Valneva - Q4 2023
March 20, 2024
Transcript
Operator (participant)
Good day, and thank you for standing by. Welcome to Valneva's full-year 2023 Results and Business Update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand over to the speaker today, Joshua Drumm, VP Global Investor Relations. Please go ahead.
Joshua Drumm (VP of Investor Relations)
Thank you. Hello, and thank you for joining us to discuss Valneva's full-year 2023 results and corporate update. It's my pleasure to welcome you today. In addition to our press release and analyst presentation, you can find our consolidated financial results for the 12 months ended December 31st, 2023, which were published earlier today, available within the financial report section on our investor website. I'm joined by Valneva's CEO, Thomas Lingelbach, and our CFO, Peter Bühler, who will provide an overview and update on our business as well as our key financial results for the year. There will be an analyst Q&A session at the conclusion of the prepared remarks.
Before we begin, I'd like to remind listeners that during this presentation, we'll be making forward-looking statements, which are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by these forward-looking statements. You can find additional information about these risks and uncertainties in our periodic filings with the Securities and Exchange Commission and with the French Market Authority, which are listed on our company website. Please note that today's presentation includes information provided as of today, March 20th, 2024, and Valneva undertakes no obligation to revise or update forward-looking statements except as required by applicable securities laws. With that, it's my pleasure to introduce Thomas to begin today's presentation.
Thomas Lingelbach (CEO)
Thank you so much, Josh, and welcome to today's earnings call. Yeah, the year 2023 was not a year without challenges, but also a year with many achievements we are proud of. We made excellent progress across our R&D pipeline, and of course, 2023 was our chikungunya year. We got FDA approval for the world's only and first chikungunya vaccine, and very recently, ACIP recommendation and respective adoptions. We enrolled the Phase III study with Pfizer on Lyme completely, and we are just about to re-enter Phase I with the second generation Zika vaccine. I'm going to go into more details on all of those programs. We have seen significant growth of our commercial business products. It surpassed pre-pandemic sales by 12% and 2022 sales by 26%. Both IXIARO and DUKORAL, our proprietary brands, grew more than 70% respectively versus 2022.
Overall, product sales grew 63% versus 2022, excluding the COVID-19 sales, and Peter will go into much more details. We are solidly funded with a strong midterm financial outlook. We had more than EUR 120 million cash at year-end. We augmented that with close to EUR 100 million net proceeds from our PRV sale early this year. Very recently, we extended the repayment of our interest-only period of the existing loan facility, which, of course, results in a significantly lower cash burn for the company. The operational business is therefore considered sufficiently funded, excluding debt repayment, of course, at a certain point in time until the line commercial revenues enable a sustained profitability for Valneva. When we look at the business in more detail, I would like to start this time with our strategy. Where do we see this company going?
As we have said already, more than 10 years ago when we created Valneva, our strategy is to become a globally recognized vaccine company, fully integrated, focused on the development, manufacturing, and commercialization of vaccines in areas of unmet medical needs, contributing to our vision to a world where no one dies or suffers from a vaccine-preventable disease. We see our strategy in three key pillars. Number 1, driving commercial growth. With the recent approval of IXCHIQ in the United States and our expected forthcoming approvals in other territories, we see really the opportunity to unlock IXCHIQ value by building awareness and markets and growing things. We hereby capitalize on the bundle effect within our existing travel business. We will further expand global reach, more addressing low-medium-income countries through partnerships.
With a change in the overall setting and the portfolio and more focus on proprietary products, we see really cash flow positivity from the commercial business 2025 onward. The second pillar is to capture our R&D upside. We will continue investing in new vaccines that address high unmet medical needs. We will leverage our proven R&D engine and strategic partnerships. We believe we are well positioned to do that, having developed three vaccines in the meantime from early discovery to licensure. We will continue focusing on vaccines that can make a difference, first only best. We will generate meaningful catalysts for our investors, targeting the next phase three entry post-Lyme. We will maximize our integrated business model.
We believe we are one of the very few companies left in the pure-play vaccine space that can really build on an integrated model, which means we will build continual value from R&D and commercial execution. We will support the timely approvals of our Lyme vaccine, which we continue to see as the single largest catalyst going forward. By doing so, we see the possibility to achieve sustained profitability with potential successful commercialization and revenues online from our partner, Pfizer. When we look at IXCHIQ, the world's first and only chikungunya vaccine, it's FDA-approved in adults. More additional regulatory approvals are expected this year. It's a live attenuated vaccine that offers strong and long-lasting protection from a single shot, and we target a minimum of five years here.
The FDA approval triggered also the PRV, which we sold, as I mentioned earlier, and the ACIP recommended the vaccine for certain travelers and laboratory workers. The U.S. launch is well underway, and we are selling through our existing and proven commercial infrastructure. Going forward, we see three key segments in terms of market opportunity. One, of course, travelers, military, but also an opportunity for stockpile, given that chikungunya is on the list of potential outbreak preparedness diseases. We will continue leveraging partnerships for Latin America and other LMICs. And with more visibility on the travel sector, the awareness around chikungunya, the market opportunity around chikungunya, we clearly see that the global market for chikungunya vaccines will exceed $500 million, with probably $300 million-$400 million represented alone by the segment I was talking about earlier.
In terms of upcoming milestones, I mentioned the additional anticipated approvals: EMA, Health Canada, and Anvisa in Brazil. We will, of course, also initiate the regulatory process in the U.K. Towards the latter part of this year, we will further go through the clinical development, mainly the Phase IV clinical program, but also other clinical activities, e.g., in the pediatric field. As we generate more and more data, we will undergo filings for potential label expansion. I mentioned already that our chikungunya vaccine has a very differentiated target profile. It shows a rapid and long-lasting immunity across all age groups tested. Here, I would like to specifically point out that the vaccine has very, very high seroprotection levels, including the most vulnerable population, namely elderly above 65 years of age, which has been specifically mentioned in the CDC-adopted ACIP recommendation.
We have close to 100% seroresponse rates after the single vaccination, and this has been maintained at a very high level over time. We got data already up to two years. We will generate data up to three years. On safety, the vaccine is generally well tolerated. Of course, it is a live-attenuated vaccine. Live-attenuated vaccines have the advantage that with a single shot, you have a very long protection, but it has a certain level of reactogenicity. But this is absolutely in line with other well-established live-attenuated vaccines in the market. We reported adolescent trial data, and this data suggests a favorable safety profile regardless of previous chikungunya infections. Turning to our Lyme disease vaccine candidate, VLA15. It is today the world's leading vaccine candidate against Lyme disease. It's the only program in advanced clinical development today.
By way of reminder, it is a multivalent recombinant protein-based vaccine that targets the 6 most prevalent serotypes of Lyme borreliosis in the northern hemisphere. It follows a proven, established, and validated mode of action. It got U.S. FDA Fast Track designation. As I mentioned at the beginning, the Phase III pivotal efficacy study is now fully enrolled. The program is partnered with Pfizer. They have an exclusive worldwide right to commercialize this product, and we anticipate the market opportunity to be north of $1 billion. We have already received, under the partnership with Pfizer, certain milestone payments, but overall, we are eligible for milestones up to $408 million. Upon successful commercialization, tiered royalties from 14%-22%.
When we look at the upcoming milestones, which are in the short term, all execution-related, of course, we will, and this is an important point when we talk later about the financials, complete our financial contributions to Pfizer in the first half this year. Then, on the execution side, we expect the complete full vaccination for the cohort 1 and the primary vaccination for the cohort 2, meaning the cohort 1 will have received 3 doses priming plus a dose booster. We will, later in the year, see the 2-year antibody persistence and booster result, which will give us a better indication as to whether this vaccine will require an annual booster later or not.
As guided many, many times, we expect efficacy results from the Phase III trial at the end of 2025, which and, if successful, will support regulatory filings, which we currently foresee in parallel in the United States and Europe in 2026. Slide 12 of the presentation shows one more time the Phase III efficacy study design. You remember that following initial operational issues, we split it in two cohorts, but within one study, roughly 50/50. We have now enrolled more than 9,000 participants. The study is randomized 1:1: vaccine against placebo, 2:1 North America versus EU. And the primary endpoint is the rate of confirmed Lyme disease cases after two consecutive tick seasons. And when I mentioned earlier, full vaccination to be expected for cohort one is imminent. And then, of course, for cohort two, the booster vaccination will come next year.
Turning to Zika, I mentioned at the beginning that we have decided to re-enter clinical development of Zika vaccine. We are leveraging what we call our optimized second-generation platform, which is a platform that originates from our Japanese encephalitis vaccine, IXIARO, got further then extended and optimized for our COVID vaccine, VLA2001. We believe that this second-generation activated/inactivated whole virus vaccine platform is perfectly suited for Zika. So Zika is, as many of you know, also transmitted by Aedes mosquitoes. We all have experienced and have seen the devastating effects that Zika infections can cause. Today, there are no vaccines or specific treatments available. It is a PRV-eligible disease, and there is potential funding from public institutions. We see there clearly opportunities given the emerging epidemiology around Zika.
In terms of next milestones, we will execute the Phase I clinical trial with the enhanced process and optimized vaccine formulation. Then we will decide on the further development strategy, considering the results, of course, more insights around the market opportunities and external non-dilutive funding. With this update on the business, I would like to hand over to Peter to provide us with the financial report.
Peter Bühler (CFO)
Thank you, Thomas. Good morning or good afternoon to all of you. Now, let's look at the financial review of our fiscal year 2023. Total product sales surpassed pre-pandemic levels by 12%, reaching EUR 144.6 million, towards the upper range of our sales guidance. This represents an increase of 26% versus prior year. 2023 product sales included EUR 5.7 million in sales of our COVID-19 vaccine, VLA2001, which was discontinued in 2022. We do not expect further COVID sales from 2024 onward. Product sales excluding VLA2001 reached EUR 138.9 million, an increase of 63%. This increase was driven primarily by substantial growth of our proprietary travel vaccines. Looking in more detail, IXIARO sales reached EUR 73.5 million, an increase of 78% versus prior year, primarily the result of the continued travel market recovery as well as price increases.
As at the end of September 2023, we signed a new one-year contract with the U.S. Department of Defense worth a minimum of EUR 32 million, of which a bit more than half is included in our 2023 sales. DUKORAL sales reached EUR 29.8 million compared to EUR 17.3 million in 2022, an increase of 72%. Similar to IXIARO, DUKORAL benefited from significant recovery in the private travel markets, particularly in Canada, where there is a strong overlap between travelers to regions of high ETEC prevalence and the vaccine's approved indication in this country. Third-party product sales increased by 34% to reach EUR 35.7 million for the fiscal year 2023, which was mainly driven by sales under our distribution agreement with Bavarian Nordic.
The very positive sales performance continues to be, as already mentioned, related to the recovery of global travel markets, several of which have reached our or even exceeded pre-COVID levels, and we expect this trend to continue. Moving on to slide 17, looking at the P&L. We already covered product sales. Other revenues, including revenues from collaborations, licensing, and services, have now returned to their historic levels at EUR 9.1 million compared to 2022, which, as you can see, included substantial one-off non-cash revenues related to COVID. Looking at expense, we observe a significant decrease in cost of goods, and this is, again, mainly the result of one-off effects related to the winddown of our COVID-19 program. Research and development expenses decreased sharply from EUR 104.9 million in 2022 to EUR 59.9 million in 2023, which was driven solely by the lower spend on Valneva's COVID-19 vaccine.
2023 expenses were just below our guidance range of EUR 60-EUR 7 million. At the same time, costs related to the Zika vaccine candidate increased as the company plans to reinitiate clinical development imminently. As we ramped up our preparations for IXCHIQ, our marketing and distribution expense increased from EUR 23.5 million in 2022 to EUR 48.8 million in 2023, of which EUR 20.7 million were associated with launch preparations versus only EUR 7.3 million in 2022. G&A expense increased from EUR 34.1 million in 2022 to EUR 47.8 million in 2023. In 2022, all expense lines benefited from a substantial non-cash adjustment related to the positive effect on the costs related to the company's share-based compensation due to the share price performance. Our G&A costs were also unfavorably impacted by a higher compliance cost related to our U.S. listing and one-off recruiting costs.
Other incomings increased to EUR 21.5 million in 2023 from EUR 12.2 million in the prior year, primarily due to grant income received from Scottish Enterprise and the gain from settlement with the supplier related to our COVID activities. In 2023, Valneva substantially reduced its operating losses to EUR 82.1 million compared to EUR 113.4 million in 2022, which again was negatively impacted by non-recurring expenses related to the wind-down of our COVID program. Adjusted EBITDA loss was nearly unchanged year-over-year at EUR 65.2 million versus EUR 69.2 million in 2022. Now, moving on to financial outlook at slide 19. With the addition of IXCHIQ to our travel vaccine portfolio and with the continued growth we anticipate from our existing products, we expect our commercial business to deliver substantial growth over the mid-term. Based on current assumptions, we are targeting an approximately 2x sales growth in the next three years.
This will be driven by our differentiated and highly competitive product, IXIARO, which is the only Japanese encephalitis vaccine approved in the U.S. and Europe and the mandatory vaccine for U.S. troops deployed to Asia, IXCHIQ, the first and only approved chikungunya vaccine, and DUKORAL, the only cholera vaccine with an additional approval for ETEC in key markets. Next slide, please. We have raised our 2024 product sales guidance since our February announcement, now estimated between EUR 160-180 million in product sales versus previously EUR 150 million-180 million. This revised estimate takes into account an improved outlook regarding anticipated IXIARO supply constraints and still assumes approximately 20%-30% reduction in third-party sales this year, driven by external supply constraints. This brings us to a total revenue estimate of EUR 170 million-190 million in 2024.
We now expect higher other income compared to our announcement in February, moving from EUR 95-105 million to EUR 100 million-110 million, largely reflecting the EUR 95 million in proceeds from the sale of the chikungunya PRV. We also lowered and narrowed our research and development expense guidance from between EUR 65 million-90 million to between EUR 60 million-75 million. This was based on additional visibility for our chikungunya and Zika-related expenses, as well as an expected non-dilutive contribution from institutions in connection with chikungunya activities and the product tech transfers to Valneva's new Almeida manufacturing facility in Scotland. As Thomas mentioned, we ended the year with EUR 126.1 million in cash, which was further augmented by EUR 95 million in proceeds from the PRV sale. This puts us in a very strong position as we expect to burn significantly less cash in 2024.
This is driven by a few factors, primarily the fact that we expect to complete our contribution to the ongoing Phase III study for VLA15 in the first half of this year. Secondly, with continued revenue growth for IXIARO and DUKORAL and improved efficiency in our manufacturing processes, we expect our commercial business, including IXCHIQ, to be cash positive this year and as it has been pre-pandemic. We anticipate significant further growth going forward. I'm now handing back to Thomas to complete the midyear outlook.
Thomas Lingelbach (CEO)
Thank you so much, Peter. Yeah, so it is important that we address also many, many questions that we have received in the market about the more midterm prospect of our business and where we see this business going, which is also why I started the presentation by reminding everyone of the Valneva strategy. When we looked at more concretely into a midterm outlook, Peter mentioned that the proprietary business excluding IXCHIQ will already be cash flow positive this year. Including IXCHIQ, we expect the commercial business to contribute cash and help financing our R&D from 2025 onwards. This is driven by continued travel sales growth for IXIARO and DUKORAL. We see, especially for IXIARO, a double-digit year-on-year CAGR for at least the next three years. We expect IXCHIQ sales to exceed EUR 100 million in year three of launch, and this even assumes a competitive product entry.
We will stay focused and strategic with regards to our investments in R&D. Our objective is clearly to provide our shareholders and everyone who can benefit from novel, innovative vaccines with a new program to enter Phase III once Lyme has completed its Phase III. We see substantial gross-margin improvement as we are focusing on proprietary sales. The majority of our third-party product sales, especially the collaboration with BN.
Operator (participant)
Please stand by. Your conference will resume shortly.
Thomas Lingelbach (CEO)
Will. Hello? Can you hear us?
Operator (participant)
We can hear you. Go ahead.
Thomas Lingelbach (CEO)
We expect gross-margin improvements significantly, as I said, as we are focusing on proprietary sales. We are improving substantially our manufacturing efficiency by leveraging our new facilities and predominantly the facility in Scotland, Almeida. As Peter mentioned, especially for chikungunya, but also for others, we expect sizable non-dilutive funding helping us to finance the R&D. When we look at the upcoming catalysts and news flows in the short term on chikungunya, we expect to initiate a Phase III in immunocompromised individuals still in the first half of this year. We talked at length about the upcoming potential approvals by EMA, Health Canada, and Anvisa. We will file for potential label extension as we generate more data. We have reminded we generated already data for the 12-18-year-olds in Brazil. We will initiate our Phase IV clinical program.
With regards to Lyme, as I mentioned earlier, on the Valneva side, we expect to complete the booster vaccination for cohort one in the second quarter, then the initial three-dose primary vaccination for the cohort two as well in the first part of this year. And then, as Peter mentioned, we complete our financial contributions to Phase III trial costs in the first half of this year. And then later this year, the Phase II-year antibody persistence and booster results data, which will help us getting a better understanding about the necessity for potential annual boosters for this vaccine once implemented. With regards to additional news flow, we do expect a new U.S. Department of Defense supply contract in the second half of this year. And we will give more clarity on our R&D pipelines as we go along in 2024.
With that, I would like to hand back to the operator to take your questions.
Operator (participant)
Thank you. As a reminder, if you would like to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. We will now take our first question. Please stand by. Please stand by. The first question comes from the line of Max Herrmann from Stifel. Please go ahead. Your line is now open.
Max Herrmann (Executive at Pharma and Biotech Consulting)
Great. Thanks very much for taking my questions. Congratulations on the milestones achieved during 2023 as well as, obviously, the IXCHIQ approval. Three questions, if I may. Firstly, just in terms of getting back to the normal travelers market, in terms of revenues, DUKORAL is pretty much back to where it was pre-COVID but still significantly below on IXIARO. I wondered how much further catch-up there is in volume terms for both products. That's question one. Secondly, it's just on in your kind of guidance overall, you talked about bringing another Phase III asset into development in the sort of midterm. Obviously, assume that's not the Zika program, particularly given Moderna's recent announcement that they were halting development of that without further external sources of funding post-Phase II.
Then just wanted to know, finally, just on IXCHIQ, when do you think you will have durability data of five years or more? Thank you.
Thomas Lingelbach (CEO)
Okay. Yeah. Hi, Max. Very good questions. So basically, you're absolutely right that we have not, in all markets, reached volume-wise pre-COVID levels. In some markets, we are back to pre-COVID volume levels. In other markets, not yet. However, we expect to be back or better in terms of volume this year compared to pre-COVID. And everything that we are seeing right now points in this direction. And this is specifically true for IXIARO and IXIARO U.S.. And I think that's a very important point. When it comes to Phase III, we have intentionally not specified at this point in time which program we will bring into Phase III. We are looking at a number of internal opportunities but also external opportunities, all just to avoid misunderstanding, within our R&D budget.
And this is why I said on the news flow, we will provide further clarity on the pipeline development in the latter part of this year. When it comes to the antibody persistence data, we have the antibody persistence study for chikungunya, is ongoing. We reported the two-year data last December, sorry. So obviously, this means that we're going to report the three-year data this December. And the trial will continue up to 5 years, which means every year in December, we will report one year more in terms of persistence data. I hope this answers your questions, Max.
Max Herrmann (Executive at Pharma and Biotech Consulting)
Great. Yeah. Thank you very much, Thomas.
Operator (participant)
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Maury Raycroft from Jefferies. Please go ahead. Your line is now open.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Hi. Congrats on the progress, and thanks for taking my questions. I was going to ask one on IXCHIQ for exceeding EUR 100 million for IXCHIQ by year three post-launch. Can you talk about the assumptions that goes into that? Can we assume that the EUR 100 million is part of the EUR 300 million-EUR 400 million market opportunity for travelers as well as military? And should we extrapolate growth trajectory based on these numbers?
Thomas Lingelbach (CEO)
No. Travel vaccines historically have shown an S-curve in the ramp-up, right? So this means you cannot just automatically extrapolate that because we expect the year three to be the first year of the period where it really goes steep up. And what we have assumed here is it indeed the, let's say, travel and military segment. We have excluded, for the time being, any potential stockpiling opportunity. We have excluded any potential and meaningful sales in LMICs. And we have used, in terms of modeling the IXCHIQ data, the experience that we have from IXIARO with regards to adoption rate in travelers and the most recent communicated price point for IXCHIQ in the United States, and on which basis we are also extrapolating the other price points and market opportunities in the travel segment. I hope this answers your question.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Yes, definitely helpful. Thomas, right at the beginning of your response, it broke out a little bit. It came back in when you mentioned S-curve for the military segment.
Thomas Lingelbach (CEO)
Sorry. Sorry.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Can you repeat?
Thomas Lingelbach (CEO)
Let me just do it one more time. So I just said that all travel vaccines show, from an uptake perspective, an S-curve historically. And this will certainly be also true for IXCHIQ. So we expect the year three, which is why we have guided year three as the first year where we see the program going into the steeper curve or the steeper part of the S-curve. And the EUR 100 million that we or the greater than EUR 100 million include travel and military.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Got it. Okay. Makes sense. And for that exceeding EUR 100 million, so that includes presumably a U.S. military contract in there. Is there anything more you can say about that and just the progress in those communications with the military and when that could be announced?
Thomas Lingelbach (CEO)
Yeah. So this is, of course, a good question. So we are following approval and following recommendation. We are now in active dialogue with the U.S. military but also with other public institutions and governments with regards to potential government contracts, which include potentially even stockpiles. So those discussions are ongoing. But please keep in mind that we got the ACIP recommendation very, very recently. And also for IXIARO, it took a certain period after the ACIP recommendation before we got into the first contract. And this is what we are currently assuming as well.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Got it. That's helpful. And maybe one more question, just following the ACIP recommendation. Maybe if you can talk about what your salesforce is emphasizing as it relates to the IXCHIQ data with payers and providers. And is it the strong data in subjects 65 and up? I guess just what are some of the key points that they're emphasizing? And then how are you addressing the onset of immunogenicity?
Thomas Lingelbach (CEO)
So basically, let's start from the very end of your series of different questions. So the product got approved by way of accelerated approval pathway, like many other vaccines did, by the way. So this means that the immunogenicity level or seroprotective thresholds are predictive and considered predictive for efficacy. And we are, of course, emphasizing our very strong data here that we are close to 100% and that this includes elderly, where we see also a major differentiation against potential other vaccines that may enter. And the second point is, of course, the unique setting that you have with a single shot, a very, very long protection, which, of course, means that this is an important feature when people think about chikungunya vaccination. The travelers that go there are very, very often travelers who go multiple times. And there's a lot of IATA data that supports that.
Therefore, we emphasize this. Of course, we focus specifically on the travelers 65 and above. We promote according to what we are allowed to promote, meaning the label of the product as approved.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Okay. That's helpful. Thanks for taking my questions. I'll hop back in the queue.
Operator (participant)
Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Evan Wang from Guggenheim Securities. Please go ahead. Your line is now open.
Evan Wang (Equity Research Analyst)
Hey, guys. Thanks for taking the question. Just had two. First, on the mid-term outlook and some of the updated chikungunya market opportunity assumptions, it seems like the total market is consistent with what you guys had said prior while the share of travelers has increased ex-travelers. So can you help us walk us through some of the updated assumptions here? Is that really driven by the ACIP recommendation, higher travelers rates, or initial reception of IXCHIQ price? And then conversely, in terms of the reduced stockpiling or endemic opportunity? And then secondly, as we're looking at the first year of launch, you know it'll be a ramp in the S-curve that you described. If you could help us understand any of, say, stockpiling or seasonality since we're still early on. Thanks.
Thomas Lingelbach (CEO)
Yeah. So a couple of different questions. So first of all, market opportunity, as I said, we have taken a couple of key data points into consideration. You have all seen the CDC map that defines the areas where chikungunya and chikungunya transmission represents a major risk. This is the basis. Then we use the IATA data with travelers going through this area, meaning the total population that we are targeting and focusing on. We are also using, of course, market data from the acceptance or expected acceptance for the vaccine. Preliminary data show that especially the longevity of immune response and the high levels of protection are especially appreciated by potential customers and prescribers. And then, of course, we take adoption rates. And those adoption rates are really educated also based on our own experience from the travel vaccine sector.
All that together has led us to further fine-tuning the opportunity for the vaccine in the travel segment, as I mentioned earlier. This is including, as I mentioned, the price point or the different price points in the different countries. Now, what is important is we have not included any potential stockpiling opportunity at this point in time because we don't think that it's prudent to do that in the absence of really knowing whether there is a commercial opportunity around the stockpiling business. We have not necessarily decreased the LMIC opportunity, but we have not yet a clear feel for the LMIC opportunity. And we will further develop that. That's why we have focused our guidance right now on the travel segment.
Operator (participant)
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Ed White from H.C. Wainwright. Please go ahead. Your line is now open.
Ed White (Managing Director and Senior Biotechnology Analyst)
Good morning. Thanks for taking my questions. First, I just wanted to ask you about the third-party sales and moving to a proprietary platform. You had stated that this is going to improve gross margins. Will there be any impact on your SG&A efforts?
Peter Bühler (CFO)
Yeah. Hey, yeah. This is Peter. So the third-party business was really a way for us to bridge revenues during the COVID years. We have not really added. I mean, we added a couple of people here and there, but really not significant numbers. So to focus on our proprietary products will not have a dramatic impact on our SG&A cost. It's really gross margin improvement that will be driven by that because our proprietary products have obviously much better gross margin.
Ed White (Managing Director and Senior Biotechnology Analyst)
Okay. Thanks, Peter. My other question was just regarding potential strategic transactions. You've mentioned it before. I'm just wondering, what is your strategy there? Maybe give us your thoughts on what makes for a good acquisition or what makes for a good target.
Thomas Lingelbach (CEO)
Yeah. So basically, we will target a next Phase III program, as I mentioned, at the time when the Pfizer Lyme Phase III trial will be completed. We have a couple of interesting internal programs we are currently working on that could be advanced and accelerated to match this timeline. We put it in direct competition to a couple of external opportunities that we are evaluating. When it comes to the criteria that we're going to use, we have, in the past, always focused our deep pipeline development on trying to build vaccines and develop vaccine solutions in areas of unmet medical need and where we can have a differentiated position, first best only. Basically, this is what we're going to do going forward.
As mentioned earlier, as part of the newsflow update, we hope to present a more detailed pipeline strategy in the latter part of this year.
Maury Raycroft (Equity Research Analyst and Biotechnology)
Okay. Great. Thank you for taking my questions.
Thomas Lingelbach (CEO)
You're more than welcome.
Operator (participant)
Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Nick Hulett from Goldman Sachs. Please go ahead. Your line is now open.
Nick Hulett (Analyst)
Oh, hi there. Thank you for taking my questions. Just coming back to the chikungunya program, if I could. On the Phase IV trial costs, how should we be thinking about phasing of these costs? And how significant are the non-diluted contributions you're expecting towards those costs? And then a second, if I may, on financing. If we assume that there's no impact from potential business development deals in the near term, should we assume that you won't be required to raise equity until at least post a potential launch in line? Thank you.
Thomas Lingelbach (CEO)
So let me start with the first part, and then I'll let Peter develop a little bit this cash outlook. So basically, when we look at the pipeline development, you are absolutely right. So we are not expecting pipeline or any potential pipeline injection to negatively influence our cash runway that we have projected before. When it comes to the Phase IV activities for Chikungunya, as part of our approval—and we have disclosed this earlier—those Phase IV programs go over a long period of time. We have roughly four to five years to complete the two Phase IV studies. We had included this in our company deck, and it's still included, I think, in the company deck with regards to the timeline. So there is not necessarily an equal spread when it comes to spending, but it's many, many years of Phase IV spending.
We have said earlier that we are expecting approximately 30% of our contributions to those costs. That's part of our planning going forward. Peter, on the cash runway discussions?
Peter Bühler (CFO)
Yeah. I think, as Thomas alluded to, so we said we were sufficiently financed for our operating business. I think debt repayment is a different story. For this, I'm sure we will find a solution. That's sufficiently financed for our operating business would include, as Thomas said, a potential injection. We could still cover that. Right now, we do not have any plans to raise further equity.
Nick Hulett (Analyst)
That's great. Thank you, both.
Operator (participant)
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Samir Devani from Rx Securities. Please go ahead. Your line is now open.
Samir Devani (Analyst)
Hi, guys. Thanks for taking my questions. I think I've got two or three. To kick off with IXIARO, you mentioned getting back to pre-COVID levels. I think pre-COVID, IXIARO had a margin of nearly 70%. And it seems quite a bit of a jump from the 52-odd that we've seen this year or 2023. So perhaps maybe a bit of commentary on how you expect the margin to evolve in line of that growth. And then just on IXCHIQ, again, on margins and I guess price as well, we can see it's being listed at $350. I'm just trying to work out what that would mean in terms of a net price to you guys. So if you can help on either of those, that'd be great. Thanks.
Thomas Lingelbach (CEO)
You want to take?
Peter Bühler (CFO)
Yeah. I can start with IXIARO. And hey, Samir, by the way. So yes, you're right. So pre-COVID, I think the margins we had published were in the 60s. And yeah, I think close to 70. And we do not see any reason why we would not get back towards this range again. And then I think on IXCHIQ, no, it's public. So the wholesaler acquisition price is $275. So that's basically what we get from the United States.
Nick Hulett (Analyst)
Okay. That's great. Thanks very much.
Operator (participant)
Thank you. We will now take our next question. Please stand by. The next question comes from the line of Suzanne van Voorthuizen from Van Lanschot Kempen. Please go ahead. Your line is now open.
Suzanne van Voorthuizen (Life Sciences Analyst)
Hi. Hello. This is Chiara on behalf of Suzanne. Thanks a lot for taking my question. I was wondering, what was the trigger to put out a midterm outlook? And if you could confirm whether the midterm outlook is also including or excluding any potential milestones from Pfizer. Thank you.
Thomas Lingelbach (CEO)
Yeah. So basically, we have received a lot of feedback with regards to how we see the commercial business going, especially for a new indication and a new product for which no benchmarks and no real data exist. And therefore, we thought it is prudent to provide further clarity, point number one, on, let's say, the future of the commercial business and how we see the ramp-up in the launch years. The second part is, of course, we have received many questions around cash and cash necessities, given that we have clearly articulated that we would put own pipeline development in direct competition to potential external pipeline injection. We wanted to make sure that people do not interpret this as external means financing need or an imminent financing need.
When it comes to the Lyme payments, the Lyme payments come at the point where we actually commercialize the vaccine or where Pfizer is going to commercialize the vaccine. They will be part of the influx that we expect the business to turn into sustained profitability.
Suzanne van Voorthuizen (Life Sciences Analyst)
Okay. Great. Thank you.
Thomas Lingelbach (CEO)
Welcome.
Operator (participant)
Thank you. As a reminder, if you would like to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. As there are no further questions, I would now like to hand back to the speakers for closing remarks.
Thomas Lingelbach (CEO)
Thank you so much for your time. Thank you for your support and the excellent questions today. Wish you a good remainder of the day. All the best.
Operator (participant)
This concludes today's conference call. Thank you for participating. You may now disconnect.