Conference Transcript - INVA 2026-06-08

Speaker 2

All right, terrific. Let's go right into our next session. I am very pleased to have Pavel Redfield, CEO of Inaviva Pharmaceuticals. Pavel, thank you so much for being with us for the afternoon session. So maybe, Pavel, just for investors, you know, listening on the webcast and those online and maybe for those not really familiar with the story, let's just start to level set with a little bit of a brief evolution of the company, its core pillars, and what, in your view, makes Inaviva different.

Pavel Raifeld, CEO

Perfect. Asit, thank you very much. It's a pleasure to be here, and I appreciate an opportunity to attend the conference. So I think that Inaviva is a somewhat unusual company, and our roots are that a number of years ago, we invented the technology that's being used in some of the most commonly used asthma and CPD treatments, which are being commercialized by GSK. And we are receiving royalties on those revenues. And so when I joined Innaviva a few years ago, we in many ways looked like a pure play royalty company. And so over time, in our efforts to create value for shareholders, we have built a much more diversified business, which right now has three pillars, and I believe that each pillar contributes very meaningfully to the value creation of opportunity for Innaviva. The first one is royalties. And over years, we have found those to be remarkably resilient, and we believe them to be very durable. The second pillar is our operating business in the Viva Specialty Therapeutics, which is a commercial stage hospital business focused on infectious disease and critical care that has been growing at 40% or 50% a year and is a wonderful platform for continued capital deployment. And then last but not the least is our portfolio of strategic healthcare assets that was valued at over $700 million as of the end of March. And this portfolio is a collection of high potential opportunities that we believe can generate a lot of upside for our shareholders. And so I think that the combination of these assets provides us with a unique opportunity which has fairly meaningful downside protection through cash and royalties that we are receiving. And at the same time, our time provides multiple opportunities for growth and value creation through our operating business and then through our strategic healthcare portfolio. All in, I think this is a business that is designed to do well across a range of market environments, including the high-velocity environment, which we're in right now.

Speaker 2

Maybe before we get into some of the specifics of each of these, which one of those three pillars are you personally right now spending more of your time on?

Pavel Raifeld, CEO

I mean, whether it's from a resource allocation perspective

Speaker 2

or whether it's as it relates to your own time, Maybe just give us the cadence of how those businesses are evolving, just high level.

Pavel Raifeld, CEO

So that's a great question. I think I probably spend the bulk of my time on the latter two businesses. I think that ISP is our fastest growth business, and there is a lot of opportunity for value creation there, both organic and inorganic, that we are trying to capitalize on. And then, of course, continued capital deployment is very important to us. And, you know, in the portfolio of businesses within our strategic healthcare assets is, you know, also has tremendous opportunities for value creation. And because, you know, because of that, you know, I try to spend my time where I think it would benefit our shareholders a lot.

Speaker 2

Let's start unpacking maybe each of those, Pavel, if I may, starting with the royalty business. How are you thinking about the durability of the royalty in light of ongoing pricing and policy developments, or maybe just high level on how these revenue streams have been holding up?

Pavel Raifeld, CEO

Sure, that's a great question. We've been incredibly pleased with the performance of our royalties for a number of years, and I believe them to be both resilient and durable. Over the last few years, you know, since I joined Inaviva, you know, we've seen their performance across a wide range of black environments, including some as disruptive as COVID. And we've been continually impressed with, you know, with how stable these royalties have been. We are, I also believe the royalties are very durable. there is a very strong pattern of state against these royalties, and because they are drug-device combinations, there is a lot of regular manufacturing complexity associated with them that I feel further builds out a moat against any potential competition. And then, importantly, these are extremely well-known, well-characterized therapies, which are largely main in therapies. And, you know, for these disease states, patients and physicians are, generally speaking, unwilling to change things if patients are well-controlled or whatever therapies they are. And so I think that this, you know, embeds, you know, an extra layer of stickiness into the royalty. And then last but not the least, you know, right now we're generating about a third of, you know, revenue from the U.S. and then two-thirds from ex-U.S. markets. And while people have spoken about policy changes and some of the pricing pressures in the U.S., in dynamics and XS markets are quite different, and it's a much more diverse collection of markets. So we think that this diversification provides us with further stability across the revenue portfolio. So all in, we have high hopes for, and if you look at consensus estimates, but people generally believe that we would get about a billion dollars of road to revenues over the course of the next five years. And so we view that as a significant source of value for us.

Speaker 2

And who do you see as sort of your main competitors in the field to that business specifically? And maybe talk a little bit about how, like, the arc of competition has been evolving, you know,

Pavel Raifeld, CEO

to that business model for both in the U.S. as well as in OU. Even for these asthma and COPD treatments. So this is a market that has been, you know, that has had a number of, you know, that has had a number of existing players. It's, you know, it's been fairly stable. And I think that the arc of competition actually hasn't, you know, hasn't changed as meaningfully for us. You know, we are, generally speaking, addressing mild to moderate patient population. and a lot of innovation has centered on sort of much more advanced patients. So we think that in some ways we have been insulated from some of the competitive pressures which affected other products in the asthma or HILPD.

Speaker 2

Okay. Maybe let's move on then to the IST business. What is driving the growth algorithm across that portfolio today, and how should investors be thinking about its scaling potential? Another great question.

Pavel Raifeld, CEO

So we designed IST business to be a commercial stage roll-up in the hospital and infectious disease space, and so far it has spanned out in line with or a bit ahead of our expectations. We've built it over the last several years through acquisition and integration of a couple of different companies. And right now we have a portfolio of four market products. We have another product that's been approved but hasn't been launched yet. And so we think that our ability to resource the portfolio appropriately, that the strength of clinical evidence against our products and, you know, generally strong commercial execution have been the key growth drivers. And I would also say that, you know, we've designed this platform. I don't think of ISP as a single product entity or multiple products. I think of it as a platform, and it's a platform that has been designed, you know, to commercialize products. We see multiple opportunities for, you know, getting growth in the States, and, you know, we would be excited to put additional products onto our platform. anything that sort of you're scanning as you look across the horizon

Speaker 2

that, you know, sort of makes sense for that business as you think about other products?

Pavel Raifeld, CEO

Yes. So, I mean, we've been looking at a number of products. I mean, generally speaking, it's a commercial stage platform, and so synergies are likely maximized, you know, at that stage. But we've also been looking for, you know, development stage opportunities. And, you know, while right now, you know, we have, you know, we have presence in critical care and fracture disease, you know, hospital is, you know, hospital, you know, channel, you know, has multiple other therapeutic areas there. And, you know, so we've also looked at opportunities, you know, in other areas as well. All in, you know, we are looking for differentiated assets. We think that our capabilities, you know, would make a difference.

Speaker 2

So let's talk a little bit, you know, let's stay with that for a second on that business, just in terms of, I guess, near term, just overall business trends. You provided 2026 U.S. revenue guidance of $150 million for the IST business. So maybe just level set us on how you're tracking towards those targets.

Pavel Raifeld, CEO

So, yes, we provided that guidance, and we still have significant confidence in our ability to achieve that. For the business, the business has continued performing very strongly. For reference, we generated Q1 revenue of approximately $34 million in the U.S., which represents very meaningful growth over past year. and importantly, you know, growth over Q4, which generally speaking tends to be the strongest quarter of the year for a hospital business such as ours. So we feel quite comfortable with, you know, with both our 26, you know, commercial performance, but importantly, the longer-term trajectory of our business.

Speaker 2

Let's talk a little bit, Babel, about the hospital market broadly, you know, before diving into products. You know, talk to us about the dynamics in the hospital space right now. What are those like?

Pavel Raifeld, CEO

Well, I think that the hospital space in general is, you know, fairly disciplined and selective. I think hospitals are very focused on products that can, you know, deliver, you know, meaningful, you know, clinical and, you know, perhaps economic value to, you know, to key stakeholders. And I think we, in many ways, are lucky that our product portfolio delivers just that. We think, you know, despite, you know, I know that, you know, some people, you know, view hospital channel as a somewhat challenging space. But, you know, we think that, you know, given our growth rates of 40% or 50% in the U.S. year on year, you know, we've managed to, you know, successfully sort of navigate the channel.

Speaker 2

And I guess when you think about, you know, what the most important levers are in advancing product adoption within the hospital setting, what would those be?

Pavel Raifeld, CEO

That's another great question. I mean, ultimately, there are multiple stakeholders involved. You know, there are, you know, there are, you know, formularies and stewardship and kind of, you know, physician communications and everything else. But I think what it really comes down to for me is clinical differentiation, because ultimately, you know, it's important to have products that fit in there, you know, that deserve a place, a treatment paradigm, you know, from both clinical and economic perspective. You know, we are likely to have these products, and so a lot of what we do is engage in, you know, medical education, commercial and other activities, you know, to really explain the value proposition to, you know, to hospitals and in some ways to let our products shine.

Speaker 2

Let's talk a little bit about those products, Pavel, Zakderu, and Geopreza. So maybe, you know, those are both significant, significant products for you. So maybe just start by reminding the audience what the key addressable markets are for those and what the key treatment and use settings are.

Pavel Raifeld, CEO

Sure. That's a great question. And, you know, always excited about an opportunity to talk about our product. Solusagdura is used in adults for hospital-acquired and ventilator-associated pneumonia, you know, driven by susceptible acenitobacter infections. This is an area, these are very serious infections and an area of very significant unmet medical need. You know, there are about 40,000 patients of that sort in the U.S. a year, and about 40% of them are carbapenem resistant with resistance rates rising. So this is an area of, you know, strong unmet needs. of stronger met needs. And importantly, Zagdura was the first product that was specifically designed for and approved in Acinetobacter. So it has a very, very clear use case in this infection, which allows it to address some of them, stewardship and other concerns that might have affected more broad use antibiotics. Geopreza is a critical care product. But it's used to stabilize blood pressure in, you know, septic and other distributive shocks. And, you know, it has a very important place, you know, after kind of in the first and second line treatment. There are approximately 140,000 patients for whom, you know, for whom it could be applicable. And, you know, there is significant mortality rates associated with, you know, you know, subject shocks, and, you know, we are very happy to be able for this alternative to physicians. And how have the launches been? So I think that for Zagdura, the launch has been, you know, one of the most successful, you know, launches in antibacterial space of the last decade. And I think that has been driven by, that has been driven by sort of the very specific use case of Zagdura, which helps navigate into stewardship and other concerns, and just general compelling nature of the data in a situation or in a disease state where the health burden is just applied. Geopreza is a more established product, but in our hands, following the acquisition of La Jolla Pharmaceutical, which developed the drug. We've been able to generate very significant revenue growth rates. I think that's driven by adoption and our ability to appropriately resource the drug and tell the story. I guess, where are you in terms of market penetration for both products? So I think with the Zagdura, we are in our third year. So I think we're just scratching the surface. of, you know, of the market, you know, our sales more than doubled last year, and we expect very robust, you know, continuing growth, you know, on a going-forward basis. It's a drug that, you know, that has, physicians have been asking us for this drug, which is, you know, which is somewhat unusual. And then Geopreza is a more established product, but it has a very specific, you know, and important use case. So, you know, we've been able to, you know, both facilitate greater adoption in hospitals that use it, as well to broaden its use to new hospitals, given, you know, some of the strong data that has been generated today and our ability to continue generating data through investigator-initiated and other, you know, relevant trials. And so those are the

Speaker 2

levers that you have in terms of driving the growth for these products.

Pavel Raifeld, CEO

Yes, that's right. It comes down to data, magical education, and strong commercial execution. And both of them, but especially Zagduro, are relatively young products, which are early in their launch phase. And we expect a new continual growth from them.

Speaker 2

Maybe before

Speaker 3

we move to the next topic, any questions?

Pavel Raifeld, CEO

um that's that's a good question i think that the general opportunity for us is uh you know is fairly broad ultimately it uh and if you think about that we have presence in the hospital channel across multiple you know areas you know there is you know there are some physician communications pharmacist communications you know administrator communications health system communications etc and so depending on the specific product and the specific uh depending on the specific product specific use case, you know, our existing infrastructure might, you know, we might be able to rely more or less on our existing infrastructure. All in, you know, we look at, you know, we look at all products where we think that our capabilities lend themselves to, above all, we look for differentiation. You know, one of the successful hospital launches is making sure that, you know, we work with products that deserve, you know, proper space

Speaker 2

to the treatment. Maybe let's talk a little bit about the strategic healthcare assets. So, Pavel, explain to us how those assets fit into your broader value creation and your capital deployment framework.

Pavel Raifeld, CEO

That's a great question. So, if we go back to thinking about the other two pillars of the business, so, rules just provide us with positive cash flows and significant downside protection. Our operating business, IST, provides us, you know, with meaningful, you know, with meaningful growth that, you know, we hope, you know, will accelerate over time with some, you know, inorganic moves. And then strategic healthcare assets provide us with further opportunities to generate value for our shareholders. These are assets which we believe, you know, have asymmetric risk, you know, risk reward profiles and which could really, you know, which could really drive significant value. We, you know, we spend, you know, we spend, you know, meaningful time thinking about, thinking about these assets and, you know, providing capital to these assets. I think a good example of an asset in that space is a company called Armada, which is a very innovative, you know, company focused on, you know, you know, that's a bacteriophage specialist. And, you know, over the course of the last several months, they announced, and we've known the company for a few years, and, you know, have been a very meaningful supporter of theirs. Over the course of the last several months, they have had, you know, very impressive phase 2 data in staphoreas buctyremia, whereas they achieved 100% clinical, you know, cure rate in a very, very challenging patient population. and on the back of the data, they've experienced very meaningful share price growth. And to us, that's a good example of the opportunities that we're looking for, having a chance to find companies to support them through longer-term value creation and then hopefully to see the value crystallize for the benefit of our shareholders.

Speaker 2

Besides, Amada, any other assets that you'd want to highlight?

Pavel Raifeld, CEO

Yeah, I think, I mean, we have a few other assets in the space. There is a neuroscience platform called Sandeo, you know, that is running, you know, phase two trials in depression, but also has some, you know, interesting early-stage assets. And, you know, last year we acquired a very interesting drug delivery platform, you know, called Lynx, that will provide more color on in the coming weeks and months. But all in, we think this is a very strong collection of assets and a meaningful part of our valuable business.

Speaker 2

Let's talk a little bit about capital allocation and overall corporate strategy. You've got a very sizable cash balance. So talk to us about how you think about capital allocation, broadly speaking, and then I'll talk to you.

Pavel Raifeld, CEO

Of course. So I think, broadly speaking, there are probably three different areas of capital allocation that, you know, that we think about. The first one is, you know, is related to ISP, you know, supporting, you know, getting growth there. We think that ISP as a platform, you know, has proven itself and that we could create value by putting other assets onto the platform. And so we spend, you know, we spend some time thinking about what would be great assets there,

Speaker 2

you know, as we just discussed.

Pavel Raifeld, CEO

The second part is, you know, supporting both our existing investments, but then looking at new investments within the strategic health care assets bucket. And, you know, we're looking for opportunities where our financial resources, but also other capabilities, might help create long-term value. And then last but not the least, you know, we're also focused on capital structure optimization. And, you know, in particular, we believe that a cash flow positive company sort of, you know, should consider returning capital to shareholders. And so we recently initiated a share repurchase program.

Speaker 2

And that's $125 million authorization.

Pavel Raifeld, CEO

And how much of that has been completed? So as of the end of last quarter, we completed $25 million of that, of the $125 million authorization. and we believe and I think that the program is both a way for us to return capital to shareholders but I think it also conveys our high conviction in the prospects of our business and while we don't have any specific how quickly we'll execute on the program we still believe that we are on the value

Speaker 2

and I guess in terms of other capital allocation leavers, you know, what sort of BD interest do you have? What kind of external opportunities do you have most?

Pavel Raifeld, CEO

So we've considered a wide range of things. You know, we've continued supporting, you know, Armada, you know, over the course of this year. You know, we also remain believers, you know, Sandeo and their neuroscience platform. And then, you know, we've also looked at a number of opportunities, you know, in, you you know, which included sort of, you know, rare or orphan diseases in certain other areas. We try to be both strategic in terms of how we, you know, assess the opportunity.

Speaker 2

And how should investors think about the scaling potential of the app?

Pavel Raifeld, CEO

I think ability to scale the platform is a significant part of the piece for me. You know, we designed the platform, you know, to provide scale. I think that over the last couple of years, we've put the right boom in place. And I think that right now we, and I think that right now the platform is ready to continue scaling. There is very significant operating leverage and better there. And I think that if you look at our revenue, at our revenues, at our kind of various performance indicators, it's a very strong platform. And so I would anticipate that we would accelerate revenue and stability delivery. with an organic growth, you know, over the coming, you know, quarters, but, you know, the specific size and timing, you know, would depend on, you know, a host of things.

Speaker 2

And I guess when you think about strategically over a longer period of time, Pablo, maybe five years, ten years, right, what do you see as the sort of future? explain to us sort of like what the vision is, maybe in five years.

Pavel Raifeld, CEO

Sure. I think that's great. So, you know, my hope is that over the next five years, you know, we'll continue, you know, generating significant revenues from our rural portfolio. I would anticipate that we would generate significant organic growth from ISP, but then we would complement that with, you know, also very significant inorganic growth. And then I would anticipate that, you know, that we would get a certain significant value accretion from some of the companies in the strategic healthcare portfolio bucket. And then perhaps, you know, we would build another vertical of Innaviva, you know, based on one of the assets. Like a boat pillow or something?

Speaker 3

I'm not sure. What could that look like?

Pavel Raifeld, CEO

Well, I mean, if you look, if you think about ISP, you know, we started, you know, ISP started with our investment into Entasis, then over time, you know, we took Entasis private, and then we combined it with La Jolla to build out ISP. But one thing to say is, you know, we tend to be, you know, we tend to be very disciplined in terms of our capital allocation, and we are very mindful of sort of correlating risks with potential rewards. Prudent capital allocation. Prudent capital allocation. I'm trying to be very disciplined.

Speaker 2

Maybe going from long-term to shorter-term, Pavel, what are the most important value drivers or milestones for Innaviva that investors should be paying attention to over the next 12 to 18 months?

Pavel Raifeld, CEO

So, you know, leaving aside, you know, the thing that, you know, continued revenue delivery, especially given the GDURO launch and Geopreza at IST would be very interesting to watch. I would also anticipate the launch of New Zolvans in the second half of this year. And so that would also be a meaningful value driver. And then we have multiple things within our strategic healthcare asset portfolio. So, you know, I think that Armata, you know, anticipates initiating a phase three trial in the second half of this year. And then we also expect, you know, we also expect, you know, readouts from Cindeo over the course of the next, you know, 12 to 18 months. And then, of course, last but not least, you know, there could also be updates on things strategic, you know, over the course of this time. All in, I think, is going to be sort of a very busy calendar for us with significant growth and multiple catalysts.

Speaker 2

Any questions?

Pavel Raifeld, CEO

So we have started to conduct activities related to potential launch prep, kind of all the customary stuff. I think in general, the way we think about the solvents is that there might be two time horizons for, you know, for the product. And I think initially, right now there's a standard of care, you know, which is fairly efficacious. We know that resistance rates in some markets outside of the U.S. are extremely high. You know, there are markets where it's like 30 to 40 percent and perhaps more than that. And sort of, you know, all the experts believe that ultimately resistance, there are some early signs of that I think that initially the market, the use case for nissolvents is going to center around its oral availability as a replacement for a very painful intramuscular injection administered in an office but then I think over time the whole market for gonorrhea is going to open up And I think that based on, you know, the product profile of insolvents, you know, we could actually capture a very meaningful market share. And, you know, just as a reminder, you know, the gonorrhea market in the U.S. is about one to one and a half million patients, you know, depending on sort of, you know, how you look at it. So I think that the opportunity for us will ultimately be very sizable. and we'll make sure to the extent we launch it ourselves, we'll make sure to resource things commensurately with the marketability.

Speaker 2

And then, Pavel, maybe just to close in the couple of minutes we have left, leave us with how should we think about how you balance downside protection from the royalty base with the upside from IST and strategic assets?

Pavel Raifeld, CEO

That's a great question. So I think that Inaziva has a very unique business model And in some ways, it's an all-weather business model in that we can actually, given the diversity of our business, we can actually thrive in multiple market environments. And I think that comes in, you know, that's especially relevant in, you know, high-volatility environments like right now. I think that, you know, in risk of environments, you know, the cash flows, you know, the downside protection, the cash on hand that we have, actually allows us to perform well, but importantly, it also creates more opportunities for us to deploy capital. And then when we have risk-on environments, hopefully some of our investments stand out and we can actually continue generating value for our shareholders. And I think that the combination of the three different pieces, so the royalties, which are stable, resilient, well-characterized, the high growth that's embedded within the IST business and then the disruptive potential that I believe is embedded within strategic healthcare assets. All of these things come together to create an opportunity for growth but at the same time also in a way that meaningful protects downside. I think it's a very unique opportunity and I'm very excited about what the future might hold for us over the course of this year and then of course beyond.

Speaker 2

Well, I think that's a great place to close. Thank you very much for the very candid thoughts and the conversation and really appreciate your being with us. Thank you very much. I really appreciate it.