Conference Transcript - INVA 2026-09-14

Operator

Good morning, everyone. Thank you for joining us. And it is my pleasure to introduce our next speakers from InnoViva. This will be Steve Basso and Austin Hackett. We'll be hearing about their pipeline and updates for infectious diseases platform. Thank you so much.

Stephen Basso, CFO

This you very much. Really appreciate the intro and certainly thanks to the team for hosting Innaviva at the conference. I think we're already had and looking forward to a number of really good meetings over the next few days, which is great. So for those that, you know, perhaps are newer to the story or less familiar, I thought I'd start with a little bit of a background. And so Innaviva actually started as a royalty company a number of years ago tied to respiratory assets that the company then developed with and then licensed to GSK to commercialize and over a number of years these royalties really provided a durable source of cash to the business it was quite profitable and then in part upon a mission over the last several years to invest that in a broader base essentially try to pivot in Aviva to a broader base healthcare company with multiple opportunities for long-term of value creation. And so as you can see here, Innaviva stands today really as a strategic business, if you will, or a business of three essentially strategic pillars. The first of which is the continued generation of the royalty portfolio. These are two leading assets we have and continue to generate meaningful amount of cash to the business. The second of which is in the middle is Innaviva Specialty Therapeutics, which as louise pointed out is our critical care and infectious disease therapeutics product hospital-based platform which is growing rapidly and and we're quite excited about that and then lastly the company has a collection of investments in what we call our portfolio of strategic healthcare assets this is really a collection of innovative companies with a variety of asymmetric risk reward profiles and opportunities to create long-term value for the organization and so i think if you look at the business broadly, you can see that it's clearly not sort of hinged on one product, one program, or one specific value driver. It has many that will compel and continue to grow the business going forward. And we're really excited about the potential of this business more broadly. And so maybe what I do now is then pivot and try to dive in a bit more detail into to each one of these strategic pillars of the business, starting first with the royalty business, and last Austin to comment on that.

Speaker 3

Great, thanks Steve. So our royalty business is really kind of the foundation of our cash flows and has been for a number of years. And this is our portfolio of two leading respiratory products that are commercialized by GSK. And they're really excellent royalty products for a few main reasons. The first is that these are well-established standard of care therapies in a therapeutic area that is primarily based on maintenance therapy. So what's nice about these products is if you're on a Noro or Brio and you are well-controlled, you tend to never talk to your doctor about it again, never switch. And so now at this point, since they're more mature products, the vast majority of patients year over year are continuing just maintenance therapy patients, which protects these against new competitors and new entrants from new mechanisms of action. The second nice thing about these products is that both products are majority ex-US. And so more than two-thirds of the sales of both of these products come from ex-US sales, which shields them from some of the late-life pricing pressures and dynamics that you see in the U.S. And so by this point, there's a balance of some slow year-over-year pricing pressure in the U.S., but still ex-U.S. growth. And so that makes these products remarkably durable and really great regulatory or really great royalty products. And the final piece is the regulatory complexity around drug device combos. So this historically has provided a pretty significant moat against early entry from generics. And then they have to get both the drug and the device separately approved and demonstrate equivalence to the FDA, which is a much more complicated process for a drug device combo. And so, you know, historically, it's about three years even after LOE before drug device generics come into market in this space. So that provides, you know, a further moat. And so, you know, as you can see, you know, if you look at the five-year projection, we're still expecting to get over a billion dollars of revenue based on the analyst consensus from the GSK covering analysts. So this is, you know, a really great source of capital for us and something that we hope to, you know, continue to productively invest into the other areas of our business and new opportunities as well.

Stephen Basso, CFO

Thanks, Austin. And so now maybe we can dive into the next pillar of the business or IST or Inaviva Specialty Therapeutics. And so maybe just to put it in a bit of a context here for why we created IST, and it was deliberate in that nature. It was born out of a series of decisions that started with a very simple thesis. And all goes back to the fact that, you know, at the time, Inaviva had a durable cash generative royalty business. But we very much wanted to take, you know, the opportunity there and complement that with investments in acquisitions in areas of high unmet medical need where we felt that we could make a difference and also add value. And in this case, you know, looking at IST, we felt that critical care by focusing there as well as an infectious disease was an area where we could do that, in particular through investments in companies like Entasis Therapeutics. And so the foundational step for the creation of IST was integrating Entasis and La Jolla Pharmaceuticals together into this business, which I mentioned is called Inaviva Specialty Therapeutics, or IST. This was formally stood up in the middle of 2023, and the combination of these two companies was really the formation of IST. Entasis brought us two things. It brought us Zac Duro, which I'll come back to in a second, as well as the Zolifidacin program, which is also known as New Zolvins now. We had approval for New Zolvins and the treatment of gonorrhea at the end of last year, and the company is making good progress to have that commercially available by the end of this year. And then Loya Hoya Pharmaceuticals had two already approved and commercialized products in the form of Geopreza and Zorava. In December of 2024, we then in-licensed the U.S. rights for Zevterra from Basilea, launching that six months later. And that's IST today, right? A commercial platform with five approved products. It was very much not intended to be a single asset or a single product company, but rather a portfolio and a platform, and that was intentional in the formation of it. The other component that I would sort of point to as we talk about ist is is why we created it in this specific setting why critical care or why infectious disease and i would point to a few things one is the hospital space is clearly an area where i think we'd all agree is is fairly complex it requires deep expertise it requires broad and extensive productive institutional relationships and i think that's where uh in Aviva Specialty in Therapeutics has done very well in this case, as demonstrated by its sort of revenue growth and its commercial presence. The complexity of this business, I would say, though, is actually complementary or a moat, if you will, for IST, namely in the fact that I think it would be genuinely very hard for another company to come in and replicate our field organizations to, you know, take over or, excuse me, replicate our account relationships, as well as the clinical credibility that we've established in this business going forward over the last several years. I think when I look back about the business, I think our commercial momentum speaks for itself. And I think that's what makes this commercial platform so attractive to multiple companies who are also developing differentiated drugs in this space and looking to get them to patients. I think there are multiple tailwinds in this business. Most notably, I would say perhaps antimicrobial resistance with growing rates of resistance around the world. We see that large pharma has dwindling pipelines from the antibiotic space, and hospitals are also becoming increasingly more sophisticated in how they manage these infections. So for a company here that is focused, credible, as well as willing to invest, I think there's a real runway for a company. And that's exactly the kind of environment where ISG's model is set up to succeed and in that way we are focused very much on two prongs of this business number one is expanding our commercial presence as well as our product portfolio both of which I would say we've become differentiated in in each of these areas and so then if we zoom out for a second and see what that sort of mission and that strategy has enabled today you can see at the end of the second quarter of this year this product portfolio generated $212 million in LTM net product sales and license revenue. And in that same period of time, the portfolio grew 46% year over year in that same quarter. If we wanted to just highlight a few of the key revenue drivers of this portfolio, I think we could double-click onto the products for a second, the first of which is Zach Duro, which I mentioned, which came from the antisus side of the portfolio. So ZacDuro is used by adults in the case of hospital-acquired and ventilator-associated pneumonia caused by susceptible acenitibacter. This is, for those that are familiar, is a very serious and difficult-to-treat infection disease setting. And what makes ZacDuro especially important here is that it was introduced and is the first and only antibiotic specifically targeted to treat acenitibacter in the U.S. There are approximately 40,000 cases of acenitibacter infections in the U.S. each year, and approximately 40% of those are carbapenem-resistant, so it is a very sort of meaningful area of unmet medical need. This product was launched in September of 2023, and less than a year after that in july of 2024 the product was already named as the preferred first-line agent for treatment asinidobacter by the idsa we very much feel this is one of the best antibiotic launches in recent history in the u.s but to be honest it's not all about the u.s i think zach duro also has a growing excuse me growing global presence and that comes in the form of a few things. Number one, we have a productive partnership with Xi Labs, who was commercializing Zac Duro across Asia. And most recently, we signed an agreement with Dr. Reddy's, or DRL, who is preparing to commercialize Zac Duro in a number of emerging markets, including Latin America. And so resistance rates, important to note that resistance rates to a scene at the factor to the standard of care in these markets are substantial, and that we would anticipate that our strategy to expand access to Zac Duro and outside of markets outside of the u.s will really continue and serve as a meaningful growth driver for this portfolio in this this platform the second product i would highlight is geopressa which treats an equally serious albeit different problem geopressa is intended to treat adults to raise blood pressure who are facing septic or otherwise a distributive shock this is obviously a high acuity critical care setting. And for instance, I think there's approximately 140,000 shock patients each year who fail both first and second line therapies, which means there's really a need for additional therapies in this particular space. And I think what's nice also about Geopressa is that it actually works different mechanistically to the current standard of care. It actually uses the body's own RAS system to raise up blood pressure so this product really represents a very key alternative to clinicians and patients as this product continues to grow so now maybe I'll ask Austin to comment on the last pillar of business our strategic healthcare assets thanks Steve so this portfolio of strategic healthcare assets represents slightly in contrast to the commercial stage IST business.

Speaker 3

These are our clinical stage and earlier stage high growth assets that we have investments in as in Aviva. And I want to just highlight a couple of them that are very exciting. So the first is Armada Pharmaceuticals. So Armada Pharmaceuticals is developing an entirely new modality for treatment of very serious life-threatening infections using bacteriophage. And they just had, last year, probably the best clinical result ever in anti-infectives. They showed a 100% clinical cure rate for staph aureus bacteremia, complicated and uncomplicated patients, in an area where standard of care typically has about a 70% to 80% success rate. So they are now preparing for their phase 3 trial, which they have stated is going to launch in the second half of this year. And we believe that, you know, if successful, this will both be a very, very valuable product in an area of high unmet need, but also be a major validation for a platform with an entirely new modality and approach to treatment with some very high value follow on indications like prosthetic joint infection and others that would then be possible from this company, which is currently the clear leader in the bacteriophage space and a highly innovative company. The second that I want to talk on is our newest subsidiary company called Nortiva Bio. So this was an interesting opportunity that Inaviva had to acquire the assets of a company that was formerly called Lyndra Therapeutics, which had developed this platform technology out of MIT's Langer Lab and developed it over the course of 10 years. This company is based around a platform technology called the Lynx technology, which is able to convert a daily dosed drug into a once-monthly or once-weekly form. So it does this through a gastric residence system, where you're able to take a normally-sized pill that then unfolds into a structure that actually stays resident in the stomach for a programmed amount of time and doses a consistent, stable amount of drug before breaking apart and passing safely through the GI tract. So what this really does is enables both the ability to have a much more adherent patient population to something that is much less frequently dosed, but also because of the stable dosing concentration over time, it removes the peaks and the valleys of daily drug dose, which in many indications could improve both tolerability and potentially efficacy. So this is a program. This is a platform that we're now carrying forward. Our lead program is a once monthly oral contraceptive that is being supported with funding from the Gates Foundation, which we think will be highly differentiated in a space where adherence is is directly tied to efficacy. and can also address, you know, major commercial opportunity, unmet needs in the U.S., while also being a very significant tool in global health for the Gates Foundation and some of their initiatives. We're also focused on finding partnerships for additional programs. There's, you know, hundreds of drugs that could fit onto this platform and, you know, improve both, you know, both adherence and potentially efficacy and tolerability. So we're very excited about the long-term potential for this platform and see it as a, you know, a very sort of capital efficient, high value opportunity for Inaviva as an investment. And then just for the remaining time, I'll pass back over to Steve to wrap up.

Stephen Basso, CFO

Yeah, no, thanks. Thanks very much, Austin. Just to round it out very briefly on the sort of strategic assets overview, you know, just run highlight again how we approach and think about these assets it's really through a very disciplined approach we obviously want to continue to support the internal portfolio here you know is where we see attractive returns we always look to stay open to external opportunities that offer compelling upside uh and then as i think you've probably seen we look to continue to evaluate opportunities of capital return uh where and when we believe our own stock is undervalued and so if we then take a step back from a big picture of you. I think if you look at sort of the charts here, you can see now that the company has substantially matured to the point where you see that the scale of our quarterly non-royalty revenue exceeds that of our legacy of royalties. I think this is incredibly important, you know, since the royalties will remain a durable source of cash. I think in contrast or in parallel with that, the impressive growth in IST, which at the end of the second quarter delivered its best revenue performance to date continues to reinforce the diversified nature of the revenue streams of the business and it's the same evolution that i think you see on the page here that shows up on our balance sheet our strategic healthcare assets in the form of equity and long-term investments have grown over time even after accounting for market volatility along the way and then our cash and cash equivalents have grown right alongside that together these two balance sheet drivers represent over a billion and a quarter dollars of value at the end of the second quarter and so as i reflect on the business i think we've been able to execute well across multiple facets of the business here i think we have a strong track record of value creative capital allocation decisions and we've proven ourselves as competent operators which gives us a few things right confidence as we look forward to the growth of the business the next phase of that as well as the foundation for us to be ambitious in that way really gives us the ability to continue excuse me to invest in other areas of our business as well as pursuing new opportunities thoughtfully and building for long-term success so thank you very much for your time