VALNEVA · the “Group”, “Valneva Group”, or “Valneva”) for the year ended December 31,...

VALNEVA SE 1

ANNUAL MANAGEMENT REPORT 2018

VALNEVA

A European Company (Societas Europaea) with a Management and a Supervisory Board Share capital: €13,816,042.74

Registered offices: 6 rue Alain Bombard, 44800 Saint-Herblain (France) Nantes Companies Register (R.C.S.) No. 422 497 560

ANNUAL MANAGEMENT REPORT TO THE ORDINARY ANNUAL GENERAL MEETING OF JUNE 27, 2019

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018 _________________________________________________

To the Shareholders,

We have called you to this annual Ordinary General Meeting in accordance with the provisions of the law and the Company's Articles of Association to report to you on the activity of our Company Valneva SE (hereafter “the Company”) and its subsidiaries (hereafter referred to jointly as the “Group”, “Valneva Group”, or “Valneva”) for the year ended December 31, 2018, the results of its operations and outlook, and submit for your approval the separate and consolidated financial statements for said period.

The separate and consolidated financial statements for the fiscal year 2018, as well as this Annual Management Report, were submitted to the Supervisory Board for review; you will be presented with the related Supervisory Board’s Report.

All documents and items provided for by applicable regulations have been made available to you in accordance with the required deadlines.

The Auditors will provide you in their reports with all information concerning the fair presentation of the separate and consolidated financial statements.

For our part, we remain at your disposal to provide you with any further details and additional information you may need.

The different information required under French regulation is hereby provided below.

THE MANAGEMENT BOARD

Thomas Lingelbach Chairman of the Management Board

Franck Grimaud Deputy CEO

VALNEVA SE - ANNUAL MANAGEMENT REPORT 2


CONTENTS

1. PRESENTATION OF THE VALNEVA GROUP ................................................... 4 1.1. About Valneva ................................................................................................................................ 4 1.2. Presentation of the subsidiaries and shareholdings ................................................................. 5

2. ANNUAL OPERATING HIGHLIGHTS ................................................................. 9 Completion of a €50.0 million oversubscribed placement led by blue-chip US

healthcare investors and supported by the Company’s existing shareholders ..................... 9 Publication of positive Phase 1 interim results for the Group’s Lyme disease vaccine

candidate and initiation of Phase 2 clinical development ....................................................... 10 Initiation of a Phase 1 clinical study to evaluate the Group’s single-shot vaccine

candidate against chikungunya, the reporting of progress in the program and the granting of an FDA fast track designation ................................................................................ 11

Initiation of a Phase 1 Clinical Study to evaluate Emergent BioSolutions and Valneva’s vaccine candidate against the Zika virus and the publication of Phase 1 interim data ................................................................................................................................... 11

FDA approval of an accelerated vaccination schedule for the Group’s Japanese encephalitis vaccine IXIARO® ..................................................................................................... 11

Signing of a collaboration and manufacturing agreement with Hookipa .............................. 12 Extension of drawdown period for the European Investment Bank Loan ............................. 12 Transfer of Valneva Liquidity Providing Contract from Natixis to Oddo BHF ....................... 12

3. MATERIAL EVENTS FOLLOWING THE CLOSING DATE FOR THE FISCAL YEAR 2018 .......................................................................................... 12

Signing of new €59.0 million IXIARO® supply contract with the US Government ................ 13 Reporting of Positive Phase 1 interim results for the Company’s chikungunya

vaccine candidate ........................................................................................................................ 13 Intention to delist from the Vienna Stock Exchange ................................................................ 13 Reporting of positive initial booster data and final Phase 1 data for the Company’s

Lyme disease vaccine candidate ............................................................................................... 14

4. BUSINESS TRENDS AND OUTLOOK OF THE GROUP .................................. 14 Trends ........................................................................................................................................... 14 Goals 2019 .................................................................................................................................... 14 Strategy of the Group .................................................................................................................. 15

5. BUSINESS DEVELOPMENT, RESULTS AND FINANCIAL POSITION OF THE COMPANY AND GROUP .......................................................................... 16

Valneva Group (IFRS) .................................................................................................................. 16 Valneva SE (French GAAP accounts) ........................................................................................ 17 Results (and other key aggregates) of the Company for the last five years ......................... 20

6. PROPOSED APPROPRIATION OF EARNINGS .............................................. 21



7. DISALLOWED TAX DEDUCTIONS .................................................................. 21

8. SUPPLIERS AND CUSTOMERS’ PAYMENT TERMS ..................................... 21

9. STATUTORY DISCLOSURE OF PRIOR DIVIDEND DISTRIBUTIONS ............ 22

10. MAIN RISKS AND UNCERTAINTIES INCURRED BY THE COMPANY AND GROUP ..................................................................................................... 22 Specific risks relating to the Group's business ....................................................................... 23 Other risks relating to the Group's business ............................................................................ 27

11. INTERNAL CONTROL PROCEDURES RELATING TO OPERATING AND FUNCTIONAL PROCESSES ............................................................................. 35 Purpose of internal control procedures and inherent limitations .......................................... 35 General organization and implementation of internal control procedures ........................... 35 Internal control procedures ........................................................................................................ 37 Internal control procedures relating to the preparation of accounting and financial information ................................................................................................................................... 38

12. SHARE CAPITAL DISTRIBUTION .................................................................... 41

13. SHARE BUYBACKS ......................................................................................... 42 ................ 42

.................................................................................................... 42 .................................. 43

14. ADJUSTMENTS INVOLVING CAPITAL SECURITIES OR SECURITIES GIVING ACCESS TO THE COMPANY'S SHARE CAPITAL ............................ 44

15. EMPLOYEE STOCK OWNERSHIP ................................................................... 44 Percentage of the Company's capital represented by employee-owned shares .................. 44 Options to subscribe for or purchase shares and free shares grants ................................... 44

15.2.1 Stock option plans of the Company ........................................................................................... 44 15.2.2 Free convertible preferred share plans of the Company ........................................................... 44

16. CORPORATE OFFICERS’ DEALINGS ON THE COMPANY’S SECURITIES ...................................................................................................... 45

17. CORPORATE SOCIAL RESPONSIBILITY ....................................................... 46



1. PRESENTATION OF THE VALNEVA GROUP

1.1. About Valneva Valneva is a biotech company developing, manufacturing and commercializing vaccines for infectious diseases with major unmet needs.

Valneva’s portfolio includes two commercial vaccines for travelers: IXIARO®/JESPECT® indicated for the prevention of Japanese encephalitis and DUKORAL® indicated for the prevention of cholera and, in some countries, prevention of diarrhea caused by Enterotoxigenic escherichia coli. The Group has various vaccines in development including a unique vaccine against Lyme disease. Valneva has operations in Austria, Sweden, the United Kingdom, France, Canada and the U.S. with approximately 480 employees. More information is available at www.valneva.com.

Valneva’s Vision Valneva’s vision is to contribute to a world in which no one dies or suffers from a vaccine-preventable disease.

http://www.valneva.com/



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1.2. Presentation of the subsidiaries and shareholdings

Percentages correspond to the percentage of ordinary capital held in each company, except for the shareholding of Valneva SE in BliNK Biomedical SAS, which is comprised of approximately 6% of preferred shares A2 (with voting rights). * Following the cancellation of free shares by BliNK Biomedical SAS in 2018, Valneva SE’s stake in BliNK is now of 43.29 as of December 31, 2018 (instead of 41.77 As of December 31, 2017).

The subsidiaries and shareholdings of the Company only concern companies that are member of the consolidation scope of the Group1. The financial impacts of the companies that are members of the

1 See the Note 5.1 to the Group’s consolidated financial statements for the fiscal year 2018, in Section D.1 of the Company’s

Registration Document 2018.

43.29%*

Valneva Scotland

Ltd.

Scotland

Valneva USA Inc. (“formerly Intercell USA

Inc.”)

United-States

Valneva Sweden AB

Sweden

VALNEVA SE

France - Nantes & Lyon

Valneva Austria GmbH

Austria

Vaccines Holdings

Sweden AB

Sweden

Valneva Canada Inc.

Canada

Valneva UK Ltd.

United Kingdom

BliNK Biomedical

SAS

France

Groupe Grimaud La Corbière SA

France

Bpifrance Participa-tions SA

France

Funds managed by

MVM Life Science

Partners LLP

United Kingdom



consolidation scope of the Group are included in the Notes to the Group’s consolidated financial statements for the fiscal year 20182.

Additional financial information is also provided in the separate financial statements for the fiscal year 20183.

Valneva Austria GmbH Valneva Austria GmbH is a fully-owned research subsidiary of Valneva SE, focusing on vaccines and pre-clinical and clinical development activities. The site is located at the Campus Vienna Biocenter, a melting pot of biotechnology and life sciences in Vienna. The facilities accommodate departments for vaccine research, (technical/clinical) product development, quality and regulatory affairs, as well as general and administrative functions.

In addition to using its latest-stage laboratory facilities for R&D activities, the site holds a certificate of Good Manufacturing Practice from the Austrian Agency for Health and Food Safety (AGES) for its Quality Control laboratories, and was successfully licensed by the U.S. Food and Drug Administration.

At December 31, 2018, the site had a total of 161 people (including Management Board members) mainly focusing on R&D and supporting commercialization of Valneva’s vaccine against Japanese encephalitis, as well as DUKORAL®, VIVOTIF®, FLUADTM, SANDOVACTM/AGRIPPALTM4.

The financial highlights of the subsidiary at December 31, 2018 are:

+ Shareholders' equity: €242,358,259.03 + Operating result: €25,488,524.67 + Net result: €21,361,229.66 + Total balance sheet: €320,429,332.74

(Figures according to IFRS reporting, as the GAAP-based financial statements of the subsidiary are not available at the filing date of this Annual Management Report)

Valneva Austria GmbH currently owns two fully-owned subsidiaries: Valneva Scotland Ltd.: the subsidiary is primarily involved in the production of Valneva’s Japanese encephalitis vaccine, IXIARO®/JESPECT®.

At December 31, 2018, the team was composed of 102 employees.

The financial highlights of the subsidiary at December 31, 2018 are:

+ Shareholders' equity: GBP 9,598,702.14 + Operating result: minus GBP 1,297,881.91 + Net result: minus GBP 637,415.42 + Total balance sheet: GBP 18,829,170.26


Valneva USA Inc. (formerly Intercell USA, Inc.): the team in Gaithersburg (United States) is focusing on marketing and sales of Valneva’s Japanese encephalitis vaccine, IXIARO®, to the U.S. military, the U.S. private market, and on international sales through distribution partners.

2 See Section D.1 of the Company’s Registration Document 2018. 3 See in particular Note 5.4, in Section D.3 of the Company’s Registration Document 2018. 4 See Section 7.9 of the Report by the Supervisory Board on the Corporate Governance 2018, in Section B of the Company’s

Registration Document 2018.



At December 31, 2018, the site had a total of 9 people.

The financial highlights of the subsidiary, at December 31, 2018, are:

+ Shareholders' equity: minus USD 8,612,135.30 + Operating result: USD 1,440,770.56 + Net result: minus USD 291,278.35 + Total balance sheet: USD 14,149,408.18

(Figures according to IFRS reporting, as the GAAP-based financial statements of the subsidiary are not required by law)

*** Vaccines Holdings Sweden AB Vaccines Holdings Sweden AB is a fully-owned subsidiary of Valneva SE, created in December 20145. The financial highlights of the subsidiary, at December 31, 2018, are:

+ Shareholders' equity: SEK 210,423,558.42 + Operating result: minus SEK 6,328.81 + Net result: SEK 1,521,989.45 + Total balance sheet: SEK 210,425,752.21


Vaccines Holdings Sweden AB owns a fully-owned subsidiary acquired in February 2015 and named Valneva Sweden AB. Based in Solna (Sweden), Valneva Sweden AB manufactures the DUKORAL® vaccine and distributes this vaccine in the Nordic countries as well as the Japanese encephalitis vaccine IXIARO®. The subsidiary also distribute third-party vaccines in these countries. In addition, Valneva Sweden AB provides certain manufacturing and technical development services to Hookipa Pharma Inc.6.



+ Shareholders' equity: SEK 186,406,406.65 + Operating result: SEK 16,090,145.42 + Net result: SEK 16,234,407.72 + Total balance sheet: SEK 286,943,697.52


*** Valneva Canada, Inc. Valneva Canada, Inc. is a fully-owned subsidiary of Valneva SE, created in January 2015. Valneva Canada, Inc. is headquartered in Montreal (Quebec), and performs marketing and sales activities in Canada in relation to the VIVOTIF®, IXIARO® and DUKORAL® vaccines. At December 31, 2018, the site had a total of 8 people.

The financial highlights of the subsidiary, at December 31, 2018, are: + Shareholders' equity: CAD 2,879,981.12

5 See the Press Releases published by Valneva SE on January 5 and February 10, 2015: http://www.valneva.com/en/investors-

media/news/2015 6 See Section 2.6 of this Annual Management Report.

http://www.valneva.com/en/investors-media/news/2015




+ Operating result: CAD 1,713,581.65 + Net result: CAD 1,191,513.05 + Total balance sheet: CAD 14,785,347.43

(Figures according to IFRS reporting, as the GAAP-based financial statements of the subsidiary are not required by law)

***

Valneva UK Ltd. Valneva UK Ltd. is a fully-owned subsidiary of Valneva SE, created in October 20157. Valneva UK Ltd. sells DUKORAL® and IXIARO® in the United Kingdom, as well as MOSKITO GUARD® products.



+ Shareholders' equity: GBP 569,876.43 + Operating result: GBP 168,237.35 + Net result: GBP 223,014.91 + Total balance sheet: GBP 3,076,764.57


***

Valneva Toyama Japan K.K. Valneva Toyama Japan K.K. was established on April 18, 2011 as part of the asset acquisition from the Japanese company SC World.

This company ended its R&D activities (in the antibody field) at the end of December 2013 and was liquidated in 2018 (proceedings closed on December 17, 2018).

Valneva France SAS Valneva France SAS is a fully-owned subsidiary of Valneva SE, created on February 15, 2019 to carry out marketing, distribution and promotion activities for vaccines in France, when all required permits and licenses have been obtained.

BliNK Biomedical SAS is a company created in 2015 which specializes in antibody-based therapeutics. BliNK Biomedical SAS’ technology results from the combination of the « IVV » platform contributed by the company BliNK Therapeutics Ltd. and the VIVA│Screen® platform contributed by Valneva SE.

Today, BliNK Biomedical SAS is held by:

+ Valneva SE, for 43.29%; and + the historic investors of BliNK Therapeutics:

o Kurma Biofund I, a professional investment fund; o different investment funds managed by the company Idinvest Partners; o the company Cancer Research Technology; and o the funders of BliNK Therapeutics,

7 See the Press Release published by Valneva SE on June 22, 2015: http://www.valneva.com/en/investors-media/news/2015




together, for 56.71%.

BliNK Biomedical SAS’ Board (comité de supervision) is chaired by its CEO and also includes a representative of Kurma Biofund I’s management company (Kurma Partners), as well as a representative of Valneva SE.

To date, BliNK Biomedical SAS has ended its R&D operations, but continues to manage licensing agreements for its technologies.

2. ANNUAL OPERATING HIGHLIGHTS Operating highlights for the Group in 2018 included:

+ the completion of a €50.0 million oversubscribed placement led by blue-chip US healthcare investors and supported by the Company’s existing major shareholders;

+ the publication of positive Phase 1 interim results for the Group’s Lyme disease vaccine candidate and the initiation of Phase 2 clinical development;

+ the initiation of a Phase 1 clinical study to evaluate the Group’s single-shot vaccine candidate against chikungunya, the reporting of progress in the program and the granting of an FDA fast track designation;

+ the initiation of a Phase 1 Clinical Study to evaluate Emergent BioSolutions and Valneva’s vaccine candidate against the Zika virus and the publication of Phase 1 interim data

+ the FDA approval of an accelerated vaccination schedule for the Group’s Japanese encephalitis vaccine IXIARO®;

+ the signing of a collaboration and manufacturing agreement with Hookipa; + the extension of a drawdown period for the European Investment Bank Loan; + the transfer of Valneva’s liquidity providing contract from Natixis to Oddo BHF.

Completion of a €50.0 million oversubscribed placement led by blue-chip US healthcare investors and supported by the Company’s existing shareholders

On September 27, 2018, Valneva SE announced that it has raised €50.0 million of gross proceeds in a private placement of its ordinary shares. The transaction, led by blue-chip US healthcare investors and supported by the Company’s existing major shareholders, was heavily oversubscribed.

The capital raise was conducted by means of a private placement reserved for qualified investors. Approximately 81% of the shares were allocated to US investors. Two of the Company’s major shareholders, Groupe Grimaud and MVM Life Science Partners, also participated in the placement. Groupe Grimaud and MVM Life Science Partners have subscribed 12% and 6% of the new shares respectively. On this basis, after completion of the capital increase, Groupe Grimaud and MVM Life Science Partners hold 15.1% and 7.3% of the Company’s ordinary shares respectively.

Key characteristics of the offering A total of 13,333,334 new shares, par value €0.15 each, were placed with new and existing investors. The closing date of the offering was October 1, 2018.

The issue price of the new shares was set at €3.75 per share, representing a 2.6% discount to the volume weighted average price of the Company’s shares on the regulated market of Euronext Paris over the 3 last trading days before pricing (i.e. from September 24, 2018 to September 26, 2018 inclusive), which was €3.85.



Use of proceeds The offering proceeds raised will be used to pursue the clinical development of the Group’s pipeline candidates, notably its vaccine candidates against Lyme and chikungunya, as well as for working capital and general corporate purposes. Net proceeds will reinforce the cash position of the Group, which amounted to €37.7 million at the end of June 2018.

Publication of positive Phase 1 interim results for the Group’s Lyme disease vaccine candidate and initiation of Phase 2 clinical development

On March 19, 2018, Valneva SE announced positive Phase 1 interim results for its Lyme vaccine candidate, VLA15. The primary objective of the Phase 1 study VLA15-101 was to evaluate the vaccine candidate’s safety and tolerability profile at different dose levels and formulations. Immunogenicity, measured by determining IgG antibodies against the six most prevalent serotypes of Lyme borreliosis in the U.S. (ST1) and Europe (ST1 to ST6) present in the vaccine, was also monitored for different dose groups and formulations at various time-points. This interim analysis for the primary and secondary endpoints includes safety and immunogenicity data up to Day 84 (month 3).

The study met its primary endpoint: the vaccine candidate showed a favourable safety profile. There were very few severe, related AEs in all treatment groups and no associated safety concerns. No differences in the safety profile were observed for the adjuvanted groups compared to the non-adjuvanted treatment groups. The safety profile of all tested doses and formulations is considered comparable to other licensed lipidated recombinant vaccines or lipid-containing vaccine formulations, and supports further clinical development for all doses and formulations.

VLA15 was also immunogenic in all doses and formulations tested. OspA-specific IgG antibody responses were induced in all treatment groups and against all OspA serotypes, with significant dose responses seen between the lowest and the highest dose groups. VLA15 was more immunogenic in adjuvanted treatment groups compared to non-adjuvanted treatment groups of the same dose level. For all six OspA serotypes, IgG levels were substantially higher after three immunizations (Day 84) compared to after two (Day 56).

Seroconversion Rates (SCR) for the highest, adjuvanted dose group, which is considered preferred for further development, ranged from 71.4% to 96.4% for the different OspA serotypes.

On July 2, 2018, Valneva SE announced that it had successfully concluded the end of Phase 1 process for this candidate with the U.S. Food and Drug Administration (“FDA”) and had obtained alignment with regard to its Phase 2 strategy.

On October 25, 2018, the Company announced that the European Medicines Agency (“EMA”) also provided positive feedback on its general development approach for its Lyme disease vaccine candidate. EMA’s comprehensive scientific advice was largely aligned with previous discussions with the FDA on the strategy for the VLA15 development and reaffirmed the Group’s key development assumptions.

On December 17, 2018, Valneva SE announced the initiation of the Phase 2 Clinical Development for its Lyme disease vaccine candidate. The overall Phase 2 objective for VLA15 is to determine the optimal dosage level and schedule for use in Phase 3 pivotal field efficacy studies, based on immunogenicity and safety data. The Phase 2 development for the Lyme disease vaccine candidate will include the evaluation of the highest dose of VLA15 tested in Phase 1 in addition to two higher doses. Furthermore, the Group plans to include the evaluation of an additional, alternative three-dose schedule. The Phase 2 duration is expected to be approximately two years with interim data (primary endpoint) expected mid-2020.

***



For more information on the progress of the program since the end of the fiscal year 2018, please refer to Section 3.4 of this Annual Management Report.

Initiation of a Phase 1 clinical study to evaluate the Group’s single-shot vaccine candidate against chikungunya, the reporting of progress in the program and the granting of an FDA fast track designation

On March 13, 2018, Valneva SE announced the initiation of a Phase 1 clinical trial in the U.S. to evaluate the safety and immunogenicity of VLA1553, its live-attenuated vaccine candidate against chikungunya. The Phase 1 clinical trial is a randomized, observer-blinded, dose-escalation, multi-center study. It will investigate three different dose levels of VLA1553 in approximately 120 healthy adults vaccinated with a single-shot immunization.

On October 16, 2018, the Company announced that the Group had commenced the second stage of its Phase 1 study. A first group of study participants has then being re-vaccinated. This re-vaccination will act as an intrinsic human challenge, with the goal of demonstrating that subjects are protected from vaccine-induced viremia early in the VLA1553 clinical development.

In addition, on December 21, 2018, Valneva SE announced that the U.S. Food and Drug Administration had granted Fast Track designation for its chikungunya vaccine candidate. Fast Track designation is granted by the FDA to products under development for serious conditions that have the potential to fulfill an unmet medical need. Fast Track is designed to facilitate the clinical development and expedite the review of new drugs and vaccines with the intention of accelerating the availability of promising products on the market.

***

For more information on the progress of the program since the end of the fiscal year 2018, please refer to Section 3.2 of this Annual Management Report.

Initiation of a Phase 1 Clinical Study to evaluate Emergent BioSolutions and Valneva’s vaccine candidate against the Zika virus and the publication of Phase 1 interim data

On February 26, 2018, Emergent BioSolutions Inc. (NYSE: EBS) and Valneva SE announced the initiation of a Phase 1 clinical trial in the U.S. to evaluate the safety and immunogenicity of VLA1601, their vaccine candidate against Zika virus. The Phase 1 clinical trial is a randomized, observer-blinded, placebo-controlled, single center study. This study, in approximately 65 healthy adults, investigates two dose levels of VLA1601 when administered using two different vaccination schedules.

On November 19, 2018, the two companies announced positive interim results for this Phase 1 study. The highly purified inactivated vaccine candidate met the study’s primary endpoint showing a favorable safety profile in all doses and schedules tested. VLA1601 was also immunogenic in all treatment groups and induced both dose- and schedule-dependent neutralizing antibodies against the Zika virus with the kinetics expected for an inactivated, alum-adjuvanted whole-virus vaccine. Seroconversion Rates (SCR) reached up to 85.7% on Day 35 (Interim Analysis of Data up to Day 56). The Phase 1 clinical trial is being co-financed by Emergent BioSolutions Inc. and Valneva SE as part of an exclusive, worldwide license agreement signed in July 2017. The agreement includes pre-defined post-Phase 1 opt-in rights for Emergent BioSolutions Inc.

FDA approval of an accelerated vaccination schedule for the Group’s Japanese encephalitis vaccine IXIARO®

On October 5, 2018, Valneva SE announced that the FDA had approved an alternate IXIARO®

immunization schedule of two doses administered seven days apart for adult travelers aged 18-65 years old. This accelerated schedule comes in addition to the previously approved schedule. IXIARO® is the only Japanese encephalitis vaccine licensed and available in the U.S. The vaccine was



approved with a two-dose primary immunization with the two vaccinations administered 28 days apart. The newly-approved accelerated vaccination schedule allows rapid immunization in adults with the two doses given seven days apart. This rapid schedule has already been approved and is used in Europe and Canada. The FDA’s revised schedule follows previous approvals by Health Canada and the European Medicines Agency, who authorized accelerated IXIARO® vaccination schedules for adult travelers in March 2018 and April 2015, respectively.

Signing of a collaboration and manufacturing agreement with Hookipa On December 6, 2018, Valneva Sweden AB, the Swedish subsidiary of Valneva SE, and Hookipa Pharma Inc., announced that they had entered into a three-year collaboration and manufacturing agreement.

Under the terms of the agreement, Valneva Sweden AB will provide analytical services, develop process scale-up and produce Good Manufacturing Practices clinical trial material to support the development of new immunotherapies based on Hookipa’s Vaxwave® and TheraT® arenavirus vector-technologies. In return, Valneva Sweden AB will receive fixed and success-based service fees. The agreement may be extended beyond three years.

Extension of drawdown period for the European Investment Bank Loan On September 20, 2018, Valneva SE announced that it had agreed, with the European Investment Bank (“EIB”), a one-year extension to its loan facility. The €25.0 million loan was granted to the Company by the EIB in July 2016. Valneva has drawn down €10.0 million of the €25.0 million facility8 and can now draw down a further €15.0 million before the end of July 2019. Under the terms of the agreement signed with the EIB, each credit tranche is repayable at the end of a five-year period commencing from the drawdown date. Valneva plans to use the funds to advance its research and development (“R&D”) programs, including its Lyme disease vaccine candidate.

Transfer of Valneva Liquidity Providing Contract from Natixis to Oddo BHF On July 18, 2018, Valneva SE announced that its Liquidity Providing Agreement was transferred from Natixis to Oddo BHF. By agreement dated June 25 2018, Valneva has entrusted Oddo BHF and Natixis with the implementation of a liquidity and market supervision contract. Consistent in particular with the AMF Decision 2018-01 establishing liquidity contracts on equity securities as an accepted market practice, this agreement is effective for a period of one year starting July 2, 2018 and tacitly renewable.

3. MATERIAL EVENTS FOLLOWING THE CLOSING DATE FOR THE FISCAL YEAR 2018

Since the beginning of the year 2019, Valneva has made the following announcements:

+ the signing of new €59.0 million IXIARO® supply contract with the U.S. Government; + the reporting of positive Phase 1 interim results for the Group’s chikungunya vaccine

candidate; + the Company’s intention to delist from the Vienna Stock Exchange; + the reporting of positive initial booster data and final Phase 1 data for its Lyme disease

vaccine candidate.

8 Two tranches of €5.0 million each, in April and December 2017 respectively.



Signing of new €59.0 million IXIARO® supply contract with the US Government On January 16, 2109, Valneva SE announced the signing of a new $59.0 million contract with the U.S. government Department of Defense for the supply of its Japanese encephalitis vaccine IXIARO®. Under the terms of the agreement, Valneva will supply IXIARO® doses to the Defense Logistics Agency of the U.S. Department of Defense, through 2019 and the beginning of 2020 with a value of $59.0 million guaranteed and potentially worth up to $70.0 million. A delivery schedule is being prepared and supply shipments will commence immediately.

Reporting of Positive Phase 1 interim results for the Company’s chikungunya vaccine candidate

On January 7, 2019, Valneva SE announced positive Phase 1 interim results for its chikungunya vaccine candidate, VLA1553. The primary objective of VLA1553-101 Phase 1 study was to assess the overall safety and immunogenicity profile 28 days after a single vaccination across three dose levels.

The interim results showed an excellent immunogenicity profile after a single vaccination with a 100% seroconversion rate achieved at Day 28 in a pooled analysis of all vaccinated groups. Results also showed 96.5% of subjects achieved at least a 16-fold increase in antibody titres and a high geometric mean titre, fully supporting VLA1553’s differentiated target product profile. The pooled safety profile of all groups was considered acceptable and supports further development. No serious adverse events nor adverse events of special interest were reported up to Day 28 and the local tolerability was considered excellent. Systemic adverse events included short-term fever, headache and fatigue. As with other live-attenuated vaccines, transient cases of reduced levels of neutrophils, lymphocytes or leucocytes without clinical symptoms were observed in the pooled analysis. The Group expects unblinded safety and immunogenicity data at dose group level by mid-2019 including additional information on whether subjects are protected from chikungunya viremia. This may allow Valneva to determine the final dose for development.

Intention to delist from the Vienna Stock Exchange On January 7, 2019, Valneva SE announced its intention to delist from the Vienna Stock Exchange (VSE) in order to focus on the best capital markets for life science companies and increase liquidity by centralizing trading on Euronext Paris.

Valneva SE’s ordinary shares have been listed on the VSE since May 28, 2013 and admitted to trade on the Official Market (Amtlicher Handel) in the Prime Market (ISIN FR0004056851). They are further listed on Euronext Paris (compartment B) where they will continue to trade. Valneva SE’s preferred shares (ISIN FR0011472943) are traded on the VSE’s Third Market Segment (MTF) and on Euronext Paris.

The delisting of Valneva SE’s shares from the VSE has been approved by the Company’s Supervisory and Management Boards and will be submitted for shareholder voting at the Company’s annual general meeting (“AGM”), to take place on June 27, 2019. Shareholders will be requested to resolve on the revocation of the admission of Valneva SE’s ordinary shares from the Official Market of the VSE, according to §38 (6) of the Austrian Stock Exchange Act 2018.

Subject to AGM approval, the application to delist Valneva SE’s ordinary shares will be filed with the VSE after the AGM. The VSE will then have ten weeks to decide on the application and timeline of the delisting. A period of at least three months between the publication of VSE’s decision and the effective date of the delisting is required, which potentially places the effective delisting date in the fourth quarter of 2019. In addition to the delisting of the ordinary shares, Valneva’s Management Board has decided to terminate the trading of the preferred shares on the Third Market (MTF) segment of the VSE. The trading of Valneva SE’s preferred shares on the MTF shall terminate in parallel with that of the ordinary shares.



Reporting of positive initial booster data and final Phase 1 data for the Company’s Lyme disease vaccine candidate

On January 31, 2019, Valneva SE announced positive initial booster data and final Phase 1 data for its leading, unique Lyme disease vaccine candidate VLA15. The final Phase 1 data confirmed the safety and tolerability profile observed at all time-points, as reported in the interim analysis. VLA15 demonstrated a favorable safety profile and had no associated safety concerns. In addition, the final Phase 1 immunogenicity results indicated that the alum-adjuvanted formulations elicit higher immune-responses at all time-points, confirming the interim data findings. As expected, based on the interim Phase 1 data, antibody titres declined post Day 84 across all groups, trending towards baseline at approximately one year post initial vaccination. The single booster re-vaccination in the period 12 to 15 months after the initial dose in the primary immunization resulted in a significant immune-response, yielding OspA antibody titres at levels 2.7-fold (ST3 ) to 5.8-fold (ST1) over the initial titres observed at Day 84 (geometric mean fold rise [GMFR]).These results are in line with published data from other OspA-based Lyme vaccines that had previously been in development.

4. BUSINESS TRENDS AND OUTLOOK OF THE GROUP

Trends Valneva delivered strong financial results in 2018. The Group’s total revenues in 2018 were €113.0 million and its EBITDA increased to €13.1 million for the full year (which exceeded the guidance of €5.0 million to €10.0 million). Valneva registered a net profit of €3.3 million, its first ever profitable annual result.

In addition, R&D investment was €25.3 million in 2018, in line with Valneva’s guidance of €25.0 million to €30.0 million.

A €50.0 million financing led by blue-chip US healthcare investors combined with positive operating cash flow of €16.3 million resulted in a strong cash position of €81.7 million at the end of 2018.

Goals 2019 As part of the management of its activities, the Group prepares operational and financial targets for the current and subsequent fiscal years.

When preparing its targets, the Group’s Management Board uses the same accounting rules as for its IFRS-compliant financial statements.

Based on information currently available, the Group has set the following financial targets for 2019:

+ Valneva expects to continue reporting double-digit product sales growth in 2019. The Group expects product sales revenues of between €115.0 million to €125.0 million in 2019, representing 15-20% (CER - Constant exchange rate) year-on-year growth.

+ 2019 overall revenue is expected to be between €125.0 million and €135.0 million while gross margin is expected to be above 60% and net operating margin, prior to R&D investments, between 25% and 35%.

+ Valneva plans to invest €35.0 million to €40.0 million in R&D, notably in its Lyme disease and chikungunya vaccine candidates, in 2019.

+ The Group expects to generate EBITDA of €5.0 million to €10.0 million in 2019.

Significant R&D progress planned in 2019

The Group expects to announce major confirmatory and supportive data points for its Lyme disease vaccine candidate (VLA15):



+ First booster data including final Phase 1 data9 in Q1 2019 reported; + Determination of final doses and Initiation of second Phase 2 trial mid 2019; + Further alignment with regulators on Phase 3 strategy.

Valneva also expects a development acceleration of its chikungunya vaccine candidate (VLA1553):

+ Phase 1 data (ungrouped), including first intrinsic human challenge, expected mid 2019; + Alignment with regulators on potential route to licensure; + Readiness to progress into next clinical stage by end 2019.

Strategy of the Group

Mid-Term Strategy

Valneva's strategy stems from its vision to contribute to a world in which no one dies or suffers from a vaccine-preventable disease.

Valneva aims to become the leading vaccine biotech by combining growth of its commercial business with the development of prophylactic vaccine candidates for diseases such as Lyme and chikungunya.

Products Valneva operates a successful commercial business, which continues to grow. Valneva aims to increase its product sales from €103.5 million in 2018 to over €200.0 million by 2022. Where possible, its ambition is to add products to its commercial portfolio, leveraging its commercial and industrial infrastructure.

R&D Valneva's research and development team is committed to developing vaccine candidates in areas of growing medical need and providing innovative solutions for the benefit of both people and society.

Valneva’s current R&D pipeline includes the most advanced clinical-stage vaccine to prevent Lyme disease, a tick-transmitted illness that is spreading widely in North America and Europe. Additionally, Valneva has vaccine programs against the mosquito-borne viral diseases chikungunya and Zika, neither of which can be effectively treated today.

In order to advance its two leading programs, Lyme disease (VLA15) and chikungunya (VLA1553), towards the next value inflection points, Valneva expects to increase R&D investments significantly in the coming years. Its approach is to fully develop products, alone, or via co-development and profit share, or through partnership agreements that will generate revenues in the form of milestone payments as well as royalties on future product sales.

Financials One of Valneva's key strategic objectives is to be largely financially self-sustainable in its operations. Valneva generated €13.1 million earnings before interest, tax, depreciation and amortization (EBITDA) in 2018, marking the third consecutive year of positive operating results. Going forward, Valneva aims to maintain positive EBITDA for its business. Valneva is focused on generating long-term shareholder value and will therefore continue to invest in advancing its key R&D programs which may result in a period of negative EBITDA in the mid-term as R&D programs undergo costly late stage development.

9 See Section 3.4 of this Annual Management Report.



5. BUSINESS DEVELOPMENT, RESULTS AND FINANCIAL POSITION OF THE COMPANY AND GROUP

Valneva Group (IFRS) Key financial information

€ in thousand 12 months ended December 31,

2018 2017

Product Sales 103.5 92.6

Total Revenues 113.0 105.3

Net profit/(loss) 3.3 (11.5)

EBITDA 13.1 10.8

Cash 81.7 38.1

Full Year 2018 Financial review Revenues Valneva’s total revenues (on an Annual Equivalent Rate - “AER” - basis) in 2018 were €113.0 million compared to €105.3 million in 2017.

Product sales revenues (on an AER basis) in 2018 increased to €103.5 million from €92.6 million in 2017, representing year over year growth of 11.7%.

Revenues from collaborations and licensing amounted to €9.6 million in 2018 compared to €12.7 million in 2017. Reporting of grants, including R&D tax credits, has been re-classified and included in “Other income and expenses, net” as of January 2018. The comparator period of 2017 has been adjusted accordingly.

Operating result and EBITDA Costs of goods and services sold (“COGS”) were €44.4 million in 2018, representing an overall gross margin of 60.7% compared to 56.3% in 2017. €23.6 million of COGS related to IXIARO®/JESPECT® sales, yielding a product gross margin of 66.2%. €13.7 million of COGS related to DUKORAL® sales, yielding a product gross margin of 54.8%. DUKORAL® COGS were also positively impacted by favorable Swedish Krona (SEK) exchange rates. Of the remaining COGS in 2018, €2.4 million related to the Third Party Product distribution business and €4.8 million were related to cost of services. In 2017, overall COGS were €46.0 million, of which €39.7 million related to cost of goods and €6.3 million related to cost of services.

Research and development expenses in 2018 increased to €25.3 million from €23.4 million in the previous year. This was driven by planned increased investments into Valneva’s clinical stage vaccine candidates. Marketing and distribution expenses in 2018 amounted to €20.9 million, compared to €17.9 million in 2017. This increase was mainly a result of investment in the U.S. private commercial operations combined with further investment in certain other markets. In 2018, general and administrative expenses amounted to €16.9 million compared to €15.5 million in 2017; this increase was primarily driven by non-cash charges for the Company’s share option program. Amortization and impairment charges in 2018 amounted to €3.2 million compared to €10.7 million in 2017. The reduction resulted from re-assessment of the lifetime of IXIARO®/JESPECT®-related intangible assets, driven by patent extensions in both Europe and the U.S. (lifetime extended from 15 to 23.75 years). Furthermore, 2017 included a one-time non-cash impairment charge amounting to €3.6 million related to Valneva’s Phase 3-ready Clostridium difficile vaccine candidate.



As a result of sales growth, improved margins and reduced amortization and impairment charges, Valneva realized an operating profit of €6.3 million in 2018 compared to an operating loss of €4.0 million in 2017. EBITDA in 2018 was €13.1 million, compared to an EBITDA of €10.8 million in 2017.

Net result In 2018, Valneva generated a net profit amounting to €3.3 million compared to a net loss of €11.5 million in the prior year.

Finance costs and currency effects in 2018 resulted in a net finance expense of €4.0 million, compared to a net finance expense of €8.6 million in 2017. The reduced net finance expense compared to the prior year was partly the result of lower interest expenses from continued loan re-payments and foreign currency related losses incurred during 2017.

Results from investments in associates comprise a €1.1 million profit from Valneva’s 43.3% shareholding in BliNK Biomedical SAS.

Cash flow and liquidity Net cash generated by operating activities in 2018 amounted to €16.3 million compared to €12.8 million in 2017.

Cash outflows from investing activities in 2018 amounted to €2.9 million (compared to €4.1 million in 2017) and resulted primarily from the purchase of equipment.

Cash inflows from financing activities amounted to €30.9 million in 2018 and consisted of €49.3 million net proceeds from private placement of new shares in October 201810 as well as re-payment of borrowings and interest payments. Cash outflows from financing activities amounted to €10.4 million in 2017.

Liquid funds on December 31, 2018 stood at €81.7 million compared to €38.1 million on December 31, 2017 and consisted of €77.1 million in cash and cash equivalents and €4.6 million in restricted cash.

Valneva SE (French GAAP accounts) The Company’s financial statements for the fiscal year 2018 were prepared in accordance with French generally accepted accounting principles as defined by the French accounting standards Committee (Comité de la réglementation comptable).

Operating income Operating income amounted to €3.6 million at December 31, 2018, up from €4.2 million for the fiscal year 2017.

Revenue amounted to €2.14 million in 2018, compared to €2.78 million in 2017.

Other operating income (mainly licensing income) amounted to €1.3 million in 2018, compared to €1.0 million in 2017.

Operating expenses Operating expenses amounted to €22.8 million at December 31, 2018, compared to €21.1 million for the prior fiscal year.

Purchases of raw materials and external expenses represented €15.1 million in 2018, compared to €14 million in 2017. This increase is mainly due to "fees" item.

Staff costs amounted to €5.5 million in 2018, compared to €5.1 million in 2017.




Impairment charges and provisions remained almost stable at €1.5 million in 2018, compared to €1.4 million in 2017.

Operating loss from ordinary activities The operating loss from ordinary activities for the fiscal year 2018 was €19.2 million, compared to an operating loss of €16.9 million for the fiscal year 2017.

Net financial result Net financial profit amounted at €0.5 million for the fiscal year 2018, compared to a net financial loss of €0.3 million for the fiscal year 2017.

Net exceptional items Net exceptional items remained steady with income of €0.1 million in 2018, compared to €0.2 million in 2017.

Corporate income tax The negative 2018 income tax corresponds to a Research Tax Credit (Crédit d’Impôt Recherche) charge of €1.8 million. The negative 2017 income tax corresponded to a Research Tax Credit charge of €1.8 million.

Net loss Net loss for the fiscal year 2018 was €16.8 million, compared to €15.3 million for the prior fiscal year.

Fixed assets Fixed assets decreased from €167 million in 2017 to €164 million in 2018 (net value).

Current assets Current assets amounted to €75.5 million in 2018, compared to €40.1 million in 2017. This increase is mainly due to the increase in cash position for €35.0 million.

Shareholders' equity Shareholders’ equity increased from €182.0 million at December 31, 2017 to €212.0 million at December 31, 2018. A detailed description is provided in the Notes to the separate financial statements for the fiscal year 2018.

On October 1, 2018, Valneva carried out a capital increase11. The gross proceeds of the capital increase amounted to €50,000,002.50 corresponding to the issue of 13,333,334 new ordinary shares issued at a subscription price of €3.75 per share.

This issue generated a share capital increase of €2,000,000.10 and an issue premium of €48,000,002.40.

€3,214,113.79 relating to the costs of the capital increase were deducted from the share premium

Liabilities Total debt increased by €3.0 million, from €22.5 million at December 31, 2017 to €25.5 million at December 31, 2018.

11 Idem.



Total borrowings decreased by €0.7 million, from €15.4 million in 2017, to €14.7 million in 2018. This change mainly reflects €0.4 million in debt repayments. The monetization of the 2017 Research Tax Credit (Crédit d’Impôt Recherche) and the repayment of the 2014 Research Tax Credit decreased the debt by €0.3 million.

Operating payables increased by €2.5 million, from €2.8 million for the fiscal years 2017 to €5.3 million in 2018. The increase is mainly due to an invoice of €2.5 million recorded in December 2018 and paid in January 2019.

Other debts increased by €1.1 million, from €4.4 million at December 31, 2017 to €5.5 million at December 31, 2018. This change reflects the current accounts settlement with the different Group’s subsidiaries.

Cash Total cash amounted to €42.7 million at December 31, 2018, compared to €7.48 million on the previous fiscal year.

Net cash provided by operating activities represented an outflow of €13.4 million at December 31, 2018, compared to an outflow of €10.9 million at December 31, 2017, reflecting:

+ a €16.9 million outflow in cash flows for the fiscal year 2018; and + a net inflow of €3.5 million from the increase in debt and decrease in operating receivables.

Net cash used in investing activities was €2.6 million in 2018, compared to €0.4 million in 2017. It comes mainly from the €2.8 million received in August 2018 from Vaccines Holdings Sweden AB, which reduced the initial contribution of €17 million made to this subsidiary in 2015.

The net cash generated from financing activities amounted to €46.0 million in 2018, compared to €8.7 million in 2017. This results from the net capital increase of €47.0 million, the repayment of loans for minus €0.4 million, the decrease in new borrowings for €10 million and the variation in the amounts of CIR mobilized for minus €0.3 million.



Results (and other key aggregates) of the Company for the last five years

Nature of items Year ended December 31,

2014 2015 2016 2017 2018

I- Capital at the end of the year

Share capital (in euros) 8,631,142.14 11,383,243.14 11,815,935.39 11,816,042.64 13,816,042.74

Number of ordinary shares (a) 56,351,833 74,698,099 77,582,714 77,583,714 90,917,048

Maximum number of shares to be created by conversion of bonds 0 0 0 0 0

II- Operations and income for the year (in euros)

Revenue excluding tax and financial income 2,375,385 1,512,809.28 3,196,953.12 3,223,001.34 3,876,876

Income before tax employee profit-sharing and depreciation allowance and provisions

(8,318,013) (16,009,711.17) (12,457,638.97) (16,241,804.98) (18,567,302.98)

Tax on profit (income if negative) (1,965,473) (1,850,965) (1,896,797) (1,781,781) (1,727,572) Employee profit-sharing due for the year 0 0 0 0 0

Income after tax employee profit-sharing and depreciation allowance and provisions

(14,883,482.38) (17,619,145.14) (12,587,988.59) (15,276,741.54) (16,847,324)

Distributed income 0 0 0 0 0

III- Earnings per share (in euros)

Income after tax and employee profit-sharing, but before depreciation allowances and provisions

(0.11) (0.19) (0.14) (0.19) (0.19)

Income after tax employee profit-sharing and depreciation allowance and provisions

(0.26) (0.24) (0.16) (0.20) (0.19)

Dividend per share (indicate if gross or net) 0 0 0 0 0

IV- Personnel

Average headcount for the period 59 45 48 46 49

Annual payroll (in euros) 3,261,008 2,660,294.33 3,095,286.35 3,616,368.82 3,946,840.33

Total of amounts paid for social benefits for the year (social security, social welfare programs, etc.) (in euros)

1,427,891 1,283,423.61 1,355,866.14 1,496,564.75 1,593,324.98

(a) The figures do not include Valneva SE’s preferred shares (i.e., i) 17,836,719 preferred shares (ISIN FR0011472943), representing around 1,189,115 Valneva SE’s ordinary shares, once the preferred shares are written down to the par value of Valneva SE's ordinary shares, and ii) the convertible preferred shares of the Company (ISIN XFCS00X0I9M1), for the total amount of 1,074 with respect to the fiscal years 2015 and 2016, reduced to 789 as from the fiscal year 2017).



6. PROPOSED APPROPRIATION OF EARNINGS After deducting all expenses, taxes, depreciation and amortization expenses, the separate financial statements for the fiscal year 2018 show a loss of €16,847,324.21.

The Company proposes to appropriate this loss of €16,847,324.21 to the accumulated deficit that would be thus increased from €104,199,767.20 to €121,047,091.41

7. DISALLOWED TAX DEDUCTIONS In compliance with article 223 quater and 223 quinquies of the French General Tax Code, the Company informs that the 2017 financial statements do not include any nondeductible expenses as referred to in articles 39.4 and 39.5 (subsection 10) of the French General Tax Code, except those regarding excess lease payments on passenger vehicle that are not deductible from taxable income in the amount of €8,961.

8. SUPPLIERS AND CUSTOMERS’ PAYMENT TERMS In accordance with paragraph 9 of article L. 441-6, I of the French Commercial code, according to the terms agreed upon by the parties, invoices payable must be settled within a period not exceeding 60 days from their date of issuance. By way of exception, the parties may agree to a payment period of not more than forty-five days from the end of the month in which the invoice was issued, provided that this period is expressly stipulated by agreement and is not grossly unfair to the creditor. In case of summary invoice, with the meaning of article 289, I, 3° of the French General Tax Code, the payment period agreed upon by the parties shall not exceed forty-five days from the invoice’s date of issuance.

Payment terms 2018 Article D. 441 I.-1° : Invoices received but not paid at the end of the fiscal year and whose payment

is due Article D. 441 I.-2° : Invoices issued but not paid at the end of the fiscal year and whose payment is

due

0 day (information only) 1 to 30 days 31 to 60 days 61 to 90 days 91 days and

more

Total (1 day and

more)


more

Total (1 day and

more)

(A) Late payment categories

Number of invoices concerned

148 34 9 6

Total amount for such concerned invoices (before tax)

449,372.40 2,585,303.92 0 0 146,077.51 2,731,381.43 65,888.80 59,066.37 50,199.90 0 0 109,266.27

Percentage of the total purchase amount (before tax) of the fiscal year

5.67% 32.64% 0.00% 0.00% 1.84% 34.49%

Percentage of the revenues (before tax) of the fiscal year

4.11% 3.68% 3.13% 0.00% 0.00% 6. 81%

(B) Invoices not accounted in (A) and related to litigious or non-accounted debts and credits

Number of invoices excluded

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Total amount for such excluded invoices (before tax)

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

(C) Payment terms used as reference (contractual or legal - Article L. 441-6 or article L. 443-1 of the French Commercial code)

Payment terms used for the calculation of late payments

■ Contractual terms: 30 days or upon receipt of invoice. ■ Legal terms: see above the preliminary text of this Section.




Payment terms 2017 Article D. 441 I.-1° : Invoices received but not paid at the end of the fiscal year and whose payment

is due Article D. 441 I.-2° : Invoices issued but not paid at the end of the fiscal year and whose payment is

due


more

Total (1 day and

more)


more

Total (1 day and

more)

(A) Late payment categories

Number of invoices concerned

182 16 182 16

Total amount for such concerned invoices (before tax)

581,439.92 41,703.23 53,392.65 0 20,000 115,095.88 270,016.33 4,036.65 1,862.00 - 42.75 - 270.24 5,585.66

Percentage of the total purchase amount (before tax) of the fiscal year

8.99% 0.64% 0.83% 0.00% 0.31% 1.78%

Percentage of the revenues (before tax) of the fiscal year

16.22% 0.24% 0.11% 0.00% - 0.02% 0.33%

(B) Invoices not accounted in (A) and related to litigious or non-accounted debts and credits

Number of invoices excluded

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Total amount for such excluded invoices (before tax)

n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

(C) Payment terms used as reference (contractual or legal - Article L. 441-6 or article L. 443-1 of the French Commercial code)

Payment terms used for the calculation of late payments



9. STATUTORY DISCLOSURE OF PRIOR DIVIDEND DISTRIBUTIONS In compliance with article 243 bis of the French General Tax Code, the Company reminds that it has paid no dividend since its creation.

10. MAIN RISKS AND UNCERTAINTIES INCURRED BY THE COMPANY AND GROUP

The Company carried out a review of the risks that could have a significant adverse effect on the Group’s business, financial standing, results and ability to achieve its goals, and considers that there are no material risks other than those presented below.

The risks presented below are, at the date of this Annual Management Report, those that could have a material adverse effect on the Group, its activity, financial condition, earnings or prospects if they were to materialize. At the date of this Annual Management Report, the Company has not identified any governmental, economic, budgetary, monetary or political risk factors or strategies that have materially affected or could materially affect, directly or indirectly, the Group’s operations, other than those listed below. Nevertheless, other risks or uncertainties of which the Company is not aware or which are currently insignificant could become important risk factors with a material adverse effect on the on the Group, its activity, financial situation, earnings or prospects.

For information on the procedures set up to identify, manage and reduce risk, please refer to the Section “Internal control procedures relating to operating and functional processes” of this Annual Management Report12.

The Company carries out a review of risks twice a year. Following the November 2018 review, the highest risks, identified with respect to their probability and consequences, and after implementation of mitigation measures, are identified below by (M) (major risks).

12 See Section 11.



Specific risks relating to the Group's business

To date, the Group has only two products on the market, namely its Japanese encephalitis vaccine and DUKORAL®, and is dependent on the sales results of these products. Future revenues from this product may be affected by a number of factors, including (i) the performance of distributors, (ii) serious adverse events linked or suspected to be linked to the product, (iii) public distrust of vaccines or adjuvants or (iv) unfavorable developments with respect to therapeutic indications or recommendations, or the terms of reimbursement or coverage.

Achieving the Group’s revenues growth objectives requires that the sales of the Group’s products are increased on existing markets and that these products are sold on new markets. In addition, the degree of market acceptance among Valneva's primary customers, the customers of Valneva's distributors and the medical community depends on a number of factors, including: the recommendations of local and international health organizations, reimbursement by health authorities and health insurance providers, legislative efforts to control or reduce healthcare spending, reforms to modify social security programs, and the ability of customers to pay or be reimbursed for the cost of medical treatments. Demand for Valneva’s commercial vaccines could also be affected by international or local events or circumstances, especially those prompting consumers and businesses to restrict travel, such as security issues subsequent to terrorist threats or attacks, war or economic crises. If Valneva and its distributors fail to commercialize the products on new markets or fail to gain further market acceptance, Valneva’s revenues, operations and financial position could be adversely affected.

The Group’s manufacturing facilities in Livingston, Scotland, and Solna, Sweden, plays and will play an important role in driving revenue growth and controlling production costs. The manufacture of biological material is a complex undertaking and technical problems may occur. The Group may experience delays, fail to successfully manufacture, or experience capacity shortfalls for the manufacture of its vaccines and meet market demand and/or regulatory requirements. The manufacture of biological material is subject to detailed regulations and routine inspections. It is impossible to predict the changes that regulatory authorities may require during the life cycle of a new vaccine. Such changes may prove costly and affect the Group’s sales as well as its sales forecasts. Failure to comply with Good Manufacturing Practices, Good Distribution Practices or other regulatory requirements could lead to the suspension or revocation of production or distribution licenses, and impede the provision of products by the Group. The risk of suspension or revocation of a production or distribution license also exists for third parties with whom the Group has entered into manufacturing, supply or distribution agreements.

The Group’s production facility in Livingston, Scotland, is the sole producer of the Japanese encephalitis vaccine. The Group’s production facility in Solna, Sweden, is the sole producer of the DUKORAL® vaccine. Were one of the sites to be destroyed or seriously damaged by fire or by any other event, the Group might not be able to produce the vaccine in question which could lead to considerable losses. If a subcontractor or a logistic supplier’s site could no longer be effective, owing to an accident, a natural disaster or a failure to comply with applicable regulations, the Group may not be able to supply one of its vaccines for several months, and consequently, would face considerable losses. In addition, the Group’s activity requires the use of hazardous materials, thereby increasing the Group's exposure to dangerous and costly accidents that could bring about accidental contamination, personal injury, or environmental impacts. The Group is subject to strict environmental and safety



standards, in addition to other laws and regulations, which could generate compliance costs that may adversely affect the performance of the Group and its financial position.

The Group's revenues are largely dependent on (i) maintaining, renewing or transferring marketing authorizations granted by health authorities, (ii) therapeutic indications authorized by these authorities, (iii) recommendations issued by authorities or advisory bodies and (iv) the regulatory status of the Group's products (for example, products subject to prescription or not, products eligible for reimbursement or not, etc.). Any difficulty or delay experienced in maintaining, renewing, amending or transferring marketing authorizations, or any change in the terms or scope of these authorizations or regulatory status, could adversely affect the Group's revenues, financial performance and financial position.

Any difficulty a licensee encounters in obtaining an authorization to market a human or veterinary vaccine produced on the EB66® cell line could result in additional work, delay the development of the Valneva licensee, or even cause a breakdown in the relations with the licensee and with other licensees informed of this fact. However, at the request of its clients, Valneva may provide all useful information relating to the EB66® line and participate in formal or informal meetings on the regulatory qualification strategy for products manufactured by its clients.

Further, the continuous change of the vaccines could lead the developers and manufacturers to convert to technologies other than the virus production on cell line (recombinant proteins, virus-like particles).

Any failure in the development or commercialization of the EB66® cell line could have an impact on the Group's earnings.

The Group’s research and development activities, and especially its programs in the clinical trial phase (vaccines against the Lyme disease or the chikungunya virus), are costly and time-consuming. The results of R&D are inherently uncertain, and the Group may experience delays or failures, in particular at the proof of concept stage or during clinical trials. To continue to develop and market its product candidates, the Group will have to obtain authorizations from authorities such as the U.S. Food and Drug Administration, the European Medicines Agency and other health organizations. These authorizations may be delayed or denied if the Group is not able to meet regulatory requirements, particularly those concerning the safety and effectiveness of its product candidates. Proof of concept failure, changes in regulatory requirements, adverse effects or ineffectiveness in clinical trials, may force the Group to halt development of its product candidates, prevent regulatory approval of its product candidates, or have an adverse effect on existing products and activities.

To develop and market its products, the Group has entered and will enter into collaboration agreements, distribution agreements, research licenses and commercial licenses with biopharmaceutical and pharmaceutical companies and with academic institutions. These agreements are necessary for the research, development, manufacturing or the marketing of Group products. The Group may fail to keep these agreements in force or to establish new agreements on acceptable terms, which could significantly limit or delay its ability to develop and market its products, and thus to reap the benefits of its R&D programs and technologies. The success of strategic partnerships depends in part on the performance of the strategic partners, over which the Group has little or no control. Partners may postpone or terminate one or more of these strategic partnerships, develop



alternative products independently or in collaboration with a third party, and thus compete with the Group’s product candidates or technologies. They may also fail to commit sufficient resources to the development or marketing of Group product candidates that depend on partnerships or collaborations, or may not live up to the Group’s expectations. The Group has partly reduced these risks by terminating the IXIARO® marketing & distribution agreement with GSK in June 2015, and by setting up its own commercial organization through a combination of in-house marketing and sales entities in some countries and a network of distributors in other countries. However, the Group remains exposed to these risks. By way of example, the agreement entered into with Emergent BioSolutions, Inc. in July 2017 for the development and commercialization of Valneva’s vaccine candidate against the Zika virus13 includes an option at the end of Phase 1 and could therefore terminate if Emergent BioSolutions, Inc. decided not to exercise this option. If one of these risks were to occur, the development of certain products could be halted and/or the marketing of certain products discontinued, prevented or delayed, which would have a material adverse effect on the Group’s business, financial position or results.

Safety concerns, including serious adverse events occurring during the clinical development or commercialization of the Group’s products, could be negatively viewed by investors, consumers or other market participants, and in this way adversely affect the Group's reputation and contribute to a decline in the share price, or adversely affect the Group's business, sales, financial position, operating results and prospects.

The Group’s success largely depends on the work and expertise of its management and scientific and commercial personnel. The loss of their expertise could affect the Group's ability to achieve its objectives.

Moreover, the Group will need to recruit new executive managers and qualified personnel, particularly in the marketing and sales areas, to develop its business.

The Group competes with other companies and organizations to recruit and retain highly qualified individuals. This competition is extremely fierce, and the Group may not be able to attract or retain key talent on economically acceptable terms.

Any failure to attract and retain these key staff members could prevent Valneva from achieving its overall objectives and have a material adverse effect on its business, results, financial position, and prospects.

The Company’s Austrian subsidiary, Valneva Austria GmbH, has taken out a “key person” insurance (a permanent disability/death insurance policy in which such subsidiary is the beneficiary) in connection with a member of the Company’s Management Board, Mr. Thomas Lingelbach.

Any failure in the monitoring and management of the Group's development, including any wrong investment decision, as well as any failure to successfully integrate businesses or products acquired in the future could have a material adverse effect on the Group's business, financial position and results. If the Group proceeds with a new merger or acquisition, the integration of its existing activities, technologies, products or services with any newly acquired or merged company could be lengthy and costly and could lead to difficulties and unforeseen expenditures.

13 See the Press Release published by Valneva SE on July 26, 2017: https://www.valneva.com/en/investors-media/news/2017.

https://www.valneva.com/en/investors-media/news/2017



The development and success of the Group's commercialized vaccines and vaccine candidates are dependent on the performance of third-party manufacturers and contracting parties. The quality and availability of goods, equipment and services supplied by these third parties are key to the Group´s development and sustainability.

The Group is just one of the customers of these suppliers. If one of them, for commercial, strategic or other reasons, were no longer to offer a given material, product or service or no longer to produce or provide it in sufficient quantities or to a standard of quality required by the Group, manufacturing and sale of the Group’s products, including product candidates, could be prevented, limited or delayed. This in turn would have a material adverse effect on the Group’s activities, financial situation and earnings. For example, fetal bovine serum, a critical and scarce raw material used in the manufacturing of the Japanese encephalitis vaccine, may not be available in the required quantities in the future.

The research, development and marketing of vaccines, as well as technologies for the development and manufacturing of vaccines, are characterized by rapidly changing environments and technologies, the prevalence of products protected by intellectual property rights, and fierce competition. If the Group's competitors market their products faster than Valneva or develop alternatives to Valneva products, the Group could lose a significant share of the target market. Valneva’s commercialized products (IXIARO®, DUKORAL®) are currently not exposed to direct competition on their main markets; however, the Group might face competition in the future and lose a significant portion of its revenue.

As part of its research and development, the Group uses hazardous and biological materials, solvents and other potentially genotoxic chemicals. Its employees handle recombinant genetic material, genetically modified organisms and viruses. Therefore, the Group is required to comply with numerous laws or regulations.

If it should fail to comply with the applicable law and regulations, obtain required authorizations or have these authorizations withdrawn, the Group might have to pay fines and suspend all or some of its R&D operations. Compliance with environmental, health and safety regulations incurs considerable costs, and the Group may have to pay significant expenses to comply with future legislation and regulations.

Although we believe that our safety procedures comply with applicable regulations, the risk of an accident or accidental contamination cannot be completely ruled out. In the event of an accident or contamination, the Group could face claims, which would mean it might have to incur potentially significant costs to compensate victims and repair damage and could have a negative impact on its income and its financial position.

***

Additional information on the Group’s health, safety and environment issues linked to Valneva’s activity is provided in the Corporate Social Responsiblity Report, in this Annual Management Report14.

14 See Section 17.



The loan agreement granted by the European Investment Bank is secured by (i) collateral over the shares of Valneva Austria GmbH and (ii) collateral over the shares of Valneva Sweden AB, indirect subsidiary of Valneva SE. The possible use of the collateral over the Valneva Austria GmbH shares, following a payment failure by Valneva Austria GmbH, would allow the EIB to take control of this subsidiary, and therefore to control and possibly sell the IXIARO® product (plants, distribution agreements, revenues) as well as the research and development programs managed by Valneva Austria GmbH (in particular the program related to the Lyme disease). The possible use of the collateral over the Valneva Sweden AB shares would allow the European Bank Investment to take control of this subsidiary, and therefore control and possibly sell the DUKORAL® product (plants, distribution agreements, revenues).

The Company is of the opinion that the Brexit may increase its costs and adversely affect some of the main risks to which the Group is exposed, e.g. by increasing risks related to currency exchange fluctuations, manufacturing & supply, customs duties and tax. Future performance of the business may also be impacted, as the manufacturing of bulk material for the IXIARO® product is conducted in the United Kingdom. Further, Valneva uses a distribution site located in the United Kingdom to sell its products and some third party products there. Valneva has prepared for a “Hard Brexit”, notably by setting up some safety stocks, thus minimizing the impact of border crossing problems following Brexit, and by reviewing its product release processes for IXIARO®.

Other risks relating to the Group's business

Historical operating losses - Risks related to expected future losses At December 31, 2018, accumulated net losses for the Group (retained earnings) under IFRS amounted to €167.4 million, including a profit of €3.3 million for the fiscal year ended December 31, 2018.

Even though the Group had an operating profit this year, it cannot exclude the possibility of future operating losses higher than expected, particularly in the event of a disruption or decrease in one of the Group's sources of revenues, which would have a material adverse effect on its results, financial position and outlook.

Uncertainty of additional funding and future capital requirements In 2018, the Group raised €50.0 million gross proceeds from issuance of common stock, €1.4 million from borrowings and repaid €15.6 million of borrowings. However, Valneva still expects future capital requirements in order to be able to continue its research and development activities and develop its portfolio of new and existing products. Should the Group be unable to finance its growth by itself, it would be required to seek other sources of financing through new capital increases and/or borrowing. An inability to meet the expectations of its investors and/or unfavorable economic conditions or credit markets could affect the Group’s ability to obtain financing.

The Group’s future capital requirements will depend on a number of factors, such as:

+ higher costs and slower progress than expected in its research and development programs; + the cost of preparing, filing, defending and maintaining its patents and other intellectual

property rights;



+ costs incurred to meet technological and market developments, to enter into and/or maintain collaboration agreements within the anticipated time-frame, and to efficiently manufacture and market its products;

+ new opportunities to develop promising new products or to acquire technologies, products or companies; and

+ higher costs and longer lead times than anticipated to obtain regulatory approvals, including time to prepare applications and file them with regulatory authorities.

The Group may be unable to raise sufficient capital on acceptable terms, or to raise funds at all, when needed. If the necessary funds are not forthcoming, the Group might have to:

+ delay, reduce or even cancel research and development programs; + reduce its workforce; + close some of its sites; + obtain funds through partnership agreements that could require it to relinquish rights on some

of its technologies or products that it would not have otherwise relinquished; + grant licenses or enter into new collaborative arrangements that may be less attractive than

those that would have otherwise been possible; or + consider selling assets or even merging with another company.

Moreover, insofar as the Group may raise capital by issuing new shares, existing Group shareholders could see their stakes diluted. Financing via new borrowings, where possible, could also include restrictive conditions.

The occurrence of one or more of these risks could have a material impact on the Group, its financial position, prospects and the situation of its shareholders.

Liquidity risks The Group has carried out a specific review of its liquidity risk and is of the opinion that it is able to meet its future payment commitments.

Fluctuations in the Group’s operating cash flow during accounting periods generate liquidity risks. Prudent liquidity risk management therefore implies maintaining sufficient cash resources, cash equivalents and short-term deposits in order to satisfy ongoing operating requirements and the ability to close out market positions. Extraordinary conditions on the financial markets may, however, temporarily restrict the possibility to liquidate certain financial assets.

Dilution risks In connection with its incentive strategy for its employees and members of management or supervisory bodies, the Company has regularly granted or issued stock options, free shares and equity warrants, since it was created. Valneva SE has also implemented Equity Lines. In the future, the Group may grant or issue new securities carrying the right to receive shares.

The exercise or conversion of dilutive instruments giving access to the share capital, any award or new issue of such instruments, or any capital increase through private placement would result in a significant dilution of shareholders’ interests. Indeed, the exercise or conversion of all dilutive instruments would have a dilutive effective of 18.01% on Valneva SE’s share capital (including a dilution of 4.52% with respect to the convertible preferred shares)15. However, it is unlikely that all dilutive instruments will be exercised or converted.

15 These rates are calculated in reference to (i) a share capital of 92,106,952 Valneva SE shares, and (ii) the total number of

16,584,444 Valneva SE ordinary shares resulting from the exercise or conversion of all dilutive instruments at



Risks of impairment of intangible assets Impairment of intangible assets could lead to substantial losses in the Group’s accounts. The Group’s balance sheet includes significant intangible assets from projects and technologies under development and which were acquired during business combinations. In 2017, the Clostridium difficile intangible asset amounting to €3,560 thousand was fully impaired as a result of GSK opting out from the program and of the unsuccessful attempts to find alternative co-development partners. If the Group is unable to successfully develop or partner its projects and technologies and to generate future cash flows from them, it may in such case never have the opportunity to recover the sums invested to acquire its assets, thereby compromising their value. Such impairment of intangible assets would result in substantial losses in the Group's accounts.

Risks of losing tax deficits In the future, the Group may not be able to use its tax-loss carryforwards and may therefore be obliged to pay higher taxes than expected and/or to reimburse tax credits16.

Risks related to the effects of climate change17 Extreme weather events are expected to happen more often in future and pose a threat to the manufacturing and supply of the Group’s products. Employees working in manufacturing plants may have problems going to work. Transportation disruption may restrict or prevent the timely receipt of materials from suppliers, the maintenance of equipment and the supply of products to customers. A natural disaster or a major interruption of electricity, water or other basic supply can restrict or prevent manufacturing and supply activities. Further, the possible combination of these problems with other manufacturing problems (e.g. out-of-spec product lots or insufficient yields) can have tremendous effects, including product shortages.

On its manufacturing sites, the Group has taken steps to minimize these risks: buffer stocks, engineering spare parts stores, emergency power supply (diesel generators), disaster recovery plans. The Group has also reduced its CO2 emissions over the last three years.

Risks related to patents and similar rights Approximately 20% of the Group's patent portfolio relating to its technologies and products consists of pending patent applications. No assurance can be given that these applications will lead to patents or that, if patents are granted, they will not be challenged, declared invalid, or bypassed, or that they will provide effective protection against competition. No assurance can also be given that third party patents do not cover the technologies used by Valneva. The absence of sufficiently broad protection and the invalidation or bypassing of patents could have a negative impact on the Group. In addition, the Group’s commercial success depends on its ability to develop products and technologies that do not infringe on the patents of competitors or other third parties. The Group cannot be certain that it is the first to design an invention and file a patent application, especially given that publication of patent applications takes place 18 months after filing in most countries.

February 28, 2019 (including 4,160,454 Valneva SE ordinary shares resulting from the conversion of the existing convertible preferred shares).

16 See Note 5.10.2 to the Group’s consolidated financial statements for the fiscal year 2018, in Section D.1 of the Company’s Registration Document 2018.

17 More information can be found in the Corporate Social Responsiblity Report, in Section 17 of this Annual Management Report.



It is important for the success of its business that the Group be able to obtain, maintain and ensure compliance with its patents and intellectual property rights in Europe, the United States and other countries. However, it cannot be ruled out the possibility that:

+ the Group fails to develop patentable inventions; + patents issued or licensed to the Group or its partners are challenged and held to be invalid,

or the Group cannot enforce them; + patent applications do not result in granted patents; + the scope of protection conferred by a patent could be insufficient to protect the Group against

infringements or competition; + third parties claim rights to products, patents or other intellectual property owned or licensed

by the Group; + third party patents cover the technologies used by Valneva or the products made or sold by

Valneva.

Granting of a patent does not guarantee its validity or permitted use. Actions in court or at the relevant offices may prove necessary to ensure compliance with the Group's intellectual property rights, protect its trade secrets, or determine the validity and scope of its intellectual property rights. Any dispute could result in considerable expenses being incurred, reduce the profits of the Group and fail to provide the protection or freedom to operate sought. The Group’s competitors may successfully challenge the validity or scope of these patents. This could reduce the scope of these patents. In addition, patents may be successfully infringed or bypassed. As a result, the rights of the Group to issued patents may not provide the expected protection against competitors.

The issue of patents in the field of biology is highly complex and involves a range of legal, scientific and factual issues. Although there is a general trend toward standardization of the approach in the area of patents relating to the patentability of inventions in the field of cells and their uses by the three main global patent bodies in the United States, Europe and Japan, there is still some uncertainty in this area, particularly as regards the interpretation of the scope of the claims that may be granted, an issue that is still governed by national law.

Moreover, developments or changes in interpretation of the laws governing intellectual property in Europe, the United States or other countries could allow competitors to use the Group’s findings, or to develop or market Valneva products and technologies without financial compensation. The laws of certain countries do not protect intellectual property rights in the same way as in Europe or the United States, and procedures and rules necessary to defend Valneva’s rights may not exist in these countries.

If the Group’s efforts to protect its intellectual property rights are insufficient, competitors could use the technologies developed by the Group to create competing products, reduce or eliminate the Group’s competitive advantage and take all or part of the Group’s target market share.

Dependence on third parties and access to certain technologies The Group has obtained licenses for certain technologies and products used in specific projects or products. No assurance can be given that the in-licensed patents and patent applications will not be challenged, declared invalid, or bypassed, or that they will provide effective protection against competition. In addition, Valneva actively monitors the intellectual property situation of its projects and businesses, in particular that of its pipeline products, and is aware that it may be necessary to obtain additional licenses on third-party patents. If such licenses cannot be obtained on acceptable terms, Valneva may not be able to pursue certain developments and market selected products. Also, licensors may be entitled to terminate the agreements if Valneva fails to meet its contractual



obligations. Finally, clauses may contain terms and conditions of implementation that vary, depending on the contract.

The following core technologies and products of the Group are currently or were recently subject to third party licenses or patents:

+ the Group’s Japanese encephalitis marketed vaccine was developed by the Cheil Jedang Corporation, VaccGen International LLC and the Walter Reed Army Institute of Research (a research laboratory within the U.S. Department of Defense). The Group was subsequently granted an authorization to develop, manufacture, distribute, market and otherwise commercially exploit its Japanese encephalitis vaccine worldwide, except for the Caribbean. The Group has not detected any other third party patent or patent application that may interfere with the development and commercialization of its Japanese encephalitis vaccine. However, for the reasons previously explained, this does not give full certainty that no third party rights may be infringed;

+ Valneva’s vaccine candidate against Clostridium difficile might be within the scope of claims of a GSK European patent. Valneva started opposition proceedings against that patent18, which has now been revoked by a first instance decision. Valneva believes it is likely to prevail on appeal; however, if eventually that was not true, Valneva would have to negotiate a license.

The termination of a license, the Group's inability to obtain licenses, or the ineffectiveness of such a license as previously explained could have a material adverse effect on the Group’s business.

Specific risks related to third-party patents and intellectual property rights As the biotechnology industry grows, new patents on technologies and products are granted. The probability, therefore, increases of seeing the Group's technologies and products face risks of infringing third party patents, particularly patents covering new techniques for the production of viral vaccines or recombinant proteins, the specific elements of these techniques or the use of the platform for screening compounds of interest, particularly for therapeutic purposes. Legal action could thus be brought against the Group or its partners, which could entail substantial costs.

If proceedings continue for their full term, the Group may be forced to stop or delay research, development, manufacture or sale of products or processes, which would have a material impact on its operations.

Any action brought against the Group seeking payment of damages or to stop its operations in manufacturing or marketing products or processes thereby called into question, or even requiring it to request a license from a third party to be able to continue its activities, may have a negative impact on the prospects and the finances of the Group. There is no guarantee that the Group could successfully defend its position or obtain a license under economically acceptable terms.

Many lawsuits for infringement of intellectual property rights are filed in the pharmaceutical and biotechnology industry. In addition to proceedings brought directly against the Group, the latter could be party to litigation or new opposition proceedings before the European Patent Office or interference proceedings at the U.S. Patent and Trade mark Office relating to the intellectual property rights for its products and technologies. Even in the event of a favorable ruling, defense costs could be substantial. Some Valneva competitors have much greater resources and could more easily bear the costs of complex litigation. Proceedings or disputes of this kind could also be very time-consuming as far as the managers of the Group are concerned. The uncertainty surrounding how to proceed in the event of a dispute could have a material adverse effect on the Group's competitiveness.

18 See Section A 3.3 (b) of the Company’s Registration Document 2018.



The Group’s efforts to avoid infringing and defend its rights against third parties regarding intellectual property could also be costly and, if unsuccessful, could lead to the restriction or prohibition of the marketing of its product candidates or its licensed products, or could require the Group to redesign its product candidates.

The Group may be unable to generate revenue from products based on its technologies or from its own products, if a third party does not grant the Group or its licensees the required license, or if it offers such a license on financially unacceptable terms. The Group may then have to modify its potential technologies and products, or avoid/stop certain activities. The licensees of the Group may face exactly the same problems.

If one or more of these risks were realized, it could have a material impact on the Group's business, results, financial position, and prospects.

Risks related to the Group’s trademarks The trademarks of the Group are important elements of the identity of the Group and of its products. Although all major trademarks were filed in the Group’s current markets and in countries where future sales are expected, other companies in the pharmaceutical industry could use or attempt to use parts of these marks, causing confusion for third parties. Also, it is possible, especially in new marketing territories, that Valneva’s trademarks are invalidated by reason of prior filings.

Risks related to potential conflicts with licensees, partners and distributors The Group has granted licenses to use its EB66® platform and its IC31® adjuvant, as well as distribution rights for its vaccines. The Group may have difficulties collecting the amounts owed by its licensees, distributors and partners. The Group may have to spend large sums to recover these amounts due or may not be able to recover them at all.

Risks related to the inability to protect the trade secrets, know-how and confidential information of the Group The Group regularly provides information and biological samples to public and private entities for the purpose of conducting tests for research or signing off on commercial projects. In both cases, the Group relies on the use of confidentiality agreements. Its business also depends on its proprietary unpatented technologies, processes, know-how and data that the Group considers to be trade secrets, some of which it protects by entering into confidentiality agreements with its employees, consultants, and certain partners and subcontractors. It cannot be ruled out that these agreements or other means of protecting trade secrets will fail to provide the protection sought, or will be breached, or that the Group will not have any appropriate solutions to combat such breaches, or that its trade secrets will be disclosed to its competitors or developed independently by them.


Risks relating to product liability (M) The Group is exposed to risk of claims and potential liability for defective products in clinical trials on product candidates and in the marketing and sale of its vaccines. The Group’s product and clinical trial liability insurance may not be sufficient, and the Group may be held liable for the use of these product candidates in clinical trials or the sale of current or future products. This could pose a serious threat to its activities, earnings, financial situation and prospects. In the future, this type of insurance may no longer be available at reasonable prices.



Disputes Following the merger between the companies Vivalis SA and Intercell AG, some former Intercell shareholders initiated legal proceedings before the Commercial Court of Vienna to revise the amount of compensation offered to existing shareholders, or the exchange ratio between Intercell and Valneva shares. If the court decides to increase the financial compensation, every former Intercell shareholder who opted for financial compensation instead of exchange would be entitled to an increase, even if he or she was not a party to the dispute. If the court decides to revise the exchange ratio, there is legal uncertainty as to whether the court could extend this revision to all former Intercell shareholders who exchanged their shares, even if they were not party to the dispute. There is therefore a risk that Valneva will be forced to compensate all former shareholders following the reevaluation of the exchange ratio. If so, these payments could have a material adverse effect on Valneva’s activities, earnings and prospects. Nevertheless, in 2016 and 2017, settlement agreements were executed with some Intercell shareholders who had held a small number of shares, which has decreased the risks associated to these proceedings. However, to date, no settlement agreement has been entered into with former shareholders who, among the claimants, held a high number of shares.

In July 2016, the Company received a request for an additional payment, with a threat of lawsuit, in connection with the acquisition of the company “Humalys SAS” in 2009, a transaction by which Vivalis SA (now Valneva SE) acquired a technology that was further combined with another antibody discovery technology and contributed to the company BliNK Biomedical SAS at the beginning of 201519. The former Humalys shareholders claimed an additional payment because of this transfer. This request was followed in late 2016 by a summons to appear before the Lyon High Court (Tribunal de Grande Instance). A first instance decision is expected during the year 2019. The Company, after consultation with its external legal advisors, believes that this claim is unsubstantiated and this lawsuit is unlikely to succeed in court20.

The Company has no knowledge of any other governmental, legal or arbitration proceedings (including pending or threatening litigation of which the Company has knowledge) that in future might have or in the last 12 months had a material impact on the financial position or profitability of the Company or the Group.

Risks relating to the sourcing of genetic resources The Nagoya Protocol on access to genetic resources and the fair and equitable sharing of benefits arising from their utilization to the convention on biological diversity (the “Nagoya Protocol”) is an international agreement, effective since October 12, 2014, which aims at sharing the benefits arising from the utilization of genetic resources with originating countries in a fair and equitable way. The Nagoya Protocol may apply, for example, to the use of pathogens in developing a vaccine. At the date of this Annual Management Report, there are uncertainties regarding the interpretation and implementation of the Nagoya Protocol and the associated European Regulations (N° 511/2014 and 2015/1866), and not all contracting parties have yet issued detailed national rules as a result of their obligations under this treaty. If Valneva is unable to comply or prove compliance with the rules of the Nagoya Protocol and the legislation derived therefrom, it may be prevented from seeking grants and filing applications for patents or marketing authorizations and may have to pay fines. Valneva is monitoring the implementation of the Nagoya Protocol and has created an internal procedure aiming at minimizing these risks.

19 See Section 1.2 (c) of this Annual Management Report. 20 No provision was made in the Group’s accounts with respect to this litigation.



Risks relating to ethical, legal or social problems regarding the use of genetic technologies and animal materials that may affect regulatory approvals, patentability or market acceptance of the Group's technology Success in marketing the Group's technologies and products partly depends on market acceptance of its technologies and products for the prevention or treatment of diseases affecting people and animals. Using genetic technologies and materials of animal origin could raise ethical, legal or social problems, and could therefore affect the success of the marketing of the Group's technologies and products.


Risks relating to compliance requirements and contractual obligations (M) Valneva operates its business in a complex regulatory environment, with multiple national peculiarities, and does not have the same resources as large companies in this industry. Further, Valneva is a party to numerous contracts. The violation of contractual or regulatory obligations could result in serious adverse consequences on Valneva’s reputation, financial standing, future development and prospects. To mitigate this risk, Valneva has set up a compliance program and contract management procedures.

Currency risks The Group operates internationally and is exposed to foreign exchange risks arising from various currencies, primarily with respect to the British Pound (GBP), the Canadian Dollar (CAD), the Swedish Krona (SEK) and the U.S. Dollar ($). The foreign exchange risks from exposure to other currencies, including the Danish Krone, the Swiss Franc, the Norwegian Krone, and the Japanese Yen, is relatively limited.

Foreign exchange risks arise from future commercial transactions, recognized assets and liabilities, and net investments in foreign operations.

The objective of the Group is to limit the potential negative impact of the foreign exchange rate changes, for example by currency conversion of cash and cash equivalents denominated in foreign currency and by using foreign currency options.

In 2018, the Group entered into various foreign currency option contracts to limit the risk of foreign currency losses on expected future cash flows21.

Interest rate risks and credit risks The Group is exposed to market risks in connection with hedging both of its liquid assets and of its medium and long-term indebtedness and borrowings subject to variable interest rates.

Borrowings issued at variable rate expose the Group to cash flow interest rate risks, which is offset by cash and financial assets held at variable rate. During 2017 and 2018, the Group’s investments at variable rate, as well as the borrowings at variable rate, were denominated in €, SEK, $ and in GBP.

The Group is exposed to credit risks. Valneva holds bank accounts, cash balances, and securities at sound financial institutions with high credit ratings. To monitor the credit quality of its counterparts, the Group relies on credit ratings as published by specialized rating agencies such as Standard & Poor’s, Moody’s, and Fitch. The Group has policies that limit the amount of credit exposure to any single financial institution. The Group is also exposed to credit risks from its trade debtors, as its

21 For additional information on foreign exchange risks, please refer to Note 5.2.5 (b) to the Group’s consolidated financial

statements for the fiscal year 2018, in Section D.1 of the Company’s Registration Document 2018.



collaborations, licensing and services income arises from a small number of transactions. The Group has policies in place to enter into such transactions only with highly reputable, financially sound counterparts. If customers are independently rated, these ratings are used. Otherwise, when there is no independent rating, a risk assessment of the credit quality of the customer is performed, taking into account its financial position, past payment experience, and other relevant factors. Individual credit limits are set based on internal or external ratings in accordance with signature authority limits as set by the Management Board22.

Share price risk The Company is not exposed to a risk on the price of its own shares except (i) with respect to the treasury shares resulting from the merger process23, and (ii) the liquidity contract with Oddo BHF24.

11. INTERNAL CONTROL PROCEDURES RELATING TO OPERATING AND FUNCTIONAL PROCESSES

This Section applies to Valneva SE and all of its direct or indirect subsidiaries within Valneva’s consolidation scope, unless otherwise stated.

Purpose of internal control procedures and inherent limitations The purpose of internal control is to ensure:

+ compliance with laws and regulations; + the application of instructions and priorities set by the Management Board; and + the effective functioning of internal control procedures of the Group, notably contributing to

safeguarding its assets; + the reliability of the financial information.

The objective of the internal control system is to prevent and manage risks inherent in the Group's operations and the risks of errors or fraud, particularly in the accounting and finance areas. As in all systems of control, it cannot provide an absolute guarantee of eliminating these risks.

General organization and implementation of internal control procedures Given the size of the Group, Valneva does not currently have a dedicated internal control department. In contrast, a number of parties are responsible for or involved in the area of internal control, including first and foremost, the Management Board, the Supervisory Board and the Audit and Governance Committee. In addition, the Management Committee, the Finance Department, the Legal Department, and the Quality Assurance team also play a major role.

The Management Board The Management Board defines the objectives of the Group, as well as the resources to be deployed to attain these objectives. To this purpose, the Management Board ensures compliance with these objectives.

The Management Board must ensure that acts of management or the conduct of operations, as well as the behavior of personnel, adhere to the framework defined by the priorities set for the Group's

22 For a description of the credit quality of financial assets, please refer to Note 5.16.3 to the Group’s consolidated financial

statements for the fiscal year 2018, in Section D.1 of the Company’s Registration Document 2018. 23 See Section 13.2 of this Annual Management Report. 24 See Section 13.1 of this Annual Management Report.



activities by the corporate bodies, the applicable laws and regulations and the values, standards and internal rules of the Group.

The Supervisory Board The role of the Supervisory Board in the area of internal control is presented in the Report by the Supervisory Board on the Corporate Governance for the fiscal year 201825. The Supervisory Board is assisted in this area by the Audit and Governance Committee.

The Management Committee The Management Committee currently includes fourteen members:

+ Mr. Thomas Lingelbach, President & CEO; + Mr. Franck Grimaud, President & CBO; + Mr. Wolfgang Bender, CMO; + Mr. David Lawrence, CFO; + Mr. Frédéric Jacotot, General Counsel & Corporate Secretary; + Mr. Jason Golan, VP Commercial Operations; + Mr. Olivier Jankowitsch, VP Global Supply Operations; + Mr. Andreas Meinke, VP Preclinical and Translational Research; + Mr. Michael Möhlen, VP Corporate Technical Development; + Mr. Klaus Schwamborn, VP Discovery Research & Innovation; + Ms. Frances Muir, Site Director Livingston; + Ms. Janet Hoogstraate, Chairman of the Management Board of Valneva Sweden AB; + Mr. Manfred Tiefenbacher, VP Finance; and + Mr. Gerald Strohmaier, Human Resources.

The Management Committee is chaired by the CEO, Mr. Thomas Lingelbach.

The Management Committee complements the Management Board by providing input on the development and execution of Valneva’s business strategy.

The Management Committee is a senior management body holistically overseeing cross-functional and cross-site alignment. The alignment includes capabilities, objectives and operational oversight across all areas of the business. Further, the Management Committee provides input on, and supports the implementation of, Group-wide initiatives in any areas including organizational development, business effectiveness, stakeholder management and compliance culture.

The Management Committee meets every 6 weeks. At the end of each meeting, meeting minutes are drafted and given to all participants with a list of action points.

The Finance Department The Chief Financial Officer ensures compliance with accounting and financial regulations. He also provides the Management Board with cost accounting and financial information serving as tools for the budget management of the Group.

25 See Section 1.3 (b), in Section B of the Company’s Registration Document 2018.



The Legal Department The General Counsel, also serving as Corporate Compliance Officer, is responsible for safeguarding Valneva's legal interests and ensuring compliance with applicable laws and regulations, notably by implementing and updating the Group’s corporate compliance program.

Quality Assurance Valneva manufactures vaccines in commercial stage, vaccines in pre-clinical phase and clinical batches of vaccines and proteins. Valneva also manufactures master cell or virus banks. For this purpose, Valneva must comply with regulations developed by several governmental authorities and is subject to inspections by regulatory authorities.

To ensure compliance with the regulatory requirements, Valneva has a Quality Assurance Department and quality assurance systems.

In compliance with Good Manufacturing Practice, internal and external audits are conducted to ensure compliance with GMP and implementation of the relevant procedures.

Internal control procedures

Analysis of risks Valneva has conducted an in-depth analysis of its risks. The risks Valneva faces are described in this Annual Management Report26.

Internal control procedures implemented, other than those relating to the production of accounting and financial information Procedures are established to ensure that the main risks are managed internally in accordance with the objectives defined by the Management Board.

In respect of business-related risks, telephone meetings involving Department Heads and the Risk Manager are organized. With respect to scientific matters, the Group also retains the services of consultants on certain specific topics to validate its choices.

Concerning intellectual property risks, the Group has an “Intellectual Property Manager” that ensures permanent oversight, notably by conducting reviews of the status of intellectual property with the assistance of specialized firms. For every new activity launched within the Group, studies are conducted. Studies are also conducted regularly for the older technologies. This way, it is possible to determine if there is a need to acquire new licenses.

As an additional measure, the Group has insurance policies covering the main insurable risks for amounts that it deems to be compatible with the nature of its business. For example, risks related to product liability are covered up to €40.0 million.

The Group also safeguards its property and intangible assets. It has established systems for the double storage of data and cells at different sites.

For market and financial risks, the Group monitors its cash position on a monthly basis.

In the light of current volatility in financial markets, the Group applies a conservative and prudent strategy of financial management. Its assets are allocated among several French, UK, Austrian, Canadian, US and Swedish banking institutions with call money and fixed-term accounts.

26 See Section 10.



Internal control procedures relating to the preparation of accounting and financial information

Internal control objectives relating to accounting and financial information Internal control procedures relating to the processing of accounting and financial information are aiming at ensuring:

+ the reliability of the Company’s separate financial statements established in accordance with French GAAP;

+ the reliability of the Group’s consolidated financial statements established in accordance with IFRS; and

+ effective management of risks of errors, fraud, inaccuracies or omissions of material information in the financial statements concerning the financial position and the assets and liabilities of the Group.

Participants Internal control relating to accounting and financial information involves the Management Board, the Finance Department, under the oversight of the Supervisory Board and the Audit and Governance Committee.

The accounting and financial organization is based on the principle of the separation of functions and the knowledge of the responsibilities of each function.

The separation of functions is effective as the Finance Department is split into Accounting and Controlling function, whereas the Purchasing Department is a separate department.

In the Group's smaller entities, it is not possible to separate functions and a single person is responsible for accounting, payroll and management control.

Concerning the definition and documentation of the responsibilities of each, an organizational chart exists with a description of each function. In addition, a number of procedures exist, particularly in the area of purchasing.

Forward-looking management tools The long-term business plan is an internal document drafted by the Management Board. Its purpose is to define the objectives of the Group over a period of several years with a breakdown of specific objectives for each activity. It is updated on a regular basis in the light of decisions concerning strategic priorities and market developments.

The budget is established according to IFRS after the Management Board has defined the strategic priorities. Every year, the Controlling Department meets with all sales managers, department managers and project leaders. The controlling function then gives the different options to the Management Board. The Management Board, according to the priorities developed in the business plan, makes choices concerning operating expenses, capital expenditure and Human Resources. This budget is initially presented to the Management Committee and submitted for final approval to the Supervisory Board.

Twice a year, or more often in case of significant events, the Controlling Department drives a forecast process based on the last actual quarterly results and prepares a bottom-up forecast for the remaining months of the current fiscal year, with the same granularity as in the initial budget process. The related profit and loss and cash position forecasts are presented to the Management Committee and then submitted to the Supervisory Board for information.



The Supervisory Board is informed about the profit and loss statement and cash position on a monthly basis, and is given a detailed presentation of the profit and loss statement and cash position in comparison to the budget in quarterly meetings.

All these documents are for internal use only and are not available to the public.

Quarterly reporting: intermediate balances Every month, the Finance Department produces an IFRS statement of intermediate balances in accordance with IAS 34 and applies the general principles for periodic closings. These intermediate balances are also presented in a cost accounting format by segment to serve as a tool for monitoring business performances.

A schedule for producing monthly balances is drafted by Valneva’s Finance Department and the Accounting Departments of the subsidiaries including a breakdown of tasks, the party responsible for each task and deadlines for completion. The deadlines for the remittance of documents according to this schedule are validated by all parties.

Intermediate balances are established by combining information from financial and cost accounting data. For cost accounting data, the Controlling Department has different software applications to record the amount of time worked by each employee, and a software application for the allocation of costs to projects.

Intermediate monthly financial reports are provided to each manager and department Head for his or her area of responsibility, and to the Management Committee, the Management Board and the Supervisory Board, thus providing a tool to monitor actual results in relation to the budget.

All these documents are for internal use only and are not available to the public.

From 2016 onward, the Company has prepared the documents required by law in connection with the prevention of financial problems. These documents are for internal use only (including the French Works Council and the Statutory Auditors) and are not available to the public. In accordance with applicable law, these documents only relate to the parent entity “Valneva SE” and do not include any subsidiary.

Preparation of financial statements

Participants

The annual separate financial statements are prepared by the Head of Accounting in France, while the annual consolidated financial statements and the interim consolidated financial statements are prepared under IFRS rules by Valneva’s Head of Corporate Accounting and Tax, as well as the Accounting Departments of the Group’s entities.

For tax matters, the team also uses tax lawyers that primarily provide advice in the following areas:

+ tax matters, tax techniques or the interpretation of regulations; + assessment of year-end tax statements prepared by the Accounting Department (statement

2065 and related schedules).

Information collection and processing

Information is collected in the same way as for intermediate balances.

For the annual consolidated and separate financial statements, a work program for tasks is drafted by the Valneva’s Finance Department providing a detailed breakdown of tasks, the party responsible for each task and deadlines for completion. The deadlines for the remittance of documents according to this schedule are validated by all parties.



The Finance Department also drafts a document listing all points that need to be verified to identify risks and avoid any risk of fraud or errors.

Furthermore, accounting topics of the current year (for example the treatment of development expenditure and the amortization of capitalized development expenditure, the interpretation of complex material contracts as well as price-related aspects of acquisitions) are discussed in meetings organized prior to the closing of annual and interim financial statements. This is also the case for changes in accounting principles that would have a material impact on the presentation of financial statements. These accounting topics are addressed immediately to the Statutory Auditors.

The consolidated financial statements of the Valneva Group and the separate financial statements are audited by the Joint Statutory Auditors, Deloitte et Associés, and PricewaterhouseCoopers.

The interim financial statements are subject to a limited review by the Joint Statutory Auditors. The quarterly financial statements are not reviewed by the Joint Statutory Auditors.

Accounting and financial information systems

All entities, including Valneva Sweden AB, maintain their accounting information on the Microsoft Dynamics AX 2012 ERP system.

AX interfaces with the payroll, the cash management software and the BI-Tool, TAGETIK, which is used for controlling. Valneva performs regular reconciliations between these different applications.

Fixed assets, depreciation and amortization as well as supplier invoices have been recorded through the ERP system AX.

At year-end, AX accounting data for the Valneva SE entity is then transferred to the "États Comptables et Fiscaux" software application of SAGE in order to:

+ establish separate annual financial statements under French GAAP on the basis of the official format;

+ establish the 2065 tax declaration and the related schedules; and + electronically transmit the tax statement.

Computer data is regularly backed up and stored on magnetic tapes that are themselves stored for safekeeping in a safe.

As for source data (contracts, minutes, etc.), an original and a copy exist for each document. A copy of each of these documents is maintained at one of the Valneva sites (generally, at the site concerned by such document), while copies are shared through the internal network of the Group (with restricted access).

Identification and analysis of risk affecting accounting and financial information

When the financial statements are prepared, the Finance Department follows a document listing all tasks, operations and controls that need to be verified to identify risks and avoid any risk of fraud or errors.

In addition, Valneva has documented the key processes by identifying the key controls.

Oversight

Valneva carries out normal oversight, for example on account closings, such as conducting stock counts or performing bank reconciliations.

Valneva has a matrix for authorizing purchases and invoices and has documented the key processes by identifying the key controls.



Other accounting and financial information destined for shareholders

In connection with special corporate actions (issuance of stock options, exercise of the corresponding rights, capital increases, etc.), it may be necessary to provide shareholders with accounting and financial information. This information is, according to its nature and the specific obligations that apply to the operation in question, prepared in coordination with Valneva’s Management Board and the General Counsel, and incorporated in statutory documents.

These operations are frequently subject to a report of the Joint Statutory Auditors and/or an Equity Auditor.

Financial and accounting communication

The Finance and Legal Departments have established a schedule for the publication of mandatory disclosures.

The Registration Document is drafted jointly by the Legal, Finance and Corporate Communications Departments, with input from other functions, including Marketing & Sales, then reviewed by the Company's Statutory Auditors.

12. SHARE CAPITAL DISTRIBUTION At December 31, 2018, the Company's share capital stood at €13,816,042.74 and was divided into:

+ 90,917,048 ordinary shares (ISIN FR0004056851) with a nominal value of €0.15 each; + 17,836,719 preferred shares (ISIN FR0011472943) with a nominal value of €0.01 each; and + 789 convertible preferred shares (ISIN XFCS00X0I9M1), with a nominal value of €0.15 each.

These shares were all fully paid-up.

The theoretical number of corresponding voting rights (including voting rights having been suspended, such as those associated with treasury shares, as well as double voting rights) amounted to 112,135,207.

Company’s shareholding structure at December 31, 2018

(End of business day, to the Company’s knowledge)

(a) Percentages in this table are calculated in reference to a share capital of 92,106,952 Valneva SE shares, divided into (a) 90,917,048 ordinary shares (ISIN FR0004056851) with a nominal value of €0.15 each, (b) 17,836,719 preferred shares (ISIN FR0011472943) with a nominal value of €0.01 each, written down to a nominal value of €0.15, and (c) 789 convertible preferred shares (ISIN XFCS00X0I9M1), with a nominal value of €0.15 each.

(b) The "Groupe Familial Grimaud" is comprised of the company Groupe Grimaud La Corbière SA, the private shareholders of the Grimaud family and the company Financière Grand Champ SAS.

Ordinary shares Preferred shares Convertible preferred shares

Theoretical voting rights %

13,704,830 0 0 14.88 25,809,660 23.027,456,785 0 0 8.10 14,913,570 13.30

MVM Funds (MVM IV LP & MVM GP (No.4) Scottish LP) 6,651,139 197,768 0 7.44 6,651,139 5.93Total Management Board members 626,978 238 593 0.68 1,104,765 0.98Mr. Franck Grimaud 482,589 0 218 0.52 960,376 0.86Mr. Thomas Lingelbach 129,983 238 308 0.14 129,983 0.12Mr. Frédéric Jacotot 4,802 0 67 0.01 4,802 0.00Mr. David Lawrence 4,802 0 0 0.01 4,802 0.00Mr. Wolfgang Bender 4,802 0 0 0.01 4,802 0.00

105,071 10 196 0.11 202,503 0.181,173,319 1,469 0 1.27 2,254,644 2.01

Mr. Alain Munoz 41,800 0 0 0.05 83,600 0.07Mr. James Sulat 17,867 0 0 0.02 35,734 0.03Mr. Alexander Von Gabain 38,218 1,469 0 0.04 38,218 0.03

61,198,926 989,630 0 67.52 61,198,926 54.5890,917,048 1,189,115 789 100 112,135,207 100

100 112,135,207 100

SUBTOTAL BY CATEGORY

TOTAL 92,106,952

0.79 1,413,800 1.26Supervisory Board) and Financière Grand Champ SAS (b)

Including independent members of the Supervisory Board

Other floating capital

Employees (non-corporate officers)Other shareholders (private individuals)Including members of the Grimaud family (including Mr. Frédéric Grimaud, Chairman of the

724,899 0 0

Management Board members

Shareholders

Shares held (a)

%

Groupe Grimaud La Corbière SA (b)Bpifrance Participations SA



13. SHARE BUYBACKS

The General Meeting of the Company held on June 28, 2018 authorized the Company to implement a share buyback program valid for a term of 18 months (resolution No. 12).

Therefore, during the fiscal year 2018, the Company proceeded with share buybacks in connection with a liquidity agreement (executed with the company Natixis for the period between January 1, 2018 and June 30, 2018, then with the company Oddo BHF for the period between July 2, 2018 and December 31, 201827). The purpose of this agreement is to ensure the liquidity and orderly trading of the Company's shares.

***

Pursuant to article L. 225-209 of the French Commercial code and the liquidity agreement managed by Natixis between January 1, 2018 and June 30, 2018, the Company acquired 500,348 Valneva SE ordinary shares and sold 485,556 Valneva SE ordinary shares for a weighted average purchase price of €3.63 per share and a weighted average sale price of €3.60 per share.

Pursuant to the liquidity agreement managed by Oddo BHF between July 2, 2018 and December 31, 2018, the Company acquired 534,940 Valneva SE ordinary shares and sold 541,144 Valneva SE ordinary shares for a weighted average purchase price of €3.65 per share and a weighted average sale price of €3.69 per share. By way of comparison, the weighted average price of Valneva SE ordinary shares purchased under the Company's liquidity agreement during the fiscal year 2017 was €2.83. The weighted average price of the Valneva SE ordinary shares sold was €2.86.

Valneva SE did not pay any execution fees.

At December 31, 2018, the Company held, in connection with this liquidity agreement, 72,788 Valneva SE ordinary shares (or 0.08%28 of the share capital - equivalent figure at December 31, 2017), corresponding to an amount on the closing date of December 31, 2018 of €230,737.96 (€10,918.20 in nominal value29).

At December 31, 2018, the Company held 124,332 own ordinary shares with a nominal value of €0.15 per share, and the same number of preferred shares with a nominal value of €0.01. These shares were acquired by the Company through a share buyback related to the merger with Intercell AG and the “Exit Right” offered to the latter’s shareholders, combined with the simultaneous implementation of consideration for the merger, as defined in article 3 of the Merger Agreement in its December 16, 2012 version.

Implementation of the Exit Right In accordance with applicable Austrian legislation, Intercell AG shareholders who objected to the resolutions concerning approval of the merger and Merger Agreement at the Intercell General Meeting

27 See Section 2.8 of this Annual Management Report. 28 This rate is calculated in reference to a share capital totaling 92,106,952 Valneva SE shares, divided into (a) 90,917,048

ordinary shares (ISIN FR0004056851) with a nominal value of €0.15 each, (b) 17,836,719 preferred shares (ISIN FR0011472943) with a nominal value of €0.01 each, written down to a nominal value of €0.15, and (c) 789 convertible preferred shares (ISIN XFCS00X0I9M1), with a nominal value of €0.15 each.

29 The nominal value of a Valneva SE ordinary share amounts to €0.15.



during which they were asked to express their position on the transaction, were granted an “Exit Right” consisting of financial compensation paid by the acquiring company in exchange for their Intercell shares.

This financial compensation, applicable to a maximum number of 4,138,800 Intercell shares, was set at €1.69 per existing Intercell share, therefore implying a maximum global amount of compensation of €6,994,572.

The company Erste Group Bank AG was appointed as receiver such that, at the completion of the merger, it would:

+ receive the shares held by exiting Intercell shareholders; + receive the new Valneva SE ordinary shares and preferred shares to which the exiting

Intercell shareholders would have been entitled had they not exercised their Exit Right; + sell these new ordinary shares preferred shares to Valneva SE at a price equal to or greater

than the amount of the financial compensation offered in place of said new ordinary shares and preferred shares;

+ receive the proceeds from the sale of new ordinary shares and preferred shares to Valneva SE;

+ if necessary, withdraw from the bank guarantee established as security the total amount of the financial compensation requested by exiting Intercell shareholders; and

+ pay the financial compensation.

At the time of the merger, the Company had to buyback nearly 382,529 ordinary shares from exiting Intercell shareholders, under the share buyback program implemented by Valneva pursuant to the authorization given by its Combined General Meeting of March 7, 2013.

Terms of consideration for the merger, as defined in the Merger Agreement As consideration for the contribution by the acquired company, Intercell AG, of the totality of its assets and liabilities to the acquiring company, Vivalis, the Merger Agreement set out that Intercell shareholders would receive new ordinary shares and preferred shares of the acquiring company in exchange for their shares. The shares would be exchanged at the time of the merger and at a ratio calculated according to the valuation given to the shares of each company party to the merger.

The exchange ratio offered to shareholders of the acquiring company and the acquired company under the merger was set at 13 new ordinary shares and 13 preferred shares of the acquiring company, for 40 shares of the acquired company.

As Valneva SE acquired nearly 382,529 ordinary Intercell shares following implementation of the Exit Right of exiting Intercell shareholders, the Company was granted a total of 124,322 Valneva SE ordinary shares, as well as 124,322 Valneva SE preferred shares.

As stated in the press release published on June 2, 201630 and in accordance with the Company’s Articles of Association31, Valneva SE’s preferred shares (ISIN FR0011472943) which were issued in the 2013 merger with Intercell AG32, are expected to be redeemed at their nominal value of €0.01 per preferred share in June 2020, as the Company no longer expects approval of the Pseudomonas

30 https://www.valneva.com/en/investisseurs-media/news/2016 31 Article 13.3, subsection 3., (i). 32 See the previous paragraph entitled "Terms of consideration for the merger, as defined in the Merger Agreement”

https://www.valneva.com/en/investisseurs-media/news/2016



vaccine within their seven-year term (which would have led to conversion into Valneva SE ordinary shares at the end of this term).

14. ADJUSTMENTS INVOLVING CAPITAL SECURITIES OR SECURITIES GIVING ACCESS TO THE COMPANY'S SHARE CAPITAL

No adjustments involving capital securities or securities giving access to the Company's share capital have been made during the fiscal year 2018.

15. EMPLOYEE STOCK OWNERSHIP33

Percentage of the Company's capital represented by employee-owned shares At December 31, 2018, total employee stock ownership (shares in registered form, excluding corporate officers) amounted to 105,277 Valneva SE shares (or 0.11%34 of the Company's share capital), as follows:

+ 105,071 ordinary shares (ISIN FR0004056851) with a nominal value of €0.15 each; + 10 preferred shares (ISIN FR0011472943) with a nominal value of €0.01 each, written down

to a nominal value of €0.15; and + 196 convertible preferred shares (ISIN XFCS00X0I9M1) with a nominal value of €0.15 each.

Options to subscribe for or purchase shares and free shares grants

15.2.1 Stock option plans of the Company The majority of the Company's employees benefits from Valneva SE stock options. However, the Company never launched any plan for stock purchase options.

At December 31, 2018, for all Company plans combined, 2,859,850 stock options were outstanding, permitting the subscription for 2,927,662 new Valneva SE ordinary shares35, representing a potential nominal increase in the share capital of €439,149.30 (or a maximum potential dilution of 3.18%36 of the Company’s share capital).

Highlights of Company stock option plans in force in 2018 are presented in the Report by the Supervisory Board on the Corporate Governance 201837.

15.2.2 Free convertible preferred share plans of the Company A description of the free convertible preferred share plans in force in 2018 is provided in the Report by the Supervisory Board on the Corporate Governance 201838.

33 Figures in this Section are all calculated at end of business day. 34 This rate is calculated in reference to a share capital totaling 92,106,952 Valneva SE shares, divided into (a) 90,917,048

ordinary shares (ISIN FR0004056851) with a nominal value of €0.15 each, (b) 17,836,719 preferred shares (ISIN FR0011472943) with a nominal value of €0.01 each, written down to a nominal value of €0.15, and (c) 789 convertible preferred shares (ISIN XFCS00X0I9M1), with a nominal value of €0.15 each.

35 Provided that all stock options become available for exercise. 36 Idem. 37 See Section 6.2.1 (c), in Section B of the Company’s Registration Document 2018. 38 Idem.



16. CORPORATE OFFICERS’ DEALINGS ON THE COMPANY’S SECURITIES In accordance with Article L. 621-18-2 of the French Monetary and financial code, the table below shows the transactions carried out by Valneva SE's corporate officers on the Company's shares during the fiscal year 2018. These transactions were carried out on Euronext Paris.

Nature of the transaction

Date Name Office Unit price (in euros)

Number of shares

Subscription of ordinary shares of Valneva SE as part of a private placement39

2018.09.27 Groupe Grimaud La Corbière SA

Legal entity linked to Mr. Frédéric Grimaud, Chairman of the Management Board of Groupe Grimaud La Corbière SA and Chairman of the Supervisory Board of Valneva SE

3.75 1,600,000




17. CORPORATE SOCIAL RESPONSIBILITY



CONTENTS

ABOUT THIS REPORT ............................................................................................. 48

MESSAGE FROM THE MANAGEMENT .................................................................. 49

BUSINESS MODEL .................................................................................................. 50

VALNEVA’S CSR APPROACH ................................................................................ 51

PROTECTING LIVES ................................................................................................ 53

ACTING ETHICALLY ................................................................................................ 58

DEVELOPING OUR PEOPLE ................................................................................... 61

ENVIRONMENT ........................................................................................................ 70

OTHER CSR INFORMATION ................................................................................... 77

THE FRAMEWORKS USED TO DRAW UP THIS REPORT .................................... 79

METHODOLOGICAL NOTE ..................................................................................... 80

DEFINITIONS ............................................................................................................ 82

INDEPENDENT AUDITOR’S REPORT .................................................................... 84



ABOUT THIS REPORT The 2018 Corporate Social Responsibility Report offers an in-depth account of Valneva’s Corporate Social Responsibility, or CSR, activities over the past year and the Company’s CSR priorities going forward.

This year, the format of the report has evolved in accordance with French Decree n° 2017-1265 of August 9, 2017. While Valneva was not required to issue a CSR report under the new law, the Company has decided to voluntarily continue its reporting for 2018. Thus, the present report describes not only the risks faced by the Company in its pursuit of sustainable growth, but also shows the counter measures put in place and Valneva’s future plans to minimize these challenges.

Valneva’s CSR strategy remains centered upon four pillars, which are reflected in the organization of this report: Protecting Lives, Acting Ethically, Developing our People, and Respecting the Environment.

The scope of reporting adopted in 2018 covers UK sites (Livingston and London), Sweden (Solna), Austria (Vienna), Canada (Montréal-Kirkland), USA (Washington, D.C.-Gaithersburg) and France (Nantes-Saint-Herblain and Lyon), or 99.9% of the Group’s total headcount in 2018. The Japanese subsidiary is excluded from this scope because the business was reduced in 2018 (and the subsidiary was definitively closed at the end of the year). In 2018, the only remaining activities were development and license & partnership management, with one person active for 20% of standard working hours (0.1% of the Group’s total headcount).

Valneva’s environmental impact data come from the production sites (two sites) and R&D sites (two sites). These four sites represent 95.4% of the Group’s total headcount in 2018.

The environmental impact of Valneva’s commercial offices is not integrated into the scope of this Report.



MESSAGE FROM THE MANAGEMENT The values of Corporate Social Responsibility are central to Valneva’s goal to advance innovative vaccines to protect people’s lives. Our daily activities are guided by a concern for protecting lives, conducting business ethically, developing our workforce and preserving the environment. The risks inherent to this work are carefully considered at all levels of the organization, where we collectively endeavor to mitigate risk as we drive for continued growth.

Epidemic emergencies persist around the world, highlighting the importance of Valneva’s business: developing and commercializing vaccines for infectious diseases with major unmet needs. Since Valneva’s creation five years ago, we have continued working to protect the global population from dangerous illnesses such as Japanese encephalitis, cholera, Lyme disease and the chikungunya virus. Valneva continues to reinvest its commercial revenues into research & development and explores potential acquisitions that could bring us ever closer to a world in which no one dies or suffers from a vaccine-preventable disease.

Doing business in an ethical manner is part of Valneva’s DNA where, internally and with partners, we aim to be an exemplary business in terms of reporting, compliance and transparency. From the R&D stage into product marketing and beyond, Valneva strives to be a compliance leader for companies of similar size.

Valneva’s successful growth would not have been possible without the commitment and talents of its greatest asset: the Company’s workforce. In order to support its employees, Valneva is committed to fostering a working atmosphere where all are encouraged to continue pursue continued development. Our growing employee base is provided with multiple ways to learn and apply new skills in their current roles, as well as opportunities to explore their career options within the Company. No matter where our 475 employees are located, we are proud to offer a positive workplace environment in every one of our eight offices in Europe and North America.

Valneva is also acutely aware of the need to preserve the environment and to use natural resources responsibly. Sustainable growth is an important aspect of our CSR approach and informs our work around the globe. From the production line to our support functions, reducing our carbon footprint, lowering the consumption of energy and raw materials, and limiting the creation of waste are responsibilities that Valneva works actively to achieve.

As Valneva expands its global reach, we pride ourselves on taking these four factors into account, growing responsibly and in harmony with our CSR values.

Thomas Lingelbach, President & CEO Franck Grimaud, President & CBO David Lawrence, Chief Financial Officer Wolfgang Bender, Chief Medical Officer

Frédéric Jacotot, General Counsel



BUSINESS MODEL



VALNEVA’S CSR APPROACH

A Four-Pillar Strategy The Company’s commitment to responsible and sustainable business spans four key focus areas, which form the foundation of its CSR approach. Valneva devotes particular attention to its first pillar, Protecting Lives, which is a main driver of the Company’s work. The second pillar covers Acting Ethically, both in R&D and in business. The third pillar focuses on the Group’s employees or, more specifically, on Developing Our People. Finally, Valneva’s fourth pillar is dedicated to Respecting the Environment through the prevention of pollution, effective waste management and the control of the Group’s energy consumption.

These four pillars are in line with the United Nations’ Sustainable Development Goals.



The United Nations Global Compact In line with its CSR approach, Valneva has sustained its support of the United Nations Global Compact and incorporates its ten principles into the Company’s strategies, policies and procedures.

As part of the Group’s participation in the UN Global Compact, a version of this Report will be submitted as Valneva’s official Communication on Progress and will be available on the UNGC website.



PROTECTING LIVES Valneva is engaged in the development and commercialization of vaccines for infectious diseases to help protect people around the world. The Company provides vaccines to consumers across the globe and ensuring access to healthcare and patient safety are Valneva’s most important goals.

Maintaining vaccine confidence Valneva works to develop and commercialize vaccines that effectively address critical needs and are able to receive marketing authorization by healthcare authorities in countries around the world, in order to provide possible protection to the greatest number of people.

The Company’s new products must be accepted by regulatory bodies, health care professionals (HCPs) and patients before going to market. In pursuit of their acceptance, Valneva strives to ensure that these crucial stakeholders recognize the risks and public health burden of a given disease and that these challenges could be reduced drastically through vaccination. The Company addresses this risk through various means and with the help of multiple actors within and outside of Valneva, including but not limited to:

+ open dialogue with Key Opinion Leaders (KOLs) to ensure that Valneva’s products and strategy address the disease burden and risks faced by patients,

+ engagement with regulatory authorities using scientific and data-driven discussions to support brand labels, bolstered by the support of KOLs, and

+ experienced local commercial teams with in-depth knowledge of the needs of their local market.



To measure the effectiveness of the activities undertaken by Valneva to mitigate the risk of commercial exposure, the Company ensures that its commercial teams are robust and well-qualified, with nearly 9% staff dedicated to this function in 2018.

Supporting healthcare-oriented charities around the world Valneva supports access to healthcare and awareness initiatives within and outside of the Company’s areas of expertise, through corporate partnerships, social media campaigns and joint events with charities around the world.

The Baan Dek Foundation: Valneva’s chosen charitable partner

Since 2016, Valneva has been an official sponsor of the Baan Dek Foundation, a Thai charity which aims to foster children’s health, safety and education in Thailand. Continuing its dedication to increasing access to healthcare, Valneva has extended this sponsorship in 2018 and plans to expand its involvement with the organization in 2019.

Valneva raises awareness of Baan Dek with its Christmas e-card

2018 saw a new corporate event to benefit the Foundation: a holiday supply collection for the children and families supported by Baan Dek. Employees from every one of Valneva’s eight offices were encouraged to donate books, toys, personal hygiene items and children’s clothing, which were then sent on to Baan Dek for distribution in Chiang Mai.

Support of the Encephalitis Society

Valneva is also a sponsor of the Encephalitis Society, the UK-registered brain inflammation charity that envision a world aware of encephalitis, its consequences and the support available.



Local Community Engagement

In addition to corporate-level sponsorships of charities whose missions align with Valneva’s work, the Company also supports social engagement at the local level. Valneva encourages employees to participate in charity events and to volunteer in their communities.

High level of expertise in R&D Valneva’s products are based on novel technologies and target complex areas of significant unmet medical need. Therefore, even after very promising early results have been obtained for a product candidate, it may be discovered in later clinical trials that the product is not as effective as the Company strives for its products to be. The risk of project failure is thus inherent to the work undertaken by Valneva and all other companies in its industry.

The Company has to align and carry out several different activities, including multiple clinical trials, over a number of years before any vaccine candidate can be brought to market. Therefore, good planning and strategic guidance are essential to successful development. As such, Valneva works to mitigate the risk that one of its R&D projects cannot progress to market. To do so, the Company examines its research practices continuously and has an internal committee dedicated to maintaining the highest research standards.

Valneva’s Research & Development Operational Committee (“RDOC”) guides the conduct of clinical trials for the Company’s vaccine candidates. The RDOC meets every month to perform a thorough review of Valneva’s product pipeline and ensure that the research to be carried out by the clinical teams corresponds to a clear medical need.



To complement the scientific review from Valneva’s internal experts, the Company also refers to external experts to confirm that the approaches it adopts for its clinical trials are the most appropriate and effective.

These reviews are coupled with rigorous project planning and regular alignment meetings to ensure that the development process is both well thought-out and progresses steadily, based on a sound scientific foundation and with the appropriate resources.

Ensuring patient safety Once Valneva has successfully developed a product and received marketing approval from the necessary health authorities, the Company must ensure ongoing monitoring of patient safety. This responsibility to ensure the quality and safety of its products is paramount to Valneva, who continues to monitor its products to ensure that any potential impacts to the safety profile are detected and assessed.

Valneva’s Pharmacovigilance (“PV”) department oversees all activities related to product safety monitoring around the globe, ensuring the appropriate flow and management of safety-related information according to applicable regulations. Healthcare professionals and vaccine users have direct access, by phone and email, to Valneva’s Medical Information professionals who provide timely and accurate information on the Group’s products.

In countries where Valneva’s products are distributed by third parties, individually adapted pharmacovigilance agreements exist to ensure the proper processing of all safety-related information. PV audit plans are also used to verify that Valneva’s partners operate according to both the terms set up in these agreements and current safety regulations, in line with the PV processes used for products distributed in-house.



Valneva’s Pharmacovigilance department maintains a Global Safety Database for its licensed products and submits individual case safety reports to national authorities. On a quarterly basis, signal detection reports are compiled for the Company’s licensed products, IXIARO®/JESPECT® and DUKORAL®, for identification of any peculiarities or unusual trends. These reports are then shared with the Product Safety Review Board, Valneva’s internal decision making body for safety-related matters. On a regular basis (yearly for IXIARO®/JESPECT® and every three years for DUKORAL®), Periodic Safety Update Reports (PSUR) are compiled and submitted to the relevant authorities.

The primary aim of Valneva as Marketing Authorization Holder and Manufacturer is to ensure patient safety. During PV audits and inspections Valneva has proved to have a robust PV system in place. Furthermore, a set of KPIs has been established to monitor compliance on a quarterly basis. The primary PV KPI is the rate of submission of individual case safety reports (serious as well as non-serious) to the authorities, with an objective of 95% of submissions in time. While 99% of submissions (serious as well as non-serious) were performed in time in 2017, a rate of 100% was met in 2018.

Responsible manufacturing Valneva’s business is dependent on its ability to manufacture vaccines at its wholly owned Good Manufacturing Practice (“GMP”) sites in Livingston, Scotland and Solna, Sweden. This activity presents inherent risks regarding the quality of the products manufactured at these sites and the possibility of not being able to provide the market with a sufficient number of IXIARO® and DUKORAL® doses to satisfy public health needs.

Valneva manages these manufacturing risks primarily through its Quality Control and Quality Assurance functions, which monitor and regularly audit the Company’s processes.

+ Quality Control evaluates the performance of the manufacturing process to ensure adherence to specifications and limits, and assesses the suitability of incoming raw materials, components, containers, closures, labelling, in-process materials and final vaccine lots.

+ Quality Assurance involves the systematic and independent examination of all trial-related activities and documents. This includes sites audits, vendor audits and system/process audits, as well as inspections and pre-approval inspections.

Biopharmaceutical manufacturing and release testing is performed regularly at these sites to help avoid disruption to supply and to deliver products in alignment with the Company’s Master Production Schedule. Multiple other counter-measures are in place to mitigate production risks, including:

+ annual quality and safety audits, + preventive maintenance measures, + a business continuity plan including an internal crisis management team and disaster

recovery, and + routine servicing and replacement of key equipment.

Objective: Future actions to protect against manufacturing risk include the continued refinement of the Company’s business continuity plan, as well as increases to bulk safety stocks.



ACTING ETHICALLY Developing new vaccines means that the Group has a responsibility to its consumers. Valneva maintains the highest ethical standards, protecting trial subjects through solid R&D processes and the continuous improvement the Group’s business integrity and transparency to preserve the trust of the patients and the communities it serves.

Complying to the highest standard Focused on integrity in its daily business, Valneva conducts its activities with high ethical standards across all functions. The Company has created an internal framework of policies that incorporate its ethical principles into tangible business processes. This allows employees to conduct themselves ethically. Valneva has continued to grow its set of rules, guidelines and training activities to further realize its standards of integrity in accordance with new and evolving legal requirements. These efforts allow Valneva to mitigate the risk of a failure in business compliance.

Valneva’s Code of Conduct

As stated in its official Code of Conduct, Valneva is committed to conducting business responsibly and in compliance with applicable laws, rules and regulations. Valneva commits itself and expects every employee to live up to the highest standards of integrity in the common mission to develop new vaccines. The Company shares the vision to serve the medical community’s needs and to seek significant returns to its stockholders in continued pursuit of excellent science for the fight against infectious diseases. Valneva tries to motivate and help every employee to contribute to the Company’s success in achieving its goal and its Code of Conduct applies to all Supervisory Board Members, Management Board Members, directors and employees of Valneva SE and its subsidiaries.



Valneva’s Anti-Bribery and Anti-Corruption Policy

In 2016, Valneva instituted its Anti-Bribery and Anti-Corruption Policy (“ABAC”) to align its business with the best practices in the industry and the highest compliance and ethics standards. The ABAC policy builds upon the Code of Conduct by providing standards to ensure Valneva’s business activities are conducted ethically and do not attempt to improperly influence others (including by paying, offering, or accepting bribes in any form, directly or indirectly). This policy was designed in compliance with all global anti-bribery and anti-corruption laws including, but not limited to, the UK Bribery Act, the US Foreign Corrupt Practices Act (“FCPA”) and the Canadian Criminal Code and Corruption of Foreign Public Officials Act. Valneva has zero tolerance for bribery or corruption of any kind.

Valneva’s Anti-Bribery Procedure

All Valneva employees have 24/7 access to a secured compliance helpline system. If an employee has a concern or believes in good faith that a law, a rule or one of the principles in Valneva’s Code of Conduct has been, or is about to, be violated, such employee can inform his or her manager, one of Valneva’s internally-designated Compliance Officers, or use the compliance helpline. Since the 2016 decision to use this helpline service, Valneva has vowed to ensure that employees are not disciplined or discriminated against for reporting any possible incident, even if the facts reported prove to be inaccurate, provided that they have acted in good faith.

Valneva’s Newest Corporate Compliance Policies

Conflicts of Interest

In October 2018, the Company announced its Global Conflicts of Interest (COI) Policy. This new guideline builds upon the Code of Conduct and related compliance policies, providing worldwide standards to ensure Valneva’s business activities are not influenced by conflicts of interest. The COI policy also outlines how Valneva defines where an actual or potential conflict of interest may arise or where individuals may become vulnerable to accusations of bias, prejudice or misuse of authority. Finally, the policy helps Valneva to avoid the inference or conferring of an unfair advantage or disadvantage, real or perceived, on employees arising from a conflict of interest.

Data Protection

In alignment with the European General Data Protection Regulation (GDPR), Valneva also created an official Data Protection Policy that became effective in May 2018. This policy governs how Valneva protects personal data in order to ensure compliance with data protection laws and regulations, specifically the GDPR. This policy further aims to ensure that employees understand the rules governing their processing of personal data from other employees, customers, suppliers, business contacts and other individuals with whom Valneva has a business relationship throughout the course of their work.

The Valneva GDPR Team, made up of 10 employees from the IT, HR and Law Departments, was formed to manage the review and documentation of Valneva’s personal data processing and draft a Data Protection Policy, corresponding SOPs and training for all employees. At the end of 2018, the Company also recruited a Data Protection Officer (“DPO”).

Valneva Non-Retaliation / Non-Retribution Policy

Valneva believes that positive employee relations and morale can best be achieved and maintained in a working environment that promotes ongoing open communication between supervisors and their employees. Open and candid discussions of employee problems and concerns are strongly encouraged.

Valneva believes employees should express their problems, concerns, and opinions on any issue and believe that their views are important. To that end, the Non-Retaliation/Non-Retribution Policy



encourages employees to communicate problems, concerns and opinions without fear of retaliation or retribution.

Valneva’s Focus on Ethics-Related Training

Valneva designates each September as Compliance & Ethics (“C&E”) Month to bring greater awareness of compliance and ethics matters to employees. In 2018, employees received a refresher course on C&E principles at “Compliance YOU-niversity”. The university-themed training event encouraged all employees to refresh their compliance knowledge earning a Valneva compliance “Bachelor’s degree”, “Master’s” or “PhD” based on the number of activities completed throughout the month. The 2018 C&E Month event garnered approximately 54% voluntary employee participation, compared to 53% in 2017.

Valneva further measures the performance of the entirety of its compliance risk counter-measures through the number of applicable corporate policies (nine, with three new policies compared to 2017) and the percentage of employees trained on our core compliance policies: anti-bribery and anti-corruption (over 93%), conflicts of interest (over 95%) and data protection (over 93%).

Optimizing the Strategic Decision-Making Process In order to pursue its business activities as successfully as possible, Valneva makes investments and explores the possible acquisition of additional products and businesses. Such investments and acquisitions are both extremely important and potentially costly, requiring considerable, in-depth analysis before Valneva’s upper management can come to a sound, definitive decision. In order to minimize the risk inherent to this type of decision-making, Valneva:

• performs thorough internal and external due diligence, • focuses potential Mergers & Acquisitions (“M&A”) on vaccines already on the market or on

assets in commercialization stage (rather than less proven, early-stage assets), • carries out thorough SWOT analyses of potential candidates (both vaccine candidates as well

as potential M&A targets), • and assures the full integration of any acquired business or asset.

This activity is also dependent on the solidity of Valneva’s corporate governance structure and the collective decision making process used by the Company’s Management Board. (For more information, please refer to Section B of the Registration Document.)

Combatting Tax Evasion Valneva fulfils its tax obligations in each of the countries where its activities are carried out.



DEVELOPING OUR PEOPLE Valneva’s success stems from the engagement and expertise of more than 475 employees, who are the Group’s single largest asset. Because a diverse workforce performs better, Valneva has committed itself to diversity and to the professional development of its employees. This commitment to people starts by creating a lively, open and friendly working environment.

Attract and retain talented people

Valneva’s HR approach

+ Attract and retain talented people; + Build a sustainable workforce for the future; + Assess and reward performance; + Value and support diversity; + Protect its workforce.



Headcount by region

On December 31, 2018, the Group had 475 employees working in Austria, Canada, United Kingdom, France, Sweden, and in the United States.

A wealth of expertise

The majority of Valneva employees work in the areas of manufacturing and R&D. Manufacturing is based in Scotland and Sweden, while R&D is principally based in Austria.

The Support functions (“G&A”) are spread across four main sites in Austria, France, Scotland and Sweden.

The Commercial Operations function has been consolidated over the past three years, with teams now located in Canada, United States, United Kingdom, Austria, and in the Nordic countries.



Gender Breakdown

Women are more highly represented than men at Valneva.

Seniority

In addition to ensuring wellbeing at work and Valneva’s competitive compensation and benefits approach, we also use employee engagement surveys in France to learn more about how our employees feel at work and what we can do to develop a more lively, open and friendly working environment.

Valneva: A Unique Corporate Identity

Valneva is an international and multicultural Group where enthusiasm, innovation and strong execution skills are driving forces.

With operations in six countries across the globe, Valneva's teams are diverse and multidisciplinary. Enriched by the 27 nationalities represented in its workforce, Valneva is built upon a unique identity in the vaccine industry.

Employee Mobility in Action

Valneva, as an international company, offers the opportunity of mobility to its employees whenever possible.

In the last two years, two Valneva employees in particular had substantial experiences on another site. One of our legal advisors, based in Nantes, had the opportunity to spend six months at our site in Sweden, where she learned more about distribution agreements while enjoying the Nordic way of life. Likewise, one of our senior technical assistants from Austria spent two and a half years at the Swedish



site. During his assignment, he shared knowledge with regard to processes and learned more about working on a manufacturing site, now speaking fluent Swedish.

Technical, scientific, organizational and human challenges are inherent to the sector in which Valneva operates. To respond to these challenges, the Group’s HR strategy is dynamic, multicultural and agile. The Human Resources and Communications teams work with the local teams in each country and across functions to develop a common Valneva culture while respecting local characteristics: focusing on what unites us rather than our differences.

Valneva’s highly experienced Human Resources department builds and deploys a policy designed to strengthen talent and organizational efficiency at both the local and Group levels. The Group HR strategy is built upon three pillars and associated processes:

Social Events: Solidifying Valneva’s Culture

Valneva encourages workplace satisfaction and aims to cultivate a sense of value around its corporate culture. In order to do this, the Group not only provides competitive pay and benefits, but also regularly plans social and cultural events at the local and Group levels to foster unity across Valneva. Twice a year, local social events are organized at every site including traditional holiday parties and summer barbecues.

This year, on September 7th, Valneva organized a very unifying event – a Company-wide celebration of Valneva’s fifth birthday. This event was celebrated on all sites, in order to enjoy the festivities together as one Valneva team.



An Open Dialog across Levels

As a European company, Valneva is proud to maintain an internal organization that represents its European workforce, called the International Works Council (“IWC”). The 12 members of the IWC were elected in 2017 for a four-year term and meet at least twice a year. They are informed about and consulted on cross-border operations carried out by Valneva, contributing to a better understanding of the cultural and organizational specificities of each European site.

In addition to the IWC and local work councils for Valneva in Europe, Canadian and US site leaders and HR team members develop a constant open dialog with the local workforce.

Labor relations

Organization of employee-management dialogue Health, Safety and Working Conditions Committee (CHSCT) report for Nantes, Local Committees, IWC

Expectation Guide Performance

Collective bargaining agreements 98 % of the Group employees are covered by a collective bargaining agreement

HR Committee: Heading up Global HR Processes

The Human Resources Committee (HRC) is responsible for the implementation and execution of the Company’s global HR policies, systems and processes across all Valneva operating entities. The HRC acts as the functional alignment and escalation body for all local HR functions, including the HR Business Partners. The HRC manages and coordinates all information and consultation processes with the Works Councils, especially the IWC. Material operational and strategic decisions are escalated from the HRC directly to the Management Board.

Offering Competitive Compensation

An early priority for the Company, Valneva implemented a Group compensation policy based on international benchmarks in 2013. The principles of this policy are consistent and have been harmonized across the different sites in the five years since the Company’s creation.

In 2018, Valneva confirmed its goal of proposing competitive compensation within the Life science sector. The compensation program is reviewed annually in order to ensure continuous market competitiveness.

Innovative Working Arrangements

Working hours at Valneva are governed by different national agreements, in compliance with local regulations.

Flexible working hour arrangements exist for employees to facilitate a better work-life balance for as many employees as possible.

In addition, telework was tested in France this year in order to offer even more flexibility.

Objective: In striving for the continuous improvement of Valneva’s working conditions, time savings accounts are currently being implemented in France.



Promotion of diversity and guarantee of non-discrimination Valneva’s Global Anti-Harassment, Anti-Discrimination and Anti-Bullying Policy, in conjunction with its Global Professional and Personal Relationships in the Workplace Policy, allow the Company to promote equal opportunity and treatment while maximizing the talents and expertise of all employees.

Diversity is part of Valneva’s DNA and the Company promotes inclusion in all aspects of the business.

Recognizing and Promoting Diversity

We believe that discrimination, in any form, is unacceptable in the workplace. Valneva promotes equal opportunity through recruitment and employment, as well as equal consideration with regard to compensation, training and advancement efforts for all employees. This means that prospective and current employees receive the same treatment regardless of nationality, ethnic origin, gender identity, physical or mental disability, age, religion or beliefs, family situation or sexual orientation.

As a global company that respects all cultures, Valneva believes that the diversity of its teams is a valuable asset for future success, supporting greater innovation, efficiency and competitiveness. The 27 nationalities represented at Valneva are a by-product of our focus on inclusion.

Valneva SE and Valneva Austria GmbH are signatories of the Diversity Charter, an initiative seeking to ban discrimination from the workplace.

Awareness and Inclusion of All Levels of Ability

Accompanied by the association “Les entreprises pour la Cité”, which helps businesses promote diversity, Valneva France dedicated one week in March 2018 to informing employees about diversity. This themed week helped employees to brush up on their knowledge and learn how to prevent discrimination in the workplace.

Valneva France also decided to assign the apprenticeship tax assigned to specific schools – “L’Ecole de la 2ème chance” and “Entreprendre pour Apprendre” – that are dedicated to support students who are struggling with personal and learning difficulties.

Number of Women in Management Positions

We believe that good Corporate Governance is the basis for the trust that our investors, institutions, and employees place in the Company. Valneva will continue to strengthen this confidence in the future while ensuring a diverse and highly qualified group of board members.

Valneva’s Supervisory and Management Boards are committed to managing the Company transparently, in accordance with the French Middlenext Governance Code for Small and Medium Capitalization Companies and with a focus on long-term value creation. As of today, four women serve on Valneva’s Supervisory Board, helping to move the Company forward with the highest of ethical standards.

The Management Committee is a senior management body that complements Valneva’s Management Board, providing input on the development and execution of Valneva’s business strategy. This



Committee holistically oversees cross-functional and cross-site (entity) alignment, including capabilities, objectives and operational oversight across all areas of the business. Currently, two women are part of the Management Committee: the directors of Valneva’s Solna and Livingston sites, which are principally dedicated to manufacturing.

Valneva is committed to ensuring that women and men have equal opportunities to become part of the Company’s corporate governance structure, notably through the development of their qualifications.

Average Age at Valneva

The average age of employees at Valneva is 43.

Having the right level of expectation in terms of performance and competencies to respond to the market demand Valneva promotes equal opportunity and seeks to help each of its employees maximize his or her talents. As an integral part of its strategy, the HR department has put into place an internally designed Performance Management system. Valneva's system helps to define the roles and responsibilities of employees and managers within the Group. All Valneva employees, including managers, are trained to use this system effectively.

People Development Approach

Valneva emphasizes talent management, meaning that employees are gradually trained for further responsibilities.

Developing employees’ skill sets plays a key role in the Group’s success. The professional development initiatives proposed by Valneva are tied to the improvement and expansion of operational expertise and are used to enhance communication and management skills at every level of the corporate hierarchy. Employees are willing to learn and take on new roles and responsibilities within the Group, thanks to the professional development options provided to them. The overall goal is to help employees boost their personal potential and advance their professional careers at Valneva.

To guide employees and managers in their development, the Human Resources department created an Expectations Guide, based on the contributions of the multi-country internal team who worked on



creating Valneva’s “Employee Value Proposition.” The Expectations Guide is a tool that makes it possible for each employee to progress in a manner that is aligned with Valneva's expectations.

Valneva Corporate Training Program

Training is a cornerstone of Valneva’s HR strategy and allows the Group to maintain high working standards in all of its activities. The Company offers a broad range of training events, including sessions on ethics & compliance, risk management, biosafety and cyber security awareness.

In November, IT Awareness training sessions were launched at all sites, educating employees in all functions about the compliance-related risks and dangers present in today’s rapidly-changing technological landscape.

Valneva Sweden continued the leadership training course for non-managers in 2018. Twelve employees at the Solna site were trained on communication, coaching and stress management, as well as on giving and receiving feedback in the workplace. The non-manager leadership training session lasted six days.

In 2018, our Global Finance Team gathered outside Vienna for its annual meeting to discuss the latest accounting developments, process improvements and strategy in person. Finance employees came together from all Valneva sites, which helped to further strengthen cooperation, communication and the cohesion of the team. In fact, 40% of the finance team had been with the Company less than one year at the time of the meeting. Therefore, the gathering allowed team members to share experiences, impressions and commitment.

Valneva’s Training Investment

Across the Group, Valneva’s total training investment was €618,750 for 2018, which represents an average of €1,303 per employee. This represents an increase of more than 18% from 2017.

Partnering with Educational Institutions

At Valneva, preparing for the future begins by supporting the development of the next generation of employees: the students who seek to discover the careers available at Valneva and learn more about the pharmaceutical industry. Group-wide, Valneva welcomed more than 12 students who were fully integrated into their teams and the Valneva community.

Creating New Opportunities in Higher Education

In addition to regularly welcoming interns in various roles within the Group, Valneva Sweden has been actively involved in the post-secondary degree in Pharmaceutical Engineering. Valneva has a seat on the Board of the degree program, which allows the Group to positively influence the practical direction of the course.

During 2018, Valneva Sweden welcomed five students from the program who for a ten week internship at the Company.



Attracting Future Leaders, Today

In May 2018, Valneva Austria participated in “Naturtalente,” a program of the University Vienna for high-potential students with life science backgrounds. At this occasion, two group of about 20 students were given the opportunity to visit Valneva Austria and gain insight on Valneva’s strategy, products, culture and career possibilities. Students also received a behind-the-scenes orientation program to see what the actual workspaces look like in order to get a feeling of Valneva as an employer. The program was highly appreciated and Valneva Austria could further strengthen its position as an employer as a result of the “Naturtalente” program, which will continue over the coming years.



ENVIRONMENT As a vaccine company, Valneva is aware that the environment directly affects people’s health. The Group feels that it has a responsibility to reduce its own carbon footprint and manage its waste and consumption.

Valneva’s Environmental Approach Valneva considers Environment, Occupational Health and Safety (EOHS) in the framework of its business activities with the intent to protect people, business assets, natural resources and the environment. We strive to prevent the injury or illness of employees, negative effects on the environment and any impact on the safety and quality of our manufactured products, by:

+ proactively managing risk and supporting a positive, innovative EOHS culture, + strategically analyzing and minimizing health & safety risks, and + preventing pollution, minimizing waste and conserving resources.

At the request of the Management Board, the local EOHS teams meet twice per year in two distinct committees: the Environmental Health & Safety (EHS) Committee and the Biosafety Committee. These committee meetings allow for improved cross-site efficiency and alignment through experience sharing, as well as risk reduction.

With the knowledge that climate change is an important global issue, Valneva seizes the opportunity to continuously improve its sustainability model. Environmental sustainability is a guiding principle at Valneva. The Group aims to use natural resources efficiently and minimize the environmental impact of its activities and products during their lifecycles. It integrates sustainable operations & supply chains, innovative products & packaging and environmental sustainability into its business decisions process. Valneva pursues its development in



strict compliance with a number of corporate social responsibility rules and environmental sustainability guidelines.

The 2015 French Energy Transition Act established obligations to promote the circular economy and waste recycling. Good practices for waste separation, recycling and monitoring have been adopted by the Group. These practices are a major priority and procedures have already been implemented on all sites.

Further developing its environmental practices, Valneva formalized a Global EOHS Policy in 2017 based on five core principles: Protect, Prevent, Manage, Analyze & Minimize environmental and safety risks.

Valneva Global EOHS Policy: Focus on the Environment

With regard to the environment, this policy ensures that the Company uses natural resources responsibly and works to minimize its environmental impact. This includes energy efficiency, minimization of waste, efficient use of water, choice of chemicals, raw materials and other materials.

The Company respects the environmental standards and requirements set by authorities in each country where it operates, and has routines and monitoring systems in place to ensure continued compliance.

Reducing our carbon footprint

Since energy use constitutes the main source of Valneva’s CO2 emissions, the Group seeks to optimize and continuously reduce its energy consumption while ensuring energy security for all its business activities.

Valneva’s CO2 emissions have been steadily decreasing since the Group’s decision to work with green energy providers for the electricity consumed on three of its four main sites. In 2018, the electric power used in Nantes, Vienna and Solna was entirely produced by renewable energies. This allowed us to reduce overall CO2 emissions by approximately 600 tons in 2018 compared to the prior year, even though energy consumption rates remained stable during the same period.

0

1000

2000

3000

4000

50004131

3651 34542806

CO2 emissions(in Tons)

2015 2016 2017 2018



Waste Management

Waste has an enormous impact on the environment, causing pollution and greenhouse gas emissions while generating substantial costs for the Group. Proper waste management, including appropriate reuse, recycling and energy recovery, is a key factor in optimizing resource efficiency.

Valneva's activities produce waste which is then eliminated at the different sites in a manner which respects applicable local and European regulations. Separating, recycling and monitoring waste are major priorities for Valneva. For that reason, procedures have been implemented and indicators adopted to closely monitor the Group’s environmental impacts.

Two types of waste are produced by the four sites within the reporting boundary of this Report:

- Non-hazardous waste (paper, cardboard, plastic, etc.); - Hazardous waste (used chemical products, contaminated plastic, electrical and electronic

equipment waste, etc.) This last category includes very specific waste associated with the Group’s activities in the biotech field: biological waste. It is subject to specific monitoring procedures by the teams on each site.

16479

16 397

17 233

16 658

0 5000 10000 15000 20000

Energy consumption (in MWh)

2015 2016 2017 2018

0

20

40

60

80

100

120

140

160

51

123

159

127

Quantity of hazardous waste produced (in Tons)

2015 2016 2017 2018



Solid biological waste are monitored and reported in this report because of their specific double-treatment (once internally and again externally).

Non-hazardous waste remained stable, despite increased production in Scotland.

Raw material consumption

The raw materials used by Valneva are essentially water, cell culture media, glucose, sodium hydroxide and buffer solution. The increase in raw materials used in 2018 is due to intensified production in Scotland and Sweden.

0

10

20

30

40

5042

35 3441

Solid Biological Waste(in Tons)

2015 2016 2017 2018

0

20

40

60

80

100

120

140 110 111120 120

Quantity of non-hazardous waste produced (in Tons)

2015 2016 2017 2018



Note: There was an error in the selection of information at the time of data extraction from the production software, leading to changes in the figures previously reported for 2016 and 2017.

Water Management

Valneva is committed to managing water responsibly to safeguard the health of individuals and communities.

In 2018, Valneva’s water consumption increased due to an issue with the cooling system in Vienna during an especially hot summer. In order to continue to cool the laboratories sufficiently, a provisory repair was made to the system. The Company is currently evaluating sustainable solutions to ensure the issue is resolved, including the installation of a spray cooling system. This will increase the cooling power of the chillers and reduce water consumption.

81

61

74

74

0 20 40 60 80 100

Quantity of raw materials used (in Tons)

2015 2016 2017 2018

50452

46321

48822

43634

0 10000 20000 30000 40000 50000 60000

Water consumption(in cubic meters)

2015 2016 2017 2018



Valneva’s manufacturing activities involve certain risks that could affect the Company’s ability to provide potentially life-saving vaccines. In order to ensure a steady rhythm of production, the Company understands that employees are key. Thus, Valneva reinforces safety at all of its manufacturing and R&D sites through its strong EOHS culture.

Valneva Global EOHS Policy: Focus on Manufacturing

The Global EOHS Policy applies equally to Valneva’s manufacturing and R&D activities and aims to sustain the Group’s high level of control over the related risks in the long term.

The cross-site EOHS team is dedicated to ensure the implementation and respect of the policy. The Company ensures that EHS rules are followed consistently through several complementary actions, including comprehensive training and procedures. EOHS teams monitor key indicators and perform regular reporting of near misses, incidents and accidents.

Managing EOHS Risks and Opportunities

Potential biotechnology risks have been identified at Valneva's manufacturing sites. Dedicated teams have been tasked with implementing and monitoring the necessary procedures for managing these risks, which include maintenance of the various installations and pieces of equipment at these locations.

To this end, Valneva’s EHS Committee defines common objectives, follows common indicators and shares experiences regarding EOHS matters between all sites, including those related to R&D.

Manufacturing-related indicators monitored by the EHS Committee include the quantity, frequency and seriousness of work accidents. However, these data points have remained stable since Valneva’s creation in 2013. Thus, only the following indicator is relevant to the present report.

Work accidents

The nature of Valneva’s activity, together with the Group’s ongoing improvement of its safety-training measures, has resulted in maintaining a low number of work accidents that have historically been non-critical.

EOHS: The right instincts + Always wear personal safety

equipment, when and where required

+ Respect safety warnings and signs + Take part in EOHS training, both

overall introduction and special EOHS training when required

+ Encourage reporting of unsafe behavior and safety risk



To date, the severity and frequency rates, which are generally excellent indicators to assess the level of safety for companies, are not relevant for Valneva due to the very low number of accidents within the Group. For that reason, these two indicators are not published in this Report.

0123456789

10

12

12

Work accidents

2015 2016 2017 2018



OTHER CSR INFORMATION

Well-being at work project Well-being at work is a part of Valneva’s identity. In the five years since the Company’s creation, Valneva has undertaken numerous actions in order to create an enjoyable workplace at its sites around the world.

Well-being at work takes many forms at Valneva and each site has its own ideas for promoting health, from being active to providing healthy food options and more.

Staying active

+ In Sweden, approximately EUR 170 (SEK 1800) is allocated per year and per employee for wellness activities

+ Yoga classes, running or walking sessions over during lunchtime in Sweden + Gym memberships are paid by the Company in Scotland + Valneva Canada offers a CAD 250 sport voucher to employees + The Company invites employees from multiple sites to visit Austria and participate in the

annual “Business Run” footrace

Eating healthy

+ Fruit baskets, free cold and hot drinks (tea, water, coffee) available on all sites + Monthly social events in France including the launch of an employee vegetable garden + Meal vouchers available for Austrian and French employees

Reducing waste

+ Exclusive use of organic coffee and replacement of paper cups by porcelain mugs in Sweden to encourage sustainability

Healthy working conditions

+ Flexible working arrangements in Austria + In Scotland, health information sessions focused on stress management and prostate, breast

and skin cancers coupled with a monthly, on-site doctor and nurse visit + Support of a nursery near the company’s Austrian site with easy access for Valneva

employees

In 2018, Valneva France launched a survey in order to measure employees’ sense of well-being at work. The results of the survey will be used in 2019 to create new programs to continue expanding in this domain.

Animal welfare The well-being of animals is an important topic for any pharmaceutical business. Valneva works proactively to ensure animal welfare, as it is an integral part of vaccine development.

Valneva has an animal laboratory in Vienna and, occasionally, teams in Nantes need to perform specific analyses that require external companies to perform certain tests. The Company works with these partners to complete questionnaires to verify adherence to all regulations before any work can begin. Valneva Nantes will include specific clause in the related contracts that requires the respect of all existing obligations with regard to animal welfare.



Animal welfare in Vienna

Valneva acknowledges its responsibility for the welfare of animals kept in its state of the art laboratories. National laws (Austrian Tierversuchsgesetz 2012 and Tierversuchs-Verordnung 2012) and international regulations (European Union's Directive 2010/63/EU and European Convention ETS No. 123) in regards to laboratory animal housing and the performance of animal experiments are strictly followed. Regular, unannounced inspections by the respective authorities are carried out in the laboratories.

In addition, recommendations of the Institute for American Laboratory Animal Research (ILAR) and the German Society of Laboratory Animal Science (GV-SOLAS) are followed to grant best possible housing conditions and responsible treatment of laboratory animals.

The ethical framework within these provisions ensures prospective assessment of proposals for in vivo testing with respect to any potential harm to the animals with special focus on the so-called ‘3R principle’ ("Reduce, Refine, Replace"), one of the key strategies to meet our highs demands of Social Responsibility.

Well-being of animals is important to Valneva, and the Company uses the best practices possible for this necessary aspect of its business.



THE FRAMEWORKS USED TO DRAW UP THIS REPORT

European Directives Directive 2014/95/EU October 22, 2014 amended Directive 2013/93/EU and introduces changes for disclosures to be included in a CSR Report. The transposition of this directive is complete since August 9, 2017.

This directive requires companies thus concerned to publish a report containing information risk prevention policies in the areas of environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters, and the outcome of these policies, including a description of the "due diligence processes" and covering the entire supply chain under this approach.

The French Order n°2017-1180 of July 19, 2017 The Order n°2017-1180 is requires the publication of non-financial information by certain large businesses et certain groups of businesses.

The French Decree n° 2017-1265 of August 9, 2017 The Decree n° 2017-1265 of August 9, 2017 completes the transposition of the CSR Directive (Directive 2014/95/EU on the publication of non-financial information by companies) initiated by Order No. 2017-1180 of 19 July 2017 on the publication of non-financial information by certain large companies and groups of companies. This decree specifies the content of the declaration, the information to be provided, the publication procedures and the verification obligations.



METHODOLOGICAL NOTE

Methodological note on Group CSR data reporting In accordance with French law, Valneva’s Corporate Social Responsibility report has changed format, focusing on the risks and opportunities linked to the Company’s activities.

In order to manage these risks and opportunities, Valneva is committed to maintaining a robust risk monitoring system and continuously evaluates the risk-reward profile of its activities. The present report is built upon Valneva’s existing risk management system, which is described in its official Corporate Risk Management Policy.

Valneva defines risks as all occurrences and possible developments inside and outside of the Company, which may have a negative impact on the achievement of Valneva’s objectives.

The Company has also identified opportunities that may have a positive impact on the achievement of Valneva’s objectives.

The risks identified within Valneva are formally evaluated and classified by their importance, according to their likelihood and potential impact. The Company then establishes a list of its ten major risks, which is updated two times per year.

The present report is inspired by this top-ten list, but goes over and above the principal risks by presenting additional opportunities that the Company would like to develop. In this report, the risks and opportunities linked to corporate social responsibility are thus presented in terms of the Four Pillars of Valneva’s previously-defined CSR strategy.

The different entities forming the Group operate according to different models linked to business operations (R&D and production) as well as their respective cultural and legal environments.

The legal and regulatory context does not reflect the same requirements for compliance from one site to another.

The different priorities relating to the environment and also employment are reflected differently according to the sites, even though common practices and shared values can be observed.

Group structure of consolidated operations The quantitative data in the employment area is consolidated at the Group level for the collection of information in 2018. These data are derived from the human resource management software: HR Cube.

Quantitative environmental data has been harmonized at the Group level. Environmental impact measures energy consumption, GHG emissions and waste for the production and R&D sites (Livingston, Vienna, Solna and Nantes).

Reporting referential To ensure the homogeneity and reliability of indicators tracked for all subsidiaries, the Group is continuing to adopt common guidelines for employment-related and environmental data. These documents specify the methodologies to be applied for the reporting of indicators for the entire Group: definitions, calculation formulas, etc.

Data collection method Data collection in 2018 required application of a working method and different steps that are presented below:



1. maintaining the resource persons identified in 2017 to report quantitative and qualitative employment, social and environmental data for each site in order to optimize the collection process;

2. sending the resource persons a data collection spreadsheet for information to be provided along with guidelines for quantitative employment-related and environmental data;

3. classifying the source documents received according to three fields: employment, environment, and social.

These documents are then made available to the CSR audit firm.

For the construction of this CSR report, data collection is organized through resource persons identified internally:

+ resource persons to coordinate, where possible, and transmit quantitative and qualitative data for employment-related information requirements;

+ other resource persons to coordinate, where possible, and transmit quantitative and qualitative data for the environmental information requirements;

+ resource persons to coordinate, where possible, and transmit quantitative and qualitative data for the social information requirements;

+ one person in Nantes (France) to coordinate the data collection at the international level; 4. implementation of a dedicated CSR reporting platform (installed on the internal server) to improve

the data storage and facilitate access for the resource persons.

Materiality test In 2018, due to the change in format of the CSR report, the project to perform a materiality test had been postponed.

Future Improvements Valneva hopes to put in place Key Performance Indicators (KPIs) for the following risks/opportunities in 2019:

• Supporting healthcare-oriented charities around the world • High level of expertise in R&D • Responsible manufacturing • Optimizing the strategic decision-making process.

We also aim to develop more complete KPIs for the following risks/opportunities in 2019:

• Attract and retain talented people • Promotion of diversity and guarantee of non-discrimination • Climate change.



DEFINITIONS

EMPLOYMENT INDICATORS

Relevance Employment indicators provide an understanding, through quantitative and qualitative data, conditions with respect to human rights, employability, working conditions, training policies impacts on employee health and safety, diversity and equal opportunity employment.

Total headcount Employees included in the headcount are those with an employment contract (permanent or fixed-term) with a Valneva Group company, both active and passive. Workforce is expressed based on headcount as of December 31st, 2018, regardless of the amount of working hours or the starting date in the reporting year. External Workforce and Students (e.g., Internship, PhD students, Summer students) are excluded.

Total headcount also excludes executive employees, corporate officers ("mandataires sociaux") in France, and two Management Board Members in Austria.

Average age Average age is calculated by subtracting the birthdate from 31.12.2018. For example, 31.12.2018 - 16.12.1973 = 45.04 years.

Seniority Calculated by the difference between Entry Date and December 31st, 2018, ignoring any absences due to maternity, paternity or educational leave.

Gender balance Takes into account the total headcount and the Management Board.

Employee development Training budget per site divided by number of employees per site.

Global sum of training budget spent divided by number of employees.

Conventions and collective bargaining agreements A collective bargaining agreement is concluded between the employer and labor unions for the purpose of setting rules governing working conditions, employment and social guarantees for employees.

Professional disease An illness arising as a consequence of exposure to occupational risk factors (physical, chemical or biological risks).

Occupational accidents Accident resulting from or arising in the course of work, regardless of the cause, to any salary employee or a person working on behalf of the Group. An occupational accident can also arise in the course of a business-related trip. This Report contains only accident with days lost.

ENVIRONMENTAL INDICATORS

Relevance Environmental indicators report inputs (energy, water and raw materials) and outputs (emissions, effluents, waste) and the types of impacts of the organization on the environment.

Materials This item corresponds to materials used in the production cycle.

Energy Only direct energy consumption (originating from a primary energy source) is taken into account. Energy savings linked to mechanism for monitoring consumption and optimizing equipment are reported in qualitative terms. Consumption expressed in MWh.



Water Water consumption concerns solely withdrawn water volume. Consumption expressed in m3.

Emissions, effluents and waste Direct emissions of greenhouse gas emission are taken into account. Direct emissions of greenhouse gas emission expressed in tons of CO2.

Waste is taken into account by category according to a breakdown between hazardous and nonhazardous waste. The production of waste is expressed in tons.

Transport Transport (employees, suppliers, customers) is not taken into account in this report due to the absence of data.

SOCIAL INDICATORS

Relevance Social indicators cover impacts of the business on the territory, impacts of products on consumer health and safety, practices with respect to suppliers and subcontractors, the purchasing policy.

All impacts are derived from qualitative data (procedures and the assessments of practices).

The Group defined more precisely its social policies, and focused around two pillars: “Protecting lives” (inherent to its R&D and vaccine commercial activities) and “Acting Ethically” (in consideration of Health, product safety and Compliance issues concerning all employees, internally and externally).

Periodic Safety Update Report (PSUR) PSURs are pharmacovigilance documents intended to provide an evaluation of the risk-benefit balance of a medicinal product at defined time points after its authorization.

The objective of the PSUR is to present a comprehensive and critical analysis of the risk-benefit balance of the product, taking into

account new or emerging safety information in the context of cumulative information on risk and benefits.



INDEPENDENT AUDITOR’S REPORT

Report by the independent third party, on the consolidated non-financial statement included in the management report

Valneva SE

6 rue Alain Bombard

44 800 Saint Herblain

For the year ended December 31, 2018

To the shareholders,

As a member of the profession of certified public accountants appointed as independent third party and certified by COFRAC under number 3-1055 (information available on www.cofrac.fr”), we hereby report to you on the non-financial statement for the year ended December 31, 2018, included in the management report pursuant to the legal and regulatory provisions of articles L. 225-102-1, R. 225-105 and R. 225-105-1 of the French Commercial Code (Code de commerce).

The entity’s responsibility

Pursuant to legal and regulatory requirements, the Board of Directors is responsible for preparing the Statement, including a presentation of the business model, a description of the principal non-financial risks, a presentation of the policies implemented considering those risks and the outcomes of said policies, including key performance indicators.

The Statement has been prepared in accordance with the entity’s procedures (hereinafter the “Guidelines”).

Independence and quality control

Our independence is defined by the provisions of article L. 822-11-3 of the French Commercial Code and the French Code of Ethics (Code de déontologie) of our profession. In addition, we have implemented a system of quality control including documented policies and procedures regarding compliance with the ethical requirements, French professional guidance and applicable legal and regulatory requirements.



Responsibility of the independent third party verifier

On the basis of our work, our responsibility is to provide a report expressing a conclusion on:

- the compliance of the Statement with the provisions of article R. 225-105 of the French Commercial Code;

- the fairness of the information provided in accordance with article R. 225-105 I, 3° and II of the French Commercial Code, i.e., the outcomes, including key performance indicators, and the measures implemented considering the principal risks (hereinafter the “Information”).

However, it is not our responsibility to comment on:

- the entity’s compliance with other applicable legal and regulatory provisions, in particular the French duty of care law and anti-corruption and tax evasion legislation;

- the compliance of products and services with the applicable regulations.

The work described below was performed in accordance with the provisions of articles A. 225-1 et seq. of the French Commercial Code determining the conditions in which the independent third party performs its engagement.

Nature and scope of our work

Our procedures allowed us to assess the compliance of the Statement with regulatory provisions and the fairness of the Information:

- we obtained an understanding of all the consolidated entities’ activities, the description of the social and environmental risks associated with their activities and, where applicable, the impact of this activity on compliance with human rights and anti-corruption and tax evasion legislation, as well as the resulting policies and their outcomes;

- we assessed the suitability of the Guidelines with respect to their relevance, completeness, reliability, neutrality and understandability, with due consideration of industry best practices, where appropriate;

- we verified that the Statement includes each category of social and environmental information set out in article L. 225-102-1 III as well as information regarding compliance with human rights and anti-corruption and tax evasion legislation;

- we verified that the Statement presents the business model and the principal risks associated with all the consolidated entities’ activities, including where relevant and proportionate, the risks associated with its [their] business relationships, its [their] products or services, as well as its [their] policies, measures and the outcomes thereof, including key performance indicators;

- we verified, where relevant with respect to the principal risks or the policies presented, that the Statement provides the information required under article R. 225-105 II;

- we assessed the process used to identify and confirm the principal risks; - we asked what internal control and risk management procedures the entity has put in place;

we verified that the Statement covers the scope of consolidation, i.e. all the companies included in the scope of consolidation in accordance with article L. 233-16 within the limitations set out in the Statement;



- we assessed the data collection process implemented by the entity to ensure the completeness and fairness of the Information;

- for the key performance indicators and other quantitative outcomes that we considered to be the most important, we implemented:

• analytical procedures to verify the proper consolidation of the data collected and the consistency of any changes in those data,

• substantive tests, using sampling techniques, in order to verify the proper application of the definitions and procedures and reconcile the data with the supporting documents. This work was carried out on a selection of contributing entities and covers between 8% and 23% of the consolidated data relating to the key performance indicators and outcomes selected for these tests;

- we referred to documentary sources and conducted interviews to corroborate the qualitative information (measures and outcomes) that we considered to be the most important;

- we assessed the overall consistency of the Statement based on our knowledge of all the consolidated entities.

Means and resources

Our work was carried out by a team of 4 people between July the 13th and March the 19th and took a total of 8 months.

We conducted 6 interviews with people responsible for preparing the Statement.

Conclusion

Based on our work, nothing has come to our attention that causes us to believe that the non-financial statement is not in accordance with the applicable regulatory provisions and that the Information, taken as a whole, is not presented fairly in accordance with the Guidelines.

Comments

Without qualifying our conclusion, the reader’s attention is drawn to the paragraph “Future Improvements”, section “Methodological note” concerning key performance indicators. The reader’s attention is also drawn to the consolidation scope described in the section “About this report”.

This is a free translation into English of the independent third party’s report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.



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After reading this Report, we will provide you with a detailed presentation of the balance sheet, income statement and notes to the financial statements.

March 20, 2019

THE MANAGEMENT BOARD

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