Valneva SE (OTC:INRLF) Q4 2015 Results Earnings Conference Call March 21, 2016 9:00 AM ET
Thomas Lingelbach - CEO
Franck Grimaud - Deputy CEO
Reinhard Kandera - CFO
Anastasia Karpova - Kempen & Co.
David Sherman - LifeSci Bank & Capital
Jean-Jacques Lefur - Natixis
Good day and welcome to the Final Q4 and Full Year Results 2015 Conference Call. Today’s conference is being recorded.
At this time, I would like to turn the conference over to Mr. Thomas Lingelbach, CEO of Valneva. Please go ahead.
Thanks a lot. Good day and very warm welcome to our today’s analysts call. Together with my management board colleagues, Franck Grimaud and Reinhard Kandera, we will guide you to our 2015 business review and full year 2015 financial results as well as giving you an operational and strategic outlook.
Let’s turn to page four of your presentation. Valneva’s business year 2015 marks the excellent operational performance and major strategic steps, focusing and growing our revenues and profitability. We successfully acquired and integrated DUKORAL and with that expanded our commercial vaccine portfolio over the Cholera and in some markets ETEC vaccine as a second product and added the foundation for a commercial organization with our decent marketing team in the Nordics.
The termination IXIARO-related marketing and distribution agreement with GSK led us to take direct control over IXIARO distribution. Opening two new commercial offices in Canada and the UK and expanding our U.S. team to focus on direct IXIARO distribution to U.S. military complemented this nicely. Country-specific marketing and distribution agreements have been entered to with leading local distributors and as such will help us to maximize the value of our commercial assets.
We have shown solid financial performance despite integration of the Swedish activities and IXIARO transition, which will be presented by Reinhard as part of the financial report.
Our vaccines R&D efforts are of strategic importance in order to generate long-term returns. The technology business segment further developed into positive cash generation, offering a basis for internal programs and partnerships. For example, we entered into 10 new license agreements on our EB66 vaccine production cell line in 2015, and partners continue to develop and license EB66 based programs, specifically viral vaccine programs, both in the human as well is in the veterinary infused.
Our late-stage clinical vaccine candidates have all progressed to next value inflection points. We saw positive Phase II results for our Clostridium difficile vaccine candidate, and we completed our 800-patient enrollment for the Phase II/III trial of the Company’s most advanced vaccine candidate Pseudomonas aeruginosa.
With the starting point in 2015, we have also defined our future journey to success and we have summarized it in what we call our 2020 Strategy. Our ambition is to become the leading independent pure-play vaccine company in the world and this is focused on four key strategic pillars.
On the product side, we want to grow our revenues from existing and future products to around €250 million in the mid-term. We would like to continue investing at least 20% of our revenues in R&D programs, delivering patient benefits and market capitalization. We would like to do this on solid financials and by achieving financial self-sustainability and positive cumulative cash-generation. And last but not least, this growth will be a growth generated from organic growth but also complemented by opportunistic M&A strategies, primarily focused on commercial stage assets.
With this, I would like to hand over to Reinhard Kandera to give us the financial report.
Thank you, Thomas. Ladies and gentlemen, welcome also from my side to our 2015 financial results presentation. Please turn to page six of our presentation, which shows the development of our key figures in 2015. The most remarkable change is certainly the almost doubling of our revenues compared to 2014 to more than €80 million. This chance was due to the acquisition of the Crucell Sweden business with the second approved Cholera vaccine. However, also when excluding the acquired revenues, our top-line showed double-digit growth in 2015.
Cost of goods and services were as well driven by the acquisition effect. As pointed out in earlier earnings calls, acquisition related cost of goods are somewhat inflated compared to actual historical manufacturing costs since the acquisition accounting rules require us to value acquired inventory at sales prices, which has driven cost of goods up.
Our R&D costs, mostly driven by the late-stage clinical trial check and were only moderately impacted by the acquisitions. Our EBITDA, which we consider the most important indicator for operational performance, has slightly deteriorated by about €1 million in 2015. We are pleased with these results since 2015 was a transformational period with the acquisition, with the transition of our two commercial products into a new commercialization testing and this transition has impacted our top-line especially for IXIARO as well as our bottom-line and it will start to pay off in 2016.
Our net loss has improved from €26.3 million to $20.6 million in 2015. Acquisition accounting and other non-operational items had an impact on the bottom-line and therefore, I’ll explain it in more detail later on. Cash position at year-end continued to be strong with more than €40 million, and we expect this to take us into cash flow breakeven.
To better understand our 2015 operating performance, I would like to draw your attention to the split of the three business segments on page nine. Two of our three business areas are now profitable, while we continue to make significant investments in the third segment of new vaccine candidates. Commercial product consisting of IXIARO, DUKORAL, and distributed third-party products generated €62.1 million in revenues and €8.5 in operating profit before amortization charges, which corresponds to 14% margin.
Technologies and services such as EB66, IC31 and research activities conducted for partners, generated revenues of €12.6 million and an operating profit of €4.6 million.
In the third segment, the new vaccine candidates, we spent almost €20 million in R&D expenses. We could fund €8.7 million through grants and revenues from partnership leading to an operating loss of €11.2 million. We consider this loss and investment into future value creation, fully in line with our strategy.
Overhead costs for all three segments amounted to €14.5 million. These costs represent approximately 15% of our entire operating expenses and we think are in line with industry standards. Overall, our operating loss before amortization was €12.6 million. Our financial goal of course continues to be able to fund our R&D and overhead by profits generated from the two profitable activities. And we think 2016 will take us a big step closer to this goal.
Page 10 shows our aggregate P&L for the fourth quarter and the full year 2015. Highlights in the last quarter of the year were the good sales performance of DUKORAL and the better than expected sales performance of IXIARO during the transition period. Let me remind you that we have started to take over IXIARO distribution from GSK in the first quarter of 2016 and as a result, our previous distributor sold down remaining inventory in this fourth quarter, so that’s a good sales development with end customers did not show in our own numbers.
On the expense side, the ramp up of commercial activity is already shown from the cost side. As a result, EBITDA of the fourth quarter was past the average of the last few quarters with a minus of €4.2 million.
Nevertheless, as already pointed out, full year results with an EBITDA of minus €8.5 million are fully in line with our plans and expectations and set a good basis for further improvement in 2016. Our net loss for the year 2015 was €20.6 million, which means there are significant nonoperational items above and beyond the EBITDA level that I would like to explain more closely. First, let me remind you that the Company booked significant amortization charges on intangible assets. These charges were €7.3 million in 2015 and they are non-cash charges that result from the history of the Company as a merger of two independent companies. Our finance expenses were significant with €6.7 million net in 2015 and will continue to be high in 2016. However, a 15 million acquisition loan has been repaid in early 2016 and will relieve us from some interest service going forward. The repayment has not impacted our cash balance since it came entirely from a purchase price adjustment received from the seller in the acquisition.
We also decided to impair our shareholding in BliNK. BliNK is the Company to we just spun out our antibody activities. The Company’s on a good path to build its long term biotech model but will be loss making for the next couple of years, which led us to take this step.
Finally, the significant positive effect resulted from the €25 million reduction of purchase price for the acquisition of Crucell Sweden and DUKORAL in December 2015. The label change in Canada and purchase price adjustment led us to retrospectively adjust the purchase price accounting and to recognize a gain in Q1 2015. This €13 million gain represents the amount by which the value of acquiring this asset exceeded the reduced purchase price.
On page 12, I want to summarize our outlook for the year 2016. As already announced, we expect to grow our revenues to €90 million to €100 million in 2016. [Indiscernible] are €70 million to €80 million from product sales on which we expect a gross margin of 50% coming from 32% in 2015. We intend to keep our R&D investments flat at around €25 million. And we expect to move very close to operational EBITDA breakeven with a negative EBITDA of below €5 million.
So, certainly an interesting financial year for the Company and I look forward to the upcoming quarterly updates. With this I would like to hand over to Franck Grimaud to elaborate on our commercial product strategy in more detail.
Thank you, Reinhard. Please let me go through the commercial activity of Valneva, So, if you go to slide 14 to the key highlight for the commercial activity is the fact that we have established ourselves in 2016 not only in the Nordics but as well in U.S., Canada and UK, which will lead in 2016 to the fact that we should manage 60% of our expected revenue coming from our own infrastructure. This will as well lead to a significant improvement of the sales margin and profitability for our IXIARO vaccine in 2016 and going forward. In country where -- key country like in for the U.S. drivers like Germany, we have decided to sign distributions agreements with key player in these two countries VaxServe, a fully owned subsidiary of Sanofi and GSK with improved distribution terms.
And we’ll continue on our EB66 cell line and IC31 to sign new and to development steps. And finally, we with our established infrastructure, we’re aiming at signing new distribution agreement to leverage our commercial infrastructure. So, now, if you want to go slide 15 on Japanese encephalitis, I will not go through the description of this product that you know quite well. Just to emphasize the key growth driver, we will continue to focus for our own infrastructure but as well with our partner to increasing, improving the awareness of the product, and we will emphasize on new recommendation such as rapid-immunization-schedule. And finally, in the short-term, we expect geographical expansion of our product including in particular in Taiwan.
If you go Slide 16, as you can see in 2015, we have recognized 8.8% growth as compared to 2014 which has been led by a strong growth in both private and the public segments. Due to the improvement of revenue recognition, we expect revenue from IXIARO to be above $50 million in 2016 and then we expect a minimum of 10% growth in Valneva revenue through the five coming years to 2020.
In 2016, the revenue split is explained in the middle of chart, 41% military, U.S. private 21%, and Europe 32% with the remaining countries 5.4%, again with 60% of our sales generated with our own team in for the U.S. military, Canada, UK and the Nordics.
This improvement in revenue reorganization as one of the results is very significant. Gross margin improvement, we’re expecting 55% in 2016, leading to an objective of 70% gross margin in the year to come. And one the key reasons, key driver is fixed cost, 80% of IXIARO’s fixed. And so any dose, additional dose we’re filling are mainly going to the bottom line.
If you go to the DUKORAL, on 2016, so it’s diarrhea; so, this vaccine in at prevention of diarrhea against Cholera and ETEC in some countries. So, the main driver here is -- so new commercialization strategy -- it’s our second product, so we’re very much focusing on DUKORAL, as well we’ll spend a bit of time on KOL management. We are exploring further product life cycle management and as well we’ll focus on maximizing the potential of the new label in Canada.
If you go to slide 18, so 2015, our revenue was €21 million. Just to remember, we acquired this product February 10. The pro forma number for 2015 was €26.3 million, growing by around 3% in 2015 as compared to 2014. Due to the label change in Canada, we expect a pro forma decrease to €23 million in 2015, so that means roughly minus 15 to minus 20 in Canada. So, however, from this €23 million number, we expect the product to grow again by 3% to 4% year-over-year with an objective of €26 million in 2020. The split in 2016 is expected to be, again 50% in Canada a bit less than 20% in the Nordics, 16% in Australia/New Zealand and 14.1% on the rest of the world. Again, we expect the gross margin to be very much improved this year at 50% due to non-recurring accounting as explained by Reinhard.
Finally, if we go to EB66 on slide 19. So, the main driver last year was our agreement in China. And we expect this agreement in China to result in few new research and commercial license agreements in China. We will continue to sign between 6 to 10 new research and commercial agreements in total in 2016. We expect as well the first royalties to come from EB66 influenza vaccine in Japan. And finally, we have announced a new agreement, new collaboration, which is to continue developing and continue to develop the process on EB66 for influenza; and this agreement is sponsored by the U.S. Department of Health Human Services.
So, based on that, I hand over to Thomas.
Thanks a lot Franck. Yes, let me guide you through our R&D update. I’m very excited and pleased to present to you today that since the creation of Valneva, we have restarted an innovative vaccine research. So, we are not only investing in our development stage programs, but we are also trying to build a coherent pipeline, starting from a new innovative research. And what you can see on this slide is an overview on the areas we are active in.
Of course, you are all well aware of our Pseudomonas aeruginosa, most advanced clinical stage program, and I will come to that in a second, same is true difficile [ph] where we are just completed Phase II and have a program there and then asset there that is Phase III ready. And our Lyme program, which has just passed all hurdles through the preclinical and R&D process and will enter Phase I towards the later part of this year.
We have decided amongst a whole bunch of interesting research candidates to focus on two indications, which have technologically, biologically, medically and also in terms of transmission of the disease, similarities to our Japanese encephalitis vaccine, namely Chikungunya and modern yellow vaccine. Both programs have just been advanced into what we call, preclinical research or preclinical development, and they will in target a potential Phase I entry in 2017, at least one of the two. You saw in a prior announcement that we are active in the field of Zika and we are trying to explore paced approach, applying the well-established process and manufacturing technology that we developed from bench-to-market for our IXIARO also to Zika, which could bring us into the front race against the devastating disease. And we are working on a very novel and innovative segment, namely the human Metapneumovirus.
The research candidates that we are working on today aim to be developed internally; to which point, we have to see. But basically, our two lead candidates would very nicely complement our commercial travel vaccine portfolio and hence, we see a good profitability to develop those, all the way to licensure.
Let’s talk about Pseudomonas. Our Pseudomonas aeruginosa vaccine is clearly the most advanced and probably the most exciting target that we have within the Company. We are waiting the full analysis of the ongoing efficacy trial including our day 180 follow-up time-point, before releasing the data in the second quarter or towards the end of the second quarter. Just as a reminder, our primary endpoint of this trial is a reduction in all-cause mortality on day 28, which is the most meaningful readout point in IP use where we are conducting this trial in ventilated patients. This program is co-developed with GSK. GSK contributes 50% to the development cost. And GSK has an opt-in right at the completion of the trial and the availability of data. And of course, subject to the data, this would be the next, we expect this step.
So, let’s picture ourselves a little bit the potential routes towards future development and hopefully one day, marketing approval. And there are three options for the trial readout towards the later part this year. Of course, if the phase -- the current Phase II/III primary end points will be met, so which means the reduction of all-cause mortality on day 28, this trial will be in support of later product licensure. If the study does not meet its primary endpoint, but confirms its clinically meaningful effects, a second confirmatory pivotal Phase III efficacy study will be required to reach the market.
Of course, since we complemented our trial protocol with different efficacy readouts in subgroups of patients with certain co-morbidities, we could also envisage in our confirmatory Phase III trial in certain subgroups with certain co-morbidities. But again, it’s hard to predict what this will be because it will heavily depend on the data that we’re going to read out in summer. And we are all looking forward to this potential in our exciting next development step. We believe that there is not one success or one failure. We believe that success in this program can mean a lot, and there are multiple successful routes for this program going forward.
Talking about C. diff, just by way of reminder, this vaccine is targeting healthcare-associated diarrhea which is an increasing threat to elderly and is a vaccine targeting primary prevention of the clostridium difficile infection.
We have successfully met our Phase II clinical trial endpoints and we are currently in the so called, follow-up period. And hence, we expect those follow-up data later in the summer. And obviously those data will be discussed with regulators and potential partners, since we are aiming for licensing agreement in 2016. So, as we alluded to many times in the past, it is not Valneva’s current intent to develop this program towards licensure. However, we would like to partner this program with someone who has the muscles to develop it quickly into the market, given the fact that our program is clearly the second most advanced vaccine candidate program in the industry. On this program, GSK have also certain opt-in rights. And GSK may or may not decide to take this program forward. However, we have also discussions with other potential partners. And so, we are confident that we will be able to reach a licensing agreement and the future destiny of this product for the later part of this year. And this is I think a very, very important step for an asset that is pretty unique and there are not many Phase III ready vaccine assets out there in the market.
Lyme borreliosis is clearly a very emerging threat in Europe and in the United States. And we have the only access clinical program. There is no vaccine on the market today and there are multiple issues [ph] and multiple serogroups [ph] of borrelia circulating. And hence we developed a multivalent protein subunit based vaccine targeting the outer surface protein A for borrelia. The priority we give right now for the European markets where high awareness on tick-transmitted diseases exist, however we are conducting and we aim to conduct the drive in parallel in Europe and the United States for our Phase I activities to commence later this year.
With that short update, I would like to come to the outlook for Valneva. And it is important that since the creation of Valneva in 2013, we have focused on shaping the Company according to our strategic vision by inventing a new commercial product as shown by Franck, divesting non-core activities, bringing clinical candidates to new inflection points and launching our own commercial network, in order to build a business that would generate strong revenues and be financially sustainable. We are proud to say that we feel very, very close to achieving that goal in 2016 while still investing around €25 million in R&D.
This year will be marked by our key material anticipated news flow, as shown on page 28. On page 28; this is a summary and let’s start with the commercial products. As already alluded to, by Franck and Reinhard, we expect product sales in the range of €70 million to €80 million and hence a 30% growth over 2015. Of course we anticipate to successfully implement our own global marketing and distribution network, marked by the growth expectation forth both, IXIARO as well DUKORAL.
Franck mentioned already that we anticipate to sign new licensing agreements, which will be served as of revenue going forward and we’re still anticipating some product revenues coming from the Japanese stockpiling for EB66 in the field of pandemic influenza. And just to recap on that one, Pseudomonas aeruginosa Phase II/III results expected in the second quarter this year; the Phase III partnering agreement for our clostridium difficile vaccine candidate latest by year-end; and the Lyme borreliosis Phase I clinical trial entry also towards the later part of this year.
With that and all the summary that we have been giving you, we feel nicely positioned to develop Valneva, according to our 2020 Strategy but the clear objective to become the leading pure-play independent vaccine company in the world.
Thank you so much for your attention. And I think with that, I would like to hand over to the operator to manage us through the Q&A section.
Thank you. [Operator Instructions] We will take our first question from Anastasia Karpova from Kempen & Co. Please go ahead. Your line is open.
Two questions if I may. Can you please comment on visibility you have regarding M&A pipeline for revenue generating assets, and would you expect to make acquisitions already this year? And secondly, regarding potential scenarios for Pseudomonas vaccine, do you have the flexibility to extend the ongoing trial engaging the same centers and the same prime investigators to expand the trial into pivotal Phase III, if the clinical significance benefit was not demonstrated? Thank you.
Okay, so very good question. So, let me start with the first one, M&A pipeline. Well, unfortunately, there is not a concrete target out there that we’re currently focusing on. But, we believe that at Valneva, we will take an M&A strategy in a very opportunistic way. So, which means that we have proven this already with the acquisition of DUKORAL and we will do exactly the same. We will be in close dialogue with potential parties that have smaller vaccine assets that maybe not any longer of strategy importance for those companies but could be very nicely complementary to our setup. And of course, we’re looking into specific divesture process, if there were some coming up this year.
So, to answer very concretely, do we have an M&A target already ahead of us this year, of course we cannot say no because there might always be opportunities coming up, but there is nothing concrete at this moment in time that could give you and us the confidence that there will be an M&A step this year already. At the same time, we are not in a hurry, we’re not under pressure. For us, this is a clear target towards delivering our 2020 Strategy but even without this M&A step, we are, as you can see in our 2016 outlook, very well positioned to develop the Company for the next step forward.
On Pseudomonas, the answer is relatively clear. The current trial is what the current trial is. So, this means this trial will be closed out. There is no way to extend the current trial. The trial has not adaptive design. However, to your question of if the infrastructure is still alive infrastructure, meaning the infrastructure managed by the respective CROs with vendors, with investigators and so on and so forth. Yes, of course, it is. But it would require a new phased restart, in case; the primary endpoint is not matched. To be clear on the -- you mentioned the clinical meaningful effects not met. We have positioned it slightly different. We have differentiated in between two scenarios, one scenario is the primary endpoint of the trial is not met, but there is a clinically meaningful effect seen. This would immediately justify and allow us to statistically power a Phase III trial properly. And then the other scenario that we positioned was that the clinical trial endpoint was met and then this trial would be directly a drive into core of product licensure. I hope this answers your questions.
Yes. Thank you for answering my questions, and if I may follow-up. Can you elaborate a little bit more what would you consider a clinically meaningful benefit, if the endpoint is not met?
The endpoint is of course in a trial has a defined number of patients that as a certain conditional power. [Ph] And we have already seen in the interim analysis that we were under power. So, in the interim analysis, we saw a clinically meaningful effect, a vaccine effect. We cannot determine what this clinically meaningful effect was in terms of percentage improvement for example, since we have been blinded and this number is only known to a group of independent data monitory committee members. However, there is a definition of clinically meaningful difference in affecting similar to ours. And this is a definition that is applied by regulators and that got confirmed to us by regulators, as part of certain scientific advice procedures. And this is above 5% point delta. So which means that -- and this is always linked to certain placebo mortality, of course. But this is a number that we would consider a clinically meaningful effect. So for example, if there was 30% placebo mortality and we reached 25% mortality in the vaccine group, this would be considered clinically meaningful. Also with this 5%, we would most likely, and again this depends on the numbers, the outside of the statistical power.
We will now take our next question from David Sherman from LifeSci Bank & Capital. Please go ahead, your line is open.
Hi guys. I was wondering if I could ask about the partnership discussions for the C. difficile vaccine. I was wondering if GSK -- if you’ve had any discussions with GSK since the data came out and whether you think it’s likely that they’re going to opt-in for the program. And I was just wondering if you could give us an update on how partnership discussions are going in general with other potential partners? Thanks.
So first of all, of course, we had discussions with our partners, with our specific partner here GSK. And of course GSK were equally excited about the Phase II data than we have been, because I mean, it is always exciting to see a successful Phase II trial in the vaccine environment. Now, GSK and Novartis have just gone through an asset swap, they have just gone and they are going to merging two vaccine businesses. And this merger result also in certain R&D portfolio consolidation and it’s required some R&D portfolio management and prioritization. And at this point in time, we cannot predict, and we have not received any guidance as to whether or not C. diff will be amongst those programs chosen in the basket of potential Phase III assets, where clearly the combined GSK and Novartis business will have a lot of opportunities.
On the other -- and this is also the reason, why of course we cannot build our entire licensing strategy on just GSK potentially opting in for this program. And hence, we have developed in agreement and in very close collaboration, a process, allowing us to entertain discussions with other interested parties. And those have just started. I think they will kind of gear up, once the final study report or final study output will be available. And this will take unfortunately a few more months, since we have to formally wait until observation period of the Phase II subjects will be completed. And this will be around the July, maybe even August, September timeframe.
Okay, thanks. And then just as far as the EB66 platform, I was just wondering, what’s the Company’s strategy for pursuing additional licensing deals going forward.
So, as explained, we will continue to sign deals in Europe and U.S. with either existing partner in new indication or new partner here or international [ph] but we have as well kicked off this new territory strategy with China last year and we expect commercial license, research license to be signed in China. We are now as well looking in India, looking in Brazil because we believe that there is some potential partner. So, that’s how we will develop the strategy. And as explained as well, we expect our first royalties from Japan stockpiling agreement.
We will now take our next question form Jean-Jacques Lefur from Natixis, please go ahead, your line is open.
Good afternoon. Quick question, going back on your guidance or your expectation for 2020 of revenues of €250 million; I’m trying if my math are good IXIARO plus DUKORAL will have sales of about €100 million, taking into account your guidance of sales growth for the both products. So that means there are about €150 million missing or suppose just the other businesses. So, I’m not sure from where we’ve come this additional €150 million, as I am not convinced in the vaccine revenue from collaboration will be this €150 million. So, if you could elaborate a little bit more on that, or if I’m missing something?
No, I think just to recap what Franck said, right? I mean Franck said that on IXIARO, we expect a greater than 10% year-on-year growth; second, we expect on DUKORAL minimum of 5% year-on-year growth. So, if you do this calculation, you see that there will be a minimum of proprietary product sales in between €110 million and €115 million and where is then the delta coming from. So basically, you would need to say revenue from that level would need to double. And our current strategy includes basically three elements to this. One is that we would continue to work on let’s say third-party sales because the infrastructure that we have could be nicely leveraged to sell also third-party activities. And we expect this to be a substantial number, so substantial I mean something meaningful. Meaningful would be for our sales and marketing infrastructure, maybe another €20 million but clearly in between 10 and 20. We have already today around €20 million revenues coming from collaboration and licensing. So, you need to add those as well, if we just assume that they would be kept at the same level as they are today. And then essentially, we will be already very close to let’s say €160 million, €170 million. And the rest, we expect to come exactly as mentioned by way of M&A. So, we expect to complement our current portfolio by 1 to 2 commercial stage assets. And this is our objective, and it’s a clear strategy. We would like to do this complementation and the acquisition of additional commercial assets by way of M&A, and by doing so to basically drive it in the least dilutive way for the Company. So, this is our current strategy around it.
Okay. And I have a second question on the cost of sales, cost of goods at the group level, €47 million this year. So, what could we expect for next year, something which with a higher increase of that or quite a gentle say increase of this cost of goods for the other group level?
The answer is that a very gentle increase, so certainly no significant increase. You know that both of our products are manufactured in single purpose manufacturing units that we own and that operate on a largely fixed cost base. So, increase in volumes, increase in revenues can be managed without significantly increasing the cost base. I also mentioned that especially with DUKORAL in a transition phase following the acquisition in 2015, acquisition accounting also somewhat inflated; the cost of goods shown in our P&L as opposed to the actual manufacturing cost. So, you can certainly expect very moderate increase to get to this higher sales numbers.
[Operator Instructions] There are no further questions in the queue at this time. I would like to now hand the call back to our host for any additional remarks.
Thanks a lot for your excellent questions. Thanks a lot for your continuous focus and for your support to the management, to the entire Company, to its shareholders in building Valneva according to our strategic vision, and to accompany us on our journey to success. With that, we would like to wish you a wonderful day, and talk to you soon. Thank you. Bye, bye.
That will conclude today’s conference call. Thank you for your participations, ladies and gentlemen. You may now disconnect.
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