A key investment theme since the onset of the pandemic has been companies working on the vaccine against COVID-19.
With several vaccines already available in the global market, this might seem like an “early movers take it all” scenario. Actually, this scenario is far from reality.
Several countries are still at an early stage of vaccination. Furthermore, with new variants, there is a strong case for the adoption of new, more effective vaccines. Recently, Anthony Fauci also opined that a COVID-19 booster shot will be needed within a year.
Among the companies that are still in the clinical stage of vaccine development, Valneva (UK:0OB3) looks like an attractive bet. As an overview, Valneva, a French company, is developing the first inactivated COVID-19 vaccine that’s entered clinical trials in the European Union.
The company initiated Phase One and Phase Two clinical trials in December 2020. In April 2021, Valneva reported positive results from the first two phases. Further Phase Three trials were initiated towards the end of April. (See Valneva stock chart on TipRanks)
Vaccine as Growth Trigger
There are two important points related to the vaccine acting as a growth trigger for the company.
First and foremost, the company has already signed a deal with the U.K. government. The deal is for the supply of 190 million doses of the vaccine by 2025, and is potentially worth 1.4 billion euros. Subject to regulatory approvals, the company plans delivery of vaccines in the second half of the year.
Furthermore, Valneva is already in bilateral discussions with other European countries to supply the vaccine. The company is also open to new partners as it looks beyond the European Union to supply vaccines. Therefore, in the coming quarters, it’s likely that new deals will act as revenue visibility growth triggers.
In May 2021, Valneva also announced that it will be participating in the world’s first COVID-19 vaccine booster trial in the U.K. Other countries will likely initiate booster trials, and therefore Valneva can potentially expand its vaccine order backlog.
Valneva has two more potential vaccines that are in the advanced stages of clinical trials. The company has the only Chikungunya vaccine candidate in Phase Three trials. Chikungunya is a viral disease transmitted to humans by infected mosquitoes. The potential single-shot vaccine has already received an accelerated approval pathway from the U.S. FDA.
Furthermore, Valneva has partnered with Pfizer (PFE) for a vaccine against Lyme disease. Initial results from Phase Two trials have been positive.
Strong Financials
Overall, over the next three to five years, Valneva is likely to see strong growth in revenue and cash flows. The stock is at a market capitalization of $1.4 billion, which looks attractive considering its growth pipeline.
From a financial perspective, Valneva reported cash and equivalents of 235.9 million euros as of Q1 2021. Additionally, the company has raised $107.6 million in gross proceeds from its recent NASDAQ listing.
Therefore, the company has ample financial flexibility to pursue clinical trials and potential manufacturing expansion.
Concluding Views
Valneva has a strong pipeline of news that can serve as a stock upside catalyst. In the foreseeable future, results from Phase Three trials and possible orders from other countries will serve as positive triggers.
Once delivery of the vaccines commence in the second half of the year, Valneva will be positioned to report strong top-line and EBITDA growth in FY2022.
The stock still seems to be flying under the radar. With some big news pending, it might be a good time to accumulate VALN shares.
Disclosure: On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
