosion and Profit Shifting recommendations and action plan aim to standardize and modernize global corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules, and nexus-based tax incentive practices. The OECD is also continuing discussions surrounding fundamental changes in allocation of profits among tax jurisdictions in which companies do business, as well as the implementation of a global minimum tax (namely the “Pillar One” and “Pillar Two” proposals). As a result of this heightened scrutiny, prior decisions by tax authorities regarding treatments and positions of corporate income taxes could be subject to enforcement activities and legislative investigation and inquiry, which could also result in changes in tax policies or prior tax rulings. Any such changes may also result in the taxes we previously paid being subject to change.
Our business may be exposed to foreign exchange risks.
We operate internationally and are exposed to foreign exchange risks arising from various currencies, primarily with respect to the Euro (EUR), the British Pound (GBP), the Canadian Dollar (CAD), the Swedish Krona (SEK), and the U.S. Dollar (USD). Foreign exchange risks arise from future commercial transactions, recognized assets and liabilities, and net investments in foreign operations. Because a substantial part of sales of IXIARO and IXCHIQ are, or are expected to be, generated in the United States, with a significant part of production costs in GBP, and in Canada for DUKORAL, with production costs in SEK, we are exposed to foreign exchange risks, principally with respect to the USD, GBP, SEK, and CAD. We have entered into currency option contracts to limit the risk of foreign exchange losses. However, our results of operations continue to be impacted by exchange rate fluctuations. For example, an increase in the value of the euro against the U.S. dollar could be expected to have a negative impact on our revenue and earnings growth as U.S. dollar revenue and earnings, if any, would be translated into euro at a reduced value. While we entered into currency option contracts in 2020 to limit the risk of foreign exchange losses, we cannot predict the impact of foreign currency fluctuations, and foreign currency fluctuations in the future may adversely affect our financial condition, results of operations and cash flows. Our ADSs are quoted in U.S. dollars on Nasdaq, while our ordinary shares trade in euro on Euronext Paris. Our financial statements are prepared in euro. Therefore, fluctuations in the exchange rate between the euro and the U.S. dollar will also affect, among other matters, the value of our ordinary shares and ADSs. We could also sign contracts denominated in other currencies, which would increase our exposure to currency risk. In accordance with our business decisions, our exposure to this type of risk could change depending on:
the currencies in which we receive our revenues;
the currencies chosen when agreements are signed, such as licensing agreements, or co-marketing or co-development agreements;
the location of clinical trials on product candidates; and
our policy for insurance coverage.
In addition, in light of the ongoing military conflict between Russia and Ukraine and the resulting tensions between the European Union, the United Kingdom, the United States and other countries with Russia, any resulting material change to the valuation of European and U.S. currencies could adversely impact our operating results. Should any of these risks materialize, this could have a material adverse effect on our business, prospects, financial condition and results of operations.  
Risks Related to Ownership of Our Ordinary Shares and the ADSs
We do not currently intend to pay dividends on our securities and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the ordinary shares and ADSs. In addition, French law may limit the amount of dividends we are able to distribute.
We have never declared or paid any cash dividends on our ordinary shares and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth.
Therefore, the holders of our ordinary shares and ADSs are not likely to receive any dividends for the foreseeable future and the success of an investment in our ordinary shares and ADSs will depend upon any future appreciation in value. Consequently, investors may need to sell all or part of their holdings of the ordinary shares or ADSs after price appreciation, which may never occur, as the only way to realize any future gains on their investment. There is no guarantee that the ordinary shares or ADSs will appreciate in value or even maintain the price at which our shareholders have purchased them.
Further, under French law, the determination of whether we have been sufficiently profitable to pay dividends is made on the basis of our statutory financial statements prepared and presented in accordance with accounting standards applicable in France. Moreover, pursuant to French law, we must allocate 5% of our unconsolidated net profit for each year to our legal reserve fund before dividends, should we propose to declare any, may be paid for that year, until the amount in the legal
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reserve is equal to 10% of the aggregate nominal value of our issued and outstanding share capital. In addition, payment of dividends may subject us to additional taxes under French law. Therefore, we may be more restricted in our ability to declare dividends than companies that are not incorporated in France.
In addition, exchange rate fluctuations may affect the amount of euro that we are able to distribute, and the amount in U.S. dollars that our shareholders receive upon the payment of cash dividends or other distributions we declare and pay in euro, if any. These factors could harm the value of the ADSs, and, in turn, the U.S. dollar proceeds that holders receive from the sale of the ADSs.
Future sales of ordinary shares or ADSs by existing shareholders could depress the market price of the ordinary shares or ADSs.
Future sales of a substantial number of our ADSs or ordinary shares, or the perception that such sales will occur, could cause a decline in the market price of our ADSs and/or ordinary shares. Sales in the United States of our ADSs and ordinary shares held by our directors, officers, and affiliated shareholders or ADS holders are subject to restrictions. If these shareholders or ADS holders sell substantial amounts of ordinary shares or ADSs in the public market, or the market perceives that such sales may occur, the market price of our ADSs or ordinary shares and our ability to raise capital through an issue of equity securities in the future could be adversely affected.
The dual listing of our ordinary shares and the ADSs may adversely affect the liquidity and value of the ADSs.
Our ADSs are listed on the Nasdaq Global Select Market and our ordinary shares are listed on Euronext Paris. Trading of the ADSs or ordinary shares in these markets takes place in different currencies (U.S. dollars on Nasdaq and euro on Euronext Paris), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and France). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on Euronext Paris could cause a decrease in the trading price of the ADSs on Nasdaq. Investors could seek to sell or buy our ordinary shares to take advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage activity could create unexpected volatility in both our share prices on one exchange, and the ordinary shares available for trading on the other exchange. In addition, holders of ADSs will not be immediately able to surrender their ADSs and withdraw the underlying ordinary shares for trading on the other market without effecting necessary procedures with the depositary. This could result in time delays and additional cost for holders of ADSs. We cannot predict the effect of this continued dual listing on the value of our ordinary shares and the ADSs. However, the continued dual listing of our ordinary shares and ADSs may reduce the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for the ADSs in the United States.
The rights of shareholders in companies subject to French corporate law differ in material respects from the rights of shareholders of corporations incorporated in the United States.
We are a European public company with limited liability (Societas Europaea or SE), with our registered office in France. Our corporate affairs are governed by our bylaws and by the laws governing companies incorporated in France. The rights of shareholders and the responsibilities of members of our Board of Directors are in many ways different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. For example, in the performance of its duties, our Board of Directors is required by French law to consider the interests of our company, its shareholders, its employees and other stakeholders, rather than solely our shareholders and/or creditors. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a shareholder or holder of ADSs. Further, in accordance with French law, as long as a double voting right is attached to each ordinary share which is held in registered form in the name of the same shareholder for at least two years, ordinary shares deposited with the depositary will not be entitled to double voting rights. Therefore, holders of ADSs who wish to obtain double voting rights will need to surrender their ADSs, withdraw the deposited shares, and take the necessary steps to hold such ordinary shares in registered form in the holder’s name for at least two years. See “Item 16G—Corporate Governance.”
U.S. investors may have difficulty enforcing civil liabilities against our company and members of the Executive Committee and the Board of Directors.
Most of the members of our Executive Committee and Board of Directors and the experts named in this Annual Report are non-residents of the United States, and all or a substantial portion of our assets and the assets of such persons are located outside the United States. As a result, it may not be possible to serve process on such persons or us in the United States or to enforce judgments obtained in U.S. courts against them or us based on civil liability provisions of the securities laws of the United States. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted outside of the United States. Foreign courts may refuse to hear a U.S. securities law claim because foreign courts may not be the most appropriate forums in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court resides, and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be governed by the law of the jurisdiction in which the foreign court resides. In particular, there is some doubt as to whether French courts would recognize and enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in France. An award for monetary damages under the U.S. securities laws would be considered punitive if it does not seek to compensate the claimant for loss or damage suffered but is intended to punish the defendant. French law provides that a shareholder, or a group of shareholders, may initiate a legal action to seek indemnification from the
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directors of a corporation in the corporation’s interest if it fails to bring such legal action itself. If so, any damages awarded by the court are paid to the corporation and any legal fees relating to such action may be borne by the relevant shareholder or the group of shareholders. The enforceability of any judgment in France will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The United States and France do not currently have a treaty providing for recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters.
Our bylaws and French corporate law contain provisions that may delay or discourage a takeover attempt.
Provisions contained in our bylaws and French corporate law could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. In addition, provisions of our bylaws impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. These provisions include the following:
under French law, the owner of 90% of the share capital and voting rights of a public company listed on a regulated market in a Member State of the European Union or in a state party to the EEA Agreement, including from the main French stock exchange, has the right to force out minority shareholders following a tender offer made to all shareholders;
under French law, a non-resident of France as well as any French entity controlled by non-residents of France may have to file a declaration for statistical purposes with the Bank of France (Banque de France) within 20 working days following the date of certain direct foreign investments in us, including any purchase of our ADSs. In particular, such filings are required in connection with investments exceeding €15,000,000 that lead to the acquisition of at least 10% of our share capital or voting rights or cross such 10% threshold;
under French law, certain investments in a French company relating to certain strategic industries (such as research and development in biotechnologies and activities relating to public health) and activities by individuals or entities not French, not resident in France or controlled by entities not French or not resident in France, are subject to prior authorization of the Ministry of Economy;
a merger (i.e., in a French law context, a share for share exchange following which our company would be dissolved into the acquiring entity and our shareholders would become shareholders of the acquiring entity) of our company into a company incorporated in the European Union would require the approval of our Board of Directors as well as a two-thirds majority of the votes held by the shareholders present, represented by proxy or voting by mail at the relevant meeting;
a merger of our company into a company incorporated outside of the European Union would require 100% of our shareholders to approve it;
under French law, a cash merger is treated as a share purchase and would require the consent of each participating shareholder;
our shareholders may in the future grant our Board of Directors broad authorizations to increase our share capital or to issue additional ordinary shares or other securities (for example, warrants) to our shareholders, the public or qualified investors, including as a possible defense following the launching of a tender offer for our ordinary shares;
our shareholders have preferential subscription rights on a pro rata basis on the issuance by us of any additional securities for cash or a set-off of cash debts, which rights may only be waived by the extraordinary general meeting (by a two-thirds majority vote) of our shareholders or on an individual basis by each shareholder;
our Board of Directors appoints the members of the Executive Committee, notably the Chief Executive Officer (Directeur Général) and Associate Managing Officers (Directeurs Généraux Délégués);
our Board of Directors has the right to appoint members of the Board to fill a vacancy created by the resignation or death of a member of the Board for the remaining duration of such member’s term of office, and subject to the approval by the shareholders of such appointment at the next shareholders’ meeting, which prevents shareholders from having the sole right to fill vacancies on our Board;
our Board of Directors can be convened by the Chair, Vice-Chair, or Lead Independent Member or, if there has been no Board meeting for more than two months, by Directors representing one-third of the Board;
our Board of Directors meetings can take place in person or by way of videoconference or teleconference and for decisions of the Board of Directors to be valid, at least half of the Directors must be present or represented;
approval of at least a majority of the votes held by shareholders present, represented by a proxy, or voting by mail at the relevant ordinary shareholders’ general meeting is required to remove members of the Board of Directors with or without cause;
the crossing of certain ownership thresholds has to be disclosed and can impose certain obligations;
advance notice is required for nominations to the Board of Directors or for proposing matters to be acted upon at a shareholders’ meeting, except that a vote to remove and replace a member of the Board can be proposed at any shareholders’ meeting without notice;
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transfers of shares shall comply with applicable insider trading rules and regulations, and in particular with the Market Abuse Regulation 596/2014 of April 16, 2014; and
pursuant to French law, our bylaws, including the sections relating to the number of members of the Board of Directors and Associate Managing Officers, and election and removal of members of the Board of Directors and Associate Managing Officers from office may only be modified by a resolution adopted by two-thirds of the votes of our shareholders present, represented by a proxy or voting by mail at the meeting.
We have previously reported material weaknesses in our internal controls over financial reporting, and if we are unable to maintain effective internal controls over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected, which could hurt our business, lessen investor confidence, and depress the market price of our securities.
We must maintain effective internal control over financial reporting in order to accurately and timely report our results of operations and financial condition. In addition, as a public company listed in the United States, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting at the end of each fiscal year. Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow our management to report on the effectiveness of our internal control over financial reporting, and we are also required to have our independent registered public accounting firm issue an opinion on the effectiveness of our internal control over financial reporting on an annual basis. To ensure compliance with Section 404, we will need to continue to dedicate internal resources to remediation efforts for any material weaknesses that we identify, and we have previously engaged outside consultants to assist us in adopting a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. The process to document and evaluate our internal control over financial reporting is both costly and challenging.
We previously identified material weaknesses in our internal control over financial reporting in connection with the preparation of the consolidated financial statements for the years ended December 31, 2021 and 2022. In connection with the preparation of our consolidated financial statements as at and for the year ended December 31, 2022, we identified deficiencies in the control environment, risk assessment, control activities, information and communication, and monitoring components of the COSO Framework (as defined in Item 15 of this Annual Report). These deficiencies constituted material weaknesses, either individually or in the aggregate, were pervasive in nature, and impacted all significant accounts and disclosures. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. These material weaknesses did not result in a material misstatement to our financial statements. However, these material weaknesses could result in material inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. For further information about the material weaknesses previously identified, see Item 15 of this Annual Report.
We took steps to address these material weaknesses and implemented remediation plans. See Item 15 of this Annual Report for further details about these past remediation measures. We cannot assure you that the controls we have judged to be effective for the year ended December 31, 2023 will continue to be effective or that we will be able to prevent any future material weaknesses in our internal control over financial reporting.
The rules governing the standards for our management to assess our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act are complex and require significant documentation, testing, and possible remediation. These stringent standards require that our audit committee be advised and regularly updated on management’s review of internal control over financial reporting. The process of designing, implementing, and testing the internal control over financial reporting required to comply with this obligation is time-consuming, costly, and complicated. Our management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are or may be applicable to us as a public company listed in the United States. If we fail to staff our accounting and finance function adequately or maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company listed in the United States, our business and reputation may be harmed, and the price of our ordinary shares and ADSs may decline. In addition, undetected material weaknesses in our internal control over financial reporting could lead to restatements of financial statements and require us to incur the expense of remediation. Any of these developments could result in investor perceptions of us being adversely affected, which could cause a decline in the market price of our securities.
Existing and potential investors in our ordinary shares or ADSs may have to request the prior authorization from the French Ministry of Economy prior to acquiring a significant ownership position in our ordinary shares or ADSs.
Under French law, investments of more than 25% by certain individuals or entities in a French company deemed to be a strategic industry may be subject to prior authorization of the French Ministry of Economy pursuant to Articles L. 151-1 et seq. and R. 151-1 et seq. of the French Monetary and Financial code.
If an investment requiring the prior authorization of the French Minister of Economy is completed without such authorization having been granted, the French Minister of Economy might direct the relevant investor to nonetheless (i) submit a request for authorization, (ii) have the previous situation restored at its own expense or (iii) amend the investment. The relevant investor might also be found criminally liable and might be sanctioned with a fine which cannot
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exceed the greater of: (i) twice the amount of the relevant investment, (ii) 10% of the annual turnover before tax of the target company and (iii) €5 million (for an entity) or €1 million (for an individual).
In the context of the ongoing COVID-19 pandemic, the Decree (décret) no. 2020 892 dated July 22, 2020, as amended by the Decree (décret) no. 2020-1729 dated December 28, 2020 created until December 31, 2021 a new 10% threshold of the voting rights for the non-European investments made (i) in an entity having its registered office in France and (ii) whose shares are admitted to trading on a regulated market, in addition to the 25% above-mentioned threshold. The transactions falling within the scope of the Decree (décret) no. 2020-892, as amended, benefit from a “fast-track procedure” pursuant to which the investor is exempt from the authorization request provided for in Article R. 151-5 of the Monetary and Financial Code, provided that the investment project has been the subject of prior notification to the French Minister of Economy and that the transaction is carried out within six months following the notification. Unless the French Minister of Economy objects, the authorization is granted at the end of a period of ten working days following notification.
Failure to comply with such measures could result in significant consequences on the applicable investor. Such measures could also delay or discourage a takeover attempt, and we cannot predict whether these measures will result in a lower or more volatile market price of our ADSs.
Purchasers of ADSs are not directly holding our ordinary shares.
A holder of ADSs is not treated as one of our shareholders and does not have direct shareholder rights, unless he or she withdraws the ordinary shares underlying his or her ADSs. French law governs our shareholder rights. The depositary, through the custodian or the custodian’s nominee, is the holder of the ordinary shares underlying ADSs. Purchasers of ADSs have ADS holder rights. The deposit agreement among us, the depositary, and ADS holders sets out ADS holder rights, as well as the rights and obligations of us and the depositary. ADS holders are encouraged to read the deposit agreement, which is filed as an exhibit to this Annual Report.
Your right as a holder of ADSs to participate in any future preferential subscription rights offering or to elect to receive dividends in shares may be limited, which may cause dilution to your holdings.
According to French law, if we issue additional securities for cash, current shareholders will have preferential subscription rights for these securities on a pro rata basis unless they waive those rights at an extraordinary meeting of our shareholders (by a two-thirds majority vote) or individually by each shareholder. However, our ADS holders in the United States will not be entitled to exercise or sell such rights unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement provides that the depositary will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. Further, if we offer holders of our ordinary shares the option to receive dividends in either cash or shares, under the deposit agreement the depositary may require satisfactory assurances from us that extending the offer to holders of ADSs does not require registration of any securities under the Securities Act before making the option available to holders of ADSs. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, ADS holders may be unable to participate in our rights offerings or to elect to receive dividends in shares and may experience dilution in their holdings. In addition, if the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable, it will allow the rights to lapse, in which case you will receive no value for these rights.
You may not be able to exercise your right to vote the ordinary shares underlying your ADSs.
Holders of ADSs may exercise voting rights with respect to the ordinary shares represented by the ADSs only in accordance with the provisions of the deposit agreement. The deposit agreement provides that, upon receipt of notice of any meeting of holders of our ordinary shares, the depositary will fix a record date for the determination of ADS holders who shall be entitled to give instructions for the exercise of voting rights. Upon timely receipt of notice from us, if we so request, the depositary shall distribute to the holders as of the record date (i) the notice of the meeting or solicitation of consent or proxy sent by us and (ii) a statement as to the manner in which instructions may be given by the holders.
You may instruct the depositary of your ADSs to vote the ordinary shares underlying your ADSs. Otherwise, you will not be able to exercise your right to vote, unless you withdraw the ordinary shares underlying the ADSs you hold. However, you may not know about the meeting far enough in advance to withdraw those ordinary shares. If we ask for your instructions, the depositary, upon timely notice from us, will notify you of the upcoming vote and arrange to deliver our voting materials to you. We cannot guarantee you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ordinary shares or to withdraw your ordinary shares so that you can vote them yourself. If the depositary does not receive timely voting instructions from you, it may give a proxy to a person designated by us to vote the ordinary shares underlying your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote, and there may be nothing you can do if the ordinary shares underlying your ADSs are not voted as you requested.
You may be subject to limitations on the transfer of your ADSs and the withdrawal of the underlying ordinary shares.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer, or register transfers of your ADSs generally when our books or the books of the depositary are closed, or
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at any time if we or the depositary think it is advisable to do so because of any requirement of law, government, or governmental body, or under any provision of the deposit agreement, or for any other reason subject to your right to cancel your ADSs and withdraw the underlying ordinary shares. Temporary delays in the cancellation of your ADSs and withdrawal of the underlying ordinary shares may arise because the depositary has closed its transfer books or we have closed our transfer books, the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting, or we are paying a dividend on our ordinary shares. In addition, you may not be able to cancel your ADSs and withdraw the underlying ordinary shares when you owe money for fees, taxes, and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities.
ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiffs in any such action.
The deposit agreement governing the ADSs representing our ordinary shares provides that, to the fullest extent permitted by law, ADS holders, including holders who acquire ADSs in the secondary market, waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.
If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.
If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and the depositary. If a lawsuit is brought against either or both of us and the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including results that could be less favorable to the plaintiffs in any such action. Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company.
We are a foreign private issuer, as defined in the SEC’s rules and regulations and, consequently, we are not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents, or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, the members of our Board of Directors and Executive Committee are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of our securities. Moreover, while we currently make annual and semi-annual filings with respect to our listing on Euronext Paris and expect to file financial reports on an annual and semi-annual basis, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies and are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. In addition, foreign private issuers are not required to file their Annual Report on Form 20-F until four months after the end of each fiscal year. Accordingly, there is less publicly available information concerning our company than there would be if we were not a foreign private issuer.
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards, and these practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.
As a foreign private issuer listed on Nasdaq, we are subject to Nasdaq’s corporate governance listing standards. However, Nasdaq rules permit foreign private issuers to follow the corporate governance practices of its home country. Some corporate governance practices in France may differ significantly from Nasdaq corporate governance listing standards. We intend to continue to rely on exemptions for foreign private issuers and follow French corporate governance practices in lieu of Nasdaq corporate governance standards, to the extent possible. For example, neither the corporate laws of France nor our bylaws require a majority of the members of our Board of Directors to be independent, and although the corporate governance code to which we currently refer (the Middlenext Code) recommends that, in a widely-held company like ours,
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a majority of the members of the Board of Directors be independent (as construed under such code), this code only applies on a “comply-or-explain” basis, and we may in the future either decide not to apply this recommendation or change the corporate code to which we refer. Furthermore, we could include non-independent members of the Board of Directors as members of our Nomination, Governance and Compensation committee, and the independent members of our Board of Directors would not necessarily hold regularly scheduled meetings at which only independent members of the Board are present. In addition, we follow French law with respect to shareholder approval requirements in lieu of the various shareholder approval requirements of Nasdaq. Currently, we intend to continue to follow home country practice to the maximum extent possible. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.
We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.
While we currently qualify as a foreign private issuer, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, our next determination will be made on June 30, 2024. In the future, we would lose our foreign private issuer status if we to fail to meet the requirements necessary to maintain our foreign private issuer status as of the relevant determination date. For example, if more than 50% of our securities are held by U.S. residents and more than 50% of the members of our Board of Directors or Executive Committee are residents or citizens of the United States, we could lose our foreign private issuer status. As of December 31, 2023, approximately 26% of our outstanding ordinary shares (including ordinary shares in the form of ADSs) were held by U.S. residents (assuming that all holders of ADSs as of such date are residents of the United States).
The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than costs we incur as a foreign private issuer. If we are not a foreign private issuer in the future, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. We would be required under current SEC rules to prepare our financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, rather than IFRS, and modify certain of our policies to comply with corporate governance practices required of U.S. domestic issuers. Such conversion of our financial statements to U.S. GAAP would involve significant time and cost. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers such as the ones described above and exemptions from procedural requirements related to the solicitation of proxies.
If we are a passive foreign investment company, there could be adverse U.S. federal income tax consequences to U.S. holders.
Under the Code, a non-U.S. company will be considered a passive foreign investment company, or PFIC, for any taxable year in which (1) 75% or more of its gross income consists of passive income or (2) 50% or more of the weighted-average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of these tests, passive income includes dividends, interest, gains from the sale or exchange of investment property, and certain rents and royalties. In addition, for purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by value of the shares of another corporation or partnership is treated as if it held its proportionate share of the assets and received directly its proportionate share of the income of such other corporation or partnership. If we are a PFIC for any taxable year during which a U.S. holder (as defined in Item 10D, “Taxation”) holds our ordinary shares or ADSs, we will continue to be treated as a PFIC with respect to such U.S. holder in all succeeding years during which the U.S. holder owns the ordinary shares or ADSs, regardless of whether we continue to meet the PFIC test described above, unless the U.S. holder makes a specified election once we cease to be a PFIC. If we are classified as a PFIC for any taxable year during which a U.S. holder holds our ordinary shares or ADSs, the U.S. holder may be subject to adverse tax consequences regardless of whether we continue to qualify as a PFIC, including ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements.
We do not believe that we were characterized as a PFIC for the taxable year ending December 31, 2023. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. As a result, there can be no assurance regarding if we currently are treated as a PFIC, or may be treated as a PFIC in the future. In addition, for our current and future taxable years, the total value of our assets for PFIC testing purposes may be determined in part by reference to the market price of our ordinary shares or ADSs from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income which will depend on the transactions we enter into in the future and our corporate structure. The composition of our income and assets is also affected by how we spend the cash we raise in any offering. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the Internal Revenue Service, or IRS, will agree with our conclusion and that the IRS would not successfully challenge our position. Accordingly, our U.S. counsel expresses no opinion with respect to our PFIC status for any prior, current or future taxable year.
For further discussion of the PFIC rules and the adverse U.S. federal income tax consequences in the event we are classified as a PFIC, see Item 10D of this Annual Report.
If a United States person is treated as owning at least 10% of our ordinary shares, such holder may be subject to adverse U.S. federal income tax consequences.
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If a U.S. holder is treated as owning, directly, indirectly or constructively, at least 10% of the value or voting power of our ordinary shares or ADSs, such U.S. holder may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group, if any. Our group currently includes one U.S. subsidiary and, therefore, under current law our current non-U.S. subsidiaries and any future newly formed or acquired non-U.S. subsidiaries will be treated as controlled foreign corporations, regardless of whether we are treated as a controlled foreign corporation. A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income”, and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. Failure to comply with controlled foreign corporation reporting obligations may subject a United States shareholder to significant monetary penalties. We cannot provide any assurances that we will furnish to any United States shareholder information that may be necessary to comply with the reporting and tax paying obligations applicable under the controlled foreign corporation rules of the Code. U.S. holders should consult their tax advisors regarding the potential application of these rules to their investment in our ordinary shares or ADSs.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, or may apply existing rules in an unforeseen manner, resulting in unanticipated costs, taxes, or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.
A tax authority may take the position that material income tax liabilities, interest, and penalties are payable by us, for example where there has been a technical violation of contradictory laws and regulations that are relatively new and have not been subject to extensive review or interpretation, in which case we expect that we might contest such assessment. High-profile companies can be particularly vulnerable to aggressive application of unclear requirements. Many companies must negotiate their tax bills with tax inspectors who may demand higher taxes than applicable law appears to provide. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.
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General Risk Factors
The trading price of our equity securities has been and may continue to be volatile, and purchasers of our ordinary shares or ADSs could incur substantial losses.
The price of our ordinary shares and ADSs has been, and likely will continue to be, significantly affected by events such as announcements regarding scientific and clinical results concerning product candidates currently being developed by us, our collaboration partners, or our main competitors, changes in market conditions related to our sector of activity, announcements of new contracts or amendments or terminations to existing contracts, technological innovations and collaborations by us or our main competitors, developments concerning intellectual property rights, the development, regulatory approval and commercialization of new products by us or our main competitors, and changes in our financial results.
Equity markets are subject to considerable price fluctuations, and often, these movements do not reflect the operational and financial performance of the listed companies concerned. In particular, biotechnology companies’ share prices have been highly volatile and may continue to be highly volatile in the future. As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry. Fluctuations in the stock market as well as the macro-economic environment could significantly affect the price of our ordinary shares. As a result of this volatility, investors may not be able to sell their ordinary shares or ADSs at or above the price originally paid for the security. The market price for our ordinary shares and ADSs may be influenced by many factors, including:
actual or anticipated fluctuations in our financial condition and operating results;
actual or anticipated changes in our growth rate relative to our competitors;
competition from existing products or new products that may emerge;
announcements by us or our competitors of significant acquisitions, divestitures, strategic partnerships, joint ventures, collaborations, or capital commitments;
adverse results or delays in our or any of our competitors’ pre-clinical studies or clinical trials or regulatory timelines;
adverse regulatory decisions, including failure to receive regulatory approval for any of our product candidates;
the termination or amendment of a strategic alliance, partnership, or collaboration or the inability to establish additional strategic alliances, partnerships, or collaborations;
failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;
issuance of new or updated research or reports by securities analysts;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
ordinary share and ADS price and volume fluctuations attributable to inconsistent trading volume levels of our ordinary shares and ADSs;
price and volume fluctuations in trading of our ordinary shares on Euronext Paris;
additions or departures of key management or scientific personnel;
regulatory or legal developments in the United States, European Union and other jurisdictions;
disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain patent and other intellectual property protection for our technologies;
changes to coverage policies or reimbursement levels by commercial third-party payors and government payors and any announcements relating to coverage policies or reimbursement levels;
announcement or expectation of additional debt or equity financing efforts;
sales of our ordinary shares or ADSs by us, our insiders or our other shareholders; and
general economic and market conditions, including macroeconomic factors such as geopolitical instability, rising interest rates and inflation.
These and other market and industry factors may cause the market price and demand for our ordinary shares and ADSs to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their ordinary shares or ADSs and may otherwise negatively affect the liquidity of the trading market for the ordinary shares and ADSs. In addition, in the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could be costly and time consuming and divert management’s attention and resources.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of the ordinary shares or ADSs and their trading volume could decline.
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The trading market for the ADSs and ordinary shares depends in part on the research and reports that securities or industry analysts publish about us or our business. As a public company in France since 2013 and in the United States since May 2021, our equity securities are currently subject to coverage by a number of analysts. If fewer securities or industry analysts cover our company, the trading price for our ADSs and ordinary shares could be negatively impacted. If one or more of the analysts who covers us downgrades our equity securities or publishes incorrect or unfavorable research about our business, the price of our ordinary shares and ADSs would likely decline. Additionally, if one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our ordinary shares and ADSs could decrease, which could cause the price of our ordinary shares and ADSs or their trading volume to decline.
Item 4. Information on the Company
A. History and Development of the Company
Our legal name is “Valneva SE”. We are a public company listed on the Nasdaq Global Select Market and Euronext Paris that was formed in 2013 through the merger of Intercell, an Austrian vaccine biotech company listed on the Vienna Stock Exchange, and Vivalis, a French biotech company listed on Euronext Paris. We were incorporated on March 24, 1999 as a limited liability company and converted into a European Company (Societas Europaea, or SE) on May 28, 2013. Our registered office is located at 6 rue Alain Bombard, 44800 Saint-Herblain, France. We are registered at the Nantes Trade and Companies Registry under the number 422 497 560. Our telephone number at our principal executive offices is +33 2 28 07 37 10.
We have nine wholly owned subsidiaries—Valneva Austria GmbH, a limited liability company formed under the laws of Austria in 2013, Valneva Scotland Ltd., a private company limited by shares formed under the laws of Scotland in 2003, Valneva USA, Inc., a Delaware corporation formed in 1997, Vaccines Holdings Sweden AB, a private limited company formed under the laws of Sweden in 2014, Valneva Sweden AB, a private limited company formed under the laws of Sweden in 1992, Valneva Canada, Inc., a corporation formed under the laws of Canada in 2015, Valneva UK Ltd., a private company formed under the laws of England and Wales in 2015, Valneva France SAS, a société par actions simplifiée formed under the laws of France in 2019, and VBC 3 Errichtungs GmbH, a limited liability company formed under the laws of Austria that we acquired in 2023 in connection with the purchase of the office building we occupy in Vienna.
Our agent for service of process in the United States is Valneva USA, Inc. Our website address is www.valneva.com. The reference to our website is an inactive textual reference only and information contained in, or that can be assessed through, our website is not incorporated by reference into this Annual Report and does not constitute a part of this Annual Report.
The SEC maintains an internet site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC.
Our capital expenditures in the years ended December 31, 2023, 2022, and 2021 totaled €6.4 million, €29.0 million and €18.9 million, respectively, primarily related to investments in our manufacturing facilities in Scotland and Sweden. We expect our capital expenditures in 2024 to be primarily financed from our existing cash and cash equivalents.
 B. Business Overview
We are a specialty vaccine company that develops, manufactures, and commercializes prophylactic vaccines for infectious diseases addressing unmet medical needs. We take a highly specialized and targeted approach, applying our deep expertise across multiple vaccine modalities, focused on providing either first-, best-, or only-in-class vaccine solutions. We have a strong track record, having advanced multiple vaccines from early Research & Development (R&D) to approvals, and currently market three proprietary travel vaccines, including the world’s first and only chikungunya vaccine, IXCHIQ, as well as certain third-party vaccines.
Revenues from our growing commercial business help fuel the continued advancement of our vaccine pipeline. This pipeline includes the only Lyme disease vaccine candidate (VLA15) in advanced clinical development, which we are developing in partnership with Pfizer, as well as vaccine candidates against the Zika virus and other global public health threats.
Our clinical portfolio is composed of highly differentiated vaccine candidates that are designed to provide preventative solutions to diseases with high unmet need. VLA1553 is a vaccine candidate which was approved by the U.S. Food and Drug Administration (FDA) under the brand name IXCHIQ in November 2023. It is indicated in the U.S. for the prevention of disease caused by chikungunya virus (CHIKV) in individuals 18 years of age and older who are at increased risk of exposure to CHIKV. At the end of February 2024, the U.S. Advisory Committee on Immunization Practices (ACIP) provided recommendations on how to use IXCHIQ and these recommendations were then adopted by the U.S. Centers for Disease Control and Prevention (CDC). The vaccine is still undergoing several clinical trials with a view to support additional marketing approvals and potential label extensions. VLA15 is a Phase 3 vaccine candidate targeting Borrelia, the bacterium that causes Lyme disease, under development in collaboration with Pfizer, and it is the only vaccine candidate against Lyme disease currently undergoing late-stage clinical trials. VLA15 targets the six most prevalent serotypes, or variations, of Borrelia in the United States, where approximately 476,000 people are diagnosed with Lyme disease each year and in Europe, where at least a further 200,000 cases occur annually. VLA1601 is a Phase 1 vaccine candidate targeting the Zika virus (ZIKV), a mosquito-borne viral disease whose transmission has been reported in 89 countries and
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territories and persists in several countries in the Americas and other endemic regions. There are no preventive vaccines or effective treatments available. As such, Zika remains a public health threat and is included in the FDA’s Tropical Disease Priority Review Voucher Program. VLA1601 is being developed on the original manufacturing platform of our licensed Japanese encephalitis vaccine IXIARO, which was further optimized to develop our inactivated, adjuvanted COVID-19 vaccine VLA2001, the first COVID-19 vaccine to receive a standard marketing authorization in Europe.
We have already successfully licensed and commercialized a portfolio of traveler vaccines, which is composed of IXIARO (also marketed as JESPECT in Australia and New Zealand), indicated for the prevention of Japanese encephalitis in travelers and military personnel, and DUKORAL, indicated for the prevention of cholera and, in Canada, Switzerland, New Zealand, and Thailand, prevention of diarrhea caused by Enterotoxigenic Escherichia coli, or ETEC, the leading cause of travelers’ diarrhea. At the beginning of 2024, we launched our chikungunya vaccine IXCHIQ in the U.S. Additionally, we distribute vaccines for third parties in selected countries where we have a commercial infrastructure.
We have a highly developed, nimble and sophisticated manufacturing infrastructure with facilities across Europe to meet our clinical and commercial needs, including BioSafety Level 3 (BSL-3) manufacturing and R&D facilities. We have assembled a team of experts with deep scientific, clinical and business expertise in biotechnology and specifically in vaccine development, manufacturing and commercialization. Our senior leadership team has extensive experience and demonstrated ability to move vaccines through the clinic and into successful commercialization. Members of our team have previously worked at industry leaders such as Novartis, Chiron, GlaxoSmithKline and Daiichi Sankyo.
Our Pipeline and Proprietary Commercial Portfolio
Our pipeline consists of assets at all stages of research & development. Our goal is to develop vaccine candidates that are first-, best-, or only-in-class and address unmet needs in infectious diseases. Our aim is to develop these assets for future commercialization either in-house or through and with partners.
Our advanced clinical pipeline and commercialized products are summarized below:
Commercial_and_Clinical_Pipeline_20F.jpg
 1.    Indications differ by country. ETEC stands for Enterotoxigenic Escherichia coli (E. Coli) bacterium.
Our clinical pipeline includes:
VLA1553 – a single-dose, live-attenuated vaccine candidate against CHIKV. VLA1553 was approved by the FDA under the brand name IXCHIQ in November 2023 and with this approval, became the world’s first licensed chikungunya vaccine available to address this unmet medical need. It is indicated in the United States for the prevention of disease caused by CHIKV in individuals 18 years of age and older who are at increased risk of exposure to CHIKV. Alongside the approval, we received a Priority Review Voucher which we sold for $103 million in February 2024. At the end of February 2024, the U.S. ACIP provided recommendations on how to use IXCHIQ and these recommendations were then adopted by the U.S. CDC. Regulatory review is ongoing in several other jurisdictions. We submitted a Marketing Authorization Application (MAA) to the European Medicines Agency, or EMA, in October 2023, and EMA’s CHMP confirmed accelerated assessment for the application based on the vaccine candidate’s “major interest for public health and therapeutic innovation”. A marketing application is also under review by Health Canada and Anvisa in Brazil. We expect to receive approval decisions in Europe, Canada, and Brazil in 2024. In the Phase 1 clinical trial of VLA1553, we observed development of antibodies to chikungunya virus and a rapid onset of immune response with 100% seroconversion of the 120 healthy participants and 100% of participants reaching the immune threshold established with the FDA
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at day 14. VLA1553 advanced directly to a Phase 3 clinical trial, for which we reported final results in March 2022, final lot-to-lot consistency data in May 2022, as well as 12- and 24-month antibody persistence data in December 2022 and 2023, respectively. The pivotal Phase 3 data were published in The Lancet, the world’s leading peer-reviewed medical journal, in June 2023. The Phase 3 results showed that VLA1553 demonstrated a very high seroresponse rate of 98.9% in participants 28 days after receiving the single administration. Additionally, VLA1553 was able to demonstrate a robust immune response which was sustained for 12 and 24 months by 99% and 97% of participants, respectively, and was equally durable in younger and older adults. This dedicated antibody persistence trial, VLA1553-303, will continue to evaluate persistence for a period of at least five years. Additionally, a clinical study in 754 adolescents 12 to 17 years of age, VLA1553-321, is ongoing in Brazil, for which we reported positive pivotal Phase 3 immunogenicity and safety data in November 2023. Funded by the Coalition for Epidemic Preparedness Innovations (CEPI) and conducted in collaboration with Instituto Butantan, this adolescent trial is intended to support the label extension in this age group following approvals in adults. The trial is also expected to support licensure of the vaccine in Brazil, which would be the first potential approval for use in endemic populations. We also initiated a pediatric trial in children 1 to 11 years of age, VLA1553-221, in January 2024 to support a Phase 3 pivotal pediatric study and potentially extend the label in this age group following initial regulatory approvals in adults and possibly in adolescents. In 2024, we will also start preparing the initiation of two Phase 4 post-marketing studies required as part of our approval under the FDA’s accelerated approval pathway.
VLA15 – a vaccine candidate against Borrelia, the bacterium that causes Lyme disease. VLA15 is a multivalent recombinant protein vaccine that targets six serotypes of Borrelia representing the most common serotypes found in North America and Europe. VLA15 is the only Lyme disease program in advanced clinical development today and has received Fast Track designation from the FDA. We reported results for three Phase 2 clinical trials of VLA15 in both adult and pediatric populations, in which we observed high levels of antibodies against all six serotypes. These include the announcement in September 2023 of positive Phase 2 pediatric and adolescent immunogenicity and safety data following a booster vaccination with VLA15. These results from the VLA15-221 Phase 2 study showed a strong anamnestic antibody response for all serotypes in pediatric (5 to 11 years of age) and adolescent participants (12 to 17 years of age), as well as in adults (18 to 65 years of age), one month after administration of a booster dose (month 19). The safety and tolerability profile of VLA15 after a booster dose was consistent with previous studies. In August 2022, jointly with Pfizer, we initiated a Phase 3 clinical study, “Vaccine Against Lyme for Outdoor Recreationists (VALOR)”, to investigate the efficacy, safety, and immunogenicity of VLA15 in participants five years of age and older in highly endemic regions in the United States and Europe. In February 2023, Pfizer, as the study sponsor, decided to discontinue approximately half of the total enrolled participants in the trial following violations of Good Clinical Practice, or GCP, at certain clinical trial sites run by a third party clinical trial site operator. The clinical trial remains ongoing with other sites not operated by the third party and new sites in the U.S. and Canada. In December 2023, we and Pfizer announced that we completed recruitment for the study. 9,437 participants 5 years of age and older were enrolled in the trial and will receive three doses of VLA15 or a saline placebo (1:1 ratio) within the first year, and one booster dose approximately one year after vaccination with the first three doses, as part of the primary series. The VALOR trial is expected to be concluded by the end of 2025, with the aim for Pfizer to submit a Biologics Licence Application (BLA) to the FDA and a MAA to the EMA in 2026, subject to positive data. According to the terms of our collaboration, Pfizer will lead late phase development of VLA15. If VLA15 is approved, Pfizer will have sole control over its commercialization, and we will be eligible to receive milestone and royalty payments. In June 2022, the terms of our collaboration with Pfizer were updated, and Pfizer invested €90.5 ($95) million in Valneva as part of an Equity Subscription Agreement. As per the terms of the collaboration agreement, we received a $25 million milestone payment from Pfizer following initiation of the Phase 3 study.
VLA1601 – a highly purified inactivated, adjuvanted vaccine candidate against the mosquito-borne viral disease caused by the Zika virus, or ZIKV. Disease outbreaks have been reported in tropical Africa, Southeast Asia, the Pacific Islands, and, since 2015, in the Americas. Zika virus transmission persists in several countries in the Americas and in other endemic regions. To date, a total of 89 countries and territories have reported evidence of mosquito-transmitted Zika virus infection; however, surveillance remains limited globally. There are no preventive vaccines or effective treatments available. As such, Zika remains a public health threat and is included in the FDA’s Tropical Disease Priority Review Voucher Program. VLA1601 is being developed on the original manufacturing platform of our licensed Japanese encephalitis vaccine IXIARO, which was further optimized to develop our inactivated, adjuvanted COVID-19 vaccine VLA2001, the first COVID-19 vaccine to receive a standard marketing authorization in Europe. We reported positive Phase 1 results for the first generation of our Zika vaccine candidate in 2019, showing a favorable safety profile and immunogenicity in all tested doses and schedules, comparable to IXIARO and other clinical stage ZIKV vaccines. We now expect to start the clinical evaluation of our second-generation vaccine in the coming weeks. A vaccine against the Zika virus would nicely complement Valneva’s portfolio of travel vaccines against mosquito-borne diseases, which already includes IXCHIQ and IXIARO.
In addition to our clinical-stage assets, our portfolio includes a series of pre-clinical assets against disease targets that reflect our strategy of providing prophylactic solutions to significant diseases that lack a preventative and effective therapeutic treatment option. These include VLA2112, a vaccine candidate targeting the Epstein-Barr virus, or EBV, which is one of the most common human viruses. EBV can cause infectious mononucleosis and is strongly associated with the development of several types of cancer and multiple sclerosis. We have also been working on a vaccine candidate targeting the human metapneumovirus, or hMPV, which is a major worldwide respiratory pathogen that causes acute upper and lower respiratory tract infection, and we are currently exploring potential partnering opportunities.
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We commercialize our fully owned travel vaccines IXIARO/JESPECT, DUKORAL, and IXCHIQ and previously supplied our inactivated COVID-19 vaccine VLA2001 under government contracts. Sales from these products are complemented by sales from the distribution of third-party products in markets where Valneva operates its own marketing and sales infrastructure (United States, Canada, Nordic countries, United Kingdom, Austria, and France):
IXIARO – an inactivated Vero cell culture-derived Japanese encephalitis vaccine that is the only Japanese encephalitis vaccine licensed and available in the United States, Canada, and Europe. IXIARO is indicated for active immunization against Japanese encephalitis, the most prevalent cause of viral encephalitis in Asia, for adults, adolescents, children, and infants aged two months and older. Sales of IXIARO were €73.5 million in the year ended December 31, 2023 compared to €41.3 million in the year ended December 31, 2022. The 78% increase in sales is primarily the result of the continued travel market recovery after being impacted by the COVID-related decline in travel in 2020 and 2021, as well as price increases. At the end of September 2023, we also signed a new one-year contract with the U.S. Department of Defense (DoD) worth a minimum of $32 million for the supply of IXIARO.
DUKORAL – an oral vaccine for the prevention of diarrhea caused by Vibrio cholera and, in Canada and certain other countries, heat-labile toxin producing ETEC, the leading cause of travelers’ diarrhea. We acquired DUKORAL in 2015 and recorded €29.8 million of sales in the year ended December 31, 2023 compared to €17.3 million in the year ended December 31, 2022. DUKORAL sales in 2023 also benefited from the continued travel market recovery. DUKORAL is authorized for use in the European Union and Australia to protect against cholera and in Canada, Switzerland, New Zealand, and Thailand to protect against cholera and ETEC.
IXCHIQ – a single-dose, live-attenuated vaccine indicated for the prevention of disease caused by chikungunya virus in individuals 18 years of age and older who are at increased risk of exposure to CHIKV. We received marketing approval for IXCHIQ from the FDA in November 2023 under an accelerated pathway based on anti-CHIKV neutralizing antibody titers. Continued approval for this indication is contingent upon verification of clinical benefit in Phase 4 confirmatory studies. At the end of February 2024, the U.S. ACIP provided recommendations on how to use IXCHIQ and these recommendations were then adopted by the U.S. CDC. With this U.S. approval, IXCHIQ became the world’s first licensed chikungunya vaccine available to address this unmet medical need and the third vaccine Valneva brought from early R&D to approval. Valneva started commercializing IXCHIQ in the U.S. in the first quarter of 2024.
VLA2001 – the only inactivated whole-virus COVID-19 vaccine approved in Europe and the first COVID-19 vaccine to receive a full marketing authorization from the European Medicines Agency. It was produced using our established Vero cell platform, leveraging the manufacturing technology for our commercial Japanese encephalitis vaccine, IXIARO. In addition to its marketing approval in Europe, our COVID-19 vaccine received conditional marketing authorization in the United Kingdom and emergency use authorization in the United Arab Emirates and Kingdom of Bahrain. In 2021, we signed advance purchase agreements with the European Commission and the Kingdom of Bahrain. In light of a reduced order volume from EU Member States, we suspended manufacturing of the vaccine in August 2022, and inventories were fully written-down as of December 31, 2022. In 2023, VLA2001 sales amounted to €5.7 million compared to €29.6 million in 2022. Sales of VLA2001 in 2023 resulted from the last deliveries made to the Kingdom of Bahrain.
Our Strategy
Our strategy supports our vision to contribute to a world in which no one dies or suffers from a vaccine preventable disease. Our strategy is based on an integrated business model that has allowed us to build a portfolio of differentiated clinical and pre-clinical assets as well as a growing commercial business. We are focused on utilizing our proven and validated product development capabilities to rapidly advance solutions addressing unmet needs in infectious diseases towards regulatory approval, with the goal of becoming first-, best-, or only-in-class. We have entered into strategic partnerships with other well-established pharmaceutical companies to leverage their clinical and commercial capabilities to optimize the potential value of select assets. As we advance our late stage portfolio, we also remain focused on investing in our research and development pipeline in order to develop our earlier stage assets as well as identify new targets and indications where we believe we can make a significant difference.
In order to execute upon this strategy as an independent, financially sustainable company, we are pursuing the following strategic goals:
Successfully launch IXCHIQ in target markets and conduct additional clinical trials. After receiving approval from the FDA at the end of 2023, we will focus on commercializing the vaccine in the U.S. in 2024. After submitting marketing applications to EMA, Health Canada, and the Brazilian agency Anvisa in 2023, we also expect to receive marketing approval decisions in Europe, Canada, and Brazil in 2024. We will also conduct additional clinical trials in 2024, notably in pediatric and immunocompromised participants, and we will start preparing the initiation of the Phase 4 studies required as part of our approval under the FDA’s accelerated approval pathway. A clinical trial in adolescents is also ongoing in Brazil which is expected to support licensure of the vaccine in Brazil and potential label extensions in countries where the vaccine will be initially approved in adults.
Advance VLA15 for the prevention of Lyme disease in collaboration with Pfizer. We are developing VLA15 as a vaccine against Borrelia, the bacterium that causes Lyme disease in North America and Europe. We reported results for three Phase 2 clinical trials of VLA15 in both adult and pediatric populations, in which VLA15
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generated high levels of antibodies against all six Borrelia strains. Together with Pfizer, we announced the initiation of a Phase 3 clinical study, “Vaccine Against Lyme for Outdoor Recreationists (VALOR)”, in August 2022 and completed recruitment of 9,437 participants for the study in December 2023. The VALOR trial is expected to be concluded by the end of 2025, with the aim for Pfizer to submit a BLA to the FDA and a MAA to the EMA in 2026, subject to positive data. If VLA15 is approved, Pfizer will have sole control over its commercialization, and we will be eligible to receive milestone and royalty payments.
Grow product sales focusing on proprietary products, and build a leading position in the travel vaccines market. We will focus on continuing to grow sales of our proprietary travel vaccines (IXIARO and DUKORAL) and launch IXCHIQ in the markets where the vaccine is or may be approved. The third-party product business supported Valneva’s revenues as a complement to its existing travel vaccine portfolio, especially during the COVID-19 pandemic. However, 2023 third-party sales of more than €35 million yielded only 36% gross margin, diluting our overall margins, and we have therefore decided to focus resources on direct sales of our proprietary products.
Expand our pipeline of clinical and pre-clinical programs to develop new vaccines addressing diseases with significant unmet need. To remain an industry leader in the development of prophylactic vaccines, we intend to continue identifying disease targets with the potential to be effectively prevented by vaccines and develop vaccine candidates against those targets. We notably expect to launch a Phase 1 clinical trial of our Zika vaccine candidate in the near future and initiated pre-clinical programs focusing on EBV and hMPV.
Opportunistically pursue strategic partnerships to maximize full potential of our clinical and commercial portfolios. We intend to continue to selectively evaluate partnerships to leverage the clinical and commercial expertise of large pharmaceutical companies. Additionally, we will continue to evaluate in-licensing opportunities for both our clinical and commercial portfolio.
Focus on stringent cost management. In the mid-term, we will continue focusing on stringent cost management with a particular focus on marketing and distribution as well as general and administrative costs.
Become an ESG (environmental, social, and governance)-driven enterprise. As a member of the United Nations Global Compact, we intend to ramp up ESG initiatives and continue to develop the four pillars of our responsible business commitments: Protecting Lives, Acting Ethically, Developing our People, and Respecting the Environment. In 2023, we recruited Laura Galindo Alfonso as ESG Director and Petra Pesendorfer as Chief People Officer to achieve this goal.
Background to Vaccine Development
Infectious diseases have widely affected, and continue to widely affect, humankind. Prevention of infectious diseases through vaccination, known as prophylactic vaccination, is considered one of the most beneficial and cost-effective health care interventions. Prophylactic vaccines often represent the preferred solution to debilitating and widespread infectious diseases given their capacity to bring about significant health benefits to both individuals and communities, while remaining highly cost effective. This is a result of the fact that vaccines provide health benefits not only to individuals who have actually received the vaccine, but also to the broader community as the vaccinated population brings the immunological benefits of protection to non-vaccinated populations through the “herd immunity” effect that helps to reduce the spread of the disease.
Despite the large and growing need for vaccines, many urgent medical needs remain unaddressed—including infectious diseases, such as Lyme disease and Zika, and hospital-acquired infections, such as infections with C. difficile. Developing vaccines for such diseases remains a high priority for the research and development world.
There are a number of approaches to engineering vaccine candidates. Most vaccines in use today utilize one of the following five technological approaches:
Live attenuated vaccines. Live attenuated vaccines use a weakened, or attenuated, form of the virus or bacteria that causes a disease. Live attenuated vaccines typically provoke more durable immunological responses. However, they may not be safe for use in immunocompromised individuals, and on rare occasions can mutate to a virulent form and cause disease. Live attenuated vaccines protect against diseases such as measles/mumps/rubella, rotavirus, smallpox, chickenpox and yellow fever. Our chikungunya virus vaccine IXCHIQ is an example of a live attenuated vaccine.
Inactivated vaccines. Inactivated vaccines use a version of the disease-causing virus or bacteria that has been destroyed with chemicals, heat or radiation. Inactivated vaccines have a long history of use and are among the safest types of vaccine, with possibilities for use in special target populations, such as patients with weakened immune systems. We believe that the extensive knowledge and experience with the existing viral inactivation procedures for vaccine manufacture will continue to serve as a foundation of vaccinology for novel inactivated vaccines. Today millions of people are, and will be, protected worldwide with inactivated viral vaccines. Inactivated vaccines protect against diseases such as hepatitis A, flu, polio, and rabies. Our products IXIARO and VLA2001 are both inactivated vaccines.
Subunit, recombinant, polysaccharide, and conjugate vaccines. Subunit, recombinant, polysaccharide, and conjugate vaccines use specific pieces of the virus or bacteria, such as its protein, sugar, or casing, to generate an immune response. Rather than introducing an inactivated or attenuated microorganism to an immune system
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(which would constitute a “whole-agent” vaccine), a subunit vaccine uses a fragment of the microorganism to generate an immune response. Subunit vaccines can produce a long-lived immunity and are relatively safe since only parts of the virus are used and can be applicable to people with weakened immune systems. These vaccines protect against diseases such as Hib (Haemophilus influenza type b), hepatitis B, HPV (human papillomavirus), whooping cough (part of the DTaP combined vaccine), pneumococcal disease, meningococcal disease, and shingles. Our clinical development and manufacturing technology have allowed us to develop our VLA15 vaccine candidate, a multivalent, protein subunit vaccine for prevention of Lyme disease.
Toxoid vaccines. Toxoid vaccines use a toxin made by the virus or bacteria that causes a disease. These vaccines are used to protect against diseases such as diphtheria and tetanus.
Messenger RNA (mRNA) vaccines. mRNA vaccines are one of the newest areas in vaccine technology. As shown during the COVID-19 pandemic, they can be developed quickly using the pathogen’s genetic code. When an mRNA vaccine is delivered, the RNA material teaches our body how to make a specific type of protein that is unique to the virus, but does not make the person sick. The protein triggers an immune response, which includes the generation of antibodies that recognize the protein. That way, if a person is ever exposed to that virus in the future, the body would likely have the tools (antibodies) to fight against it.
Additionally, there are companies pursuing novel technologies such as DNA vaccines, which transfect a specific antigen DNA-coding sequence onto the cells of an immunized species, and dendritic cell vaccines, which combine dendritic cells with antigens in order to present the antigens to the body’s white blood cells, thus stimulating an immune reaction. Although some of these novel technologies have shown promise, they largely remain in the early stages of development and face significant challenges related to manufacturing and distribution.
Our deep expertise and capabilities across many of these approaches gives us the flexibility to follow our strategy of first targeting diseases that lack a preventative solution and then developing an efficacious and safe vaccine candidate based on our determination of the most effective approach.
In addition to the vaccine’s primary component, such as an inactivated virus, vaccines may contain adjuvants, which are used to improve the immune response to the vaccine, for example through producing more antibodies. Adjuvants used in human vaccines include alum (aluminium hydroxide) and others (e.g. CpG-1018, manufactured by Dynavax). Adjuvants have a proven safety record based on more than 60 years of use. Effective use of adjuvants requires expertise around vaccine formulation and development. We have utilized different adjuvants in a number of our vaccine candidates or licensed vaccines.
Vaccines are administered through various routes such as orally, subcutaneously, intramuscularly, intradermally and intranasally. These various methods of administration help to simplify the vaccination process, allowing more people to be vaccinated and promoting adherence to the recommendations, such as receiving a follow-up dosage.
The different approaches to vaccine development cannot be universally applied to infectious diseases and be effective; instead, each approach must be targeted against a disease according to a compelling biological rationale. As such, development of vaccines are intensive and complicated processes that require evaluation of multiple modalities, endpoints and clinically meaningful data points. The efficacy and safety of vaccines are measured using multiple methodologies and approaches, although research and regulatory bodies often focus on the following measures:
Immunogenicity — the ability of a foreign substance, such as an antigen, to provoke an immune response
Seroconversion rates (SCR) — the proportion of subjects in a trial for whom a specific antibody develops and becomes detectable in blood
Seroconversion — an antibody response capable of preventing infection
Titer — a laboratory test that measures the presence and amount of antibodies in the blood
Viremia — the presence of a virus in the blood
 
Our Clinical Pipeline  
Clinical_Pipeline_Only_20F.jpg
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VLA1553 / IXCHIQ—Our vaccine targeting the chikungunya virus
VLA1553 is a single-dose, live-attenuated vaccine candidate against CHIKV, which was approved by the FDA under the brand name IXCHIQ in November 2023. It is indicated in the United States (U.S.) for the prevention of disease caused by CHIKV in individuals 18 years of age and older who are at increased risk of exposure to CHIKV. With this approval, IXCHIQ became the world’s first licensed chikungunya vaccine available to address this unmet medical need. Alongside the approval, we received a Priority Review Voucher (PRV) which we sold for $103 million in February 2024. At the end of February 2024, the ACIP provided recommendations on how to use IXCHIQ and these recommendations were then adopted by the U.S. CDC. Additionally, we submitted a MAA to the EMA in October 2023, and EMA’s CHMP confirmed accelerated assessment for the application based on the vaccine candidate’s “major interest for public health and therapeutic innovation”. A marketing application is also under review by Health Canada and Anvisa in Brazil. We expect to receive approval decisions in Europe, Canada, and Brazil in 2024.
In our Phase 1 clinical trial, we observed that VLA1553 led to the development of antibodies to chikungunya virus and a rapid onset of immune response resulting in 100% seroconversion of the 120 healthy participants and 100% of participants reaching the immune threshold established with the FDA at day 14. VLA1553 was also generally well-tolerated in all dose groups. Based on this Phase 1 dataset, we were able to advance directly into Phase 3 clinical development and concluded a pivotal Phase 3 trial in over 4,000 healthy adults. We received confirmation from the FDA and EMA for our proposal to seek licensure under the accelerated approval pathway. We received FDA licensure in November 2023 based on a surrogate endpoint (seroresponse rate) agreed with the FDA and the EMA. The surrogate endpoint is an immune response that is reasonably likely to predict protection from chikungunya infection. This eliminates the need to execute a time-intensive and costly field trial where a group of patients receiving a placebo is compared to groups of patients receiving VLA1553. However, this approach requires that vaccine effectiveness, i.e. the proof that the vaccine can prevent cases of disease, is demonstrated post-licensure. We reported positive topline results of our pivotal Phase 3 trial involving over 4,000 healthy adults in August 2021, final results, including six-month follow-up data, in March 2022 and 12 and 24 month antibody persistence data in December 2022 and 2023, respectively. These antibody persistence results confirmed a very high level of seroconversion, with 99% and 97% of participants showing protective CHIKV neutralizing antibodies twelve and twenty-four months, respectively, after receiving a single vaccination. The dedicated antibody persistence trial, VLA1553-303, will continue to evaluate persistence for a period of at least five years. The final pivotal Phase 3 data were published in The Lancet, the world’s leading peer-reviewed medical journal, in June 2023. The Phase 3 results showed that VLA1553 demonstrated a very high seroresponse rate of 98.9% in participants 28 days after receiving the single administration compared to the 70% threshold (for non-acceptance) agreed with the FDA.
Additionally, in May 2020, we partnered with the Instituto Butantan in Brazil to develop, manufacture, and market VLA1553 in certain low and middle income countries. As part of this collaboration, we initiated an adolescent clinical trial of VLA1553 in 754 healthy volunteers in Brazil in 2022, which has been approved by the local regulatory agency, Anvisa, and is sponsored by Instituto Butantan. In November 2023, we announced positive pivotal Phase 3 immunogenicity and safety data in 754 adolescents 12 to 17 years of age. This adolescent trial is intended to support the label extension in this age group following approvals in adults. The trial is also expected to support licensure of the vaccine in Brazil, which would be the first potential approval for use in endemic populations. We have been awarded up to $24.6 million in funding from CEPI in relation to this partnership. See “Item 10.C—Material Contracts—CEPI Funding Agreement” for more information about this agreement.
Additionally, we initiated a Phase 2 pediatric trial in children 1 to 11 years of age, VLA1553-221, in January 2024 to support a Phase 3 pivotal pediatric study and potentially extend the label in this age group following initial regulatory approvals in adults and possibly in adolescents. In 2024, we will also start preparing the initiation of the two Phase 4 post-marketing studies required as part of our approval under the FDA’s accelerated approval pathway.
Overview of the chikungunya virus
Chikungunya is a mosquito-borne virus posing a serious public health problem in tropical and sub-tropical regions. Chikungunya virus often causes sudden large outbreaks with high attack rates, affecting one-third to three-quarters of the population in areas where the virus is circulating and can cause a significant economic impact. Between 2013 and 2023, more than 3.7 million cases were reported in the Americas. The true incidence of chikungunya is likely to be much higher due to the level of under-reporting, with available studies suggesting an under-reporting factor of five times due to difficulty in diagnosing the symptoms, which can be similar to those of dengue and Zika, and due to lack of access to good medical care in certain areas where outbreaks are prevalent. It is estimated that the global market for a chikungunya vaccine, including travel and endemic markets, will exceed $500 million annually by 2032.
Chikungunya infection is characterized by an acute onset of fever, rash, myalgia, and sometimes debilitating arthritic pain in multiple joints. Chikungunya causes symptomatic infection in 72-92% of infected humans around four to seven days after infection. Mortality of chikungunya is low (<1%) but the chronicity of its joint pain (arthralgia) and inflammatory symptoms represent a significant burden of disease with potential long-term debilitating impact. For example, following a significant outbreak in 2005, 94% of symptomatic travelers infected in La Reunion, an island in the Indian Ocean, complained of joint or bone pain six months after the epidemic peak, and this pain was constant in 41% of the cases. The effect of chronic symptoms on the quality of life was defined as totally disabling or important in almost half of the patients. Even at 32 months post-infection, 83% of people continued to report joint pain.
In addition to having significant impact on patients who become infected, chikungunya is highly transmissible, and prior outbreaks have led to significant spread of the virus. For example, in 2004, a chikungunya epidemic in Kenya triggered the spread of this virus to nearly all regions of the world with cases reported in Africa, Asia, Europe, the Americas, the Indian
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Ocean, the Pacific Ocean, and the Caribbean islands. Cases in Europe and the United States are typically tied to recent travel to endemic areas. However, one of the vector mosquitos, the tiger mosquito, is established in southern regions of Europe and the United States, and travel-related cases have generated local outbreaks as reported from Italy and France.
The below map shows countries and territories with current or previous transmission of chikungunya virus as of March 5, 2024 (it does not include countries or territories where only imported cases have been documented):
Countries with outbreaks or evidence of chikungunya virus transmission to humans during last 5 years.jpg
Source: CDC. Reference to specific commercial products, manufacturers, companies, or trademarks does not constitute its endorsement or recommendation by the U.S. Government, Department of Health and Human Services, or Centers for Disease Control and Prevention.
Without vaccination, we believe the spread of chikungunya will continue to increase rapidly, driven by a number of key factors:
The recent development that chikungunya can be spread by a second species of mosquitos, one that has a broader worldwide distribution, is tolerant to colder temperatures, and is highly abundant in large parts of the world;
The current lack of herd immunity in large portions of the human population;
The ease of chikungunya’s spread by travel, which can occur if an uninfected mosquito feeds on an infected person who has returned home from an endemic area; and
An increase in the geographic distribution and size of the population at risk due to climate change.
The current standard of care to treat individuals who have become infected with chikungunya is the application of non-steroidal anti-inflammatory drugs to relieve symptoms. To date, apart from our vaccine IXCHIQ which has recently been launched in the U.S., preventive measures in other territories rely on avoiding mosquito bites. Effective mosquito control has proven challenging, even in higher income countries.
In addition to IXCHIQ, there are two third-party advanced chikungunya vaccine candidates. The first is a virus-like particle vaccine candidate in development by Bavarian Nordic, which reported Phase 3 clinical trials in August 2023. The second is an inactivated vaccine candidate manufactured by Bharat Biotech of India, which initiated a seamless Phase 2/3 clinical trial in August 2021. We believe that both of these potential vaccine candidates may face limitations relative to IXCHIQ, including IXCHIQ being designed to only require a single administration, while Bharat’s and potentially Bavarian Nordic’s vaccine candidates are likely to require multiple shots to either reach or maintain high levels of effectiveness.
VLA1553 / IXCHIQ Approach
IXCHIQ is a live-attenuated chikungunya vaccine based on the East, Central, and Southern African, or ECSA, strain which has spread across the Indian Ocean. It is cross-reactive with other strains, meaning that it is designed to protect against those as well, including the strain of Asian lineage which is rapidly spreading across the Americas as observed in pre-clinical studies. Additionally, given that we have engineered IXCHIQ as a live-attenuated vaccine, we believe it may confer life-long immunity.
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IXCHIQ is engineered using a strain of chikungunya, where specific segments of the virus have been deleted, thereby weakening, or attenuating, the virus. This approach enables IXCHIQ to catalyze the patient’s immune system into generating the antibodies necessary to provide protection against the virus while the weakened strain does not cause the patient to develop significant symptoms. In our pre-clinical studies, growth of this strain on Vero cells resulted in a viral titer 35 times lower than observed with the original unattenuated strain, demonstrating the attenuation of our chikungunya strain. The deleted segment also remained absent following replication of the virus in the Vero cells, suggesting that the weakness of the virus is sustained.
Phase 1 Clinical Trial and Results
We conducted a single blind, randomized dose-escalation Phase 1 clinical trial of VLA1553 in 120 adults, at multiple centers in the United States, the results of which were published in the Lancet Infectious Diseases in 2020. In this trial we examined three doses of VLA1553: a low dose having a viral titer of 3.2 x 103, a medium dose of 3.2 x 104, and a high dose of 3.2 x 105. Participants in the low and medium dose cohorts and half of the patients in the high-dose cohort received a single dose of VLA1553 on Day 0 through intramuscular injection and a re-vaccination at 12 months. Half of the patients in the high-dose cohort received a re-vaccination at six months instead of 12 months. The primary endpoint of the trial was evaluation of safety measures including frequency and severity of injection site and systemic reactions.
Chikungunya virus neutralizing antibodies were observed in 100% of patients for 12 months at all three of the doses evaluated. A single vaccination was sufficient to induce sustaining high-titer neutralizing antibodies at 12 months post-vaccination.
Individuals that received a single high dose of VLA1553 did not exhibit an increase in antibody titers following subsequent re-vaccination at month six. Similarly, none of the dose levels that were re-vaccinated at month 12 exhibited an increase in antibody titers after re-vaccination. This result suggests that a single dose of VLA1553 could offer sufficient protection with no additional booster required.
The titer of these neutralizing antibodies was assessed by determining how far the antibodies in the plasma could be diluted and still reduce in vitro viral infection by 50%, a commonly used parameter referred to as the neutralization titer or NT50. Seroconversion was defined as having an NT50 of 20 or greater, meaning that dilution by 20-fold or greater still resulted in inhibiting the virus-induced cytopathic effects by at least half. We found that 100% of participants had seroconverted by day 14 at all three of the doses tested and this seroconversion persisted for one year across all dose groups. When re-evaluated with the assay that was used to define the seroresponse threshold for Phase 3, we confirmed that 100% of participants had seroresponded by day 14.
Plasma of the trial volunteers was screened for viremia, which peaked at day three in all groups and was lower in the low-dose and medium-dose groups. No viremia was detected in any participant after any re-vaccination, suggesting that a single dose provides sufficient protection.
The majority of adverse events across the dose groups were assessed as mild or moderate and were reported after the single vaccination. No adverse event of special interest, meaning adverse events resembling a chikungunya-like infection, and no vaccine-related serious adverse events were reported. Injection site reactogenicity was low, with less than 7% of individuals in the high-dose group reporting any local adverse event, all of which were mild in severity. Systemic adverse events were predominantly headache (32.5%), fever (26.7%) and fatigue (24.2%), followed by muscle pain (20.0%) and joint pain (13.3%), all of which were transient and are typical reactions after immunization and similar to those reported after vaccination with other vaccines in the general population. Severe fever (a temperature of 102.1°F or higher) was reported by seven participants. Adverse events decreased on re-vaccination at month six.
Phase 3 Clinical Trials
VLA1553-301 Clinical Trial
In September 2020, we initiated our pivotal Phase 3 clinical trial, VLA1553-301, in the United States. In this double-blind, multi-center, randomized Phase 3 clinical trial, 4,115 participants aged 18 years and above were randomized 3:1 into two groups to receive either VLA1553 0.5mL or placebo. Immunogenicity was determined with a µPRNT50 assay.
The primary endpoint was safety and immunogenicity 28 days after a single vaccination with VLA1553. The trial met its primary endpoint, inducing protective CHIKV neutralizing antibody titers in 98.9% of participants 28 days after receiving a single shot (263 of 266 subjects from the per-protocol subgroup tested for immunogenicity, 95% CI: 96.7-99.8). The seroconversion rate result of 98.9%, and specifically the lower bound of the 95%CI of 96,7%, exceeded the 70% threshold (for non-acceptance) agreed with the FDA. The excellent immunogenicity profile was maintained over time, with 96.3% of participants showing protective CHIKV neutralizing antibody titers six months after receiving a single vaccination (233 of 242 subjects from the per-protocol subgroup tested for immunogenicity, 95% CI: 93.1-98.3). VLA1553 was highly immunogenic, with a GMT of approximately 3,362, confirming the immunogenicity profile seen in the Phase 1 clinical trial.
VLA1553 was generally well tolerated across all age groups among the 3,082 subjects evaluated for safety. An independent Data Safety Monitoring Board, or DSMB, continuously monitored the study and identified no safety concerns. The final data safety profile is consistent with results from the Phase 1 clinical trial. The majority of solicited adverse events were mild or moderate and resolved within three days. 2.0% of study participants reported severe solicited adverse events, most commonly fever. Approximately 50% of trial participants experienced solicited systemic adverse events, most commonly headache, fatigue, and myalgia. The local tolerability profile showed that approximately 15% of participants experienced solicited local adverse events.
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Additionally, VLA1553 was highly immunogenic in elderly study participants (65 years of age or older), who achieved equally high seroconversion rates and neutralizing antibody titers over time as younger adults.
The final pivotal Phase 3 data were published in The Lancet in June 2023.
VLA1553-302 Clinical Trial
We also initiated a lot-to-lot consistency Phase 3 trial, VLA1553-302, in February 2021 to show manufacturing consistency of VLA1553, which is a requirement for licensure. We announced completion of recruitment for this trial in June 2021 and positive topline and final data from this trial in December 2021 and May 2022, respectively.
VLA1553-302 was a prospective, multicenter, randomized, pivotal Phase 3 clinical trial. Participants in the VLA1553-302 trial were randomized and followed for a total of six months. The objective of the trial was to show manufacturing consistency of the vaccine by demonstrating that three consecutively manufactured lots elicit equivalent immune responses measured by neutralizing antibody titers on Day 29 after vaccination. Lyophilized VLA1553 were administered as a single intramuscular immunization. Equivalence of immune responses were determined based on neutralizing antibody titers. The primary objective of the trial was to evaluate a pair-wise comparison of the 95% CI on the ratio of GMTs on Day 29 after vaccination in the three vaccine lots. The two-sided 95% CI on the GMT ratio should be within 0.67 and 1.5 in order to demonstrate consistency.
The VLA1553-302 trial met its primary endpoint, demonstrating that three consecutively manufactured vaccine lots elicited equivalent immune responses measured by neutralizing antibody titer GMT ratios on Day 29 after vaccination. The trial included 408 participants aged 18 to 45 and confirmed the excellent immunogenicity profile observed in the pivotal Phase 3 trial, VLA1553-301. All three lots were equally well tolerated and the safety profile was consistent with results in VLA1553-301. The trial therefore confirmed clinical equivalence as well as manufacturing consistency of the three lots.
The lot-to-lot data were part of our submission to the FDA which we completed in December 2022.
VLA1553-303 Clinical Trial
In April 2021, we initiated an antibody persistence trial that will follow annually up to 375 subjects in the immunogenicity subset of the VLA1553-301 trial for a period of five years. VLA1553-303 is a prospective, multicenter trial. The primary objective is to evaluate persistence of antibodies annually for five years after a single immunization. Subjects will have annual follow-up visits at Months 12, 24, 36, 48 and 60 after immunization. Secondary outcome measures include frequency and relatedness of any serious adverse events, immune response as measured by CHIKV-specific neutralizing antibody titers post-vaccination, proportion of subjects with seroconversion, fold increase of CHIKV-specific neutralizing antibody titers post-vaccination as compared to baseline, and proportion of subjects reaching at least 4-fold, 8-fold, 16-fold or 64-fold increase in CHIKV-specific neutralizing antibody titers post-vaccination as compared to baseline.
In December 2022 and 2023, we reported 12- and 24-month data, respectively, for this trial. 12 and 24 months after the single-dose vaccination, 99% and 97% of participants, respectively, retained neutralizing antibody titers above the seroresponse threshold of 150. The antibody persistence was similar in older adults aged ≥65 years, who retained neutralizing antibody titers comparable to younger adults throughout the follow-up. No safety concerns were identified for the duration of the follow-up study, confirming the safety profile observed in previous studies.
VLA1553-321 Clinical Trial
In January 2022, we announced the initiation of a Phase 3 trial of VLA1553 in 754 adolescents 12 to 17 years of age. Conducted in Brazil by Institution Butantan and funded by CEPI, the VLA1553-321 trial is intended to support the label extension in this age group following the initial regulatory approval in adults from the FDA. This trial is also expected to support licensure of the vaccine in Brazil, which would be the first potential approval for use in endemic populations.
VLA1553-321 is a prospective, double-blinded, multi-center, randomized, and placebo-controlled Phase 3 trial. In November 2023, we reported positive Phase 3 immunogenicity and safety data showing that a single-dose vaccination with VLA1553 induced a robust immune response in adolescents, thereby confirming the excellent immunogenicity previously observed in adults. VLA1553 induced levels of protective antibody titers in 98.8% of participants 28 days after a single vaccination significantly exceeding the FDA’s requirement for study success of the lower bound of the 95% CI for seroresponse rate >70%. Additionally, VLA1553 was generally well tolerated in adolescents, irrespective of previous CHIKV infection, and showed a similar safety profile as reported in adults. Participants will be followed up to 12 months.
VLA1553-221 Clinical Trial
In January 2024, we initiated a Phase 2 pediatric trial in children 1 to 11 years of age. The multicenter, prospective, randomized, observer-blinded Phase 2 clinical trial is planned to enroll approximately 300 healthy children at three trial sites in the Dominican Republic and Honduras. Following a safety run-in phase, participants will be randomized to receive either a full dose formulation of the vaccine (120 participants), a half dose formulation (120 participants), or a control vaccine (60 participants). Once available, the Phase 2 pediatric data are intended to support a Phase 3 pivotal study in children with the objective to extend the label in this age group following initial regulatory approvals in adults and possibly in adolescents.

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VLA15— Our vaccine candidate targeting Lyme disease
We are developing VLA15 as an investigational vaccine against Borrelia, the bacterium that causes Lyme disease. VLA15 is a recombinant protein vaccine candidate that targets six serotypes of Borrelia representing the most common serotypes found in North America and Europe. We have reported initial results of three Phase 2 clinical trials of VLA15 in over 900 healthy adults, and results have demonstrated the presence of high titers of antibodies against all six serotypes. In August 2022, together with Pfizer, we initiated a Phase 3 clinical study, “Vaccine Against Lyme for Outdoor Recreationists (VALOR)”, to investigate the efficacy, safety, and immunogenicity of VLA15 in participants five years of age and older in highly endemic regions in the United States and Europe. In February 2023, we announced that Pfizer, as the study sponsor, decided to discontinue approximately half of the total recruited participants in the trial following violations of GCP at certain clinical trial sites run by a third-party clinical trial site operator. The discontinuation of these participants was not due to any safety concerns with the investigational vaccine and was not prompted by a participant-reported adverse event. The clinical trial remains ongoing with other sites not operated by the third party and new sites in the U.S. and Canada. In December 2023, we and Pfizer announced that we completed recruitment for the study. 9,437 participants five years of age and older have been enrolled and will receive three doses of VLA15 or a saline placebo (1:1 ratio) within the first year, and one booster dose approximately one year after completion of the first three doses, as part of the primary immunization. The VALOR trial is expected to be concluded by the end of 2025, with the aim for Pfizer to submit a BLA to the FDA and a MAA to the EMA in 2026, subject to positive data.
We announced our collaboration with Pfizer for late phase development and commercialization of VLA15, if approved, in April 2020 and received a $130 million upfront payment on signing. In June 2022, the terms of this agreement were updated and Pfizer invested €90.5 ($95) million in Valneva as part of an Equity Subscription Agreement. As per the updated terms, Pfizer will fund 60% of the remaining shared development costs compared to 70% in the initial agreement. We will receive tiered royalties ranging from 14% to 22%, compared to royalties starting at 19% in the initial agreement, which will be complemented by up to $100 million in milestones payable to us based on cumulative sales. Other development and early commercialization milestones were unchanged, of which $143 million remain to date. We received a $25 million milestone payment from Pfizer following initiation of the Phase 3 study. See “Item 10.C—Material Contracts—Pfizer License Agreement” for more details.
Overview of Lyme disease
Lyme disease is a systemic infection caused by Borrelia bacteria transmitted to humans by infected Ixodes ticks. It is considered the most common vector-borne illness in the Northern Hemisphere. According to the U.S. Centers for Disease Control and Prevention, approximately 476,000 people in the United States are diagnosed with Lyme disease each year, and at least a further 200,000 cases occur in Europe. Research suggests that Lyme disease cases may rise 92% by 2100 in the United States due to climate change. Although most patients recover from Lyme disease, 10-20% have persistent symptoms, which for some are chronic and disabling. Studies indicate that Lyme disease costs up to approximately $1.3 billion each year in direct medical costs in the United States alone. The global market for a Lyme disease vaccine is estimated to reach $1 billion by 2030.
The transmission of Lyme disease infection is well understood and documented. Borrelia bacteria colonize in the salivary glands of ticks. When a tick attaches for feeding, it injects its saliva into the human or animal host, bringing along with it antihistamines, cytokine blockers, and anticoagulants and, in the case of an infected tick, Borrelia bacteria as well.
Early symptoms of Lyme disease can often be overlooked or misinterpreted as they are often associated with other, often less severe, illnesses. These symptoms include fever, chills, headache, fatigue, muscle and joint aches, as well as swollen lymph nodes. In 70-80% of cases, a gradually expanding rash called Erythema migrans forms. As this rash enlarges, it appears as a target or bulls-eye, three to thirty days after infection. Left untreated, the disease can disseminate beyond this initial area into the circulation, the joints, the heart, the brain, and the rest of the central nervous system. If not treated, once the infection has progressed it can cause serious complications, including arthritis with severe joint paint, heart palpitations or irregular heartbeat, and inflammation of the brain and spinal cord.
When diagnosed sufficiently early, Lyme disease can be successfully treated with a two-week to four-week course of oral antibiotics. However, given that the disease is often misdiagnosed in its early stages, patients often miss this therapeutic window. Additionally, chronic symptoms can commonly persist beyond antibiotic treatment, a set of conditions referred to as Post-Treatment Lyme Disease Syndrome, or PTLDS. There are no proven treatments for PTLDS, which often resolves over time but unfortunately may take many months. There is therefore a strong emphasis on prophylactic approaches to preventing the disease through behavior modification – avoiding areas where ticks are prevalent, wearing clothing which minimizes tick exposure, using insect repellants and physically removing ticks that have attached. However, even with education and behavior modification, Lyme disease remains a serious and prevalent disease in the regions where it is endemic.
VLA15 Approach
VLA15 provides a potential prophylactic solution to Lyme disease by generating antibodies that target the OspA protein on the surface of Borrelia, killing the bacteria before it can be transmitted from the infected tick to the human host. Third-party studies have shown that antibodies against OspA, which are immunoglobulin G, or IgG, antibodies, in the blood of an animal bitten by an infected tick are transmitted to the tick during feeding and kill the Borrelia in the tick’s gut before it can migrate to the tick’s salivary glands and be transmitted to the animal. VLA15 is a recombinant protein subunit vaccine that
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is designed to achieve this protective effect using a truncated form of the OspA protein to generate IgG antibodies against the OspA protein through a process summarized in the table below.  
Step 1Step 2Step 3Step 4
Vaccine, when injected, elicits high levels of anti-OspA antibodies
Tick attaches to vaccinated human and begins feeding on blood (24- to 48-hour attachment needed to transmit B. burgdorferi)
Anti-OspA antibodies from vaccine enter tick via consumed blood
Antibodies kill B. burgdorferi in midgut, preventing transmission
to human host
There are multiple serotypes or variants of Borrelia that lead to Lyme disease. The difference among the serotypes includes the fact that they have variant genetic sequences in the code for the OspA protein, meaning that each serotype requires a specific antigen targeting its OspA protein. In the United States, Lyme disease is predominantly associated with B. burgdorferi infection, or serotype 1 (ST1), while in Europe, there are multiple serotypes with B. afzelii, or serotype 2 (ST2), accounting for slightly more than half of infections. We have developed VLA15 as a single vaccine candidate that includes the OspA antigens from the six most frequently observed serotypes of Borrelia in North America and Europe.
To simplify production of the antigenic proteins, we linked the antigenic regions of two OspA proteins from different serotypes into a fusion construct. This allows us to produce the antigens against the six primary serotypes of Borrelia with just three protein constructs.
Phase 1 Clinical Trial and Results
We evaluated VLA15 in a partially randomized, multi-center dose escalation Phase 1 clinical trial conducted in Belgium and the United States in 179 healthy adults below 40 years of age. The first 24 subjects were included in an open-label trial in which they participated in a staggered dose escalation design. The remaining 155 subjects were enrolled in one of six blinded treatment groups, receiving VLA15 at a dose of either 12 µg, 48 µg, or 90 µg, with or without alum as an adjuvant, by intramuscular injection on Days 0, 28, and 56. The trial was designed to investigate the safety and tolerability as well as immunogenicity of VLA15. The primary endpoint was safety and tolerability of VLA15 up to three months after enrollment (Day 84).  
The final Phase 1 data supported the tolerability profile observed at all time-points, as reported in the interim analysis. The Phase 1 trial met its study endpoints in terms of safety and immunogenicity. The majority of adverse events were mild or moderate, and there were no vaccine-related serious adverse events, allergic reactions, or reactions potentially related to Lyme borreliosis observed. The most common local adverse events were injection site pain (67.0%) and tenderness (84.4%). Solicited systemic adverse events were reported by 58.1% (48 µg with alum group, 90 µg with alum group) to 76.7% (90 µg without alum group) of subjects. The most common solicited systemic adverse events were headache (44.7%), excessive fatigue (25.1%), and myalgia (25.1%). Adverse event rates following subsequent doses in the primary series declined compared to the first dose, indicating no enhanced reactogenicity risk with subsequent vaccinations.
In addition, the final Phase 1 immunogenicity results indicated that the alum-adjuvanted formulations elicited higher immune responses at all