Inventiva S.A. Q4 FY2023 Earnings Call

Good day and thank you for standing by. Welcome to the Inventiva Annual Results 2023 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Frederic Cren, please go ahead.

Thank you. Good morning. Good afternoon, everybody, and thank you for joining us today for this webcast. Before we begin, as usual, I ask you to please read the disclaimer on slide two, which should appear now. And I want to remind everyone that various statements that we may make during today's conference or during the Q&A session will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Today in this call, I'm joined by Jean Volatier, our CFO, and by our CFO and Co-founder Pierre Broqua. So, let me go back to some of the highlights of lanifibranor development program by starting by NATiV3. So, in January 23, we announced some important changes to the design of the Phase 3 evaluating lani in patients with MASH/NASH, which made the study more attractive for the site and especially more patient-friendly. This new design is based on discussions we had with the FDA and on the alternative approach put forward by the US FDA, which includes two independent Phase 3, one based on histology outcomes, NATiV3, which would allow us, if our results are positive, to file for accelerated approval. And the second Phase 3 study in patients with MASH/NASH and compensatory cirrhosis, which will be our confirmation trial in order to demonstrate clinical outcomes and which would secure a positive full approval. As part of the development of lani, we were pleased that our partner, Sino Biopharm, received their ILD approval by the Chinese NMPA to initiate the clinical development in China. Sino Biopharm is participating in our global NATiV3 Phase 3 clinical trial, and we have closed to 7.23 with the first patient enrolled in China and also a breakthrough therapy designation granted by the NMPA in China. Making lani the first drug candidate to our knowledge to receive such designation from both the FDA and the NMPA for the treatment of MASH/NASH. We also published the results, a positive result of a study conducted by Professor Cusi from the University of Florida in 2023. The study met its primary endpoint which demonstrated the reduction of liver steatosis in patients with MAFLD/NAFLD and Type 2 diabetes treated with a low dose of lani for six months. What was key in this study was showing the effect on hepatic fat and liver insulin sensitivity, as well as fat metabolism within just 24 weeks. The effect on insulin sensitivity is an important feature and key differentiator of lani versus other therapies approved or in development at NASH as insulin resistance is a feature of all NASH patients. We have also been active on licensing as we also announced the licensing of lani in Japan and South Korea with a signature of an agreement with Palace Pharma. This is an exciting milestone and expands our potential footprint with this agreement. We have received a $10 million upfront payment and have emphasized our rights to take a stakeownership in the newly created company. In February, we reported the first SUSAR experience with lani as we were approaching the end of our screening for native NATiV3. Our team has been all hands on deck. We have made changes to our protocol as recommended by our data monitoring committee, and we're today back on track. We have resumed screening and also, we have started randomizing new patients in the majority of our sites under the central IRB in the U.S. and we confirmed that we target the last patient first visit in the first half of ‘24. Finally, just last week, we announced a positive interim analysis of our proof-of-concept Phase 2 clinical trial legend evaluating the combination of lani with SGLT-2 inhibitor empagliflozin. The study was designed to potentially demonstrate an additive effect of the combination in the management of weight gain that can be observed in some patients treated with Lanifibranor. The study met its primary endpoint, which was the reduction of HbA1c, demonstrating that the combination addresses the moderate and metabolically healthy weight gain seen in some patients. The study shows that both lani alone, and in combination with empagliflozin, induces a redistribution of fat from visceral to subcutaneous fat, reflecting a shift from pro-inflammatory visceral fat towards metabolically active tissue. This redistribution of fat is consistent with improving insulin sensitivity seen with both lani alone or the combination. Finally, lani improved markers of cardiometabolic health, the effect appears to be further improved when lani is combined with empagliflozin. These results further support the robust data from our Phase 2b study. From the investor initiative study conducted by Professor Cusi, we plan to present this data in scientific congresses as well as submit it for publication. We briefly cover several key financial milestones before turning it over to Jean. In 2023, we have secured financing of approximately $39 million with equity issues. We also secured $50 million of non-dilutive funding from our partner in China following the progress made in the development of Lani. Additionally, we received an upfront payment of $10 million with the signing of the licensing agreement with Palace Pharma, which also makes us eligible for up to $231 million of clinical regulatory and commercial milestones as well as royalties. As you are aware, at the beginning of the year, thanks to the achievement of key financial and operational milestones, we drew the second tranche of the €50 million EIB loan, totaling €25 million. We're very optimistic about the future of Lanifibranor and Inventiva and are focusing on the upcoming important milestones, which for us, is the last patient first visit of the Phase 3 NATiV3 clinical trial, which we expect to secure by the first half of this year. Let me give you some figures that make us confident that we can achieve this target. We have more than 75% of the patients targeted to be randomized in the main cohort, and more than 350 are in screening. Importantly, close to 90% of the patients randomized come from North America and the EU, which we think bode well for the quality of the results. From a financial standpoint, we are, of course, focusing our efforts to expand our cash runway. We're confident that the recent positive data from the legend study, the progress made in NATiV3, and the approval of treatments without the requirement of a biopsy create a favorable environment for Inventiva. The management of patients with NASH/MASH will require treatment options and potential combination therapy. Given Lanifibranor's dataset and mechanism of action, we believe there is a significant space for a drug with direct antifibrotic activity and strong insulin sensitizing properties like Lanifibranor, as clearly highlighted in the recent physician survey we conducted in the US, showing prescribers expect to write Lanifibranor for approximately 30% of their MASH patients. We'll now turn it over to Jean. He will provide you with an overview of our full-year ‘23 financial reports.

Thank you, Frederic. Good morning, good afternoon, everyone. Everything has been said, I may say, and the financials for ‘23 reflect quite a rich activity as you have heard. Let's start with the profit and loss accounts. So, the company's revenues for this year amounted to €17.5 million, which I guess is a record for Inventiva since it has been created. This represents an increase of more than 40% compared to the €12.2 million recorded in ‘22. I said the revenues derived from two sources. First, the continuing milestones from CTTQ, the Chinese partner, which contributed $5 million. Also, two-thirds of the revenues in ‘23 came from the upfront payment of $10 million from Palace Pharma, along with a non-cash consideration from the fair value of an option to acquire shares of the joint venture. The key point is the increased effort in R&D, which saw an increase of 82%, reaching €110 million in ‘23 compared to €60.5 million in ‘22. This reflects the planned acceleration in activities concerning the clinical development for NATiV3, and also, to a lesser extent, with the legend Phase 2A combination trial we just talked about. G&A expenses amounted to €13.8 million, a slight increase of 7% compared to €12.9 million in ‘22. We consider this to be under control, considering the growing scope of activities for the company. To highlight also a net financial income loss of €5.1 million reflects the first tranche of the EIB loan incurred in ‘23, which will be paid back by the end of ‘26 or early ‘27. However, we also incurred expenses related to this loan and were impacted by some interest on other existing minor loans. The variation in net financial income is also due to close to zero foreign exchange results in ‘23 compared to a greater positive result in ‘22. This is obviously related to the Euro-dollar context in ‘23 compared to last year. We recorded, for the first year, our share of net loss for the stake we have in the Japanese joint venture with a non-cash loss of €12 million, compared to zero in ‘22. All things considered, the company's net loss for the full year reached €110.4 million compared to €54.3 million in ‘22. Let's talk now about cash. If we consider what we call a global cash position, including pure cash and cash equivalents, the mid-term investments we have that are very liquid and easily mobilizable, and the second tranche of the European Investment Bank that we drew in mid-January, we started the year with close to €61 million in cash compared to €88.4 million at the beginning of the prior year. This reflects a decrease of close to €30 million, obviously due to the higher cash consumed by operations, which totaled €82 million, including the €20 million cash inflow deriving from the efforts in R&D. By the way, in terms of metrics for the R&D, we must underline that lanifibranor is truly focused in our financial efforts. R&D in the company represents 87% of overall expenses. Of this 87%, lanifibranor accounts for 85%. Overall, 75% of our financial efforts are dedicated to this program. The negative impact on operating cash flow has been partially offset by the operation mentioned by Frederic: the financing rate of €35.7 million gross in regular capital increase supported by existing partners such as Sofinnova, Yiheng Capital, and we are pleased to welcome Qatar Holding LLC, which now holds close to 10% of our shareholder base. All in all, our cash position as of today confirms that this will allow us to operate until early Q3 ‘24. I will be glad to answer any questions in the Q&A session if needed. I just pass it over to Frederic for the conclusion. Thank you.

Thank you, Jean. Before we move to the conclusion, let's open it up for the Q&A. I see that there are some questions already.

We will now take the first question coming from Seamus Fernandez from Guggenheim Securities. Please go ahead.

Frederic, I just wanted to follow up on some of the data that was just presented and comments from Dr. Harrison on the call that were certainly very interesting. We have got the concern around data, not a lot of changes that we see in HbA1c in a diabetic patient population, whereas we clearly see substantial changes in HbA1c with Lani. Also, the incremental benefits of adding an SGLT-2 would suggest that this opportunity is quite substantial. I just wanted to confirm your view of the market, his comments that he would much prefer to give his product to diabetic patients. And then also just the confirmation that, depending on the timing of the completion of the last patient, if you would strongly expect this to be the next oral MASH therapy available in the market. I have one additional follow-up question.

Thank you, Seamus. We were very pleased by your comment made by Steve Harrison who said that for lanifibranor, if he sees patients entering his clinic with MASH and type two diabetes, he would prescribe lani over any other compound. That was a very nice comment for us because we know that there is a large proportion of patients with NASH and type two diabetes, between 40 to 60%. We have 60% in our Phase 3 study without actively recruiting more patients with type two diabetes. Patients with type two diabetes tend to present a more severe form of NASH, with a higher proportion being classified as F2-F3, and they tend to exhibit more progressive fibrosis. When we look at the competitors, we really believe that our activity on HbA1c and the insulin sensitivity properties we possess, as illustrated by the study conducted with Professor Cusi, where we observed a statistical impact on insulin sensitivity in the liver and muscle, are features we really want to promote. We should not forget another aspect of our work, which showed that patients with pre-diabetes treated in the Phase 2b saw their diabetes progression halted when treated with lani. Lani truly has a great profile for patients with established and pre-diabetes. To answer your question about whether we believe we are the next orally approved drug, yes. I can confirm that, as we are close to completing recruitment by the first half of ‘26. Other oral drugs that we are aware of still have to start Phase 3, while other drugs in development are injectable. All the studies we have conducted with payers, especially prescribers, indicate that oral drugs are preferred over injectables. Thus, we feel we're very well positioned in this area. Just as a follow-up question regarding Phase 3, you mentioned that you have added an additional 5% of patients recruited officially into the study, with an additional 15% to 20% expected. Does that indicate a strong conviction that the last patient first visit will take place by the end of the first half of this year or during the second quarter? Is there a sooner rather than later aspect to this with high confidence? Regarding the rescreening in the US, we are currently starting rescreening with sites under central IRB, and the opening of all sites is following the plan. There is one aspect that we cannot control, which is the screen failure rate following the introduction of these autoimmune antibodies that we comités have implemented according to the recommendations of the data monitoring committee. We believe the impact will be limited, but only time will confirm that. If the screen failure does not change significantly compared to what we have experienced in the past, we should meet our end of recruitment goal as planned by the end of H1. We have had numerous meetings with all our site staff to ensure they are motivated to restart screening. We have already received positive feedback on how we have handled the situation. Regarding the next Phase 3, which is intended for full approval and will involve patients with compensated cirrhosis, we need to have this trial ongoing. When we file for NDA, we will include patients with F4 compensated cirrhosis in the exploratory arm. From those 200 patients, we expect approximately 30% will have F4. We are not conducting a second biopsy; however, we have a comprehensive set of non-invasive tests planned for these patients that are stratified one to one in the exploratory cohort. This will give us valuable information on how lani performs in these patients and will assist us in finalizing our discussions with the FDA regarding the design of this confirmatory trial.

Great. Thank you so much, and good luck with the continued progress and congrats on the recent updates.

We will now take the next question from the line of Rami Katkhuda from LifeSci Capital. Please go ahead.

Thanks for taking my question as well. Just a couple of quick ones from me. First, I guess, when do you expect ex-U.S. sites to begin enrolling patients again? And then, secondly, what milestones do you need to hit to draw additional tranches from the EIB loan, and could that occur before the third quarter?

The second question is easy. We have met all the requirements of the EIB, which allowed us to draw the second tranche of €25 million. For opening ex-U.S. sites, specifically in Canada, there are sites under central IRB that we plan to open soon. The other countries will start opening from April onward with an emphasis on European sites. As I mentioned earlier, most of our patients come from the U.S. or North America, contributing about 70%, with an additional 21% from the EU. Focusing on these two geographic areas is critical for our team.

I know it's a bit early, but would you look to partner lani in Europe as well? Would that partnership come before or after the NATiV3 readout?

Our strategy concerning lani is that we see two strategic regions for NASH: Europe and the U.S. We intend to keep these rights bundled together. Therefore, we are more likely to pursue partnerships for both Europe and the U.S. at the same time rather than separately. We believe the appropriate moment for this will be after Phase 3, as we have confidence in the data generated and our ability to attain approval based on the NATiV3 data.

We will now take the next question from the line of Lucy Codrington from Jefferies. Please go ahead.

I didn't quite catch in the prepared remarks. Could you just repeat the status of randomization post the screening resuming, and whether you had a set amount already in screening when the recruitment was halted? Has that number changed within that screening pool? Given the sort of safety concerns, has that meant you have lost any patients within screening? Additionally, just on the partnership commentary, are you in any active discussions with potential partners, and has interest increased since your recent data and the approval? Your comment just then suggesting you'd prefer to wait until after Phase 3 might imply that no, but can you afford to wait until after Phase 3 given your cash constraints? Could you consider other options such as a potential option agreement? And how long do these loans typically take to negotiate?

I'll take the first two questions about the state of the trial and the partnering, and then let Jean address the question about the European Investment Bank and the timing of loans. What I said is that we have more than 75% of the patients needed for the main cohort that are randomized, and we have more than 350 patients in screening. The pool of patients in screening is diminishing not because of pushback or a change of attitude of the sites toward Lanifibranor, but rather because of the limited validity period for lab tests and biopsies; we lose patients that no longer meet those criteria. In terms of where we will reopen first, the U.S. and European countries are really where our focus lies. Regarding our cash runway, we have enough to continue operations until early Q3. Luckily, we are in a favorable moment with positive data in the NASH field, and we believe the regulatory hurdles have been lifted. We are open to all options, both collaborating with big pharma and considering additional capital market opportunities. I believe our share price is well supported, and we're in a positive trend.

We have ongoing discussions with the EIB; they have asked to come visit us on site in a couple of weeks. There are two avenues we could take: a short circuit below €10 million could be managed within the existing loans; generally, this could be handled within two to three months. The second option, a larger tranche, would require a new financing agreement. This could take six months to a year before discussions are settled on a subsequent tranche. Both options typically accompany cash injections, which we are actively working towards.

We will now take the next question from Jacob Mekhael from KBC Securities. Please go ahead.

Can you please provide some guidance on how we should look at R&D for 2024? Do you expect R&D spending to decrease once you have completed enrollment in the trial? Regarding the target of 950 patients, do you think that target is achievable only with US sites, or will you need additional sites to reach that? Also, do you need to meet certain thresholds in terms of patient numbers from each region?

In terms of R&D, we'll provide some highlights for the coming years and what our planning hypothesis is. When we say we plan to reach enrollment by the end of H1, this includes contributions outside North America, particularly from Europe. In terms of minimum numbers to achieve, I would say the FDA had certain requirements for a certain percentage to come from the U.S., and we've already largely fulfilled that target.

For your question about the trend of R&D expenses, we should see a slight increase in 2024, around 10%; however, as you mentioned, the year after that, in ‘25, we should see a decrease due to the conclusion of recruitment and the investments needed to wrap up this phase.

I think we lost the operator, but just to conclude, ‘23 was a busy year for our team at Inventiva, and 2024 will be another hectic year with many milestones to achieve. What we find remarkable is that we have an incredible asset in an oral compound with a competitive profile. The data we have generated makes lani a compound that is well-positioned to make it through the finish line in NASH and MASH treatment. We are convinced that lani will play a significant role in treating patients with NASH and MASH. Thank you very much for attending, thank you for your support, and I look forward to continuing the open dialogue throughout 2024.

This concludes today's conference call. Thank you for participating. You may now disconnect.