Inventiva S.A. Q2 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to the Inventiva 2022 Half Year Results and Webcast. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please note that today’s conference is being recorded. I would now like to hand over to your speaker, Mr. Frédéric Cren, CEO and Co-Founder. Please go ahead.

Thank you, and welcome, everybody, to this half-year webcast. As usual, some disclaimers—we will be making forward-looking statements. So please have a look at our regulatory filings that are available on our website. In terms of speakers, I would say we have the classical imperative team, myself and Pierre, the Co-Founder of the company; with Michael, our CMO; and Jean, our CFO. But today, it’s a special day for Inventiva given the recent partnership we signed with Sino Biopharm for lanifibranor. We are very pleased to have with us Philip Duong, Head of Investment, who will give us an overview of Sino Biopharm activity. In terms of agenda, I will provide highlights of the activity over the past six months, and then I will share the floor with Philip, Pierre, and Michael to give a pipeline update. We will move to the financial section with Jean, near-term catalysts, and then we will open the floor for Q&A. So moving now to the highlight section, we will start first with lanifibranor, our Phase III drug in non-alcoholic steatohepatitis, NASH. Importantly, a lot of improvement and key milestones have been reached in the past six months. In terms of NATiV3, we have expanded to 24 countries and have activated 300 sites in the trial. In the presentation, we will give you more detail on the improvements in terms of site activation. Very pleased, as I mentioned in my introduction, with our recent collaboration with Sino Biopharm and the expansion of lanifibranor in Greater China, a country that we see as really promising from a commercial point of view given the prevalence of NASH among the Chinese population. Some of the key figures of the collaboration I will highlight here include the upfront, total milestones, and royalties, and we will provide more details in the presentation. In terms of recruitment, we have had to announce a delay for the inclusion of the last patient to H2 2023. Despite the improvements in site openings, country openings, and site activation, we see that all the actions we have launched have not fully paid out. We are still encountering a higher-than-expected screening failure, which has led to this delay. As you know, we have two other very important Phase II studies ongoing, one that we call LEGEND, which is a combination of lanifibranor with empagliflozin. We have started screening, opening sites, and randomizing patients as planned, first in the United States; we also secured regulatory approval and activation in the other countries where this study is taking place. We are pleased with Professor Cusi's ability to enroll the last patient in the trial over the summer, a bit later than anticipated. Results, however, are not expected in H2 but in Q1 2023. Moving now to cedirogant, ABBV-157, we are expecting with much excitement the results of the Phase IIb in patients with psoriasis, which are expected in H1 2023. Odiparcil is another update I would like to discuss. We had an important meeting with the FDA over the summer, and we are very pleased with the outcome and feedback provided by the FDA. We know that we can now go directly into children aged five to 14 with MPS VI. The design we presented to the FDA, which is a single Phase II/III trial, can potentially support marketing applications. This gives us confidence in our search for opportunities to find a new home for odiparcil, as the feedback from the FDA indicates we are heading in the right direction with this project. Finally, concerning the financials, we have been continuing to reinforce our cash position through both dilutive and non-dilutive sources. We have raised close to €50 million through a combination of our At-The-Market program, which is managed by Jefferies, and also through some non-dilutive funding coming from state-backed financing from France. We are also pleased with the loan from the European Investment Bank that we secured—a €50 million loan award agreement of two tranches of 25 million each. We are pleased by the fact that with the upfront payment we expect to receive from our partner Sino, we will be able to secure the first tranche from the EIB, which will extend our cash runway into Q4 of 2023. Lastly, also noteworthy is the recognition of being selected by Euronext as part of the Euronext Tech Leaders index, which is a nice recognition of the work that has been done thus far. Let’s now move to lanifibranor. I would like to first give a brief overview of the competitive landscape in NASH. It’s encouraging to see positive news happening in the field with recent data from our peers and others. When we look at the landscape, I think all eyes are focused on the results expected from the first part of Phase III trials. You can see from this slide that lanifibranor is well-positioned regarding the timing of these results and is among the limited number of promising compounds in Phase III or those planning to enter into Phase III trials. When looking at our competitors, we can divide them into two sections: oral drugs and injectables. Regarding oral drugs, we are positioned as the only oral drug that has met the two important endpoints considered by the FDA for approval for NASH resolution and fibrosis improvement. Others in the injectable section have also reported success but differ based on the populations studied, which can significantly affect the interpretation of results. Thus, as we move forward, we aim to ensure the proper positioning of lanifibranor within this competitive landscape. I will give the floor to Philip to elaborate on Sino Biopharm and then continue with the rest of our updates.

Thanks, Frédéric. Just to check if you can hear me.

Perfectly.

Perfect. Okay. Thanks, Frédéric, and thank you to the Inventiva team during the collaboration discussions for the fruitful outcome. We look forward to collaborating with Inventiva long-term. I will give a quick background on Sino Biopharm, and I am currently looking at page 14. For those who are not familiar, Sino Biopharm is one of the largest, if not the largest Chinese pharmaceutical group. We have been listed on the Hong Kong Stock Exchange since 2003. Our current market cap is slightly over US$10 billion, and last year we recorded revenues of US$4 billion. Globally, we rank as the 40th largest pharmaceutical company as per Pharm Exec’s. Through our subsidiaries, we operate fully integrated pharmaceutical operations from discovery to clinical development, manufacturing, and sales. We started as a generics company back in the ‘80s and transitioned towards innovation in the last decade. We have significant R&D capabilities with over 68 innovative assets in the pipeline, seven of which focus on liver diseases. Our manufacturing is U.S. and EU qualified for API, small molecules, and biologics. From a commercialization perspective for lanifibranor, it is important to highlight that we have the largest sales and marketing team in China, with almost 14,000 sales reps covering the entire China. We utilize both traditional sales channels, such as hospitals, as well as emerging channels like online platforms and pharmacy chains. In hepatology, we boast a proven track record with over 17% market share, and that’s more than double our closest competitor. Sino Biopharm is privately owned by the Tse family, currently run by the second generation, making it a very entrepreneurial and agile organization. The family has been active in the Chinese market since the 1980s. On the next page, I want to discuss how Sino Biopharm operates as a group of operating companies that together provide a comprehensive healthcare ecosystem to the Chinese market. On the top here, we have our pharmaceuticals. The key partner for Inventiva will be CTTQ, which is a fully integrated pharmaceutical company focusing on liver health, oncology, and respiratory medicines. Additionally, we invest heavily in online health; we are the largest investors in Medlinker, which is China's leading online platform for chronic disease management, providing access to over 800,000 doctors. Furthermore, we established invoX in 2020 to facilitate our global presence, having made recent acquisitions including F-star and others, and collaborated with the Karolinska Institute Group. We have also worked closely with Sinovac for vaccine development. On to the next page, please. I’d like to highlight some important factors contributing to our success in bringing lanifibranor to the Chinese market. Our large clinical development team of over 500 people in China will help accelerate clinical enrollments. Additionally, we have various manufacturing sites spread across the country, enhancing our operational efficiency. Furthermore, our extensive sales force covers approximately 90% of hospital channels in China. I want to reiterate our long history in the liver space, starting with hepatitis, liver protection, and beyond. We currently possess market share at more than double our second-largest competitor in this space, making us well-positioned to introduce lanifibranor in this lucrative market. With that said, I will pass the floor back to Frédéric for the rest.

Yes. Thank you, Philip. I believe everyone understands why we are excited about this partnership and its potential opportunities. Now returning to NATiV3, where do we stand? As of now, we have secured full regulatory approval in 23 out of 24 countries included in the operation. We have closed activities in Ukraine and decided not to move forward in Russia. As of the end of August, we have qualified 463 sites with 297 activated. While this shows significant progress, we must note that factors such as the challenges posed by the war in Ukraine and the ongoing COVID pandemic have affected recruitment rates. Despite our measures to increase site numbers and optimize recruitment, we are still facing a higher-than-expected screening failure rate, which has pushed the target for the last patient’s first visit for Part 1 to the second half of 2023 compared to the earlier expectation of H1 2023. I will now hand over to Michael, who will give you an update on the two ongoing Phase II studies, particularly the one led by Professor Cusi in the LEGEND study.

Thank you, Frédéric. As you mentioned, there are two studies in Phase II. On slide 20, one aims to provide more information on the mechanism of action of lanifibranor as a dual agonist in patients who have type 2 diabetes along with other conditions frequently encountered in the same patients. Specifically, this study aims to demonstrate that lanifibranor decreases intrahepatic triglyceride content and improves insulin sensitivity in hepatic and muscle tissue. The study is a one-type study, sponsored by principal investigators Ken Cusi from the University of Florida. We have enrolled a total of 34 patients with type 2 diabetes, alongside reference data from 10 healthy individuals who are non-obese and do not receive investigational compounds. The sample size is calculated on an effect size of more than 50% reduction of intrahepatic fat, which is based on available data. The primary endpoint is a change in intrahepatic triglyceride levels measured by MR spectroscopy at baseline compared to 24 weeks. In addition, there are several secondary endpoints that will provide a comprehensive view of how lanifibranor impacts metabolic health in these patients, which include measures of hepatic fibrosis and other biomarkers of metabolic health. Results are expected in early 2023. Now moving to the next slide, slide 21. This study, known as LEGEND, combines lanifibranor and the SGLT2 inhibitor empagliflozin in patients with NASH and type 2 diabetes. The rationale for this combination is strong, as SGLT2 inhibitors offer additional metabolic benefits alongside lanifibranor. The study has around 40 sites in five countries: the U.S., U.K., Netherlands, Belgium, and France. The FDA IND is open, and the study began with the first site activated in the first half of 2022. We expect topline results in the second half of next year. The primary efficacy outcome is HbA1c, a critical measure of metabolic health relevant to both NASH and type 2 diabetes. We also have a range of secondary efficacy measures, including imaging techniques to assess fat distribution in the liver and markers of inflammation, body weight, and safety. The treatment duration is half a year across three arms: lanifibranor plus empagliflozin, lanifibranor alone, and placebo. Overall, as we progress into the next few years, we anticipate regular announcements of data availability pertaining to the efficacy of lanifibranor in clinical settings. We will begin with results from the study conducted by Professor Cusi in Q1 2023, followed by topline results from the LEGEND study in the second half of 2023, and subsequently the topline results of Part 1 of the current pivotal NATiV3 study, which we predict will be available in the second half of 2025. That's it for my update. Frédéric.

Thank you, Michael. I would like to provide a brief update on ABBV-157. We were last week in Chicago and are very pleased with its progress. The potential of this compound excites us. As you know, we are targeting the suppression of IL-17F gene expression, a validated target in the clinic. The prospects for this orally available compound, the ROR gamma, are immense, and we believe we have a strong position within our pipeline. The meeting was quite promising and generated a lot of excitement around this molecule. Now we need to wait for the Phase IIb trial to conclude, which is currently ongoing. This trial involves 200 patients over 15 weeks, and the primary endpoint is a significant measurement of efficacy. AbbVie has also initiated a Phase I study designed to transition into Phase III. If all goes well, we anticipate positive progress. We are also excited about potential financial rewards, particularly with milestones and royalties that begin at mid-single digits and could reach double digits. Given the potential applications and the capabilities of AbbVie, we are optimistic about this being a significant revenue source for Inventiva in the future. Now let’s move to the odiparcil update, and Pierre will provide the latest details on this program.

Yes, thank you, Frédéric. We are thrilled to update you on the odiparcil program. I would like to start with a recap on MPS and its mechanism of action. MPS are innovative disorders characterized by the dysfunction of lysosomal enzymes needed to break down glycosaminoglycans, the GAGs. Within this family, MPS VI arises from mutations in ERT SBT, responsible for degrading dermatan sulfate and chondroitin sulfate. As a debilitating multisystem disease, MPS VI can considerably reduce life expectancy. Currently, there is one approved treatment, enzyme replacement therapy with Naglazyme, which has limitations due to poor distribution and underscores the urgent need for improved treatments. Now onto odiparcil: it is a small, orally available molecule shown to decrease GAG accumulation in disease cells through a unique clearance mechanism. Importantly, odiparcil can penetrate challenging tissues like cartilage and bone, which could address many clinical manifestations left untreated by ERT. We have conducted a Phase III study called iMProveS in adult MPS VI patients with advanced disease, and results showed that odiparcil is safe and beneficial in both ERT-treated and naive MPS VI patients after just six months. Therefore, we find a compelling reason to assess odiparcil’s efficacy further in younger patients. So far, odiparcil has demonstrated a favorable safety profile from multiple trials involving over 1,500 patients. We are optimistic about odiparcil's potential as a first oral therapy capable of addressing a broad range of clinical manifestations in MPS VI patients. This market is nearly $400 million. Moreover, odiparcil exhibits treatment potential for other MPS types where GAGs accumulate, such as MPS I, II, IVA, and VII. Regarding regulatory progress, we have obtained orphan drug, Fast Track, and Rare Pediatric designations. I want to report on our recent FDA meeting, where we discussed the regulatory path for approval, encompassing objectives, patient population, endpoints, and clarifications beneficial for future partnerships. In summary, the FDA indicated that a single Phase II/III study lasting one year in MPS VI patients aged five to 15 could support a five-year filing. This pivotal study will be double-blind, randomized, placebo-controlled, evaluating odiparcil plus ERT against placebo plus ERT, aiming to improve mobility as the primary endpoint. Secondary endpoints will include fatigue, pain assessments, and more. Following this pivotal study, all patients will be placed on odiparcil plus ERT in a 12-month safety extension. This remains an attractive opportunity for partnerships.

Thank you, Pierre. Now let’s move on to the final slide before we conclude. Jean, please provide us with an update on the financials.

Let’s go through the key financial figures. You will see it’s quite straightforward in continuity with the prior financial period. I will be happy to answer your questions at the end of the meeting. An essential aspect is our cash position, which is currently at €87 million compared to €95 million at the end of last year. This positions us to operate until Q2 2023, and as disclosed, the Sino Biopharm deal helped us meet the conditions for accessing the first tranche from the EIB. Therefore, we can extend our cash runway through Q4 2023. As for the profit and loss account and cash flow developments, there are no revenues for this semester. Inventiva recorded €4 million in milestones from AbbVie last year, but this payment positively affected our cash flow. Research and development investments continue to represent over 80% of our total OpEx, with significant increases driven by the NATiV3 studies. Furthermore, the operating cash flow aligns with R&D expense evolution. We successfully activated our ATM program, raising close to €15 million, in addition to mobilizing soft loans totaling €5.3 million. The dollar's favorable evolution against the euro positively impacted our cash flow by €2.4 million. This summarization reflects the key details, and I would be happy to address any further inquiries at the end. Thank you.

Thank you, Jean. Before we open it up to Q&A, I would like to highlight our upcoming milestones. We have two critical clinical readouts ahead—one concerning lanifibranor in early Q1, resulting from Professor Cusi's study in type 2 diabetes and NAFLD, and then the data from the ongoing Phase IIb study carried out by AbbVie this year, which I would say will be a significant event for our company next year. With that, let’s proceed to Q&A. The operator will guide you on how to ask your question via the platform or by telephone.

Thank you. We have the first question from Ed Arce from H.C. Wainwright. Please go ahead with your question. Your line is open.

Hi. Good morning. Can you hear me?

Perfectly, Ed.

Wonderful. Thanks for taking my questions, and congratulations on the deal with Sino Biopharm. I have three questions. First, you mentioned the recent results of Akero, were a protocol versus ITT, which is more of a standard, and I was wondering if you could talk about how you view the differences in that data and your perspective on how the regulatory agencies view the differences? For my second question, you mentioned with the Sino Biopharm deal that they could either join NATiV3 or decide to conduct their own Phase III trial. If you and Sino decided to have them join the NATiV3 trial, would that impact the timeline? Lastly, the topline NASH results from NATiV3 appear to be about three years away, in the second half of 2025. Given your most recent runway, this creates a two-year funding gap. Are there any opportunities for funding from the results of AbbVie or perhaps initial funding from a future partnership on odiparcil?

Thank you, Ed. That’s a very cumulative question. I will try to address it. Regarding the first question, I think Pierre and Michael could add more context, particularly the difference between protocol and ITT. I just think it’s crucial because Akero produced some slides where they compared their Phase II data, and it’s crucial to have a complete picture. What they stated in their presentation is that if they had used an ITT approach, they would have lost statistical significance on—let’s take NASH resolution as an example. Therefore, we could claim to be the only drug that has shown both endpoints for regulatory approval. Still, it’s important to note that for Phase III, the regulatory authorities will be looking at ITT data. The fact that we validated in our Phase IIb with ITT provides us with greater confidence for our Phase III success. Now, about the second question regarding Sino Biopharm joining NATiV3 and its impact on the timeline. It is still too early to say. Their involvement would certainly aid recruitment, as their patients would contribute to the necessary count for Part 1, but we remain prudent and don’t factor this upside into our projections. Philip, would you like to add anything?

Yes, thanks, Frédéric, and thanks for the question, Ed. Regarding our clinical enrollment capabilities, we can quickly enroll patients, subject to regulatory approvals and other factors. If we pursue a global multicenter trial, our capabilities will facilitate rapid patient recruitment, which should help prevent further timeline delays.

Thank you, Philip. As for your last query, regarding the two-year funding gap until Part 1 readout, there are two ways to consider it positively. Given the capital struggles in the market, we successfully secured financing until Q4 2023. As mentioned, we have multiple opportunities for financing along both dilutive and non-dilutive lines. We still have our ATM open and have historically received support from front enrollment. Beyond that, the discussions surrounding FDA feedback strengthens our rationale for odiparcil, and we remain committed to partnering rather than developing on our own. Lanifibranor is also an attractive compound; there are other geographic areas outside of China where partnerships would be beneficial. Overall, if these programs transition to Phase III, it could trigger milestones. However, we maintain that royalties in this contract are the crucial elements. If we can advance to Phase III with lanifibranor in NASH, combined with AbbVie's ongoing trials, we believe this could provide a compelling value proposition for investors.

Great. That’s all right. Thank you.

Thank you. I believe we have a question from Jeroen; can we hear him?

Hello.

Yes, we can hear you now.

Hi. Congrats from KBC regarding the Sino Biopharm deal and the odiparcil results. Following up on Akero a little, NASH has been a challenge over the past years. Do you see renewed investor interest? Furthermore, do you believe the refocus on it could present opportunities for non-invasive diagnostic methods? Lastly, can you provide an estimate of the NASH market size in China?

On your first question, I would say yes, favorable news from Akero and others creates a positive sentiment around the market. Historically, failures surrounding compounds have unjustly cast a negative light on successes like ours. I genuinely hope this positive trend continues, particularly for Madrigal as they advance in their Phase III trials. Regarding non-invasive diagnostics, Michael, would you like to provide an update?

Certainly! Yes, with the FDA emphasizing histology as a key efficacy endpoint, notable progress is being made on non-invasive markers gathered through imaging and biomarker studies. These alternative approaches are being actively discussed and may complement or, one day, replace histology. Lanifibranor's strong efficacy profile in both histology and a comprehensive set of biomarkers positions it favorably for regulatory discussions concerning these metrics.

Regarding the NASH market size in Greater China, I haven’t seen formal estimates. However, the estimates we cited earlier suggested that the prevalence may be higher or comparable to that in the U.S. Given the size of the Chinese population, this represents a significant market opportunity. Philip, do you have any insights into published figures?

Certainly. Over time, various figures have been cited; estimates range from 2% to even 6-7%. Considering China's vast population of over 1.3 billion, this translates into significant numbers—around 50 million patients, although these figures remain challenging to validate without approved treatments. Ultimately, the market in China for NASH is substantial.

Thank you. We now have Alex from Bryan, Garnier. The floor is yours.

I hope you can hear me well. Yes, thanks for taking my questions. I would like to learn more about the screening failures in the Phase III study. Specifically, what is the current failure rate, and what measures are you implementing to mitigate it? Have those measures led to faster enrollments? Secondly, regarding cedirogant, AbbVie seems enthusiastic about this compound, indicated by swift recruitment in Phase IIb. However, I don’t think they’ve released Phase Ib results, which may be presented at AAD in March, along with Phase IIb data. Can you shed light on their plans for releasing that data?

The screening failure rate is indeed high, and we have observed a similar trend across multiple NASH clinical studies. While this situation is reassuring to some extent, it remains a challenge. We've taken a deep dive into analyzing the reasons for these failures, looking into each individual case. The main issues have often pertained to lab values and histology readings, assessed through quantitative scoring systems. We have collaborated with three expert pathologists to align their readings prior to commencing biopsies for the study. We have now instituted a system where each biopsy will be evaluated by two pathologists independently. If discrepancies occur, we have a tie-breaker clause to ensure a conclusive reading. Based on our analysis, we anticipate that these improvements will positively affect the screening failure rate. Moreover, we’re focusing on guiding our sites in accurately diagnosing and pre-screening patients to decrease the likelihood of encountering screening failures when patients enter the screening process. We’ve been analyzing published data alongside our data to identify the most impactful criteria on patient selection, and it's well known that specific enzyme levels can greatly affect the screening process. To that end, we are amending our inclusion criteria accordingly, which we believe will lead to measurable improvements in screening outcomes going forward. On cedirogant, you’re correct; the Phase Ib results are forthcoming, with the next congress being AAD in March, where they could potentially present results. However, plans for releasing the Phase IIb data have not been confirmed yet.

Understood. Are there specific milestones linked to the Phase IIb data release, like study finalization or Phase III initiation?

Yes, milestones are focused on initiating the Phase III study.

Thank you.

Delphine Le Louët from Société Générale is also online. We can hear you.

Hello. Good afternoon, good morning, everyone. I have different questions. Can you provide exact numbers of screened and enrolled patients as of August’s end? What kind of ramp-up can we expect to prevent delays? Secondly, do you perceive a probability of Sino Biopharm opting for a Chinese study or integrating into NATiV3? Lastly, can you remind us what conditions need to be met for unlocking the other €25 million from the EIB?

Regarding your first question, we do not disclose specifics on the number of screened and screened-failed patients; we want to protect our competitive edge. However, what I can tell you is that unlike our past experiences gaining regulatory approval at different stages, we have progressed well recently. Our focus now, as Michael stated, is to lower the screening failure rate to a more reasonable figure. On your second question about Sino Biopharm's interest in either path, I’m uncertain, given my lack of experience with their regulatory processes. Philip, would you like to elaborate?

Yes, it’s possibly too early to predict. Yet we’re focused on achieving the quickest possible launch for lanifibranor in China, which will rely on the most suitable regulatory path.

I see. Additionally, has Sino Biopharm shared experience from past partnerships concerning regulatory pathways for the Chinese market?

It’s been done globally across other therapeutic areas, yielding successful outcomes. However, for NASH, if a global multicenter trial occurs, it would be groundbreaking, and there are precedents for success in other therapeutic areas.

As for the conditions to unlock the second tranche from the EIB, I’ll let Jean address that.

Good afternoon, Delphine. We’ve disclosed the conditions related to the EIB in past communications. The total necessary to unlock the second tranche must reach €70 million within a year from now. This includes the initial cash injection required for the first tranche. To date, we have raised approximately €9.5 million via the ATM and matched it with an additional €12 million from Sino Biopharm deals. This leaves us needing to bridge around €50 million over the coming period. We are exploring further opportunities that could assist in closing this gap, as the conditions for warrant issuance and operational success can help meet our negotiation targets with the EIB.

To wrap up, we met our initial condition by signing the Sino partnership. We hope to meet the remaining conditions successfully.

Thank you.

Now, I believe we have no more questions. I want to thank you all for participating and for your questions. I also want to thank Philip for staying up late as it’s over 9 p.m. in China. Thank you for joining us today. Importantly, we are pleased to be celebrating our 10th anniversary as a company today. We began this journey on August 27, 2012, and it is great to reflect on our progress alongside the positive news with lanifibranor and odiparcil, as well as cedirogant. Thank you again for your participation, and I look forward to talking to you all soon.